Here is our take on the articles summarized below: 

As we move into the final third of 2021, the continual advance of change has only accelerated. While the “meme stock” craze has died down from its January highs, the aftershocks of the decisions made by Robinhood and other trading platforms at that time are creating ripple effects that have drawn the attention of the SEC. On the global front, multilateral institutions continue to lose influence in the face of fracturing forces. China has once again thrust itself into the spotlight by regulating its citizens’ private lives in the name of “common prosperity.” Meanwhile, Europe faces an energy crisis as supply chain and climate dynamics have driven up the cost of natural gas. The engine of creative destruction is hard at work, but we must remain vigilant to ensure it does not destroy the very foundation it seeks to build upon. In every system, we must exercise wisdom as new supplants old to see that the successes of the old are not erased by the excesses of the new.

SEC’s Gary Gensler Has a Big, New Vision for the Stock Market. There Are Too Many ‘Inherent Conflicts of Interest.’

Avi Salzman, Barron’s

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The explosive growth of retail trading has prompted the new Securities and Exchange Commission (SEC) chairman Gary Gensler to question the incentive structures present in the stock market infrastructure.  Trading halts on so-called “meme stocks” like Gamestop and AMC has brought increased scrutiny to the trading mechanisms enabling platforms like Robinhood to profit without taking commissions on individual transactions. The “payment for order flow” model allows these firms to make money off of the difference between the buy and sell price of a given stock (the “bid-ask spread”), but this creates an incentive for these firms to look for trades which increase their margins rather than the best price for the individual investor. A large percentage of these trades go through wholesale exchanges, which trade outside the public eye. Gensler asserts that these so-called “dark pools” of market activity create price inefficiencies and threaten the liquidity and transparency of the US markets. His solution would likely involve increased transparency for the “unlit” regions of market activity, a move which would almost certainly meet with resistance on the institutional level and possibly the Congressional level as well. With the status quo changing rapidly, the SEC will have its hands full dealing with the ever-shifting investment landscape.

What’s Next for Multilateralism and the Liberal International Order?

World Politics Review

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Multilateral institutions from the United Nations (UN) to the World Trade Organization (WTO) are under strain. Many multilateral agencies are facing severe funding shortages which significantly restrict their ability to address global crises like the coronavirus pandemic. Of perhaps greater concern is that these funding shortages have been compounded by hostility from member states. For example, the WTO was already struggling to regulate trade before former US President Donald Trump took office, but his protectionist-minded opinions and policies further constrained the organization’s ability to resolve trade disputes. While current US President Joe Biden’s administration is bringing a more conventional US approach to multilateralism, it remains unclear whether the efforts will be enough to revive multilateral institutions and shore up the liberal international order. Other multilateral bodies like the G-7 and G-20, which were created to leverage the economic power of rich countries to create a unified response to international crises, have been unable to exercise any influence as global power competition usurps cooperation. The UN has also been hampered by competition between its member states, especially among the five veto-wielding members of its Security Council who have used their power to limit the UN’s involvement in recent major conflicts. As long as multilateral institutions are hindered by limited funding, protectionist-minded leaders, and global power competition, many of the world’s greatest crises will go unchallenged.

The Chinese Control Revolution: The Maoist Echoes of Xi’s Power Play

Tom Mitchell, Financial Times

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China’s recent crackdowns on video games and private tutoring have many wondering if China is moving into a new era of executive power, one in which the state wields its influence more directly to accomplish its goals. Several commentators have noted that Chinese President Xi Jinping’s methods have remarkable similarity to those employed by Mao at the height of the Cultural Revolution. While Xi was himself a victim of that chaotic period, the continual shift of power dynamics, the swift destruction of any locus of power outside Xi’s own office, and the general zeitgeist of uncertainty around both economics and private life all underscore the depth of Xi’s commitment to the “revolutionary ideals” of the Chinese Communist Party. Much of this revolutionary energy is directed towards purging China of Western influence, as seen in the backlash over ride-hailing service DiDi’s listing on US stock exchanges and the blacklisting of several celebrities. More recently, the CCP has declared its intent to “regulate excessively high incomes” for the sake of “common prosperity,” a move which had top executives scrambling to demonstrate their commitment to social welfare through a glut of charitable giving. With Xi set to remain in power for a third term after 2022, the pace of these reforms is likely to increase, along with the scope of government control.

Europe Faces Energy Price Shock With Gas and Power at Records

Vanessa Dezem, Rachel Morison, and Will Mathis, Bloomberg

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Prices of natural gas and electricity are surging in Europe as a gas supply shortage is boosting the cost of producing power. At the same time, demand is increasing as businesses reopen and more people begin working from offices again. The climate is also playing a major role. This summer’s hot weather and low wind speeds have curbed production of renewable energy, pushing the price of coal up more than 70% in Europe this year while last year’s bitter winter depleted gas storage sites. Natural gas is now trading at a rare premium to crude oil and higher gas prices are pushing up the price of carbon permits needed by companies to cover emissions. Coal generation has become more profitable at a time when politicians are trying to garner support for the green energy transition. The climbing energy prices are fueling inflation as food and transport costs are also rising. Prices in Germany rose 3.4% in August which is much higher than the 2% rate the European Central Bank is targeting for inflation. Energy executives are warning that this may just be the start. If parts of Europe are faced with another bitter cold winter, things could get much worse.