Month: January 2022

Is Democracy Dying Or America Disintegrating?

Is Democracy Dying Or America Disintegrating?

Authored by Pat Buchanan,

“What do we mean by the Revolution? The war? That was no part of the revolution; it was only an effect and consequence of it. The revolution was in the minds of the people.”

What did John Adams mean when he wrote this to Thomas Jefferson in 1815, after both had served as president?

Adams was saying that America, the country that took up arms and fought for its independence from the British, was already a nation — before 1775.

America preexisted the Constitution, Adams is saying. America had been conceived and born before he and Jefferson began to write its Declaration of Independence in Philadelphia in 1776. America had come into being even before Lexington and Concord in 1775.

A corollary of what Adams wrote is that America, and the republic created by the Constitution, are not the same thing.

While America is a country, a republic is the form of government created for that country in Philadelphia in 1787.

“A republic if you can keep it,” said Ben Franklin to the lady who had asked what kind of government they had created for the already existing nation, when he emerged from that constitutional convention.

What, then, are our elites bewailing when they say that populists, rightists and Trumpists have put “our democracy” at risk?

Answer: It is not America the country or America the nation they are referring to, but our political system as it has evolved.

And what is the nature of the threat they see?

A precondition of democracy is that the results of elections be recognized and respected, and if repeatedly challenged, this is a mortal threat. And this is the present peril.

Yet, there are other preconditions, not only for democracies but for countries, that were enumerated in The Federalist Papers:

“Providence has been pleased to give this one connected country to one united people — a people descended from the same ancestors, speaking the same language, professing the same religion, attached to the same principles of government, very similar in their manners and customs … ”

“This country and this people seem to have been made for each other, and it appears as if it was the design of Providence, that an inheritance so proper and convenient for a band of brethren, united to each other by the strongest ties, should never be split into a number of unsocial, jealous, and alien sovereignties.”

John Jay was describing the preconditions of a nation, a country, a people. Do these preconditions still exist in America?

“One united people”? “A band of brethren”? A common ancestry, common religion, common language, common customs and manners?

That may describe the America of 1789. Does it describe the America of 2022? Or does Jay’s phrase, “a number of unsocial, jealous and alien sovereignties,” better describe the America of today?

Hillary Clinton once wrote off half of Trump’s supporters, nearly one-fourth of the nation, as “a basket of deplorables … racist, sexist, homophobic, xenophobic, Islamaphobic … bigots,” who are “irredeemable.”

Assume that our elites, who often echo what Hillary Clinton said of the populist Trumpist right, agree with her.

Why would virtuous liberals wish to continue in political association with people like this?

Why would they not declare that, if an election again delivers rule to such people, we want no part of the system or polity that produced so intolerable an outcome?

Why would the capture of all three branches of government by people such as Hillary Clinton describes not be cause for dissolving the Union?

How could democracy be a superior form of government, if it could deliver the republic to people such as these, and perhaps twice?

If the progressives’ enemies are “Nazis” and “fascists,” why would progressives not rise in resistance and reject their rule, rather than cooperate with them in the governance of the country?

Why would good people not battle to overturn an election that produced a majority for such “deplorables”?

Do the commands of democracy take precedence over the demands of decency? Rather than govern in concert with people like this, why not get as far removed from them as possible?

The point here: Not only may the preconditions of democracy be disappearing, but the preconditions of nationhood may be disintegrating.

Again, the American right is today routinely compared to Nazis, fascists and Klansmen. Why would good liberal Democrats accept an electoral victory and future rule by Nazis and fascists rather than seek to overturn it, by whatever means necessary?

And how do you hold up American democracy as a model to mankind if, after two centuries, it has produced scores of millions of citizens like those described by Hillary Clinton?

And, again, if the preconditions of democracy are vanishing, and the preconditions of nationhood are disappearing, is not secession of some kind inevitable and even desirable?

Ultimately, the logic of our situation must lead us to consider something like this. Western Maryland’s attempt to secede and join West Virginia, and Eastern Oregon’s attempt to secede and join Idaho, may be harbingers of what is to come.

Tyler Durden
Fri, 01/28/2022 – 16:20

via ZeroHedge News https://ift.tt/3Gc8Se6 Tyler Durden

Georgetown Should Not Fire Ilya Shapiro for a Bad Tweet


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Georgetown University’s Black Law Students Association is demanding the firing of Ilya Shapiro, a director of constitutional studies at the Cato Institute, from his brand new position at the university. Shapiro was slated to start work as executive director of the Georgetown Center for the Constitution next week, but a poorly worded tweet about President Joe Biden’s pledge to appoint a black woman to the Supreme Court has landed him in hot water.

Shapiro agrees that the tweet was not great.

“I regret my poor choice of words, which undermine my message that no one should be discriminated against for his or her gender or skin color,” Shapiro tells Reason.

On Wednesday, Shapiro tweeted the following:

Objectively best pick for Biden is Sri Srinivasan, who is solid prog & v smart. Even has identify politics benefit of being first Asian (Indian) American. But alas doesn’t fit into the latest intersectionality hierarchy so we’ll get lesser black woman. Thank heaven for small favors?

Because Biden said he’s only consider[ing] black women for SCOTUS, his nominee will always have an asterisk attached. Fitting that the Court takes up affirmative action next term.

I sincerely and deeply apologize for some poorly drafted tweets I posted late Wednesday night. Issues of race are of course quite sensitive, and debates over affirmative action are always fraught. My intent was to convey my opinion that excluding potential Supreme Court candidates, most notably Chief Judge Srinivasan, simply because of their race or gender, was wrong and harmful to the long term reputation of the Court. It was not to cast aspersions on the qualifications of a whole group of people, let alone question their worth as human beings. A person’s dignity and worth simply do not, and should not, depend on any immutable characteristic. Those who know me know that I am sincere about these sentiments, and I would be more than happy to meet with any of you who have doubts about the quality of my heart.

In seeking to join the Georgetown community, I wanted to contribute to your worthy mission to educate students, inform the public, and engage in the battle of legal ideas that lead to justice and fairness. I still want to do that. Recklessly framed tweets like this week’s obviously don’t advance that mission, for which I am also truly sorry. Regardless of whether anyone agrees or disagrees with me on a host of legal and policy issues, I can and will do better with regard to how I communicate my positions.

Shapiro’s wording was certainly misguided, as he freely admits. But it’s not right to say he had asserted that black women as a category would make poor Supreme Court justices. Rather, he indicated that he thought the absolute best choice—from a progressive standpoint—was a specific judge, Sri Srinivasan (an Indian American and member of the Hindu faith, which would also be a first for the Court). In his tweet, Shapiro was lamenting that Biden’s commitment to choosing a justice who fits a specific demographics profile would preclude him from making this selection.

This is an understandable opinion. While ensuring that the Supreme Court better reflects the diversity of the country is a worthwhile goal, there are many ways to accomplish this. (Currently, eight of the nine justices attended law school at either Harvard or Yale—Biden could look outside the Ivy League, for one.) It is fine to criticize the idea that Biden’s primary and overriding criteria would be along racial and gender lines.

