Looking Backwards …
LB #1
If we looked at the three branches of American government (executive, legislative, and judicial) and count all the stories written about each one I would be very surprised if the judicial wasn’t last, and last by an order of magnitude. Biden has all the headlines now as he tries to remember what cereal he had for breakfast and whether he is running with or against Donald Trump. Congress is its own special version of inept. The executive can use executive order to bring about change and has over ran its bounds since FDR and Congress has overspent for much of the last century and has us on the precipice of a banana republic status, but the judicial branch is trying to hold back the tide, but they just don’t get enough publicity. They need a better press agent because they have been doing some fantastic work lately and with two cases in particular.
Mark Sherman writes for the AP, “The Supreme Court on Friday upended a 40-year-old decision that made it easier for the federal government to regulate the environment, public health, workplace safety and consumer protections, delivering a far-reaching and potentially lucrative victory to business interests. The heart of the Chevron decision says federal agencies should be allowed to fill in the details when laws aren’t crystal clear. Opponents of the decision argued that it gave power that should be wielded by judges to experts who work for the government…But in dissent, Justice Elena Kagan wrote that the assurance rings hollow. “The majority is sanguine; I am not so much,” she wrote.
Kagan called the latest decision “yet another example of the Court’s resolve to roll back agency authority, despite congressional direction to the contrary.” Just a day earlier, the same lineup of justices stripped the Securities and Exchange Commission of a major tool used in fighting fraud.”
That case would be the Jarskey case which we will discuss in a minute, but one of the greatest things about America becoming a dominant world power in the last half of the century last century was there was so little regulation and taxation. We have cute little sayings like no taxation without representation, but now we need a new one, no regulation without representation. The alphabet agencies have been overstepping their bounds for 40 years and the courts just took that power away from them. This is a seismic shift.
This case involved fisherman that were being forced to pay for government observers who tracked how many fish they were catching. The is a great example of why we have so many useless government jobs and how the employment rate is being propped up by government jobs that are adding to GDP but being a cost. This reversal will be wonderful in the long term as businesses are finally getting relief from this regulatory burden.
The Jarksey case also involved regulatory overstep. In that case, Jarksey committed fraud which there is no real dispute, but the SEC was found to be violating his constitutional right to a jury trial by trying to adjudicate the matter inside of its own regulatory body. This from GreenbergTraurig “On June 27, 2024, the U.S. Supreme Court issued its long-awaited decision in SEC v. Jarkesy. In its holding, the Court found that when the Securities Exchange Commission seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial and thus the SEC must bring the action in federal court.
The implications of this decision, including its effect on SEC (and other agency) use of administrative tribunals, are considerable.
By way of background, in 2011 the SEC initiated an investigation into George Jarkesy and his firm, Patriot28, LLC. In 2013, the SEC brought an in-house action alleging violations of the antifraud provisions contained in the federal securities laws. After an evidentiary hearing, an administrative law judge found Jarkesy liable for securities fraud and ordered him to pay $300,000 in civil monetary penalties, among other sanctions. Jarkesy then sought review in the U.S. Court of Appeals for the Fifth Circuit, which reversed and remanded, finding that the SEC’s decision to adjudicate the matter in-house (rather than in federal court) violated Jarkesy’s Seventh Amendment right to a jury trial.”
The article goes on to mention that the power of certain enforcement agencies may be curtailed, but my response to that would be fantastic. If I pause to play devil’s advocate here, we are so overly concerned with enforcement of agency instead of personal accountability. If someone gets defrauded, that should be a time of lesson learning. We have so much unaccountability in this country. I am not pointing the finger at anyone but myself here. Did you read your Iphone contract? On page 457, it says that Steve Jobs can use your likeness to do anything he wants. It can be sold to third party vendors and your likeness can now be created in AI and you have no say. Your face can be in porn, nazi gear, and even attending the Democratic convention. All of what I just said is false, but you didn’t know that because you don’t know what is on page 457, yet you signed it. I don’t either although I did download the contract once and it was hundreds of pages and I am sure I signed away my rights, for lots of things. The alternative is to not to business with these products and I am quickly working toward doing just that.
