- Did Trump Just Solve The Border Crisis: Mexican President "Agreed To Stop Migration Through Mexico" Trump Claims
Did Trump Just Solve The Border Crisis: Mexican President “Agreed To Stop Migration Through Mexico” Trump Claims
Did Trump solve the border crisis two months before even being sworn in as the 47th president?
Two days after surprising markets – and sending the peso plummeting – by announcing he would enact 25% import duties on Mexican goods if the country doesn’t stop the flow of drugs and migrants across the border.
tariffs on Mexican goods in response to the flood of drugs across the porous southern border, best known for allowing millions of illegal immigrants to enter the US in the past four ears, Trump’s unexpected gambit may have already paid off.
In a post on Truth Social network, Trump announced that after a “wonderful” conversation with Mexican president Claudia Sheinbaum, she “agreed to stop Migration through Mexico, and into the United States, effectively closing our Southern Border.”
He added that the two also talked about “what can be done to stop the massive drug inflow into the United States” concluding that it was a “very productive” conversation which of course, it would be, if indeed Trump – who again is still two months away from inauguration – managed to solve the US border crisis just 48 hours after using targeted tariffs as a bargaining chip.
While it remains to be confirmed on the Mexican side if Trump’s recollection of the conversation is accurate, Trump’s announcement comes just hours after the legacy media reported that Mexico would take on a more aggressive posture, with the AP reporting that Sheinbaum had suggested that “Mexico could retaliate with tariffs of its own” and that while she was willing to engage in talks on the issues, drugs were a U.S. problem.
“One tariff would be followed by another in response, and so on until we put at risk common businesses,” Sheinbaum said, referring to U.S. automakers that have plants on both sides of the border.
She said Tuesday that Mexico had done a lot to stem the flow of migrants, noting “caravans of migrants no longer reach the border.” However, Mexico’s efforts to fight drugs like the deadly synthetic opioid fentanyl – which is manufactured by Mexican cartels using chemicals imported from China – have weakened in the last year.
Amusingly, Sheinbaum also said Mexico suffered from an influx of weapons smuggled in from the United States, and said the flow of drugs “is a problem of public health and consumption in your country’s society” which judging by the libs ongoing reaction to Trump’s victory is pretty much spot on.
As noted, there is still no official confirmation or full context of the agreement from President Sheinbaum’s side, but the market certainly reacted with the peso surging, and almost wiping out all losses from the past 48 hours after Trump’s first unveiled his 25% tariff threat.
If confirmed, this would be the second time Trump has managed to convince Mexico to suspend migrants from crossing its territory to enter the US. Back in 2018, former President Andrés Manuel López Obrador – a charismatic, old-school politician – developed a chummy relationship with Trump. The two were eventually able to strike a bargain in which Mexico helped keep migrants away from the border – and received other countries’ deported migrants – and Trump backed down on similar threats.
While Sheinbaum, who took office Oct. 1, has been seen as a stern leftist ideologue trained in radical student protest movements, and appeared less willing to pacify or mollify Trump, it seems she too has capitulated just 48 hours after Trump unveiled what was coming.
Tyler Durden
Wed, 11/27/2024 – 23:17 - The Top States Where Americans Are Looking to Buy Homes Heading Into 2025
The Top States Where Americans Are Looking to Buy Homes Heading Into 2025
A new study has revealed where Americans are most likely to buy a home heading into the end of 2024. Highland Cabinetry conducted a comprehensive analysis of all 50 U.S. states to determine where homebuying is most preferred.
The study utilized search data from Google’s Keyword Explorer Tool to gauge interest and incorporated additional factors such as home sale prices, mortgage rates, average rent, and home value changes over the past year. Data was sourced from the U.S. Census Bureau, Business Insider, Zillow, and others.
A preference score was then assigned to each state, combining these metrics to create a comparative ranking.
California emerges as the most sought-after state for homebuyers, boasting a preference score of 75.8. Despite its high average home sale price of $782,695, the Golden State saw the largest home value decrease at 2.8% over the past year. Coupled with over 5.6 million searches for terms like “buy a house,” this drop signals growing interest in the state as a potential investment opportunity. However, California remains the priciest state to rent, with average monthly rent at $1,870, presenting challenges for renters but opportunities for landlords.
Texas and Ohio stand out for their affordability. Texas, with a preference score of 55.8, recorded nearly 4.8 million home-buying searches and offers one of the lowest average home sale prices at $303,352. Monthly rent in Texas is relatively low at $1,290, making it an attractive choice for both buyers and renters.
Ohio, ranked eighth with a score of 51.1, is the cheapest state to rent, with an average monthly rent of $949. It also boasts the lowest home sale price among the top states at $221,816, combined with a 3.5% rise in home values, signaling strong investment potential.
Florida, New York, and New Jersey round out the top states for homebuying interest. Florida’s reasonable home prices, averaging $396,318, and moderate rent costs of $1,525 earned it a score of 62.2, while New York secured second place despite its high mortgage rates and modest home value growth, according to Highland Cabinetry.
New Jersey, with a significant 5.2% increase in home values and one of the lowest mortgage rates at 4.84%, remains a strong competitor, though its average home sale price of $508,430 places it in the mid-range.
While California leads in overall interest, states like Texas and Ohio highlight the appeal of affordability. The findings suggest that prospective buyers balance various factors, including potential long-term value, cost of living, and market trends.
A Highland Cabinetry spokesperson emphasized the importance of looking beyond upfront costs: “If you’re considering purchasing a home, look beyond just the price tag. While states with declining home values, like California, may seem attractive, remember to weigh other factors such as mortgage rates, average rent, and potential long-term value growth.”
They concluded: “A state with a modest initial investment can become a hidden gem if its home value trends upward, offering a better return in the long run. Diversifying your search can help you spot opportunities that align with your financial goals and lifestyle needs.”
Tyler Durden
Wed, 11/27/2024 – 23:00 - A Single Point Of Failure
A Single Point Of Failure
Submitted by Ahmed Bin Sulayem, Kimberly Process Chair 2024
The global diamond industry once again finds itself at a crossroads, and while the need to curb conflict diamonds and ensure ethical sourcing remains paramount, the European Union’s proposal for a single diamond control node in Antwerp raises serious concerns about sovereignty and efficiency, while undermining the integrity of the Kimberley Process (KP).
In a statement issued by the Diplomatic Service of the European Union, my comments made during the KP Plenary meeting in my capacity as the KP Chair were described as “regrettable” and that the Kimberley Process had “failed, for a third year in a row, to address the implications of Russia’s war of aggression against Ukraine on the global rough diamond sector.”
As an organization, the KP serves a very specific function – to unite administrations, civil societies, and industry in reducing the flow of conflict diamonds. It has no mandate to endorse political sanctions against sovereign nations. As a process that has proven its purpose and function, particularly by identifying all diamonds at source, the EU should first ask themselves why now they wish to displace an operation they have trusted for a generation with a less effective proposal that is untried, untested, and unrequired. It should also question why its position has isolated itself within the global diamond community, which increasingly sees its proposal as a play for hegemony over the holistic needs of the industry.
Contrary, the KP’s decentralized solution is overwhelmingly supported by industry members, KP observers, including the World Diamond Council, civil society, and numerous Belgian stakeholders, many of whom are afraid to speak out in fear of reprisal. As the Kimberley Process Chair, I have consistently voiced my concern about this centralized approach. Not only does it disrupt the established KP framework, a decentralized network of 59 nodes, (60 if you include recently onboarded Uzbekistan), that has functioned effectively for over two decades, but worse, undermines the trust and collaboration that has upheld the equitable participation and sovereignty of all member states.
Conversely, the single-node model imposes a Eurocentric lens on the global diamond trade by placing disproportionate burdens on African producers, requiring them to channel their diamonds through Antwerp for verification before accessing G7 markets. This not only adds logistical and financial costs but also undermines the ability of African nations to self-regulate and manage their own natural resources. In other words, the EU’s agenda can only be seen to be self-serving as a way of preserving its relevance in an industry that overwhelmingly rejects supervision and bureaucracy in favour of decentralised collaboration.
Frankly, it is disheartening to see that despite vocal opposition from African nations, including Botswana, Namibia, and Angola, and the concerns raised by the African Diamond Producers Association (ADPA), Europe remains deaf and committed to its single-node concept, setting a troubling precedent reminiscent of its imperial past. Even in terms of practical efficiency, this centralised approach creates a single point of failure, making the system vulnerable to corruption, bottlenecks, and inefficiencies; vulnerabilities for which Antwerp already has a demonstrable track record.
And what logic selects Antwerp? Not consensus. Not its track record.
Belgium, and specifically Antwerp, was long considered the heart of the global diamond trade. However, this glittering reputation is tarnished by a history of corruption, smuggling, and ethical breaches. The Monstrey Case exposed a network of 220 corrupt diamond dealers, of which 107 were charged for large-scale forgery, including fraudulent Kimberley Process certificates and money laundering. Other notable cases include Agim De Bruycker – the long-standing Antwerp Federal Police Commissioner and Head of the Diamond Squad, who was arrested twice and served a custodial sentence for similar charges.
If one were to choose some paradigm of efficiency, Antwerp is hardly a strong candidate, leading to the conclusion that the choice was made at a geopolitical level for the benefit of the few. This isn’t to say that any location is perfect. Any single location is, by its nature the wrong choice. The argument for a decentralized system based on transparency, versus blindly trusting the EU for certification, is just common sense. Even when taking a step back from the diamond industry specifically, the current global political climate, with its shift towards nationalism and self-determination, further underscores the need for a decentralized approach. As former European Central Bank President Mario Draghi aptly stated, the future of competitiveness lies in embracing decentralization and empowering individual nations.
Throughout its twenty-four-year history, the KP has proven its effectiveness in curbing conflict diamonds and promoting ethical sourcing, while its tried and tested processes have the capacity to adapt and improve, ensuring that all nations have the right to self-regulate their natural resources. Additionally, the UAE’s proof-of-concept KP certification platform, which was showcased at the KP Plenary in Dubai, is a testament to the potential for innovation within the existing framework. It demonstrates that technology can be leveraged to enhance transparency and traceability without compromising sovereignty or imposing undue financial and logistical burdens. In this, I look forward to working with the KP family to build a future where all stakeholders, particularly Africa’s producing nations, continue to have a voice and benefit equitably from their natural resources.
Tyler Durden
Wed, 11/27/2024 – 22:30 - Thanksgiving Dinner Will Be 19% More Expensive This Year Than Before Biden Was Elected
Thanksgiving Dinner Will Be 19% More Expensive This Year Than Before Biden Was Elected
Each year the American Farm Bureau Federation releases a price survey of classic items found on the Thanksgiving dinner table. This year, the average cost of feasting stands at $54.33, which is less than last year but still constitutes a $8.64 increase from before the pandemic.
The most expensive item by far is the turkey, which this year costs an average of $25.67 and is an increase of $4.87 from pre-pandemic levels. While most ingredients have increased somewhat, sweet potatoes, fresh cranberries and whipping cream have dropped in value.
2024 marks the second consecutive year that the average price of a Thanksgiving dinner in the United States has decreased.
However, as Statista’s Anna Feck reports, this does not erase the increases seen between 2020 and 2022, when the meal rose from an average of $46.90 to $64.05 thanks to the impacts of inflation on food prices and farmers’ costs.
You will find more infographics at Statista
The AFBF discovered regional differences in the average cost of a Thanksgiving meal, with the most affordable prices found in the South at $56.81 and the most expensive in the West at $67.05.
The shopping list of the survey includes all ingredients and foods in quantities sufficient to serve a family of 10 (though quite frankly we question the serving sizes that implies). Volunteers checked prices in grocery stores in all 50 states and Puerto Rico for the Farm Bureau.
Tyler Durden
Wed, 11/27/2024 – 22:00 - Financialization & Missed Boats: When Mythology Papers Over Reality
Financialization & Missed Boats: When Mythology Papers Over Reality
Authored by David Bahnsen via The American Institute for Economic Research,
Executive Summary
Despite its ubiquitous use in modern America, the term ‘financialization’ is deeply misunderstood. Evidence shows the concept’s meaning often changes in different contexts. In some instances it serves as a relatively benign catch-all term for anything construed as a “greater role for the financial sector in the economy.” Others have described financialization as a “mismatch between the public interest and Wall Street interest.” In some instances, it is misunderstood as the simple pursuit of profit.
As the term ‘financialization’ has gotten more mileage in recent years, critics have seized on the ambiguity of the word to wage class warfare and attack capital markets, which are little understood. Among the most heavily criticized institutions and actions in the financial sector are the following: hedge funds, private equity, high-frequency trading, stock buybacks, dividends, and banks.
Key Points
This paper explores how the term ‘financialization’ has been employed – and explains why it should not be confused with mere financial sector activity—and demonstrates how its critics have done the following:
- Inadequately defined the term
- Used a critique of the financial sector to disguise rank-class envy
- Failed to understand the nature of markets and the primacy of resource allocation
- Demonized instruments of financial markets that have been overwhelming positives for economic growth
- Proposed policy initiatives that would unilaterally do more harm than good
- Failed to see the most egregious actors in that which distresses them: excessive government debt and excessive monetary policy
Introduction
The term ‘financialization’ has received significant attention in recent years and is seeing far greater use in the vernacular of policymakers and thought leaders. The term is used in different ways by different parties, and a plethora of agendas exist behind these discussions. What’s clear is that there is growing interest in the role of financial markets in the broader economy.
While a treatment of financialization that embraces nuance is difficult in our time, no treatment will be coherent without nuance. The different uses, agendas, and contexts matter, and using vocabulary to poison a well is easy to do in this discussion, and also counterproductive. This essay explores the underlying concerns behind financialization, and seeks to more accurately describe what market forces do while addressing misconceptions about ‘financialization’ and free markets.
Conscious effort is required to avoid the laziness embedded in the label to paper over a class warfare argument. At the same time, advocates of robust capital markets concede that financial activities exist that offer limited productive value. In other words, it is entirely possible (and, indeed, will be the position of this paper) that what is often referred to as ‘financialization’ is no such thing at all, and is rather a misguided attack on all capital markets. And yet, it is also entirely possible (and the thesis of this essay) that a consortium of policies has facilitated what can be called financialization, and these policies should be rebuffed as contrary to the aim of a productive economy which facilitates maximum opportunity for flourishing.
In this nuance, we find the tragic irony of this contemporary debate. A growing movement, increasingly bipartisan, hostile to various activities in financial markets, has identified the wrong targets for critique. In so doing they not only have demonized healthy and vital components of an innovative economy but have missed the culprits who do warrant our attention. The reasons for this misidentification of cause and effect vary from a weak understanding of financial market reality to more severe ideologically driven errors. When the critics of financialization show a weak understanding of the problems they seek to solve, their proposed solution can only be flawed, incomplete, and misguided. Activities pejoratively referred to as financialization that are healthy and useful need to be defended. Likewise, activities, policies, and incentives that pollute the engines of a healthy economy need to be criticized. In short, a lot is on the line in this contemporary discussion.
The first section of this paper seeks to define what financialization is and what it is not. Upon establishment of a clear definition, analysis is needed to determine what is negative and what is positive. Once defined, an objective assessment of the causation of this phenomenon is in order.
After clarifying what financialization is, it will be useful to note the dangers of class warfare in the debate. This essay strives for an intellectually honest critique of any economic development or policy disposition that is weighing on the cultivation of prosperity. It does not seek to exploit or incite class envy. Nor does it seek to utilize demonization as a substitute for argument.
Critics of financialization, or at least those prone to using the term, have concerns about economic productivity and how resources are currently allocated. A basic refresher in how markets work and how resources are most efficiently allocated will be a useful foundation for this study.
In a similar vein to how class warfare underlies many misguided attacks on financial markets, a vigorous defense of profits is paramount to this discussion. Financial activity that hurts the common good is fair game for our scrutiny; an activity that is criticized merely because of its profitability is not. This essay will explore why corporate profits are vital in a prosperous society.
There exists a lengthy list of expected targets of criticism, even beyond the abstract and poorly defined “Wall Street.” Specific vehicles, institutions, and activities such as private equity, hedge funds, high-frequency trading, both commercial and investment banking, the payment of dividends, the buyback of corporate stock, and passive ownership of public equity all receive the ire of today’s market critics. In each case, their concerns ring hollow, incomplete, or woefully inaccurate.
