- Amazon Now Accounts For 49% Of Online Retail
Amazon will account for accounts for 49.1% of all online retail sales, up from 43% the year before, if they clear an expected $258 billion in sales this year.
The stunning figure provided by research firm eMarketer is tempered by the fact that Amazon’s near-majority share of online sales accounts for just 5% of all retail sales. Amazon is set to rake in $258.22 billion in US retail sales in 2018, while annual growth has jumped 29.2% year-over-year, reports Tech Crunch.
Fueling Amazon’s rise is a robust network of third-party sellers and a rapidly expanding range of goods from groceries to fashion – made all the more attractive for subscribers of their Prime services.
Now, it is fast approaching a tipping point where more people will be spending money online with Amazon, than with all other retailers — combined. Amazon’s next-closest competitor, eBay, a very, very distant second at 6.6 percent, and Apple in third at 3.9 percent. Walmart, the world’s biggest retailer when counting physical stores, has yet to really hit the right note in e-commerce and comes in behind Apple with 3.7 percent of online sales in the US. –TC
Popular categories:
The most popular category on Amazon is consumer electronics and tech, with projected sales of $65.82 billion according to eMarketer; around a quarter of total turnover. Second in line is apparel and accessories, which should account for roughly $39.88 billion, followed by health, personal care and beauty with $16 billion. In last place is food and beverage trailing at $4.75 billion.
EMarketer arrives at their estimates “based on an analysis of quantitative and qualitative data from research firms, government agencies, media firms and public companies, plus interviews with top executives at publishers, ad buyers and agencies.”
What’s more, Amazon is expected to drive over 80% of ecommerce growth this year.
Bread and butter
By in large Amazon’s largest cash cow is their Marketplace – a third-party sales platform on which sellers can use Amazon’s retail and logistics infrastructure to hawk their wares. It currently accounts for 68% of all retail sales – or around $176 billion. Direct sales from Amazon comprise the remainder.
It’s no wonder that so many other online commerce businesses are chasing the marketplace model, which essentially creates transactions on two fronts for the platform operator, thereby improving margins that might be cut by not selling items directly. –TC
“The continued growth of Amazon’s Marketplace makes sense on a number of levels,” said Andrew Lipsman, eMarketer’s principal analyst. “More buyers transacting more often on Amazon will naturally attract third-party sellers. But because third-party transactions are also more profitable, Amazon has every incentive to make the process as seamless as possible for those selling on the platform.”
Given that Amazon now accounts for roughly half of all online sales, one might think it’s ripe for an antitrust investigation. That said, all of Amazon’s sales only amount to five percent of all retail sales across the country.
- RIMPAC-2018: What Makes It So Special This Year?
Authored by Peter Korzun via The Strategic Culture Foundation,
The US-organized biennial Rim of the Pacific (RIMPAC) is the largest international exercise held in and around the Hawaiian Islands and Southern California. The RIMPAC- 2018, the 26th exercise in the series, is running from June 27 to Aug.2 under the motto “Capable, Adaptive, Partners.”
It involves 46 surface ships, five submarines, 18 national land forces, more than 200 aircraft and 25,000 personnel from twenty five nations. Defending sea lanes is the main mission and there are always political connotations.
Besides, many things happened for the first time to make the event stand out this year.
It was the first time Brazil, Israel, Sri Lanka and Vietnam were invited. Brazil had to reject the invitation at the last moment for internal reasons. Chile, a non-founding RIMPAC nation, had never before held a top leadership position (component commander) like this year, joining Canadian, Japanese and Australian admirals. The Philippines increased it participation, and Malaysia sent a warship – something it had not done in previous years.
For the first time, Israel is among the participants. It demonstrates the US readiness to counter Iran. Israeli sailors can share the experience of mine warfare operations, air defense and conducting commando raids at sea. This year, Israel is also participating for the first time ever in a US European Command exercise. Swift Response is held in Poland, Germany, Latvia, and Lithuania this month. 40 Israeli paratroopers will team with the US Army’s 173rd Airborne Brigade in an operation to seize the Miroslawiec airfield in Poland. So, Israel goes global.
RIMPAC-2018 features live firing of a Long Range Anti-Ship Missile (LRASM) from a US Air Force aircraft, surface to ship missiles by the Japan Ground Self-Defense Force, and a Naval Strike Missile (NSM) by the US Army – the first time a land-based unit is participating in a live-fire event.
