Podcast Summary
LBJ's War on Inflation and Eggs: Understanding inflation requires recognizing both monetary and non-monetary factors. While the Fed manages inflation through monetary policy, external factors like supply chain disruptions and public perception can also influence price levels.
While the Federal Reserve plays a significant role in managing inflation through monetary policy, there are also non-monetary factors that contribute to price increases. This was highlighted in the discussion about Lyndon B. Johnson's efforts to combat inflation in the 1960s by manipulating public perception of eggs and their cholesterol content. Today, with inflation rates at 6.8%, it's essential to recognize that factors beyond the Fed's control, such as supply chain disruptions and resource scarcity, can also impact price levels. As investors and consumers, it's crucial to stay informed about these complexities and adapt accordingly. For more insights on the economy and investing, visit principalam.com or tune in to the Visibility Gap podcast presented by Cigna Health Care. Investing involves risk, including possible loss of principal. Principal Asset Management SM is a trade name of Principal Global Investors LLC.
Using Antitrust Laws to Address Supply Chain Issues and Inflation: Antitrust laws could increase productive capacity and potentially bring down prices for goods, including food, by preventing a few companies from having too much buying power due to market concentration.
Antitrust laws, which aim to prevent monopolistic practices and maintain competitive markets, could potentially be used to address supply chain issues and inflation. By preventing a few companies from having too much buying power due to market concentration, antitrust enforcement could increase productive capacity and potentially bring down prices for goods, including food, in the medium to longer term. Antitrust laws include the Sherman Act, which regulates agreements and monopolies, and the Clayton Act, which regulates mergers. It's important to note that being a monopolist is not illegal in the United States, but engaging in monopolistic practices, such as raising prices, is. The use of antitrust laws to address supply chain issues and inflation is a developing area of interest for politicians and experts, and it's a topic that will be explored further in upcoming discussions.
Antitrust enforcement in shipping industry: Despite a focus on criminal enforcement, there's a shift towards more aggressive antitrust enforcement in shipping under Biden. Shipping companies have an antitrust exemption, but its application is narrow.
Antitrust enforcement in the United States has seen a mixed record in recent years, with a focus on criminal enforcement but less activity in monopolization cases. However, there's a shift towards more aggressive antitrust enforcement under the Biden administration. It's important to note that there are antitrust exemptions, one of which applies to shipping companies due to the industry's historical regulation. This exemption, applied narrowly by courts, allows shipping companies to avoid antitrust scrutiny in certain circumstances. The history of this exemption is rooted in the heavily regulated past of the shipping industry.
Competitors in the shipping industry can hold meetings to discuss rates under a regulatory structure: Competitors in the shipping industry can discuss rates in conferences, but cannot agree on them and must file discussions with the Federal Maritime Commission under US antitrust laws, but jurisdiction is limited and industry competitive landscape is complex.
The shipping industry's regulatory structure allows for competitors to hold meetings to discuss rates, but they cannot agree on them. This is known as a conference and is a remnant of an antitrust exemption. While the exemption has evolved over the years, it still allows for competitors to file their discussions with the Federal Maritime Commission. This unique setup can cause issues in the industry and is not limited to shipping. US antitrust laws can challenge foreign companies that have a direct and foreseeable effect on US commerce. However, the jurisdiction of US regulators in the shipping industry is not unlimited, and the industry's competitive landscape is complex.
Antitrust investigations in shipping industry: Antitrust authorities have the power to investigate shipping companies for anticompetitive practices, but outcomes can take years and may not provide immediate relief for supply chain issues and inflation.
Antitrust authorities, such as the FBI and the Federal Trade Commission (FTC), have the jurisdiction and power to investigate and potentially bring actions against companies, including those in the shipping industry, for potential anticompetitive practices related to supply chain issues. However, antitrust investigations and cases can be lengthy and complex, potentially taking years to reach a resolution. For instance, in a past investigation of shipping companies, the FBI raided a meeting and handed out subpoenas, but no actions were ultimately taken. Currently, the FTC is investigating supply chain issues in the US, and this could lead to further investigations and potential civil or criminal cases if anticompetitive practices are discovered. While antitrust actions can be helpful, they are not an immediate solution to current supply chain issues and inflation.
Historical lack of antitrust enforcement led to higher prices: Changes in attitudes towards antitrust enforcement could lead to more competitive markets and greater economic capacity
The lack of robust antitrust enforcement in the past has led to diminished markets and atrophied capacity, resulting in higher prices during periods of economic growth. However, there are signs that attitudes towards antitrust enforcement are changing, with a realization that perhaps too much deregulation has occurred. This is reflected in the growing number of cases against railroad and shipping industries, which have seen a decrease in competition and an increase in market control by a few major players. With bipartisan support for addressing inflation, there is a potential for more antitrust legislation to pass, as both parties now seem more open to the idea. This shift could lead to more competitive markets and greater economic capacity overall.
