Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Category Archives: Economics

Supreme Court to Take Another Swing at Consumer Financial Protection Bureau

Tuesday, 28 February 2023 15:11
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This article appeared online at TheNewAmerican.com on Tuesday, February 28, 2023:  

Like the Energizer Bunny, Senator Elizabeth Warren’s brainchild, the Consumer Financial Protection Bureau (CFPB), “keeps going and going.” On Monday the Supreme Court announced it will take at the CFPB, this time looking at how it’s being illegally funded by the Federal Reserve.

The CFPB, created by language buried in the Dodd-Frank Act of 2010 in response to the financial crisis of 2008, was designed by Senator Warren to avoid any manner of restraint: It would operate independently of Congress or the president, and would be funded by the Federal Reserve, where the agency’s 1,600 employees are located.

Efforts to rein in the rogue bureau, or abolish it altogether, have failed. It continues to harass any private company of sufficient size to catch its attention: banks, credit unions, securities firms, payday lenders, mortgage-servicing companies, foreclosure-relief services, debt collectors, and others.

It violates the separation of powers doctrine upon which the American Republic is based. It writes its own rules, it enforces its own rules, and punishes those companies which it finds has violated those rules. And, as mentioned above, it gets its funding not from Congress, but from the Federal Reserve.

Sometimes the fines the CFPB levies are in the millions of dollars. In fact, the bureau boasted that it had “extracted nearly $12 billion” in fines and “refunds” from the financial services sector of the U.S. economy in its first six years of operation.

In 2013, the House Financial Services Committee criticized the bureau, citing its lack of transparency and accountability. A lawsuit filed that same year claimed that “CFPB’s structure insulates it from political accountability and internal checks and balances in violation of the United States Constitution.”

In 2016, Judge Brett Kavanaugh, while on the U.S. Court of Appeals for the District of Columbia, wrote:

The director of the CFPB possesses more unilateral authority — that is, authority to take action on one’s own, subject to no check — than any single commissioner or board member in any other independent agency in the U.S. government.

 

The CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency.

And still the Bunny keeps going and going…

However, in October, the Fifth Circuit Court of Appeals ruled in a lawsuit brought by the Community Financial Services Association of America (CFSAA) on behalf of its many members injured by the agency that its funding mechanism is unconstitutional. The appeal will be heard by the high court this fall, with its ruling expected in June 2024.

Noted Christian Vergonis, the lawyer for the CFSSA:

The CFPB’s self-funding mechanism lacks any contemporary or historical precedent, improperly shields the agency from congressional oversight and accountability, and unconstitutionally strips Congress of its power of the purse under the Appropriations Clause of the Constitution.

The law firm McGlinchy Stafford predicts a substantial disruption if the high court cuts the agency’s funding legs out from underneath it. It could not only end the agency’s operation altogether, but also render inoperative those rules and regulations it imposed while operating illegally. The firm said:

If all regulations that the CFPB has adopted for the last eleven years are thrown out, all that certainty and all those market expectations disappear and [would be] replaced by confusion and uncertainty.

The agency itself said such an outcome would create the proverbial “parade of horribles,” including “undermining any and all rules amended or promulgated by the CFPB, [and would call] into question any enforcement actions it has taken.”

That would be called freedom! The market would adjust quickly, breathing the clean air of liberty from oppression by a rogue agency bent on applying its own rules according to its own agenda without any oversight or limitation.

May the Supreme Court finally seize the opportunity to pull the plug on the CFPB!

Enthusiasm Fading for Electric Vehicles

Monday, 23 January 2023 13:06
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This article appeared online at TheNewAmerican.com on Monday, January 23, 2023:  

The recent announcement that electric vehicle (EV) manufacturer Tesla has cut its prices by between six and 20 percent just to maintain its production goals and market share is the latest manifestation of the fading enthusiasm for electric vehicles.

In essence, the result of government meddling in the private market is now showing up in such moves.

In 2021, for example, auto executives were “very optimistic” about EVs, expecting them to capture as much as 70 percent of the total automotive market by 2030. A year later that optimism had subsided considerably, with those same executives cutting their expectations to 40 percent.

The latest report from international accounting firm KPMG reveals that car dealers expect EVs to capture just over 20 percent of the total automotive market by 2030.

The initial enthusiasm was generated by the belief that somehow EVs would save the planet. Governments got on board with the fraud, allowing massive tax credits to be given to purchasers of them to stimulate demand and hasten the transition.

That demand is now causing consternation, especially in California, where the far-Left interventionist governor and his Democratic sycophants in the state’s Legislature have deemed that 100 percent of vehicles sold in the state by 2035 be electric. The only problem, of course, is that making the demand and providing the supply are separate issues. As Ram Rajagopal, a professor at Stanford University, pointed out, a complete transition to electric vehicles in the state would require at least 15 times more charging stations than the 80,000 that presently exist.

And the demand on the state’s existing energy grid would be highly unlikely to be met. For instance, during a heat wave last September, just days after Governor Gavin Newsom announced that his state was going 100 percent “green” by 2035, the California Independent System Operator (which runs the state’s power grid) asked residents owning EVs to avoiding charging them during peak usage hours.

There are other issues as well. As inflation impacts the cost of building EVs, the so-called “cost advantage” of owning one over the traditional internal-combustion vehicle has narrowed to almost zero. An analysis by The Wall Street Journal in December showed that drivers of Tesla’s Model 3 had to pay the same to drive 100 miles as did the owner of a Honda Civic.

And there are political issues as well. Geopolitical strategist Peter Zeihan wrote:

The lithium comes from one place, and it’s all processed in China. So, just building the alternate processing infrastructure … and by the way, we [would] have to invade Russia too … just to get the materials to do EVs at scale is just laughable for the next decade.

There are reliability issues, too. Consumer Reports noted in its 2022 Annual Auto Reliability survey that just four of the 11 EVs in that survey had “average or better than predicted” reliability.

Plus, there are battery issues — they are expensive to replace. Consumer Affairs reported that “all EV batteries will eventually fail to hold a charge and require replacement.” In its survey of auto mechanics, the company reported that the total cost to replace a battery in a nearly 10-year-old Toyota Prius was $4,489, while the cost to replace the lithium battery in a 2014 Nissan Leaf was an astounding $17,657. A quick check on the price of a used 2014 Nissan Leaf reveals sellers are currently asking around $10,000 or so to get rid of them.

Then there are supply-chain issues. Last February the Felicity Ace — a cargo ship carrying hundreds of EVs — caught fire and sank in 10,000 feet of water off the shores of the Azores, Portugal. As Captain Rahul Khanna, global head of the marine insurance firm Allianze Global Corporate & Specialty (KGCS), noted, a single fire, from whatever cause, could (and did) incinerate an entire ship. In an interview with Autoweek, he said:

There have been quite a few, let’s say, near misses that the industry has seen over the years. And we … recognize the fact that EVs can be problematic, especially when it comes to fire….

 

The problem with EVs is that the lithium-ion batteries can actually propagate the fire. In fact, they can actually encourage a fire if a fire has already started and you have lithium-ion batteries — they can ignite a lot more vigorously as compared to any other cars.

Just last Friday a Norwegian shipping company banned EVs on its ferries, explaining that if an EV catches fire, the fire cannot be extinguished.

The bloom appears to be off the rose for EVs now that the reality of government interference for political reasons is becoming increasingly obvious. The cost of “going green” continues to escalate, and consumers are reacting accordingly.

DOA: Fair Tax Act to Abolish the IRS Has Zero Chance of Passage

Thursday, 12 January 2023 13:20
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This article appeared online at TheNewAmerican.com on Thursday, January 12, 2023:  

Tantalizing though it may sound, Rep. Buddy Carter’s (R-Ga.) bill to replace the IRS and the nation’s present convoluted and complex income-tax system with a simple flat-consumption tax has no chance of seeing the light of day in the new Congress.

It was one concession that now-Speaker of the House Kevin McCarthy was more than happy to give to those blocking his campaign. Efforts in past decades to pass a similar bill have been ignored, with no committee even looking at it and never passing it on for a floor vote.

The concept is elegant: In place of the IRS (and its 87,000 new agents), the Fair Tax Act would eliminate all taxes — federal, state, estate, capital gains, gift, and payroll — and replace them with a nationwide sales tax, a simple 23-percent sales tax on all goods and services purchased for personal consumption.

Carter made his pitch to his colleagues:

Instead of adding 87,000 new agents to weaponize the IRS against small business owners and middle America, this bill will eliminate the need for the department entirely by simplifying the tax code with provisions that work for the American people and encourage growth and innovation.

