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Deflation\Inflation\Stagflation\Mass Inflation\Hyperinflation?

Which Flation Will Get Us?

By 

September 5, 2009

One of them will. That’s if things work out really well. Two or three will if things go according to the Austrian theory of the business cycle.

Americans have been living in the eye of the monetary hurricane. Prices have been stable. In July, both the Consumer Price Index and the Median CPI were flat compared to June.

There are five flations to consider.

DeflationInflationStagflationMass inflationHyperinflation

We had better consider all of them.

FLATION: MONETARY OR PRICE?

We should always keep in mind the fact that there are two ways to define flation: (1) as a change in the money supply; (2) as a change in the price level.

This assumes two more things: (1) we can accurately define money; (2) we can accurately identify the price level. Both are questionable.

The Federal Reserve three years ago dropped M3. It said that M3 was useless as an indicator of future prices. That was a long time coming. The FED was correct. M3 was the most misleading of these M’s: M1, M2, M3, MZM. It always vastly overstated the looming rise in the CPI. There is no doubt which M is best in this regard: M1. For my detailed Remnant Review article on this, go here.

Furthermore, there is more to an M than predicting future consumer prices. There is also the question of predicting the business cycle. There is no agreement here among economists.

Then there is the price level. Which basket of goods and services should statisticians use? What relevance should a statistician place on any of a hundred commodities and services? This weighing will change when consumer tastes change. No index survives intact over time. They all are revised when there are major changes, from the CPI to the Dow Jones averages.

I look for trends. I use M1 and the Median CPI.

The crucial fact is monetary policy. According to the Austrian theory of the business cycle, the cycle is completely the outcome of prior central bank monetary policy. Booms and busts are the result of central bank monetary inflation, followed by reduced expansion. The other schools of thought reject this theory. The other schools of thought are wrong. For an introduction to this issue, see Chapter 5 of my mini-book, Mises on Money.

DEFLATION

Most of those who forecast deflation have in mind price deflation. A few think monetary deflation will take place because of bankrupt banks, but the position is difficult to defend. The FDIC can keep bank doors open. There are no runs on banks involving currency withdrawal. There are only runs involving the transfer of digital money to other banks. This does not affect the money supply.

Price deflation can come through the free market. It results from steady increases in economic output in an economy with stable money. Here is my slogan: “More goods chasing the same amount of money.” A gold coin standard economy provides such a world, as long as central banks do not protect insolvent banks. So does 100% reserve banking, which we have never had. This is not the scenario offered by deflationists.

Here is their scenario. Banks create credit. Fiat money lowers interest rates. People borrow. This is consistent with Austrian economics. This credit structure cannot be sustained indefinitely. Austrianism also teaches this.

Here is where the schools of opinion depart. The deflationist says that people in general cannot pay their debts. They default. So, prices fall. Not just prices of market sectors that were bubbles, but all prices.

There is a problem with this argument. If you find that half of the things you regularly buy cost less, you buy the same amount, or maybe a little more, and then buy more of something else. This includes the purchase of capital goods.

You don’t put currency in a mattress. You buy something with the money that falling prices allows you to keep. You buy more of B when the price of A falls . . . or more of A.

Simple, isn’t it? But those who call themselves deflationists do not understand it or believe it.

The same money supply is out there. Someone owns each portion of it. You own some. I own some. We both would like to own more . . . at some price. But the credit contraction of a popped market bubble does not affect the money supply if the central bank or the Treasury or the FDIC intervenes and prevents a fractional reserve bank from going bust and taking all of the digital money with it.

This is economic logic. If the logic is incorrect, then there should be detailed theoretical criticisms of it. Or, given the weaknesses of human thought, maybe logic does not correspond to reality. Economists are famous for constructing detailed theories that do not conform to reality. But the free market theory of price changes as the result of the supply and demand for money in relation to the supply and demand for products and services is straightforward. It undergirds all of economic theory. Throw it out, and what remains of economic theory?

If a central bank creates a boom with fiat money, and then ceases to inflate, it can create deflation. How? By refusing to bail out busted banks. It allows the money supply to contract as bankrupt commercial bank deposits disappear. Fractional reserve banking implodes. That will create a deflationary depression. We have not seen anything like this since 1934: the creation of the FDIC.

Don’t bank on this just yet.

