Saturday, May 18, 2024

An Inflation Conversation - Mauldin Economics

An Inflation Conversation - Mauldin Economics

...“But in an inflationary world—and I’ll go into a second as to why we are an inflationary world and why we will stay there—in an inflationary world, rising interest rates are seldom enough to break the back of bull markets because the reality is, nominal growth tends to go up just as fast as interest rates. And so, if you have interest rates that move from 0% to 5% but nominal growth that moves from 2% to 7%, then with 7% nominal growth, companies, individuals, households can pay off their debt, and you don’t get into the bust phase of the cycle.

...nominal growth grew even faster and is still doing so. Why? Louis sees two drivers. First, the demographic labor shortage is raising wages for low-end workers with a propensity to spend most of it. This boosts demand for all kinds of products. The second factor is an unfolding boom in emerging markets—not just China. This is raising global demand for energy and natural resources.

Thursday, May 16, 2024

Orange Charger thinks a $750 outlet will solve EV charging for apartment dwellers | TechCrunch

Orange Charger thinks a $750 outlet will solve EV charging for apartment dwellers | TechCrunch

A message for those graduating in toxic times - GZERO Media

A message for those graduating in toxic times - GZERO Media

   

You might be wondering … what’s it like to be the graduation speaker on an American college campus these days? On Monday evening, I got the chance to find out.

Columbia University’s School of International and Public Affairs, a school where I teach a class on applied geopolitics, invited me to deliver this year’s commencement speech. It was a privilege – and a challenge – that I took very seriously.

I’ve reprinted my speech below, but first, let me describe the experience.

Yes, there were protesters – of course there were. A number of students in the audience wore the keffiyeh, the scarf that has become a symbol of solidarity with Palestinians, particularly those trapped by the war in Gaza. Many brought Palestinian flags on stage with them as they collected their diplomas. More still passed out “diplomas” calling on Columbia University to divest from Israel in protest against the continuing conflict.

But not a single student walked out. Not one turned their back. When I began speaking about the war, there were rumblings in the audience for me to go into more depth. I stopped the speech briefly to assure them I intended to do just that. And then I did.

At no time did anyone try to disrupt the event or to shout me down – or anyone else.

The protesters were visible, creative, constructive, and respectful of the importance of the event for the graduates. They made themselves seen and heard, but they allowed everyone else to be seen and heard too.

In short, it was a beautiful thing, and I was proud to see it, particularly for the reasons I laid out in my speech.

Here it is … in its entirety.

*****

Dean Yarhi-Milo, distinguished faculty, honored guests, SIPA class of 2024.

Congratulations! To the graduates, with thanks to your families that supported you in your studies to get here today. With appreciation for the faculty and staff that make SIPA such a unique and valuable experience.

You made it!

How, exactly, you should feel about that and what, exactly, you’ve made it to, may feel unsettling to you today.

You’ve come to SIPA from all over the world, and you’ve finished an intense and rigorous program in public affairs. You’ve explored how institutions can improve human societies, and how and why they fail. You’ve studied these things so that you can help guide the future in ways that will ultimately serve the public good. I’ve no doubt that doing good and solving problems are your goals.

And yet …

You’re leaving behind a campus that has been ripped apart by an intractable problem of societies in conflict. Here on this campus, in this tiny insignificant microcosm of that deadly, decades-long crisis in the Middle East, has progress been made? Demands have been issued by the powerless, and mostly ignored by the powerful. There have been chants and yelling, and not much listening. And now, the players in this drama, and all of you, depart for new jobs, internships, fellowships, and summer travel, boundless opportunities afforded by elite institutions and the constituencies they serve.

While the war rages on. The hostages remain. And death stalks the population of Gaza.

You might ask yourselves why this particular conflict in the Middle East has so captured our attention. It is not, of course, the only conflict out there.

The war in Ukraine still deserves more of our attention. No, not because they’re white people in Europe. Hundreds of thousands have died, and more will follow. And this war’s impact on global food and fuel supplies threatens to push tens of millions of the world’s poorest back into poverty and starvation. Of all the conflicts in the world through your time here at SIPA, the war in Ukraine has hurt the most people.

In Sudan, with far fewer journalists to tell the stories, we will never know how many have already been killed or how many face starvation.

A few hundred miles from the tip of Florida, violent gangs are consuming Haiti. The government of the United States has done nothing about it, except to send back the desperate refugees who make it to our shores.