An abundance of policy solutions now circulate seeking to remedy various conditions described herein. Eliminating bad solutions and embracing good solutions, all the while considering expected trade-offs, must be our aim. Unfortunately, many proposed remedies must be considered worse than the disease, and for this reason, also deserve our attention.
Likewise, it behooves us to consider the positive innovations in financial markets, fruits of a market economy and society ordered in liberty, that have demonstrably improved conditions for prosperity and flourishing. It does critics of finance no good to analyze that which is prima facie problematic without also looking at the clear positive results that robust financial markets have made possible.
And finally, we must look at that which is truly responsible for downward pressure on economic growth and productivity. Critics of financial markets so often reach over dollar bills to pick up pennies, concerning themselves with benign activities that present nothing more than a cosmetic concern, while ignoring the substantial and measurable negative impact of excessive government indebtedness, an obese regulatory state, an inefficient tax system, and most ignored of all, monetary policy that substantially misallocates resources.
Re-orienting our understanding of this subject will promote a cogent direction in economic policy and better move us towards the proper aim of financial markets—human flourishing.
What ‘financialization’ is, and isn’t
‘Financialization’ can mean different things in different contexts, but it generally carries negative overtones. The definition matters because, for some (including the author), there is a ‘financialization’ phenomenon that warrants significant criticism. But upon closer scrutiny, the actions most often described as ‘financialization’ warrant no such criticism. A coherent definition also allows for precision in what is being scrutinized and criticized, while failure to define the term properly risks generating an inadequate critique of what should be criticized, and a wrongheaded critique of that which should not.
There is an abstract but fair context in which financialization is a catch-all term for a “greater role for the financial sector in the economy.” At that level, it is a reasonably benign description and does not necessarily indicate any malignant effects on the economy as a whole or specific economic sectors. Here ‘financialization’ simply describes a scenario whereby capital markets activity becomes more prominent.
Other conceptions of financializations, however, are explicit in their condemnation of the manner in which financial markets re-allocate capital in ways that increase profits to owners of capital but without paying heed to what such critics’ conceptions of social justice or equality. An example of this is an American Affairs article that views financial actors as tools of “market worship” which, its author claims, undermines a just and responsible society.
A more particular definition of financialization might incorporate the influence or power of financial markets in overall economic administration. If we referred to the ‘technologization’ of society we would more likely be referring to a greater use of technology than increased power for technology elites, but it seems fair to allow for the inclusion of both—some increase of use and some increase of power.
Regardless, however, of what sector of the economy is having a new noun made out of its description, greater use of that sector is not self-evidently problematic. It may even be an obvious improvement (“medical sophistication”). Indeed, one could argue that influence or power is expected when greater utility is found in a particular segment of the economy. Whether it be consumer appetites or just general product novelty, the influence of various segments of the economy ebb and flow quite organically around their use, relevance, and capability. A generic increase in the use of financial services and accompanying influence lacks the specificity necessary to identify it as problematic.
As the term ‘financialization’ has gotten more mileage in recent years, those concerned with its allegedly malignant impact have taken advantage of the ambiguity, complexity, and mystery of capital markets (real or perceived) and present them as a malignant force. In this sense, class envy is a more likely description for much of what is described as financialization. It is therefore incumbent upon us to break down the ambiguity of where financial sector activity might be putting downward pressure on productivity, and where the term is being used only for its well-poisoning virtues.
Because financialization involves some basis for warranted criticism, mere financial sector activity is not the same as financialization. Likewise, increasing financial sector profits should not be considered the same as financialization. Critics are fair (prima facie) to suggest that if such profits come at the expense of other sectors, and at the price of total economic growth, then there may be a problem. However, the mere accumulation of financial sector profits is not financialization unless, in a zero-sum sense, such profits result from a decline in total profits and productivity. This will be a tough burden to overcome.
Is financialization the same thing as securitization, i.e., manufacturing financial products (securities) around other aspects of economic activity and streams of cash flow? Does the economy suffer when more components of economic life are securitized, meaning, capitalized, traded, valued, priced, and institutionally owned and monitored? Does securitization distract from organic economic activity, product innovation, and customer service? Or does it facilitate more of the above, mitigate risk, and enhance price discovery? Does securitization invite profits into the financial sector, while benefiting the public good by opening new markets for healthy activities (i.e. auto loans, inventory receivables, debtor financing, and more)? Is a critic of financialization willing to say that securitization enhances economic opportunity and activity, but still must be viewed skeptically because of the enhanced profits it produces for the financial sector?
Some have said that financialization produces a “mismatch between the public interest and Wall Street interest.” This may be getting closer, if we believe that scenarios exist where the production of goods and services that make people’s lives better are contrary to the wishes of Wall Street (i.e. our nation’s financial markets). Do those who invest, steward, trade, and custody capital do better when that capital is put to work for the public or against the public? It would be a high burden of proof to suggest that the financial sector at large (distinct from an individual actor) has interests disconnected from the broad economy.
The above listed distinctions and clarifications should make critics of Wall Street be more careful in framing their critiques of the financial sector. Confusing the financial services sector by giving the public exactly what it wants for working against public interest is a profound mistake. Close analysis of this dynamic reveals that what Wall Street is often being criticized for is not working against the public interest, but rather giving the public exactly what it wants too liberally. From subprime mortgages to exotic investments, many products and services may prove to be bad ideas, but they can hardly be called things that “Wall Street” distributed to “Main Street” against the latter’s will.
Nor should financialization’s problems be confused with the mere pursuit of profit. To the extent that critics of the profit motive exist, their philosophical objections are hardly limited to the financial sector. The productive pursuit of profits in a market economy is a good thing, and this judgment does not exclude the financial sector. The profit motive is not a problem in ‘financialized’ or in ‘non-financialized’ enterprises. Economic activity intermediated by financial instruments does not suddenly take on a different character. Rather, the problem is where more productive activities are substituted for less productive activities. If the production of goods and services towards the meeting of human needs is replaced by non-productive ‘financializing’, a problem exists that requires attention.
As we shall see, such ‘financialization’ does, indeed, exist. However, the culprits behind such are never the ones targeted by financialization’s loudest critics[1].
Class warfare by any other name
Associating Wall Street with greed and callous disregard for the public is not new. While Hollywood portrayals of Wall Street in the 1980s and 1990s focused more on hedonism and a general profligate culture, there has been a multi-decade distrust of “money changers” and various representatives of the financial markets of America. “Wall Street” has the disadvantage of being nebulous. It has not been known in a geographical context for a century, and its linguistic shorthand for capital markets is ill-defined and understood. What it is, though, is an easy target of the envious. It suffers from the lethal combination of being affiliated with riches and success, while at the same time lacking a clear definition. This tandem allows for an all-out class warfare on the very concept of Wall Street without any need for nuance or specificity.
Greed, arrogance, corruption, and disregard for the common good ought to be repudiated regardless of the industry in which they occur. These character components are common traits in fallen mankind, not unique to the financial sector. The particular disdain felt for Wall Street is really class envy that receives intellectual and moral cover from the widespread impoverished understanding of what our financial markets and the actors within them do.
We thus need a sober separation of the envy of wealth and success from a granular understanding of the work being done in any sector of the economy. A middle-class worker may believe a Hollywood A-list actor is grotesquely overpaid, or they may be jealous of the generous compensation that such an elite group of professionals enjoys, but demonizingall “acting” or “entertaining” makes no sense. Reasonable people can hold different subjective opinions about the talent of a given celebrity, but analyzing their theatrical or cinematic skills is hardly enhanced when buried underneath an intense jealousy of their compensation.
The same dynamics unleashed by envy and lack of knowledge applies to Wall Street and particularly the scrutiny of financialization’s role in driving or hindering economic productivity. That such a dynamic is common should not allow it to stand. Our economy either has a problem with financial sector activity in itself hindering productivity, or it doesn’t. We either need policy reforms to limit the use, power, and influence of financial markets, or we do not. The reality of this discussion is that those components of the modern economy that have most distorted and hindered economic growth are not as easily demonized as Wall Street, because bad policy, bad ideas, and the folly of central planning do not fall into a class envy narrative. A vital ingredient in our task is correctly identifying that class warfare is part of the ‘financialization’ critique.
Resource allocation and productivity
Getting to the core of this issue becomes possible once we accept that financialization, properly understood, is the substitution of productive activity with non-productive activity.. Financial markets involve the intermediation of capital in facilitating transactions, but they do much more. When one speaks of financial markets taking from another part of the market, what does that mean? How can we identify when this is occurring? What should we do about it?
Much of the problem comes down to not knowing what a market is. If markets were created by the state, or imposed by a third party, one could argue that the financial sector is negatively impacting markets. But a market is not imposed or created by the state or any other disinterested third party. A market is two people transacting. Embedded in market transactions are all sorts of realities about the human person. Humans make choice and act individually. They have subjective tastes and preferences, have reason, are fallible, have a high regard for self-preservation, and tend to pursue what they regard as their self-interest.
Given that humans are also social beings, most market activities also involve some degree of social cooperation. Our transactions with one another often take place in the context of a community. Our transactions often involve access to goods and services for entire communities. Steve Jobs did not make the iPhone for his childhood friend; he made it to scale distribution globally. Some products are purposely more limited in scope and appeal. The complexity and inter-connectedness of markets cause us to forget that markets are actions of mutual self-interest between free people.
When we hold to the fundamental basics of the market we are in a better place to consider where a financial sector may enhance the facilitation of our market objectives. Likewise, when we forget what a market is, we are more likely to be tempted by the allure of third-party actors to intervene, oversee, regulate, plan, and control the economic affairs of mankind. We forget that a market is grounded fundamentally on human actions at our peril.
In the context of free men and free women making a market together, negotiating the terms of trade, commerce, use of labor, and other conditions of economic activity, we can see both individually and cooperatively where financial markets can be a powerful tool of facilitation. Currency facilitates divisibility in exchange at the simplest and historically earliest of levels. Trading a herd of cattle for water presented challenges; trading with a currency to allow for settling accounts without impossible barter exchange values changed the world. Currency rationalizes exchange and facilitates more of it.
But it still must be said: the currency is not the end, but the means to the end. The financial instrument that facilitates the accumulation of water or cattle of whatever the goods or services may be is a mere tool. The resources being allocated, traded, pursued, exchanged, and acquired—enhances productivity and quality of life—are separate from the financial instrumentation. This intermediary functionality of money is a feature, not a bug. At the most basic of levels, it was the initial function of financial markets to drive resource allocation and free exchange.
It would be disingenuous to assert that all we mean, today, by financial markets is its intermediary function in exchange. Currency remains a vital part of economic activity and for much of the same reasons it was thousands of years ago. While the discussion of the financial sector facilitation of resource allocation begins with currency and it evolves, the fundamental function does not. When capital is made available for projects, the goods and services underlying the capital are still paramount. The use of debt or equity to entice support of a project invites a risk-reward trade-off, and creates a new “market,” but it does so towards the aim of an underlying market. Will customers like this product, or not? Will this entrepreneur execute? Is this cost of capital appropriate for this endeavor? Financial markets represent the pursuit of a return on capital, and yet, the return that capital rationally pursues comes from an underlying good or service.
Forgetting these points leads to economically ignorant conversations where you hear critics of financial markets suggest that we must stop talking about “cash flows” and “financial engineering,” and start focusing more on productive activity, customer satisfaction, and innovation. Where are “cash flows” from, if not the sales of goods and services? When financial activity is considered in the prospects of a business, or even for macroeconomic impact, it is all in the context of a “means to an end” – the instrumentation of finance to generate wealth-building activities. Financial resources (debt capital, equity capital, deposit funds, working capital, etc.) are evolved tools for driving resource allocation.
Our capital markets have matured and fostered innovation because, like our culture, they embrace and help us calibrate risk-taking. Devoting a significant amount of financial resources to a risk-taking enterprise is inappropriate for a person of limited means with certain obligations and monthly cash flow needs, lacking the capital to absorb losses. But the great projects that enhance our quality of life represent the risk of failure. Bank depositor money has only a limited capacity for loss absorption; a widow’s retirement savings might have no capacity for loss absorption; but money pooled and targeted for equity investment contains the risk-reward character suitable for investment. That our financial markets have developed, further, into more complex structures for both debt and equity, as well as various securitized options, does not alter this basic fact: Money is a mere instrument in allocating resources.
Have financial markets in the economy over the last five decades put downward pressure on capital expenditures, as we are often told? Quite the contrary, the empirical support is overwhelming that the evolution of capital markets enhanced capital expenditures over the last fifty years. The trendline was broken after the global financial crisis, but the upward trajectory of capital expenditures is indisputable.
Likewise with “non-residential fixed investment,” the so-called business investment component of how Gross Domestic Product (GDP) is measured, we see a steady increase in tandem with financial markets evolution. A post-crisis interruption of trendline growth will be better explained shortly, but fundamentally business investment has stayed robust as financial markets have innovated, grown, and evolved.
Perhaps an increased role of financial markets in the economy has not hurt capital expenditures or investment into new goods and services (i.e. R&D, factories, inventories, machinery, etc.), but has siphoned off profits from other sectors. Those making that specious claim carry the burden of proving it, but the empirical evidence is not up for debate. As the financial sector has become a modestly higher percentage of GDP, total national income has risen, making obsolete the fact that the financial sector’s portion of that income has risen, too.
The claim that profits from trade and production have been replaced with profits from financial activity is incoherent at best and patently false at worst. Profits inside the financial sector are tangential to the underlying activity of resource allocation. The financial sector is certainly capable of incorrectly allocating resources. Inherent to risk capital is the possibility of loss. Do financial markets allocate capital, subject to the trade-offs of risk and reward, more resourcefully and efficiently thanthe alternatives?.
What are those alternatives? One option is significantly limited access to capital markets, thereby limiting the instruments available for economic output. Another option is to meet capital needs with an expanded role for the state instead of using private capital. Again, the contest is between robust financial markets, declining financial markets, and greater governmental allocation of resources. These are the options on the table, and this is so because of what a market is. Markets allocate resources based on the decisions of people operating in their self-interest. Condemning financial markets for easing the operation of natural processes hampers economic growth and invites crony corruption.
In defense of profits
The topic of corporate profits is integral to discussions of financialization. Financial markets critics worry that profits have become problematic, and that ‘financialization’ is to blame. For our purposes, it is reasonable to ask if we are concerned with how profits are generated, or if we are concerned with what is being done with profits.
Many critics of financial markets claim that its profits are not connected to social productivity. This implies the existence of “socially unproductive” profits. Support for this view seems reasonable if we are talking about the profitability of certain unwholesome activities—strip clubs, online pornography, so much of the mindlessness of a gaming technology culture, etc.
But is the sentiment of “socially unproductive profits” putting a burden on profit makers and profit-seekers that is unfair? The general objective of meeting the needs of humanity through a profitable delivery of goods and services is unobjectionable. Profits become problematic when they are ill-gotten (fraud, theft, corruption), and yes, many would concede that profits from legal but also immoral activities warrant discussion. Yet the burden of creating fruitful and uplifting profit-creating activities belongs to the people in the market place and the associations and communities that constitute civil society – not the state. When undesirable activities occur, it is not the profit pursuit behind the activity that is the problem, but rather the problem itself. The last concern we should have with hired hitmen is their financial aspiration!
Concerns about “socially unproductive profits” is a category error that lacks a limiting principle. The creation of “socially productive” profits by disinterested third parties via intervention, cronyism, or some other form of central planning has to be read in the context of its trade-offs. The unintended consequences unleashed in this vision for society are catastrophic. It is not the burden of financial markets to resolve the tension that can exist between worthy social aims and profit-seeking activities. It is also untrue that financial markets exacerbate this tension. Because markets reflect the values, aims, interests, and intentions of free human beings, the financial resources behind these market-making endeavors will reflect the values of the people engaged in them. Demonizing the profit motive per se misidentifies the appropriate solution of moral formation and strong mediating institutions.
