Learning by Proxy

US Jobs | Learning by Proxy

Life is filled with dichotomies. One of the dichotomies facing American businesses right now is the high unemployment rate coupled with the inability to find workers. One would assume that if there were jobs on offer, people would come out looking for work. That has not happened.

US Jobs

Donald Trump had presided over the best jobs market in a long long time. George Bush the last republican president handed an absolute shit-show to Obama before he departed. The 2008 recession was just getting started when Obama stepped into office in Jan 2008.

Obama handed over an economy that was in great shape to Trump and thankfully Trump was only focused on building the wall and female reproductive rights (read supreme court). As a result, the tailwinds carried the economy all the way till COVID, that is.

The lockdown precipitated huge job losses and also furloughs (Unpaid leave). Restaurants, Cafes, Hotels, Amusement Parks, all businesses that had a physical interface with the customer laid of people like crazy. Then, the COVID situation got worse because nobody would listen to the president and drink bottles full of Clorox. His wisdom fell on deaf ears.

Biden moved in – pushed the vaccine agenda and America is open to business again.


The number of corporate calls with at least one mention of “labor shortage” is surging, according to transcripts collected by Sentieo, a financial research company. Up until 2021, there had been fewer than 60 mentions per quarter of the phrase “labor shortage.” In the second quarter of 2021, “labor shortage” was referenced 136 times.

“You certainly can’t have a conversation with any business person across America, certainly, [and] I think fast coming across the globe, without labor shortages and tightness in markets coming up,” said Marie Robinson, executive vice president and chief supply chain officer of food-distributing giant Sysco, on a May 20 analyst call.

Source: Quartz

There are a few things at play over here. There has been a huge push to try and raise minimum wages in the United States to $15 per hour. Currently, it is stuck at $7.25 per hour.

Source: Wikipedia

The green line represents the actual minimum wage as advertised. Which seems to have gone from $1 per hour to $7.25 per hour. The blue one represents the inflation-adjusted purchasing power as per 2020 dollars. It is obvious, being part of the labour force in 1970 was far more rewarding than in 2020.

This is precisely what makes those obnoxious CEO salaries possible. They are pinching 10 dollars each hour from those serving at the frontline and putting it in their pockets. That is how Jeff Bezos earns $149,353 a minute.

At $7.25 an hour, working 10 hours a day, 25 days a month (Sunday off), one would make $1812.5.

The Republicans have been quick to place the blame at the Democrats’ doorstep. The $2 Trillion aid package sent out a $1400 cheque to the poor, which Biden enacted as soon as becoming President. First of all, if $1400 is keep people away from jobs, you really need to consider how much you are paying them. In large cities in America, rent alone can be $500 – $1000 in poorer neighbourhoods.

But there is more than that!

Three million Americans retired during the first six months of the coronavirus pandemic in the US, and that could make returning to full employment in the US more challenging.

The US labor market is like a complicated, sophisticated house party: It’s not just one-in, one-out at the main entrance. People are switching rooms, popping in the side-door, falling out the windows and sneaking in again through the back. Americans have been quitting at the highest rate in decades as the pandemic recession spurred them reevaluate what they want from their employers, even as record-high job openings entice them with new opportunities.

If more workers are demonstrating the leverage they now hold by quitting, many are also showing their independence from the labor market by retiring. During the pandemic, the share of Americans in retirement jumped from about 18.5% to 19.5%:

Source: Quartz

America is ageing. The median age was 30 in 1980, it has slowly crept up to 39 by 2021. Youngsters are unwilling to start families because it is very expensive and the disparities they have inherited make it harder and harder for them to cover the costs.

Several immigrants, especially the undocumented ones who would have worked the seven dollar jobs most probably left the country during the lockdown, unable to cover costs in the US.

Most importantly, these people who work low wages were the first ones to be exposed to COVID and also died by the hoards. They also were in no position to afford care for themselves. There is bound to be fear about exposing themselves once more.

Also, irrespective, if the businesses are desperately looking for people, this is the time to ask for more. This is when they can hope to get ahead. So many are probably just playing hardball.

As a result,

“As you know, we are experiencing one of the greatest hiring challenges in the history of DFW Airport,” wrote Ken Buchanan, executive vice president of revenue management and customer experience at DFW airport, in a May 27 letter to concessionaires. “As we prepare for a busy summer, please continue to practice DFW Airport’s high standards of hiring operations and refrain from soliciting employees from other DFW operations (‘poaching’).”

Source: Quartz

Anti-poaching agreements are illegal. Apple and Google settled their case by paying $415 Million back in 2015.

