Our Financial System And Trust

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Guest Post by Michael R

The recent House hearing on Wall Street did not actually dig into the scandals that are threatening our financial systems. The blatant manipulation of the stock market by market players has been made clear and people are just ignoring it. The same is true with precious metals trading, with JP Morgan being fined almost $1 billion for manipulating metals the same way the hedge funds manipulated GameStop above. This is after being fined $550 million in 2015 for rigging currency prices. In 2013, they were fined $410 million for price fixing energy In 2019, they were fined for manipulating the currency market. In one 3-year period, they were fined $35 billion for financial wrongdoing. Why is such a company still allowed to dominate key financial sectors? Why is it even allowed to be in business?

Is our entire system ‘rigged’? Look at the feedback loop the Fed is currently in:

A. “We don’t have inflation because inflation would cause the government to collapse under the interest of $30 trillion in debt.”
B. “We have inflation due to unrestrained printing of money, so foreign government dump Treasury bonds that pay little interest and are being devalued by inflation.”
C. Interest on the Treasury bonds increase to attract customers.
D. This can’t happen, so the Fed declares there is no inflation, prints a lot of new money to buy the bonds off the market to make the bond more valuable (because there are fewer of them).
E, This still isn’t enough and only half the bonds are purchased.
F. The fed prints more money to buy the bonds that didn’t sell to keep interest rates from increasing due to inflation from printing

Return to A...
Certainly looks rigged. Cue hyperinflation!

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GameStop Ethics

Guest Post by Andrew Nelson and Rich in Ct, with a note by Humble Talent

GameStop

[I would say that finance is among my worst topics along with soccer and calculus. My request for clarification on the current GameStop controversy and its ethics implications attracted helpful responses, and I am combining them into one collaborative post. First, Andrew:]

Gamestop, a publicly traded company, was seen as undervalued by some users of an internet forum, in this case, a reddit forum called r/wallstreetbets. That same stock was seen as on the brink of collapse by a hedge fund management group, Melvin Capital, who decided to short sell….

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Here Humble Talent clarifies:

A short sell is when someone, usually a broker, is holding stock in a company they think is overvalued. They owe their client X number of shares, regardless of the price. So if you have 100 shares of Game Stop stock at $4, and you think it’s going to $2, you sell at $4 and then rebuy the stock at $2, pocketing the difference and letting your client swallow the loss. It’s a loss they would have swallowed one way or the other, so they’re not really hurt, per se. Basically, you’re betting that a stock will go down in value. If the stock instead increases in value, you lose the difference. I think it breaks a fundamental fiduciary duty and should be illegal, but it’s where we are.

So what happened here was that a lot of people thought Game Stop was overvalued, it was listed at approximately what I said it was, between $3 and $4 per share. Short sellers were banking on it decreasing in value, so they sold all their client’s shares. Now that there’s been a ridiculous noise buy on these stocks, and they’ve *increased* in value 1000% (real number) instead of decreasing 50% (expectation) the firms that short sold the stock are going to have to find stock to buy to make their client’s portfolios whole. Which means that they will have to buy thousands of shares back at $400 when they sold them at $4, instead of $2, which they expected to. That 2000% difference over all those shares represents tens of millions of dollars, just on the Game Stop shares.

Basically, a bunch of unethical portfolio managers got their paws slammed hard in the cookie jars of their client’s portfolios, and it’s magnificent.

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….Whether through intent or accident, these two groups converged on Gamestop at roughly the same time.Regardless of original intent, the users of the reddit forum got more and more people to buy into that stock, causing the price per share to inflate drastically. It’s sitting at over $400 per share when I last checked. A similar situation is happening with AMC stock, though with less drastic inflation.

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China. The Emergent Competitor

China

Guest post by Michael West.

