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Google Celebrates Frederick Douglass Today. So Should You, If You’re a Libertarian.
Today’s Google doodle is an image of Frederick Douglass, the escaped slave who became one of the most eloquent and influential abolitionists in American history. The doodle signals the start of Black History Month, which grew out of earlier traditions such as “Negro History Week” and offers a period of intensive reflection on the contributions of blacks to the history of the United States while also reminding the country of the historical realities of slavery and other unspeakable ills pushed on African Americans due to de facto and de jure racism.
Douglass, who was believed to have been born in February, 1818 is of special interest to libertarians for many reasons. As Damon Root has written for Reason, Douglass was a true classical liberal who believed in individualism, strong property rights, and voluntary philanthropy as the best way to create a free, prosperous, and inclusive society. From a 2012 review of Nicholas Buccola’s The Political Thought of Frederick Douglass:
“Douglass’s arguments against slavery are, in a very important sense, arguments for liberalism,” writes Linfield College political scientist Nicholas Buccola in The Political Thought of Frederick Douglass, his engaging new study of the great abolitionist. Taking seriously Douglass’ dual commitment to both a “robust conception of mutual responsibility” and “the ideas of universal self-ownership, natural rights, limited government, and an ethos of self-reliance,” Buccola offers a nuanced portrait that illuminates both Douglass and his place in American intellectual history….
Buccola notes, “throughout his development as a political thinker, Douglass was presented with a series of ideological alternatives,” including the pacifist anarchism of Garrison, who said the only government he recognized was the “government of God,” and the utopian socialism of John A. Collins, general director of the Massachusetts Antislavery Society, who believed “that private property was the root of all evil.” Douglass, Buccola observes, “consistently rejected these in favor of liberalism.”
Socialism was then becoming particularly attractive to many New England reformers. Yet Douglass rejected the socialist case against private land ownership, saying “it is [man’s] duty to possess it—and to possess it in that way in which its energies and properties can be made most useful to the human family.” He routinely preached the virtues of property rights. “So far from being a sin to accumulate property, it is the plain duty of every man to lay up something for the future,” he told a black crowd in Rochester, New York in 1885. “I am for making the best of both worlds and making the best of this world first, because it comes first.” As Douglass’ glowing description of his first paying job indicated, he also considered economic liberty an essential aspect of human freedom….
In my opinion, Douglass’ 1852 speech “What to the slave is the Fourth of July?” is one of the greatest texts in American literature, which simultaneously enacts what is these days lazily called “American exceptionalism” while critiquing it. Douglass exemplifies the tradition of critiquing the country’s laws and customs by examining them in light of rarely attained but always articulated ideals of equality:
What, to the American slave, is your 4th of July? I answer: a day that reveals to him, more than all other days in the year, the gross injustice and cruelly to which he is the constant victim. To him, your celebration is a sham; your boasted liberty, an unholy license; your national greatness, swelling vanity; your sounds of rejoicing are empty and heartless; your denunciations of tyrants, brass fronted impudence; your shouts of liberty and equality, hollow mockery; your prayers and hymns, your sermons and thanksgivings, with all your religious parade, and solemnity, are, to him, mere bombast, fraud, deception, impiety, and hypocrisy—a thin veil to cover up crimes which would disgrace a nation of savages. There is not a nation on the earth guilty of practices, more shocking and bloody, than are the people of these United States, at this very hour.
The three editions of Douglass’ autobiography (most Americans know the first one) are phenomenal testaments both to the ideals of American freedom and the ways that ideal has rarely come close to being realized. Perhaps most important, he offered up a critique of the country’s history, customs, and laws but also personified and argued for a way forward in which all Americans would both be more free and able to transcend the awful indignities and crimes of the past.
For more Reason on Douglass, go here.
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Friendly Reminder: The Iowa Caucuses Don’t Actually Matter That Much
Iowa will caucus tonight, and Beltway reporters (myself included) are busy bringing you all the analysis you can handle. But it bears repeating—repeatedly—that actually, what happens in Iowa often stays there.
This is one of the least politically correct things a person can say. Early last year, Republican strategist Liz Mair lost her job for having tweeted, months earlier, disparaging comments about the state.
