If a Financial Institution is Too Big to Fail, It's Just Too Big

EXTRACT: "Although Ukraine’s armed forces are outnumbered by those of Russian President Vladimir Putin invading our country, we take heart from the growing support we are receiving from friends abroad. Nobody should forget that this is not just an unprovoked invasion of Ukraine; it is an assault on the free world. ---- Putin has been at war with the free world for decades. "

EXTRACT: "Moreover, with China sharing the Kremlin’s interest in containing the advance of liberal democracy around the world, Putin could count on the Chinese to provide an additional economic lifeline by purchasing Russian gas. But this new relationship will not be costless. As the world continues to divide into separate technological and economic blocs, Russia will become even more dependent on China, implying a loss of strategic autonomy. Russia may have a powerful military; but with a GDP similar to that of Spain and Italy, it is far from being an economic power."

EXTRACT: "The financial measures just announced against Russia are unprecedented for a country of its size. This of course means it’s impossible to predict exactly how their impacts will reverberate around the Russian – and global – economy. And we still need to see the exact details of the plan. But on their face they threaten the collapse of the Russian ruble, a run on Russian banks, hyperinflation, a sharp recession and high levels of unemployment in Russia, as well as turmoil in international financial markets."

EXTRACT: "Putin apparently assumes that China will back him. But while he launched the invasion just weeks after concluding something akin to an alliance agreement with Xi in Beijing, Chinese officials’ reactions have been very distant with calls for “restraint.” Given Putin’s near-total reliance on China for support in challenging the US-led international order, lying to Xi would have no political or strategic advantage. That is what is so worrying: Putin no longer seems capable of the calculations that are supposed to guide a leader’s decision-making. Far from an equal partner, Russia is now on track to become a kind of Chinese vassal state."

EXTRACTS: "Russia’s ascent to global power in the nineteenth and twentieth centuries resulted in numerous tragedies not only for the neighbors it subjugated and gradually absorbed, but also for its own people. China’s current leaders, in particular, should be mindful of this history, considering that imperial Russia seized more territory from China than from anyone else." ----- "Putin is taking Russia hurtling back toward the nineteenth century, in search of past greatness, whereas China is forging ahead to become the defining superpower of the twenty-first century. While China has achieved unprecedentedly rapid economic and technological modernization, Putin has been pouring Russia’s energy-export revenues into the military, once again cheating the Russian people out of their future."

EXTRACT: "........ Xi did what was needed to lock Russia into a vassal-like dependency on China. And Putin chose to walk straight into his trap, thinking that partnership with Xi would help him in his confrontation with the West. ---- What could be better for China than a Russian economy completely cut off from the West? All the natural gas that does not flow westward to Europe could flow eastward to an energy-hungry China. All Siberia’s mineral wealth, which Russia has required Western capital and expertise to exploit, would be available only to China, as would major new infrastructure projects in Russia." ---- "Putin seems to be ignoring that China’s leaders and people view Russia as a corrupt country which stole more Chinese territory in the nineteenth century than any other."

EXTRACT: "Russia’s large-scale military mobilization on Ukraine’s border has grim historic precedents. But should the Kremlin pull the trigger, it will encounter a hazard that no invading army has ever faced before: 15 nuclear power reactors, which generate roughly 50% of Ukraine’s energy needs at four sites. The reactors present a daunting specter. If struck, the installations could effectively become radiological mines. And Russia itself would be a victim of the ensuing wind-borne radioactive debris. Given the vulnerability of Ukraine’s nuclear reactors and the human and environmental devastation that would follow if combat were to damage them, Russian President Vladimir Putin should think again about whether Ukraine is worth a war."

EXTRACT: "Yet Putin gives Xi precisely what he wants: a partner who can destabilize the Western alliance and deflect America’s strategic focus away from its China containment strategy. From Xi’s perspective, that leaves the door wide open for China’s ascendancy to great-power status, realizing the promise of national rejuvenation set forth in Xi’s cherished “China Dream.” "

EXTRACTS: "It has become abundantly clear that the United States has an inflation problem. What is not yet clear is how big the problem will turn out to be and how long it will last. ---- "Alarmed observers point to parallels with the 1970s, when commodity prices shot up,..." ------ "Today, in contrast, inflation expectations remain firmly anchored. The Michigan Survey of Consumers shows that respondents expect inflation to approach 5% over the coming year, before falling back to just above 2% in the subsequent four years. The inflation rate implicit in the price of five-year inflation-indexed Treasury securities shows basically the same thing: inflation averaging 2.8% over the next five years."

EXTRACT: "Over the past three decades, bonds have offered a negative overall yearly return only a few times. The decline of inflation rates from double-digit levels to very low single digits produced a long bull market in bonds; yields fell and returns on bonds were highly positive as their price rose. The past 30 years thus have contrasted sharply with the stagflationary 1970s, when bond yields skyrocketed alongside higher inflation, leading to massive market losses for bonds."