Space Race

The term Space Race was coined during the cold was to describe the competition that was unleashed between Russia and the US to reach space. The fear at the time was that whoever had control of space, would be able to look into another country and control them just by having the capability to attack them at will.

Russia armed some German documents built their rockets. At the same time, Americans ran ‘Operation Paperclip‘ and smuggled all of the German scientists waiting to go to trial at Nuremberg to America to build their rockets.

Today, capitalists who have squeezed so much money out of people, as cited above, are taking that money to engage in some ego wars by going to space.

Jeff Bezos announced at the end of last month that he was going to go to space on July 20th with his brother on the Blue Origin spacecraft.

Richard Branson who has been working on Virgin Galactic since 2003 announced that he would be going to space on 11th July using a craft that is first flow under a plane to the upper reaches of the atmosphere before being released to launch to about 60 km above the earth.

Not only are they waving it at each other, but they are also trying to turn it into a mission to habilitate their image and get as much PR as they can.

Sirisha Bandla, a Telugu-origin woman, is all set to realise her childhood dream of going to space. With Virgin Galactic launching its crewed test spaceflight on July 11, Bandla will be the backbone of this operation and accompany company’s founder Richard Branson to space.

Source: New Indian Express


An 82-year-old woman who has spent six decades trying to reach space will join Jeff Bezos on the first human flight by his space company later this month.

Wally Funk, who underwent training in the 1960s, will become the oldest person to ever fly to space.

Mr Bezos has invited Ms Funk as an “honoured guest” and shared video on Instagram of him telling her the news.

She will join the Amazon founder, his brother Mark and a mystery person who paid $28m (£20m) at auction for a seat.

Source: BBC

Rich people. 🤦🏽‍♂️

Corporate Tax

Three issues back, I had explained the tax deal being entered into by the G7 and what that meant for the rest of the countries. I had ended that piece by saying – let the intimidations begin.

Turns out 130 countries have already fallen in line.

Officials from 130 countries, including G20 nations and OECD members, agreed on Thursday in Germany’s business hub of Frankfurt to the broad outlines for an overhaul of rules for taxing international companies.

“The principles underlying the solution vindicate India‘s stand,” the government said in a statement.

It listed advantages such as a greater share of profits for the markets, consideration of demand-side factors in profit allocation and tax rules to stop treaty shopping.

Source: The Wire

Given that India is not a tax haven and we “try” to tax corporations at a rate that is double what this agreement requires, I do not even know what this means for India. Also, given that the Prime Minister was casually joking about India’s commitment to “defending democracy, freedom of thought and liberty”, I don’t even know how serious they really are.


The American oil & gas industry delivers one thing without fail – Catastrophe.

Learning by Proxy

Taxing the rich | Learning by Proxy

Learning by Proxy is a weekly newsletter that covers things happening around the world, along with some context that helps you understand it better.
This is the 64rd edition of the newsletter.

The rich companies, especially in tech have been getting away with paying little to nothing in taxes for several years now. Those days are numbered. The rise of democrats in the US has ensured that their days of getting away with murder are over.

Escaping Tax Corporate Style

Some of the largest companies in the world pay some of the lowest taxes in the world as well. How is this even possible? You may ask.

Enter Patents.

Say I am a company that is incorporated in India which has a tax rate of 30%. Now, I create a bunch of products that involve several patents within them. I create another company in Ireland. Ireland wants technology companies to move there. They are also looking to create R&D jobs so they are willing to provide a 100% waiver on income derived through patents.

I create a company in Ireland. Sell all my patents to that company and then charge a licensing fee to the Indian company.

Because the licensing fee can be arbitrary, I charge 50% of the product cost as licensing fee to the Indian company.

After making and selling a ton of product, the Indian company ends up barely breaking even. But the Irish entity is loaded with cash. Since this income was a result of R&D, also read patents, I have a 100% per cent waiver of taxes on this income.

So although all of the business activity is actually taking place in India, all of the money is being moved to another tax residency and almost no tax accrues on it.

This is one of the variants of how tax avoidance takes place, there are, of course, several other ways to do this.

G7 or the Group of 7 countries, represent about 50% of the global GDP. This in turn means that they have a huge amount of influence on other countries and have the capability to hurt a lot of smaller economies with their sanction.

Finance leaders from the Group of 7 countries agreed to back a new global minimum tax rate of at least 15 percent that companies would have to pay regardless of where they locate their headquarters.

