Month: July 2019

Former NY Fed Head Warns “Needlessly Stimulating” Now Will Push Stocks To “Unsustainable Heights”

Authored by Bill Dudley, op-ed via Bloomberg,

The U.S. Federal Reserve is poised to make a monumental move: At its policy-making meeting this week, it will cut interest rates for the first time in more than 10 years. Many see this as just the first step in a new stimulus policy aimed at supporting a fragile economy.

I’m not so sure. I think there’s a good chance the Fed won’t be cutting further anytime soon.

Some think this week’s cut in the federal funds rate could be as large as half a percentage point. I don’t agree. There’s no consensus for such an aggressive move on the policy-making Federal Open Market Committee, and the most recent data show the economy gaining momentum. Also, it might compromise the Fed’s independence, creating the impression that the central bank was caving to President Donald Trump’s insistent calls for deeper cuts.

Even a quarter-point cut — which is what I expect — entails significant risks. What if, in hindsight, it proves to have been a mistake?

Right now, the Fed is focused on the risk that the economy will slow and inflation will keep falling short of its 2% target. If this erodes people’s expectations of future inflation, it will undermine the central bank’s ability to provide stimulus. With inflation already low, it’s hard to justify any action — including standing pat this week — that could precipitate such an outcome. The public and the president would inevitably blame the Fed.

Also, the Fed faces the question of how best to maintain its recession-fighting firepower at a time when interest rates are already much lower than they typically are at this stage in the economic cycle. Officials believe that earlier and more aggressive action is needed to ensure that the U.S. doesn’t end up like Japan, with interest rates stuck at zero. As Chair Jerome Powell put it, an ounce of prevention is worth a pound of cure.

That said, there’s another risk: that of needlessly stimulating the economy when it is already growing at an above-trend rate and pushing bond and stock prices to new and perhaps unsustainable heights. By focusing on downside threats such as the uncertainties of U.S. trade policy and foreign growth, the Fed might ultimately go too far. After all, the current level of short-term rates is already stimulative. If the economy maintains its momentum and inflation accelerates, the central bank could be forced to tighten again –- an abrupt about-face that could burst a financial bubble of the Fed’s own creation, increasing the chances of a painful recession. 

This second risk deserves greater attention. In recent weeks, the U.S. has seen stronger-than-expected employment gains, retail sales and growth in gross domestic product. The GDP reading for the second quarter, in particular, was considerably stronger than it appeared on the surface: Real final sales to domestic purchasers, which excludes fluctuations in inventories and trade, rose at a 3.5% annualized rate, nearly double the 1.8% rate of the first quarter. Also, core inflation accelerated a bit in June, while bond prices and consumer surveys suggest that inflation expectations have also ticked upward.

All told, the case for lowering rates is less compelling now than it was when the Federal Open Market Committee last met in June. This doesn’t necessarily mean that an interest-rate decrease this week would be a mistake. But it does mean that market participants — who are expecting a series of cuts over the next year or so — might be in for an unpleasant surprise, because the Fed’s future moves will be more dependent on incoming economic data than they think. There’s a good chance that, after this week’s meeting, the central bank will be “one and done.” 

via ZeroHedge News https://ift.tt/2ylSJSV Tyler Durden

Cops Can’t Take a Joke? The First Amendment Doesn’t Care

“The First Amendment does not depend on whether everyone is in on the joke.” So ruled a federal appeals court this week in another case of someone arrested over his Facebook speech.

The ruling stems from a parody police page created by Anthony Novak of Ohio. He set it up to poke fun at and criticize cops in his local Parma Police Department.

“Novak’s page delighted, disgusted, and confused,” notes the 6th Circuit Court of Appeals in its recent ruling. “Not everyone understood it. But when it comes to parody, the law requires a reasonable reader standard, not a ‘most gullible person on Facebook’ standard.”

The court ruled in favor of Novak, who had been investigated and arrested by the actual Parma Police Department. After going to trial and getting acquitted, Novak sued the City of Parma and sevearl Parma PD officers. The city argued that qualified immunity for police prevented Novak from bringing the suit.

The 6th Circuit court’s ruling this week says that Novak does indeed have a right to sue.

“Apple pie, baseball, and the right to ridicule the government” all hold “an important place in American history and tradition,” states the court’s opinion.

