Otherwise Lawful Powers and Impeachable Offenses

During the debates surrounding the Mueller investigation into possible Russian interference with the 2016 presidential elections, we heard a great deal about presidential use of “otherwise lawful powers.” There were those who thought President Trump had committed criminal obstruction of justice in his efforts to bring the investigation to a rapid conclusion. Trump had not done the sort of things that any private individual might do to obstruct justice, such as tampering with documents or concealing evidence. Rather Trump had done things that only a sitting president could do. He had used, or contemplated using, the powers of his office to cut short the investigation by, for example, firing FBI director James Comey.

This gave rise to the difficult constitutional question of whether Congress could ever make it a criminal offense for a president to use his otherwise lawful powers as president. Robert Mueller thought that Congress probably could. William Barr thought Congress probably could not. I tended to agree with the attorney general on this point.

This does not mean that the president is beyond any accountability for how he uses his powers. As both I and the attorney general emphasized, the proper places to hold a president to account for abuses of his otherwise lawful powers are at the ballot box and in a court of impeachment.

Alan Dershowitz and my Volokh co-blogger Josh Blackman have contended that “otherwise legal conduct” cannot become an impeachable abuse of power. Otherwise, they say, anything that an ordinary politician might do could place them in the impeachment crosshairs. They would extend the argument that government officers cannot be criminally prosecuted for otherwise legal actions to also hold that they cannot be impeached for such actions.

This is a very sweeping doctrine, and one that is at odds with how the impeachment power was discussed and applied from the founding to today. It is ultimately subversive of the constitutional system of checks and balances.

Presidents, as well as other government officials, are given vast discretionary powers. Some of that discretionary power can and should be pared back through statute, but a great deal of discretion is unavoidable and even desirable and quite a lot is directly vested in the president by the Constitution itself. We hope that officers will use that discretion wisely, but they might use it foolishly. They might even abuse it in a host of ways.

The question then becomes what can or should be done about officers who abuse their power, who act within the scope of their otherwise lawful power but who do so in intemperate, imperious, despotic, or dangerous ways. The effective answer offered by the Dershowitz theory is that one should wait until the next election—if there is a next election that is relevant to that particular abusive officer—and replace the officer. In the meantime, the country should simply suffer whatever damage the abusive officer is willing to mete out.

This is contrary to the very purpose of including the impeachment power in the constitutional scheme. The framers recognized that the president, and other government officers, might abuse the discretionary power with which they are entrusted and they might do so in ways that are simply intolerable. A president who brazenly granted pardons to minions who engaged in criminal activity to advance the president’s own goals should not be tolerated until election day. A president who categorically refused to cooperate in any way with congressional investigations into misconduct in the executive branch need not be tolerated for another four years. A president who sweepingly refused to enforce laws with which he disagreed under the cloak of prosecutorial discretion need not be left in the position of chief executive. A president who rashly used American military power to assassinate American citizens and foreign leaders abroad or invited cataclysmic war need not be left as commander in chief. A president who stubbornly refused to use military force to protect American citizens and territory from foreign military aggression need not be left to serve out his term. A president who directed executive branch officials to use all available lawful tools to harass and intimidate their political enemies without any credible rationale for doing so need not be left in office to continue his campaign of governmental harassment.

It is not easy to impeach and remove any government officer, let alone a president. A partisan majority in the House of Representatives might be able to abuse the impeachment power and convert it into a weapon of factional politics. Convincing a supermajority in the Senate to do the same has proven to be an insurmountable obstacle to bringing such an abuse to fruition. The supermajority requirement in the Senate is the ultimate check on the congressional use of the impeachment power.

Congress too might abuse its discretion in exercising its lawful power. It might impeach and even remove an officer without adequate justification. Ultimately, it will be up to the voters to determine whether Congress has used the impeachment power inappropriately. But the constitutional framers believed that if accusers could convince a supermajority of the Senate that an officer has grossly abused his or her otherwise lawful powers, the nation would be safer if those electorally accountable representatives of the people could take steps to remove that officer from power before too much damage was done.

An impeached officer might offer a variety of explanations to senators to try to convince them to acquit. A president might claim that he was in fact acting in the public interest. A president might claim that he had not realized that such an action would be seen as abusive. A president might claim that even if the actions that he took were misguided and wrong, they were not so consequential as to justify an early end to his tenure in office. A president might argue that the type of actions in dispute can and should be considered by the voters at the next election. A president might claim that the abusive actions in question had already been remedied and presented no further danger to the nation. If enough senators are convinced by such explanations, they can vote to acquit and let the voters judge whether they have made the right decision.

What a president should not do—and what senators should not accept as a viable defense—is claim that the use of his discretionary authority, no matter how tyrannical or dangerous, is beyond the reach of the impeachment power.

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The Wall Isn’t Working

Here’s your obvious metaphor of the week: On Wednesday morning, a section of President Donald Trump’s expensive and “virtually impenetrable” border wall was literally blown over.

Police in Mexicali, Mexico, confirmed to KYMA that about 130 feet of newly constructed border wall “fell on the Mexico side of the border, landing on several trees.” Evidently, the sections had not yet been set in a concrete foundation. The Mexican government still isn’t paying for the wall, but at least Mexico’s trees are helping to prop it up.

That’s not the only loss Trump’s wall has suffered this week in its ongoing battle against Mother Nature. On Friday, The Washington Post reported that other sections of the border wall have huge holes, by design, to prevent flash floods from damaging it. Sources familiar with the wall designs tell the Post that the structure will act like a giant sewer gate during those periodic downpours, allowing water to pass through but causing rocks, trees, and other debris carried by the water to slam into it. To avoid potential damage, there 30-foot floodgates will be built into the wall, and the floodgates will be left open for months at a time during the rainy season.

