The latest federal data, said Rep. Rashida Tlaib, should put “an end to the false myth that unemployment insurance benefits keep people from working.”
Republican lawmakers argued, and many of their Democratic counterparts accepted, that slashing federal jobless aid would lead to robust growth in employment. However, data released Friday shows that while eight million people were booted from expanded unemployment insurance programs last month, employers added just 194,000 jobs—the weakest monthly increase this year.
“194,000 jobs is equal to less than 3% of the people who were removed from the UI rolls in September.”
“I hope this puts an end to the false myth that UI benefits keep people from working,” said Rep. Rashida Tlaib (D-Mich.). “They don’t.”
“We can’t build back better by adopting GOP talking points and putting them into policy,” she added. “This was the wrong call a month ago and it’s the wrong call today.”
According to the right-wing theory, the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) benefits introduced in the early stages of the coronavirus crisis were keeping people from taking jobs, so removing a key source of income from millions of people would force them to return to the labor market in droves.
This “starve people back to work” strategy, as Sen. Bernie Sanders (I-Vt.) called the UI cuts, “did not work to say the least,” said policy analyst Matt Bruenig, founder of the People’s Policy Project, a left-wing think tank.
The September jobs report from the U.S. Bureau of Labor Statistics (BLS), Bruenig noted in a Friday blog post, showed “the worst month of job growth since [Joe] Biden became president and the second-worst since May of last year when the pandemic labor market recovery began.”
Citing the BLS data, Bruenig wrote that “194,000 jobs is equal to less than 3% of the people who were removed from the UI rolls in September. At this rate, it would take 3.5 years for jobs added to equal the number of people who lost their pandemic UI benefits.”
“The management of UI in the last six months,” he stressed, “has been a complete disaster.”
Last month’s nationwide assault on unemployed workers was preceded by state-level attacks on jobless benefits. Over the summer, 26 states—all but Louisiana led by Republican governors—prematurely ended federally expanded UI programs in a coercive bid to boost employment.
In a sign of things to come, the right-wing plan failed then as well. August job growth, Bruenig pointed out in an earlier blog post, was more than twice as fast in states that retained unemployment benefits.
Despite mounting evidence against cuts, the Democratic-controlled federal government refused to intervene to preservepandemic-era UI before it expired on September 6, although Rep. Alexandria Ocasio-Cortez (D-N.Y.) recently unveiled a bill to extend the benefits until next February.
Echoing Bruenig and Tlaib, Rep. Bill Pascrell (D-N.J.) on Friday said that “back in June I led my colleagues sounding the alarm on Republican governors terminating unemployment aid early. We feared their cruelty would hurt job growth and sadly our fears were right.”
Back in June I led my colleagues sounding the alarm on republican governors terminating unemployment aid early. We feared their cruelty would hurt job growth and sadly our fears were right. https://t.co/VKR1qVjsVlpic.twitter.com/HOkgDNc2ah
The Economic Policy Institute (EPI) on Friday attributed September’s weak job growth to the impact of the ultra-contagious Delta variant and encouraged widespread vaccination to support economic recovery amid the ongoing pandemic.
Experts at the progressive think tank also urged policymakers to pursue changes that would permanently increase the bargaining power of workers.
“This is yet another sign that the strong wage growth we have seen in some industries this year is not a permanent shift in worker bargaining power, but a temporary result of the (very) unique circumstances of this recovery,” tweeted EPI president Heidi Shierholz. “For sustained strong job growth for working people, we need things like the PRO Act, minimum wage increases, etc.”
Originally published on Common Dreams by KENNY STANCIL and republished under a Creative Commons license (CC BY-NC-ND 3.0).
“Pfizer has used its monopoly on a lifesaving vaccine to extract concessions from desperate governments,” said the report’s author, urging action from the Biden administration.
Pfizer has used its position as a producer of one of the leading Covid-19 vaccines to “silence governments, throttle supply, shift risk, and maximize profits” through secret contracts with countries around the world, according to a Public Citizen report published Tuesday.
“The contracts consistently place Pfizer’s interests before public health imperatives.”
“Behind closed doors, Pfizer wields its power to extract a series of concerning concessions from governments,” report author Zain Rizvi, law and policy researcher at Public Citizen’s Access to Medicines program, said in a statement. “The global community cannot allow pharmaceutical corporations to keep calling the shots.”
The new report begins by noting February reporting about accusations of Pfizer—an American pharmaceutical giant that developed its mRNA vaccine with the German firm BioNTech—”bullying” Latin American governments during contract negotiations for doses.
Public Citizen obtained unredacted term sheets, drafts, or final agreements between Pfizer and Albania, Brazil, Colombia, the Dominican Republic, the European Commission, and Peru. The consumer rights advocacy group also examined redacted contracts with Chile, the U.S., and the U.K.
You can read our first story on Pfizer’s vaccine contracts in Latin America here. We found Pfizer had asked some countries to put up sovereign assets as a guarantee against the cost of any future legal cases. (Published February.)https://t.co/c0Y8qDIW4z
Based on those contracts, the report identifies six tactics Pfizer is using to serve the company rather than public health in the midst of a deadly pandemic:
1. Pfizer Reserves the Right to Silence Governments
The Brazilian government complained earlier this year that the company insisted on “unfair and abusive” terms but ultimately accepted a contract that “waived sovereign immunity; imposed no penalties on Pfizer for late deliveries; agreed to resolve disputes under a secret private arbitration under the laws of New York; and broadly indemnified Pfizer for civil claims.”
Brazil also agreed to a nondisclosure provision similar to those found in contracts with the European Commission and the U.S. government.
2. Pfizer Controls Donations
Again using Brazil as an example, the report points out that the South American nation must first get a go-ahead from Pfizer to accept donations or buy its vaccines from others. The country is also barred from “donating, distributing, exporting, or otherwise transporting the vaccine outside Brazil without Pfizer’s permission.”
3. Pfizer Secured an “IP Waiver” for Itself
Pfizer CEO Albert Bourla “has emerged as a strident defender of intellectual property in the pandemic,” the report says, noting his opposition to a proposal that members of the World Trade Organization who signed on to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) waive IP protections for Covid-19 vaccines and treatments during the crisis.
“But, in several contracts, Pfizer seems to recognize the risk posed by intellectual property to vaccine development, manufacturing, and sale,” Public Citizen explains. “The contracts shift responsibility for any intellectual property infringement that Pfizer might commit to the government purchasers. As a result, under the contract, Pfizer can use anyone’s intellectual property it pleases—largely without consequence.”
4. Private Arbitrators, Not Public Courts, Decide Disputes in Secret
While the U.K. contract requires that disputes are settled by secret panel of three private arbitrators under the Rules of Arbitration of the International Chamber of Commerce, the report says, “the Albania draft contract and Brazil, Chile, Colombia, Dominican Republic, and Peru agreements require the governments to go further, with contractual disputes subject to ICC arbitration applying New York law.”
5. Pfizer Can Go After State Assets
“Pfizer required Brazil, Chile, Colombia, the Dominican Republic, and Peru to waive sovereign immunity,” the report highlights, detailing that the doctrine can sometimes protect states from companies trying to enforce decisions reached by the previously noted secret arbitral panels. Some of the contracts enable the company to “request that courts use state assets as a guarantee that Pfizer will be paid an arbitral award and/or use the assets to compensate Pfizer if the government does not pay,” according to Public Citizen.
6. Pfizer Calls the Shots on Key Decisions
“What happens if there are vaccine supply shortages? In the Albania draft contract and the Brazil and Colombia agreement, Pfizer will decide adjustments to the delivery schedule based on principles the corporation will decide” the report notes, concluding that “under the vast majority of contracts, Pfizer’s interests come first.”
Public Citizen calls on world leaders, especially U.S. President Joe Biden, to “push back” against Pfizer’s negotiating tactics and “rein in” its monopoly power.
According to the group, the Biden administration can “call on Pfizer to renegotiate existing commitments and pursue a fairer approach in the future” as well as “further rectify the power imbalance by sharing the vaccine recipe, under the Defense Production Act, to allow multiple producers to expand vaccine supplies.”
The U.S. administration “can also work to rapidly secure a broad waiver of intellectual property rules,” the report adds, declaring that “a wartime response against the virus demands nothing less.”
In response to Public Citizen’s report, Sharon Castillo, a spokesperson for Pfizer, toldThe Washington Post that confidentiality clauses were “standard in commercial contracts” and “intended to help build trust between the parties, as well as protect the confidential commercial information exchanged during negotiations and included in final contracts.”
Castillo also said that “Pfizer has not interfered and has absolutely no intention of interfering with any country’s diplomatic, military, or culturally significant assets,” adding that “to suggest anything to the contrary is irresponsible and misleading.”
Meanwhile, Peter Maybarduk, director of Public Citizen’s Access to Medicines program, accused Pfizer of “taking advantage of countries’ desperation” with the far-reaching contracts.
“Most of us have sacrificed during the pandemic; staying distant to protect family and friends,” Maybarduk said Tuesday. “Pfizer went the other way, using its control of scarce vaccines to win special privileges, from people that have little choice.”
This article was originally published on Common Dreams by JESSICA CORBETT was republished under the Creative Commons license (CC BY-NC-ND 3.0).
Leaked documents reveal the e-commerce company’s private-brands team in India “secretly exploited internal data” to copy products from other sellers and rigged search results.
U.S. Sen. Elizabeth Warren on Wednesday renewed her call to break up Amazon after internal documents obtained by Reutersrevealed that the e-commerce giant engaged in anti-competitive behavior in India that it has long denied, including in testimonies from company leaders to Congress.
“These documents show what we feared about Amazon’s monopoly power—that the company is willing and able to rig its platform to benefit its bottom line while stiffing small businesses and entrepreneurs,” tweeted Warren (D-Mass.) “This is one of the many reasons we need to break it up.”
Warren is a vocal advocate of breaking up tech giants including but not limited to Amazon. The company faces investigations regarding alleged anti-competitive behavior in the United States as well as Europe and India. The investigative report may ramp up such probes.
Aditya Karla and Steve Stecklow report that “thousands of pages of internal Amazon documents examined by Reuters—including emails, strategy papers, and business plans—show the company ran a systematic campaign of creating knockoffs and manipulating search results to boost its own product lines in India, one of the company’s largest growth markets.”
“The documents reveal how Amazon’s private-brands team in India secretly exploited internal data from Amazon.in to copy products sold by other companies, and then offered them on its platform,” according to the reporters. “The employees also stoked sales of Amazon private-brand products by rigging Amazon’s search results.”
In India, Amazon stoked sales of private-brand products by manipulating its search results so that the products would appear ‘in the first 2 or three … search results’ when customers were shopping on https://t.co/OA0tY09fhk, an internal document shows https://t.co/1FMsAX0pza
In sworn testimony before the U.S. Congress in 2020, Amazon founder Jeff Bezos explained that the e-commerce giant prohibits its employees from using the data on individual sellers to help its private-label business. And, in 2019, another Amazon executive testified that the company does not use such data to create its own private-label products or alter its search results to favor them.
But the internal documents seen by Reuters show for the first time that, at least in India, manipulating search results to favor Amazon’s own products, as well as copying other sellers’ goods, were part of a formal, clandestine strategy at Amazon—and that high-level executives were told about it. The documents show that two executives reviewed the India strategy—senior vice presidents Diego Piacentini, who has since left the company, and Russell Grandinetti, who currently runs Amazon’s international consumer business.
While neither Piacentini nor Grandinetti responded to Reuters‘ requests for comment, Amazon provided a written response that did not address the reporters’ questions.
“As Reuters hasn’t shared the documents or their provenance with us, we are unable to confirm the veracity or otherwise of the information and claims as stated,” Amazon said. “We believe these claims are factually incorrect and unsubstantiated.”
“We display search results based on relevance to the customer’s search query, irrespective of whether such products have private brands offered by sellers or not,” the company said, adding that it “strictly prohibits the use or sharing of nonpublic, seller-specific data for the benefit of any seller, including sellers of private brands.”
Warren was not alone in calling for the breakup of Amazon following the report.
“This is not shocking. But it is appalling,” the American Economic Liberties Project said in a series of tweets. “Independent businesses have sounded the alarm for years—providing evidence that Amazon stole their intellectual property.”
4/ Months later, in April 2020, @WSJ revealed that Amazon had been stealing from independent businesses to create competing products.https://t.co/ZgsNmtExIJ
— American Economic Liberties Project (@econliberties) October 13, 2021
“We said back in 2020 that a perjury referral was in order—and it still is,” the group added, highlighting testimony from Bezos and Nate Sutton, Amazon’s associate general counsel. “But Amazon will remain an anti-business behemoth, flagrantly breaking the law and daring policymakers to stop them.”
Highlighting a report from a trio of its experts, Economic Liberties added that “it’s time to break Amazon up.”
Originally published on Common Dreams by JESSICA CORBETT and republished under a Creative Commons license (CC BY-NC-ND 3.0).
The online giant gives a leg up to hundreds of house brand and exclusive products that most people don’t know are connected to Amazon
It took Robert Gomez about five months to get his Kaffe coffee grinder to the big leagues in e-commerce: among the first three search results for “coffee grinder” on Amazon.com.
Gomez, founder of Atlanta-based consumer goods startup 4Q Brands, said he obsessively refined his photos and description, amassed reviews from happy customers, and paid Amazon $40,000 a month on advertising to boost sales, one of the elements Amazon tells sellers will increase search ranking.
Then Amazon introduced a competitor from house brand Amazon Basics and another from a brand that sells exclusively on Amazon, DR Mills.
“They ranked well right away,” Gomez said, each of them appearing among the top-three results for “coffee grinder” searches immediately. The reason, he said, was clear: “Their search ranking is high because they’re an Amazon brand.”
An investigation by The Markup found that Amazon places products from its house brands and products exclusive to the site ahead of those from competitors—even competitors with higher customer ratings and more sales, judging from the volume of reviews.
We found that knowing only whether a product was an Amazon brand or exclusive could predict in seven out of every 10 cases whether Amazon would place it first in search results. These listings are not visibly marked as “sponsored” and they are part of a grid that Amazon identifies as “search results” in the site’s source code. (We only analyzed products in that grid, ignoring modules that are strictly for advertising.)
When we analyzed star ratings and number of reviews, neither could predict much better than a coin toss which product Amazon placed first in search results.
Amazon told Congress in 2019 that its search results do not take into account whether a product is an Amazon-owned brand.
Sellers say it doesn’t seem that way to them. Gomez said Amazon’s brands have “unfair advantages” that make it harder for small merchants like him to compete” on its open marketplace. “Who bears the cost are those entrepreneurs and small businesses that don’t have the means to fight.”
The Markup found Amazon placed its Happy Belly Cinnamon Crunch cereal, with four stars and 1,010 reviews, in the number one spot ahead of cereals with better and more reviews including Cap’n Crunch (five stars, 14,069 reviews), Honey Bunches of Oats (five stars, 5,205 reviews), and Honey Nut Cheerios (five stars, 11,702 reviews). A vacuum cleaner from Amazon’s exclusive Noisz brand was placed on top, ahead of models from Bissell, Eureka, and Hoover with higher ratings and more reviews. And the Amazon-exclusive Concept 3sneaker from Skechers placed number one, four spots ahead of a similar but not exclusive to Amazon Skechers sneaker with the same star rating but 77 times more reviews.
A former Amazon employee told The Markup that the company used to give its new house brand products an unearned place at the top of search rankings when they first launched. He said the practice has since stopped.
However, we found that Amazon brands and exclusive products overall received an outsized portion of the top spot on search results, one that was far out of line with their proportion of the sample.
That’s not what shoppers expect.
In a national survey we commissioned from YouGov, only 17 percent of respondents said they assumed Amazon put its own products first. Half said they expected the first nonsponsored product on Amazon’s search results page to be the cheapest, highest rated, or bestselling.
By giving its brands top billing, Amazon is giving itself a significant leg up in sales. The first three items on the search results page get 64 percent of clicks, according to one ex-Amazon-employee-turned-consultant.
In a short, written statement, Amazon spokesperson Nell Rona said that the company does not favor its brands in search results and declined to answer any of the dozens of specific questions posed by The Markup.
She said the company identified its brands to shoppers by adding “Amazon brand” to the list of product features on the product page and sometimes to the listing title as well. We only found this to be the case in 23 percent of products in our sample that were Amazon-owned brands. She said brands that are exclusive to Amazon would not carry the disclosure because they are not owned by the company.
Invisible Tags
A signal, invisible to the public but coded into the listings, suggests that most of the Amazon brand and exclusive products that were listed first were ads. In 87 percent of cases, the listing’s source code identified them as “sponsored”—though that label isn’t shown to the public. Instead, Amazon labels the products “featured from our brands.”
