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Brownstone Institute

Where Is Occupy Silicon Valley?

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From the Brownstone Institute

BY Craig PirrongCRAIG PIRRONG

Bank failures tend to come in waves, and we are experiencing at least a mini-wave now.

Banks fail for three basic reasons: 1. Credit transformation: deterioration in borrower creditworthiness, usually due to an adverse economic shock (e.g., a real estate bust). 2. Maturity transformation: borrowing short, lending long, and then getting hammered when interest rates rise. 3. Liquidity transformation combined with an exogenous liquidity shock, a la Diamond-Dybvig, where idiosyncratic depositor needs for cash lead to withdrawals that exceed liquid assets and therefore trigger fire sales of illiquid assets.

The two most notable failures of late–Silicon Valley Bank and Silvergate–are examples of 2 and 3 respectively.

In some respects, SVB is the most astounding. Not because a bank failed in the old-fashioned way, but because it was funded primarily by the deposits of supposed financial sophisticates–and because of the disgusting policy response of the Treasury and the Fed.

SVB took in oodles of cash, especially in the past couple of years. The cashcade was so immense that SVB could not find enough traditional banking business (loans) to soak it up, so they bought lots of Treasuries. And long duration Treasuries to boot.

And then Powell and the Fed applied the boot, jacking up rates. Bonds have cratered in the last year, and took SVB’s balance sheet with it.

Again, an old story. And hardly a harbinger of systemic risk–unless such reckless maturity mismatches are systemic.

SVB was the Banker to the Silicon Valley Stars, notably VCs and tech firms. These firms are the ones that deposited immense sums in exchange for a pittance of return. Case in point, Roku, put almost $500 million–yes, you read that right, 9 figures led with a 5–into SVB!!!

I mean: what the eff? Was the Treasurer a moron? For who other than a moron would hold that much in cash in a single institution? (Roku claims its devices “make your home a smarter.” Maybe they should have hired a smarter treasurer and CFO, or replaced them with one of its devices). Hell, why is a company holding that much in cash period?

A few of these alleged masters of the universe (like Palantir) saw the writing on the wall and yanked their deposits: deposits fell by a quarter on Friday alone, sealing the bank’s doom. Those who were slow to run howled to the high heavens over the weekend that if there was not a bailout there would be a holocaust in the tech sector.

Even though the systemic risk posed by SVB’s failure is nil (or if not, then every bank is systemically important), the Treasury Department and the Fed responded to these howls and guaranteed all the deposits–even though the FDIC’s formal deposit insurance limit is $250,000. You know, .05 percent of Roku’s deposit.

When evaluating this, one cannot ignore the reality that the Democratic Party is completely beholden to Silicon Valley. This is beyond scandalous.

Occupy Silicon Valley, anyone?

Treasury Secretary Janet Yellen insulted our intelligence by assuring us this is not a bailout. Well, it’s not a taxpayer bailout, strictly speaking, because the Treasury is not providing the backstop. Instead, it is being funded by a “special assessment” on solvent banks. Which are owned and funded by people who also pay taxes. And such an “assessment” is a tax in everything but name–because it is a contribution by private entities compelled by the government.

The policy implications of this are disastrous. The whole problem with such bailouts is moral hazard. What is to stop banks from engaging in such reckless behavior as SVB did if they can obtain seemingly unlimited funding from those who know that they will be bailed out if things go pear-shaped?

And the regulatory failure here demonstrates that bank regulation–despite the supposed “reforms” of Frankendodd–can’t even catch or constrain the oldest bet-the-bank strategy in the book. Free banking–no deposit insurance, no bailing out of depositors–couldn’t do worse, and would likely do better.

No, the failure of SVB is not the scandal here. The scandal is the political response to it. This reveals yet again how captured the government is. This time not by Wall Street, but by tech companies and oligarchs that are currently the primary source of Democratic political funding.

A couple of weeks ago the Silvergate story looked juicy, but SVB has put it in the shade. Silvergate also grew dramatically, but on the back of crypto rather than SV tech. It became the main banker for many crypto firms and entrepreneurs. The crypto meltdown did not affect Silvergate directly, but it did crush its depositors, the aforesaid crypto firms and entrepreneurs. They withdrew a lot of funding, and an old-fashioned liquidity mismatch did it in.