This lawyer based mumbo jumbo is exactly what these regulatory agencies have used to allow these massive companies to hide behind and now these companies are worth more than the entire wealth of Sweden. These regulatory changes should be pro business so we need to be careful what we wish for, myself included.
LB#2
A couple weeks ago we discussed the possibilities of these countries and their elections causing chaos for the newly elected. Rishi Sunak called quick elections and his party is out, Macron called quick elections and his party is now sharing party with the far left and the Le Pen party. It would seem that they have diffused themselves of responsibility. When the economy crashes and we are inching closer every day with every credit card delinquency, every share bought into Tesla and Nvidia that take the stock further from reality, and every dollar borrowed by world governments with no plan to pay them back. If the party in charge gets the blame and the blame will be generationally large, the opposite party wins. This is the case of musical chairs and when the music stops you don’t want to be left out.
Tom Fairless wrote a wonderful line in the Wall Street Journal which encapsulates what governments are facing, “New governments in Europe are being handed a poisoned chalice. They are being elected with mandates for change, but only limited means at their disposal to enact it.” A poisoned chalice is a fantastic phrase and I wish I had thought of it. Putting my jealousy aside of Mr. Fairless’ grasp on the English language he continues, “No French party has discussed how to reduce a public deficit that, at around an estimated 5% of GDP this year, has triggered disciplinary proceedings from the European Union. French government-bond yields have surged in recent weeks as investors responded with alarm at the prospect of much heavier French borrowing. Ratings agency Standard & Poor’s in May cut its rating on France’s sovereign debt to AA-…Public debt in the U.K. increased to 104% of gross domestic product this year from 86% in 2019 and 43% in 2007. In France, national debt has risen to 112% of GDP from 97% in 2019 and 65% in 2007, according to International Monetary Fund data…The U.S. picture is worse: its public debt has risen to 123% of GDP from 108% in 2019, according to the IMF’s broad measure. Publicly held federal debt has risen from 78% to 97% in the same time span. Yet neither presumptive Republican presidential candidate Donald Trump nor Democratic President Biden has given priority to reducing it, and there is little political pressure to act.” This isn’t an American problem, it is global.
LB #3
It is also municipal. We go to Chicago where the only thing worse than the Bears are the finances of the city of Chicago. Wirepoints Nick Binotti and Ted Dabrowki report, “Chicago’s pension shortfall across the city’s four major retirement funds – Municipal, Laborers, Police and Fire – rose to $37.2 billion total in 2023. That’s a 5% increase from $35.4 billion reported the prior year. Most of the increase is attributed to changes in actuarial assumptions and recent legislation that sweetened the cost-of-living pension benefit for thousands of police and firefighters.
Add in the Teachers Pension Fund’s $15.8 billion shortfall and Chicagoans are on the hook for $53 billion in unfunded pension liabilities. That’s over $45,000 owed per Chicago household to be paid off over time…Chicago has the worst credit rating in the country among big cities with the exception of Detroit. Chicago was able to shed its junk rating only because of the billions in federal public and private aid during covid. The city’s pension crisis will reemerge as those federal funds dry up.” That last part was so important. Do you remember when we read the ridiculous items in these pork laden Covid stimulus bills. Well in the trillions of dollars was basically bailouts of all the states who are funded by sales taxes, business taxes, and income taxes. When you shut the economy down for months it seems that the government coffers go dry pretty quickly as well and the amount of government s that were facing financial ruin was the real hidden reason that we needed to do the spending bills. This bailed out Chicago briefly but they and most everyone else are back at it spending and not putting their house in order.
There are many smart people who are calling for deflation out there and they would be right for awhile until states break, cities break, and then the federal bailout committee must step in and print which is wildly inflationary. This dilemma and cycle is only getting faster and faster and the debts and obligations get higher and higher, the music is almost to the stopping point so make sure that you have your chair.
