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GOP Leader McCarthy Unveils ‘Commitment To America’ Plan

GOP Leader McCarthy Unveils ‘Commitment To America’ Plan

Authored by Joseph Lord via The Epoch Times,

House Minority Leader Kevin McCarthy (R-Calif.)…

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GOP Leader McCarthy Unveils 'Commitment To America' Plan

Authored by Joseph Lord via The Epoch Times,

House Minority Leader Kevin McCarthy (R-Calif.) on Sept. 23 unveiled Republicans’ “Commitment to America” plan, which includes a litany of policy promises on various issues.

While the race for the Senate is generally considered slightly favorable for Democrats, in the House it’s widely expected that Republicans will be in control next year.

If they do take the lower chamber, McCarthy is on track to become speaker of the House.

‘A Plan for a New Direction’

McCarthy on Sept. 23 sat down with “Capitol Report” on NTD to discuss the plan, which he called “a plan for a new direction.”

He said that the plan is about “the American public, not about the politicians in Washington."

“For last year and a half, we’ve gone across the nation listening to Americans,” he continued. “And they’re fearful. They wonder whether they can afford it—can they afford to fill up their gas, can they go to the grocery store again which now costs more?”

Adding to these worries, McCarthy noted, is rapidly-rising inflation, which over the past year has broken record after record.

“Now [Americans’] take-home pay is less,” he said. “They only get 11 months, they lost one month of their wages, because the Democrats have caused inflation. And so what we think you should do is actually have a plan for a new direction.”

“That’s what the commitment to America is—a plan for a new direction where we’ll have an economy that’s strong, we take away this runaway spending [by] Democrats, we make America energy independent, so your price of gas goes lower, more money in your pocket, inflation gets slowed down.”

House Minority Leader Kevin McCarthy (R-Calif.), speaks during the Congressional Gold Medal Ceremony to honor the merchant mariners of World War II in Washington May 18, 2022. (Oliver Contreras/Getty Images)

Stop ‘Runaway Spending,’ Address Inflation

The key pillars of the plan re-articulate oft-repeated GOP criticisms of the current regime.

One such position is a promise to stop Democrats’ “runaway spending.” Since they thinly took the majority of both chambers, Democrats have spent a staggering amount of money, and the cost of consumer essentials has risen by over eight percent on average.

In March 2021, the party used the partisan reconciliation process to pass a $1.9 trillion COVID relief bill dubbed the American Rescue Plan with no GOP support or input. Later, the majority party was joined by a handful of Republicans in each chamber to pass a $1.2 trillion infrastructure bill.

At the same time, the party pushed for an even more expensive reconciliation, the Build Back Better Act. In its first draft, the 2,000-page bill would have cost $3.5 trillion. Later, in an effort to win the crucial support of Sens. Joe Manchin (D-W. Va.) and Kyrsten Sinema (D-Ariz.), that figure was dropped to $1.75 trillion, but this bill also failed when Manchin announced that he would not support the package at all.

Most recently, the party again turned to the reconciliation process to pass the Inflation Reduction Act, a bill that carried over some key elements of Build Back Better and which will cost taxpayers over $700 billion.

President Joe Biden signs the Inflation Reduction Act as Democrat lawmakers look on at the White House in Washington, on Aug. 16, 2022. (Drew Angerer/Getty Images)

In total, these three bills alone come out to well over $3.8 trillion spent by the majority party over the course of only a few short years.

Republicans have been highly critical of this pattern of spending, which they argue is the largest factor behind soaring inflation that has reduced the spending power of the dollar by almost 10 percent. McCarthy made just this point.

“If you watch, how did inflation start, it wasn’t just Republicans warning the Democrats because remember, only Democrats voted for the American Rescue Plan,” McCarthy said.

McCarthy also noted that the GOP position was influential among even many Democrat economists.

“Larry Summers, a Democrat, [and] former Secretary of the Treasury warned them not to do it, you cause inflation,” McCarthy said. “Steve Rattner, an economic adviser to [President Barack Obama] calls it ‘the original sin of inflation.'”