 

Armed, unelected bureaucrats should not have more power over your paycheck than you do.

His pitch so far has elicited the support of fewer than a dozen of his colleagues. One of them, Rep. Jeff Duncan (R) from South Carolina, gave his approval:

As a former small business owner, I understand the unnecessary burden our failing income tax system has on Americans.

 

The Fair Tax Act eliminates the tax code, replaces the income tax with a sales tax, and abolishes the abusive Internal Revenue Service.

 

If enacted, this will invigorate the American taxpayer and help more Americans achieve the American Dream.

Another Republican supporter, Rep. Bob Good of Virginia, added:

I support the Fair Tax because it simplifies our tax code.

 

This transforms the U.S. tax code from a mandatory, progressive, and convoluted system to a fully transparent and unbiased system which does away with the IRS as we know it.

 

It is good for our economy because it encourages work, savings, and investment. Thank you to my colleague Rep. Buddy Carter for leading this effort to simplify the system for American taxpayers.

Just in case Carter’s bill gains some traction, the Biden White House fired a warning shot:

With their first economic legislation of the new Congress, House Republicans are making clear that their top economic priority is to allow the rich and multi-billion-dollar corporations to skip out on their taxes, while making life harder for ordinary, middle-class families that pay the taxes they owe.

The chances that Carter’s bill won’t see the light of day is due to the present system’s ability to be manipulated by Congress to reward certain segments of the economy through tax incentives, credits, or welfare transfer payments from people who earned it to those who didn’t, for political purposes.

The root of the evil is the 16th Amendment: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

This amendment passed muster at the Supreme Court in 1916, three years after its passage. Since then, it has allowed the Federal Reserve, also created in 1913, in conjunction with the U.S. Treasury, to fund both World Wars and create the largest welfare state in history.

Would a national sales tax do anything to reduce that welfare state? To be enforced, would not every transaction need to be monitored by the federal government so that “all goods and services purchased for personal consumption” could be effectively taxed?

Bad as it is, it’s perhaps best to keep the present system in place and let the utopian idea of a flat tax die a natural death in the 118th Congress.

Investors, Wall Street Pummeled in 2022; Worse to Come in 2023

Monday, 02 January 2023 16:41
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This article appeared online at TheNewAmerican.com on Monday, January 2, 2023:  

Doug Noland, a highly regarded financial analyst, wrote in Seeking Alpha on New Year’s Eve: “It had all been a grand illusion: the Fed [the Federal Reserve System] and free ‘money’ [through government handouts] generat[ed] a permanent plateau of prosperity. The year saw inflationism’s inescapable scourge of wealth destruction and misery begin to be revealed.”

On paper, investors saw their accounts lose more than $30 trillion (that’s trillion, with a T) in 2022. There was no place to hide. Said Noland: “The ‘everything Bubble’ morph[ed] into the everything bust.” The Dow Jones Industrial Average (the “Dow”) dropped by 9 percent; the broader market index, Standard & Poor’s 500, lost 20 percent; and the tech-heavy NASDAQ lost a third of its value. Bond funds lost between 15 and 20 percent, and Bitcoin dropped 64 percent.

Popular names that had led the parade for the past three years gave back most of those gains: Tesla stock collapsed 65 percent, Facebook (META) declined 64 percent, Netflix dropped 51 percent, Amazon 50 percent, Alphabet/Google 39 percent, Microsoft 29 percent, Apple 27 percent, Disney 44 percent, and Nike 30 percent.

Seven hedge funds — those touted by their purveyors as providing an alternative hiding place — went bankrupt, with the one making the most headlines being FTX, the cryptocurrency empire that some are now calling a giant Ponzi scheme and a money-laundering Ukrainian/Democrat slush fund.

FTX’s founder, Sam Bankman-Fried (aka SBF), will start the new year under a court-ordered detention in his parents’ home on a $250 million bond. He faces eight federal counts of wire fraud, money laundering, and conspiracy, carrying a maximum of 115 years in federal prison.

The decline in the value of bonds and stocks turned 2022 into the worst year since 1871.

The cause of all this was, naturally, the combination of federal spending enabled by the unholy alliance between the Federal Reserve System and the U.S. Treasury. Republicans and Democrats alike are guilty of spending without limit, utilizing the new economic principle called MMT, or Modern Monetary Theory.

This “other worldly” fantasy is defined by Investopedia:

Modern monetary theory (MMT) is a heterodox macroeconomic supposition that asserts that monetarily sovereign countries (such as the U.S.) … which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending.

 

Put simply, modern monetary theory decrees that such governments do not rely on taxes or borrowing for spending since they can print as much money as they need and are the monopoly issuers of the currency.

 

Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of a rising national debt.

Translation: Seized by politicians as the way to print the way to utopia, the resulting inflation is then to be reined in by raising interest rates.

In 2022, the fraud of MMT was in full view. By pumping the money supply (allegedly to keep the economy from cratering during the plandemic), consumers and businesses went on spending sprees, causing supply chain disruptions. The money supply, as measured by the Fed’s M2 indicator, rose 42 percent in the three years that ended in March.

When the Fed then tentatively started tapping the brakes (i.e., raising interest rates) and beginning to reduce its now enormous balance sheet, the game was over. The stock market peaked in November 2021, and has been coming off its “high” ever since.

As Noland noted:

The year [2022] marked the end of a multi-decade cycle of ever-looser monetary policy, declining [interest rates], [and] inflating financial asset prices [i.e., stocks and bonds].

It was, in other words, the year that Reagan economist Herb Stein was proved right: when something cannot continue, it will stop.

What about 2023?

Jeffrey Hirsch has been studying seasonal and historical patterns for decades. In his Stock Trader’s Almanac, he says:

The 2022 bear market will likely bounce along sideways, testing [its] June 2022 lows, reaching a bear market low in late Q3 [July-August-September] or early Q4 [October-November-December] … in typical midterm bottom fashion.

 

[W]e expect a new bull market to commence … that takes the market to new highs in the Pre-Election Year 2023.

The list of reasons such a sunny outlook may get derailed is long: drought, floods, fires, hurricanes, heat waves, deep freezes, and food supply issues. The number of people still “not in the labor force” is five million higher than at pre-Covid levels, and job openings are still more than three million higher than before the start of the plandemic.

And this list doesn’t include the potential for a European war; the flood of illegals pouring into the country looking for handouts, health care, and education for their children; election fraud; energy supply constraints; and so on.

The real danger is that weak-kneed Republicans now in control of the House, headed up by RINO Kevin McCarthy, will not change anything of substance, but instead allow the federal government to continue to ignore constitutional boundaries. The threat of an imploding economy is overshadowed by the increasing threat of an exploding government that runs everything into ruin.

Rich New Yorkers Fleeing the Big Apple

Wednesday, 14 December 2022 15:19
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This article appeared online at TheNewAmerican.com on Wednesday, December 14, 2022:  

The results of a study by New York City’s Independent Budget Office (IBO) released last week revealed what common-sense economics predicted: High-income earners in New York City are fleeing the Big Apple for lower- or no-income tax states such as Florida and Texas.

It’s common sense, something clearly lacking among progressives in Albany. They raised state taxes by $4 billion last year, making New York the state with the highest tax rate in the country. And just last week those same economic illiterates have launched a campaign for another $40 billion in new taxes on the rich.

Surely they must know that the top one percent of New York City’s taxpayers provide nearly half of the city’s budget. Wouldn’t one think politicians would want to cater to them, make things easier for them, and reduce their tax liabilities to make their state more competitive with low-tax states?

As Walter Wriston, the former chairman and CEO of Citicorp, famously said, “Capital goes where it’s welcome, and stays where it’s well treated.” But Wriston died in 2005, apparently taking with him the last semblance of reason, reality, and economic good sense.

And the wealthy are getting out before things get worse. Between April 2020 (the start of the Covid-19 pandemic) and June 2021, 337,000 people left New York City for warmer and lower-tax climes. That’s an astonishing three times the number who leave in a typical year.

Arthur Laffer (the creator of the “Laffer Curve”) and Stephen Moore, one of those few “common sense” economists who works at the Heritage Foundation, reported recently the impact of the transition of such large amounts of capital is having on the “move-in” states such as Florida and Texas. They found that those states created more jobs and had faster economic growth. Where capital is treated well, it appears, it goes to work creating additional capital, not only for its owners, but for those who are employed by its owners.

It didn’t have to be this way, as Laffer and Moore point out:

Consider the fiasco of New Jersey [another high tax state]. In the early 1960’s, the state had no income tax and no state sales tax. It was a rapidly growing state, attracting people from everywhere and running budget surpluses.

