Month: July 2023

Justice Alito’s Interview in the Wall Street Journal

As a general rule, Supreme Court Justices speak through their opinions. From time to time, Justices will be “interviewed”by friendly interlocutors during public events. The screened questions are usually softballs, and even then, the Justices tend to avoid saying anything newsworthy. In recent years, perhaps the biggest outlier was Justice Ginsburg. In 2016, she gave an interview with Adam Liptak of the New York Times. RBG made critical comments about then-candidate Trump. Ultimately Ginsburg sort-of apologized, but still faced calls to recuse in certain Trump-related cases. She would not recuse. RBG should have been grateful the Supreme Court Ethics, Recusal, and Transparency Act (SCRET) was not in effect during this final years on the Court.

Speaking of the SCRET Act, on Friday, the Wall Street Journal published a “weekend interview” with Justice Alito. The Justice spoke with the Journal in early July. In April, Alito also spoke with the Journal for “four hours in two wide-ranging sessions” in his chambers. (I wrote about that interview here.) Perhaps the most significant aspect of the interview is that it happened at all. On the current Court, Justice Alito is the member most likely to talk to the press. And he had a lot to say–including about the SCRET Act, and his colleagues. Here are thirteen highlights.

First, Justice Alito repeated his refrain from April that the “bar” is not defending the Court against attack–indeed legal elites are leading the calls that the Court is “illegitimate.”

“I marvel at all the nonsense that has been written about me in the last year,” Justice Samuel Alito says during an early July interview at the Journal’s New York offices. In the face of a political onslaught, he observes, “the traditional idea about how judges and justices should behave is they should be mute” and leave it to others, especially “the organized bar,” to defend them. “But that’s just not happening. And so at a certain point I’ve said to myself, nobody else is going to do this, so I have to defend myself.”

My post in April was titled, “Justice Alito Defends The Supreme Court In Ways Chief Justice Roberts Cannot.” I bet the Chief Justice’s head exploded when he read this interview. But Justice Alito is right. The Chief only speaks out when it serves his interests Again, whenever the Chief Justice speaks of the Court’s “legitimacy,” he is actually speaking about himself–the man cannot separate himself from the Court. No Justice has done more to undermine the Court as a institution that follows law in a dispassionate fashion that Roberts himself. But so long as we avoid 5-4 conservative-liberal splits, he is happy, no matter what the opinion says. (More on Roberts later.)

Second, Justice Alito observed that “‘There are very serious differences'” in how the six conservative justices approach cases.” Well that’s for darn sure.

Justice Thomas does not place much weight on precedent:

Justice Alito says. The simplest difference involves respect for precedent: Justice Thomas “gives less weight to stare decisis than a lot of other justices.” It is, “in its way, a virtue of his jurisprudence,” Justice Alito says. “He sticks to his guns.” . . . The disadvantage of this approach, Justice Alito says, “is that you drop out of the conversation, and . . . lose your ability to help to shape what comes next in the application of that rule.”

Justice Alito is right about this much: it is hard for Justice Thomas to play the game if he insists on eschewing precedent. Then again, is the game worth playing if you have to follow made-up law. Stare decisis does not mean inexorably stare at decisions from the Warren Court.

Third, Justice Alito turned to the third member of the 3-3-3 troika, Justice Gorsuch:

Justice Gorsuch has an ornery streak that has shown itself in cases involving Indian law, crime and discrimination. “He’s definitely not a consequentialist,” Justice Alito says of his colleague—meaning he is less concerned with the real-world effects of following his principles.

An example is Ramos v. Louisiana (2020), which overturned a pair of 1972 precedents and held that the Sixth Amendment’s right to a jury trial requires unanimity for a finding of guilt in state court. Every state but Louisiana and Oregon already required unanimous verdicts, but “Ramos potentially affected many, many criminal convictions that had been obtained . . . using nonunanimous jury verdicts, which had been specifically approved by the Supreme Court,” Justice Alito says. “Overruling those decisions had potentially vast consequences. . . . That was not a big factor in his analysis.”

Spot on. Gorsuch is utterly unconcerned with the consequences of his decisions. Indeed, his unwillingness to even recognize how disruptive his jurisprudence can be leads to decisions like Bostock–could it really be the case that Congress in 1964 enacted a statute that protected against SOGI discrimination? Ditto for Gorsuch on Indian law. Given all the chaos McGirt caused, could his reading of federal law possibly be the right one? Though, I should note that Circuit Justice Gorsuch granted a temporary administrative stay of a Tenth Circuit decision, which held that a member of an Indian tribe was immune from an Tulsa, Oklahoma speeding ticket. I’m not sure if this shadow docket entry counts against his 10-0 pro-tribe record. We’ll see what happens when this stay expires on August 2.

Fourth, Justice Alito turned to the Chief Justice:

As for Chief Justice John Roberts, “he puts a high premium on consensus. He rarely dissents.” He filed no outright dissenting opinions in the 2022-23 term and only one in 2021-22. He also “has expressed a very strong tendency to protect the prerogatives of the judiciary,” as in Bank Markazi v. Peterson (2016). The court upheld a law directing that Iranian assets targeted by successful plaintiffs in a specific terrorism case be seized to pay the judgment. The chief justice dissented against what he called an unacceptable intrusion on judicial power: “Hereafter, with this Court’s seal of approval, Congress can unabashedly pick the winners and losers in particular pending cases.”

For the Chief, voting with the progressives is more important that reaching the best legal conclusion. I’ve long written that the Chief’s judicial lodestar is not the Constitution, but the Gallup Poll. The only issue that gets his dander up is any perceived intrusion about the Judiciary (read John Roberts’s) powers.  (More on the SCRET Act later–I’ll get there eventually, I promise).

Fifth, Justice Alito said nothing at all about the judicial philosophies of Justices Barrett or Kavanaugh. I am still not entirely sure what to make of those two. Perhaps Justice Alito is in the same boat.

Sixth, Justice Alito spent very little time on the judicial philosophy of the three progressives:

On the liberal side of the court, by contrast, “I don’t see that there’s a difference in interpretive method,” Justice Alito says.

Seventh, in perhaps a subtle jab at Justices Barrett and Kavanaugh, Justice Alito observed that the Court does not always line up 5-4 or 6-3. But when it does, you know who the Chief Justice persuaded!

Yet he emphasizes that “we don’t always line up 6-3, 5-4, the way some people tend to think. If you look at all the cases, there are cases where the lineup is unusual.” Chief Justice Roberts wrote two election-law decisions this term, Allen v. Milligan and Moore v. Harper, in which he was joined by the three liberals and Justice Kavanaugh, along with Justice Amy Coney Barrett in the latter case.

Then again, I don’t think anyone would think of Allen or Moore as “unusual.” The “unusual” case this term is Pork Producers. Justice Alito explains that he thinks there is a “Dormant” Commerce Clause, unlike Justices Thomas and Alito:

Justice Alito, who agreed with that view, says “it’s no secret that Justice Thomas and Justice Gorsuch don’t think that there is such a thing as the Dormant Commerce Clause.” Justices Barrett, Sonia Sotomayor and Elena Kagan signed on to parts of Justice Gorsuch’s opinion, providing a majority that let the law stand.

“I have not joined Justice Thomas, Justice [Antonin] Scalia, Justice Gorsuch in saying we should get rid of the Dormant Commerce Clause,” Justice Alito says. “I’ve written this in the Tennessee wine case—that the Constitution surely was meant to contain some principle that prevents the balkanization of the economy. That was one of the main reasons for calling the Constitutional Convention in Philadelphia.”

Eighth, Justice Alito turned to his views on history and originalism.

That demonstrates a central feature of Justice Alito’s jurisprudence: its emphasis on historical context. “I think history often tells us what the Constitution means,” he says, “or at least it can tell us what the Constitution doesn’t mean.” His dissent in Obergefell v. Hodges (2015) is a case in point. “It’s perfectly clear that nobody in 1868 thought that the 14th Amendment was going to protect the right to same-sex marriage,” he says. Before this century, “no society—even those that did not have a moral objection to same-sex conduct, like ancient Greece—had recognized same-sex marriage.” The first country to legalize it was the Netherlands, effective in 2001.

Justice Alito has described himself as a pragmatic originalist. In practice, there are probably not that many differences between Justices Alito and Thomas, but in some criminal law cases, where original meaning favors the defendant, Justice Alito may remain skeptical of originalist arguments. Gundy comes to mind. Speaking of Gundy, Justice Alito returned to Justice Gorsuch.