Rona, the Amazon spokesperson, said the company considers “featured from our brands” listings “merchandising placements” and not “search results,” despite their presence in the search results grid. She also said they are not ads, despite the “sponsored” label in the source code. Rona said they are “clearly labeled to distinguish them from search results” but did not respond to questions about whether the company believes such disclosures were clear enough under Federal Trade Commission requirements.
Mary Engle, who retired as the FTC advertising practices associate director last year, said that what Amazon calls “merchandising” is actually advertising.
“Amazon’s placement of its own products on its own site is advertising, whether or not money changes hands,” she said. She said it would require an investigation to determine whether “featured from our brands” is sufficient disclosure under the FTC’s rules.
Bill Baer, a former assistant attorney general in charge of the antitrust division of the U.S. Department of Justice and former director of the Bureau of Competition at the FTC, said if consumers expect Amazon’s product search results to be neutral, but they are not, and the site is essentially a monopoly, that could be a violation of the FTC Act of 1914, which prohibits unfair competition and unfair or deceptive practices in commerce, or the U.S. Sherman Antirust Act, which prohibits monopolies from using their market power to harm competition.
“If basically you’ve got somebody with market power that is restraining competition both in terms of site access or where things appear on the site,” he said, “that is potentially problematic.”
Amazon’s online marketplace garners more than five times more sales than its closest online competitor, Walmart, which also allows third-party sales.
Congress is considering a package of anti-monopoly bills aimed at big tech, including the Ending Platform Monopolies Act, which would make the practice of platforms giving their brands a leg up explicitly illegal.
Amazon refers to its own brands and brands developed by others that sell exclusively on Amazon as “our brands.” They peddle everything from snack chips and vitamins to fashion and furniture.
Using public records from the U.S. Patent and Trademark Office and Amazon’s own statements, we identified more than 150 brands registered by or owned by Amazon. These include both brands with an obvious connection, such as Amazon Basics and Amazon Commercial, and those that are generally known to be owned by the company, including Kindle and Zappos. But they also include dozens more, such as Happy Belly, Daily Ritual, and Society New York, where the connection to the company is not obvious. Those are in addition to the estimated hundreds of third-party brands that are exclusive to the site.
We analyzed search results on Amazon for 3,492 popular internet product queries in January 2021 and looked closely at what Amazon placed in the first spot. In 60 percent of cases, Amazon sold this spot to an advertiser and added a public label indicating the listing was “sponsored.” Of the rest, Amazon gave half to its own brands and brands exclusive to the site, and the other half to competing brands. But Amazon brands and exclusives made up only 6 percent of all products in the sample, and competitors made up 77 percent. In short, Amazon was hogging the top spot.
In more than a quarter of searches in which Amazon gave its brands the top spot, it placed its products above competitors that had both better ratings and more reviews than the Amazon brand or exclusive product.
‘They Would Shut Us Down’
Sellers said there’s no mistaking the effect on sales of Amazon’s choices in search results.
“If the customers are not seeing [our products] in the top five offers, then it makes it really hard for us to reach customers,” said Gabriela Mekler, a Miami mom who co-founded the organizational products company Mumi in 2014.
Mumi’s top product—a set of color-coded packing cubes—struggles for visibility on Amazon, even after more than two years on the site. She said the coronavirus pandemic decimated her sales—they dropped by more than 68 percent—costing the company a hard-won “Amazon’s Choice” badge on its packing cubes.
Mumi has not placed on the first page of our search results for “packing cubes” for months. At the time of this writing, Amazon Basics took up eight spots on the first page; one was labeled “featured from our brands.” None were visibly marked “sponsored.”
“Their product will always show before yours,” Mekler said.
One Mumi product has still been selling well despite the pandemic, she said: reusable pill pouches. For now, there is no Amazon Basics pill pouch, and Mekler hopes there won’t be anytime soon.
“We’re a small company,” she said. “They would shut us down.”
The National Association of Wholesaler-Distributors, which represents more than 30,000 distributors, submitted a letter to members of Congress in July 2020, complaining that Amazon “abuses its position” to give preferential treatment to its house brands.
But when The Markup asked to speak to some of the sellers the group had quoted anonymously, NAW’s vice president of government relations, Blake Adami, demurred.
“Our members are still very hesitant to speak out against Amazon for fear of retaliation,” he said in an email, “even anonymously.”
Many sellers whose products we found were placed below Amazon products with fewer sales or ratings also declined a reporter’s request to be interviewed for this article, saying they were concerned it would negatively affect their livelihoods.
“Everybody’s so scared of Amazon,” said Paul Rafelson, executive director of the Online Merchants Guild, which represents Amazon sellers. “Their whole livelihood relies on them.”
‘This Was a Knockoff’
Some of Amazon’s competitors have accused the company of knocking off their products to sell under its house brands.
Williams Sonoma settled a lawsuit that included the claim that Amazon was copying West Elm furniture and selling it under the Amazon house brand Rivet. Allbirds co-CEO Joey Zwillinger wrote an open letter to Jeff Bezos when Amazon’s 206 Collective brand copied his company’s wool sneaker, urging Amazon to adopt Allbirds’ sustainability practices in addition to its design.
In March, Amazon Basics started selling the Everyday Sling, a camera bag with a similar design, the same name but a much lower price than a product from Peak Design.
“It wasn’t like they took some styling cues from it. This was a knockoff,” CEO Peter Dering said in an interview. The smaller company produced a parody video that now has 4.6 million views on YouTube. Within hours, Amazon changed the product’s name.
Dering said he wasn’t worried about losing sales because Peak Design mainly targets wholesalers and customers who want a high-end brand. Still, he said he found the move “highly distasteful.”
Rona, the Amazon spokesperson, said the company “did not infringe” on Allbirds’ or Peak Design’s “design rights” and “strictly prohibit[s] our employees from using nonpublic, seller-specific data to determine which store brand products to launch.”
Hard to Spot
Identifying all of Amazon’s brands and brand exclusives to the site for this investigation was cumbersome. The company does not provide a complete list. The Markup’s reporting team used various filters on the site, reviewed the U.S. Patent and Trademark Office records, and reviewed Amazon bestseller lists—but even then we likely missed some.
Consumers would have an even harder time. We found Amazon does not consistently label its brands and exclusives.
Of the products in our sample that Amazon considered “our brands,” about two in five were not labeled as such in search results nor did they carry a name that many people would understand was connected to the company, such as Amazon Basics, Kindle, or Whole Foods.
Inconsistent labeling, combined with an almost endless stream of its own private brands, leaves customers in the dark to decide whether Amazon highly ranked a particular product because it was a good buy or because it benefited the company’s bottom line.
Nine in 10 respondents to the national survey The Markup commissioned in July didn’t know that Amazon’s highest-selling house brands, apart from Amazon Basics, were owned by the company.
Even there, 24 percent of respondents could not identify Amazon Basics as an Amazon brand, and half didn’t know Amazon owned Whole Foods.
Alex Harman, competition policy advocate at Public Citizen who has studied Amazon’s marketplace, said that to him, the strategy of creating a stream of brands without a clear affiliation to Amazon feels “deceptive.”
Large brick-and-mortar retailers also have house brands. Costco has Kirkland Signature. Target has Up&Up, among others. Historically, he said, when large stores create brands they have been clearly affiliated with the store.
And Amazon’s search results are different from a store shelf.
“Unlike a retail store where you see everything on the shelf, the platform may be in a position to elevate its goods in a way that is harder to do in a retail outlet,” said Baer, the former FTC official and assistant attorney general at the Justice Department.
By creating more than a hundred trademarked brands, most without an obvious connection to the company, Amazon can preserve its reputation if one of its homegrown products flops. This happened in 2015 when customer reviews for its newly launched Amazon Elements diapers included complaints about leaks and “sagginess.” Amazon pulled the products after just seven weeks to make “design improvements.”
Stacy Mitchell, co-director of the small business advocacy group Institute for Local Self-Reliance, and a frequent Amazon critic, said that as Amazon’s brands squeeze competitors, those competitors have less money to spend on innovation—and consumers lose.
“Consumers don’t even know what’s missing,” she said.
Case in point: Brandon Fuhrmann, who runs the New York Amazon Seller Meetup. He was considering expanding his kitchenware brand into a new type of dishware. While checking trademark registrations and U.S. import logs for sellers with similar products, he realized that the majority of his competition would come from Amazon brands.
“When that happened, we realized we couldn’t even compete,” he said. He decided not to launch the product.
Rise of Amazon Brands
Amazon has continually set its sights on dizzying growth.
It launched in 1995, with the goal of becoming “Earth’s Biggest Bookstore.” Four years later, it declared its intention to become “Earth’s Biggest Selection.”
To reach this point, it took a page from rival eBay’s playbook, inviting individuals and business owners to list rare, used, and collectible items—which quickly transitioned to third parties selling mainstream, new wares on Amazon.
In 2003, Jason Boyce got a call from Amazon asking him to list his company’s basketball products on the nascent marketplace.
“We’re like, what are you talking about? You guys sell books,” he said. “What do you mean you’re selling sporting goods?”
Boyce took the plunge and his company’s basketball sales took off on Amazon.
By 2018, third-party sellers like Boyce were responsible for 58 percent of physical goods sales on Amazon. They helped boost Amazon’s North American sales by more than an order of magnitude, from $24.5 billion in 2009 to $386.1 billion in 2018.
The volume created fortunes for small businesses across the world. It also created a deep reliance on Amazon. A 2021 report by JungleScout, which provides software for Amazon sellers, found that Amazon was the only source of income for 22 percent of Amazon’s third-party sellers.
“Within two years of getting on Amazon, most of my clients, whether they want to or not, it becomes their single biggest sales channel,” said James Thomson, who was a manager at Amazon from 2007 to 2012 and now works at the e-commerce consulting firm Buy Box Experts.
And these new third-party sellers had lots of competition, eventually from Amazon itself.
Boyce said Amazon started undercutting his business, selling the same sporting goods—Spalding basketballs, for example—for less.
Unable to compete with Amazon on price for brand-name products, Boyce and his brothers launched their own brand, Harvil, in 2007, to sell sporting goods and home recreation equipment on Amazon. They figured Amazon couldn’t undercut their prices if he and his brothers owned the brand.
They had no idea Amazon was also beginning to launch its own brands and to enter into deals with companies to develop brands exclusive to the platform.
Among the first Amazon brands was Pinzon (a likely nod to the first conquistador to stumble across the Amazon River), which Amazon registered as a trademark in 2007 to sell bedding. Then came Denali for tools, and Amazon Basics for a slew of products, including household appliances and office supplies.
Sometime in 2017, Boyce was searching keywords related to his products on Amazon—”bocce ball,” “air hockey table”—when he noticed a new brand, Rally and Roar, peddling very similar products to his own. They showed up at the top of search results.
Rally and Roar is exclusive to Amazon, labeled as “our brands.” The company was moving in on his territory, again.
The speed of Amazon’s expansion of its own brands has been accelerating, according to several e-commerce and retail research firms. TJI Research counted 598 Amazon-exclusive brands in 2019. Coresight Research said Amazon brand products on the site tripled in the two years between 2018 and 2020 alone.
Amazon invites companies and individuals to join its “our brands” family through programs like Amazon Accelerator, which promises increased exposure for products sold exclusively on Amazon in exchange for extra fees, and sets a sales price if Amazon chooses to later buy the brand.
Boyce and his brothers had already been talking about getting off Amazon’s platform when they noticed Rally and Roar pop up. That settled it.
“We’re like, we’re not going to sit around and wait for Amazon to knock off the rest of our private-label products as well,” he said.
They sold the business.
A Leg Up
For years, Amazon gave items from its own brands multiple advantages when they first launched, said JT Meng, a former house brand manager at Amazon—though he said the practice has since stopped.
Employees manually applied the Amazon’s Choice label to a new Amazon brand product, even if it didn’t meet the usual criteria, he said.
And instead of starting from scratch in search results with zero reviews, sales, and stars, Meng said employees used a tactic called “search seeding” for new products, “cloning” a competing product’s search ranking and allowing the new Amazon product to appear immediately below that competitor in search results.
“We would use that for all of our products from the get-go for the first six months or longer,” he said.
Meng worked on the launch for Amazon Elements baby wipes, which he said were seeded against similar products from Huggies, Pampers, and others.
Sales spiked so quickly that his team had to stop promoting the Amazon Elements wipes so they didn’t take too much market share, he said.
Once a new house brand product was established, Meng said employees would turn off search seeding. “Without fail, your product would drop in ranking,” he said, “but the hope was that it would drop a small amount.”
By the time Meng left Amazon in 2016, he said search seeding and adding the Amazon’s Choice label to new Amazon brand products were no longer allowed.
Sellers who do try to compete with Amazon brands today said they feel compelled to pay for sponsored listings in order to get a higher result for nonsponsored listings on Amazon. On its Seller Central site, Amazon underlines to sellers how important sales are, stating that “better-selling products tend to list towards the beginning of search” and that as sales increase “so does your placement.”
“You can’t not advertise anymore,” said Boyce, who after selling his sporting goods line founded a consulting firm, Avenue7Media, which advises companies and individuals who want to sell on Amazon.
“You turn off the ads and you lose organic rank within days,” Boyce said. “It’s pay to play.”
Lots of companies are paying.
We found that inside the search results alone, 17 percent of products were paid listings. That doesn’t include entire rows of sponsored products that appear as special modules on about a third of search result pages. (Including those would roughly double the ad percentage on the first results page.)
Amazon is the third-largest seller of online advertising in the U.S., after Google and Facebook, and is growing fast. “Other” revenue, which the company says “primarily includes sales of advertising services,” jumped 52 percent from 2019 to 2020, to $21.4 billion a year.
Struggling for Visibility
“If you’re willing to spend a ton of money, you can sell a ton of product,” said Evan Patterson, vice president of business development at California-based Linco, which is one of Boyce’s clients.
The 47-year-old family-owned institution makes casters, the small wheels that attach to office chairs and industrial gear—and has a solid reputation in the offline world for premium products. It competes against a product from Amazon Commercial, among others.
It’s so well known in industrial circles that Linco’s competitors advertise against its name within Amazon’s search results, Patterson said.
Still, Linco hasn’t consistently listed on the first page of search results for “caster wheels,” despite selling on Amazon for years. It will appear on the first page for Patterson, but did not in repeated searches by The Markup.
The only thing that seems to help Linco’s search ranking, Patterson said, is to spend more money for paid listings on Amazon. The company now pays about $10,000 a month for advertising.
“Our search ranking has improved dramatically,” Patterson said.
But it still has a ways to go. When The Markup searched for “caster wheels” at the time of writing, Linco appeared in the middle of the fifth page.
Crypto converts are obsessed with price – Pi is not yet released but has a more important goal before an initial value is set: 100 million users / miners
Cryptocurrency and Blockchain are here to stay.
But does the world need yet another cryptocurrency?
Can a stable, safe currency be created that is more than just another speculative playground?
What if a coin could be mined by millions, even billions on their cell phones?
What if the mining proceeds were shared equitably by all?
What if transactions and trading could be administered and verified by the same billion users that are also the holders, traders and miners?
And what if the Pioneers would be able to use the Pi network to communicate and trade and brainstorm with each other?
Would that be a utopian fantasy?
The future is uncertain but Pi addresses many of the shortcomings of the current system
There are now so many crypto coins that just the names or the underlying concepts are difficult to list, let alone understand. With over 6,000 as of August 2021, it is not likely that very many will survive in the long term.
Cryptocurrency and Blockchain and the origins and technical backdrop that led to the current explosion of interest in buying, trading, owning and mining is maddeningly complex for beginners. For that reason please follow links from this page or see some of our previous articles for more information and background.
It’s natural that most of the attention by the media is focused on the top 10, even the top 2 cryptocurrencies: Bitcoin and Ethereum / Ether. Both are well established, and Bitcoin having a market cap (total of all outstanding coins multiplied by the current price in fiat dollars) of over 800 billion, is highly likely to survive
One issue for all crypto, however, is the way that they are mined, and how the blockchain ledger is maintained. The proof of work system for Bitcoin has pros and cons that have people debating if it can ultimately remain the standard.
Ethereum is undergoing a complex transition away from a similar system to a new variant, and this is touted by many as likely to lead to its ultimate superiority while others don’t see that as a given.
Above: Photo credit Pi / 1998 Artisan Entertainment
Price wars are getting all the attention but an alternative is quietly amassing millions of adherents
Meanwhile Pi (π), a little known alternative coin with a radical underlying concept, created by it’s core team based at Stanford, has a few very unique features. These deviations from the norm make for a new direction in how cryptocurrency can function. And the launch via a proprietary 3 phase plan is also unique and worthy of note.
While many alt-coins are fly-by-night fast buck scams, launched in weeks or even days, little more than an exercise in crypto-branding as an end in itself (Jake Paul has an NFT game coin launching September 1st, nuff said) Pi (π) is conceived with the polar opposite of this “wild west-fly-by-night” ethos.