Nonetheless, it’s indisputable that Iowa’s track record of choosing the eventual winner of the GOP nomination is poor at best. Of course, the purpose of the cacuses is not to predict who will win; it’s for Iowans to make their voices heard and to contribute to the nominating process. But to the extent people try to make sweeping conclusions about who’s most likely to come out on top based on what happens today, they’re grasping at straws. Let us recap.
In 2012, this was the winner of Iowa’s Republican caucuses:
And this was the person who actually won the nomination:
In 2008, this was the winner of Iowa’s Republican caucuses:
And this was the person who actually won the nomination:
Iowa Republicans also picked the wrong victor in 1988, when Bob Dole beat the sitting vice president there, and in 1980, when George H.W. Bush defeated Ronald Reagan in the Hawkeye State.
Things are, I concede, somewhat better on the Democratic side, where Iowa voters picked Barack Obama over Hillary Clinton in 2008, John Kerry in 2004, and Al Gore in 2000. But if you look back as far as 1992, you’ll find that future president Bill Clinton received less than 3 percent of the vote in the state that year. And four years before that, eventual nominee Michael Dukakis came in just third.
It’s absolutely possible that the people who win both sets of caucuses tonight will go on to be their respective parties’ nominees. But if that happens, it will be overwhelmingly a matter of chance. Iowans’ votes matter in the sense that they will determine who their state’s delegates go to. And doing poorly in an early state like Iowa is often the impetus a struggling candidate needs to to call it quits (and in some cases to throw his or her support behind a rival). But winning Iowa is far from determinative of the final nomination outcome. And that’s just a plain fact.
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Hillary: “I’m Asking People To Hold Me Accountable”
As we anxiously await the results out of Iowa, where we’ll get the first real test of whether “protest” candidates Donald Trump and Bernie Sanders have a legitimate shot at upending America’s political establishment, Hillary Clinton is fighting to convince the electorate that the scandal involving her use of a private e-mail server to transmit state secrets is largely a distraction dreamed up by the GOP to derail what might otherwise have been a largely uncontested run for The White House.
Last week, the State Department admitted that 22 of the e-mails Clinton sent on her private server were indeed “top secret” and would not be released to the public. 18 additional e-mails from Clinton to President Obama are also being withheld. “The disclosure of the top secret emails, three days before Iowans vote in the first-in-the-nation caucuses, is certain to fuel the political debate over the unclassified computer server,” The New York Times wrote on Friday. “The top secret emails lent credence to criticism by Mrs. Clinton’s rivals in the presidential race of her handling of classified information while she was secretary of state from 2009 to 2013.”
The Clinton campaign respondeed by saying that the process for reviewing the e-mails “appears to be over-classification run amok” – whatever that means.
“This is very much like Benghazi,” Clinton said during an interview with ABC. “Republicans are going to continue to use it, beat up on me. I understand that. That’s the way they are.”
The extent to which the controversy has dented Clinton’s reputation with voters is still up for debate but it’s probably safe to say that the former First Lady would be polling stronger had she kept state business out of her personal inbox when she was Secretary of State.
Put simply, to the extent Americans trusted Clinton in the first place, the e-mail controversy undermines their faith in one of Washington’s most seasoned politicians.
On Monday, Clinton spoke to CNN about the e-mails and about what separates her from Bernie Sanders, the only serious challenge she faces for the Democratic nomination.
In what may go down as one of the most amusing soundbites of her campaign, Clinton told CNN she that she’s “asking people to hold her accountable.”
“I know how you get things done. I am a progressive who wants to make progress and actually produce real results in people’s lives. That’s what I’m offering,” Clinton said.
“I’m not over-promising,” she continued. “I’m laying out the plans that I have, I’m asking people to look at them and I’m asking people to hold me accountable, because I want to get back to working together, to try to unite this country.”
We assume that since Clinton wants us to “hold her accountable”, she’ll happily march over to the Justice Department and indict herself.
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The Bank of Japan Just Rang the Bell at the Top
As we first noted last week, something absolutely astounding has happened.
Two weeks ago, the head of the Bank of Japan, Haruhiko Kuroda stated that Japan has a “potential growth rate of 0.5% or lower.”
By way of context, remember that the Bank of Japan has been at the forefront for ALL monetary policy for decades. The US Federal Reserve launched its first QE program in 2008. The European Central Bank launched its first QE program in 2015. The Bank of Japan first launched QE back in 2001.