In Armenia, where some of my family are from, 100,000 people were ethnically cleansed just a few months ago in Nagorno-Karabakh. An old friend of mine, who left a comfortable life to serve his people there, has been falsely imprisoned on charges of terrorism.

Why has Israel / Palestine taken such command of our attention? Is it because we believe this killing results from the sins of Western civilization? Is it that America bears greater responsibility for this conflict? Or has greater opportunity to influence the outcome?

Let me pose a different hypothesis. Perhaps it is because this conflict is easier to reduce to absolutes. One side is right. The other is always wrong. One is always a victim, the other a hotbed of terrorism, or a vindictive colonial oppressor. We identify with one side over the other. We share the greatest cultural or religious affinity with this side or the other one.

Wherever you come from, I’ve no doubt that you — SIPA graduates — know this conflict is deeply complex, with historical roots well beyond the fighting this year. And yet the nature of this conflict makes it useful to powerful interests in this country. Useful to generate clicks, to capture attention, to sell ad space, to secure political advantage in this instant — and in this election — without any attention to the long, slow slog of work and compromise that is the only path to peace.

There are so many political and commercial forces today that frustrate progress. They ignore history and reject evidence. They amplify bias. They push made-for-the-moment ideas that are more slogan than solution. “Build the wall.” “Defund the police.” “From the river to the sea.”

These slogans divide us from them.

We don’t need to find shadowy forces that come from some deep global conspiracy. These threats are the result of the political and economic systems we’ve built. In recent decades, we thought liberal democracy would be the bulwark against dictatorships and autocracy. But liberalism has been supplanted by corporatism, which lacks a moral compass and makes a mockery of the public good.

Our public institutions are in decline just when we need them the most.

When I say the word “institution,” what image do you see? An edifice of stone, solid and unyielding, built for the ages? Hamilton Hall?

As SIPA grads you know that institutions are more like gardens. Dynamic systems of diverse and competing interests, constantly growing and reacting to their environment. Capable of great beauty, but at constant risk of infestation and disease.

Your leaders and elites have failed to tend as they should to the institutions they inherited. We have taken for granted the benefits of globalization with no plan to pay the check. We have reached for short-term gains — in wealth, in power — and avoided the hard effort of tending the gardens that sustain us.

And so, graduates, you should face the future with concern about our ability to manage the forces that drive us apart. Are our institutions fit for today’s purpose? Information warfare is fought on all sides, and we are the civilian casualties. Algorithms — controlled by people and business models that don’t care about civil society — shape our perceptions of what is true.

Israel and its supporters don’t see and hear the same news that Palestinians and their supporters see. Russians don’t get the same information about their war as Ukrainians, Europeans, and Americans do. In today’s America, the political information consumed by Biden and Trump voters comes from different planets.

I wish I was overstating that problem. But here at SIPA, you know that I’m not.

Our technological futures are being shaped by corporate leaders who don’t answer to elections, who will oversimplify the challenges we face and promote fixes only the technologists can provide. Techno-utopianism is a dangerous fantasy. Look at what it offers us: painless solutions to complex problems. Endless profits for its high priests. Civil society becomes an externality. The public good, a helpless bystander.

Disinformation, conspiracies, and performative outrage are the most dangerous rot in the gardens of our institutions. They will be impossible to eradicate if we huddle comfortably within our own bubbles, rejecting all the ideas and information that challenge us to question our assumptions, refusing to hear the other side.

How do we prevent these outcomes, and the violence that will inevitably ensue?

I have built my professional career on thoughtful analysis, but on these questions, I have no easy answers. We live in a world of complexity, where real evidence, critical thinking, and the dogged, persistent pursuit of practical solutions are so essential.

I am certain of a few things. First, it does not have to be this way. Humans created these problems, and humans can solve them.

Second, your generation — particularly you who have been so fortunate to study at this place and in this moment — YOU MUST find different paths from those who came before you.

I know that you have goals as varied as your backgrounds. Some of you are ready to change the world, you will pursue the heights of public service and government or found innovative startups to make a difference. Some of you have debts to pay, families to support, responsibilities too great to think about taking big risks. Some of you, like me over 30 years ago, have absolutely no idea what you really want to do. I’ll be honest, when I came to New York from Stanford so long ago, I just wanted a good job. But no one would hire me. They thought they didn’t need political scientists. I’ve spent the past three decades trying to show them they were wrong, and I’m looking forward to you doing the same.

Regardless of the path you choose, now or in the future, ALL of you have something to offer. All of you can make a difference. You know how to analyze problems, and you understand much of what makes societies stable, what brings countries into conflict. You can see where the choices that governments and institutions make can either help or hurt your fellow humans. You can help others to see clearly. You can choose to do the right thing.