Simply put, Pi (π) is a new cryptocurrency. Its claim to fame is that it was designed from the ground up to be “mined” by its users on their cell phones. It was also designed to be the most egalitarian and evenly distributed coin in terms of ownership.
Above: Photo credit Lynxotic / Adobe Stock
The founders, a group of P.H.D.s out of Stanford, wanted to design a next generation cryptocurrency that would solve some of the problems of the first generation, notably Bitcoin.
Perhaps due to the frenzy and mania surrounding the price increase, measured against the dollar, for Bitcoin and others, there has been precious little in the media taking the idea of wealth distribution among crypto coin holders (hodlers in the jargon of alt coins) and almost nothing about using millions (and eventually billions) cell phones to mine and what benefits could potentially be derived from doing exactly that.
One obvious benefit, which seems to solve the issue of massive amounts of electricity, particularly “dirty” electricity as opposed to sustainable power from solar, etc., currently used for Bitcoin mining.
A second related issue is the massive expensive machinery needed to mine even a single Bitcoin (currently around $50,000 in value) and the natural concentration of those mining proceeds going into the hands of a tiny number of huge companies.
Further, there is the problem of transaction difficulty and speed (slow) due to the system and the computer power required to maintain the blockchain ledger.
And with the massive and vast run up in price, that phenomenon that everyone’s so excited about, has put billions in USD$ value into the hands of early adopters and very few others, which is not desirable if you are one of the billions of people on earth who do not own any Bitcoin.
In phase 3 the potential of Pi will begin to be realized
The live launch of Pi (π) will come in stage three and until then the coin can not be bought or traded. The status of the project is currently in phase 2, known as Testnet, with over 23 million “pioneers” who mine and hold Pi on their cellphones.
A deeper level of the eventual expansion of the project, with a goal of 100 million users set, with an eventual billion user base not out of the question, is the fact that this base would automatically represent a “private” and separate internet of sorts.
There are plans in the works for trading, bartering and interacting much in the way social media and the web work today but without any intermediaries such a Zuckerberg, and no restrictions on interaction and transactions, other than the security built in to the system.
If this, or a similar system with the same goals and objectives, were to take off and take hold the level of potential impact on the world and especially existing the financial structures and even internet and social media communication would be mind boggling, to say the least.
Phase 3, known in Pi world as “Mainnet” is when the cryptocurrency will officially launch and be ascribed an initial value.
Here is an edited description for Phase 3 from the Pi official website:
When the community feels the software is ready for production, and it has been thoroughly tested on the testnet, the official mainnet of the Pi network will be launched. After this point, the faucet and Pi network emulator of Phase 1 will be shut down and the system will continue on its own forever.
Future updates to the protocol will be contributed by the Pi developer community and Pi’s core team, and will be proposed by the committee. Their implementation and deployment will depend on nodes updating the mining software just like any other blockchains.
No central authority will be controlling the currency and it will be fully decentralized. Balances of fake users or duplicate users will be discarded. This is the phase when Pi can be connected to exchanges and be exchanged for other currencies.
In development for over 2 years, the white paper was initially published on March 1st 2019, by the aforementioned team of Standford PhDs behind Pi.
Above: Photo credit Lynxotic / Adobe Stock
Pi is built on a unique concept from a legitimate source, looking to solve important problems
Currently there are 7,916 (as per CoinGecko) and if you want to dig deeper into why that number is not undisputed, and how the realm is still expanding at a very rapid pace, this is a good article to look into that.
However, the only question that matters for this article is why Pi is different than the rest and why the world might need it, even with so many contenders and pretenders already in the queue.
Pi is being developed at Stanford by a team headed by Dr. Nicolas Kokkalis, Head of Technology. A Stanford PhD and instructor of Stanford’s first decentralized applications class; combining distributed systems and human computer interaction to bring cryptocurrency to everyday people.
The primary and first raison d’être for Pi is built into its definition according to the Pi Network web site:
”Pi is a new cryptocurrency for and by everyday people that you can “mine” (or earn) from your phone”
Simple enough, but groundbreaking in consequence when seen from the perspective of the challenges and solutions that are being developed and promoted among the many others in the crypto space.
”Mining crypto is hard. Investing in crypto is risky. Too many of us are left out of the cryptocurrency revolution.”
— Pi Network
One big issue that has been on the radar relating to the future of crypto is how various mining (proof of work), ( proof of stake) or farming (proof of space & time)
Bitcoin is the top crypto currency and uses proof of work mining, Cardano is a coin that is based on proof of stake, as are also lesser known alt coins, including Polygon, Tezos, Polkadot and EOS. These proof of stake coins could all be overtaken in importance, however, by the project called Ethereum 2.0, which would take the second largest cryptocurrency which would be an alternative version of Ethereum that is based on proof of stake, rather than proof of work, as is currently the case for Ethereum (1).
Finally Chia is the most prominent example of farming using hard drive space and processing to maintain proof of space and time.
The current state of cryptocurrency conceptual frameworks and how Pi is different
Rather than going into a complex and contentious discussion of the various methods and coins listed above, suffice it to say that proof of work, which was built for Bitcoin and is the most established and recognized method for a blockchain solution to maintaining the security and privacy of the a cryptocurrency.
One of the reasons that these alternatives are cropping up, beyond the speculative frenzy and profit motives that accompanied the price peak in crypto earlier this year (2021), is the somewhat overblown outcry regarding the energy intensive process of proof of work mining as it is currently the norm for bitcoin mining.
This is a concern, and added to it is the fact that the most profitable method for mining bit coin is have an extremely large ASIC (Application Specific Integrated Circuit) farm which has reduced the goal of decentralization (DeFi) to a very large extent.
For these reasons and more, Pi is being developed to be the first truly decentralized crypto coin that is mined via cell phone and that does not therefore require special, extremely expensive, gear or huge amount of electricity.
“How many more insurrections have to happen before we hold Facebook to account?” one group asked after whistleblower Frances Haugen said the corporation is unwilling to confront hate speech and disinformation.
Following whistleblower Frances Haugen’s Sunday night allegation that Facebook’s refusal to combat dangerous lies and hateful content on its platforms is driven by profit, social media experts denounced the corporation for embracing a business model that encourages violence and endangers democracy—and urged the federal government to take action.
Haugen, who copied a “trove of private Facebook research” before she resigned from the social media company in May, toldCBS‘s Scott Pelley during a “60 Minutes” interview that the tech giant took some steps to limit misinformation ahead of the 2020 election because it understood that then-President Donald Trump’s incessant lies about voter fraud posed a serious threat. Many of the safety measures that Facebook implemented, however, were temporary, she added.
“As soon as the election was over,” Haugen said, “they turned them back off or they changed the settings back to what they were before to prioritize growth over safety. And that really feels like a betrayal of democracy to me.”
Facebook officials claim that some of the anti-misinformation systems remained in place, but in the interregnum between Election Day and President Joe Biden’s inauguration, far-right extremists used the social networking site to organize the deadly January 6 coup attempt—something acknowledged by an internal task force’s report on Facebook’s failure to neutralize “Stop the Steal” activity on its platforms.
There is, according to Haugen, a simple explanation for why executives at the company refuse to do more to mitigate harmful social media behavior: “Facebook has realized that if they change the algorithm to be safer, people will spend less time on the site, they’ll click on less ads, they’ll make less money,” she said.
“The thing I saw at Facebook over and over again was there were conflicts of interest between what was good for the public and what was good for Facebook,” Haugen told Pelley. “And Facebook, over and over again, chose to optimize for its own interests, like making more money.”
Haugen—who first revealed her identity on Sunday after having secretly shared internal documents with federal regulators, reported on in the Wall Street Journal‘s series, “The Facebook Files”—also said the corporation is lying to the public about how effective it is at curbing hate speech and disinformation, arguing that “Facebook has demonstrated it cannot operate independently.”
In the wake of Haugen’s bombshell interview, social media experts condemned Facebook for prioritizing “profits above all else.”
“Facebook runs on a hate-and-lie-for-profit business model that amplifies all sorts of toxicity on its platforms,” Jessica J. González, co-CEO of Free Press, said Monday in a statement. “Thanks to this brave whistleblower, we now have further proof that Facebook’s executives—all the way up to CEO Mark Zuckerberg and COO Sheryl Sandberg—routinely chose profits over public safety.”
González, co-founder of Ya Basta Facebook and the Change the Terms coalition, added that Facebook executives “designed the company’s algorithms to put engagement, growth, and profits above all else, even allowing lies about the 2020 election results to spread to millions in advance of the white-nationalist assault on the U.S. Capitol.”
Longtime critics of Facebook argued that the “new revelations” about the company demand immediate federal intervention.
“How many more insurrections have to happen before we hold Facebook to account?” the Real Facebook Oversight Board, a coalition of civil rights leaders and academics, asked in a statement released after Haugen’s interview aired. “The system is blinking red, and without real, meaningful, independent, and robust oversight and investigation of Facebook, more lives will be lost.”
“The goal,” added the group, “is no longer to save Facebook—Facebook is beyond hope. The goal now is to save democracy.”
Free Press summarized the Journal‘s key findings on Facebook, which we now know stem from internal documents provided by Haugen:
Facebook exempted high-profile users from some or all of its rules; Instagram is harmful to millions of young users; Facebook’s 2018 algorithm change promotes objectionable or harmful content; Facebook’s tools were used to sow doubt about Covid-19 vaccines; and globally, Facebook is used to incite violence against ethnic minorities and facilitat[e] action against political dissent.
Shireen Mitchell, founder of Stop Online Violence Against Women, praised Haugen for exposing Facebook’s “amplification and use of hate to keep users on the platform engaged.”
Facebook has “weaponized… data in harmful ways against users,” Mitchell continued, and failed to consider the negative effects of “hate-filled rhetoric” even after the Myanmar military used Facebook to launch a genocide in 2018.
González argued that Haugen “turned evidence of this gross negligence over to the government at great personal risk, and now we need the government to respond with decisive action to hold the company responsible for protecting public safety.”
“The government must demand full transparency on how Facebook collects, processes, and shares our data, and enact civil rights and privacy policies to protect the public from Facebook’s toxic business model,” said González.
“Facebook must also act swiftly to remedy the harms it is continuing to inflict on the public at large,” she added. “It must end special protections for powerful politicians, ban white supremacists and dangerous conspiracy theorists, and institute wholesale changes to strengthen content moderation in English and other languages—and we need this all now.”
According to Carole Cadwalladr, a journalist at The Guardian and co-founder of the Real Facebook Oversight Board, “Facebook is a rogue state, lying to regulators, investors, and its own oversight board.”
“What we are seeing today is a market failure with profound, devastating global consequences,” she said. “Executives and board members must be held to account. There is evidence to suggest that their behavior was not just immoral but also criminal.”
Shoshana Zuboff, professor emeritus at Harvard Business School and author of The Age of Surveillance Capitalism, argued that “even as we feel outrage toward Mr. Zuckerberg and his corporation, the cause of this crisis is not a single company, not even one as powerful as Facebook.”
“The cause is the economic institution of surveillance capitalism,” said Zuboff. “The economic logic of these systems, the data operations that feed them, and the markets that support them are not limited to Facebook.”
“The imperatives of surveillance economics determine the engineering of these operations—their products, objectives, and financial incentives—along with those of the other tech empires, their extensive ecosystems, and thousands of companies in diverse sectors far from Silicon Valley,” she continued. “The damage already done is intolerable. The damage that most certainly lies ahead is unthinkable.”
Zuboff added that the only “durable solution to this crisis” is to “undertake the work of interrupting and outlawing the dangerous operations of surveillance capitalism and its predictable social harms that assault human autonomy, splinter society, and undermine democracy.”
Haugen is scheduled to testify on Tuesday at a Senate subcommittee hearing on “Protecting Kids Online.”
Originally published on Common Dreams by KENNY STANCIL and republished under a Creative Commons license (CC BY-NC-ND 3.0).
Frances Haugen said the company’s leaders know how to make their platforms safer, “but won’t make the necessary changes because they have put their astronomical profits before people.
Two days after a bombshell “60 Minutes” interview in which she accused Facebook of knowingly failing to stop the spread of dangerous lies andhateful content, whistleblower Frances Haugen testified Tuesday before U.S. senators, imploring Congress to hold the company and its CEO accountable for the many harms they cause.
Haugen—a former Facebook product manager—told the senators she went to work at the social media giant because she believed in its “potential to bring out the best in us.”
“But I’m here today because I believe Facebook’s products harm children, stoke division, and weaken our democracy,” she said during her opening testimony. “The company’s leadership knows how to make Facebook and Instagram safer, but won’t make the necessary changes because they have put their astronomical profits before people.”
“The documents I have provided to Congress prove that Facebook has repeatedly misled the public about what its own research reveals about the safety of children, the efficacy of its artificial intelligence systems, and its role in spreading divisive and extreme messages,” she continued. “I came forward because I believe that every human being deserves the dignity of truth.”
Facebook whistleblower Frances Haugen: "I saw Facebook repeatedly encounter conflicts between its own profits and our safety. Facebook consistently resolved its conflicts in favor of its own profits."
“I saw Facebook repeatedly encounter conflicts between its own profits and our safety,” Haugen added. “Facebook consistently resolved its conflicts in favor of its own profits.”
“In some cases, this dangerous online talk has led to actual violence that harms and even kills people,” she said.
Addressing Monday’s worldwide Facebook outage, Haugen said that “for more than five hours, Facebook wasn’t used to deepen divides, destabilize democracies, and make young girls and women feel bad about their bodies.”
“It also means that millions of small businesses weren’t able to reach potential customers, and countless photos of new babies weren’t joyously celebrated by family and friends around the world,” she added. “I believe in the potential of Facebook. We can have social media we enjoy that connects us without tearing apart our democracy, putting our children in danger, and sowing ethnic violence around the world. We can do better.”
Doing better will require Congress to act, because Facebook “won’t solve this crisis without your help,” Haugen told the senators, echoing experts and activists who continue to call for breaking up tech giants, banning the surveillance capitalist business model, and protecting rights and democracy online.
She added that “there is nobody currently holding Zuckerberg accountable but himself,” referring to Facebook co-founder and CEO Mark Zuckerberg.
Sen. Richard Blumenthal (D-Conn.)—chair of the Senate Consumer Protection, Product Safety, and Data Security Subcommittee—called on Zuckerberg to testify before the panel.
“Mark Zuckerberg ought to be looking at himself in the mirror today and yet rather than taking responsibility, and showing leadership, Mr. Zuckerberg is going sailing,” he said.
Frances Haugen strongly shakes her head in agreement as Richard Blumenthal says "Mark Zuckerberg ought to be looking at himself in the mirror" and "Zuckerberg, you need to come before this committee." pic.twitter.com/QC0B6zK9tW
“Big Tech now faces a Big Tobacco, jaw-dropping moment of truth. It is documented proof that Facebook knows its products can be addictive and toxic to children,” Blumenthal continued.
“The damage to self-interest and self-worth inflicted by Facebook today will haunt a generation,” he added. “Feelings of inadequacy and insecurity, rejection, and self-hatred will impact this generation for years to come. Our children are the ones who are victims.”
Originally published on Common Dreams by BRETT WILKINSand republished under Creative Commons (CC BY-NC-ND 3.0).
Above: Photo Collage /Lynxotic / Original Image by ICIJ
“This is the Panama Papers on steroids.”
In what’s being called the “biggest-ever leak of offshore data,” a cache of nearly 12 million documents published Sunday laid bare the hidden wealth, secret dealings, and corruption of hundreds of world leaders, billionaires, public officials, celebrities, and others.
The bombshell revelations—known as the Pandora Papers—were published by the International Consortium of Investigative Journalists (ICIJ) and include private emails, secret contracts, and other records obtained during a two-year investigation involving more than 600 journalists in 117 countries and territories.
“This is the Panama Papers on steroids,” said ICIJ director Gerard Ryle, referring to the 2016 exposé of the tax-evading secrets of the super-rich. “It’s broader, richer, and has more detail.”
NEW: #PandoraPapers reveals the inner workings of a shadow economy that benefits the wealthy and well-connected at the expense of everyone else.
Brought to you by ICIJ and 600+ journalists, the largest collaboration in journalism history. 🧵 https://t.co/qXMuUcqPc4
More than 100 billionaires feature in the leaked data, as well as celebrities, rock stars, and business leaders. Many use shell companies to hold luxury items such as property and yachts, as well as incognito bank accounts. There is even art ranging from looted Cambodian antiquities to paintings by Picasso and murals by Banksy.
“There’s never been anything on this scale and it shows the reality of what offshore companies can offer to help people hide dodgy cash or avoid tax,” said ICIJ’s Fergus Shiel, who added that the people in the files “are using those offshore accounts, those offshore trusts, to buy hundreds of millions of dollars of property in other countries, and to enrich their own families, at the expense of their citizens.”