Whether Novak’s page was “a protected parody in the great American tradition of ridiculing the government or a disruptive violation of state law” is still undetermined, noted 6th Circuit Judge Amul Thapar. But what was clear to the court is that Parma cops aren’t entitled to a blanket qualified immunity here.

FREE MINDS

Regressive right and illiberal left unite to quash online speech. Section 230 is “just about the most libertarian, free speech law on the books,” in the words of its original sponsor, Sen. Ron Wyden (D–Ore.). Is it any wonder that many politicians are trying to kill it?

From Tucker Carlson and Ted Cruz to Nancy Pelosi and Kamala Harris, both the right and the left have been blasting this foundational internet law for allegedly enabling “big tech” bias and a host of horrific crimes. But what it actually enables is for all of us plebes to talk without Washington having the final say.

See my new article—”Section 230 Is the Internet’s First Amendment. Now Both Republicans and Democrats Want To Take It Away)“—for more details on how this law came to be, why it’s so important, who is trying to destroy it, and what that would mean for all of us.

FREE MARKETS

New York just decriminalized marijuana—sort of. Yesterday, Gov. Andrew Cuomo signed a law that removes criminal penalties for possessing smaller amounts of marijuana and also expunges some pot possession convictions.

Under the new measure, set to take effect in 30 days, possessing under two ounces of pot will no longer be an offense that can get you thrown in jail or give you a permanent criminal record. But it’s still a ticketable offense that comes with a fine of $50 to $100.

“The bill does not change the charges or penalties for possession of larger amounts of marijuana,” nor does it “legalize or decriminalize marijuana dealing or sales,” points out NYUp.com. “It does add marijuana to the definition of ‘smoking’ under state health laws—meaning that smoking marijuana will be prohibited in any circumstances where smoking tobacco is also prohibited (like bars and restaurants).”

ELECTION 2020

The second round of Democratic presidential debates takes place tonight and tomorrow night. This time, the ruckus starts at 8 p.m. and will be televised by CNN (and streamed on CNN.com). The candidate roster this time around is basically the same, but with Montana Gov. Steve Bullock swapped for Rep. Eric Swalwell (D–Calif.), who dropped out of the running earlier this month.

Tonight’s debate will feature Bullock, Pete Buttigieg, John Delaney, John Hickenlooper, Amy Klobuchar, Beto O’Rourke, Tim Ryan, Bernie Sanders, Elizabeth Warren, and Marianne Williamson.

Wednesday night’s debate will feature Michael Bennet, Joe Biden, Cory Booker, Julián Castro, Bill de Blasio, Tulsi Gabbard, Kirsten Gillibrand, Kamala Harris, Jay Inslee, and Andrew Yang.

QUICK HITS

  • Stationing U.S. troops as migrant detention center guards may breach federal law, said Rep. John Garamendi (D–Calif.), and it is “certainly mission creep,” since it’s “not the role of the U.S. military to be a prison guard.”
  • Once again blending the big-goverment zeal of his Democratic counterparts and the panicky howls of 1980s church ladies, Sen. Josh Hawley (R–Mo.) is introducing a bill to ban “addictive” features on social media.
  • Sanders takes aim at Harris’ “Medicare for All” plan:

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Cops Can’t Take a Joke? The First Amendment Doesn’t Care

“The First Amendment does not depend on whether everyone is in on the joke.” So ruled a federal appeals court this week in another case of someone arrested over his Facebook speech.

The ruling stems from a parody police page created by Anthony Novak of Ohio. He set it up to poke fun at and criticize cops in his local Parma Police Department.

“Novak’s page delighted, disgusted, and confused,” notes the 6th Circuit Court of Appeals in its recent ruling. “Not everyone understood it. But when it comes to parody, the law requires a reasonable reader standard, not a ‘most gullible person on Facebook’ standard.”

The court ruled in favor of Novak, who had been investigated and arrested by the actual Parma Police Department. After going to trial and getting acquitted, Novak sued the City of Parma and sevearl Parma PD officers. The city argued that qualified immunity for police prevented Novak from bringing the suit.

The 6th Circuit court’s ruling this week says that Novak does indeed have a right to sue.

“Apple pie, baseball, and the right to ridicule the government” all hold “an important place in American history and tradition,” states the court’s opinion.