 

Today, its income and sales taxes are among the highest in the nation … [and] it suffers from perpetual deficits.

It turns out that even after driving away high-income taxpayers, progressives continue to run the government programs they love, creating enormous and increasingly larger budget deficits. This leaves the middle class — those without the means to move — holding the proverbial bag. Progressives seeking to close those budget gaps have only one place left to go: the middle class.

So, raising taxes on the rich is in reality an attack on the middle class. And this is Marxism in action. According to Marxist ideology, capital is the enemy and thus private property should be abolished. History shows that a strong, well-educated, and prosperous middle class is the primary bulwark against tyranny. Damage or destroy the middle class, and Marxists are then free to inflict their regressive “back to the Middle Ages” economic system onto the country.

Perhaps the “progressive” legislators in Albany and elsewhere know exactly what they are doing.

Social Security to Announce Cost of Living Increase Tomorrow

Thursday, 13 October 2022 06:21
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This article appeared online at TheNewAmerican.com on Wednesday, October 12, 2022:  

Trustees managing the federally mandated “most successful Ponzi Scheme in History” — Social Security — will announce the largest COLA (cost of living adjustment) in history tomorrow. It is expected to be 8.7%, or an increase of about $170 a month for each of the nearly 70 million Americans who are forced to participate in it.

The increase is calculated on the basis of an inflation factor that is alleged to measure the cost of goods and services purchased by working people.

Gary Galles of the Mises Institute backs up his claim that Social Security is “the most successful Ponzi Scheme in History”:

If Social Security and Medicare both involved people voluntarily financing their own benefits, an argument could be made for seniors’ “earned benefits” view.

 

But they have not. They have redistributed tens of trillions of dollars of wealth to themselves from those younger.

 

Social Security and Medicare have transferred those trillions because they have been partial Ponzi schemes.

For proof, he offers as evidence the scheme’s first participant, Ida Mae Fuller:

After Social Security’s creation, those in or near retirement got benefits far exceeding their costs (Ida Mae Fuller, the first Social Security recipient, got 462 times what she and her employer together paid in “contributions”).

 

Those benefits in excess of their taxes paid inherently forced future Americans to pick up the tab for the difference.

 

And the program’s almost unthinkable unfunded liabilities are no less a burden on later generations because earlier generations financed some of their own benefits, or because the government has consistently lied that they have paid their own way.

According to retired Boston University Professor Laurence Kotlikoff, the unfunded liability of Social Security exceeds $200 trillion, thanks to the government’s flawed accounting of the scheme’s deficit.

The news from the trustees is bad enough: the primary “trust fund” — the Old-Age and Survivors Insurance Trust Fund (OASI) — will be depleted in less than 12 years. The present “reserves” — a staggering $2.9 trillion — will have been spent by then, leaving trustees with few options to keep the scheme afloat.

The misnamed “Committee for a Responsible Federal Budget” has come up with 10 ways to keep the flawed system afloat, but they boil down to these:

  1. Raise taxes
  2. Raise the retirement age
  3. Change the COLA calculation

Missing from Thursday’s announcement by the trustees will be the fact that for most recipients, 85 percent of their monthly check will be taxable. That means that a large part of each check will ultimately find its way back into the U.S. Treasury.

And the fact that inflation is currently far ahead of wage growth won’t show up until the trustees’ report next year. At that time, it’s more than likely the $2.9 trillion in “reserves” will have shrunk considerably, shortening the life span of the Ponzi scheme even further.

For those still thinking that each “participant” has his own account that he can count on, the Supreme Court ruled back in 1960 in Flemming v. Nestor that he has no binding contractual right to any of the funds he has paid into it. Which is just as well, as those funds have already been spent to fund the retirement of those currently receiving checks from the scheme.

Chicago’s Rising Crime Continues to Drive Big Companies away

Tuesday, 11 October 2022 14:24
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This article appeared online at TheNewAmerican.com on Tuesday, October 11, 2022:  

Even though, officially, Tyson Foods’ surprise announcement last week that it was moving from Chicago to Arkansas had to do with something called “unlocking greater opportunities to share perspectives” among its key people, most observers know the real reason: those key people working in Chicago don’t want to get mugged or carjacked on their way to work.

Said Tyson CEO Donnie King:

Bringing our talented corporate team members and businesses together under one roof unlocks greater opportunities to share perspectives and ideas, while also enabling us to act quickly to solve problems and provide the innovative products and solutions that our customers deserve and value.

Chicago Mayor Lori Lightfoot’s “progressive” policies such as ending cash bail and defunding the Chicago Police Department (CPD) have allowed crime to explode. According to the latest statistics from the CPD, crime surged in both 2021 and thus far in 2022 to heights not seen in decades.

Murders are up 32 percent since 2019 (with 526 murders so far this year), violent crime is up 37 percent, while common low-level theft (property, vehicles, etc.) is up an astonishing 61 percent.

Chicago’s homeless camps and open-air drug markets remind one of San Francisco, which Neighborhood Scout rates as a 4 out of 100 of the safest cities in the nation. Chicago rates a 10.

While King avoided any mention of the real reason for Tyson’s sudden announcement, MacDonald’s CEO Chris Kempinski wasn’t so constrained. His company built a $250 million headquarters in the city in 2018 and isn’t persuaded (yet) that he should move. But he declared in a speech to the Economic Club of Chicago last week,

Everywhere I go, I’m confronted by the same question these days: what’s going on in Chicago?

 

While it may wound our civic pride to hear it, there is a general sense out there that our city is in crisis.

He added,

We have violent crime that’s happening in our restaurants.… We’re seeing homelessness issues in our restaurants. We’re having drug overdoses that are happening in our restaurants.

And, understandably, that’s making it hard for him to recruit top talent to the Windy City:

The truth is, it’s more difficult for me today to convince a promising McDonald’s executive to relocate to Chicago … than it was just a few years ago.

Tyson follows the departure of the city’s richest man, Ken Griffin, and his companies. Griffin owns 80 percent of Citadel LLC, a multinational hedge fund, and all of Citadel Securities, one of the largest market makers in the country. Griffin echoed Kempinski:

If people aren’t safe here, they’re not going to live here. I’ve had multiple colleagues mugged at gunpoint. I’ve had a colleague stabbed on the way to work, countless issues of burglary.

Griffin himself experienced an attempted carjacking, and there continue to be reports of shootings, riots, and looting near some of his employees’ homes.

Tyson also follows Boeing, which has been a corporate resident of Chicago’s Deerfield suburb for three decades, and Caterpillar. Each is moving to safer locales: Arlington, Virginia, and Dallas-Fort Worth, Texas, respectively.

Food retailers Whole Foods and Aldi are reducing their presence in the crime-infested city. Said Aldi, “Our decision [to close at least one of its stores] was based on several factors, including repeated burglaries and declining sales. Out of concern for our employees and customers.… Keeping this store open was no longer a sustainable option.”

Elon Musk Reverses Course, Reinstates Offer to Buy Twitter at $54

Thursday, 06 October 2022 12:20
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This article appeared online at TheNewAmerican.com on Thursday, October 6, 2022:  

Elon Musk is about to turn the Twitter lemon into lemonade. He notified the SEC on Tuesday, just one day before he was scheduled to be deposed by Twitter attorneys in its lawsuit against him, that Musk “intend[s] to proceed to closing of the transaction contemplated by the April 25, 2022, Merger agreement.”

Musk had gotten cold feet, and in June sued to end the purchase agreement. But the global entrepreneur sees his opportunity to turn Twitter into the world’s largest “everything” app.

He’s planning to rename Twitter, calling it “X”:

Buying Twitter is an accelerant to creating X, the everything app….

 

Twitter probably accelerates X by 3 to 5 years.

During Tesla’s annual shareholder meeting in August, he revealed that he has a “grander vision” for the social-media platform:

It’s a pretty, pretty grand vision. Now obviously [the everything app] could be started from scratch, but I think [buying] Twitter would help accelerate that by three to five years.… It’s something I thought would be useful for a long time.

Industry analysts think Musk will likely build the new platform X around the model provided by the Chinese platform WeChat, which currently has more than a billion subscribers. Mostly Chinese, WeChat subscribers can access most of their favorite online services and utilities on a single app, including hold-to-talk voice messaging, social-media interaction, paying bills, placing food orders, video conferencing, video gaming, sharing of photographs and videos, among others.

Musk told Twitter employees in a town hall meeting with them in June that he wanted to grow the platform to a billion users: “If we can recreate [WeChat] with Twitter, we’ll be a great success.”

Assuming that the Delaware court where Musk was due to testify today agrees, the deal could be consummated in the next couple of weeks, if not sooner.