The leaked documents reveal how some of the world’s wealthiest people avert the financial consequences of their misdeeds by using offshore entities. Dozens of current and former world leaders feature prominently in the files, including Russian President Vladimir Putin, Jordanian King Abdullah II, and former British Prime Minister Tony Blair.
While most of the richest Americans do not appear in the files, The Washington Postreports that “perhaps the most troubling revelations for the United States… center on its expanding complicity in the offshore economy.”
Why so few US names in Pandora Papers? Largely because US is itself a spectacularly corrupt tax haven. “Financial experts said the uber-rich in the United States tend to pay such low tax rates that they have less incentive to seek offshore havens.” https://t.co/YaUH86VBEE
Chuck Collins, author of The Wealth Hoarders: How https://bookshop.org/a/565/9781509543496Billionaires Pay Millions to Hide Trillions, and co-editor of Inequality.org at the Institute for Policy Studies, said in a statement that “the U.S. has become the weak link in stopping global crime and wealth hiding.”
“States like South Dakota and Delaware have morphed their laws to attract billions, sometimes illicitly obtained, from around the world,” he said. “We in the U.S. should be embarrassed that we’ve become a magnet for kleptocratic funds.”
Collins added that the Pandora Papers show “it is time for U.S. lawmakers to shut down the hidden wealth system that allows for such aggressive tax avoidance and the sequestering of wealth.”
ICIJ said Sunday that the “publication of Pandora Papers stories comes at a critical moment in a global debate over the fairness of the international tax system, the role of Western professionals in the shadow economy, and the failure of governments to stanch the flow of dirty money into hidden companies and trusts,” and that the documents “are expected to yield new revelations for years to come.”
Originally published on Common Dreams by BRETT WILKINS and republished under a Creative Commons license (CC BY-NC-ND 3.0).
A huge but little-known industry has cropped up around monetizing people’s movements
Companies that you likely have never heard of are hawking access to the location history on your mobile phone. An estimated $12 billion market, the location data industry has many players: collectors, aggregators, marketplaces, and location intelligence firms, all of which boast about the scale and precision of the data that they’ve amassed.
Location firm Near describes itself as “The World’s Largest Dataset of People’s Behavior in the Real-World,” with data representing “1.6B people across 44 countries.” Mobilewalla boasts “40+ Countries, 1.9B+ Devices, 50B Mobile Signals Daily, 5+ Years of Data.” X-Mode’s website claims its data covers “25%+ of the Adult U.S. population monthly.”
In an effort to shed light on this little-monitored industry, The Markup has identified 47 companies that harvest, sell, or trade in mobile phone location data. While hardly comprehensive, the list begins to paint a picture of the interconnected players that do everything from providing code to app developers to monetize user data to offering analytics from “1.9 billion devices” and access to datasets on hundreds of millions of people. Six companies claimed more than a billion devices in their data, and at least four claimed their data was the “most accurate” in the industry.
The Location Data Industry: Collectors, Buyers, Sellers, and Aggregators
The Markup identified 47 players in the location data industry
“There isn’t a lot of transparency and there is a really, really complex shadowy web of interactions between these companies that’s hard to untangle,” Justin Sherman, a cyber policy fellow at the Duke Tech Policy Lab, said. “They operate on the fact that the general public and people in Washington and other regulatory centers aren’t paying attention to what they’re doing.”
A Catholic news outlet also used location data from a data vendor to out a priest who had frequented gay bars, though it’s still unknown what company sold that information.
Many firms promise that privacy is at the center of their businesses and that they’re careful to never sell information that can be traced back to a person. But researchers studying anonymized location data have shown just how misleading that claim can be.
The truth is, it’s hard to know all the ways in which your movements are being tracked and traded. Companies often reveal little about what apps serve as the sources of data they collect, what exactly that data consists of, and how far it travels. To piece together a picture of the ecosystem, The Markup reviewed the websites and marketing language of each of the 47 companies we identified as operating in the location data industry, as well as any information they revealed about how the data got to them. (See our methodology here.)
How the Data Leaves Your Phone
Most times, the location data pipeline starts off in your hands, when an app sends a notification asking for permission to access your location data.
Apps have all kinds of reasons for using your location. Map apps need to know where you are in order to give you directions to where you’re going. A weather, waves, or wind app checks your location to give you relevant meteorological information. A video streaming app checks where you are to ensure you’re in a country where it’s licensed to stream certain shows.
But unbeknownst to most users, some of those apps sell or share location data about their users with companies that analyze the data and sell their insights, like Advan Research. Other companies, like Adsquare, buy or obtain location data from apps for the purpose of aggregating it with other data sources. Companies like real estate firms, hedge funds and retail businesses might then turn and use the data for their own advertising, analytics, investment strategy, or marketing purposes.
Serge Egelman, a researcher at UC Berkeley’s International Computer Science Institute and CTO of AppCensus, who has researched sensitive data permissions on mobile apps, said it’s hard to tell which apps on your phone simply use the data for their own functional purposes and which ones release your data into the economic ether.
“When the app asks for location, in the moment, because maybe you click the button to find stuff near you and you get a permission dialog, you might reasonably infer that ‘Oh, that’s to service that request to provide that functionality,’ but there’s no guarantee of that,” Egelman said. “And there’s certainly usually never a disclosure that says that the data is going to be limited to that purpose.”
Companies that trade in this data are reluctant to share which apps they get data from.
Companies like Adsquare and Cuebiq told The Markup that they don’t publicly disclose what apps they get location data from to keep a competitive advantage but maintained that their process of obtaining location data was transparent and with clear consent from app users.
“It is all extremely transparent,” said Bill Daddi, a spokesperson for Cuebiq.
He added that consumers must know what the apps are doing with their data because so few consent to share it. “The opt-in rates clearly confirm that the users are fully aware of what is happening because the opt-in rates can be as low as less than 20%, depending on the app,” Daddi said in an email.
Yiannis Tsiounis, the CEO of the location analytics firm Advan Research, said his company buys from location data aggregators, who collect the data from thousands of apps—but would not say which ones. Tsiounis said the apps he works with do explicitly say that they share location data with third parties somewhere in the privacy policies, though he acknowledged that most people don’t read privacy policies.
“There’s only so much you can squeeze into the notification message. You get one line, right? So you can’t say all of that in the notification message,” Tsiounis said. “You only get to explain to the user, ‘I need your location data for X, Y, and Z.’ What you have to do is, there has to be a link to the privacy policy.”
Only one company spokesperson, Foursquare’s Ashley Dawkins, actually named any specific apps—Foursquare’s own products, like Swarm, CityGuide, and Rewards—as sources for its location data trove.
But Foursquare also produces a free software development kit (SDK)—a set of prebuilt tools developers can use in their own apps—that can potentially track location through any app that uses it. Foursquare’s Pilgrim SDK is used in apps like GasBuddy, a service that compares prices at nearby gas stations, Flipp, a shopping app for coupons, and Checkout 51, another location-based discount app.
GasBuddy, Flipp, and Checkout 51 didn’t respond to requests for comment.
A search on Mighty Signal, a site that analyzes and tracks SDKs in apps, found Foursquare’s Pilgrim SDK in 26 Android apps.
While not every app with Foursquare’s SDK sends location data back to the company, the privacy policies for Flipp, Checkout 51, and GasBuddy all disclose that they share location data with the company.
Foursquare’s method of obtaining location data through an embedded SDK is a common practice. Of the 47 companies that The Markup identified, 12 of them advertised SDKs to app developers that could send them location data in exchange for money or services.
Placer.ai says in its marketing that it does foot traffic analysis and that its SDK is installed in more than 500 apps and has insights on more than 20 million devices.
“We partner with mobile apps providing location services and receive anonymized aggregated data. Very critically, all data is anonymized and stripped of personal identifiers before it reaches us,” Ethan Chernofsky, Placer.ai’s vice president of marketing, said in an email.
Into the Location Data Marketplace
Once a person’s location data has been collected from an app and it has entered the location data marketplace, it can be sold over and over again, from the data providers to an aggregator that resells data from multiple sources. It could end up in the hands of a “location intelligence” firm that uses the raw data to analyze foot traffic for retail shopping areas and the demographics associated with its visitors. Or with a hedge fund that wants insights on how many people are going to a certain store.
“There are the data aggregators that collect the data from multiple applications and sell in bulk. And then there are analytics companies which buy data either from aggregators or from applications and perform the analytics,” said Tsiounis of Advan Research. “And everybody sells to everybody else.”
Some data marketplaces are part of well-known companies, like Amazon’s AWS Data Exchange, or Oracle’s Data Marketplace, which sell all types of data, not just location data. Oracle boasts its listing as the “world’s largest third-party data marketplace” for targeted advertising, while Amazon claims to “make it easy to find, subscribe to, and use third-party data in the cloud.” Both marketplaces feature listings for several of the location data companies that we examined.
Amazon spokesperson Claude Shy said that data providers have to explain how they gain consent for data and how they monitor people using the data they purchase.
“Only qualified data providers will have access to the AWS Data Exchange. Potential data providers are put through a rigorous application process,” Shy said.
Oracle declined to comment.
Other companies, like Narrative, say they are simply connecting data buyers and sellers by providing a platform. Narrative’s website, for instance, lists location data providers like SafeGraph and Complementics among its 17 providers with more than two billion mobile advertising IDs to buy from.
But Narrative CEO Nick Jordan said the company doesn’t even look at the data itself.
“There’s a number of companies that are using our platform to acquire and/or monetize geolocation data, but we actually don’t have any rights to the data,” he said. “We’re not buying it, we’re not selling it.”
To give a sense of how massive the industry is, Amass Insights has 320 location data providers listed on its directory, Jordan Hauer, the company’s CEO, said. While the company doesn’t directly collect or sell any of the data, hedge funds will pay it to guide them through the myriad of location data companies, he said.
“The most inefficient part of the whole process is actually not delivering the data,” Hauer said. “It’s actually finding what you’re looking for and making sure that it’s compliant, making sure that it has value and that it is exactly what the provider says it is.”
Oh, the Places Your Data Will Go
There are a whole slew of potential buyers for location data: investors looking for intel on market trends or what their competitors are up to, political campaigns, stores keeping tabs on customers, and law enforcement agencies, among others.
Fast food restaurants and other businesses have been known to buy location data for advertising purposes down to a person’s steps. For example, in 2018, Burger King ran a promotion in which, if a customer’s phone was within 600 feet of a McDonalds, the Burger King app would let the user buy a Whopper for one cent.
Of the location data firms The Markup examined, the offerings are diverse.
https://bookshop.org/a/565/9781479837243
Advan Research, for instance, uses historical location data to tell its customers, largely retail businesses or their private equity firm owners, where their visitors came from, and makes guesses about their income, race, and interests based on where they’ve been.
“For example, we know that the average income in this neighborhood by census data is $50,000. But then there are two devices—one went to Dollar General, McDonald’s, and Walmart, and the other went to a BMW dealer and Tiffany’s … so they probably make more money,” Advan Research’s Tsiounis said.
Others combine the location data they obtain with other pieces of data gathered from your online activities. Complementics, which boasts data on “more than a billion mobile device IDs,” offers location data in tandem with cross-device data for mobile ad targeting.
The prices can be steep.
Outlogic (formerly known as X-Mode) offers a license for a location dataset titled “Cyber Security Location data” on Datarade for $240,000 per year. The listing says “Outlogic’s accurate and granular location data is collected directly from a mobile device’s GPS.”
At the moment, there are few if any rules limiting who can buy your data.
Sherman, of the Duke Tech Policy Lab, published a report in August finding that data brokers were advertising location information on people based on their political beliefs, as well as data on U.S. government employees and military personnel.
“There is virtually nothing in U.S. law preventing an American company from selling data on two million service members, let’s say, to some Russian company that’s just a front for the Russian government,” Sherman said.
Existing privacy laws in the U.S., like California’s Consumer Privacy Act, do not limit who can purchase data, though California residents can request that their data not be “sold”—which can be a tricky definition. Instead, the law focuses on allowing people to opt out of sharing their location in the first place.
The European Union’s General Data Protection Regulation has stricter requirements for notifying users when their data is being processed or transferred.
But Ashkan Soltani, a privacy expert and former chief technologist for the Federal Trade Commission, said it’s unrealistic to expect customers to hunt down companies and insist they delete their personal data.
“We know in practice that consumers don’t take action,” he said. “It’s incredibly taxing to opt out of hundreds of data brokers you’ve never even heard of.”
Companies like Apple and Google, who control access to the app stores, are in the best position to control the location data market, AppCensus’s Egelman said.
“The real danger is the app gets booted from the Google Play store or the iOS app store,” he said.” As a result, your company loses money.”
Researchers found, however, that the companies’ SDKs were still making their way into Google’s app store.
Apple didn’t respond to a request for comment.
“The Google Play team is always working to strengthen privacy protections through both product and policy improvements. When we find apps or SDK providers that violate our policies, we take action,” Google spokesperson Scott Westover said in an email.
Digital privacy has been a key policy issue for U.S. senator Ron Wyden, a Democrat from Oregon, who told The Markup that the big app stores needed to do more.
“This is the right move by Google, but they and Apple need to do more than play whack-a-mole with apps that sell Americans’ location information. These companies need a real plan to protect users’ privacy and safety from these malicious apps,” Wyden said in an email.
Recent White House Study on Taxes Shows the Wealthy Pay a Lower Rate Than Everybody Else
A decade ago, in an essay for The New York Times, Warren Buffett disclosed that he had paid nearly $7 million in federal taxes in 2010. “That sounds like a lot of money,” he wrote. “But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”
The words “taxable income” are doing a lot of work in that sentence.
Buffett owns a substantial number of shares in Berkshire Hathaway, the fabulously successful holding company he founded decades ago. As the company’s shares have soared nearly every year, his wealth has grown by billions. Under the U.S. tax code, none of that is taxed until he sells shares at a profit.
A little math shows that Buffett’s 17.4% rate meant he reported roughly $40.2 million in income in a year where Forbes said his wealth grew by $3 billion. His revelation made it possible to compare how much he was paying the government to the increase in the size of his fortune.
No one did so, and Buffett became something of a folk hero for calling for any increase in taxes.
When we obtained access to a trove of tax data on the richest Americans, it quickly became clear to our reporters that Buffett’s comparison of his own tax rate to his employees’ vastly understates the inequity of our tax system. Buffett is far from unique; the documents showed that the amount of money people like Michael Bloomberg, Jeff Bezos or Elon Musk reported to the IRS as income was infinitesimal when measured against their annual gains in wealth.
And so the first story in our “Secret IRS Files” series set out a new concept that makes more sense in our 21st century Gilded Age; we called it “the true tax rate.” We compared the annual taxes paid by the ultrarich to their wealth gains to give readers a sense of how the system really works.
From 2014 to 2018, we pointed out, Buffett paid $125 million in federal taxes. As he said, that sounds like a lot. But according to Forbes, his riches rose $24.3 billion during that period, making his true tax rate 0.1%. In a detailed written response, Buffett defended his practices but did not directly address ProPublica’s true tax rate calculation.
When we published this story, howls of rage rang out from the freewheeling corners of Twitter to the ornate offices on Wall Street. Some of the most irate critics wrote to me directly and demanded to know whether I was so @#$!@ stupid that I didn’t understand the meaning of the word “income tax.”
“This story, sadly, reeks with ‘class envy,’” one angry reader wrote. “If this was intended to get clicks, you made your money.” We’re a nonprofit and our revenue from advertising adds almost nothing to our annual budget, but I understand this reader’s larger point, which we noted in the story: The ultrarich are doing only what the current tax code invites them to do.
The debate intensified, and the White House-backed proposals on taxes advanced by congressional Democrats largely followed the traditional approach of raising rates on income. A separate bill introduced by Sens. Elizabeth Warren and Bernie Sanders to impose a 3% tax on all wealth above $1 billion is seen as having little chance of passing.
The reluctance to embrace a wealth tax is deeply rooted. The biggest donors to both parties would be hit hard by such a law. And as we pointed out in our initial story, the complexities of taxing wealth are not trivial. Several countries have tried and struggled to figure out a fair way to tax stock gains. Does an entrepreneur whose stock skyrockets in one year, and pays a big tax, deserve a rebate if his company’s shares plummet the next year?
All of that said, we took note when White House economists issued a study that used publicly available data to estimate “the average Federal individual income tax rate paid by the 400 wealthiest American families’ in recent years, determined using a more comprehensive measure of income.” Their methodology was similar to ours, and their findings — that those families gained $1.8 trillion from 2010 to 2018 and paid 8.2% in taxes — are in line with what we found in the tax data.
