Thoughts on the “Why” (rather than the “How”) of Cryptocurrencies

Reading media articles about Bitcoin and other cryptocurrencies left me frustrated because none of them directly addressed the real question that needs to be asked.  Yes, various articles are correct that Congress has no idea what blockchain is or what a cryptocurrency is.  Yes, other articles are correct that Bitcoin has emerged as a combination Ponzi scheme and money laundering tool.  Yes, cryptocurrencies are hard to comprehend because there appears to be (in Alice Walker’s words) “no there there.”  Against this backdrop of relatively uninformed speculation, there are articles in both financial and academic journals that clearly explain the potential of blockchain technology to create an entirely new type of currency – one that is beyond the control of any single government and which can be freely used by anyone and everyone as a unit of exchange as well as a reserve currency.  What I have not seen (outside some dense academic pieces) is an explanation of why anyone should care.  In other words, why should people around the world abandon their heavy dependence on the US dollar both as a unit of exchange and as a reserve currency in favor of some strange computer bits floating out in “the cloud” (whatever that is).

The potential economic advantage of cryptocurrencies lies in the promise of a genuinely global unit of both reserve and exchange that is no way dependent on the political or economic policies (or whims) of any one government.  Such a currency could facilitate world trade by providing a fair, impartially valued universal unit of exchange and.  It could provide a reserve currency that is not dependent on the economic fortunes of any one nation over which most holders of the currency have no control.  Because the value of a cryptocurrency is determined by global market forces, there is the potential, at least, for a cryptocurrency to become the only currency for which the value is managed by everyone.  While the benefits to many countries around the world are obvious, the emergence of a genuinely globally accepted world currency could also help the US by greatly strengthening the ability of the Federal Reserve to manage the dollar.  While there certainly are advantages to the USA of the US dollar (US$) being the world’s primary reserve currency and unit of exchange, there are downsides as well.  At present, the fact that well over half of all US currency is held outside the USA means that domestic policies implemented by the Fed are watered down.  Looking beyond physical (paper) currency, literally trillions of dollars are held as electronic balances in banks around the world – banks that are outside of the Federal Reserve’s purview.  Both multinational corporations and national governments may choose to trade in dollars for reasons that have nothing to do with, or are even diametrically opposed to, Federal Reserve policy goals.  It’s no wonder that some economists have joked that the Federal Reserve managing the dollar is a bit like the captain of a ship attempting to change course by dipping a teaspoon into the water.

While the Bretton Woods agreement remains the most commonly cited reason why the US Dollar is the leading international reserve currency, in reality the Bretton Woods agreement only explains how the US$ became the world’s primary reserve currency.  It does not explain why the US$ has remained the world’s de facto reserve currency and preferred unit of exchange for over half a century.  The most interesting — and often ignored – question is why the US$ has retained and even deepened its role in the immediate post-WWII world.

The first answer is that for most of the post-WWII era, the US had been kept a remarkably free exchange policy.  Nixon’s decision to (finally) break the formal tie between the dollar and gold represented a decision to keep dollar markets free rather than to limit them in the face of rent-seeking behavior by traders who profited off disparities in the dollar/gold exchange ratio.

Today, there are almost no limits on who can hold dollars, where they can be held, how they are exchanged, etc.  If someone (or corporation or national government) wants to exchange a billion dollars or even issue a billion (or 10 or 100 billion) in US$ bonds, there is nothing to prevent them from doing so.  They don’t even need to come to the USA or involve the USA in any way since dollar exchanges exist around the globe.  While the US$ is not completely uncontrolled, the controls that do exist are light and rarely implemented.  For example, persons carrying more than $10,000 in cash across the US border need to declare it, but there is absolutely no prohibition to transporting $1,000,000 or even $1,000,000,000 with absolutely no duties or taxes. The reporting requirement was implement as an anti-crime (primarily anti-money laundering) measure rather than to restrict the movement of dollars.

To understand how “hands-off” the US government has been toward the US$, remember that there are nations that use it as their national currency even though they have no “permission” or agreement from the US government to do so. They don’t have an agreement because they don’t need one.  There is absolutely nothing in US law to stop anyone from accumulating or using US$ for any purpose or in any location on earth.  For countries (such as Russia and much of the Foreign Soviet Union as well as others) that prefer to hold large quantities of actual paper money rather than electronic bank balances, the NY branch of the US Federal Reserve will even assist them in shipping billions of dollars in currency to wherever it is needed (which is why three-fourths of all paper currency in circulation is in the form of $100 bills).

The second answer to the question of why the US$ has remained the world’s most widely-used unit of exchange for so long is that there have been no real rivals.  While many touted the Euro as a potential rival, eventually the inherent weakness of a single currency that is effectively managed independently (and issued in bonds, etc.) by more than two dozen national banks and governments caught up with the currency.  Until and unless the EU can work out some basic and divisive issues regarding the rights of member states versus the European Central Bank, the fate of the Euro will remain uncertain.  The Japanese Yen was, at one time, thought of as a competitor to the dollar.  The reality is, however, that Japan’s national laws governing currency and exchange are not nearly as liberal as the USA’s.

Countries such as China and Russia sometimes promote their own currencies as units of exchange, but have thus far been unwilling to relinquish control over those currencies.  Anyone dealing in Roubles or Yuan is always at the mercy of Moscow and Beijing.  Exchanging a large quantity (or technically, a small quantity) of currency requires the permission of the government.  If one government or the other decides to declare a devaluation or to limit trading in order to support some national economic policy, there is no appeal.  Similarly, there is no recourse should one of the governments decide to demonetize certain paper bills, something Russia has done repeatedly.  For all its faults, the US government has never, in the post-WWII era, sought to control trading in its currency in the same way that other governments do.

