That’s quite a jump

Following on from observing that Obama’s fundraising (and therefore advertising) success gives Republicans an excuse for losing the upcoming election, I see the following:

In August 2008, the Obama campaign set a record for the most successful fundraising month ever for a US presidential campaign:  $66 million.

On the 29th of August 2008, John McCain presented Sarah Palin as his vice-presidential candidate.

In September 2008, the Obama campaign blows their August fundraising figure out of the water, this time managing over $150 million.

Russia, Georgia, the Caucasus

Inspired by this piece in the FT by Martin Wolf …

“I am feared; therefore I am.” This is more than a restatement of Machiavelli’s celebrated advice that, for a ruler, it “is much safer to be feared than loved”. Vladimir Putin, the latest in the long line of autocratic Russian rulers, would agree with the Italian on that. But the war in Georgia is not just a re-assertion of Machiavelli’s principles of statecraft; it is a renewal of Russian national identity. It is yet again feared. In the eyes of its rulers, therefore, it exists.

… a friend asked why, if Georgia started this whole thing, we’re necessarily viewing Russia as the bad guys.  This was my attempted reply:

First the background. The area of the Caucasus (Georgia, Azerbaijan, Armenia and bits of southern Russia) is viewed as generally important for a few reasons:

  • Geographically, it represents the land-bridge between the Caspian sea to the east and the Black sea (which connects to the Mediterranean sea through the Bosphorus (the body of water that splits Istanbul in half)).
  • Economically, it is traditionally a very important trade route between Europe and the east. In today’s world, that means that oil pipelines run through the area (the Bosphorus is the world’s busiest stretch of water for oil (the English channel is the busiest overall)).
  • Politically, it has been a focal-point of conflict for centuries, since it represented the junction of the Russian, Ottoman (Turkish) and Persian (Iranian) empires. Since World War I for sure and arguably before, the area has been seen as Russia’s “backyard” – the equivalent of Mexico and central America to the USA.
  • Militarily, the three previous reasons join to give it enormous strategic value. Commanding the Caucasus enables you to project power all over the Middle East and eastern Europe.

All of this is complicated by the fifth point:

  • Culturally, the area is enormously diverse and filled with distrust. The various national boundaries are really pretty arbitrary and only loosely represent the various ethnic, religious and linguistic groupings. Note, in particular, that the Armenians were on the receiving end of an intensely brutal killing spree by the Turks back when the Ottoman empire was coming apart. Asking whether or not to call that event genocide is a good way to get people’s tempers from perfectly calm to screaming rage in milliseconds.

On to recent history:

Given that Russia had “owned” the area for the best part of a century, it was enormously shameful to them to lose it when the Soviet Union broke up in the early Nineties. It was, in a way, the ultimate demonstration of their descent (however temporarily) into mediocrity as a world power. Imagine if not just Cuba, but the entirety of Central America had switched to Soviet-inspired communism over the space of two or three years in the late 1980s. America would have shat itself.

From the point of view of the rest of the world, though, the move to independent statehood for the three little countries represented a victory over Soviet communism and a triumph for (hopefully democratic) liberalism. That is the backdrop to the Georgia conflict. It’s Russia-at-the-core-of-the-Soviet-death-machine that is seen as the bad guy and Putin as the ex-KGB nutjob that’s pulling the strings and taking Russia back to the Bad Old Days ™.

To a certain extent, this is partially the West’s fault. When the Soviet Union fell, we didn’t do the sportsmanlike thing of offering them our hand to help them stand up. We kicked them while they were down. The Shock Therapy that we foisted on them through the voice of Jeffery Sachs might arguably have helped the Soviet satellite states like Poland and the Czech Republic, but in Russia itself it really only served to cause massive unemployment, the dismantlement of healthcare and other forms of state aid and worst of all, the pillaging of anything of economic value by the now-infamous oligarchs. On top of that, Nato simply started marching east. Russia was admitted to the G8 only grudgingly, was ignored utterly in Kosovo and has never been recognised as a grown-up on the post-Cold War stage.

