Populism In Our Time - "The Status Quo Is The Fundamental Problem"

Authored by Paul Brodsky via Macro-Allocation.com,

“Be even more suspicious…of all those who employ the term we or us without your permission. This is another form of surreptitious conscription, designed to suggest that we are all agreed on our interests and identity.”
- Christopher Hitchens

Merriam-Webster defines populist as “a believer in the rights, wisdom and virtues of the common people”, and when the word is capitalized: “a member of a U.S. political party formed in 1891 primarily to represent agrarian interests and to advocate the free coinage of silver and government control of monopolies”. The first definition seems to be the very point of representative government; the latter what happens when representative government is no longer representative.

The use of the word “populist” among professional politicos implies an off-the-run candidate or leader with ill-intent - an irreverent voice deigning to challenge established institutions by speaking directly to the deplorable rabble, bypassing the narrative perpetuated by vast political and media infrastructures. Those inclined towards transitive logic might infer that governments and the Fourth Estate propose, but are not structured and do not work, to serve the rights, wisdom and virtues of commoners.

We won’t get idealistic about democracy or the gaping separation between political rhetoric and execution. In non-revolutionary times (about 99.9% on a timeline) governments serve the privileged. It is what they do. Political leaders throw bones to commoners, providing bread, circuses and welfare - distractions eminently better than brioches chucked at them by Marie Antoinette, but decidedly worse than most people’s conception that their government abides by the principle of equal access for all.

Liberal democracies are like major medical insurance policies. They will, in the end, protect freedom and most liberties, but they do not provide preventative health care. (Indeed, as their promotion of systemic debt shows, they are not above distributing the fiscal equivalent of cigarettes to their citizens.)

We would argue that the manner in which resources are distributed (i.e., where an economy falls on a spectrum ranging from heavy government subsidies to entirely free commercial markets), is the most critical determinant of economic sustainability and social tranquility; an influence even greater than religious and cultural identities. Fitting government into popular needs and expectations is an ongoing balancing act, requiring authorities to continually synchronize public needs, capabilities and expectations.

Brexit, Trump (Le Pen, Frexit?), etc. are manifest samples of popular will seeking more equitable resource distribution. What is the difference between Les Misérables in 1832 and Ms. Clinton’ Deplorables today? About 4,000 miles and a hundred or so years.

The best “the people” (and investors) can hope for from governments today is that regime changes will be swift, orderly, and will keep the principles that sustain patriotism intact, even if those principles do not comport with reality. Reality ultimately resides in popular will, not in the narrative wealth-funded institutions foster. Diverse societies with a plurality of political ideals, social mores and economic goals are great. We should all watch out when they coalesce around a general sense of helplessness.

Fake News

Fake news is the deliberate spread of misinformation through traditional news or social media with the intent to mislead for financial or political gain. We are shocked (shocked!) it has become a thing today:

• In the first century, Octavia launched a campaign of misinformation against Mark Anthony.


• Benjamin Franklin wrote fake news about murderous "scalping" Indians working with King George III in an effort to influence public opinion towards revolt.


• In 1835, the New York Sun reported that astronomers confirmed bizarre life on the moon. The Sun’s subscription based increased despite admitting soon after that it was all a hoax.


• The Nazi Party rose to power in Germany in 1933 and established the Reich Ministry of Public Enlightenment and Propaganda under Joseph Goebbels. All published fact and fiction were dubious, to say the least.


• Also in 1933, The New York Times published false reports written by its Moscow bureau chief (who won a Pulitzer Prize them), denying Russia was purposely starving millions of its citizens.


• For some unknown reason (facetious), modern examples of fake news episodes promoted by established media are difficult to come by…in established media.


• Social media is where all the fake news is today (facetious again).

The old saw about not believing everything you read in the papers never threatened established media until there was an alternative news source. While old media’s journalistic standards for sourcing and editing are no doubt generally superior to new media’s, the advent of internet-based news is shining a harsh light on a fundamental problem that has always existed with the press, but no longer does: the tight, clubby control of the Fourth Estate over a narrow information channel.