Having cited the laissez-faire policy that the US government takes towards its currency many times, I must also admit that even the US policy is not without limits.  Sanctions on Russia, Iran, and North Korea all represent rare instances in which the US government has deviated from its overall policy of free and open exchange.  More importantly, the value of the US$ is managed (to the extent that management is possible) by the US Federal Reserve for the sole purpose of supporting the US economy.  While the Fed has a stellar reputation among world bankers and is not driven by foreign policy concerns when setting monetary policy, it nonetheless remains committed to the goal of supporting US economic growth.  No one outside the USA, not even other countries that use the US dollar as their currency, has any say in US monetary policy.

Cryptocurrencies hold the potential to break the linkage between a unit of exchange used by the whole world and a currency managed for the benefit of one country.  A theoretically ‘perfect’ cryptocurrency could represent a genuinely independent unit of exchange, the value of which is set by billions of market actors (people, corporations and governments) functioning independently around the world via free market transactions rather than by a group of economists (all of whom were appointed by politicians with often partisan agendas) meeting in DC once a quarter.

Thus far, the reality of cryptocurrencies has fallen fall short of perfect.  Bitcoin, the best known of all cryptocurrencies, made fundamental decisions early in its development that make it not only impossible for governments to control but also make it an ideal medium for money laundering and other criminal pursuits.  World governments – and most ordinary people – will not adopt Bitcoin as their primary reserve currency and unit of global exchange for the simple reason that Bitcoin has already been adopted by the criminal world.  I don’t mean to fault Bitcoin too much; they were among the pioneers.  Like many pioneers, they did not get it right on the first try.  The important point to remember is that the manifold weakness of Bitcoin are not inherent in the blockchain technology on which it and other cryptocurrencies are based.  Instead, Bitcoin’s problems can be traced to policy and marketing decisions that shaped the currency we see today.

If a cryptocurrency is ever to emerge as a genuine rival to the US$ as a unit of global exchange, it must combine the key trait of independence from any one government with the vitally important traits of transparency and accountability.   The simple yet hard to fathom reality is that blockchain technology, along with closely related technologies of distributed or “hyper” ledgers, open the possibility of a currency that is as transparent and resistant to manipulation as it is independent of the political policies of any one government.  If blockchain technology and the enormous networked computational power that supports it had existed in the 1940’s, Bretton Woods may have reached a very different conclusion.  While the technology did not exist at that time, eventually someone is likely to find (or stumble upon) the perfect mix of technologies and policies for creating a unit of exchange and reserve medium that is not just a mode of Ponzi-scheme style speculation or a tool for money laundering.  Once that happens, those who now dismiss cryptocurrencies as a ridiculous passing fad will look just as foolish at the vast majority of 18th century economists and bankers who dismissed fiat currencies as ‘the promises of fairies.’


Arming Teachers is Fantasy, Not Policy

Having “20% of your teaching force” trained and armed with concealed weapons is not a serious policy proposal but a talking point written by the NRA and dutifully recited by President Trump — the man the NRA spent $30 million electing.  Arming teachers to stop gun violence sounds plausible only to those who so devoutly want to believe that more guns are the answer to gun violence that they will ignore reality. To understand why the idea is pure fantasy rather than serious policy, please consider what would happen if a shooter burst into a classroom after Trump’s “arm the teachers” proposal had been fully implemented.

First, there is an 80% chance that the teacher in the classroom would not be armed (since only 20% are armed). In those cases, the shooter then proceeds to shoot the teacher first (just to make sure he/she is not one of the 20%) and then methodically murder every child in the classroom before moving on to another classroom, thereby taking another 1-in-5 chance that a teacher could be armed. They would inflict maximum carnage in each classroom rather than wandering the halls since each move entails facing that 1-in-5 risk of encountering an armed teacher. While the NRA would like us to believe that another, armed teacher would intervene, that won’t happen since it would require the armed teacher to abandon his/her own classroom, leaving all of the terrified students completely unprotected and without any adult guidance. Every armed teacher would need to think about questions such as what if there are multiple shooters? What if the shooter kills the teacher and then takes vengeance on the students in that teacher’s classroom? What would parents say when they learned that the trained and armed teacher responsible for their children’s safety simply abandoned them?

Second, if the teacher in the classroom chosen by the shooter is one of the trained and armed 20%, it would boil down to a contest of who could shoot first – a teacher with a concealed handgun or a shooter who bursts into the classroom holding a semiautomatic (or even automatic, given the continued availability of bump stocks) weapon held at the ready and already aimed at the teacher. Remember, this is real life and not the movies; the odds of someone pulling out a concealed handgun, disengaging the safety, firing and hitting the shooter faster than the intruder could squeeze off rounds from an AR-15 already held at the read is virtually zero.  In most schools, the shooter could simply fire through glass in the door to kill the teacher before the victim knew an attack was about to happen.

Third, since the most common school shooter is a current or former student, the odds are very high that the shooter will know which teachers are armed even before entering the school. As anyone who has spent time around undercover or plainclothes police knows, “concealed” weapons are only concealed in the sense that they are not obvious. Anyone with even a bit of knowledge (easily gleaned from the Internet) would recognize the tell-tale bulges around ankles, under suit jackets or near the waistband.  Children are naturally curious, particularly with respect to scary or forbidden things such as guns.  Students also spend time with teachers every day. They see them stand up, sit down, reach for objects and bend over countless times. In lower grades, the teacher likely squats, kneels or sits on the ground with young students.  In the upper grades, teacher move among their students.  With hundreds of pairs of curious eyes and a typical gossip network, within a week of school starting every student would know exactly which teachers are armed.

Fourth, knowledge that some teachers are armed will make every teacher a target. Even if an armed intruder believes that he/she (although it always seems to be ‘he’) knows which teachers are armed, the obvious course of action for aspiring mass murderers will be to shoot the teacher first. Remember, President Trump is only going to give bonuses to those teachers who carry weapons. All other teachers will, in effect, become target #1 without any compensation or training.

