For several years now, economist Mark Perry has published a chart showing price changes from several key sectors of the U.S. economy. And with each update the divergence of prices becomes more glaring. “The obvious conclusion,” Perry says, “is that the more government gets involved, or the more government regulation, the greater are the increases in prices over time. The less government intervention or regulation, the greater the decline in prices over time.”
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In this episode, I interview Thomas Rid about his illuminating study of Russian disinformation, Active Measures: The Secret History of Disinformation and Political Warfare. It lays out a century of Soviet, East European, and Russian disinformation, beginning with an elaborate and successful operation against the White Russian expatriate resistance to Bolshevik rule in the 1920s. Rid has dug into recently declassified material using digital tools that enable him to tell previously untold tales – the Soviets’ remarkable success in turning opposition to US nuclear missiles in Europe into a mass movement (and the potential shadow it casts on the legendary Adm. Hyman Rickover, father of the US nuclear navy), the unimpressive record of US disinformation campaigns compared to the ruthless Soviet versions, and the fake American lobbyist (and real East German agent) who persuaded a West German conservative legislator to save Willy Brandt’s leftist government. We close with two very different predictions about the kind of disinformation we’ll see in the 2020 campaign.
In the news, David Kris, Nick Weaver, and I trade perspectives on the Supreme Court’s grant of certiorari on the question when it’s a crime to access a computer r “in excess of authority.” I predict that the Justice Department’s reading of the Computer Fraud and Abuse Act will lose, but it’s far from clear what will replace the Justice Department’s interpretation.
Remember when the House left town without acting on FISA renewal? That’s looking like a worse and worse decision, as Congress goes weeks without returning and Justice is left unable to use utterly uncontroversial capabilities in more and more cases. Matthew Heiman explains.
In Justice Department briefs, all the most damaging admissions are down in the footnotes, and it looks like that’s true for the inspector general’s report on the Carter Page FISA. Recently declassified footnotes from the report make the FBI’s pursuit of the FISA order look even worse, in my view. But at the end of the day, the footnotes don’t add much to suspicions of a partisan motivation in the imbroglio.
Speaking of IG reports, the DOD inspector general manages first to raise the possibility that Amazon was the victim of political skullduggery in the big DOD cloud computing award and then to find a way to stick it to Amazon anyway. Meanwhile, the judge overseeing the bid protest gives the Pentagon a chance for a do-over.
Nick and I mix it up, first over the Gapple infection tracing plan and their fight with the UK National Health Service and then over Facebook’s decision to suppress posts about anti-lockdown demonstrations that violate the lockdown. I think that’s highly questionable and not something Facebook would be doing if the first demonstrations had been Black Lives Matter activists in Detroit – or regime protestors during the Arab Spring for that matter. Nick thinks it’s the best way to treat a “zombie death cult serving haterade.” So, all in all, exactly the restrained and civil exchange of views you’ve come to expect from the Cyberlaw Podcast.
You can subscribe to The Cyberlaw Podcast using iTunes, Google Play, Spotify, Pocket Casts, or our RSS feed. As always, The Cyberlaw Podcast is open to feedback. Be sure to engage with @stewartbaker on Twitter. Send your questions, comments, and suggestions for topics or interviewees to CyberlawPodcast@steptoe.com. Remember: If your suggested guest appears on the show, we will send you a highly coveted Cyberlaw Podcast mug!
The views expressed in this podcast are those of the speakers and do not reflect the opinions of their institutions, clients, friends, families, or pets.
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For several years now, economist Mark Perry has published a chart showing price changes from several key sectors of the U.S. economy. And with each update the divergence of prices becomes more glaring. “The obvious conclusion,” Perry says, “is that the more government gets involved, or the more government regulation, the greater are the increases in prices over time. The less government intervention or regulation, the greater the decline in prices over time.”
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via IFTTT
Amidst an investigation into the question of whether Spain’s draconian lockdown laws are constitutional, people are being fined a whopping €2,000 euros for “disrespecting” a police officer.
Unlike other European countries, people in Spain aren’t even allowed to go out to exercise during the coronavirus quarantine.
Citizens are only allowed to visit their nearest grocery store and only one person can be in a vehicle at a time unless the other person is classed as “vulnerable” or there is a medical emergency.