In short, the Bank of Japan has two decades of experience with QE. Indeed, Japan is responsible for the single largest QE program in history, its “Shock and Awe” program launched in April 2014 which equaled over 25% of Japan’s GDP.
Which is why when Kuroda admitted that Japan’s GDP growth “potential” is limited to 0.5% or lower, he was implicitly admitting that QE cannot generate growth.
Remember, Central Bankers speak in half measures. They NEVER admit failure directly. Their primary job is to maintain confidence in the financial system even if it entails lying.
In Central Banker speak, Haruhiko Kuroda has admitted that there is a limit to potential GDP growth regardless of how much QE and Central Bank employs. He has admitted that Central Bankers might not have the tools required to generate growth.
Even more that this, his actions SUPPORT this claim.
Last Friday, the Bank of Japan announced that it would be implementing Negative Interest Rate Policy or NIRP.
This change in policy was incredible. But what’s even more incredible is the fact that the Bank of Japan did NOT increase its QE program when it announced NIRP.
Put another way, the head of the Bank of Japan announced that QE cannot generate GDP growth, and then DIDN’T increase the Bank of Japan’s QE program when it came time to announce a new policy.
In short, Haruhiko Kuroda’s actions are supporting his words.
This is the single most important development in the monetary world. The head of a MAJOR Central Bank announced that QE cannot create economic growth and then refused to increase his bank's QE program.
As usual, the markets have yet to adjust. Eventually they will. When they do, the S&P 500 will be below its March 2009 lows.
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Manufacturing Bounces But Disappoints, Hovers At 6-Year Lows
While January's final manufacturing PMI print disappointed (52.4 vs 52.6 expectations) and dropped from its initial print, its still managed a seasonally-adjusted bounce off December's two year lows. As Markit warned, this is still one of the worst prints in the last 2 years as "the manufacturing sector continues to struggle against the headwinds of weak global demand, the strong dollar, slumping investment in the energy sector and rising financial market uncertainty." ISM Manufacturing also rose very modestly but disappointed as Decmber's data was revised lower still.
Commenting on the final manufacturing data, Chris Williamson, chief economist at Markit said:
“Despite picking up slightly, the January PMI reading is one of the worst seen over the past two years, highlighting the ongoing plight of the manufacturing sector.
“One bright light appeared, in that order book growth picked up, led by an upturn in domestic demand. However, hiring remained in the doldrums, suggesting that firms remain cautious in relation to the business outlook and reluctant to expand capacity.
And then ISM Manufacturing data hit…
Respondents were broadly pessimistics:
"The oil and gas sector continues to be challenged by low oil and gas prices. Risk of suppliers filing for bankruptcy and reducing their workforce is becoming an increasing risk. Our company workforce is also declining." (Petroleum & Coal Products)
As Markit concludes…
“The manufacturing sector continues to struggle against the headwinds of weak global demand, the strong dollar, slumping investment in the energy sector and rising financial market uncertainty, all of which mean the goods-producing sector looks set to act as a drag on the wider economy again in the first quarter of 2016.”
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WTI Crude Plunges To $31 Handle As Production Cut Gains Entirely Erased
Denials, Goldman’s dismissal, and now Persian Gulf oil producers unsupportive, and Thursday’s exuberance is done…
You didn’t really think it was that easy right?
As WSJ reports,
Persian Gulf Arab oil producers don’t support holding an emergency meeting of the Organization of the Petroleum Exporting Countries, officials said, dampening expectations that the group will act to prop up sagging crude prices.
Persian Gulf Arab OPEC delegates said they want to wait until the next scheduled OPEC meeting in June, when they will have a clearer picture of how new barrels of Iranian oil are affecting the market now that western sanctions have ended. Iran has pledged to increase production by a million barrels a day this year, potentially flooding a market that already has too much supply.
“We still don’t how much oil Iran can add to the market and this won’t be clear for weeks if not months so calling for an emergency meeting is pointless,” a Gulf OPEC delegate said.
The Persian Gulf Arab states include Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, an influential bloc that is leading OPEC’s current policy of letting the market sort itself out.
The comments come as Venezuelan energy minister Eulogio Del Pino conducts a tour of oil-producing countries such as Russia and Saudi Arabia to drum up support for a coordinated output cut in hopes of lifting prices. OPEC’s inaction has helped oil prices fall to levels not seen in more than a decade, hitting $27 a barrel last month.