Fifth try to imagine the warped psychology of an intending mass murderer contemplating committing an atrocity at a school. From what we have learned after the fact, these individuals tend to be isolated and angry, but more importantly they believe that the act of mass murder will prove some type of point. Most expect to die. Will knowing that some teachers are armed deter such an individual or only serve to excite and thus further motivate violence? Knowing some teachers are armed may cause an intending mass murderer to modify tactics (just as the Florida shooter took steps to distract the police officer at the school by pulling the fire alarm), but knowledge that armed individuals are present will not reliably deter an attacker.

Sixth, and last, think about mass shootings in America. The Law Vegas massacre did not occur in a school. Neither did the San Bernardino attack, nor the Colorado Springs, the Southerland Springs, Texas, church shooting, the Charleston church shooting, the Aurora cinema shooting or countless others. Trump’s proposal does nothing to deter the majority of mass shootings in America. Even beyond that, there were armed and trained people present at many of those shootings, including San Berdardino, Colorado Springs, Law Vegas and others. Their presence did not deter or prevent the shooting.  Remember, President Reagan was surrounded by a half dozen or more of some of the most highly trained and dedicated weapons experts there are — Secret Service Agents.  Nonetheless, he was shot by a deranged, untrained youth.

President Trump’s proposal for arming 20% of teacher with concealed weapons is not a policy proposal; it is a talking point dreamed up by the NRA and recited verbatim by politicians that the NRA – and their backers in the arms industry dreaming of profits from classroom sales – have bought and paid for.

The Auto-Obit of an Unassuming Hero

This is a different sort of post from my usual rants on “Lies and Damn Lies.”  Nonetheless, it somehow fits the theme.  (At least I think so; you can decide for yourself.)

A friend of mine passed away recently. Bob Peirce was an amazing person. In many ways, the sort of person I admire most – the person who does the right thing just because it is right.  About a year before he passed away (and just a year or so after he ceased leading trekking expeditions through the Himalayas for people 30 to 60 years younger than himself), he decided to sit down and write his own “auto-obituary.”  Below is what he wrote.  I know that I should present his words without commentary, but I just can’t.  So, here’s my commentary: don’t be fooled by Bob’s modesty. Bob was a man who moved people. Nepal named a mountain after him.  Out of the blue, they just did it.  On his 90th birthday, he led a 130-mile fund-raising bike trip from Portland to Seattle. The Portland Art Museum held a retrospective of his artwork.  When he became weak, Bob never asked for help.  Without prompting, Nepalese Sherpas tried to convince him to retire to Nepal.  When he refused, they simply moved from Nepal to care for him in Portland. He was that kind of person. To this day, don’t be surprised if, while trekking through Nepal, you meet a Sherpa whose middle name is Peirce.  So many loved him that much.  Anyway, here’s his auto-obituary.  I claim zero credit for his brilliance and all blame for any faults, typos or errors I introduced while transcribing it.


“Bob Peirce never made it to the top.

He never much got to the top of anything.

For that matter, he didn’t get to the top of Mr. Robson, the highest mountain in Canada, and he didn’t get anywhere near the top of Grand Teton in Wyoming (it turned out they were climbing the wrong peak, anyway).  Nor did he really get to the top of Mera Peak, the highest trekking peak in Nepal.  He said he did, but that was because getting up to the real top would be too much of a challenge and would take too long, so he told his group that what they were standing on was the top, that it was higher than that other hump over there (never mind appearances), and that they had reach the summit.

He was in an honors department at Harvard, the only honors department that that college had at the time, but he did not receive honors.  That was because on his very last term at Harvard, his grades dropped below a B average and that disqualified him.  He had to write a thesis anyway and the reader said it certainly deserved a summa cum laude,’ but he was already disqualified, so he graduated without honor.

He took the test for Officer Candidate School when he when into the army but, because he didn’t know any math, his grade was just below what it should be to make him an acceptable candidate.

So he spent his time in the US Army as a Private.  Sometime before the war was over, there was a change in the Table of Organization, the chart by which the army matched rank with jobs.  The job he had been doing was now supposed to be done by a Technician Fifth Class, a kind of broken-down corporal and only a small step up from Private.  Whether anyone wanted it or not, that meant a promotion for Bob Peirce.  Peirce was one of the people who did not want it (maybe this had to do with the ugly prospect of having to sew stripes on his sleeve).  He even went to his commanding officer to tell him this.  The CO agreed that it did not make sense for Peirce to be promoted, yet he had no choice.  You do not argue with the TO, which is created in heaven and inscribed on tablets.

In spite of two degrees from Harvard and a private school education, Bob Peirce was not qualified for any line of work when he finally had to leave school.  His job search took him from universities to hardware stores to the Federal Reserve Bank (where, at the end of his job interview, they felt compelled to ask him, as delicately as they could, just what ever made him think he would want to work there).  It was not until he walked into the Portland Art Museum that anyone asked him “which job do you want?”  (When, not having listened to the choices available, he answered, “Curator,” it turned out that was the job of the man who was interviewing him.  They hired him anyway, but as Librarian).

Earlier – back in New York where he had spent a year in the Statistical Department of Oxford University Press, he was presented with one of those opportunities that come out of the sky and can change a person’s life.  One of the editors had been impressed by Peirce’s hand-drawn Christmas card and had a proposition.  The Press was about to publish a book that they thought was very good (I’ve forgotten what kind of book it was) but the author wanted it to be illustrated by his friend, and the friend’s illustrations, in this editor’s view, were “pretty awful.”  Bob Peirce’s assignment was to take up pen and make his own version of what the friend had illustrated and to do such an outstanding job that the author would have to agree that Peirce would be the illustrator instead of his friend.  It had to be a secret mission; the author was not to know what was afoot until presented with drawings so dazzling that he would forgive the Press for its misgivings about his own choice of illustrator. And the fact is that the drawings Peirce made were outstanding – maybe even dazzling.  He did them in Maine where he had gone to spend a few days with his grandmother, and they were right there in the bag when he arrived back in New York.  What he had managed to leave on the train, and what was never recovered in spite of frantic searches, were the original drawings of the author’s friend.  There is no way of knowing how they explained this to the author.  What is known is that this marked the end of Bob Peirce’s career as an illustrator.  The rumor is that it was his picture that the editors posted just outside the bathroom door to throw darts at during their lunch hours.