The lockdown is enforced via a network of roadblocks at which drivers are quizzed as to their intentions by aggressive police, some of whom carry guns. A physiotherapist was hit with a €600 euro fine for going to see a client after police stopped him when he was driving home.
The €2,000 euro fine for “disrespecting” a police officer is obviously completely arbitrary and easily open to abuse as a form of revenue generation.
“The guidelines state a standard €601 penalty for unauthorized movement outside the home without good reason that can be increased to up to €2000 if the offender responds with an “inappropriate attitude” to law enforcement officers, reports the Local.
People who cannot provide identification to police are fined €700 euros, while a trip to a second home earns a €1500 euro fine. The biggest fine – a gargantuan €10,400 euros – is reserved for anyone who attempts to “to organize or participate in a gathering, party or celebration.”
According to journalist Jason O’Toole, who is locked down in Madrid, tensions are “running high” and people are now being arrested for going out “too frequently” to the grocery shop.
This has prompted some judges, solicitors, law professors, and NGOs to complain that the onerous fines are “unconstitutional.”
“There’s an investigation now underway by the Defensor del Pueblo (Spanish Ombudsman) to see if the fines are “correct and proportional,” because they want to “protect the rights of the citizens.” It’s a move that has even been welcomed by La Abogacia del Estado,” writes O’Toole.
“The Ministry of Justice is now questioning whether the fines are legally sound and says it’s possible many cases could be thrown out of court on a technicality. They say, for example, those apprehended might get off scot-free if the police didn’t first give them a formal warning – like a yellow card in football.”
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Black Market Demand for COVID-19-Fighting HIV Drug Surges In Russia
News that HIV drugs were being deployed in hospitals in China and elsewhere to treat COVID-19 patients has resulted in panic hoarding on the Russian black market by speculators and people who fear they could contract the deadly virus.
Panic hoarding began in February and has since increased months later. Reuters points out that Kaletra is one of those leading antiviral HIV drugs that are in high demand.
Reuters’ explanation of why Kaletra is in high demand dates back to January in China, where scientists used the drug on COVID-19 patients and showed encouraging results. There were also 20 other trials of the drug across the world that followed. The Russian Health Ministry even recommended Kaletra as a possible treatment but added its effectiveness was uncertain.
We noted in February that a 21-year-old man in Wuhan, China, who contracted the virus, was prescribed Kaletra, which the treatment ultimately led to his recovery.
Speculators on the black market were buying Kaletra, and the generic form Kalidavir, in large amounts earlier this year, betting shortages would develop.
“Three months ago, people were buying Kaletra from us without much enthusiasm for 900 roubles ($12) a box,” an online trader of HIV drugs told Reuters.
“Now, anticipating (supply) interruptions, people are buying between 100 and 700 boxes from us, at 3,800 roubles ($51) a box. Mainly, people are buying (Kaletra) with the aim of reselling it for a very high price.”
The trader said a box now fetches 7,000-8,000 roubles ($94-$108), which is a dramatic increase in the price from several months ago.
The prescription-only HIV medicine is ordered in bulk by the Russian health ministry and handed out to HIV patients for free. Still, with panic hoarding over the last several months, supply disruptions could materialize.
The director of H-Clinic in St. Petersburg, who specializes in infectious diseases, said HIV patients at his pharmacy had been worried that the supply of the medication would run out thanks to the new demand.
“We have a van coming from the pharmaceutical company, and everything in it has already been claimed in orders,” H-Clinic’s Andrei Skvortsov told Reuters. “There were up to 120 calls a day.”
Skvortsov said there were ample supplies of the generic drug, but it was the distributor of Kaletra that said supplies had recently become exhausted.
A person that goes by the name of Alexei, who asked Reuters for anonymity, operates a ‘back-up medicine cabinet’ that delivers leftover drugs to people in need when shortages emerge.
He said, “Messages and calls started coming in from people saying they were ready to purchase these medicines.”
Alexei said there are “resellers and middlemen” attempting to acquire as much of the HIV drug as they can.
R-Pharm CEO Alexei Repik said Kaletra is in high demand, and it is now being sold illegally at some pharmacies.
