$16.5 million — that’s how much Daniel Middleton, the highest paid YouTuber of 2017, made last year, according to Forbes. Since its founding in 2012, Middleton’s channel “DanTDM” has amassed over 20 million subscribers, 13 billion total video views and an active audience that keeps coming back for more gameplay videos.

Middleton’s position isn’t an idiosyncrasy. Falling only a few places behind him are the household names Logan Paul (18.5+ million subscribers) and Jake Paul (17+ million subscribers), who made $12.5 million and $11.5 million in 2017, respectfully. That same year, the highest paid female YouTuber was Lilly Singh “||Superwoman||” (14+ million subscribers), who made $10.5 million.

“Influencers are social media ‘stars’ who have monetised their subscriber base on Instagram by posting pictures and endorsing brands,” defines Yasmin Jones Henry of the Financial Times. The modern world of internet influencers/content creators, however, has only sprung up in the past decade, so how did these individuals go from making videos in their bedrooms to raking in millions of dollars? The answer is simple: advertisements.

In the past, advertisers have paired with traditional media, like television and radio, to focus on larger interests in hopes of having their product be a contender for the general audiences. Influencer marketing, however, has come along with more niche, new-form media, which has allowed advertisers to hyper-target consumers for more successful sales.

“One result of social media has been the democratization of influence and creativity. We no longer need the approval of large corporations to determine what content is truly worthy of views,” writes Matthew Biggins in an article on influencer economics for Medium. Biggins is right — we, the viewers, have taken the power out of the hands of big corporations and have redirected that decision-making authority to ourselves. We decide what we like and what content to ingest, which produces a positive feedback loop of receiving content that repeatedly satisfies us. This is where influencers come in. As viewers constantly returned to the same creators for reliable quality content, the influencer economy continued to expand, leader influencers naturally to become the next tool for advertisers to use.

“Sixty percent of Gen Z are more likely to believe what a YouTube star says over what a movie star says,” said Deborah Weinswig, the Managing Director of Fung Global Retail & Technology,

Images from Visual Capitalist.

In late 2017, roughly 70 percent of brands were using influencers. On just Instagram, which is a platform often used to establish or expand a creator’s social media presence, influencer marketing is a $1 billion industry, according to Retail Dive. Overall, companies primarily have been redirecting their advertising funds to online video and sponsoring Instagram posts, which can cost companies tens of thousands or hundreds of thousands of dollars per post.

Though influencer marketing is clearly the future of business and retail (and the large sums of money involved seem to indicate success), the newness of influencers still has kinks to be worked out when compared to traditional media advertising. While the number of traditional media viewers tends to be concretely-based, many pages with thousands of followers may consist of purchased, fraudulent fans, leaving companies to make investments they can’t be sure will yield the results advertised.

Nonetheless, the way consumers discover and purchase goods in our larger economy is changing for good. No longer can the intertwined economics of entertainment and retail sales rely on relating to the general public in hopes that something will stick.

“Beyond creating content for brands, another driving force of the influencer economy is the consumer’s hunger for representation,” writes Bof Team for Business of Fashion.

So, yes, individually liking something on Instagram is an economic transaction after all. Welcome to the influencer economy.

On Sep. 24, the United States will begin imposing tariffs of 10 percent on another $200 billion worth of Chinese goods. That tariff rate will rise to 25 percent beginning Jan.1. Subsequently, China retaliated as promised on Tuesday that it would enact tariffs on $60 billion in U.S. goods from aircraft to liquified natural gas.

From July this year, the trade battle between the United States and China started that the U.S. imposed 25 percent tariffs on $34 billion worth of Chinese goods as part of President Trump’s tariffs policy. As the trade war escalates over time, an unavoidable question occurs to me: what’s the meaning of the continuously escalating trade war with retaliation?