INFLATION

Monetary inflation produces price inflation. On this, Chicago School monetarists and Austrian school economists agree.

If the central bank expands the money supply, prices will rise. This takes time. Economists debate about the lag time: 6 months, a year, 18 months. But monetary expansion will raise prices. The new money has to go somewhere. It has to wind up in someone’s bank account.

If the central bank expands the monetary base by buying assets of any kind, it creates money to buy them. The recipients of those assets spend the money. If the Treasury gets it, Congress spends it. (In both theory and practice, if Congress gets its collective hands on money, it spends it. All economists are agreed on this point.)

The expansion of money by the central bank is the source of economic booms and specific asset bubbles. The expansion of money temporarily lowers the interest rate. Someone borrows this newly created money.

America suffered from monetary inflation from 1914 to 1930. Then, with a 3-year hiatus of collapsing banks, we have suffered from 1934 until today. The dollar has fallen by 95% since 1914. No, I don’t believe the CPI tells us this exactly. But I can follow the trend. The trend is up for prices and down for purchasing power.

For as long as the Federal Reserve creates money, we will have price inflation. The only thing that can retard this is if the FED raises reserve requirements or commercial banks send excess reserves to the FED. The monetary effects are the same: increased reserves are the result. This reduces the multiplier of fractional reserve banking.

Price inflation of under 10% per annum is what I call inflation. But before we get to this, we will suffer from stagflation.

STAGFLATION

This was the burden of the 1970’s. There was monetary expansion and massive Federal deficits. Why, the Federal deficit was a staggering $25 billion in 1970, and as bad the next year. Unthinkable!

The dominant Keynesian theory was that Federal deficits would overcome recessions. The central bank need only inflate enough to cover part of the Federal deficit. But there were two major recessions in the 1970’s. Unemployment rose, and prices rose. That combination of events was dubbed stagflation.

That we can have economic stagnation in today’s world is obvious. Just about every mainstream economist and forecaster is predicting slow economic growth next year. The familiar V-shaped recovery is not a popular forecast these days. More typical is the forecast of Muhammed El-Erian, the CEO of PIMCO, the largest bond fund in the world. He calls this “the new normal.”

Global growth will be subdued for a while and unemployment high; a heavy hand of government will be evident in several sectors; the core of the global system will be less cohesive and, with the magnet of the Anglo-Saxon model in retreat, finance will no longer be accorded a preeminent role in post-industrial economies. Moreover, the balance of risk will tilt over time toward higher sovereign risk, growing inflationary expectations and stagflation.

This scenario is a combination of slow growth and rising prices. Today, we have no growth and flat prices. So, slow growth and rising prices is not much of a stretch conceptually.

I think stagflation is likely, once the recovery comes. But we are seeing a gigantic Federal deficit. Ross Perot in 1992 spoke of a giant sucking sound. He said that was the sound of jobs lost to Mexico. I think it is the sound of the Federal government sucking up all excess capital in the United States and much of the world. This money will not be going into the private sector.

What is the basis of a sustained economic recovery? Increased capital formation. We are seeing capital destruction.

For a time, we will suffer from stagflation. It will not be stag-deflation. It will be stag-inflation.

What do I envision? Economic growth under 2% per annum, coupled with price increases of 5% per annum or more.

MASS INFLATION

This phenomenon will appear when the Federal deficit cannot be covered by private investment and purchases by foreign central banks. This seems certain within a decade. I think it is likely before the end of the next President’s term. I think the Social Security trust fund will cease to provide a surplus that is used to purchase nonmarketable Treasury debt, as it is today. The trustees will have to sell some of these nonmarketable Treasury debt certificates back to the Treasury. The Treasury in turn will have to sell conventional Treasury debt to cover the redemptions by the trust fund.

This stage will be the indicator that the present borrow-and-spend model has failed. The FED will be called upon to supply the difference between purchases of T-debt by the public and borrowing by the government. When the FED complies, the rate of monetary inflation will rise. Prices will also rise.

I define mass inflation as double-digit price inflation above 20% but below 40%. Americans have not seen this. No industrial nation has seen this except after a major military defeat.

The disruption of the capital markets will be extreme. The government will absorb virtually all capital formation. There will be no net capital formation. There will be capital consumption.