The de-centralization component of the internet has thrown a grenade into that channel and the result has been information disintermediation, which we think is, on balance, a great thing. The market for information is now free, even freer than the market for stocks and bonds. The difference is regulation. The process through which the public can consume securities is highly scrutinized while the process through which the public can consume information is not (in the US, thanks to the first amendment).

There are two directions popular opinion can go today regarding fake news: 1) demand that public information be regulated, or 2) embrace the idea that all information may be false. We believe the public has already decided overwhelmingly that it wants access to all news – real or fake, no matter.

If global communications authorities really want to set standards for news distributors then they would have to prohibit news organizations from being for-profit companies with incentives to sensationalize. This would apply to the New York Times as well as everyone posting cats that look like Hitler on Face Book. Practically, there would be very little compliance and such so a scenario is a non-starter.

The difference between news and information, whether fact or fiction, is in the eye of the beholder, not the editorial judgment of the publisher. This is where it belongs. Consumers of information beware. If we are to be honest, fake news is information meant to manipulate us and it will be with us always, as it always has been.

Regulatory Populism

Securities regulators should follow the non-action of public communication regulators - drop all standards related to the distribution of market information so that market participants become aware that they do not (indeed, cannot) have equal information and that information is not distributed simultaneously to all.

As for timing, an investor who witnesses first-hand a terrorist event or natural disaster is at an advantage, should she choose to act on it. More common, unscheduled information typically arrives on our screens two to ten minutes before financial television stations broadcast it. As for information itself, investors that do not make the effort to know all public information, or do not hire people that make the effort, will always be at a disadvantage. This is as it should be if we want to investing to be fair and merit-based.

Regulators cannot enforce how people communicate amongst themselves, but they can try to enforce how those with non-public information act on it. Identifying an illegality can be challenging. What if an investor who was about to take a position comes to understand something will soon happen that would make him suffer losses were he to do so? How can regulators get in the minds of investors?

Our sense is that regulatory oversight mostly exists to provide a means of weeding out the most heinous abuses of the public trust. The public trust is an interesting concept on its own. Question: Why are investors supposed to always trust the markets? Answer: So they stay invested. Question: Why are investors always supposed to stay invested? Formal Answer: We have no idea. (Informal Answer: To benefit rentiers with money and those closest to the credit channel, and to attract global wealth.)

Thus, market regulation is more a tool to sustain the perception of fair markets so the public stays invested than a means of actually ensuring fair markets. In a normally functioning economy, which at this point has been fictionalized, the factors of production would actively decide whether to save or invest.

Financial Populism

Our series of reports last month on passive vs. active investing highlighted a trend towards financial populism that has taken hold recently in the form of exchange traded products. (Vanguard, for example, took in $2 billion each day to their ETFs in the first quarter – monster inflows at the expense of active managers with educations, experience, and sometimes dissenting market views and opinions.)

The greater trend towards financial populism has been in place for a long time. The establishment of defined benefit pensions and mutual funds created consensus opinion, which brought together how economic and market information is framed and consumed. Certain information – popular economic data series, asset valuation metrics and political narratives – would reliably migrate in and out of vogue like herds of sheep, but with the speed and dexterity of cattle.

The herding behavior of helpless animals is analogous to the survival instincts of contemporary investors who think they have learned that they cannot get richer than their neighbors by speculating in alpha-seeking strategies. They are enthusiastically embracing beta strategies that promise market returns - nothing more, nothing less.

The demographically-driven, credit-driven popularity of financial asset markets over the last generation, combined with loss protection provided by exogenous market forces (i.e., central bank “puts”), have given financial asset markets the patina of risk-free sanctuaries. They are anything but. The truly unintended consequence passive investors will discover (soon, we think) – is that beta investing is not saving. Investing in financial asset markets remains speculative…now more than ever.

