Amazon Calls California’s Tax Non-Bluff

Amazon is calling out California on the state’s proposal — make that now law — to tax in-state online sales. Here is its letter to Amazon Associates saying that it will end its affiliate program if & when California signs the bill into law: [-]


For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to,, MYHABIT.COM or Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from,, MYHABIT.COM or

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.


The Amazon Associates Team

I dig Amazon’s bluster, and I would cheerfully see it win, but I understand California’s perspective. What is the point of a sales tax system that can be so easily end-run? In the limit, say most things get sold on-line — does that mean no sales tax income for California?

The current sales tax system predicated on retailer physical presence in-state is vestigial, and hopelessly broken. Hey, why stop at physical presence? Why not link it to the number of horses used for hauling? Goats owned? Serfs? it points to one of the many goofy consequences of the U.S. being trapped in the past, and not having a national value-added tax.


Guide to Writing About Greece For People Who Can’t Bear To Write About Greece

The Greece debt debacle has, it feels like, being going on for most of my adult life. Fine, it may only be a year or so, but it feels much, much longer. I’m way past the point where saying anything else about it is bearable, so, herewith, a Guide to Writing About Greece For People Who Can’t Bear to Write About Greece. [-]

  1. Talk about the U.S. instead. For full contrarian points, say it’s much worse/better/different than Greece.
  2. Say that the market has already discounted the Greece news, whatever it is, so it doesn’t matter.
  3. Tie it all to which banks are being bailed out, and tie that, in turn, back to everything you said about bank bailouts in 2007-8. Feign righteous indignation, or world-weariness, or both, depending on your particular bent.
  4. Clip pictures and video from the various riots. For extra points, run a livestream from a Greek TV station.
  5. Make jokes about auctioning off Greek islands. For extra banal points, be sure to only mention the best known islands, like Santorini, Mykonos, or Crete. For double-extra points, writing something about the Isle of Lesbos. Ho-ho.
  6. Headline the two-millionth article with some variant of “Beware of Greeks bearing debt”.

Feel free to add your own. I’m trying to be helpfully comprehensive here.

Today in Stating the Obvious

I can’t decide if it’s smart, obvious or just silly to point out that most of modern economic growth has happened in recent years, coincinding with longer lifespans. Let’s call it “smillious” and be done with it.

via Quantifying history: Two thousand years in one chart | The Economist.

Playing the China GDP Game

In his latest, Michael Pettis wonders aloud what China’s real GDP is, given misallocation of capital, environemental degradation, political statistics, etc. Like Pettis, I argue that China’s GDP is overstated, for these reasons among others.

The combination of these two sources of GDP overstatement – uncounted environmental degradation and ignored NPLs – is pretty substantial.  To show how substantial, assume that GDP has been overstated by anywhere from 2 to 4 percentage points over the past ten to fifteen years.  This would imply that China’s GDP today is actually about 55% to 85% of its stated size – or to put it another way, that China’s economy is anywhere from 15% to 45% smaller than we think.

This is a pretty big haircut.  I have no idea what the correct deduction is (none of my numbers seem especially implausible), but even very rough ballpark numbers suggest that China’s GDP may be sharply overstated.  At the very least they also suggest that all those breathless predictions about when China will have the world’s largest GDP may turn out to be as simple-minded as the same predictions made about the USSR in the 1960s or, perhaps a little more plausibly, about Japan in the 1980s.  And for the same reasons: in each case we start from the assumption that the country’s real GDP, inflated as it is by misallocated environmental costs and overstated investment numbers, is much larger than it really is.  Much, much larger.

By the way notice that if we discount GDP by 20-40%, the astonishingly low household consumption share of China’s GDP – 35% in 2009 – rises to 44-59% – still very low by global standards, but not quite as surreal.  Could it be that much of China’s GDP really is overstated, and with it total savings too?

More here.

[Update] And some more China bearishness here.

Led Zep at Knebworth … You Know, When They Sucked

From a Chuck Klosterman piece at Grantland, Led Zeppelin at Knebworth from 1979.

Twitter Digest: 2011-06-28

Will Q-Oil 3 Work? No

I’m deep in the camp that says QE3 — otherwise known as last week’s announcement of eventual release of reserve oil supplies from (mostly) the U.S. — will backfire. It will convince people that economies are weakening, and that sovereigns are just as suspicious as the rest of the us about Saudi’s ability to deliver swing supply when needed.

I see today that I have company:

But at Deutsche Bank, oil analyst Paul Sankey said the United States has effectively injected itself into the equation as another speculator, and the result will not be as intended. “Every oil market comment from the White House will [now] become a market-moving event,” Sankey writes in a note to clients. “In short, this move has added to oil markets’ fear of volatility.

Oil analyst Stephen Schork told Bloomberg that the move will backfire and in fact convince traders that there is something very wrong in the market, which will be reason for them to push prices back up.

More here.

Fiscal Exam Time!

