Protect Domestic Oil and Gas Producers from the Oil Price War

Saudi Arabia is a strategic ally but their actions threaten our security.

The Saudis and the Russians have joined forces in yet another effort to knock the United States out of the #1 position as petroleum producer. To do this, they are taking advantage of the inevitable weakening of demand because of the COVID-19 pandemic to magnify the impact of their supply increases.

What the world markets need in a time of crisis is stability, yet the Russians and Saudis seem hell-bent on kicking us while we are down.

What can we do about this?

• Maximize diplomatic efforts to convince the Saudis and Russians that price stability is what is most important right now.
• Leverage the strategic relationship to put pressure on the Saudi leadership.
• Ban the import of any foreign crude until the crisis has resolved, except for Canadian crude.
• Use a portion of the federal excise tax to create a subsidy for domestic producers to help them weather the storm. For example, a $5 per barrel subsidy would only cost $1.9B per month and would be more than sufficient to keep domestic producers afloat.
• Add to the U.S. Strategic Petroleum Reserves, to include the addition of new storage capacity if needed.

The world is at risk of shifting into a deflationary spiral which could be very destructive to wealth and to the debt that this wealth back-stops. Therefore, efforts must be made to stabilize markets while we work our way through the curent health crisis.

Don't Let The Response to COVID-19 Be Worse Than The Disease

No, COVID-19 is NOT the zombie virus

UPDATE 3/17/2020:

So I just came across correspondence published in The Lancet on 3/11/2020 and it is some scary stuff.

Here is what the Lancet has to say about these results:

"Estimates will increase if a longer delay between onset of illness and death is considered. A recent time-delay adjusted estimation indicates that mortality rate of COVID-19 could be as high as 20% in Wuhan, the epicentre of the outbreak. These findings show that the current figures might underestimate the potential threat of COVID-19 in symptomatic patients."

(https://www.thelancet.com/journals/laninf/article/PIIS1473-3099(20)30195-X/fulltext)

So, yikes, this certainly got my attention. However (and, this is why random testing is so important and failing to test randomly so dangerous), people who got infected but were not reported as infected to the authorities because they experienced mild symptoms and recovered at home were NOT considered in this study. Therefore the true mortality rate could be MUCH LOWER.

Here is what the authors had to say on that point:

"Notably, the full denominator remains unknown because asymptomatic cases or patients with very mild symptoms might not be tested and will not be identified. Such cases therefore cannot be included in the estimation of actual mortality rates, since actual estimates pertain to clinically apparent COVID-19 cases."

 Nonetheless, this article is going to scare people way more than they might otherwise be scared, which will lead to an increased risk of panic, chaos and a more draconian government response.

IT IS PAST TIME FOR RANDOM TESTING TO GET A HANDLE ON HOW MANY CASES ARE PRESENT IN THE GENERAL POPULATION -- IS ANYONE LISTENING?

UPDATE 3/16/2020:

Only through random testing can the CDC determine how prevalent the COVID-19 virus is, but for some reason the United States doesn't have enough test kits to engage in random testing, and the test kits we do have take several days to produce a result, while the rest of the world has ample test kits that can produce a result in 4 hours.

For unknown reasons the CDC refused to adopt the WHO test kit in favor of a homegrown option that we are still waiting for.

By the time the test kits arrive the virus will be everywhere and it will be too late, so nice work killing people.

UPDATE 3/15/2020:

If COVID-19 is mainly a threat to those over 60 years old, pregnant women, and anyone else who is immuno-deficient (such as people receiving cancer treatment), doesn’t it make more sense to isolate that sub-group and let the rest of the population go about their business as usual in order to develop herd immunity?

Herd immunity can be highly effective in stopping viral flare-ups when more than half of the population are immune and cannot spread the virus.

Until a vaccine is available, letting people fight the virus naturally might help us control future outbreaks.

Because the economic impact of weeks and weeks of closures brings with it greater costs and risks to society, including permanent wealth destruction and dangerous deterioration of the social order.

ORIGINAL POST 3/11/2020:

I think it is important to remember that while the novel coronavirus that is currently racing around the globe is new and is highly contagious it is only lethal to those who are already immuno-comprised, such as is the case in the elderly or the infirm. In fact, some estimates indicate that at least 80% of those infected suffer only very mild symptoms.

In that regard COVID-19 is better than the regular influenza strains that circulate each year.