The agreement would also impose an additional tax on some of the largest multinational companies, potentially forcing technology giants like Amazon, Facebook and Google as well as other big global businesses to pay taxes to countries based on where their goods or services are sold, regardless of whether they have a physical presence in that nation.

Source: New York Times

Setting this floor rate for taxation makes it harder for some of the companies to change their tax residence to another country and escape taxes.

You may say, but no American company based itself out of Germany to save tax! Yes, but…

Ireland’s permissiveness has made it the biggest tax haven in the world for footloose companies, according to the economist Gabriel Zucman. Of the $616 billion in corporate profits shifted to tax havens in 2015, Zucman and his colleagues found, Ireland accounted for $106 billion.

Many manufacturers, such as Pfizer, exploit Ireland’s tax regime, but the firms that do so most prominently are in the tech sector. In 2020, for instance, Microsoft’s Irish subsidiary made $315 billion in profits, but this money was reallocated to a company resident in Bermuda, so no corporate tax had to be paid on it. Using the same clause—called the “double Irish” arrangement—Google moved $75 billion in profits out of Ireland in 2019. (The “double Irish” arrangement ended last year, under EU pressure, but other incentives work in similar ways.)


The two pillars of the G7 tax plan are designed to recover some of this avoided tax. One measure permits a country to tax any large multinational that makes profits off its residents; the company can’t claim that its profits are actually accruing to a subsidiary in another country. The second measure ensures that even if, say, a British company books its profits in Ireland and pays a 12.5% corporate tax rate there, the UK can still levy the remaining 2.5% to bring the firm’s effective tax rate to the agreed-upon 15%. With these pillars, the OECD estimates, countries can raise at least $50-80 billion a year in tax revenues.

Source: Quartz

So while the one part makes tax residency in another country irrelevant. The other part is the ability to tax the company up to 15% so long as they are generating their income from the people of said country.

While this reduces tax avoidance, it also kills two birds with one stone.

One of the greatest gripes in the EU-US relationship has been the tax avoidance of the American tech giants who have been moving their monies around the world and avoiding paying taxes in the EU. This has resulted in a complete breakdown of trust and more and more piecemeal actions that can end up breaking the internet.

Creating different laws in different countries for the internet makes it difficult to adhere to those laws for the companies. This, in fact, is also counter-productive because a company like Google which has infinite resources can potentially adhere to differing laws, the smaller startups will most certainly find it harder to scale their businesses across boundaries.

This agreement addresses that gripe.

To prevent individual countries from imposing dozens of digital taxes around the world, the agreement reached Saturday would apply a new tax to large businesses with a profit margin of at least 10 percent. The finance ministers agreed that the tax would be applied to at least 20 percent of profit exceeding that 10 percent margin “for the largest and most profitable multinational enterprises.”


“This agreement will make it possible to tax the digital giants, and for the first time to implement a minimum corporate tax rate to crack down on tax dumping,” he said on Saturday. “As talks continue, France will aim for the highest possible minimum tax rate to put an end to the race to the bottom in certain countries.”


Despite the breakthrough, completing such a sweeping agreement will not be easy and the threat of a trade war remains if countries keep their digital services taxes in place. The Biden administration said this month that it was prepared to move forward with tariffs on about $2.1 billion worth of goods from Austria, Britain, India, Italy, Spain and Turkey in retaliation for their digital taxes. However, it is keeping them on hold while the tax negotiations unfold.

Source: New York Times

Let the intimidations begin!


More than anything else, banks tend to lend a lot to one another. Depositors keep their money with banks so that they can move it at a moment’s notice. In order to be able to make the transaction happen banks are required to maintain certain minimum liquidity. This also means that they have money that they cannot really use – just in case someone chooses to withdraw.

If you had a customer who is willing to buy something for 20 rupees while you can buy the same thing for 10 rupees, you would probably borrow the money, buy it and make the difference. Even after paying the interest, you should have something left to spare. Banks borrow when they see an opportunity, have the money but cannot really use it.

The instrument of choice is a product called the Interest Rate Swap which is essentially a contract, where the borrowing bank pays a fixed rate but has to return the money based on a floating rate usually pegged against the LIBOR.

Source: Wikipedia

The LIBOR is used as a benchmark. The LIBOR is essentially a rate published by the British Bankers’ Association. This figure is based on the rates submitted by the member banks (223 of them), rates at which they claim to be able to borrow from the open market. The average the middle 50% ignoring the rest and publish a rate which is the rate at which the floating interest is fixed.

