4 thoughts on “Monday Message Board”

1. The economics of war production seems topical at the moment. When the US Congress passed the bills that would see billions of dollars in military aid going to the Ukraine, Israel and Taiwan; it was the US armaments industry that broke out the champagne. The USA has one of the largest military arms industries in the world. But they need big orders to remain profitable. Of course,there are orders from other NATO countries; but this is not constant. Forward orders from AUKUS will bring in profits in the future. But it is the next few years that was looking glum for military equipment forward orders. Now the orders for military weapons to go to the Ukraine, Israel and Taiwan will go a long way to boosting profits for US military equipment suppliers.

   Wars are good for certain businesses. Apart from military equipment suppliers, construction industry suppliers will also benefit. Damaged cities and towns will eventually have to be rebuilt. Most war ravaged countries cannot produce their own construction materials and provide construction projects with supplies. This means that trade partners will benefit from the rebuild of war ravaged cities.

   It does not even stop there when war is prolonged. Highly skilled workers will rarely remain in war torn countries. They will migrate and take their skill set to another country. That country will benefit in terms of human capital deepening and widening.

   But wait there’s more economic benefits of war. If war damage includes energy infrastructure, then the replacement of war damaged energy infrastructure will benefit the project partners involved in that enterprise. If foreign aid is involved, then there are opportunities to lock in whole national energy markets and make them dependent on one supplier.

   So when the flags were waved in the US congress, many US executives were quietly waving flags of their own. The money approved by the US congress is likely NOT going to leave the country. Well not most of it anyway. What will leave the country is US made weapons, expertise and capital goods. It’s unlikely that the GDP of the Ukraine, Israel or Taiwan will improve due to these Congress bills. But it is certain that the US NNP will improve and future improvements will be locked in.

   As one US president once famously announced

   ” The business of government IS business!”

   The USA has just demonstrated the upside of the economics of war.

2. Is Trump broke?

   In recent weeks Donald Trump has done the following:

   • He carried out a purge of the Republican National Committee, a fundraising structure for all Republican candidates, replacing its leadership and dozens of its staff. Part of the aim was that of Hitler’s “Night of the Long Knives” in 1934, replacing one set of movement ideologues with another set of movement ideologues personally loyal to the Leader. But Trump had another agenda as well. By moving the RNC operation down to Mar-al-Lago and fusing it with his personal reelection campaign staff and funding, he has allowed himself to freely raid campaign contributions to meet his enormous legal expenses fighting federal, New York and Georgia indictments and civil lawsuits. The zombie Maga faithful will continue to make their small contributions, but it’s likely that many of the millionaire donors will balk at spending their money simply to keep Trump out of jail. They can find ways of supporting congenial congressional and state candidates directly, but overall the move is bad news for the GOP as a party.
   • Trump was hit with a $464m fine awarded by Judge Engoron in the New York tax fraud case, a figure set as proportionate to Trump’s frequent public boasts about his wealth. He is appealing the judgement and the fine, but to do this has to post a surety of the full amount. He appealed the level of the surety too, and the appeals court knocked it down to £175m, a strong hint about their future ruling on the fine itself. Any normal litigant would be very grateful for such a break, but not Trump. Instead he posted a transparently phony bond from a crony in California, featuring shell companies in the Cayman Islands and a signature page from a completely different document. The NY prosecutors called the bluff and Trump has now posted a real bond. But why try something so stupid?
   • Trump has floated his struggling social media platform “Truth Social”. It’s naturally a complex transaction designed to be opaque to the rubes and hard going even for professionals. Kevin Drum has the details: https://jabberwocking.com/why-is-truth-social-trading-at-100-times-its-actual-value/ The stock started at $70 and is now down to $35. This is still a colossal overvaluation. Drum thinks an aggressive valuation for a social media startup based on a 15x multiple of revenue (there are no profits to value) would be $2.13: its current market price represents a pure bubble, destined to pop sooner or later. Trump owns 65% of the shares, 114m. At $35 a share, that would catapult him out of the class of mere billionaires into the rarefied group of decabillionaires. But it’s fairy gold. Trump cannot easily cash out early, and as CNN puts it, “Even if Trump was able to get around this lock-up agreement, experts say it would be practically difficult for him to sell a sizable chunk of his stake without causing a crash in the share price.” He is condemned to watch the bubble deflate. All is not lost. At the more realistic $2 share price, he could still clear a handy $200m or so – at the price of losing what little is left of his carefully constructed image of a financial superman. That is still optimistic and assumes Truth Social remains a going concern. This is not a given. A commenter at Daily Kos who works in the web service industry points out that the customers cannot get away with stiffing the cloud providers, who can shut down non-payers in half an hour.
   • Trump is selling a souvenir “God Bless America” Bible for $60. It’s naturally the obsolete King James version, with a few non-biblical documents thrown in like the Declaration of Independence. Unlike the other cases, this is not an outright scam, and buyers will get an actual book they can read and even profit from. It is still a ripoff. The text of the KJV is in the public domain and can be downloaded from Project Gutenberg for free. A fortnight’s work with LibreOffice (also free) to format it and you are ready to send to the printer. Amazon USA will sell you a nice presentation KJV Bible from a real publisher for $19.49, a fair indication of the market value of the Trump Bible. What is striking here is how petty the grift is. Trump will be lucky to sell 10,000 Bibles, netting a princely $400,000, a drop in the bucket of his legal costs.

   My reading of these events is not just that Trump is still what he always has been, a uniformly dishonest conman. I get the impression that the latest stunts are born of desperation. He is running out of money, that is liquid cash to pay his debts. Post-Ukraine sanctions on Russia, and the spiralling burden of war on the Russian economy, have made covert Russian funding much less feasible. Trump has become a risky bet for the Saudis too. A loss of confidence is self-reinforcing, and deadly to a conman. We will find out soon, probably before the election.

3. Correction: 114m shares at $35 a share makes$3.99 bn. So Trump can’t be a decabillionaire even in fairy gold.

4. I would like my country to go back to being just regular crazy, and divided, instead of … whatever this is. In a thousand years I’d never have thought the GOP would collapse inwards the way it has. It’s astounding.