But Twitter is laden with many issues that Musk must first resolve. At the moment. Twitter allows porn videos on its site. That got the company in trouble more than 10 years ago when it was learned that Twitter was unable to keep underage users from accessing them. It now appears that Twitter violated its consent decree with the Federal Trade Commission which, if proved, could result in fines in the billions of dollars.

And Twitter whistleblower Peiter “Mudge” Zatko, the company’s former head of security, has filed a complaint alleging that the platform is a risk to national security. This is expected to result in investigations by both the FTC and other regulatory agencies.

And there’s the risk that, once X is operating as the “everything app,” those same agencies will likely seize the opportunity to use it to surveil users just as the Chinese communists use WeChat to monitor the activities of its users.

On the positive side, Musk intends to change the platform’s reliance on advertising revenues to a subscription-based service. At $3 a month, a billion subscribers would generate a very handsome return to the investors who have joined Musk in purchasing the platform.

And that would virtually eliminate the influence of large advertisers on the platform and mute attempts by the notoriously liberal employees from disparaging, punishing, or eliminating conversations that they don’t like.

It would also challenge other platforms such as Facebook and Amazon, which currently provide services that X would duplicate.

It’s going to take all of Musk’s time, attention, and talents to right the left-wing ship, but with successes like Tesla and SpaceX behind him, few are betting against him in his quest to provide the world with a public forum for free expression.

Chicago’s Richest Resident Moves to Florida

Thursday, 15 September 2022 13:29
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This article appeared online at TheNewAmerican.com on Thursday, September 15, 2022: 

At first blush this is hardly news. Illinois has high taxes. Florida has no personal income tax. But for Ken Griffin, the billionaire entrepreneur who made his money trading stocks and then started two companies that trade stocks, there’s another reason: crime.

While a student at Harvard, Griffin persuaded school administrators to allow a satellite dish to be installed on the roof of his dormitory so he could receive stock quotes. He turned a few dollars into many, moved to Chicago after graduation, and now sports a net worth of nearly $30 billion.

He owns 80 percent of Citadel LLC, a multinational hedge fund already operating in Miami, and 100 percent of Citadel Securities, one of the largest market makers in the U.S. Approximately one-third of all individual stock transactions that take place in the United States are completed through Citadel Securities.

Citadel employs more than 1,000 people, and they are tired of being attacked on the way to and from work. Said Griffin:

If people aren’t safe here, they’re not going to live here. I’ve had multiple colleagues mugged at gunpoint. I’ve had a colleague stabbed on the way to work, countless issues of burglary.

Griffin himself experienced an attempted carjacking, and there continue to be reports of shootings, riots, and looting near some of his employees’ homes.

In June he announced to his employees that he was moving Citadel Securities to Miami, and then moved himself and his family to the Sunshine State. This follows similar moves, for perhaps similar reasons, by Boeing (which is moving its operations to Arlington, Virginia) and Caterpillar (which is moving its operations to Dallas-Ft. Worth in Texas).

While Illinois Governor J. B. Pritzker is putting the best possible face on Griffin’s departure — “Countless companies are choosing Illinois as their home,” he said — Citadel’s move will cost Chicago and the state billions of future tax dollars, as well as more than $600 million in gifts that Griffin himself has given to local charities and other good works over the past 30 years.

It’s true that Florida has lower taxes than Illinois. According to the Tax Foundation, Florida ranks #4 in its State Business Tax Climate Index, while Illinois lags far behind in the #36 position. That’s because, in every tax category — corporate taxes, individual income taxes, sales taxes, property taxes, and unemployment insurance premiums — Illinois’ burdens are significantly higher that Florida’s.

On a per capita basis, which is the best measure of how those taxes impact the working individual — who ultimately pays all taxes — Florida collected $2,002 on average from each citizen in 2020, while Illinois extracted almost twice as much: $3,534.

But on crime the difference is staggering. In Chicago the violent crime rate, according to Neighborhood Scout, is 9.69 per 1,000 residents. In Miami, it’s 6.00 per 1,000. The chances of becoming a victim of a violent crime in Chicago are one out of every 103 residents; in Florida it’s one out of every 167.

Taken all together then — weather (the average temperature in January in Chicago is 26 degrees; in Miami in January it’s 69 degrees), taxes, and crime — one wonders why Griffin and Citadel stayed so long in such an inhospitable place.

Elon Musk Wins Court Approval to Gain Access to Twitter’s Real Number of Bots

Wednesday, 17 August 2022 13:35
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This article appeared online at TheNewAmerican.com on Wednesday, August 17, 2022:  

A court ruled on Monday that Twitter must “collect, review and produce” documents from Twitter’s former consumer-product head Kayvon Beykpour and provide them to Elon Musk.

This is the breakthrough Musk has been seeking, and it could, depending upon what those documents show, be the end of Twitter’s resistance and the beginning of a truly “free speech” platform on social media.

Initially Musk asked the court for permission to quiz 22 Twitter executives about those bots, but the key executive he wanted was Beykpour.

Around the time that Musk formalized his bid to take the social media company private in April, Beykpour was fired. Although the court denied Musk the opportunity to quiz the others, Beykpour is the one Musk most needs to prove that Twitter inflated — and has continually inflated since its beginning — the number of real users the platform enjoys.

Called MDAUs — monetizable daily active users, or real people with money to spend — Twitter claims 238 million of them. Musk thinks a more accurate number is 173 million, a difference of 65 million.

Musk’s attorney, Alex Spiro, can hardly wait: “We look forward to reviewing Beykpour’s communications and will continue to seek information and witnesses until the full truth comes out.”

According to Dan Brahmy, CEO of the Israeli tech company Cyabra, Twitter has understated the number substantially, and the share of fake accounts is 13.7 percent, not the five percent Twitter claims.

If that proves true then Musk will have a decision to make: 1) withdraw his bid to buy the platform, or 2) renegotiate the purchase price down from the original $54 a share and complete the purchase.

As the richest man in the world, Elon Musk doesn’t need to turn a profit, although he wouldn’t turn it down. His primary purpose, according to his own words, is to make Twitter a public free-speech zone for its users, who will pay $3 a month for the privilege of speaking/tweeting their minds without fear of reprisals or being censored or canceled.

Musk had asked his 80 million Twitter followers what to do back in March:

Free speech is essential to a functioning democracy.

 

Do you believe Twitter rigorously adheres to this principle?

More than 70 percent of those who responded said no. Then Musk asked, “Is a new platform needed?” One responded: “Just buy Twitter!”

In his letter to Twitter’s chairman to do just that, Musk reiterated his support for free speech:

I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.

 

However, since making my [initial] investment I now realize the company will neither thrive nor serve this societal imperative in its current form.

 

Twitter needs to be transformed as a private company.

Musk knew that the company was in thrall to commercial interests selling advertising to those MDAUs: “The power to dictate policy [to Twitter] is greatly enhanced if Twitter depends on advertising money to survive.”

Musk also knew that Twitter was almost completely staffed with liberal Democrats. Many acted as self-appointed censors of conservatives, dropping not only Donald Trump from the platform but hundreds of others of like mind, including Georgia Republican Rep. Marjorie Taylor Greene and Dr. Robert Malone, a contributor to mRNA vaccine technology.

As Media Research Center vice president Dan Gainor noted:

From the top to the bottom, these companies [Google and Twitter] are overwhelmingly liberal, overwhelmingly pro-Democrat.

 

At the top, they contribute to Democrat causes. At the bottom, they contribute to Democrat causes in overwhelming numbers.

The trial begins on October 17, just two months away. This should give Twitter plenty of time to not only reveal the true numbers to Musk but also negotiate a better (lower) price so Musk can begin the process of turning Twitter into a free-speech zone. And do so profitably.

Three Latest Polls Show Biden’s Approval Rating Continuing to Sink

Wednesday, 20 July 2022 14:25
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This article appeared online at TheNewAmerican.com on Wednesday, July 20, 2022:  

No matter who does the polling or how the questions are posed, Americans are increasingly fed up with the performance of Joe Biden. The latest three polls show his performance dropping from dismal to disastrous in the eyes of American voters.

The results of CNBC’s All-America Survey released on Monday reveal that Biden’s economic and overall job-performance numbers “dipped to the lowest levels of his presidency,” said the survey authors. His economic approval numbers dropped five points since April, lower than even Barack Obama’s worst levels.

More than half told the pollster that they expect the economy, already in trouble, to get worse over the next year, while six out of 10 expect the economy to be in recession by then.

Biden’s overall job-performance numbers now show a disapproval/approval rating of 57/36, the lowest since CNBC has been tracking them.