When searching “trade war” on the internet, the headlines like “Will tariffs hit American more than China?”, “What’s at stake for the U.S.?”, or “China once looked tough on trade. Now its options are dwindling.” popped up on the screen. Now that the negative effects of the trade war with retaliated tariffs can be realized by both sides, why not negotiate a peace treaty? A free trade is better than retaliated tariffs.

Early in 18^th century, an economist Adam Smith wrote in his book The Wealth of Nations: “It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.” This is the core of free trade: businesses concentrate on services or goods where they have a distinct competitive advantage so that they could swap something with lower cost and all profit by doing so. However, a free market is being devalued and tariff is becoming a weapon for the state’s rivalry.

Generally, tariffs opposing free trade can be used for five reasons: protecting domestic employment, protecting consumers, protecting infant industries, national security, and retaliation. As President Trump claimed that US jobs got “stolen” by China and increased tariff on imported goods can boost American business interests, he enacted tariffs for protecting domestic employment, businesses, and consumers.

In terms of employment and businesses, it is true that jobs have been lost in America due to cheaper foreign imports under free trade. However, protectionism will destroy more jobs than it can create. The economist Milton Friedman famous for his support for free market wrote in his book Free to Choose: A Personal Statement (1980, p41): “our real objective is not just jobs but productive jobs—jobs that mean more goods and services to consume.” Increased tariffs do retrieve some labor-intensive manufacturing industries, but jobs provided by them will lead to increased producer costs, increased producer costs will lead to increased products costs, increased products costs will lead to fewer sales and fewer tax recipients, fewer sales will result in fewer jobs and fewer profits.

As for consumers, increased imported tariffs will limit consumers’ freedom to choose products and force consumers to pay more for products while free trade can increase the number of goods that domestic consumers can choose from and decrease the cost of those goods through increased competition. In the long run, the living standard and quality of consumers will be negatively affected by trade barriers. Also, the government has to spend more subsidies on an increased demand for public services because of increased living costs.

In addition to the US, China will also be negatively affected by the trade war in the same way although Chinese policymakers think they have a prudent financial and monetary policy to face the pressure from Washington. China’s economy is always much more vulnerable to exports than America’s economy and China is still trying to shift its growth model to one relying more on consumption and less on investment and exports. Thus, it could take a bigger hit from the escalating trade war.

The free market with free trade is not perfect but it can correct itself better than state, because sometimes government regulations will be used for political rivalry regardless of long-run losses, for example, the current trade war.

There are not many countries that want to be associated with violent tyranny, the absence of freedom, and a disgusting lack human rights. This makes finding a trade partner very difficult for the North Korean government. It doesn’t look very good when you supply your main export, coal, through child labor and what is essentially slavery. On top of that, international organizations like the United Nations and NATO often require members to impose strict sanctions in response to the way North Korea treats its citizens. So how does a country that is so universally hated survive?

North Korea’s economy is still up and running for one reason: China. 83% of North Korea’s exports are to China. Though countries like India, Russia, Pakistan, and Burkina Faso are also trade partners, China’s relationship with North Korea is immense in comparison.

Though one may think that China simply wants to expand its economy and trade with whoever it can, there is another glaring reason for its support of the authoritarian regime. China is not only North Korea’s trading partner, but also its neighbor. If Kim Jong Un’s iron fist lost its grip, millions of refugees may seek shelter across the border, giving China big problems.

Information about the Chinese-North Korean relationship is pretty available, but there is another major country accused of trading behind the scenes: Russia. In Spring, eight U.S senators wrote a letter to Trump urging him to take immediate action against Putin. Lawmakers, along with many analysts, strongly believe that Russia is employing North Korean prisoners in Siberia, trading oil, and exporting supplies related to chemical weapons to Syria. If these allegations are even remotely true, then Russia would be outright defying several international organization agreements, such as U.N-wide sanctions.

Looking forward, North Korea may be thinking about expanding its economy beyond its current limits. Some experts believe that Kim Jong Un is looking for ways to improve trade. U.S President Donald Trump thinks so too.

