Modlin Global Analysis Newsletter

Watergate with Dan Modlin

Welcome. Thank you for joining us for this edition of the Modlin Global Analysis Podcast. We regularly talk about international affairs as well as economics and politics, and it's always helpful to notice how much these themes often interact with each other. And we'll continue in that discussion throughout this year. And in all these episodes, but it is worth noting, specifically, we're going to go back in history and talk about Watergate and this interaction of international politics and the Watergate scandal that we're many of us are familiar with. I'm glad to be joined. In by Dan Modlin this week, we're going to twist the tables and I'll be asking and Dan questions. And it's particularly interesting because throughout his life he has been fascinated by the Watergate scandal. And as a student, he did extensive research on this question and his revisited—frequent times. So Dan, thank you for joining us on this. And our first question to you is although Watergate was generally considered to be a domestic story doesn't it have some international politics connections to it? Dan Yes, thank you, Kevin. It's something a lot of people don't realize that the roots of the whole Watergate scandal really go back to the Pentagon Papers incident in which a Rand analyst named Daniel Ellsberg was accused of leaking documents to the New York Times that became known as the. Pentagon Papers and these were internal documents from the Defense Department. Which had analyzed some of the mistakes made during the Kennedy and Johnson administrations in the war in Vietnam, Richard Nixon's name was not in the Pentagon Papers, but he was very concerned about the leaks. As it turns out, he and Henry Kissinger in that time were involved in some of the diplomacy that. Would later lead to. Opening some of the doors with China and they were very concerned that some of the information from the Pentagon Papers, even some of the documents that hadn't been released yet. Referred to some surveillance flights that the US had carried out over China and they were concerned that that could impede their progress in talking with Chinese leaders. So there was very definitely an international aspect to this. Another interesting side light of this was that Ellsberg, the person who's widely recognized as the person who leaked the Pentagon Papers, had actually had a mentor named Henry Kissinger in his past. Going to Garrett M Graff in his very interesting book, Watergate and New History, Kissinger was concerned that if that former student would continue to leak documents, that would reflect badly on him, and it would also obviously have an impact on some of their diplomacy. But according to graph. Kissinger then encouraged Nixon to take a hard stand on. Leaks and that hard stand was what led directly to some of the corruption and illegal activity that became known as the Watergate scandal. Kevin You know, this is fascinating because, well, you've spent a significant amount of time thinking about Watergate. I've been interested in the Cold War era of this same time period. And I've read biographies on Kissinger. And this was a very important mark both in the history of what we would know with Watergate, but also the relationship that Kissinger has throughout the administration. And this feeding of basically paranoia that comes from that and we see. The Nixon and Kissinger bond kind of strengthened through this paranoia, right? So they have a greater trust basically through developing distrust of others. And just as I mentioned earlier, you've had these interesting stories that you've shared with me throughout my life. Of being at the Watergate hearings, and in fact, you were there the day Attorney General John Mitchell. So I know all of us would enjoy hearing some of the macro pieces that you've heard, as well as what was it like being there? Dan It was a very interesting experience and to put it kind of in context, I don't know of anything that happens currently that had quite the attentional center. Watergate hearings had all three TV networks were devoting the entire day to carrying the testimony at those hearing. But I did have the opportunity. It's it's kind of a strange way I I got the. Chance but I. Did get to go to hear the first day, John Mitchell testified Attorney General John Mitchell. As it happened, I was a young agriculture reporter and my father worked for a TV affiliate in Indianapolis who had a Stringer. On the hill. And as it turned out, that Stringer wasn't going to be going to the hearing that day, so he loaned me his press pass. So I actually got to go in and sit through the entire day's hearings. And it was it was amazing. Author Norman Mailer was there. There were rumors that John Lennon was going to be there. I never saw him. But I would have. Kevin I'm sure I'm sure if he. Dan Was there when? You would know him. Dan I would. Have noticed him, but it was. It was an amazing activity and really that particular day, Mitchell. Was very effective at not answering questions, and there wasn't anything that earth shattering that that came out the particular day I was there, but it was it was an amazing experience to be able to witness all all of this going on in, in the caucus room there and and that the Senate was dealing with it was it was really. It was like watching history being made. Kevin And that caucus room? That meeting room is one that continuously they go to for major hearings because of the size and the media capacity they have for that room. So Garrett Graff, as you mentioned, has written a book that's garnered a lot of attention in recent years on Watergate, a new history. What are some of these key findings that you have from this both? In domestic politics, particularly, but maybe anything international. Dan As well, I think I think Graff did an excellent job of researching this story and a lot of the information that I found new was he went back and dug up the early abuses, the plans to bug offices. And again, a lot of this started with the idea of stopping leaks, but it it quickly. Grew to illegal activity and the graph lays that out and then points out that there was much more to the story than just the break in at the Democratic headquarters. He's also very quick to point out that a lot of the information that that came out through the Washington Post, again through reporters, Bob Woodward and Carl Bernstein. A lot of that information came from their source at the time. Was just known as. Deep-Throat, but that it was later revealed that that was Mark Felt and graph points out that a lot of the information that felt provided to those reporters was really pretty self-serving in that felt was hoping to take over the head position at the FBI after the death of J Edgar Hoover and so. Although in the movie all the president's men, we kind of get the in. To this interesting guy that meets reporters in the garage and he's trying to do something to help save the country from some kind of awful fate. In fact, he probably was giving them information that was helping him. At the same time, so that that was certainly one of the things