The authors say their findings are evidence in support of President Joe Biden’s plan for tweaking the existing system; the words “wealth tax” are not mentioned. They point to the administration’s proposal to impose higher tax rates on stock dividends and on capital gains, the profit an investor reaps when selling a stock whose value has risen.
(The Biden administration has proposed getting rid of a provision in the tax code that shields heirs who inherit stock from paying capital gains tax on the growth in value that occurred before the shares were transferred.)
None of the proposed changes come close to addressing the biggest hole in the system, which is that an ultrarich person can live comfortably off gains in wealth while never selling a single share. As our initial story pointed out, the Buffetts and Bezos of the world can borrow against the value of their considerable holdings and live comfortably without selling stock or receiving any income from dividends, which new companies like Tesla and Amazon don’t pay.
The strategy, known as “buy, borrow and die,” allows the wealthy to amass fast fortunes, pay no taxes on those gains and pass on much of the wealth to their descendants.
Herb and Marion Sandler, the founders of ProPublica, made it clear from the outset that they hoped our journalism would spur real-world change. They were not particularly interested in stories whose biggest effect was that they had “started a conversation.”
We still measure our success by tangible effects. But over the years, we have seen that the road to impact on very complex issues can begin by changing the conversation.
Lawmakers have said that some of the most egregious tax loopholes we’ve exposed, notably multibillion-dollar Roth IRA accounts, will be scrutinized as Congress takes up tax legislation in coming months.
There’s no telling where the larger conversation about taxing wealth will lead. As the White House paper suggests, a new way of thinking about equality and taxation has taken center stage. Whether that ultimately results in change remains very much an open question.
Conviction of Steven Donziger, said one critic, “perfectly encapsulates how corporate power has twisted the U.S. justice system to protect corporate interests and punish their enemies.”
Environmental justice advocates and other progressives on Friday condemned a federal judge’s decision Friday to sentence human rights lawyer Steven Donziger to six months in prison—following more than two years of house arrest related to a lawsuit he filed decades ago against oil giant Chevron.
The sentence, delivered by U.S. District Judge Loretta Preska in New York City, represents “an international outrage,” tweeted journalist Emma Vigeland following its announcement.
Donziger’s sentence came a day after the United Nations Working Group on Arbitrary Detention said it was “appalled” by the U.S. legal system’s treatment of the former environmental lawyer and demanded the U.S. government “remedy the situation of Mr. Steven Donziger without delay and bring it in conformity with the relevant international norms” by immediately releasing him.
Donziger represented a group of farmers and Indigenous people in the Lago Agrio region of Ecuador in the 1990s in a lawsuit against Texaco—since acquired by Chevron—in which the company was accused of contaminating soil and water with its “deliberate dumping of billions of gallons of cancer-causing waste into the Amazon.”
An Ecuadorian court awarded the plaintiffs a $9.5 billion judgment in 2011—a decision upheld by multiple courts in Ecuador—only to have a U.S. judge reject the ruling, accusing Donziger of bribery and evidence tampering. Chevron also countersued Donziger in 2011.
In 2019, U.S. District Judge Lewis A. Kaplan of the Southern District of New York—a former corporate lawyer with investments in Chevron—held Donziger in contempt of court after he refused to disclose privileged information about his clients to the fossil fuel industry. Kaplan placed Donziger under house arrest, where he has remained under strict court monitoring for 787 days.
In addition to Kaplan’s own connections to Chevron, the judge appointed private attorneys to prosecute the case, including one who had worked for a firm that represented the oil giant.
Preska, who found Donziger guilty of the contempt charges in July, is a leader of the right-wing Federalist Society, which counts Chevron among its financial backers.
“As I face sentencing on Day 787 of house arrest, never forget what this case is really about,” tweeted Donziger on Friday morning, as he awaited the sentencing. “Chevron caused a mass industrial poisoning in the Amazon that crushed the lives of Indigenous peoples. Six courts and 28 appellate judges found the company guilty.”
Donziger indicated Friday afternoon that he plans to appeal the sentence.
“Stay strong,” he tweeted along with a photo from a rally attended by his supporters Friday.
BREAKING: Flouting the U.N. decision ordering my release, Judge Preska sentenced me to 6 months in prison. Still on house arrest until the appeals court rules on my motion for release pending appeal. Picture is from rally this morning.
350.org co-founder and author Bill McKibben said on social media that Donziger “deserves our thanks and support” for “daring to point out that Big Oil had poisoned the rainforest.”Rick Claypool, research director for Public Citizen, tweeted that Donziger’s case “perfectly encapsulates how corporate power has twisted the U.S. justice system to protect corporate interests and punish their enemies”—noting that as Donziger is ordered to prison for six months, members of the Sackler family recently won immunity from opioid lawsuits targeting their private company, Purdue Pharma.
“This ruling was done to deter ANYONE from crossing corporate special interests,” said progressive former congressional candidate Jen Perelman.
Originally published on Common Dreams by JULIA CONLEY and republished under a Creative Commons License (CC BY-NC-ND 3.0).
More Than Half of America’s 100 Richest People Exploit Special Trusts to Avoid Estate Taxes
It’s well known, at least among tax lawyers and accountants for the ultrawealthy: The estate tax can be easily avoided by exploiting a loophole unwittingly created by Congress three decades ago. By using special trusts, a rarefied group of Americans has taken advantage of this loophole, reducing government revenues and fueling inequality.
There is no way for the public to know who uses these special trusts aside from when they’ve been disclosed in lawsuits or securities filings. There’s also been no way to quantify just how much in estate tax has been lost to them, though, in 2013, the lawyer who pioneered the use of the most common one — known as the grantor retained annuity trust, or GRAT — estimated they may have cost the U.S. Treasury about $100 billion over the prior 13 years.
As Congress considers cracking down on GRATs and other trusts to help fund President Joe Biden’s domestic agenda, a new analysis by ProPublica based on a trove of tax information about thousands of the wealthiest Americans sheds light on just how widespread the use of special trusts to dodge the estate tax has become.
More than half of the nation’s 100 richest individuals have used GRATs and other trusts to avoid estate tax, the analysis shows. Among them: former Democratic presidential candidate Michael Bloomberg; Leonard Lauder, the son of cosmetics magnate Estée Lauder; Stephen Schwarzman, a founder of the private equity firm Blackstone; Charles Koch and his late brother, David, the industrialists who have underwritten libertarian causes and funded lobbying efforts to roll back the estate tax; and Laurene Powell Jobs, the widow of Apple founder Steve Jobs. (Powell Jobs’ Emerson Collective is among ProPublica’s largest donors.)
More than a century ago amid soaring inequality and the rise of stratospherically wealthy families such as the Mellons and Rockefellers, Congress created the estate tax as a way to raise money and clip the fortunes of the rich at death. Lawmakers later added a gift tax as a means of stopping wealthy people from passing their fortunes on to their children and grandchildren before death. Nowadays, 99.9% of Americans never have to worry about these taxes. They only hit individuals passing more than $11.7 million, or couples giving more than $23.4 million, to their heirs. The federal government imposes a roughly 40% levy on amounts above those figures before that wealth is passed on to heirs.
For her part, Powell Jobs has decried as “dangerous for a society” the early 20th century fortunes of the Mellons, Rockefellers and others. “I’m not interested in legacy wealth buildings, and my children know that,” she told The New York Times last year. “Steve wasn’t interested in that. If I live long enough, it ends with me.”
Nonetheless, after the death of her husband in 2011, Powell Jobs used a series of GRATs to pass on around a half a billion dollars, estate-tax-free, to her children, friends and other family, according to the tax records and interviews with her longtime attorney. By using the GRATs, she avoided at least $200 million in estate and gift taxes.
Her attorney, Larry Sonsini, said Powell Jobs did this so that her children would have cash to pay estate taxes when she dies and they inherit “nostalgic and hard assets,” such as real estate, art and a yacht. (At 260 feet, Venus is among the larger pleasure ships in the world.) Without the $500 million or so passed through the trusts, he said, Powell Jobs’ heirs would have to sell stock that she intends to give to charity to pay her estate tax bill.
Sonsini said Powell Jobs, whose fortune is pegged at $21 billion by Forbes, has already given billions away to charity and paid $2.5 billion in state and federal taxes between 2012 and 2020. “When you look at an estate that may be worth multiple billions, and all the rest is going to charity, and you put it in perspective, what is the problem we’re worried about here?” Sonsini asked. “This is not about creating dynasty wealth for these kids.”
In a written statement, Powell Jobs said she supports “reforms that make the tax code more fair. Through my work at Emerson Collective and philanthropic commitments, I have dedicated my life and assets to the pursuit of a more just and equitable society.”
Others whose special trusts ProPublica identified, including Bloomberg and the Kochs, declined to comment on why they’d set up the trusts or their estate-tax implications. Representatives for Lauder didn’t respond to requests to accept questions on his behalf. Schwarzman’s spokesperson wrote that he is “one of the largest individual taxpayers in the country and fully complies with all tax rules.”
A typical GRAT entails putting assets, like stocks, in a trust that ultimately benefits a person’s heirs. The trust pays back an amount equal to what the trust’s creator put in plus a modest amount of interest. But any gains on the investments above that amount flow to the heirs free of gift or estate taxes. So if a person puts $100 million worth of stock in a GRAT and the stock rises in value to $130 million, their heirs would receive about $30 million tax-free.
In 1990, Congress accidentally created GRATs when it closed another estate tax loophole that was popular at the time. The IRS challenged the maneuver but lost in court.
“I don’t blame the taxpayers who are doing it,” said Daniel Hemel, a professor at the University of Chicago Law School. “Congress has virtually invited them to do it. I blame Congress for creating the monster and then failing to stop the monster once it became clear how much of the tax base the GRAT monster would eat up.”
Users of the trusts extend well beyond the top of the Forbes rankings, ProPublica’s analysis of the confidential IRS files show. Erik Prince, founder of the military contractor Blackwater and himself heir to an auto parts fortune, used the shelter. Fashion designer Calvin Klein has used them, as have “Saturday Night Live” creator Lorne Michaels and media mogul Oprah Winfrey.
“We have paid all taxes due,” a spokesperson for Winfrey said. A representative of Klein did not accept questions from ProPublica or respond to messages. A spokesman for Michaels declined to comment.
Prince also did not answer questions. “Hey if you publish private information about me I’ll be sure to return the favor,” he wrote. “Go ahead and fuck off.”
The GRAT has become so ubiquitous in recent decades that high-end tax lawyers consider it a plain vanilla strategy. “This is an off-the-shelf solution,” said Michael Kosnitzky, co-leader of the private wealth practice at law firm Pillsbury Winthrop Shaw Pittman. “Almost every wealthy person should have one.”
ProPublica’s tally almost certainly undercounts the number of Forbes 100 members who use shelters to avoid estate taxes. ProPublica counted only those people whose tax records or public filings explicitly mention GRATs or other trusts commonly used to dodge gift and estate taxes. But a wealthy person can call their trusts whatever they want, leaving plenty of trusts outside of ProPublica’s count.
This month, the House and Senate are hammering out proposals to raise revenue to help pay for the Biden administration’s plans to expand the social safety net. The legislative blueprint released by House Ways and Means Committee Chairman Richard Neal, D-Mass., would defang GRATs and other trusts, which would still be legal but no longer be as useful for estate tax avoidance. If the provision makes it into law, “it would put a major dent in GRATs,” said Bob Lord, an Arizona attorney who specializes in trusts and estates.
Senate Budget Committee Chairman Bernie Sanders, I-Vt., has proposed going further in undercutting estate tax avoidance tools. But the prospect of any reform is uncertain, as Democrats on Capitol Hill struggle to find the votes to pass the package of spending and tax changes.
GRATs are commonly described by tax lawyers as a “heads I win, tails we tie” proposition. If the investment placed in the GRAT soars in value, that increase passes to an heir without being subject to future estate tax. If the investment doesn’t go up, the wealthy person can simply try again and again until they succeed, leading many users to have multiple GRATs going at a time.
For example, Herb Simon, founder of the country’s biggest shopping mall empire and owner of the Indiana Pacers, was one of the most prolific GRAT creators in records reviewed by ProPublica. Since 2000, he has hatched dozens of the trusts, often more than one a year. In an interview with The Indianapolis Star in 2017, the octogenarian Simon said, “It’s always a big tax problem” for the next generation when someone dies, “but we’ve worked that tax problem. We won’t have a problem with that.”
A spokesperson for Simon didn’t respond to questions for this article.
Mentions of these trusts have periodically surfaced in the press after being disclosed in securities filings, as was the case with trusts held by Facebook co-founders Mark Zuckerberg and Dustin Moskovitz and Chief Operating Officer Sheryl Sandberg. In 2013, Bloomberg News published a groundbreaking series on GRATs, mining securities filings and other records to reveal how the mega-rich, including casino magnate Sheldon Adelson and such families as Walmart’s Waltons, had perfected the use of the device.
ProPublica’s data shows that Michael Bloomberg, the majority owner of the company that bears his name and No. 13 on Forbes’ list of the wealthiest Americans, is himself a heavy user of GRATs. Over the course of a dozen years, he repeatedly cycled pieces of his private company in and out of the trusts — often opening multiple GRATs in one year. During that time, hundreds of millions of dollars in income flowed through Bloomberg’s GRATs, giving him opportunities to shield parts of his fortune for his heirs.
ProPublica described the transactions (but not the name of the person engaging in them) to Lord, the trusts and estates attorney. The GRAT is “the perfect loophole to avoid estate and gift tax in this situation,” said Lord, who is also tax counsel for Americans for Tax Fairness and an advocate for estate tax reform.
When Bloomberg ran for president in 2020, he vowed to shore up the estate tax. “Owners of the biggest estates are expert at gaming the system to reduce what they owe,” a campaign fact sheet for his tax plan said. Bloomberg vowed to “lower the estate-tax threshold, so that more estates are taxed,” and to “shut down multiple estate-tax avoidance schemes.” His fact sheet offered few details as to how he would do that, and it didn’t mention GRATs.
The legislation Congress is now considering to curtail GRATs would leave open other options for estate tax avoidance, including a cousin to the GRAT known as a charitable lead annuity trust, or CLAT, which contributes to charity while passing gains from stocks and other assets on to heirs. And the legislation would grandfather in existing trusts, meaning that those who have already established trusts would be able to continue to use them to avoid paying estate taxes.
That has set off a predictable push by tax lawyers to get their clients to create tax-sheltering trusts before any new legislation takes effect.
Porter Wright, a law firm that offers estate planning services, told existing and potential clients it was “critical” to evaluate opportunities because “the window may close very soon. There are important and time sensitive issues which could substantially impact the amount of wealth you are able to transfer free of estate and gift tax to future generations.”
Originally published on ProPublica by Jeff Ernsthausen, James Bandler, Justin Elliott and Patricia Callahan and republished under Creative Commons.
“We continue to bankroll the very fossil fuel companies responsible for the climate crisis, then wonder why our planet is on fire.”
A new report released Wednesday identifies $86 billion worth of offshore tax loopholes that a dozen U.S.-based oil and gas companies exploit each year as part of a “tax bonanza,” a finding that comes as climate justice advocates push Congress to eliminate subsidies to the fossil fuel industry.
“Our government cannot continue to bankroll climate destruction,” Friends of the Earth tweeted Wednesday.
NEW REPORT: Exxon Mobil currently relies on a tax loophole worth nearly one BILLION dollars. Enough is enough — time to gut all $121 billion in fossil fuel subsidies. Our government cannot continue to bankroll climate destruction.#EndFossilFuelSubsidieshttps://t.co/1gdN6oEgQt
The report (pdf), compiled by Friends of the Earth, Oxfam America, and BailoutWatch, reveals the consequences of “two esoteric provisions in the tax code worth tens of billions of dollars to Big Oil’s multinational majors,” including ExxonMobil, Chevron, ConocoPhillips, and other polluters most responsible for the climate emergency.
As a result of the GOP’s 2017 tax law, corporations that drill overseas benefit from special treatment under the Global Intangible Low-Tax (GILTI) framework, which covers Foreign Oil and Gas Extraction Income (FOGEI).
The Treasury Department estimates that repealing the Trump-era exemption for FOGEI would raise $84.8 billion in revenue from just 12 companies that are currently eligible for the carveout, the report notes.
“It is unfortunate but not surprising that the handful of companies benefitting from these loopholes are lobbying to protect their special treatment.” —Chrive Kuveke, BailoutWatch
Another corporate handout, the so-called dual capacity loophole, is “a longstanding gimmick” wherein fossil fuel giants “artificially inflat[e] their foreign tax bills” to evade U.S. taxes.
Although they are permitted to claim tax credits for taxes paid to foreign governments, U.S. companies are not allowed to do so for non-tax payments such as royalties.
