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Zelenskyy Asks Congress for More Aid

Yesterday morning, Ukrainian President Volodymyr Zelenskyy addressed Congress by video and asked for help, not only for his country, but for all of Europe and the whole world. He wore his trademark green army T-shirt and read from an Apple MacBook on his desk to show that he has good taste. Most of his speech was in Ukrainian with a translator, but part was in somewhat halting English. Nevertheless the message was crystal clear: If a bully like Russian President Vladimir Putin isn't stopped now, there is no telling what he will do next. Here is the speech:

Although Zelenskyy is a professional comedian, there were no jokes. He was deadly serious and pleading for help. He compared the Russian attacks on his country to Pearl Harbor and Sept. 11, knowing that if Congress saw the attack on his country in that light, it would be more inclined to provide help, without which Ukraine would be doomed. He also threw in a reference to Martin Luther King's "I Have a Dream" speech. He did miss the Gettysburg Address, but he clearly knows enough American history to know what might move Congress to action.

He also understands enough about American politics to ask members to pressure companies in their districts to stop doing business with Russia. In addition, he complimented Joe Biden on being the leader of a great nation and called on him to be leader of the world. With Donald Trump, a little flattery gets you whatever you want, but with Biden that's not enough. Maybe Zelenskyy knew that, but it was worth a try. He also played a short videoclip showing that Ukraine was a beautiful and peaceful country until Russian missiles started causing heartbreaking destruction. It also showed two men tossing a dead Ukrainian into a makeshift grave. It was an emotional appeal and not the kind of speech being a professional comedian prepares you to do, but he did a good job. The subtle message was "We are a 21st century modern European country that just wants to be left alone to live in peace. We are not Afghanistan, where half the country wants to go back to the 7th century." For many Americans, that may be news.

One of the things he wants is for NATO to enforce a no-fly zone. That ain't gonna happen, because in essence that is asking for the U.S. to shoot down Russian planes that intrude in it, which would start World War III. Plan B is getting more weapons. Inasmuch as Zelenskyy's desires for a no-fly zone, and for more MiGs (from Poland or elsewhere), are well known, he did not emphasize those in his speech. Instead, he asked for more and better defensive weapons, specifically mentioning S-300s (surface-to-air missiles used for shooting down airplanes) by name.

Zelenskyy also asked the U.S. to sanction Russian oil and gas exports, but that is a tough call. The U.S. has already done that, but it hasn't pressured European allies to do the same since Europe is very dependent on Russian energy.

In addition, Zelenskyy called for a new United Nations agency that could nip small wars in the bud. That's is also a nonstarter because an agency that can actually stop wars is called an army, and there is no way any of the countries in the Security Council with veto rights would approve a U.N. army, let alone fund it and provide soldiers for it. Can you envision a joint U.S.-Russian-Chinese army fighting and killing Russian soldiers in Ukraine? If so, you have a better imagination than we have.

So was Zelenskyy 0 for 3, a strikeout? Not at all. His speech and video moved some Congress members to tears. It was a powerful speech. Furthermore, maybe Zelenskyy knew what he was doing, maybe he didn't, but the speech gave Republicans an idea: criticize Biden for not doing enough to help Ukraine.

Biden obviously does not want the midterms to be about "Who lost Ukraine?" so he is sensitive to that possibility. Right after Zelenskyy's appeal, Biden gave a speech sympathizing with the Ukrainian people and announcing the transfer of another $800 million for military hardware for Ukraine. Here is Biden's speech.

If you want a shorter version, this page has a video in which Biden enumerates the hardware he plans to give Ukraine. It includes 800 anti-aircraft systems, some long-range anti-aircraft systems, 9,000 anti-tank weapons (like Javelins), 7,000 small arms including machine guns, and cutting-edge "kamikaze" Switchblade drones. Zelenskyy won't get his S-300s, at least not in this round, but he's going to get similar (if less sophisticated) surface-to-air missiles that are capable of shooting down planes (the Stingers that the Ukrainians had previously are meant for helicopters). Last week when the U.S. offered to evacuate Zelenskyy, he refused, saying: "I need ammunition, not a ride." Well, he's getting it: 20 million rounds of ammo are included in the package. And the weapons Ukraine already has have been very effective. A conservative U.S. estimate puts the number of Russian soldiers already killed in Ukraine at a minimum of 7,000, more than all the American soldiers lost in 20 years of fighting in Iraq and Afghanistan combined. Biden is mediocre public speaker, but the message should be clear to the Republicans (and probably to Putin): Biden is all in on giving Ukraine the weaponry it needs to defend itself.

