Month: August 2023

Maybe attacking the state of Florida and supporting transgender indoctrination in schools was not the best money-making business model? 

Disney has been injecting far-left propaganda into its film productions and streaming productions for a number of years, but it was not until their very public attempt to undermine Florida’s Parental Rights In Education Bill that larger audiences started applying more scrutiny to the company and withholding their dollars.  In the past, consumers used to let subversive progressive preaching slide, but with the rapid decline in story quality as well as the open hostility shown by companies like Disney towards conservatives, the tide is turning.   

Woke leftist messaging would include – Mary Sue stories designed to bolster false feminist premises while denigrating men.  Critical Race Theory messaging that attempts to exaggerate and exploit negative race relations.  The race swapping of established white characters for the sake of virtue signaling.  The erasure of positive romantic stories featuring straight protagonists; showing only LGBT relationships in a positive light.  LGBT propaganda aimed at young children.  The promotion of trans ideology, often based on anti-science.  Sexualized messaging aimed at children.  Regularly depicting pro-American and pro-free market characters as the villains.  The list goes on…         

When it comes to the “culture war” there are a few important questions that have been begging to be answered for the past several years:

1)  Is there really a market for woke propaganda in popular media?

2)  If so, how much of the population is actually going to spend money to consume that propaganda?

3)  If there is no market and the business model is a money losing prospect, then why are so many major corporations abandoning traditional American audiences and pumping out such garbage anyway? 

For a long time the public has been told that woke entertainment is the wave of the future and that the majority of Americans want to see such stories more often.  They have also been told that anyone who criticizes the social shift in media to the far-left is “probably a bigot or a fascist” and that they should be treated as monsters.  Yet, crashing audience numbers and plummeting profits for Hollywood have indicated the opposite (theater audiences have dropped by 50% in the past four years).  It is a condition they have sought to hide, but the consequences of bad business practices cannot be denied forever.

Consumer boycotts of woke brands have erupted in 2023, leading to the implosion of companies like Bud Light and the continued sales rot of retailers like Target.  Leftists have joked that the public would have to stop shopping almost everywhere just to boycott all the actively woke corporations – Basically admitting that the corporate world they claim to hate is on their side.  However, there’s always small businesses, and the boycotts don’t have to target every single woke perpetrator, they only need to make examples out of a handful to send a message.  

What’s the message?  Leftists are a minority and they are broke bums.  There is no market for what they are selling. 

Disney has learned this lesson the hard way with a string of major box office failures leading to at least $1 billion in losses this year along with their stock crashing to 9-year lows this week.  Disney park attendance is also thinning dramatically with wait times on rides down from 47 minutes to 27 minutes on peak days.  The company is now considering selling off assets to stay afloat, with Amazon in talks to purchase a stake in ESPN streaming.

One could also blame the growing cancer of “stakeholder capitalism,” a notion developed by the World Economic Forum which argues that corporations must engage in social engineering rather than being concerned with making money.  Without ample ESG funding to backstop the losses these companies have to fund their agitprop from their own coffers, and now we are seeing the inevitable results.

Authored by Daniel Lacalle via dlacalle.com,

Are the BRICS a threat to the U.S.?

The summit of the so-called BRICS (Brazil, Russia, India, China, and South Africa) has closed with an invitation to join the group extended to the Emirates, Egypt, Iran, Saudi Arabia, Argentina, and Ethiopia.

The summit has generated a lot of headlines about the impact of this widespread group of nations, including speculation about the end of the U.S. dollar as a global reserve currency if this group is perceived as a threat to the United States or even the International Monetary Fund.

Several things need to be clarified.

Many political analysts believe that China lends, invests, or supports in return for nothing. China is a major economic power, but it has no interest in being a global reserve currency. Its currency is currently used in only 5% of global transactions, according to the Bank of International Settlements.

China and Russia have capital controls. It is impossible to have a global reserve currency without freedom of capital movement. More requirements are needed than solid gold reserves to have a stable fiat currency. It is essential to guarantee economic freedom, investment, legal security, and the free movement of capital, as well as an open, transparent, and diversified financial system.

China and Russia are much more demanding and rigorous lenders than many politicians think. It seems that some emerging market politicians think that joining China and Russia will be a kind of free money panacea.