“In practice, however, the categories often are commingled—particularly when companies make a single combined payment including both taxes and fees,” the report explains. “A foreign country may even try to disguise non-tax payments as a tax, knowing that in many cases a multinational company may receive a foreign tax credit from its home country. Existing regulation gives dual capacity taxpayers vast latitude to assert what portions of their payments are taxes eligible to offset U.S. tax bills.”
Eliminating the dual capacity loophole would raise at least an additional $1.4 billion, according to the Biden administration, while the Joint Committee on Taxation puts the figure somewhere between $5.6 billion and $13.1 billion. The report points out that “the estimates vary so widely in part because we have precious little visibility into Big Oil’s payments to governments—and that’s just how the companies want it.”
“As Democrats propose closing loopholes to help cover the cost of their $3.5 trillion reconciliation package,” the report states, “these obscure subsidies present a rare chance to act on climate, fund infrastructure, and promote tax fairness in a single stroke.”
While the House Ways and Means Committee’s markup of the Build Back Better Act includes a tax reform proposal that would reverse the FOGEI carveout and the dual capacity loophole, it would leave intact at least $35 billion in federal subsidies for domestic fossil fuel production—despite President Joe Biden’s call to phase out polluter giveaways over a decade.
House Democrats’ failure to stop showering Big Oil with public money—a move supported by a majority of people in the U.S. and many, though not all, Democratic lawmakers—has drawn progressives’ ire.
“The House bill made a decent start by targeting Big Oil’s international tax loopholes, but it went nowhere near far enough,” Lukas Ross, Climate and Energy Justice program manager at Friends of the Earth, said Wednesday in a statement.
Senate Majority Leader Chuck Schumer (D-N.Y.) “needs to lead on climate and ensure that all $121 billion in fossil fuel subsidies are repealed in the final package,” Ross added.
According to Daniel Mulé, policy lead for Oxfam’s Extractive Industries Tax and Transparency project, “U.S. Big Oil companies like Exxon and Chevron have fought tooth and nail to keep the payments they make to governments around the world a secret, while paying lip service to the global movement for payment transparency.”
“This secrecy,” said Mulé, “has a potential tax impact in the U.S. as well, as it makes it all the more difficult to discern if U.S. oil and gas companies are illegitimately inflating their foreign tax credits.”
The report draws attention to several legislative proposals that would do away with subsidies for domestic fossil fuel production as well as tax exemptions for foreign extraction, including:
The No Tax Breaks for Outsourcing Act from Sens. Chris Van Hollen (D-Md.), Sheldon Whitehouse (D-R.I.), and Dick Durbin (D-Ill.), and Rep. Lloyd Doggett (D-Texas);
The Corporate Tax Dodging Prevention Act from Sens. Van Hollen, Sanders, Whitehouse, Kirsten Gillibrand (D-N.Y.), and Jack Reed (D-R.I.), and Reps. Jimmy Gomez (D-Calif.) and Jan Schakowski (D-Ill.);
The End Oil and Gas Tax Subsidies Act from Reps. Earl Blumenauer (D-Ore.), Sean Casten (D-Ill.), Donald McEachin (D-Va.), and Katie Porter (D-Calif.).
The report was released the same day members of the Congressional Progressive Caucus urged House leaders to include a repeal of domestic fossil fuel subsidies in the Democrats’ Build Back Better Act.
“Instead of creating jobs,” the progressive lawmakers wrote, the subsidies “widen the profit margin of fossil fuel companies.”
We continue to bankroll the very fossil fuel companies responsible for the climate crisis, then wonder why our planet is on fire.
Thank you to the reps calling for an end to Big Oil’s $86 billion in offshore tax loopholes — as well as their $35 billion in domestic handouts! pic.twitter.com/hY0EVsOMK4
The report emphasizes that fossil fuel champions—including the Exxon lobbyist who was caught on camera discussing how the company benefits from offshore tax loopholes and intends to further undermine climate action—are fighting hard to preserve billions of dollars in taxpayer-funded handouts.
“Big Oil isn’t going quietly,” said Chrive Kuveke, an analyst at BailoutWatch. “Since Biden became president, it is unfortunate but not surprising that the handful of companies benefitting from these loopholes are lobbying to protect their special treatment.”
Bond jump should have been seen coming, yet the reaction is nevertheless a big rush to the exits
In what some are calling a Taper Tantrum, the markets dropped with a sense of purpose today, with little bounce after the close in the futures market. With Fed rate hikes now a certainty, inflation concerns real, and bond yields spiking today, there were plenty of things to point to as catalysts.
This could be, and this is extremely likely regardless of what endless permanent-bull commentators would have you believe, the start of a tough two months, with late September and October being known as a very dangerous time in markets, especially whey they exhibit pre-crash signs and warnings.
Insane valuations that have preceded past September / October disasters are back
It’s unbelievable that the fall of 2008, when the financial crisis came to a head with the Lehman Brothers collapse, was 13 years ago, and the prior peak in November 2007 was a full 14 years.
I guess we can observe that we now have the iPhone 13, with the iPhone “1” which was just called “iPhone” at the time, has been marking the time with yearly iterations, not always named in sequence:
iPhone: June 29, 2007
iPhone 3G: July 11, 2008
iPhone 3GS: June 19, 2009
iPhone 4: June 24, 2010
iPhone 4S: October 14, 2011
iPhone 5: September 21, 2012
iPhone 5S & 5C: September 20, 2013
iPhone 6 & 6 Plus: September 19, 2014
iPhone 6S & 6S Plus: September 19, 2015
iPhone 7 & 7 Plus: September 16, 2016
iPhone 8 & 8 Plus: September 22, 2017
iPhone XS, XS Max: September 21, 2018
iPhone 11, Pro, Pro Max: September 20, 2019
iPhone 12, Mini, Pro, Pro Max: October 23, 2020
iPhone 13, Mini, Pro, Pro Max, September 24, 2021
And during all these years, for the most part the artificially inflated Fed “bubble of everything” has continued.
Here is a disturbing chart, courtesy of Elliott wave International at Elliottwave.com:
This behavior, seen across nearly all markets since extreme measures were taken to respond when the March 2020 pandemic crash occurred, has been building to a crescendo. And today was a tiny pin-prick that could augur ill for October.
What this has led to, naturally, is an overvaluation beyond anything seen in modern times, perhaps 500 years. The previous all-time-peak for overvalued stocks (S&P) was in March 2000. August 2021 is far beyond that peak and likely will stand as the most overvalued moment for decades.
Unless, that is, somehow the insane valuations are pushed even higher. Which is unlikely, but not impossible, given the state of delusional euphoria that pervades the financial markets.
Many 2021 characteristics, such as the Crypto, NFT frenzy will be seen in a similar light to the tech stocks in 2000 or Real estate in 2007
There’s a sense that it is normal for bored apes NFTs to experience a multimillion dollar bidding wars, or for crypto alt coins with dog mascots to explode 10,000% or more during this, possibly final phase, of what has been called the “everything bubble”.
And why not? If you bought and held almost anything in March 2009 or again at the bottom of the crash on March 16, 2020, then you have seen nearly continuous gains that you’d be eager to risk on, well, anything.
And if you were 10 years old in the year 2000, you’d not have known about NASDAQ drops that take around 13 years to regain what was lost after a 1 year bear market, so why worry?
Perhaps the Fed and the markets seemingly infinite ability to expand and inflate will go on for years. Or the next bear, possibly the one that already kicked off today, and will accelerate into October, is one to take seriously.
Photo by Extinction Rebellion NYC / Twitter @XR_NYC
At least 40 climate activists were arrested Friday at the New York City offices of JPMorgan Chase, Citibank, and Bank of America, organizers said, as campaigners across the United States demanded financial institutions stop supporting the destruction of the planet.
“People are in denial about the mess we’re in,” said Kerith Creo of Extinction Rebellion (XR) NYC. “We’re sending a message loud and clear that the little action that politicians and greenwashing CEOs have taken so far does not begin to deal with the magnitude of this crisis.”
The protest actions included delivering 150,000 petition signatures as part of the Stop the Money Pipeline (STMP) coalition‘s “Deadline Glasgow: Defund Climate Chaos” campaign to pressure banks ahead of COP 26, a United Nations summit set to start on October 31.
Despite financial institutions’ net-zero emissions by 2050 pledges, the petition highlights, “they are providing loans, insurance, and billions in investment capital to corporations expanding the fossil fuel industry and deforesting the Amazon and other tropical forests―companies that are guilty of human rights abuses and violations of Indigenous sovereignty.”
The petition calls out some specific projects—such as Line 3—and urges banks, insurers, asset managers, and the Biden administration to “end their support for companies engaged in climate destruction and human rights abuses” before the two-week U.N. summit in Scotland.
@XR_NYC is staging a boat outside @Chase HQ, who is the biggest fossil fuel funder in the world.
They poured $317 billion poured into fossil fuels since the 2015 Paris Agreement. Who pays the price for Hurricane Ida? We do.https://t.co/1pZUyDyRLD
The upcoming negotiations in Glasgow “are the most important international climate talks since the Paris agreement was signed in 2015,” STMP said in a statement Friday. “It is also supposed to be ‘the climate finance COP.'”
In New York City, climate activists set up a boat outside the office of JPMorgan Chase, urging the bank to “stop the greenwashing,” and draped a banner that read “#1 Funder of Climate Death” over the building’s entrance.
At Bank of America’s Manhattan office, “half a dozen women blockaded the entrance and a seventh woman sat in a hammock supported by a large tripod on the sidewalk,” according to XR. Outside Citibank’s building, “activists set up a camp on the lawn near the entrance and put up a tripod to which they locked themselves down.”
And thank you to these activists at @Citibank HQ this morning for also risking arrest to bring attention to the SECOND worst fossil fuel funder @XR_NYChttps://t.co/4bLjmuPgff
“We’ve reached the breaking point,” said Christina See of XR NYC. “We need our government leaders to take action immediately. The New York City area saw over 40 deaths due to record breaking floods just a few weeks ago. The climate crisis is here, now.”
The remnants of Hurricane Ida—which initially made landfall in Louisiana on the anniversary of Hurricane Katrina—caused fatal flooding across the Northeast, sparking warnings from not only climate activists but also political leaders about what the future holds.
While touring damage in New York and New Jersey, President Joe Biden said that “we got to listen to the scientists and the economists and the national security experts. They all tell us this is code red; the nation and the world are in peril. And that’s not hyperbole. That is a fact.”
Climate campaigners responded to Biden’s comments by urging him to declare a national climate emergency and stop all fossil fuel projects, highlighting his refusal to block the Line 3 tar sands pipeline opposed by Indigenous leaders and environmentalists in Minnesota.
The protests came as the U.S. president held a climate meeting with leaders of major economies and confirmed a new global pledge to reduce methane pollution at least 30% by 2030. Biden’s event followed his leadership summit in April, during which he pledged to cut the nation’s overall planet-heating emissions in half within this decade.
Activists on Friday “shut down 4th Avenue in downtown Seattle, and disrupted business at the Canadian Consulate, Chase, and Bank of America,” according to the Washington city’s arm of 350.org.
STMP explained that “they’re targeting the world’s biggest financers of climate chaos, as well as the Canadian government, who bought the troubled Trans Mountain oil pipeline in 2018.”
The demonstrations in New York City, Seattle, and beyond came as a new U.N. analysis revealed that recent emissions reduction pledges governments have made in anticipation of COP 26 are nowhere near ambitious enough to meet the Paris agreement’s 1.5°C target.
According the new report, the world is on track for 2.7°C or warming by 2100—a revelation that prompted U.N. Secretary-General António Guterres to warn that a failure to meet the Paris temperature goal “will be measured in the massive loss of lives and livelihoods.”
China is at the forefront of government opposition to cryptocurrencies
The central bank of China stated as a declaration that all transactions involving Bitcoin and any “virtual” currencies illegal, according to the AP.
This seems to be an escalation of the various methods being used to block and prohibit the use of any currency or “money” outside the direct control of the Chinese government.
In a notice released by the central bank the reasoning was elaborated on – stating that digital currencies such as Bitcoin, Ethereum and others disrupt the current financial system and encourage and help facilitate money-laundering and other crimes.
“Virtual currency derivative transactions are all illegal financial activities and are strictly prohibited,”
–the People’s Bank of China
The price of Bitcoin fell, to $41,180, in the hours after the announcement. Other major cryptocurrencies also fell. . Ethereum dropped almost 10%, falling from $3,100 to around $2,758.
Those levels appeared to be a short term low as there has been a recovery bounce since the initial reaction selloff.
China is gearing up for it’s own ‘innovations’ involving digital currencies and transactions
This clampdown follows the banning of Bitcoin mining and an exodus of a large number of Chinese mining operations, many relocating to the US, Europe, Southeast Asia and elsewhere. At the peak, Chinese miners accounted for around 3/4 of the world’s electricity consumption related to crypto mining, according to the Cambridge Bitcoin Electricity Consumption index.
That share is still the highest, though far lower, with the USA being the second largest consumer of electricity used for Bitcoin mining.
There is a worldwide “showdown” of sorts building, with cryptocurrency adherents touting, often with great resolve, the privacy, anonymity and “freedom” of using the coins, while many governments, China, and Turkey being outspoken, consider the potential losses that could come from allowing private actors to control financial transactions.
Although fiat currencies all have cash, paper bills, that can also be used anonymously, the potential criminal laundering has government controls and laws in place to minimize (or at least attempt to minimize) the magnitude of the problem.
tumbles
Governments getting increasingly worried as crypto adoption continues to expand worldwide
Many governments, including the People’s Bank of China, are developing electronic versions of the local fiat currency, such as China’s yuan for example. to facilitate cashless transactions which, unlike with Bitcoin, can be more easily tracked and controlled by the local authorities, communist or otherwise.
Calls and warning are also building with Regulators in many countries, including the US, warning of the dangers and emphasizing that they want cryptocurrencies to have greater oversight.
For example, Gary Gensler, chairman of the Securities and Exchange Commission, recently said that investors need more protection in the cryptocurrency market, calling the current state of the largely unregulated market “rife with fraud, scams and abuse” and compared it to the “Wild West.”
The SEC has already cracked down on cases of alleged freud involving crypto, but Gensler believes that the agency will need more authority from Congress to and funding to adequately regulate the market..
As a result, miners have been moving operations out of China.
Two years ago, China alone accounted for around three-quarters of all the electricity used for crypto mining, by far the most in the world, according to the Cambridge Bitcoin Electricity Consumption index.
Expect more government announcements involving crypto and new ways to try to control or inhibit its proliferation
The looming showdown appears heading for a significant and dangerous climax, with both sides, crypto enthusiasts and private holders and users of the coins on the one side, and, in some cases, terrified governments on the other wanting to outlaw and stamp out the entire sector.
In the US this will be difficult, with so many high profile and powerful individuals and companies already embracing the idea that the future will contain, at least for the foreseeable time frame, both the government controlled fiat system and the surging and diverse cryptocurrency systems.
House Bill Would Blow Up the Massive IRAs of the Superwealthy
Legislation currently making its way through Congress would take a sledgehammer to the massive individual retirement accounts built up tax-free by a select group of the ultrawealthy.
The proposal, which is part of the infrastructure and tax package advancing in the House, targets the jaw-dropping IRAs accumulated by multimillionaires and billionaires such as tech investor Peter Thiel, which were first reported by ProPublica earlier this year. Those accounts — Thiel’s alone was worth $5 billion in 2019 — have allowed some super-wealthy Americans to turn their Roth IRAs, tools meant to incentivize middle-class retirement saving, into supersized tax shelters.
The proposed reform, put forward by House Ways and Means Chairman Richard Neal, D-Mass., would effectively cap the total amount someone could hold in a Roth at $20 million and compel the holders of the giant accounts to withdraw anything over that limit. Separately, individuals would have to add up the balances of their retirement accounts — including Roths, traditional IRAs, 401(k)s and 403(b)s — and every year withdraw half of any amount over $10 million. The provisions would only apply to individuals with taxable income of over $400,000 or couples making over $450,000.
The reform wouldn’t affect the overwhelming majority of Americans, whose retirement savings (if they have any) are far more modest — the average Roth was worth just $39,108 at the end of 2018.
“Incentives in our tax code that help Americans save for retirement were never intended to enable a tax shelter for the ultra-wealthy,” Neal said earlier this year. “We must shut down these practices.”
Should the bill pass, it could have profound implications for PayPal founder Thiel, whose gargantuan Roth stunned lawmakers, spurring Neal to vow a crackdown. Thiel wouldn’t owe any tax up front and no early withdrawal penalties would apply, but he’d be required to move billions out of the tax-advantaged account. And any gains on investments made with that money would no longer be sheltered from taxes, potentially creating hundreds of millions of dollars in future tax liabilities.