The financialization critique of profits is built on class envy and economic ignorance (not how profits are created, but what is being done with them). Robust financial markets allow for optionality that supports flexibility, choice, and future decision-making (for example, dividends, stock buybacks, and investing in corporate growth). Risk-taking owners receiving profits incentivizes future investment, promotes facilitates cash flow needs for investors, and enables consumption that satisfies other producers, and makes possible charitable bequests and other activities. Nothing in the prior sentence is possible without presupposing the existence of a profit. Optionality in what to do with profits is vital. The assumption that only the reinvestment of profits into more hiring, wage growth, further inventories, or other forms of business investment are appropriate is short-sighted, arrogant, and lacks factual evidence. Yes, some reinvestment of profits is generally warranted for the sustainability of a business. Many more mature companies reach a free cash flow generation that does not require additional capital reinvestment, but many do. Decisions around profit allocation are impacted by competitive pressures, company culture, investor desires, and other complexities.
What is not complex is that profits are the sine qua non of the entire discussion. Financial markets are a tool in generating profits whose very distribution is the subject of this discussion, and financial markets provide greater possibilities for how those profits are distributed. Profits themselves are not problematic, and in no way do financial markets “financialize” what is done with those profits. Optionality should be heralded, not condemned.
The usual bogeymen
At the heart of the modern crusade against financial markets are objects of ire: the institutions, innovations, and categories that become convenient targets for those who lament the role of the financial sector in the economy. As previously noted, these complaints are often reducible to rank class warfare. However, accepting the concerns at face value allows us to analyze many financial market innovations. This assessment should result in gratitude for capital markets, not condemnation. The following list is just an overview.
Private Equity
Perhaps no component of financial markets has become more caricatured and demonized than what is known as “private equity.” The words carry more connotation than just “equity ownership of companies that are not publicly traded.” The private equity industry is large, powerful, and dynamic, and has become a vital part of the American economy. To critics, this is something to bemoan. An objective analysis comes to a very different conclusion.
At its core, private equity represents professional asset managers serving as general partners, putting up some equity capital themselves (in amounts that can be majority ownership or often very limited), raising further equity capital from professional investors as limited partners, and taking ownership positions in companies. While the ownership is usually a majority position, it is almost always intended to be temporary (assume 5-7 years as a median hold period), and is very often financed with debt capital on top of the equity the general and limited partners put in.
The targets being acquired may be distressed companies whereby some enterprises have suffered deterioration and distress, and the hope is that new capital, management, and strategy may right the ship. But often the targets are highly successful companies that have achieved a certain growth rate and strong brand, but require additional growth capital to scale, more professional or seasoned management, or some synergistic advantage that a strategic partner can bring. And beyond the objective of “repaired distress,” and “growth and scale,” there is often an exit strategy for founders and early investors who can monetize what they have built by selling to new investors who could have any number of strategic or financial considerations in the acquisition (roll-ups, ability to introduce greater operational efficiency, etc.). Motives and objectives of buyers and sellers vary across private equity, and the industry’s growth and success have facilitated a highly specialized, niched, and diversified menu of private equity players.
There are various arguments made against the industry that are sometimes at odds with one another (they return too much capital to the owners compared to workers; but also, the returns are terrible and the industry is a sham). Opponents see private equity as either too risky, too opaque, too illiquid, too conflicted, or too unsuitable for the common good of society. Each concern deserves analysis.
First, the notion that private equity returns are terrible ought to be the greatest encouragement to the cottage industry of those concerned about private equity. If the returns on invested capital coming back to private equity investors were terrible, or even subpar, in any market known to mankind this industry would self-destruct over time. Sponsors would not be able to raise money. Limited partners would find other alternatives for the investment of their capital. Even acquisition targets (who generally carry some skin in the game) would seek better buyers out of their self-interest. Could some constituency of “sucker” leave some lights on longer than one might expect? Sure. But as a growing, thriving, popular institution in capital markets, private equity would evaporate if it were not generating returns that satisfied its investors. This strikes rational market students as obvious. Now, the range of return outcomes has historically been much wider for private equity managers than public equity managers, and the delta between top-performing managers and bottom-performing managers is much wider in private markets than in public markets. This is an advantage to the space, as skill is more predominantly highlighted, and noteworthy advantages are more statistically compelling, purging the space of poor performers and attracting more capital to diligent asset allocators. But no rational argument exists for why the largest, most sophisticated investors on the planet (institutional investors, pension funds, sovereign wealth, endowments, and foundations) would maintain exposure to private equity strategies with either inappropriate fees or inadequate results. If one believed that private equity was damaging to economic growth or the public good, poor investment results would be the ally of their cause.
Second, opacity and illiquidity are features, not bugs. Entrepreneurial endeavors are not straight lines. Businesses routinely face headwinds, cyclical challenges, unforeseen circumstances, and interruptions to strategy. Likewise, investors routinely face emotional ups and downs, sentiment shifts, and volatility of temperament. That a reliable capital base exists in private equity which prevents the latter (investor sentiment) from damaging the former (the realistic time frame needed for a business to succeed) is a huge advantage to the structure of private equity. Of course, some investors’ circumstances render illiquidity unsuitable for them. The solution is not to strip the illiquidity advantage and patient capital that it presents from private equity, but rather for free and responsible investors to exercise agency, and not invest where not suitable. Private equity provides a highly optimal match between the duration of capital and the underlying assets being invested.
Opacity is similarly beneficial. The better way to say this is that public markets suffer from the curse of transparency, meaning that competitors, the media, and all sorts of interested parties with any kind of agenda, are made privy to the deepest of details of the company’s financials, disclosures, and circumstances. For clarity, this is a trade-off that publicly traded companies accepted for other advantages to being public, but it is just that—a trade-off. All things being equal, there is no reason that a business would want the world to know its trade secrets, and financial dynamics in near real-time, let alone challenges and obstacles, especially not its competitors. The opacity of being private is not a negative; it is a tautology (when a company is private, it is private).
Finally, there is the concern that private equity is a negative force for workers. Specifically, the argument goes that private equity’s pursuit of operational efficiencies, the use of debt to fund the acquisition itself and subsequent growth, and the period promised to investors for an exit, all pit the interests of capital against the workers. There is, however, a fatal flaw in this argument, and that concerns the empirical data. Private equity-owned businesses employ 12 million people in the United States, a 34 percent increase from just five years ago. Eighty-six percent of private equity-owned businesses employ less than 500 people, and half of all companies with private equity sponsorship employ less than 50 people[2].
Interestingly, the National Bureau of Economic Research[3] found that where net job losses did occur (three percent after two years of a buyout and 6 percent after five years), it was predominantly in public-to-private buyouts and transactions involving the retail sector. Put differently, 20 percent or more job losses were highly likely had a public retail company failed, but a “take private” transaction minimized those losses. The same study found that private equity buyouts lead to the rapid creation of new job positions and “catalyze the creative destruction process as measured by both gross job flows and the purchase-and-sale of business establishments.” In other words, those who claim private equity leads to worse circumstances for laborers must establish that the jobs lost would not have been lost anyway.
That investors are not driven by the employee headcount is a given, similar to workers who are not driven by the ROI for investors. The argument for free enterprise is that there is a reasonable correlation of interest between all these parties and that the natural and organic tension between labor and capital is healthy and best managed by market forces. Demonizing this specific facet of financial markets (private equity) for possessing the same embedded tension as all market structures are selective, dishonest, and unintelligible.
Private equity defenders need not avoid the facts of failure. Private equity-backed businesses do sometimes (albeit rarely) fail. The reason is that businesses often do fail. The dynamic nature of market forces, changes, trends, consumer preferences, macroeconomic conditions, cost of capital, competitive forces, manager skill, and company strategy all lead to the very real possibility of failure, or what we learn as children to call “risk.” That private equity is not immune to risk is not a criticism. According to the Bureau of Labor Statistics, 20 percent of small businesses fail in the first year, 30 percent fail by the second year, and 50 percent by the fifth year[4]. Small business suffers a high rate of failure (and attendant job losses) because small business is hard. A more stringent regulation of small business or vilifying small business, though, would seem absurd to most reasonable people.
What about the argument that private equity uniquely increases risk by its use of debt? As we will see, there is a large actor in the American economy whose use of debt is threatening workers and the general welfare, but that actor is not the private equity industry. The capital structure of a business ought to be optimized to drive a healthy and efficient operation. Sub-optimal use of debt creates credit risk for lenders, and because debt is senior to equity in the capital structure, it threatens the entire solvency of the equity investors. In other words, ample incentives exist to prevent reckless debt use from doing damage. What is paramount, though, is that risk-takers suffer when there is a failure. Private equity works against the socialization of risk, but it doesn’t eliminate the existence of risk.
The private equity industry has added trillions of dollars to America’s GDP over the last four decades, employed tens of millions of people, added monetization and liquidity to founders and entrepreneurs, and created access to capital for talented operators who make the goods and services that enhance our quality of life. No part of this warrants skepticism or ire.
Hedge Funds
Similar criticisms exist for the hedge fund industry as private equity, in that many without skin in the game feel the fee structures and performance results are underwhelming. Again, it bears repeating that for the anti-hedge fund crowd, this outcome would be ideal. Indeed, over-priced and under-performing strategies have no chance of surviving over time. Some return-driven, self-interested investors must find something compelling within the hedge fund industry that keeps them returning for more.
That objective is a risk and reward exposure not correlated to the beta of traditional stock and bond markets. Idiosyncratic strategies may involve various arbitrage opportunities and the pursuit of mispriced securities and relationships, but the fee level and performance reflect an entirely different characteristic than that offered by broad stock and bond markets. This is not unknown to the investors of hedge funds but it is the entire point. Correlation is cheap (i.e. index funds), and non-correlation comes at a cost. Top-performing managers and strategies command a fee premium, and sub-par managers lose the Darwinian battle for assets. Market forces have a funny way of sorting this out, without the commentary of disinterested third-party critics.
Sebastian Mallaby’s masterful More Money than God: Hedge Funds and the Making of a New Elite[5] pointed out that hedge funds privatized gains and losses in the events of the 2008 global financial crisis, whereas the banking system allowed the socialization of losses even as gains had been privatized. Put differently, the banking system inherently poses systemic risks, risks that can be (and should be) mitigated and monitored. The hedge fund industry, though, represents an ecosystem of capital allocation, price discovery, information sharing, and profit-seeking, all with highly privatized risk and reward (as it should be).
Hedge fund criticism is always reducible to concerns the critics have with individual hedge fund operators (political, persona, etc.), or rank class warfare. That an alternative investment world exists where idiosyncratic trades can be executed, contrarian themes pursued, and various knobs of risk turned up and down (often with leverage and hedging) is an overwhelming positive to American enterprise.
High-Frequency Trading
High-frequency trading (so-called) has become a popular scapegoat for the anti-financial markets crowd. Advancements in digital technology have enabled complex algorithms to trade large blocks of shares of stock in nanoseconds. Those who have invested in this technology and infrastructure have bet on the ability of technology to identify opportunities and deliver value through speed and execution. Banks, insurance companies, and institutional investors can buy large blocks of stock quickly. Human decisions are disintermediated in favor of computers, and those utilizing high-frequency trading are accepting the trade-off that algorithms, speed, and execution will offer advantages over the cost of losing human interaction.
A trade-off is just that: a trade-off. The benefit of technological advancements in the trading of our capital markets has been unprecedented levels of speed and liquidity, which has meant dramatically lower costs of execution. Across our public stock and bond markets, trading costs are virtually zero, and bid-ask spreads are nil.
The advantages of high-frequency trading are obvious. But what about the disadvantages, and not merely the loss of human interaction the principal is now exposed to? Does this innovation pose the possibility of systemic risk, enhanced volatility, and system errors in our financial markets? Again, a better question would be: does high-frequency trading represent an exacerbation of those risks relative to what existed before it? Volatility, a mismatch of buyers and sellers, trading errors, and any number of market realities existed before high-frequency trading, and exist today (albeit with a bare minimum of instances of actual damage done). Market-making is a complicated business, and there is no question that high-frequency trading facilitates the making of a market (matching buyers and sellers, in this case at light speed). Opportunities for manipulation are highly regulated, and the net benefits from this innovation have spread to all market participants in greater liquidity, improved price discovery, and diminished trading costs.
Banks
From the days of the 1946 film It’s a Wonderful Life, the notion of a bank failure has been the subject of public fear and trepidation—and for good reason. Banks exist to hold customer deposits, facilitate customer payments from those deposits, and generate a profit by lending out those deposits at a positive net interest margin (i.e. the spread between interest paid to depositors and the interest collected on money lent out). Banks have largely been in the business of residential mortgage lending, but also handle 40 percent of commercial real estate lending in America[6]. Hundreds of billions of dollars of small business loans are also processed by commercial banks, funded by the capital base of the banks, which is largely depositor-driven.
That the banking business model effectively amounts to short-duration funding (i.e. bank deposits) being matched to long-duration loans (i.e. mortgages and business loans) is a theoretical flaw that is intended to be remedied by (a) Capital reserves, (b) Diversification, and (c) Quality underwriting. Liquidity issues can still surface when banking assets (the money they have lent out) prove to be longer duration than its liabilities (the money it owes its depositors back). Capital requirements mitigate if not fully eliminate, this risk, yet admittedly favor large banks to regional banks due to the disproportionate impact these requirements have.
Nevertheless, our financial markets, largely through trial and error and the lessons of experience, have increasingly presented the banking system as a store of value and a medium for payment processing, with engines of risk and opportunity increasingly coming from other aspects of financial markets. Banks still have a vital role to play in lending needs. Bank failures are increasingly rare, and competition has created ample optionality for the products and services banks offer (i.e. mortgages, credit cards, business loans, etc.).
Mergers & Acquisitions
Straight out of the class warfare playbook is the belief that investment bankers are money changers with no productive economic aim who are looking to squeeze money out of good and productive companies. Concerns about excess corporate deal activity are not limited to those who bemoan investment banking. Consider the words of one of the most highly regarded investment bankers of the last 75 years, Felix Rohatyn, atop his perch at Lazard in 1986:
In the field of takeovers and mergers, the sky is the limit. Not only in size, but in the types of large corporate transactions, we have often gone beyond the norms of rational economic behavior. The tactics used in corporate takeovers, both on offense and on defense, create massive transactions that greatly benefit lawyers, investment bankers, and arbitrageurs but often result in weaker companies and do not treat all shareholders equally and fairly … In the long run, we in the investment banking business cannot benefit from something that is harmful to our economic system.[7]
Like under-performing hedge funds or poor execution from high-frequency trading, the cure for bad Mergers and Acquisitions (M&A) is M&A. Markets will not support premiums irrationally paid for acquisitions (over time), and boards will not tolerate management eroding value through bad mergers (over time). Bad deals will happen, and good deals will happen, and short-sighted investment bankers will be incentivized to promote deals that do not represent good financial, strategic, or social sense. And yet, to not have access to robust merger and acquisition opportunities is to take away optionality in capital markets that are desperately needed. Competitive forces evolve over time in ways that can combine the embedded strengths of one company with the embedded strengths of another, creating value. The diversification of talent and subject matter expertise, properly channeled, is a huge benefit to our complex enterprise system and has allowed for the pairing of tremendous talent and corporate ecosystems that have created trillions of dollars of wealth. The simplicity of casting aspersions on all mergers and acquisitions because of the cases where some transactions proved ill-conceived is dangerous and harms economic opportunity. While it is incumbent on corporate management, company boards, and especially shareholders to resist unattractive M&A (that is, those with skin in the game), access to such innovation of capital markets is a vital part of our free enterprise system.
Dividends
Though not yet as demonized as stock buybacks, the return of corporate profits to minority owners via dividends is viewed as an example of ‘financialization’—as the favoring of owners of capital over the workers who help create corporate profits. Of course, these two things are not mutually exclusive. Owners are only paid dividends with after-tax profits, and profits are only realized after workers are paid. Dividends represent a substantial incentive to feed equity capital into businesses and therefore facilitate capital formation. The dividends then cycle through the hands of the risk-takers into their consumption desires or reinvestment aspirations. Any argument against dividends is an argument against profits, and an argument against profits is an argument against a market economy.