In my own history, even when crammed into a borrowed cubicle, eating ramen under a leaky roof off West End Avenue, there were easy paths to financial success I would not follow. And later, when my company Eurasia Group finally became something more than Eurasia Guy, there were clients we would not take, governments we would not serve. That remains true today.

You may feel that your role today is small, that nothing you do will matter so much. Resist such feelings. Hard work is never a hopeless cause. Each step in the right direction matters.

You will make endless decisions over your careers in public affairs. Countless opportunities for small steps forward when you remain focused on doing right, with an eye toward the long term, toward repairing public confidence in our civic institutions.

This is what you have been trained for, and this is what our institutions need.

As you set off on the next phase of your lives, I hope that you will keep a few principles in mind, some themes to help us create a truly civil society:

1. Change your mind

The world never stops changing.
If you’re afraid to change your mind …
even about things you consider fundamentally important …
ESPECIALLY those things,
the more wrong you will become as the world around you changes. Having a fixed worldview is the one thing that guarantees you’ll be wrong as the world changes.

2. Listen to the other side

Are you a tolerant person?
I’m really asking you.
If you’re a tolerant person, you can listen to people you disagree with, even strongly disagree with, and learn something you didn’t know.
Learn something that can help you do what you think you should do.
Make a list of people you respect …
… but with whom you disagree on questions you feel are truly important.
Listen to those people. Read what they write. Follow them on social media.
They may not shift your core convictions. It doesn’t matter.
Listening to them and considering FAIRLY, HONESTLY what they say will broaden and deepen your perspective.

3. Remember that your work is about helping people

If your work is on the problems of international and public affairs, your work is about people and their lives.
Don’t forget that.
It’s not mainly about ideas and principles.
It’s about creating opportunities for people alive today and others not yet born.
Opportunities to live securely. To learn. To realize potential. And to share.

When life gets in the way, as it surely will, remember what brought you here, to this place, to this field of study. Remember how fortunate you are, and never forget those whose most basic needs are constantly under pressure. Resist the gentle tug of fatalism. Resist the long slide into complacency.

And please remember, cynicism is toxic. It’s pure poison. Do not swallow it.

And last but not least (at least not for those of you who know me)

4. Take your work, but not yourself seriously

I was going to make this speech funny.
Because I’m generally a funny person.
But I take this moment seriously.

If you’re a generous person, your WORK will outlive you.
When we go, we can’t take anything with us.
Give what you have.

I believe this is a secret of happiness.
The happiness of those who will benefit because you shared what you had to give.
I believe that can make you happy too.

Class of 2024, today’s wars will grind on a while longer, and America’s election season will only get uglier.

We’re not going to kid ourselves.

None of us will change the world this week.

But each of us has a chance to use whatever talent and wisdom we have to learn what this world has to teach us … and to work with other people, especially those we disagree with, to build a more cooperative future.

I wish you, graduates, the very best.

And I thank you.

Wednesday, May 15, 2024

Why an MLP Doesn’t Belong in Your IRA - btbirkett@gmail.com - Gmail

Why an MLP Doesn’t Belong in Your IRA - btbirkett@gmail.com - Gmail

Why an MLP Doesn't Belong in Your IRA

By Ed D'Agostino | May 14, 2024

Ed D'Agostino

   

The path to the US’s energy future is becoming obvious. Over time, nuclear will become one of, if not the primary, sources of energy feeding our ever-growing demand for electricity. China and India are far ahead of the US on this, with hundreds of new reactors slated for construction.

The problem is our projected increase in energy demand is here now. The rapid growth of artificial intelligence is fueling the construction of massive new data farms, housing thousands of energy-hungry CPUs. The government wants us to drive electric cars, get rid of our gas stoves, and replace our central heat and AC systems with more efficient heat pumps.

It is not obvious how to reconcile today’s greener energy goals with a grid that depends on fossil fuels. You may believe the answer is more wind or solar power, combined with batteries, but that comes with another set of problems—our reliance on China for solar panels and the rare earth metals required to build them.

So, what’s the plan? How do we generate more electricity over the next two decades? That’s how long it will take (under current regulatory restrictions) for the US to build more nuclear power plants.

The only viable option to get us from today’s goals to a nuclear-powered future is natural gas. It is the perfect bridge to nuclear—at least, in the US. It’s cheap, abundant, provides baseload power, and burns far cleaner than other traditional fuels.