and I think. Just in general Graff also was pretty tough on a couple of the key players in terms of how they work things around to try to make themselves look less culpable than they were. He was, I would say he was fairly tough on John Dean and Jeb Magruder. Both in terms of their role, their direct role in the cover up and their attempts to. Appear that they they really weren't as involved as they were. Kevin So it's interesting how self-interest came to play into these conversations. They're all by political actors that are thinking ahead about the environment they're in, seeking to move up in the world somehow created an institution that can internalize that and. Both see the challenges as well as some of the checks that can create throughout the Watergate committee proceedings, the White House tried to downplay investigations and call them a witch hunt. Did that strategy work? Dan Well, obviously in the end it did not work. For a while. It helped. Helped to keep the president in office, probably looking back on it, they were able to continually use this approach that the investigators were it was a witch hunt or that the American people didn't care about this investigation and that we needed to get back to the business of the country and that. Argument was used repeatedly during the last months of the Nixon administration, but eventually the what I believe what happened and looking back on it, some of the. Key and a mid level figures who were involved in the White House and in the campaign to reelect the president started to get plea deals and the information started to come out and it became more and more difficult to maintain that line that there really was nothing to the case. And then of course the revelation that there was a taping. System in the White House was a real game changer in terms of the evidence that the investigators could eventually locate. Kevin How were the investigators able to get into this inner circle of the White House? Dan I think that was really largely through the plea deals. I think these were a lot of these people were individuals who had certainly no criminal background, no criminal record. And as they began to feel more and more isolated as the conspiracy continued, some of those. Figures such as I mentioned John Dean and Jeb Magruder obtained plea arrangements to kind of absolve themselves of most of the charges against them in return for a relatively light sentence. And once those. Figures started to work with prosecutors. Really, the end was almost inevitable because of the information they provided implicated the higher ups, and so it was pretty much once the once the investigators were able to get people like Dean and Magruder to cooperate, I think it probably was just a. Matter of time. Kevin So one of the other things that I think is fascinating about this and it's something that you and I've talked about is how many individuals involved in this had no monetary gain from either their criminal activities or their advocacy or the support of. Of the break-ins, they didn't make money from this. They seemed to be either drawn to power or believing in something. I think it'd be interesting to think about how that dynamic intersects with these plea deals, right? So did these individuals who came to the plea deal. Was that some way they're accepting their role on this, but also maybe a shift in their optimism of what their purpose was. Dan Yeah, I think that's true. I I that's a good point. And as the plea deal started as we said, it's an interesting thing to note that. All the people who ended up with the plea deals, the people who did prison time for the Watergate break in with the exception of the people who actually broke into the building, most of them really did not do anything in terms of a physical act that would you would associate with the crime. Certainly, conspiracy cover up perjury, obstruction of justice or crimes. There's no doubt about that. But there really wasn't personal gain for most of them, as you said. Interestingly enough, Spiro Agnew, the vice president, who had to step down in 1973, was the only person really in that White House that lost his position because of corruption. In terms of making money on a kickback or a bribe, Agnew was, and Agnew really wasn't too involved in the Watergate. They didn't seem to include him in the discussions, but he he's the one that served time for or he's the one that gave up his had to lose his office. I should. For greed and corruption, the others were more. It was a belief that they were doing something to keep the president in office, or a belief that. They were helping. To protect national security, whatever, whatever their justification may have been at the time, it certainly the evidence mounted up and it was. Clear that they were doing illegal things. Kevin Yes, this is a fascinating topic and actually we have so much to cover on this we're going to do this as a two-part series. So we'll hear more about this in the following week. But again, Dan, thank you for talking about this with us. I've been fortunate throughout my life that to listen to somebody. He was fascinated by events, fascinated by people and fascinated by history that I get to hear these conversations and wanted to take this opportunity. Unity to highlight this with the broader audience and if you ever have questions, you're welcome to contact me e-mail at kevin@modlinglobalanalysis.com and again, thank you for your time. Thank You, Dan. Dan Thank you very much I enjoyed it, Kevin. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit modlinglobal.substack.com [https://modlinglobal.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

US Inflation and Global 🇺🇸 🌐💵📈

Welcome. Thank you for joining us for this edition of the Modlin Global Analysis Podcast. This week we are focusing on inflation, what it means, and both inflation in the international sense, with a number of countries and regions we're going to focus on. As well as in the United States, again, we're going to be talking about this monetary phenomenon, what prices? Changing and what they mean for consumers and how we define that and we're not talking about inflated egos or the inflated value of my baseball cards. We're going to emphasize the consumer aspects and the costs that they experience through this, and this week, I'm glad to be joined again by Dan Modlin, who has a series of interesting questions on inflation. Dan Kevin, we hear a great deal of talk about inflation, obviously, and a lot of people when they're in the grocery store certainly feel they're seeing the effects of inflation, but. I wonder if it might be a good idea just to start with an actual definition of inflation. Kevin Great question. First off, I feel that sentiment as well. I'm one of those penny pinchers and I go through the grocery and I notice when butter and bread go up $0.10 and think about ways I can compensate for that. But inflation is about the increase in prices. And they're different people that have debates about what causes inflation. And everything, but it's first important to note that this is about the increase in price across the board. For consumers, so