Ninth, Justice Alito addressed Bostock, indirectly at least:

The same attention to history informs Justice Alito’s textualism. “I reject the idea that a statute should be interpreted simply by looking up the words in the dictionary and applying that mechanically,” he says. Justice Gorsuch did something like that in Bostock v. Clayton County (2020), in which the court held that Title VII of the 1964 Civil Rights Act, which prohibits employment discrimination “because of . . . sex,” covers “sexual orientation and gender identity.”

Justice Gorsuch reasoned that because sex is essential to the definition of both categories, such discrimination is “because of” sex. But in 1964 homosexuality was subject to widespread disapprobation, and gender identity “hardly existed as a concept, even among professionals in the field,” as Justice Alito says. “When it’s very clear that the author of the text . . . cannot have meant something, then I don’t think we should adopt that interpretation, even if a purely semantic interpretation of the statute would lead you to a different result.”

I won’t linger on Bostock any further. I’ve already said enough. Let’s see what Justice Gorsuch does if the Court ever grants cert on a Title IX bathroom case–or more precisely, whether Gorsuch would be the fourth vote for cert in such a case. We all know about Kastl now.

Tenth, Justice Alito turned to stare decisis:

Justice Alito’s respect for precedent has limits: “Some decisions—and I think that Roe and Casey fell in this category—are so egregiously wrong, so clearly wrong, that’s a very strong factor in support of overruling.” Those are the 1973 and 1992 abortion cases that Dobbs overturned, with Justice Alito writing for a majority of five. Chief Justice Roberts provided a sixth vote to uphold Mississippi’s 15-week abortion ban but urged “a more measured course” that would narrow the precedents while deferring the question of whether to overturn them altogether.

The Journal pointed out that Alito has favored incrementalism in the past, at least with regard to the path from Harris v. Quinn to Abood.

Justice Alito has been known to take a similarly incremental approach. His opinion for the court in Janus v. Afscme (2018) held that compelling public employees to pay union dues violated the First Amendment, and it overturned a 1977 precedent, Abood v. Detroit Board of Education. A foretaste came in Harris v. Quinn (2014), also written by Justice Alito, which subjected Abood to a withering critique but left it standing.

I suppose the difference is in Janus, Justice Kennedy was the fifth vote, and in Dobbs, Justice Kavanaugh was the fifth vote. Justice Alito admits as much.

“The question how broad a decision should be—should we overrule a prior precedent when we really don’t have to in order to decide this case?—it’s a judgment call,” he says. “There can be reasons for deciding the case more narrowly. Maybe we’re not sure whether it should be overruled. Maybe we think it would be better if the issue were highlighted for others to address first—scholars, lower-court decisions. Maybe it’s a question of what a majority of the court is willing to go along with.“

Eleventh, Justice Alito alluded to Loper Bright Enterprises, indirectly at least:

In the 2023-24 term, the court will consider whether to overturn Chevron v. NRDC (1984), an increasingly disputed precedent that requires courts to defer to administrative agencies’ interpretations of ambiguous statutes. Justice Alito is careful not to state a position on Chevron, but he does make a pertinent broader point about precedent: “I’m not in favor of overruling important decisions just by pretending they don’t exist but refusing to say anything about them.”

A hallmark of the Chief Justice’s jurisprudence is to not formally overrule cases, but to read them in such a way as they are effectively overruled. I agree entirely with Justice Thomas that Grutter v. Bollinger is all-but-overruled. Chevron may meet a similar fate this upcoming term.

Justice Alito suggests that Massachusetts v. EPA may also have been quietly overruled:

He says that’s what his colleagues did last month in U.S. v. Texas, the term’s only case that had him alone in dissent. The court threw out Texas’ challenge to lax Biden administration immigration guidelines on the ground that the state lacked standing to challenge them in court. But Justice Alito says Texas’ claim of injury “was the same as—in fact, stronger than—that of Massachusetts in Massachusetts v. EPA,” a 2007 case that opened the door to federal regulation of greenhouse gases. “The court just hardly said a word about Massachusetts v. EPA.”

I think Massachusetts v. EPA got the Lemon test treatment. Alito also suggests that several of his colleagues ruled against Texas for, let’s say, optical reasons:

The Biden policies suspended all enforcement measures for certain categories of illegal aliens, despite statutory language to the contrary—a clear violation, in Justice Alito’s view, of the president’s express constitutional duty to ensure that the law be faithfully executed. How did all eight of his colleagues end up on the other side? “I have no idea,” he says. “I honestly don’t. Why did it turn out that way? Because it involves immigration? Because it’s vaguely connected to Trump? I don’t know. I don’t know what the explanation is.”

I’m with Alito. In my view, this case was the most perplexing decision of the term.

Twelfth, Justice Alito turned to the pending Supreme Court ethics bill. He offered his opinion that the law would be unconstitutional:

The attacks on the court are sure to keep coming as well. Last week the Senate Judiciary Committee voted along party lines to advance Sen. Sheldon Whitehouse’s Supreme Court Ethics, Recusal and Transparency Act, which purports to impose on the justices and their clerks regulations “at least as rigorous as the House and Senate disclosure rules.”

Justice Alito says he voluntarily follows disclosure statutes that apply to lower-court judges and executive-branch officials; so do the other justices. But he notes that “Congress did not create the Supreme Court”—the Constitution did. “I know this is a controversial view, but I’m willing to say it,” he says. “No provision in the Constitution gives them the authority to regulate the Supreme Court—period.”

Do the other justices agree? “I don’t know that any of my colleagues have spoken about it publicly, so I don’t think I should say. But I think it is something we have all thought about.”

Justice Alito did not spell out his argument with any particularity, but he seems to reject all possible sources of congressional authority–in particular the Necessary and Proper Clause. I would flag Randy Barnett’s work suggesting that a Court packing bill would likewise be beyond Congress’s enumerated powers. Under this analysis, much would turn on what is the real purpose regulating the Court–actual ethics reform, or affecting the substantive outcome of cases by forcing justices to disqualify. (In many regards, the ethics bill would amount to Court unpacking.0

We do know for certain that at least one of Justice Alito’s colleagues thinks there are problems with Congress regulating the Supreme Court. Chief Justice Roberts’s April 2023 letter to Senator Durbin included this line:

Testimony before the Senate Judiciary Committee by the Chief Justice of the United States is exceedingly rare, as one might expect in light of separation of powers concerns and the importance of preserving judicial independence.

At the time, I observed:

Roberts does not even begin to explain what those “separation of powers concerns” are. Nor does he elucidate why testifying would weaken “judicial independence.” To play devil’s advocate for a moment, Roberts would be under no obligation to talk about any case or controversy. And, with lifetime tenure and guaranteed salary, the Senators cannot actually do anything that would affect Roberts’s ability to decide cases. The Senate could defund the Court, turn off the lights, eliminate law clerks, and so on, but those remedies are unlikely. Roberts’s conclusory statements are not self-evident.

More than a decade ago, Chief Justice Roberts offered what I described as an “advisory opinion” about whether Congress could regulate the Supreme Court:

The Code of Conduct, by its express terms, applies only to lower federal court judges. That reflects a fundamental difference between the Supreme Court and the other federal courts. Article III of the Constitution creates only one court, the Supreme Court of the United States, but it empowers Congress to establish additional lower federal courts that the Framers knew the country would need. Congress instituted the Judicial Conference for the benefit of the courts it had created. Because the Judicial Conference is an instrument for the management of the lower federal courts, its committees have no mandate to prescribe rules or standards for any other body. 

The Constitution arguably created the Supreme Court–this issue is not as simple as the Chief Justice suggests–but the Constitution did not create the members of the Supreme Court. The seat that Chief Justice Roberts holds was the same seat the John Jay held, which was established by an act of Congress. If the ethics bill is unconstitutional, the answer lies in Article I, and not in Article III alone.

Thirteenth, and finally, Justice Alito turns to massive resistance:

Justice Alito wonders if outright defiance may be in the offing for the first time since the aftermath of Brown v. Board of Education (1954): “If we’re viewed as illegitimate, then disregard of our decisions becomes more acceptable and more popular. So you can have a revival of the massive resistance that occurred in the South after Brown.”

Will the justices’ recent rulings endure? The court shows little sign of yielding to external pressure, but its three liberal members stand ready to overturn many recent precedents from which they dissented. Whether they’ll have the opportunity likely depends on who holds the White House and the Senate when future high-court vacancies arise. About that prospect, Justice Alito demurs: “We are very bad political pundits.”

I think many of the post-Bruen laws have amounted to resistance. I think we will see much the same in the wake of Students for Fair Admission. If you keep calling the Court illegitimate, then there is no reason to respect its decision.