The phrasing “lesser black woman” was particularly ugly by itself, of course, but is being misconstrued by those calling for Shapiro to be fired. Members of the Georgetown community are not wrong to demand more precise wording from someone of Shapiro’s stature, but given that he has apologized, the university should accept this and move on. If Georgetown’s administration were to fire Shapiro, it would be tacitly endorsing the unfair smear that he is a racist and a sexist.

The post Georgetown Should Not Fire Ilya Shapiro for a Bad Tweet appeared first on Reason.com.

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Short Circuit: A Roundup of Recent Federal Court Decisions

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

While he was on the campaign trail, President Biden told voters that he would allow states to “continue to make their own choices” on marijuana legalization. So just why is the FBI trying to forfeit nearly $1.1 mil from California-legal cannabis businesses? Read all about IJ’s latest forfeiture case in the Los Angeles Times.

  • Plaintiffs: Various tech companies treated us badly because they didn’t like what we had to say about vaccines. And they did this because Congressman Adam Schiff sent them a letter! D.C. Circuit: You’ve established that exactly one of those things is true. Case dismissed.
  • The worst part of having the Venezuelan government nationalize your manufacturing company is having to figure out what counts as effective service under the Hague Convention after you sue the Venezuelan government for nationalizing your manufacturing company, as this D.C. Circuit opinion illustrates. (Ed. note: That is probably not the worst part.)
  • DEA administratively subpoenas the program manager for New Hampshire’s Prescription Drug Monitoring Program, demanding an individual’s PDMP-kept prescription-drug records. Program manager: Pound sand. Your statute says you can subpoena “persons” and here, you’re really subpoenaing the State of New Hampshire, which isn’t a “person.” First Circuit: All your theories are wrong. The subpoena was against you, not the state, and even if it were against the state, that’d be okay too. Plus, the rare First Circuit vocab nugget from a jurist other than Judge Selya: “semble.” (Separately, First Circuit—Courier font? Still? Why? Is it because of the Massachusetts state courts? You don’t have to stick with them on this. And this wouldn’t be the first time you broke with the Massachusetts SJC on a matter of pressing nationwide significance. Remember when you split with them on the Fourth Amendment’s protections for cell-phone data? And then the Supreme Court said you were in the right? You could do the same here, but with fonts.)
  • Under the leadership of El Chapo, the Sinaloa Cartel supplied more illegal drugs to the U.S. than anyone in history, employing techniques such as murder, kidnapping, torture, and bribery. Mexico extradited the kingpin to the U.S. in 2017, where he was convicted of ten offenses and sentenced to five terms of life imprisonment. El Chapo: Here are ten reasons my convictions should be overturned (spanning the usual to the less typical, such as the indictment violated the extradition treaty between the U.S. and Mexico and that his attorney had a conflict of interest (made public by the attorney’s sexual relationship with another client)). Second Circuit: No, ten times over.
  • Hayley Paige wedding dresses are a $220 mil business for JLM Couture, with the designer appearing on “Say Yes to the Dress” and running popular social-media accounts. Yikes! Things start to sour in 2019; Hayley Paige Gutman (the designer) locks JLM out of the social-media accounts and starts outside work. JLM: The contract has a noncompete and gives us the right to the name and its derivatives. Second Circuit (over two partial dissents): The noncompete and name-ownership portions of the contract are enforceable. But ownership of the social-media accounts is fuzzy, and it’s too soon to assign them to JLM.
  • A pair of school mask-mandate cases from the Fourth and Eighth circuits (with dissents in both): South Carolina’s law prohibiting the use of state funds to impose mask mandates survives (plaintiffs lack standing), while Iowa’s similar prohibition is enjoined (for running afoul of the Rehabilitation Act).
  • The Fourth Circuit is known for its cordiality—they shake hands with the lawyers after each argument—and that tradition is on full display in this False Claims Act decision. Majority: “We thank our friend for his thoughtful dissent,” which takes a view that “is not sustainable under law or under any notion of notice and due process with which we are familiar.” Dissent: “With respect for my colleagues in the majority,” this opinion is further evidence for “[t]hose who believe that some judicial decisions usurp the power of elected legislatures by making the law rather than merely interpreting it” and the majority’s “legal hand-waving cannot cover the stench here.”
  • When a pregnant teenager fell in the shower and broke her tailbone, her doctor prescribed her opioids. Later, a doctor for whom she worked gave her blank prescriptions and allowed her to write her own. Soon, she was hopelessly addicted, forging prescriptions, taking up to 80 pills a day, and selling pills. She gets caught and is sentenced to 210 months in prison. Fourth Circuit (en banc): And she needs to be resentenced for ineffective assistance of counsel; her lawyer inexplicably waived multiple meritorious objections to the sentencing calculation. Dissent: Would be nice to hear his side of things, which is why we normally handle this on collateral review, not direct appeal.
  • The Wayback Machine is an amazing free resource that archives more than 651 billion web pages. But for all that, it is not—per the Fifth Circuit—so obviously reliable that its contents are subject to judicial notice.
  • A few months back we shared with our readers the inspirational story of Texas A&M’s original “12th Man,” E. King Gill, and also the less-than-inspirational story of how Texas A&M straight-up stole a biography of Gill from its copyright owner. The first time around, the Fifth Circuit let the Aggies get away with it, holding that the school was entitled to sovereign immunity. But a bright spot appears! In this substituted opinion, the Fifth Circuit holds that they have no jurisdiction over an appeal by the Texas A&M employee most directly responsible for the theft, and the claims against him will thus go to trial.
  • Lawyers spend thousands of hours litigating False Claims Act case that results in a settlement of more than $97 mil that expressly reserves the issue of attorney fees. The relators’ share of that money was awarded to one relator and then distributed under a shared agreement to the other relators in the case. District Court: So no fees for the relators who received their money under the agreement instead of directly from the government. Sixth Circuit: Nothing in the statute requires that the relator get their share directly from the government to be entitled to fees. Everyone gets paid.
  • In enacting the second round of the Paycheck Protection Program, the squares in Congress excluded strip clubs. Strip clubs: Which violates our First Amendment rights. District court: Sounds probably right—preliminary injunction! Seventh Circuit motions panel (Sept. 2021): Sounds probably wrong—preliminary injunction stayed. Seventh Circuit merits panel (Jan. 2022): Those motions-panel judges were sharp cookies—preliminary injunction vacated.
  • Allegation: St. Louis, Mo. man was not protesting the acquittal of a police officer, was not involved in riotous behavior, and did not receive a dispersal order from officers. Yet, when he left his home near the scene of a protest, he was rounded up via officers’ kettling technique, pepper sprayed, and arrested with zip ties (along with ~100 others). Eighth Circuit: No QI for the officers who participated in the kettling, even if they were following orders. And no QI for the supervisory officers who failed to intervene.
  • University of Arizona student brings Title IX suit, alleging the university should be liable for taking insufficient steps to prevent physical abuse she suffered at the hands of her former boyfriend, a university football player who assaulted two former girlfriends (he’s now serving five years). Ninth Circuit: No liability. The abuse took place at the player’s off-campus apartment, where the university has no control. Dissent (“strong[] but respectful[]”): Players are only allowed to live off campus with university permission, and that’s contingent on good behavior. They had plenty of control.
  • Arizona inmate orders six rap/R&B CDs and two Nation of Islam texts. Prison declares the CDs unauthorized content because of the references to drugs, sex, and violence and declares the Nation of Islam texts unauthorized because they had previously been excluded for promoting racism and the superiority of one group. The inmate sues. District Court: All fine. Ninth Circuit: Not fine! The inmate has adequately alleged both that the unauthorized-content rule is enforced inconsistently (e.g., the prison library is full of romance novels) and that he sincerely believes the books are necessary for his observance of Ramadan.
  • Are Roth IRAs excluded from Georgia debtors’ bankruptcy estates? Bate your breath no longer, world. The Eleventh Circuit says yes.
  • And in en banc news, the Eleventh Circuit will reconsider its decision striking down a 2014 Alabama law changing the judicial process by which a minor can obtain an abortion without parental consent so as to allow or require the participation of parents, the district attorney, and a guardian ad litem for the fetus, “transforming it from a proceeding that was designed to be more of an avuncular visit in chambers with the judge than an open court, call-your-first-witness affair.”
  • And in amicus brief news, IJ is asking the Supreme Court to affirm a Ninth Circuit ruling allowing constitutional claims to proceed against a CBP agent, who (among other things) allegedly assaulted a man after the man asked him to leave his property. In recent cases, the Court has suggested that such claims (which the Ninth Circuit found are the only remedy available to this plaintiff) are improper and ahistorical—a remnant of the “heady days” in the 1960s and ’70s when the Court felt comfortable creating causes of action without the express approval of Congress. In the brief, however, we argue that claims for damages for violations of individual rights have always been a part of our legal system and that it’s the Court’s recent doctrine that is a break with tradition (and, moreover, that the Court should take the two IJ cases involving the same issue that are currently pending on cert). Click here to read the brief.