if. The price of gasoline, or the price of Wheaties increases dramatically. That is not inflation. That is a phenomena related to the supply and demand dynamics of those goods. This is an across-the-board phenomena where a large basket of goods. Have increased in price overtime and that it is noticing that. It's a distinct phenomena that has to do with the supply and demand for goods and services, but how this intersects with the quantity supplied of money and we know throughout history and we know throughout American history. Inflation is caused by a lot of extra money in the economy, so that individuals need to use more money to buy a similar amount of goods that they could buy a few months earlier. Dan Let's talk a little bit about that. We hear obviously the partisan politics a lot discussing this. Your legislation causes inflation and your legislation causes inflation and these kinds of accusations float around a lot. But let's talk about the basic causes of it. What do we see as primary causes of this trend? Kevin Yeah, that's a great question. And what's important with that also is, is that there's a rich debate about this. And so it's not just a debate among policy actors. There's a debate amongst the academic classes and what they think about that. One of the things is it relates to the conversation, the points that we just had is people will associate increases in prices and say that that is all inflation when in fact it can be changes in supply and demand. If producers decide to dramatically reduce the supply of oil or reduce the supply of Wheaties. We can expect the price to increase, and that is related to. And to the global market, having the demand for those products, that is a very different question than the global supply of money and specifically the supply of money within the United States and now which is circulating throughout the economy. So our both our policy actors. In the Federal Reserve. We'll try to regulate the supply of money in an effort to control inflation, and we'll have to have a very serious conversation to explain what went off the rails in the last few years. But it is true that certain policies can contribute to inflation. Both the two big effects are how much a country is spending and how much are they taxing. So how much is basically being put out there in the economy and circulating around? What are the trillions of dollars doing that and how much is being taken in through taxes that also regulate that, so that perspective? Is an argument of what we call fiscal policies, so that taxing and spending of the federal government. The other arm that has very significant influence, is what they call monetary policy, and that is interest rates that are put on savings and the amount that we borrow throughout our economy, so the interest rates are going to influence how much money is circulated. So if it's more expensive for me to buy a house or to buy a car and everything, this has a way of taming down the amount of activity and economy and therefore taming down the circulation. So it's both the quantity of money and the amount that is circulating that both these instruments that we call fiscal policy, which again is congressional and presidential action and then Federal Reserve regulating the supply of money. Dan OK, now we tend to focus on inflation domestically in a lot of our conversations with, as you say, when we go to the grocery store or buy Wheaties or whatever, we're buying. But what about the situation in Europe? Kevin So what's interesting in many regards is both the United States and the EU. We started to see an increase in inflation around the same time period, and we both continue to struggle with this problem. What's also fascinating is the policies chosen to address it have differed, and the policies around which may have contributed to it have differed. So it's very difficult to know all the causes of this, right. So if we really want to know what's going on. And not just what the arguments are, but to really unpack what's going on? It's more difficult. What we do know is that both areas, the European Union and the United States had as to the whole world experienced a pandemic, but many of those other regions don't seem to have had the same inflation effects, right? So that's a hard thing to control for, is it? The policies that both regions instituted during the pandemic that could be in place so. Particularly the amount of fiscal stimulus, meaning more government spending on a whole host of things. So we know that both in the healthcare sector, but especially providing relief for workers throughout the closure period and afterwards played a significant role in the federal balance sheet and maybe that is circulating a lot of money. It was kind of in excess to that. It meant a social need, but that didn't mean that it created extra money in the system, especially in a system where people were probably spending less money to begin with because they had fewer activities and social choices and opportunities to spend money. That is something that does mirror the European experience overall. That is a background, but Europe has had a much more difficult time taming inflation than even the United States had high single digit inflation. Throughout the last few years. Now it's tamping down to about 4%. Again, the goal is to have about 2%, so it is making some progress and the Federal Reserve came out and announced that they a few days ago that they were not going to raise interest rates, but in the announcement and another signals a lot of people anticipate at a quarter point increase will happen in the next time. So we're seeing the United States policy be incremental and measured and still, conveying a commitment to addressing inflation, whereas the European side has increased rates more slowly than the United States and they are being more cautious with this policy and they still have about 9% inflation across the board. Another challenge they have and they did raise rates recently as well is the experience that is going on in Germany or what's going on in Europe, or in Spain. All of these different countries are experiencing inflation differently. So you have one tool that has different effects throughout the European Union and this creates different pressure points that basically encourages incrementalism and increasing rates, which will likely sustain higher inflation, longer than maybe socially desired, and definitely not desired even by the policymakers. But again, this is really challenging to understand because I would argue that if you read the biographies of central bankers and you and academics. There was a sentiment that the economic class had figured out how inflation happened, so this was a complete surprise to all across the board in that regard. So it's both interesting to look at. Europe and the United States and compare the experiences and also notice how different their approach is, and I think Europe is going to have a much more difficult time climbing out of this inflation trap, whereas the US is slowly, maybe not as desired, but is getting to a place of maybe a more normal inflation rate. Dan So Kevin, if