Except for the Portland Art Museum, Bob Peirce was fired from ever job he ever had – and there is a good reason to believe that he was about to be fired from the Museum when, after 24 years and his first trip to Nepal, he quit.

And then there were smaller things where he missed the top.  After spending many hours interviewing Portland Symphony Conductor James dePreist and writing what would have been the feature in the forthcoming issue of Portland Quarterly, that magazine folded up before publication.

Later, Nancy Russell, a Portland lady who had done more than anyone else to preserve the natural beauty of the Columbia Gorge, asked him to write a book on the subject.  He worked on this for two years, interviewing many people and doing extensive research.  Nancy was suffering from A.L.S. (better known as Lou Gehrig’s Disease), under which you slowly deteriorate.  At some point (I think two years into the project), her son told Peirce that he had taken things over from his failing mother.  But because he wanted a book that would be something different from what he mother had in mind or what Peirce had already written, the latter dropped out of the project, turning over his manuscript with all his notes and files, yielding to a new author.  Not long after, Nancy died.  No book has ever been published.

Still later – he was asked to write a piece that would be an introduction to the catalogue for an exhibition at the Portland Art Museum celebrating the 100th anniversary of the Pacific Northwest College of Art.  They paid him handsomely (by his standards) but the catalogue was never published – they did not have enough money for it.

And, earlier, there were academic setbacks of one kind or another.  Peirce did not do well with languages, even his own, so he was happy when his freshman advisor, who happened to be Dean of Freshmen, told him not to worry until later about taking the language courses needed for graduation.  When “later” arrived, it turned out that the man was wrong: Peirce now was told he would have to stay in school a full year beyond his expected graduation date in order to complete the necessary language requirement.  There was only one language that could qualify him on time and that was Ancient Greek.  That was how, unexpectedly, he landed in the Greek History and Literature Department.

While there, he received another piece of bad advice (academics are not to be trusted).  He enrolled in the summer session of the American School of Classical Studies in Athens partly because he was told he would earn academic credit by doing this.  This too turned out to be false information, as he learned when he got back to the US, yet he had a wonderful summer.

Then, of course, there is the fact known to everyone that Bob Peirce never got married.  Nor do we think he ever had a serious love affair.  Even in a carnal sense, he was never on top.

But there were serious moments of truth in his life.  There was the time – he says he thinks it was 1953 – when, one night, he experienced a kind-of moment of revelation, the sort of thing that Saint Augustine or Moses talked about happening to them, except that in his case, God did not appear and nothing was revealed other than what seemed to be the certain knowledge that the world was good and that no matter what happened to him in future years – no matter how depraved he or it became, all was good.  And yes, there was a blinding light – or not exactly blinding but a real increased illumination of things that stayed with him for some time, diminishing as the days went by.  He remembered that in his vision, he could see that he was near the top of The Mountain, yet that was a far as he would ever go.  He would never get to the top, that that did not seem to matter.

So even though Bob Peirce never got to the top of anything, he had some kind of satisfaction in being where he was, wherever he was, wherever that happened to be, and knowing, in a way, that that’s where he was supposed to be. It’s like always hovering somewhere near ten minutes before the hour on the Buddhist Wheel of Life.  You may forever be below the pinnacle, but as you look ahead, you can have a chance to observe that the people on top of this moving wheel have nowhere to go but down.”


An Assault on American Democracy

One of the key – and very expensive at $250 billion or so – components of the GOP tax reform plan is the immediate reduction of the estate tax followed by its complete elimination in five years.  To many people, that sounds reasonable.  After all, isn’t the “death tax” a bad, un-American thing?

Actually, the opposite is true.  Very soon after the signing of the Declaration of Independence – and well before the U.S. Constitution was ratified – the Continental Congress voted overwhelmingly to eliminate certain aristocratic laws that had been inherited from Europe.  First among these was something called “primogeniture and entail,” a strange-sounding term that reflect political reality in Europe at the time.  The reason the “founding fathers” (that sounds sexist, but everyone in the Continental Congress was indeed male – a sign of the times) acted so quickly and decisively to outlaw primogeniture and entail was that it was the basis of the European aristocracy.  What the obscure-sounding term “primogeniture” referred to was the common practice – often enforced by law – of leaving the entire estate of a family to the first-born son.  Everyone else – including, of course, all daughters – were (in more modern parlance) SOL.  The “entail” part refers to the common practice among European aristocracy of including a clause in the will of an aristocrat that forbids his (it was always ‘his’) heirs from ever breaking up the estate.  The idea was to ensure that the family name and family fortune endured for eternity.

The reason that America’s “founding fathers” put such great emphasis on outlawing these practices was that they realized that not just the aristocracy but the entire concept of a class-based society rested on such laws.  Thomas Jefferson went farther than his peers in this regard, arguing that all wealth should be redistributed equally every 50 years.  His hope was that this frequent redistribution would keep democracy alive and fresh and allow what he called the “natural aristocracy” – those individuals that, for whatever reason, are more intelligent, capable and public-minded than all others – to rise to the top of society and lead our nation.  As Jefferson’s one-time adversary and life-long friend politely explained to him, the proposal might have merits but was utterly impractical, if not impossible, to implement.  Despite not agreeing with Jefferson on one of his more audacious proposals, there was essentially zero dissention among the leading figures of the American Revolution that preventing the rise of a hereditary aristocracy was one of the most important tasks facing the young United States of America.