John Ladd, a cattle rancher who has one such floodgate on his property—built into an older section of border wall constructed in 2008—tells the Post that he’s seen smugglers drive pick-up trucks through the openings.

What was that about “virtually impenetrable”?

As Ladd’s experience with that older section of wall indicates, these problems aren’t Trump-specific. They will afflict any attempt to build a physical barrier through the rugged and diverse geography of the U.S.-Mexico border.

These are well-known problems. As David Bier wrote in Reason three years ago:

A 1970 treaty requires that the floodplain of the Rio Grande remain open to both sides of the border. The Obama administration attempted to build fences along the river anyway, but the treaty and the river’s floods forced the barrier to be placed so far into the interior of the United States that it has many holes to allow U.S. residents access to their property. These also provide an opportunity for border crossers.

At the same time, the fence can cause Mexico to receive too much water. Even when a fence has holes, which a wall would not, debris can turn the fence into a dam. Thanks to the barrier, some floods have fully covered the doors of Mexican buildings in Los Ebanos, across the Rio Grande, while producing little more than deep puddling on the U.S. side. The International Boundary and Water Commission that administers the treaty has rebuffed the Border Patrol’s attempts to replicate this disaster in other areas of the Rio Grande Valley….

Border Patrol agents have told Fox News that a border wall would still “have to allow water to pass through, or the sheer force of raging water could damage its integrity, not to mention the legal rights of both the U.S. and Mexico to seasonal rains.” In 2011, for example, a flood in Arizona washed away 40 feet of steel fence.

Mother Nature, it turns out, doesn’t care about immigration policies or lines on maps.

If nature doesn’t destroy the wall, human beings will. Smugglers have already been spotted cutting holes in new sections of the wall, and there’s a long history of people gaining access to the United States by tunneling or catapulting their way in. More than 200 such tunnels discovered since 1990, and another one was found just this week near San Diego, California.

In a rare moment of admitting to reality, Trump has even conceded that “you can cut through any wall.”

Exactly. That’s why spending an estimated $60 billion on what amounts to little more than a presidential vanity project is so foolish.

Even if it didn’t get cut through or knocked over or otherwise circumvented, the wall wouldn’t do much to limit illegal immigration. Most illegal immigrants to the United States don’t hop the border; they land at airports and then overstay their visas. It also wouldn’t do much to stop the flow of drugs into the United States, because they’re mostly smuggled in through checkpoints.

The best way to reduce illegal immigration is to let more people into the country legally. And if you want to deter drug smugglers, your best option is to reduce their profits by legalizing drugs.

But of course, the true purpose of Trump’s border wall has little to do with drugs or immigrants. It’s a political symbol more than anything: a way to appeal to border hawks, a neat hook for the crowds at his rallies to chant. What does it matter if the wall can’t stand up to a gusty desert wind? The whole project has always been just a lot of hot air.

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Fidelity Has Launched Fractional-Share-Based Investing To Compete For Younger Clients

Fidelity Has Launched Fractional-Share-Based Investing To Compete For Younger Clients

Robinhood’s impact on the brokerage space has certainly been profound. Not only has the app caused significant M&A in the industry as brokerages battle to compete with its zero commission gimmick, but now it has enticed brokerages to follow in its footsteps with fractional trading.

And this week, that exactly what Fidelity announced they were doing.

The firm said this week its clients can now trade fractions of stocks and exchange traded funds. The “dollar based trading” option allows individual investors to own any company they want, regardless of the share price, according to CNBC.

For instance, if a client only has $100, it can still purchase fractional shares of a $2000 stock, like Amazon.  

Fidelity said in a press release: “Customers can now own a piece of their favorite companies and ETFs based on how much they want to invest, independent of the share price.”

Fidelity currently has $8.3 trillion in client assets and is following in the footsteps of Schwab, who also announced it would offer fractional trading this year. Other companies, like Stockpile, have offered this service for $0.99 per trade. 

Robinhood started offering fractional trading in December 2019 and announced that more than 200,000 users were already “in line” for the service within hours of launching it. Robinhood topped 10 million accounts last year, causing bigger names in the industry – like Fidelity – to gun for their client base. 

“Fidelity will execute all fractional trades in real-time during market hours, meaning customers will always know the share price, unlike some firms that execute fractional trades at the end of a trading day or wait for multiple orders to add up to full shares,” Fidelity concluded. 

Not unlike ETFs themselves, we’re sure this will at some point come back to bite the market when it decides to revolt against central bank policy. Until then, these brokerages are more than happy to sell your order flow to the highest bidder.


Tyler Durden

Fri, 01/31/2020 – 14:35

via ZeroHedge News https://ift.tt/36JTN1D Tyler Durden

What To Expect When China Reopens On Monday

What To Expect When China Reopens On Monday

Submitted by RanSquawk

Mainland Chinese stock markets are poised to open on February 3rd following its annual Lunar New Year holiday – which was extended on account of the coronavirus outbreak, and in an attempt to slow down the spread of the pathogen.

THE LATEST: China announced that the confirmed number of coronavirus cases increased to 9692 (Prev. 7711) and total deaths at 213 (Prev. 170). Moreover, the Centers for Disease Control (CDC) verified the first human to human transmission of coronavirus in the US, to bring total number of cases in US to 6 (Prev. 5), in which the new patient is the spouse of the Chicago woman who brought the infection back from Wuhan

WHO’S VERDICT: World Health Organization declared the coronavirus a Public Health Emergency of International Concern in which the decision was near unanimous although it did not recommend limiting trade and movement due to the China outbreak and noted the greatest concern is for the virus to spread to countries with weaker health systems. Furthermore, WHO said there has been progress made in developing a vaccine and believes measures taken by China “will reverse the tide”. Participants digested this a as a “soft announcement” which provided markets with some short-term relief at least.