Back in June, Donald Trump and Kim Jong Un met in Singapore for a historic summit. After the meeting, Trump said that Un had agreed to begin denuclearization, and that once that happens, trade with the notoriously isolated country might just be an option for the United States.

“They (North Korea) have great beaches. You see that whenever they’re exploding their cannons into the ocean. I said, ‘Boy look at that view. Wouldn’t that make a great condo?’” Trump told reporters after the summit.

If North Korea were to suddenly abandon its nuclear weapons and give its citizens basic rights, its economy could skyrocket. However, signs of that actually happening are still slim.

A turbulent few years of American politics has created new groups of activists across the nation standing up for themselves, what they believe in and what they feel is right. The #MeToo movement disrupted Hollywood and has spread to Silicon Valley and to Washington. Black Lives Matter rallies have filled the streets of the United States. Celebrities and professional athletes have made statements of support on national TV. As we are living in a time of activism, people are encouraged to participate.

It is no longer acceptable to just stand by – for individuals, or for companies. This age of activism is translating to the way consumers behave. Support – or disapproval – of a company’s values is shown in purchase behavior. It may seem like a risky PR move for a company to stake a political or social stance, but recent events have demonstrated the possible pay-off.

On September 4^th of this year, Nike released the following ad starring Colin Kaepernick:

Kaepernick was the part of a highly controversial protest starting in 2016. He and other NFL players began kneeling during the national anthem to protest racism, police brutality and social injustice. President Trump politicized the protests and many viewed it as disrespectful to those who have served our country. Nike took a huge risk with this ad, that would potentially alienate many of their previous customers.

Backlash seemed immediate after the ad was released. Social media sites flooded with videos of people burning their Nike products and criticizing the language of “sacrificing everything.” President Trump even partook in the conversation:

Although many – including fellow athletes LeBron James and Serena Williams – supported Nike’s decision to run this ad, the media primarily emphasized the negative reactions. This made Wall Street and Nike investors nervous. On the day the ad was released, there was a larger than normal sell-off of Nike stock.

However, as seen in the graph above, it was very insignificant in the scheme of things. In fact, since the ad was released Nike’s stock has seen reached an all-time high.

Instead of the #NikeBoycott approach, many people actually showed their support for the brand by going out and buying their products. According to the research firm Edison Trends, online sales jumped – sales rose 31% from Sunday (September 2^nd)  through Tuesday (September 4^th). While that spike didn’t last long, it demonstrated the way consumers felt towards Nike and the divisive stance they took.

The support shown on social media, in sales and in pieces of journalism like, This Life: If Nike can stand with Kaepernick, I can shell out extra for sneakers, speak to the way retail activism works in this political climate. While the long-term stock and sale performances will likely not be heavily effected, the immediate reactions of consumers are telling. People will remember what Nike stands for when they go to buy their next pair of running shoes, and an individual’s own beliefs will impact whether they buy Nike or a competing brand.

Recently, the Trump administration decided to pay subsidies to farmers to offset the impact of the trade war between the United States and other countries. A similar government intervention policy called “government cheese” had been used during the 1970s by President Jimmy Carter.

All these cheesy stories started in 1949. When the Agricultural Act of 1949 got passed, the U.S. government established the Commodity Credit Corporation to take charge of stabilizing farmers’ incomes. It was the first time for the government to purchase dairy products like milk and cheese from farmers.

In the later 1970s, The U.S. federal government distributed 300 million pounds of government cheese, an almost neon orange mixed cheese, to do food charities. This kind of cheese was five pounds per block, had a rectangular shape, and attached lots of USDA stamps. The primary purpose was to maintain the price of daily supplies. President Jimmy Carter, along with Congress, raised the price of milk 6 cents per gallon and kept increasing the price with inflation in 1977. Also, the government put $2 billion subsidies to save the dairy food industry. Although this strategy saved the dairy food industry from its shortage, the government itself became the primary customer. It bought all the milk that couldn’t be sold by farmers and processed the milk into cheese. Without the market, the government had to store all the cheese in thousands of warehouses and even some caves in 35 states.