[I realized…I’m a little slow sometimes…that it was silly to call outstanding posts on Ethics Alarms Open Forums “comments” when they are, in fact, stand alone essays. With this example by Michael West, Ethics Alarms will, when appropriate, designate such commentary as guest posts. That will not mean that my answer to all of the people who tell me they love Ethics Alarms and want to contribute with product promotions or articles on haberdashery, insect larvae or cosmetics will be changing. It’s still NO. JM]

This will be a tough nut to crack. We’re heavily “interdependent” with them economically (but we don’t have to be). We’re becoming direct competitors in the eastern Pacific.

From an “all nations are equal” point of view America has the distinct positional advantage. We have allies ringing the Chinese periphery on one side. As frontiers are described, nations prefer a “peripheral zone” around their “cultural core” before the nation even reaches the “fringe” or the “frontier”.

For the vast majority of American history, the core was the “Boston-Washington corridor”, with the periphery being the “North” +West Coast and the “fringe” being “the South and the West Coast” and the frontier being “the Southwest” and Alaska + Hawaii, with outposts in the wide ranging Pacific. America has been “comfortable”.

China…with landmasses in it’s ideal “peripheral zone” being oriented towards the United States: Japan and Taiwan, and several being neutral but more inclined to the USA, such as Vietnam….and with landmasses in it’s “fringe and frontier”, such as Indonesia and Singapore, being oriented towards the United States, has never enjoyed the “comfort” that the USA has felt.

But that’s okay…because all things are not “being equal”. I don’t care that a Communist country that inflicts as much pain on it’s landed periphery and fringe- Tibet and Western China- that it would love to inflict on its Pacific periphery. They are the Bad Guys.

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Once Again, Foes Of A Looming Progressive Dictatorship Are Depending On An Unethical Pol To Save Them

insider_trading_ban

It would be nice if Senator David Perdue, one of two Republicans in Georgia Senate run-offs that will determine whether the Democrats’ last four years of sabotaging President Trump’s Presidency is considered a success or a failure, was an ethical, trustworthy official. But as if Perdue already didn’t have enough obstacles to winning re-election, like the ridiculous attempted boycott of the run-offs some Republican wackos are pushing (the boycott plan narrowly beating out holding their breath and setting their heads on fire as alternatives to voting), there is also this: he appears to be among the worst of Congress’s inside traders.

I’ve written a lot about this ongoing scandal. (The chart above is from one of the earliest posts.) The practice continues because both parties’ members make so much money from it that they refuse to police themselves adequately. Perdue is just the latest offender to come under public scrutiny. This time, the motivation for the exposure is the critical nature of the Georgia races, prompting the now open and obvious committed ally of the Democratic Party, the New York Times, to do a front page hit job on the Senator their Dark Masters have to destroy. But just as being paranoid doesn’t mean they aren’t out to get you, being biased doesn’t mean you can’t be right. The Times article about Perdue is damning, and not especially surprising, since I would believe the same of most members of Congress. This is literally sanctioned corruption, and has been for a long, long time.

From the Times article:

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Theoretically Tuesday Ethics Nightcap, 10/6/2020 (All Right, Both Of These Should Be Individual Posts): The Impending Wauwatosa Riots And Reflections On The Distinction Between Racism And Being Treated As A Minority

Back to the Future

Why “theoretically”? This post was almost finished at about 6:15 pm yesterday. Then I heard a scream from my wife: Spuds, our delightful rescue dog of a month’s duration as a Marshall had somehow shed his lead and dashed off in the direction of the field behind the school near our house. I had to fumble for my shoes (I’m barefoot most of the day—keeps the gout away!) and a sweater, pause for a brief, clearly unfair “how could you let this happen?” exchange with Grace (that I paid for later,) and went running in the direction of my wife’s “He went thataway!” finger. The odds were high where Spuds would be. Of late he has frequently joined a small group of delightful dogs (there’s Snow, Star, Minnie, Hunter, and other occasional drop-ins) and their owners for a sundown romp. He was not scheduled for a playdate, but had decided, I assumed, to schedule one himself. Sure enough, there he was, wrestling with Snow the Samoyed. It only took me about twenty minutes to collar him: he knew he was in trouble.