Telling Georgia that they could ultimately join Nato just after Russia had finished bludgeoning Chechnya into submission with a nail-studded bat was the equivalent of deliberately spilling red wine on Russia at a fancy dinner party and then saying loudly so everyone could hear “Oh dear, and that’s your only suit. Well, I’m sure you can scrub it out in the kitchen” before turning your back on them to talk to the Austrians about how their music was always so much more inspired than that brutish Russian peasant noise.

Russia has been handing out Russian passports to anybody old enough to hold them in South Ossetia for years so they could declare that they were simply defending their citizens. They’ve been sort-of-almost occupying the region for a while anyway under the guise of peacekeeping, but that role was never recognised by the UN or any other country in the region. Formally, South Ossetia and Abkhazia are part of the sovereign nation of Georgia. Their declarations of independence were – it’s widely believed – to have been encouraged, if not actually orchestrated, by Russia in an attempted loose parallel to Kosovo.

The West in general and the USA in particular had told Georgia that they had their backs. Georgia had troops in Iraq fighting with the Americans. The Georgians, stupidly it turns out, thought they were genuine allies of America. When Georgian troops started going into South Ossetia and triggered this whole mess, it demonstrated two things. First, that the USA under the Shrub [*] administration had really, really dropped the ball in its international relations. That the Georgians managed to get the idea that the US would rush to direct war with Russia over the Caucasus really says that the State and Defence departments screwed up badly. Second, that Russia was staggeringly well prepared for the Georgian move. They just happened to have an enormous mass of troops just over the border waiting to leap to the Ossetian’s defence? No. This was a trap laid by Russia and Georgia walked into it.

[*] Little bush.

ORLY?

Dear Michael Medved (who wrote the article and who graduated from Yale) and Professor Greg Mankiw (who linked to the article and teaches at Harvard),

I’m willing to accept that Michael’s argument represents some of the reason why Harvard and Yale graduates represent such a large fraction of presidential candidates if you are willing to accept that it is almost certainly a minor reason.

Ignoring your implied put-down of all of the other top-ranked universities in the United States, not to mention the still-excellent-but-not-Ivy-League institutions, the first thing that leaps to mind is the idea of (shock!) a third event that causally influences both Yale/Harvard attendance and entry into politics.

Perhaps the wealth of a child’s family is a good predictor of both whether that child will get into Harvard/Yale and also of whether they get into the “worth considering” pool of presidential candidates?

Perhaps there are some politics-specific network effects, with attendance at your esteemed universities being simply an opportunity to meet the parents of co-students?

Perhaps students who attend Harvard/Yale are self-selecting, with students interested in a career in politics being overly represented in your universities’ applicant pools?

Perhaps the geography matters, with universities located in the North East of the United States being over-represented in federal politics even after allowing for the above?

For the benefit of readers, here is the relevant section of the article:

What’s the explanation for this extraordinary situation – with Yale/Harvard degree-holders making up less than two-tenths of 1% of the national population, but winning more than 83% of recent presidential nominations?…

Today, the most prestigious degrees don’t so much guarantee success in adulthood as they confirm success in childhood and adolescence. That piece of parchment from New Haven or Cambridge doesn’t guarantee you’ve received a spectacular education, but it does indicate that you’ve competed with single-minded effectiveness in the first 20 years of life.

And the winners of that daunting battle – the driven, ferociously focused kids willing to expend the energy and make the sacrifices to conquer our most exclusive universities – are among those most likely to enjoy similar success in the even more fiercely fought free-for-all of presidential politics.

Needing a visa to visit America

Australia, like most of Western Europe and a few other countries, is on America’s “visa waiver” programme, which lets people travel to the USA for up to 90 days at a time without first applying for a visa, although the US can still deny entry to anybody that doesn’t answer the immigration official’s questions to their satisfaction.

By comparison, Australia requires that all visitors from everywhere except New Zealand have a visa. It’s a staggeringly simple and not overly expensive process that can happen online, but it’s a visa-requirement nonetheless.