“We’ve got to stop that runaway spending,” the California Republican added.

Restore US Energy Independence

Republicans will also seek to restore American energy independence if they take the House, McCarthy said.

Under President Donald Trump, the United States became energy independent for the first time in decades. But when he took office, President Joe Biden, citing the so-called “climate crisis,” significantly cut U.S. energy capacity by shuttering the long-debated Keystone XL Pipeline and by declaring a moratorium on new oil and natural gas leases on federal lands.

At the time, critics warned that these policies would substantially raise gas prices. When the predicted price spikes came about, Biden pulled millions of barrels of oil from the Strategic Petroleum Reserve rather than reversing his energy policies. Republicans joined by Joe Manchin unanimously opposed the move, calling on Biden to reverse his policies rather than pulling from U.S. reserves, which were intended to be used in case of global or financial crises.

If they take the House, McCarthy said that Republicans will work to restore America’s energy sector.

A person uses the keypad on a pump at a gas station in Arlington, Va., on July 29, 2022. (Olivier Douliery/AFP via Getty Images)

Beyond Democrats’ spending, McCarthy noted that the rising costs of energy have had a substantial impact in worsening inflation.

“Another cause of inflation is the rise of energy costs,” he said. “So we’re going to make America energy independent, create more American jobs, but lower the price. The energy cost goes in every product and good.

“We’re going to make a sound economy with sound money policies,” he added. “That’s a start to get us under control.”

‘A Nation That’s Safe’

McCarthy also said that Republicans will work to reduce crime rates.

Over the past two years, cities across the U.S. have begun to see higher and higher rates of violent crime, with many cities breaking past records for homicide rates.

Republicans have blamed the situation in part on the “soft-on-crime” attitude of Democrats and liberals in the criminal justice system.

Following the death of George Floyd in 2020, anti-police sentiments spiked among liberals, and in several major cities prosecutors and district attorneys have refused to enforce several laws.

Speaking on this issue, McCarthy said, “We believe in a nation that’s safe.”

“We watch the Democrats defund the police and crime rises—from Portland to Philadelphia, it’s the highest it’s been in 20 years,” he continued. “So we … will make sure we don’t defund the police. We’ll actually bring 200,000 more police officers, we put the accountability to these prosecutors and [district attorneys] to uphold the law fairly and equally.”

House Minority Leader Kevin McCarthy (R-Calif.) speaks with U.S. Capitol Police Officers after arriving on a bicycle to an event at the National Law Enforcement Officers Memorial as part of the “Back The Blue” bike ride in Washington, on May 12, 2022. (Anna Moneymaker/Getty Images)

After largely evading the issue during most of the 117th Congress, Democrats on Sept. 22 finally tried to address rising crime rates with a series of policing bills that passed through the House along broadly party lines. The move, coming as it does only weeks out from a midterm election, raised eyebrows among observers after two years of largely anti-police sentiments among many Democrats.

‘A Future That’s Built on Freedom’

McCarthy also vowed that Republicans will address ongoing controversies in public schools about parents’ rights.

Schools in several major cities have faced scrutiny for the content being taught to children, which has included controversial topics like homosexuality, critical race theory, and graphic representations of nudity or sexual intercourse sometimes shown to children as young as primary school age. In turn, many parents in school districts across the United States have turned up to school board meetings to challenge the material being taught to their children.

If Republicans take the House, McCarthy promised a long-touted “parents bill of rights,” which McCarthy said would ensure that “parents have a say in their children’s education.”

The issue has increasingly become a rallying cry for Republicans.

Republican Glenn Youngkin made the issue the central pillar of his 2021 gubernatorial race in Virginia, which he later won by margins far wider than observers had predicted.

A local mother at a rally outside the Loudoun County Public Schools administration building in Ashburn, Va., on Sept. 13, 2022. (Terri Wu/The Epoch Times)

Florida Governor Ron DeSantis has also put focus on the issue, lobbying and successfully passing a bill that forbids schools from teaching young children about issues like sex, gender identity, or sexual orientation. Though critics dubbed the legislation the “don’t say gay” bill, polls on it have generally shown that most Americans support the move.