you could give us a summary here, what's going on economically in China? Kevin So just as it's important to know, the economic activity in the United States and in Europe. Other economic powerhouses are also not stagnant, and they're having effects on our global order, and there is increasing amount of reports. There was a story in the Wall Street Journal recently about expectations that economic slowdown is more persistent and maybe deeper than what some had anticipated for China. And there's talk of there being a greater fiscal stimulus program for China throughout. The system and this approach is expected to mirror what previous programs have instituted to try to boost up the economy. So a lot of this is going to involve borrowing, which is going to be problematic for the balance sheet throughout the Chinese system, both at the national level. And also importantly, at the provincial and the local. Levels how they will. Deal with this round of debt, but it's going to try to spur more employment and more spending through infrastructure projects and local initiatives like that. So it's kind of this confluence of many economists and. And China went to school in the United States, and they learned Canadian stimulus. But they're also adhering to the principles and the systems within China. What that will mean for China going forward is going to be really important again. China is this unique economic engine that seems to produce about 30% of the global products of the world. They're consuming a lot more of those that share and they are expected to consume more of that going forward through their dual circulation. But this slowdown is going to make it harder to hit those targets, hit those objectives going forward. So we're going to have to keep a close eye on. How that develops and we're going to have to keep a close eye on how these things affect policy going forward. I think everybody's going to ask more serious questions globally about what inflation looks like, because in fact, when I look at it, there were a number of mistakes made about what they expected. Inflation would be, maybe because it's confidence. And assuming what it looked like and what causes it, and we're going to have to revisit some of the ideas that academics that have had around this idea, they call fiscal dominance that even though we haven't a monetary arm, the Federal Reserve have some autonomy in decision making. It's always going to be subject to. What the federal government taxes and what they spend, it's the Federal Reserve always has to internalize. The choices and that's the idea of fiscal dominance. So we'll have to revisit those arguments as well as. Really try to see how that's going to affect policy. But I do think it's important to note just these distinct changes in each of these regions and how they're going to affect things going forward. Dan Very interesting subject to taking a look at inflation, not only domestically but also in a global perspective. Kevin, thank you very much for giving. Us that update. Kevin Thank you very much for your time and thank you all for your questions. An analysis [https://podcasts.google.com/feed/aHR0cHM6Ly9mZWVkcy5zaW1wbGVjYXN0LmNvbS9hTjVNczdxbA/episode/MzRmYWVlOWQtNjcyOS00NzBhLTgzMTktYTE5MGQwMjk0YmI3?sa=X&ved=0CEUQz4EHahcKEwjQraLP0eD_AhUAAAAAHQAAAAAQRA] of the events in Russia from Dmitri Alperovitch. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit modlinglobal.substack.com [https://modlinglobal.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Putin and the Bomb ☢️💣🧠

Thank you for joining us for this edition of the Modlin Global Analysis Podcast. This week, we're going to be focusing on Vladimir Putin and the bomb. We're going to consider the national discussion and global discussion on the ramifications of Putin’s references to nuclear posture and what are perceived as nuclear threats and the war in Ukraine, and how we as a society grapple with that. But perhaps most importantly, how do we think through what Vladimir Putin as the singular actor may be considering these questions? I'm glad to be joined by Dan Modlin as always and some questions that he has on this important issue. Dan And obviously this is an issue that concerns a lot of people, not just in the United States but around the world, obviously one of the changes that some people have remarked on in Putin's approach to the discussion of nuclear weapons or possible use of nuclear weapons is that in the Cold War. Era. Both sides tended to take the position they didn't want to be the first to use a nuclear weapon. How has Putin's approach changed? Kevin Yeah, that's a great point. And that goes right into the weeds of this question. Both sides during the Cold War, after they both acquired weapons, realized that they were better off not first using them because of the retaliatory nature of the weapons, especially the threat of retaliation, was so undesirable that both sides decided not to escalate tensions and a lot of times it may have helped quell some fears throughout the Cold War. So in a sense, even though weapons are very damaging and of course, deadly to some people analyzing it, it created a degree of stability because both sides had a sense of what the other side would do and a retaliation part of that aspect was an understanding by both sides that they would not be the ones to start a war. They would not be the ones to escalate it and that helps also contribute to some semblance of stability. Again, it's kind of contrarian to think that stability comes from these terrible, destructive weapons, but many people came to that conclusion when gaming out in various scenarios. Part of that has been a position that both sides, after the end of the Cold War. Reduce their nuclear stockpiles and in fact. Even Putin was part of the range of treaties that reduced weapons, but there is an evolution in discussion on what that doctrine looks like, and there's two components on that. One is the suggestion that they may escalate by their own decisions and that they have a mindset or an argument, especially people in the US think tank community emphasizes this idea that Russia may escalate a situation in order to deescalate. So they may uilized nuclear weapons, tactical or strategic, with the goal of using that as a way to get out of a conflict. This is troubling to a lot of analysts and therefore they emphasize this aspect, but I think what's important in this is also to realize that both of those components emphasize the singular decision making of a president. So a policy that is retaliatory or says that they will not be the first one to use that actually puts less responsibility and decision. By that country, right? That would just mean that they would have to retaliate if they were attacked. So that puts less decision weight on that. But this change in policy puts greater emphasis for us to consider how Vladimir Putin thinks, and I think this is very important as it. As a conversation, as you mentioned, because I hear a lot of people ask questions about this. This is when the war started. This was what a lot of people were concerned about, and I hear people continue to be concerned. Whether