If Google Is Breaking the Antitrust Laws, What’s the Right Remedy?

Bloomberg’s Gerrit de Vynck wrote earlier this month that Alphabet’s lawyers are likely to follow the time-tested strategy of arguing that Google is not, in fact, dominant. “We don’t agree that we’re dominant. We don’t agree that there isn’t a ton of choice,” Don Harrison, head of corporate development, said during a Sept. 15 congressional hearing.

Stay tuned for much more on this case, which Bloomberg’s David McLaughlin calls “the most significant antitrust action against an American company in more than two decades—and possibly a century.” That’s saying something, considering that in the 1980s the government sought the breakup of both International Business Machines Corp. (unsuccessfully) and American Telephone & Telegraph Co. (successfully.) 

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Although the U.S. money supply is approaching its fastest growth since World War II, “this money surge is not a precursor to inflation.” That’s what Shweta Singh, managing director for global macro at TS Lombard, a research company, says in a report today. Using a term that’s gotten a lot of currency because of Covid-19 testing, Singh says the indications of incipient inflation are “false positives.”

Inflation-phobes point out that the annual increase in M1, the narrowest measure of the money supply, accelerated to 40% in August from a little over 6% in February.

But the demand to hold money is growing even faster than the supply of it, Singh writes. That’s what keeps inflation at bay—no excess money sloshing around. And why is the demand for money growing so rapidly? Money is the ultimate liquid instrument. Always happily accepted, as compared with, say, a house in the woods, which may be valuable but is a hard sell on a moment’s notice.

When interest rates are high, people try not to hold a lot of money because they must forgo interest. But when interest rates are essentially zero, you might as well hold a lot of money because you’re not making any sacrifice to do so. As Singh puts it, there’s been “a fall in the opportunity cost of liquid assets.”

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One thing the Federal Reserve has clearly achieved with its near-zero rate policy is stimulating the demand for housing by pushing mortgage rates to their lowest on record. On my bookshelf is a copy of A History of Interest Rates by Sidney Homer and Richard Sylla. They write that mortgage rates used to be far higher than rates on corporate bonds. In the first decade of the 20th century, which is as far back as their mortgage data goes, the yield on conventional U.S. mortgages was 5.35%, vs. 3.47% for prime corporate bonds.

According to Freddie Mac’s Prime Mortgage Market Survey, rates “hit another all-time low” the week of Oct. 15. The average rate for a 30-year fixed-rate mortgage was 2.81%. Today the government reported that starts on construction of single-family homes rose 1.9% in September, the fifth monthly increase in a row. Yesterday the National Association of Home Builders reported that its index of members’ optimism rose this month to the highest rate since recordkeeping began in 1985.

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