In 2015, then-Judge Gorsuch of the Tenth Circuit suggested that victims of government misconduct should look to state tort law rather than the Constitution to seek redress for their injuries: “Often, after all, there’s no need to turn federal courts into common law courts and imagine a whole new tort jurisprudence under the rubric of § 1983 and the Constitution in order to vindicate fundamental rights when we have state courts ready and willing to vindicate those same rights using a deep and rich common law that’s been battle tested through the centuries.” This week, IJ released a study, 50 Shades of Government Immunity, that takes up that suggestion, examining each state’s regime for civil rights enforcement—and finds them wanting. Click here to read it.

The post Short Circuit: A Roundup of Recent Federal Court Decisions appeared first on Reason.com.

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S&P Suffers Worst Start To A Year Since 1939 As Yield Curve Yells ‘Recession’

S&P Suffers Worst Start To A Year Since 1939 As Yield Curve Yells ‘Recession’

Before we start, let’s make this clear right from the start – despite today’s panic-buying, this is the worst start to a year for the S&P 500 since 1939 (and on course for its worst January ever)…

Nasdaq is down 5 straight weeks (16% from its highs) – the longest losing streak since 2012 – while Small Caps are down 22% from their highs (in a bear market)…

Source: Bloomberg

Everything was going so well too… “smooth sailing” they said! “Fed Put” they said! “Transitory inflation” they said…

Today was just a little bit turbo as it seems ugly sentiment data (10 year lows) and plunging growth expectations (Q1 GDP forecasts collapsed), was the ‘bad news’ the dip-buyers needed to reassure themselves that uber-hawkish Powell wouldn’t execte on his plan to crush inflation into a recessionary environment. We have one word for them – stagflation, and it leave Powell in an ugly box.

Atlanta Fed GDP expectations crashed to zero for Q1…

Source: Bloomberg

And as that happened, rate-hike expectations shifted dovishly lower (modestly at the time)…

Source: Bloomberg

Which helped send stocks soaring (particularly hyper-growth, long duration stocks). But that all came to an abrupt end at 1400ET today (for no obvious reason)… which was immediately met with a wall of dip-buyers amid the total lack of liquidity. Then all the majors just went vertical into the last 10 minutes as a significant buy-imbalance appeared (all helped by AAPL’s explosive gains today). Nasdaq was up a shocking 3% today (from down 1% pre-open). The S&P was up 2.5% today (from down 1% pre-open). Russell 2000 closed up almost 2% today from down 2% pre-open…

As one veteran trader noted, “today was a shitshow, no liquidity, gamma-driven gappy jumps everywhere… it was all algos and no average joes.”

Well that idiotic rampage managed to get the Dow, S&P, and Nasdaq unchanged on the week (which appears to be all that mattered to the machines)…

Just look at the volatility (but Monday’s puke lows held… and so did Wednesday’s pre-Fed highs).

Growth stocks were flat on the week as Value was bid (mostly benefitting on Thursday)…

Source: Bloomberg

Both Defensive and Cyclical stocks were hammered equally this week (while obviously cyclicals were more volatile)…

Source: Bloomberg

Today’s bounce was not really triggered by a short-squeeze as the size of the swing higher is very modest and unsustained…

Source: Bloomberg

The energy sector is the only one up in January while Tech and Consumer Discretionary are down hard MTD…

Source: Bloomberg

Real yields continue to rise (to their highest since June 2020 – but still negative), and have recoupled with gold…

Source: Bloomberg

…but have completely decoupled from stocks (Nasdaq should be significantly lower relative to Russell 2000)…

Source: Bloomberg

Notably, if real yields keep rising, then valuations are going to come under significant pressure…

Credit markets saw very little of the chaotic chop in stocks this week as they just fell with HYG (HY Corporate Bond ETF) at its lowest since Nov 2020…

Source: Bloomberg

Treasury yields were extremely mixed on the week with the short-end exploding higher and long-end actually coming all the way back to unchanged…

Source: Bloomberg

This week saw 2Y yields jump most since Oct 2019 (up for the 6th week in a row to the highest since Feb 2020).