When we look at companies that failed after paying out dividends and buying back stock, the conclusion that it was a net loss to society requires an assumption of facts not supported by the evidence. That company not returning cash or buying back shares but continuing to invest in a failed business is what would have eradicated value. Cash to shareholders via share purchases or dividends allowed those owners to re-deploy capital in better businesses. And since dividends and share buybacks can only take place with after-tax profits, we are not talking about companies eroding the capital base of the company to pay them, but rather the allocation of profits after the fact.
Stock buybacks
Like dividends, share buybacks with after-tax corporate profits is a form of capital return to shareholders. As a professional dividend growth investor, I have ample reasons for believing dividend payments are a superior mechanism for the interests of shareholders. But the idea that share buybacks are inherently dangerous, short-sighted, or anti-worker, is demonstrably false. Once again, we are not talking about eroding the capital base of a company, but rather how to return capital to the owners of a business when that capital is enhanced by profit creation. Because many employees in public companies are paid via stock issuance (restricted shares, stock options, etc.), stock buybacks offset the theoretical expense that this form of executive compensation represents.
Examples exist of companies buying back stock at what is later revealed to be a high stock price, later running into cyclical challenges with the company operations, and having less cash to work through those times than they otherwise would have. All cases of a business challenge not perfectly predicted ahead of time are exposed to this risk. It does not address the underlying issue of share buybacks. If a company knew that it would later face an existential crisis and suffer a cash crunch, using the after-tax profits to pay down debt, pay bonuses to workers, or do anything other than increase reserves, would be unwise. This is not a unique burden for share buybacks, but rather a general challenge for businesses that are not guaranteed a perpetual path of easy profits.
Markets often provide incentives for corporate managers to use share buybacks more favorable to their compensation metrics than other forms of capital return. This is problematic. But it is a problem that must be addressed by those who bear risk, among managers, boards, and shareholders. The state has not proven itself a model capital allocator. For government to put its thumb on the scale of how companies allocate their capital is to invite distortion, corruption, and flawed information into economic calculation.
Passive ownership/indexing
Finally, there is the so-called passive ownership dilemma. An enormous increase in the popularity of low-cost index funds has led to a wide disintermediation of ownership across public equity markets. Passive stakes are voted on by non-beneficial owners like Blackrock and Vanguard. As the intermediaries who are legal owners, their agendas may conflict with the agendas of their customers. This issue can be solved in one of two ways: (1) Investors themselves will determine that their chosen intermediary is voting or operating in a way that does not serve their interests, and either choose a different intermediary or investment option; (2) Passive equity facilitators and managers will present innovations and options to solve for this tension.
The growth of passive/index strategy and the perceived power it gives these asset managers is a worthy conversation. It does not negate the substantial advantage of low-cost ownership and easy liquidity and access to public markets for investors, but it warrants attention and alteration to ensure that investors are receiving the best representation that achieves the highest returns on investment. Nevertheless, that attention and innovation are sure to be found in a combination of both #1 and #2 in the previous paragraph, and not by limiting the advent of passive equity ownership vehicles.
Cures that are worse than the disease
Opponents of financial sector growth have argued that the public interest calls for a variety of draconian measures to curtail freedom in capital markets. Introducing friction in financial sector activity by limiting its growth, protecting other economic actors, or generally reallocating capital in a way that central planners find more advantageous for the public good would accomplish this objective. All of these ideas carry unintended (or sometimes intended) consequences that would be counter-productive to the aim of economic growth.
A policy proposal to both suggest and critique is a special transaction tax on various stock and bond transactions in American public markets. Progressive politicians have taken advantage of the public popularity of this rhetoric (a “Wall Street tax”) to suggest that “free money” can be found by removing it from ‘financialization’ and into the coffers of the federal government for some spending initiative (Medicare for All, the Green New Deal, etc.). What is never understood, or otherwise is completely ignored, is that this money is not free. It comes out of financial transactions. This means that it becomes an additional cost to be borne by the private economy. The price may be paid by smaller investors who would incur greater trading costs, or it may be paid with less net money received in a particular transaction, leading to a less productive outcome over time for market actors rationally allocating resources. Regardless, it is not “free.”
Nor should we forget, it is not likely to work. Large institutions have resources outside of the United States for trading capital. Such a money grab would leave higher costs for smaller investors and sophisticated investors would pursue global options that avoid such a burden. Incentives matter, and the unintended consequences here would not curtail excesses in financial markets while raising money for other social aims. Rather, it would move money offshore, empower global competitors, and damage those who are not the target of the policy.
Some have suggested that making debt interest cost non-deductible would remove incentives to take on debt, thereby protecting workers in the case of companies exposed to excessive leverage. Of course, lowering the business income tax rates also better protects workers, and so removing a tool used to reduce that tax burden is simply the inverse when it comes to workers. Driving tax obligations higher does not protect workers. To the extent the policy succeeded in limiting debt, astute commentators might wonder what those costs would be. What is the debt being used for and what uses of capital would now be sacrificed if this policy suggestion prevailed? Will companies have less working capital, less liquidity, and be more susceptible to an equity sale (where job losses would be more likely, not less)? These expensive policy proposals have failed to count the costs, and in this case, the cost would be monumental. More than likely, the loss of deductibility of the debt would just be priced into the market rate of the loans, leaving less interest income for the lenders and banks, not a higher after-tax interest expense for the borrowers. In other words, it would be ineffective at best, and distortive at worst.
Various other proponents of de-financializing the economy suggest that increased tax rates would do this, including matching the tax rate on capital to the tax rate on income. The present tax policy is inefficient, but not for the reasons suggested by critics. Presently, a long-term capital gain of $100,000 creates a tax burden on the entire $100,000 in the tax year it was realized. However, a loss of $100,000 only allows for a $3,000 deduction in the year it was realized. This law was passed in 1977 but has not been updated for inflation. Furthermore, when a gain of $100,000 on capital is realized (real estate, stock, etc.), if their holding period was 10, 20, or 30 years, a significant part of the nominal gain was eroded by inflation, leaving the real gain to be a fraction of the total nominal gain. However, the capital gain tax is paid on the entire nominal gain.
Fundamentally, taxes on investment income are “double taxes”—as the money was already taxed when it was first earned (i.e. income), and now is facing additional tax when it is being invested (capital gains or dividends). But if that basic fact does not trouble the anti-finance constituency, the notion of matching income rates to investment tax rates can surely be done by lowering earned income tax rates. An increase in investment tax rates stifles capital formation, disincentivizes risk-taking, freezes capital in static projects, and impairs economic growth. If one wants to make a “fairness” argument for equal rates between tax on capital and labor, that fairness is already stretched in that the tax on capital represents a second tax on the same dollar. But if they persist in the fairness argument, lower ordinary income rates will likely be an agreeable solution for those wanting to protect capital formation.
From transaction taxes, to greater scrutiny of private equity, to changing the tax rules on debt or investment income, to various regulatory burdens on financial actors—no proposed solution from the anti-financial crowd serves workers or the cause of public interest. Rather, these and other proposed policy solutions invite hidden costs (and some that truly are not hidden), build state power, and damage broad prosperity.
Monetary and fiscal policy getting a pass
This concluding section can reasonably be called a tragedy. As was established in our early pursuit of a definition of ‘financialization,’ there is, indeed, an unattractive phenomenon that sub-optimally allocates resources. This ‘financialization,’ however, is not a by-product of more profitable investment banks, larger private equity managers, or increased technological capacity in capital trading. This ‘financialization’ where less productive activities take precedence over more productive ones is not created by Wall Street. Rather, the culprits are the very forces that the anti-finance critics are so often looking to play savior: the governmental tools of fiscal and monetary policy. In other words, the regulatory state, Congress, and the Federal Reserve are actors involved in this discussion, but not as fixers. The modern critics of finance have failed to identify the root causes of ‘financialization’ and in so doing have not only enabled the damage to continue but have invited them to do far greater damage, still.
No single factor has put greater downward pressure on economic growth than the explosion of government indebtedness, particularly, the ratio of that debt to the overall economy.
Common ground exists with those worried about diminished economic productivity and what that means to workers, and indeed, all economic actors. That common ground has not parlayed into shared despair over the growth of government spending, the growth of government debt, and the crowding out of the private sector both represent.
Furthermore, post-financial crisis monetary policy has been a series of gigantic monetary experiments that have served to do the very thing that critics of financial sector activity profess opposition to. Defenders of interventionist monetary policy may claim that it served to stimulate the economy post-crisis and to reflate the corporate economy as the household sector de-leveraged in the aftermath of the housing bubble. Yet even the most zealous defenders of that trade-off could not argue that such a monetary framework came at no cost. That cost was a substantial increase in real financialization.
The fiscal components are easy to identify. Government debt represents dollars extracted from the private sector either in the present or future tenses. A Keynesian would argue that such debt when used for productive projects like the Hoover Dam adds to GDP (a positive multiplier). However, present debt explosions have not been to build a Hoover Dam. Post-crisis spending exploded above the trendline, well before the 2020 COVID pandemic. The spending response to COVID created a huge outlay of expense, unfortunately as the pandemic subsided and all pandemic-related expenditures were completed, expenditures resumed far above the trendline, and far above the level of economic growth.
The federal government is doing what Goldman Sachs, Blackstone, and JP Morgan have never done—removing resources from the productive portion of the economy to the non-productive. It is outside the scope of this paper to evaluate what government spending projects ought to be. One can believe that current spending priorities are legitimate without believing they are productive. Some cost of government is necessary, and that funding will come from the private sector. However, when the cost of funding the government grows exponentially quicker than its revenue sources, and when the level of debt accumulates to the absolute levels it has, and with the annual debt funding costs it has, then declining productivity is the ultimate result.
Economic growth pulled into the present means less economic growth in the future. In the current debt predicament, this is not even economic growth pulled forward, but rather the accumulation of seemingly endless transfer payments. This extraction of wealth from the private sector to fund income replacement does not produce anything nor build anything. A real GDP growth rate that has declined from over +3% to below +2% measures the impact on economic output.
The monetary component of this strikes at the heart of resource allocation. If the Federal Reserve was tasked with holding interest rates at a natural rate, it would be at that level where economic activity would be most “natural”—where the interest rate was neither incentivizing nor disincentivizing economic activity. For 14 of the last 16 years, the Fed held the interest rate at or near zero percent, well below the natural rate in all but the most extreme crisis years out of 2008. That artificially low cost of capital extended the lifeline of many over-levered economic actors, and in the early years of post-crisis economic life likely facilitated some productive reflation. Yet over time, the perpetual zero-bound rate target encouraged economic actors to bypass the production of new goods and services for financial engineering. Incumbent assets in the economy—real estate or equity stock already in existence—could be bought and levered with little financial risk, with the low cost of leverage intensifying returns for these economic actors. Such activity was far more attractive than the creating new projects, sinking capital into new ideas, and innovating with one’s capital at the risk of loss. The zero-bound was a substitute for new goods and services, and it has taken a toll on productive economic investment.
Likewise, a prolonged unnaturally low rate facilitated ongoing resources into sub-optimal assets, keeping “zombie” companies alive where a natural cost of capital would have expedited their demise. While seemingly generous in its impact, the real cost of this process is in the resources that do not work their way to innovation, new growth, and new opportunities. Overly accommodative monetary policy extends the lifeline of those whose time has come and gone preventing fresh ideas from receiving the capital and human resources they need to breathe life into the economy. It fosters malinvestment, distorts economic calculation, and wreaks havoc on economic growth.
The twin towers of fiscal and monetary policy are powerful economic levers. On one hand, the fiscal tool crowds out the private sector and inhibits innovation by taking from the growth of the future to fund excessive spending today. On the other hand, the monetary tool uses the cost of capital to manipulate economic activity, ignoring the diminishing return and obvious distortions created by their efforts.
If one is looking for a malignant financialization, they have found it, and Wall Street is nowhere near the scene of the crime.
Conclusion
Critics of financialization have:
- Ambiguously or inadequately defined the term,
- Used a critique of the financial sector to disguise class envy,
- Failed to understand the nature of markets and the primacy of resource allocation,
- Demonized instruments of financial markets that have been overwhelming positives for economic growth,
- Proposed policy initiatives that would unilaterally do more harm than good, and
- Worst of all, failed to see the most egregious actors in that which distresses them: Excessive government debt and excessive monetary policy
An optimal vision for the economy does not favor the financial sector over the “real economy,” nor does it pit the financial sector against the real economy. Rather, an optimal vision sees financial markets as capable instruments in advancing the economic good and public interest. A large public bureaucracy cannot improve the economic lot of workers, and diminished financial markets cannot optimally allocate resources to the real economy.
The need of the hour is better price discovery, starting with the price of money. The cost of capital as a tool of manipulation in the hands of our central bank has facilitated ‘financialization’ and hampered productive economic activity. The tools of modern finance can advance the cause of prosperity when we limit distortions in economic decision-making, maximize the availability of resources in the sector of the economy most equipped to utilize those resources productively, and remove impediments to growth.
Human beings are capable of great things. Advanced financial markets enhance those capabilities and build opportunities for the future.
Tyler Durden
Wed, 11/27/2024 – 21:30 - Arabica Futures Surge Into Blue-Sky Breakout As Traders Panic: "We Might Not Have Enough Coffee"
Arabica Futures Surge Into Blue-Sky Breakout As Traders Panic: “We Might Not Have Enough Coffee”
Arabica coffee futures blasted through March 1977 highs into blue sky breakout territory as traders panicked about global supply fears originating in Brazil, the world’s top producer.
Arabica beans trading in New York hit $3.26 per pound on Wednesday, exceeding the $3.08 high last reached in March 1977. Bean prices have jumped 123% since September 2023.
On Monday, we outlined that adverse weather conditions in Brazil spooked agricultural traders as bean stockpiles are being quickly drained ahead of next season.
Carlos Santana Jr., a Brazil-based commercial director at trader Ecom Group, told Bloomberg, “There are about eight months before the start of the next season, and the percentage of coffee sold by Brazilian growers is very high.”
“We might not have enough coffee to get to the next season,” Santana warned.
Rabobank analyst Carlos Mera pointed out, “The rally is due to a number of complex circumstances,” including concerns about Brazil’s output next year, plus shipping and logistical challenges.
Mera added that the European Union’s deforestation rules and bean front-loading ahead of a potential trade tariff war are other factors pressuring bean prices higher.
Citi commodity strategist Arkady Gevorkyan told clients, “Coffee’s bull run [is] likely to continue near term,” adding, “We revise up our three-month target for Arabica coffee to $US3.10 a pound, and note a significant upside risk skew to this forecast as supply from Brazil and Vietnam could still underperform.”
Here is Gevorkyan’s full comment to clients about the bull run in coffee prices:
We revise up our 3M target for Arabica coffee to $3.10/lb, and note a significant upside risk skew to this forecast as supply from Brazil and Vietnam could still underperform. Coffee is up 57% YTD, making it one of the best performing commodities. Such a bull run has been fueled by unfavorable weather in key producing regions in Brazil damaging crops as well as support from the roasting switching demand driving Robusta demand from Vietnam. We project a consecutive three-year deficit in balances will switch to a surplus in 2025 and expect ICE coffee to trade rangebound. We also upgrade our base case 2025 forecast to $2.80/lb, while prices should normalize at $2.65/lb in 2026 (see Figure 1). Nevertheless, we note the large uncertainty on the health of Brazilian crops after the adverse weather and general production issues poses the possibility of falling into a structural deficit.
Vietnam, a major producer of the cheaper Robusta bean, has also faced adverse weather conditions, impacting harvest outputs. In London, Robusta bean prices are currently around $5,200 per metric ton, down from a record high of $5,829 observed in mid-September.
“The increased costs of hedging — due to higher margin calls — and the possibility of producer defaults have contributed to panic buying recently,” analysts at coffee trader Sucafina SA wrote earlier this week.
Price action here reminds us of the cocoa squeeze earlier this year…
Anyone know if oil trader Pierre Andurand is buying Arabica coffee futs? He dabbled with cocoa.
Tyler Durden
Wed, 11/27/2024 – 21:00 - In The Beginning, There Was Pax Americana
In The Beginning, There Was Pax Americana
Authored by Lorenzo Maria Pacini,
We often speak of the collective West, Hegemon, Seapower and Civilization of the Sea in relation to the United States of America. It is necessary to understand well what is the origin of this geopolitically determinant power for the world order.