The international value of the dollar will fall. But other Western nations will be pursuing comparable policies. It is not clear how far the dollar will fall. It depends on the competitive race to national self-destruction. Every Western nation faces the day of reckoning: the bankruptcy of Social Security/Medicare.

At this point, the FED will have to make a choice: put on the brakes or destroy the dollar.

HYPERINFLATION

The worst-case scenario is hyperinflation. Ludwig von Mises called this the crack-up boom. It leads to the destruction of the currency. The economy will move to barter or to alternative currencies. The division of labor will collapse.

No modern industrial economy has suffered this since the recovery after World War II. The West is not Zimbabwe. The West is not a backward agricultural nation that still has functional tribal organizations to help their members.

Think about the implications of your money not buying anything of value. How would you live? You are urban. You are dependent on a complex system of computerized production and distribution. It is all governed by profit and loss. The profit-and-loss system will cease to function at some point. That is when the economy shifts to a new monetary system.

This would be the destruction of wealth on the scale of a war. It would create a new social order.

I do not think the Federal Reserve will allow this. This would destroy the banking system. The FED’s unofficial but primary job is to preserve the biggest banks in the banking system. If it’s a question of providing fiat money for the government’s debt vs. destroying the dollar, the FED will cease buying Treasury debt.

That will be the turning point.

DEFLATION

Then we will get the crash. The FED will protect the biggest banks, which will swallow the assets of smaller banks. A lot of smaller banks will go under. They will take deposits with them.

We will get bank runs. People will demand currency. The FDIC will be busted. These banks will go under. So will depositors’ money. It will be “It’s a Wonderful Life” without the 6 o’clock escape hatch in the script.

You had better have your money in Potter’s Bank, not the Bedford Falls Building & Loan.

The contraction of digital money will be matched by a truly serious recession. Bankruptcies will be widespread. Unemployment may not rise, but only because the final phase of mass inflation had created so much unemployment.

This will be a period of restoration. The cost of the restoration will depend on how bad the dislocations of the mass inflation had been. If they are very serious, which I would expect, the time of recession will be tolerable if you have currency and a job. But the investment strategies of hedging against mass inflation will produce losses. An opposite set of strategies will appear. Be a debtor in mass inflation. Be a creditor in the post-inflation recovery.

If the Federal Reserve intervenes again, repeat the cycle from the top. But the numbers will be much larger.

CONCLUSION

Pick your flation. You can try to beat it, but each successive flation threatens your capital.

We are entering a period of capital consumption in the United States. I think this problem will afflict the West. The same political promises have been made. They will be broken.

He who sustains his lifestyle through these flations will be blessed indeed. Getting rich will be miraculous.

September 5, 2009

From LRC, here.

We Only Accept Historical Testimony from Experts

Is History Proof?

Posted by: Gil Student May 1, 17

by R. Gil Student

We like to think that facts will end an argument. More often than not, they only move the battlefield. History is not a science but an art of interpretation. While historical analysis begins with careful research, it continues with inference and explanation. Both are subject to debate.

In the Talmud, we find mixed responses to historical claims. On the one hand, history is invoked as a potential method of resolution to a longstanding debate. The Gemara (Bava Basra 73b-74a) tells how Rabbah Bar Bar Chanah was wandering in the desert and met an Arab peddler who offered to show him the corpses of the generation of the biblical wandering, which were remarkably preserved. Rabbah Bar Bar Chanah tore off a piece of their tzitzis but was forced to leave it there. When Rabbah Bar Bar Chanah returned, the rabbis lamented that he could not remember the number of strings and knots. Had he remembered, this would have resolved a debate between Beis Shammai and Beis Hillel.

This text implies that historical information can resolve these types of religious debates. In another passage, this is qualified.

The Gemara (Chullin 6b-7a) describes how R. Meir’s brother-in-law testified to R. Yehudah Ha-Nasi that R. Meir ate from vegetables of Beis She’an as if they were grown outside the land of Israel. Based on this testimony, R. Yehudah Ha-Nasi permitted all the vegetables of Beis She’an (treating the city as outside the borders of Israel). The Gemara continues to challenge this ruling. Maybe R. Meir ate under specific circumstances and did not believe that Beis She’an was outside the borders? After a number of such challenges, the Gemara concludes: “See what a great man testified about him.” Rashi explains: “Since he was coming to testify about this, he carefully examined it.” While we can question the historical proof, the source can be assumed to have reliably interpreted the event. Rav Menachem Krochmal (Tzemach Tzedek, no. 75, cited in Gilyon Maharsha, Chullin, ad loc.) deduces from this passage that we only rely on the testimony of experts, even regarding common practice. The average person misses crucial details and some even misrepresent Torah for convenience. He quotes from a responsum of Rav Moshe Mintz who writes similarly about testimony from non-experts that is often clearly incorrect.