From Michael Cembalest at JP Morgan, an exam. Part I today, on the U.S. fiscal situation. As he says, no cheating and Google-ing the answers. [-]

1. What might it take to stabilize the US federal debt, and return to a 3% budget deficit in 2015?

  1. 2001 Bush tax cuts expire for everyone; agreed-upon cuts to physician Medicare reimbursement get implemented; AMT relief ended; personal exemption phase-outs and itemized deduction haircuts applied as previously agreed
  2. Forget about tax hikes and spending cuts, go for growth: achieve 6.5%-7.0% annual nominal growth (without interruption)
  3. Eliminate all non-defense discretionary spending
  4. Any of the mutually exclusive choices shown above

2. Current US Federal debt held by the public is around $10 trillion.  In a speech Richard Fisher of the Dallas Fed gave in 2008, he estimated the present value of all unfunded entitlement obligations (e.g., the debt of the future) to be:

  1. Another $10 trillion
  2. A “gazillion
  3. Another $99 trillion
  4. Same as the maximum damages the recording industry is suing Limewire for, $75 trillion

3. Debt ceiling talks have reportedly broken down again over differences regarding the need for higher taxes.  Partisanship in the House and Senate, measured by the frequency of  legislators only voting for their own party’s bills, is now:

  1. High, but not as high as during the Nixon era (recall that Nixon sent his Enemies List to the IRS so they’d be audited)
  2. Medium, and considerably lower than during the Great Depression when the gap between rich and poor widened
  3. High, but lower than the period following the Civil War, an internal conflict with 6x the casualty rate as WWII
  4. Higher than at any time since 1879

4. While the profits boom in the US has been impressive, it is heavily reliant on two things: weak labor markets, and rising non-US demand linked to abnormally low policy rates in the emerging world.  During the 1980’s and 1990’s, post-recessionary profits recovered at 4x the rate of nominal US GDP growth.  In the current recovery, that ratio peaked at:

  1. 2x
  2. 8x
  3. 12x
  4. Infinite, since there has been no recovery in nominal GDP

5. During the recession, 75% of all high yield bonds traded below a dollar price of $80. Strong corporate balance sheets and easy Fed policy then contributed to a massive rally in credit.  The percentage of HY bonds now trading below $80 is:

  1. 31%
  2. 14%
  3. 2%
  4. 0%, since with interest rates at zero, anything with a coupon must be worth par

6. Household debt, which was 90% of disposable income in the year 2000, peaked at 130% of disposable income in 2007. After the last 3 years of defaults and de-leveraging, this ratio is now:

  1. 141%
  2. 114%
  3. 102%
  4. 85%

7. Some suggest a tax holiday for companies repatriating offshore profits (taxing them at 5% instead of 35%).  When a tax holiday was enacted in 2004 (American Jobs Creation Act), the # of jobs created per $1 million of foregone tax revenue was:

  1. 50
  2. 200
  3. 1,000
  4. negative; repatriating companies cut jobs in a rising job market & raised dividends

[Update] I have now posted answers here.

Chewing Gum Makes You Smarter

Speaking as a hater of gum-chewers, this is depressing:

Effects of chewing gum on cognitive function, mood and physiology in stressed and non-stressed volunteers.


Recent research suggests that chewing gum may improve aspects of cognitive function and mood. There is also evidence suggesting that chewing gum reduces stress. It is important, therefore, to examine these two areas and to determine whether contextual factors (chewing habit, type of gum, and personality) modify such effects.


The aims of the present study were: (i) to determine whether chewing gum improved mood and mental performance; (ii) to determine whether chewing gum had benefits in stressed individuals; and (iii) to determine whether chewing habit, type of gum and level of anxiety modified the effects of gum.


A cross-over study involving 133 volunteers was carried out. Each volunteer carried out a test session when they were chewing gum and without gum, with order of gum conditions counterbalanced across subjects. Baseline sessions were conducted prior to each test session. Approximately half of the volunteers were tested in 75 dBA noise (the stress condition) and the rest in quiet. Volunteers were stratified on chewing habit and anxiety level. Approximately, half of the volunteers were given mint gum and half fruit gum. The volunteers rated their mood at the start and end of each session and had their heart rate monitored over the session. Saliva samples were taken to allow cortisol levels (good indicator of alertness and stress) to be assayed. During the session, volunteers carried out tasks measuring a range of cognitive functions (aspects of memory, selective and sustained attention, psychomotor speed and accuracy).


Chewing gum was associated with greater alertness and a more positive mood. Reaction times were quicker in the gum condition, and this effect became bigger as the task became more difficult. Chewing gum also improved selective and sustained attention. Heart rate and cortisol levels were higher when chewing which confirms the alerting effect of chewing gum.


Overall, the results suggest that chewing gum produces a number of benefits that are generally observed and not context-dependent. In contrast to some previous research, chewing gum failed to improve memory. Further research is now required to increase our knowledge of the behavioral effects of chewing gum and to identify the underlying mechanisms.

via Effects of chewing gum on cognitive function, mood… [Nutr Neurosci. 2010] – PubMed result.

Dollar, Dollar, What’s the Future?

From the results of a UBS survey of $9-trillion worth of sovereign wealth managers on the outlook for the dollar. If you believe this, and it’s fairly striking, you would expect an even more significant shift in the dollar to have already happened as investors acted accordingly. That means they aren’t acting according to the views they’re professing here, which means that this is more their rhetoric than their reality.