He who wins the war, dictates the rules
Let us make clear at once an empirically incontrovertible factual truth: He who wins the war, dictates the rules of the post-war order. Whoever wins, writes history. Whether we like it or not, the defeated never had much decision-making power (which is not to say that they could not organize well to retaliate and return to power – but that is another matter).
World War II ended with the victory of the United States of America as the first, undefeated and predominant power. From there followed an expansion of U.S. influence toto orbe terrarum in all respects (cultural, economic, military, political).
The twentieth century was the “American century.” Almost the whole world took the shape the U.S. wanted to give it. The second half of the century was marked by the low-tension conflict of the Cold War, which ended-if it really did-with the collapse of the Soviet political system in the USSR and the beginning of the unipolar phase of American global domination. That period aroused much optimism in the West for a new world order, marking the end of the military and ideological rivalry of the 20th century. Two possibilities were on the horizon: a system based on balance of power and egalitarian sovereignty, or a U.S.-led liberal hegemony based on the values of democracy. The first approach evoked perpetual conflict, while the second promised lasting peace and global stability.
U.S. hegemony, already dominant in the transatlantic region after World War II, was seen as a model of peace and prosperity. However, the collapse of the Soviet Union removed the justification for a world order built on the balance of power, pushing the United States toward a mission of recognized hegemony to prevent the rise of new rivals. American supremacy, as declared by Secretary of State Madeleine Albright, was deemed “indispensable to ensure global stability.”
This was the Pax Americana: the U.S. would ensure a period of prosperity and global peace – as early as the end of WWII – by extending control over the entire world. A peace for America was equivalent to a peace for the globe; a war for America would mean war for the entire globe. The stated goal of building a peaceful world often justified imperialistic approaches, revealing the contradictions of the hegemonic project.
Set this paradigm as an axiom of reasoning in international relations and geopolitical programming, lo and behold, everything acquired new meaning. The world had been formatted and the “control room” was now in Washington.
The time of ideologies
It was the time of ideologies. In the “short century” everything had changed rapidly. The great world chessboard was constantly being shaken and reshuffled. The clash between the Western bloc and the Eastern – or Soviet – bloc characterized all concepts of each country’s politics in an extremely powerful way.
In the 1990s, two visions dominated the debate on world order: that of Francis Fukuyama and that of Samuel Huntington. Fukuyama in his famous book The End of History, envisioned a future in which liberal democracy and capitalism would triumph universally, leading to perpetual peace under the leadership of the United States: he argued that economic interdependence, democratic reforms, and shared institutions would unite the world around common values, which were, of course, American values. Any other model of civilization would have been beside the point, because History was finished, there would be nothing left to write about. In contrast, Huntington, wrote The Clash of Civilizations, in which he predicted that the world would be fragmented into distinct cultural blocs based on civil, religious and economic identities. Individualism and human rights, according to him, were peculiar to the West and not universal. His theorizing assumed a future marked by conflicts between civilizations, fueled by the decline of Western hegemony and the emergence of alternative powers, particularly in Confucian and Islamic societies.
The influence of Fukuyama’s ideas shaped post-Cold War Western politics, justifying the expansion and exceptionalism of Pax Americana. Exceptionalism that has been one of the U.S.’s most pragmatic “values”: there are rules and only we can break them, when we want, how we want and without having to account to anyone.
History, however, does not have only one actor: other countries, such as Russia, have chosen to be fascinated by Huntington’s proposal – confrontational, certainly, but not already “final.” In Russia, this debate has deep roots, linked to the historical rivalry between Westernists and Slavophiles. In the 1990s, Russia initially tried to move closer to the West, but the West’s failure to include it reinforced the idea of a distinct Russian civilization, culminating in Vladimir Putin’s view that no civilization can claim to be superior.
A matter of ideologies, indeed, a low-profile but very high-value battle in which the steps of the new century that was beginning would be defined. These divergences highlighted the tension between universalist aspirations and distinctive cultural identities, defining the geopolitical conflicts of the 21st century.
Building Pax Americana at any cost
Washington promoted a world order based on the Pax Americana, a liberal hegemony that reflected the success of the peaceful and prosperous transatlantic system created by the United States during the conflict with the Soviet Union. It proposed to extend this model globally, citing as examples Germany and Japan, transformed from militaristic and imperialist nations into “peaceful”-or, rather, defeated-democracies under U.S. influence. But the success of these transformations had been made possible by the presence of a common adversary, Russia, and the history of Latin America suggested that U.S. hegemony was not always synonymous with progress and peace.
Charles Krauthammer described the post-Cold War period as a “unipolar moment,” characterized by American dominance, where the new Hegemon dictated the rules and the others had little choice. Although he recognized that a multi-participant set-up (today we can say “multipolarism”) would inevitably return, he believed it was necessary to exploit unipolarity to ensure temporary peace, avoiding a return to turbulent periods. There was a weakness, however: the United States was unlikely to voluntarily relinquish its dominant role, preferring instead to counter any threat by force, fueled by an obsession with its own historical greatness. It is a missile issue: whoever has it bigger, wins. Let us not forget that the U.S. invented the strategic concept of deterrence precisely by virtue of the atomic weapon it held, throwing the world into a climate of constant fear and risk in which we still live today.
It is equally true that many Americans wished for a dismantling of the U.S. empire, proposing a less interventionist foreign policy focused on domestic challenges: abandoning the role of superpower would allow the United States to strengthen its society by addressing economic, industrial and social issues. Walter Lippmann argued that a mature great power should avoid global crusades, limiting the use of power to preserve internal stability and coherence. Sort of like a “good hegemon.” But this has not been the case.
The notion of “good hegemon” has been criticized for the risk of corruption inherent in power itself. John Quincy Adams warned that the search for enemies to fight could turn the United States from a champion of freedom into a global dictator. Similarly, President Kennedy, in his 1963 speech at American University, opposed a Pax Americana imposed by arms, calling instead for a genuine and inclusive peace that would promote global human progress, which he called “The Peace of All Time.” An ideal that has faded into the oblivion of collective memory.
American hegemony is the sine qua non for having a Pax Americana. The universalism that characterizes this hegemony admits of no discounts. Inequality among global powers has been exploited as a pivot to increase U.S. profits and administrative expansion at the expense of weaker countries. Neoliberally speaking, there is no error in this. Everything is very consistent. The struggle of the strongest to destroy all the smallest. Not only the one who produces and earns the most wins, but the one who can maintain the power to produce and earn the most wins.
A hegemonic system needs internal stability without which it cannot subsist. A kingdom divided in itself cannot function. This applies to economics as well as politics. It is essential that the ideological paradigm does not change, that power can always be understood and transmitted, from leader to leader, as it has been successfully established. Because the “peace” of the ancient Romans was a peace given by the maintenance of political control to the very ends of the empire, which only came about through a solid military administration.
The Americans did not invent anything. To really control (realpolitik) one must have military control. In front of an atomic bomb, reasoning about political philosophies is worth little. The U.S. knows this very well and its concept of Pax has always been unequivocally based on military supremacy and the maintenance of it.
Something changed when with the first decade of the 2000s new poles, new civilization-states, began to appear that promoted alternative models of global life. The U.S. began to see its power wane, day by day, until today, where the West is worth less than the “rest of the world,” the U.S. no longer has its “exclusive” status, and we are not even so sure that it is then so strong that it can control the globe. The geometries change again. What Pax for what borders of what empire?
Is Trump ready to give up his Pax?
The crux of the question is, if imperialistic military supremacy is what has allowed the U.S. to maintain its dominance and this dominance is precipitating today, will the newly elected U.S. President Donald Trump really be ready to compromise the Pax Americana?
We are talking about a polymorphous compromise:
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Economically, he would have to accept the end of the dollar era and downsize the U.S. market on comparison with sovereign global currencies. Practically throw a century of global financial architecture in the trash.
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Politically, accept that it is possible to think otherwise and do otherwise. Politics is not just American “democracy.” There are so many possibilities, so many different models, so many futures to be written according to other scripts.
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Militarily, it means stopping with the diplomacy of arrogance and threats, accepting that we cannot arbitrarily decide how to deal with anyone and stop aiming missiles at the flags of other states.
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Most complicated and risky of all, all this means giving up peace within the United States. If the balances of power implemented externally are broken, those internally begin to falter and the organism undergoes remodeling.
Giving up the Pax Americana as it has been known does not mean that alternatives do not exist. The concept of “pax” is broad and can be interpreted differently by the American school. Taking this step, however, involves giving up a “tradition” of global power, having to go through the collapse of the entire U.S. domestic system and then rebuilding an alternative.
Make America Great Again will mean what? Restoring American hegemony in the world, or rebuilding America?
Tyler Durden
Wed, 11/27/2024 – 20:30 -
- Electric Revenge: Texas Sues BlackRock And Others For 'Conspiring' To Quash Coal, Sending Energy Prices Soaring
Electric Revenge: Texas Sues BlackRock And Others For ‘Conspiring’ To Quash Coal, Sending Energy Prices Soaring
Texas is leading a new lawsuit with 10 other red states against BlackRock, Vanguard and State Street for allegedly breaking antitrust law by colluding to suppress coal – causing electricity prices to spike.
“Competitive markets — not the dictates of far-flung asset managers — should determine the price Americans pay for electricity,” wrote Texas Attorney General Ken Paxton in the complaint.
The Republican-led states, including West Virginia and Montana, are asking the court to bar the three largest US investment firms from using their stock in coal companies to vote on shareholder resolutions and take other steps in a way that restrains output and limits market competition. -Bloomberg
The complaint, filed in Tyler, Texas, is one of the highest profile lawsuits targeting companies that promote environmental, social and governance goals, or ESH.
“Over several years, the three asset managers acquired substantial stockholdings in every significant publicly held coal producer in the United States, thereby gaining the power to control the policies of the coal companies. Using their combined influence over the coal market, the investment cartel collectively announced in 2021 their commitment to weaponize their shares to pressure the coal companies to accommodate “green energy” goals,” the complaint continues.
“Blackrock, Vanguard, and State Street utilized the Climate Action 100 and the Net Zero Asset Managers Initiative to signal their mutual intent to reduce the output of thermal coal, which predictably increased the cost of electricity for Americans across the United States.”
The ‘cartel’ is accused of “deliberately and artificially constricting supply,” which “increased prices and enabled investment companies to produce extraordinary revenue gains.”
The other states involved in the lawsuit are Alabama, Arkansas, Indiana, Iowa, Kansas, Missouri, Montana, Nebraska, West Virginia and Wyoming.
🚨BREAKING: Texas Sues BlackRock, State Street, and Vanguard for Illegally Conspiring to Manipulate Energy Markets, Driving Up Costs For Consumers
Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized… pic.twitter.com/WrpftEr0cJ
— Attorney General Ken Paxton (@KenPaxtonTX) November 27, 2024
https://platform.twitter.com/widgets.js“Texas will not tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda. BlackRock, Vanguard, and State Street formed a cartel to rig the coal market, artificially reduce the energy supply, and raise prices,” said Paxton in a statement. “Their conspiracy has harmed American energy production and hurt consumers. This is a stunning violation of State and federal law.”
The lawsuit follows years of investigation by GOP officials, who have taken aim at Wall Street’s efforts to force a green agenda.
Specifically, the lawsuit accuses BlackRock, Vanguard and State Street of using their shareholdings in Peabody Energy Corp, Arch Resources, Inc. and others to press management to cut their carbon emissions starting in 2021 – at the height of the ESG boom, Bloomberg reports.
The firms also joined activist groups such as Climate Action 100+ and the Net Zero Asset Managers Initiative in which they formed “a syndicate and agreed to use their collective holdings of publicly traded coal companies to induce industry-wide output reductions.”
The suit repeatedly refers to allegations that BlackRock, Vanguard and State Street have the power through their large shareholdings to constrain the supply of coal, which significantly diminishes competition in the market and produces “cartel-level profits” for the firms.
Climate-finance coalitions are “voluntary associations and therefore don’t include any form of collusion and coercion, so it’s hard to see a legal basis for this claim,” said Lisa Sachs, director of sustainable investment at Columbia University Law School. But “coal-financed politicians are now using the bully pulpit to scare financial institutions, which won’t in any way benefit the coal sector and will harm the constituents these AGs purport to represent.” -Bloomberg
That said, the firms have since reversed course – with State Street announcing in February that it quit Climate Action 100+ because its requirements were inconsistent with the firm’s “independent approach” to shareholder voting. Vanguard left the Net Zero Asset Managers Initiative in 2022, however BlackRock and State Street remain members of the group.
Plaintiffs in the Texas lawsuit acknowledge the departures, but say that they don’t “change the reality that defendants’ holdings threaten to substantially reduce competition in violation of Section 7 of the Clayton Act.”
The case is Texas v. BlackRock, 24-cv-00437, US District Court, Eastern District of Texas (Tyler).
Tyler Durden
Wed, 11/27/2024 – 20:00 - Historians Debate Ukraine War As WWIII Risk Mounts: Niall Ferguson Vs Scott Horton
Historians Debate Ukraine War As WWIII Risk Mounts: Niall Ferguson Vs Scott Horton
Watch the debate replay below (or on YouTube)
— zerohedge (@zerohedge) November 27, 2024
https://platform.twitter.com/widgets.js
* * *
Despite Trump’s promises to bring a swift end to the war in Ukraine by negotiating with Russia, the war has escalated to a dangerous inflection point with long-range U.S., British, and French missiles being deployed deep in Russian territory and talks of deploying NATO troops in Ukraine. That… and anonymous officials in the New York Times saying what is impossible to believe:
“Several officials even suggested that Mr. Biden could return nuclear weapons to Ukraine that were taken from it after the fall of the Soviet Union. That would be an instant and enormous deterrent. But such a step would be complicated and have serious implications,” the newspaper wrote.
Amid the chaos, ZeroHedge will be hosting preeminent historians Sir Niall Ferguson and Scott Horton to debate the history of the conflict and U.S. policy in the region. They will be joined by the Hoover Institute’s Peter Robinson (if you’ve seen a Thomas Sowell interview, it was probably his).
Join us at 7pm ET right here on the ZeroHedge homepage (as well as Twitter/X and YouTube channels) for an epic matchup that you won’t find anywhere else.
Ferguson is a senior fellow at the Hoover Institution and at the Belfer Center for Science and International Affairs at Harvard University. He’s written over a dozen books on geopolitical and monetary history.
Horton is the founder of the Libertarian Institute and recently published his book, Provoked, on the history of the war in Ukraine and decades of rising tensions between the U.S. and Russia.
We hope you’ll join us on the eve of Thanksgiving. Recent war context included below:
***
Nukes for Ukraine?!
Days ago, The NY Times revealed that US and European officials have discussed a range of options they believe will deter Russia from taking more Ukrainian territory, including the possibility of providing Kiev with nuclear weapons. “US and European officials are discussing deterrence as a possible security guarantee for Ukraine, such as stockpiling a conventional arsenal sufficient to strike a punishing blow if Russia violates a cease-fire,” the report said.
The article then stated, “Several officials even suggested that Mr. Biden could return nuclear weapons to Ukraine that were taken from it after the fall of the Soviet Union.”
Former Russian president and current deputy chairman of the Security Counsel Dmitry Medvedev has responded by pointing out that if the West actually went forward with transferring nukes to Ukraine, this would be seen as tantamount to an attack on Russia. He explained that this is a key aspect of Russia’s newly expanded nuclear doctrine.
Image source: Presidency of Russia In a Telegram post on Tuesday, Medvedev specifically referenced the recent NY Times report, and said: “Looks like my sad joke about crazy senile Biden, who’s eager to go out with a bang and take a substantial part of humanity with him, is becoming dangerously real.”
Medvedev then stressed that “giving nukes to a country that’s at war with the greatest nuclear power” is so absurd that Biden and any of his officials considering it must have “massive paranoid psychosis.”
His biggest and most specific threat came as follows:
“The fact of transferring such weapons may be considered as the launch of an attack against our country in accordance with Paragraph 19 of the ‘Basic Principles of State Policy on Nuclear Deterrence’,” Medvedev wrote.