Whether Novak’s page was “a protected parody in the great American tradition of ridiculing the government or a disruptive violation of state law” is still undetermined, noted 6th Circuit Judge Amul Thapar. But what was clear to the court is that Parma cops aren’t entitled to a blanket qualified immunity here.

FREE MINDS

Regressive right and illiberal left unite to quash online speech. Section 230 is “just about the most libertarian, free speech law on the books,” in the words of its original sponsor, Sen. Ron Wyden (D–Ore.). Is it any wonder that many politicians are trying to kill it?

From Tucker Carlson and Ted Cruz to Nancy Pelosi and Kamala Harris, both the right and the left have been blasting this foundational internet law for allegedly enabling “big tech” bias and a host of horrific crimes. But what it actually enables is for all of us plebes to talk without Washington having the final say.

See my new article—”Section 230 Is the Internet’s First Amendment. Now Both Republicans and Democrats Want To Take It Away)“—for more details on how this law came to be, why it’s so important, who is trying to destroy it, and what that would mean for all of us.

FREE MARKETS

New York just decriminalized marijuana—sort of. Yesterday, Gov. Andrew Cuomo signed a law that removes criminal penalties for possessing smaller amounts of marijuana and also expunges some pot possession convictions.

Under the new measure, set to take effect in 30 days, possessing under two ounces of pot will no longer be an offense that can get you thrown in jail or give you a permanent criminal record. But it’s still a ticketable offense that comes with a fine of $50 to $100.

“The bill does not change the charges or penalties for possession of larger amounts of marijuana,” nor does it “legalize or decriminalize marijuana dealing or sales,” points out NYUp.com. “It does add marijuana to the definition of ‘smoking’ under state health laws—meaning that smoking marijuana will be prohibited in any circumstances where smoking tobacco is also prohibited (like bars and restaurants).”

ELECTION 2020

The second round of Democratic presidential debates takes place tonight and tomorrow night. This time, the ruckus starts at 8 p.m. and will be televised by CNN (and streamed on CNN.com). The candidate roster this time around is basically the same, but with Montana Gov. Steve Bullock swapped for Rep. Eric Swalwell (D–Calif.), who dropped out of the running earlier this month.

Tonight’s debate will feature Bullock, Pete Buttigieg, John Delaney, John Hickenlooper, Amy Klobuchar, Beto O’Rourke, Tim Ryan, Bernie Sanders, Elizabeth Warren, and Marianne Williamson.

Wednesday night’s debate will feature Michael Bennet, Joe Biden, Cory Booker, Julián Castro, Bill de Blasio, Tulsi Gabbard, Kirsten Gillibrand, Kamala Harris, Jay Inslee, and Andrew Yang.

QUICK HITS

  • Stationing U.S. troops as migrant detention center guards may breach federal law, said Rep. John Garamendi (D–Calif.), and it is “certainly mission creep,” since it’s “not the role of the U.S. military to be a prison guard.”
  • Once again blending the big-goverment zeal of his Democratic counterparts and the panicky howls of 1980s church ladies, Sen. Josh Hawley (R–Mo.) is introducing a bill to ban “addictive” features on social media.
  • Sanders takes aim at Harris’ “Medicare for All” plan:

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They’re Coming For Biden: 2020 Democrats Sharpen Knives Ahead Of Second Debate

Beset by racial gaffes, stodgy moderate positions, and recovering from a serious verbal beatdown by Kamala Harris last month, former Vice President Joe Biden is firmly in the crosshairs ahead of this week’s second debate, according to Bloomberg. 

The lineup of the second debate of Democratic candidates on Tuesday and Wednesday is almost exactly the same as for the first. But the stakes on Tuesday and Wednesday are higher as the contenders try to ensure they will survive an inevitable winnowing of the crowded field.

Biden will be the main target of rivals such as Senators Cory Booker and Kamala Harris, who are likely to once again confront him issues from criminal justice to health care. –Bloomberg

And it looks like Biden is ready for a fight. 

“I’m not going to be as polite this time,” Biden said Thursday at Detroit fundraiser, before five days of closed-door debate preparation with advisers. His opponents, meanwhile, are maintaining busy public schedules throughout the weekend and Monday. 

“Joe Biden probably goes into this debate right now with the largest expectations in terms of what he must do,” said University of Missouri professor Mitchell McKinney, who notes that Biden doesn’t have the luxury of assuming he’s the ‘chosen one’ anymore, and must focus on the primaries. 

