..... of inflation?

A federal appeals court has ruled that most of President Donald Trump's tariffs are illegal.

"We affirm the CIT’s holding that the Trafficking and Reciprocal Tariffs imposed by the Challenged Executive Orders exceed the authority delegated to the President by IEEPA’s text," the opinion from the Washington-based U.S. Court of Appeals for the Federal Circuit states. 

"We also affirm the CIT’s grant of declaratory relief that the orders are invalid as contrary to law."

This will of course go to the Supremes and they stayed it until October 14th, conveniently beyond the September 30th end of the fiscal year.  But assuming this stands there's a roughly $600 billion hole blown in the upcoming fiscal year's balance sheet.

First, the $200 billion or so that will have to be paid back to those who had tariffs collected from them that were unlawful.  Second, the ~$400 billion or so, perhaps $500 billion, that won't be collected this coming fiscal year yet the spending from the bill passed through Congress in reconciliation will occur.

I remind you that inflation is very simply the creation of credit without anything behind it, which all deficit spending is in each and every case.  Everyone loves to try to toss that hot potato to someone else when it occurs but in point of fact it is Congress, not The Fed, that is responsible for it every single time, in every instance, because it is Congress that authorizes deficit spending per the Constitution and exactly nobody from either party will put a stop to it.

Further, as I've repeatedly pointed out, the largest component of this deficit spending occurs in CMS -- that is, Medicare and Medicaid.  While the states are prohibited from deficit spending the Federal component of Medicaid not only has no such prohibition it also has no offsetting tax receipts.

The Trump administration argued that courts approved President Richard Nixon’s emergency use of tariffs in a 1971 economic crisis that arose from the chaos that followed his decision to end a policy linking the U.S. dollar to the price of gold, according to the AP. 

....

In his post, Trump said allowing Friday's decision to stand would "literally destroy the United States of America."

Oh really?  It's all some "partisan judges" fault?

Why didn't Congress explicitly delegate said tariff authority to the President in this specific instance over the last seven+ months that Trump has been in office?  It could have, which would have prevented this question from arising, since all revenue bills must originate in the House per the Constitution -- and that would make such explicitly clear and authorized.  Indeed I do recall that just recently a rather-large revenue bill was passed by Congress and signed by the President yes?

But Congress didn't include that in there, did they?

So if the United States is destroyed, precisely who destroyed it?

Its really not very difficult.

The Fed should be constrained to this by Congress, which is the only entity that can.  Of course they won't want to, which means we as citizens have difficult choices to make.  There are lawful and peaceful ways to enforce this, one of which would be an absolute shunning in all respects of anyone who won't in our personal and professional lives -- including family members.  But that seems unlikely to be something people will do.

Nonetheless this is the only defensible formula.

Here 'ya go:

Fed Funds (overnight money) rate = ((Federal deficit percentage of GDP, 12 month trailing) - (12mo productivity change percentage / 2)) + ~50 basis points.

Very simple and respects that (1) Congress is responsible for all inflationary pressure and (2) we accept the federal government taking half of productivity improvement as seigniorage, thus they have an incentive to make policy that increases it and nobody may, on the short end, be paid by force out of taxpayer's earnings and inflation generally to borrow.

Further this formula respects the fundamental fact that it is never possible to get back time no matter what you do; every minute of every day you expend is expended forever, therefore time must have value in a monetary context.

That's it.

Congress may hand out  "gibs" via whatever process it decides to use.  It is the job of Congress to figure out how to balance both revenue and expenses within the Government; that is, in fact, their primary job.  All revenue and spending bills must originate in the House per the US Constitution with good reason -- the House is the federal organ most-aligned with the people and subject to their will.

The Federal Reserve has a mandate of stable prices.  To the extent Congress emits credit the Federal Reserve's job is, per Statute, to prevent that from inflating prices.  That is, the Fed is formally charged with not allowing Congress to do that and it is not a suggestion, it is a mandate in the law.  Congress, in other words, deliberately put a check and balance upon the likelihood of the people demand it do unsound things, a fact that the Founders (and anyone else who's studied history) were well-aware of.  They were also aware that the consequences, if said foolery is maintained over time, invariably includes the fiscal (and often both social and political) destruction of the nation involved.

Productivity and unit labor costs are reported quarterly, and the operating deficit is reported monthly.  GDP is reported quarterly so all of the necessary items to set policy are on the table on no less than a quarterly basis.

The Fed's job in this regard is in fact ministerial given their mandate.

Of course were they do this prices would correct in many areas on an immediate and durable basis.

That's good for you in the current context in which prices are too high, right?

So why don't we all make that happen?

Because we can, you know.

I've heard a lot of screaming from some quarters about the Trump Administration buying a part-stake in Intel.  Indeed look at the quote here from CNBC:

Commerce Secretary Howard Lutnick said on Friday that the U.S. government has taken a 10% stake in embattle chipmaker Intel, the Trump administration’s latest effort to exert control over corporate America.

Uh, "control"?

The equity taken is non-voting and thus non-governance.  Further, the funds came from the Biden-era CHIPS act, so no, Trump didn't get the money from Congress to do this either; Biden did and was handing it out "no strings attached and the people and their tax burden doesn't benefit" which sounds a lot like a scheme to force me and everyone else in the country to pay for construction of someone else's stuff, with us getting no benefit from it.

And, incidentally, the record is that plenty of those "grants" wound up being literally whizzed down a well because the firms who got them have either curtailed or not built the promised thing anyway -- and that's not a new thing at all.  Who remembers the Foxconn factory that got huge tax breaks out of Wisconsin and then didn't actually build and complete the facility?  Yes, some of those breaks didn't go to Foxconn but the damage to the state taxpayer happened anyway because the site was in fact taken out of commercial circulation and given that tax privilege so the revenue loss was both immediate and real.  The promise was of course that the jobs generated would make up for and more but that didn't happen so the people got hosed.