It looks like the US is moving to an Australian-style system. They’re still calling it a “visa waiver,” but the requirement that I register before entering the US and that they reserve the right to deny my registration seems a lot like a visa to me. From the article:

Passengers travelling to the United States from countries whose citizens do not need visas must register online with the US government at least 72 hours before departure [from January 2009]

Although the new rule requires 72 hours advance registration, it will be valid for multiple entries over a two-year period. The rule will only apply to citizens of the 27 visa waiver programme countries

A Homeland Security official said the new measure would require the same information that passengers now have to include on the I-94 immigration form they must fill out before entering the US. He said Australia has been using a similar system for several years.

Presumably this means that the US will be more likely to start adding the newer members of the EU to the “visa waiver” programme.

Where is Obama’s big speech on sexism?

I can’t write much at the moment – exams – but it just occurred to me to ask:  Where is Obama’s big speech on sexism?

Why didn’t he give a month ago?  In particular, why didn’t he give it before the DNC made their decision on Florida and Michigan?  Giving it after Hillary bows out will look like what it will be – a naked political attempt to convince her most ardent supporters to turn up on the first Tuesday after the first Monday of November.  If he’d given it two months ago, it would have had at least a chance of being seen as an honest, even gracious attempt to reach out to the Hillary-voters and convince them that he believes in fighting all forms of bigotry.

Understanding race relations in America

Now, I’m just a white guy from Australia who’s only visited the US a few times, so there’s a strong element of “What the hell would I know?”[*], but still … I suspect that if you want a quick, visual introduction to race relations and the issues facing non-whites in America, you would not do too badly by only watching three things:

[*] The answer, of course, is “probably not very much,” especially if you subscribe solely to ethnographic or other immersive techniques of sociological fact-finding, but since my wife grew up as an Hispanic immigrant in the (28% African-American, 6% Hispanic) state of Georgia, I work on the assumption that even if I have no clue, she’ll yell at me if I say something entirely stupid.

A prediction: Only Bear Stearns will fall; Lehman Brothers is safe

The “orderly liquidation” of Bear Stearns is certainly dramatic, but I think that it will be the only US investment bank to fall from the current mess. The reason can be found in this press release from the Federal Reserve:

Release Date: March 16, 2008

For immediate release

The Federal Reserve on Sunday announced two initiatives designed to bolster market liquidity and promote orderly market functioning. Liquid, well-functioning markets are essential for the promotion of economic growth.

First, the Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

Second, the Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent, effective immediately. This step lowers the spread of the primary credit rate over the Federal Open Market Committee’s target federal funds rate to 1/4 percentage point. The Board also approved an increase in the maximum maturity of primary credit loans to 90 days from 30 days.

The Board also approved the financing arrangement announced by JPMorgan Chase & Co. and The Bear Stearns Companies Inc.

You might argue that this should have been in place a while ago, but now that it’s in place, I doubt that any more US investment banks will fall. You can safely assume a 50bp drop in the base rate in the next week, I think. As with the previous drops, I think that we will see little, if any drop in longer-term paper. That increased gradient in the yield curve, combined with the effectively-intentional inflation (their liabilities are largely nominal and a fair fraction of their assets are real), should be enough to recapitalise the banks over time. The new lending facility from the New York Fed seems designed explicitly to give them that time.

See also this comment from Deutsche Bank’s Mike Mayo (HT to Calculated Risk):

Lehman is Not Bear. 1) It has more liquidity, 2) It has support among its major counterparties, evidenced by an extension on Friday of a $2B working capital line with 40 banks (one issue w/Bear Stearns [BSC] seems to be that counterparties pulled in lines). 3) Its franchise is more diversified given almost half outside the US and an asset management business that is more than twice as large relative to its size (BSC was more plain vanilla). 4) It has a seasoned and experienced CEO (Bear’s CEO was new). We maintain our Buy rating given a belief that LEH will weather this storm and our estimate of a price to adj. book value ratio of 83%.

The industry issue seems more liquidity than solvency, and LEH protected itself more fully after it’s problems similar to BSC in 1998. At year-end, it had $35B of excess liquidity combined with $63B of free collateral, implying $98B available for liquidity, or $70B more than needed for $28B of unsecured short-term debt (which includes the current portion of long-term debt). While it also has $180B of repo lines, we take comfort that 40 banks extended credit on Friday and believe that some of the repos are likely to be termed at least to some degree.