CNN’s poll, conducted by SSRS and with results also released on Monday, reported that 62 percent disapprove of Biden’s overall performance, with just 38 percent approving — a favorability rating of -24. Among Democrats, Biden’s approval rating continues to drop as well: In April, they gave him an 86-percent approval rating. It’s now down to 73 percent. And when it comes to managing the economy, Democrats’ support of their man has also dropped, from 71 percent this spring to 62 percent.

Among people of color, the disaster is even worse. Biden’s overall performance among Black adults has dropped six points in two months, while among Hispanic adults it has dropped by nine points. CNN summarized the continuing disaster:

Just 38 percent of Democrats now say things are going well in the country, down from 61 percent this spring. Likewise, there’s been a steep drop among people of color, from 41 percent saying things were going well in the spring to 27 percent now.

The CNN poll also asked its audience about Biden’s (and Vice President Kamala Harris’) “personal favorability”: “A year and a half ago, just before their inauguration, 59% held a favorable opinion of Biden and 51% had a favorable view of Kamala Harris. Now, those figures stand at 36% and 32% respectively.”

The results of a Reuters/Ipsos opinion poll released on Tuesday confirmed the results from CNBC and CNN: Biden’s approval rating fell to 36 percent, “the lowest rating of his 19 months in the White House … [while] 59% of Americans disapprove of Biden’s job performance.” That’s a three-point drop from another Reuters poll taken last week.

Biden is also underwater in 44 out of the 50 states, according to Morning Consult. That’s up from 40 just three months ago. Especially damaging is that, in so-called battleground states — states where Biden allegedly won enough votes to tip the election in 2020 — he is greatly underwater: Arizona (-20 net approval rating), Georgia (-13), Pennsylvania (-19), Ohio (-23), and Wisconsin (-18). Excluding Ohio, the president supposedly won all of those states in the 2020 election.

America’s middle class — the target of the Biden administration’s attack — is suffering. Two thirds report spending less on entertainment, while three out of five are driving less and more than half have cut back on their travel plans this summer.

What’s worse is that these polls were taken before the latest inflation numbers were announced (above nine percent), and before Biden’s obsequious trip to Saudi Arabia (which The Wall Street Journal called “worse than an embarrassment”).

Pollsters tracking the rolling disaster are likely to report even lower approval numbers for Biden in the future as the impact of his anti-middle-class policies takes firmer hold over the intended victims.

Twitter Sues Musk, Asks for “Expedited” Court Date for Trial

Wednesday, 13 July 2022 15:54
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This article appeared online at TheNewAmerican.com on Wednesday, July 13, 2022:  

Social networking site Twitter sued Tesla CEO Elon Musk on Tuesday, claiming breach of contract. Musk offered to buy the site in April for $46.5 billion, subject to disclosures about how many advertising “bots” (robots) make up the site’s 200 million-plus users.

Last week Musk reneged on the deal, claiming that Twitter failed to provide him with sufficient proof that those “bots” make up less than five percent of its users, as the company has consistently claimed.

The lawsuit gave this summary:

In April 2022, Elon Musk entered into a binding merger agreement with Twitter, promising to use his best efforts to get the deal done.

 

Now, less than three months later, Musk refuses to honor his obligations to Twitter and its stockholders because the deal he signed no longer serves his personal interests.

 

Having mounted a public spectacle to put Twitter in play, and having proposed and then signed a seller-friendly merger agreement, Musk apparently believes that he — unlike every other party subject to Delaware contract law — is free to change his mind, trash the company, disrupt its operations, destroy stockholder value, and walk away.

 

This repudiation follows a long list of material contractual breaches by Musk that have cast a pall over Twitter and its business.

 

Twitter brings this action to enjoin Musk from further breaches, to compel Musk to fulfill his legal obligations, and to compel consummation of the merger upon satisfaction of the few outstanding conditions.

In covering the developing story yesterday, The New American quoted attorney Matt Levine, who suggested there were only two likely outcomes from such a lawsuit: 1) the Delaware court rules for Twitter, forcing Musk to pay the $1 billion termination fee plus Twitter’s legal fees, or 2) the court forces Musk to go through with the deal, buying the 800 million shares outstanding at $54.20 per share.

At the close of business on Tuesday, Twitter traded at a little over $34 per share.

However, there is a least one other option: that Musk will use Twitter’s lawsuit as a negotiating tool to obtain a lower price.

Here’s the reasoning: Twitter claims it has given Musk all the information he demanded in the purchase agreement concerning those pesky advertising bots. For years the company has reported to the Securities and Exchange Commission (SEC) that they represent “less than five percent” of the 200 million users currently present on the site, along with a disclaimer that that number is only a rough estimate, subject to change.

But, as Musk’s lawyer noted on Friday, Twitter itself is “in material breach of multiple provisions” of the purchase agreement.

Twitter has requested an “expedited” trial date for September:

Expedition is essential to permit Twitter to secure the benefit of its bargain, to address Musk’s continuing breaches, and to protect Twitter and its stockholders from the continuing market risk and operational harm resulting from Musk’s attempt to bully his way out of an airtight merger agreement.

Part of the discovery process in that trial (if it happens) will finally reveal what percentage those “bots” make up of the Twitter universe. Musk is persuaded that it’s much higher than Twitter claims, perhaps as many as one in every five users.

If that proves to be the case, this opens a Pandora’s box for Twitter. It could be accused of defrauding its advertisers, making false statements to the SEC, and exposing the company’s board of directors to charges they breached their fiduciary duty to protect the interests of the company’s stockholders.

This would exacerbate the company’s declining stock price, putting the present offer by Musk even further out of reach.

Since there are no other suitors interested in purchasing Twitter, the board would be pressed to renegotiate a lower price with Musk.

Is Musk Really Walking Away From Twitter?

Tuesday, 12 July 2022 20:42
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This article appeared online at TheNewAmerican.com on Tuesday, July 12, 2022:  

Within days of Elon Musk’s offer to buy up the 800 million plus shares of outstanding Twitter (stock symbol TWTR) at $54 a share in April, the stock rose to $51 a share. This made the deal doable — with Musk’s detailed plan of turning Twitter into a subscription-based business instead of an advertising-based one subject to pressures from advertisers and ridding the company of dead-weight employees, he could see the company growing immensely profitable.

That’s the pitch he made to his investors, who gladly ponied up millions to reduce the amount Musk personally had to invest in the deal.

But then he noticed he was getting pushback from Twitter: Twitter execs weren’t, he said in a filing with the Securities and Exchange Commission on Friday, upholding their part of the bargain, i.e., they weren’t giving him proof that less than five percent of Twitter users were advertising bots.

Musk, in other words, is following an old rule: It’s easier to stay out than to get out.

Twitter execs, on the other hand, said they were complying the best it could, subject to various privacy agreements and laws prohibiting full disclosure of sensitive company information that Musk night be able to use against them in the event the deal fell through.

So TWTR started falling in price. And Musk began getting nervous. As of today, TWTR is selling for $34 a share, down $20 a share from what Musk offered back in April. That means that Wall Street now values Twitter at about $27 billion, a far cry from the $46.5 billion he offered.

Built into the offer was the promise that if he terminated the agreement without cause, he would pay $1 billion. That’s a lot less — very much less — than the billions in value Twitter has declined since April.

Two high-powered merger and acquisition (M&A) law firms are hungry, each salivating over their third of that termination fee. And each is building the case for their client. Musk has grounds to terminate. Twitter claims it has given, and continues to give, Musk everything he is asking for.

Though the world’s wealthiest man — even though his primary asset, Tesla (TSLA), has declined sharply in value as the market itself has declined — Musk remains protective of his capital. It would be a much harder task to bring back a company that’s worth just $27 billion for which he paid $46 billion to profitability, much less to give himself and his investors a significant return.

Matt Levine was an editor of DealBreaker, an investment banker at Goldmans Sachs, and a M&A lawyer at one of those two law firms. He took 13 pages on Bloomberg to explore all the options, and the ins and outs of this proposed purchase, and noted that the real risk is on Twitter.

If Musk is correct — and this will be determined during the discovery part of the trial that both law firms are thirsting for — that Twitter has lied for years about just how many of its users are real people and how many are advertising bots, then Twitter could be fairly accused of defrauding its advertisers. Logic helps: 90 percent of Twitter’s revenues comes from those advertisers’ bots popping up on Twitter. Twitter has said that less than five percent of its users — estimated at more than 200 million — aren’t real people. Logic demands there must be more bots than Twitter claims.