Talk of NATO Troops
Prominent French publication Le Monde on Monday followed by saying serious discussions over injecting Western troops into the war have intensified in the last days:
As the conflict in Ukraine enters a new phase of escalation, discussions over sending Western troops and private defense companies to Ukraine have been revived, Le Monde has learned from corroborating sources. These are sensitive discussions, most of which are classified – relaunched in light of a potential American withdrawal of support for Kyiv once Donald Trump takes office on January 20, 2025.
Britain is once again at the forefront of urging NATO’s deeper involvement in the war, which threatens at any moment to explode into WW3 among nuclear-armed powers. Enter Keir Starmer… in the hawkish footsteps of Boris Johnson:
However, it was relaunched in recent weeks thanks to the visit to France of the UK prime minister, Keir Starmer, for the November 11th commemorations. “Discussions are underway between the UK and France on defense cooperation, particularly with a view to creating a hard core of allies in Europe, focused on Ukraine and wider European security,” confided a British military source to Le Monde.
Jean-Noël Barro’s aforementioned words about ‘no options’ ruled out appears to have been a reflection on these continued ‘sensitive’ conversations.
There have been more reports of US-supplied ATACMS launches on Russian territory since their initial use last week:
Looks like Khalino airbase in Kursk, where Russia launches drones to attack Ukraine, just got a taste of ATACMS. The guy in the video seems pretty impressed! pic.twitter.com/ui8r0je74p
— Maria Avdeeva (@maria_avdv) November 25, 2024
Tyler Durden
Wed, 11/27/2024 – 19:44 - Biden Asks Congress To Authorize $24BN More To Spend On Ukraine
Biden Asks Congress To Authorize $24BN More To Spend On Ukraine
Authored by Dave DeCamp via AntiWar.com,
The Biden administration has asked Congress to approve $24 billion in additional spending on Ukraine as it’s working to ramp up the proxy war as much as possible during President Biden’s final weeks in office.
POLITICO Pro obtained a request from the White House’s Office of Management and Budget that asked Congress to include additional Ukraine spending in a continuing resolution that’s expected to be voted on next month. Two congressional aides said Congress received the proposal on Monday.
Image source: US Air Force The request asks for $8 billion for the Ukraine Security Assistance initiative, a form of military aid that allows the US to purchase weapons for Ukraine, and $16 billion to replace US military equipment that’s been sent to Ukraine.
The money to replenish US weapons would allow the Biden administration to use the remaining Presidential Drawdown Authority for Ukraine, which allows the US to ship weapons directly from US military stockpiles. The administration is looking to rush arms shipments to Ukraine throughout the rest of the transition period.
If Congress agrees to the request, it would bring total US spending on the proxy war, according to publicly available data, to about $210 billion.
Earlier this year, President Biden signed a foreign military aid bill into law that included $61 billion for Ukraine. Before that, the US spent at least $125 billion on the conflict.
US officials have told The Washington Post that the Biden administration is trying to put Ukraine in the best position possible before President-elect Donald Trump might push for an end to the war.
US officials acknowledged that within a few months, Ukraine could be pushed into negotiations and could end up ceding territory. “Biden’s reversal of his previous policies on mines and missiles was intended in part to give Ukraine the strongest possible hand as it enters those potential talks,” The Washington Post wrote.
🚨#BREAKING: Joe Biden has asked congress for another $24 billion for Ukraine…
…while #WNC looks like this TODAY. pic.twitter.com/8TLS7yspKe
— Matt Van Swol (@matt_vanswol) November 26, 2024
https://platform.twitter.com/widgets.js
“The change of direction also caps a long-standing pattern, as Biden has often resisted upgrading Kyiv’s weaponry for fear of escalation with Russia, only to relent a few months later,” the report added.
Tyler Durden
Wed, 11/27/2024 – 19:25 - Why Trump's Election Case Was Dismissed 'Without Prejudice'
Why Trump’s Election Case Was Dismissed ‘Without Prejudice’
Authored by Sam Dorman via The Epoch Times (emphasis ours),
District of Columbia Judge Tanya Chutkan dismissed the election interference case against President-elect Donald Trump on Nov. 25, bringing an end to a highly contentious prosecution and raising questions about whether the charges could once again surface.
Special counsel Jack Smith prepares to speak about an indictment against former President Donald Trump in Washington on Aug. 1, 2023. Drew Angerer/Getty Images Chutkan’s dismissal was entered “without prejudice,” which means the charges can hypothetically be brought against Trump at a later date.
Special Counsel Jack Smith based his request for a dismissal on longstanding Department of Justice (DOJ) policy that says prosecution of a sitting president would violate the constitution. Smith’s motion added that “although the Constitution requires dismissal in this context, consistent with the temporary nature of the immunity afforded a sitting President, it does not require dismissal with prejudice.”
Analysts say it’s unlikely, however, that Smith’s indictment would be filed again given that the statute of limitations will run out before the expected end of Trump’s second term in 2029.
“The fact is that asking the judge to dismiss the case without prejudice is common practice,” John Shu, a constitutional law expert who served in both Bush administrations, told The Epoch Times. “The government wants to keep all of its options open, even if those options are remote or if it’s likely that the options will expire because of the statute of limitations.”
Smith’s reference to temporary immunity was about a type of immunity that was separate from what the special counsel’s office and Trump’s attorneys were debating in recent months. That litigation focused on immunity that stemmed from the Supreme Court’s decision in Trump v. United States.
That decision held that presidents enjoy varied levels of immunity from criminal prosecution for actions they engage in during their tenure, including for former officeholders like Trump.
Smith’s argument about the DOJ’s longstanding policy, by contrast, focused on the prosecution of a sitting president. Smith added that his request for dismissal was “not based on the merits or strength of the case against the defendant.”
Shu told The Epoch Times that Smith’s motion pointed to an attempt by him to preserve other future prosecutions.
“Smith and the DOJ are not just thinking about the current case, they’re thinking about future cases,” he said. “They still want to keep the option open of prosecuting in the future—not Trump but, in the future, some former president, even though the Supreme Court made that significantly harder with its presidential immunity opinion.”
In her opinion explaining the dismissal, Chutkan said her decision was consistent with Smith’s interpretation of Trump’s immunity while in office. She also said that dismissing without prejudice was appropriate in this case because “there is no indication of prosecutorial harassment or other impropriety underlying the [motion to dismiss].”
Even if Trump left office early and the prosecution resumed, it’s unclear how successful it would be.
The Supreme Court’s decision on Trump v. United States arose from an appeal of Smith’s prosecution, which has been mired in a delayed pre-trial process since he brought the initial indictment last year. Chutkan’s court was headed towards deliberations over how that decision applied more specifically to Trump’s actions.
Besides the immunity issue, Trump also sought to challenge the case on statutory grounds and the legitimacy of Smith’s appointment as special counsel.
The latter issue is the subject of an appeal by Smith in the U.S. Court of Appeals for the 11th Circuit, which is reviewing Florida Judge Aileen Cannon’s decision that constitutional issues surrounding Smith’s appointment meant his classified documents case against Trump should be dismissed.
Smith filed a motion on Nov. 25 to dismiss his appeal as it related to Trump but sought to leave it in place for two other defendants involved. The 11th circuit granted Smith’s motion on Nov. 26. Also on Nov. 26, Smith’s team filed a brief defending Smith’s appointment as legal.
Tyler Durden
Wed, 11/27/2024 – 18:30 - "Significant Uptick" In M&A Rumors Observed In News Cycle Ahead Of 2025
“Significant Uptick” In M&A Rumors Observed In News Cycle Ahead Of 2025
Goldman Sachs analysts have noted a “significant uptick” in merger and acquisition rumors in the press over the past six weeks. The investment bank forecasts positive M&A growth trends over the next 12 months, signaling a potential rebound in dealmaking activity.
Analysts Matt Michon and Hannah Taylor penned a note Wednesday to clients about the surge in M&A headlines.
“In the last six weeks, there has been a significant uptick in M&A “rumours” relative to the prior three-quarters so hopefully an encouraging sign that corporate activity is picking-up…!” they said.
The list of companies below is part of the desk’s M&A monitor, which shows “potential M&A situations reported through the press” and also “highlighted in blue are those with news updates since our last note.” A list of failed M&A approaches was also recorded.
Most recent M&A headlines…
Failed M&A approaches.
In a separate but recent note, Goldman analysts James Yaro and Richard Ramsden told clients that internal leading indicators “forecast 20% M&A growth over the next twelve months.”
The latest remarks from the FOMC Minutes suggest that Fed officials are leaning toward a more gradual interest rate-cutting cycle. One that could certainly provide relief to corporates…
Tyler Durden
Wed, 11/27/2024 – 18:00 - US To Deepen Footprint In Lebanon As Part Of Ceasefire Deal
US To Deepen Footprint In Lebanon As Part Of Ceasefire Deal
The US is set to deepen its footprint in Lebanon as part of a ceasefire deal aimed at ending more than a year of fighting between Israel and Hezbollah. According to details of the agreement shared with Middle East Eye by current and former US and Arab officials, the 60-day ceasefire will see all Israeli forces withdraw from Lebanon in phases, with Hezbollah moving north of the Litani River.
The deal which was announced late Tuesday is broadly based on UN Security Council Resolution 1701, which ended the 2006 war between Israel and Hezbollah and was supposed to see the Lebanese army and the United Nations Interim Force in Lebanon (Unifil) deployed to southern Lebanon.
As per the deal, the Lebanese army, with assistance from Unifil, will be deployed to the south to ensure that Hezbollah does not re-enter the area between the Israeli border and the Litani.
Via Reuters “By day 60 there will be no Israeli or Hezbollah troops in southern Lebanon,” a senior Arab official told Middle East Eye.
The agreement, which seeks to end more than a year of fighting that has claimed more than 3,700 lives in Lebanon, will also see the US deploy technical military advisers to Lebanon and see Washington provide additional funds to the Lebanese army.
The US will also provide oversight on Hezbollah’s withdrawal and a military official – likely from Central Command (Centcom) – will head an international committee that will coordinate with hundreds of soon-to-be-deployed French soldiers as part of a beefed-up UN peacekeeping mission.
A senior US official told MEE that Israel will not be granted the right to attack Lebanon based on any suspicious movements. Israel will have to report any movement it deems suspicious to the international committee, which in turn will inform the Lebanese army to take the necessary action.
If the Lebanese army fails to act after receiving a complaint regarding suspicious activities south of the Litani or in any Lebanese area, Israel will consider the agreement void and resume its attacks on Lebanon.
The US is not expected to deploy additional troops on the ground. Instead, the pending ceasefire is set to expand the 10,000-strong Unifil peacekeeping mission. Hundreds of French soldiers are expected to deploy to Lebanon as part of Unifil, according to the former US and Arab official.
The agreement will also deepen the US’s ongoing efforts to support the Lebanese military. The US started funding the Lebanese army in 2005 after a protest movement prompted the withdrawal of Syrian troops from the country.
In the last 20 years, Washington has been the army’s largest donor, giving more than $2.5bn in support to the military, which is seen as a national institution that crosses sectarian and political divides.
The sources told MEE that the army has already recruited 1,500 troops and seeks to bring on board roughly 3,500 more in the next four months.
Via Middle East Eye (MEE) The US will also beef up training, equipment and reimbursement funds to the army. Washington is also speaking with Saudi Arabia and Qatar about providing funds to the Lebanese forces to pay additional salaries. Qatar already provides funds to the cash-strapped Lebanese army, pledging $60m in 2022 to support soldiers’ salaries.
Lebanon was in the midst of a disastrous financial crisis before Hezbollah began launching missiles and drones at Israel on 8 October 2023 in solidarity with Palestinians under attack in Gaza.
The ceasefire will also include a renewed commitment to several other UN Security Council resolutions, including 1559 and 1680, which call for the disarmament of Hezbollah.
Unlike other Lebanese armed groups, Hezbollah kept its weapons after the 1975-90 civil war so it could continue to fight against Israel’s occupation of south Lebanon. Though Israel mostly withdrew in 2000, it continues to occupy the Shebaa Farms, which Hezbollah says are Lebanese.
Hezbollah’s year-long attacks have displaced around 60,000 Israelis from their homes in northern Israel. Meanwhile, Israeli bombardment and the ground invasion launched in October have forced more than a million people in Lebanon to flee.
Tyler Durden
Wed, 11/27/2024 – 17:40 - Chinese Automakers Are Dethroning Their Once-Dominant Japanese Competitors
Chinese Automakers Are Dethroning Their Once-Dominant Japanese Competitors
China is doing the unthinkable and dethroning once dominant Japanese automakers, who are struggling to compete in China.
China is the world’s largest car market and domestic brands are dominating with a surge of electric vehicles. Chinese companies are also expanding into Southeast Asia, challenging the long-standing dominance of brands like Toyota, Honda, and Mitsubishi, according to w new report by Bloomberg.
Between 2019 and 2024, Japanese automakers experienced the steepest market share declines in China, Singapore, Thailand, Malaysia, and Indonesia, according to Bloomberg’s analysis of sales and registration data.
Japanese automakers are losing ground across Asia, with all six tracked by Bloomberg experiencing declines in China. Even Toyota, the global leader in car volume, has seen its sales stagnate. In Southeast Asia, a traditional stronghold for Japanese brands, market share has dropped sharply.
In Thailand and Singapore, Japanese carmakers now control just 35% of the market, down from over 50% in 2019, while streets once dominated by Nissan and Mazda are increasingly filled with Chinese brands.
The Bloomberg profile notes that Toyota remains competitive in some segments, like pickups, but the broader outlook is troubling for automakers once renowned for efficiency and reliability. Their slow pivot to fully electric vehicles puts them at risk of falling behind in a market driven by advanced battery technology and smart software.
Although Chinese automakers face high tariffs in Europe and the U.S., the erosion of Japanese dominance in Asia could signal wider challenges ahead.
Toyota’s stronghold in Southeast Asia is supported by regional production of gasoline cars with larger engines, appealing to local preferences. In 2023, Thailand and Indonesia accounted for nearly 10% of Toyota’s 11 million global vehicle output. However, other Japanese brands, like Nissan, are struggling.
Nissan’s outdated lineup and lack of hybrids contributed to profit losses and production cuts, with its presence in Jakarta now fading.
Meanwhile, Chinese automaker BYD has rapidly gained traction in Indonesia, ranking as the sixth top-selling brand just months after delivering its first vehicles. Its $40,000 Seal EV is proving especially popular.
Japan’s global auto production share has dropped from over 20% two decades ago to 11%, while China has surged to dominate, now accounting for nearly 40% of worldwide car manufacturing. Chinese automakers are leveraging their expertise in low-cost batteries and flexible supply chains to expand into Southeast Asia, the Middle East, and Africa, further challenging Japan’s dominance in these markets.
Tyler Durden
Wed, 11/27/2024 – 17:20 - How Trump Voters Learned To Love, And Turn Out, The Mail-In Ballot
How Trump Voters Learned To Love, And Turn Out, The Mail-In Ballot
Authored by Philip Wegmann via RealClearPolitics,
In the spring, James Blair, political director for the Trump campaign, called a meeting in West Palm Beach. The occasion: Marc Elias had changed the world.
It was Elias who had petitioned the Federal Election Commission at the beginning of the year to allow a George Soros-funded political action committee to coordinate with campaigns. And the Democratic super lawyer had won. A nine-page advisory opinion followed in March. For the first time, the FEC ruled that federal candidates could coordinate with outside organizations. And now politics would change forever.
Blair sensed opportunity. All he had to do, the reason he gathered the most loyal MAGA captains of the biggest grassroots armies around a conference table inside Trump campaign headquarters last April, was convince them to accept a little heresy. The political director had to teach them to love the mail-in ballot.
Trump had taught his base to hate mail balloting, a practice he blamed for his loss in 2020. Now Blair was urging the former president’s most faithful followers to embrace what was previously verboten. According to sources inside the room that day, the conversion did not go smoothly.
Charlie Kirk, founder of Turning Point USA, balked. A confidant of the Trump family, Kirk and his lieutenant Tyler Bowyer were allegedly “horrified” by the idea of pushing absentee ballots for fear of alienating MAGA diehards. Ned Ryun, CEO of American Majority Action, insisted absentee ballots were half the battle, arguing that Republican hopes would languish in long lines on Election Day without them. One source described the mood that day as “snippy.”