For the first time, the US 3d Fleet commander organized the RIMPAC Innovation Fair in Pearl Harbor (June 28-July 2) to showcase emerging and new technologies, which can be used by navies and marine corps.
This is also the first time a US newly created regional command is overseeing the exercise. On May 30, Secretary of Defense James Mattis announced that US Pacific Command (PACOM), which oversees all US military forces in Asia, had changed its name to be called the Indo-Pacific Command (INDOPACOM) to reflect “the increasing connectivity between the Indian and Pacific Oceans,” as well as America’s determination to remain the dominant power in both.
The US Navy has stepped up patrols in the proximity of waters adjacent to China-claimed islands in the South China Sea (as has China), raising the prospect of clashes. “When it comes down to introducing what they have done in the South China Sea, there are consequences,” US Defense Secretary James Mattis warned China at the Shangri La Strategic Dialogue in Singapore on June 2. The Pentagon is planning to conduct “a steady drumbeat” of naval operations in waters abutting the disputed islands.
Now the main thing – China’s RIMPAC invitation was revoked in May. China first participated in the RIMPAC exercises in 2014. The formal reason given by US military is the “militarization” of artificial islands in the South China Sea. Secretary Mattis said he did not expect countries to choose between the US and China “because a friend does not demand you choose among them.” The Chinese Navy has sent a Type 815 intelligence gathering ship to observe the exercise.
The list of nations invited to the RIMPAC-2018 obviously reflects the US desire to strengthen its military ties with states on China’s perimeter in an effort to confine it. The US opposes China’s ambitious “One Belt, One Road” economic initiative and encircling the country with US-friendly actors is a vital component of the policy to counter it.
The US is testing its combat capability in the two oceans and is doing it with numerous partners. This month, USS Essex amphibious assault ship (jump-jet carrier) with Marine Corps F-35Bs onboard sailed into the Pacific – the second ever deployment of small-deck flattop with the new the aircraft onboard. The F-35 aircraft is known for its stealth design and advanced sensors and controls. Israel was the first nation to ever use the F-35 in combat. This year, it sent the stealth aircraft to attack Iranian training bases and weapons depots in Syria. The plans to sell F-35s to Taiwan are under consideration in the United States. If the deal goes through, the relations with China will greatly deteriorate – the eventuality RIMPAC is taking into account. The voices inside Congress are calling for approval of the sale.
RIMPAC is a tool of foreign policy. As US military leaders say it’s about “building relationships”, adopting an ‘I’m the popular kid on the block’ approach to all this,” as Peter Layton, visiting fellow at the Griffith Asia Institute in Australia, put it. “We work together, build relationships here, so later on … it’s hard to turn down a friend,” said Vice Adm. John Alexander, commander of the US Navy’s 3rd Fleet at the opening ceremony. The United States demonstrates its “openness” and the ability to bring together many nations while isolating China and Russia.
RIMPAC could have been an event of friendship and peace to bring all the seafaring nations of the region together. Germany’s Kieler Woche (Kiel Week) maritime holiday is an example of how it can be done at global scale.
Keeping such large and powerful navies as that of Russia and China out turns RIMPAC into an event organized to bolster US foreign policy goals and challenge its rivals. Actually, it’s US, not international, because other participants have no say in the decision-making process and have to succumb to what America’s commanders tell them while it may not meet their foreign policy goals. The exercise was initially conceived to promote peace and deter terrorists in an international effort but has turned into a demonstration of US readiness to use force against the nations of the region.
- China Building 8 Submarines For Pakistan, As China-Pak Projects Flourish
Chinese shipbuilders are constructing eight new submarines to protect its ally Pakistan with an aim to counter India. Currently, Pakistan’s Navy has ten subs, which suggests their submarine fleet could expand by 80 percent upon delivery, expected in the mid to late 2020s. Relations between both countries are incredibly complex, as the Kashmir conflict and the numerous military disputes on the Line of Control (LoC) have intensified in recent years.
According to unnamed sources, as quoted per Zee News, under Project Hangor, China’s shipbuilding industry could soon be delivering over eight new subs to Pakistan. India’s underwater warfare program is perceived to be far superior to Pakistan. As of now, India has sixteen submarines while Pakistan has about ten. However, China wants to scale up Pakistan’s underwater warfare capabilities to defend the China Pakistan Economic Corridor (CPEC).
