Amazon has become a retail behemoth, driving out much of the retail competition. It did this by providing low prices for an immense array of goods and fast delivery, and with those methods managed to develop a huge customer and supplier base. The way it did that was by selling below cost and offering incentives to sellers and in the process running up huge deficits in the initial years. By those methods, it persuaded manufacturers and other retailers to sell through the site. I read about a company that sold diapers online and was doing well. Amazon tried to buy the company but when the company turned down its offer, Amazon cut the prices of its own diapers well below cost and drove the rival out of business. That kind of tactic is only possible for companies with large cash reserves or huge amounts of venture capital and other financing.

Initially, both manufacturers and consumers got a good deal. But once they all got hooked and Amazon became almost a monopoly, Amazon started squeezing them by raising prices. It is an old trick. Since manufacturers who sold through it had to guarantee that their product would not be available cheaper anywhere else, what they did was raise the price of their product everywhere outside of Amazon to be higher. Someone I know recently went looking for a part to fix his dishwasher. He found that Amazon had the lowest price but that the part at the manufacturer’s own site was a few cents more.

The Federal Trade Commission is currently suing Amazon for this and other monopoly practices.
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I was skeptical about cryptocurrency and was utterly baffled by the appeal of NFTs. The former seemed risky and the latter felt very much like a speculative bubble driven by hype in which the underlying entity being bought and sold had no intrinsic value. So I was not surprised by the collapse of various cryptocurrency endeavors like FTX and even less surprised by the recent lawsuit filed against Sotheby’s auction house, accusing them of fraud in inflating the value of the ugly Bored Ape BFT and using celebrities to hype it.
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The invaluable ProPublica has come out with another article about how billionaire Harlan Crow, the generous benefactor of justice Clarence Thomas who showered him with vacations on his luxury yacht and private planes, has used the tax law loopholes to avoid paying taxes.

He adopted a well-known tactic by the wealthy, to use so-called ‘business losses’ to reduce their net income. In his case, how this was done was to set up a company for his luxury superyacht that was purportedly a business and then use the ‘losses’ incurred by the company (i.e., the money used to run the yacht for him and his family and friends) to offset his income.
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The deal to raise the debt ceiling has passed both houses of congress with bipartisan support and will be signed into law by president Biden on Saturday, two days before the projected X-date (June 5th) when treasury secretary Janet Yellen said the government will run out of money to pay its bills. As of Thursday evening, the closing balance in the government’s account was just $22.892 billion, the lowest it has been since the recent crisis started.

The current debt ceiling limit is $31.4 trillion which has already been reached. The deal did not raise the ceiling by a fixed amount. Instead it agreed to suspend the debt ceiling until January 2025, just after the next election. As I understand it, ‘suspension’ means that there is no debt ceiling at the moment so it is possible that the US treasury could, in theory at least, run up the debt by a huge amount by selling off US treasury bills.

But I don’t think they will do that.

House speaker Kevin McCarthy and his Republican negotiators have reached a deal with Joe Biden and Democratic negotiators over a deal that would raise the debt ceiling to carry it over until 2025, i.e. after the next election. There still remains the task of having the deal passed by both houses of congress before the X-date of Monday June 5. It is scheduled for the first vote in the house on Wednesday, May 31.

I am no federal budget expert but on the surface it seems like a deal that could just as easily have been arrived at without all this brinkmanship. This article outlines what is in it.
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As of Thursday’s close, the amount of cash in the government’s account was just $38.837 billion, the lowest it has been since the current debt ceiling crisis began. To get a sense of how small that figure is, it is less than the net worth of 31 individuals in the US, even though the size of US economy is of the order of $27 trillion. Or if one wanted to look at it another way, it is also an indicator of the obscene wealth accumulation in the US that allows individuals to have more than the government has in its cash account.

Treasury secretary Janet Yellen warned some months ago that the government would run out of money sometime around June 1. Skeptics accused her of scaremongering and that the so-called X-date would be much later, maybe even in July or August. It is hard to estimate the exact date since revenues and expenditure vary on a day-by-day basis. But it is beginning to look like she was pretty accurate and yesterday she provided a much firmer date, and that it would be June 5th.

“Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government’s obligations if Congress has not raised or suspended the debt limit by June 5,” she wrote in a letter to House Speaker Kevin McCarthy.

Yellen’s new estimate contains more specificity than her earlier guidance. “By June 5,” she said in Friday’s letter, whereas her last two letters to Congress suggested a little more uncertainty — “as early as June 1” was the phrasing she used. 

The exact timing of the so-called “X-date,” when the U.S. will not be able to pay its bills, has a degree of uncertainty, as the Treasury Department tracks money coming into and leaving its coffers. 

“We will make more than $130 billion of scheduled payments in the first two days of June, including payments to veterans and Social Security and Medicare recipients. These payments will leave Treasury with an extremely low level of resources,” Yellen wrote.

She noted the Treasury Department is scheduled to make an estimated $92 billion in payments and transfers the week of June 5 and said the government would not have adequate resources to satisfy all of its obligations. 

So here we are, on the brink again.

It is a crazy way to run the economy.

As of the close on Wednesday, the government’s cash on hand had dropped to just $49.473 billion, the lowest value since the current debt ceiling brinkmanship by the Republican congress began.

That should give some urgency to the process of increasing the debt ceiling but there are mixed signals coming from the on again-off again talks between the speaker of the House of Representatives and the White House, with some suggesting progress and others suggesting major obstacles, though the two position are not mutually exclusive.

As details leak about an emerging bipartisan debt deal just days before a possible default, House conservatives are growing increasingly unhappy.
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One of the concerned lawmakers was Rep. Ralph Norman (R-S.C.), a member of the conservative Freedom Caucus who has repeatedly stated he didn’t want anything less than what the House GOP passed as their debt plan last month.

McCarthy “doesn’t have the 218 on that unless he gets Democrats,” Norman said of the emerging proposal, noting he saw the list from Burchett. “If he gets Democrats, that’s a telltale sign.”

Rep. Bob Good (R-Va.) echoed Norman, citing concerns about “rumors” of a potential deal that would raise the debt ceiling for more money and more time than Republicans wanted — and “for a whole lot less in return that we need.”

“If that were true, that would absolutely collapse the Republican majority for this debt-ceiling increase,” he said.

These signals should not be taken too seriously since such leaks may be part of the negotiating process, as each side seeks to ramp up the pressure.

One thing I have noticed is that although McCarthy and his allies regularly keep issuing statements thus keeping their point of view in the news cycle, Joe Biden has not been doing the same. This seems like a mistake.