Turning Point spokesman Andrew Kolvet dismissed that characterization and told RealClearPolitics the organization was making plans as early as 2022 to “hammer home” the early vote.
“There were skeptics,” Blair said in retrospect. Without singling anyone out, he told RCP that “less sophisticated” operatives on the right still subscribed to “this theory that ‘well, if the votes come in early, then [Democrats] know how many they need to cheat.’” His counter-argument as he showed the grassroots the math: “No, once a vote is banked, that’s good.”
This was easier said than done, as Trump had hardwired a deep distrust into the minds of millions of Republicans by arguing that anything other than same-day voting was synonymous with fraud. “We have to get rid of mail-in ballots,” Trump said during his January victory speech after winning the Iowa caucuses. As he began his easy march through the GOP primary field, Trump added, “Once you have mail-in ballots, you have crooked elections.”
Data alone would not be enough to convince the base to abandon that belief. Only Trump could change their minds. “He had to create the permission structure for his voters,” Blair explained, “which is that voting early, whether by mail or in person, can be a pathway to victory, not to defeat.”
Clearing a primary field of Republican challengers too afraid to attack him was one thing. Unseating an incumbent president would be another. Enter Susie Wiles.
She came from Florida, just like Blair, where Republicans had built majorities for decades despite being outnumbered by Democrats on registered voter rolls. As campaign co-chair, she had just helped Trump brush aside the primary challenge of Florida’s own governor. Then Wiles looked to the general election, directing Blair to draft a memo outlining a new Trump way to win. In short, they planned to export the Florida model.
They laid out the data, pointed to successful case studies, and ran sophisticated election simulations. But the final argument that changed Trump’s mind? “Look, sir,” the former president was told, according to sources familiar with the discussions, “people are really excited to vote for you, and they want to vote for you as soon as they have the chance to vote.” On the evening of April 19, in characteristic all caps, Trump did something very uncharacteristic: He reversed himself and blessed the mail ballot. Wrote the former president on his social media website Truth Social:
ABSENTEE VOTING, EARLY VOTING, AND ELECTION DAY VOTING ARE ALL GOOD OPTIONS. REPUBLICANS MUST MAKE A PLAN, REGISTER, AND VOTE!
Once the green light was given, the Trump machine kicked into another gear. They would still drive turnout on Election Day, but they would work just as hard to bank votes in advance. This has an obvious tactical advantage. Every supporter who cast their ballot early represented one less voter the campaign had to spend time and resources on getting to the polls on November 5. All campaigns do this. But the FEC decision that allowed federal candidates to coordinate with outside groups, the one ushered in by liberal lawyer Marc Elias, turbocharged everything. Tim Saler, chief data consultant for the Trump campaign, took full advantage.
Saler was the analytical brain behind the GOP’s ground game juggernaut. Despite all the massive reporting from the Associated Press to the New York Times suggesting the opposite, he insisted in an interview with RCP that Trump actually had one. “It was not outsourced at all,” Saler said of the get-out-the-vote apparatus. “It was coordinated.”
Flashback to Florida. Many of the groups inside Trump headquarters, almost a dozen in total, were already planning their own canvassing programs. Some had more experience than others.
Turn Out for America, a political action committee bankrolled by conservative billionaire Dick Uihlein, was on board from the beginning and widely considered among Trump operatives as “the gold standard.”
American Majority Action, Ryun’s group, had just run two pilot programs the year before, one in Louisiana and another in Virginia. Ryun was convinced Republicans could win by banking votes. “We had faith in what they did,” said a source with direct knowledge of the Trump operation. The newest addition: Turning Point Action.
Kirk and Bowers leveraged their influence with millions of conservative students to create a turnout machine. “Turning Point will just need to keep evolving,” a Trump operative said of the newest edition while stressing that their efforts were welcome and helpful.
America PAC, the Elon Musk upstart that would eclipse all the rest in spending, would come later.
Saler loves them all and says each did good work. Ahead of Election Day, the first order of business was making sure the assorted groups “did no harm.” Under the new FEC paradigm, and for the first time, the campaign could communicate priorities, coordinate strategy, and share best tactics. Hence the second priority discussed at the West Palm Beach meeting: A data-sharing agreement.
“There was a real misnomer, or just a false attack, that we didn’t have a field program,” Saler said of the idea “that our field program had been farmed out.” The campaign already had in-house volunteers, a program called Trump Force 47, that fanned out to all 50 states and knocked on millions of doors on its own. What the new coordination rules provided for was the creation of the outside armies fanning out to each of the seven battleground states in search of the all-important low-propensity voter.
“The president’s coalition is more rural, lower propensity, and more down scale,” Saler explained. “Think a 35-year-old man who turns a wrench in small-town, central Wisconsin, who never engages face-to-face with anybody in politics.”
To turn out a coalition like no other, Saler had to assemble an apparatus like no other. The campaign would be at the center. They shared targeting priorities with the outside groups, who then sent their people into the field to find and identify Trump voters, building a real-time data loop. They didn’t just go where other GOP presidential campaigns had been in years past. Because of the new canvassing rules, Trump HQ could send outside groups, not just to big population centers, but door to door even in the most rural areas. On front porches, outside grocery stores, and everywhere in between, canvassers sought out the MAGA faithful, registered them to vote, and pushed them to do it early.
“The president is a unique character in American history; He is the champion of the forgotten man and woman,” Saler said before adding that the campaign was just as unique. “We also didn’t forget them.” In the moment, though, skepticism abounded. Some Republicans, many of them on the outside looking in, questioned the wisdom of relying so heavily on mercenary doorknockers ahead of what was sure to be a make-or-break election. Even Ben Shapiro was worried. In an October interview, Shapiro warned the former president that he was hearing mixed reviews about the ground game. Was his campaign up to the job? Trump avoided the question. In the final stretch, no one had a definitive answer.
A team of rivals, meanwhile, was working on his behalf in pursuit of low-propensity voters.
A staple on the college circuit, Kirk focused on the youth vote while directing his organization’s political arm, Turning Point Action, to decamp from campus and field an army of more than a thousand paid doorknockers across each of the swing states in pursuit of low-propensity voters overall. A spokesman denied that there was any hesitation about registering voters for absentee ballots. Instead, the organization modeled its early-vote strategy off of the Democratic playbook while making accommodations for lingering concerns over mail-in ballots.
The emphasis was on early voting, but if a voter preferred to cast their ballot in person on Election Day, the organization was ready to drive them to the polls. Explained Turning Point spokesman Andrew Kolvet, “We only care about getting ballots in the box.”
At times, the organization took “low propensity” to the extreme. Scott Presler, a conservative activist who partnered with Turning Point in Pennsylvania, courted a normally apolitical and untapped constituency: the Amish.
That community’s aversion to politics wasn’t the chief obstacle. It was the calendar. “Get this,” he told RCP, “Amish get married on Tuesdays in November.” Otherwise, they generally match the voter profile of a normal social conservative, he reported. Armed with that information, Presler parachuted into rural farming communities west of Philadelphia and north of Pittsburgh with absentee and mail-in ballot applications.
While Turning Point and their partners earned praise for that kind of innovation, elsewhere, some questioned the efficiency of their organization. One Turning Point intern attracted online criticism when he bragged in a social media post that he knocked on just 500 doors over the course of nine weeks, a seemingly low number. Another paid Turning Point Action employee, currently under contract in Wisconsin through November, told RCP that management had set a daily goal of just 10 voter contacts.
“We set out on a mission to chase low-prop and first-time voters across the country,” Kirk wrote in a social media post the week after the election. Across four states (Arizona, Michigan, Nevada, and Wisconsin), according to their internal numbers, Turning Point Action had helped no less than 300,000 low-propensity voters cast their votes. “Mission accomplished,” he wrote.
American Majority Action took a more traditional approach with Ryun at the helm. The hard-nosed operative, who helped former Wisconsin Gov. Scott Walker become just the second state executive to survive a recall 13 years prior, had raised and deployed as many grassroots armies in the time since. The difference this time? Ever since the “Red Wave” fizzled in the 2022 midterms, Ryun had been on a one-man crusade to force Republicans to embrace absentee and early voting in earnest.
After running two successful pilot programs in state races, he was convinced the GOP could take the approach national. Trump supporters would learn to love the mail-in ballot, he was convinced, once they won with it. Toward that end, American Majority picked four targets: Arizona, Nevada, North Carolina, and Wisconsin. They hired 1,600 staff, drilling into each canvasser two numbers: Seven and nine. Between seven and nine is how many times a single low-propensity voter, on average, must be contacted before they will return a mail-in ballot. A blunt Ryun calls it “targeted harassment.”
According to an after-action report, the group made more than 11 million phone calls in support of Trump and sent just shy of four million texts to voters in each of their four target states. They knocked on nearly 2 million doors.
On the eve of the election, Ryun wrote in an op-ed for “American Greatness” that Republicans had experienced their fair share of growing pains. It would take time for the GOP to catch up to Democrats on the early voting front, but overall, the conservative movement earned a passing grade: “A solid B to B+ level with lots of room for growth.”
America PAC was the last big group to arrive. Elon Musk endorsed Trump after the first assassination attempt, and while Republicans welcomed the many millions of dollars from the world’s richest man, the political novice attracted his fair share of scrutiny. His group planned to compete in all seven battleground states. They initially hired just a handful of vendors to execute a one-size-fits-all, top-down strategy.
By the end of the summer, though, Musk fired his initial team and hired Genera Peck and Phil Cox, veterans of the defunct DeSantis campaign, to put together a national plan with individual directors in each of the battleground states. They took a tailored approach, and by the end, Musk lent his celebrity to the Pennsylvania campaign, a state he often told voters was the key to the whole election. His group spent north of $200 million, a deep war chest that lent itself to sending canvassers nearly everywhere.
The scope of all of this was relatively new territory. Few national, grassroots organizations previously had the resources and expertise to chase votes across multiple states concurrently. Each additional battleground added another level of complexity and difficulty. But it wasn’t all top-down. A patchwork of groups supplemented the work in the individual swing states.
Motivated by the frustration that the right had “yielded voter registration to the left,” former Georgia Sen. Kelly Loeffler launched “Greater Georgia” in the Peach State. The group identified tens of thousands of conservative Georgians and helped get them registered to vote. Another state-specific get-out-the-vote engine to the north: PA Chase. Founded by Cliff Maloney, that organization canvassed throughout Pennsylvania in search of low-propensity voters in need of a mail-in ballot. “We’re finally catching up to the Democrats,” Maloney said of his efforts before Election Day. “This is straight out of their playbook, right?
In this way, the Trump campaign and its allies chased the low-propensity voter. And it worked. He not only swept each swing state on his way to becoming just the second president in history to win non-consecutive terms, but Trump also won the popular vote, something Republicans haven’t achieved since 2004. Said Saler of the electorate that returned the former and future president to the Oval Office, “He created them.” Many were first-time voters. Some voted only for him. Now every Republican operative involved in planning for the midterms and the next general election is focused on one question: How to keep these voters in the GOP fold? It will likely include a heavy emphasis on the early vote.
Trump World, even in victory, sees the mail-in ballot as a pragmatic necessity, not an ideal way to vote. “Look, they’re not perfect, and if we could just do away with them, we probably would, but that’s not the world we live in,” Blair said. “They exist. So, it is what it is.”
For his part, Ryun has become their biggest apostle of early voting and the mail-in ballot. After Republicans won big, he isn’t in a hurry to see the GOP set them aside. “I’m telling you, this works, and this should be our game planning forward,” he said, before adding that a more pressing question for the right was discerning which groups did real work and which did little more than gobble up donor dollars.
“There are some vaporware organizations, like Turning Point, that I’m afraid were not as effective as they could have been because they were on a journey of self-discovery in politics,” Ryun said. “My concern for the future is, how do we make sure that some of these voters who turned out for Trump-only become consistent Republican voters.”
A Turning Point spokesman dismissed that criticism. Said Kolvet, “We’re not in the business of getting down in the mud.” The results, he said, speak for themselves. “The campaign, which knows the data and accomplishments well, knows how successful our program was,” the spokesman concluded.
Republicans will have their work cut out for them in the midterms. They have historically underperformed whenever Trump is not on the ballot. The coordination between federal candidates and outside groups – that the FEC allowed at the insistence of Democrats like Elias – will not change. It was central to a Trump victory.
“Thank you, Marc,” quipped Saler, the Trump data consultant who helped engineer the former, and future, president’s comeback. “We appreciate you.”
Tyler Durden
Wed, 11/27/2024 – 17:00 - Exxon Pours Cold Water On Trump's "Drill, Baby, Drill" Plans
Exxon Pours Cold Water On Trump’s “Drill, Baby, Drill” Plans
Contrary to expectations for a self-defeating flood of new energy production under the second Trump admin, Exxon’s Upstream President Liam Mallon said that oil and gas producers in the US will not raise output significantly in the coming years despite calls from President-Elect Donald Trump to “drill, baby, drill.”
“I think a radical change is unlikely because the vast majority, if not everybody, is primarily focused on the economics of what they’re doing,” Mallon said on Tuesday at a conference in London, according to Bloomberg.
Trump is expected to open up federal lands for more oil and gas drilling, in part to execute on Scott Bessent’s “3-3-3 plan” which envisions boosting US oil production by an addition 3 million barrels per day (from the current record 13.3 million), but much of the land in the country’s largest oil and gas producing state, Texas, is private. Still, there’s plentiful federal land in neighboring New Mexico which includes the oil- and gas-rich Permian Basin.
“If those rules were substantially changed, you would be able to drill more, assuming you have the quality and met your economic threshold,” Mallon said. “But I don’t think we’re going to see anybody in the drill, baby, drill mode. I really don’t.”
Exxon’s European rival TotalEnergies is also skeptical of Trump’s vow to open US taps.
“Maybe he has a magic recipe to push them to drill like mad,” TotalEnergies CEO Patrick Pouyanne said at the conference. He cited US producers’ commitment to return cash to shareholders and said “it’s not only decisions by politicians” that drive American output.
The US is pumping more than 13 million barrels of crude a day, exceeding every other nation and up almost 45% in the past decade. With a surplus looming next year, the global oil market is watching to see at what rate American explorers drill new wells. Many of the biggest US operators are taking a long-term approach to production, weighing when to bring certain wells online against their overall inventory. Many have throttled their output to maximize shareholders returns (i.e. higher prices) over total production (higher volumes).
Mallon’s comments mark the second time since the election that the largest US oil company has diverged from Trump’s policies. CEO Darren Woods discouraged the president-elect from withdrawing the US from the Paris climate pact, arguing that it’s better to participate and push for “common sense” carbon-cutting policy.
Mallon reinforced Woods’s recent remarks supporting the US Inflation Reduction Act, which Trump has characterized as Washington’s “green new scam.” Some IRA incentives — including tax credits for capturing carbon, producing hydrogen and making sustainable aviation fuel — are particularly popular with oil companies.
“Our position on the IRA is very good,” Mallon said. “We strongly believe in what it is, what it stands for and the incentives it’s providing.”
Tyler Durden
Wed, 11/27/2024 – 16:40 - What Ails America… And How To Fix It
What Ails America… And How To Fix It
Authored by Jeffrey Sachs via CommonDreams.org,
When a nation is very sick, we need multiple and overlapping remedies…
America is a country of undoubted vast strengths—technological, economic, and cultural—yet its government is profoundly failing its own citizens and the world. Trump’s victory is very easy to understand. It was a vote against the status quo. Whether Trump will fix—or even attempt to fix—what really ails America remains to be seen.
The rejection of the status quo by the American electorate is overwhelming. According to Gallup in October 2024, 52% of Americans said they and their families were worse off than four years ago, while only 39% said they were better off and 9% said they were about the same. An NBC national news poll in September 2024 found that 65% of Americans said the country is on the wrong track, while only 25% said that it is on the right track. In March 2024, according to Gallup, only 33% of Americans approved of Joe Biden’s handling of foreign affairs.
At the core of the American crisis is a political system that fails to represent the true interests of the average American voter. The political system was hacked by big money decades ago, especially when the U.S. Supreme Court opened the floodgates to unlimited campaign contributions. Since then, American politics has become a plaything of super-rich donors and narrow-interest lobbies, who fund election campaigns in return for policies that favor vested interests rather than the common good.
