Elon Musk Purchases Twitter for $44 Billion

On Monday, Twitter revealed that it had sold itself to Elon Musk, the billionaire founder of Space X and CEO of Tesla. Musk, who is currently the richest man in the world, purchased Twitter for $44 billion, or $54.20 per share.

This purchase follows a quick turn of events between Musk and Twitter over the past few weeks. Musk was revealed to hold a 9.2% stake in the company as of April 4th, briefly making him the largest shareholder of Twitter. After this information went public, Musk was offered a position on Twitter’s Board of Directors, but he later declined. A day after Musk offered to buy the company for $43 billion on April 15th, Twitter’s Board of Directors voted unanimously to adopt a “poison pill” plan that, in the case of any single party acquiring at least 15% worth of stake in the company, would offer other shareholders additional shares at a discounted price. The intention of the plan was to dilute the stake of said single party and prevent a hostile takeover of the company.

However, Twitter’s tune changed rapidly last week when Musk revealed he had $46.5 billion lined up in financing. After a meeting on Sunday, the board agreed to sell the company to Musk, prompting a storm of speculation over what the future held for the social media platform.

Despite its relatively small size compared to other social media platforms like Facebook (Facebook’s user base exceeds one billion, while Twitter’s hovers around 500 million), Twitter has grown increasingly influential over the past few years. Following former president Donald Trump’s abundant use of the platform throughout both the 2016 election and his presidency, it has rapidly gained a notorious reputation, but also a vital role in political discourse. The large number of other politicians, public figures, and journalists that frequent Twitter also undoubtedly helps its relevancy. 

In addition to its general associations with Trump, Twitter has been embroiled in several controversies, most notably being accused of playing a major role in the Capital Riot on January 6th, 2021. Trump’s Twitter account was removed for inciting violence following the riot, but Twitter’s controversies exceed Trump. Due to its disproportionate influence in politics, it has been accused of harboring conspiracists, misinformation, hate speech, and other harmful forms of online communication. As a result, Twitter had begun to crack down on misinformation this past year, especially throughout the pandemic. But in turn, it has been accused of stifling free speech. 

Musk has been one of the loudest critics of Twitter’s moderation, going so far as to call himself a “free speech absolutist.” Despite being 50 years old, Musk has been an active user on the platform — he has over 83 million followers, as well as a tendency to post memes, “go after” other public figures, and make controversial political statements. His political beliefs, while hard to pin down precisely, err libertarian and have recently trended towards the right. Last September, he called California’s stay-at-home orders “fascist,” and in May 2020, violated COVID-19 restrictions to reopen Tesla’s car factory. He has also amassed support amongst reactionary corners of the Internet, especially after using lingo such as “red-pilled.” 

As a result, many fear what Musk’s ownership of the company means for the future of Twitter. In particular, many fear that Trump’s Twitter account may be reinstated, although the former president has claimed that he wouldn’t return to Twitter even if Musk reversed his ban. (Trump has been developing his own social media platform, Truth Social, as a “free speech” alternative to Twitter.) In his Monday tweets, Musk stated that he hopes “even my worst critics remain on Twitter, because this is what free speech means,” and that “free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.” He also said that he opposes permanent bans and prefers temporary suspensions for social media platforms.

Aside from his free speech “absolutism,” Musk has proposed making Twitter’s algorithms open source for transparency, eliminating spam bots, and adding an edit button. Regardless of what exactly the future holds for Twitter, Musk at the very least seems eager to work on it, and change is almost certain. He concluded one of his Monday statements with “Twitter has tremendous potential — I look forward to working with the company and the community of users to unlock it.”

Questions:

1. Do you support Musk acquiring ownership of Twitter? Why or why not?
2. What are the potential political ramifications of Musk controlling Twitter? How much influence do social media platforms like Twitter hold over political discourse, and is that a problem?
3. In 2013, Jeff Bezos, Amazon founder and second richest man in the world, purchased the Washington Post. What are your thoughts on this trend of billionaires buying media companies?

