Cut Bait
Inflation
We talk a fair amount about inflation around here, and so do many news outlets. Much of the spotlight is given to economists, who tell us their opinions on why inflation is bad, and what can be done about it. We’re assured that higher consumer prices are not simply corporate price gouging - they’re a combination of factors someone without a masters degree couldn’t possibly understand.
Once in awhile though, a business publication spells it out in plain English:
The goal is to cool financing and thus demand for things like cars, houses and business expansions, and slow the fastest inflation in four decades. Whether it can do so without inflicting serious pain on the economy will hinge partly on how easily companies surrender their hefty profits, Jeanna [Smialek] writes. If they curb profits to compete for customers, inflation could ebb without the loss of too many jobs. But if businesses prioritize profits, the Fed could be forced to squeeze the economy more drastically.
So…businesses are reaping record profits via price gouging, and the Fed’s solution is to jack up costs on consumers to reduce demand which will curb inflation…if companies stop price gouging. This is what Republican former private equity executive Jerome Powell is referring to when he says this:
"We have got to get inflation behind us," chair Jerome Powell said in his news conference on Wednesday. "I wish there were a painless way to do that. There isn't."
Except…the pain he’s referring to is consumer pain, because businesses are experiencing the opposite of pain right now. They’re making record profits, charging whatever prices they want. The only lever the Fed feels it has is to inflict pain on consumers, hoping they will stop spending so much money on goods, which companies can gouge them for unchecked. Does this system seem insane to anyone else?
It may be true the Fed can’t call up car dealers and tell them to cut it out - any sort of consumer price controls would have to be passed through Congress, which isn’t going to happen. Focusing for a moment on one industry - cars - it’s easy to see how lack of consumer protection leads to exorbitant gouging:
While there are signs that price increases for used cars are beginning to moderate as supply recovers, that process has been halting, and the new-car market illustrates why the path toward lower profits that help slow inflation could be a long one.
That’s because three big forces that are playing out across the broader economy are on particularly clear display in the car market. Supply chains have not completely healed. Demand may be slowing down, but it still has momentum. And companies that have grown used to charging high prices and raking in big profits are proving hesitant to give those up.
Yeah, why would they? New car supply is struggling to keep up with demand - especially with new subsidies encouraging people to make the switch to EVs - and so the Fed fiddling with numbers may not do anything:
If demand continues to outstrip new-car supply and dealers continue to reap big profits, that could limit how quickly inflation will ease. If the mismatch is large enough for sellers to keep pushing up prices without losing customers, it could even continue to fuel inflation.
To be clear, this is because the US (and its states) do not regulate what companies are allowed to charge for things. In some cases, like luxury goods, it may be fine to see costs skyrocket if a small number of wealthier consumers are willing to keep paying, but the unfortunate reality is that many Americans are reliant on cars. Higher priced cars and higher interest rates on loans mean more of their income goes towards transportation, at a time when costs of other goods like groceries are still high.
Perhaps the best way to explain inflation is to say that it’s a confluence of factors - greedy companies gouging record profits, a government that refuses to rein in said profiteering, and a central bank whose only tool to ‘rein in’ inflation is to make life even more expensive for the average person.
Inflation, Part Two
In addition to hurting US consumers, the Fed aggressively raising interest rates is ‘causing pain’ in other countries, who are struggling to deal with a strong dollar:
The [dollar] rally has placed central banks around the world in a race to see who can lift interest rates — and, by extension, the value of their money — faster to keep up.
[…]
And while the ongoing "reverse currency war" might sound like good news for the US, the nature of the modern global economy means that slowdowns abroad can hurt at home.
More than eighty central banks around the world are raising interest rates to combat a rising dollar. Unfortunately, each of those countries is doing so in a unique economic situation, and they aren’t able to coordinate with one another. We talked last week about the situation in the UK - sharply rising interest rates as the value of the pound is falling are major contributors to the mess.
An unfortunate byproduct of running the world’s reserve currency is everyone else is directly impacted by whatever the US Fed does:
"Recent tightening of monetary and fiscal policies will likely prove helpful in reducing inflation," Ayhan Kose, the acting vice president for equitable growth, finance, and institutions at the World Bank, said in a recent report. "But because they are highly synchronous across countries, they could be mutually compounding in tightening financial conditions and steepening the global growth slowdown."
And while the Fed is understandably only focused on the US economy, which has proven remarkably resilient to recession in the last few years, sending swaths of the world into recession will undoubtedly come back to bite us:
If other central banks are forced to hike aggressively to keep pace with the dollar's appreciation, then his hawkish statements could fuel global growth recessions that come back to bite the US.
The US relies on imports to maintain a steady supply of goods like food, crude oil, and car parts — and the price of those goods is directly connected to the performance of other global economies.
There would be a dark irony to the Fed reacting to supply chain shortages (and price gouging!) by ratcheting up interest rates, which sends key trading partners into recession, which disrupts the supply chain again in another year or two.