Musk thinks that number is much higher — perhaps as high as one in every five. He just continues to ask Twitter for information that would prove that, and let him off the hook. Twitter can’t, for existential as well as legal reasons.

On the other hand, advertisers continue to use Twitter because those bots generate sales. As Levine noted, “Companies advertise on Twitter because it sells products! People use Twitter because other, non-bot people also use Twitter.”

So, it’s perfect for those law firms who are preparing for World War III in the case of Musk v. Twitter, or Twitter v. Musk.

The firm representing Twitter has promised to file suit in a Delaware court later this week claiming Musk has breached the contract.

Levine says there are only two possibilities: The court rules for Twitter, and forces Musk to pay the $1 billion termination fee (plus associated legal fees and court costs) — which he’d be glad to do so, getting out while the getting is good.

Or, the Delaware court forces Musk to buy Twitter at $54 a share.

Musk has an out: He has obtained financing commitments from a number of banks who by now likely want to get out of the deal as badly as Musk. If the deal cannot be consummated, the banks don’t have to provide the loans, and Musk doesn’t have to pay his share of the purchase price either. As Levine noted:

Musk agreed to buy Twitter with $33.5 billion of his own money and $13 billion of debt financing from his banks, and if the banks don’t put up their $13 billion then he doesn’t have to put up his $33.5 billion: in that case, he can pay the $1 billion to walk away….

 

Musk says the deal is off, so his banks walk away, so his financing isn’t available, so he doesn’t have to close the deal and can get away with just paying $1 billion.

Dems “Have Thrown In the Towel” on Bidenflation in Latest Poll

Tuesday, 21 June 2022 17:48
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This article appeared online at TheNewAmerican.com on Tuesday, June 21, 2022:  

Pollster TIPP (TechnoMetrica Institute of Policy and Politics) reported on Monday that even Democrats have ceased buying the canard that Vladimir Putin, oil companies, or shipping companies are the underlying cause of inflation. Wrote Terry Jones, an editor with Issues & Insights, which partnered with TIPP:

Most surprising … Democrats have thrown in the towel on Biden’s economic leadership, with 53% blaming Biden’s policies for inflation.

A majority of every other group except those calling themselves “liberals” see Biden and the Democrats’ policies as the root cause of the diminishing purchasing power of their paychecks:

Indeed, of all the major demographic groupings followed by the I&I/TIPP Poll, just one was below 50% overall: self-described “liberals.”

 

All the other groups, including blacks (61%), Hispanics (61%), men (68%), women (61%), along with every income group, every age group, and every education group, all felt Biden’s policies caused the current inflation mess.

TIPP asked the 1,300 people they polled the first week of June a follow up question: “Does excessive government spending … ‘worsen inflation,’, ‘lessen inflation,’ or ‘not sure.’” Nearly 90 percent of Republicans and 70 percent of independents said “excessive government spending” was the root cause, while more than half of Democrats agreed.

This is an astounding result. For years, Keynesian economist Paul Samuelson brainwashed college students into thinking it was a “demand-pull” concoction that was to blame. In his college textbook Economics — the bible taught in introductory economics classes for decades in nearly every major university in the country — Samuelson tried to explain it:

Demand-Pull inflation arises when the aggregate demand increases more than the economy’s potential for productivity which leads to rise in Prices so as to have a new equilibrium with the Aggregate Supply.

Any student who could memorize this for the final exam would pass. Anyone who questioned its falsity — like the little boy declaring that “the emperor is naked!” — would fail.

This writer is a product of that system, and that canard.

Happily, Florida Governor Ron DeSantis, with degrees from both Harvard and Yale, has recovered from the Keynesian myth. On Friday, he gave reporters a lesson in real-world economics:

I think it’s sad to see some of the economic numbers with Bidenflation coming out — 8.6 percent. They tried to say — first, they said it wasn’t going to happen, was transitory and it would basically kind of solve itself.

 

They said it was gonna moderate two months ago and now it’s accelerating, and you have energy, groceries, all the things that really, really matter are just going through the roof … [these] are the results that we’re seeing with this inflation report.

 

Unfortunately, as a result of a lot of bad policy … you don’t declare war on American energy and undercut our energy independence and think that that’s gonna lead to more affordable energy for people….

 

You don’t print trillions and trillions of dollars and think that that’s somehow not gonna be reflected in rising prices and rising inflation.

DeSantis failed to clarify that while Biden has supported big government spending, it is Congress, working with and through the U.S Treasury and the Federal Reserve System, which is also to blame. Instead of Keynesian myths it’s common sense: One cannot increase the amount of currency in circulation without diluting the purchasing power of each unit of that currency.

And it was Republican President Richard Nixon who unleashed the inflation tiger back in 1971 when he unilaterally removed the last tie the dollar had to gold. That tiger will, if the present rate of inflation (eight percent per year, using government figures) continues, reduce the purchasing power of today’s already-weak and weakening dollar to just fifty cents in nine years.

It’s nice to know that Democrats are finally owning up to their part in the destruction of it.

Musk Demands Hard Numbers of Fake Accounts on Twitter, Stock Drops

Tuesday, 17 May 2022 21:09
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This article appeared online at TheNewAmerican.com on Tuesday, May 17, 2022:  

A tweet by Elon Musk posted early (1:32 a.m.) Tuesday morning sent Twitter stock (TWTR) below $37 a share. That’s 31 percent below what Musk offered to pay to buy the company and take it private.

Musk posted:

20% fake/spam accounts, while 4 times what Twitter claims, could be “much” higher.

 

My offer was based on Twitter’s SEC [Security and Exchange Commission] filings being accurate.

 

Yesterday, Twitter’s CEO [Parag Agrawal] publicly refused to show proof of < [less than] 5%.

 

The deal cannot move forward until he does.

Agrawal had tweeted the day before that he couldn’t provide the proof, even though in SEC filings the company repeatedly estimated that those fake or sham or false bots constituted less than five percent of the total.

From an advertiser’s perspective, that meant that 95 percent or more of the 217 million “daily active users” (DAUs) were really human eyeballs constituting an enormous target market for his product or service. He was willing to pay for that opportunity.

But upon receiving Agrawal’s claim that “we don’t believe that this specific estimation can be performed.… It’s not even possible to know which accounts are counted as mDAUs [million daily account users] on any given day,” Musk responded, “So how do advertisers know that they’re getting for their money? This is fundamental to the financial health of Twitter.”

It’s also fundamental to Musk, as he is pricing his offer to buy on what Twitter tells the SEC.

That 20 percent number that Musk used is confirmed by market research firm SparkToro, which estimates non-human accounts at 19 percent. Although some of those accounts provide automated news updates, inspirational quotes, and stock-price changes, advertisers aren’t willing to pay extra for them. They want to know the hard number of humans actively tweeting every day.

If Agrawal cannot prove the “less than five percent” claim, then Musk has a decision to make: terminate his offer and pay a $1 billion breakup fee, or negotiate for a lower price.

This puts Agrawal and Twitter in a pickle: If they cannot verify the five-percent number and admit that the real number of non-human Twitter accounts is higher — perhaps much higher — then they will have to deal with lawsuits from advertisers claiming they were misled. There will be lawsuits from shareholders claiming they purchased shares at artificially high prices. Bondholders holding the $5 billion in Twitter debt will claim they were defrauded.

And, of course, there are the SEC and the Federal Trade Commission (FTC), who would likely sue as well.

Added all up, these lawsuits, if successful, could not only bankrupt Twitter, but end the company’s existence altogether.

Musk is aware of all of this, and has little interest in assuming those enormous and essentially unknowable liabilities.

If Agrawal and the board can provide the proof that Musk is demanding — that real humans constitute more than 95 percent of those 217 million accounts — then Musk should be very happy to proceed with the purchase. In which case, buyers of TWTR at under $40 a share will enjoy a nice gain when the purchase is consummated later this year.

Does Decline in Consumer Sentiment Portend a Recession?

Monday, 16 May 2022 14:17
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This article appeared online at TheNewAmerican.com on Monday, May 16, 2022:  

According to a report released last week by the University of Michigan,

The University of Michigan consumer sentiment for the US fell to 59.1 in May of 2022, the lowest since August of 2011, from 65.2 in April and below market forecasts of 64, as Americans remained concerned over … inflation.

Behind the headline there was little good news:

The current economic conditions index fell to 63.6, the lowest in 13 years while the expectations gauge sank to 56.2 from 62.5….

 

To make things even worse, the index of buying conditions for durable goods, such as household appliances, fell to the lowest level since the survey began in 1978….

 

Consumers’ assessment of their current financial situation relative to a year ago is at its lowest reading since 2013, with 36% of consumers attributing their negative assessment to inflation.