In recent weeks, candidate Cory Booker – polling in the low single digits – slammed Biden as “the architect of mass incarceration,” drawing a sharp rebuke from the former VP’s camp. 

“You can’t be called the architect of mass incarceration and remain quiet,” a Biden ally told The Hill last week. “That’s cruel and personal. That goes against his entire career. You can’t let people say bullshit and not respond to it.“

“The gloves are off,” added the ally. “At this point, you have to punch back when someone attacks your record. People want to see him throw a punch. The president is certainly going to come at him hard, so why not start now?”

According to McKinney, Booker is “telegraphing his debate strategy,” adding “It’s no coincidence that on the stump he’s going after Biden.“

Harris vs. Biden, round 2: 

Kamala Harris absolutely ‘ambushed’ Biden during last month’s debate over his warm recollection of working with segregationist Democratic senators as well as his opposition to federally mandated bussing programs to better integrate schools. This time around, Harris will likely continue to confront the 76-year-old Biden on race issues as they try to whittle away at his support among black voters. 

A Quinnipiac poll released Monday showed Biden a strong front-runner overall, with 53 percent support among black voters. Harris had 7 percent among black voters and Booker trailed even further.

“If they want to argue about the past, I can do that,” Biden said last week. “I got a past I’m proud of. They got a past that’s not quite so good.” –Bloomberg

Tuesday night’s debate will be headlined by Bernie Sanders (VT) and Elizabeth Warren (MA), who have been ‘mostly respectful of each other on the campaign trail’ according to Bloomberg. 

A Monday Quinnipiac poll of Democrats and independent voters shows that Biden is still in the lead with 34%, while Warren stands at 15%, Harris at 12% and Sanders at 11%. 

Political headlines since the first debate also suggest possible questions for the candidates: President Donald Trump attacked four minority lawmakers, suggesting they “go back” to where they came from, even though three are American born and one moved to the US as a child. Then he began a three-day attack on Representative Elijah Cummings’ Baltimore district as a “disgusting, rat and rodent infested mess.” –Bloomberg

In order to qualify for the debate, candidates need to have at least 65,000 donors from 20 states – or at least 1% in any three party-approved recent state and national polls. Next month, that requirement doubles. 

As noted by Bloomberg, just seven candidates already qualify: Biden, Booker, Pete Buttigieg, Harris, Beto O’Rourke, Sanders and Warren.

via ZeroHedge News https://ift.tt/2K54nIt Tyler Durden

Stossel: Free Stuff 2020

Never before have so many politicians promised to spend so much.

Among some candidates, the 2020 presidential campaign has turned into a contest to see who can offer the most “free stuff.”

So far no one has tracked their promises, so the Stossel team did.

Stossel compares the top five Democratic candidates, based on the betting odds. He looks at Sen. Kamala Harris (D–Calif.), Sen. Elizabeth Warren (D–Mass.), former Vice President Joe Biden, Mayor Pete Buttigieg, and Sen. Bernie Sanders’ (D–Vt.) expensive promises, issue by issue: education, health care, climate, welfare, and… well, let’s make it a contest! There’s a grab-bag round too.

Some examples of what the Democrats would spend if they become president:

Sanders wants to “eliminate student debt” and “make public colleges and universities tuition-free.” Sounds nice, but he seldom mentions the $220 billion price tag.

Mayor Buttigieg promises to spend $31.5 billion to give teachers a pay raise. Kamala Harris likes that one too.

Senator Harris also wants the government to pay your rent if it’s more than 30% of your income. The cost? $94 billion a year.

The Democratic candidate promises keep on coming: Medicare for All, $3 trillion.

Increase Food Stamps, $10.8 billion.

Expand National Service, $2 billion.

A federal job guarantee, $158 billion.

But the Republican incumbent is a big spender too, says Stossel. Since Donald Trump became President, spending has risen about $500 billion.

But the Democrats want to spend much more. Stossel’s tally includes more than 50 spending proposals.

Watch to see who wins the title of “Biggest Spender.”

Stossel says, no matter who wins, taxpayers are the losers.

Since we completed this video Friday, Senator Harris proposed her own “Medicare for All” plan. She says it will be cheaper than Senator Sanders’ version, but as of now there is no independent calculated cost. She also proposed a new plan to spend $75 billion on minority-owned businesses and historically black colleges.