Sources:

https://www.cnn.com/2022/04/25/tech/elon-musk-twitter-sale-agreement/index.html

https://www.reuters.com/technology/exclusive-twitter-set-accept-musks-best-final-offer-sources-2022-04-25/

https://www.cnbc.com/2022/04/25/twitter-shares-jump-5percent-on-reports-that-its-ready-to-accept-elon-musks-bid.html

https://www.cnbc.com/2022/04/15/twitter-board-adopts-poison-pill-after-musks-43-billion-offer-to-buy-company.html

https://www.independent.co.uk/news/world/americas/us-politics/elon-musk-political-party-views-republican-b2067871.html

https://www.newsweek.com/elon-musk-donald-trump-supporter-twitter-1697979

https://www.cnbc.com/2022/04/25/donald-trump-says-he-wont-return-to-twitter-if-elon-musk-reverses-ban.html

https://twitter.com/elonmusk/status/1518677066325053441

Congressional evidence that Trump Allies Knew about January 6th

    Since the 2021 storm on the U.S. Capitol Building in Washington, D.C., by Trump supporters, there have been ongoing investigations on who is responsible for the violence that took place at the coup. The House committee has since joined the investigation and has concluded that they found evidence that exposes Trump’s inner circle of being aware of the riot and the possibilities of violence and did nothing to stop it. 

    Mark Meadows, the White House chief of staff at the time, appointed by former President Trump, as well as other members of the right Freedom Caucus, have been discovered to be related to the conspiracy of Jan 6 and even encouraged supporters to join the march. The evidence from the House committee includes testimonies and other materials like text messages and phone calls involving Representative Scott Perry and Jim Jordan, President Trump, and other Republican government officials. The most convincing evidence entails over 2,000 text messages between former President Trump and Meadows that described the works behind the scenes of getting Trump allies and Republican lawmakers to attempt to overthrow election results. This most likely started the false allegations that the election was stolen and that there was miscounts in votes and/or voter fraud.

    The main purpose of the investigation for the committee and the Justice Department is to find who can be accountable for the violence at the Capitol that resulted in 5 casualties and had Senators and Representatives fearing for their safety. The House committee is claiming that Meadows was involved with the conspiring the plan as well as being warned and aware of potential violence, but did nothing to stop it. Meadow has been avoiding and blocking the House committee’s requests for him to testify in court. Meadow’s testimony could provide insight into the involvement of Republican members in Trump and his ally's attempt to overthrow the 2020 election. As of now, investigations are still ongoing and as more evidence comes out, people will be held accountable. 

Questions: 

How do you think the government officials involved in the rally should be punished? Versus the supporters who participated in the rally? 

Did Congress effectively deal with the aftermath? 

Sources: 

https://www.cnn.com/2022/04/25/politics/mark-meadows-texts-2319/index.html

https://www.vanityfair.com/news/2022/04/new-congressional-evidence-yes-trump-allies-knew-what-was-coming-on-jan-6

https://www.washingtonpost.com/politics/2022/04/25/mccarthy-border-trump-biden/

https://www.washingtonpost.com/politics/2022/04/23/meadows-jan6-secret-service-committee-testimony/

Florida advocates, voters challenge DeSantis’ congressional maps

 

Just recently Florida voters filed a lawsuit against Republican governor Ron DeSantis in an effort to counter his redistricting/ congressional map, which appears deeply flawed yet was approved by Florida's legislature (which has a Republican majority). After having vetoed a map proposed earlier this year which would have added two republican districts and eliminated one democratic district, this new map takes things further by eliminating three Democratic districts and adding four republican majority districts, creating a massive objective advantage for the Republican party in the state moving forwards. The party line vote to accept this map highlights an aspect we have studied greatly which is the extent to which political polarization and party ideology/strength has an influence in government, and in this case, the 24-15 vote demonstrates all republican senators voting in favor, and nearly all democrats voting against it, as one democrat senator did not vote.

In actual terms, this map creates 20 congressional seats for the republican party and just eight for democrats out of the 28 total the state has, having major implications on the composition of Congress by strengthening Republican party influence. The map would almost certainly result in the combination of predominantly African American districts as well in certain areas, leading to more densely packed districts, and new districts now set to be won by republicans. For example, DeSantis eliminated a district currently represented by Al Lawson, and which historically has enabled African-American voters to elect a representative of choice. Members of the democratic party are threatening to challenge this legislation on grounds of violating the Voting Rights Act and its prohibition of gerrymandering, and many state that “DeSantis has bullied the legislature into enacting a map that does not allow for a fair electoral contest, and instead draws Republicans an illegitimate and illegal partisan advantage that they have not earned from the voter" (Holder).

