February 15, 2016
By: Bobby Casey, Managing Director GWP
“The road to hell is paved with good intentions.” It’s said that adage is derived from the earlier adage, “hell is full of good meanings, but heaven is full of good works”. All theological connotations aside, the bottom line is results over feelings. It’s nice that you meant well, but what did you actually accomplish?
There is no greater application of that adage than to the government of the United States. Of COURSE the policies of bureaucrats and legislators are well meaning! They are either for your own good or the greater good, right? They can’t exactly sell their policies using candid statements like, “We’re out to control you and take all your money.”
Apparently all the monetary manipulations from the Federal Reserve have been for our own good right? I mean, sure the USD has fell over 90% in value since the inception of the Fed, but let’s not forget that it gave a few elites a nice bump in their wallets, and pacified the ignorant masses of this imaginary “money shortage” by creating… that’s right… a money shortage.
What we have now are digital 1’s and 0’s with 10% of it actually being in physical cash form. The physical cash is basically an IOU. We don’t have actual cash to back up our quantitative easing which is why our government has vilified using cash as being suspicious if not criminal.
If you have a large amount of cash on you, cops suspect that it’s because you’re a drug dealer… and next thing you know, asset forfeiture has you fighting for your own money back.
If you withdraw or deposit too much cash, banks complete a “SAR” or Suspicious Activity Report on you, notifying government authorities of what you just did.
If you’ve done nothing wrong, you have nothing to hide, right? Well, anyone operating in cash obviously has something to hide. And the US isn’t the only one with that notion in their head and policies. Sweden is about to become the first cashless country in the world.
Toward the end of 2015, there was talk of the Fed finally raising the interest rates for the first time in years. Eyebrows rose, heads turned, mumbling ensued… and then Janet Yellen makes a 90 degree turn (not a FULL 180, mind you), and says:
“… the Federal Reserve computer systems used to calculate and manage interest on reserves do not currently allow for the possibility of a negative IOER rate, although these systems could be modified over time if needed.”
“DIs might opt to shift a significant quantity of their reserve balances into currency. Present Federal Reserve inventories of currency, at about $200 billion, would not be adequate to cover large-scale conversion of the nearly $1 trillion in reserve balances to banknotes.”
“I am not aware of any legal restriction that would mean that we could not establish negative rates, but I will say that we have not looked carefully at the legal side of this.”
“…we don’t even know if payment systems will be able to handle negative rates.”
Ben Bernanke himself said last month:
“I think negative rates are something the Fed will and probably should consider.”
This sort of vacillation is absolutely no good for the markets. It causes panic and uncertainty. Zero interest rates are bad enough, but negative ones can come with a lot more unintended consequences. What we’re saying is, they can neither confirm nor deny anything about negative interest rates. Very helpful, indeed, Federal Reserve. I think the take-away here is that once the Fed finds away, we will be looking at NIR or Negative Interest Rates just as soon as we can find a work-around, because the alternative is QE4.
Among other translucent policies out there that affect you and me today, but are for our own good, is Net Neutrality. Once again, policies written by people who don’t know what they are talking about, deliberately kept vague so that regulators can go either way depending on whether you’re cooperative or not.
“The FCC’s Open Internet Order codified certain principles of net neutrality for broadband providers: No blocking of lawful content, no unreasonable discrimination or throttling, and no paid prioritization,” explains Evan Swarztrauber in his interview with Forbes contributor Jarod Meyer.
Evidently, T-Mobile recently released some products that offer what their customers want most at a lower cost. T-Mobile, the 3rd largest wireless company in the industry, offers a product called Binge-On. Once it realized that the majority of data used on data plans is on video and music, they found a way to offer that at no additional charge to their customers.
Basically, if you buy a 2G data plan, video streaming doesn’t count against your data plan.
You might be thinking, “And that’s bad becaaaaauuuuusssse…..?”
Well, the EFF (Electronic Frontier Foundation) says in order to provide this service, T-Mobile is engaging in “throttling”, or downgrading the quality of a given service or product, therefore violating the FCC’s order.
This is technically true. In order to afford this feature, T-Mobile does change the resolution from high quality to DVD quality, however it isn’t noticeable on a 3.5” screen. And rather than having high speed streaming to accommodate the high quality resolution, it reduces it to more of a slow trickle.
Here’s the thing: any one of the products that qualify for this program through T-Mobile are subject to this modification. So it doesn’t single out Hulu or YouTube while allowing ESPN, HBO, and Netflix to maintain higher quality resolution. They all get throttled. Also, all video services are eligible. They simply have to register with T-Mobile so it knows to exempt it from billing data. Likewise, while it is offered and it is the default setting, the users are told and can opt OUT of it by simply turning the feature off.
Not only have customers not complained about this, but they have switched over to T-Mobile specifically FOR this service! Rhetorically, the FCC’s guidance and the point of Net Neutrality was to “empower the consumer”. If the consumer WANTS this, but the FCC overrides it, what becomes of the stated purpose of intent of the legislation or regulation?
Quality costs money. I’ve said this before, and I’ll say it again until these idiot policy makers finally get it. When regulators like the FCC are absolutists, they stymie innovation and discourage ideas. How so? Well, imagine if it was a smaller competitor. T-Mobile has the legal team in place to deal with the FCC. Smaller competitors would not. The FCC is communications bully. It will strong-arm the smaller guys who don’t have the means to take them on legally, and even the heavy hitters will need to make some concessions lest they bankrupt themselves on FCC interference and meddling.
The ones who really get hurt are the economically disadvantaged. It’s such a first-world thing to complain about the resolution quality of a movie having a zero-rating in a country where wireless market penetration is relatively high. When you consider countries like India, or even poorer sectors of the United States, those people would like a place at the wireless table too. Throttling makes it possible. It’s unfortunate that such expensive regulations are being streamed across other countries that are in no position to complain about quality of video resolution when only 20% of their population has wireless capabilities in the first place.
Below is a great interview from Techfreedom.org which goes into great discussion in simple terms how Net Neutrality can become a thorn in the side of innovation and competition:
Holding everyone to an expensive standard, marginalizes the poor first, every time. Higher minimum wage? Poor under or unskilled individuals are blocked from entering the work force. No throttling or zero-rating products, again kicks the poor out the door first because they can’t afford the plans that allow for their use.
Whether it’s the Fed tinkering with our worthless dollar or the FCC telling us how and what we are allowed to consume wirelessly, it’s all for our own good… right? No. It’s not. It’s for someone’s good, but very unlikely your good or mine. Consumers, responsible people, savers, producers, and innovators, they all lose. Intentions have NO place in a discussion on policy. Results are all that matter, and based on what we’ve seen from QE, interest rate adjustments, and regulations, the results are abysmal. Our progress is impeded if not ground to a halt because competing ideas can’t afford to enter the market place. If someone EVER tells you that the US is a “free market” look no further than our monetary and telcom policies to know we are anything BUT free.