Beware of ‘free’ offers

All of us are inundated with offers of a free trial period for some goods or services. The sellers of those products, from drugs to magazine subscriptions, know that it helps to get people hooked on their product and that there is no better way to get people addicted than to offer it free for a short period.

This also happens at the governmental level and Renee Dudley of ProPublica reports that major companies like Microsoft and Elon Musk’s Starlink are using this tactic in order to get the US government dependent on them so that they cannot escape giving them long-term contracts.

A few weeks ago, my colleague Doris Burke sent me a story from The New York Times that gave us both deja vu.

The piece reported that Starlink, the satellite internet provider operated by Elon Musk’s SpaceX, had, in the words of Trump administration officials, “donated” internet service to improve wireless connectivity and cell reception at the White House.

The donation puzzled some former officials quoted in the story. But it immediately struck us as the potential Trump-era iteration of a tried-and-true business maneuver we’d spent months reporting on last year. In that investigation, we focused on deals between Microsoft and the Biden administration. At the heart of the arrangements was something that most consumers intuitively understand: “Free” offers usually have a catch.
[Read more…]

The fall in bond prices, not stocks, may have caused Trump to cave on tariffs

Why did Trump, after insisting that the tariffs were here to say and rejecting any pause on their implementation, cave this morning and reverse himself, pausing them for 90 days? This caused the stock markets to shoot up today.

I said in an earlier post that my belief that Trump only cared about the stock market was proven wrong by the huge tariffs he imposed on pretty much every country, since he had to have known that such a move would tank the markets. Of course, it is always possible that he had the absurd idea that since he was imposing tariffs on goods imported to the US, the US stock market would remain stable and even rise while only those of other countries would fall. In a global economy, that would have been unrealistic since stocks tend to rise and fall together but we have to remember that we are dealing with an idiot and anything is possible when it comes to speculating about his thinking.

So why did he impose the tariffs in the first place?
[Read more…]

Who benefits from Trump’s abrupt reversals of policy?

When last Wednesday Trump announced his huge set of tariffs on every country, the stock markets tanked globally on Thursday and Friday. Then on Monday and Tuesday, Trump insisted that the tariffs were here to stay and that there would be no pause in them going into effect but the markets rallied somewhat because, as is often the case after a big sell off, some investors swoop in to buy stocks that they think are now available at bargain prices.

Then today, Trump abruptly announced what he had said he definitely would not do and that is issue a 90-day pause in the implementation of the tariffs, though it was not clear whether it meant all the tariffs or just some, since he also announced that tariffs on China would increase to 125% after they said that they would impose tariffs of 84% on US goods in retaliation to the earlier US tariffs. But despite that ambiguity in exactly what the pause meant, the stock market surged upwards today.

Which raises the obvious question: Who in addition to Trump would have known about these policy actions and reversals? Because whoever knew could make a killing on the stock market.
[Read more…]

The bizarro world of Trumpian economics

Trump has released his big tariffs plan and most observers are stunned, not just by the size and scope of the tariffs ,but also by the bizarre reasoning that has been given for the numbers

It is clear from the reasoning given for the sizes of the tariffs that Trump sees things in very simplistic terms. He thinks that the US should have a trade surplus with every other country and that if it has a deficit, that must be because those countries are engaging in unfair trade and should be punished accordingly. That is how he arrived at his tariff numbers.
[Read more…]

Choosing to rent instead of buying a home

In the US, owning one’s own home has always been portrayed as the ultimate dream and people strive to do so as soon as they have some kind of stability in terms of jobs and location. The equity in one’s home was portrayed as the best way to save for financial security and indeed for most people, the value of their home is their most substantial asset.

An owned home is typically the most valuable asset for U.S. homeowners. Black and Hispanic homeowners typically derive a higher share of their wealth from owned homes than White and Asian households.
…

In 2021, 62% of U.S. households lived in homes they owned as their primary residence. But homeownership is less common among Black, Hispanic and multiracial households. In 2021, 40% of Black households, 47% of Hispanic households and 45% of multiracial households owned their primary residence. In the same year, 70% of White households and 58% of Asian households lived in homes they owned.