The views expressed in this video are solely those of John Stossel; his independent production company, Stossel Productions; and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.

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The Federal Reserve Is Gambling With The Global Economy

Authored by Mac Slavo via SHTFplan.com,

The economy is being gambled with.  The Federal Reserve is likely going to cut interest rates this week, and the global economy is at stake.

Despite unemployment being at historic lows and the stock market being at historic highs, a highly unusual action is shaping up to be the biggest gamble of Fed Chair Jerome H. Powell’s brief tenure as leader of the world’s most powerful economic institution.  The central bank will be putting the economy on the line to see what will happen when they cut interest rates.

According to the Washington Post, the Fed doesn’t have unanimous support. Fed officials and people on Main Street say the Fed’s action will benefit the stock market more than the real economy. And they argue cutting rates would introduce risks that could worsen the next downturn.

Typically, when the Fed slashes interest rates, borrowing costs drop for mortgages, business loans, auto loans, and credit cards, leading to more homes being sold, more businesses investing, and more economic activity overall. But it comes with so strain to the economy too. It is an incredibly dangerous gamble and James Davis of Future Money Trends agrees that now is NOT the time to “take advantage” of the new lower rates.

I’d suggest limiting liabilities and not taking on any more debt.That means, stop borrowing money and pay off what you already owe. Even if the Federal Reserve decides to lower interest rates (which it looks like they will do) making borrowing look more appealing, it just is not the right time.Being in debt during an economic meltdown is going to make things much more difficult in the event of a job loss.

– James Davis, Future Money Trends

And for those looking to borrow money to buy a house, this rate cut won’t have much of an effect anyway.

“A Fed rate cut will have zero impact on the housing market,” said Tendayi Kapfidze, chief economist at Lending Tree.

“Mortgage rates are already at three-year lows.”

Real Estate agents tend to agree.

Washington-real estate agent Kara Sheehan said that she hears a long list of concerns from prospective home buyers these days, but the interest rates aren’t up there on that list. People tend to want move-in ready homes.  But this is the height of the economic bubble and now is not the best time to buy a house, especially if you are considered a subprime borrower.

“Buyers are a little more hesitant lately and very price-conscious. They are all about property condition,” said Sheehan, of Washington Fine Properties according to the Washington Post. 

The danger of acting too soon and dropping rates is that cheaper borrowing costs will spur even more risky lending that ultimately leads to a bubble bursting, similar to the dot-com era or the housing market crash, as Davis has often warned about.  Corporate debt, much if fueled by high-risk leveraged lending, is already at a record high. Consumer debt continues to skyrocket and break record highs, and that’s the problem with lowering the rates.  Borrowing money looks more appealing especially to those who are already leveraged or living paycheck to paycheck. Risky lending offers higher returns to investors and can be even in more demand when interest rates are low in the economy.

“The Fed feels the need to come in and save the day like Superman, but all the Fed is going to do is encourage more corporate debt,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. 

“It’s not going to help, and then the Fed will keep cutting.”

via ZeroHedge News https://ift.tt/2ZlUXNR Tyler Durden

Case-Shiller Home Price Appreciation Slows For 14th Straight Month

US home price appreciation slowed for the 14th month in a row in May, rising only 2.39% YoY (below expectations), its weakest home price growth since Aug 2012…

“Though home price gains seem generally sustainable for the time being, there are significant variations between YOY rates of change in individual cities,” Philip Murphy, managing director and global head of index governance at S&P Dow Jones Indices, said in a release.

“Seattle’s home price index is now 1.2% lower than it was in May 2018, the first negative YOY change recorded in a major city in a number of years.”

Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities; seven of the 20 cities reported greater annual price increases in May.

Finally, there is a potential silver lining – if history is any guide…

Lower rates may be set to drag home prices higher.

via ZeroHedge News https://ift.tt/2LPbtTn Tyler Durden

Stossel: Free Stuff 2020

Never before have so many politicians promised to spend so much.

Among some candidates, the 2020 presidential campaign has turned into a contest to see who can offer the most “free stuff.”

So far no one has tracked their promises, so the Stossel team did.