Source: Bloomberg

The yield curve was crushed this week, triggered by The Fed’s hawkish tilt…

Source: Bloomberg

…with 7s10s at almost record flats, 20s30s still inverted, and 2s30s at its flattest since March 2020… all screaming The Fed is about to make a big mistake and hinting strongly at recessionary risks rising fast…

Source: Bloomberg

Short-term markets are now fully pricing in 5 rate-hikes by year-end (and a 25% chance of 50bps hike in March)

Source: Bloomberg

Perhaps even more notably, the forward OIS market is pricing in rate-cuts between 2024 and 2025…

Source: Bloomberg

The dollar soared higher for the 5th straight week (best week since June 2021), closing at its highest since July 2020. NOTE, the dollar took out the December USD spike highs and faded…

Source: Bloomberg

Cryptos had a nasty drop on Monday, along with stocks, and another puke after The Fed, but bitcoin ended the week modestly higher, while Ether was down around 5%…

Source: Bloomberg

Commodities were very mixed this week with most lower by hawkish tilts (Silver slammed 8% on the week) while crude rallied on geopolitical tensions…

Source: Bloomberg

Silver dropped back below $23…

WTI came very close to $89 intraday during the week, its highest since Oct 2014 (up for the 6th straight week in a row)…

NatGas went supersonic this week amid chaotic settlement and a new cold front, breaking above the early Jan highs (and up 19%, its best week since Aug 2020)…

Finally, just in case you think the market can handle all this vol, think again – liquidity in the most-liquid global equity futures contract (ES) is at its lowest since the COVID crash in 2020…

Simply put, a moderate-sized order moves ES 10 ticks so how do you think it’s going to handle all the fintwit/tiktokkers “paper hands” puking out of their Robinhood accounts?

The good news is that US COVID cases are following the same trajectories at UK and South Africa and tumbling…

Source: Bloomberg

Nevertheless, as we noted above, GDP in Q1 could well print contractionary.

Tyler Durden
Fri, 01/28/2022 – 16:02

via ZeroHedge News https://ift.tt/3AGVCNo Tyler Durden

Oaktree Threatens Rift With China After Seizing Evergrande’s Prized “Versailles” Plot, Derailing Massive Restructuring Plan

Oaktree Threatens Rift With China After Seizing Evergrande’s Prized “Versailles” Plot, Derailing Massive Restructuring Plan

While the collapse and default of Evergrande was 2021’s business, the subsequent restructuring – and its potentially absurd fallout – will be with us for a long time.

Take the fluid restructuring plan of China’s most indebted property developer: according to Bloomberg, Chinese authorities are considering a proposal to dismantle China Evergrande Group by selling the bulk of its assets. The restructuring proposal, which was submitted to Beijing by officials in Evergrande’s home province of Guangdong, calls for the developer to sell most assets except for its separately listed property management and electric vehicle units. A group led by China Cinda Asset Management, a state-owned bad debt manager and major Evergrande creditor, would take over any unsold property assets, the Bloomberg sources said.

If approved by Beijing, the plan – which we previewed several weeks ago – would mark the biggest step yet by China’s government to prevent a disorderly collapse of the world’s most indebted developer from roiling China’s financial markets and economy before the closely watched Communist Party leadership transition later this year.

As part of this “Chapter 7-like” liquidation, proceeds from the asset sales would be used to partially repay creditor claims, although according to Bloomberg, it remains unclear to what degree banks and bondholders would be forced to accept haircuts on their claims (judging by the deeply impaired price of the company’s bonds, where Evergrande’s dollar note due in 2025 last traded at about 16 cents on the dollar, one can say that the degree would be “great”). Senior Chinese regulators have repeatedly said in public remarks that debt risks at Evergrande and other distressed property companies should be dealt with in a “market-oriented way.”

If Beijing ultimately signs off on the plan, it would kick off the liquidation and unwind of the country’s formerly biggest property developer that was started 25 years ago by billionaire Chairman Hui Ka Yan, who was not too long ago China’s 2nd richest man. It would also likely set off a lengthy battle over who gets paid from what remains.

For its part, Evergrande – which was officially labeled a defaulter for the first time in December after it missed payments on several offshore bonds – said in a statement on Wednesday that it plans to come up with a preliminary restructuring proposal in the next six months. Amusingly, it earlier urged offshore bondholders not to adopt aggressive legal action over repayments, after an ad-hoc group of holders said the company failed to substantively engage with it over restructuring efforts. Evergrande has started the process of identifying bondholders and plans to hire additional financial and legal advisers.

And this is where the “restructuring” process gets a bizarre twist, because while China is seeking to quietly pursue a straightforward (if lengthy) liquidation, some of the creditors have found creative loopholes to avoid getting pennies on the dollar.

One of them is debt-investing giant, Oaktree Capital, which according to the FT, has “scuppered” a plan to restructure Evergrande’s $20 billion of offshore debts by seizing a vast Hong Kong plot where the property developer’s chair had intended to build a Versailles-like mansion.

The Los Angeles-based Oaktree this week moved to seize control of the asset –  known by insiders as “Project Castle” – after Evergrande defaulted on a loan against which the $158bn asset manager had security, the FT reports.

The 2.2 million sq ft project was to be a crucial piece of collateral in a planned restructuring of Evergrande’s giant offshore debt load, but the plan is now in turmoil after Oaktree appointed a receiver in hopes of seizing the real etate.  Project Castle was set to form a significant chunk of the assets that would facilitate the restructuring of the company’s offshore debts, an FT source said.

“Evergrande has got the offshore bondholders to stop making noise on the basis there’s a restructuring process coming soon,” said this person. “That land was going to be used to facilitate the restructuring.”

But apparently now that Oaktree has found legal recourse to strip the land, it will do so, in the process derailing the broader restructuring process: indeed, the appointment of the receiver has to be approved by a Hong Kong court, after which the asset “will be removed from the general restructuring of Evergrande.” Of course, without the property, the value of the estate would collapse dramatically.

Pulling a page out of the Elliott Management playbook, Oaktree previously reassured its clients about the ease with which it could seize the “Project Castle” development, according to a copy of a 2021 investor letter seen by the Financial Times. The letter said the firm “structured these transactions with legal protections” that would enable it “to get to the underlying collateral in a smooth fashion should a legal process ensue”.

It remains to be seen how “smooth” this process will be when Oaktree directly and transparently challenges the supremacy of China’s own interests on China territory. Needless to say, an outcome favoring Oaktree, which would be viewed as humiliating for Beijing, would have tremendous consequences for China.

The move by Oaktree represents one of the most significant yet from any international player in the crisis at Evergrande, which last year became a symbol of the sprawling debts underpinning China’s property sector and faces a drawn-out restructuring process.

Oaktree is one of many investors in international bond markets, where Evergrande has borrowed about $20bn of its more than $300bn in total liabilities, who have focused on its offshore assets, including listed subsidiaries in Hong Kong. They warned last week over potential enforcement action against the company, which laughably responded with a blanket statement asking them not to take legal action.

Since “Project Castle” remains one of Evergrande’s most prized possessions, the company naturally had its own plans for the future of the sliver of Hong Kong land, and had been attempting to sell the residential project, in the Yuen Long area of Hong Kong’s New Territories, since last year as part of its plans to offload non-core assets to minimise losses for creditors. It was reported to be valued at about $1bn.

But wait, there’s more…

If the potential Hong Kong scandal wasn’t enough, today the FT also reported that Oaktree also has a secured loan to a sprawling tourism resort on the Yellow Sea coast called “Venice” that would allow it to take control of the land in the event of a default.

Just like with “Project Castle”, a move by Oaktree – whose founder Howard Marks is a former acolyte of “junk bond king” Michael Milken and has a reputation as one of the savviest specialists in distressed investing – to seize “Venice” could have a profound impact on the wider restructuring of Evergrande, and recoveries to creditors.