DeSantis on the other hand seems to be strengthening his position in the Republican party in anticipation of a possible presidential campaign in the upcoming 2024 elections. Actions such as this have given him more prominence and strength amongst potential voters which can help him moving forwards should he decide to run, yet it is awful to see how partisan politics and increased polarization prompt more extreme actions which favor only one party and lead to no compromise. This map specifically I believe disrupts the balance of Florida’s congressional makeup, creating an apparent advantage for Republicans which is not driven by voter ideology but rather by district divisions as drawn by DeSantis and approved by the state legislature. Hopefully when challenged, the map can be struck down and prevent the destruction of various established democratic districts, and similarly prevent the weakening of African American voter preferences in the state’s congressional elections.

Questions: 

Is this a clear example of gerrymandering and thus in violation of Shaw v. Reno's SCOTUS decision?

Do you think that DeSantis made this move in order to enhance his status in the Republican party ahead of the 2024 presidential elections where he may run for the Republican party nomination?

Sources:

https://www.nytimes.com/2022/04/20/us/politics/florida-redistricting-maps-desantis.html

https://www.nbcnews.com/politics/elections/florida-advocates-voters-challenge-desantis-congressional-maps-rcna25645

https://www.pbs.org/newshour/politics/florida-senate-approves-gov-desantis-congressional-map

https://www.washingtonpost.com/politics/2022/04/20/florida-senate-approves-congressional-map-proposed-by-desantis-sending-it-house/

Warsaw Accepts Ukrainian Refugees, but Now Under Strain

     As the Russian invasion of Ukraine continues, Ukrainian refugees have fled to a number of neighboring countries. Poland has been providing Ukrainian refugees with free healthcare and free education, and about 13,000 Ukrainian children are already attending school in Warsaw. Warsaw, the capital and largest city in Poland, has been housing and accepting millions of Ukrainian refugees, gaining international praise and credit for standing with Ukraine, however now is “at [its] capacity.” This is coming from Rafal Trzashowski, the current Mayor of Warsaw, who also noted, “escalation by Russia in eastern Ukraine we could have a second wave.” With the addition of the Ukrainian refugees, Warsaw’s population has increased by 20% in just a matter of a few weeks with a possibility of another wave and therefore more refugees. Each day, about 30,000 Ukrainians flee to just Warsaw alone in the last month.

   With the increase in population, especially in times of war, Warsaw hospitals are in need of supplies, housing is becoming scarce, and volunteers are tired. The education system in Warsaw has also been under a lot of strain as about half of the 2 million Ukrainian refugees in Poland are children. Warsaw is enrolling about a thousand new students every day and looking for teachers who can speak Ukrainian and Russian. Warsaw is attempting their best to accommodate the refugees and their needs, however, space and supplies are running short. Due to the increase in buyers on the market in Warsaw, supplies are dwindling and demand is increasing. It is also safe to assume that other cities that have taken in huge numbers of refugees are also facing some economic changes as a result. 

    Trzaskowski is asking for European support in providing supplies and rehousing refugees throughout Europe, “While Russia wages war in Ukraine, life in much of Europe remains normal but uneasy.” The mayor wishes to relocate the refugees with a more spread-out housing arrangement and then provide the refugees with money and other means of support through local governments. Currently, Warsaw and the refugees are still facing uncertainty, however, Poland continues to welcome more refugees. 

Questions: 

How do you think the refugees should be housed? 

Should other countries be helping neighboring countries to Ukraine in housing 

and aiding refugees?

Why do you think there has been a lack of aid coming from more developed countries like Europe and America? 

Sources: 

https://www.washingtonpost.com/world/2022/03/21/ukraine-refugees-warsaw-poland/

https://www.nytimes.com/2022/04/23/world/europe/ukraine-poland-refugees.html

https://abcnews.go.com/International/warsaw-mayor-calls-international-community-increase-aid-ukrainian/story?id=83763723

China's Lockdowns due to Omicron Variant and Impact on Economy

Being one of China’s richest and most populous cities, Shanghai’s strict COVID lockdown is now approaching several weeks long. Other overlooked cities and provinces in China are also in lockdown, and with two COVID cases appearing in the city of Wuhu in the Anhui Province, the Wuhu government has also called for a stay-at-home lockdown. Residents of Wuhu quickly swept stores for food and other necessities, leaving many people with supply shortages. Many residents of Wuhu have accepted the lockdown but wanted the government to supply homes with food and permit people to leave for medical emergencies. Many neighborhoods are not able to keep up with residents’ needs and many disabled and elderly residents are left unable to care for themselves. Prices of resources, especially food, have sharply increased.