Another problem with creating a BRICS currency is that, logically, neither China nor Russia has the slightest intention of losing their national currency to dilute it alongside a group of issuers who have a doubtful track record in controlling their monetary imbalances. Over the past ten years, the currencies of the BRICS guest countries have depreciated significantly against the U.S. dollar. The Argentine peso has fallen by 98%, the Egyptian pound by 78%, the Indian rupee by 35%, the Ethiopian birr by 68%, the Brazilian real by 55%, according to Bloomberg, and the Iranian rial has collapsed by 90%, according to The Economist. Putting together weak currencies does not create a strong currency.

We must not forget that the performance of the Russian ruble (-68% against the U.S. dollar, according to Bloomberg) in the last decade has also been poor despite having a relatively prudent central bank.

The best “BRICS and guests” currency against the U.S. dollar in the last 10 years is the Chinese yuan, with a depreciation of only 14%.

For a fiat currency to be stable, it is necessary that the issuer defend it as a reserve of value, a generally accepted payment method, and a unit of measure. Freedom of capital and independent institutions that provide legal security to domestic and international investors are needed. Having a strong military power does not guarantee a currency accepted as a reserve of value, as demonstrated by the disastrous Soviet kopek, despite the USSR’s influence on half the world.

Moreover, China has no interest in taking on all the challenges required to be a global reserve currency, starting with a financial and monetary system with a high level of independence from political power. Many analysts ignore that what has made the Federal Reserve a success as the world’s central bank is that it is not under total state control or public management. The Fed may not be completely independent, but it is as independent as a central bank for a fiat currency can be.

Joining countries with governments that advocate monetizing uncontrolled public spending and massively increasing monetary imbalances cannot create a stable currency unless they implement the example of the euro. In the euro, Germany, the country with the most prudent and responsible fiscal policy, dictated the main lines of the monetary and fiscal rules for the rest. Unfortunately, the eurozone and the ECB, in trying to play to be the US and the Federal Reserve, have lost most of their options to be a real alternative to the U.S. dollar. And the euro is the greatest fiat monetary success in the post-Bretton Woods era; let us not deprive it of its merit.

The BRICS alternative starts with a major Achilles heel. China and Russia are going to have major difficulties imposing fiscal and monetary policy restrictions on their partners. Let us not forget that several of these partners have joined the group, thinking that from now on they will be able to continue printing money and spending without control, but their monetary imbalances will be distributed to other nations.

The euro has been a success because liberal democracies with independent institutions and broad economic freedom and legal certainty agreed to align their policies for the common good, creating a solid currency that avoided the debacle created by the inflationary spirals that were the norm in Europe historically when governments devoted themselves to transferring their imbalances to citizens’ wages and savings through monetary destruction. This does not seem easily replicable with BRICS and guests.

China, however, can increase its control over all these countries by implementing rigorous monetary and fiscal policies. It is the strongest lender of all the BRICS, but it is unlikely to take on the role of the euro’s Germany, willing to absorb the excesses of others in exchange for a common project. China is going to increase its control over the countries in the group, but it is not likely to jeopardize the stability and security of its enormous population by sinking the currency. The Chinese government is probably analyzing how the euro is losing monetary prudence and reaching the conclusion that it cannot take that same risk with some of these new partners. However, China will probably make the most of its financial strength to lend, increase their domestic and international growth options, and access abundant and cheap commodities.

China is the big winner of the BRICS summit. The Chinese government probably knows that many of its partners are going to continue increasing their imbalances, and this may allow China to strengthen its leadership position. However, I find it hard to believe that China will agree to the creation of a currency that others can use to trigger inflationary imbalances.

Meanwhile, in the U.S., the government may jeopardize the credibility of the U.S. dollar if it continues to generate deficits of two trillion dollars a year, more than a $14 billion estimated deficit by 2030, and with an increasing number of irresponsible advisers saying that it can create all the money it wants without risk. The fiscal credibility, institutional independence, and economic freedom of the U.S. dollar, the most widely used currency in the world, cement its leadership. If the government undermines these strengths, the dollar will lose its reserve status.

The end of the U.S. dollar, if it comes, will not arrive through competition from another fiat currency, as the temptation of governments to destroy the purchasing power of the issued currency is too strong. It will probably come from independent currencies.