EXTRACT: "The idea of a conventional force attack by Russia on Poland, the Baltic or Black Sea states is fanciful. But it is rendered near impossible in the minds of the Kremlin leadership by the sure knowledge that Nato would take a stand. In response to events around Ukraine, the credibility of the alliance is being affirmed through a set of coordinated measures...." ---- "The forces Moscow has assembled on Ukraine’s borders are clearly intended to intimidate the government in Kyiv. But as the weeks drag on Russia may be losing the military advantage. It has already forfeited the element of surprise essential for a swift land grab (as was used during the seizure of Crimea in 2014)."

EXTRACT: "By now, it is passé to warn that the Fed is “behind the curve.” In fact, the Fed is so far behind that it can’t even see the curve. Its dot plots, not only for this year but also for 2023 and 2024, don’t do justice to the extent of monetary tightening that most likely will be required as the Fed scrambles to bring inflation back under control. In the meantime, financial markets are in for a very rude awakening."

EXTRACT: "As it is, Germany has made strides in getting off coal. Coal provided half of power production in 2000, and is now down to about a little over a quarter. And Germany has done more to put in renewables, with its “Energiewende” or Energy Switch, than any other large industrialized nation. The new Social Democratic government, which is in coalition with the Greens, plans to put enormous amounts of new renewables in every year until 2030, projecting that by that date, 80 percent of Germany’s power will come from renewables."

EXTRACTS: "The fear is that Moscow is backing itself into a diplomatic corner where the use of force is its only way to remain credible." ----- "The Ukrainian population has also been mobilizing in support of the troops since the seizure of Crimea and the war in Donbas. And according to a poll taken in December 2021 by the Kyiv International Institute of Sociology, 58% of Ukrainian men and almost 13% of women declared that they are ready to take up arms. A further 17% and 25% more said they would resist through other means. In what would be a classic case of asymmetrical warfare, resistance from Ukraine’s population could therefore prove a serious thorn in Moscow’s side."

EXTRACTS: "While at the time of writing, the outcome of Djokovic’s visa troubles was uncertain, the double standard of rules raises a much bigger question about the philosophy of law: can the application of a rule be so unfair that we have no valid reason to follow it?" ------ "......a rule that doesn’t treat like cases alike can’t be a law at all. This is because a key requirement of a legal system is that it needs to be stable, which means that people need to know what the law is and when it applies. If a rule doesn’t treat everyone equally, then it does the opposite and increases doubt and uncertainty about what the law even is. And if enough rules exist that create uncertainty about what the law is and when it applies, the system will collapse. A rule that undermines a legal system in this way can’t really be law at all, and legal officials shouldn’t create or uphold them."

EXTRACT: "Novak Djokovic, the world’s top-ranking tennis player, has just been granted a medical exemption to take part in the Australian Open. Djokovic, who has won the event nine times (one more victory would give him a record-breaking 21 major titles), refused to show proof of vaccination, which is required to enter Australia. “I will not reveal my status whether I have been vaccinated or not,” he told Blic, a Serbian daily, calling it “a private matter and an inappropriate inquiry.” The family of Dale Weeks, who died last month at the age of 78, would disagree. Weeks was a patient at a small hospital in rural Iowa, being treated for sepsis. The hospital sought to transfer him to a larger hospital where he could have surgery, but a surge in COVID-19 patients, almost all of them unvaccinated, meant that there were no spare beds. It took 15 days for Weeks to obtain a transfer, and by then, it was too late."

EXTRACT: "The protests that erupted across Kazakhstan on January 2 quickly turned into riots in all of the country’s major cities. What do the protesters want, and what will be the outcome of the country’s most severe civil unrest since independence in 1991? "

EXTRACT: ".....one wonders how Chinese President Xi Jinping views Russia’s intervention in Kazakhstan, which shares a nearly 1,800-kilometer (1,120-mile) border with China, especially in light of Putin’s earlier comments diminishing the history of Kazakhstan’s independent statehood. (He has shown similar contempt for the independence of Belarus, the Baltic states, and Ukraine.)"

EXTRACT: "The problem with history as propaganda is not that it makes people feel good or bad, but that it creates perpetual enemies – and thus the perpetual risk of wars."

EXTRACT: ".....a scenario in which Trump (or one of his allies) is designated president by the House of Representatives after the 2024 election probably belongs in the realm of political-thriller fiction.  Now consider the unlikely event that Trump were nominated and won a clear Electoral College or popular-vote majority in 2024. Rather than establish the white-nationalist dictatorship of progressive nightmares, an elderly second-term Trump would most likely be an even more ineffectual figurehead in a party dominated by conventional Republicans than he was in his first four years. If Italian democracy could survive three terms of Silvio Berlusconi as prime minister, American democracy can survive two terms of Trump. None of this is to suggest that American democracy is not under threat. Populist demagogues like Trump are symptoms of a disease in the body politic. The real threat to American democracy is the disconnect between what the bipartisan US political establishment promises and what it delivers. This problem predates Trump by decades and helps to explain his rise. "