CATCH-UP PLAY: Using Hong Kong and Taiwan as proxies, Shanghai and Shenzhen markets look set to open with significantly steep losses. The Hang Seng fell over 5% in the two days after its extended break, while the Taiex saw its worst open since late-2018, and the FTSE China A50 futures trimmed ~6% since the last trading day in the Mainland.

Mainland China abandoned circuit breaks in onshore equities following major declines in 2015. Stocks trading on the main boards are permitted to fluctuate 10% intraday on either side of break-even. Desks note that investors find it hard to hedge positions in onshore markets amid the lack of index futures, volatility products and single stock options.

  • Pre-market prices for Shanghai are released at 09:25am Beijing time (01:25GMT) with Cash open at 09:30am (01:30GMT)

In terms of sector focus:

  • Commodity stocks will bear the brunt of the W/W declines across the oil and base metal complexes

  • Airline names are likely to see effects amid numerous flight cancellations and isolations in the region

  • Luxury and gambling names will have to face the prospect of lower demand as tourist numbers fall

  • Financials will be opening to a lower-yield environment vs. Jan 23rd

  • Healthcare names may see support amid heightening demand for drugs and due to the sector’s defensive nature

Metals: Shanghai Iron ore, steel and coking coal futures are seen declining upon Mainland’s return as the contracts are likely to align themselves with price action in the Singapore Exchange (SGX) and London Metal Exchange (LME) over the past week.

Bonds: Yields on Chinese bonds are likely to fall in synchrony to Western core bond markets.

CHINA INTERVENTION:

Unsurprisingly, participants expect Beijing to take steps to stem losses. The PBoC has said that the Central Bank will offer abundant liquidity after the Lunar New Year Holiday through Open Market Operations. Additionally, Chinese government stated that it is to study and implement tax and financial support policies to mitigate effects of the coronavirus outbreak. In terms of other interventions to lookout for:

PBOC CNY FIXING: Since Mainland’s New Year departure from the market, the Yuan briefly surpassed the 7.00 mark vs. the Dollar for the first time since late-December amid the implications of the outbreak on the Chinese economy. The PBoC’s last USD/CNY fix stood at 6.8876; some desks note that the Chinese Central Bank may set a firmer-than-expected fix for the CNY to provide markets with some reprieve.

  • The Yuan fixing occurs at 09:15am Beijing Time (01:15GMT) with onshore (CNY) trading commencing at 09:30am (01:30GMT)

OPEN MARKET OPERATIONS (OMO): China will experience the largest single day maturity in almost four years upon its return, with some CNY 1tln of Central Bank funding due. Traders expect the Central Bank to roll over some of the funds. As mentioned above, the PBoC stated that it will ensure ample liquidity using tools, including open market operations.

  • Details of OMO are seen at 09:15am Beijing Time (01:15GMT)

OTHER FORMS: Aside from the above, Chinese state funds are widely expected to buy stocks to stem the downside in cash markets via the government’s influence.


Tyler Durden

Fri, 01/31/2020 – 14:15

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

The Wall Isn’t Working

Here’s your obvious metaphor of the week: On Wednesday morning, a section of President Donald Trump’s expensive and “virtually impenetrable” border wall was literally blown over.

Police in Mexicali, Mexico, confirmed to KYMA that about 130 feet of newly constructed border wall “fell on the Mexico side of the border, landing on several trees.” Evidently, the sections had not yet been set in a concrete foundation. The Mexican government still isn’t paying for the wall, but at least Mexico’s trees are helping to prop it up.

That’s not the only loss Trump’s wall has suffered this week in its ongoing battle against Mother Nature. On Friday, The Washington Post reported that other sections of the border wall have huge holes, by design, to prevent flash floods from damaging it. Sources familiar with the wall designs tell the Post that the structure will act like a giant sewer gate during those periodic downpours, allowing water to pass through but causing rocks, trees, and other debris carried by the water to slam into it. To avoid potential damage, there 30-foot floodgates will be built into the wall, and the floodgates will be left open for months at a time during the rainy season.

John Ladd, a cattle rancher who has one such floodgate on his property—built into an older section of border wall constructed in 2008—tells the Post that he’s seen smugglers drive pick-up trucks through the openings.

What was that about “virtually impenetrable”?

As Ladd’s experience with that older section of wall indicates, these problems aren’t Trump-specific. They will afflict any attempt to build a physical barrier through the rugged and diverse geography of the U.S.-Mexico border.

These are well-known problems. As David Bier wrote in Reason three years ago:

A 1970 treaty requires that the floodplain of the Rio Grande remain open to both sides of the border. The Obama administration attempted to build fences along the river anyway, but the treaty and the river’s floods forced the barrier to be placed so far into the interior of the United States that it has many holes to allow U.S. residents access to their property. These also provide an opportunity for border crossers.

At the same time, the fence can cause Mexico to receive too much water. Even when a fence has holes, which a wall would not, debris can turn the fence into a dam. Thanks to the barrier, some floods have fully covered the doors of Mexican buildings in Los Ebanos, across the Rio Grande, while producing little more than deep puddling on the U.S. side. The International Boundary and Water Commission that administers the treaty has rebuffed the Border Patrol’s attempts to replicate this disaster in other areas of the Rio Grande Valley….