Bipartisan concern over big business power in shipping industry: The Ocean Shipping Reform Act passed with bipartisan support, granting the Federal Maritime Commission more regulatory powers to address issues in the shipping industry, while Republican confidence in big business has dropped significantly.
There's a growing bipartisan concern over the power and practices of big businesses, particularly in the shipping industry. This is evidenced by the recent passing of the Ocean Shipping Reform Act in the House of Representatives with an overwhelming bipartisan majority. The act aims to give the Federal Maritime Commission more regulatory powers to address issues like unreasonable fees and prevent empty containers from leaving ports without export cargo. This shift in political alignment is also reflected in declining confidence in big business among Republicans, with net confidence dropping from a positive double-digit figure to a negative one in the past year. This trend suggests that there is a growing recognition and desire for greater regulation and oversight of big businesses across party lines.
Antitrust considerations in Ocean Shipping Reform Act: The new Ocean Shipping Reform Act raises antitrust concerns due to potential government intervention and impact on competitors' constitutional rights.
While the Ocean Shipping Reform Act of 2021 aims to address shipping and rail industry issues, there are complex antitrust considerations at play. The shipping and rail industries have different barriers to entry, with trucking having essentially non-existent barriers. This raises the question of whether certain industries might benefit from greater regulations to stabilize prices and supply. However, this is a delicate issue for antitrust lawyers, as it could potentially involve government intervention and infringement on competitors' constitutional rights to lobby for legislation. The Federal Maritime Commission, which is tasked with enforcing the new act, may need to expand its role to include antitrust issues, which could be a significant shift for the commission. Overall, the discussion highlights the intricacies of antitrust law and its application to various industries.
FMC and Antitrust Agencies Face Resource Constraints in Addressing Antitrust Issues in Shipping Industry: Despite limited resources and infrastructure constraints, the FMC and antitrust agencies are working together to address potential antitrust issues in the shipping industry, with renewed efforts under the Biden administration's executive order on antitrust.
The Federal Maritime Commission (FMC) and antitrust agencies face resource constraints when it comes to addressing potential antitrust issues in the shipping industry. The FMC, with only around 130 employees and a budget of $30 million, is a small organization. Meanwhile, the antitrust agencies, while having more resources, are currently overwhelmed with merger reviews and investigations against big tech companies. This leaves both agencies with limited legal firepower compared to the sophisticated legal teams of the companies they regulate. Additionally, the industries of shipping and rail are inherently constrained due to limited public infrastructure, such as ports and rail tracks, which can limit the ability of new competitors to enter the market. Despite these challenges, the Biden administration's recent executive order on antitrust has invigorated efforts to address potential antitrust issues in these industries, and the FMC and antitrust agencies are working together to tackle these issues.
Antitrust not a cure-all for inflation and supply chain pressures: Antitrust cases are retrospective and take time, but strong compliance programs and potential future enforcement action can encourage behavior change and contribute to long-term improvements in business practices.
While antitrust enforcement and legislation can be a useful tool in addressing inflation and supply chain pressures, it is not a cure-all solution. Antitrust cases are generally retrospective and can take a long time to be decided, but their impact is felt through the established case law and the importance of strong compliance programs. The threat of future enforcement action may also encourage behavior change within industries. The global focus on antitrust is increasing, and companies should prioritize strong compliance programs to avoid legal issues and potential penalties. While antitrust enforcement may not have an immediate effect, it can contribute to long-term improvements in business practices.
Potential deregulation and shifting norms in anticompetitive industries: Bipartisan support for deregulation could lead to legislative changes and decreased monopolies, potentially lowering consumer prices and increasing business incentives.
The current state of anticompetitive behavior in industries like shipping may be leading to higher prices for consumers and decreased incentives for businesses to increase capacity. However, there is bipartisan support for deregulation and potentially bringing down monopolies, which could lead to legislative changes and a shift in norms. The hatred for big business among the public may be stronger than previously thought, and this could result in actual law changes. Matt Levine and Katie Greifeld's new podcast, Money Stuff, will provide in-depth analysis on Wall Street finance and related topics.
Stay informed about money matters with Money Stuff podcast: Subscribe to Money Stuff podcast on Apple Podcasts, Spotify, or other platforms for practical advice and expert insights on personal finance
You can easily access Money Stuff, a podcast that provides valuable insights into personal finance, by subscribing to it on popular platforms like Apple Podcasts, Spotify, and other podcast providers. This means that no matter where you prefer to listen to podcasts, you can stay informed about money matters and improve your financial literacy. Whether you're interested in saving, investing, budgeting, or just want to learn more about money, Money Stuff offers practical advice and expert insights that can help you make informed decisions and take control of your financial future. So, make sure to tune in regularly to stay on top of the latest financial news and trends.