Then, as now, the idea was not to prevent children from inheriting the family farm or continuing the family business.  The goal was to prevent the emergence of a class of wealthy overlords capable of controlling the political process in America for their own benefit.  That’s why Benjamin Franklin pushed (unsuccessfully) for the constitution of the Pennsylvania to declare concentrated wealth “a danger to the happiness of mankind.”

While neither Jefferson nor Franklin were successful, that does not mean that leaders of the Revolutionary Era disagreed with their goals.  The method for avoiding the possible disaster of American Democracy being overthrown by a European-style aristocracy was the inheritance tax.  Over the ensuing two hundred-plus years, the exact implementation of the tax has changed, as has the rate.  At times, it reach 90% on large estates, but at other times it was much lower.  Today, it is as low as it has ever been in American history.

Under current law, only estates with a net value of over roughly $5.5 million for an individual or $11 million for a couple are subject to any taxes at all.  “Net value” means that farms and small business are not taxed on the value of land or the value or all assets, but on the net value of assets minus all encumbrances such as loans, other debt, contractual obligations, etc.  What this means in practice is that 99.8% of Americans’ estates pass to heirs without any estate taxes.  Zero.  Of the remaining 0.2%, most pay relatively little.  Even though the top rate for the estate tax is 40%, the average tax paid by those who paid estate taxes is just 17%.  In 2012, total receipts from the estate tax equaled less than 1% of the $1.2 trillion inherited that year.  1%.  Another way of looking at this question is to realize that in a nation composed of roughly 325,000,000 Americans, just 400 families stand to reap 80% of the benefit from the elimination of the inheritance tax.  That’s right, the top 0.0001% of the population reaps 80% of the gains.  Looking back at the correspondence between Jefferson, Adams, Franklin and the other founders of American democracy, there can be no question that this is exactly the type of concentration of wealth that they all agreed should be avoided.

In the eyes of the people who literally wrote the Declaration of Independence and the U.S. Constitution, the GOP “tax reform” is nothing less than a frontal assault on American democracy itself.


Waiting for the Other Shoe to Drop

Note:  This is a post I wrote back on Feb 19.  I thought I had posted it, but I guess I didn’t press the right combination of buttons.  In light of recent developments, I thought I would post it despite the long delay.  The only changes I made today (Aug 1) were to add this comment and to correct two typos that I saw.  (Sadly, everything I do has typos.)

The conventional wisdom among many analysts not happy with the direction of President Trump’s administration is that Russian President Vladimir Putin supported candidate (now President) Donald Trump because Putin expected that Mr. Trump would follow more “Moscow friendly” policies that Hillary Clinton would.  While that explanation might have a grain of truth, I do not believe that it is correct since it misses the primary reason why Putin behaved the way he did and, more importantly, why the Putin-Trump “bromance” is destined to end acrimoniously.

Early in the primary season, before Donald Trump had emerged as the front-runner for the Republican nomination, Moscow was already following its well-established policy of attempting to undermine faith in the American electoral system and the American system of government in general.  Moscow followed these decades-old policy initiatives with a modern twist, supplementing traditional propaganda tools such as fabricated anti-American rumors and news with an aggressive social media campaign backed by a veritable army of human and robotic “trolls” to help ensure that Moscow-created and Moscow-approved propaganda reached the maximum number of Americans as well as others around the world.  After all, the traditional target of anti-American propaganda is not just American citizens but pro-democracy activists around the world – and particularly those in Russia or in its sphere of influence.  In Putin’s world view, making Russia great involves making America weak since the world is a zero sum game.

As the primary season progressed, not only did Mr. Trump emerge as the front runner, he emerged as the perfect example of what Russian intelligence services have referred to for decades as the “useful idiot” – the individual who willingly and without payment spouts the exact false propaganda that Russian intelligence agencies devised in Moscow.  Given that Moscow’s traditional role was to “throw bombs” in an ongoing attempt to undermine faith in American democracy, the Kremlin’s attraction to a political “bomb thrower” such as Mr. Trump who cast aspersions on both parties and on U.S. government as a whole was clear.  The repeated assertions that American cities are collapsing under the weight of an unprecedented crime wave, that patriotism is under siege, that American government institutions are actively working to take away American’s basic rights and freedoms were right out of Moscow’s playbook.

Certain elements in the Kremlin may have also believed that Mr. Trump would pursue more “Russian friendly” policies than would Ms. Clinton, but that was secondary.  The main rationale for supporting Mr. Trump was almost certainly to support the person whose stump speeches denigrated American democratic institutions as vociferously as the Kremlin’s paid propagandists did.

It is alleged, but not proven, that Russian intelligence agencies have additional compromising information, or kompromat, on Mr. Trump and his inner circle.  While I have no inside knowledge, even if the dossier complied by former MI6 agent Christopher Steele is wildly inaccurate it is highly unlikely that Michael Flynn, Paul Manafort and Carter Page were the only three Trump insiders in touch with Moscow and that no one else in the entire Trump campaign organization and administration knew anything about those contacts.

Even if such kompromat exists in Kremlin vaults, however, that does not mean that Putin ever intended to use the material to blackmail or manipulate the White House into adopting pro-Moscow policies that are antithetical to American interests, whether those policies involve ceding Ukraine to Russia or turning a blind eye to Russian violations of treaties limiting intermediate nuclear forces. Neither Mr. Putin nor his top propaganda experts are stupid.  They understand that the American “establishment” – the Congress, the courts, public opinion, the media and even President Trump’s own party – would have very limited patience for abrupt changes in U.S. policy that favored Russian actions at the expense of American interests.