Border Patrol agents have told Fox News that a border wall would still “have to allow water to pass through, or the sheer force of raging water could damage its integrity, not to mention the legal rights of both the U.S. and Mexico to seasonal rains.” In 2011, for example, a flood in Arizona washed away 40 feet of steel fence.

Mother Nature, it turns out, doesn’t care about immigration policies or lines on maps.

If nature doesn’t destroy the wall, human beings will. Smugglers have already been spotted cutting holes in new sections of the wall, and there’s a long history of people gaining access to the United States by tunneling or catapulting their way in. More than 200 such tunnels discovered since 1990, and another one was found just this week near San Diego, California.

In a rare moment of admitting to reality, Trump has even conceded that “you can cut through any wall.”

Exactly. That’s why spending an estimated $60 billion on what amounts to little more than a presidential vanity project is so foolish.

Even if it didn’t get cut through or knocked over or otherwise circumvented, the wall wouldn’t do much to limit illegal immigration. Most illegal immigrants to the United States don’t hop the border; they land at airports and then overstay their visas. It also wouldn’t do much to stop the flow of drugs into the United States, because they’re mostly smuggled in through checkpoints.

The best way to reduce illegal immigration is to let more people into the country legally. And if you want to deter drug smugglers, your best option is to reduce their profits by legalizing drugs.

But of course, the true purpose of Trump’s border wall has little to do with drugs or immigrants. It’s a political symbol more than anything: a way to appeal to border hawks, a neat hook for the crowds at his rallies to chant. What does it matter if the wall can’t stand up to a gusty desert wind? The whole project has always been just a lot of hot air.

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Meet The Ex-Professional Tennis Player Whose Hedge Fund Soared 124% In 2019

Meet The Ex-Professional Tennis Player Whose Hedge Fund Soared 124% In 2019

SoftBank was the butt of many jokes in 2019. in fact, it’s likely the bank will remain the butt of many jokes heading into the new year. 

But despite the bank’s well known embarrassing failures during 2019, namely the botched IPO of WeWork, the bank did have one thing going for it this year. One of its executives, Marcelo Claure, backed a $160 million hedge fund that surged 124% last year, according to Bloomberg

The fund smoked the S&P index and stood out at one of the lone beacons of success related to anything having to do with SoftBank. 

DPM started in 2017 with personal backing from Claure, who had a stake in at least 20% of the firm. The founder of the firm, Pedro Escudero, is a former pro tennis player who has worked on several shops across Wall Street. Most recently, he worked in sales and marketing for Latin America on behalf of J.P. Morgan. 

In keeping with the SoftBank ethos, the fund says it invests in companies that are “unique species” and have adapted their price models to survive intense competition. DPM said 95% of the positions it took or held at the start of last year has positive results for 2019. The fund is up 49% since its October 2017 inception, versus 34% for the S&P 500. 

Escudero said in his investor letter: “We need to understand exactly where in a business’s story we stand — are things just about to get good, or is it headed for a swift decline? — before we invest.”

His letter also says he’s using bearish wagers only as a hedge. “Absent signs of an imminent recession, we believe our time is better spent on longs,” his letter says.

He also said that the hedge fund industry’s track record over the past decade is “embarrassing” and that if DPM doesn’t beat the S&P, it’s “just another hedge fund”. 

We’ll check back in on Escudero and Claure in a couple of quarter to see if the magic still exists…


Tyler Durden

Fri, 01/31/2020 – 14:00

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The Era Of Boom And Bust Isn’t Over

The Era Of Boom And Bust Isn’t Over

Authored by Thorstein Polleit via The Mises Institute,

At the 2020 World Economic Forum in Davos, Bob Prince, co-chief investment officer at Bridgewater Associates, attracted attention when he suggested in a news interview that the boom and bust cycle as we have come to know it in the last decades may have ended. This viewpoint may well have been encouraged by the fact that the latest economic upswing (“boom”) has been going for around a decade and that an end is not in sight as suggested by incoming macro- and microeconomic data.

But would that not reject the key insight of the Austrian business cycle theory (ABCT), which says that a boom, brought about by artificially lowered market interest rates and injections of new credit and money produced “out of thin air,” must eventually end in a bust?

In what follows, I will remind us of the key message of the ABCT and outline the “special conditions” which must be taken into account if the ABCT is applied to real-world developments. Against this backdrop, we can then form a view about how the next crisis might look.

What the ABCT Says

The ABCT is actually a “theory of crisis,” and it explains the broader consequences if and when central banks, in close cooperation with commercial banks, increase the amount of money in the economy through credit expansion—that is, an increase in bank lending that is not backed by real savings. The increase in the circulation of credit supply initially lowers the market interest rate below its “natural level,” or, “the originary interest rate level,” to use the Austrian school’s term.

The artificially lowered market interest rate discourages savings and encourages consumption and investment expansion. The economy enters a boom. However, after the initial injection of new credit and money has had its impact on prices and wages, people start realizing that the economic expansion was a one-off. People return to their pre-boom savings-consumption-investment ratio, which means that the market interest rate finally returns to the higher originary interest rate level. This is the very process that makes the boom turn to bust.

To prevent the boom from turning to bust, central banks take action to bring down market interest rates even further. For if the market interest rate drops even more, the production and employment structure can be upheld and the boom can continue. In other words: the trajectory of market interest rates—which are actually expressive of how people allocate their incomes to savings, consumption, and investment—is the crucial issue in the boom-and-bust cycle. And this is where central banks have increasingly taken control.

Controlling Interest Rates

Since the financial and economic crisis of 2008/2009, central banks have more than ever before taken control of market interest rates. They no longer limit themselves to setting short-term interest rates, but hope also to control interest rates with longer maturities. In fact, central banks have started to set long-term interest rates as well, through purchasing, say, government bonds, mortgage bonds, corporate bonds, and bank bonds. In this way, they directly influence bond prices and thus their yields. Market interest rates are no longer determined in a “free market.”