China and Pakistan have a close strategic relationship as both countries have supported each other financially, strategically and militarily. The move to increase Pakistan’s submarine fleet comes at a time when CPEC, a $50 billion collection of infrastructure projects throughout Pakistan that intends to modernize Pakistan’s energy infrastructure, transportation networks, and economy, threatens to reshape global trade and disrupt the status quo.
Connecting all of Eurasia and Africa to China through the One Belt, One Road (OBOR) is seen as a significant “security vulnerabilities” for the United States, said Kurt Tidd, chief of the US Southern Command (SOUTHCOM), who spoke with US lawmakers at a Senate Armed Services Committee meeting, earlier this year.
China has put forth a cohesive strategy for future growth while the United States has offered zero solutions in response, other than weaponizing India and China’s neighbors [Tiawan], conducting Freedom of Navigation (FON) operations in the South China Sea, along with destabilizing countries in Eurasia to slow down the progression of OBOR.
In addition to submarines, China successfully launched two remote sensing satellites for Pakistan last week, which could help both countries monitor India and CPEC infrastructure. The satellites were on-board the Chinese Long March (LM-2C) spacecraft, while the PRSS1 – Pakistan’s first optical remote sensing unit – was developed by the China Academy of Space Technology (CAST).
China successfully launched 2 remote sensing satellites for Pakistan on Mon from Jiuquan Satellite Launch Center in NW China’s Gansu Province, marking the first intl commercial launch for the Long March-2C rocket in about 19 years. pic.twitter.com/nWdypSse2a
— People’s Daily,China (@PDChina) July 9, 2018
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Furthermore, the fiber optic pipeline project connecting Pakistan to China was completed in June which now provides a direct link between Pakistan, Middle Asia, and East Asia and reduces the possibility of disruption to international traffic. This is amongst the only information and communication technology project under the CPEC. The project started in March 2016 and concluded last month. The cable extends over a distance of 509 miles and has 26 microwave transmission nodes from Rawalpindi to Karimabad and 106 miles of aerial fiber cable from Karimabad to Khunjerab as a back-up.
Also, Chinese automakers are entering the Pakistani market with the likes of JAC Motor, DFSK, Luoyang Dahe, Lifan, Foton JW, and Changan. Some of the companies have already received the government’s approval. They have been awarded a Greenfield status to build their respective manufacturing facilities for the local market.
So all in all the relation between Pakistan and China is mutually beneficial for both the countries. CPEC enables China access to the Arabian Sea, thus allowing one of the six economic corridors via OBOR to come online.
In doing so, China recognizes CPEC and or the overall OBOR system can disrupt global trade, or better yet, the American empire. That is why China is beefing up Pakistan’s underwater warfare program, to deter US Indo-Pacific Command.
- Two Keywords For US Imperialism: 'Justification' And 'Plausibility'
Authored by Federico Pieraccini via The Strategic Culture Foundation,
Observing the behavior of the United States over recent decades, it becomes clear that the American establishment has always relied on two fundamental factors to justify choices in foreign policy.
We have been accustomed in recent years to humanitarian interventions being justified on the assumption that the United States and the West were in some way intervening militarily in the interests of defending innocent civilians from brutal dictators. This justification for armed intervention has either been the key factor or the direct cause for the expansion of US imperialism.
The use of the media as an instrument of war – with lies, artfully constructed stories, intentional omissions, and targeted disinformation – has helped US imperialism to justify armed interventions abroad.
There is always some sort of justification, rationale or pretext offered when Washington intervenes to bring about conflict. These excuses were showcased in Yugoslavia in 1999, in Afghanistan in 2002, in Iraq in 2003, and in Libya in 2011. With Yugoslavia and Libya, the lie of protecting human rights was the justification offered to the public. The September 11, 2001 attacks were used to justify attacks on Afghanistan and Iraq in 2002 and 2003, pointing the finger of blame at these countries. The war on terror in general offered a perfect justification for bringing about chaos in every corner of the world.
Naturally, these are excuses meant to be peddled in the international arena. There is no justification for bombing a nation, completely destroying its services and infrastructure, and killing tens of thousands of its innocent people.