The role of parents in determining what schools teach their children has largely become a mainstream issue only in the past year or two, and it remains to be seen whether the issue can rally new voters to the GOP’s banner in November.

Investigations to ‘Hold the Government Accountable’

McCarthy also vowed that Republicans would look into a series of controversial issues and decisions by the current administration through new probes and investigative panels.

The current rules of the lower chamber give the speaker of the House substantially broad authority over the creation of new committees and probes, meaning that Republicans have largely been unable to use the full force of Congress to investigate things they find potentially concerning.

Under Republicans, McCarthy said, the government is “going to be held accountable.”

“We’re … going to look from the aspects of holding government accountable, as well as the DOJ going after parents,” McCarthy added, referencing a controversial decision from the Department of Justice to pursue parents attending school board meetings to protest their children’s curriculum.

McCarthy also promised accountability from China through a probe into the origins of the COVID-19 virus, which is now widely recognized to have likely leaked from a biological research facility in Wuhan, China.

“Why don’t we find out where the origin of COVID started,” he said.

McCarthy said that he’d also create a select committee on China that would look at ways to have U.S. industries, that were shipped there, return to America.

Workers inside the P4 laboratory in Wuhan, capital of China’s Hubei Province, on Feb. 23, 2017. (Johannes Eisele/AFP via Getty Images)

Republicans have also suggested probes into Dr. Anthony Fauci’s ties to the Wuhan facility, the role of Speaker of the House Nancy Pelosi (D-Calif.) in leaving the Capitol building unprepared on Jan. 6, and the recent raid by the FBI of Trump’s Mar-a-Lago home.

Undoing Democrats’ IRS Expansion

McCarthy said that if they take the House, Republicans will also work to undo Democrats’ recent expansion of the IRS.

Specifically, the expansion was included as part of the Inflation Reduction Act, which sextupled the IRS’ current budget overnight.

The IRS provisions of the Inflation Reduction Act were among its most controversial.

The $80 billion allocated to the agency by the bill sextuples its budget, and Republican critics have warned that the bulked-up IRS could hire as many as 87,000 new agents. These agents, in turn, critics have said, will be let loose against middle-class Americans and small businesses, despite Democrats’ claims about the expansion that nobody making less than $400,000 per year will see their tax bill increase.

Proponents of the bill suggest that, in addition to the new tax code changes, a bulkier IRS will bring in an additional $124 billion annually through enforcement efforts.

The funding for the IRS will go toward “necessary expenses for tax enforcement activities … to determine and collect owed taxes, to provide legal and litigation support, to conduct criminal investigations (including investigative technology), to provide digital asset monitoring and compliance activities, to enforce criminal statutes related to violations of internal revenue laws and other financial crimes … and to provide other services.”

The Internal Revenue Service headquarters building in Washington is seen in a file photo. (Chip Somodevilla/Getty Images)

Preston Brashers, a senior tax policy analyst at the Heritage Foundation, told The Epoch Times that contrary to Democrat claims, the IRS expansion will almost certainly mean more audits, and in turn more taxes, for middle-class families and small businesses.

“On the very first day, [we’re going to] repeal 87,000 IRS agents,” McCarthy said.

However, this promise may be impossible for McCarthy to keep, particularly if Democrats retain the Senate. Because the Inflation Reduction Act was passed using the filibuster-immune reconciliation process, Republicans theoretically could repeal the expansion of the IRS if they take both chambers of Congress. But even in this case, the measure would need the signature of President Biden, who’s likely to oppose any such move.

Limitations

Despite the broad range of promises and proposals discussed by McCarthy, Republicans will likely face many limitations on how much they can do, particularly if they only take the House.

Currently, Republicans seem to be on track to reenter the House majority after four years in the minority, but the Senate is less certain. Though Senate races in several states remain nail-bitingly tight, observers currently peg the fight for the Senate as leaning heavily in Democrats’ favor.

Right now, FiveThirtyEight gives Republicans a 71 in 100 chance of retaking the House after four years in the minority. But FiveThirtyEight also gives Republicans only a 29 in 100 chance of reclaiming the upper chamber.

