Economics: Antitrust - The Wrath Of The Khan

 

(Drivebycuriosity) - The Federal Trade Commission (FTC), America`s mighty antitrust authority, filed a massive law suit against Amazon. FTC Chair Lina Khan claims that the corporation is a monopolist and stifles emerging competition (ftc.gov vox.com yahoo).

The Khan has a history of loathing and harassing Amazon. Back in the year 2014, when today`s FTC chair was a policy analyst at the left-of-center New America Foundation, she wrote a piece for CNN about Amazon`s conflict with French book publisher Hachett (driveby ). Amazon dared to reduce book prices and tried to sell e-books cheaper than printed books (no costs for paper, printing, storing & transporting). The Khan sided with the book publishers, who insisted on their rights as monopolists to set book prices, and complained about Amazon`s "brute exercise of power" and suggested to "drastically curb Amazon’s power" ( cnn).  

In 2017 the Khan, then a law school student, wrote a famous paper: "Amazon`s Antitrust Paradox" ( yalelawjournal). She predicted that Amazon will become a monopolist and  complained that Amazon´s prices are "too low" (!), which would drive competitors out of business and would hinder potential competitors to emerge. The Khan ignored history, economics and the continuously growing number of Amazon competitors ( reason   yalelawjournal  driveby).

Since then the Khan continued her attacks on Amazon. She claimed publicly that the corporation is "guilty of antitrust violations and should be broken up." ( wsj.com). In 2018, still a law student, the Khan presented her Amazon critique before the Stigler Center, a left-leaning organization ( StiglerCenter). Khan´s Amazon obsession impressed obviously President Biden, who called her Chair of the powerful FTC in 2021.

 

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Today`s law suit is the crown of the Khan crusade and based on lies and economic illiteracy. Amazon is neither a monopolist, neither it stifles emerging competition. In the fourth quarter 2023 Amazon`s online stores advanced just 8% YoY, while Walmart`s e-commerce segment expanded 17% YoY in the US and 23% worldwide, obviously eating Amazon`s market share, at least part of it (amazon cnbc). Amazon is also losing market share to Shopify. The E-commerce platform boosted her gross merchandise volume (the total volume of merchandise sold on the platform) by 23% YoY, rebutting the claim that "Amazon stifles emerging competition" ( cnbc). 

The Khan also ignores innovative newcomers ("emerging competition") who are aggressively entering the highly competitive e-commerce market (economist). Last September the Chinese online service TikTok launched its e-commerce shop, called TikTok Shop, in the U.S. "in an effort to translate the app’s cultural relevance among young consumers to sales" ( apnews npr.org). And the Chinese shopping app Temu, known from their Super Bowl commercial, is rapidly gaining ground (retailbrew ). Temu’s parent company PDD Group said revenue rose by 94% to 68.84 billion yuan ($9.62 billion) in the quarter ended Sept. 30 from a year ago ( cnbc).

Amazon is also losing market share to Shein, "the ultra-cheap fast-fashion app" (nymag). New York Magazine claims that "Shein Found Amazon’s Weakness". Amazon already responded to the new competition and was forced "to dramatically decrease the commissions it takes on cheap clothing “ (nymag ).

Khan`s dislike of Amazon made her to a kind of Jeanne d'Arc of the left-wing and gets her support from Bernie Sanders, Elizabeth Warren & President Biden. It is clear that the Khan wants to destroy the Amazon we know. 

The Khan attacks are not surprising.  The FTC Chair belongs to a movement called Neo-Brandeisians (after Supreme Court Justice Louis Brandeis, 1916-1939), who are working on a fundamental change of America´s economic structure and try to expand the role of the government in the U.S. economy significantly ( pbwt.com dailyjournal promarket reason). 

Since Lina Khan leads the FTC the authority represents a Marxist ideology, explained former FTC-Commissioner & Khan colleague Christine S. Wilson (ftc.gov ). According to Wilson the Neo-Brandeisians, who are now in control of the FTC, try to replace the market process of supply and demand by a continuously regulated environment. Wilson calls the FTC´s antitrust enforcement "a politicized exercise that serves as a tool of oppression".

The Khan tries to gain control over one of America´s largest corporations and to be in charge of Amazon`s business. The FTC Chair wants to tell Amazon what it can do and what not, how much the corporation charges their customers and how they deal with the business partners (nationalreview ).