But US imperialism works like a steam-roller. The artful fabrication of a humanitarian cause gives the green light to rain down bombs to save the poor and downtrodden civilians. All this is possible thanks to the nauseating and false media rhetoric that creates the ideal conditions needed to justify the horrible war crime that is aggression against a sovereign nation.
Such justifications constitute some of the most deceptive and aggressive imperialist tools employed by the Euro-American power conglomerate to impose its unipolar vision of international relations and strong-arm those seeking a new path in international relations. The objective is to disrupt (with bombs and propaganda) the vision these countries have of fixing the corrupt and sickening world order guided by Washington.
In more recent times, this strategy of war based on (spurious) justifications has added a new type of ploy that is much more subtle and suitable for imperialist ends. Since Washington has lost the ability to decide the situation on the ground in different war theaters like in Iraq and Syria, it settles for sowing chaos and destruction.
This is done through the employment of plausible deniability, which helps mask covert operations. An example can be seen in Syria, where Washington arms the Free Syrian Army (FSA), an insurgency group labelled “moderate rebels”, but these weapons somehow seem to find their way into the hands of Al Nusra and Daesh. This situation has been going on for years, with Washington using Daesh and Al Nusra to fight against Assad, being able to plausible deny doing so by professing to be only arming the moderate rebels and not the extremist terrorists.
Clearly we are facing an obvious case of plausible deniabIlity. The United States claims to be arming only the “rebels” in its efforts to remove Assad, but in reality these rebels do not exist and are merely different acronyms for various Islamist extremists. It is therefore natural that the arms given to the rebels will wind up in the hands of ISIS or Al Nusra. On the rare occasions that journalists enquire as to how US weapons have ended up in the hands of Daesh or Al Nusra, US authorities can plausibly deny that they are intentionally arming any extremist groups.
Plausible deniability and justifications for war are two manifestations of the hallucinatory world in which we live, based on conjurations rather than reality. No newspaper or journalist questions whether the justification given for war is legitimate. No newspaper wonders whether Iraq really was linked to Al Qaeda, preferring instead to repeat US propaganda. No one bothers to dig and ask whether the FSA is just an acronym like the SDF and therefore another way of plausibly denying and covering for America’s illegal involvement in Syria.
Clearly there is no justification, or any plausible denial, that can exonerate the United States from the seventy-year attempt to consolidate its power over other countries or prevent them from pursuing foreign policies independently of Washington. But what is increasingly noticeable is how, thanks to more and more good reporting from alternative news sources, the justifications for war and plausible denials carry less and less credibility with the wider population.
Decades of lies and omissions have convinced the European and American populations that the press is probably more interested in protecting the interests of its management and owners than it is in revealing the truth. As a result, the alternative press, online media, and alternative giants like CGTN, RT, TeleSUR and PressTV widen their audience simply by exposing how the Western media’s packaged truth only aims to justify the deployment of Western troops to foreign countries, or provide plausible deniability for their less palatable covert operations.
The new perspective provided by the alternative media is ripping apart the lies of the past regarding Iraq, Syria, Yemen or Donbass, showing as fabrications the justifications used to drop bombs, kill civilians, subjugate entire populations in order to advance the US geopolitical goals.
The world population is increasingly better informed thanks to widespread Internet access and a growing thirst for news. This phenomenon is beginning to gain steam as the deceptions of the mainstream media are increasingly being called out with every passing day. CNN, The New York Times, Al Jazeera, the BBC, and many other broadcasters and newspapers have for many years shown European, American and Middle Eastern populations a partial, falsified and manipulated version of reality for the purposes of justifying criminal actions and providing plausible-denial cover to enable the sneaky killing of even more innocents.
As the chickens are coming home to roost, more and more old statements made by US officials are revisited and measured against new facts on the ground. Obama’s words about how the US never gave weapons to ISIS are today contradicted by evidence of the perverse flow of weapons from the US and her allies to Daesh terrorists. In the same way, Clinton’s celebration over Gaddafi’s death (“We came, we saw, he died”), or Madeleine Albright’s justification of the death of 500,000 Iraqi children as a result of US sanctions, as well as them bombings from 1991 to 2003, are coming back to haunt them. All these lies are exposed years later, delivering a devastating blow to the Western establishment’s credibility.