Economic prognosticators make a handsome living explaining the continuing drop in consumer sentiment. Topping the list is rising prices, incorrectly but repeatedly called “inflation.” Rising prices is the result of the inflation of the currency and the Federal Reserve is responsible for that.

Regardless, consumers see the impact every day at the grocery store and the gas pump. Every day they see their paychecks purchasing less and less. And they’re mad at Joe Biden, pushing his job approval rate to ever lower lows.

There are plenty of other “causes,” including the Russian invasion of Ukraine, the invasion of illegals across the nation’s southern border, China’s internal lockdowns disrupting the supply chain, and the Fed’s belated response to the rising prices that its policies have created.

The Fed is playing catch up. Initially Fed Chairman Jerome Powell said last fall that the rise in prices was “transitory.” Now, to quench the fire he started, he is raising interest rates under the assumption that a slower economy will force prices down. There is little talk of the Fed reducing the money supply, which is the only permanent solution.

The Fed’s recent 50 basis point (half of a percentage point) rise in the Fed Funds Rate is not only the largest single increase in 22 years, but Powell has promised a similar half-point rise in interest rates at each of the next two meetings of the Fed’s Board of Governors.

The trick is to avoid raising interest rates too far and too fast, forcing a contraction in economic output. Two quarters of negative growth is the classic definition of a recession.

Some are blaming Wall Street, which has given up about a fifth of its value just since the first of the year. More than $7 trillion has evaporated from the stock market so far this year.

Others are saying that the decline on Wall Street is a predictor of a recession six months out.

Still others point to the recent “yield curve inversion,” that moment in time when short-term interest rates rise above long-term interest rates. The history is unhappy: That “inversion” has preceded every recession since 1955 — and giving only one “false positive” during that time — according to the Federal Reserve Bank of San Francisco.

Another good living is made by those predicting just how far Wall Street will drop in the event of a recession. One firm doing just that is DataTrek, which is saying Wall Street could drop another 25 percent before finding a bottom. That would bring the Dow, currently trading at 32,200, down to 24,000. And the S&P 500 Index, currently at 4,000, would decline to 3,000.

One prognosticator with a remarkable record of calling tops and bottoms is Barry Ritholtz. His asset-management firm, Ritholtz Wealth Management LLC, has over $2.7 billion in assets under management. His blog, The Big Picture, generates half a million page views every month, and he is one of the few who saw the coming housing implosion and derivative mess long before his peers.

Today he is taking the long view. He wrote on Friday that there are many competing explanations for the selloff on Wall Street, including “inflation, war, rising Fed Fund rates, [the] end of cheap capital, [the] fall-off in liquidity, [the] impending recession, and political unrest.”

He thinks there is a simpler answer: a reversion to the mean. Wrote Ritholtz:

Over the past decade, we have enjoyed returns of above 14% per year … the past two years gained 20% and 28%….

 

Over longer periods of time, equity markets generate average returns of 8-9%….

 

Perhaps [the decline] is nothing more complex than mean reversion.

For the long haul, Ritholtz remains bullish:

This market could/should have another good 5-7 years in it (assuming random events do not mess it up).

 

That is how I have been seeing this market for a while: it is one part history, one part secular theory, [and] two parts wishful thinking.

Is Bitcoin Collapse a Setback for Global Cryptocurrency Plans?

Friday, 13 May 2022 16:19
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This article appeared online at TheNewAmerican.com on Friday, May 13, 2022:  

The collapse in the price of digital currencies, particularly Bitcoin, has not only significantly damaged Americans who invested or traded in the currency but its credibility as a tool for governments to control its citizens.

An estimated one in every six Americans has owned, invested, traded, or used a cryptocurrency at least once, taking advantage of its encrypted property: No outside agency, including government, can track its ownership or use.

The collapse has been staggering: In November Bitcoin (stock symbol BTC-USD) peaked at $67,802. It closed on Thursday at $28,315, a breathtaking decline of nearly 60 percent. At the same time, Wall Street’s S&P 500 Index (stock symbol SPX) declined by just 16 percent.

Commentators blame a combination of factors, including inflation, the decline on Wall Street, and the tweet from Elon Musk that Tesla will no longer be accepting Bitcoin to purchase his company’s cars.

One underlying cause, however, enjoyed scant exposure: the announcement by the White House, by executive order, that it was moving ahead with plans to develop a “central bank digital currency” (CBDC) as a tool to replace not only the dollar but the entire commercial banking system. Once in place, the U.S. CBDC would be melded into CBDCs of other central banks around the globe, making private cryptocurrencies not only irrelevant, but illegal.

It’s already happening in China, where the communists have banned Bitcoin while developing their own CBDC.

The Executive Order released by the White House on March 9 is just now resonating among supporters of cryptocurrencies who are seeing the implications. As that EO states explicitly, America “must play a leading role in international engagement and global governance of digital assets.” It orders Federal Reserve Chairman Jerome Powell “to continue its research, development, and assessment efforts for a U.S. CBDC.”

Powell is only too happy to oblige, declaring that a CBDC “could serve as a complement to, and not a replacement of, cash and current private-sector digital forms of the dollars, such as deposits at commercial banks.”

This is a canard of the first order. Once installed, all financial transactions will take place with the new digital currency, making those commercial banks irrelevant. Norbert Michel, writing in Forbes, makes it clear that CBDCs will not “complement” the existing private banking system in the U.S. but will replace it altogether. He wrote:

I believe that the Fed should not launch a CBDC. Ever.

 

And I think Congress should amend the Federal Reserve Act, just to be on the safe side….

 

[Under a CBDC] the federal government, not privately owned commercial banks, would be responsible for issuing deposits [which is] a major problem for anything that resembles a free society….

 

The problem is that there is no limit to the level of control that the government could exert over people if money is purely electronic and provided directly by the government. A CBDC would give federal officials full control over the money going into — and coming out of — every person’s account.

No less a worthy than Warren Buffet and his partner, Charlie Munger, have come out opposed to digital currencies, but only for practical and not political reasons. Buffet told his audience of shareholders in April that bitcoins aren’t a “productive asset,” that they don’t produce anything tangible:

Whether it goes up or down in the next year, or five or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything.

 

It’s got a magic to it and people have attached magic to lots of things.

But with the collapse in the price of Bitcoin and its close relatives, the magic is gone, and along with it the excitement the White House is trying to gin up over replacing the dollar with it.

Buffet made clear that he wouldn’t touch a Bitcoin even if one were handed to him:

If you said … for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon. [For] $25 billion I now own 1% of the farmland.

 

[If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check. It’s very simple.

 

[But] if you told me you own all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it. Because what would I do with it? I’d have to sell it back to you one way or another.

 

It isn’t going to do anything. The apartments are going to produce rent and the farms are going to produce food.

Buffet’s partner Charlie Munger added:

In my life, I try to avoid things that are stupid and evil and make me look bad … and bitcoin does all three.

 

In the first place, it’s stupid because it’s still likely to go to zero. It’s evil because it undermines the Federal Reserve System….

 

And third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.

Munger is mostly correct (China is moving ahead with its own CBDC). But the losses the free market has inflicted on cryptocurrencies since last November have severely damaged their credibility along the way. That damage is likely to delay significantly any immediate implementation of the totalitarian scheme by the Fed.

Two Federal Agencies Investigating Musk’s Purchase of Twitter Shares

Thursday, 12 May 2022 16:30
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This article appeared online at TheNewAmerican.com on Thursday, May 12, 2022:  

Just when he thought he might escape a federal investigation into his purchase of shares of Twitter, Elon Musk now has two government agencies looking into his initial purchase of shares of the social-media company back in March.

Open Markets Institute (OMI), a George Soros-backed liberal think tank, released a statement in April asking the Federal Communications Commission (FCC), the Department of Justice (DOJ), and the Federal Trade Commission (FTC) to look into Musk’s takeover of Twitter. OMI said “it believes the deal poses a number of immediate and direct threats to American democracy and free speech. Open Markets believes the deal violates existing law, and that the [FCC], the [DOJ], and the [FTC] have ample authority to block it.”

FCC commissioner Brendan Carr rejected the request:

The FCC has no authority to block Elon Musk’s purchase of Twitter, and to suggest otherwise is absurd.… We will not entertain these types of frivolous argument[s].

In an interview with Fox News on Tuesday, Carr supported Musk’s purchase:

I’m hopeful that Elon Musk is going to bend Twitter’s content moderation toward a greater embrace of free speech.

No such support was forthcoming from the other two agencies. Instead, the FTC and the Securities and Exchange Commission (SEC) each have launched their own investigations into Musk’s initial purchases of shares that were later followed by his offer to buy the entire company.