After that adventure, I was beset by one vicissitude of life (my Dad’s phrase) after another, and never got back to the office….until now, at around 4:30 am Wednesday morning. Spuds woke me by rolling over onto my face, and I decided to finally get this post up.

1. Oh great: here comes another one. Wauwatosa, Wisconsin police reported that a 17-year-old fired a gun before he was fatally shot by a police officer in a Mall parking lot in February. There is no question that the shooting victim, Alvin Cole, had a 9 mm semiautomatic handgun and ammunition on his person when he was shot; they were recovered at the scene. The gun had been stolen. Police were summoned after a disturbance was reported inside the mall; Cole ran from police and according to the police report, fired first. Officer Joseph Mensah fired five shots at Cole, police said, killing him.

Tomorrow, that is, on the October seventh, the DA is  supposed to hand down the decision of whether to indict Mensah. Fortunately, Mensah is black, so the racist cop trope is a bit harder to maintain that in other recent incidents. But now, thanks to so much of the culture swallowing whole the false litany of Black Lives Matter,  the assumption is that any time a black man, and especially a teen, is shot in a confrontation with police, it’s an example police brutality. If Mensah was white, I assume the riots would have started already. The city is preemptively closing the schools and City Hall among other pre-riot measures. Once again, Facts Don’t Matter.

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Observations On The Trump Tax Returns Dud

Someone at the IRS finally leaked the President’s taxe returns to the Times. That’s a crime, just as it would be if someone leaked my taxes or yours. Of course, this was inevitable, filled as the government bureacracy is with unethical employees who feel it is their duty to try to undermine their ultimate supervisor. Those who cheer on this per se wrongful conduct are enabers and rationalizers.

Other points:

1. In “An Editor’s Note on the Trump Tax Investigation,” the Times felt it necessary to remind readers, “Some will raise questions about publishing the president’s personal tax information. But the Supreme Court has repeatedly ruled that the First Amendment allows the press to publish newsworthy information that was legally obtained by reporters even when those in power fight to keep it hidden. That powerful principle of the First Amendment applies here.” That’s right, the news media has a right to encourage others to break the law and to publish the results. It’s still unethical, except in the rare circumstances where the public interest is indisputably served by furthering an illegal act, as with (arguably) the Pentagon Papers. Publishing documents protected by law that show no wrongdoing only to encourage partisan attacks in an election year is not such a situation.

The Times can’t be punished, but whoever leaked the documents can, and should.

2. I guess this is the time to post this tweet by CNN’s Brain Stelter, which proves his stunning ethical deficits as well as anything he has ever said on CNN. He was responding to another tweet pointing out that leaking tax returns is a crime, as I just did.

Oh! So if Stelter knows he has received embezzled funds from a bank employee, Stelter can spend the cash on a hairpiece because the thieving employee had legal access to the cash!

Has any news network simultaneously employed three dolts as mentally deficient as Stelter, Don Lemon, and Chris Cuomo? Continue reading

Prelude To “The Pandemic Creates A Classic And Difficult Ethics Conflict, But The Resolution Is Clear, Part II”

No, I am not satisfied with the current draft of Part II, but I trust it’s obvious what the resolution referred to is. The lock-down has to end, and before vaccines, cures, or adequate medicine are available. One of the components of my research has been reading as many of the pro and con articles as I can stand. It is quite striking: the arguments for continuing the lockdown indefinitely are almost entirely authored by progressives, and are without exception characterized by bad logic, emotionalism, manipulated facts, biased analysis, fearmongering, and suspect motives. The majority of the arguments for opening up the economy soon are markedly more logical, unemotional, and based on sound statistics and analysis. Certainly one cannot choose between two options based on the quality of the advocates for each. Nonetheless, the divide is striking.