“Probably the cheapest and most practical thing to would be to dump it in the ocean,” a USDA official said in 1981. Although the government cheese was useless for the USDA, most Americans at that time still suffered from the after-effects of the recession. Therefore, American citizens harshly criticized President Ronald Reagan and the federal government for the waste of these daily food products, which include cheese, butter, and milk powder.

Surprisingly, Agriculture Secretary John R. Block showed up at a White House event with some pieces of government cheese on his hand and said, “we can’t find a market for it, we can’t sell it, and we’re looking to trying to give some of it away.”

To distinguish the government cheese from regular cheese products, the Commodity Credit Corporation established some new supporting programs to deliver the cheese to lower-class families. One joke related to this was that if you give cheese to people who cannot afford regular cheese, it is not a behavior to hurt the current market. Obviously, it is not true. This government cheese story has shown the butterfly effect of one government intervention. Ultimately, the Temporary Emergency Food Assistance Program released more than 30 million pounds of cheese around the nation.

When the dairy prices came down in the 1990s, the government finally took itself out of this “cheese charity” business.

However, as the U.S. Department of Agriculture secretary Sonny Perdue announced the plan to provide $11 billion subsidies to assist the farmers who had struggled during the Trade War, the same organization Commodity Credit Corporation comes back and start to do its job again.

Sources:

https://www.history.com/news/government-cheese-dairy-farmers-reagan

https://www.npr.org/2018/09/07/645459818/government-cheese-well-intentioned-program-goes-off-the-rails

The Tyranny and the Comfort of Government Cheese

It is almost truism to say that when you’re young, you are, as rapper Whiz Khalifa once noted, “wild and free.” Youthful exuberance, in popular Western imagination, is epitomized by reckless. But youth, as advertised, isn’t always just about the freedom to be irresponsible. It is also true that when you’re young, you’re most free to explore and inquire in ways that you can’t really do so when you have, say, a mortgage to pay off and kids to feed. Thus, your 20s are potentially your most experimental years. That is, if you are not burdened by debt.

 

Today, students at a four-year public institution pay 213% more for tuition than they would have thirty years ago. For private schools, students pay 130% more Roughly 70 percent of graduates leave college with student debt. Total student loan debt is now at about $1.5 trillion (two-thirds of which are held by woman.).

According to data from the Census Bureau compiled and aggregated by Forbes, annual cost of college, which includes room and board, tuition, and fees, has greatly outpaced median income. Even incomes for males with bachelor degrees are starting to feel the burn.

In a new survey by the Kogog School of Business, about 60 percent of millenials earning less than $50,000 a year are living “paycheck to paycheck”. Even more astonishing, about 60 percent of those earning between $50,000 to $99,000 say it’s still hard to make ends meat.

In another study, conducted by the NBC News/GenForward survey, about 62% of millenials owe more in debt than what they have saved up, with about 30% of millenials having less than $1000 dollars in their savings account and about 24% having no savings at all. Credit card debt and student loans make up the majority of the debt.

And before one jumps prematurely to the “millenials are just lazy, have bad work ethics, buy too much avocado toast etc.” argument, keep in mind, millenials tend to be workaholics, using less of their vacation time than previous age groups.

None of this is to say that these are problems unique to the young. Americans across all age groups face mounting debt. But the fact that the largest generation since the boomers must simultaneously balance debt payments while entering into an increasingly precarious labor market with few options for cheap affordable housing is cause for alarm. This isn’t just a spiritual and cultural travesty but an economic one too.