Putin’s motive was never to control the White House.  Instead, he was always playing (quite effectively) an old game to undermine faith in the U.S. government and thereby to weaken the U.S. government’s ability to act to check Russian expansionism.  Until very late in the campaign – likely on Election Day itself – Putin did not even expect Trump to win.  Putin supported Trump solely to give more voice to Trump’s almost apocalyptic view of American society and government.  When Trump actually won the election, Mr. Putin and his intelligence/propaganda services were almost certainly as surprised as anyone.

While I certainly do not rule out that President Putin will take a few stabs at coercing the Trump Administration into adopting policies that favor Russia’s drive to recreate an empire, I seriously doubt he anticipates a continued string of successes.  Instead, each attempt to manipulate the Trump Administration will simply add to the Kremlin’s stockpile of kompromat that will eventually be utilized to undermine both Americans’ and the world’s faith in American democracy.

According to this theory of Russian actions, it has always been a given that Russian President Putin would not only cease supporting Donald Trump once he became President but Putin would use all of his intelligence assets to actively undermine the newly-inaugurated President.  This is because the goal has never been to support a “Russia friendly” President of the USA but to undermine the very basis of American democracy such as respect for the rule of law, the separation of powers and equality under the constitution.

If this view is correct, the only reason Putin has not yet begun to dole out kompromat against President Trump and his inner circle is that U.S. media, law enforcement and intelligence have already been highlighting the grievous shortcomings of both the President and his inner circle.  Should U.S. domestic criticism of President Trump being to die down – either due to fatigue or an active anti-media, anti-dissent campaign orchestrated by the White House – President Putin is waiting to fill in the gap because, in Putin’s world view, there is no better way to advance his desire to create a new Russian empire than to undermine faith in American democracy and to render the American government so internally conflicted that it is unable to take meaningful again against Russian aggression.

In this view, the only real question is when, not if, President Putin will turn against President Trump.


Oh! What A Tangled Web They Weave When First They Practice To Deceive: A Trump – Russia Chronology

I suspect that I am not alone in feeling overwhelmed by the flood of information (revelations, accusations, denials, counter-denials, statements, revised statements, etc.) surrounding allegations of collusion and/or conspiracy between President Donald Trump’s campaign and the Government of Russia.  Tracking the whole web is beyond my abilities (Robert Mueller and his team is working on that), so I therefore attempted to assemble a chronology with complete original sources surrounding just one aspect of this complex saga: the events starting with June 3, 2016, when Donald Trump Jr. received an email proposing a meeting with a group of Russians through today, August 1, 2017.

I was tempted to try to create sort of wiring diagram to go along with the statements to highlight the myriad ways in which statements from the President, his family and various officials and spokespersons have “evolved” (or contradicted each other) over time.  In end the, I gave that up both because there were just too many lines to draw and because I felt readers could form their own views.

Readers be ware:  Having complied this, I can see why the various press attempts at a similar timeline are so incomplete – there is just too much information.  Nonetheless, I thought some people might be interested in reading the full, overly long, version.  If anyone believes that I have left out important dates/events/statements, please send a comment so that I can update accordingly!

 June 3, 2016: Trump Jr. receives an email from Rob Goldstone stating that Trump associates Emin and Aras Agalarov had arranged for the delivery of “information that would incriminate Hillary” as “part of Russia and its government’s support for Mr. Trump.”

June 7, 2016: In a primary-night speech at the Trump National Golf Club in Westchester, New York, Donald Trump announces that he will reveal “big news” about Hillary Clinton “probably” on June 13.

June 8, 2016: Trump Jr. forwards the email thread to Trump’s senior advisor and son-in-law Jared Kushner and to his Campaign Manager, Paul Manafort.  (The exact forwarding addresses and time are in the e-mail chain.)

June 9, 2016: The promised meeting took place.  Representing the Trump Campaign are Campaign Manager Paul Manafort, Trump Senior Advisor and Son-in-Law Jared Kushner and Donald Trump Jr.  Donald Trump Jr. now says the information offered was not of interest and that the meeting focused on the lawyer’s desire to change adoption-related sanctions against Russia.  Because adoptions were suspended in response to US sanctions over Russian human rights abuses, “discussing adoption” means discussing sanctions.

June 15, 2016: The Democratic National Committee’s Trump opposition research file is released online. The software firm CrowdStrike releases an analysis indicating that the DNC had been hacked by “Russian intelligence-related adversaries.”

July 22, 2016: On the eve of the Democratic National Convention, WikiLeaks releases hacked DNC emails.

July 24, 2016: Donald Trump Jr. tells CNN’s Jake Tapper that the Clinton campaign’s suggestion that Russia was trying to intervene in the election on behalf of Trump is “disgusting” and “phony.”  He goes on to state that “It just goes to show you their exact moral compass. They’ll say anything to be able to win this. I mean this is time and time again, lie after lie. … It’s disgusting. It’s so phony. … These lies and the perpetuating of that kind of nonsense to try to gain some political capital is just outrageous.” Paul Manafort similarly denies any links between Russia and the Trump campaign, telling ABC’s George Stephanopoulos that such a suggestion is “absurd and there’s no basis to it.”

July 27, 2016: Paul Manafort again denies any relationship with the Russians and again says it’s “absurd” to suggest Russia was working on behalf of the Trump campaign.  (Note: He knew he was lying since he received a copy of the full e-mail chain with Rob Goldstone explaining Russia’s efforts to support Trump.)

July 27, 2016: Donald Trump publicly asks Russia to hack Hillary Clinton’s emails.

Oct. 7, 2016:  The Office of the Director of National Intelligence (ODNI) and the Department of Homeland Security (DHS) jointly stated that Russian intelligence services had hacked the servers of the Democratic National Committee (DNC) and the personal Google email account of Clinton campaign chairman John Podesta and forwarded their contents to WikiLeaks.

Oct. 19, 2016:  During the final debate of the 2016 Presidential season, Donald Trump rejects the findings of U.S. intelligence agencies and instead declares that “the U.S. has no idea” who was behind election interference.