it be my students or friends I run into, they ask about this question. So it's important for us to think about what Putin is thinking about. But it's also important for us to pause. And recognize all of the flawed analysis that has preceded this conversation. A lot of people have basically baked in their own assumptions of how Putin thinks. is he rational? Is he hypermasculine? Is he insecure? Is he risk averse? Well, many of these assumptions have been shown to not hold up much weight. So how can we instead of try to package information of how we see Putin? How can we instead pull back and provide some analysis, and recently Foreign Affairs came out with an article by Rose McDermott, Polly and Slovic on Putin in the psychology of nuclear brinksmanship. And what they help us see is a different way of examining this instead of us trying to. Package Putin as how we see him, they instead look at the psychology and rationales that people in general look at questions around nuclear brinksmanship. And then use that to then contextualize how Putin may be. Thinking so, this is a very engaging article. I think it will be very helpful for us to look into. Dan Maybe you can help to describe again what the significance of that article might be and what we should take away from the research by McDermott, Pauline slogan. Kevin First off, it's available on the Foreign Affairs website, so you can pull it up to read. It's available for free on their site. So First off they emphasize the fact that people have difficulty with making decisions, and this is a broad statement, but the individuals have difficulty with that. And of course they have difficulty weighing nuclear decision. And because of the complexities involved, they will seek to simplify choices, right? So then that starts to narrow that choice, and then they start to not only simplify choices, they start to prioritizing what's most important. So is that the survival of a state, Is it the survival of the Person, is the survival of an idea? These become aspects that are most acute that so I think it's important for us to recognize that and that plays a lot into the conflict that we're seeing right now. Has not been successful in this military operation. In fact, it's been a disaster. Recently, Secretary Blinken made the remark that the Russian military was rumored or discussed to be the second leading military in the world. And then it's cutting statement after that was is it is actually the second leading military in Ukraine, they have not performed as expected, but what's important in thinking about this is that if Russia has objectives, and specifically Putin has objectives and is not able to meet those objectives, what tools will he consider? What options will he consider? In this so regardless if the whatever the West’s posture is, if he doesn't achieve his objectives, what tool set will he consider when trying this? So it's this is very complicated for thinking about how the West may respond because. Even if he's defeating himself, that could still be escalatory. So this again, is it has presents some unique challenges in this situation. Dan It seems like it would always be difficult to get in someone's head and really understand exactly what they're thinking, but he's perhaps a more. Complicated figure then many other world leaders that people have tried to analyze in the past. Kevin He is complicated. It's also again worthwhile to note how many times our analysis of leaders is wrong. So our analysis of Putin is wrong. Our analysis of many leaders has been wrong, so it's probably good again to take this framework. That they apply with this and consider what they point to as the number of surveys done of the general public and of leaders and the trade-offs they're willing to. Take when considering nuclear actions and basically they find that individuals are. And be less willing to trade the lives of their own citizens. Versus others and the ratios in that death affected are pretty startling in these surveys. Now, are these sentiments held closer, are they not? But you have to consider that politicians would weigh the similar types of questions, and that would be just as startling what they would consider so. If a loss is too great for Russia. What would they consider it's also worth noting that Putin can always revisit what he defines his loss. He is in Exterritorial and is defending. In parts of what they occupy in Ukraine, is he going to claim that as a success and go forward with that with continuous fighting? On both sides. That's worth considering also. So again, it's really hard to know what's in that mental space of where he is, but it is worth noting. Because he is a centralized. Leader what unique role? That since plays in and of course his sense of Russian nationalism, and increasingly, when listening to Putin, the sense of victimhood he has when discussing these issues. Dan Again, the article that prompted today's discussion is in foreign affairs. It's titled Putin and the Psychology of Nuclear Brinkmanship, the war in Ukraine hinges on one man's thoughts and feeling by Rose McDermott, Reid Pauly and Paul Slovic. Kevin, in closing, any any comments you'd like to share? Kevin You know, there's two things that I think that are important. Again, building off of what the authors discuss here. And again, I encourage people to read the article is there is a growing perception in the West. This is a note of caution that because Putin has not escalated relative to NATO. Whenever the West provides assistance to Ukraine that the perception is because that has been not been seemingly escalatory, that each additional thing made is going to be less threatening or less problematic for them, when in fact it accumulates differently on Russia's side. So at one point it may actually be seen as unfeasible that it is threatening, so from different perspectives, how these incremental changes are weighed are very different and people are actually probably not looking at the lessons properly. Again, a few examples of one act should not be viewed as. Examples of how they will. Go forward the other thing that I think is really important when listening to Putin's speeches, whether it be around the annexation of territories or whenever he talks about the conflict, is both his rhetoric and how he portrays Ukrainians. That's very important but also the grievances that are expressed and how there is a mix of ideas that he is dealing with here and it is a hybrid approach of ideas that are this mix of nationalism. Even a mix of socialism and different ideas that are all coalesce around this Russian idea. But a lot of this is borrowed from Hagel. And Hegel talks about this link around these ideas if that it is moral for the survival of the state and in fact how history determines the superiority of a state or a race or people is how they survival, war and everything so that it may be that these spirits of destiny, if you will, with in Hegel’s framework, are being played out right now. As we watch this puts a lot on the line for Russia and in these mindsets, so I think this is again important for us to think seriously through the weight