The three examples of Iraq, Libya and Obama himself represent the greatest expression of American deception, namely, the portrayal of the US as fighting for a noble cause, sacrificing itself for the sake of humanity in order to confront and overcome tyranny. But reality paints a different picture, showing the US as the bringer of chaos and destruction. It is the revelation of these lies more than anything else that can accelerate the global awakening and complete the rejection of imperialism that relies on false justifications and plausible denials to succeed.
With the credibility of their previous arguments shot to pieces, the corporate media find themselves with the now practically impossible task of attempting to deceive a woke population that can no longer be fooled as easily as in the past. People are fed up with war and the lies that are offered to justify them, and they are starting to understand the techniques and keywords employed to justify US Imperial policies.
- San Francisco Begins Registering Non-Citizens To Vote In Local Elections
The San Francisco Department of Elections issued voter registration forms for non-citizens, including undocumented migrants, who are now eligible to vote for members of the SF Board of Education during the November elections, making the city the first in the state to allow non-citizens to vote in local elections.
The measure to allow non-citizens over the age of 18 to vote narrowly passed in 2016 in a vote of 54-46 percent following two failed attempts. In order to cast their ballot, however, non-citizens must also be city residents and have at least one child under the age of 19.
Prospective voters can request a non-citizen voter registration form in-person at the Department of Elections, online or by phone. The deadline to register is October 22nd. Those who miss the deadline can visit the City Hall Voting Center to register and vote under conditional voter registration. –ABC7
“This is no-brainer legislation,” Hillary Ronen, a San Francisco supervisor, told the Chronicle. “Why would we not want our parents invested in the education of their children?”
“We want to give immigrants the right to vote,” Norman Yee, also a county supervisor, told KGO.
RNC member Harmeet Dhillon disagrees with the measure.
“The reason I voted against it is that I think the right to vote is something that goes along with citizenship and should be,” Dhillon told KGO, adding that the school board is already obligated to look out for the interests of all children in the city.
“I don’t think that people who have otherwise tenuous ties to San Francisco given their lack of legal residence should be making long term decisions about that structure and process,” said Dhillon.
The measure allowing non-citizen voting expires in 2022 unless it is renewed by the board of supervisors.
Boston too?
Last week, the Boston City Council discussed the the idea of voting rights for non-US citizens living in the country legally.
The hearing called by Council President Andrea Campbell is aimed at a discussion on how to make city elections “more inclusive” for the roughly 190,000 foreign-born residents of the city, who would be allowed the right to vote in municipal races.
That could include legal permanent residents, visa holders and those on Temporary Protected Status or Deferred Action for Childhood Arrivals. –Boston.com
Foreign-born residents account for around 28% of Boston’s population according to Campbell’s order, which claims non-US citizens paid $116 million in local and state taxes, while generating over $3.4 billion in spending according to a 2015 city report.
- Baby Boomers In Gig Economy Make 60% More Than Millennials
Baby boomers working jobs in the gig economy are raking in more money than younger workers, are far less financially stressed and are typically more content with their situation, according to a study recently published by Prudential Financial.
Boomers – those above 56-years-old, make an average of $43,600 a year while working 25 hours a week. This compares to Gen Xers (36-55) at $36,300 per year and Millennials (18-35) at $27,500. The younger generations are also working longer hours per week, with GenX at 30 hours and Millennials clocking in an average of 26 hours weekly.
The reason behind the variance in income may be because boomers – due to their age – have more hard-to-find skills in fields in which Boomers appear well qualified, compared to younger and less experienced cohorts.
There are other factors making boomers in the gig economy happy:
“Boomer gig workers are enjoying not only higher levels of income, but also are more likely to be married,” said Jim Mahaney, vice president of strategic initiatives at Prudential Financial, in an email to AARP.
“This means that not only are they more likely to have access to employer-sponsored benefits, but that they are less likely to be the sole source of income as well. These factors, we believe, lead to higher degrees of satisfaction than younger generations of gig workers.”
Surprisingly, just 32% of boomers are their household’s sole source of income, vs 49% of Gen-X and 36% of Millennials, which may be linked to the fact that more boomers are married. While 60% of Boomers are married, just 52% of millennials and 39% of Gen-X have a spouse.
This also ties into the motivation behind gig work.
For Boomers and Gen-X, financial worries and making ends meet are the primary concern (46% and 59% respectively). Meanwhile, 75% of Millennials said their gig work is lifestyle related – a number that is high enough to conclude that most live with their parents.
