It is with great sadness that we announce the death of our chief analyst, Michael Delzer, who passed away earlier this year. Michael’s experience, wisdom, energy, patience and good humor inspired everyone who worked with him. He was above all an outgoing person, as one work colleague remarked, “While Michael is undoubtedly one of the smartest people I have ever met, I will remember him primarily for his kind and open heart.”
Ben Book, CEO of GigaOm, says: “Michael had such deep knowledge of the industry, plus he made time for everyone and treated all of his colleagues as equals. His experience and energy have contributed enormously to our company, but more than that, he has been instrumental in creating the culture of caring and sharing that GigaOm is today. We are all proud to have known him as a colleague and friend.”
GigaOm is planning charitable activities on Michael’s behalf to honor his memory.
We would like to express our sincere condolences to his family, his friends and all those whose lives he touched.
The post Remembering Michael Delzer first appeared on GigaOm.
V most downloaded app in the world is in hot water. Last week, the Biden administration demanded that Chinese-owned TikTok be sold or face a national ban in the US due to security and privacy concerns, and TikTok’s CEO will testify on these issues before Congress on Thursday.
The app poses a real national security threat that the US government has to contend with. But the reality is that achieving a nationwide ban or forced divestment will be difficult.
Concerns are mounting over TikTok’s disturbing history of protecting user data. class action lawsuit alleging that the app sends personal, personally identifiable and biometric data to third parties without user consent, settled for one of the largest payouts in history privacy lawsuits – $92 million – in 2021. FBI and Justice Department are also investigating ByteDance, the parent company of TikTok, for using the app to spy on American citizens, including journalists. US, UK, Canada and European Union already banned TikTok on government devices. India banned the app across the country in 2020.
ByteDance relies on Chinese government approval to operate, putting it under pressure from which firms like Meta are fleeing. Yet even while raising countless red flags due to its ownership structure and privacy concerns, TikTok outperforms the other leading social media companies in the US, hugely shaping how people get information and remaining extremely popular. The company has over 150 million monthly active users only in the USA.
TikTok has already survived a ban attempt by the US government. The Trump administration first proposed a ban on the app in 2020, but that attempt was halted federal courtswhich questioned the validity of claims of national security risks and ruled that the move exceeded the limits emergency economic powers of the administration.
The app ban also raises serious 1st Amendment concerns. In 2020, along with a proposed ban on TikTok, the Trump administration tried to ban WeChat, the Chinese messaging and social media app, but the U.S. District Court for the Northern District of California ruled that due to Role of WeChat as the only means by which many people could reliably communicate in China, the app represented a unique form of communication. Thus, blocking its use would violate the rights of users. 1st amendment rights. While TikTok does not play the same primary communication role, similar arguments for the app’s distinctiveness as a communication medium could result in any bans on private use subject to scrutiny and lengthy legal scrutiny.
For now, instead of a ban, the Biden administration is proposing to sell ByteDance to TikTok. This process has some precedents, including the US government’s successful attempt to change ownership of Grindr through a federal interagency Committee on Foreign Investment in the United States (which TikTok review). In March 2019, the Committee used the power granted to it by the Foreign Investment Risk Assessment Modernization Law to require the then owner of Grindr, China’s Beijing Kunlun Tech Co. Ltd., sell with link US national security concerns over the app’s access to sensitive personal information. A little over a year after forced expropriation was announcedGrindr was acquired by West Hollywood investment group San Vicente Acquisition Partners.
But after that sale, China created fences to protect TikTok and other Chinese tech companies. Amid legal troubles with the TikTok ban, the Trump administration has attempted to force the TikTok sale to a US company. But then the Chinese Ministry of Commerce updated its list of “prohibited or restricted export technologies” to include “services of personalized information recommendations based on data analysis“. In practice, this meant that the Chinese government had to agree to any sale of TikTok that would allow foreign companies to access the application’s algorithm.
The Chinese government has also enacted a law that allows the national security data of all Chinese firms, including ByteDance, to be audited and receive gold shares or a government financial stake in Subsidiary of ByteDance. On top of that, the widespread adoption of TikTok provides ByteDance with an opportunity to reach more users and develop robust new technologies in areas such as AI, deep forgeries and face recognition. As part of China’s program to merge civilian and military technologies, these technologies are also becoming China’s national security assets. Any sale of TikTok would likely require the cooperation of the Chinese government in a deal that works against its interests.