Chicago finances are worse than the Bears
Looking Forwards…
LF#1
If it seems that I am being alarmist, well I am, but I come with facts under my arm to this musical chair’s recital. This from ZeroHedge, “the biggest risk factor is not so much spending on such discretionary items as social security, health and national defense (“how dare you say these are discretionary! these are mandatory, untouchable outlays” some will scream, but if and when the taxes dry up and the dollar loses its reserve status you will see just how discretionary they are), but on interest, and here recall what we said back in April: “interest on US debt – currently the second biggest government outlay at $1.1 trillion – will surpass social security and become the single biggest US expense before the end of 2024 at $1.6 trillion.”
LF#2
This from ZeroHedge “In a fascinating geopolitical development, Bloomberg reports that Saudi Arabia privately hinted earlier this year it would sell some (or all) of its European debt holdings if the G-7 confiscated Russia’s frozen assets. Now we know, and as Bloomberg notes “the Kingdom’s finance ministry told some G-7 counterparts of its opposition to the idea, which was meant to support Ukraine, with one person describing it as a veiled threat.” The Saudis specifically mentioned debt issued by the French treasury, two of the people said.” Why this is important is that you’re seeing that Saudis are now open for business, to the east and to the west. And if you think that they’re going to stand by and watch the US and Europe freeze Russian assets when they’re doing business with China and Russia, you’re mistaken. If you want to freeze those assets and use those against Russia, you’re going to force some countries to choose. Saudia Arabia just said, fine. We will sell all of your debt into the market, and this stopped instantly. There’s real power when people decide to go against the dollar and Europe. Now this wasn’t the dollar, this was a steppingstone this was Euro bonds right? They didn’t say they were going to sell US Dollars, but that could come in the future, and this is how it starts. It starts in Europe, our proxy, and then it gets to us.
LF#3
A late entry into LBLF this week, but an important one. Donald Trump survived an assassination attempt at a campaign rally in Pennsylvania. Matt Peterson writes for Barron’s, “Former President Donald Trump was shot and injured in an apparent assassination attempt at a rally Saturday evening in Butler, Penn. The Secret Service whisked him offstage and issued a statement saying he was safe.
The event occurred several minutes into Trump’s speech. Loud bangs were audible. A Secret Service agent could be heard on a live feed saying, “Shooter’s down.” On his way offstage, Trump paused to raise his fist to the crowd. His face and ear were bloody.”
Not since Ronald Reagan was shot in 1981 has a candidate or president been wounded on the secret service watch. We mentioned how the Slovakian leader Robert Fico was shot less than two months ago and now we have someone try and kill Trump. They literally missed by an inch or two as the bullet grazed his right ear. Unfortunately, one member of the audience died and two more are in critical conditions on bullets that also missed the former president.
I have been transparent about my dislike of both candidates. I have written about how January 6 was a disgrace. The peaceful transition of power should be upheld at all times. Donald Trump didn’t hold up his end of the bargain at that time. Now we are seeing that another peaceful transition of power could be unlikely as a shooter firing from distance toward the former president is anything but peaceful. This is deeply concerning, and I hope moving forward that this incident can perhaps draw us closer together as a nation instead of further tearing us apart. A quick Google search shows the number of liberals that are disappointed that the shooter missed. This simply saddens me. As the leaders of the world, perhaps it is I who am being foolish when I think we have a responsibility to show the world how to conduct and run a country. Yesterday was not it. I leave you with a quote about the dangers of violence and what we stand to lose.
“There are only two means by which men can deal with one another: guns or logic. Force or persuasion. Thos who know that they cannot win by means of logic, have always resorted to guns.” Ayn Rand
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 40,000.
The 10-year Treasury bond is at …at 4.186%
The price of Brent Crude is … at $85.03 per barrel.
The price of gold is … at $2,416/oz.
The price of silver is … at a $31.02/oz.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.