For example, in a study by the Health Science Journal on “economic growth and the harmful effects of student loan debt on biomedical research”, empirical evidence is found that supports the hypothesis that “indebtedness among young medical graduates affects speciality career choices. This means that, in the future, ceteris paribus, prospective students in biomedical sciences will be strongly incentivised, firstly, to choose the more remunerative career of medical practitioner instead of that of medical (pure or applied) researcher, and secondly to further sub-specialize in those fields that promise higher earnings to offset their higher loan repayments.”

I think this finding could be applied across most creative, professional, and specialized fields. To take just one example, there is a huge shortage (as well as underfunding) of public defenders. It’s highly possible that many attending law schools, even those with deep interests in public defense, go instead into corporate law for reasons similar to those cited in the above study: that is, to offset loan repayments or reduce precariousness in living standards—which is becoming more precarious as wealth inequality continues to widen. What are the consequences of this? A large reserve of lawyers in defense of the most privileged and a shortage of lawyers for the most marginalized, thus furthering racial and class disparity.

So what can be done? A study by the Levy Economics Institute at Bard College proposed a radical idea back in February: cancel the nation’s $1.4 trillion student debt.

The researchers looked at what would happen if the government cancelled all federal loans as a one-time policy. According to their models, this would lead to an $86 billion to $108 billion boost in GDP over the next ten years as well as reduce unemployment by .3%. What about deficit and inflation? The report indicates only “modest” effects.

Although there are many legitimate concerns to this seemingly simple solution, it may be something worth considering—a radical solution for a radical problem.

 

 

 

 

In 2015 it was Greece. In 2018 it has been Argentina, Venezuela, and Turkey just to name a few. Across the globe, those countries unable to execute the delicate ballet of monetary policy have seen staggering inflation, interest rates to match, and devalued currency. Perhaps most urgent, however, is the inability for these countries to pay back loans. Even more, 40% of low-income developing countries (not always sprawled across headlines) are either in a debt crisis or nearly there.

Let’s look at Turkey, for example. Despite raised interest rates (now at 24%), inflation is at 18% and the country doesn’t appear solvent enough to repay the foreign money dumped into the economy over the past few years. GDP is expected to contract in Q3. Just yesterday, Turkey’s Treasury borrowed around $347 million at the interest rate of 25.05%. These numbers scream impending doom. As interest payments come due, Turkey will likely have to refinance the loans or, more probably, borrow more money, this time at an even higher interest rate. This process will increase the deficit again, drive interest rates higher, and propel the positive feedback loop yet again.

It’s easy to sit behind the news headlines, shaking our heads at the recklessness of Treasury officials in Washington or Ankara or Buenos Aires or Athens. The reality is, however, that this insidious cycle happens not merely within governments, but also within a much quieter space—the world’s poorest.

A financial epiphany hit the world in the 1970s: microfinance. As inflation was skyrocketing in the US, nonprofits began to understand and prove that the “poor are creditworthy.” This realization opened the door to a now widely used process that allows individuals who wouldn’t ordinarily have access to capital, such as women in sub-Saharan Africa, to be granted loans to start small businesses. This reinvention of the financial system promised the potential to become a powerful tool in alleviating worldwide poverty.

But people, like governments, have trouble with debt.

Source: CGAP

While the lending interest rate in the United States was about 8% in 2006,  the average microfinance interest rate was about 35%, as shown in the figure above. For individuals in Uzbekistan, that number was 85%. It’s intuitive, practical, and even necessary for lenders to be compensated for risky investments through higher interest rates; this reality, however, leaves individuals trying to start a small business, like Greece in 2015, broke, desperate, and unable to attempt repayment. For microloan recipients in India, the reality was bleaker than desperation. “More than 80 people [took] their own lives in the last few months after defaulting on micro-loans,” reported the BBC in December 2010. These are devastating realities for individuals who fall prey to interest rates that are wildly unsustainable.