Now, if a bank raised money at 4% because LIBOR at the time was 3.9% they are expecting to lose about 0.1% on the deal. So long as the activity they carried out with that money netted them more than 0.1%, they stand to profit. But if the LIBOR was to shoot up or crash, one of the two sides would have to take the hit depending on what happens.

Although there are 223 members, the larger banks can collude to fix LIBOR at a certain rate. This is to make the markets think that they have the ability to borrow at much lower interest rates than they are actually able to. This was part of the problem that contributed to the 2008 crash.

Source: New York Times

This fixing hid the degree to which the banks were in trouble which eventually became apparent as their liquidity started to erode which ultimately led to the financial crisis.

And therefore, Libor is going to be abandoned. Or is it?

The US would love to see LIBOR gone as soon as possible. They want to replace it with another benchmark that is harder to manipulate. Treasury Secretary Janet Yellen has been insisting on giving up LIBOR by the end of 2021. But,

Rather than dwindling as regulators have urged, loans tied to Libor grew to around $223 trillion early this year compared with $199 trillion at the end of 2016, according to a March report from the Alternative Reference Rates Committee, a financial industry group made up of major banks, insurers and asset managers alongside the Federal Reserve Bank of New York.

The increase is one sign lenders have yet to fully embrace the Fed’s preferred replacement: the Secured Overnight Financing Rate, or SOFR. While large banks and mortgage lenders like Fannie Mae have started actively using the benchmark, some large U.S. corporations and other borrowers held off, seeking a benchmark that could fix rates over longer time spans.

Source: WSJ

What is this replacement by the way?

Secured Overnight Financing Rate (SOFR) is a secured interbankovernight interest rate and reference rate established as an alternative to LIBOR, which is published in a number of currencies and underpins financial contracts all over the world. Because LIBOR is derived from banks’ daily quotes of borrowing costs, banks were able to manipulate the rates through lying in the surveys. Deeming it prone to manipulation, UK regulators decided to discontinue LIBOR.

As of 2021, SOFR is seen as the likely successor of LIBOR in the US. SOFR uses actual costs of transactions in the overnight repo market, calculated by the New York Federal Reserve. With US government bonds serving as collateral in the borrowing, SOFR is calculated differently from LIBOR and is considered a less risky rate. The less risky nature of SOFR may result in lower borrowing costs for companies.

Unlike the forward-looking LIBOR (which can be calculated for 3, 6 or 12 months into the future), SOFR is calculated based on past transactions, which limits the rate’s predictive value on future interest rates. In addition, SOFR is overnight, whereas LIBOR can have longer tenors.

Source: Wikipedia

For Britain, this is another blow. Brexit ensured that they fell out of favour. It has had a material impact on the assets sitting in London, with many banks choosing to move their assets to mainland Europe. LIBOR was one of the last vestiges of Imperial power. This will make London a little less important.


I came across a headline that read – “Scientists Used CRISPR to Engineer a New ‘Superbug’ That’s Invincible to All Viruses”.

My only thought, why do we have to do this to ourselves?

A team at the University of Cambridge recently did just that. In a technological tour de force, they used CRISPR to replace over 18,000 codons with synthetic amino acids that don’t exist anywhere in the natural world. The result is a bacteria that’s virtually resistant to all viral infections—because it lacks the normal protein “door handles” that viruses need to infect the cell.

But that’s just the beginning of engineering life’s superpowers. Until now, scientists have only been able to slip one designer amino acid into a living organism. The new work opens the door to hacking multiple existing codons at once, copyediting at least three synthetic amino acids at the same time. And when it’s 3 out of 20, that’s enough to fundamentally rewrite life as it exists on Earth.

Source: Singularity Hub

They went in there and changed EVERY SINGLE codon in the DNA that was not performing a specific function.

Why do something whose consequence you are not aware of?

On the other end, global warming is releasing microbes that we have not had to face for many millennia.

A microscopic animal has come back to life after slumbering in the Arctic permafrost for 24,000 years.

Bdelloid rotifers typically live in watery environments and have an incredible ability to survive. Russian scientists found the creatures in a core of frozen soil extracted from the Siberian permafrost using a drilling rig.

“Our report is the hardest proof as of today that multicellular animals could withstand tens of thousands of years in cryptobiosis, the state of almost completely arrested metabolism,” said Stas Malavin, a researcher at the Soil Cryology Laboratory at the Pushchino Scientific Center for Biological Research in Russia.

Source: CNN

Maybe they are too primitive and are unable to take on human immunity or not even interested in getting into humans. But given how eco-systems work, micro-organisms reproduce fast and also spread across eco-systems quickly. It is only a matter of time we discover if they are good for us or bad.


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