That said, while a protracted legal fight in Hong Kong is one thing, challenging Evergrande on the ground in mainland China would seems like an impossible task. As the FT notes, if Oaktree moves to seize control over the land “it could face a difficult fight in the mainland Chinese courts over an asset that is strategically important to both Evergrande and Beijing, due to its vast size and because ordinary Chinese citizens have bought homes there.”

The Venice project, which has been in development for more than a decade, embodied the meteoric ambitions of Evergrande, which has racked up more than $300bn of debt to fund its rapid expansion.

The resort has a “platinum seven-star hotel, nine centers (for international conferences, catering, health, sports, badminton, tennis, business, children and entertainment), a bar street and a food street”, according to the local government website for the area. It also has a residential area that covers 66m sq ft, which includes homes and schools.

According to a local government website for the province where the development is located, about two hours drive from Shanghai, 30bn yuan ($4.7bn) has been invested in the project.

Needless to say, lending in mainland China is considered far riskier (or, more accurately, dumber) than in Hong Kong because of the difficulty foreign creditors have in navigating the labyrinthine local court system and claiming security on assets, not to mention facing the incredibly corrupt local legal system. While many US distressed debt funds refuse to lend against assets on the mainland for this reason, others have been coaxed into this riskier form of Chinese lending because of the dearth of opportunities in more mainstream debt markets.

In letters to its investors last year, Oaktree said that the Venice loan was made at “about mid-60s see- through LTVs” — meaning that the size of the debt is just over 60 per cent of the asset’s overall value — and that it benefited from “substantial” protections that included claims on the “underlying properties”. The letter did not disclose the size of the loan, nor what the protections are.

“In addition to structuring our investments with priority claims on the underlying assets, we structured our Venice financing with a guarantee from Evergrande’s listed company,” the 2021 investor letter continued, in an apparent reference to the Hong Kong-listed entity China Evergrande Group.

Evergrande’s closely watched debt restructuring will be the biggest in China’s history and a politically sensitive process for a company whose rapid growth made its chair and founder Hui Ka Yan China’s richest man as recently as 2017. Tens of thousands of ordinary Chinese citizens hold investments in the company and have bought its homes; millions of people could be impacted by the uncontrolled collapse of the company, such as what would happen if an orderly dissolution of Evergrande was prevented.

And if the fund responsible for the ensuing social unrest ends up being a distressed-debt investor operating out of West LA, the diplomatic fallout between China and the US would be unprecedented.

Tyler Durden
Fri, 01/28/2022 – 15:40

via ZeroHedge News https://ift.tt/3AHQOaz Tyler Durden

Georgetown Should Not Fire Ilya Shapiro for a Bad Tweet


Screen Shot 2022-01-28 at 2.45.45 PM

Georgetown University’s Black Law Students Association is demanding the firing of Ilya Shapiro, a director of constitutional studies at the Cato Institute, from his brand new position at the university. Shapiro was slated to start work as executive director of the Georgetown Center for the Constitution next week, but a poorly worded tweet about President Joe Biden’s pledge to appoint a black woman to the Supreme Court has landed him in hot water.

Shapiro agrees that the tweet was not great.

“I regret my poor choice of words, which undermine my message that no one should be discriminated against for his or her gender or skin color,” Shapiro tells Reason.

On Wednesday, Shapiro tweeted the following:

Objectively best pick for Biden is Sri Srinivasan, who is solid prog & v smart. Even has identify politics benefit of being first Asian (Indian) American. But alas doesn’t fit into the latest intersectionality hierarchy so we’ll get lesser black woman. Thank heaven for small favors?

Because Biden said he’s only consider[ing] black women for SCOTUS, his nominee will always have an asterisk attached. Fitting that the Court takes up affirmative action next term.

I sincerely and deeply apologize for some poorly drafted tweets I posted late Wednesday night. Issues of race are of course quite sensitive, and debates over affirmative action are always fraught. My intent was to convey my opinion that excluding potential Supreme Court candidates, most notably Chief Judge Srinivasan, simply because of their race or gender, was wrong and harmful to the long term reputation of the Court. It was not to cast aspersions on the qualifications of a whole group of people, let alone question their worth as human beings. A person’s dignity and worth simply do not, and should not, depend on any immutable characteristic. Those who know me know that I am sincere about these sentiments, and I would be more than happy to meet with any of you who have doubts about the quality of my heart.

In seeking to join the Georgetown community, I wanted to contribute to your worthy mission to educate students, inform the public, and engage in the battle of legal ideas that lead to justice and fairness. I still want to do that. Recklessly framed tweets like this week’s obviously don’t advance that mission, for which I am also truly sorry. Regardless of whether anyone agrees or disagrees with me on a host of legal and policy issues, I can and will do better with regard to how I communicate my positions.

Shapiro’s wording was certainly misguided, as he freely admits. But it’s not right to say he had asserted that black women as a category would make poor Supreme Court justices. Rather, he indicated that he thought the absolute best choice—from a progressive standpoint—was a specific judge, Sri Srinivasan (an Indian American and member of the Hindu faith, which would also be a first for the Court). In his tweet, Shapiro was lamenting that Biden’s commitment to choosing a justice who fits a specific demographics profile would preclude him from making this selection.

This is an understandable opinion. While ensuring that the Supreme Court better reflects the diversity of the country is a worthwhile goal, there are many ways to accomplish this. (Currently, eight of the nine justices attended law school at either Harvard or Yale—Biden could look outside the Ivy League, for one.) It is fine to criticize the idea that Biden’s primary and overriding criteria would be along racial and gender lines.

The phrasing “lesser black woman” was particularly ugly by itself, of course, but is being misconstrued by those calling for Shapiro to be fired. Members of the Georgetown community are not wrong to demand more precise wording from someone of Shapiro’s stature, but given that he has apologized, the university should accept this and move on. If Georgetown’s administration were to fire Shapiro, it would be tacitly endorsing the unfair smear that he is a racist and a sexist.

The post Georgetown Should Not Fire Ilya Shapiro for a Bad Tweet appeared first on Reason.com.

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Short Circuit: A Roundup of Recent Federal Court Decisions

Please enjoy the latest edition of Short Circuit, a weekly feature from the Institute for Justice.

While he was on the campaign trail, President Biden told voters that he would allow states to “continue to make their own choices” on marijuana legalization. So just why is the FBI trying to forfeit nearly $1.1 mil from California-legal cannabis businesses? Read all about IJ’s latest forfeiture case in the Los Angeles Times.