Non-voting equity at least puts the capacity of the taxpayer to profit from the investment on the table; should the value of that investment rise the taxpayer benefits and if the government requires the revenue the investment can be turned back into money by selling the stake.  Yes, being non-voting equity it is entirely passive so there might be a discount to the open market ordinary equity price but we already have multiple-class shares allowed on public exchanges and in fact plenty of firms have that sort of structure where the board members and other executives have wildly-superior (and in some cases essentially unitary) voting rights.

I fail the see the problem or how this adds up to the Administration exerting "control" over corporate America.

Unless, of course, the opposing view is that government's job is to take your money as a taxpayer and just shower it on preferred people with no capacity for you to benefit from the enhanced profitability, if any, that doing so generates.

That opposing view sounds a lot like armed robbery to me and, while this approach isn't perfect, it at least takes some or most of the "robbery" component out since the taxpayer now obtains something of value, doesn't it?

Just recently in the local news a man in the next few towns over has been arrested and charged for possessing child porn.  This not a new or rare event, of course; when I ran MCSNet we used to get subpoenas every few months for records that were related to these sort of investigations -- and most of them were facially entirely-valid (in other words, I didn't have go look given what was being alleged and the subpoenas were signed by a judge, so there you are.)

But this one is a bit different; the allegations include that the suspect possessed child pornography entirely produced by an AI; that is, there was no actual child involved.

Tennessee, along with other states, have recently criminalized this act.

The man in question above allegedly had both AI-generated and real material, so at least on the real material the law is well-settled and, in my view, well-founded.  Since he was caught with actual material (produced through the abuse of real children) he's cooked and should be.

But where things get more-murky is on the AI side.

These statutes leave more questions than answers for two rather-obvious reasons.  First, possession of "actual" (e.g. actual person) material cannot occur without an actual criminal sexual act first occurring with a child, obviously, in that to possess it someone had to produce it and that production inherently involved a felonious act perpetrated on a person.  Therefore the same sort of derivative liability theory that leads you to go to prison if you drive someone to a bank where you have reason to believe their intention is to make a rather-unlawful withdrawal, and they shoot a teller in the process, gets you the same punishment as the robber since you are an accessory before the fact (and after the fact if you drive the getaway vehicle once the robbery takes place) logically and reasonably applies.  You become an accessory after the fact to the abuse by partaking of it and you know damn well how what you possessed came into being thus you can logically reach the conclusion that the possessor meets the "mens rea" test (of criminal mind; that is, knowledge of wrongdoing) required for criminal prosecution.

But in the case of an AI-generated image where no actual child is involved the weeds get thick fast.  There's no cogent argument that ties the creator or possessor to an inherently-felonious and abusive act.  It is similar in form and fashion to criminalizing the thought of such an action which of course we cannot because there's no way to get into someone's mind and be certain of what they envisioned in it -- yet, in terms of actual harm to actual children -- that is, in the real world -- they're precisely the same thing.

But let's say we overcome this on a Constitutional basis.  This is potentially problematic due to a 2002 Supreme Court decision (ASHCROFT v. FREE SPEECH COALITION 198 F. 3d 1083.)  That decision did not entirely release any wholly machine-generated pornography (nor one produced by adults but intended to depict someone underage) but it did slam the door on what could have otherwise, for example, led to prosecution of the makers and distributors of The Blue Lagoon -- and by the way, Brooke Shields was underage when that was filmed.  In short that decision came down to criminalizing legally obscene (not just pornographic) material irrespective of the means of production.

Nonetheless times have changed and so has the Court.

That's the first obvious question.

The next one is of far more importance to the technology industry: Who created the porn, if criminalizing the act of creation itself passes constitutional muster?

The problem for the tech industry is that the creator wasn't the possessor; the possessor solicited the creation (making he or she equally liable under the same derivative theory that criminalizes you driving the getaway car) but the actual entity that created the images is one of the large corporate entities that owns and operates the AI, and which under the law is thus also a felon exactly as the photographer of such an act with a real child is equally guilty as are the adult actor(s).  Worse, as such laws are written not only did the corporation produce the porn it also distributed it to the user and Section 230 provides no safe harbor as the act of creation occurred on the corporation's premises, not on the user's personal machine.

The specifics of the law in Tennessee are:

The legislation, sponsored by Senator Ken Yager (R-Kingston), was signed into law by Governor Bill Lee on April 24, and it will take effect on July 1. The law makes it a felony to “knowingly possess, distribute, or produce any software or technology specifically designed to create or facilitate the creation of AI-generated child sexual abuse material.” Possession will be a Class E felony, distribution will be a Class C felony and production will be a Class B felony.

That ain't no small-potatoes felony -- Class B felonies in Tennessee are eight to thirty year prison term offenses never mind distribution which the company also engaged in when it transmitted the produced image and each person involved in the production of said thing is equally-liable.  Thus all the coders, IT people and executives in a firm that has a public-facing AI which is used for this purpose are exposed to three decades in the slammer for the production plus the penalties for distribution, assuming of course the law survives challenges as to its constitutionality.

In short if this law survives said challenges then any owner of an "AI" that does not prevent it from being abused in this way, along with all employees of said firm, are individually and personally liable for 30 years in the slammer.

Thus quite-obviously, since they caught this guy with AI-generated porn -- the obvious question I'd like an answer to is who's AI was it and where are the indictments aimed at said operator's executives, directors and employees?