Three years of relentless, post-George Floyd race-baiting by major media, politicians and woke corporations has had varying effects on Americans’ perception of the extent to which racism is a real problem in the country.

A growing majority of whites think false accusations of racism are a bigger problem than failures to perceive real racism. The cultivation of black victimhood has taken a predictable toll on that group, but the biggest and most interesting move has been observed among Hispanics. 

To their credit, the folks at Pew Research Center have dared over recent years to ask Americans which is the bigger problem:

• “People NOT seeing racism where it really does exist”
• “People seeing racism where it really does not exist.”  

In this year’s survey, 54% of whites said phantom racism is the bigger problem for American society. That’s up 2 points since 2019. 

What happens when you constantly tell black people that racism is the reason for every disparate outcome in American society — and that they’re consequentially owed cash reparations and special treatment? In 2019, 14% of blacks said false claims of racism represent the biggest problem. That’s now shrunk to 11%, with 88% saying the inability to see racism is the bigger challenge. 

The most significant shift over the past four years has been observed among Hispanics. Fully 40% of Hispanics now say that seeing racism where it does not exist is the bigger problem — an impressive 10-point increase from 30% in 2019.  A similar but smaller shift has occurred among Asians. A third say phantom racism is the bigger problem, up 5% since 2019. 

As with every other issue, the sharpest divide comes across party lines, as 74% of Republicans say phantom racism is the bigger worry, compared to just 19% of Democrats. 

By Seth Carpenter, Morgan Stanley Global Chief Economist

The topic of artificial intelligence (AI) is still top of mind in markets, in particular among equity investors, who have to sort the winners from the losers and decide how to trade the theme. The macro topics of employment, inflation, and interest rates are relevant to the theme as well. Over time, we will learn how AI gets deployed, in which industries, and over what time horizon the benefits are realized.

For employment, I continue to be skeptical of the gloomy prognostications that a myriad of workers will lose their jobs to new technology. Economies evolve, and the advent of the lightbulb has not left a lingering horde of unemployed candlemakers. The implications for labor markets can be categorized (following, for example, Acemoglu (2021)) into a productivity effect, a displacement effect, and a reinstatement effect. Higher productivity makes each worker more profitable and thus should increase the demand for labor over time. But some will be displaced in the short run, as fewer workers are needed and tasks get automated. But a frequently overlooked factor is that new technology creates new jobs, reinstating many workers. The invention of the computer created a need for computer programmers. Because displacement can be more of a short-run phenomenon, the faster the adoption of the new technology, the higher the risks of an adverse effect on employment. The timing of adoption and deployment is still unclear;my colleague Joe Moore and his team have highlighted immediate market effects, while our recent CIO survey suggests that firms are looking into AI, but that an immediate disruption is not likely.

We should also remember that simply because the same work can be done by fewer workers, the result is not lower employment. History suggests we will simply see more output. The legal profession is often cited as ripe for disruption by AI. But the question remains whether the same amount of legal work will be done with fewer paralegals and associates, or instead, if items such as wills and trusts will go from being the purview of the relatively wealthy to becoming ubiquitous. Confoundingly, the higher output may not be measurable. In financial services, for example, AI is being explored and deployed. Institutional investors may learn to cover more single-name stocks than ever before and develop investment theses across more and more asset classes. Doing more work without reducing employment is clearly a plausible outcome, but if the whole industry adopts the technology, gains will be competed away. The result may be no measured efficiency gains or an arms race with no winner.

But surely, across the various applications, there will be some net increase in meaningful and measurable productivity, allowing the economy to produce more at lower cost. The result eventually would be a disinflationary impulse. For now, the Fed is working on bringing inflation down through restrictive monetary policy—AI or not. And since the productivity gains will only play out over time, we can think about the period after the Fed has restored price stability. Will inflation fall back below target? Only until the Fed sees the disinflation happening, and then it will want to ease policy to take up the slack created by a more-productive economy.