Stossel compares the top five Democratic candidates, based on the betting odds. He looks at Sen. Kamala Harris (D–Calif.), Sen. Elizabeth Warren (D–Mass.), former Vice President Joe Biden, Mayor Pete Buttigieg, and Sen. Bernie Sanders’ (D–Vt.) expensive promises, issue by issue: education, health care, climate, welfare, and… well, let’s make it a contest! There’s a grab-bag round too.

Some examples of what the Democrats would spend if they become president:

Sanders wants to “eliminate student debt” and “make public colleges and universities tuition-free.” Sounds nice, but he seldom mentions the $220 billion price tag.

Mayor Buttigieg promises to spend $31.5 billion to give teachers a pay raise. Kamala Harris likes that one too.

Senator Harris also wants the government to pay your rent if it’s more than 30% of your income. The cost? $94 billion a year.

The Democratic candidate promises keep on coming: Medicare for All, $3 trillion.

Increase Food Stamps, $10.8 billion.

Expand National Service, $2 billion.

A federal job guarantee, $158 billion.

But the Republican incumbent is a big spender too, says Stossel. Since Donald Trump became President, spending has risen about $500 billion.

But the Democrats want to spend much more. Stossel’s tally includes more than 50 spending proposals.

Watch to see who wins the title of “Biggest Spender.”

Stossel says, no matter who wins, taxpayers are the losers.

Since we completed this video Friday, Senator Harris proposed her own “Medicare for All” plan. She says it will be cheaper than Senator Sanders’ version, but as of now there is no independent calculated cost. She also proposed a new plan to spend $75 billion on minority-owned businesses and historically black colleges.

The views expressed in this video are solely those of John Stossel; his independent production company, Stossel Productions; and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.

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Anti-Tech Wave Grows with New Justice Department Antitrust Efforts

The U.S. is moving against big tech in a big way. Last week, the Department of Justice (DOJ) announced a broad antitrust investigation into whether unnamed technology companies have engaged in anti-competitive activities. This is in addition to DOJ’s joint antitrust efforts with the Federal Trade Commission (FTC); DOJ is tackling Apple and Google, while the FTC has Amazon and Facebook. The FTC formed a separate task force to monitor competition in the technology industry earlier this year. Oh yeah, and the House Judiciary Committee is sniffing around for Silicon Valley shenanigans, too.

So far, the DOJ has not named names. Since “search, social media, and some retail services online” were specifically mentioned, it’s a good bet that Google, Facebook, and Amazon are among the targets. We can probably throw in the Apple App Store, as well.

We also don’t know whether the investigations will be voluntary, or if DOJ will exert authority to compel discovery on heretofore unknown dirty deeds. So it’s hard to say exactly what DOJ has up its sleeves.

But if the Trump administration’s posture towards big tech is any indication, we should expect a fairly aggressive examination of possible anti-competitive actions.

During his nomination hearing, Attorney General Robert Barr stated that he wondered “how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers” and advocated for “vigorous enforcement of the antitrust laws to preserve competition.” In particular, Barr worries that large platforms enjoy network effects so substantial that “particular sectors could essentially be subsumed into these networks.”

The writing was always on the Facebook Wall. It’s true that until fairly recently, most technology companies had something of a neon halo about them. We used and enjoyed social media platforms every day, those harmless and amusing outlets for comradery and cat-posting. Amazon gave us great cheap junk, Apple had the coolest products. Google gave us, well, everything else.

But how the mighty fall. After a few bonkers elections and a mass awakening to just how all those “free” services make money, America now calls for tech companies’ heads.

It’s an illustration of general U.S. attitudes to antitrust. On paper, enforcers like the DOJ and FTC are only supposed to intervene when a firm restricts output and raises prices, or when it possesses an “essential facility” available nowhere else. In other words, officials should get involved where consumers are demonstrably harmed, as gauged by measurable economic outcomes like price increases or output restriction.

In practice, however, many call for firms to be broken up anytime we feel they are getting too big. We forget today, but at one point, the hot talk in tech was that MySpace and AOL were due for the antitrust treatment. Today, these names do not conjure images of anti-competitive activity because they were successfully competed against—by Facebook and Google. Yet their actions remain the same.

Under the “market structure” conception of antitrust, it’s not so much about protecting consumers as it is about protecting competition—that is to say, protecting current and future competitors.