Let’s suppose that a microfinance organization has agreed to lend $100 to a woman in Malawi to make and sell resilient water jugs in her community. Completely ignoring start-up costs, she will have to expect returns of 37% ($137) in the first year just to pay off the loan and make a 2% ($2) profit. When this woman cannot pay off her loan at the end of the year, she’s forced to borrow more money at a higher interest rate in order to pay off the first loan. Of course, it’s unlikely that she’ll be able to pay off the second loan either. This is an infeasible system.

When interest rates are highest among individuals with the least amount of power to pay them back, these citizens turn into a personification of Greece or Argentina or Venezuela, desperately looking around, pleading for someone to help pay their debts. There is no IMF for individuals.

Betting and gambling are inherently based on chance, luck, and uncertainty. Because uncertainty is difficult to measure, and we cannot predict the future with one hundred percent accuracy, gambling on an outcome is exciting because no one knows what will happen. So, many people enjoy the thrill. In fact, the betting industry is a multi-billion-dollar industry in the countries of the world where it is legalized. The American Gaming Association estimates that in the United States, whose Supreme Court just struck down an important law making it illegal for states to regulate and allow sports betting, $150 billion is spent on illegal gambling each year. The Professional and Amateur Sports Protection Act (PASPA) was a federal law that essentially restricted sports betting to Nevada for a quarter of a century. And with PAPSA struck down, the American market is poised to become the world’s largest legal gambling market.

Although for a long time betting and gambling was seen as a vice that should be completely outlawed, much like alcohol post-Prohibition it is coming mainstream. Attempts to deny access to it, as with alcohol, brought forth illegal and shady offshore operations. Now, states and Congress are viewing a healthy amount of sports betting as “a potential source of revenue more than a detriment to society,” according to industry experts. Additionally, the rise in daily fantasy sports – considered by many to be a form of betting – has captivated the country, with nearly one-fifth of the country now participating in fantasy sports.

[source: Fantasy Sports Trade Association]

The illegality of sports gambling in the United States (save in, famously, Nevada, as well as a couple of other states) led to the rise in offshore betting sites. They were not legal or sanctioned, yet many managed to evade regulators and lawmakers. They continue to have a head start on much of the industry in America. While that is currently an issue, because states are quickly moving to legalize and regulate the industry, and Congress is moving to pass legislation as well, the legal market should win out. NBA Commissioner Emeritus David Stern declares that “between five and 10 years” from now, we will see a massive, regulated, fully online betting market in the United States.

The future legalized market in the United States could reshape the way sports teams and leagues operates, as well as create more experiences for fans to actually participate in, according to team owners and gambling experts.  Leagues see the revenue from gambling bringing in billions of dollars, money that will modify the way teams market and provide services to fans; this additional revenue could cause salary caps and team payrolls to explode as well.  Already, the Pittsburgh Pirates’ executives have argued that states should allocate sports-gambling revenues to stadium building.

According to Chris Eaton, an integrity monitor and former INTERPOL investigator, “In 10 years’ time … I see the large international conglomerates — Bloomberg, Google, the massive data companies — swallowing up most of the sports betting operations around the world and operating an international platform, with all of sports betting being essentially offered on the mobile device, the mobile platform.”

The large technology corporations are already seeking to implement their services into the betting industry. In the past decade “Google, Yahoo, Microsoft and others in the technology sector made written filings to the Commodity Futures Trading Commission (CFTC) in support of expanding so-called prediction markets into the public sphere.” This opportunity to enter a new market will not only boost revenues for the companies that are prepared, have a first-mover advantage or own large name recognition, but will also provide them with even more data.

Lawmakers and companies need to ensure this data is used efficiently and with respect for privacy; that the athletes are not taken advantage of vis-a-vis point shaving; and that gambling is properly regulated and able to be enjoyed in moderation. That these issues will be firmly addressed, however, much like betting on an outcome, are no sure things; with billions of dollars and lives at stake, it will be fascinating to experience the future prominence of legalized gambling across the United States.