of this situation. And also consider the effects of this again it may be very escalatory, but I think the most important thing for us as citizens is to recognize things haven't escalate, but that doesn't mean that things won't escalate. Putin's own failings could be viewed as rationales for him to escalate when even others are not playing a direct role in that. At the same time, things haven't escalated significantly and both sides. Have the capabilities to discourage the other one from escalating the nuclear realm and discouraging those actions. So it is true that the concern about the nuclear environment is higher than it was. Two years ago, that doesn't mean that it is imminent that there is a nuclear threat. Risk is still close to 0, but it is not as close to 0 as it was before. So be cautious. Think through what this means and think about the psychology of Putin and also be cautious and our assumptions around. Dan Very important information about a very important subject, Kevin, thank you very much for giving us this update. Kevin Yes, thank you all for your time. https://www.foreignaffairs.com/ukraine/putin-and-psychology-nuclear-brinkmanship [https://www.foreignaffairs.com/ukraine/putin-and-psychology-nuclear-brinkmanship] This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit modlinglobal.substack.com [https://modlinglobal.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Debt Limit Breakdown 🇺🇸 💳 ⬆️

Welcome. Thank you for joining us for this edition of the Modlin Global Analysis. I'm glad to be joined by Dan Modlin, and we were talking recently about how it would be helpful to do a post-debt ceiling negotiation wrap-up and explore what has transpired the last few days. As well as the ramifications and the content of those policies, so we will dive in both into the content as well as the politics involved. Dan This Kevin has certainly been an interesting last few days and something that has been rather fascinating to watch. Several people who listened to last week's podcast on the debt crisis that we posted pointed out that you seem to be pretty much right on the money on several things that came about. So I think it might be good for us to talk a little bit about some of the things we discussed that we might see happen. That actually did come to pass. Kevin So part of this goes to the point that I tried to emphasize is in politics, sometimes listening to language is not a good leading indicator. Of how policies will develop. So it's common for political actors to have disdain or say, even inflammatory things about their rivals, and then other people in the echo chamber reinforce those points, or even, say, wackier things. These are not strong indicators of anything. In the policy-making process, it's better to see what are the must-pass pieces of legislation, and again, from a Washington standpoint, what is must pass is not necessarily the things that individuals or groups think are most important, but what is the state find most important. And for a state money making money, spending bills and related item are the issues that are always going to be top of the list, so whether this be appropriations bills or tax bills or these related items, that is always part of the function of a state and was necessary. And then you start looking at the components of the negotiations and you think what is palatable to all people? Not what is the preference or what is desired by all people, though probably everyone in the room wanted to raise the debt ceiling. All of the other components we're trying to fill a space out for what is palatable. So for example, we're sending money from COVID-19 funds. It's very common for Congress to rescind spending for money from crises or other major events that has not been spent. And there's a lot of reasons for that. One is they're reasserting their authority over the spending, but also because it's open money that hasn't been spent. It's like families, budget for travel that they didn't spend entirely in one area that they decided to use that money and some other space. So Congress has this same mindset, and this was used basically to quote unquote, reduce the deficit through that, so that was seen as a way of leveling down the numbers for this coming fiscal year. Dan Let's talk about some of the key provisions that are in the bill that passed. As you look at the bill, what were the major things people in the general public need to know that were in that bill? Kevin Right. So there's a lot of the policy components and again this has to do with each side feeling its space to reach a palatable compromise, given what was an impermissible for each side. But what was became permissible for them. So they're our work requirement. Changes for individuals that are seeking food stamps program from 50 to now 54, but there are also some adjustments on that that gave more flexibility. Individuals that are veterans or homeless or have a history of being in the child welfare system. It is also has a cap on spending for this year and a 1% increase from this coming fiscal year into the next. The year as well as a reduction in domestic spending, but a a slight increase in defense spending in line with what the President proposed in his budget. It also changes some permitting rules that are interesting that will allow more energy projects and to go forward, it seems, or at least have a somewhat more streamlined process for evaluating those environmental rules. And of course, it raises the debt ceiling through January of 2025, which seemed desirable for both sides. DanNow in our discussions regarding the debt we try to avoid getting into the partisanship too much and just try to stick to the basic information and to understand what's going on. One of the more interesting aspects of this, I think, to some people was that in the House? There were actually more Democrats who voted for the bill than Republicans, even though it was largely seen as a victory for Speaker McCarthy to get that bill over the line. Kevin Right. So both parties have factions that are not pleased with the bill and they weighed their sentiments on that through their vote and as well as the symbolism. So Democrats had, when you listen to the speeches being made throughout the day. They were wholeheartedly very disappointed with the compromise, but they found the palatable to support and a lot of this is interesting. The committee vote in the Rules Committee one by 7 to 6, which is usually they have larger margins, carry the bill on Rules. The vote on whether or not to consider the measure also had a more narrow margin than what ended being the case for the final passage of the bill, so this may be a way for these members to signal both their displeasure and how they'll explain that displeasure to their constituencies, but how they were. Overall satisfied to move on from the debt ceiling so members of Congress sometimes cast votes where they are divided on aspects, but find some way to explain it on that. A lot of that has to do again with just where the regular factions are within the group and some of your or far right, and you're more far left. Members ended up voting against the