The post Justice Alito's Interview in the <i>Wall Street Journal</i> appeared first on Reason.com.

from Latest https://ift.tt/Yulreg4
via IFTTT

Nevada Magistrate Judge Recommends Rejecting Internet Preservation Challenge—And Why It’s Wrong

As regular readers know, I wrote an article, The Fourth Amendment Limits of Internet Content Preservation, on what I see as significant Fourth Amendment limits on the government’s power to order Internet providers to run off copies of people’s online accounts and save them for possible later government access.

Here’s how the practice works.  When agents think a person might have some connection to a crime, federal agents order Internet providers to run off a government copy of the entire account and to hold it for the government away from the account holder. The point is to make sure suspects can’t delete their files and thwart a possible investigation down the road.  A federal statute, 18 U.S.C. § 2703(f), requires Internet providers to comply. In recent years, the statute has been relied on with extraordinary frequency; in 2019, about 1 in every 820 adults had their account copied for possible government use.  This all goes on in total secrecy. Under order of federal law, Internet providers create and hold government copies, for the government, and in most cases no one tells the user.  The government still needs a warrant to ultimately access the copy, but preservation allows the government to gain access to a stored copy that they would not have otherwise—a copy that may have records that the user might have otherwise deleted.

My article, which I have turned into a model motion to suppress for defense attorneys to file, argues that there are Fourth Amendment limits on this process.  A private actor who does the government’s bidding under penalty of law is a state actor, and running off a copy and holding it for the government, so the user cannot control it, is a Fourth Amendment seizure.  I argue that this seizure has to be justified as reasonable under the Fourth Amendment, which will usually require probable cause or at least reasonable suspicion.  But a common practice, in which every possible suspect’s account can get copied and held for the government, “just in case,” without particularized suspicion, is generally unconstitutional.  (There are then interesting questions of what the remedy is. A plausible remedy is that the government has to use the account copy that existed when they ultimately served the warrant to get the copy, not when they made the preservation request. But that’s beyond today’s post.)

A few motions have been filed based on my model motion, and the first opinion on the issue to just recently appeared on Westlaw.  The motion to suppress in this case wasn’t the exact model motion I drafted, but it had the basic gist of it in a condensed form.

Here’s the opinion, from Magistrate Judge Daniel J. Albreghts of the U.S District Court for the District of Nevada: United States v. King, 2023 WL 4844888 (D. Nev. July 17, 2023).

Unfortunately, the Report and Recommendation contends that the motion should be denied on the ground that preservation is not a government seizure at all.  Under that reasoning, any federal, state, or local government employee could cause every account of every person in the United States to be copied and held for the government with no suspicion at all, and that simply wouldn’t trigger the Fourth Amendment.

The rest of this post will explain Magistrate Judge Albreght’s reasoning and why I am unpersuaded.  I’ll do the arguments in reverse order, as I think it makes a little more sense that way. I’ll start with whether there was state action, and then turn to whether a seizure occurred.

(1) The State Action Question

First, Judge Albreght argues that a provider who complies with a §  2703(f) request to preserve files for the government’s potential use, as required by federal law, is not state actor so the Fourth Amendment is never triggered in the first place:

The Court recommends denying King’s motion to suppress the internet accounts. It finds that King did not meet his burden of showing that Omegle or TextNow should be deemed agents of the government by complying with the government’s preservation request under 18 U.S.C. § 2703(f). Although the Government directed Omegle and TextNow to preserve the accounts, its involvement was limited only to requesting the preservation under 18 U.S.C. § 2703(f). And although Omegle and TextNow were responding to a request from the Government, they were also complying with their statutory obligations.

King has also failed to carry his burden of demonstrating that the Court should deem Omegle and TextNow agents of the government because the cases on which he relies are distinguishable and nonbinding on this Court. In Commonwealth v. Gumkowski, the Massachusetts Supreme Court found that Sprint acted as a government agent when it turned a defendant’s cell site location information over to the government without a warrant. Commonwealth v. Gumkowski, 487 Mass. 314, 320-21 (Mass. 2021). However, here, the government did not ask Omegle or TextNow to turn over information, but instead requested that the electronic service providers preserve the information already in their possession under the Stored Communications Act pending the government obtaining a warrant. In United States v. Hardin, the Sixth Circuit Court of Appeals found that an apartment manager acted as an agent of the government when he entered a defendant’s apartment at the government’s request under the guise of repairing a leak to determine if the defendant was in the apartment. See United States v. Hardin, 539 F.3d 404, 417-20 (6th Cir. 2008). But Omegle and TextNow’s actions of preserving information already in their possession as required under statute is meaningfully distinguishable from the private apartment manager entering a person’s home to determine specific information at the government’s behest.

With all respect to Magistrate Judge Albreght, I don’t think that can be right.  Magistrate Judge Albreght is missing something super important:  Federal law mandates that providers comply.  It’s a statutory “requirement,” with the directive being what the provider “shall” do.  Here’s the text of 18 U.S.C. §  2703(f), with emphasis added:

(f) Requirement To Preserve Evidence.—

(1) In general.— A provider of wire or electronic communication services or a remote computing service, upon the request of a governmental entity, shall take all necessary steps to preserve records and other evidence in its possession pending the issuance of a court order or other process.

(2) Period of retention.— Records referred to in paragraph (1) shall be retained for a period of 90 days, which shall be extended for an additional 90-day period upon a renewed request by the governmental entity.

Granted, the statute calls the government’s demand a “request.” But when the law mandates that you comply with a “request,” that’s not really a request.  It’s an order. And when it’s making you do the government’s bidding, it’s an order that makes you a state actor when you comply with it.

To see this, consider a hypothetical.  Imagine the statute were about making arrests rather than making copies of Internet files.  Let’s slightly rewrite the statute accordingly into the following:

(f) Requirement to Make Arrests

(1) In general. —Any person, upon the request of a governmental entity, shall take all necessary steps to arrest a suspect who the government entity requests to be arrested.

(2) Period of detention.  A suspected arrested shall be detained for 48 hours, or until the government takes custody of the suspect arrested.

Imagine a police officer wants Bob arrested.  He comes up to Albert and says, “I request that you arrest Bob.” The officer also shows Albert the legal requirement of federal law that he “shall” make an arrest when a police officer “requested” it.  Being made aware of the legal obligation to arrest, Albert arrests Bob on the police officer’s behalf.

In that scenario, I think we would see pretty clearly that Albert is a state actor.   It would be pretty weak to say there was no state action because the government merely made a “request,” as the federal statute said that a requested person “shall” do what the request was.  It’s an order, not a request.  And it would be pretty weak to say that Albert was not a state actor because he merely “complied with his statutory obligations.” The statutory obligation was to become a state actor; the law requires him to become the government’s agent.

That’s exactly the case with § 2703(f).  Internet providers don’t fulfill preservation requests because they feel like it.  It’s not their idea.  They get nothing from it.  They fulfill the requests because federal law makes them do it, and the providers don’t want to violate federal law that requires them to comply.   When governments make preservation “requests” to providers, those providers are acting on the government’s behalf, doing the government’s bidding because they have to.  Seems pretty clear to me that the providers are state actors for Fourth Amendment purposes.

(2) The Seizure Question

Magistrate Judge Albreght also recommends concluding that, even if the providers were state actors, their running off a copy of the account that the defendant could not control does not “seize” anything.   As I read this, the government can order anyone’s account to be copied without limit, or even order government servers to be installed that automatically make government copies of everyone’s data. As long as the government doesn’t look at its copy yet, the act of just having  the government copy made doesn’t trigger the Fourth Amendment at all.

Here’e the argument:

A “seizure” of property occurs when there is some meaningful interference with an individual’s possessory interests in their property. United States v. Jefferson, 566 F.3d 928, 933 (9th Cir. 2009). In analyzing what constitutes a possessory interest in the context of law enforcement’s search of a defendant’s rental car, the Ninth Circuit determined that “a ‘possessory or ownership interest’ need not be defined narrowly…a defendant who lacks an ownership interest may still have standing to challenge a search, upon a showing of ‘joint control’ or ‘common authority’ over the property searched.” United States v. Thomas, 447 F.3d 1191, 1198 (9th Cir. 2006) (internal citations and quotations omitted).