Above: “I’ll Take Your Questions” book on inside secrets of the Trump final days, by Stephanie Grisham for aide to both Trump and Melania
The great appeal of the Roth IRA is that once money is inside it, any income generated — such as capital gains from selling a stock, investment interest or dividends — is tax-free, as long as the holder waits until he or she is 59 and a half to withdraw it. (Thiel hits that mark in 2027.) In a traditional IRA, by contrast, money that’s withdrawn counts as income and is taxed.
The IRA reforms are part of a slate of proposals designed to eliminate loopholes and boost tax rates on rich individuals and corporations.
Several of the changes address revelations contained in The Secret IRS Files, a series of ProPublica stories published this year that are exploring the ways the very richest Americans avoid paying taxes. Usually such efforts remain secret, but ProPublica has obtained a trove of tax records covering thousands of the country’s richest people. The records reveal not only the diverse array of tax-avoidance techniques used by the rich, but also that some of the very richest have consistently found ways to avoid taking income, so they pay little or no taxes, even as their wealth multiplied to historic levels.
The current House plan falls short of President Joe Biden’s more ambitious proposals to combat wealth inequality through the tax code. But experts say it would significantly increase the taxes paid by high-income Americans. Among other things, it would all but eliminate a major deduction created by President Donald Trump’s 2017 tax law that, as ProPublica recently reported, showered massive tax breaks on some of the richest families in the country.
Given the stakes for a small group of wealthy and powerful Americans, it’s unclear whether the IRA proposal, along with the rest of the package, will become law. It must pass the House and make it through the Senate, where it will likely need the votes of all 50 Democratic senators to pass. Capitol Hill staffers say the bill remains fluid and provisions could still be cut, added or modified.
For now, however, the proposal has alarmed those who stand to lose the most. Three tax lawyers told ProPublica that clients with giant IRAs have reached out to them, worried about the potential reforms. Already a lawyer and an accountant are offering a paid webinar that pitches strategies to help owners of large IRAs get around the proposed rules.
A spokesman for Thiel didn’t respond to a request for comment.
The tax proposals have drawn opposition from Republicans on Capitol Hill. “This is very bad news for the U.S. economy,” said Ways and Means Committee ranking member Rep. Kevin Brady, R-Texas, in an interview this week.
A budget analyst at the anti-tax Heritage Foundation specifically criticized the IRA reform proposals as “stifling retirement savings and decreasing the economy-wide investment in future productivity.”
Neal announced his plans to curb the size of mega IRAs in July following ProPublica’s story revealing how Thiel and other billionaires had amassed giant retirement accounts using techniques largely unavailable to most taxpayers. Other wealthy investors with giant retirement accounts included financier Michael Milken, Warren Buffett and executives from investment giant Bain Capital.
Neal joined his Senate counterpart, Ron Wyden, D-Ore., who had been pushing for reform of mega IRAs for years without much support from his peers.
With a multibillion-dollar tax-free account on the line, a wealthy investor might try to keep his income below the $400,000 threshold set by the proposal. In Thiel’s case, it’s not clear if that would be possible, given that he’s long reported tens of millions of dollars on his tax returns from capital gains, interest and dividends on investments he holds outside of his Roth IRA. And even if he has to withdraw billions from his Roth, he will never have to pay taxes on years of growth inside the account.
ProPublica has previously reported that several billionaires have had very little taxable income in certain years, including Jeff Bezos and Elon Musk. Musk did not respond to questions for that story and Bezos’ representatives would not designate someone to accept questions related to that story.
The proposal would also add restrictions in areas that congressional investigators have said are ripe for abuse by the wealthy: The owners of IRAs would be barred from using the accounts to either purchase certain nonpublic investments or buy stakes in companies in which they are an officer.
Thiel launched his Roth IRA by purchasing so-called founder’s shares of PayPal in 1999 when he was chairman and CEO of the company, according to tax records and a financial statement Thiel included in his application for residency in New Zealand. Securities and Exchange Commission records show he bought 1.7 million shares for $1,700, or a tenth of a penny per share. (The maximum contribution to a Roth that year was $2,000.) PayPal later told the SEC the shares were sold “below market value.”
The practice has become popular among the founders of Silicon Valley companies, who tuck shares of their startups into IRAs, often after buying them at bargain prices. This can sidestep IRA contribution limits and generate massive tax-free growth if the value of their companies explodes.
The proposal would also shut down the so-called backdoor Roth. ProPublica found that billionaires like Buffett had taken advantage of a maneuver, known as a conversion, that allows the wealthy to sidestep existing income caps to create a Roth IRA. In a conversion, the owner of a traditional IRA can transform it into a Roth by paying one-time tax on the money. Once the account is converted into a Roth, no additional income taxes are ever due. The new provision would bar conversions for individuals with income over $400,000, though the ban would not go into effect until 2031 for budgetary reasons. (Buffett previously didn’t respond to questions about his IRA.)
The proposal also has implications for the holders of giant traditional IRAs, who could suddenly owe a hefty tax bill. Money withdrawn from a traditional IRA counts as taxable income. Milken, the 1980s junk bond king who went to prison for fraud and was later pardoned by Trump, had traditional IRAs valued at $509 million at the end of 2018, according to tax records. If the law passed, Milken could face a tax bill of roughly $100 million, depending on the current size of his account. A spokesperson for Milken declined to comment.
Separately, another part of the bill would tackle the generous business income deductions granted by Trump’s 2017 tax law.
As ProPublica previously reported, the drafting of the deduction was marked by last-minute changes and a rush of lobbying dollars from corporations and the superrich. The result of its passage, confidential tax records show, was a windfall for billionaires such as media mogul Michael Bloomberg, packaging tycoons Dick and Liz Uihlein, and the Bechtel family, owners of a global engineering and construction firm.
Bloomberg received a deduction of roughly $183 million in 2018 alone as a result of the provision, while the Uihleins netted around $118 million.
Under the House proposal, the deduction would be capped at $400,000 for an individual and $500,000 for a couple, virtually wiping it out for the very rich. If such a cap had been in place in 2018, for example, the Uihleins would have gotten a deduction worth just $500,000 instead of $118 million. A competing Senate proposal unveiled by Wyden in July would go even further. A spokesperson for the Uihleins declined to comment on the proposed reforms.
On a broader level, the House plan would spell a significant tax hike on Americans earning more than $400,000, raising their individual income tax rates as well as bumping up the corporate tax rate, the first such hikes in a decade.
But despite the proposal’s ambition, critics say it misses a rare opportunity to capture the massive untaxed wealth of some of the richest individuals in history, including Bezos and Musk, who have often found ways to keep their income low.
As ProPublica reported, they and other billionaires have managed to pay little to no taxes in the past. Some have done so by pursuing the so-called buy, borrow, die strategy. By holding on to his Tesla stock but borrowing money to finance his lifestyle, Musk, for example, can avoid income that is taxable under current law. If he sticks to this strategy till death, the income tax liability on his fortune will evaporate for his heirs.
Some Democrats and policymakers had aspired to even bolder tax code changes that would have targeted the stratospheric increases in the ultrawealthy’s riches. One idea, championed by Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., would be to levy a so-called wealth tax on billionaires’ overall holdings. Another, pushed by Wyden, would tax the annual gains billionaires logged, even if they hadn’t sold the assets. Both ideas foundered, with concerted opposition from billionaires and skittishness from Democratic centrists. Some critics point out that wealth taxes have often failed in other countries. And many policymakers believe it would be too logistically difficult to measure assets properly and enforce such a sweeping rule on gains.
Originally published on ProPublica by Justin Elliott, Patricia Callahan and James Bandler and republished under Creative Commons.
A bill headed to the governor’s desk aims to curb injuries in warehouse distribution centers run by a broad spectrum of employers and outlaw punishment for bathroom breaks
Yesenia Barrera was just finishing up her 10-hour shift at an Amazon fulfillment center in Rialto, Calif., she recalled, when a manager approached her. She said he was concerned that throughout the day she’d racked up about 60 minutes of “time off task,” Amazon parlance for when someone is not directly working on the assignment at hand or taking too long to complete it. He told her he was writing her up and asked what happened, she said.
“I used the restroom today,” Barrera said she told him.
“How many times did you use it?” she remembered he asked.
“Three times,” she said she responded, thinking about how it took five minutes to walk each way across the warehouse floor to get to the bathroom.
When Barrera returned to Amazon for her next scheduled shift two days later, her badge wouldn’t let her into the building. She later learned she’d been terminated. Barrera has since become an organizer with the Warehouse Worker Resource Center, a nonprofit that advocates on behalf of warehouse workers.
The California Senate passed legislation last week that, if signed by the governor, would prohibit a spectrum of employers, including Amazon, from firing warehouse workers like Barrera for policies such as “time off task.” The bill, AB 701, would be the first law in the country to address productivity quotas and strict algometric metrics used to manage warehouse employees. (Governor Newsom’s office did not reply to a request for comment.)
Under AB 701, employers wouldn’t be able to punish workers for failing to meet quotas when health and safety issues come into play, such as a worker’s need to take bathroom and water breaks. And it would prohibit retaliation against workers who complain. The law would also require companies that run warehouses to report to the government—and their own employees—the quotas and speed metrics they mandate for workers.
“Right now, it’s very secretive,” said Christian Castro, communications director for the Los Angeles County Federation of Labor, AFL-CIO, which sponsored the bill. “E-commerce has been growing exponentially, it’s gotten even more popular during the pandemic…. Workers are telling us about an increase in quotas, not even knowing their quotas.”
Amazon spokesperson Rachael Lighty declined to comment on AB 701 and Barrera’s allegations but said in an email, “The health and safety of our employees is our number one priority—and has been since day one,” adding, “We’re committed to giving our employees the resources they need to be successful, creating time for regular breaks and a comfortable pace.”
In opposition to AB 701 is a coalition of about two dozen business groups, including the California Chamber of Commerce, California Farm Bureau, and California Retailers Association. They say the law could raise costs for companies that run warehouses and effectively drive employers from the state.
AB 701 is “burdensome and needlessly overbroad,” Steve McCarthy, vice president of public policy for the California Retailers Association, wrote in an Aug. 30 letter to all state senators. He said the bill could lead to increased litigation “by establishing potentially open-ended employee access to bathroom facilities which will make employers’ ability to enforce production standards even more complex.”
AB 701 would cover all warehouse distribution centers, such as those run by Walmart, Target, and UPS, but the bill’s supporters say Amazon is the main target. The company, they say, is leading the charge to automate workforces, increase the speed of work, and use surveillance technologies to monitor worker productivity.
Advocates who support the bill say they hope it will cause a ripple effect to other states. They say California’s labor laws have often served as a model for policymakers and worker organizations nationwide.
“Chart Topping” Injury Rates
Amazon is the largest private employer in California, with more than 150,000 employees in the state, and the second largest employer in the U.S. Over the years, several Californian cities have welcomed the influx of warehouses, which they say have brought in thousands of well-paying jobs to regions historically plagued by unemployment.
But it’s been well documented that warehouse work can be dangerous. Several studies point to injury rates that exceed those of other industries.
The U.S. Bureau of Labor Statistics cites data that shows warehouse workers are injured nearly twice as often as other workers in the private sector. And when employers, like Amazon, add in productivity quotas, those injuries tend to increase, other studies show. A December 2019 report by the Athena coalition looked at data and internal documents that Amazon provided to OSHA and found the injury rate at the company’s warehouses was nearly three times the combined rate of all other private employers that submitted data to OSHA.
“Primed for Pain,” a report by a coalition of four labor unions called the Strategic Organizing Center, found that not only are injury rates higher at Amazon warehouses, but the injuries also tend to be more severe—with a “serious injury rate” nearly 80 percent higher than that of all other employers in the warehousing industry.
“The rate of injuries at Amazon is astronomical…. It’s chart topping by all measures,” said Irene Tung, senior researcher at the workers’ rights group National Employment Law Project, who co-wrote a report about injury and churn rate at Amazon’s California warehouses. “I don’t think people understand just how different Amazon is as an employer and how they’re ushering in this new paradigm.”
When asked about injury rates at Amazon’s warehouses, spokesperson Lighty said the company has more than 6,200 “safety professionals” throughout its facilities. “We also invest billions of dollars in new operations safety measures, technologies and other innovative solutions that protect our employees, work closely with health and safety experts and scientists, conduct thousands of safety inspections each day in our buildings, and have made hundreds of changes as a result of employee feedback on how we can improve their well-being at work,” she said.
Lighty added that the data on musculoskeletal injuries, such as sprains, strained muscles, and torn ligaments, at Amazon’s warehouses “is skewed.” She said that’s because the company’s workforce has many people in the 18 to 24 age range, which she said is more likely than other age groups to claim work-related musculoskeletal injuries.
In April, Amazon’s executive chairman and former CEO Jeff Bezos called the company “Earth’s Best Employer and Earth’s Safest Place to Work.”
Along with injuries, Amazon has also been accused of not allowing workers enough time for bathroom breaks. In a 2020 letter to Bezos, a group of 15 U.S. senators wrote, “Pressure to meet their quotas is so great that workers report urinating in plastic bottles on the warehouse floor.” Amazon responded, saying workers are “allowed and encouraged to take breaks as needed.”
Last December, Amazon settled a class-action lawsuit in California brought by 27 warehouse workers who said the company violated the state’s labor codes by denying them adequate bathroom and rest breaks. Amazon’s “production clock does not stop when employees need to use the restroom facilities,” the lawsuit said, which meant workers “have been forced to forego bathroom breaks completely, simply out of fear of termination.”
Lighty declined to comment on the lawsuit or settlement.
While California law mandates that employers must allow breaks, warehouses with production quotas can make it difficult for workers to use the bathroom while still being able to meet their tasks. Assemblywoman Lorena Gonzalez, AB 701’s author, said the bill aims to strengthen state law by creating standards around these quota systems.
“To make next-day delivery possible, corporations like Amazon have forced warehouse employees to work faster, service more customers with more orders in record amounts of time, and risk their own bodies in the process,” Gonzalez said in a statement. “No worker should be forced to sacrifice their basic human needs, or accept such undignified conditions for a paycheck.”
When Barrera was working at Amazon’s Rialto warehouse, one of her jobs was scanning boxes on a conveyor belt.
“The conveyor doesn’t stop,” she said. “Time is against you.”
She remembers at one point, she fell behind and boxes started piling up. She set down her scan gun to move some boxes aside, and it got buried in the pile. She said when she tried to pry it free, she pulled too hard, and it bounced back and smacked her in the eye. She said she went to the onsite clinic, where she was given ibuprofen and told to hold a wet paper towel on her eye. Barrera said she asked to sit down, and after about five minutes, both her manager and the clinic medic said she should be good to go back to work.
“You’re being tracked the moment you clock in,” Barrera said. “Unrealistic quotas are why workers are getting injured.”
Amazon’s Lighty did not respond when asked about the incident.
Protecting Workers vs. Increasing Bureaucracy
AB 701 has two major components: creating more transparency around work quotas and banning policies that negatively affect worker health and safety, including “time off task” policies.
For the transparency piece, employers that run warehouse distribution centers would be compelled to tell government agencies the quotas and speed metrics they require of employees and also disclose that information to workers.
“This policy provides the tools that are needed to keep workers safe in a growing industry plagued with widespread injuries and labor violations,” said Ron Herrera, president of the Los Angeles County Federation of Labor and secretary treasurer of Teamsters Local 396, both of which are sponsors of AB 701.
“This kind of speed-up on workers is breaking their bodies and churning them out,” Shadix said. “It undermines the argument that these are good stable jobs.”
While AB 701 would require transparency from companies around quotas, it would not create specific rules on worker surveillance and metrics.
Several Republican lawmakers in California have opposed AB 701, saying it would lead to more lawsuits, higher prices for consumer goods, and that the bill is part of an organized labor strategy to unionize warehouses.
“This bill is sponsored by union leaders as part of a campaign to tip the scales to coerce employees to unionize,” Sen. Brian Jones said in an email, adding that he doesn’t have confidence in Democratic legislators to run the state efficiently. “So now we’re supposed to trust them to micro-manage private warehouses throughout the state? No thanks.”
Jones is one of 11 senators who voted no on AB 701 (26 voted yes, and three had no vote recorded).
At least four senators, including Jones, received campaign donations of $2,500 from Amazon, according to public records from the California secretary of state. Amazon also made payments of $2,500 and $4,900 to various state assembly members, including to nearly half of those who voted no on the bill in May. The company additionally made several donations to senators and assembly members who voted yes (though not to any authors or co-authors of the bill).
When asked about the donations, Jones’s chief of staff, Craig Wilson, said, “Campaign contributions are irrelevant when it comes to how Senator Jones votes on legislation.”
Amazon has hired at least four lobbying firms in California during this year’s legislative session, according to the public records. For comparison, in 2019 and 2020, it hired just two firms per year. And the company spent more than $425,000 on lobbying in the state from January to June. More recent lobbying expenditures aren’t yet publicly available. Amazon’s Lighty didn’t respond to questions about the company’s lobbying activity.