bill this time. Dan OK, now for those of us watching all of this unfold again, it's been a rather interesting last few days, but what are some lessons maybe we can all learn from watching this develop? Kevin So one is again the value of parsing back the rhetoric and instead looking at what's going on. So sometimes rhetoric is not a helpful indicator. So whether that be how Biden is portrayed in the press or how McCarthy is portrayed in the press, that's not always going to tell us the direction of how things are going to go or even an analysis of individuals sometimes can be really problematic. So we know that McCarthy became Speaker through a very long series of ballots and considering the vote for speaker and a lot of people could reasonably assess that he didn't have much political capital in the House or anywhere else. But in fact he was able to get a lot of what he wanted in that package. So that is a kind of surprising outcome to a lot of people and reasonably so, but it again it helps for us to sometimes pause and instead think about the conditions in individuals are in, but also maybe not try to personalize politics too much. It's easy to personalize it because we are human and we are interested in politics at that level, but not to draw too many assumptions from that right. So just because I have an opinion of a political figure does not necessarily cause a certain outcome and political negotiations. Dan Kevin, in light of the experience of this debt crisis, vote and and all the political posturing that took place before it could be passed. How will all of this affect future debates? Will it have an effect on other things that are coming up? Kevin Yeah, there's some really important components to this. So because now the top line number for budget making has been agreed to, even if there is some grumbling about it, there's going to make the spending bills going forward this year a little easier for both. Needs to address I also think, especially with the deliberations that we saw in the Senate, that it's very likely that we will see a closer consensus being made around what the next defense spending bill comes out. There's expected to be a supplemental bill that provides funding for Ukraine, Taiwan, and frankly, there's basically a side deal being developed to include some other programs because the Senate Republicans are very unhappy with the caps. They agreed to in this package. So they're going to attach some things that they prefer and probably what this will mean is that a lot more individuals find various reasons to actually like this defense supplemental package that's developing that may have had some sticking points for your more radical members that didn't like the funding for Ukraine or wanted that to be slowed down, so that actually may create some accelerant. In this situation, we'll also see the Farm Bill on how that evolves. I think the politics of the farm bill have evolved to the point where there's the constituency that's more interested in the food stamp components, and then the others that thought that the farm components were most important and now that has created a tension. It used to be that they rode together and they created votes for each other, but now they are subtracting support from the other side. Now that this provision for the food stamps was added to the debt bill. It'll be very interesting to see how that feeds into the Farm Bill because normally those types of changes would be in there. So would people take another run at the FarmBill and add additional provisions related to what will they be? Satisfied with those changes? Or will this actually make the Farm Bill more difficult to solve? Highlight these divisions and that there's not an easy middle space to compromise on that that that's been taken off the table. I think it's also important to think about the political consequences of this. I think it probably has taken it's going to have an effect on inflation, probably a modest effect on inflation. But this coupled with Federal Reserve policy that looks like throughout the year is going to make some twenty-five point basis increases a few times this year and and probably a little bit next year. That coupled with this kind of flat budget provides a lot of predictability for markets and everybody else on where inflation is headed. That doesn't mean that inflation will return. Our recent experience before these last two years, so it's not probably going to be 2%, but it's somewhere between 3 and 4%. And I really think that that is going to be very beneficial to politicians and particularly to the Biden administration that's been taking a lot of the complaints on that front. If they're able to. Push that number down. That is a much more beneficial thing for them on the flip side, McCarthy benefits also from not having to deal with another debt ceiling vote. That's very divisive within his conference. It's very divisive among Democrats, so it's good for President Biden as well, said take this off the table and be able to address these going forward. Different pieces legislatively are affected by this, as well as political figures and what their outlook has now. At the same time, those outlooks are always subject to main change. Dan Well, Kevin, it's certainly been interesting to watch this all unfold and it's been. Nice to be able to use the model and global analysis podcasts to provide updated current information on this. So thank you very much for your input. Kevin Yeah. Thank you for your time and I enjoyed discussing this and always glad to have people's questions. You can e-mail me anytime at. Kevin@modlinglobalanalysis.com. Thank you. Zenel Garcia and Kevin Modlin – Revisiting “Sino-Russian Relations and the War in Ukraine” Podcast [https://ssi.armywarcollege.edu/2023/pubs/parameters/zenel-garcia-and-kevin-modlin-revisiting-sino-russian-relations-and-the-war-in-ukraine/] with Conversations on Strategy This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit modlinglobal.substack.com [https://modlinglobal.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

China's Intelligence Law 🇨🇳 📒 ⛔