Here, the Court does not find that by preserving King’s accounts from deletion Omegle and TextNow “seized” King’s property. King argues that preservation of his accounts “dispossessed him of exclusive control over the accounts and their contents.” But the Government has the better argument on this point. As a preliminary matter, while the Ninth Circuit was discussing a defendant’s ability to challenge a search of a rental car in Thomas, the Court finds the Ninth Circuit’s discussion of possession instructive here. Considering the Ninth Circuit’s decision that possession need not be defined narrowly, the Court finds King’s insistence that possession requires the exclusion of all others to be unpersuasive. As the Government points out, King never had exclusive control of his accounts because, “[a]t all times, the data was jointly possessed by both the internet service providers and King.” The Government also argues that a preservation request does not alter the account holder’s ability to use their account and view, alter, or delete information. Instead, the preservation request creates a “snapshot” of the account as it existed at the time the service provider received the preservation request. The Court thus does not find that Omegle and TextNow “seized” King’s data.

Again, I don’t see how that can be right.  It’s true that Internet providers have possession of user data. It’s data stored on their servers.  But why would this mean that making a copy on the government’s behalf is not a seizure?  I don’t see why joint possession makes a seizure any less of a seizure.

Consider this hypothetical.  Let’s say you have drugs wrapped in aluminum foil in your freezer in an apartment that you share with your roommate.  The government goes to your roommate and says, “Go into your apartment and look inside the freezer, where you will find a package of drugs in aluminum foil.  Bring the package to us now, or else we’ll arrest you for obstruction of justice.”  Not wanting to be arrested, your roommate gets the package from the freezer and gives it to the government.

In that scenario, the package was obviously “seized” for Fourth Amendment purposes.  The fact that your roommate had common authority over the contents of the freezer before the government told your roommate to get it is simply irrelevant.   You had control of the package, and the government took away your control.  The government isn’t free to take away all your stuff without limit just because you happen to have a roommate with common authority over the freezer.  By the same reasoning, the government isn’t free to order copies made of all your Internet files without limit just because the Internet works by having accounts with third-party providers.

Magistrate Judge Albreght also agrees with the government’s argument that making a government copy is not a seizure because it “does not alter the account holder’s ability to use their account and view, alter, or delete information.”  But how can that be?  Step back and think about it: The entire point of the statute, and of the preservation request, is to alter the account holder’s ability to delete their information.  Specifically, the point of the statute is to deprive account holders of their ability to delete incriminating files.  True, because the process occurs in total secrecy, the account holder can’t know that the government has altered their ability to delete their information.  Because no one tells the account holder, the account holder will wrongly think they can delete their files.  But the point of the statute is to take that control away.  They used to have control over their files, and government action took that control away by seizing a copy that the user cannot control. That is a Fourth Amendment “seizure.”

If I am reading the docket sheet correctly, objections to the Magistrate Judge’s R&R are due before District Judge Jennifer Dorsey at the end of August.  As always, stay tuned.

The post Nevada Magistrate Judge Recommends Rejecting Internet Preservation Challenge—And Why It's Wrong appeared first on Reason.com.

from Latest https://ift.tt/SOH6AR1
via IFTTT

When Our Weapons Go Missing


Ukrainian troops with a rocket launch system

Fears of loose weapons in Ukraine have become reality: Once American weapons arrive, Ukrainian criminals steal them. If U.S. arms transfer policies are not changed, Washington will inevitably accidentally arm groups that actively want to harm the United States.

In June, two separate Department of Defense inspector general reports revealed poor monitoring when U.S. weapons are transferred to Ukraine. Challenges in Ukraine’s war zone have made it nearly impossible to track the weapons.

The first report found that the personnel responsible for ensuring accountability were given no “training or guidance.” It concluded that the Pentagon does “not have accountability controls sufficient enough to provide reasonable assurance that its inventory of defense items transferred to [Ukraine] via the air hub in Jasionka was accurate or complete.”

The second report discovered that the Office of Defense Cooperation–Kyiv was unable to monitor how American military equipment was put to use. Indeed, monitors could not “visit areas where equipment provided to Ukraine was being used or stored.”

Such problems are not unique to Ukraine, but the Biden administration has been open to accepting the possibility of weapons dispersion when it comes to Ukraine’s war. Yet discounting these perils comes with four long-term security risks.

First, larger weapons systems have a high value on the black arms market. In Afghanistan, for example, the Taliban has been able to continue funding itself through its already existing smuggling networks by selling U.S. weapons left behind in the withdrawal. These weapons are now used in attacks in Pakistan, Kashmir, and the Gaza Strip.

Even before the war, Ukraine had one of the largest illegally trafficked arms markets in Europe, according to the 2021 Global Organized Crime Index. This has only intensified since the Russian invasion. For example, in August 2022 a criminal organization in Ukraine stole and intended to sell 60 rifles and 1,000 rounds of ammunition.

Second, weapons can empower groups that intend to harm Americans. This has already happened in the Middle East, where Saudi Arabia and the United Arab Emirates lost and sold U.S. weapons to al-Qaeda–linked groups. CNN has reported that in Ukraine this year, Russia sent captured NATO weapons to Iran.

Furthermore, Washington has indiscriminately provided arms to groups fighting for Ukraine. Among the groups who have received U.S. weapons is the Azov Brigade—a militia with neo-Nazi roots that is currently fighting against Russia but has previously attacked civilians in Ukraine. The Brigade was identified as a human rights violator in the State Department’s 2016 and 2017 Report on Human Rights Practices and serves as a key cog in the global far-right network.

Third, loose weapons create risks of hostile actors attaining confidential, high-value U.S. technology. In October 2022 the State Department created a plan to train Ukrainian soldiers in tracking highly portable, lethal, and advanced proprietary U.S. weapons. Nonetheless, as the plan notes, this training will take years before the plan has any substantial impact.

Fourth, weapons dispersion can escalate American entanglement in a war with another nuclear power. While loose weapons have not yet been used against Russia, Ukrainian military units have previously ignored U.S. suggestions to not attack the Nord Stream pipeline and used U.S. armored vehicles in attacks over the Russian border.

If U.S. weapons are used against Russian citizens inside Russia’s borders, it all but guarantees escalation and increases the risk of a nuclear exchange. While the chances of the latter may be low, the Biden administration should be trying to eliminate the risk entirely. 

The reality is that any time such a large number of weapons is transferred—especially to an active conflict zone—dispersion will occur. But the consequences of this dispersion are still up in the air. If the Biden administration is open to accepting these risks, Congress should speak up for Americans who aren’t.

The post When Our Weapons Go Missing appeared first on Reason.com.

from Latest https://ift.tt/wVDKp5r
via IFTTT

Yellow’s Demise: Two Decades In The Making

Yellow’s Demise: Two Decades In The Making

Authored by Todd Maiden via FreightWaves.com,

The biggest bankruptcy in U.S. trucking history could occur in the coming days when the nation’s third-largest less-than-truckload carrier, Yellow Corp., files. The company ceased all operations at noon on Sunday, and leadership representing its Teamsters workforce said it had been notified of a pending bankruptcy filing.

The company is still shopping a small 3PL unit, which may delay a filing. However, it laid off most of its nonunion workforce last week and told union employees on Sunday afternoon not to show up.

While the Nashville, Tennessee-based company saw operations deteriorate rapidly in recent months as it unsuccessfully attempted to push through operational changes with its union workforce, its ultimate failure was anything but sudden.

Bankruptcy filing years in the making

A series of large LTL and other acquisitions in efforts to transform Yellow into a global transportation and logistics leader, the ambition of former Chairman and CEO William “Bill” Zollars, were the catalysts for an eventual downfall.

In 2003, Yellow acquired Roadway in a $1.1 billion deal and then leveraged up in 2005 to acquire USF for $1.47 billion. The goal was to emerge with a command position in the LTL space, allowing the company to leverage larger scale into greater operating and cost synergies.

A much bigger organization with a debt-laden balance sheet, the company took on the YRC Worldwide moniker in 2006 as it had become a holding company for numerous transportation and logistics brands operating in more than 70 countries around the world. In that year, it would see its revenue increase more than threefold since the buying spree began to nearly $10 billion, with earnings per share of roughly $5, or $277 million in net income. That would be the financial pinnacle for the company as a freight recession would take hold that year, followed by a near collapse in financial markets two years later.

However, YRC continued to grow through the freight downturn and with a more cumbersome debt profile in place.

A sign posted on terminal gates on Sunday. (Jim Allen/FreightWaves)

Further expansion of its logistics unit occurred in China with the 2007 acquisition of Shanghai Jiayu Logistics. This further fueled the company’s global growth initiatives. The deal complemented its existing freight forwarding and logistics joint ventures in China, which were established in 2005.

Failure to integrate acquisitions and its national LTL freight network (Yellow and Roadway’s national networks weren’t integrated until March 2009) along with its debt burden left the carrier bloated entering the Great Recession. Matters were further compounded by internal service issues and a rapidly declining freight environment, which was highlighted by fierce price competition as some carriers sought to hasten YRC’s demise by underbidding freight.

