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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

The White House Makes Good on Its Antitrust Threats

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From the Brownstone Institute

BY Jeffrey A. TuckerJEFFREY A. TUCKER

On May 5, 2021, White House press secretary Jen Psaki issued a mob-like warning to social-media companies and information distributors generally. They need to get with the program and start censoring critics of Covid policy. They need to amplify government propaganda. After all, it would be a shame if something would happen to these companies.

These were her exact words:

The president’s view is that the major platforms have a responsibility related to the health and safety of all Americans to stop amplifying untrustworthy content, disinformation and misinformation, especially related to Covid-19 vaccinations and elections. And we’ve seen that over the past several months. Broadly speaking, I’m not placing any blame on any individual or group. We’ve seen it from a number of sources. He also supports better privacy protections and a robust antitrust programSo, his view is that there’s more that needs to be done to ensure that this type of misinformation, disinformation, damaging, sometimes life threatening information is not going out to the American public.

On the face of it, the antitrust action against Apple is about their secure communications network. The Justice Department wants the company to share their services with other networks. As with so many other antitrust actions in history, this is really about the government’s taking sides in competitive disputes between companies, in this case Samsung and other smartphone providers. They resent the way Apple products all work together. They want that changed.

The very notion that the government is trying to protect consumers in this case is preposterous. Apple is a success not because they are exploitative but because they make products that users like, and they like them so much that they buy ever more. It’s not uncommon that a person gets an iPhone and then a Macbook, an iPad, and then AirPods. All play well together.

The Justice Department calls this anticompetitive even though competing is exactly the source of Apple’s market strength. That has always been true. Yes, there is every reason to be annoyed at the company’s hammer-and-tongs enforcement of its intellectual property. But their IP is not the driving force of the company’s success. Its products and services are.

Beyond that, there is a darker agenda here. It’s about bringing new media into the government propaganda fold, exactly as Psaki threatened. Apple is a main distributor of podcasts in the country and world, just behind Spotify (which is foreign controlled). There are 120 million podcast listeners in the US, far more than pay attention to regime media in total.

If the ambition is to control the public mind, something must be done to get those under control. It’s not enough just to nationalize Facebook and Google. If the purpose is to end free speech as we know it, they have to go after podcasting too, using every tool that is available.

Antitrust is one tool they have. The other is the implicit threat to take away Section 230 that grants legal liability to social networks that immunize them against what would otherwise be a torrent of litigation. These are the two main guns that government can hold to the head of these private communications companies. Apple is the target in order to make the company more compliant.

All of which gets us to the issue of the First Amendment. There are many ways to violate laws on free speech. It’s not just about sending a direct note with a built-in threat. You can use third parties. You can invoke implicit threats. You can depend on the awareness that, after all, you are the government so it is hardly a level playing field. You can embed employees and pay their salaries (as was the case with Twitter). Or, in the case of Psaki above, you can deploy the mob tactic of reminding companies that bad things may or may not happen if they persist in non-compliance.

Over the last 4 to 6 years, governments have used all these methods to violate free speech rights. We are sitting on tens of thousands of pages of proof of this. What seemed like spotty takedowns of true information has been revealed as a vast machinery now called the Censorship Industrial Complex involving dozens of agencies, nearly one hundred universities, and many foundations and nonprofit organizations directly or indirectly funded by government.

You would have to be willfully blind not to see the long-run ambition. The goal is a mass reversion to the past, a world like we had in the 1970s with three networks and limited information sources about anything going on in government. Back then, people did not know what they did not know. That’s how effective the system was. It came about not entirely because of active censorship but because of technological limitations.

The information age is called that because it blew up the old system, offering hope of a new world of universal distribution of ever more information about everything, and promising to empower billions of users themselves to become distributors. That’s how the company YouTube got its name: everyone could be a TV producer.

That dream was hatched in the 1980s, gained great progress in the 1990s and 2000s, and began fundamentally to upend government structures in the 2010s. Following Brexit and the election of Donald Trump in 2016 – two major events that were not supposed to happen – a deep establishment said that’s enough. They scapegoated the new systems of information for disrupting the plans of decades and reversing the planned course of history.

The ambition to control every nook and cranny of the Internet sounds far-flung but what choice do they have? This is why this machinery of censorship has been constructed and why there is such a push to have artificial intelligence take over the job of content curation. In this case, machines alone do the job without human intervention, making litigation nearly impossible.