Not only have market interest rates been distorted and set at too low a level through central bank policies, they are also kept from returning to economically sensible levels. At least this is what financial market agents seem to think: they assume that central banks will continue to take care of the credit market—they know that if and when market interest rates rise, the boom will undoubtedly turn into a bust, something central banks wish to prevent at all costs.

And given the basically unlimited power of central banks in the determination of bond prices and thus bond yields, no investor (in his right mind) will want to bet against the monetary authority. In fact, investors have a great incentive to trade bond prices toward the level they think the central bank would like to establish in the marketplace. In other words: if the market thinks that the central bank does not want higher interest rates, interest rates will remain artificially low.

Mind the “Safety Net”

By controlling market interest rates, central banks have in fact put a “safety net” under the economies and financial markets. As central banks have signaled to the public that they feel responsible for a healthy economy, and, in particular, for ensuring that “financial market stability” prevails, investors can put two and two together: should the economies or financial markets get to the verge of collapse, investors can expect central banks to step in, fighting the impending crisis. This understanding encourages investors to take additional risks, step up their investments, and disregard and underestimate risk.

Central banks’ “safety net” is not only a powerful tool to sustain the boom, it is also a rather subtle, stealthy intervention in capital markets. It effectively brings about an entirely rigged financial market: prices are higher and yields are lower than unhampered market forces justify. The central banks’ safety net policies amount to a manipulation of the market system on the greatest scale possible. With basically all prices and all market yields distorted, the economy and financial markets enter a “hall of mirrors” regime, where consumers and firms must inevitably get disoriented and make wrong decisions.

However, under such conditions the boom can be kept going much longer compared to a scenario in which free market forces are allowed to do their job—that is, establishing financial asset prices as well as inflation, credit, and liquidity premia according to real-world realities. However, today’s environment is rather different: central banks, in their attempt to prevent the current boom turning into another bust, have effectively corrupted the vital roles that financial markets and market interest rates play in a free market system.

The Role of the Originary Interest Rate

It would be a mistake to conclude that a boom can be upheld indefinitely if central banks beat down the market interest rate to zero, or even push it into negative territory. In fact, without a positive market interest rate (in real terms), the modern economy, which rests on the division of labor and complex “roundabout production” processes, could not exist. This is an insight derived from the Austrian time preference theory of the interest rate. In a nutshell, time preference means that acting man values earlier satisfaction of a want more highly than the satisfaction of the same want at a later time.

The manifestation of time preference in the market is the “originary interest rate.” It denotes the value discount that a good that is available in the future suffers compared to the same good that is currently available. Acting man’s time preference and thus his originary interest rate are, for logical reasons, always and everywhere positive. They may well approach zero, but they can never hit zero, let alone become negative. This is a significant insight, as it tells us what would happen if the market interest rate were to drop to zero: the modern market economy would disintegrate. This is why:

Every acting man carries, so to speak, a positive originary interest rate in himself. So if the market interest rate is zero, no one would put their savings in time-consuming production processes any longer. People would not be willing to offer their savings for replacement investments or new investments. They would simply hoard them “under their mattresses.”Capital consumption would set in. In other words: by bringing the market interest rate down to zero, central banks would destroy the market economy with its division of labor as we know it today.

The End Game

In recent years, most central banks have concentrated on policies that push down selected types of market yields, in particular those in the funding markets for government debt, mortgage debt, and bank debt. However, the consequences of such actions are increasingly felt in other asset markets. In a search for yields, investors increasingly use their funds to purchase, say, stocks and real estate. As a result, these asset prices rise, thereby lowering their future returns. In other words: the zero interest rate policy of the central banks drags down basically all kinds of yields with it.

This may go on for quite a while.

But once all market interest rates hit zero, the real trouble starts: the boom turns to bust. Credit markets shut down, borrowers can no longer roll over their maturing debt, and no investor is willing to lend new funds. To prevent credit defaults and the collapse of the debt pyramid, central banks would presumably step in as “lenders of last resort,” refinancing basically all kinds of borrowers in need. An outright inflation policy would begin. Nevertheless, capital consumption and economic regression would set in. People’s living standards would nosedive; many would be thrown into outright misery.

Applying the ABCT to real-world developments yields the following insights: Central banks have done nothing to put an end to the boom-and-bust cycle. Instead, their unscrupulous interventions in credit markets just prolong the boom. However, it would be mistaken to assume that by bringing market interest rates to zero, a perpetual boom could be created. Such a policy is self-defeating: once all market interest rates have been dragged down to zero, the capitalistic economic system will collapse. Then—at the latest—the boom will definitely turn into bust.


Tyler Durden

Fri, 01/31/2020 – 13:40

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Lindsey Graham Wants to Use Mistrust of Big Tech To Destroy Your Right to Online Privacy

Sen. Lindsey Graham (R–S.C.) has a plan to make social media and online messaging platforms do the federal government’s bidding. He thinks the feds should withhold those platforms’ protection from lawsuits if they don’t demolish their own encryption.

It’s cynical fearmongering all the way down with the Eliminating Abusive and Rampant Neglect of Interactive Technologies (or EARN IT) Act. The as-yet-unintroduced bill (which Bloomberg reports is a bipartisan measure) would create a government commission to decide what should be the “best practices regarding the prevention of online child exploitation conduct.” The attorney general would then review and modify these practices as he or she sees fit.