Another factor in higher income among boomers in the gig economy is the fact that they have a higher concentration of hard-to-find, or specialty skills in which they are qualified. The survey suggests that construction, installation and repair jobs are more popular among Boomers – fields which have experienced worker shortages.
Meanwhile, just 19% of boomers say they use online platforms to find work or generate business – as compared with almost half of millennial gig workers.
So it sounds like getting your hands dirty in a high-demand field while being married is the way to go, meanwhile for those 35 and under, the likelihood of ever exiting the parents’ basement grows slimmer by the day.
- China Launches Quasi QE To Support Banks And Sliding Bond Market
With the ECB’s QE coming to an end at the end of the year (absent some shock to the market or economy), some traders have already been voicing concerns which central bank will step in and provide a backstop to the global fixed income market, especially once the BOJ joins the global tightening bandwagon (something it will soon have to as Japan is rapidly running out of monetizable securities, and just moments ago the BOJ announced it would trim its purchases of bonds in both the 10-25 and 25+ year bucket).
Today one answer emerged when China’s central bank – three weeks after its latest RRR cut – announced further easing measures, including the introduction of incentives that will boost the liquidity of commercial banks, helping them to expand lending and increase investment in bonds issued by corporates and other entities.
And in a surprising twist, in order to make sure that Chinese banks and financial institutions have ample liquidity, the PBOC appears to have engaged in quasi QE – using monetary policy instruments such as its medium term loan facility (MLF) – to support the local bond market and banks, especially those that have invested in bonds rated AA+ and below. Effectively, China will directly fund banks with ultra cheap liquidity, with one simple instruction: “increase bank lending and bond purchases.” And since all Chinese banks are essentially state owned, what Beijing is doing is launching a form of stealthy QE, only one where it is not the central bank, but the country’s various commercial banks that do the purchases… using central bank liquidity.
As a reminder, one month ago we noted that the spread between China’s AAA and AA- rated bonds has spiked in the past three months, blowing out to levels not seen since August 2016, and an indication of the market’s growing fears about the recent surge in Chinese corporate defaults.
It is this spread, and other indications of bond market tightness that the PBOC wants to address using its MLF and the various other central bank lending facilities as tools for managing short- and medium-term liquidity in the banking system. It has to ensure that there is adequate liquidity especially with economic uncertainties, given the trade dispute with the United States. Indicatively, back in July 2014, when describing the PBOC’s Pledged Supplementary Lending facility, that we asked “Is this China’s QE“? We now have the answer.
And speaking of the MLF, in June, the PBOC lent out 663 billion yuan, or roughly $100 billion, to financial institutions via the MLF, with the outstanding MLF totaling 4,420.50 billion yuan at the end of June, up from 4,017.00 billion yuan at the end of May.
Commenting on the move by the Chinese central bank, Goldman said that this is a sign that the government is stepping up its loosening measures given the weakness in May and June TSF data, lukewarm June activity data, weak asset market performance, and rising trade tensions.
The catalyst for this quasi QE? Trump’s unexpected trade war escalation:
In our view, the government was likely surprised by the timing of the USD200bn tariff announcement by the US and is taking time to come up with a concrete response. While the direct hit to aggregate demand growth from weaker exports is likely to be fairly limited (still 0.5pp or less for the total USD250bn in goods related tariffs in three rounds: USD34bn+USD16bn at 25% and USD200bn at 10%) and can be relatively easily offset by policy loosening, the risk of further escalation and the potential effects other than the hit to export demand (e.g., negative impact on investment due to uncertainty) are significant and much harder to quantify.
Meanwhile, as we reported last Friday, the government already stepped up loosening in June, seen in the rebound in new yuan loan growth. However, off balance sheet non-loan TSF – and especially the record collapse in shadow – has become a bigger drag.
In this context, Goldman notes that any guidance to slow the pace of the decline in shadow banking would be an effective policy loosening tool as shadow banking remains the biggest binding constraint on TSF growth.
Going forward, Goldman expects the government to take further measures to ensure growth stability, including further RRR cuts, lowering the interbank rate, and, most importantly, administrative directives. Further, the bank notes that CNY depreciation is clearly a risk as well, and as we reported moments ago, perhaps in response to today’s directive, the Yuan is tumbling and is now 600 pips below what at the start of the month was said to be the PBOC’s “red line.” Clearly it wasn’t.