Thanks to Amazon`s sheer size and efficiency the company can offer a wider selection of products, faster delivery and lower prices than competitors. The Khan treats these advantages as unfair (to competitors) and wants to restrict them. If her law suits succeeds Amazon may have to cancel Prime and customers will have to pay more and will have to wait longer till their orders arrive (  datainnovation). Millions of small businesses, who cooperate with Amazon, will lose an efficient platform to sell and connect with consumers ( cato).

The Khan attack throws already a lot sand into the gears of a successful company, which belongs to the engines of the US economy. The law suit reduces Amazon`s ability to further innovate. It is already occupying management capacities and slowing decision processes - making Amazon`s business more complicated and costly. If corporations get punished for being efficient and for keeping costs low, it will slow economic growth, raise price level and reduce living standards of low income households who depend on purchasing cheap goods.

The consumers are the losers. They have to bear these costs by paying higher prices and are getting reduced selection and quality of goods & services.

  

Economics: Are Interest Rates Really Too High?

 

(Drivebycuriosity) - There is a lot ado about the Federal Reserve interest rates. Many claim that they are too high and might cause the next recession. Are the critics right?.

According to the textbooks high interest rates slow the economy because they discourage borrowing and investing. Do they? This post uses statistics by the Federal Reserve Bank of St. Louis ( fred.stlouisfed).

 

 

On top of this post you can see the growth of the money supply in the recent years. Money growth ended April 2022 and the money supply dropped in the following months, partly as a response to the interest rate hikes of the Federal Reserve (image above this paragraph). It bottomed October 2023 - since then the money supply is rising again - and the rise is accelerating! (image below).

 

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The Federal Reserve also reports that the volume of bank credits jumped in the recent months, in spite of the "high" interest rates (image below). The borrowed money lands on the accounts of the bank customers and adds to the money supply (the sum of currency in circulation and short term accounts at public banks).

 

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Credit card loans are also climbing swiftly, withstanding the interest rates. These payments land on the bank accounts of sellers who accept credit cards and are driving monetary growth as well (image below).

 

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These numbers fit to other solid economic data, like the steady growth of the job market and the continuous rise of the GDP. The numbers may also explain the stubbornly high inflation rates.

The Fed rates are much higher than in the recent past - and they feel too high. But none of the economic indicators signal tight money - rather the contrary.

Contemporary Art: Emotional Moonscapes @ Gallery Perrotin New York

 

(Drivebycuriosity) - The French/American Perrotin on Orchard Street belongs to my favorite art galleries (perrotin ). I often spot amazing shows there. Recently I reported about their show with works by GaHee Park ( driveby).

 

This post is about a show with works by Oslo based artist Jason Boyd Kinsella, called "Emotional Moonscapes" ( leaflet). The images are called "psychological portraits".  

To be continued

Science Fiction: Tales Of Pirx The Pilot By Stanlislaw Lem

 

(Drivebycuriosity) - Stanislaw Lem is maybe the most underrated science fiction author. Most might only know his novel "Solaris" from the film adaptions by Andrei Tarkovsky (1972 imdb) & Steven Soderbergh (2002 imdb). His oeuvre covers - beyond scifi - futurology (no fiction), philosophy, psychology, crime novels, satyrical works and much more.

Lem´s "Tales of Pirx the Pilot" contains 5 short stories & novellas which follow a young man, named Pirx (amazon ). The protagonist is a dreamer, full of hopes & ideas, but has a weak self esteem and is not well regarded by his superiors. On the other side he is mentally strong, cunning and he never gives up. So he survives very challenging situations caused by technical problems, physical phenomena and other calamities.

Lem interwove physics, engineering and cosmology into thrilling adventure stories, spiced with humor, psychology and a bit of philosophy. Highly recommended.

Economics: Why Is Inflation So Stubbornly High?

  (Drivebycuriosity) - The inflation numbers are disappointing. The swift drop from the peak of 9.1% ended summer 2023, since then the numbers are fluctuating above 3% (cnbc ). There are several explanations for the sticky inflation. Since December 2023 the price of oil price climbed about 20%, lifting the gasoline prices on US pumps and so the costs for many products & services.