A year after these practices are determined, online services will have to certify that they are following them if they want to claim protection under Section 230 of the Communications Decency Act, the rule that generally protects them from liability for content posted by their users.

In other words: If the commission tells a tech company to do something (or not do something) and vaguely ties those orders to fighting child porn or child sex trafficking, any company that refuses will become legally liable for every stupid thing its users post on their platform or in their messages.

This is clearly an attempt to make platforms insert so-called “back doors” into the encryption mechanisms that protect our data. This will facilitate further secret surveillance of the citizenry—not just by the American government but by any other governments or independent hackers—for purposes that have nothing to do with stopping child pornography.

Indeed, everything related to transmitting images of child sexual abuse online is already against federal law. And online service providers are already required to pass along any information they have about such crimes to the feds; if they do, they’re protected from legal liability for having the messages. That process is handled under a separate part of federal law, not Section 230. The purpose of Section 230 is to protect online speech by stopping a parade of lawsuits from people and corporations trying to stifle critical comments.

“People are angry about Section 230, so the [Department of Justice] is seizing upon that anger as its opening to attack encryption,” writes Rianna Pfefferkorn of Stanford’s Center for Internet and Society. “I’ve been saying since 2017 that federal law enforcement agencies would take advantage of anti-Big Tech sentiment to get their way on encryption. Now the techlash is strong enough that they’re finally making their move.”

In short, Graham’s law would intimidate platforms into compromising your data protection in order to comply with anti-encryption demands. This wouldn’t do anything to actually fight the transmission of child porn, because Section 230 doesn’t protect sites that host or transmit child porn anyway. And the people who do transmit child porn are “highly adaptable to shifts in law enforcement strategy,” in Pfefferkorn’s words, so they’ll migrate to dark web sites where “they’ll be much harder to track down” than “when they’re using their Facebook accounts.”

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Lindsey Graham Wants to Use Mistrust of Big Tech To Destroy Your Right to Online Privacy

Sen. Lindsey Graham (R–S.C.) has a plan to make social media and online messaging platforms do the federal government’s bidding. He thinks the feds should withhold those platforms’ protection from lawsuits if they don’t demolish their own encryption.

It’s cynical fearmongering all the way down with the Eliminating Abusive and Rampant Neglect of Interactive Technologies (or EARN IT) Act. The as-yet-unintroduced bill (which Bloomberg reports is a bipartisan measure) would create a government commission to decide what should be the “best practices regarding the prevention of online child exploitation conduct.” The attorney general would then review and modify these practices as he or she sees fit.

A year after these practices are determined, online services will have to certify that they are following them if they want to claim protection under Section 230 of the Communications Decency Act, the rule that generally protects them from liability for content posted by their users.

In other words: If the commission tells a tech company to do something (or not do something) and vaguely ties those orders to fighting child porn or child sex trafficking, any company that refuses will become legally liable for every stupid thing its users post on their platform or in their messages.

This is clearly an attempt to make platforms insert so-called “back doors” into the encryption mechanisms that protect our data. This will facilitate further secret surveillance of the citizenry—not just by the American government but by any other governments or independent hackers—for purposes that have nothing to do with stopping child pornography.

Indeed, everything related to transmitting images of child sexual abuse online is already against federal law. And online service providers are already required to pass along any information they have about such crimes to the feds; if they do, they’re protected from legal liability for having the messages. That process is handled under a separate part of federal law, not Section 230. The purpose of Section 230 is to protect online speech by stopping a parade of lawsuits from people and corporations trying to stifle critical comments.

“People are angry about Section 230, so the [Department of Justice] is seizing upon that anger as its opening to attack encryption,” writes Rianna Pfefferkorn of Stanford’s Center for Internet and Society. “I’ve been saying since 2017 that federal law enforcement agencies would take advantage of anti-Big Tech sentiment to get their way on encryption. Now the techlash is strong enough that they’re finally making their move.”

In short, Graham’s law would intimidate platforms into compromising your data protection in order to comply with anti-encryption demands. This wouldn’t do anything to actually fight the transmission of child porn, because Section 230 doesn’t protect sites that host or transmit child porn anyway. And the people who do transmit child porn are “highly adaptable to shifts in law enforcement strategy,” in Pfefferkorn’s words, so they’ll migrate to dark web sites where “they’ll be much harder to track down” than “when they’re using their Facebook accounts.”

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What the Porn Industry Thinks of the New War on Porn

Republicans in Congress recently demanded that the Justice Department step up enforcement against online pornography, and their counterparts at conservative magazines and think tanks have been proclaiming porn’s evils with renewed vigor, with right-wing intellectuals like Sohrab Ahmari and Terry Schilling writing anti-porn screeds.

But Republicans have often demonized porn during elections or scandals. (The 2016 election cycle saw Republicans declaring pornography a public health crisis.) So are the bad old days of obscenity prosecutions coming back? Or are the current calls for a crackdown just another tawdry political show?

Last week I attended the AVN Adult Entertainment Expo in Las Vegasan annual trade conference, fan meet-and-greet, and awards show in which much of the porn industry gathers to talk shop, show off their latest products, and assess the state of the business. The performers and producers I talked with told me they’re intimately acquainted with how hypocritical politicians tease their base by performing disgust at porn.

“Politicians have always used the porn industry as a topic to be raised during election years,” says Dee Siren, an adult performer and CEO of Siren XXX Studios, which brands itself as showcasing “only real women that love real sex!”

“In my experience, politicians enjoy porn in their personal lives as much as any other group of people—if not more,” says actress Maitland Ward, who collected three AVN Awards this year. “You should ask them why they feel the need to stigmatize sex workers during election years if it goes against what they privately enjoy.”