The leverage proved to be too much and nearly led to a bankruptcy filing in late 2009.

Debt-for-equity swaps, wage concessions and other financial reengineering

By the end of 2009, YRC was in a perilous position. It had to find a solution for pending debt payments and appease its union workforce, which had already consented to reduced wages. YRC was also tasked with attracting freight to its network as competitors underpriced the company and its customer base sought alternatives as both groups were planning for the carrier’s exit.

After months of credit agreement amendments and extensions from its lender group, YRC was finally able to craft a $470 million debt-for-equity deal in the closing hours of 2009. The deal deferred interest and fee payments to lenders through 2010 and provided the company with access to $160 million in liquidity under its revolving credit facility. The transaction wiped out existing shareholders, including union stakeholders, leaving former bondholders owning 94% of the company’s outstanding shares.

That deal was preceded by two rounds of wage concessions from union employees. In early 2009, the union agreed to 10% wage cuts in exchange for a 15% stake in the company. Later in the year, another round of wage cuts, this time an additional 5%, as well as an 18-month cessation of pension fund contributions, would be required to get the debt-for-equity deal done.

The following year, those wage concessions would be extended into 2015 (and eventually into 2019), and the company’s new pension contribution rate would be just 25% of the rate in place in 2009 — all part of Zollars’ final restructuring, which concluded in the summer of 2011. The union’s equity stake would increase to 25%, and it would get a second seat on the board in exchange. The day before the new deal was approved, YRC said Zollars would step down upon its completion.

The 2011 restructuring included $100 million in new capital for the company along with increased liquidity under a new $400 million loan. The debt-for-equity swap left existing shareholder positions reduced to just 2.5% of the outstanding stock.

That would cap Zollars’ career at the helm. He left the same day the transaction was completed, replaced as CEO by former Yellow Transportation head James Welch.

Zollars’ compensation (including cash, stock, changes in pension valuation and perks) totaled $2.5 million in the restructuring year of 2009. He earned more than $12 million in the three-year period ended 2009.

’09 restructuring was only the beginning

Saved from bankruptcy and with a little breathing room, YRC accelerated its corporate overhaul, which began in late 2009 as a bankruptcy filing was looming. Those efforts included divesting non-LTL offerings.

In late 2009, YRC unloaded its dedicated unit and in 2010, the company sold a stake in its logistics operations to private equity to provide incremental liquidity. In 2011, the carrier sold its truckload operations, Glen Moore, to now-defunct Celadon, and in 2012, it sold its stake in Shanghai Jiayu Logistics to its joint venture partner.

Other liquidity improvement measures were required along the way, including selling and leasing back facilities and reducing capital expenditures on equipment. Reverse stock splits would be required to prop up declines in the share price as a result of the equity dilution. The company completed a 1:25 reverse split in 2010 and a 1:300 split in 2011 to comply with Nasdaq listing requirements for shares to maintain a $1 level.

Facing debt maturities, Welch would complete a recapitalization that again included debt for equity in 2014 after tumultuous but ultimately successful negotiations with the union and the lending group. That transaction would relieve $300 million in debt and pave the way for the company to refinance $1.1 billion in debt, providing it with a more stable capital structure for a while.

However, years of neglecting to fund fleet and terminal upgrades led to higher operating costs and service inadequacies compared to peers, fueling a cycle of lower yields and continual underinvestment in the network. Its industry-lagging service scores — dead last among national providers — forced it to become a low-cost provider. Its inability to appropriately charge for the freight it hauled left it barely covering operating expenses in most quarters and booking losses when accounting for interest expense and other items.

In 2019, it was able to negotiate a collective-bargaining agreement that provided it flexibility around job classifications, work rules for part-time employees and the use of purchased transportation. It was also allowed the use of box trucks in LTL operations with non-CDL drivers. Teamsters would get a pay bump of 18% in aggregate throughout the five-year term (essentially a clawback of what they had given up), the restoration of one week of vacation and an increase in the contribution rate to health and welfare benefits.

The new labor deal also laid the framework for a broader overhaul that later became known as One Yellow, in which the carrier began consolidating its four LTL operating companies, closing redundant service centers and altering work rules for some employees, among other restructuring initiatives.

The same year, YRC executed a $600 million term loan refinance, which lowered the interest rate, provided additional liquidity and offered less restrictive covenants on a portion of its debt. The deal also extended the maturity by two years to June 2024.

The more favorable flexibility in its debt profile would be relatively short-lived as the industry was about to endure a COVID outbreak and subsequent lockdowns, which negatively impacted even the strongest carriers.

Controversial $700M Treasury loan not enough to save the ship

In short order, Yellow (officially renamed in 2021) blew through a $700 million infusion from the government in the form of a COVID-relief loan. The program was established shortly after the outbreak to help companies bridge liquidity gaps directly related to lost business from stay-at-home mandates.

Numerous trucks were parked Monday at a Yellow terminal in Houston. (Jim Allen/FreightWaves)

The first tranche of the loan was $300 million, which was used to clear the deck of the company’s immediate cash needs. It covered previously delayed health care and pension plan contribution payments, lease payments on equipment and real estate, and even interest payments on its other debt, among other items.

A $400 million second tranche was used to fund capital expenditures, largely the purchase of tractors and trailers, which received considerable scrutiny from industry participants. The thought on the part of the government may have been, “In for a penny, in for a pound.” Yellow estimated it would save $10,000 to $12,000 per tractor annually running newer models, and that the upgrades would be the key to reaching longer-term financial stability.

In total, the company replaced roughly 2,400 tractors (17% of the fleet) and 3,600 trailers, and it purchased 600 rail containers — executing roughly three years of tractor capex in a 15-month period. However, the new loan raised its total outstanding debt to nearly $1.6 billion from $880 million at the end of the 2020 first quarter (the last update prior to the loan announcement).

The Treasury’s issuance of the loan in July 2020 has been heavily scrutinized since. An oversight commission concluded recently there were many shortcomings in the decision-making process used to issue the loan.

A key concern all along was the company’s “precarious financial condition” prior to the pandemic given its history of operating at a loss and its poor credit ratings. Yellow’s financial profile and the Treasury’s “less favorable” lien position, compared to the company’s other creditors, present “significant” default risk to taxpayers, the commission found.

Yellow qualified for the loan under a Treasury-created “catch-all” category — “critical to maintaining national security.” The carrier was thought to handle 68% of the Defense Department’s LTL freight at the time, a number that the commission later estimated to be only between 20% and 40%. The commission also took issue with why LTL service couldn’t be handled by another carrier and why a backup plan for service wasn’t in place in the event Yellow shut down.

However, the commission ultimately acknowledged the loan program lacked established guidelines and underwriting was done on the fly as government authorities were required to move quickly to provide emergency liquidity. It provided future remedies should the need for another crisis-induced lending program arise.

At the end of the 2023 first quarter, Yellow owed the government $729.4 million, including capitalized interest. It had made total cash interest payments of $59.6 million by the end of May, according to a company representative.

In addition to collateral for the loan, the government received a 30% equity stake in Yellow, which would likely be wiped out if it files bankruptcy.  Yellow’s two top-paid executives earned more than $6 million combined in total compensation the year the Treasury loan was issued.

No change of operations, no Yellow

In the end, Yellow’s inability to get a deal done with the union would prove fatal. Months of back and forth proved fruitless.

Running out of money and options, Yellow sued the union for breach of contract, saying the Teamsters didn’t have the right to reject the change of operations it asserted was vital to its survival. The company said the union also had dragged its feet in coming to the bargaining table when it was well aware Yellow would soon be out of funds.

Throughout the process, the union maintained it had already given enough in the form of billions in wages, benefits and pension concessions. It also said it wouldn’t allow Yellow to jump the line and rush negotiations as it was working on other labor deals with closer expiration dates. It offered to begin its normal collective-bargaining protocols, likely in August, or see the current contract through to its March 31, 2024, expiration.

Missed benefits payments to health, welfare and pension funds managed by Central States put the final nail in the coffin. The delinquency allowed the Teamsters to issue a strike notice, which spooked customers and brokers into accelerating the rate at which they were pulling freight out of the carrier’s network.

“The board members, especially those who represent the Teamsters, have not done service to the members or to the company,” Satish Jindel, founder of transportation advisory firm SJ Consulting Group, told FreightWaves.

He also faulted Yellow’s leadership for not taking pay cuts when it was desperately seeking concessions from the Teamsters.