  • Plaintiffs: Various tech companies treated us badly because they didn’t like what we had to say about vaccines. And they did this because Congressman Adam Schiff sent them a letter! D.C. Circuit: You’ve established that exactly one of those things is true. Case dismissed.
  • The worst part of having the Venezuelan government nationalize your manufacturing company is having to figure out what counts as effective service under the Hague Convention after you sue the Venezuelan government for nationalizing your manufacturing company, as this D.C. Circuit opinion illustrates. (Ed. note: That is probably not the worst part.)
  • DEA administratively subpoenas the program manager for New Hampshire’s Prescription Drug Monitoring Program, demanding an individual’s PDMP-kept prescription-drug records. Program manager: Pound sand. Your statute says you can subpoena “persons” and here, you’re really subpoenaing the State of New Hampshire, which isn’t a “person.” First Circuit: All your theories are wrong. The subpoena was against you, not the state, and even if it were against the state, that’d be okay too. Plus, the rare First Circuit vocab nugget from a jurist other than Judge Selya: “semble.” (Separately, First Circuit—Courier font? Still? Why? Is it because of the Massachusetts state courts? You don’t have to stick with them on this. And this wouldn’t be the first time you broke with the Massachusetts SJC on a matter of pressing nationwide significance. Remember when you split with them on the Fourth Amendment’s protections for cell-phone data? And then the Supreme Court said you were in the right? You could do the same here, but with fonts.)
  • Under the leadership of El Chapo, the Sinaloa Cartel supplied more illegal drugs to the U.S. than anyone in history, employing techniques such as murder, kidnapping, torture, and bribery. Mexico extradited the kingpin to the U.S. in 2017, where he was convicted of ten offenses and sentenced to five terms of life imprisonment. El Chapo: Here are ten reasons my convictions should be overturned (spanning the usual to the less typical, such as the indictment violated the extradition treaty between the U.S. and Mexico and that his attorney had a conflict of interest (made public by the attorney’s sexual relationship with another client)). Second Circuit: No, ten times over.
  • Hayley Paige wedding dresses are a $220 mil business for JLM Couture, with the designer appearing on “Say Yes to the Dress” and running popular social-media accounts. Yikes! Things start to sour in 2019; Hayley Paige Gutman (the designer) locks JLM out of the social-media accounts and starts outside work. JLM: The contract has a noncompete and gives us the right to the name and its derivatives. Second Circuit (over two partial dissents): The noncompete and name-ownership portions of the contract are enforceable. But ownership of the social-media accounts is fuzzy, and it’s too soon to assign them to JLM.
  • A pair of school mask-mandate cases from the Fourth and Eighth circuits (with dissents in both): South Carolina’s law prohibiting the use of state funds to impose mask mandates survives (plaintiffs lack standing), while Iowa’s similar prohibition is enjoined (for running afoul of the Rehabilitation Act).
  • The Fourth Circuit is known for its cordiality—they shake hands with the lawyers after each argument—and that tradition is on full display in this False Claims Act decision. Majority: “We thank our friend for his thoughtful dissent,” which takes a view that “is not sustainable under law or under any notion of notice and due process with which we are familiar.” Dissent: “With respect for my colleagues in the majority,” this opinion is further evidence for “[t]hose who believe that some judicial decisions usurp the power of elected legislatures by making the law rather than merely interpreting it” and the majority’s “legal hand-waving cannot cover the stench here.”
  • When a pregnant teenager fell in the shower and broke her tailbone, her doctor prescribed her opioids. Later, a doctor for whom she worked gave her blank prescriptions and allowed her to write her own. Soon, she was hopelessly addicted, forging prescriptions, taking up to 80 pills a day, and selling pills. She gets caught and is sentenced to 210 months in prison. Fourth Circuit (en banc): And she needs to be resentenced for ineffective assistance of counsel; her lawyer inexplicably waived multiple meritorious objections to the sentencing calculation. Dissent: Would be nice to hear his side of things, which is why we normally handle this on collateral review, not direct appeal.
  • The Wayback Machine is an amazing free resource that archives more than 651 billion web pages. But for all that, it is not—per the Fifth Circuit—so obviously reliable that its contents are subject to judicial notice.
  • A few months back we shared with our readers the inspirational story of Texas A&M’s original “12th Man,” E. King Gill, and also the less-than-inspirational story of how Texas A&M straight-up stole a biography of Gill from its copyright owner. The first time around, the Fifth Circuit let the Aggies get away with it, holding that the school was entitled to sovereign immunity. But a bright spot appears! In this substituted opinion, the Fifth Circuit holds that they have no jurisdiction over an appeal by the Texas A&M employee most directly responsible for the theft, and the claims against him will thus go to trial.
  • Lawyers spend thousands of hours litigating False Claims Act case that results in a settlement of more than $97 mil that expressly reserves the issue of attorney fees. The relators’ share of that money was awarded to one relator and then distributed under a shared agreement to the other relators in the case. District Court: So no fees for the relators who received their money under the agreement instead of directly from the government. Sixth Circuit: Nothing in the statute requires that the relator get their share directly from the government to be entitled to fees. Everyone gets paid.
  • In enacting the second round of the Paycheck Protection Program, the squares in Congress excluded strip clubs. Strip clubs: Which violates our First Amendment rights. District court: Sounds probably right—preliminary injunction! Seventh Circuit motions panel (Sept. 2021): Sounds probably wrong—preliminary injunction stayed. Seventh Circuit merits panel (Jan. 2022): Those motions-panel judges were sharp cookies—preliminary injunction vacated.
  • Allegation: St. Louis, Mo. man was not protesting the acquittal of a police officer, was not involved in riotous behavior, and did not receive a dispersal order from officers. Yet, when he left his home near the scene of a protest, he was rounded up via officers’ kettling technique, pepper sprayed, and arrested with zip ties (along with ~100 others). Eighth Circuit: No QI for the officers who participated in the kettling, even if they were following orders. And no QI for the supervisory officers who failed to intervene.
  • University of Arizona student brings Title IX suit, alleging the university should be liable for taking insufficient steps to prevent physical abuse she suffered at the hands of her former boyfriend, a university football player who assaulted two former girlfriends (he’s now serving five years). Ninth Circuit: No liability. The abuse took place at the player’s off-campus apartment, where the university has no control. Dissent (“strong[] but respectful[]”): Players are only allowed to live off campus with university permission, and that’s contingent on good behavior. They had plenty of control.
  • Arizona inmate orders six rap/R&B CDs and two Nation of Islam texts. Prison declares the CDs unauthorized content because of the references to drugs, sex, and violence and declares the Nation of Islam texts unauthorized because they had previously been excluded for promoting racism and the superiority of one group. The inmate sues. District Court: All fine. Ninth Circuit: Not fine! The inmate has adequately alleged both that the unauthorized-content rule is enforced inconsistently (e.g., the prison library is full of romance novels) and that he sincerely believes the books are necessary for his observance of Ramadan.
  • Are Roth IRAs excluded from Georgia debtors’ bankruptcy estates? Bate your breath no longer, world. The Eleventh Circuit says yes.
  • And in en banc news, the Eleventh Circuit will reconsider its decision striking down a 2014 Alabama law changing the judicial process by which a minor can obtain an abortion without parental consent so as to allow or require the participation of parents, the district attorney, and a guardian ad litem for the fetus, “transforming it from a proceeding that was designed to be more of an avuncular visit in chambers with the judge than an open court, call-your-first-witness affair.”
  • And in amicus brief news, IJ is asking the Supreme Court to affirm a Ninth Circuit ruling allowing constitutional claims to proceed against a CBP agent, who (among other things) allegedly assaulted a man after the man asked him to leave his property. In recent cases, the Court has suggested that such claims (which the Ninth Circuit found are the only remedy available to this plaintiff) are improper and ahistorical—a remnant of the “heady days” in the 1960s and ’70s when the Court felt comfortable creating causes of action without the express approval of Congress. In the brief, however, we argue that claims for damages for violations of individual rights have always been a part of our legal system and that it’s the Court’s recent doctrine that is a break with tradition (and, moreover, that the Court should take the two IJ cases involving the same issue that are currently pending on cert). Click here to read the brief.