According to this passage, we have to be careful about historical testimony. Aside from the general flaws in eyewitness testimony due to the frailty of human memory, witnesses may not have seen all the details or understood the entire context. History requires context. We often don’t know all the circumstances of what happens today, even events that we live through. Someone in the ancient world writing about events about which he heard may not be describing them accurately. Only a trustworthy contemporary expert who has sufficiently researched the history can be fully trusted.

The ben sorer u-moreh, rebellious son, is a startling biblical law. The Sages explain that the laws contain many different requirements, rendering the laws nearly ineffective. For example, the boy has to be within three months of turning thirteen. Additionally, the parents have the right to forgo the harsh punishment since the Torah says that they will take him to the court. They can refrain from taking him. One Sage even says that “a rebellious son never was and never will be.” He says the same about an idolatrous city that is burned to the ground and a leprous house that must be buried (Sanhedrin 71a). These are not just religious declarations but historical statements that can be disproven. And they are.

R. Yonasan (ibid.) says that he personally saw a rebellious son and sat on his grave. (This raises the halakhic question how R. Yonasan, a priest, could sit on the grave.) He also saw a mound that was an idolatrous city. Similarly, R. Elazar Bar Tzadok saw a mound that people said was the remains of a leprous house.

These are respectable testimonies. Do they end the historical question about whether these laws were ever put into effect? The Talmud does not reach a conclusion, presumably because this has no legal ramifications. However, medieval thinkers address this. Sefer Ha-Chinukh (248) quotes both opinions, as if each is valid. Some say that these laws were never put into effect while others said that they were. In contrast, Rav Yitzchak Arama (Akeidas Yitzchak 61) says: “However, we rely on the trustworthiness of those rabbis who testify faithfully that they saw [these laws put into effect] and stood on their mounds.” Rav Arama seems to close the discussion by appealing to the faithful testimony of the rabbis.

What role does historical evidence play in religious debates? According to these passages, a real but limited role. We must neither overstate the decisive value of history nor ignore its contribution when used responsibly.

From Torah Musings, here.

Never Trust Any Media Organization Large Enough to Gain ‘Access’!

The Enron Disaster Was the Product of Poor Business Journalism. A Word to the Wise Is Sufficient.

Gary North

The media were on Enron like a dog on a bone. The reporters had one assignment from editors: to expose dirt. They wanted workers’ empty retirement fund dirt, payoffs to top Republicans dirt, and insider trading dirt. Dirt attracts viewers. Dirt gets the ratings up. Higher ratings allow the media to charge more money to advertisers.

This media feeding frenzy basically reported on an empty barn from which the thoroughbred horses have all escaped. The horses that were left behind — nags, mostly — are not topics for public discussion.

Enron’s empty barn is not the important story. The story is the breed of departed thoroughbreds: derivatives. They are a temperamental breed. They run like the wind when spooked, taking men’s dreams and capital with them. They are easily spooked. They are not understood by business journalists. They are surely beyond comprehension by the general public, whose eyes would glaze over 60 seconds into the “Special Report: Why Enron Failed.” Congress hasn’t a clue. They were also beyond Arthur Anderson Company’s powers of comprehension. This is what scares me. The professional monitors did not see this coming, did not sound a warning in time.

Derivatives are everywhere: $100 trillion worth, minimum. They have become business as usual. On them, the employment, retirement portfolios, and dreams of tens of millions of employees depend, but derivatives are so complex that Kenneth Lay and his associates did not see that they were creating a monster that would consume the company and their careers. Derivatives made Enron look good; then they made Enron look bad; but at no point did a journalist ask Kenneth Lay: “Are derivatives the main source of Enron’s above-average profits?” There had to be some reason why Enron was abnormally profitable. It wasn’t efficiency; they were hiring too many new people too fast. There are not that many innovative people on the market, at least not of the kind who produce above-average profits long term.