I am bullish on US energy. Energy has outperformed the market over the past four years, yet energy stocks are still relatively cheap. Louis Gave calls energy the new “anti-fragile asset of choice,” taking the place of bonds in a portfolio. Energy provides you with a geopolitical hedge, while paying generous dividends.

Share 
 

Several readers of our macro investment service, Macro Advantage, have asked why we have not added a company like Energy Products Partners LP (EPD) to the portfolio. After all, the company yields over 7%, and is well regarded and relatively cheap.

No argument. EPD is a fine business and worth considering, but… the company is structured as a Master Limited Partnership (an “MLP”).

MLPs are hybrid entities. They are considered partnerships for federal tax purposes, but they trade on public exchanges just like many corporations do. MLPs issue “units” instead of shares, and investors are the limited partners. MLPs do not pay income taxes at the business level. Instead, the MLP’s profits and losses pass through to the limited partners (aka, the investors), who receive a Schedule K-1 each year.

To maintain this setup, an MLP needs to produce at least 90% of its income from qualifying sources. These qualifying sources include the production and processing of natural resources. This is why MLPs are concentrated in the energy sector.

MLPs make minimum quarterly distributions, typically returning most of their distributable cash flow to investors. The often-repeated rule is that around 80% of these distributions tend to be tax deferred, but the mechanics here are complicated, and the amount that is deferred varies.

If this all sounds good so far, you are right. MLPs, for the right investor (consult your advisor) can be a fantastic source of steady, tax-deferred income. But as always, know what you are buying. If you invest primarily through an IRA or other type of tax advantaged account, an MLP might bring unexpected issues.

MLP investors will see some amount of “unrelated business taxable income,” or UBTI, listed on the Schedule K-1 they receive from the MLP annually. A few unpleasant things happen when you have more than $1,000 in UBTI from MLPs in your IRA. First, you need to submit another special tax form (Form 990-T). Second, you need to pay taxes on the UBTI. And third, in some rare instances you could endanger your IRA’s tax deferred status.

In short, investing in an MLP can offer tax benefits—and even some estate planning benefits if you get strategic. But MLPs also come with additional paperwork at tax time that you might not want to deal with. If you’re a high-net-worth investor or running a family office, you likely have the infrastructure in place to manage the extra work.

But if you are new to investing, invest primarily through an IRA, or merely place a high premium on simplicity come tax time, MLPs might not be the best way for you to invest in the energy sector.

Not to worry—there are plenty of traditional energy stocks worth a look, including the two domestic producers we hold in the Macro Advantage portfolio. If you’d like to learn more about them, consider joining us at Macro Advantage by clicking here.

🍅 Axios Finish Line: Eat your veggies - btbirkett@gmail.com - Gmail

🍅 Axios Finish Line: Eat your veggies - btbirkett@gmail.com - Gmail

  • For example, eating a tomato with olive oil unlocks a different nutrient profile than eating a roasted tomato: "If you're eating it in a way that tastes very good," it's often a more "nutritionally rich experience."

Monday, May 13, 2024

Just how bad are ultraprocessed foods? Here are 5 things to know | CNN

Just how bad are ultraprocessed foods? Here are 5 things to know | CNN

///\\\... Researchers found that when the participants were on the ultraprocessed diet, they ate about 500 calories more per day than when they were on the minimally processed one. This difference in calories translated quickly to the scale. Participants gained on average 2 pounds during the two weeks on the ultraprocessed diet and lost 2 pounds on the minimally processed one. And their blood work showed lower markers of inflammation when they were on the latter.

Saturday, May 11, 2024

Florida HOA fees are soaring. Here's what to know

Florida HOA fees are soaring. Here's what to know

Stagflation, AI & “Condomageddon”

 https://www.mauldineconomics.com/download/global-macro-update-transcript-danielle-dimartino-booth


... [Powell on wrong data] I think it's definitely something that he had planned. You don't effectively dis the powers that be at US statistical agencies without planning. But there he was talking about Indeed and obviously with reference to Indeed's wage tracker and Indeed's job postings data. That was a slight to all those months that he clung tight to the JOLTS data. He spoke to the conference board and jobs hard to get, that metric being at the weakest since 2011, if you feel like you're going to lose these just... excuse me… came out in last week's most recent conference board report. But if somebody loses their job right now, their confidence in getting another one is at the lowest since 2011. But the fact is Powell brought that up, so that's really dissing a lot of all..