In traditional banks, deposit funding is “sticky.” Banks that rely on wholesale funding (“hot money”) are more vulnerable to runs. Silvergate’s funding was not traditional sticky deposit funding, nor was it hot money per se. It was money that was pretty cool as long as crypto was cool, and became hot once crypto melted down.

A run started, but the run was precipitated by a liquidity shock. Simple story, really.

Silvergate’s failure was not a scandal. SVB’s failure per se was not a scandal (except to the extent that our vaunted banking regulators failed to prevent the most prosaic type of failure).

Again–the scandal is the politically tainted response that will have baleful consequences in the future, as the response virtually guarantees that there will be more SVBs in the future.

Author

  • Craig Pirrong

    Dr Pirrong is Professor of Finance, and Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business of the University of Houston. He was previously Watson Family Professor of Commodity and Financial Risk Management at Oklahoma State University, and a faculty member at the University of Michigan, the University of Chicago, and Washington University.

After 15 years as a TV reporter with Global and CBC and as news director of RDTV in Red Deer, Duane set out on his own 2008 as a visual storyteller. During this period, he became fascinated with a burgeoning online world and how it could better serve local communities. This fascination led to Todayville, launched in 2016.

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Brownstone Institute

A Coup Without Firing a Shot

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From the Brownstone Institute

BY Jeffrey A. TuckerJEFFREY A. TUCKER  

We all have a different starting place and journey but each of us has the following in common. We’ve realized that official sources, the ones we’ve trusted in the past, are not going to make any sense of the above for us. We have to seek out alternatives and put the story together ourselves. And this we must do because the only other choice is to accept that all of the above consists of a random series of disconnected and pointless events, which is surely not true.

The last few years can be tracked at two levels: the physical reality around us and the realm of the intellectual, mental, and psychological.

The first level has presented a chaotic narrative of the previously unthinkable. A killer virus that turned out to be what many people said it was in February 2020: a bad flu with a known demographic risk best treated with known therapeutics. But that template and the ensuing campaign of fear and emergency rule gave rise to astonishing changes in our lives.

Social functioning was wholly upended as schools, businesses, churches, and travel were ended by force. The entire population of the world was told to mask up, despite vast evidence that doing so achieved nothing in terms of stopping a respiratory virus.

That was followed by a breathtaking propaganda campaign for a shot that failed to live up to its promise. The cure for the disease itself caused tremendous damage to health including death, a subject about which everyone cared intensely before the shot and then strangely forgot about after.

Protests against the goings-on were met with media smears, shutdowns, and even the cancellation of bank accounts. However, and simultaneously, other forms of protest were encouraged, insofar as they were motivated by a more proper political agenda against structural injustices in the old system of law and order. That was a strange confluence of events, to say the least.

In the midst of this, which was wild enough, came new forms of surveillance, censorship, corporate consolidation, an explosion of government spending and power, rampant and global inflation, and hot wars from long-running border conflicts in two crucial regions.

The old Declarations of rules on the Internet put free speech as a first principle. Today, the hosting website of the most famous one, signed by Amnesty International and the ACLU, is gone, almost as if it never existed. In 2022, it came to be replaced by a White House Declaration on the Future of the Internet, that extols stakeholder control as the central principle.

All the while, once-trusted sources of information – media, academia, think tanks – have steadfastly refused to report and respond in truthful ways, leading to a further loss of public trust not just in government and politics but also in everything else, including corporate tech and all the higher order sectors of the culture.

Also part of this has been a political crisis in many nations, including the use of sketchy election strategies justified by epidemiologic emergency: the only safe way to vote (said the CDC) is absentee via the mails. Here we find one of many overlapping parallels to a scenario hardly ever imagined: infectious disease deployed as a cover for political manipulation.

Crucially and ominously, all of these mind-blowing developments took place in roughly similar ways the world over, and with the same language and model. Everywhere people were told “We are all in this together,” and that social distancing, masking, and vaxxing was the correct way out. Media was also censored everywhere, while anti-lockdown protestors (or even those who simply wanted to worship together in peace) were treated not as dissidents to be tolerated but irresponsible spreaders of disease.

Can we really pretend that all of this is normal, much less justified? The exhortation we receive daily is that we can and must.

Really? At what point did you realize that you had to start thinking for yourself?