Amberly Rothfield, a clip creator, adult marketing consultant, and phone sex operator, suggests that progress on marijuana legalization “means that politicians need to show they are strong on other issues, leaving us.” Rothfield thinks the level of anti-porn sentiment in this country has stayed the same but the anti-porn crowd is “getting louder. Meaning, same amount of people but they are doubling down on those policies as other ground is being taken.”

While no one would say that renewed obscenity convictions are around the corner, prosecutions aren’t unimaginable.

“I think it’s unlikely that there would be a conviction for obscenity,” attorney D. Gill Sperlein said in an AVN session on the legal issues facing adult entertainment. But prosecutions are often “done for political gain,” he added, and in that case “they don’t care if they get a conviction or not.”

And political stigmas express themselves in many ways. Beyond the anti-porn culture war, adult entertainers and those advising them also have more immediate, practical concerns, like the effects of FOSTA, a 2018 law that’s had a chilling effect on online content related to sex, and new labor laws like California’s AB 5, which could upend porn economics.

Does Anyone Really Know What Obscenity Is?

The enduring legal problem for porn producers and performers comes down to a single word: obscenity. Obscenity is one of the few types of speech exempted from protection by the First Amendment. Yet it’s never been clear precisely what it means. Federal statutes contain no explicit definition of obscenity, and guidance from courts has been maddeningly subjective.

The current legal standard was set in 1973 by Miller v. California: Obscenity is anything “the average person” using modern “community standards” would think appeals to “prurient interests,” depict or describe sexual activity “offensively,” and be without “serious literary, artistic, political, or scientific value.” Some of the right-wing anti-porn jeremiads of the Trump era have called for ramping up the legal assault on porn, arguing that courts could take a much stronger line as to what constitutes obscenity.

“I don’t think the obscenity law works today because it’s based on ‘I know porn when I see it’ [and] that’s so meaningless, especially in today’s day and age,” says John Stagliano, who has the distinction of being the last person to face a federal obscenity prosecution for mainstream, professional porn productions. A judge dismissed the charges against Stagliano and his company, Evil Angel, in 2010. (Stagliano serves on the board of the Reason Foundation, the nonprofit that publishes this website.) Since then, federal obscenity units have kept to prosecuting sexual material featuring minors.

The two Bush presidencies were more aggressive about targeting porn that featured consenting adults. In 2005, the Department of Justice created an Obscenity Prosecution Task Force to go after “the distributors of hard-core pornographydefined as any visual depiction of uncovered genitals or of sexual activity. “The special challenges that obscenity cases pose in the computer age require an equally specialized response,” said Christopher Wray, then assistant attorney general, on May 5, 2005.

Wray is now director of the FBI. And Bill Barr, now attorney general, oversaw aggressive obscenity prosecutions during the first Bush administration. That may help explain why some conservatives think it’s time to have a go at it again.

“Change is constant, and the laws are going backwards and forwards,” says porn director and star Steve Holmes, who has worked on adult film sets (and sometimes public streets) around the world. “You have to adapt. You have to adjust.”

But adjusting can be hard with an administration as unpredictable as this one.

“Any time a conservative politician starts thinking they’re going to lose” or needs “to rile up the basethey start thinking, ‘Well, where can we go that isn’t going to hurt our interests? And pornography is usually pretty high on that list,” Sperlein saidduring the legal issues panel. But “there is a distinct difference this time: Our president owns a string of hotels, and those hotels offer pay-per-view porn. So it’s probably less likely that [obscenity prosecutions are] going to be be an issue.”

Co-panelist Allan Gelbard, a First Amendment, intellectual property, and entertainment attorney, disagreed. “I was on board with that whole analysis of Trump before he was elected,” said Gelbard. “Seeing how he’s governed, I don’t think that idea holds water anymore,” because Trump likes to rile up his base “and his base would love it” if Trump went after porn.

A film being shown in hotels owned by the president may be a pretty good sign it’s not a violation of “community standards.”

But “they’re not going to prosecute the relatively softcore porn that’s in his hotels,” suggested Gelbard. “They’re going to go after things that are believed to degrade women, or other things like that.”

When I talk to him later, Stagliano agrees, suggesting that who winds up prosecuted is “more related to the disgust emotion” than rational analysis or public safety priorities.

Stagliano mentions director Max Hardcore, who was indicted on obscenity charges in 2007 for five films that featured fisting, pee, and vomit. The films got him three years and 10 months in federal prison. “Max Hardcore got put in jail because what he was doing looked disgusting to a lot of people, because it’s not normal sex,” says Stagliano. “Not that many people are going to stand up and defend any sex that’s viewed as being abnormal or not part of the mainstream.”

How FOSTA Paved the Way For Online Censorship

“The biggest fight is against stigma, the idea in people’s heads that sexually empowered women who choose to do sex work and porn are somehow ‘tainted’ for other social roles,” says Ward, who has appeared in a mix of mainstream television and adult entertainment. It’s this stigma that fuels destructive laws and agendas.

That includes laws like FOSTA (short for the Allow States and Victims to Fight Online Sex Trafficking Act). This 2018 law gives the government a new way to go after online content related to sex, by making it a federal crime to host web content that promotes or facilitates prostitution.

“FOSTA most definitely is designed to target, among other things, adult entertainment,” Ward says. “It’s censorship legislation,” making digital platforms legally liable “for having content that is very vaguely defined and subject to the random whims and attitudes of officials.”

Vagueness is one of FOSTA’s big problems. It fails to differentiate between sex trafficking and prostitution. It fails to distinguish between conduct and speech. And it wraps the whole package in language so muddled and penalties so severe that web platforms have an incentive to crack down on all sorts of sexually-themed content.