In addition, Biden called Putin a "war criminal" for the first time. This will not go over well in the Kremlin, but might go over well in the Republican caucuses in the House and Senate. Biden is clearly determined to prevent the Republicans from claiming he didn't do enough to help the freedom-loving Ukrainians from the evil would-be-czar Putin.

During Zelenskyy's speech, Donald Trump issued a statement that he rebuilt a floundering NATO during his presidency. That's quite a claim. Some might even call it "delusional." In truth, he attacked NATO and it's possible the reason Putin didn't invade Ukraine during Trump's presidency is that he was hoping to talk Trump into withdrawing from NATO in a second term.

The next few days will tell how this plays out, but we think Zelenskyy did a great job of winning over Congress (especially getting Republicans to criticize Biden for not doing enough and thus forcing him to do more) and most likely getting the American people on his side. It also creates a huge tension within the Republican Party, with members trying to outdo one another in calling for Biden to give Ukraine more weapons, bigger weapons, and more deadly weapons. And where does that leave Trump, who is on the record calling Putin a savvy genius? The more Americans in general and Republicans in particular come to hate Russians in general and Czar Vladimir I in particular, the more likely Republicans are going to feel comfortable about going after Trump. Of all things, it might turn out that foreign policy is Trump's Achilles' heel. (V)

Seizing Oligarchs' Property Is Not So Simple

Some people have the idea that seizing an oligarch's property is easy. Like the Justice Dept. just goes to the owner of a luxury condo building and subpoenas a list of the owners, Then they go down the list and if they hit one owned by Oleg Oligarch, they just take it. Turns out it doesn't work quite like that.

To start with, any oligarch who was smart enough to steal billions from the company he runs is probably smart enough to make sure the legal owner of record is a corporation in Panama. And that corporation is owned by a corporation in the Cayman Islands. And that a corporation is owned by a Bermuda corporation. And that corporation's shares are split between a trust in the British Virgin Islands and the oligarch's niece's three-year-old daughter. And none of those jurisdictions are keen on helping nosy people, no matter how many U.S. subpoenas they get. So finding out who owns a condo isn't so easy except maybe for those owned by people who flunked Oligarch 101 in college.

And once the Dept. of Justice has found out who owns a condo (or yacht or mansion or corporation that owns a lot of stock, bank accounts, and other assets) that is only step 1. The U.S. has laws saying that the government can't just seize private property willy-nilly. It has to have a case that the owner did something illegal. Note that freezing an asset—that is, temporarily blocking the owner from accessing it or selling it—is not the same as the government seizing it (i.e., taking ownership of it). Freezing assets is easy for the government. Seizing is not.

For example, in 2008, federal prosecutors tried to seize an office building in Manhattan owned by the Iranian government, in violation of sanctions. It took a court case that lingered until 2017 before a jury concluded that the government could seize the building. Of course, from an oligarch's point of view, having your property frozen for 9 years, paying millions of dollars to expensive lawyers, and then losing it in the end is not a great outcome.

Fundamentally, to seize a property, the government must prove that the real owner has broken some law. If an oligarch is sanctioned but his brother-in-law is not, then if formal title is in the brother-in-law's name, proving that the brother-in-law committed a crime could be difficult, assuming the government can even figure out who actually owns the place. Some state senators in New York are working on new state laws that would make the true ownership of properties more visible, but such laws haven't passed yet and if they do pass, will have to be enforced somehow.

Still, some prosecutors are optimistic. Andrew Adams, a veteran DoJ prosecutor who works on corruption cases, has been assigned to lead the new KleptoCapture task force. The force has prosecutors, agents, analysts, and linguists. They will examine all routes oligarchs use to evade the sanctions, specifically including the use of cryptocurrencies. The group has subpoena power and is expected to use it heavily to collect millions of documents and interview large numbers of bankers, real estate agents, and others. Nearly 900 Russians are on the sanctions list and Adams has the list and is getting to work. (V)

Two Can Play the Sanctions Game

As most people know now, the U.S. has placed sanctions on many Russian oligarchs in an attempt to punish them for stealing millions or billions of dollars, and to put pressure on Russia to stop the war in Ukraine. It turns out other countries can also place sanctions on people it thinks have behaved badly Specifically, Russia has now placed sanctions on Joe Biden, Secretary of State Antony Blinken, Secretary of Defense Lloyd Austin, Chairman of the Joint Chiefs Mark Milley, NSA Jake Sullivan, CIA Director William Burns, and some other U.S. officials. Russia didn't forget Canada either. Prime Minister Justin Trudeau also got hit, although the sanctions are only 80% as costly there. No doubt all the luxury condos, personal jets, and megayachts these people have in Russia will soon be seized (rather than merely frozen). And the seizure process will take seconds, not 9 years (see above item) as things move fast in Russia.