If these projections pan out, Senate Democrats would find their scope heavily limited by the Republican House, while the Republican House would find its scope severely limited by the Senate. If the race does end in a divided government, it is likely that McCarthy will face substantial hurdles to rolling out the policy proposals in the Commitment to America plan.

On the other hand, House Republicans would have the benefit of Manchin’s swing vote, which could help them get some budget reconciliation legislation over the finish line in the Senate.

Nevertheless, even in the best case for Republicans—control of both chambers of Congress—the White House will still be occupied by a Democrat, meaning that a fully Republican Congress’s most ambitious goals would be difficult or impossible to carry out.

Tyler Durden Sun, 09/25/2022 - 16:30

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EY Eyes Comeback for Biopharma M&A

EY noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021. The $88 billion accounted for most of the…

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A recent trickle of mergers and acquisitions (M&A) announcements in the billion-dollar-and-up range suggests that biopharma may be ready to resume dealmaking this year—although the value and number of deals isn’t expected to return to the highs seen just before the pandemic.

2022 ended with a handful of 10- and 11-figure M&A deals, led by Amgen’s $27.8 billion buyout of Horizon Therapeutics, announced December 13. The dealmaking continued into January with three buyouts announced on the first day of the recent J.P. Morgan Healthcare Conference: AstraZeneca agreed to acquire CinCor Pharma for up to $1.8 billion, while Chiesi Farmaceutici agreed to shell out up to $1.48 billion cash for Amryt, and Ipsen Group said it will purchase Albireo Pharma for $952 million-plus.

Biopharmas generated about $88 billion in M&A deals in 2022, down 15% from $104 billion in 2021. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. The number of biopharma deals fell 17%, to 75 deals from 90. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine. [EY]
EY—the professional services firm originally known as Ernst & Young—recently noted that the total value of biopharma M&A in 2022 was $88 billion, down 15% from $104 billion in 2021 [See Chart]. The $88 billion accounted for most of the $135 billion in 124 deals in the life sciences. That $135 billion figure is less than half the record-high $313 billion recorded in 2019, including $261 billion in 70 biopharma deals.

The number of biopharma deals fell 17% to 75 deals from 90. EY’s numbers include only deals greater than $100 million. The other 49 deals totaling $47 million consisted of transactions in “medtech,” which includes diagnostics developers and companies specializing in “virtual health” such as telemedicine.

We expect this to be a more active year as the sentiment starts to normalize a little bit,” Subin Baral, EY Global Life Sciences Deals Leader, told GEN Edge.

Baral is not alone in foreseeing a comeback for biopharma M&A.

John Newman, PhD, an analyst with Canaccord Genuity, predicted last week in a research note that biopharma companies will pursue a growing number of smaller cash deals in the range of $1 billion to $10 billion this year. He said rising interest rates are discouraging companies from taking on larger blockbuster deals that require buyers to take on larger sums of debt.

“We look for narrowing credit spreads and lower interest rates to encourage larger M&A ($50 billion and more) deals. We do not anticipate many $50B+ deals that could move the XBI +5%,” Newman said. (XBI is the SPDR S&P Biotech Electronic Transfer Fund, one of several large ETFs whose fluctuations reflect investor enthusiasm for biopharma stock.)

Newman added: “We continue to expect a biotech swell in 2023 that may become an M&A wave if credit conditions improve.”

Foreseeing larger deals than Newman and Canaccord Genuity is PwC, which in a commentary this month predicted: “Biotech deals in the $5–15 billion range will be prevalent and will require a different set of strategies and market-leading capabilities across the M&A cycle.”

Those capabilities include leadership within a specific therapeutic category, for which companies will have to buy and sell assets: “Prepared management teams that divest businesses that are subscale while doubling down on areas where leadership position and the right to win is tangible, may be positioned to deliver superior returns,” Glenn Hunzinger, PwC’s U.S. Pharma & Life Science Leader, and colleagues asserted.