“Even though I am not a full-service sex worker”that is, someone who engages in sexual activity directly with private clients“I have had to deal with the censorship that came along with FOSTA,” says Allie Even Knox, a fetish performer who also works as vice president of sales at the Ethereum-based payment processor SpankChain. It’s “limited me [in] services that I need to have for my business,” such as email list management and photo storage, because many popular sites won’t accept accounts related to sex.

Knox tells me her Instagram account has been shut down three times, even though she doesn’t post nudes, and so has “every single cash app that you could imagine, and even a crypto wallet.”

FOSTA sign at AVN

“Even though I was just accepting tips or tributes through the system, or selling panties or content, whatever, the platforms have taken a much tighter stance and will shut you down merrily for existing,” she adds. “This bill has made it much harder for me to accept payment for my legal work.”

On the night of the AVN Awards, as the guests of honor walked the red carpet, someone circled the periphery holding a sign that said “I want sex workers rights! Not awards” and, under that, “Fuck FOSTA. Fuck SESTA.” (SESTA is the acronym for a similar bill that started in the Senate, and the bill that passed is often called SESTA-FOSTA.)

Porn performers and workers in other legal sex industries sometimes strive to distance themselves from criminalized sex work such as prostitution. But Kaytlin Bailey of the group Decriminalize Sex Work, which is pushing to remove criminal penalties for prostitution in several states, says the group’s booth got a good reception at the AVN Expo.

“We are all stigmatized as sex workers,” says Bailey. “There are a lot of people here that told me that SESTA-FOSTA was the thing that got them to contact their senator or the first time, or got them to vote or pay attention to politics.”

On the legal issue panel, Sperlein said he hopes prostitution decriminalization will follow the path of cannabis in the U.S. “People really do believe that the government shouldn’t get involved in what people do in their personal lives,” he says. “It may not be that easy, but I’m hoping that it follows that trend.”

He’s been working with a group of advocates and a California lawmaker to get a decriminalization billand research to back it upready for 2021.

“Officials are often lobbied by religiously motivated groups that consider all sex work to be ‘human trafficking’ and all porn to be ‘exploitation,'” says Ward, commenting on FOSTA. “But I’m not worried too much because Americans love freedom and hopefully they can see censorship for what it is.”

Will California’s Gig Economy Law Be Porn’s ‘Armageddon’?

Porn faces another legal threat. A.B. 5—California’s new law regulating the gig economy—is “armageddon in some ways” for the state’s porn industry, said longtime AVN writer Mark Kernes on the legal issues panel.

Many adult entertainment companies rely on talent and crew employed as independent contractors, not full-fledged employees. And for porn performers these days, it’s the norm not just to contract with one or more studios but to make money via webcamming, video clip sales, and other online platforms. Having multiple income streams that don’t depend on a few big gatekeepers makes the work safer and puts performers in more control.

A.B. 5, and the copycat legislation it’s spawning in other states, threatens that.

These laws are presented as ways to protect workers from being taken advantage of by companies who get a significant number of hours out of them without classifying them as full employees. But in practice, they take options away from freelancers, consultants, gig workers, and independent contractors, who are now limited in their options, while giving companies no incentive to suddenly hire all their contractors and incur huge additional costs.

A.B. 5 “could reclassify any performer working for a studio as that studio’s employee, no matter how many different studios you shoot for,” warned the Adult Performer Advocacy Committee and the Free Speech Coalition in pamphlets handed out at the AVN Expo.

Because A.B. 5 contains exemptions for business-to-business relationships, the groups suggest performers form their own corporations in order to continue to be allowed to be paid as an independent contractors. “Your employer would now have a contract with your corporation instead of with you as an individual,” they explain.

Rothfield points out that “exceptions are being written in for cam performers and the like,” but A.B. 5 “has made many adult sites feel they have to hire cam girls as employees to be compliant,” which “leaves many part time cammers scared about their income.”

Bascially, laws like this make it harder for porn performers to work as independent contractors for multiple platforms, giving them less leverage and fewer options and creating greater risk for exploitation.

AVN Awards Show

The Right to Look at Stronger, Crazier Stuff

Despite the current climate of panic and fear surrounding “sex trafficking” and, by extension, all forms of sex work, we’ve come a long way on this front from just a few decades ago.

As an example: When Good Vibrations founder Joani Blank first tried to place ads for the company in the 1980s, she could “not buy ads in most places,” author and educator Carol Queen told a crowd at an AVN panel on sex tech. “She couldn’t even in PlayboyPlayboy rejected her ad. And then the same year, Ms. Magazine, the magazine of record for modern feminism, rejected it.” Just “getting the word out” about anything related to sex was difficult, Queen said.

Some people say we’ve come too far.

As a father, Stagliano says, “I understand why the public is concerned and wants the government to step in and make it somewhat harder” to access porn online. But he also believes “it’s my responsibility to control what my children look at.”

Adults should have “the right to choose to look at stronger, crazy stuff” if they wish, he adds.

Whether these rights persist depends on breaking down stigma, Rothfield argues. She hopes to see more people “come out of the ‘new closet’ and admit to being sex workers in the past and show politicians just how many of us are. Adding them to our numbers, I believe is the only way to ensure our rights do not get trampled on.”

The advent of accessible, low-budget ways to create adult content, combined with the proliferation of ways to distribute that content, has revolutionized the porn industry for performers in a way that’s only starting to be realized. And according to those in the industry, it stands to bring even more positive changes—if government can get out of the way.

“The far rightjust like in the ’80swants a war on everything, including a war on porn,” Siren says. “But we will not go away and will fight for our freedoms.”

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