“The board and the executives should have announced taking cuts in their compensation before asking for any accommodation from the rank and file,” Jindel said. “As they say — ‘leading by example.’ The failure of the company cannot be put at the feet of the Teamsters.” 

The bankruptcy would mark the largest filing in U.S. trucking history. The last major LTL closure was Consolidated Freightways, the third-largest carrier in 2002 when it filed. That company was generating roughly $2.3 billion in revenue with 20,000 employees (14,500 of them Teamsters).

Yellow had 30,000 employees, including 22,000 Teamsters.

Tyler Durden
Mon, 07/31/2023 – 14:45

via ZeroHedge News https://ift.tt/GIYopxO Tyler Durden

SLOOS Finds Even Tighter Bank Credit Standards, Dismal Loan Demand And A Dire Outlook For Rest Of 2023

SLOOS Finds Even Tighter Bank Credit Standards, Dismal Loan Demand And A Dire Outlook For Rest Of 2023

One quarter after the entire market was closely watching a Fed report most had never heard of before, namely the Senior Loan Officers Opinion Survey on Bank Lending Practices (also known as SLOOS), to get some sense of just how much tightening there has been in the US financial system following the March bank failures, moments ago the Fed released the latest, July SLOOS report which showed that the incredibly shrinking US loan market has accelerated its shrinkage even more in the second quarter, when bank lending standards tightened across most products, while loan demand – not surprisingly with rates at the highest level in 40 years – dropped to levels where one wonders just how the debt-addicted US economy is funding itself.

Here are the report highlights, first on loans to businesses:

  • Survey respondents reported tighter standards and weaker demand for the all-important commercial and industrial (C&I) loans to firms of all sizes over the second quarter.
  • Banks also reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.

Looking at standards for C&I loans, there are only two times it has been more difficult to get a C&I loan for small businesses in the past three decades: the covid crash, and the global financial crisis. One wonders how much longer the unemployment rate can defy the gravity from the collapse in US credit…

Next, loans to households:

  • Banks reported that lending standards tightened across all categories of residential real estate (RRE) loans, especially for RRE loans other than government-sponsored enterprise (GSE)-eligible and government loans.
  • Banks reported tighter standards and weaker demand for home equity lines of credit (HELOCs).
  • Standards tightened for all consumer loan categories; demand weakened for auto and other consumer loans, while it remained basically unchanged for credit card loans.

Meanwhile, demand weakened for all RRE loan categories.  The report also showed weak demand for credit. The share of banks reporting weaker demand for commercial and industrial loans among large and mid-size firms fell to 51.6%, from 55.6% in the first quarter.

Here is a visual summary of lending standards, which tightened for most loan categories except Construction and Land Development, Multifamily Residential and New and Used Auto Loans.

And here is loan demand summarized:

While the demand rebound may be attributed to the modest retracing in yields across the curve in Q2, which has since faded as rates are once again at the highest in 40 years, what is more troubling is that looking at the second half, banks reported they expect to further tighten standards on all loan categories. The most cited reasons for expecting to tighten lending standards were “a less favorable or more uncertain economic outlook, an expected deterioration in collateral values, and an expected deterioration in credit quality of CRE and other loans.”

Additionally, major net shares of banks also cited an expected reduction in risk tolerance, an expected deterioration in their liquidity position, increased concerns about funding costs and deposit outflows, as well as increased concerns about the effects of legislative, supervisory, or accounting changes as reasons for expecting further tightening.

In a preview of the Fed survey, Powell said “it’s broadly consistent with what you would expect. You’ve got lending conditions tight and getting a little tighter, you’ve got weak demand, and you know, it gives a picture of a pretty tight credit conditions in the economy.”

“I think it’s really hard to tease out whether how much of that is from this source or that source, but I think what matters is the overall picture is of tight and tightening lending conditions,” the Fed chair said.

In short: Biden’s “stealth” $1 trillion stimulus better be able to push the economy well into 2024 singlehandedly, because anyone hoping to get a sizable loan at good terms in the next 3-6 months will be stuffed.

Tyler Durden
Mon, 07/31/2023 – 14:35

via ZeroHedge News https://ift.tt/fblM6Bg Tyler Durden

BOJ’s Yield Curve Control “Tweak” Ends In Disaster As Yen Tumbles, JGB Yields Soar

BOJ’s Yield Curve Control “Tweak” Ends In Disaster As Yen Tumbles, JGB Yields Soar

Last Friday, ahead of the BOJ’s surprise Yield Curve Control tweak, we predicted that not even the BOJ – a central bank  that has traditionally won the Olympics in monetary policy stupidity – would be so mentally challenged as to pursue the type of half-assed YCC “tweak” that the Nikkei had leaked just hours earlier. After all, it should have been obvious to most – we thought – that a non-tweak tweak such as the one we learned the BOJ may was contemplating, would achieve nothing in terms of propping up the yen (the clear intention of Ueda, who is terrified of seeing the USDJPY rise to 150 again at which point it may be game over for Japan), while it would certainly blow up the JGB market, and set the BOJ on collision course with an even bigger bond market disaster than the one seen in January 2023, while at the same time sparking even more aggressive yen selling.

Alas, we were wrong and the BOJ again managed to shock us, and the market, with its stupidity when on Friday it announced it would engage in a half-pregnant YCC “tweak” where it would still keep the 10Y target at 0.5% but raise the JGB intervention “strict cap” from the old 0.50% level to anywhere between 0.5% and 1.0% (a range in which it would “nimbly conduct market operations” whatever the hell that means).

Source: BOJ

For timestamp purposes, we made it clear at the time, that this would be another catastrophic decision by the one central bank that will be the first to lose control of everything.

Just to be clear, we also predicted that the latest “tweak” would promptly break the JGB market while doing nothing to contain the collapsing yen, which is driven as much by the market’s outlook on how likely Japan is to normalize, as it is by the staggering yield differentials between the yen (-0.1%) and every other currency pair (the US is now at 5.50%), resulting in the juciest carry trade in history.

Anyway, while we may have been wrong in underestimating the BOJ’s stupidity and pursuing a YCC “tweak”, we were absolutely correct in predicting what will happen if the BOJ went ahead with said “tweak” and just one day later, the 10Y JGB blew out by more than 10bps, which may sounds small but for the economy with the centrally-planned bond market, this was the third biggest spike in the past decade.

What happened next was the second biggest surprise by the BOJ in the past two days: with yields spiking to a fresh nine-year high in morning trading, in hopes of containing the bond rout which we warned was coming, the BOJ announced an unscheduled bond-purchase operation to contain the JGB crash, saying it would buy the equivalent of more than $2 billion bonds at market rates, just as we had joked it would a day earlier.

It was the first time since February that the BOJ had barged into the bond market this way, suggesting that it will continue to smooth any sharp upward moves. And while the 10-year yield dropped back below 0.6%, the yen quickly reversed its advance against the dollar as FX traders realized that any attempts at tightening would lead to a collapse in the bond market, just as we warned they would. In fact, after dropping as low as 138 in the minutes after the BOJ’s Friday morning announcement as a wrong kneejerk reaction dominated the Mrs. Watanabe trading flow, the USDJPY has since blown out as high as 142.50, almost 500 pips higher in 2 days!

As Bloomberg put it, “the aggressive purchases are another reminder that Japan’s slow retreat from ultra-loose monetary policy brings a heightened risk of volatility and intervention across multiple asset classes globally. It also underscores the challenge in interpreting a rates regime that is built on gray lines to let the BOJ be flexible rather than clarity for markets.”

“That flexibility is obtained with opaqueness on when they intervene,” said Calvin Yeoh, portfolio manager at hedge fund Blue Edge Advisors Pte in Singapore. “Flexibility is another word for optionality, which potentially manifests as volatility. No one knows exactly when, between 0.5 to 1%, does the BOJ step in meaningfully, which is an awfully wide range.”

Well, we now know: 0.6% is where the BOJ’s valiant effort at normalization draws a red line. In other words: a whopping 10bps move higher which somehow is supposed to contain Japan’s 3% inflation.

Hilariously, after spending all of Friday praising the BOJ’s “bold” decision, the chorus flipped overnight, and all those who predicted the USDJPY would collapse to 130 in hours, suddenly changed their tune with some BOJ watchers going beyond what even we said, noting that the YCC band is now so wide as to render the notion of a zero target largely meaningless. Yet Monday’s operation also shows that the BOJ can come into the markets at any time.

“Unscheduled operation was a surprise,” said Keiko Onogi, senior JGB strategist at Daiwa Securities in Tokyo. “The action is probably aimed at slowing the speed of yield gains after a sharp rally in the yields, and before a 10-year bond auction Tuesday.”