But Inflation less food & energy - the so-called core-inflation - also stays elevated. The numbers are partly magnified by the "shelter costs", a mix of rents & house prices, which count for about 40% of the core-inflation and 27% of the headline inflation! Unfortunately the statisticians base their calculations on rent payments from the past, therefore the "shelter" component has a time lag of 12-18 months! (marketwatch aier  cato). The actual reported inflation numbers are a view into the rear window.

 

 

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But there is a more important explanation. The image above shows the growth of the money supply M2 in the recent years, the main reason of the actual inflation.

In 2020 & 2021 the US government flooded the economy with stimulus checks in the value of trillions of dollars (American Rescue Plan), supported by massive bond purchases by the Federal Reserve. The government money landed directly on the bank accounts of the Americans, blowing up the money volume M2 (bank notes & coins & deposits at banks). Milton Friedman described this as helicopter money (cato ).

As a result in 2020 & 2021 the US money supply M2, the engine of the inflation, jumped 40%. The money deluge met a constrained supply of goods & services partly - because of Covid19. "Inflation is caused by too much money chasing too few goods and services", noticed the economists at fisherinvestments. "

 

                     Causal Connection

The causal connection between money and inflation is known since the 16th century at least. Nicolaus Copernicus described already in the year 1522 how "too much money" causes inflation. Copernicus` "quantity theory of money" is based on observations: 

Early in the 16th century Spain conquered today`s Latin America and looted the silver stocks. The Spaniards send the precious metal to Europe where is was printed into coins and used as money.

As a result the European money supply jumped, meeting a restrained supply of goods (agriculture, hand works) &  services. The flood of money raised suddenly the demand for scarce goods & services and caused a jump of the price level.

Elaborated studies by Milton Friedman, Karl Brunner, Allan Meltzer and many other economists (known as Monetarists) described already in the 1960s how and why the inflation rate follows the growth rate of money with a time lag (causal connection).

Fortunately the monetary growth already peaked in February 2021 (with plus 27%). Since then the monetary growth rates have been falling and turned negative in December 2022. In the recent months the money supply has been shrinking! In February M2 dropped 1.7% YoY ( ycharts).

 

(source )

Unfortunately the money flood from 2021/22 is not yet digested. As the image above shows there is still a surplus above the long term trend. This surplus works like hot steam in a boiler, keeping the inflation engine still running.

 

But the slow down of the money growth (image above) since summer 2022 is taking the pressure out of the inflationary steam boiler - albeit slowly - and inflation rates will drop again in the run of this year.

Books: Mick Jagger By Philip Norman

(Drivebycuriosity) -  A long time ago I read an interview with Mick Jagger. I knew that he had studied at the London School of Economics and I expected something better than the usual bragging by a rock star, but I was still impressed by his smart answers and his broad knowledge. That intensified my interest in a musician who`s early songs I still love. Philip Norman´s biography "Mick Jagger" gives a good introduction into the complexity of giant of 20th century culture (amazon ).

Mick Jagger had a rather conservative start into his professinonal life. After finishing school he thought about studying art or science. Finally he decided for economics, which "seemed about halfway in between", and started to study at London School of Economics. In his leisure time he collected and played albums by Amerian Blues musicians. While waiting for the tram he met Keith Richards, whom he knew from school times. They discovered that they both love American Blues songs, which inspired them to start a rock band. 

On July 12 1962 at London`s Marquee Club Mick sang with the Rolling Stones for the very fist time. Soon the Stones became popular as a cover band who replayed their beloved American blues & soul songs. Mick Jagger`s somewhat metallic voice, his stretched Cockney slang pronunciations, plus the rough riffs of Keith Richards, made their cover versions special. They also benefited from the explosive success of the Beatles, who drew attention to the whole rock genre and created a veritable market

Rather hesitantly Jagger & Richards started their own compositions. Their song "As Tears go by" was first used by Marianne Faithfull, which made her famous (1964). "The Last Time", the band's first original song, was recorded January 1965. "Aftermath", recorded December 1965 and March 1966, was their first album to consist entirely of original compositions, including "Paint it Black (US version), "Lady Jane" & "Under My Thumb". Then "Satisfaction", released June 1965, and  "Sympathy for the Devil" (1968 ) catapulted them into the rock Olympus.

Founding member Brian Jones, presented himself in the early days as leader of the band, but had not much influence on their music, besides playing exotic instruments on some pieces (but there is a different version on wikipedia). Because of his erratic behavior and his drug issues he had to leave the band in 1969. Shortly after his leave he drowned in his pool.