LOCK-STEP JOURNALISM

For years, business journalists marched lock-step to assure their readers that Enron was the greatest horse barn around. A good example is this document: a press release from Enron dated February 6, 2001.

 

ENRON NAMED MOST INNOVATIVE FOR SIXTH YEAR

FOR IMMEDIATE RELEASE: Tuesday, Feb. 06, 2001

HOUSTON — Enron Corp. was named today the “Most Innovative Company in America” for the sixth consecutive year by Fortune magazine. “Our world-class employees and their commitment to innovative ideas continue to drive our success in today’s fast-paced business environment,” said Kenneth L. Lay, Enron chairman and CEO. “We are proud to receive this accolade for a sixth year. It reflects our corporate culture which is driven by smart employees who continually come up with new ways to grow our business.”

Enron placed No.18 overall on Fortune’s list of the nation’s 535 “Most Admired Companies,” up from No. 36 last year. Enron also ranked among the top five in “Quality of Management,” “Quality of Products/Services” and “Employee Talent.”

Corporations are judged primarily from feedback contained in confidential questionnaires submitted by approximately 10,000 executives, directors and securities analysts who were asked to rate the companies by industry on eight attributes.

Enron is one of the world’s leading electricity, natural gas and communications companies. The company, with revenues of $101 billion in 2000, markets electricity and natural gas, delivers physical commodities and financial and risk management services to customers around the world, and has developed an intelligent network platform to facilitate online business.

http://www.enron.com/corp/pressroom/releases/2001/ene/docs/15-mostInnovative-02-06-01-LTR.pdf

[2005 Note: This document was still on-line on Enron’s website in 2002. It is gone today. It is kept alive here:]

http://www.propagandacritic.com/articles/examples.enron.html
At the bottom of this press release is a remarkable slogan. Best of all, it is trademarked.

 

Endless possibilities (TM)
I gather that this applied especially to Enron’s accounting practices.

I suspect — just a guess, of course — that this example of breakthrough financial journalism will not be featured in future direct-mail solicitations for subscriptions to FORTUNE.

When one company is said to be the most innovative company in the nation for the sixth time, there is something amiss. Reporters should dig deeper. If any company maintains first place for six years, the free market is not responding as the textbooks say. There should be imitators and raiders who hire away the company’s innovative geniuses.

This especially caught my attention:

 

Corporations are judged primarily from feedback contained in confidential questionnaires submitted by approximately 10,000 executives, directors and securities analysts who were asked to rate the companies by industry on eight attributes.

So, the “best and the brightest” one year ago thought that Enron was #18 among all large American corporations. A year ago, you could have bought a share of Enron stock for $80. What a deal!

This brings me to a consideration of the academic economists’ theory of efficient markets.

EFFICIENT MARKETS AND INEFFICIENT MANIAS

Investors want to believe that the market is as smart as the efficient market theory says. It isn’t. The market is no wiser than the fund managers who decide where to put their clients’ money. These are bright people, but they run in packs. There are more stock mutual funds than there are New York Stack Exchange stocks. They have to do something with all that money. Pension fund managers see money rolling in, month after month. What to do with all this money?

The dot-com mania is the best example of an irrational stock market in our generation. Wynn Quon of Canada’s NATIONAL POST puts it well:

 

Here’s the simple bottom line of what happened in the tech boom and bust: Most of the dot-coms, the telecom startups, the Linux companies simply didn’t make any money. It’s as black and white as that. This meant that any large upward movement in prices would be unsustainable. The key to understanding how things got out of hand doesn’t lie in interest rates but in mass psychology. As a species, humans just don’t behave very well in crowds. There is a tuning fork inside each one of us which, when struck the right way, makes us move together in tragicomic formation. All it takes is some technological novelty and the jingle of profit and the crowds hum in manic earnestness. In the 1990s, investors got the sweetest siren call of the century. Investing in the Internet made our portfolios sing and our tuning forks resonate. It didn’t take long for behavioral feedback loops to kick in. (“I bought at $20, it’s now at $40, hey this is easy, I’ll buy more”). Add in plenty of leverage and we were on a rocket ride to NASDAQ 5000.

http://www.legadoassociates.com/hardest%20word%20George%20Gilder%20Jan%202002.htm
 

Here is the reality: the market is no wiser than investors are. The best-informed investors are still people. They get caught up in manias and panics. The economists’ assertion that the stock market uses the best information out there is true. It uses it; it even maximizes it; but it does not pay much attention to it when mania-driven lemmings are telling their brokers to buy. The brokers respond to “buy” orders, and the feedback loop continues. Until it ends.