Which is not to say that COVID-19 isn't a virus that is worth protecting ourselves from.

The questions is this: how far is too far to go in efforts to prevent the spread of the virus?

Epidemiologists current estimate that it is virtually impossible to prevent COVID-19 from infecting up to 60% of the world's population and that current efforts at control are doomed to fail. However, these efforts could easily bankrupt us, leaving us in a financially weak position and unable to deal with the treatment of the infected.

So, what is the appropriate response? Basically, to resign ourselves that this thing is coming and there is no stopping it, and that we should prepare emergency treatment facilities to deal with the approximately 10% of infected who will require life-saving measures.

We should NOT attempt to quarantine the population at large (such as what Italy is doing currently) or take any other measures that deviate in any significant way from the routine.

Yes, this means that the virus will rage for a while and many people will die, but that is all but inevitable in any event. We should be focused at this time on keeping our powder dry and preparing to do our best to save the infected who present with severe symptoms.

And, above all, DO NOT PANIC.

Reference

https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30567-5/fulltext

Are We At War with Iran Already?

This molten heap of metal is the SUV in which Iran's top general was traveling,
after it was hit by U.S. missiles.

For a moment let's imagine a scenario: U.S. General Mark A. Milley, Acting Chairman of the Joint Chiefs of Staff, is killed when his motorcade is attacked with missiles launched from an aircraft flying the flag of the Islamic Republic of Iran. Now, in what universe would the U.S. not take this as a blatant act of war?

Therefore, we must be clear that the assassination of Iranian General Qasem Soleimani, who, by all accounts, was the ranking member of the Iranian military, was an act of war.

However, we have not openly declared war on Iran and we try to deny that our actions amount to an act of war. Why is that? Does it not make more sense to be clear about what it is we are doing, in order to rally support at home and abroad and in order to expedite a resolution to the conflict?

Make no mistake: actions on both sides of this conflict are part of a clear march toward war and the same questions could be asked of Iran; is Iran in open conflict with the U.S.? Were the attack on the U.S. Embassy in Baghdad, the multiple missile attacks on U.S. bases in Iraq and Syria and the downing of a U.S. drone in the Persian Gulf not overt acts of war? When non-state actors like ISIS take similar actions we do not hesitate to declare ourselves at war with them -- why not with Iran?

This conflict should be called what it is and decisive action should be taken, or we should step back and let our allies carry water for us. I am not a fan of leaders who incite to war but claim to not seek war.

If Iran wants war with the U.S. then let them have it and stop all this pussy-footing around.

Mexico On The Knife's Edge - A Path Forward

Could this be the future of Mexico?

It is no secret that Mexican president Ángel Manuel Lopez Obrador (AMLO) has been steeped in the same political and economic philosophy espoused by Hugo Chávez and Fidel Castro, which is one of a powerful leader with near-absolute control whose objective is to guarantee the basic basket of goods and services to his people at little or no cost.

It is also no secret that this path is that of complete disaster, as can be easily seen when one looks at Cuba and Venezuela.

In fact, it is my opinion that the collapse of Venezuela is the only thing that is saving Mexico from catapulting itself headlong down this path, and if not for the cautionary tale that Venezuela is to the world, there would be nothing to stop this from happening: AMLO won by a historically wide margin and he enjoys a majority in Congress, so he can pretty much do whatever he wants to do.

With the Mexican economy teetering on the edge, the next steps that AMLO takes are all the more critical.

Currently, Mexico suffers from a crisis of uncertainty.

• Will NAFTA II pass in the U.S. Congress (the answer? yes)?
• Can lawless states like Guerrero and Jalisco be brought under control or will this contagion spread?
• Are any public/private partnerships safe from the axe?
• Can PEMEX turn its ship around and avoid dragging down the economy?
• Can the "informal" economy be regulated?

For the solutions, AMLO is going to look toward greater centralization of power and greater government control over goods and services. He will do this because it is his instinct to do so, and because politicians in his party are suspicious of the private sector.

Therefore, getting Mexico to the level of per capita GDP where it easily could be if not for the inclinations of the ruling party will be very hard, and it may require an economic crisis or a change of government, but I hope not. I see a level of pragmatism in AMLO's approach to government that makes any outcome possible.

What should Mexico do to turn things around and get on the path of growth again?