Though shutting down is an effective way to prevent the spread of COVID, these lockdowns are deeply affecting businesses and China’s economy overall. With the lockdown in place, which is extremely strict (some cities have police officers in hazmat suits patrolling neighborhoods), China’s gross domestic product has decreased by a whopping 40%. Many residents are desperate for supplies and food, with viral videos of residents screaming from their apartment windows and of pet owners lowering their dogs from apartment complexes that are several stories high, by rope for the dog to walk around before being pulled back up into their apartment. One resident in Shanghai said that his 50-year-old apartment neighbor begged him for some rice and other food, evening insisting on paying, but after giving half of his rice to the neighbor, was turned down as the resident needed food too. The resident then said that this was when he realized how serious this situation was. 

Shanghai has the world’s largest port, which now has shipping containers left stocked and unloaded. Economists are predicting that once the strict lockdown is lifted, there will be a huge and “overwhelming movement of goods” that can shatter supply chains. Supply chains in Shanghai continue to worsen and the jam of export volumes is impacting other nations’ economies as well. With the U.S. being one of China’s biggest foreign trade partners, Americans can also feel the effects of China’s lockdown, which many businesses who have their supplies imported from China being effected the most and are being left empty-handed.

Questions: 

How do you think China should handle transitioning from their lockdown in terms of softening the impact on their economy? 

Is the Chinese government handling this situation well? 

Do you think that the strict COVID lockdown is worth damaging the economy? 

Sources: 

https://www.nytimes.com/2022/04/19/world/china-lockdowns.html

https://fortune.com/2022/04/19/china-covid-lockdown-cripple-global-supply-chain/

https://www.theguardian.com/world/2022/apr/19/my-life-in-shanghais-never-ending-zero-covid-lockdown

https://www.ndtv.com/world-news/coronavirus-china-vs-covid-hazmat-suits-on-streets-police-tape-around-whole-blocks-2823561

New York Subway Shooting

 

At 8:30am on Tuesday, an African American man wearing a neon orange and green construction vest released two smoke grenades as the N train New York subway pulled into the 36th Street station in Sunset Park. He proceeded to open fire using a 9mm semi automatic Glock, hitting 10 victims and leaving at least 19 others wounded (included two teens, a pregnant woman, seven men and three women). Luckily, the gun jammed, preventing the man from firing more. Police identified Frank James as the primary suspect and have yet to catch him as of Tuesday night. 

The incident has once again brought up the issue of gun control and how America’s lenient gun laws allows for mass shootings to occur. There was also a recent shooting in Sacramento as well. Gov. Kathy Hochul declared that these shootings have to stop and that she would commit full resources to cut down on crime. With all these recent shootings, I believe it only adds to the urgency to create new gun control laws that make it harder for people to gain guns. However, new laws will only lead to fierce pushback from the NRA and people claiming their Second Amendment rights. This is what makes it difficult to create new gun laws.

The person of interest, Frank James, was also posting racist content on YouTube before the shooting. He was “ranting about Mayor Adams, homeless people in the subway system, gun violence, and how out reach workers are ‘homosexual predators’”. He also has a history of being treated for mental-health issues which bring up the question of how he was able to get his hands on a gun and smoke bombs. He for sure shouldn’t have been able to access a gun and the incident demonstrates a great flaw within our gun control system. Another interesting issue is that of social media regulation and if his videos beforehand warranted a possible arrest or something that could’ve prevented the shooting from occurring. NYPD Commissioner Keechant Sewell stated that the videos James posted were “concerning posts” but not “threats” which probably wouldn’t have led to any action beforehand.

Questions:

How do you think this shooting could’ve been prevented?

Do we need tighter gun laws?
Is social media regulation necessary to stop crime and violence? This connects to the January 6th insurrection last year where much of the organizing came from social media.

Sources:

https://www.nytimes.com/live/2022/04/12/nyregion/brooklyn-subway-shooting

https://www.nydailynews.com/new-york/nyc-crime/ny-frank-james-brooklyn-subway-shooting-person-of-interest-20220413-yk7jt6ye5zbi5i6s5jibo4hteu-story.html

https://nypost.com/2022/04/12/nypd-investigating-possible-explosion-in-brooklyn-subway-station/

https://www.cnn.com/2022/04/12/us/brooklyn-subway-shooting/

Controversy over the removal of Title 42

 Recently, Biden ended border restrictions that allowed the US to expel illegal immigrants without a hearing. The restriction was created under Trump, using the pandemic as a way of justifying the bill. Now that the effects of the pandemic have subsided, the CDC with the support of the Biden administration, have deemed Title 42 aka the restrictions, as “no longer necessary” for public health. However, this move hasn’t been without controversy. Republicans were firm in their opposition to the bill, demanding changes and introducing a bill to preserve the policy. The Biden administration will not be able to pass a 10 billion COVID aid bill because of the backlash against Title 42. 