Thank you for joining us for this edition of the Modlin Global Analysis Podcast. I'm glad to be joined with Dan Modlin, who will be asking a series of questions. This week, he and I have been having a rich conversation that we wanted to bring you all in on China and some changes that were noted. Using about China and things that we think that are developing that are important to have a general conversation about, these are factors that particularly have economic ramifications, but I think these are important to consider. Dan Kevin, at your recent presentation at Lost River Cave, several people asked questions about the economic outlook for China. And it's kind of a mixed situation right now. Isn't it kind of a challenging situation for Chinese leaders? Kevin China does face a series of challenges. One of them was related to, of course, COVID and the policies that they had around closures. But even before COVID, there was a shift in policy outline where they call it a dual circulation economy, where they emphasize exports as much as they do on domestic consumption. When in previous time periods, they emphasized exports primarily. So when they speak of emphasizing 2 things, that is a way of elevating an emphasis on domestic consumption. And of course, that has been a component of their economy, but this is a new emphasis on where their consumers are headed with that, and we know from general economic studies that when countries start to emphasize their domestic consumption over export they will have generally slower economic growth compared to previous time periods. That does not mean that it is a recessionary condition or depression or anything close to that, but it is a slower growth model. Dan OK, so China may actually not be growing as we've expected it to in the past. Kevin The pandemic, of course, interceded within this framework, so these are the general goals that China had in the pandemic with the closures and everything intervened and caused even probably greater slowdown than they hadn't planned for. But we can't anticipate that over the coming decade that there will be less global output from China. As far as general. Here we are seeing a lot of reshoring of facilities as well as moving to companies and regions outside of China and general Asia. Dan On the subject of growth, just recently in May, an American economist named Bob Lucas, a macroeconomist passed away, and I understand a lot of his studies really dealt with growth itself. Kevin He was fascinated by economic growth and in a way his passing is a contrast to what we may be seeing going forward in China. Again, we saw China growing at 8 and 9% year over year, for the last few decades, and I think it's important for us to really consider what that outlook may look like. Does that mean it's 3 or 4% growth, which is still again significant. But it is a different way to look at what China's economy will be producing as well as what the security outlook and capabilities look like for China over this coming decade. So Lucas provides a kind of a starting point in trying to understand why states grow, and they're the impetus behind these instruments, and we know that focusing more on consumption does usually produce lower economic growth. Dan Lucas dealt with a concept called rational expectations. What does that mean and what does it mean to those of us who don't work in economics? Kevin So rational expectations is basically kind of a challenge to the models at the time that he was looking at that were based on Keynesian economics. He asserted that people were simplifying some things or not assuming human beings would think through choices and make the weight of their own choices seen so that they people just skipped over the ramifications and the choices of individuals. Whereas he brought in this micro emphasis here that individuals have a weight in their own decisions. And that has to be accounted for in economic choices, and this is particularly relevant in our conversation with inflation. And it shows how challenging it is for countries to deal with inflation. But it also creates these guardrails and what I mean by that is, is that expectations start to become a big factor in economic policy making and what society generates, but that also that governments have difficulties in. Gain expectations, especially if there is expectations, are not in line with actual conditions. So in government may be able to utilize a policy that encourages growth, but over time is really just inflationary. Over the producers and the economic decision makers will recognize that actually it's not growth, but it's inflation, and over time they. Will put that. Expectation into their models of what really is growth looks like. And therefore has this feedback effect of discouraging certain economic behavior. But it also puts a check on the flexibility that policymakers may think they have and discouraging actions. So this rational expectations actually has this feedback effect and discouraging behavior. Dan Kevin, we understand there are some relatively small or appearing to be small changes going on in China. Some of them relate to their approach to intelligence, some changes in that. Could those have significant economic impacts. Kevin So there's a lot of conversation right now in China and among Western businesses about this new intelligence law and the application of that law around the sharing of information that they're going to prohibit the sharing. Of general business information with Western businesses and what the effects of this may be. So it's speculating right now, but the terms of what is restricted is very broad and in an environment of tensions between both sides, some people are interpreting. This situation that almost any type of business information, so whether that be sales or general economic conditions or other pieces of information that is normally used in common. Others may be utilized as the Chinese Communist Party as a type of intelligence, and the individuals utilizing that information may be restricted or be punished for that. So that could have a real chilling effect on economic activity. Years ago, China started to reduce the amount of economic data available throughout the economy and this compounds this problem. So if individual businesses are unable to share information. And there is less information shared from these macro sources from the government is going to be less clear about what economic conditions look like in China. So if individual firms are seeking to invest or they're seeking to, say, sell more cars or sell more environment for more technology, it will be more difficult for them to start a conversation about this or to commit to this because. It'll be unclear what the information looks like, but also, the signal about possibly being charged or facing backlash against the party would all discourage economic activity, whereas of many other countries do not have these types of uncertainties. So in a lot of ways, this comes back. To the conversation we just had around rational expectations, will firms, knowing this imperfect information and knowing that a few firms have already been caught afoul by the Chinese Communist Party for related cities? Will they decide to exit China or will some reconsider or rebalance their exposure to China under these conditions? If it's unclear how things may look, it could be rational for them to reevaluate where their standing is within China. Dan Well, certainly an interesting situation and one that bears watching and through this series of podcasts, we certainly will do our best to come back and revisit several of these issues to help keep people informed. Thank you, Kevin.KevinThank you WSJ reports on China’s general economic [https://www.wsj.com/articles/chinas-fading-recovery-reveals-deeper-economic-struggles-31f4097b?mod=hp_lead_pos4] conditions and examples of U.S. manufacturers are reevaluating [https://www.wsj.com/articles/u-s-manufacturers-seek-china-alternatives-as-tensions-rise-3cf539fa?mod=hp_lead_pos1] relations with China. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit modlinglobal.substack.com [https://modlinglobal.substack.com?utm_medium=podcast&utm_campaign=CTA_1]