In our view, equity and real estate markets will soon destroy vast amounts of perceived wealth, either in nominal (price) terms or in real (inflation-adjusted) terms, most likely the latter. The destructive cause will not be a sudden change in popular sentiment, because even that would not change how and where perceived wealth is warehoused. The cause will be the necessary dilution of currencies in which financial assets are denominated. (We would be happy to provide more on this.)

We agree with elites that see populism as dangerous, but for an entirely different reason. The status quo is the fundamental problem, not an institutional framework to which we can revert for protection. The very way contemporary societies think of resources and wealth is at issue. The way we will be richer than our neighbors will be by satisfying our liabilities with our assets in real terms; not a very popular notion.

As for our particular relationship with populism, we agree with Cyril Connelly of the New Statesman: “Better to write for yourself and have no public, than to write for the public and have no self."

Zuckerberg Just Revealed Facebook’s 7-Point Plan to Censor “Fake News” and It’s Chilling

Until corporate media and the neoliberal establishment refused to acknowledge their direct role in the election of Donald Trump and threw a temper-tantrum about misinformation on social media to scapegoat blame, Facebook CEO Mark Zuckerberg balked at the notion faulty reports circulating on social media had anything at all to do with the November 8th shocker.

“Of all the content on Facebook, more than 99 percent of what people see is authentic. Only a very small amount is fake news and hoaxes,” Zuckerberg wrote in a post to his platform last Saturday. “The hoaxes that do exist are not limited to one partisan view, or even to politics. Overall, this makes it extremely unlikely hoaxes changed the outcome of this election in one direction or the other.”

Now, rather than stand by that original assertion, Zuckerberg instead cast all logic aside and unleashed a Machiavellian seven-point plan to eradicate the “very small amount” of false information — read: all opinion not in lock step with the establishment narrative — from the newsfeeds of Facebook’s billion-plus users.

Because, apparently, we can’t be trusted to think for ourselves.

“The bottom line is: we take misinformation seriously,” Zuckerberg wrote late Friday evening, apparently forgetting what he posted exactly one week ago. “Our goal is to connect people with the stories they find most meaningful, and we know people want accurate information. We’ve been working on this problem for a long time and we take this responsibility seriously. We’ve made significant progress, but there is more work to be done.”

Curiously, the head of the Facebook Ministry of Truth neglected to explain how the 65 corporate presstitutes and myriad mendacious mainstream outlets exposed in Wikileaks’ Podesta Files for colluding with the Clintonite establishment were awarded a free pass to spread propagandic disinformation — and, frequently, flagrant lies.

Worse, what Zuckerberg wrote next should send chills down the spines of anyone who has ever been forced to deal with fallout from the social media platform’s already-rampant and oft-inexplicable censorship via erroneous and revenge reporting on posts, arbitrary unpublishing of pages, ghosting, and newsfeed suppression — as well as those who look to Facebook for alternatives to vapid mainstream media:

“Historically, we have relied on our community to help us understand what is fake and what is not. Anyone on Facebook can report any link as false, and we use signals from those reports along with a number of others — like people sharing links to myth-busting sites such as Snopes — to understand which stories we can confidently classify as misinformation. Similar to clickbait, spam and scams, we penalize this content in News Feed so it’s much less likely to spread.”

Snopes? Really? The same Snopes that took it upon itself to “debunk” an inside joke in meme form that happened to go viral?

In just those three sentences, Zuckerberg does more to expose the innate perils of censorship than any scholarly tome on the subject ever could — personal opinion always operates the censor’s heavy hand. It’s inescapable fact that what one individual deems devoid of value, another may find sacrilegiously offensive — while another may laugh off as innocuous.

Dismissing that scripture — or, perhaps, forgetting it formed the foundation for First Amendment protections of free speech, press, and expression — Zuckerberg laid out his plan to combat the ‘relatively small percentage of misinformation,’ encompassing the following points:

1. Stronger detection. The most important thing we can do is improve our ability to classify misinformation. This means better technical systems to detect what people will flag as false before they do it themselves.

2. Easy reporting. Making it much easier for people to report stories as fake will help us catch more misinformation faster.