The Right deals

Rising interest and narrowing credit partially explain the drop-off in deals during 2022, EY’s Baral said. Another reason was sellers adjusting to the drop in deal valuations that resulted from the decline of the markets which started late in 2021.

Subin Baral, EY Global Life Sciences Deals Leader

“It took a little bit longer to realize the reality of the market conditions on the seller side. But on the buyer side, the deals that they were looking at were not just simply a valuation issue. They were looking at the quality of the assets. And you can see that the quality deals—the right deals, as we call them—are still getting done,” Baral said.

The right deals, according to Baral, are those in which buyers have found takeover targets with a strong, credible management team, solid clinical data, and a clear therapeutic focus.

“Rare disease and oncology assets are still dominating the deal making, particularly oncology because your addressable market continues to grow,” Baral said. “Unfortunately, what that means is the patient population is growing too, so there’s this increased unmet need for that portfolio of assets.”

Several of 2022’s largest M&A deals fit into that “right” category, Baral said—including Amgen-Horizon, Pfizer’s $11.6-billion purchase of Biohaven Pharmaceuticals and the $6.7-billion purchase of Arena Pharmaceuticals (completed in March 2022); and Bristol-Myers Squibb’s $4.1-billion buyout of Turning Point Therapeutics.

“Quality companies are still getting funded one way or the other. So, while the valuation dropped, people were all expecting a flurry of deals because they are still companies with a shorter runway of cash that will be running to do deals. But that really didn’t happen from a buyer perspective,” Baral said. “The market moved a little bit from what was a seller’s market for a long time, to what we would like to think of as the pendulum swinging towards a buyers’ market.”

Most biopharma M&A deals, he said, will be “bolt-on” acquisitions in which a buyer aims to fill a gap in its clinical pipeline or portfolio of marketed drugs through purchases that account for less than 25% of a buyer’s market capitalization.

Baral noted that a growing number of biopharma buyers are acquiring companies with which they have partnered for several years on drug discovery and/or development collaborations. Pfizer acquired BioHaven six months after agreeing to pay the company up to $1.24 billion to commercialize rimegepant outside the U.S., where the migraine drug is marketed as Nurtec® ODT.

“There were already some kind of relationships there before these deals actually happened. But that also gives an indication that there are some insights to these targets ahead of time for these companies to feel increasingly comfortable, and pay the valuation that they’re paying for them,” Baral said.

$1.4 Trillion available

Baral sees several reasons for increased M&A activity in 2023. First, the 25 biopharma giants analyzed by EY had $1.427 trillion available as of November 30, 2022, for M&A in “firepower”—which EY defines as a company’s capacity to carry out M&A deals based on the strength of its balance sheet, specifically the amount of capital available for M&A deals from sources that include cash and equivalents, existing debt, and market cap.

That firepower is up 11% from 2021, and surpasses the previous record of $1.22 trillion in 2014, the first year that EY measured the available M&A capital of large biopharmas.

Unlike recent years, Baral said, biopharma giants are more likely to deploy that capital on M&A this year to close the “growth gap” expected to occur over the next five years as numerous blockbuster drugs lose patent exclusivity and face new competition from lower-cost generic drugs and biosimilars.

“There is not enough R&D in their pipeline to replenish a lot of their revenue. And this growth gap is coming between 2024 and 2026. So, they don’t have a long runway to watch and stay on the sidelines,” Baral said.

This explains buyers’ interest in replenishing pipelines with new and innovative treatments from smaller biopharmas, he continued. Many smaller biopharmas are open to being acquired because declining valuations and limited cash runways have increased investor pressure on them to exit via M&A. The decline of the capital markets has touched off dramatic slowdowns in two avenues through which biopharmas have gone public in recent years—initial public offerings (IPOs) and special purpose acquisition companies (SPACs).

EY recorded just 17 IPOs being priced in the U.S. and Europe, down 89% from 158 a year earlier. The largest IPO of 2022 was Prime Medicine’s initial offering, which raised $180.3 million in net proceeds for the developer of a “search and replace” gene editing platform.