It’s hard to argue, for instance, that Windows users were harmed by the free Internet Explorer browser that came preinstalled on their computers. Microsoft’s aggressive behind-the-scenes campaign to convince vendors to snub alternative browsers didn’t really affect user experience. If you wanted a different browser, you could just use IE to download another browser. But competitors like Netscape clearly were harmed by such structural defaults, which is why DOJ eventually intervened.

Microsoft was big and seemed unassailable. Of course, it wasn’t, but not along the dimensions over which ’90s antitrust regulators so agonized. The fall came, to regulators at least, out of nowhere: Apple’s streamlined strategy and the open source operating system Linux dealt major blows to Microsoft’s seemingly untouchable positions in the personal computing (hello, iPhone) and server markets. Browsers were the wrong battle—dirty as the fight may have been for poor Netscape—and today Microsoft browsers are considered a bit of a joke.

In a similar way, successes spelled trouble for tech titans. It was only a matter of time until they got big enough and unpopular enough to draw antitrust scrutiny. It’s almost tautological: The most competitive companies in hindsight become the most “anti-competitive.” (Is there a major company who got there by playing nice?) You can always find something to point to as an unfair and unbreakable barrier to competition.

It doesn’t sound great to say you are breaking up firms to benefit other companies. Today, aggressive antitrust enforcement is couched in terms of “innovation.” It’s not that we are shoring up businesses that couldn’t keep up. We are taking down today’s titans so that they little guys can get a crack at them. With more breathing room, tomorrow’s paradigm shifts can sooner take flight today. Some go so far as to claim that without the DOJ’s antitrust case tying up Microsoft, Google would have never taken off.

The Justice Department’s statements on their investigations hew to this new conception of antitrust as a harbinger of tomorrow’s innovation. Its press release singles out practices that have “reduced competition” and “stifled innovation” for scrutiny. Last on that list, by the way, are activities that “otherwise harmed consumers.”

We’ll have to wait and see what the DOJ will dig up as evidence of anti-competitive behaviors. Perhaps they will discover some truly heinous deeds. Or maybe something fairly benign will be touted as proof that online platforms’ gains were ill-gotten, or that their very size is on its face is bad for competition. After all, antitrust regulators will want to come up with something.

They walk a fine line. It’s not hard to imagine scenarios where actions that are bad for competitors are also bad for consumers. Let’s say Microsoft’s browsers blocked users from downloading alternative options. That would clearly limit choice and competition, and would probably stall browser innovation as well. But it’s not always the case that what makes competitors’ jobs harder makes consumers’ lives worse.  Regulators should keep the distinctions clear.

The big guys are ready for a fight, and their lawyers are surely fashioning preemptive rebuttals to defend their most notorious business practices from antitrust affronts. It’s how the game is played.

Should we expect these antitrust efforts to do much for innovation? If the past is any guide, the Davids that will take down our Goliaths are probably putting together their slingshots as we speak, far from the eyes of antitrust regulators. And then the next decade’s Justice Department will puzzle over just how those new giants got where they are in the first place. After all, if they had actionable information on what the next major markets will be, they might be in a different line of work.

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Bill Blain On Boris, Brussels, Backstops, & BBC Bashing Boeing’s Killer-Planes

Authored by Bill Blain via Shard Capital,

“They stab it with their steely knives, but they just can’t kill the beast..”

Boris discovered just how much they love him in Scotland.

This does not feel like a great time to be long Sterling.  But…. as sterling slid on the heightened prospects for a No-Deal Brexit, the UK stock market soared, driven by M&A speculation.  A reader sent me a text to congratulate me on being spot on when I gave the considered market advice “When May is Gone Put Your Buying Boots on!” on May 23rd.  Theresa resigned the following day, and the market is up 7.5% since!  I must be an investment genius…

What should the current mantra be?

How about: While Boris Bluffs and Blunders, the Pound will remain a’Chunder?

Sterling is down 2.6% against the Euro since Boris became prime minister. That’s an extraordinary decline.  A no-deal Brexit will hurt all ways: UK, Ireland and Europe.  Yep.  Its going to hurt Europe as well.  Time for everyone to wake up.

Over the next three months it looks likely to remain brutally negative for Sterling as the Brexit deadline approaches.  Dominic Cummings and Boris are framing it simply: Brussels agrees to compromise on the Irish Backstop or it’s a No-Deal.  Boris is refusing to meet European leaders until they agree to positively discuss ditching the backstop.  It’s become a very High Stakes game of Poker – and no one wants to lose face.  A sober assessment of the risks and potential gains might be in order.  Europe betting on the UK blinking is a big risk for a pretty  minimal return.  Boris is not bluffing – he’s all-in 110% on the UK leaving – any kind of political future depends on it.