• Dump PEMEX.
• The same people who dug this hole are not going to pull themselves out of it.
• Sell the assets and the rights to exploration and use the proceeds to buy out the pension obligations for cash.
• Change the mineral rights laws to allow private ownership but keep the excise taxes.
• Open up fracking pretty much anywhere and everywhere.
• Remember that the free market turned the U.S. in to the #1 oil producer in the world against all odds -- when in doubt look to the U.S. for guidance.
• Establish a national land tax structure.
• Currently, property taxes in Mexico are ridiculously low, a mere pittance, which is NOT a good thing.
• Landowners have little to no incentive to put their lands to productive use since it costs them almost nothing to just sit on them waiting to "hit the lottery" when the next big multinational corporation comes along looking to build a maquiladora or big box store.
• A land tax with a homestead exemption will free up large parts of the country to economic development and will help diversify the tax base.
• Lower the IVA tax to 8% nationwide.
• For over half of Mexico, a 16% IVA tax translates to 16% LESS of goods and services that they can afford to consume.
• Almost all of this tax cut will be ploughed right back into the economy.
• Get rid of antiquated and protectionist import regulations.
• Stop protecting new car dealerships and liberalize the import regulations on used cars.
• Stop protecting domestic garment producers and liberalize the import regulations on new and used clothing.
• The grassroots effect of liberalizing import rules will create millions of new jobs.
• Restore the rule of law to the entirety of Mexico.
• Make the distinction between cartels that traffic in substances that are in high demand in the U.S. and cartels whose goal is the establishment of pseudo-governments for the purpose of imposing excise taxes on the Mexican population and local businesses (bribery, extortion, kidnapping, outright theft).
• Drug trafficking is a problem of demand, not supply. If Mexico is not meeting the demand other countries will, and it will not end until the demand dries up. Mexico can go bankrupt fighting the DEA's war or they can be smart about it.
• Keep in mind that being labeled as a "Narco State" can have disastrous effects on the economy so tread carefully.
• The Mexican Constitution must be the ONLY law in Mexico and radical steps are needed to restore peace and tranquility, including widespread imposition of martial law and suspension of habeas corpus.
• Lower the corporate tax and establish a more progressive personal income tax structure.
• A lower corporate tax will attract greater foreign investment which will lead to high employment and better salaries.
• The current income tax structure hurts private spending and the economy as a whole.
• Simplify the legal processes for starting and operating a new business.
• Currently, over HALF of the workers in Mexico do not pay taxes because they are working "under the table" so to speak.
• The barriers to opening new businesses are extremely high and the obligations for periodic reporting are onerous and difficult to comply with.
• Get rid of the need to hire a public notary to draft articles of incorporation.
• Everthing a new business owner needs to form a private corporation should be available ONLINE and at LOW COST.
• Instead of monthly income tax reporting, try quarterly reporting.
• Current policy is a HUGE deterrent to economic growth.
• Look to the U.S. for ideas on how to simplify and liberalize the process.
• Make ending the informal economy a TOP PRIORITY of this government.

Comrade Putin

What was Putin doing with his hand wedged in the chair like that?

In Helsinki Trump went completely off the reservation and is now pretty much outside the Fort all by himself. Whether the Fort will reach him in time is an open question, and the survival of his presidency is in play as a result.

What do I think Trump wants? I think he wants full normalization of political relations with Russia, to include military cooperation including joint operations. He wants to work with Russia jointly in the war against Islamists and thereby take the pressure off the U.S. forces. Unlike presidents before him, Trump does not care about the internal politics of other countries. He does not believe that it the responsibility of the United States to be the one to stand up to all the bullies around the world. He believes that sanctions are stupid because they hurt U.S. businesses and help business from other countries whose governments don't participate in the sanctions program. Does he care about the annexation of the Crimean Peninsula or the civil war that Russia directly supports in eastern Ukraine? No, not really. He'd gladly recognize Crimea as part of Russia if Putin abandoned eastern Ukraine, or if Kiev and Moscow could work out a division of the disputed areas.

What is Trump more worried about? Some would say pee tapes, but I think it is the emergence of China as a global superpower. The U.S. national security apparatus is stuck in a habitual and reflexive adversarial relationship with Russia. It is starting to look as if they fear losing Russia as an enemy more than they relish the notion of a world with greater peace. By antagonizing Moscow through sanctions and legislation such as the Magnitsky Act, the West is pushing Russia closer to China, when they have less in common with the Chinese than they do with Western Europe, both culturally and geographically.