Repik said he was boosting the output of Kaletra as the pandemic could worsen.
“But of course, no one can predict the full scale of the epidemic,” he added.
Demand for Kaletra has flourished on the Russian black market as the world is without a vaccine at the moment for COVID-19. Speculators, who bet on the shortages of the drug would arrive, have been handsomely rewarded as cases and deaths surge in Russia.
Although the heads of the world’s largest oil-producing nations were quick to claim a diplomatic victory following the latest OPEC+ (Organization of the Petroleum Exporting Countries “plus” non-OPEC oil producers) output-cut agreement, crude prices are telling a different story. Prompt month Brent and WTI futures contracts are now trading nearly 20 percent below their early April highs, both returning to a supercontango forward curve price structure following the conclusion of the OPEC+ meeting. A contango price structure, where near-term prices plummet relative to prices further along the curve, is the market’s way of clearing. But political efforts to support crude prices from around the world continue to muddy the waters for those trying to efficiently and rationally reallocate capital in the industry.
With the long-awaited OPEC+ deal failing to balance the market, some Texas oil producers are hoping to rekindle a largely dormant regulatory body in the Texas Railroad Commission to coordinate output cuts in the heartland of US crude production for the first time since the 1970s. In addition, amid this week’s turn lower in oil prices, US tariffs on crude imports are reportedly still on the table as well as a newfound idea to potentially pay producers to shut in production. Although politicians and regulators are still busy trying to find regulatory cures, this historic moment in oil markets should serve as a lasting reminder of the limitations of political remedies and the need to allow market prices to be the ultimate arbiter of production levels. Efforts by US policymakers to boost crude prices and to throw a lifeline to high-cost US crude producers is the exact opposite of what prices are telling us the market needs at this time. Seeking to prop up the least efficient US oil producers through import penalties or production quotas risks further misallocations in the sector going forward.
Let us address a few key points:
1. Higher Crude Prices Are Not What Is Needed Amid Sharp Fuel Demand Contraction
Much of the recent focus for US politicians and other representatives of oil-producing nations has been on getting crude prices higher. But nothing could be more unwarranted at this time. As fuel demand for transportation has ground to a halt globally over the past two months, refining margins have been crushed—particularly for gasoline and jet fuel. It is this record weakness in underlying demand for transportation fuels, and the accompanying weakness in refining margins, that has led to the rapid surplus of crude oil globally as refineries have cut throughput.
Therefore, global political efforts to send crude prices higher risk exacerbating demand contraction for crude oil in the near term as higher crude prices without higher refined fuel demand would further limit a refiner’s incentive to process crude.
2. The Market Is Trying to Do Its Job
Crude prices returned to a state of supercontango early this week, following the conclusion of the OPEC+ meeting. After narrowing to just –$3.96 in early April, the Brent 1–7 month time spread has widened back to –$9.51 as of the April 15 close. Prompt month WTI is at an even wider discount to prices further along the curve than it was prior to the OPEC+ agreement, with the 1–7 month time spread closing at a whopping –$13.54 on April 15. This historically steep discount for near-term crude reflects the market coordinating multiple needed processes simultaneously.
On the one hand, physical crude prices and prompt month futures prices are coordinating the process of shutting in production. With prompt month WTI trading at a $13.54 premium to current prices just six months from now, a steep contango price structure is the strongest signal a US producer can receive to shut off new supply today and reserve that production for a future date. To the extent that production cannot be immediately shut in, this same price structure incentivizes placing crude into storage rather than continuing to push it onto the market, further crushing physical prices.
On the other hand, and to reflect on the first point above, the steep discount in near-term crude prices is needed to begin to stimulate crude demand at refineries once again. Crude prices must drop faster than refined fuel prices or refiners will have no profit motive to begin to process the glut of crude. In order to clear, the crude market needs positive gasoline-refining margins and/or diesel margins high enough that the weak gasoline and jet fuel margins are not overwhelming. This can only be accomplished by allowing for weakness in crude prices.