According to the Wall Street Journal, Musk violated an SEC rule requiring a timely disclosure of more than five percent of the company’s outstanding shares. He had until March 24 to file that disclosure.

He didn’t file it until April 4.

Daniel Taylor, an accounting professor at the University of Pennsylvania, thinks the SEC has a strong case against Musk but doubts that they will pursue it:

The case is easy. It’s straightforward.

But whether they’re going to pick that battle with Elon is another question.

Musk got sideways with the SEC earlier when he Tweeted that he had arranged enough financing to take Tesla private. The SEC fined him $20 million and requires him not to Tweet about Tesla without first getting his attorney’s approval. Musk says the SEC pressured him into pleading guilty, threatening to bombard him and his company with endless lawsuits unless he complied.

Jill Fisch, a securities and law professor at the University of Pennsylvania’s Law School, said that it’s unlikely the SEC would attempt to derail the agreement at this late date. The board has already endorsed and approved the purchase, and the SEC lacks the power to stop such “take-private” transactions, according to Fisch.

Aron Solomon, the chief legal analyst for Esquire Digital, a lead-generating company for attorneys, agrees: “There is no way that the SEC, the DOJ, or any other similarly-situated body will even consider laying a finger on this deal.” It is simply “too big to fail,” said Solomon, adding that intervention “at this point would [hurt] the existing shareholders whose shares Musk is acquiring.”

The Federal Trade Commission is also investigating Musk for failing to file certain reports to various anti-trust agencies that he was taking a substantial stake in Twitter. Those rules don’t apply to passive investors, but when Musk filed that he was seeking to take over the company, the rules kicked in.

Musk’s Plans for Twitter: Cut Board Salaries, Make Algorithm Open-source

Tuesday, 26 April 2022 12:52
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This article appeared online at TheNewAmerican.com on Tuesday, April 26, 2022:  

In his announcement on Twitter that he was taking the company private, Elon Musk revealed his plans:

Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.

 

I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.

 

Twitter has tremendous potential — I look forward to working with the company and the community of users to unlock it.

The first thing Musk will do, once the transaction has been completed, is to cut the board members’ salaries to zero. He warned them in this Tweet just days earlier:

Board salary will be $0 if my bid succeeds, so that’s $3M/year saved right there.

The transaction will take months to close, thanks for the need to gain approval from regulatory agencies and the shareholders.

But not from the board. After reflecting on Musk’s original offer, and the legal consequences if it moved ahead with its “poison pill” strategy, it folded like a Hohner accordion. The board was suddenly unanimous in approving Musk’s original offer. Wrote board chairman Bret Tayler:

The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing.

 

The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.

Musk had boxed them in, using his own Twitter account to accomplish his purpose. On April 14, he reminded them of their fiduciary responsibilities:

If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty.

 

The liability they would thereby assume would be titanic in scale….

 

Taking Twitter private at $54.20 [per share] should be up to the shareholders, not the board.

Those shareholders have seen their Twitter stock holdings drop from $80 per share in February 2021 to just over $30 a share a year later. The $54 bid will likely persuade the vast majority of them to agree to Musk’s buyout offer.

Regulatory approval will take longer, but the purchase is scheduled to close before the end of the year.

That will allow disaffected Twitter employees to find other work. They would chafe under Musk’s new open-algorithm policy where users can see exactly where they stand.

Musk is likely to uncover secrets being hidden successfully from shareholders, regulators, and the public until now. A techie named Sundance, writing at The Last Refuge, speculated as to what one of those secrets might be:

I share this perspective having spent thousands of hours in the past several years deep in the weeds of tech operating systems, communication platforms, and the issue of simultaneous users. What Twitter represents, and what Musk is attempting, is not what most would think.

 

In the big picture of tech platforms, Twitter, as an operating model, is a massive high-user commenting system.

 

Twitter is not a platform built around a website; Twitter is a platform for comments and discussion that operates in the sphere of social media. As a consequence, the technology and data processing required to operate the platform does not have an economy of scale.

 

There is no business model where Twitter is financially viable to operate…. UNLESS the tech architecture under the platform was subsidized.

 

In my opinion, there is only one technological system and entity that could possibly underwrite the cost of Twitter to operate. That entity is the United States Government.

If Sundance is correct, then Musk may uncover the greatest secret of all: The U.S. government has infiltrated Twitter, and used it to punish a sitting president of the United States by permanently removing him from the platform.

Judicial Watch’s Tom Fitton agrees that Musk is likely to uncover many such secrets: “Twitter has been lying to shareholders, regulators, and Congress, about its censorship abuses. [It’s no wonder] the [board had] a keen interest in keeping Elon Musk from further exposing this fraud.”

So does Matt Vespa. Writing for Townhall, Vespa noted:

[Musk] did a flank march and outmaneuvered the Left who for years enjoyed censoring and banning conservatives with impunity. We all knew these Silicon Valley types were left-wing and biased. It entered a new and disturbing phase during the 2016 and 2020 elections.

 

Twitter literally censored The New York Post from reporting on the Hunter Biden laptop. They intervened to help Joe Biden win the election.

Hopefully Musk means what he says about the importance of free speech and that, once in control, he’ll fumigate Twitter and turn it into a legitimate public forum where free speech is enjoyed and encouraged on issues of the day.

Trump’s Media Platform “Truth Social” Moves to Rumble

Monday, 25 April 2022 17:17
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This article appeared online at TheNewAmerican.com on Monday, April 25, 2022:  

The online video-hosting platform Rumble, currently enjoying 44 million visitors every month, is about to get much, much larger. On Friday, the company announced that

Truth Social, the social media platform created by the Trump Media & Technology Group (TMTG), has successfully migrated … to Rumble’s cloud infrastructure. This migration will enable the Truth Social platform to scale significantly on a new and cancel-culture-free cloud platform.

“Scale significantly” is the operative phrase. Prior to being unceremoniously booted from Twitter following the faux Capitol “insurrection” in January 2021, Donald Trump had nearly 90 million followers.

In October Trump formally announced the creation of TMTG, named former California Congressman Devin Nunes to head it up, and initially launched in February using hosting service Mastodon.

So many of Trump’s followers stampeded onto the platform that more than a million were wait-listed while the system underwent its beta testing.

Naturally, the anti-Trump media chortled about the “failure” of Trump’s launch. Chris Cillizza of CNN predicted that it was doomed to fail. Noah Berlatsky of The Independent said that if it were successful Trump’s new platform would be a potential “threat to democracy.” The Forward expressed concerns that antisemitism would pervade the platform, while The New York Times expressed “skepticism” about whether Trump’s platform would be able to compete with other rival social media services like Gettr, Parler, and Gab.

And Wikipedia reported that “some commentators pointed out the similarity with the name of the newspaper Pravda (‘Truth’ in English), a notorious propaganda outlet in the Soviet Union.”

On the other hand, Rumble’s founder and CEO Chris Pavlovski was happy to welcome his newest and largest customer:

We are excited to partner with one of the fastest-growing social media companies on the internet. Providing top-notch cloud infrastructure is essential, and Truth Social users will start to see the fruits of our labors immediately.

More than a million of those wait-listed until the end of the testing period have already been added to the new platform, according to Nunes, who added:

[On Thursday], Truth Social and Rumble took a major stride toward rescuing the internet from the grip of the Big Tech tyrants. Our teams have worked tirelessly to realize this great endeavor.

 

Rumble’s cloud infrastructure is second to none and will be the backbone for the restoration of free speech online for ages to come.

Rumble, founded by Pavlovski in 2013, has enjoyed enormous success on its own. It currently hosts Alex Jones of InfoWars, Newsmax, One America News Network (OANN), and Reuters.

Trump’s TMTG has a massive $1.25 billion to ensure the new platform’s success. And, according to Nunes, “engagement” on the new platform is already ramping up:

We have opened the new Rumble cloud. Yesterday … early in the morning … it went off flawlessly….

 

You’ve got half of America [who] should be concerned about being canceled by those crazy woke companies.

With Elon Musk’s pending takeover of Twitter, one of those “woke” companies, it is not clear just how many of Trump’s former followers will migrate over to Rumble. Musk has promised to turn Twitter into a “free speech” subscription platform in order to eliminate corporate influence over its platform’s conversations.

As House Republican Marjorie Taylor Greene — who had her personal Twitter account permanently suspended last month — said after setting up her account on Truth Social: “Options are always good for consumers.”

And likely to be good for Donald Trump, as well, as he continues to tantalize his followers with increasing intimations about running for a second term in 2024.

Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2021 Bob Adelmann