Speaking after Friday’s policy adjustment, Governor Kazuo Ueda had said he didn’t expect yields to get to 1% under current circumstances. The view of many Tokyo-based economists is for 10-year yields to settle around 0.7%-0.8% by year-end, with some pointing to 1% as more likely next year than anytime soon. That, however, does little to contain the collapse in the yen, while assuring massive periodic injections of liquidity which will weaken the yen well beyond 145.

“In the near term, 10-year yields may face upward pressure, and the BOJ will try to calm that with unscheduled JGB purchase operations,” said Shigeto Nagai, Japan head of Oxford Economics.

Kyohei Morita, chief Japan economist at Nomura Securities Co., expects “the next policy move from the BOJ to be the end of negative rates and YCC around April to June” when it is sure of sustainable inflation and wage gains. Good luck with that.

The most apocalyptic take on the entire YCC “tweak” disaster came from Win Thin, the top FX strategist at Brown Brothers Harriman, who appears was reading Zerohedge when commenting in a Bloomberg TV interview.

Paraphrasing what we have been saying for the past week,

The Bank of Japan’s surprise move to ease its yield curve control program was a “half-hearted attempt” to alter policy and will only weigh on the Japanese yen going forward, according to Brown Brothers Harriman & Co.’s top currency strategist. 

Realizing that the BOJ is now chasing after the impossible trinity that crippled China’s monetary policy, Thin told Bloomberg that “You can’t have free capital flows and also control interest rates and exchange rates. The Bank of Japan is trying to do all three.”

Repeating what we said almost verbatim, the FX strategist said that the central bank’s policy decision Friday was a “very puzzling move” – “They kept the yield curve control and kept the target, but they made it a moving target in terms of the upper limit. It was a halfhearted attempt, I think, to do something.”

And the punchline: “I think they squandered a lot of credibility for really a lot of nothing.” Equity market gains and the yen’s retreat since Friday “tells me the markets really don’t believe the Bank of Japan,” Thin added.

“Where it is going to lead is the currency rate. That’s where pressure is going to be let out. I am more convinced than ever that we should buy dollar-yen” he said, and we completely agree as we explained last Friday. Not surprisingly, the BBH strategist sees USD/JPY going to 145 “if not higher.” Spoiler alert: it will be much higher.

Tyler Durden
Mon, 07/31/2023 – 14:00

via ZeroHedge News https://ift.tt/7weFSPq Tyler Durden

If Bitcoiners Don’t Do More, CBDCs Will Win

If Bitcoiners Don’t Do More, CBDCs Will Win

Authored by Logan Chipkin via BitcoinMagazine.com,

As history has shown, incumbent powers can control the narratives around their inherently-inferior solutions…

In “The Fiat Standard,” economist Saifedean Ammous argues at length that the United States federal government has been propagandizing the masses into choosing “cheap industrial substitutes” and “massively reducing (its) meat consumption” since at least 1916.

As Ammous wrote:

“…the ADA (American Dietetics Association) is responsible for formulating the dietary guidelines taught at most nutrition and medical schools worldwide, meaning it has for a century shaped the way nutritionists and doctors (mis)understand nutrition. The astonishing consequence is that the vast majority of people, nutritionists, and doctors today think that animal fat is harmful, while grains are healthy, necessary, and safe!”

In other words, even though a meat-centered diet is superior to a grain-centered one, the government and its quasi-private partners succeeded in persuading millions of people into opting for the latter.

Ammous raises the topic of dietary guidelines as just one example of how a fiat standard distorts an industry, but there’s another lesson in this story that Bitcoiners have to grapple with:

Even if your product is the best on the market, governments (and other entities) are capable of spreading narratives that persuade citizens to choose an inferior alternative.

If it happened with food, it could happen with money.

A CBDC PUNCH-COUNTERPUNCH

On July 10, 2023, Karin Strohecker published an article in Reuters titled, “Twenty-Four Central Banks Will Have Digital Currencies By 2030, Survey Shows.” Apparently, a couple dozen central banks have been making “great” progress in their development of central bank digital currencies (CBDCs). Strohecker wrote that these central banks have been “working on digital versions of their currencies for retail use to avoid leaving digital payments to the private sector (emphasis added) amid an accelerating decline of cash.”

This purported motivation behind CBDCs has been brewing for a while — in August 2022, the European Central Bank (ECB) released a report called “Towards The Holy Grail Of Cross-Border Payments.” In it, the authors compared the merits and demerits of various technological implementations of a cross-border payment solution that might be “immediate, cheap, universal and settled in a secure settlement medium.” Of the candidates they considered, they concluded that “Bitcoin is least credible” and that “the interlinking of domestic instant payment systems and future CBDCs, both with a competitive FX conversion layer” are the two most credible solutions.

While the ECB left out any remark about the risks that CBDCs pose to citizens’ privacy and sovereignty, River Financial responded with a report of its own. Spearheaded by River’s Sam Wouters, this report does explain the gaping hole in the ECB’s argument for CBDCs, as well as the technological barriers that Bitcoin ought to overcome if it’s going to be adopted worldwide.

Readers can review the technical and quantitative arguments of both ECB and River Financial for themselves — my purpose in bringing up this punch-counterpunch is that the battle between freedom-money and tyranny-money is not one that we will win by default, and that it’s as much a battle for hearts and minds as it is for product superiority. Much like the propaganda campaign that persuaded people to switch from healthier diets to those that the government preferred, central banks are levying their best words, videos and other marketing techniques to convince people that CBDCs are superior to Bitcoin.

And, in the end, their victory is possible.

UNDERSTANDING THE EDUCATION PROCESS

We know that Bitcoin solves humanity’s many monetary problems far better than CBDCs do. We recognize the havoc that rampant inflation wreaks on nations. We understand that lacking a store of value is the cause of so many anti-civilizational behaviors. But that’s not enough. If others don’t understand the fiat origins of these problems, they don’t stand a chance of appreciating Bitcoin as their solution. Whether or not central banks recognize the importance of this knowledge in the battle over the future of money, they’re certainly taking every opportunity they can to spread ideas that push Bitcoin to the outskirts and earn CBDCs widespread acceptability.

“Bitcoin bad, CBDCs good,” the people think. And that’s all central banks need, the inferiority of their product be damned.

As Wouters rightly pointed out in his report:

“Great strides have been made in education, but if Bitcoiners who are less experienced in education want to accelerate adoption, they would benefit from gaining a deeper understanding of the education process to take ownership of it and become more effective. This starts by understanding the gap between their perspective and knowledge and that of the recipient… (S)ome people inside the Bitcoin space are not aware enough of how difficult it is for the average person to go through this journey.”

As much as Wouters heroically explains the “how,” “what,” and “why” of the technological improvements that will help Bitcoin achieve widespread adoption, none of these holds a candle to people’s ideas about money. Even if Bitcoin eventually becomes as easy to use as credit cards or cash, the masses could still reject it in favor of CBDCs for purely-ideological reasons. Grain will have defeated meat once again.

This is no reason to despair. Bitcoin isn’t inevitable, no. But victory is possible, and its fate is largely determined on the ideological battlefield. The gap between our deepest explanation of monetary economics and most people’s views on the subject is vast. The same goes for the problems that fiat money continues to cause, the dangers of CBDCs, and how and why Bitcoin is a panacea for most of our money problems.

The educational effort before us is enormous, but, in the face of the enemy’s propaganda, necessary. And it’s thrilling — billions of people are about to learn about the greatest civilizational battle they hadn’t even known was occurring right under their noses.

Our war is an ideological one. Bitcoin doesn’t have to suffer the same fate as meat — and the industrial sludge that is CBDCs can perish in the sewers of history. We have persuading to do.

Tyler Durden
Mon, 07/31/2023 – 13:40

via ZeroHedge News https://ift.tt/kpvfbuN Tyler Durden

Rand Paul Files Criminal Referral Against “Absolute Liar” Fauci

Rand Paul Files Criminal Referral Against “Absolute Liar” Fauci

Authored by Steve Watson via Summit News,

Senator Rand Paul has filed a criminal referral to the Department of Justice, asserting that Anthony Fauci lied while under oath concerning gain of function research in Wuhan being funded by Fauci’s NIH.

Paul forwarded copies of 2020 email exchanges that show Fauci confirming that he knew “scientists in Wuhan University are known to have been working on gain-of-function experiments.”

The email Fauci sent to then-Inspector General of the Health and Human Services Department Garrett Grisby, cites a conversation Fauci had with, “highly credible scientists,” who, “were concerned about the fact that upon viewing the sequences of several isolates of the nCov there were mutations in the virus that would be most unusual to have evolved naturally in the bats and that there was a suspicion that this mutation was intentionally inserted.”