But as the prices of homes have increased along with mortgage rates, that dream of homeownership has become increasingly elusive for many. Now people are beginning to question whether buying a home is even desirable.
[Read more…]

Another crypto heist and the NFT bust

I know hardly anything about cryptocurrencies or the underlying blockchain structure but was under the impression that it was supposed to be very secure because the ‘ledger’ was widely distributed over many computers and thus hard to hack. But now we hear of yet another heist of cryptocurrency, this time for a whopping $1.5 billion.

North Korea was behind the theft of approximately $1.5bn in virtual assets from a cryptocurrency exchange, the FBI has said, in what is being described as the biggest heist in history.
…

Describing this particular form of North Korean malicious cyber activity as “TraderTraitor”, the FBI on Wednesday warned that the virtual assets, stolen from ByBit, a Dubai-based crypto trading platform, would eventually be turned into currency.

“TraderTraitor actors are proceeding rapidly and have converted some of the stolen assets to bitcoin and other virtual assets dispersed across thousands of addresses on multiple blockchains,” said an FBI statement.

The bureau added that it expected the assets would be further laundered and eventually converted to fiat currency – a normal, government-backed currency that is not tied to commodities such as gold.
…

Hackers linked to North Korea stole more than US$1.3bn in cryptocurrency in 2024 – then a record amount – according to a report published in late December. The thefts were spread out over 47 incidents, the blockchain analysis firm Chainalysis said, adding that the total was a dramatic jump from the $660m seized in 2023.

[Read more…]

Real estate scammer now advising on government real estate

That wealthy people are able to exploit all manner of tax loopholes is well known. Most of these loopholes do not occur by accident but are inserted by lawmakers at the instigation of lobbyists. One of the most common areas for such loopholes is in real estate because there is so much ambiguity about valuations that can be fiddled with endlessly. Trump used those loopholes all the time and was found guilty of it in one case but escaped many others.

ProPublica writes about someone who specialized in these kinds of shady dealings many times who has now been made a senior adviser to the General Services Administration, which manages the federal government’s property, even though he pushed a scam that the IRS called the “Worst of the Worst”.
[Read more…]

Trump Day One agenda

Trump has made a lot of statements about what he will do on day one of his administration, so many that there will not be enough hours in the day to do most of them even if he were serious about the promises. But I know what his most important priority will be and that is to try and show that the crowds at this inauguration exceed in size what Barack Obama had in 2008. That his inauguration crowd in 2016 was much smaller than Obama’s was something that really rankled him to the extent that he made his then press secretary Sean Spicer look foolish by trying to argue otherwise when the aerial evidence clearly showed the opposite. Trump continued to lie about this long after everyone other than his cult followers knew that it was false. So brace yourself for this to be his top priority.

But what about the more consequential things that he has promised to do one day one?
[Read more…]

The phony debate over cutting the budget deficit

One of the longest running pointless discussions in US politics is about what to do about the federal budget deficit. This is simply the annual excess of all government spending over all government revenues. The cumulative total of all such deficits is the government debt. For the fiscal year 2024, the government had revenues of $4.92 trillion and spent $6.75. trillion, leaving a deficit of $1.83 trillion. The national debt up through November 2024 was $36.09 trillion.(See here for more.)

Different people have different views about how big of a problem the deficit is. One school of thought uses the metaphor of the government budget being like a family’s budget, and that a deficit means borrowing money that has to be paid back with interest later. They argue that running up deficits year after year means that the debt burden will become intolerable and that we are leaving future generations (our children in this metaphor) in a fiscal hole that they will have a hard time digging themselves out of. They view this as a horrible prospect.
[Read more…]

Don’t believe the lies about the minimum wage

State and federal-mandated minimum wages set a floor for what employers can pay their employees. It benefits more than the minimum wage workers because it raises wages up the line. Hence it is should be no surprise that the capitalist class and its supporters hate raises in the mandated minimum wage and try to do everything in their power to keep them from being raised because it lowers their ability to exploit workers and increase their profits. In their mind, the there should be no mandated minimum wage and all wages should be set by the employer and the employee, negotiating freely. Of course they oppose unions as well since those too interfere in the glorious working of the free-market. In this world view, a single employee and a company or massive corporation are equally matched powers and thus the figure they arrive at would reflect the true market value of labor.

Of course this is a fantasy indulged by the capitalist class and has no basis in reality. There is a massive power discrepancy between employer and employee and you need the federal and state governments and unions to at least partially redress that imbalance.
[Read more…]