Two groups own the Congress and White House: super-rich individuals and single-issue lobbies.
The world watched agape as Elon Musk, the world’s richest person (and yes, a brilliant entrepreneur and inventor), played a unique role in backing Trump’s election victory, both through his vast media influence and funding. Countless other billionaires chipped into Trump’s victory.
Many (though not all) of the super-rich donors seeks special favors from the political system for their companies or investments, and most of those desired favors will be duly delivered by the Congress, the White House, and the regulatory agencies staffed by the new administration. Many of these donors also push one overall deliverable: further tax cuts on corporate income and capital gains.
Many business donors, I would quickly add, are forthrightly on the side of peace and cooperation with China, as very sensible for business as well as for humanity. Business leaders generally want peace and incomes, while crazed ideologues want hegemony through war.
There would have been precious little difference in all of this with a Harris victory. The Democrats have their own long list of the super-rich who financed the party’s presidential and Congressional campaigns. Many of those donors too would have demanded and received special favors.
Tax breaks on capital income have been duly delivered by Congress for decades no matter their impact on the ballooning federal deficit, which now stands at nearly 7 percent of GDP, and no matter that the U.S. pre-tax national income in recent decades has shifted powerfully towards capital income and away from labor income. As measured by one basic indicator, the share of labor income in GDP has declined by around 7 percentage points since the end of World War II. As income has shifted from labor to capital, the stock market (and super-wealth) has soared, with the overall stock market valuation rising from 55% of GDP in 1985 to 200% of GDP today!
The second group with its hold on Washingtons is single-issue lobbies.
These powerful lobbies include the military-industrial complex, Wall Street, Big Oil, the gun industry, big pharma, big Ag, and the Israel Lobby. American politics is well organized to cater to these special interests. Each lobby buys the support of specific committees in Congress and selected national leaders to win control over public policy.
The economic returns to special-interest lobbying are often huge: a hundred million dollars of campaign funding by a lobby group can win a hundred billion of federal outlays and/or tax breaks. This is the lesson, for example, of the Israel lobby, which spends a few hundred million dollars on campaign contributions, and harvests tens of billions of dollars in military and economic support for Israel.
These special-interest lobbies do not depend on, nor care much about, public opinion. Opinion surveys show regularly that the public wants gun control, lower drug prices, an end of Wall Street bailouts, renewable energy, and peace in Ukraine and the Middle East. Instead, the lobbyists ensure that Congress and the White House deliver continued easy access to handguns and assault weapons, sky-high drug prices, coddling of Wall Street, more oil and gas drilling, weapons for Ukraine, and wars on behalf of Israel.
These powerful lobbies are money-fueled conspiracies against the common good. Remember Adam Smith’s famous dictum in the Wealth of Nations (1776): “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
The two most dangerous lobbies are the military-industrial complex (as Eisenhower famously warned us in 1961) and the Israel lobby (as detailed in a scintillating new book by historian Ilan Pappé).
Their special danger is that they continue to lead us to war and closer to nuclear Armageddon. Biden’s reckless recent decision to allow U.S. missile strikes deep inside Russia, long advocated by the military-industrial complex, is case in point.
The military-industrial complex aims for U.S. “full-spectrum dominance.” It’s purported solutions to world problems are wars and more wars, together with covert regime-change operations, U.S. economic sanctions, U.S. info-wars, color revolutions (led by the National Endowment for Democracy), and foreign policy bullying. These of course have been no solutions at all. These actions, in flagrant violation of international law, have dramatically increased U.S. insecurity.
The military-industrial complex (MIC) dragged Ukraine into a hopeless war with Russia by promising Ukraine membership in NATO in the face of Russia’s fervent opposition, and by conspiring to overthrow Ukraine’s government in February 2014 because it sought neutrality rather than NATO membership.
The military-industrial complex is currently—unbelievably—promoting a coming war with China. This will of course involve a huge and lucrative arms buildup, the aim of the MIC. Yet it will also threaten World War III or a cataclysmic U.S. defeat in another Asian war.
While the Military-Industrial Complex has stoked NATO enlargement and conflicts with Russia and China, the Israel Lobby has stoked America’s serial wars in the Middle East. Israel’s Benjamin Netanyahu, more than any U.S. president, has been the lead promoter of America’s backing of disastrous wars in Iraq, Lebanon, Libya, Somalia, Sudan, and Syria.
Netanyahu’s aim is to keep the land that Israel conquered in the 1967 war, creating what is called Greater Israel, and to prevent a Palestinian State. This expansionist policy, in contravention of international law, has given rise to militant pro-Palestinian groups like Hamas, Hezbollah, and the Houthis. Netanyahu’s long-standing policy is for the U.S. to topple or help to topple the governments that support these resistance groups.
Incredibly, the Washington neocons and the Israel Lobby actually joined forces to carry out Netanyahu’s disastrous plan for wars across the Middle East. Netanyahu was a lead backer of the War in Iraq. Former Marine Commander Dennis Fritz has recently described in detail the Israel Lobby’s large role in that war. Ilan Pappé has done the same. In fact, the Israel Lobby has supported U.S.-led or U.S.-backed wars across the Middle East, leaving the targeted countries in ruins and the U.S. budget deep in debt.
In the meantime, the wars and tax cuts for the rich, have offered no solutions for the hardships working-class Americans. As in other high-income countries, employment in U.S. manufacturing fell sharply from the 1980s onward as assembly-line workers were increasingly replaced by robots and “smart systems.” The decline in the labor share of value in the U.S. has been significant, and once again has been a phenomenon shared with other high-countries.
Yet American workers have been hit especially hard. In addition to the underlying global technological trends hitting jobs and wages, American workers have been battered by decades of anti-union policies, soaring tuition and healthcare costs, and other anti-worker measures. In high-income countries of northern Europe, “social consumption” (publicly funded healthcare, tuition, housing, and other publicly provided services) and high levels of unionization have sustained decent living standards for workers. Not so in the United States.
Yet this was not the end of it.
Soaring costs of health care, driven by the private health insurers, and the absence of sufficient public financing for higher education and low-cost online options, created a pincer movement, squeezing the working class between falling or stagnant wages on the one side and rising education and healthcare costs on the other side.
Neither the Democrats nor Republicans did much of anything to help the workers.
Trump’s voter base is the working class, but his donor base is the super-rich and the lobbies. So, what will happen next? More of the same—wars and tax cuts—or something new and real for the voters?
Trump’s purported answer is a trade war with China and the deportation of illegal foreign workers, combined with more tax cuts for the rich. In other words, rather than face the structural challenges of ensuring decent living standards for all, and face forthrightly the staggering budget deficit, Trump’s answers on the campaign trail and in his first term were to blame China and migrants for low working-class wages and wasteful spending for the deficits.
This has played well electorally in 2016 and 2024, but will not deliver the promised results for workers in the long run. Manufacturing jobs will not return in large numbers from China since they never went in large numbers to China. Nor will deportations do much to raise living standards of average Americans.
This is not to say that real solutions are lacking. They are hiding in plain view—if Trump chooses to take them, over the special interest groups and class interests of Trump’s backers.
If Trump chooses real solutions, he would achieve a strikingly positive political legacy for decades to come.
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The first is to face down the military-industrial complex. Trump can end the war in Ukraine by telling President Putin and the world that NATO will never expand to Ukraine. He can end the risk of war with China by making crystal clear that the U.S. abides by the One China Policy, and as such, will not interfere in China’s internal affairs by sending armaments to Taiwan over Beijing’s objections, and would not support any attempt by Taiwan to secede.
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The second is to face down the Israel lobby by telling Netanyahu that the U.S. will no longer fight Israel’s wars and that Israel must accept a State of Palestine living in peace next to Israel, as called for by the entire world community. This indeed is the only possible path to peace for Israel and Palestine, and indeed for the Middle East.
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The third is to close the budget deficit, partly by cutting wasteful spending—notably on wars, hundreds of useless overseas military bases, and sky-high prices the government pays for drugs and healthcare—and partly by raising government revenues. Simply enforcing taxes on the books by cracking down on illegal tax evasion would have raised $625 billion in 2021, around 2.6% of GDP. More should be raised by taxation of soaring capital incomes.
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The fourth is an innovation policy (aka industrial policy) that serves the common good. Elon Musk and his Silicon Valley friends have succeeded in innovation beyond the wildest expectations. All kudos to Silicon Valley for bringing us the digital age. America’s innovation capacity is vast and robust and an envy of the world.
The challenge now is innovation for what? Musk has his eye on Mars and beyond. Captivating, yet there are billions of people on Earth that can and should be helped by the digital revolution in the here and now. A core goal of Trump’s industrial policy should be to ensure that innovation serves the common good, including the poor, the working class, and the natural environment. Our nation’s goals need to go beyond wealth and weapons systems.
As Musk and his colleagues know better than anybody, the new AI and digital technologies can usher in an era of low-cost, zero-carbon energy; low-cost healthcare; low-cost higher education; low-cost electricity-powered mobility; and other AI-enabled efficiencies that can raise real living standards of all workers. In the process, innovation should foster high-quality, unionized jobs—not the gig employment that has sent living standards plummeting and worker insecurity soaring.
Trump and the Republicans have resisted these technologies in the past. In his first term, Trump let China take the lead in these technologies pretty much across the board. Our goal is not to stop China’s innovations, but to spur our own. Indeed, as Silicon Valley understands while Washington does not, China has long been and should remain America’s partner in the innovation ecosystem. China’s highly efficient and low-cost manufacturing facilities, such as Tesla’s Gigafactory in Shanghai, put Silicon Valley’s innovations into worldwide use … when America tries.
All four of these steps are within Trump’s reach, and would justify his electoral triumph and secure his legacy for decades to come. I’m not holding my breath for Washington to adopt these straightforward steps. American politics has been rotten for too long for real optimism in that regard, yet these four steps are all achievable, and would greatly benefit not only the tech and finance leaders who backed Trump’s campaign but the generation of disaffected workers and households whose votes put Trump back into the White House.
Tyler Durden
Wed, 11/27/2024 – 16:20 -
- Biden Ramps Up Pressure On Ukraine To Lower Conscription Age From 25 To 18
Biden Ramps Up Pressure On Ukraine To Lower Conscription Age From 25 To 18
The Ukrainian military accepts voluntary enlistments from those 18 and older. However, in stark contrast to Americans’ experience with military drafts, Ukraine had long exempted men under 27 from being conscripted. The country’s legislature last April finally moved to lower the minimum draft age to 25.
Last spring on one of his many visits to Ukraine, hawkish Senator Lindsey Graham expressed shock upon learning that men in their early 20s in Ukraine cannot be drafted. “I would hope that those eligible to serve in the Ukrainian military would join. I can’t believe [conscription age starts] at 27,” he said at the time. “You’re in a fight for your life, so you should be serving — not at 25 or 27.”
When President Volodymyr Zelenskiy soon after this statement signed a bill into effect to lower the mobilization age for combat duty from 27 to 25, this took some of the pressure off for the time being.
AFP/Getty Images This debate has now been renewed as President Biden, on his way out of office, is ramping up the pressure on Kiev to drastically change things.
The Associated Press reports Wednesday:
President Joe Biden’s administration is urging Ukraine to quickly increase the size of its military by drafting more troops and revamping its mobilization laws to allow for the conscription of troops as young as 18.
A senior Biden administration official, who spoke on the condition of anonymity to discuss the private consultations, said Wednesday that the outgoing Democratic administration wants Ukraine to lower the mobilization age to 18 from the current age of 25 to help expand the pool of fighting-age men available to help a badly outnumbered Ukraine in its nearly three-year-old war with Russia.
The official said “the pure math” of Ukraine’s situation now is that it needs more troops in the fight.
As the outgoing Biden administration is asking Congress to soon approve billions more for Ukraine, this conscription age change policy could serve as the quid pro quo being requested of Kiev from Washington, in order to keep the billions in arms and aid flowing.
The AP further cites an official who says the Ukrainians “believe they need about 160,000 additional troops, but the U.S. administration believes they probably will need more than that.”
To the last Ukrainian: “White House presses Ukraine to lower draft age to meet manpower needs against Russia. President Joe Biden’s administration is urging Ukraine to quickly increase the size of its military by drafting more troops and revamping its mobilization laws to allow… pic.twitter.com/N4m052LV8d
— Ivan Katchanovski (@I_Katchanovski) November 27, 2024
https://platform.twitter.com/widgets.js
In the early days of the war, some US hawks admitted their view is that Ukraine would be willing to “fight to the last person” as long as the US continued to provide the weapons. These politicians don’t seem to actually care about Ukrainians and their future in making remarks like this.
Tyler Durden
Wed, 11/27/2024 – 15:45 - 'Conservative' Outfits Are 'Scouring' Because Journalists Won't
‘Conservative’ Outfits Are ‘Scouring’ Because Journalists Won’t
Authored by Michael Chamberlain via RealClearPolicy,
The other day I acquired a new title: “Scourer.” My organization, Protect the Public’s Trust (PPT), was among the groups mentioned in a Politico article the outlet’s X account promoted as “Conservative outfits are scouring feds’ emails.”
I know “scouring” isn’t meant as a compliment, but I’m happy to take it that way. As stated in the article, PPT has made more than 1,600 Freedom of Information Act (FOIA) requests of the Biden-Harris administration. We’ve done so because the journalists and watchdog groups so enthusiastic about policing the Trump administration seem to have decided sometime around January 20, 2021, that their vigilance was no longer needed.
I have no issue with how I and PPT were portrayed in Robin Bravender’s report, but the piece’s framing and marketing were a bald attempt to whip up fear inside the Beltway of a Trump II purge of the bureaucracy. Bravender quoted the overwrought words of the Environmental Protection Network’s Jeremy Symons: “This abuse of the FOIA system is to intimidate civil servants and pave the way for hit lists in the event that Trump takes office.”
I can only speak for PPT, but that’s certainly not something we’ve focused on. We’ve found that there are more than enough conflicts and ethics problems with Biden-Harris political appointees to keep us busy. Our work mentions career civil servants when necessary, but PPT doesn’t target them and we keep no lists.
Career bureaucrats should not be above scrutiny, however. Transparency is not for certain classes of government employees. Civil servants must be accountable to the people who pay their salaries … and who elect their boss.
Symons told Bravender that the Trump administration would seek “excuses to get rid of anybody of significance and importance, so that the only people left in the agency are political hacks that are loyal to the president.”
No doubt, that would be bad. But, as long as we’re being reductive, wouldn’t it be just as bad to countenance “political hacks” who actively oppose the president? Those hacks would be flouting the will of the majority that elected the president and thus subverting “our democracy.”
The article states that the FOIAs “are causing concern among government employees and their allies.” That government employees have or need allies means they have adversaries, which, whatever their personal politics, civil servants shouldn’t have. Presidents serve at the pleasure of the electorate. Political appointees serve at the pleasure of the president. Career bureaucrats serve at the pleasure of … whom?
It recently surfaced, thanks to a whistleblower, that in the aftermath of Hurricane Milton, a career FEMA supervisor in Florida directed workers to avoid houses with Trump signs. That certainly sounds like a situation in need of scouring.
All federal employees, appointed or career, work for the taxpayers. They use taxpayer-provided resources to spend taxpayer-provided money. There is nothing sinister about insisting that the taxpayers have the right to know what they are getting for the salaries they pay and the resources they provide.
There was a time when scouring legally obtained public documents was also known as journalism – a noble and necessary role in a functioning republic. Journalists could and sometimes did shine light into the career bureaucracy. Few seem interested in doing that anymore, so it falls to others – some of whom journalists ascribe politics they dislike. That’s the price of abandoning the field.
But since there will be a second Trump administration, we can expect journalists and erstwhile “watchdogs” to rediscover their curiosity. Maybe “scouring” will no longer be a term of derision.
For our government to function for the maximum benefit of the American people, transparency is paramount. And nobody in government should be immune to scrutiny.
Michael Chamberlain is the Director of Protect the Public’s Trust, a watchdog organization focused on ethics and transparency.
Tyler Durden
Wed, 11/27/2024 – 15:25
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