Friday, May 10, 2024

Sterling Ruby’s New Paintings Sold for $550,000 Each at Frieze New York. Are They Worth That?

Sterling Ruby’s New Paintings Sold for $550,000 Each at Frieze New York. Are They Worth That?

Let me point out something: If you spent $550,000 on a brand new painting by Ruby last week, you paid more than anyone else did for a Ruby at auction in the past two years, according to the Artnet Price Database. Since 2018, only one person paid more than that at auction: the buyer of a massive, pink-hued spray painting, SP15 (2007), spending about $615,000 at Sotheby’s Hong Kong in 2021.

photograph of sterling ruby paintings

Sterling Ruby paintings at Gagosian’s Frieze New York booth. Photo by Elvin Tavarez.

I’ve written a lot lately about the disconnect between primary and secondary prices, where artworks cost more when they are new than when they are resold. Investment-grade art seems a lot less liquid than it used to be. Yet collectors still pay wild primary prices

Saturday, May 4, 2024

On My Radar: A Different Kind of World War - CMG

On My Radar: A Different Kind of World War - CMG

...David Rosenberg, Dr. Lacy Hunt, and Danielle Di Martino Booth are firmly in the recession camp. Jim Bianco, Luis Vincent-Gave, and Felix Zulauf are in the inflation camp. At the start of the year, a loud lone voice, active in the media, called for "no landing." It was Jim Bianco. Not soft, not hard, but no landing, as in no soft or hard recession. The consensus was calling for six rate cuts in 2024. He continues to predict rising inflation and an ok economy. ...

WWIII – Dr. Pippa Malmgren and General H. David Petraeus

... China and Russia know they cannot defeat the US using traditional military means. Their strategy is simple. Force the US to deploy military assets, which will bleed America dry of cash at a time when the US budget deficit is already overwhelmingly too large and perhaps unfixable. Create inflation by any means because the US is very politically sensitive to inflation, especially in the run-up to an important election. Open multiple geopolitical fronts because the US can’t handle a multi-front conflict very well.

...
  • Innovation vs. Inflation: She proposed that in the context of a peace dividend, innovation would likely outpace inflation, leading to economic growth and new opportunities. This optimism contrasts with the dark tone of the geopolitical realities she discussed earlier.

Thursday, May 2, 2024

Duolingo - 5 Things You Need to Know to Start Your Day: Americas - btbirkett@gmail.com - Gmail

5 Things You Need to Know to Start Your Day: Americas - btbirkett@gmail.com - Gmail

Duolingo can actually incorporate the conversational element of language learning, which everyone regards as crucial, in a way that couldn't be done earlier. Meanwhile the company's own in-house AI model is used to constantly rewrite the app's own pedagogical approach, calibrating lessons to each user.

Wednesday, May 1, 2024

🎯The Rolling Stones have been touring for 60 years - Axios PM: - btbirkett@gmail.com - Gmail

🎯Axios PM: Trump's campaign scramble - btbirkett@gmail.com - Gmail

4. 🎸 1 for the road
Mick Jagger of the Rolling Stones performs during the first night of the U.S. leg of their "Hackney Diamonds" tour in Houston on Sunday. Photo: Amy Harris/Invision/APin

The Rolling Stones have been touring for 60 years — and they're still at it.

  • The band kicked off their latest North American tour earlier this week in Houston, playing songs from "Hackney Diamonds," their first new album in nearly 20 years.
  • Mick Jagger and Keith Richards are both 80; guitarist Ronnie Wood is 76.

Microsoft, Brookfield to develop more than 10.5 gigawatts of renewable energy

Microsoft, Brookfield to develop more than 10.5 gigawatts of renewable energy

Team Nadella signed a deal with Brookfield Asset Management to invest $10B to develop 10.5 gigawatts of renewable energy capacity between 2026 and 2030 for use in its data centers.  

 

To put that in perspective, CNBC reports that the deal is 3X the existing 3.5 gigawatts consumed by data centers in Northern Virginia, the world’s largest data center market. (Read

Sunday, April 21, 2024

China-Russia-Iran Axis Is Bad News for Trump and GOP Isolationists - Bloomberg

China-Russia-Iran Axis Is Bad News for Trump and GOP Isolationists - Bloomberg

The Second Cold War Is Escalating Faster Than the First

To understand what is at stake in the fight against the axis of China, Russia and Iran, just read “The Lord of the Rings.”