The Supreme Court has the chance to do something to stop this but it’s not clear that many Justices even understand the scale of the problem or the Constitutional strictures against it. Some seem to think that this is only about the right of government officials to pick up the phone and complain to reporters about their coverage. That is absolutely not the issue: content curation affects hundreds of millions of people, not just those posting but those reading too.

Still, if there is some concern about the supposed rights of government actors, there is a clear solution offered by David Friedman: post all information and exhortations about topics and content in a public forum. If the Biden or Trump administration has a preference for how social media should behave, it is free to file a ticket like everyone else and the recipient can and should make it and the response public.

This is not an unreasonable suggestion, and it should certainly figure into any judgment made by the Supreme Court. The federal government has always put out press releases. That’s a normal part of functioning. Bombarding private companies with secret takedown notices and otherwise deploying a huge plethora of intimidation tactics should not even be permitted.

Is there muscle behind the growing push for censorship? Certainly there is. This reality is underscored by the Justice Department’s antitrust actions against Apple. The mask of such official actions is now removed.

Just as the FDA and CDC became marketing and enforcement arms of Pfizer and Moderna, so too the Justice Department is now revealed as a censor and industrial promoter of Samsung. This is how captured agencies with hegemonic ambitions operate, not in the public interest but in the private interest of some industries over others and always with the goal of reducing the freedom of the people.

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

Kid Lab Rats

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From the Brownstone Institute

BY Thomas BuckleyTHOMAS BUCKLEY 

” (since [Covid] is universally mild in children), the risk-to-benefit ratio for the [Covid] mRNA injections in children is infinitely bad,” Baker said. “There is no ethical reason whatsoever to continue clinical trials of these products in children, and all such trials should be stopped.” “

Mommy, can I be a Covid lab rat?”

That is a request most parents will never hear and it is a request that very few parents would ever want to hear.

But, unlike the more typical “Can I have a pony?” request, letting your child be a Covid shot test subject is a request that can actually be granted around the nation.

Right now, for example, Pfizer/BioNTech is running an ongoing clinical trial to test the effectiveness of its shots (the shot is not a vaccine as it does not prevent catching the virus or transmitting the virus as typical vaccines do) on kids.

Pfizer has been running radio and other ads looking for test subjects; this is how they describe the study on their “Enrolling Children 6 to 23 months old for a COVID-19 Vaccine Study” website:

This study will help us learn how well our updated COVID-19 vaccine works in babies and toddlers who have not been previously vaccinated and see if the number of recommended doses can potentially be reduced for children under the age of 5. The study vaccine has been authorized by the United States Food and Drug Administration for children at least 6 months of age. It is designed to protect against the newer COVID-19 variant called XBB.1.5.

The company is also running similar trials for older kids and, of course, adults.

Clinical trials for drugs and procedures involving children are not inherently wrong and they are conducted safely around the world almost daily.

But this Covid trial stands out for a number of reasons.

First, the trial only involves kids who have never had a Covid shot before. The likelihood that a parent who has declined to get the shot for their kids in the first place will say “We chose not to get the shots for our kids, but feel free to experiment on them with the stuff we previously declined” is minimal.

In other words, if a parent didn’t feed their kid aluminum foil-flavored ice cream before it is highly unlikely they would feed their kid an experimental version of aluminum foil-flavored ice cream, even if you paid them (the trial comes with certain compensation enticements – Pfizer did not respond to a request for exactly what they are in this trial, though industry averages would indicate the pay would be between a few hundred to a few thousand dollars).

Second, there is the matter of “informed consent.” A trial subject must give permission freely, be told of any risks, and understand the entire situation. Clearly, nine-month-olds cannot do that.

It is perfectly legal for parents to give their “informed consent,” but here we get into the third problem: the risk/benefit question.

For example, during the pandemic (early 2020 to May 2023) there were 41 Covid deaths in California of kids under five. That number does not differentiate between “died with Covid” or “died from Covid;” that is a debate that continues to rage across the country and shall be put aside for the time being.

Every death of a child is a tragedy and this article is not intended to lessen that fact. However, children in general were not at all likely to get, let alone die from, Covid during the pandemic.

During the pandemic, there were about (rolling average) 2.4 million (about 6% of the total population) under-fives in California and there were about 385,000 cases of Covid reported in that age group.

Currently, about 3.2% of California’s under-fives have had the latest shot. That’s on par with the national average. What is interesting is that of the 70,817 kids who have received the shot in the state, 41,224 live in the Bay Area. In other words, the Bay Area has 20% of the state’s population, but 57% of the state’s “vaccinated” toddlers and babies. But do not ever think that politics has had nothing to do with Covid protocols.