Oct. 31, 2016: U.S. President Barack Obama directly warned Putin to stop interfering or face “serious consequences”.

Nov. 8, 2016: Donald Trump wins the 2016 Presidential election with a minority of the popular vote but a majority of the Electoral College.

Nov. 10, 2016: Two days after Trump’s election, his spokeswoman, Hope Hicks, denied a report in the Washington Post that the Russians and the campaign had communicated, saying the campaign had “no contact with Russian officials.”

Nov. 11, 2016: Hicks issues another denial. “It never happened,” she said. “There was no communication between the campaign and any foreign entity during the campaign.”

Dec. 16, 2016:  The FBI officially concurs with other U.S. intelligence agencies that Russia hacked both the DNC and John Podesta’s personal e-mails as part of an overall campaign to influence the U.S. election.

Dec. 18, 2016: Kellyanne Conway, a campaign and eventual White House official, denies outright any contact between the campaign and the Russians. “Absolutely not,” she told CBS’s John Dickerson. “And I discussed that with the president-elect just last night. Those conversations never happened. I hear people saying it like it’s a fact on television. That is just not only inaccurate and false, but it’s dangerous.”

Jan. 10, 2017: Manafort denies a report alleging collusion between Russia and the Trump campaign. “I have never had any ties to Russia or Putin,” Manafort told NPR.  (Note: Paul Manafort received millions of dollars from Russian government sources for his efforts to elect Viktor Yanukovich, a pro-Putin candidate, in the Ukrainian presidential election.  When widespread protests over election fraud forced Yanukovich from office, he fled straight to Moscow where he remains under Vladimir Putin’s protection.)

Jan. 15, 2017: Five days before the inauguration, Vice President Mike Pence went on Face the Nation and Fox News Sunday and stated unequivocally that there had been no contact between Trump campaign officials and Russians seeking to meddle in the election. “I think to suggest that is to give credence to some of these bizarre rumors that have swirled around the candidacy,” Pence told Dickerson.

Jan. 19, 2017: The day before the inauguration, Manafort again vigorously denies that any contact ever took place. From the New York Times: “In an emailed statement Thursday evening, Mr. Manafort called allegations that he had interactions with the Russian government a ‘Democrat Party dirty trick and completely false.’  “I have never had any relationship with the Russian government or any Russian officials. I was never in contact with anyone, or directed anyone to be in contact with anyone,” he said.  “On the ‘Russian hacking of the D.N.C.,’ ” he said, “my only knowledge of it is what I have read in the papers.”

March 18, 2017: Trump Jr. tells the Times: “Did I meet with people that were Russian? I’m sure, I’m sure I did. But none that were set up. None that I can think of at the moment. And certainly none that I was representing the campaign in any way, shape or form.” Asked at that time whether he had ever discussed government policies related to Russia, the younger Mr. Trump replied, “A hundred percent no.”

March 27, 2017: Under scrutiny for a transition meeting with the Russian ambassador, the White House describes Kushner’s meetings with Russians as follows: “Throughout the campaign and transition, Jared Kushner served as the official primary point of contact with foreign governments and officials.”

April 6, 2017: The New York Times reports that Kushner failed to disclose meetings with Russians on his security clearance forms. His lawyer said he told the FBI the following about those meetings: “During the presidential campaign and transition period, I served as a point-of-contact for foreign officials trying to reach the president-elect. I had numerous contacts with foreign officials in this capacity.”

May 6, 2017: Trump Jr. tweets out a New York Post story titled “Bad news for the Trump-Russia tinfoil-hat brigade” denying any collusion between the Trump campaign and Russia, adding his own comment .

May 8, 2017: Trump makes the header image of his Twitter account an image that incorrectly states that former Director of National Intelligence James Clapper had “reiterated what everybody, including the fake media already knows – there is ‘no evidence’ of collusion w/Russia and Trump.”

May 9, 2017: President Trump dismisses FBI Director James Comey without even warning Comey in advance.

 May 18, 2017: President Trump repeatedly denies collusion during a press conference, but then seems to hedge on whether any of his campaign officials might have colluded. “The entire thing has been a witch hunt. And there is no collusion between, certainly, myself and my campaign, but I can only speak for myself and the Russians—zero.”

May 30, 2017: Trump Jr. tweets another denial of collusion, this time including a story from, a conservative site that consistently backs the Trump administration.  The story repeated President Trump’s mischaracterization of Director Clapper’s remarks.  Trump Jr. added his own comment that “You mean nothing has changed in the 10 month witch hunt?

June 8, 2017: On the day of James Comey’s Senate Intelligence Committee testimony, Trump Jr. sends out a series of tweets denying collusion.  One thanking former FBI Director Comey read “Thanks James: Comey Debunks NYT report about Trump Campaign having repeated Russian contacts.”  The other referenced a report on the right-wing “Drudge Report with Trump’s Jr.’s added comment “If Chris Matthews is willing to say it, it’s over folks. Now can we get to work to ???”

June 27, 2017:  The “Trump 2020” campaign fund pays the law firm of criminal defense attorney (who is best known for defending Mafia figures) Alan S. Futerfas $50,000 to represent Donald Trump Jr.

 July 8, 2017: The first story about Trump Jr.’s meeting with lawyer Natalia Veselnitskaya went up on the New York Times website.

 July 8, 2017: In response to the New York Times article, Trump Jr. states that campaign issues were not discussed in the meeting and that he didn’t know the identity of the person he was meeting.  He specifically stated that “It was a short introductory meeting. I asked Jared and Paul to stop by. We primarily discussed a program about the adoption of Russian children that was active and popular with American families years ago and was since ended by the Russian government, but it was not a campaign issue at the time and there was no follow up. I was asked to attend the meeting by an acquaintance, but was not told the name of the person I would be meeting with beforehand.”