Ann Althouse chose such an essay today to critique, “Whose Freedom Counts?/Anti-lockdown protesters are twisting the idea of liberty” by Dahlia Lithwick, who has periodically been discussed here, the first time in 2010. It is e fair to say that her mind and mine run in different metaphorical riverbeds, not that there’s anything wrong with that. Lithwick’s article endorses yet another one of the  same ilk, Ibram X. Kendi’s  current piece in The Atlantic called “We’re Still Living and Dying in the Slaveholders’ Republic/The pandemic has brought the latest battle in the long American war over communal well-being.”

Ann makes short work of both, writing,

Aha! We see what you’re doing! What a distraction! But I suppose that because slavery was invoked, I’m expected to listen without protest while Kendi’s solemn, censorious lecture is promoted by an over-excited Lithwick. I resist. Sorry. I do hear what you’re saying, and I see how well it works to justify depriving us of all freedom. There’s never enough freedom from all the things in the world that might hurt us if we’re not kept in eternal lockdown.

Excellent. Althouse is a liberal, much as she tries to hide it, but she is not an aspiring totalitarian, like such a large swath of the current mutated progressives and Democrats. Her last sentence echoes two of my favorite quotes, “In order to have enough liberty, it is necessary to have too much,”  (Clarence Darrow), and “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety,” (Benjamin Franklin).

I have another screed to deconstruct: a New York Times editorial  by Charlie Warzel titled “Open States, Lots of Guns. America Is Paying a Heavy Price for Freedom,” or in my print edition, “Will We Get Used To The Dying?” I’ll let you read it first without my comments, here. That’s only fair.

***

Done? Maybe you don’t even need this: eviscerating Warzel ‘s analysis shouldn’t be too hard. Rebutting most of these essays isn’t hard.

Away we go…

The coronavirus scenario I can’t stop thinking about is the one where we simply get used to all the dying. I first saw it on Twitter. “Someone poke holes in this scenario,” a tweet from Eric Nelson, the editorial director of Broadside Books, read. “We keep losing 1,000 to 2,000 a day to coronavirus. People get used to it. We get less vigilant as it very slowly spreads. By December we’re close to normal, but still losing 1,500 a day, and as we tick past 300,000 dead, most people aren’t concerned.”

How old is Warzel, 15? We accept the mortality of modern life, just as our ancestors accepted the mortality of their own periods. That tweet is simply making sinister the adjustments that human beings have to make to get on with civilization. To that, it adds scaremongering, and Warzel joins in the virtue-signalling. Anyone who isn’t willing to keep the lockdown in force indefinitely isn’t concerned.

That’s crap. I’m concerned: both my wife and I are in the high-risk category; so is my sister; so are most of our extended family. I do not advocate the destruction of American society for my own self interest, that’s all. That’s how members of a community and democracy are supposed to feel.

This hit me like a ton of bricks because of just how plausible it seemed. The day I read Mr. Nelson’s tweet, 1,723 Americans were reported to have died from the virus. And yet their collective passing was hardly mourned. After all, how to distinguish those souls from the 2,097 who perished the day before or the 1,558 who died the day after?

People die every day, and from predictable causes, many of them a direct result of our way of life and societal choices. The Times has been running a feature showing selected photographs of recently succumbed victims of the Wuhan virus with a biographical sketch. I have wondered each time I see it: why are these people more worthy of ostentatious memorials in the Times than anyone who has died in the same period? The answer is, they aren’t. This is part of the news media’s effort to build anxiety and hysteria, which will be weaponized for political purposes. Hardly mourned? Every American is supposed to mourn everyone who dies every day? We mourn our loved ones. I am still mourning Dennis Nollette, a former law school roommate who was among the best human beings I have ever had the honor of knowing.  He was carried off by the epidemic within a few days. That’s plenty for me right now. I’m not becoming callous because the deaths of strangers don’t hit me as hard as the death of a cherished friend.