* * *
A third OPEC delegate said Gulf Arab delegates see little upside to an emergency meeting and a production cut. “If we meet in the next few weeks for an emergency meeting and we cut, we are potentially subsidizing shale production,” a third Gulf Arab OPEC delegate said, holding the often-stated view that American shale producers can ramp output up or down faster than conventional oil producers.
But what is most notable is the ever louder war of words between Iran and the Saudis:
The impasse has left some oil-industry producers seething at Saudi Arabia. Akbar Nematollahi, the chief of public relations for Iran’s oil ministry, called the Saudi policy “illogical,” “obstinate,” “stubborn” and potentially dangerous, in a little-noticed opinion article published in December in the ministry’s official magazine.
“The Saudis are now snared in a trap they set to other petrostates,” he wrote.
Clearly no love lost between the two nations.
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Google Celebrates Frederick Douglass Today. So Y
Don’t Treat Uber, Lyft Drivers Like Employees: New at Reason
Recently the ridesharing company Lyft, Uber’s largest competitor, settled a pending lawsuit for $12.25 million. Lyft can continue to classify its drivers as independent contractors—a designation that is crucial to the sharing economy’s success. But the settlement may lead to additional difficulties for other sharing-economy companies.
Jared Meyer of the Manhattan Institute for Policy Research explains why labor regulators should resist the urge to force 21st century sharing-economy companies to treat their employees like traditional 20th century workplaces.
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IEX Strikes Back: Charges NYSE With “Tiering” Order Flow, Shows “Latency Arbitrage” Is Real
As most market structure watchers are well aware, the biggest debate currently roiling the field of equity markets revolves around the August 21, 2015 submission by the dark pool made famous by Michael Lewis’ Flash Boys, IEX, in which it is seeking become a public trading venue that will compete with the New York Stock Exchange and Nasdaq Stock Market. What makes IEX different from all other “lit” venues and markets is its embedded technology which implements a 350 microsecond order delay which makes HFT frontrunning, spoofing, and quote stuffing of orders impossible.
This “speed bump” which would apply to everyone has led to a vocal outcry among the established HFT players who allege that what IEX is doing would go against the principle of market fairness, when in reality virtually every exchange provides tiers of access speeds to paying clients, in order to be richly compensated by those who can afford to frontrun general orderflow.
The best example of this may be the recent advent of “laser” trading at the NYSE, duly chronicled here, which seeks to provide a several microsecond advantage to those who can afford it.
In any event, as discussed here previously, at the heart of virtually every complaint against granting IEX exchange status is that a ‘speed bump’, would “result in the investors receiving stale and misleading quote information” according to such prominent competitors as the NYSE.
Overnight, the IEX, faced with stiff resistance from the likes of not only the NYSE but also NY Fed “favorites” as Citadel, struck back and in an op-ed posted on the IEX website on Sunday night, IEX cofounder Don Bollerman said that the NYSE also has a speed bump, one which it has keep quiet about and which serves merely to further enrich its best-paying clients.
Here is the full IEX allegation of impropriety at the NYSE:
IEX is applying to become a registered stock exchange and we find ourselves at the center of a fierce debate over what is, and what is not, permissible in the operation of a U.S. stock exchange. The heart of the issue is the IEX “Speed Bump,” a coil of fiber optic cable that slows down access to our market by 350 microseconds, which is one one-thousandth of the time it takes to blink your eye.
Our speed bump has two primary purposes. First, it protects client orders on IEX from being scalped at stale prices by certain high-speed traders who have purchased faster access to information from other exchanges, and know the prices to be stale. Second, it protects clients who use IEX’s Router from being beaten to other exchanges by high-speed traders who are looking to react to the client’s orders by removing liquidity on those exchanges before the orders can be executed.
IEX’s detractors are trying to convince the Securities and Exchange Commission (“SEC”) that IEX’s speed bump will harm the entire U.S. stock market and that it gives IEX an unfair advantage. The irony is that over the past ten years, U.S. stock exchanges have invested huge sums of money creating two-tier markets – building and offering faster data and technology infrastructures at a price that only a small niche of traders can benefit from or afford, while at the same time continuing to offer slower products to everybody else.
Some of the existing exchanges might say such accusations are unfounded, with the justification that anyone who is willing to pay up can have access to the fast lane. However, the bigger questions remain: why offer both slow and fast access, and how transparent are the relative advantages/disadvantages of each?