Another 12 biopharmas agreed to SPAC mergers with blank-check companies, according to EY, with the largest announced transaction (yet to close at deadline) being the planned $899 million merger of cancer drug developer Apollomics with Maxpro Capital Acquisition.

“For the smaller players, the target biotech companies, their alternate source of access to capital pathways such as IPOs and SPACs is shutting down on them. So how would the biotech companies continue to fund themselves? Those with quality assets are still getting funded through venture capital or other forms of capital,” Baral said. “But in general, there is not a lot of appetite for the biotech that is taking that risk.

Figures from EY show a 37% year-to-year decline in the total value of U.S. and European VC deals, to $16.88 billion in 2022 from $26.62 billion in 2021. Late-stage financing rounds accounted for just 31% of last year’s VC deals, down from 34% in 2021 and 58% in 2012. The number of VC deals in the U.S. and Europe fell 18%, to 761 last year from 930 in 2021.

The decline in VC financing helps explain why many smaller biopharmas are operating with cash “runways” of less than 12 months. “Depending on the robustness of their data, their therapeutic area, and their management, there will be a natural attrition. Some of these companies will just have to wind down,” Baral added.

M&A headwinds

Baral also acknowledged some headwinds that are likely to dampen the pace of M&A activity. In addition to rising interest rates and inflation increasing the cost of capital, valuations remain high for the most sought-after drugs, platforms, and other assets—a result of growing and continuing innovation.

Another headwind is growing regulatory scrutiny of the largest deals. Illumina’s $8 billion purchase of cancer blood test developer Grail has faced more than two years of challenges from the U.S. Federal Trade Commission and especially the European Commission—while Congress acted last year to begin curbing the price of prescription drugs and insulin through the “Inflation Reduction Act.”

Those headwinds may prompt many companies to place greater strategic priority on collaborations and partnerships instead of M&A, Baral predicted, since they offer buyers early access to newer technologies before deciding whether to invest more capital through a merger or acquisition.

“Early-stage collaboration, early minority-stake investment becomes increasingly important, and it has been a cornerstone for early access to these technologies for the industry for a long, long time, and that is not changing any time soon,” Baral said. “On the other hand, even on the therapeutic area side, early-stage development is still expensive to do in-house for the large biopharma companies because of their cost structure.

“So, it is efficient cost-wise and speed-wise to buy these assets when they reach a certain point, which is probably at Phase II onward, and then you can pull the trigger on acquisitions if needed,” he added.

The post EY Eyes Comeback for Biopharma M&A appeared first on GEN - Genetic Engineering and Biotechnology News.

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IMF Upgrades Global Growth Forecast As Inflation Cools

IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday,…

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IMF Upgrades Global Growth Forecast As Inflation Cools

The International Monetary Fund published its latest World Economic Outlook on Monday, painting a slightly less gloomy picture than three and a half months ago, as inflation appears to have peaked in 2022, consumer spending remains robust and the energy crisis following Russia’s invasion of Ukraine has been less severe than initially feared.

But, as Statista's Felix Richter notes, that’s not to say the outlook is rosy, as the global economy still faces major headwinds.

However, the IMF predicts the slowdown to be less pronounced than previously anticipated.

Global growth is now expected to fall from 3.4 percent in 2022 to 2.9 percent this year, before rebounding to 3.1 percent in 2024.

The 2023 growth projection is up from an October estimate of 2.7 percent, as the IMF sees far fewer countries facing recession this year and does no longer anticipates a global downturn.

Infographic: IMF Upgrades Global Growth Forecast as Inflation Cools | Statista

You will find more infographics at Statista

One of the reasons behind the cautiously optimistic outlook is the latest downward trend in inflation, which suggests that inflation may have peaked in 2022.

The IMF predicts global inflation to cool to 6.6 percent in 2023 and 4.3 percent in 2024, which is still above pre-pandemic levels of about 3.5 percent, but significantly lower than the 8.8 percent observed in 2022.

“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Pierre-Olivier Gourinchas, the IMF’s chief economist, wrote in a blog post released along with the report.

“Inflation, too, showed improvement, with overall measures now decreasing in most countries—even if core inflation, which excludes more volatile energy and food prices, has yet to peak in many countries.”