The UN Conference on Trade and Development weighed in this week, saying central banks in advanced economies could be responsible for a recession worse than 2008 if they continue with rate hikes:
The report predicted that current monetary policies in wealthy nations could spark an economic downturn worldwide, with growth slipping from 2.5% in 2022 to 2.2% next year. The UN says that such a slowdown would leave global GDP well below its pre-pandemic norm, and cost the world economy around $17 trillion, or 20% of the world’s income. And developing nations will be the most negatively impacted, according to the report, and many might be facing a recession worse than any financial crisis in the past 20 years.
Developing nations lean heavily on rich ones for borrowing, and other forms of financial and humanitarian support. When debt becomes more expensive because the dollar or euro is unexpectedly strong due to rate hikes, poorer nations have less money to spend on, well, everything:
With debt becoming more expensive to service, emerging economies have fewer funds available to invest in health care, climate resilience, and other critical infrastructure, the Unctad report warned, which could lead to a prolonged period of economic stagnation.
When central banks, run by economists terrified of the inflation boogeyman, fail to take into account how their actions impact the rest of the world, it has ripple effects across a shaky global economy still struggling to recover from pandemic shocks. Everyone will feel the pain of inflation austerity, except of course the rich and powerful who’ve decided the pain of others is necessary to achieve their desired outcome: making imaginary numbers go down.
Food Lawsuits
We are big fans of food lawsuits around here, but typically those involve plaintiffs - consumers - who win damages from food companies. Sometimes, though, food companies sue each other for business reasons:
Monster Energy Co convinced a California jury on Thursday to award it $293 million in damages from rival Bang Energy in a lawsuit alleging that Bang falsely advertised the ingredients and health benefits of its drinks.
This may seem, on its surface, like a standard consumer protection lawsuit, filed by a rival instead of the FDA or FTC. Which, I guess it is? A portion of the lawsuit claimed Bang was stealing shelf space and trade secrets (?) from Monster, which seems like pretty standard business lawsuit stuff. But, what sort of claims was Bang making?
According to the lawsuit, Bang advertised its "Super Creatine" as being "20 times more effective at reaching the brain than other forms of creatine," and said its energy drink can "reverse mental retardation" and help cure disorders like Alzheimer's and Parkinson's Disease.
Uhhhhh, what? VPX Sports/Vital Pharmaceuticals (not a pharmaceutical company), maker of Bang, has this on their company LinkedIn profile:
And what is the ‘world’s leading authority’ on 'physique-altering nutrition’ posting on social media? Stuff like this:
I guess he was unable to expose the ‘SEC Fraud’ Monster was perpetrating against his not-publicly-traded company back in 2019, and now his #1 Growth Beverage has to pay a quarter billion dollars to his Low Energy competitor. VPX had been in talks with Keurig Dr Pepper to be acquired, but for whatever reason the deal didn’t materialize.
Elsewhere, in European food lawsuit news, two major chocolate players have been battling it out over…bunnies:
After a yearslong legal battle, the Federal Supreme Court of Switzerland sided with Lindt and found that Lidl’s chocolate bunnies could be confused with Lindt’s chocolate bunnies, which are protected under Swiss trademark law.
As a result, the court decreed that Lidl can no longer sell its bunnies in Switzerland and “must destroy” the chocolate bunnies it still has in stock, according to a statement from the court.
Listen, most corporate lawsuits over imitation or theft of IP are sketchy at best, but I do see how someone could confuse a Lidl chocolate rabbit with a Lindt rabbit. The names are practically the same! If you’re grabbing a hollow confectionary bunny off a shelf at CVS in a rush to make it to an Easter Egg hunt on a Sunday morning in April, you may not take the time to inspect the branding on the impossibly large box it comes in.
However! If you are concerned about the wanton destruction of millions of pounds of Swiss chocolate, the court has your mental wellbeing in mind:
The court’s statement seemed to suggest the bunnies could be melted and reused, saying that while Lidl had to destroy its bunnies, “this does not necessarily mean that the chocolate as such has to be destroyed.”
And Lidl confirmed that, due to the fact it’s currently October, no bunnies would be harmed in the filming of this episode:
Lidl said in a statement that no bunnies would have to be discarded.
“The chocolate bunny in question is a seasonal item, which is why we currently have no stocks in Switzerland that need to be destroyed,” Lidl’s statement said.
Phew! Lindt has been aggressively litigating against its competitors for years, claiming its chocolate designs are unique and should be protected under Swiss intellectual property law:
Lindt’s zeal in protecting its chocolate bunny was not a surprise, said Jonathan Drucker, a former general counsel at the Belgian chocolate maker Godiva, who called Lindt “an 800-pound gorilla in the chocolate industry.”
At Godiva, he said, “we were always very cognizant of what their chocolate bunnies look like and what protections they had.”