“Upon considerable discussion, some of the scientists felt more strongly about this possibility, but two others felt differently. They felt that it was entirely conceivable that this could have evolved naturally even though these mutations have never been seen in a bat virus before,” Fauci wrote. 

“The reasons for each side of the argument are too complicated to bother you with,” Fauci wrote.

The Senator has repeatedly vowed to expose Fauci’s role in a cover up of the origins of COVID.

Last week Paul also took aim at several virologists who apparently agreed that pursuing evidence concerning a Coronavirus lab leak in Wuhan would cause a “shit show” of problems with China, and that it was better to dismiss the notion out of hand.

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown.

Also, we urgently need your financial support here.

Tyler Durden
Mon, 07/31/2023 – 13:00

via ZeroHedge News https://ift.tt/Y0S3mCW Tyler Durden

Medvedev Says Russia Could Use Nuclear Weapon If Ukraine Offensive Wins

Medvedev Says Russia Could Use Nuclear Weapon If Ukraine Offensive Wins

Senior Russian national security official Dmitry Medvedev has issued a dire nuclear warning and threat aimed at Ukraine and its Western backers (though certainly not for the first time).

He said in a Sunday Telegram post that Russia could be forced to mount nuclear attack if Ukraine’s counteroffensive succeeds. In effect it is to say that if Ukraine “wins”, nukes would be deployed. This would happen in the scenario of “part of our land being taken away,” he said.

“Just imagine that the offensive… in tandem with NATO, succeeded and ended up with part of our land being taken away. Then we would have to use nuclear weapons by virtue of the stipulations of the Russian Presidential Decree,” the former president and now deputy chairman of Russia’s Security Council asserted, which is being widely cited in Western press reports.

“There simply wouldn’t be any other solution,” he added. “Our enemies should pray to our fighters that they do not allow the world to go up in nuclear flames.”

It remains a little ambiguous over whether Medvedev was primarily referencing Russian territory proper within its national borders “being taken away”, or if this was a reference to the four regions of eastern/southern Ukraine, as well as Crimea, which have been declared absorbed into the Russian Federation as of last year.

Putin and top Russian officials had previously asserted that Donetsk, Luhansk, Kherson, and Zaporizhzhia would now be defended as de facto Russian territory under the law. Medvedev appears to be reasserting that even if this territory comes under ‘existential threat’ of being taken by Kiev and NATO, the ‘nuclear option’ would be firmly ‘on the table’.

But Medvedev has throughout the conflict been prone to delivering hawkish, even apocalyptic-sounding warnings and statements. For example last January he said “The loss of a nuclear power in a conventional war can provoke the outbreak of a nuclear war.”

He added in the Telegram statement, “Nuclear powers do not lose major conflicts on which their fate depends.” Such threats are perhaps why Washington has remained hesitant on supplying Ukraine forces with longer-range missiles, also at a moment President Zelensky is actively vowing to ‘return’ the war to Russia.

Here’s what Zelensky threatened on Sunday, as we previewed:

On Sunday, the day following a major drone attack on Moscow’s financial district, Ukrainian President Volodymyr Zelensky has announced that he is ready to “return” war to Russia’s own territory, emphasizing that this is “inevitable”.

“Today is the 522nd day of the so-called ‘Special Military Operation’, which the Russian leadership thought would last a couple of weeks,” he said in a new video message. “Gradually, the war is returning to the territory of Russia – to its symbolic centers and military bases, and this is an inevitable, natural and absolutely fair process.” 

He described these increasing attacks Russian territory as an “inevitable, natural and absolutely fair process” of the war between the two nations.

Russia could also be seeking to reassert it’s ‘red lines’ in the face of these increasingly brazen attacks. Inside Ukraine there have been reports that intelligence and military command centers are being hit with Russian missiles at greater regularity.

When F-16s are introduced to Ukraine (possibly by year’s end or next), this will represent a whole new alarming level of escalation. Moscow has underscored that the American-NATO fighters are capable of delivering a tactical nuke.

Tyler Durden
Mon, 07/31/2023 – 12:40

via ZeroHedge News https://ift.tt/fS50M8r Tyler Durden

Inflation-Adjusted, Men Are Making Less Money Than In 1979; Women Are Doing Better

Inflation-Adjusted, Men Are Making Less Money Than In 1979; Women Are Doing Better

Authored by Mike Shedlock via MIshTalk.com,

BLS charts show interesting trends in real (inflation-adjusted) weekly earnings. Men are getting clobbered relative to women, but everyone is losing lately…

Median real earnings from the BLS, inflation adjusted to the 1982-1984 CPI Index, chart by Mish.

Median Weekly Real Earnings

  • In the first quarter of 1979 men were making $408 weekly. Today, men are making $391.

  • In the first quarter of 1979 women were making $250 weekly. Today women are making $330 weekly.

  • Collectively, people were making $335 then and now they are making $365.

Men are getting clobbered, down 4.2 percent, while median women’s earnings have risen 32 percent. These numbers may look silly but you can verify them on the St. Louis Fed FRED database.

Wait, you say, people are taking home more than $365 weekly. Yes they are, in nominal terms. Normally I take numbers and adjust them for inflation. This data is already inflation adjusted, so I had to un-adjust the data.

Median Weekly Earnings and Real Earnings Since 1979

Median real earnings from the BLS, nominal earnings and chart by Mish.

In nominal terms, men were making $282 weekly in 1979 and $1,186 weekly today. Adjusted for inflation, $282 bought 4.2 percent more in 1979 than $1,186 does today.

Women have certainly fared better. In nominal terms, women were making $179 in 1979 and $1,001 today. In real terms that’s a jump from $250 to $330, a gain of 32 percent.

Nominal and Real Average Wages

Nominal hourly wages from the BLS, real wages and chart by Mish.

In contrast to the first set of data where wages are weekly, and calculated quarterly, the BLS produces hourly data monthly. The calculation for this set is the reverse. The BLS shows nominal hourly wages and I calculate real wages.

Last week, someone on Twitter asked what earnings look like adjusted by the PCE price index. Economists tend to use 2012 as the base year for PCE so that is what I used as well. It doesn’t matter, so don’t dwell on the difference in the index year.

For both charts, I went back as far as the data was available. This chart is for production and nonsupervisory workers, not all workers. The hourly data for all workers only dates to March of 2006.

The BLS does not break out average hourly wages by sex. In terms of average hourly wage, the peak was February of 1973. For comparison purposes it’s too bad that data for the first chart does not go back as far.

As a cross check of the first chart calculation, take $28.82 hourly x 40 hours per week and you get $1,153 weekly.

February 1973 vs Today

  • In nominal terms, production workers were making $4.06 per hour. Today they are making $28.83.

  • In real PCE terms, production workers were making $17.56 then and $22.67 now, a 29 percent total jump over 30 years, about 1 percent a year.

  • In real CPI terms, production workers were making $21.05 then and $21.72 now, a 3.2 percent total jump over 30 years, essentially nothing.

We can deduce from the first chart that men are getting clobbered relative to women in both median and average terms. You can also say women are slowly catching up to men. Since we do not have a job-by-job breakdown, it’s not easy to quantify these expressions accurately.

What About Housing?

Case Shiller National and 10-City home prices indexes plus OER, CPI, and Rent indexes from the BLS.

Chart Notes

  • The latest Case-Shiller home price indexes is for May. It represents repeat sales of the same house in roughly a March-April timeframe.

  • OER stands for Owners’ Equivalent rent. It’s the price one would pay to rent one’s own home, unfurnished, without utilities.

  • CPI is the consumer price index.

  • Rent of primary resident is just what it sounds.

  • CPI, OER, and Rent as as measured by the Bureau of Labor Statistics (BLS).

Home prices wildly disconnected from the CPI in 2000 and in 2013. The disconnect accelerated in 2020.

After a two-month decline in most markets, prices are again on the rise.

Housing Not Directly in the CPI or PCE

Please recall that housing prices are not directly in the either the CPI or PCE inflation indexes. For those wishing to buy a home, both measures of inflation are dramatically understated.

That means real hourly earnings are even dimmer than I presented above.

For discussion of home prices see The Housing Bubble, as Measured by Case-Shiller, Is Expanding Again.

And please consider this question, Is It Time to Bet on an Inflation Overshoot?

*  *  *

Subscribe to MishTalk Email Alerts.

Tyler Durden
Mon, 07/31/2023 – 12:20

via ZeroHedge News https://ift.tt/diyT76n Tyler Durden