In any case, during manias and panics, most of the best and the brightest are caught up in the same public psychology. They go with the flow. They add their confirmations to the lemmings. This is especially true in manias. The greed factor is the stuff of direct-mail packages and interviews by the media. When panic hits, the media try to avoid giving space and air time to prophets of doom because their message hurts advertising revenues. “If things are this bad, may we had better not spend money,” thinks the businessman. In manias, prophets of boom sell advertising.

Deep inside all of us, there is a Ponzi-scheme button waiting for some crook to press. This is the reality that the efficient-market hypothesis never quite gets around to dealing with.

Enron is the post-dot-com era’s best example of fund- driven mania. Fund managers should have known something was wrong, just by looking at the chart of Enron’s price history.

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ENRNQ&sid=&o_symb=ENRNQ&freq=2&time=13
From early 1992 to early 1998, Enron’s shares rose from $10 to $20. Over the next year, they rose to $30. Over the next year, they rose to $40. That was on January 2, 2000. Then, in a matter of 14 days, the price went to $70. By September, 2000, it was at $90. That was the peak. Beginning in October, it started down. This was seven months after the decline of the NASDAQ had begun. It was still above $80 a year ago.

There should be reasons — solid, documented, third- party-verified reasons — why a stock that was worth $30 in early January 1999 was worth $90 in mid-2000. If the stock market was smart in 1999, it should have been equally smart in mid-2001. The rise in price was achieved in the face of collapsing NASDAQ prices and falling S&P 500 prices. There should have been a horde of journalists asking “Why?” But all we got was press releases dressed up as financial reporting. When the stick started down, we got more press releases disguised as straight reporting. Here is an example from the HOUSTON BUSINESS JOURNAL:

 

November 24, 2000

Enron puts down profit warning rumors

Energy and communications giant Enron Corp. has dispelled rumors of a potential profit warning.

“All of our business are performing extremely well, and we are very comfortable with consensus analyst earnings estimates of 35 cents per share in the fourth quarter and $1.65 for the full year 2001,” says Jeff Skilling, Enron president and chief operating officer. . . .

Enron shares closed at $77 3/4, up $2 3/16, in Friday’s abbreviated trading day on the New York Stock Exchange. The shares had fallen to $75 9/16 on Wednesday, down from $80 last week and a high of $90 Aug. 23.

Enron had revenues of $40 billion in 1999 and $60 billion for the first nine months of 2000.

http://houston.bcentral.com/houston/stories/2000/11/20/daily27.html
There as no analysis, just official denials and PR department explanations that explained nothing.

The fact was this: Enron’s profits were based on derivatives, which in fact were producing massive losses. How could this be? For details, read Prof. Partnoy’s testimony.

http://www.senate.gov/~gov_affairs/012402partnoy.htm
We are living in a world in which a Big-8 accounting firm was either hoodwinked by, or winked at, numbers that were completely surrealistic — the complete opposite of reality. The steady decline of Enron stock all through 2001 was accompanied by official denials, assurances of future profitability, and insider selling on a scale never before seen. All the way down, Enron received no significant criticism from the media. The financial press would not believe what the market was telling them. Enron’s officials said that what the market was saying had to be wrong, but it was right. Sadly, it was right several years too late.

WHY JOURNALISM FAILED

What went wrong in the media? Skepticism had failed. The press refused to look at the numbers: rising insider trading and falling share prices. They took as gospel the reassurances of senior officials who were bailing out. So did the investors who held onto the stock.

Where was journalism’s vaunted skepticism? It’s long gone. The press sees itself as an extension of the brokerage houses. If the press starts telling the truth, reporters will lose their access to senior officials, or even lose their jobs. The press lives on advertising. Anything that reduces investors’ confidence is seen by publishers as a threat to advertising revenues. They act as though they believe that the stock market maintains the economy rather than merely forecasting it.