The UK is going to leave whether it gets a good or bad deal. Which means the current stand-off over the Channel is pretty much pointless willy-waggling on both sides. There is a much better compromise to be done.

The waggling is over a pretty dumb concept – The Irish Backstop.  C’mon.  Does Europe really think the UK is going to breach promises to be a good non-European European and will exploit an open Irish border after Brexit?  The UK is about the only country that enforces most of the current rules!  The Backstop is the kind of passive aggressive clause that makes simple good deals impossible. Nobody wants to see the Irish border closed – so lets get rid of the clause, and keep it open.  Negotiate it away.

At the risk of attracting negative comments from my many European readers this morning… Please, make this simple. Change the Backstop so we can all remain chums.  Why?  Because it’s not important, its not a real issue, and we’re all bored of it.  Move on.  It’s not difficult.  Don’t tell us the Backstop is critical, or even important, and global trade can’t function without it (Clue – you can trace everything on computers). It’s a pointlessly stupid clause that in standing in the way of a solution that benefits everyone.

You know the response I will get to that plea… Outrage from Brussels. Why should Europe shift, when it’s the Brits that caused all the trouble?

For Fecks sake – will everyone please grow up!

For Brussels to “win” the hand it requires UK politics to hold back/topple Boris. But what would they win? Are the stakes worth it? What does Brussels gain by forcing the UK to back off? Nothing. It might send some kind of Hotel California signal to the rest of Europe – you can check out any time you want, but you can never leave.  But, Europe must know its’ potential for stronger European union is enhanced without the distraction of an uncommitted UK, that UK imports from Europe feed the whole economy, and a UK that remains engaged with Europe is better across every single metric.

Even the most extreme of the lunatic far Brexit wing realise an open trade door with Europe is massively positive for UK.

Leaving Europe with a bad no-deal is going to play badly for all parties. Forget all the nonsense rhetoric about the UK going out and quickly signing trade deals, and finding new markets – it won’t be as bad as Project Fear suggests, but it will still hurt. But it won’t hurt as much as Europe. The UK has some critical and massive advantages over Europe:

  • The UK still owns the keys to the monetary printing presses – if the crunch comes, the UK can inflate and pump the economy and import whatever is required. There will be consequences – inflation, currency weakness, and social ones also.  In contrast, European nations still have to agree new fiscal rules to run alongside the Euro – the don’t own their own money trees!

  • The UK has the advantage of being able to move swiftly – its not hamstrung by Brussels bureaucracy or the red-tape that characterises business across Europe. Labour and business rules are pro-growth.

  • The UK remains the premier centre for English legal and financial services. I read a confidential report by one of the major Golden Circle legal firms suggesting less that a couple of hundred real jobs have transferred out of London (and most of these were French).

Perhaps the current sorry state of the UK is not such a knee-jerk sell as the markets seem to think.

Meanwhile, did anyone watch the BBC’s Panorama Last night? Boeing’s Killer Planes made some very sharp points about how the plane-maker sacrificed safety in order to pay out investor dividends, buyback its own stock and pay its senior execs massive bonuses. Kind of sickening to watch the CEO refuse to accept any responsibility for 346 deaths while taking his $70mm per annum “reward” from the company.

If you have been following the story, then the BBC said nothing new. But it’s the fact millions of people will watch the programme that counts. When aerospace engineers say the plane is unsafe, corners were cut, and they won’t fly on it…. then why would paying passengers. Airlines know that. Bottom line is the B737 Max crisis is escalating and becoming a public relations disaster of a force 10 magnitude. Take a look at how the stock is underperforming and work out how much lower it could go.

Out of time, back to the day job…

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In the headlines this morning: https://morningporridge.com/stuff-im-watching. Blain’s Financial Porridge Podcast on Website (Subscribe to Audioboom podcast or go via Spotify or iTunes (Other channels available from Audioboom) . Blain’s new book: The Fifth Horseman – How to Destroy the Global Economy, is on Amazon in Kindle or book format.

via ZeroHedge News https://ift.tt/2K1J76h Tyler Durden