The Russian Foreign Ministry said: "This step, taken in the order of backlash, became an inevitable consequence of the extreme Russophobic course taken by the current #US Administration, which in a desperate attempt to preserve American hegemony, made a bet, throwing away all decency ... and Russia's frontal restraint." Take that, you American oligarchs! (V)

Are Black Voters Becoming Republicans?

After the 2020 election, there was some talk that Black voters (also Latinos) were warming to the Republican Party and this was freaking out Democratic leaders since Black folks are the most loyal and dedicated group of Democratic voters and are generally pretty good about turning out (in contrast to, say, young voters). However, new analyses of the data come to a somewhat different conclusion.

The initial (very small) exit polls showed Trump went from 8% in 2016 to 12% in 2020, a 50% increase. If the Black population makes up 14% of the electorate, then a Republican going from 8% of 14% (1.1%) to 12% of 14% (1.7%) is a gain of only 0.6%. Still, if were true, it would be a trend in the wrong direction for Democrats. But it's not true.

New analyses show that Trump got 6% of the Black vote in 2016 and 8% in 2020, a smaller absolute number and a smaller percentage change. But let's look at the historical picture. From 1968 to 2004, Republican presidential candidates averaged 11% of the Black vote. Trump not only did worse than the 36-year average, but he also underperformed every single Republican nominee since the Voting Rights Act went into effect. To show the real effect here, 2008 and 2012 need to be omitted from the statistics since the presence of a Black Democrat in the race skewed the data. And against the extremely unpopular Hillary Clinton, Trump only matched Mitt Romney's percentage of the Black vote.

A 1998 paper by Paul Frymer and John David Skrentny defined "electoral capture" as the effect when one party gives up trying to attract some group so the other party can take it for granted and neglect its interests without too much damage. Republicans have de facto given up on Black voters so Democrats don't feel they have to cater to Black voters so much and some Black voters notice that, even though voting for Republicans may feel repugnant to them.

The electoral capture of Black voters by the Democrats is due to three factors:

  1. Republicans do not want strong civil rights laws for fear of alienating its huge angry white base
  2. To prove to its base how pro-white it is, the GOP takes positions of other issues that Black voters oppose
  3. While the Democrats give Black people some policies they want, it doesn't feel compelled to fight hard for their votes

Moderate Republican politicians at the state level have done better with Black voters, especially in blue states where governors know that a base-only strategy is doomed to failure. When they start to go base-only, they not only lose Black votes, but also white votes. Gov. Glenn Youngkin (R-VA) has been in office only a couple of months, but already his approval rating has dropped to 41% because his outspoken opinion on Critical Race Theory has run headlong into the two-thirds of all voters who want schools to teach history the way it really was.

Currently, Joe Biden's approval rating with Black voters matches Bill Clinton's, who was wildly popular among Black voters, even though Biden doesn't play the saxophone. Biden is a centrist who is pushing back on the "woke" left and, if anything, Black voters like his emphasis on the economy and jobs, rather than cultural issues. The conclusion is that if the Republicans really want to make inroads in the Black vote, they are going to have to abandon their white-base-only strategy, but that is not going to happen as long as Donald Trump is calling the shots. (V)

Warren Splits with Progressives on Crypto

Sen. Elizabeth Warren (D-MA) is something of a bête noire (bêth noire? ) among bankers. She wants to curtail their power with heavy regulation. So she is naturally a huge fan of cryptocurrency, since its goal (other than making business easier for kidnappers and blackmailers) is to compete with the banks and reduce their power, right?

Actually, wrong. She is probably the Democrats' most vocal opponent of all things crypto because it exposes consumers to great risk, enables financial crimes, and threatens the environment due to its massive electricity usage for mining. In contrast, many young progressive are all for encouraging the crypto industry, hoping it will become an alternative for traditional banks. What Warren realizes and the others don't is that Bitcoins and the others are speculative assets, like gold or pork belly futures. If you put $100 in a bank account now, next week you will still have $100 there. In contrast, $100 in crypto could be worth $75 or $125 next week. Most people don't realize that.

Another older Democrat who is on the same page as Warren is Sen. Sherrod Brown (D-OH), chairman of the Senate Banking Committee., who also sees the risks for people who don't understand they are buying the digital equivalent of tulip bulbs during tulip mania. Then, a single bulb was worth 10x the annual wages of a skilled artisan—until it was suddenly worth nothing.