Furthermore, it is not “plausible” that the pandemic will continue forever; pandemics don’t. And indeed, if they did, it would be an irrefutable reason to open up now.

Such loss of life is hard to comprehend when it’s not happening in front of your own two eyes. Add to it that humans are adaptable creatures, no matter how nightmarish the scenario, and it seems understandable that our outrage would dull over time. Unsure how — or perhaps unable — to process tragedy at scale, we get used to it.

Talk about complaining about an unchangeable feature of human life, sanity,  and reality! But that kind of lament is irresponsible progressiveness in a nutshell.

There’s also a national precedent for Mr. Nelson’s hypothetical: America’s response to gun violence and school shootings.

Here we go, down the rabbit hole.

We often talk here about incompetent analogies. This is a lulu. It is embarrassing that the New York Times would consider such a contrived and illogical argument to be published as an editorial—embarrassing, and signature significance.

You should skim the next part; I know my eyes glazed over. It’s standard CNN/Don Lemon/ David Hogg propaganda and emotionalism.

As a country, we seem resigned to preventable firearm deaths. Each year, 36,000 Americans are killed by guns — roughly 100 per day, most from suicide, according to data from the Giffords Law Center. Similarly, the Everytown for Gun Safety Support Fund calculates that there have been 583 “incidents of gunfire” on school grounds since 2013. In the first eight months of 2019, there were at least 38 mass shootings, The Times reported. Last August, 53 Americans died in mass shootings — at work, at bars, while shopping with their children. Some of these tragedies make national headlines; many don’t. The bigger school shootings and hate-crime massacres can ignite genuine moral outrage and revive familiar debates: over safe storage practices, gun show loopholes, red flag laws, bump stocks, comprehensive background checks, stringent licensing systems and, of course, the accessibility of endlessly customizable semiautomatic weapons like AR-15s. In every case, the death tolls climb but we fail to act. There are occasional marches and protests but mostly we continue on with our lives.

Yes, we are monsters for understanding the importance of the rights of self-defense and bearing arms to a functioning democracy. In reality, while there are usually, in hindsight, ways that any single abuse of firearms could have been prevented, gun deaths are not preventable as long as there are guns, law abiding citizens have access to them, and a police state doesn’t abuse its power to make us “safe.”

Notice that Warzel’s gun-virus analogy breaks down immediately. There is no societal value to pandemics. There is no right to get fatally ill. There are no Constitutional amendments preventing the government from eliminating a disease. Continue reading

Ethics May Day, 2020: Biden, Reade, Planned Parenthood, A Renegade Times Pundit, And The Democrats Get Their Way.

It’s May! It’s May!

1. So Joe Biden went on “Morning Joe” and denied that Tara Reade was telling the truth. So what? What does this tell us? Was there any chance whatsoever that he was going to say, “Yup, I finger-fucked her. I don’t know what came over me!”? No. This is like the Kurt Gödel conundrum about the island where there are only truth-tellers and liars, and there are some questions where they will give exactly the same answers. He picked a screamingly partisan journalist, Mika  Brzezinski, to ensure soft-ball treatment (she actually was a bit tougher than expected), and, to some eyes, looked as if he had rehearsed his statement. Ann Althouse does an extensive analysis here.

I don’t see the point. It’s a pro forma denial, and Biden was pressured into it.

I do think the Post article used some unfortunate phrasing..

“The presumptive Democratic presidential nominee was rebutting Tara Reade’s accusation that he reached under her skirt to penetrate her with his fingers somewhere in the Capitol in 1993. This denial requires him to thread a thin needle.”

2. Showing it has more integrity than most women’s groups, Planned Parenthood, the Daily Beast reports, was the only one among  the major pro-abortion groups in the nation that responded directly to the progressive site’s request for a comment regarding Tara Reade’s allegations. The “Democrat-aligned” groups either “did not respond” or ” replied and did not provide a statement”…except Planned Parenthood.