The risks to the latest outlook remain tilted to the downside, the IMF notes, as the war in Ukraine could further escalate, inflation continues to require tight monetary policies and China’s recovery from Covid-19 disruptions remains fragile. On the plus side, strong labor markets and solid wage growth could bolster consumer demand, while easing supply chain disruptions could help cool inflation and limit the need for more monetary tightening.

In conclusion, Gourinchas calls for multilateral cooperation to counter “the forces of geoeconomic fragmentation”.

“This time around, the global economic outlook hasn’t worsened,” he writes. “That’s good news, but not enough. The road back to a full recovery, with sustainable growth, stable prices, and progress for all, is only starting.”

However, just because the 'trend' has shifted doesn't mean it's mission accomplished...

That looks an awful lot like Central Bankers' nemesis remains - global stagflation curb stomps the dovish hopes.

Tyler Durden Tue, 01/31/2023 - 14:45

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Nike Escalates Design Battle Against Lululemon

The sportswear giant is accusing lululemon of patent infringement.

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The sportswear giant is accusing lululemon of patent infringement.

The Gucci loafers. The Burberry  (BBRYF) trench coat. When it comes to fashion, having a unique design is everything. This is why brands spend millions both creating and protecting their signature looks and the reason, as in the case of Adidas  (ADDDF) , extricating a brand's design from creators who behave badly is a costly and difficult process.

There is also the constant effort to release new styles without infringing on another group's style. This week, sportswear giant Nike  (NKE) - Get Free Report filed a lawsuit accusing lululemon  (LULU) - Get Free Report of infringing on its patents in the shoe line that the Vancouver-based activewear company launched last spring.

After years of selling exclusively clothing, accessories and the odd yoga mat, lululemon expanded into the world of footwear with a running shoe it dubbed Blissfeel last March. These were soon followed by training shoe and pool slide styles known as Chargefeel, Strongfeel -- all three of the designs (including a Chargefeel Low and a Chargefeel Mid design) have been mentioned in the lawsuit as causing "economic harm and irreparable injury" to Nike.

Nike's History Of Suing Lululemon Over Design

The specific issue lies in the technology used to build the shoes. According to the lawsuit filed in Manhattan federal court, certain knitted elements, webbing and tubular structures are too similar to ones that had been used by Nike earlier.

Nike is keeping the amount it hopes to receive from lululemon under wraps but is insisting the company infringed on its patent when releasing a shoe line too similar to its own. Lululemon had previously talked about how its shoe line "far exceeded" its leaders' expectations both in terms of sales and ability to expand.

In a Q1 earnings call, chief executive Calvin McDonald said that the line "definitely had a lot more demand than we anticipated."

Nike has already tried to go after lululemon through the courts once before. In January 2022, it accused the company of infringing on six patents over its at-home Mirror Home Gym. As the world emerged out of the pandemic, lululemon has been billing it as a hybrid model between at-home and in-person classes. 

The lawsuit was also filed in the U.S. District Court in Manhattan but ultimately fizzled out.

When it comes to the shoe line lawsuit, Lululemon has been telling media outlets that "Nike's claims are unjustified" and the company "look[s] forward to proving [their] case in court."

Lululemon

Some More Examples Of Prominent Design Battles

In the fashion industry, design infringement accusations are common and rarely lead to high-profile rulings. While Nike has gone after the technology itself in both cases, lawsuits more often focus on the style or pattern on a given piece.

Shein, a China-based fast-fashion company that took on longtime leaders like H&M  (HNNMY)  and Fast Retailing  (FRCOF) 's Uniqlo with its bottom-of-the-barrel pricing, has faced numerous allegations from smaller and independent designers over the copying of designs -- in some cases not even from fashion designers but artists painting in local communities.

"They didn't remotely bother trying to change anything," U.K.-based artist Vanessa Bowman told the Guardian after seeing her painting of a local church appear on a sweater on Shein's website. "The things I paint are my garden and my little village: it’s my life. And they’ve just taken my world to China and whacked it on an acrylic jumper."

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