April 21, 2024 at 5:00 AM GMT+1

https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iDdISHx_Tsuo/v2/piUjdcePl62Og/160x160.jpg

 

By Niall Ferguson

Niall Ferguson is a Bloomberg Opinion columnist. He is the Milbank Family Senior Fellow at the Hoover Institution at Stanford University and the author, most recently, of “Doom: The Politics of Catastrophe.”


In J.R.R. Tolkien’s great epic, The Lord of the Rings, it becomes apparent only gradually that the forces of darkness have united. Sauron, with his baleful all-seeing eye, emerges as the leader of a vast axis of evil: the Black Riders, the corrupted wizard Saruman, the subhuman orcs, the malignant courtier Wormtongue, the giant venomous spider Shelob — they are all in it together, and Mordor is their headquarters.

Tolkien knew whereof he wrote. A veteran of World War I, he watched with dismay the approach of a second great conflagration. Sipping pints of bitter and puffing his pipe in “The Shire” — his idealized Middle England — he could only shudder as Nazi Germany, fascist Italy and imperialist Japan came together to form their Axis in 1936-37, and mutter, “I told you so,” when Hitler and Stalin joined forces in 1939.

We, too, are witnessing the formation and consolidation of an Axis. I was vividly reminded of Tolkien by a tweet published by the conservative broadcaster Mark R. Levin on Tuesday. It is worth quoting: “Appeasement is escalation. Our enemies are on the move. Our allies are being encircled and attacked or soon attacked. … Conservatism and MAGA are not about isolationism or pacifism. They’re not about appeasement or national suicide. … It is up to us, patriotic Americans, to step into the breach and get this done now.”

The significance of Levin’s intervention — penned from Israel, which he has been visiting — is that it so clearly puts him on a collision course with the isolationist elements within the Republican Party, such as Representative Marjorie Taylor Greene, who last week threatened to oust House Speaker Mike Johnson if he pressed ahead with a bill that would restore US aid to Ukraine. “We are going to stand for freedom and make sure that Vladimir Putin doesn’t march through Europe,” Johnson declared. “We have to project to Putin, Xi, and Iran, and North Korea, and anybody else that we will defend freedom.”

To the likes of Greene and Levin’s former Fox News colleague Tucker Carlson, the war in Ukraine is just “a quarrel in a far-away country between people of whom we know nothing,” as British Prime Minister Neville Chamberlain infamously said of Czechoslovakia in September 1938. They appear quite unembarrassed to serve as Russian President Vladimir Putin’s “useful idiots,” in direct lineal succession to Hitler’s and Stalin’s apologists in the 1930s.

And not only Putin’s. for, as State Department spokesman Matthew Miller pointed out last week, behind the Russian war effort stands the vast economic resources of the People’s Republic of China. “What we have seen over the past months is that there have been materials moving from China to Russia that Russia has used to rebuild [its] industrial base and produce arms that are showing up on the battlefield in Ukraine,” Miller told reporters on Tuesday. “And we are incredibly concerned about that.” In Beijing earlier this month, Treasury Secretary Janet Yellen warned her Chinese counterpart that there would be “significant consequences” if China continued to support the Russian war effort in Ukraine.

Despite their protestations that they wish to act as peacemakers, China’s leaders gave the invasion of Ukraine their blessing on its eve — what else did the mutual pledge of a “no-limits” partnership mean? — and President Xi Jinping’s support has been crucial to Putin’s survival ever since his invasion force was repelled from the outskirts of Kyiv  

The emergence of this new Axis was foreseen by Zbigniew Brzezinski, President Jimmy Carter’s national security advisor years ago.

By the same token, one cannot treat Iran’s war against Israel in isolation. Tehran supports Russia’s war against Ukraine, supplying thousands of drones and missiles similar to the ones unleashed against Israel last weekend. Russia, in turn, is likely helping to strengthen Iran’s air defenses. China is not only one of the main buyers of Iran’s oil; Chinese Foreign Minister Wang Yi called Tehran immediately after the attack on Israel to praise rather than condemn his Iranian counterparts. Chinese propaganda has been consistently anti-Israel since Hamas’s murderous attacks of Oct. 7 last year. er, as long ago as 1997. In his book The Grand Chessboard, Brzezinski wrote:

Potentially, the most dangerous scenario would be a grand coalition of China, Russia, and perhaps Iran, an “antihegemonic” coalition united not by ideology but by complementary grievances. It would be reminiscent in scale and scope of the challenge once posed by the Sino-Soviet bloc, though this time China would likely be the leader and Russia the follower.