“Lindt is very, very aggressive as far as trying to stop other competitors from quote-unquote infringing on their trademark and their product, and they’ve been very, very particular about their Easter bunny, which they claim to have ironclad protection for,” he said.
Because the Swiss are Very Serious People, their chocolate companies issue press releases like this:
“It will help to further protect the iconic form of the Lindt Gold Bunny against dilution from unauthorized copies and will likely serve as a precedent also in other jurisdictions.”
[…]
Lindt calls its chocolate bunnies “one of the most famous Lindt chocolate products” and an “iconic Easter fixture.”
Sure, whatever. I suppose if you have been making chocolate since the 19th century, you owe it to your shareholders or whoever to say such things about your brand. At least they aren’t saying it cures Parkinson’s disease. If you find Lindt’s behavior distasteful and would rather buy another brand’s chocolate rabbits this Easter do not worry, Lidl is still going to make them! They’ll just look different.
Fishing
Late Friday, the walleye fishing world was sent reeling after a cheating scandal was exposed in front of God, country, and a mob of justifiably furious walleye fishermen. Two guys – we can no longer call them fishermen without smearing the 99 percent who play by the rules – were exposed for what appears to be the most nefarious, blatant, and outrageous case of cheating that tournament walleye fishing has ever experienced.
This is why we so badly need local journalism. The New York Times would never! Anyhow, two fishermen in the competitive walleye (?) fishing circuit were caught cheating, leading to many questions about whether they’ve won hundreds of thousands of dollars (??) legitimately over the past year. They were outed in dramatic fashion:
When tournament director Jason Fischer sliced open the gullet on one of the fish that Jacob Runyan and Chase Cominsky had turned in, lead weights were exposed. Next fish – same thing. Next fish – lead weights and pieces of walleye fillets.
Here is a video (warning: language and gesticulating white dudes) of the moment. Prior to being caught red handed, there had been signs something wasn’t quite right with the fishing duo:
The duo weighed in the apparent top catch in last year's Lake Erie Fall Brawl and made claim for the more than $100K attached to that finish, but then were disqualified. When the tournament director at the time offered no explanation or clarity other than to say one of them had failed the polygraph, the tournament lacked the transparency it so desperately needed.
Okay, hang on. I was today years old when I learned they give polygraph tests after fishing tournaments. This isn’t a new thing, apparently, which led me to ask - what other competitive tournaments use polygraphs? According to the Global Polygraph Network(tm), they are sometimes used in bodybuilding, golf, and track and field.
Apparently bodybuilding competitions regularly do and I’ve probably hit my limit of googling ‘sport + polygraph’ for today but….what the fuck? Despite the Internet being littered with factual-sounding webpages - often from professional polygraph consultants or organizations - the research says polygraphs do not work. And yet! Fishing and other competitive sports seem to use them extensively.
In fairness to event coordinators and judges, it may be difficult to spot cheating in tournaments with dozens or hundreds of competitors. However, the judge in the above video has developed a one-hundred-percent accurate method - cut the fish open!
There were other signs the duo wasn’t above board, which I will quote because they are funny, though probably not to the competitors who voiced them at the time:
After the pair were awarded the first place money in the Rossford event, several other competitors shared, off the record, their suspicions that something shady had taken place. Other anglers claimed that Runyon and Cominsky's fish “looked old,” like these walleye had been caught prior to the start of the event and stashed in a live well.
Adding fuel to that charge was the additional factoid, laid out by several competitors in the event, that Runyon and Cominsky declined to donate their catch to local food banks, as most of the tournament fishermen did.
They hadn’t just placed weights in fish, they may have brought their own fish to the competitions, and passed them off as fresh. I do think it’s nice that fishing competitions donate their catch to local food banks, though it must be strange to roll up to the local food bank and receive twenty pounds of fresh walleye. Maybe people in stream-and-lake-adjacent communities are accustomed to it by now.
The author notes the two are likely facing multiple felony fraud charges for their deception, which seems like a fitting punishment for pissing off hundreds of fishermen, who’d hoped to score their own six figure paydays for the grueling experience of sitting in a boat all day with a friend.
Short Cons
Hellgate NYC - “The New York City Police Department and the Department of Correction have been unlawfully taking New Yorkers straight from their arrest to detention on Rikers Island, without bringing them to court as required by state law, according to a new lawsuit.”
WaPo - “A judge has ordered the bankruptcy trustee in the case to investigate the intra-family and other dealings that could hurt creditor payout. Future court rulings could wreak havoc on Jones’ quest to use bankruptcy to limit his liabilities.”
Consumer Reports - “The websites and their advertising partners were tracking me for targeted ads even though I’d taken the time to tell them not to—using the tools the companies themselves had provided.”
Tips, thoughts, or twenty pounds of fresh walleye to scammerdarkly@gmail.com