In 2015, then-Judge Gorsuch of the Tenth Circuit suggested that victims of government misconduct should look to state tort law rather than the Constitution to seek redress for their injuries: “Often, after all, there’s no need to turn federal courts into common law courts and imagine a whole new tort jurisprudence under the rubric of § 1983 and the Constitution in order to vindicate fundamental rights when we have state courts ready and willing to vindicate those same rights using a deep and rich common law that’s been battle tested through the centuries.” This week, IJ released a study, 50 Shades of Government Immunity, that takes up that suggestion, examining each state’s regime for civil rights enforcement—and finds them wanting. Click here to read it.

The post Short Circuit: A Roundup of Recent Federal Court Decisions appeared first on Reason.com.

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Massive Subsidies Won’t Solve the Semiconductor Supply Chain Crisis


polspphotos864165

On the same day that the White House kick-started an effort to get Congress to approve billions in new subsidies for American chipmakers, and the Commerce Department published a long-awaited report on the status of semiconductor supply chains, Commerce Secretary Gina Raimondo put an exclamation point on the whole thing.

“It’s a crisis,” Raimondo told Yahoo Finance. “What we need is to make more chips in America.”

In a nutshell, that’s the main argument for passing the America COMPETES Act. A key element of the sprawling, nearly 3,000-page bill is a $52 billion pile of cash intended to entice semiconductor manufacturers to make more chips in the United States—ostensibly to protect against the sort of supply chain crunches that have been roiling the industry for the past several months.

It’s true that American manufacturers that require semiconductors to make everything from cars to video game consoles to home appliances have seen stockpiles dwindle and deliveries delayed. Supply chains have been disrupted, the Commerce Department report says, due to “a series of black swan events such as factory fires, winter storms, energy shortages, and COVID-19-related shutdowns.” Further disruptions in the global supply chains, it ominously warns, could “disable a manufacturing facility and furlough workers in the United States” if domestic manufacturers can’t count on larger inventories of chips in the future.

The White House’s solution to this “crisis” is, no surprise, to throw a lot of money around. In addition to the $52 billion in direct subsidies for chipmakers, the bill would spend another $45 billion on grants and loans meant to address vague supply chain issues and another $7 billion to help develop 10 “technology hubs” around the United States. (Read Adam Thierer, a senior research fellow at the Mercatus Center, on why top-down investment meant to create “a Silicon Valley in every state” is folly.)

But the semiconductors are central to the whole thing. And before lawmakers vote to hurl $52 billion at chipmakers, they ought to ask two important questions. The first is: Do they need it?

They clearly don’t. Last year, when Intel announced plans to build a new $20 billion fabrication facility in Arizona, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)

There’s also a ton of private sector investment flowing into semiconductor manufacturers right now—equity markets, it turns out, are much more efficient at identifying and fulfilling a need than government subsidies are—and the big chipmakers are not short on cash. The Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chipmaker, reported record profits last year. As of September, Intel’s net profit margin for the past decade was more than 15 percent.

In fact, Intel announced plans just this week for at least two new manufacturing facilities in Ohio. Samsung and the TSMC have also announced plans for U.S.-based factories. That’s not the sort of thing that industries and companies in desperate need of government aid tend to do—though they will surely be happy to receive taxpayer funds if Congress makes the offer.

The second question is whether the subsidies will make an immediate impact in solving the supply chain crisis that Raimondo and others are so worked up about. Again, the answer is a pretty obvious “no.”

Remember those new Intel factories in Arizona and Ohio? Neither is expected to come online until 2024 at the earliest. Even if Congress passed the America COMPETES Act tomorrow and the money was magically distributed by the end of next week, there’s no way it would make a material difference in domestic semiconductor supplies for at least a few years.

Meanwhile, the current supply crunch caused by the pandemic and those other “black swan” events is going to work itself out by the middle of this year, according to Gartner, a global market research firm. Other analysts and experts seem to agree that the crisis will pass before the end of the year.

It’s also pretty debatable whether $52 billion in fresh subsidies spread over several years will make much of a difference in a global semiconductor market that was worth $425 billion last year alone, and is only going to keep rising.

Again, it’s certainly true that companies like Intel and the TSMC will happily accept fat checks from whatever government is willing to write them. Those new Intel plants in Ohio are reportedly being underwritten by the state government—the exact details are still under wraps—and South Korea has announced subsidies worth about $450 billion for its own domestic chip industry. But there’s no need for any of this, and there’s little reason to believe it will have an impact on the current, serious supply chain issues afflicting many downstream industries.

What we will get from the America COMPETES Act is an expanded and more powerful federal bureaucracy. The bill proposes a new “national supply chain database,” a new office in the Commerce Department to review supply chain resiliency, and new plans for the White House and Congress to direct national science and technology policy. As Thierer points out, other provisions of the bill would expand regulations on everything from trade to drug manufacturing to federal antitrust powers.

“Lawmakers and bureaucrats are not going to allocate capital more efficiently than private innovators and investors,” he writes. “Nor are they going to be able to ‘shore up supply chains’ or create tech hubs in every city just by sprinkling a little magical industrial policy pixie dust thinly across the entire nation.”

But they will be able to create layers of new rules and bureaucracy that limit future innovation, keep subsidies flowing to politically favored firms, and entrench techno-nationalist tendencies. The semiconductor shortage is a legitimate crisis in some ways, but it should not become an excuse for enacting wasteful, damaging policy.

The post Massive Subsidies Won't Solve the Semiconductor Supply Chain Crisis appeared first on Reason.com.

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Navy Confirms Newly Emerged Video Shows F-35 Crash In South China Sea

Navy Confirms Newly Emerged Video Shows F-35 Crash In South China Sea

The US Navy has confirmed that an image and video that emerged in social media this week showing the crash landing of an advanced F-35C stealth fighter is authentic. It crashed and apparently rolled off the USS Vinson aircraft carrier and landed in the South China Sea on Monday.

The US Navy is reportedly working on the daunting task of recovering the aircraft after the “landing mishap” which injured seven in total, including the pilot who had successfully ejected and six sailors who were presumably injured while on the flight deck. “The ship has assessed that the video and photo covered by media today were taken onboard USS Carl Vinson,” Cmdr. Hayley Sims, a 7th Fleet public affairs officer, belatedly acknowledged Friday. He said the images, one of which was posted to Reddit, were taken from aboard the carrier “during the crash.” Here is now confirmed authentic video…

CNN was the first to report the Navy’s confirmation of the imagery authenticity, writing that “The $100 million warplane impacted the flight deck of the 100,000-ton aircraft carrier and then fell into the water as its pilot ejected, Navy officials said. The pilot and six sailors aboard the Vinson were injured.”