Brzezinski was prophetic. Looking back over the past three years, however, it is hard not to conclude that his successors in the Biden administration have done a great deal unwittingly as well as wittingly to make this coalition a reality, beginning by abandoning the Afghans to the tender mercies of the Taliban in 2021, then failing to deter Russia from invading Ukraine in 2022, and finally failing to deter Iran from unleashing its proxies against Israel in 2023. Yes, Biden stepped up to aid Ukraine and Israel when they came under attack, but an earlier show of strength might have avoided both emergencies.

Levin and Johnson have realized, as former Secretary of State Mike Pompeo has long argued, that some quarrels in far-away countries must ultimately concern us. They are parts of a single war being waged by a new Axis against the fundamental values we hold dear: democracy, the rule of law, individual freedom. I predict that the isolationists’ counterarguments will not age well.

For now, fortunately, we are in Cold War II, not World War III. However, Cold War II is proceeding rather faster than Cold War I. If the Russian invasion of Ukraine was our equivalent of the Korean War of 1950-53, we have (thus far) skated past a second Cuban Missile Crisis — over Taiwan — and have already entered a period of détente, a sequence that took two decades last time around. Since last November’s presidential summit in Woodside, California, the Chinese have seemed genuinely keen to avoid a showdown and want to engage in serious, if frosty, dialogue with their American counterparts, reminiscent of 1969-72.

But the surprise attack on Israel by Hamas last October propelled us all the way to 1973. And it is worth recalling that détente did not long survive Henry Kissinger’s successful assertion of US primacy in the Middle East in the wake of that year’s Yom Kippur War. In short, in Cold War II we seem to be getting the 1950s, 1960s and 1970s compressed together in a somewhat bewildering mash-up.

Then, as now, cold war has an ideological dimension: at least some Republicans are back to talking about defending freedom. To Putin and Xi, that is just code for CIA-backed “color revolutions.” Then, as now, cold war is technological race, though today the frontiers of innovation are artificial intelligence and quantum computing as well as nuclear weapons and “star wars” (missile defense).

Then, as now, cold war is inflationary and domestically divisive. Then, as now, it matters a lot if China and Russia are united, as opposed to at each other’s throats. Their current unity is a real headache for the US and its allies, who find themselves in the situation — envisioned more than a century ago — of Nicholas Spykman’s “Rimland,” trying to contain Halford Mackinder’s vast Eurasian “Heartland.” Then as now, there are not just two groupings, but three, because a significant number of countries would prefer to be nonaligned rather than have to choose a side.

So what are the biggest differences between Cold War I and Cold War II?

First, China is a much bigger economic contender than the Soviet Union ever was. Second, the West is economically entangled with China, through a vast web of supply chains, in a way we never were with the USSR. Third, we are much weaker in terms of manufacturing capacity. With China flooding the world with cheap “green” stuff, the West has no option but to revive protectionism and industrial policy, turning the economic strategy clock back to the 1970s, too. Climate adviser John Podesta made that clear last week at Bloomberg’s BNEF Summit. Treasury Secretary Janet Yellen complained last month that Chinese “excess capacity … in ‘new’ industries like solar, EVs, and lithium-ion batteries” was “hurt[ing] American firms and workers, as well as firms and workers around the world.”

Fourth, US fiscal policy is on a completely unsustainable path. To run a 7% deficit at a time of full employment is, to put it mildly, not what the macroeconomics textbooks recommend. More importantly, as the Congressional Budget Office has just pointed out, the relentless growth of the federal debt in public hands relative to gross domestic product — from 99% this year to a projected 166% by 2054 — will inevitably constrain future administrations, for the simple reason that an inexorably rising share of revenues will have to go on servicing the debt.

My sole contribution to the statute book of historiography — what I call Ferguson’s Law — states that any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long. True of Hapsburg Spain, true of ancien régime France, true of the Ottoman Empire, true of the British Empire, this law is about to be put to the test by the US beginning this very year, when (according to the CBO) net interest outlays will be 3.1% of GDP, defense spending 3.0%. Extrapolating defense spending on the assumption that it remains consistently 48% of total discretionary spending (the average of 2014-23), the gap between debt service and defense is going to widen rapidly in the coming years. By 2041, the CBO projections suggest, interest payments (4.6% of GDP) will be double the defense budget (2.3%). Between 1962 and 1989, by way of comparison, interest payments averaged 1.8% of GDP; defense 6.4%.

As Michael Boskin and Kiran Sridhar recently argued, the Biden administration’s proposed defense budget for 2025 is already “vastly inadequate.” The Department of Defense needs to be spending more if our adversaries are to be deterred. On current trends, it seems certain to be spending less.