Yet while China’s further easing steps are hardly surprising – as trade tensions are intensifying it is clear that economic and market stability has become the short-term priority over controlling leverage, pollution, and property prices (here Goldman adds that “the key phrase in recent policy directives has been to avoid “one-cut” policy making – i.e., no uniform, across-the-board suspensions of infrastructure investment projects aimed at controlling debt, reducing industrial pollution, and limiting bank lending to reduce credit risk”) – the biggest risk is two-fold: at what point will China’s devaluation reignite the capital outflow observed between 2014 and 2016, when Chinese reserves declined by $1 trillion from $4 to $3 trillion to offset capital flight, and just how will Trump respond to what is now a clear, if implicit, currency devaluation using monetary policy tools?
Judging by the US president’s recent words and actions, sending Xi Jinping a congratulatory tweet over his handling of the economy will hardly be a priority; instead further tit-for-tat escalation is inevitable.
- How A Central Bank Caused One Of History's Biggest Cons
Authored by George Pickering via The Mises Institute,
In the summer of 1821, a roguish Scotsman named Gregor MacGregor arrived by boat in London, and initiated arguably the most audacious confidence scam in history.
MacGregor had spent much of the previous decade fighting as a soldier of fortune in the Venezuelan War of Independence, where he had manoeuvred his way up the ranks, eventually being promoted to general by Simón Bolívar. At some point during this period, local Central American rulers had granted MacGregor a large tract of land, most of which took the form of uninhabitable, malaria-ridden swamp along the Black River, in modern-day Honduras. Despite the poor economic prospects of his new acquisition, MacGregor was determined that the land should be his ticket to fortune, even if that required unconventional measures.
It was this series of events which led to the ‘founding’ of the non-existent country of Poyais.
Upon returning to Britain, MacGregor ingratiated his way into London’s high-society, claiming to be the sovereign prince, or ‘Cazique’, of a newly-formed, British-friendly colony on Central America’s Mosquito coast, supposedly named ‘Poyais’ after the Poyer peoples of that area.
In order to convince the British public of the realness of this imaginary country, MacGregor was forced to employ an extremely elaborate series of means, foremost amongst them being the publication of a 355-page guidebook for prospective settlers. This book, likely penned by MacGregor himself, contained a plethora of highly-detailed (and entirely fictitious) descriptions of every aspect of life in Poyais. These included convoluted descriptions of its tricameral parliamentary system and of its commercial and banking systems, distinctly designed uniforms for each regiment of its non-existent armed forces, a fully elaborated honours system, a Poyaisian coat of arms (featuring unicorns), and a national flag. The guidebook also offered detailed descriptions of the climate and agriculture of Poyais, not to mention of its resplendent capital city, and even claimed that the rivers of Poyais contained “globules of pure gold.”
In addition to the guidebook, MacGregor established Poyaisian government offices in London, Edinburgh and Glasgow, began having Poyaisian paper money and government documents professionally printed, and even commissioned the composition of songs about Poyais to be sung in the streets of Britain’s major cities.
The trick worked.
In late-1822 and early-1823, approximately 270 hopeful colonists set sail for Poyais, and MacGregor was able to raise £200,000 from the sale of Poyaisian ‘government bonds’ – with the loan being obliviously underwritten by the highly respectable City of London bank Sir John Perring, Shaw, Barber & co. – in addition to the money he had made by the sale of Poyaisian land certificates and paper money.
When the 50 surviving Poyais settlers made it back to London in October of 1823 with the news that none of it had been true, the resultant outrage exploded throughout the British press. MacGregor, however, had fled to Paris just days before their arrival, and was not only never convicted of any crime for his involvement of the Poyais scheme, but even went so far as to attempt to repeat the exact same scheme in France, in 1826.
How could this absurd con possibly have succeeded so completely in tricking the British investing public of the early-1820s?
The answer is to be found in the British banking system of the time, which was structured in a way that left it particularly able to fuel the kind of economic crises described by the ‘Austrian Business Cycle Theory’ of Ludwig von Mises. In the early-1820s, the British money supply outwardly appeared to be controlled in a very decentralised manner, with approximately 800 banks throughout the country having the right to issue their own banknotes, theoretically redeemable in gold.