WTI Crude Oil Forward Curve
3. Only the Market Knows Which Crudes Should Be Cut and in What Quantities
Any refiner knows that crude quality matters, but most policymakers certainly do not. Crude quality, which is to say the profile of a specific grade of crude based on both its API gravity and sulfur content, is of chief importance to a refiner. A crude refining slate consisting of various grades is chosen carefully, based in large part on a refinery’s physical sophistication (what they can run) and the cost of the crudes compared to their expected revenues (based on their relative yields of the refined products (what they want to run)). For example, with gasoline currently bearing the brunt of the demand-contraction pain, light, sweet crudes that yield high volumes of light distillates, such as the majority of US shale grades, are far less desired by refiners that can run heavy crudes and are optimizing their refining slate to target higher yields of diesel.
Only the market knows which crude grades need to be produced and in what quantities at a given time. Likewise, only the market knows which crude grades need to be exported or imported and in what quantities. Prices along the oil supply chain alone coordinate this process. Now more than ever, the market needs unfettered prices to tell producers which grades to produce and refiners which grades to refine. This is just another reason why blanket production cuts or quotas and penalties on crude imports are both risky and suboptimal. Only refiners and producers themselves are sophisticated enough and can respond in a timely enough fashion to optimize the supply chain. And let us not forget that this market function will be just as important as demand begins to recover in the coming months. Policy interventions risk not only skewing market prices today, but also causing misallocations longer term.
Conclusion
It is often forgotten that market prices are themselves the constant coordinators of commerce. “The market” is not just some amorphous entity in the imaginations of ideologues and traders. Markets are made up of the industrial players that have the most skin in the game and the most to lose from misallocating capital.
In times of high uncertainty and economic risk it is politically difficult to resist the temptation to intervene in markets in an effort to protect specific pieces of domestic industry, but policies enacted in panicked times can also produce large and lasting unintended consequences. As we hope for a slow return to normalcy in refined product demand as COVID-19 quarantines are lifted in the coming months, let us be cautious of policy prescriptions that can wind up further ailing the entire oil industry and consumers in the long run.
Norway’s Wealth Fund CEO Embroiled In Scandal Over Private Jet Ride As Oil Prices Collapse
As international crude benchmarks get clobbered (though not quite as badly as their American cousin), major oil-producing nations have been a major focus on Monday. The markets have taken a keen interest in how they plan to weather this unprecedented market dislocation, or whether the damage to the local energy industry might set production capacity back for years.
However, we’ve found an intriguing story from Norway – Europe’s biggest oil producer – and its sovereign wealth fund, one of the biggest – if not the biggest (it has got some pretty stiff competition in the Middle East) – piles of fossil fuel blood money in the world.
The story is this.
The fund’s former chief executive, who announced his plans to resign last fall, as well as his successor have become embroiled in a scandal involving the appearance of what might be a bribe involving a seminar appearance, five-star treatment including food and musical performances by major artists (we hear Sting is very popular in Norway), and a ride back home on a luxury jet when an affordable public option was available.
The world’s biggest sovereign wealth fund faces serious questions over the conduct of its outgoing chief executive and the selection process of his successor amid a scandal involving a luxury jet and a private performance by Sting.
CEO Yngve Slyngstad has had to explain why he accepted a flight paid for by Nicolai Tangen, the hedge-fund manager who was eventually tapped to succeed him. The development has now prompted the central bank’s watchdog to look into convening an emergency meeting to examine more closely the circumstances under which Tangen was selected.
The revelations have stunned Norwegians and created the appearance of scandal around one of the country’s most revered institutions. Tangen’s appointment had already raised eyebrows. To some, his jet-set lifestyle seemed at odds with the spirit of a fund created to safeguard the savings of an entire nation.
The Supervisory Council of Norway’s central bank, which oversees the $1 trillion fund, will try to find out whether the events “represent a breach of regulations applying to Norges Bank’s activities,” its head Julie Brodtkorb, said in a text message on Monday.
In his defense, Tangen, a billionaire who doesn’t really even need this job, said he booked Slyngstad years ago when the seminar was first planned, and that the other accoutremonts were last-minute requests, and perhaps reflective of bad judgment.
At this point, who would even want that job? Slyngstad grew the fund’s capital by many, many hundreds of billions during his tenure as a rode a global equity bull market to riches. It certainly doesn’t sound like a good fit for somebody who’s no longer ‘hungry’ to make a name for themselves.