During the pandemic, the overall likelihood of a child dying from/with Covid was about 1 in 60,000; for those over 75 – about 6.5% of the population or 2.7 million – there were about 51,000 with/from Covid deaths, or about 1 in 50.

The risk, clearly, is extremely different depending upon age and general state of health.

With a relative risk of being harmed by Covid, the risks of the Covid shot itself must be considered carefully – note: no kid in the study will get a placebo for comparison purposes.

The Covid shots, in the general population, did have significant side-effects and did cause a number of deaths. While these numbers are not broken out by age, in the same time period there were 640 deaths and 89,000 “adverse effects” experienced (much much more than just a sore arm) by Californians.

Also during the same time period, all other vaccines combined caused 66 people to die and 14,000 to have a reportable “adverse effect.” (Note – the numbers are taken from the CDC’s “vaccine adverse event reporting system,” a tool it stood by as an early warning device for decades…that is, until the Covid problem numbers got too high.)

That puts the general odds of something bad happening to a person after they get a Covid shot at about 1 in a 1,000 and some studies have shown it to be 1 in 800. In other words, the risk from the shot appears to outweigh the risk of Covid itself by a factor of 60 times.

Citing the uncertainty of benefit, it should also be noted that the European Union has not cleared the shot at all (with minor exceptions) for the under-fives and were hesitant in allowing them for the under 18s.

Clearly, the risk outweighs the reward, as it were, and it is unclear – because Pfizer did not answer any request for information/comment (see questions below) – if parents are given those figures when making the decision to enroll their kid in an experimental drug program.

Adults calculate risk and reward constantly – from “Can I make that light before it turns red?” to “Should I tease that lion?” But a seven-month old is simply not capable of doing so and while certain clinical trials do hold out serious hope and are important for society at large, a trial such as this for such a limited reward – kids very very very rarely get, let alone suffer seriously, from Covid – seems dubious.

In other words, if you wanted to test a new malaria drug you would not do so on Santa’s elves at the North Pole because there are no mosquitoes there to infect anyone.

According to the Belmont Report, which set baseline standards for human-involved clinical trials in the late 1970s (it was a government reaction to the horror of the CDC’s own “Tuskegee Syphilis Study”) one of the three core standards for justifying clinical trial testing is “beneficence.”

In other words, there is an obligation to protect persons from harm by maximizing anticipated benefits and minimizing possible risk and harm.

That risk/benefit calculation obviously changes in regard to other far more common childhood maladies, making participation in those studies potentially far more “beneficent.”

But in the case of Covid, the question is how are maximal, as it were, are the anticipated benefits?

Very very minimal and that is the problem, said Dr. Clayton Baker, former Clinical Associate Professor of Medical Humanities and Bioethics at the University of Rochester.

“Given the real and well-established risks of harm (including myocarditis and death), and given the functionally zero potential for benefit (since [Covid] is universally mild in children), the risk-to-benefit ratio for the [Covid] mRNA injections in children is infinitely bad,” Baker said. “There is no ethical reason whatsoever to continue clinical trials of these products in children, and all such trials should be stopped.”

Come to think of it, maybe just get the kid the pony instead.

Here’s a link to an on-going kids Covid study with a handy map so you can find a location near you (mostly Bay Area): A Study to Learn About Variant-Adapted COVID-19 RNA Vaccine Candidate(s) in Healthy Children

For clinical trials in general, you can look here for one that you might be interested in taking part in:

For clinical trials just about Covid, you can look here

As noted above, here are the questions Pfizer did not reply to:

-Exactly how is informed consent handled? I assume a parent/guardian can provide said consent?

-Do (or have) you run trials with previously vaccinated children?

-What child/youth trials have been run in the past and what have been their results?

-What is the compensation amount?

-Have any previous trials shown conclusively that the vaccine ameliorates Covid severity in children?

-When and in what manner did the FDA approve this trial?

-When do you expect to conclude the trial?

-Is this trial aimed at testing a “booster” shot or to cover a new variant?

-Has any child in any trial conducted had a significant and serious reaction requiring hospitalization and/or led to death?

-It appears one of the points of the study is to figure out how to cut the number of doses as well as check effectiveness. Is that correct?

-How many children – nationwide and in California specifically – have signed up for/been through the trial so far?

-What are the differences between trials involving children and those involving adults?

-Will Pfizer conduct trials each time it comes out with new variant vaccine shot?

Republished from the author’s Substack

Author

  • Thomas Buckley

    Thomas Buckley is the former mayor of Lake Elsinore, Cal. and a former newspaper reporter. He is currently the operator of a small communications and planning consultancy.

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