July 9, 2017: Donald Trump Jr. gives the following new and greatly revised statement about the meeting:  “I was asked to have a meeting by an acquaintance I knew from the 2013 Miss Universe pageant with an individual who I was told might have information helpful to the campaign. I was not told her name prior to the meeting. I asked Jared and Paul to attend, but told them nothing of the substance. We had a meeting in June 2016. After pleasantries were exchanged, the woman stated that she had information that individuals connected to Russia were funding the Democratic National Committee and supporting Ms. Clinton. Her statements were vague, ambiguous and made no sense. No details or supporting information was provided or even offered. It quickly became clear that she had no meaningful information. She then changed subjects and began discussing the adoption of Russian children and mentioned the Magnitsky Act. It became clear to me that this was the true agenda all along and that the claims of potentially helpful information were a pretext for the meeting. I interrupted and advised her that my father was not an elected official, but rather a private citizen, and that her comments and concerns were better addressed if and when he held public office. The meeting lasted approximately 20 to 30 minutes. As it ended, my acquaintance apologized for taking up our time. That was the end of it and there was no further contact or follow-up of any kind. My father knew nothing of the meeting or these events.”

July 10, 2017: Trump Jr. sends two tweets.  The first states “Obviously I’m the first person on a campaign to ever take a meeting to hear info about an opponent… went nowhere but had to listen.”  The second denied that there were any inconsistencies between the multiple evolving statements he had issued describing the June 9, 2016 meeting with Russian representatives.

July 11, 2017: Trump Jr. sends a tweet at 5:27 AM stating “Media & Dems are extremely invested in the Russia story. If this nonsense meeting is all they have after a yr, I understand the desperation!”

July 11, 2017: A few hours after the tweet above, the New York Times informed Donald Trump Jr. that they had obtained copies of the actual e-mail exchanges that led up to the July 8, 2016, meeting with the group of Russians and planned to publish them.  Trump Jr. himself released the an image of the e-mail chain via twitter at the exact time deadline set by the NYT for comments.  The full e-mails in readable form can be found on the NYT website.

July 11, 2017:  On afternoon after Trump Jr. pre-empted the NYT story by releasing the e-mails himself at the very last minute, the White House issued a statement from President Trump is statement from President Trump stating that “My son is a high-quality person and I applaud his transparency.”

July 12, 2017:  Jay Sekulow, the lawyer on President Trump’s personal legal team charged with handling all press relations appeared on Good Morning Americaand stated categorically that “the president didn’t sign off on anything” and “wasn’t involved” with the statement in any way.

July 16, 2017: Jay Sekulow reaffirmed that statement on NBC’sMeet the Press”, stating “I want to be clear – that the President was not involved in the drafting of the statement.

July 31, 2017:  The Washington Post breaks the story that President Trump personally dictated the initial (July 8) statement issued in the name of Donald Trump Jr. concerning the meeting with multiple campaign officials and Russians in Trump tower.  This contradicts every previous statement made by the White House and Trump’s lawyers.

August 1, 2017: While being careful to avoid confirming the details of the July 31 Washington Post story, White House spokesperson Sarah Huckabee Sanders indirectly confirms the gist of the report during an official press briefing by stating “Look, the statement that Don Jr. issued is true. There’s no inaccuracy in the statement. The president weighed in as any father would, based on the limited information that he had.




A Nation of Laws

Nearly a year ago, I wrote a blog post on the “Clinton e-mail server” fiasco in which I argued that while I certainly would not defend former Secretary Clinton’s use of a private e-mail account for official purposes, the reality is that every Secretary of State since the dawn of e-mail has done more or less the same.  More broadly, I argued, the very real and dangerous problem we face as a nation is that elected officials and senior political appointees of both parties almost routinely flaunt laws and regulations.  Just as the old nobility of Europe were not held to the same standards as the peasants, America’s political class has come to view itself as above the law.  If you don’t believe that, just think of what would have happened if a “normal person” (the modern counterpart to a feudal peasant) did what the politicians did.  If a career member of the State Department had done what Hillary Clinton did, he/she would have been fired and maybe even jailed.  If a career officer at the CIA has ‘outed’ Valery Plame the way former VP Cheney did, he/she would have been sent to jail for a very, very long time.  The list of examples is (unfortunately), endlessly long.

If anyone had any hope that President Trump’s “drain the swamp” rhetoric meant that these sorts of abuses would stop, now is the time to wake up.  The Attorney General of the United States himself failed to disclose required information on his security form (known as a DS-86 or EQIP).  If a career civil servant of any branch of service – State Department, military, intelligence agency – did that, he/she would have his/her security clearance pulled in a heartbeat and would likely spend the next five years in jail.  It does not matter how ‘material’ the information was.  Withholding information on a security form is a crime.  Period.  Lying to or misleading the FBI officers who personally interview candidates for security clearances is a crime.  Period.  The list of senior Trump administration officials who have knowingly violated these laws is growing daily:  AG Sessions, former National Security Advisor Flynn, and Presidential son-in-law Jared Kushner, just to name a few.  On top of those, the Trump administration is now refusing to release the (evidently extensive) list of lobbyists who were granted special Presidential waivers from ethics rules so that they can now manage or oversee the exact same government bodies they once lobbied.

This post may sound to some as “anti-Trump,” but that is not my intent.  Instead, I deeply believe that we as a nation must reaffirm our commitment to equality and justice.   After all, America has survived rough times before because we are a nation a laws – laws that apply to everyone.  At its heart, that is the idea of America – a nation based on the belief that all people are equal and should be treated accordingly.  Not only are Trump administration officials continuing a decades-long practice of assuming that the laws don’t apply to political appointees, they are doing so in an unprecedentedly public and decisive manner.  The clear message is:  this Administration is above the law.  For anyone of any political party or political stripe, the time has come to stand up for America.  If we are not a nation of laws, then our Constitution is reduced to merely words on a scrap of paper.