While the disinflation from rising productivity should first lead to lower policy rates, over time, if productivity gains are large and sustained, we should actually see higher policy rates. The greater productivity is, the greater the incentive to invest. To keep the economy in equilibrium with rising productivity takes higher interest rates. And if the higher productivity growth is expected to last for some time, the higher rates should be reflected across the entire yield curve. Further, because the higher rates would be driven by fundamentals and not inflation, the entire real yield curve should rise. But, instead of seeing higher real rates as a negative for equities, faster productivity growth means that both earnings and real rates can rise in tandem—a shift in a correlation that many in markets have become used to.

Free speech is a problem – Not so much for the general population, but for the establishment class and their grip on social influence.  Much like the invention of the printing press that created an information revolution in the Middle Ages, the internet has created a global platform which almost anyone on the planet can access and speak, hypothetically, to millions or even billions of people.  This level of information sharing is unprecedented in human history and so it is no surprise that governments and globalists want the ability to filter what is said and what is heard to their benefit.

To this end, the EU Commission, using the covid event as a convenient cover, heralded the passage of the ‘Digital Services Act’ (DSA) in early 2022.  The DSA was presented as a tool for the EU to “rein in” the power of social media corporations, but in reality its primary purpose is to give the EU legal precedence to force Big Tech companies to apply EU censorship standards to their platforms even if they are not European based businesses.  In other words, the goal is to force the entire western world to accept the European governance of online speech while ignoring national boundaries and constitutional protections.

Similar to China’s “Great Fire Wall”, the EU plans to use the DSA as a means to shut down domestic access to offending websites and content.  But where the EU situation is unique is in their focus on controlling speech outside of Europe as well.  That is to say, information and speech among non-Europeans could still be identified as a threat to their leftist sensibilities and cited as a reason for sanctioning a website altogether. 

This means, for example, that an EU-friendly (censored) version of Twitter might still not be allowed to operate, not because of information shared by Europeans, but because of information shared on Twitter outside of Europe.  The EU will not be happy until every other country follows the same online rules they follow.   

These rules would include EU “hate speech” and “disinformation” restrictions.  Keep in mind that in many parts of Europe using the wrong pronouns for a trans person is considered punishable hate speech, and pointing out that medical masks are useless for stopping covid transmission is considered dangerous disinformation.  Scientific facts don’t play into such determinations, they are purely political. 

Elon Musk and Twitter have been cited as targets of the DSA, and some argue that the DSA was specifically created by the EU in preparation for Musk’s eventual takeover of the massive platform.  EU officials publicly argued with some vigor that they would find a way to force Musk to conform to their political taboos.  Twitter is one of several dozen signatories to the European Union’s “2022 Strengthened Code of Practice on Disinformation,” a self-regulatory framework for addressing disinformation tied to the DSA.  

The 2022 Disinformation Code contains a series of 44 “Commitments,” some of which are further subdivided into “Measures.” When a company becomes a signatory, it submits a subscription document identifying which Commitments (and, more specifically, which Measures) it is signing up for. Twitter’s June 2022 subscription document indicates that Twitter has committed, among other things, to: “defund the dissemination of disinformation and misinformation,” “prevent the misuse of advertising systems to disseminate misinformation or disinformation,” and “put in place or further bolster policies to address both misinformation and disinformation.”

Who gets to determine what constitutes “disinformation?”  A group of faceless and unelected bureaucrats on the other side of the world from Twitter headquarters.  How Musk plans to meet the requirements of the DSA without crushing the renewed surge of free speech on the site is not entirely clear.  In theory, armies of mass flaggers operating out of places like Germany can now seek out tweets they don’t like in the US and have posts erased, or accounts locked and banned, even if the info presented is factually accurate.

That which the EU considers “hate speech” and “disinformation” is based in far-left ideology and zealotry, not on clearly defined and reasonable guidelines.  That which progressives deem acceptable today will ultimately become outlawed tomorrow.  Adapting to their rules means abandoning any semblance of a free environment. There is no free speech in Europe.   

Thierry Breton, the current Commissioner for Internal Market of the European Union and member of the World Economic Forum, tweeted this week about his excitement for the official legal enforcement of the DSA, saying that it would ‘make the internet safer for everyone.’   

But what threat is the public being saved from?  Hurt feelings?  The notion that governments are stewards of speech is nonsensical because all governments naturally seek to restrict freedoms to the furthest extent to which the public will tolerate.  Political elites are not protectors, they are predators, always looking for that next piece of freedom they can snatch away in their jaws.