We all have a different starting place and journey but each of us has the following in common. We’ve realized that official sources, the ones we’ve trusted in the past, are not going to make any sense of the above for us. We have to seek out alternatives and put the story together ourselves. And this we must do because the only other choice is to accept that all of the above consists of a random series of disconnected and pointless events, which is surely not true.

That leads to the second layer of comprehension; the intellectual, mental, and psychological. Here is where we find the real drama and incalculable difficulties.

At the dawn of lockdowns, what appeared to be a primitive public health error seemed to be taking place. It seemed like some scientists at the top, who gained an implausible amount of influence over government policy, had forgotten about natural immunity and were under the impression that it was good for health to stay home, be personally isolated, avoid exercise, and eat only takeout food. Surely such preposterous advice would be revealed soon as the nonsense it was.

How in the world could they be so stupid? How did they gain so much influence, not just nationally but all over the world? Did the whole of humanity suddenly forget about all known science in every field from virology to economics to psychology?

As time went on, more and more anomalies appeared that made that judgment seem naïve. As it turns out, what was actually taking place had something to do with a move on the part of security and intelligence services. It was they who were given rule-making authority on March 13, 2020, and that’s why so much of what we needed to know was and is considered classified.

There were early initial reports that the virus itself might have been leaked from a US-backed lab in Wuhan, which introduces the entire subject of the US bioweapons program. This is a very deep rabbit hole itself, thoroughly exposed in Robert F. Kennedy, Jr.’s The Wuhan Cover-Up. There was a reason that topic was censored: it was all true. And as it turns out, the vaccine itself was able to bypass the normal approval process by slipping through under the cover of emergency. In effect, it came pre-approved by the military.

As the evidence continues to roll in, more and more rabbit holes appear, thousands of them. Each has a name: Pharma, CCP, WHO, Big Tech, Big Media, CBDCs, WEF, Deep State, Great Reset, Censorship, FTX, CISA, EVs, Climate Change, DEI, BlackRock, and many more besides. Each of these subject areas has threads or thousands of them, each connecting to more and to each other. At this point, it is simply not possible for a single person to follow it all.

To those of us who have been steeped in following the revelations day by day, and trying to keep up with putting them together into a coherent model of what happened to us, and what is still going on, the ominous reality is that the traditional understanding of rights, liberties, law, business, media, and science were dramatically overthrown in the course of just a few months and years.

Nothing operates today as it did in 2019. It’s not just that functioning broke. It was broken and then replaced. And the surreptitious coup d’état with no shots fired is still ongoing, even if that is not the headline.

Of this fact, many of us today are certain. But how common is this knowledge? Is it a vague intuition held by many members of the public or is it known in more detail? There are no reliable polls. We are left to guess. If any of us in 2019 believed we had our finger on the pulse of the national mood or public opinion generally, we certainly do not anymore.

Nor do we have access to the inner workings of government at the highest levels, much less the conversations going on among the winners of our age, the well-connected ruling elites who seemed to have gamed the entire system for their own benefit.

It’s so much easier to regard the whole thing as a giant confusion or accident on grounds that only cranks and crazies believe in conspiracy theories. The trouble with that outlook is that it posits something even more implausible; that something this gigantic, far-reaching, and dramatic could have happened with no real intentionality or purpose or that it all fell together as a huge accident.

Brownstone Institute has published more than 2,000 articles and 10 books exploring all over the above topics. Other venues and friends are out there helping us with this research and discovery, issue by issue. Even so, a great deal of responsibility falls on this one institution, the main work of which is providing support for dissident and displaced voices, which is implausible since it was only founded three years ago. We are deeply grateful for our supporters and would welcome you to join them.

As for the intellectuals we once revered for their curiosity and wisdom, most seem to have gone into hiding, either unable to adapt to the new realities or just unwilling to risk their careers by exploring hard topics. It’s understandable but still tragic. Most are happy to pretend like nothing happened or celebrate the change as nothing but progress. As for journalists, the New York Times publishes daily commentaries dismissing the Constitution as a dated anachronism that has to go and no one thinks much about it.

There is a lot to sort out. So much has changed so quickly. No sooner than the dust seems to be settling from one upheaval, there is another and then another. Keeping up with it all causes a level of psychological brain scramble on a scale we’ve never previously experienced.