Its president released a statement saying in part, “We believe survivors—and saying we believe survivors doesn’t mean only when it’s politically convenient…Joe Biden must address this allegation directly.'” Continue reading

Comment Of The Day: “You Know, Harvard, When You Have To be Embarrassed And Shamed Into Doing What Should Have Been Your Automatic Response Anyway If You Had Any Decency, It’s Too Late To Save Face.”

Veteran commenter Tim Levier comes to the defense (sort of) of both Harvard and nuance.

Here is his Comment of the Day on the post, “You Know, Harvard, When You Have To be Embarrassed And Shamed Into Doing What Should Have Been Your Automatic Response Anyway If You Had Any Decency, It’s Too Late To Save Face.”

Can I play Devil’s Advocate here? (Maybe just devil’s half-advocate.) I mean, I think it’s delicious that Harvard is getting a first hand experience in “political correctness”, “public shaming”, and “fake news” all in one fell swoop; but this is an Ethics site and saying the truth should always be ethical.

Harvard’s endowment is $38.3 billion, but what does that mean? Endowments are donations intended not for the donation to be “used” but for the donation to be “invested”. The investment grows and pays income distributions to the target recipient. Sure, Harvard has an endowment of $38.3 billion, but that generates an annual distribution of roughly $1.9 billion. That’s a distribution during “good times”. Any bets out there that the distribution might crater this year?

Let’s assume it doesn’t. The $1.9 billion distribution is roughly 1/3rd of Harvard’s annual operating budget. That’s money that they were counting on, budgeted, and spent. Continue reading

Wuhan Virus Ethics Updates, Part 1

1. Why keep calling it the Wuhan virus? Because the largely successful news media and political correctness assault on the completely legitimate (and non-racist) label continues to bolster Chinese Communist propaganda and blame-shifting, and because the effort emerged as yet another use of Big Lie #4: “Trump Is A Racist/White Supremacist.”

As for me personally, I will keep using the term because I resent being told that what cannot possibly be racist is racist, especially when my capitulation enables similar political correctness bullying. See the Third Niggardly Principle.

2. Because it’s so darn difficult to maintain social distancing while playing tennis... About  200 yards from my home in Alexandria, Virginia, the public tennis courts have their nets removed by another proto-fascist. Yesterday, I saw two people playing on one of the courts using a self-rigged net.  Good for them.

3. The problem is, you can’t force bank employees to come to work. Our bank, a large national chain, has all of its offices closed in this area, Banking is certainly an essential  service, but the fact is that you can’t do banking completely remotely, though the bank is pretending you can. Its website asks for a social security number at the same time as scammers are sending out fake emails that lead you to an authentic-looking clone of the bank’s site so they can steal your personal data. Try to call to clarify or address any problem, and you get a message about how wait times are longer than usual. I’ll say they are: to try to get a fraudulent $4000 charge to our account cancelled, I had to wait for an hour and 40 minutes, then be transferred to wait another 35 minutes, then be cut off when a transfer failed.

Meanwhile, the bank’s on-hold music is played at an unbearable volume, and is an endless loop of some hellish arrangement of a melody that would have been rejected for a theme park ride. I am certain that the recording is designed to make you hang up, or, in the alternative, go crazy and run into the street naked.  It is exactly like the deliberately uncomfortable seats and garish color schemes fast food outlets use to ensure you vacate the premises the second you finish eating. I swear that there cannot be a single person on the globe who would find this music anything but torture. The genre is “loud, abrasive, repetitious semi-music,” and there is no market for that. It makes hip-hop seem like Chopin.

Banks are essential, and rather than stopping stores from selling “non-essential” items, the government ought to require really essential services to have open outlets to serve depositors and bank customers experiencing their own emergencies. If a 7-11 clerk can come to work, so can a bank employee. Banks have my property within their control, and in exchange for the privilege, they are obligated to respond when I need service related to that money. Continue reading