I have looked skeptically on Russian "hacking" of our elections, not because they didn't do it, but because it worked. They used the simplest tricks in the book and they only served to uncover the apathy and laziness of the electorate. If anything, the Russians did us a favor: as voters, we have to become more critical readers and we have to ask more important questions. Our democracy is not in danger because of hacked emails or fake Facebook ads. Our democracy is in danger because too few of us have the time or compulsion to look into the facts and would rather believe fantastic reports from the world of alt-news.

In a recent New York Times report, members of the intelligence community related briefings with Trump in the weeks after the 2016 elections in which they showed the transcripts of intercepted telephone calls and emails to Trump to make the case that the Russians had influenced the election, in part, by intercepting the emails of the Democratic National Committee. So, if I read that correctly, the U.S. was intercepting Russian emails at the same time they were intercepting U.S. emails.

Personally, I would like to see improved relations with Russia. I believe that Russia wants what is in Russia's interest the same way thay the United States wants what is in our own interest, but that fact does not preclude cooperation on many levels. The chances of making progress in hot spots around the world, improved control over fissible materials, and more stable energy price over a longer period of time would be some of the results.

Plus, we might be able to count on Russia is we ever have to confront China militarily.

So, as ludicrous as Trump looked in Helsinki, and how poorly he handled things, I kind of agree with what I think he is trying to do.

Get Rid of the Estate Tax Completely, But Use the Original Cost Basis for Valuation

It makes sense my assets should flow freely to the next of kin, or whomever I designate.

The estate tax is fundamentally immoral, in my opinion: assets that I have accumulated over my life with after-tax dollars should be able to freely change hands when I die. Why should an asset that I bequeath suddenly be treated like income for the person who inherits it? I just don't see how that makes sense, and it can force my heirs to make undesirable moves, such as selling assets into a weak market to raise the money to cover the estate tax.

However, another the part of estate law that is equally illogical is how the cost basis changes to the value of an asset at the time of the inheritance.

For example, if I buy a house today for $250K and leave it to my next of kin in 30 years fully paid off and worth $500K he can sell it immediately and pay zero capital gains tax on the sale because the IRS allows him to report that the house cost him $500K, not $250K.

This is fundamentally illogical -- why should the cost basis change if I originally only paid $250K? My next of kin didn't buy the house from me, he simply inherited it.

Currently, estates smaller than $5.34 million are exempt from federal estate tax, which means that my next of kin could inherit my house for free and sell it for free, too, but if I sell it before I die the sale is subject to tax. I'm sorry, but that is just wrong.

So, while I support elimination of the estate tax for estates of any size, I strongly believe that the cost basis for any assets in estates of all sizes should reflect the value at which the assets were originally acquired, not the value when they are inherited.

Anthem Protests by Players Not A Free Speech Issue

A good coach is always on the side of his player.

I understand why NFL players choose to kneel during the National Anthem, and it is not because they do not love America. To the contrary, it is BECAUSE they love America that they do it. America is a great country that is rich with great opportunity. It also has a very dark history, the vestiges of which live on. That is why, in the wake of the #BlackLivesMatter movement that successfully focused attention on racial profiling and the use of excessive force, athletes want to keep the spotlight focused on these lingering problems so that we can engage as a nation in a discussion about how to police effectively without unneccesary hurt and insult.

That being said, if the team owners and the league want them to stand for the national anthem, then they must stand for the national anthem. Standing for the national anthem is a part of their job, just as wearing the uniform that they are given to wear and adhering to a lengthy code of conduct is part of their job.

Can you imagine if a worker at Chik Fil A comes to work with a big anti-abortion pin on her shirt and refuses to take it off? Should they or should they not be fired? Do they have a free speech right to use the exposure that they get as cashier to lobby on behalf of their personal beliefs? No, they do not.

That is why I have been puzzled by the constant vacillation on the part of the owners and the league with regard to the issue of players kneeling. It's really not that complicated; the player is either doing his job and following the rules or he is not. It is not his place to co-opt the anthem to express his own political beliefs or anything else, for that matter.

However, in my opinion, these players are not unpatriotic. It is unpatriotic to turn a blind eye to behavior that runs afoul of our constitutional and civil rights as Americans. It is unpatriotic to not strive to make America a better place, which is exactly what they are trying to do by kneeling down during the anthem.