It’s easier to wait for the historians to tell the next generation what happened. But maybe, just maybe, by stepping up and telling the story as we see it in real time, we can make a difference in stopping this madness and restoring some sane and normal freedom back to the world.

Author

  • Jeffrey A. Tucker

    Jeffrey Tucker is Founder, Author, and President at Brownstone Institute. He is also Senior Economics Columnist for Epoch Times, author of 10 books, including Life After Lockdown, and many thousands of articles in the scholarly and popular press. He speaks widely on topics of economics, technology, social philosophy, and culture.

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Brownstone Institute

Is the Overton Window Real, Imagined, or Constructed?

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From the Brownstone Institute

BY Jeffrey A. TuckerJEFFREY A. TUCKER 

Ideas move from Unthinkable to Radical to Acceptable to Sensible to Popular to become Policy.

The concept of the Overton window caught on in professional culture, particularly those seeking to nudge public opinion, because it taps into a certain sense that we all know is there. There are things you can say and things you cannot say, not because there are speech controls (though there are) but because holding certain views makes you anathema and dismissable. This leads to less influence and effectiveness.

The Overton window is a way of mapping sayable opinions. The goal of advocacy is to stay within the window while moving it just ever so much. For example, if you are writing about monetary policy, you should say that the Fed should not immediately reduce rates for fear of igniting inflation. You can really think that the Fed should be abolished but saying that is inconsistent with the demands of polite society.

That’s only one example of a million.

To notice and comply with the Overton window is not the same as merely favoring incremental change over dramatic reform. There is not and should never be an issue with marginal change. That’s not what is at stake.

To be aware of the Overton window, and fit within it, means to curate your own advocacy. You should do so in a way that is designed to comply with a structure of opinion that is pre-existing as a kind of template we are all given. It means to craft a strategy specifically designed to game the system, which is said to operate according to acceptable and unacceptable opinionizing.

In every area of social, economic, and political life, we find a form of compliance with strategic considerations seemingly dictated by this Window. There is no sense in spouting off opinions that offend or trigger people because they will just dismiss you as not credible. But if you keep your eye on the Window – as if you can know it, see it, manage it – you might succeed in expanding it a bit here and there and thereby achieve your goals eventually.

The mission here is always to let considerations of strategy run alongside – perhaps even ultimately prevail in the short run – over issues of principle and truth, all in the interest of being not merely right but also effective. Everyone in the business of affecting public opinion does this, all in compliance with the perception of the existence of this Window.

Tellingly, the whole idea grows out of think tank culture, which puts a premium on effectiveness and metrics as a means of institutional funding. The concept was named for Joseph Overton, who worked at the Mackinac Center for Public Policy in Michigan. He found that it was useless in his work to advocate for positions that he could not recruit politicians to say from the legislative floor or on the campaign trail. By crafting policy ideas that fit within the prevailing media and political culture, however, he saw some successes about which he and his team could brag to the donor base.

This experience led him to a more general theory that was later codified by his colleague Joseph Lehman, and then elaborated upon by Joshua Treviño, who postulated degrees of acceptability. Ideas move from Unthinkable to Radical to Acceptable to Sensible to Popular to become Policy. A wise intellectual shepherd will manage this transition carefully from one stage to the next until victory and then take on a new issue.

The core intuition here is rather obvious. It probably achieves little in life to go around screaming some radical slogan about what all politicians should do if there is no practical means to achieve it and zero chance of it happening. But writing well-thought-out position papers with citations backed by large books by Ivy League authors and pushing for changes on the margin that keep politicians out of trouble with the media might move the Window slightly and eventually enough to make a difference.

Beyond that example, which surely does tap into some evidence in this or that case, how true is this analysis?

First, the theory of the Overton window presumes a smooth connection between public opinion and political outcomes. During most of my life, that seemed to be the case or, at least, we imagined it to be the case. Today this is gravely in question. Politicians do things daily and hourly that are opposed by their constituents – fund foreign aid and wars for example – but they do it anyway due to well-organized pressure groups that operate outside public awareness. That’s true many times over with the administrative and deep layers of the state.

In most countries, states and elites that run them operate without the consent of the governed. No one likes the surveillance and censorial state but they are growing regardless, and nothing about shifts in public opinion seem to make any difference. It’s surely true that there comes a point when state managers pull back on their schemes for fear of public backlash but when that happens or where, or when and how, wholly depends on the circumstances of time and place.