What the progressive Democrats see is a banking system that has little interest in poor people, many of whom are minorities. They think crypto can solve the problem, overlooking its hugely speculative character. What they have missed is that there is a very different (and much safer) route to helping the unbanked: postal banking. Congress could pass a law allowing the USPS to offer basic banking services such as checking accounts and saving accounts, and maybe even credit cards and small loans, all at fees much lower than the banks because USPS would be required to only break even, not turn a profit. Many other countries have postal banking. It's not rocket science and doesn't expose the least sophisticated and most vulnerable people to a highly speculative investment they don't understand and have no business being in.

Crypto depends on a technology called block chain, where each transaction is recorded in multiple ledgers in parallel. This eliminates a central authority (like a bank) from the loop. Advocates see that as a big feature. One potential problem that hasn't occurred yet, but could, is a fork. Suppose there is a very suspicious (or maybe outright illegal) transaction, such as an oligarch clearly violating a sanctions law. What happens if some of the ledgers that are told to record the transaction refuse to do so because it is illegal. Then the ledgers will be inconsistent. Which ones should be believed going forward?

As an irrelevant but interesting aside, in the middle of the Politico article linked to above, which is headlined "Elizabeth Warren's anti-crypto crusade splits the left," and which is about her opposition to crypto, this ad appeared:

Crypto ad inside anticrypto article

Apparently the artificial intelligence system Politico is using to decide where to place ads isn't so intelligent. So people aren't quite obsolete yet. (V)

Fed Raises Interest Rates and Larry Summers Is Worried

Yesterday the Fed raised interest rates by 0.25% and projected six more raises this year and next in an effort to tame inflation. If it works (quickly enough) that is good news for the Democrats. Then Joe Biden can claim he did it (by renominating Jay Powell as Fed chair). The stock market liked the move, with the Dow Jones average up 519 points (3.8%) yesterday.

But not everybody is happy. Specifically, Larry Summers is not happy. Summers is a famous, but controversial, economist. He was a boy genius, entering MIT at 16 and becoming a tenured full professor at Harvard at 28. He was later president of Harvard. He also served as secretary of the treasury in Bill Clinton's administration and Director of the National Economic Council in Barack Obama's, so he is clearly a Democrat and has no interest in sinking the S.S. Biden. That said, he is also known for being stubborn and arrogant.

Summers wrote an op-ed in the Washington Post warning about what is likely to happen next. He said that Powell hopes to have a "soft landing," meaning inflation comes down without causing a recession and massive unemployment. Summers also said that while anything can happen and he is hoping for the best, he foresees stagflation in the coming years, with inflation about 5% and unemployment also above 5%, a bad outcome that would almost certainly be followed by a recession. History strongly suggests that he has a point. Generally after a series of rate increases there is a recession, as shown by this chart:

Interest rates and unemployment, the chart
covers 1970 to the present and shows that fed rate increases do tend to come right before periods of higher unemployment. That said, the correlation isn't
overwhelming, in particular because the time lapse between the two events is quite variable.

The big problem for the Democrats is the timing. If interest rates go to 1% this year, there won't be a recession. But if they go to 2-3% next year, the recession is likely in 2024—an election year. The Republicans will blame the recession on Joe Biden and the Democrats, even though: (1) it's not Biden's fault and (2) the Fed raised rates to conquer the inflation the Republicans are screaming about. If Powell can pull off the soft landing, it will be a feather in his cap, but Summers, for one, is not counting on his ability to do it. (V)

Shalanda Young Confirmed as Director of OMB

With Ukraine and the Fed sucking up all the oxygen, an important news story sort of got lost. The Senate has confirmed Shalanda Young as director of the Office of Management and Budget. She is not the first woman to run OMB (Sylvia Burwell was one of the seven (!) people who ran it during the Obama administration), but she is the first Black woman.

The confirmation vote was 61-36. That is actually surprising since the director or OMB is a hugely powerful position. That office puts together the federal budget that gets sent to Congress. In principle, Congress has the power of the purse, but the members are too busy grandstanding to actually put together the federal budget. So Young will do it and they may tinker a bit around the edges, but for the most part, what Young wants to spend money on is where it will go.

The office is considered a cabinet-level appointment, so Young is the fifth Black woman in the Cabinet. Biden promised Black women that he would put Black women in positions of power and he has absolutely kept that promise. Sen. Richard Shelby (R-AL), the ranking member of the Senate Appropriations Committee, said: "I think it'd be hard for the Biden administration to do any better. She'll do a good job, if they let her." And remember, Shelby is a conservative Republican from Alabama. (V)

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