Fifth, our alliances may prove to be weaker than they were in Cold War I. In Europe, Germany is even more ambivalent about US leadership of the Atlantic alliance than it was in the days of Ostpolitik. In Asia, the US may think the “Quad” has turned India into an Asian ally, but I very much doubt India’s prime minister, Narendra Modi, would pick up the phone if Washington called for assistance in a Taiwan crisis.

For all these reasons, we should not be overconfident about the outcome of Cold War II. In particular, as Elbridge Colby has consistently warned, a Taiwan crisis — were China to blockade or invade this year — would find the US ill-prepared. And Beijing may not conform to US intelligence assessments that it will wait until 2027 to make its move.

Yet there is one final similarity with Cold War I that I omitted above. Now, as then, there is a bipartisan consensus in Washington that the communist superpower poses a serious threat. The political question that remains to be answered this year is who is best able to counter that threat.

In a way, Joe Biden and Kamala Harris personify the post-Vietnam Democratic Party’s approach, which ran from Jimmy Carter through Bill Clinton to Barack Obama. This approach nearly always prioritizes “de-escalation” over deterrence (even in Ukraine that has been true), and tends to cut the defense budget. By contrast, Donald Trump has veered between belligerence and isolationism, clearly preferring trade wars to the “fire and fury” of real wars. But he is temperamentally good at deterrence — if only because our adversaries find him so unpredictable. Under Trump defense spending went up.

By launching their drone and missile swarm at Israel, the Iranians have unwittingly given many Republicans permission to follow Pompeo down a path of hawkishness that is anything but isolationist. Read the new Foreign Affairs essay by outgoing Wisconsin Representative Mike Gallagher and former Trump adviser Matt Pottinger to get a flavor. “China,” they argue, “is underwriting expansionist dictatorships in Russia, Iran, North Korea, and Venezuela.” Stopping it will require “will require greater friction in US-Chinese relations” and “rapidly increasing US defense capabilities.” They accept my longstanding argument that we are in Cold War II, but dismiss détente as likely only to “fortify [the Chinese] conviction that they can destabilize the world with impunity.” In short, Pottinger and Gallagher want to fast-forward this new cold war to the 1980s.

Will Trump himself heed the hawks’ advice? If he chooses to stick with isolationism, I suspect it may hurt his chances of reelection. But if he discards that delusion, there could suddenly be a 1980 vibe to his year — and not only because Trump has rediscovered Ronald Reagan’s lethal question: “Are you better off than you were four years ago?” Despite having pursued a policy of technological containment of China that has been in many ways tougher and more effective than Trump’s, Biden looks weak right now. Not only has he been lousy at deterring America’s foes. He can’t even get a close US ally — Israel — to do as he asks.

It may therefore be that the ultimate historical significance of the Iranian attack on Israel will be its effect not on the Middle East but on Republican sentiment in the US.

Tolkien’s hobbits are also isolationists, in their way. However, despite their strong preference for the quiet life, Frodo and Sam come to realize that they must fight their way to Mordor and risk their necks to destroy Sauron’s Ring of Power. When they return to the Shire, they find that it, too, has been overrun by the Enemy. But it is not too late to salvage the situation. Symbolically, the wicked wizard Saruman perishes on the very threshold of Frodo’s beloved home:

“And that’s the end of that,” said Sam. “A nasty end, and I wish I needn’t have seen it; but it’s a good riddance.”

“And the very last end of the War, I hope,” said Merry.

“I hope so,” said Frodo and sighed. “The very last stroke. But to think that it should fall here, at the very door of Bag End! Among all my hopes and fears at least I never expected that.”

“I shan’t call it the end, till we’ve cleared up the mess,” said Sam gloomily. “And that’ll take a lot of time and work.”

Words for isolationists to ponder in 2024.

Ferguson is also the founder of Greenmantle, an advisory firm; FourWinds Research; Hunting Tower, a venture capital partnership; and the filmmaker Chimerica Media.

More From Niall Ferguson at Bloomberg Opinion:

·        From Deepfakes to Arms Races, AI Politics Is Here

·        Resistance Is Futile, But Maybe Not With AI

·        If You Think World War III Is Unimaginable, Read This

 


Niall Ferguson is a Bloomberg Opinion columnist. He is the Milbank Family Senior Fellow at the Hoover Institution at Stanford University and the author, most recently, of “Doom: The Politics of Catastrophe.”Su

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