The NYSE Speed Bump
Last year, IEX noticed that its ability to access displayed quotations (our “fill rate”) on the New York Stock Exchange (“NYSE”) had degraded to as low as 84% (meaning we were able to, on average, trade 84 shares out of every 100 shares that were quoted at the time we attempted to trade). On some days, 1 out of every 10 orders sent to NYSE missed ALL available liquidity. In contrast, IEX’s fill rate averages 96.9% across all other U.S. exchanges. We found this especially curious given that our fill rate on Arca, an exchange owned by NYSE and located in the same data center, was 96.8%.
While consulting with NYSE, they advised we consider upgrading from the NYSE FIX gateway to their Binary gateway instead. One of the few public documents we found stated that the Binary gateway is a “new, faster protocol [which] reduces bandwidth and latency.”
After making the change, we noticed our fill rate on NYSE immediately improved to 97%, on average. The practical explanation: using NYSE’s FIX offering is so much slower than Binary that market participants seeing IEX’s Router trade on other exchanges were able to race ahead of our routing client and cancel or trade with quotes on NYSE through the faster Binary gateway before IEX’s client order arrived through the slower FIX gateway.
Fill Rates by Exchange (%)
Source: IEX Router 1/20/2016 – 1/26/2016.
So why does this matter?
First, it offers more validation that “quote fading” or “latency arbitrage” at the microsecond level is real.
Second, by offering the faster binary access method, NYSE effectively imposed a “Speed Bump” on all of its participants who did not upgrade. They essentially slow down everyone else by offering a faster means of access that only a few have bothered to adopt given the amount of development work necessary to do so. We found very little documentation about this offering, and no public filings with the SEC.
Most interesting, the difference we found in the speed between NYSE FIX and Binary ranged from approximately 200 to 400 microseconds. And those microseconds translated into over a ten percentage point difference in fill rates! NYSE’s speed bump was intentionally imposed on existing participants with very little disclosure, and without any review or approval by the SEC. All the while, NYSE continues to be a registered stock exchange with a protected quotation.
Moreover, this isn’t just some temporary transitional system upgrade; NYSE has offered both means of access in parallel since 2011.
By comparison, IEX’s speed bump is 350 microseconds and is equally applied to all our participants – there is only one lane. IEX has been fully transparent in our dealings with members and our filings with the SEC, but this transparency is being used against us as existing exchanges, including NYSE, are citing the speed bump as a reason to prevent IEX from having a protected quotation, the status that NYSE enjoys under its current fast lane/slow lane model.
Does this mean only exchanges that offer an uneven playing field and varying speeds of access will be allowed to operate? And that an exchange that offers a level playing field, with uniform access for all will not be allowed to compete?
Some would have you think that the debate over our exchange application is about rules, or even market structure philosophy, but it’s not. What the debate is really about is commercial interests. IEX slows everyone down to make our market more fair. Other exchanges offer products with different access speeds: connection ports, co-location, and market data – charging a premium to the fast which enables them to make money trading against the slow. Manufacturing those kinds of trading “opportunities” creates market share and revenue for those exchanges.
IEX’ conclusion:
If participants are provided the opportunity to choose the IEX exchange model, IEX can grow. If it grows, other exchanges will either lose market share or need to adopt similar investor protections themselves. Either way, the premium on pure speed goes down, and that will cost a select few players, including the exchanges themselves, a lot of money. Clearly those players have a very strong incentive to prevent IEX from ever becoming an exchange.
And who are those players? The answer is easy – just read the IEX comment letters.
Normally, this would be an open and shut case, with the SEC granting the IEX its desired exchange status: after all nobody is forcing market participants to use IEX – they would only do it if they themselves agree that the US stock market is, for lack of better words, “broken” and “rigged”, thus benefiting the IEX business model which has set off to fix precisely that. If there was no demand for IEX’s “speed bump” it would disappear on its own without regulatory intervention: capitalism 101.
However, since granting IEX exchange status would lead to an immediate market structure disruption, one which would impair such embedded HFT players as Citadel which, as we have explained previously is the NY Fed’s preferred “arms length” intermediator in the market to ingite momentum at critical downward junctions, we are very skeptical that when all is said and done, the SEC will grant IEX what it wants: after all there are too many status quo revenue models at stake, not to mention a potential threat to the Fed’s preferred market “intervention” pipeline.
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