General Mills backed down from its controversial lawsuit policy. But the problem isn’t over.

Class action lawsuits are an efficient way for wronged individuals — who may lack funds and legal expertise — to fight back against the powerful legal muscle of big business. One very famous example is the case of Erin Brockovich, who built a class action lawsuit that successfully sued Pacific Gas and Electric over contamination of drinking water.

A lone consumer wronged by a large corporation might struggle to foot the bill to hire the legal firepower necessary to win their case in court. But hundreds or thousands of consumers claiming similar injuries or damages from the same company or organization can, by banding together in a class action lawsuit.

It isn’t surprising, then, that some firms are taking measures to limit their customers’ abilities to join class action lawsuits.

General Mills, the manufacturer of Cheerios, Betty Crocker, Green Giant, and various other grocery products has reversed a recent change to its online legal policy that would have barred customers who “liked” General Mills’ social media pages, downloaded money-saving coupons from its website, or entered any company-sponsored contests from joining class action lawsuits against the firm.

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What does the Big Mac Index really measure?

The Economist is out with the latest Big Mac Index measurement. The Big Mac Index — which compares the price of the famous McDonald’s hamburger in various countries around the world — was started as a joke in 1986, and purports to act as a light-hearted proxy for measuring the purchasing power of currencies around the world. The Big Mac is a homogeneous good that is sold worldwide, which makes it a plausible candidate for such a comparison.

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The taper is finally here: What the Fed’s move means for the economy


Ben Bernanke, in his final press conference as chairman of the Federal Reserve, announced today that the central bank would be tapering asset purchases to $75 billion a month, down from $85 billion, which has been widely seen as a modest first step toward reducing the Fed’s outsized role in financial markets and the economy.

The move caught many economists by surprise — USA Today survey found that most economists polled said the Fed would maintain its current levels of quantitative easing, as the policy is known, before trimming down in January.

After the financial crisis in 2008, spooked investors started piling into low-risk assets like Treasuries, driving prices dramatically higher. The Fed’s aim in buying these assets was to take safe investments like Treasuries off the market, in order to encourage investors to take more risk and invest in higher-yielding and more productive ventures like stocks, equipment, and new employees.

The ultimate objective was more jobs, and more economic activity.

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Who should the SEC punish next for the Madoff scandal? Itself.


J.P. Morgan Chase is nearing a settlement with federal regulators over the bank’s ties to convicted fraudster Bernie Madoff, reports The New York Times. The deal would involve penalties of up to $2 billion dollars and a rare criminal action. The government intends to use the money to compensate Madoff’s victims.

For two decades before his arrest, Madoff had banked with J.P. Morgan — and apparently laundered up to $76 billion through the bank. Employees at the bank had raised concerns about Madoff’s business. In 2006, a J.P. Morgan employee wrote after studying some of Mr. Madoff’s trading records that “I do have a few concerns and questions,” and expressed worry that Madoff would not disclose exactly which trades he had made. Madoff’s company turned out to be an elaborate ponzi scheme that stole an estimated $18 billion from clients; it collapsed in 2008.

Is it fair to blame J.P. Morgan for the activities of Madoff? Do banks have a responsibility to know if their clients are involved in criminal activities? I think so — banks should have strong checks and balances to prevent fraud and money laundering, because if they don’t then criminals like Madoff can get away with it for years and years. According to Robert Lenzner of Forbes, “J.P. Morgan never reported to the Treasury or the Federal Reserve a huge cache of checks going back and forth for seven years between Madoff’s Investment Account 703 and Bank Customer Number One, belonging to real estate developer Norman Levy, who died in 2005.”

By agreeing to pay the fine and the government’s rebuke, J.P. Morgan is admitting a failure of oversight. But it’s not as if J.P. Morgan is the only one to blame. Others on Wall Street had expressed concern about Madoff’s business much earlier.

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Australia just scrapped its debt ceiling. America should, too.

Debt ceiling fights, it seems, have become a permanent fixture in American politics. Twice in the last couple of years, the United States has been days away from potentially irrevocable economic damage because Congress refused to raise the debt ceiling and let the Treasury issue more debt. The next debt ceiling fight is slated for March 2014.

But isn’t there a better way to increase a borrowing limit — and one that doesn’t freak out markets, investors, and, well, just about everyone every few months?

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No, wrecking shopping carts won’t help the homeless

Hawaii state Representative Tom Brower (D) has been taking a sledgehammer to Hawaii’s homelessness problem. Literally. Wielding a sledgehammer, the lawmaker has destroyed over 30 shopping carts used by homeless people to store and transport their belongings.

Brower claims his actions are a product of his frustration over the existence of homelessness in his district, telling Hawaii News Now, “I got tired of telling people I’m trying to pass laws. I want to do something practical that will really clean up the streets.”

Brower also wakes those he finds sleeping and tell them to sleep somewhere else. “If someone is sleeping at night on the bus stop, I don’t do anything, but if they are sleeping during the day, I’ll walk up and say, ‘Get your ass moving,’” he said.

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How saving endangers the economy — and what to do about it

An impressive video featuring former Treasury Secretary Larry Summers has been making the rounds.

Summers makes the case that the United States and other Western nations may have reached a state of permanent stagnation in growth and employment. In Japan, per capita incomes grew strongly until the 1990s, and since then they have been growing very weakly and intermittently. Summers cites Japan as an early example of what might occur elsewhere.

Japan’s stagnation is shocking — today, the Japanese economy is only half the size economists in the 1990s predicted it would be if it had continued on its pre-1990s growth trend. As Summers notes, in the U.S., growth is also well below its pre-crisis trend, and unemployment remains persistently high. More than 12 million people who want work and are actively looking cannot find it. That’s a very ugly situation.

Under normal conditions, central banks can lower interest rates on lending to banks as a way to encourage activity and fight unemployment. Lower rates make business projects easier to afford, and more business projects should mean more jobs. If an economic shock pushes the unemployment rate up, central banks can lower lending rates to ease conditions. And conversely, if economic conditions are overheating and inflation is pushing up above the Federal Reserve’s target of 2 percent, interest rates can be hiked to encourage saving and discourage spending.

Yet in the current slump, unemployment has remained elevated even while interest rates have been at close to zero for four years while inflation has remained contained. This suggests that the interest rate level required to bring employment down significantly is actually below zero. Summers agrees:

Suppose that the short-term real interest rate that was consistent with full employment had fallen to negative 2 percent or negative 3 percent sometime in the middle of the last decade.

But central banks can’t lower interest rates below zero percent because people can just hold cash instead. Why invest if you’re going to lose money doing so?

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