3. Third party verification. There are many respected fact checking organizations and, while we have reached out to some, we plan to learn from many more.

4. Warnings. We are exploring labeling stories that have been flagged as false by third parties or our community, and showing warnings when people read or share them.

5. Related articles quality. We are raising the bar for stories that appear in related articles under links in News Feed.

6. Disrupting fake news economics. A lot of misinformation is driven by financially motivated spam. We’re looking into disrupting the economics with ads policies like the one we announced earlier this week, and better ad farm detection.

7. Listening. We will continue to work with journalists and others in the news industry to get their input, in particular, to better understand their fact checking systems and learn from them.

In other words, apart from spam detection, which other websites and platforms have effectively combatted for years, Facebook’s plan to ‘detect’ misinformation will be based on what any idiot says. Although the people of this planet generally operate from a place of honesty and integrity, let’s face it, humans have nasty penchants for retribution, revenge, sanctimonious arrogance, self-righteousness, misjudgment, mischaracterization, hyperbole, and — most imperatively — making mistakes.

Relying on people’s personal assessments of possibly-false news items as the primary driver of what deserves to be branded with a Scarlet Letter “F” is a system destined to fail everyone before it even begins.

Facebook still does not provide the means to rebut post and link removals or the sudden unpublishing of pages — the platform has, in essence, a shoot first, ask questions later attitude when it receives a report something violated its Community Standards. This has already imperiled owners of perfectly legitimate pages with millions of fans to the arduous process of challenging unjustified reports and coping in the meantime with devastating loss of revenue.

Nowhere in Friday’s announcement does Zuckerberg address those concerns — which will exponentially increase if and when the plan begins. With little to no recourse to defend against what will undoubtedly be an explosion of posts erroneously flagged as ‘false information,’ Facebook is brazenly handing over the censor’s black marker to a populace already too lackadaisical to bother investigating questionable news items.

Therein lies the greatest threat to a free press and free speech this country has seen since Red Scare McCarthyism — Facebook, backed by a polarized public, will be the arbiter of acceptable thought — and those who dare question or criticize that thought will pay with their livelihoods.

Far worse, everyone will pay the price of lost access to information. We’re already starting to.

Responses to Zuckerberg’s announcement post seemed largely ambivalent, and many took the opportunity to question the validity of the authoritarian plan.

“Please just be a neutral platform that display original voice from people as long as the content are not illegal. Do not try to treat your users are idiots and need somebody to tell them what is right what’s wrong. Fake or non-fake, people will figure it out. It’s dangerous such decision or filtering will be done by your company or any other power. This will be called censorship if it happens in China or Russia,” user Chen Li implored.

Others chided the head of Facebook for the disingenuous failure to apply the same standards to the mendacious corporate media.

“Mark, will you also fight government sponsored propaganda of the United States?” asked user Jiri Klouda. “What about articles where unnamed government officials intentionally share false information with journalists, often with grave consequences. Like for example in the lead up to the Iraq war, or many other wars. We’d like to know that if you are going to fight against disinformation that it will be applied evenly and not just in one sided way as the mass market US media companies do.”

Some noted how the platform’s censorship and arbitrary suppression already irreparably harms honest businesspeople.

“You advertised Facebook as a great place for businesses to have pages, small businesses did well, like mine did. My 783k page that took years to build was unpublished, thousands of people have had their pages removed without reason, businesses are suffering, you are taking food off the table, heat from people’s homes and kids presents away from under the tree. The Sad thing is you don’t seem to care; you won’t listen to us. I hope you have a great Christmas Mark Zuckerberg because lots of people won’t be able to because of you,” wrote Laura Holmes.

Facebook’s plan might, indeed, rid the platform of misinformation — but, to be sure, it will also rid the platform of dissenting voices, the debate of controversial topics, editorial opinions provoking new thought, and alternative news outlets whose integrity proved the corporate media worthless.

This plan will, in short, rid Facebook of the truth — that beautiful diversity of thought we once celebrated, rather than snuffed.