For the U.S., the political cost of a TikTok ban will increase the longer there is no resolution. More users are joining the app every day, making it an even more important communication tool. TikTok’s security concerns may be bipartisan, but have yet to overcome the social media app’s popularity.
Ainn Kokas is the author of Trading Data: How China is Winning the Battle for Digital Sovereignty.
The Federal Reserve Building in Washington, January 26, 2022
Photo:
JOSHUA ROBERTS/REUTERS
Growth prospects for the economy are mixed, with fears of a recession still mounting, even though the unemployment rate is remarkably low. The worst inflation in 40 years seems to be coming down, but slowly and unsteadily.
Does this mean the Federal Reserve model works? Yes and no, that’s a problem. Worries about the Fed and its ability to make the right monetary policy decisions haunt the financial markets.
Of course, this model doesn’t work the way Fed policymakers thought. In August, Chairman Jerome Powell bluntly said that restoring price stability would require “resolute use of our tools to better balance supply and demand.” The message was clear: an aggressive increase in interest rates is needed. “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also cause some discomfort for households and businesses,” Mr. Powell explained. “That’s the unfortunate cost of lowering inflation.”
But if the Fed believes that the price of beating inflation is slower economic growth and higher unemployment, what happens when growth numbers beat expectations and labor markets seem resilient? The monthly decline in the CPI may be satisfactory, but it’s hard to argue that the Fed’s model works as predicted when the process of declining inflation is not consistent with economic facts.
To solve the problem of inadequate supply relative to the increased demand that fueled this inflation, a more rational economic solution would be to provide a stable monetary platform for productive investment, with the price of capital determined by the interaction of supply and demand. In other words, growth driven by maximum employment and strong economic activity is the answer.
Participants in the real economy are more aware of post-pandemic needs and opportunities than members of the Fed’s monetary policy committee. Eventually, massive fiscal transfers in government payments provided in 2020 and 2021, including stimulus checks and unemployment insurance, are being depleted and fueling the high spending that was the main driver of inflation.
At the time, Mr. Powell encouraged fiscal bailouts and now appears reluctant to criticize the government’s fiscal actions that increase aggregate demand. The lesson should be that paying people not to work is inflation; paying people who work to increase the supply of goods and services does not cause inflation.
Meanwhile, Fed policymakers are too quick to ignore the impact of interest rate manipulation on supply. “What we can control is demand,” Mr. Powell told Marketplace in May last year. “We can’t really influence supply with our policies.” But how can higher interest rates not affect the formation of new businesses or the viability of existing ones? When the cost of borrowing rises beyond what can be absorbed or transferred while remaining profitable, businesses close and output declines. The Fed’s formula could lead to a monetary policy that cuts supply more than it holds back demand when inflation worsens.
None of this suggests that the zero interest rate policy that the Fed adopted as recently as a year ago encouraged productive investment or created healthy jobs. The emergency measures taken by the Fed in March 2020 should have been seen as an anomaly. Financial markets, however, were all too familiar with the Fed’s tactical responses to zero rates and conduct quantitative easing through massive purchases of government securities.
The breakneck climb to today’s range of 4.5% to 4.75% for federal funds has been tight, but it has improved the overall health of the economy by reintroducing meaningful interest rates. The nominal rate the Fed pays on its reserve balances—its key rate—must be above the rate of inflation to generate a positive return. The current rate of 4.65% is likely to be perceived as offering a compensation level that is roughly equivalent to a 2.5% return on a risk-free asset, boosted by the Fed’s 2% inflation target.
However, post-pandemic normalization could have been a game-changer for creditors, even as it stymied the Fed’s operating model. This may explain why financial conditions began to improve in the last two months of 2022 despite the Fed tightening. A report from the Federal Reserve Bank of St. Louis notes, “Looking to the future, it may be important to monitor the correlation between the index of financial conditions and the effective monetary policy rate, which have diverged recently, to predict the behavior of consumption and inflation.”
In other words, when capital is allocated through meaningful price signals that reward long-term investment in productive economic opportunities, people get profitable jobs and real growth leads to greater prosperity.
Call it the difference between normal and crazy.
Ms. Shelton, Financial Economist, Senior Fellow at the Independent Institute, and author of The Money Crisis.
Wonderland: How is it that the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corporation could be spooked by a premature bailout of all depositors after a social media hysteria? Images: Shutterstock/Zuma Press Composite: Mark Kelly
Google is now providing limited public access to its Bard AI chatbot to compete with ChatGPT OpenAI. Here’s what we know so far about what it can do and how to access it.