Second, the Overton window presumes there is something organic about the way the Window is shaped and moves. That is probably not entirely true either. Revelations of our own time show just how involved are major state actors in media and tech, even to the point of dictating the structure and parameters of opinions held in the public, all in the interest of controlling the culture of belief in the population.

I had read Manufacturing Consent (Noam Chomsky and Edward Herman; full text here) when it came out in 1988 and found it compelling. It was entirely believable that deep ruling class interests were more involved than we know about what we are supposed to think about foreign-policy matters and national emergencies, and, further, entirely plausible that major media outlets would reflect these views as a matter of seeking to fit in and ride the wave of change.

What I had not understood was just how far-reaching this effort to manufacture consent is in real life. What illustrates this perfectly has been media and censorship over the pandemic years in which nearly all official channels of opinion have very strictly reflected and enforced the cranky views of a tiny elite. Honestly, how many actual people in the US were behind the lockdowns policy in terms of theory and action? Probably fewer than 1,000. Probably closer to 100.

But thanks to the work of the Censorship Industrial Complex, an industry built of dozens of agencies and thousands of third-party cutouts including universities, we were led to believe that lockdowns and closures were just the way things are done. Vast amounts of the propaganda we endured was top down and wholly manufactured.

Third, the lockdown experience demonstrates that there is nothing necessarily slow and evolutionary about the movement of the Window. In February 2020, mainstream public health was warning against travel restrictions, quarantines, business closures, and the stigmatization of the sick. A mere 30 days later, all these policies became acceptable and even mandatory belief. Not even Orwell imagined such a dramatic and sudden shift was possible!

The Window didn’t just move. It dramatically shifted from one side of the room to the other, with all the top players against saying the right thing at the right time, and then finding themselves in the awkward position of having to publicly contradict what they had said only weeks earlier. The excuse was that “the science changed” but that is completely untrue and an obvious cover for what was really just a craven attempt to chase what the powerful were saying and doing.

It was the same with the vaccine, which major media voices opposed so long as Trump was president and then favored once the election was declared for Biden. Are we really supposed to believe that this massive switch came about because of some mystical window shift or does the change have a more direct explanation?

Fourth, the entire model is wildly presumptuous. It is built by intuition, not data, of course. And it presumes that we can know the parameters of its existence and manage how it is gradually manipulated over time. None of this is true. In the end, an agenda based on acting on this supposed Window involves deferring to the intuitions of some manager who decides that this or that statement or agenda is “good optics” or “bad optics,” to deploy the fashionable language of our time.

The right response to all such claims is: you don’t know that. You are only pretending to know but you don’t actually know. What your seemingly perfect discernment of strategy is really about concerns your own personal taste for the fight, for controversy, for argument, and your willingness to stand up publicly for a principle you believe will very likely run counter to elite priorities. That’s perfectly fine, but don’t mask your taste for public engagement in the garb of fake management theory.

It’s precisely for this reason that so many intellectuals and institutions stayed completely silent during lockdowns when everyone was being treated so brutally by public health. Many people knew the truth – that everyone would get this bug, most would shake it off just fine, and then it would become endemic – but were simply afraid to say it. Cite the Overton window all you want but what is really at issue is one’s willingness to exercise moral courage.

The relationship between public opinion, cultural feeling, and state policy has always been complex, opaque, and beyond the capacity of empirical methods to model. It’s for this reason that there is such a vast literature on social change.

We live in times in which most of what we thought we knew about the strategies for social and political change have been blown up. That’s simply because the normal world we knew only five years ago – or thought we knew – no longer exists. Everything is broken, including whatever imaginings we had about the existence of this Overton window.

What to do about it? I would suggest a simple answer. Forget the model, which might be completely misconstrued in any case. Just say what is true, with sincerity, without malice, without convoluted hopes of manipulating others. It’s a time for truth, which earns trust. Only that will blow the window wide open and finally demolish it forever.

Author

  • Jeffrey A. Tucker

    Jeffrey Tucker is Founder, Author, and President at Brownstone Institute. He is also Senior Economics Columnist for Epoch Times, author of 10 books, including Life After Lockdown, and many thousands of articles in the scholarly and popular press. He speaks widely on topics of economics, technology, social philosophy, and culture.

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