While Amazon hasn’t publicly commented on AB 701, the coalition of business organizations and its members, including the California Retailers Association and California Chamber of Commerce, have spoken out against the bill.
Initially, the California Chamber of Commerce listed AB 701 on its “job killer” list—a label that often leads to dead bills—but then removed it in July after certain provisions around litigation and regulations were amended. The chamber still opposes the bill, however. When asked for comment, spokesperson Denise Davis referred The Markup to the letter McCarthy sent to state senators on behalf of the business coalition.
This bill “establishes anti-retaliation provisions that will make it more costly and difficult to take job actions against underperforming employees,” McCarthy wrote in the letter. He added that AB 701 could “have a chilling effect on production at distribution centers that will ripple through the rest of the supply chain.”
Amazon is on the California Retailers Association’s board of directors. McCarthy didn’t respond to a request for comment.
If AB 701 is signed by California governor Gavin Newsom, it would be slated to go into effect on Jan. 1, 2022. Newsom faces a recall election on Tuesday, but regardless of the outcome, he will determine the bill’s fate. Should Newsom lose Tuesday’s recall election, he would have 38 days to sign or veto all pending legislation before leaving office, according to California law.
Ask almost any billionaire how they got so obscenely rich and , invariably, you will get the response: “I just did what the law allows” or some convoluted version of that idea. Tax laws, property and financial regulations and structures, corporate stock options, Roth IRA tricks, all the tried and true methods outlined in a slate of recent articles from ProPublica and others are rightfully given credit for the insanely massive windfalls.
Not that these arrogant, self-centered sociopaths don’t jump at the chance to take credit for their “miraculous” good fortune, or even write books and “let” others write books about all the “genius” ideas and methods they used to conquer the universe.
Jeff Bezos is the most ridiculous example of this, literally dozens of books exist only to extol the virtues and genius of this a-hole that basically used one simple trick: selling dollar bills for .75 cents and using the stock market to “monetize” a trillion in intentional losses and turn them into “wealth”, to amass his absurd mountain of “worth”, yet if you read these books the central concept of his fraud doesn’t even get a mention.
Of course, 25 years later, the FTC and Lina Khan are finally beginning to wake up to the simple fact that, not only is the entire scam something that “ought-a-be-illegal”, but literally is illegal and always was, yet this comes across, so far, as a somewhat pathetic attempt to put a band-aid on the world after a nuclear holocaust has already devastated the planet.
When we say “tax the rich,” we mean nesting-doll yacht rich. For-profit prison rich. Betsy DeVos, student-loan-shark rich.
AOC used her beauty and a cheeky dress to highlight the issue of income inequality
Above: Photo / Wikipedia
AOC at the Met Gala styled herself in a “Tax the Rich” gown. The look on her was beautiful. The subject matter being broached couldn’t be uglier. Tax the rich a not a bad idea, but the system is so screwed up, and so far from any semblance of “fair”, that a few little pin pricks on trillions in undeserved holdings is basically meaningless.
How can it be said that the system is that far gone? It’s in the numbers and the proportions of “wealth”. The extremes of unequal wealth distribution have risen to levels so incredible, that it’s as if they are turning into an economic ouroboros dragon that will expand and swallow itself until it has devoured all life.
The increases, during the pandemic, for example, in the “net-worth” (which is in itself an obscene concept for measuring humans) of the worlds richest animals was like the replication of the virus the rest of us were fighting to avoid, most with too few resources to have any hope of being rescued by medical intervention, if we got infected.
This idea and proof of a system vastly out of balance can be seen everywhere you look…
In a recent, excellent, NYT article on Afghanistan multiple examples were cited illustrating who really “won” that endless war, and points out that it wasn’t the just Taliban. It was locals entrepreneurs and politicians who, early on, saw the opportunity for what it really was, a way to build personal fortunes supplying the US military with support and comfort during the endless, directionless morass.
Several examples were of people who began the war as local american sympathizers and ended up with fortunes hundreds of millions of USD and more, virtually none of which trickled into the local populations which, ostensibly, the war was meant to give a chance for “democratic freedom”. And capitalism.
Here’s a couple of paragraphs from the NYT article in full :
”Consider the case of Hikmatullah Shadman, who was just a teenager when American Special Forces rolled into Kandahar on the heels of Sept. 11. They hired him as an interpreter, paying him up to $1,500 a month — 20 times the salary of a local police officer, according to a profile of him in The New Yorker. By his late 20s, he owned a trucking company that supplied U.S. military bases, earning him more than $160 million.”
“If a small fry like Shadman could get so rich off the war on terror, imagine how much Gul Agha Sherzai, a big-time warlord-turned-governor, has raked in since he helped the C.I.A. run the Taliban out of town. His large extended family supplied everything from gravel to furniture to the military base in Kandahar. His brother controlled the airport. Nobody knows how much he is worth, but it is clearly hundreds of millions — enough for him to talk about a $40,000 shopping spree in Germany as if he were spending pocket change”
New York Times
Redistribution will likely only happen after the entire system collapses of its own stupidity
Hubris and pride before the fall is the reason that, when you read this, you’ll think perhaps this writer has lost his marbles. But the system is unsustainable in its current unequal, and increasingly unjust, form.
Sources: March 18, 2020 data: Forbes, “Forbes Publishes 34th Annual List Of Global Billionaires,” accessed March 18, 2020. August 17, 2021 data: Forbes, “The World’s Real-Time Billionaires, Today’s Winners and Losers,” accessed August 17, 2021.
Just one more ballooning of the one tenth of one percent and the system will be so out of balance, that only a total and complete realignment of reality will allow any kind of improvement in the distribution of resources.
In fact, the opposite outcome is far more likely, where to increase in the imbalance will continue ‘till there are no options, but for the current system to be drowned in its own orgy of self-congratulations.
The solutions that are out there, many even championed ironically and paradoxically by the very billionaires that sit on top of this mountain of inequality, could work. But a “penny tax” or some kind of gratuitous show of “generosity” by those that have wealth that, if the system were designed with any form of equal distribution, they would not, and could not, have, is less than nothing.
Similar to the climate conundrum, things will have to get worse, it appears, to engage and enrage people, and wake enough people up, to set a fire under enough people, to build to a tipping point toward real change. Fortunately, if you accept that inverted and convoluted logic, that day is very near.
A post on the celebrity’s instagram stories back in June is now getting some unwelcome attention from the head of U.K.’s Financial Conduct Authority Charles Randell.
Randall called out Kim Kardashian West, in particular, in a speech to the Cambridge International Symposium on Economics Crime as he discussed risks in crypto and the needs for token regulation.
Here’s an excerpt from his speech: “Which brings me on to Kim Kardashian West. When she was recently paid to ask her 250 million Instagram followers to speculate on crypto tokens by ’joining the Ethereum Max Community‘, it may have been the financial promotion with the single biggest audience reach in history.”
The concern is that her ad could have easily been confused with Ethereum.”Ethereum Max” is a newer token created by unknown developers. More importantly the price peak, to date, for the not-ethereum coin coincided with Kim’s Instagram ad going live. She is rumored to receive up to $1 million or more per Instagram post.
Despite the name and the similar look of the logo, its is not affiliated with any of the developers behind the already well established Ethereum digital currency known as “Ether” or ETH.
Not only that, but her massive payday for boosting the coin coincided with a price crash for the token immediately thereafter. A classic pump-and-dump scenario.
It is unknown if the E-Max founders and her client, or even she herself “double-dipped” and sold on the bump she and her ad orchestrated, but that, along with the potential victims that bought at the high and subsequently were left holding the bag, are exactly what the questions are all about.
The Financial Conduct Authority (FCA) cautioned against “hype” in the marketing of cryptocurrencies, particularly new tokens backed by celebrities that may end up being fake, as reported in The Guardian.
This is where is the big issue arises since this problem is a fairly common one, generally because crypto names are sometimes not copyrighted, and therefore there can be many look-a-likes, and these can often be riddled with higher risks, etc.
The speculative token hasn’t officially been deemed a scam, however it is quite common for social media influencers to get paid large sums of money by the developers of scam products and services, with little regard to those being “scammed” (that is to say, the general public targeted with the ads) or the total amounts of money lost in “pump-and-dump” schemes.
Above: Photo by Michael Krahn on Unsplash with elements added by Lynxotic
Coming after a frenzied run-up the hand wringing is no surprise
On the big El Salvador day for Bitcoin to go live, for the first time as legal tender, naturally there were glitches. And the predictions for crypto in general and Bitcoin in particular to surge on the news were, backwards.
The longstanding stock market adage “buy on rumor, sell on news” once more proved itself as what is now being called a “crypto flash crash” knocked around $400 billion off the market cap of the previous 24 hour period, or almost 12%, as per CoinMarketCap at the time of this writing.
The president of El Salvador announced that his government used the dip to buy an additional 150 Bitcoin, above the 400 he had announced on the previous day, bringing the total to 550.
From CoinMarketCap:The global crypto market cap is $2.07T, a 11.91% decrease over the last day
The total crypto market volume over the last 24 hours is $227.12B, which makes a 66.15%increase.
The total volume in DeFi is currently $30.41B, 13.39% of the total crypto market 24-hour volume.
The volume of all stable coins is now $179.83B, which is 79.18% of the total crypto market 24-hour volume.
Bitcoin’s price is currently $46,893.62.
Bitcoin’s dominance is currently 42.55%, an increase of 1.17% over the day.
By 3:30 PM ET on Tuesday Bitcoin bounced back, the “discount” ended, for now, and recovered to around $47,000 after dipping to $42,870. The recent highroad been $52,732, with the all time high from April still intact above $63,000.
I many ways it seems as if Bitcoin and Cryptocurrencies appeared suddenly in 2021 out of the head of Zeus. Protean and fully formed, with billions and trillions in market caps, and all your sisters, brothers, cousins and even the Uber driver climbing aboard.
And the FOMO blog posts, where every hour an innocent reader is assaulted by a story, perhaps true, perhaps exaggerated and certainly foolhardy in retrospect, of an innocent putting their life savings into Dogecoin and suddenly having, theoretically, huge gains at their disposal.
Meanwhile, craggy faced, ancient stock market mavens would interject famous last words that now appear to be wise. However, all that notwithstanding, this week’s crash is nothing new or unexpected.
In reality, as can be seen from the graphic below, provided by Visual Capitalist, there have been so may crashes / corrections and doomsday prognostications since 2012 in Bitcoin that it seems like a miracle the there’s any thing such as Crypto at all.
There’s a reason it’s not dead and it’s in the DNA
The resiliency, far from a shock to those that have been around more than a fortnight, is kinda the point. When Satoshi Nakamoto built the system architecture of Bitcoin and since then inspired the over 8000 new crypto entities that have been developed, it was, just like the internet itself that was build to survive WWIII, supposed to be as indestructible as possible.
Like physical gold, which is considered have been adopted as a store of value partly due to its indestructibility and immutability (alchemy notwithstanding) the volatility and sometimes violent-seeming life story of Bitcoin is a necessary adjust to its role in finance, commerce and even individual monetary survival.
Not for the faint of heart, perhaps
While the mainstream and those forces opposed to the adoption or survival of Bitcoin and Crypto are out in force pointing to the “unsuitability” of Bitcoin and other cryptocurrencies for any “legitimate” use as a trade or savings vehicle, the progress so far, in spite of the obvious fact that volatility has always been baked in to the situation, is an obvious refutation of that viewpoint.
Will the current drop in dollar values relative to Bitcoin end it’s popularity and strip it of the respect it has thusfrar earned among many? In a word, no. In essence what is happening is, as many have foretold, what happens often and repeatedly, the excess attention and dollars that were pumped into crypto by you brother, sister, cousin and Uber driver are now getting blown out, since those were more speculation and psychosis than any kind of vote for viability or permanency.
And, why not? Where was to concern, shock and hesitation by the masses when the prices seemed to only rise for weeks and even months across so many products and coins it was impossible to keep count? Why was to feeding frenzy and the mania-like piling on not ignored as an anomaly?
The herd does as the herd will do. Diamond hands and Paper hands will ebb and flow as long as the rivers flow to the sea and humans herd like buffalo. And, in all likelihood, dollars and euros and yen will be long forgotten when the last bitcoin is transferred to the final wallet in the sky.
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Lynxotic does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
El Salvador has officially legalized bitcoin as legal tender (alongside the U.S. dollar which is the country’s current national currency) starting today; September 7, 2021.
The day before the big day, President Nayib Bukele announced El Salvador had purchased 200 Bitcoins and later in the day confirmed that “we now hold 400 bitcoins”. Given the current market prices, the country’s recent bitcoin purchases amount to roughly $20.8 million.
In June this year, El Salvador’s Congress voted 62 out of 84 votes to establish the crypto coin as legal tender. This will make the small country is Central America the first in the world to recognize bitcoin as an official form of currency.
In a subsequent tweet Bukele’s translated tweet said
Like all innovation, the process of #Bitcoin in El Salvador it has a learning curve. Every road to the future is like this and not everything will be achieved in a day, or in a month.
But we must break the paradigms of the past. El Salvador has the right to advance towards the first world.
-President of El Salvador – Nayib Bukele
Bitcoin climbed nearly 2% to more than $52,680 as of Sept 6, and according to a market analyst with Reuters the cryptocurrency is on track to reach $56,000.
Salvadorians will now have the ability to use the digital coin in exchange for goods and services, and as an accepted form of tax payments by the government. Bitcoin is actually the second legal tender in El Salvador, with the US Dollar also having that status since 2001.
Upon its adoption, users who register with the country’s government supported Bitcoin wallet called Chivo will be awarded with $30 worth of currency pre-loaded (must have a Salvadorian national ID number).
The overall impetus for legalizing bitcoin officially is, according to experts, that savings that will be possible for citizens to receive remittances – transfers, until now in US dollars, without intermediaries and the large fees they charge for international transfers.
Remittances account for more than 20% of GDP for El Salvador – mainly in the form of dollars sent by the approximately 1.5 million ex-patriots living abroad and wiring payments to families in El Salvador.
Western Union, for example, handles these transactions and charges a hefty fee. And those fees would represent a percentage (for small remittances up to 10%) of $5.9 Billion per year that flows into the small country from abroad, mostly from the United Stated, according to World Bank data.
Although there has been a lot of political rhetoric and expressions of opinion against the move, such an obvious adversary as the international wire transfer interests, like Western Union, and the large income from fees that may begin to dry up starting today, could easily explain at least a portion of the well represented opposition opinion.
That being said, the now famous price swings of Bitcoin do represent a real risk for people hoping to transfer directly into the country. Another risk is losing the coin due to lack of experience handling a digital currency, by people who are more likely to know the feel of paper dollars than digital screens, cryptocurrency exchanges and virtual wallets.
For observers, both crypto adherents and detractors, this is a very important opportunity to see what kinds of practical obstacles will arise and what benefits are realized by the El Salvadoran people.
It is also a kind of warning to those in governments, including in the U.S., that hope to stop Bitcoin’s seemingly inexorable rise, and to prevent what they perceive as threats to the public, and perhaps, to the U.S. dollar’s previously unchallenged hegemony.
The news that 400 Bitcoins were purchased by El Salvador was, naturally seen as a positive by the Bitcoin trading community, and there has been speculation of further pricing strength likely continuing going forward.
On the utopian dream side, various experiments have recently been announced related to Bitcoin and crypto. For example, in El Salvador there are emerging plans to make Bitcoin mining a state run operation with power being supplied by geothermal energy drawn from the country’s volcanos. How’s that for cheap, renewable resources?
A town in the U.S., fittingly called Cool Valley, MO has a mayor who recently announced that the city government is considering making payments to all residents of 1000 in Bitcoin. In this case, the idea behind the plan is to give citizens a crypto nest-egg, and the holders would be barred from selling, with the hope that, in the event the currency continues its exponential climb, the residents would benefit from holding it as an appreciating capital asset.
Which leads to the observation that, over the last few years, a fog of confusion appears to hang above the media regarding coverage of cryptocurrencies.
Price speculation is off the charts and there’s a kind of mania afoot. But the biggest confusion seems to come from one simple truth, that the U.S. dollar has gone only in one direction for more than 100 years, since the Federal Reserve was established in December 1913, down.
Against any measure of buying power for goods and services the dollar is continuously worth less, far less, on a yearly basis.
Although many headlines scream “Crypto and Bitcoin are Worthless” the same could be said of the U.S. dollar, in relative terms, against a basket of goods and services which is the traditional measure of “inflation” and against other assets, for example, now that Bitcoin provides a second measuring tool, dollars are worth less over time against bitcoin.
With prominent people and companies around the world and in the U.S. already supporting the idea of Bitcoin and Cryptocurrencies with their dollars and by choosing to hold crypto, it will be very interesting to see what transpires as these “currency wars” mutate and expand around the globe.