A significant part of the opposition to Title 42 were that 5 moderate Democrat Senators (Kyrsten Sinema, Mark Kelly, Joe Manchin, Raphael Warnock, and Maggie Hassan) sided with the Republicans against the removal of the restrictions. Two House Democrats (Henry Cuellar and Vicente Gonzalez) also sided with the Republicans. This demonstrates a divide within the Democratic party as senators and representatives attempt to distance themselves from the Biden administration in order to gain more support as the midterms approach. What is interesting is that most of these senators and representatives come from hotly contested areas like Arizona or Georgia. It’s also interesting to note how they are sacrificing party loyalty to protect the interests of their constituents. 

I like how they are considering their constituents over the party since they are representing them in government. Whether I agree with the removal of the bill is a different matter. In my opinion, the White House has definitely miscalculated with the timing of the removal of Title 42 by placing it right before the midterm elections. They should’ve done it right away when there was more time till the midterms. As a result, they will pay the price politically. Republicans are already emphasizing this mistake, making sure to constantly push for elongated restrictions. They feel that they can appeal to the moderate independent voters by getting rid of illegal immigrants that have been linked to the fentanyl crisis around the country. This doesn’t bode well for the Democrats at all. The policy itself is an interesting one because it has pros and cons on both sides. On one side, you don’t want a constant stream of people entering the country, bringing illegal substances along with other problems. On the other side, it is definitely inhumane and also against the Bill of Rights to just force people back without a hearing or something that can allow them to defend themselves. This problem won’t go away soon.

Questions:

Do you think the Democrats still have a chance with the midterm elections? Will this move hurt them significantly?

If you were Biden, would you have removed Title 42? What would you have done instead?

Do you believe it is better to serve your party or your constituents?

Sources:

https://www.vox.com/policy-and-politics/23016907/democrat-biden-border-title-42-midterms

https://www.cnn.com/2022/04/05/politics/title-42-gop-election-strategy/index.html

https://www.npr.org/2022/04/06/1091263387/clash-over-immigration-policy-derails-senate-covid-aid-bill

Ketanji Brown Jackson's Polarized Confirmation Process

 Last week, Ketanji Brown Jackson became the first African American woman to be confirmed into the Supreme Court. It was a momentous occasion filled with relief and excitement for the Democratic Party. However, the ugly confirmation process that she was forced to go through was a sign of the partisan politics of this era. Republicans interrogated her, accusing her of giving “light sentences to child pornographers, supporting teaching critical race theory in secondary school, and trying to let dangerous criminals out of prison”. They wanted to paint a picture of Jackson as a “dangerous” judge that would “undermine public safety” if on the court. 

I believe these claims on Jackson are quite outrageous, considering the lack of evidence that they have. For example, the Republicans claim that Jackson is a supporter of pedophiles due to her sentences that were below the child pornography guideline. However, through fact checking by ABC News, judges typically sentence below guidelines in around “2 out of 3 cases”. This shows that sentencing below the child pornography guideline is quite mainstream and normal within the US because the guideline is quite harsh. The harsh remarks made by the Republicans signal how polarized politics has really become. Only 3 Republicans, with one being a surprise (Mitt Romney), voted to confirm Jackson. The others latched onto conspiracy theories or false claims to fight against Jackson and her confirmation when she clearly deserved it under her qualifications. Even with little to lose (there will still be liberal minority in SCOTUS), Republicans used the opportunity to promote their own self-interests and demonstrate how polarized they just are. If anything, I believe they ruined their image even more by attacking Jackson so heavily.

This latest confirmation process is a signal of how the Supreme Court has become another tool for parties to use in order to win the “culture wars”. The Court, under the power of judicial review, has become a battleground to create pivotal policy on many social issues. The Court was designed to not have politics influence it but inevitably it has become deeply embedded within the fight between liberals and conservatives. Conservatives want to keep out liberals like Jackson (a sure liberal vote), who could stop them from overturning abortion rules, gender identity, same-sex marriage, and more. Jackson’s confirmation is only the beginning of a continued fight over the courts with many ugly claims, some if not many of which will be false, in order to gain control. There are not many solutions which is definitely worrying. The last thing we want is for something similar to cancel culture reaching Supreme Court nominations.