The press must preserve the public’s illusion of access by the press, when in fact access is an informational liability. Any reporter who has easy access to anyone in high places should be aware that he is being given access in order to get management’s line to the investors. Access is the bone that management throws to reporters.

The first master of this screening process in American history was Teddy Roosevelt, who kept critical reporters away from his chummy sessions with “his” reporters. The Soviet Union played the same game with the entire press corps from the West in the 1820’s and 1930’s. Censors monitored in advance every story sent out of the country. Malcolm Muggridge describes the system in his autobiography, THE GREEN STICK. (This is the best autobiography I have ever read.) Everyone involved knew what was expected. The West’s newspaper editors preferred running false with a byline from Moscow rather than being cut off completely. Their readers wanted those bylines. This is the “eyewitness news” syndrome. It is alive and well today. The most notorious example of false reporting from the USSR was Walter Duranty of the NEW YORK TIMES.

http://www.nationalreview.com/contributors/stuttaford051501.shtml
All of the reporters were involved in the same kind of deception, just not the same degree of access. The Communists even supplied mistresses for some reporters. These women were spies. The reporters probably knew this. They thought the exchange was worth it.

Reporters should allow management to tell its story. But reporters should know that anything less than detailed, expensive investigations will not get to the truth, if the truth is bad news.

This is another reason why most financial reporting is filled with good news. It is mainly puff journalism. Puff journalism is low-cost journalism. It is also low-risk journalism. No newspaper ever gets sued for running puff journalism, not even after the entire market collapses. This is the dot-com collapse’s message to reporters.

Continue reading…

From Gary North, here.

Amiram Ben Uliel: INNOCENT & IMPRISONED!

Ben Uliel’s conviction left standing

Posted on September 7, 2020

Monday, September, 7, 2020, 13:16 On Monday, September 7, the Central District Court in Lod rejected the new evidence in the Kfar Duma arson trial, ruling that the testimony of Ahmed Dawabshe is not reliable enough to exonerate Amiram Ben Uliel, and let the conviction stand. Later the same week the court will hand down a sentence in the case.

Ahmed Dawabshe, who was seriously injured in the arson attack and is the only eyewitness who was inside the house that was destroyed, recently revealed that he remembers the incident in detail and that he saw the arsonists. He described an incident which is factually different from that of which Amiram Ben Uliel was convicted. He was not interrogated after the incident and the investigating authorities have never examined his testimony which contradicts the version of events written in the bill of indictment.

In interviews in the Arabic-speaking media, which have been submitted to the court by agreement between the sides, Ahmed recounted that several arsonists, more than three, were involved with the incident and they entered the family’s house and clashed with family members. This version of events completely contradicts the evidence on the basis of which Ben Uliel was convicted of murder, according to which there was only one arsonist at the scene and he did not enter the house.

Honenu: “Today the court imprisoned an innocent man for life. The court did not have the courage to admit to its past mistakes, because if the court had spoken the truth, a battery of officials would have paid the price – the ones who tortured Amiram, the ones who authorized the torture. The court preferred to remain in its comfort zone and convict the ‘settler’, the ‘outsider’.

“The court chose to ignore testimony from the most objective person, the injured party himself – the testimony which should have led to an exoneration. The court chose to accept the testimony of torture. Such evilness will not be forgiven.”

Orian Ben Uliel: “The court decided to convict my husband at any price. Again the court closed its eyes to more evidence, to that of a child who experienced trauma, remembers that night, told about it out of his own volition, and everything he remembers contradicts the false confessions extracted from my husband. My husband has been convicted again of something he did not do. Our hearts are broken. Our faith in the system has been reduced to nothing. My daughter cries at night. My husband has sat in prison for years already, and I know that he did not do it.

testified on the subject and they are ignoring my testimonies. They are ignoring his testimonies about what happened. They are ignoring all of the testimonies and all of the contradictions – that [the graffiti] is not in my husband’s handwriting, that [the footprints at the site of the crime] are not his footprints, that there were several people there, that there was a car there. They are ignoring everything. My husband is paying the price for a crime because they are not willing to admit [to their mistakes]. So that those guilty of the injustice done to my husband will not have to pay, my husband is sitting in prison through no fault of his own.” Prior to the ruling, Ben Uliel sent a letter to the judges in the case requesting that they exonerate her husband in light of new evidence.

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From Honenu, here.