Inspired Idiot of the Week: Lina “Genghis” Khan and the FTC

In the year 1218 on the great plains of central Eurasia, a Mongolian trade caravan was on a long expedition across the Silk Road when it reached the city of Otrar in the Khwarazmian Empire (modern day Kazakhstan).

The governor of the local province– a career politician named Inalchuq– was suspicious of the Mongol traders and thought they might be spies… so he had them all killed. He also confiscated their property, which included plenty of luxurious silk, furs, and precious metals.

Unfortunately for Inalchuq, one of the traders managed to escape, and he rode his camel all the way back to Mongolia to inform Genghis Khan what happened.

The Khan was furious. And the following year, in the autumn on 1219, he laid waste to the city of Otrar, then ultimately the entire Khwarazmian Empire.

It was one of the most brutal military campaigns in history. And for Genghis Khan, it wasn’t even really a war as much as it was personal vengeance. And he turned it into a massacre; modern historians estimate the death toll at nearly 6 million– the vast majority of whom were Khwarazmian.

Genghis Khan razed entire cities to the ground. He slaughtered women and children. He killed family members who were only trying to bury their dead. He even executed cats and dogs.

It finally ended in 1221 when Genghis Khan decided that he had waged sufficient destruction, at which point he returned to China.

Eight centuries later, in the spring of 2021, another Khan would rise to power in Washington DC. And while her methods are non-violent, they are, at least from an economic perspective, potentially even more destructive than Genghis.

This new Khan’s name is Lina Khan. And she is the head of the Federal Trade Commission, the US government agency whose charge is to regulate big business.

Now, the FTC was originally created more than a century ago back when vast monopolies (like Standard Oil) dominated critical industries. So, in response to public outcry, the government set up a special agency to investigate and prosecute monopolistic businesses who were “likely to cause substantial injury” to consumers.

That’s been the primary mission of the FTC for more than 100 years; they’re supposed to be independent professionals who seek balance between capitalism and consumer protection.

They don’t always get it right. And the agency has gone through periods in its history where it has been more aggressive, and other periods where it’s been ‘hands off’.

But under the stewardship of Lina Khan, the FTC has completely transformed from a non-partisan, non-political, professional regulator… to radical, Marxist activist.

First and foremost, Lina Khan has zero business experience. She’s an academic whose entire university career was spent trashing big business.

She wrote a number of papers as an Ivy League professor, for example, suggesting that the FTC should invent new authority for itself in order to sue some of the largest companies in America.

A reasonable person probably wouldn’t have chosen someone with zero business experience (and who hates big business) to lead the FTC, i.e. government’s chief regulator for big business.

But Joe Biden isn’t a reasonable person. So 34-year-old Lina Khan was his #1 choice.

And right from the start, Lina Khan has gone full Genghis on American business.

There are the usual suspects, of course, like Microsoft, which the FTC sued in 2022 after the software giant announced a deal to acquire video game maker Activision Blizzard.

(Khan’s case against Microsoft was so ridiculous that even the highly liberal federal judge from Northern California– who was appointed by Joe Biden– ruled in favor of Microsoft.)

But her latest target is truly one for record books.

Earlier this week Lina Khan’s FTC announced a lawsuit to block a proposed merger between two grocery store chains: Albertsons and Kroger.

The crux of Khan’s argument– which she offers zero evidence to substantiate– is that the merger “may lead to higher prices and reduced services for consumers.” She also blasts both companies, insinuating that they are unfairly profiting from higher food prices while Americans suffer the effects of inflation.

This is classic Inspired Idiot; this woman has absolutely no idea what she’s talking about.

Anyone who understands even the basics of finance can see that grocery store profitability is DOWN substantially since inflation kicked in.

Kroger’s gross profit margin was already razor thin at about 3% back in 2019 before the pandemic. When inflation spiked, it fell to the 1% range. That’s almost nothing.

These stores aren’t unfairly profiting; inflation has made them LESS profitable.

There’s also a lot more competition than there used to be. Tech companies (like Amazon) have cut in on their business. Consumers are turning to farmers markets and coops. There’s a lot more choice out there… I mean, food literally grows on trees.

So, it’s totally naive to assume that the merger of two companies will result in higher prices. If anything, the merger should result in LOWER prices.

The point of the merger is to find synergies and cut costs… which would allow them to remain competitive and pass along the savings to consumers in the form of lower prices.

Yet Ms. Khan’s 24-page court filing demonstrates a kindergartner’s understanding of finance, business, and economics. I actually laughed out loud several times as I read it.

At one point, for example, Ms. Khan cites seven different times that either Kroger or Albertsons acquired another grocery store chain. Yet– quite bizarrely for Ms. Khan– ZERO of those instances resulted in higher food prices.

It’s almost as if she is arguing against herself.

But that’s the way these Inspired Idiots always operate; they don’t have a clue what they’re talking about, and their arguments make no sense. All they know is that they’re enraged, and they think their actions are saving the world.

Bear in mind that grocery store chains like Kroger actually provide something of value. Even during the government’s most horrific lockdowns in 2020, they still managed to provide food for hundreds of millions of people every single day. That’s hard to do.

Lina Khan has never done anything close to that in her entire life. She creates nothing. She can only tear down what other people have built.

And there’s a significant cost to her fanaticism.

I’ve written countless times that the US is in deep financial trouble thanks in large part to the government’s endless deficit spending.

Working out of this problem requires maximum productivity; US economic growth needs to be at least 3% to 4% on a sustained basis…

Breaking up mergers, stopping acquisitions, and frustrating American businesses with fanatical legal action doesn’t help. It only hurts. It takes the country in the wrong direction.

So does bad leadership.

An internal government investigation shows that Khan has consistently mismanaged government resources and abused her authority. Career professionals within the FTC believe that she is “making decisions for headlines” as opposed to following the law.

The investigation also finds that the FTC is “beset by dysfunction and chaos stemming from poor leadership and ideological bullying of its Chair and her leadership staff. These findings reinforce the results of repeated government-wide surveys that found the FTC to have a toxic work environment under Chair Khan.”

Lina Khan’s reign at the FTC could easily cost tens of billions of dollars in lost economic activity… which might rival Genghis.

At least Genghis eventually got bored of waging so much destruction, and in the year 1221 he went back to China. We can certainly hope that Ms. Khan will do the same.

Source

Simon Black is an international investor, entrepreneur and permanent traveler. His daily letter is both educational and entertaining, and we suggest that those who want unbiased, actionable information about global opportunities sign up for Sovereign Man’s free, actionable newsletter at http://www.SovereignMan.com.

From Simon Black of SovereignMan.com