Questions:

Do you agree with Jackson’s confirmation?

Do you think the Republicans should’ve attacked Jackson the way they did?

Are there any solutions to avoiding a political war on the Supreme Court? Should the Court’s power be restrained?

Sources:

https://www.newyorker.com/magazine/2022/04/18/the-ketanji-brown-jackson-hearings-may-be-only-the-beginning

https://www.nytimes.com/2022/04/08/opinion/ketanji-brown-jackson-supreme-court.html

https://fivethirtyeight.com/features/the-culture-wars-couldnt-stop-ketanji-brown-jacksons-confirmation/

https://abcnews.go.com/Politics/fact-check-judge-ketanji-brown-jackson-child-porn/story?id=83565833

Economic Blitzkrieg

Russia, with the 8th largest oil reserve in the world at 4.8%, had the 11th largest economy in the world at the start of the invasion of Ukraine. It is a large economy by most standards and Putin likely felt secure that it would not be extremely sanctioned as Russia planned its attack on Ukraine.  Never before has an economy of this size ever been cut off so quickly from most large economies in the world.

Daleep Singh - Deputy National Security Adviser for International Economics at the White House - calls the sanctions an “economic blitzkrieg.” Singh designed the sanctions on Russia when it annexed Crimea in 2014 and on Putin himself recently. Singh presented his economic blitz of Russia to the White House. Per Singh, the Russian economy is quickly headed to a Soviet era weak economy, where scarcity of goods was common.

The USA, and its allies froze $300 billion of Russian Central Bank assets, causing the Central Bank to double its interest rate from 10% to 20% in order to reduce the risk of flight of capital from the Russian Rouble in favor of foreign currencies. Still, the Russian Rouble lost one-third of its value in less than a week. This created a panic situation for Russian citizens that drove them to try to purchase foreign currencies in order to protect their savings and to line up at ATMs to withdraw cash.  Assets of certain Russian oligarchs as well as those of Putin were frozen.

Within three days the Russian banks were kicked out of the SWIFT financial network where international banks trade with each other. This impacts over 300 Russian banks.  According to the Brookings Institution, more than 30 countries have leveled a total of 2,500 sanctions on Russian targets. Even Switzerland broke centuries of neutrality to join the sanctions. There are more sanctions to come, per Singh, that can target additional Russian banks and industries like oil.

Surprising to Signh has been the corporate activism exhibited by over 400 corporations that have stopped doing business with Russia, putting a serious hurt on the Russian economy. The Russian Central Bank views this exodus as a large structural economic transformation. The impact of corporate activism has been significant.

Boeing and Airbus are no longer supplying airplane parts, crippling the Russian travel industry. Some oil companies have divested from Russian ventures. Cogent Communications - the provider of internet services to 170 countries - has terminated its services to entities linked to the Russian government; their number one motivation was to help prevent any cyber attacks by Russia. Visa and MasterCard have stopped providing credit card services to Russia; this cuts off purchasing power by consumers which in turn adds to the economic chaos.

Recently, Putin acknowledged that inflation and unemployment will rise for the Russian people. It is possible that Russia will default on some debt, something that has not happened since the Bolshevik Revolution a century ago. The Russian Central Bank has closed the Russian stock market since the war started. Can you imagine the average American not being able to get to their stock investments while their economy was in free-fall? That’s what’s happening for Russian citizens now.

Putin considers the sanctions akin to a declaration of war and has stated that it reserves the right to react in kind. So far he has announced that he put his nuclear arsenal on heightened alert. It is unclear whether he will act militarily against those countries that are sanctioning Russia. It’s a balancing game of how far to go with sanctions according to Richard Nephew who used to work for the U.S. State Department.

The sanctions would backfire in several ways and Russia could potentially find workarounds to some of the sanctions.

Instead of SWIFT Russia could use its own “System for Transfer of Financial Messages (aka SPFS)” but it’s only available during weekday working hours whereas SWIFT is 24x7 and banks have contractual obligations with SWIFT members, whereas SPFS does not. Russia could use China’s CIPS, but it can only handle transactions in Yuan; less than 2% of global transactions are in Yuan while about 40% are in US Dollars, the dominant currency of SWIFT.