Even though Jagger was smart, well educated and had a controlling nature, he & Richards behaved naively and gave their manager Allen Klein the rights of most of their 60s hits. Much later they filed immense law suits against Klein to receive some of their money.

Norman dedicates a chapter on the arrest of Mick Jagger & Keith Richard in February 1967. The detention was orchestrated by a powerful and ruthlessness tabloid, "The News of the World", which had a personal feud with Jagger. The magazine planted an informant into Richards home, who initiated a massive drug raid, leading to the arrest. The British law system needed a victim, the loud long-haired Stones, where perfect for that. But friends in high place got them released soon.

In the 1970s rock music got defined by Pink Floyd, Black Sabbath, David Bowie, Jimmy Hendrix, Sex Pistols and many others, but the Stones` popularity continued to climb because they learned to cater the taste of the masses (disco music, reggae and other popular styles) and to control the rights of their songs - and they became filthy rich.

 

                          Massive Courage

Another chapter describes painstakingly the infamous Altamont concert that happened north of Los Angeles in December 1969. The event was initiated by the hillbilly band Grateful Dead "in a haze of hippie idealism". Apparently there was no organization and the show  went out of control, partly because someone hired the local highly violent Hells Angels - of all people - as security. The beloved "Deads" left the event without playing and let others, including Jefferson Airplane, alone with the mess. The Stones, who performed as last band and at the peak of the turmoils, got later blamed for the mess and that the Hell Angels killed one of the spectators. But one visitor reported that Mick "showed massive, massive courage at the terrible moment" and added "to have stayed on that stage and carried on performing need the balls of a lion".

Jagger tried also a career on film, with less success. The movie "Performance", directed by Donald Cammell & Nicolas Roeg, was the only respectable production, but the film was called pornographic and got not immediately released. Other projects failed, partly Mick was not much interested, and he was turned down for the role of Mozart (!) in Amadeus and Dr. Frank N. Furter in the Rocky Horror Show. Maybe in some alternate universe Mick really played as Amadeus, what a show!

In the 1980, ageing 40 something, Mick Jagger prepared extensively for the stress of hours of extensive shows. He began a program of intense weight training, karate, squash and daily seven-mile runs. After a couple of weeks he was down to just 125 pound and a waist measurement of twenty-seven inches.

After the year 2000 he maintained a strenuous fitness regimen under the famous Norwegian fitness trainer Torje Eike, with daily running, swimming, cycling, gym work, yoga and Pilates, combined with a diet of whole-grain bread, rice, beans, pasta, chicken & fish.

Jagger also was a good cook, more patient and painstaking in the kitchen than anywhere else except music, and might spend a whole afternoon cycling from shop to shop to find every last correct ingredients for a Japanese recipe that appealed to him.

It goes without a saying that the most beautiful women buzzed around the mega-rock star like flies, how could he resist? Was he really "predatory", as one of wives later claimed? Or were the women predatory, who took other´s lover, husband, father of children away without any scruple? Sleeping with Mick made them famous and gave them access to a lot of money.

It is surprising that the biography ignores the early rivalry between the Stones and The Kinks. The latter group started also as a cover band and played US blues songs as well. But their first album - released 1964 - had already four self composed song, including the Ray Davies composition "You Really Me", which become a number one hit int the UK, about a year before the Stones released "Satisfaction". In the US Stones, Beatles & Kinks together were called the English invasion.

                        Feminine Qualities

 

 

 

There were rumors that Mick joined a menage a trois with David Bowie and Bowie´s wife Angie Barnett. Angie claimed that she had discovered Mick & David together in bed. Mick dismissed the rumors as "total rubbish". But Marianne Faithfull wrote in her memoirs that she "realized in some part of my mind that Mick was bisexual". She added that his more feminine qualities of sensitivity and intuition were part of his appeal.

The journalist Lesley-Ann Jones claims in her book "The Stone Age: Sixty Years of the Rolling Stones" that Mick was bisexual and suggests Jagger had affairs with bandmates Keith Richards, Mick Taylor and others (advocate ).

There is no proof, but Jagger´s performances in the late sixties where often androgynous and there a lot of drag images. Maybe he played with the trans image or not, but he was certainly not afraid of that.

Anyway, Mick Jagger helped to shape the popular culture in the 20th century and his & Richards` songs, at least the early ones, are still important and beloved.