However, at the centre of this system stood the Bank of England, Britain’s central bank, which not only had a monopoly on banknote issues in the London area, but was also legally privileged in a way that allowed the private banks of the time to use Bank of England notes as if they were gold, for reserves, clearing transactions, and redeeming their own private notes.
Thanks to these legal privileges of Bank of England notes, the private banks of the time were able to pyramid their own credit expansion and note issues atop their fractional reserves of Bank of England notes, which were themselves pyramided atop an even more fractional reserve of gold. This not only allowed a far greater overall extent of credit expansion than if Bank of England notes had not had these privileges, but also gave the Bank of England a huge influence on the extent of credit expansion by the broader British banking system, by altering the volume of its own note issues.
How does all of this relate to Gregor MacGregor?
Because the success of his Poyais scheme was only made possible thanks to the speculative mania which had been fuelled by Bank of England credit expansion through these channels. In an effort to reverse the monetary and price deflation which had been going on since 1819, the British government and the Bank of England decided, in 1822, to initiate a massive and coordinated policy of credit expansion.
Just as Mises’ Austrian Business Cycle Theory would lead us to expect, this credit expansion caused a boom of investment in risky ventures and ‘higher-order’ industries. Given the declining lending standards and borrowing costs which accompany any period of credit expansion, British investors jumped at the chance to invest extensively in the newly-independent states of Latin America, creating a speculative mania surrounding the investments of that continent, which played perfectly into the hands of MacGregor and his attempts to raise money for his non-existent kingdom.
It was in this way that the credit expansion of 1822-25 not only gave life to the most audacious confidence scheme in history, but also inflated a wider bubble which finally burst during the financial Panic of 1825, which was arguably the most severe economic crash experienced by Britain in the entire first half of the nineteenth century.
In recent years, central bank credit expansion has often repeated this trick of causing bubbles in absurd and risky investments, such as the ‘NINJA loans’ before the 2007/8 crisis, or the unprofitable tech startups during the dot-com bubble of 1997-2001. However, there is perhaps no lesson from history which more vividly illustrates the dangers of credit expansion-fuelled business cycles than the story of Gregor MacGregor and his imaginary country of Poyais.
- Cuomo Dominating 'Sex & The City'-Socialist Cynthia Nixon In NY Governor's Race
New York Governor Andrew Cuomo’s lead over Democratic Socialist Cynthia Nixon in the state’s Democratic primary race for governor has widened to 36%, up from 22% in May, according to a Wednesday poll from Quinnipiac University.
Cuomo, the son of a three-term governor who is himself seeking a third term, leads Nixon 59 percent to 23 percent among potential voters, according to a poll out Wednesday from Quinnipiac University. Nixon, an Emmy winner who starred in HBO’s “Sex and the City,” has called Cuomo a “corrupt hypocrite” who doesn’t reflect Democrats’ core values, is beholden to corporate interests, and has let the subway system deteriorate on his watch. –Bloomberg
The poll also finds that people want an experienced leader governing the state:
“New Yorkers say 59 – 30 percent they want a gubernatorial candidate with experience in politics over someone new to it. Democrats, non-white voters and women, in particular, lead the charge in that preference,” according to Mary Snow, polling analyst for the Quinnipiac University Poll.
Also hurting Nixon is the fact that virtually nobody knows who she is aside from “the Miranda” of the group – her character on Sex and the City.
“A significant percentage of voters say they haven’t heard enough about Gov. Andrew Cuomo’s two main rivals, Duchess County Executive Marc Molinaro and Cynthia Nixon, to give them a thumbs up or down on what they think of them. That is also helping Gov. Cuomo.”
Cuomo also has a massive fundraising advantage – with $31.1 million in his warchest vs. just $660,000 for Nixon according to the New York Times.
Nixon’s sagging performance is notable in light of the progressive wave of Democratic Socialists unseating establishment candidates – starting with 28-year-old progressive activist Alexandria Ocasio-Cortez, who beat the 4th most powerful Democrat in Congress – Joe Crowley, in an upset victory.
Ocasio-Cortez, Senator Bernie Sanders of Vermont and Nixon have sought to push the party further left and a victory over the more moderate Cuomo would mark arguably the biggest victory in that political movement to date. –Bloomberg
We wonder if Nixon can explain the Israeli-Arab conflict better than Ocasio-Cortez?
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