Russia could switch to China’s UnionPay credit card system in order to replace the Visa and MasterCard systems. Russia is rumored to be seeking financial aid from China, but China doesn’t want to raise the ire of its trading partners in the West in favor of a shrinking economy that was only the 11th largest in the world.

Secretary of State Antony Blinken told National Public Radio that ending Russia's economic isolation would require Putin to stop his war and agree not to attack Ukraine again.

Questions

1. How will the Russian people react as Russia heads to a Soviet era weak economy and seeing their hard earned economic progress wiped off? 

2. Will Putin act militarily to economic sanctions he sees as akin to a declaration of war?

3. If Russia weathers the economic blitz, will China and others fill the void left behind western companies as they move out of Russia? 

4. Are we entering a world where corporate activism is as powerful as government sanctions?

Sources

• 60 Minutes link

• Russian banks rush to switch to Chinese card system

• ​​Explainer: Russia could work around SWIFT ban but with high costs

• The Top 25 Economies In the World

• Oil Reserves by Country

Will depleting the National Oil Reserves hold off inflation and climbing gas prices?

President Biden is tapping into the National Oil Reserves in hopes of reducing gas prices at the pump and holding off the highest inflation in 40 years – that was then created by the oil embargo of 1973-1974 and reached as high as 13.55% in 1980.

The Strategic Petroleum Reserve (SPR) is the largest known emergency oil reserve in the world. Stored in Texas and Louisiana it is officially capable of storing 714,000,000 barrels of oil, but it surpassed that amount at its peak in December 2009 with 726,626,000 barrels of stored petroleum.

Congress has been selling the reserve in the open market to fund the federal deficit. Between 2015-2017 congress sold 19.1% of the SPR. That’s 132,000,000 barrels of the 690,959,000 in storage at the end of 2014. At the end of January 2020, the SPR sat at 588,317,000 barrels, at only 80.9% of its peak just 12 years ago.

The Biden administration is proposing to release 1,000,000 barrels a day through October. That’s a whopping 36.4% of the current SPR, which by the end of October would leave the reserves at 374,000,000 barrels – 51.5% of it’s prior maximum – a level not seen since November 1983, just 6 years after it first started storing oil in 1977 (the SPR was created in 1975).

The U.S.A. consumes about 20.5 million barrels a day and imports about 9.14 million barrels of its consumption. While releasing 1 million barrels a day – 10.9% of the imported oil – and it does cover the 8% of imported oil produced by Russia, it may not have the desired effect on inflation. 

Analysts don’t expect a relief at the gas pump until late April or mid-May, with lumpy consumption between Memorial Day and Labor Day. Some state governments like Maryland, Connecticut, and Georgia are suspending taxes on gasoline in order to stave off inflation and pressure on their citizens. Patrick De Haan, of Gas Buddy, thinks shielding Americans from gas prices could induce more gas use and higher prices.

President Biden blames the jump in gas prices on the Russian invasion of Ukraine.  According to AAA, gas prices have increased well before the Russian/Ukranian prices. Since the invasion of Ukraine, U.S. gas prices have climbed from $4.029 to $4.594 a gallon. However, in the prior 11 months the price of a gallon climbed from $3.204 to $4.029. The price pressure on crude oil and gasoline lies elsewhere; most likely in the overheated economy created by an influx of capital by the Federal Reserve and extremely low interest rates.

Cooling the overheated economy, with a 7% inflation rate in 2021, will likely have a bigger impact on controlling gas prices that have been increasing for over a year.

Questions

1. Will an influx of oil really dampen gas prices created by traditional supply and demand forces of open markets?

2. Is the U.S. really facing an oil shortage sufficient to warrant depleting the national reserves?

3. Is depleting the SPR to 51.5% of capacity worth it? Is it politically motivated or emergency motivated?

Sources

• CBS News - National Oil Reserves

• Strategic Petroleum Reserve: Why is Biden Tapping It and Will It Bring Lower Gas Prices?

• Wikipedia - Strategic Petroleum Reserve (United States)

• U.S. Energy Information Administration - SPR Stocks

• MacroTrends - U.S. Inflation Rate 1960-2022

• NBC News - How Much of U.S. Oil Comes From Russia

• The Balance - US Inflation Rate by Year from 1929 to 2023

• AAA - Gas Prices