Tangen
For foreigners who are reading this and trying to understand why such a small appearance of impropriety is being taken so seriously, the FT explained it’s simply the latest reminder of how cozy Norway’s elites are. It seems they all know each other, because they probably do.
Slyngstad
Norway’s central bank governor Oystein Olsen, who led the search, told the FT on Monday that he has “concluded” an investigation into whether Slyngstad breached ethical guidelines by agreeing that the central bank should pay Tangen for the costs of the hotel in Philadelphia and the flight home. Put another way: The central bank has decided to put to rest questions of improper financial gifts made to a public official by reimbursing the alleged ‘giver’ of said gift for the costs of the gift.
Now, if they had asked Slyngstad to reimburse Tangen – who was already treated with suspicion by many in Norway’s establishment due to his flashy jet-setting lifestyle – that would have made more sense. But this?…
“Judged from now, he [Mr Slyngstad] should have taken another route home,” said Mr Olsen, who added that he now regarded the matter as closed.
[…]
The central bank published a long overview of the hiring process on its website, including the entire history of email exchanges between Slyngstad and Tangen. It also said it had decided to try to refund Slyngstad’s expenses.
Tangen is officially due to take over as CEO of the fund in September, unless his appointment is somehow rescinded, or he declines to accept it under pressure (or simply because he’s realized he’d rather be chilling on a yacht like Obama).
Back in October when we reported Slyngstad’s decision to resign after more than 20 years at Norway’s central bank and the sovereign wealth fund (which is an arm of the central bank, though it maintains a level of independence), we noted that Slyngstad was still planning to have some kind of hand in investment strategy via an advisory role with the fund’s renewables group. We must admit that raised eyebrows at the time. Is it still a good idea for Slyngstad to have any involvement with the institution after being the one who solicited the jet-ride? Perhaps we shall learn more in the coming weeks and months.
In Georgia, Carrollton City Schools has expelled two students for making a racist TikTok video off-campus. The video shows the two making disparaging remarks about blacks and using a racial slur. Carrollton High School Principal David Brooks said it did not matter that the students were not at school when they made the video. “It is our priority to keep our schools safe, and there is no doubt this incident has caused significant tension at Carrollton High School, across the district, state and nation—even the world,” he said.
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In Georgia, Carrollton City Schools has expelled two students for making a racist TikTok video off-campus. The video shows the two making disparaging remarks about blacks and using a racial slur. Carrollton High School Principal David Brooks said it did not matter that the students were not at school when they made the video. “It is our priority to keep our schools safe, and there is no doubt this incident has caused significant tension at Carrollton High School, across the district, state and nation—even the world,” he said.
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Professor Johan Giesecke, one of the world’s most senior epidemiologists, advisor to the Swedish Government (he hired Anders Tegnell who is currently directing Swedish strategy), the first Chief Scientist of the European Centre for Disease Prevention and Control, and an advisor to the director general of the WHO, lays out with typically Swedish bluntness why he thinks:
UK policy on lockdown and other European countries are not evidence-based
The correct policy is to protect the old and the frail only
This will eventually lead to herd immunity as a “by-product”
The initial UK response, before the “180 degree U-turn”, was better
The Imperial College paper was “not very good” and he has never seen an unpublished paper have so much policy impact
The paper was very much too pessimistic
Any such models are a dubious basis for public policy anyway
The flattening of the curve is due to the most vulnerable dying first as much as the lockdown
The results will eventually be similar for all countries
Covid-19 is a “mild disease” and similar to the flu, and it was the novelty of the disease that scared people.
The actual fatality rate of Covid-19 is the region of 0.1%
At least 50% of the population of both the UK and Sweden will be shown to have already had the disease when mass antibody testing becomes available
UnHerd host Freddy Sayers speaks with Professor Johan Giesecke in what they describe as one of the most extraordinary interviews they have done… Watch:
For several years now, economist Mark Perry has published a chart showing price changes from several key sectors of the U.S. economy. And with each update the divergence of prices becomes more glaring. “The obvious conclusion,” Perry says, “is that the more government gets involved, or the more government regulation, the greater are the increases in prices over time. The less government intervention or regulation, the greater the decline in prices over time.”