“A video shows the F-35 on its landing approach to the aircraft carrier but cuts off before the plane impacts the flight deck,” CNN details based on Navy statements. “The Navy said earlier this week that the damage to the Vinson was only superficial, and it and the carrier’s air wing have resumed normal operations.”

Below is the now confirmed authentic photo which first emerged in social media. The F-35 is floating in the water with its cockpit open, and soon after sank to the bottom of the South China Sea…

Complicated Navy recovery operations are underway, especially given the US doesn’t want the closely guarded and secretive stealth technology to fall into the hands of China. 

US military sources were earlier in the week quoted as saying it remains vital that “no one else can get their hands on the plane” – without doubt an indirect reference to China, which has a heavy military presence in the region. According to a US military quote: 

The US presently faces the challenge of pulling the wreckage out of the contested waters of the South China Sea to recover US technology, as well as make sure no one else can get their hands on the plane. “The planning efforts are ongoing for the recovery of the F-35,” a 7th Fleet spokesman told Insider.

Experts say China would almost certainly want to get ahold of the F-35, a highly-capable fifth-generation fighter jet that has taken many years and significant funding to research and develop. 

The white smoke seen at the very end of the brief crash clip is believed to be the moment the pilot ejected.

The F-35 stealth manufacturer Lockheed Martin had announced last August when the USS Vinson had departed San Diego: “This deployment marks the first time in U.S. naval aviation history that a stealth strike fighter has been deployed operationally on an aircraft carrier,” it said.

This is the second crash of an F-35 in a matter of months at sea. Last November, a British F-35 stealth jet has crashed into the Mediterranean Sea during what was described at the time as routine flying operations from the aircraft carrier HMS Queen Elizabeth. 

Via Daily Mail

F-35 fighters are an estimated 135 million dollars, with cutting-edge stealth technology and radar. The controversial program overseen by Congress has been notoriously costly. 

Tyler Durden
Fri, 01/28/2022 – 15:18

via ZeroHedge News https://ift.tt/35zq2FV Tyler Durden

Massive Subsidies Won’t Solve the Semiconductor Supply Chain Crisis


polspphotos864165

On the same day that the White House kick-started an effort to get Congress to approve billions in new subsidies for American chipmakers, and the Commerce Department published a long-awaited report on the status of semiconductor supply chains, Commerce Secretary Gina Raimondo put an exclamation point on the whole thing.

“It’s a crisis,” Raimondo told Yahoo Finance. “What we need is to make more chips in America.”

In a nutshell, that’s the main argument for passing the America COMPETES Act. A key element of the sprawling, nearly 3,000-page bill is a $52 billion pile of cash intended to entice semiconductor manufacturers to make more chips in the United States—ostensibly to protect against the sort of supply chain crunches that have been roiling the industry for the past several months.

It’s true that American manufacturers that require semiconductors to make everything from cars to video game consoles to home appliances have seen stockpiles dwindle and deliveries delayed. Supply chains have been disrupted, the Commerce Department report says, due to “a series of black swan events such as factory fires, winter storms, energy shortages, and COVID-19-related shutdowns.” Further disruptions in the global supply chains, it ominously warns, could “disable a manufacturing facility and furlough workers in the United States” if domestic manufacturers can’t count on larger inventories of chips in the future.

The White House’s solution to this “crisis” is, no surprise, to throw a lot of money around. In addition to the $52 billion in direct subsidies for chipmakers, the bill would spend another $45 billion on grants and loans meant to address vague supply chain issues and another $7 billion to help develop 10 “technology hubs” around the United States. (Read Adam Thierer, a senior research fellow at the Mercatus Center, on why top-down investment meant to create “a Silicon Valley in every state” is folly.)

But the semiconductors are central to the whole thing. And before lawmakers vote to hurl $52 billion at chipmakers, they ought to ask two important questions. The first is: Do they need it?

They clearly don’t. Last year, when Intel announced plans to build a new $20 billion fabrication facility in Arizona, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)

There’s also a ton of private sector investment flowing into semiconductor manufacturers right now—equity markets, it turns out, are much more efficient at identifying and fulfilling a need than government subsidies are—and the big chipmakers are not short on cash. The Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chipmaker, reported record profits last year. As of September, Intel’s net profit margin for the past decade was more than 15 percent.

In fact, Intel announced plans just this week for at least two new manufacturing facilities in Ohio. Samsung and the TSMC have also announced plans for U.S.-based factories. That’s not the sort of thing that industries and companies in desperate need of government aid tend to do—though they will surely be happy to receive taxpayer funds if Congress makes the offer.

The second question is whether the subsidies will make an immediate impact in solving the supply chain crisis that Raimondo and others are so worked up about. Again, the answer is a pretty obvious “no.”

Remember those new Intel factories in Arizona and Ohio? Neither is expected to come online until 2024 at the earliest. Even if Congress passed the America COMPETES Act tomorrow and the money was magically distributed by the end of next week, there’s no way it would make a material difference in domestic semiconductor supplies for at least a few years.

Meanwhile, the current supply crunch caused by the pandemic and those other “black swan” events is going to work itself out by the middle of this year, according to Gartner, a global market research firm. Other analysts and experts seem to agree that the crisis will pass before the end of the year.

It’s also pretty debatable whether $52 billion in fresh subsidies spread over several years will make much of a difference in a global semiconductor market that was worth $425 billion last year alone, and is only going to keep rising.

Again, it’s certainly true that companies like Intel and the TSMC will happily accept fat checks from whatever government is willing to write them. Those new Intel plants in Ohio are reportedly being underwritten by the state government—the exact details are still under wraps—and South Korea has announced subsidies worth about $450 billion for its own domestic chip industry. But there’s no need for any of this, and there’s little reason to believe it will have an impact on the current, serious supply chain issues afflicting many downstream industries.

What we will get from the America COMPETES Act is an expanded and more powerful federal bureaucracy. The bill proposes a new “national supply chain database,” a new office in the Commerce Department to review supply chain resiliency, and new plans for the White House and Congress to direct national science and technology policy. As Thierer points out, other provisions of the bill would expand regulations on everything from trade to drug manufacturing to federal antitrust powers.

“Lawmakers and bureaucrats are not going to allocate capital more efficiently than private innovators and investors,” he writes. “Nor are they going to be able to ‘shore up supply chains’ or create tech hubs in every city just by sprinkling a little magical industrial policy pixie dust thinly across the entire nation.”

But they will be able to create layers of new rules and bureaucracy that limit future innovation, keep subsidies flowing to politically favored firms, and entrench techno-nationalist tendencies. The semiconductor shortage is a legitimate crisis in some ways, but it should not become an excuse for enacting wasteful, damaging policy.

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