1/Today's @bopinion post is about Trump's taxes, and what they show about how America allocates capital.

We appear to have some big problems.

2/Trump has a bunch of businesses that lose money. Our financial system has lent him money to throw into unsuccessful golf courses, hotels, and so on.

https://t.co/mgWQbsFQGN
3/A lot of these loans are loans that Trump hasn't even paid back yet, using loopholes in the tax system to avoid paying taxes on those unpaid debts.

Why would creditors give money to a guy who wastes the money on bad businesses and doesn't even pay them back?
4/One seemingly obvious answer is that capital is just really cheap these days. Companies are able to borrow more easily than at any time in the last few decades.
5/But this presents us with a mystery.

Why hasn't an abundance of cheap capital caused the return on financial capital to fall? Interest rates are low, but stock returns have held up strongly.
6/Standard economic theory says this isn't supposed to happen.

When you increase the supply of loanable funds, prices are supposed to go down. In other words, cheap capital should fund a lot of marginal businesses that compete away profits...
7/But far from being competed away, profits have risen to unprecedented levels!!
8/Economists are starting to notice that capital markets aren't working like an Econ 101 textbook says they're supposed to work.

Simcha Barkai and Matt Rognlie have both written about this:

1. https://t.co/OLln8npr8b

2. https://t.co/BY1EWyluD7
9/One possible explanation -- which Barkai prefers -- is that market power is growing in the economy. Meaning that big profitable quasi-monopolies are sucking up all the cheap capital, while all the little guys starve.

https://t.co/xNzE9SO8nY
10/But Rognlie doubts this explanation.
https://t.co/BY1EWyluD7

And it doesn't really explain Trump, does it? He's not a monopolist, and he doesn't even make profit. He's just a huckster who can borrow cheaply because he's famous.
11/An alternative idea is that capital is being RATIONED in the U.S., rather than priced.

Financiers are willing to throw tons of cheap money at big powerful companies or at famous hucksters like Trump, but charge inordinate prices to fund new entrants or marginal businesses.
12/If this is true, it means lots of perfectly good companies are probably struggling to get the capital they need, leaving the playing field to the big boys who can borrow cheaply. As a side effect, crappy borrowers like Trump waste some of our nation's savings.
13/Our financial system isn't working the way it's supposed to. Cheap capital should be reducing the return on financial capital, increasing business entry, and competing down profits.

We need to figure out what's going wrong, and fix it!

(end)

https://t.co/dHVCEQGa9q

More from Noah Smith 🐇

"Competitive wokeness", like "virtue signaling" and "preference falsification", seems to be something people on the right say in order to pretend that people on the left don't really believe what they claim to believe.


Basically we have a whole bunch of ways of saying "You can't possibly believe that!!". Which helps us avoid the terrifying fact that yes, people generally do believe it.

Of course, "believe" doesn't mean what it means in econ class. It means that people get a warm feeling from asserting something, even if they don't know what it means. "God is omnipotent", etc.

A lot of times we believe extreme things, simply because asserting those things all together in a group gives us a warm feeling of having an army on our side.

It's not competitive wokeness. It's COOPERATIVE wokeness.

"Virtue signaling" isn't fake or pretend. It's real.

"Virtue", when it comes right down to it, means membership on a team.

Sometimes, to prove you're on a team, it helps to say something people on the other team could never bring themselves to say.
Time for panel #3: Big Tech and regulation!

I will be live-tweeting again, and you can also watch video at either the Twitter or Facebook links below!


Kaissar: Every industry gets regulated when it gets big. The question is what kind of regulation Big Tech will get,and whether the companies will be proactive in shaping it.

Kaissar: More profitable companies have higher returns. Why? Maybe it's a risk factor, because more profit = higher risk of getting regulated.

Bershidskyis showing a diagram of GDPR complaince pop-ups. What a massive ill-conceived bureaucratic mess.

Ritholtz: It's 2018 and we're still talking about Facebook privacy settings?! If you're still giving your personal data to Facebook, you just don't care about privacy!

More from Trump

Having a Twitter account is not a right.

If you incite violence on Twitter, the company can - and should - stop you. Good call.


Plans for “future armed protests” are spreading on Twitter and elsewhere, the company warned, “including a proposed secondary attack on the US Capitol and state capitol buildings on January 17, 2021”.

Yes, people who boosted their careers off of Trump - his sycophants, his kids & people like Haley, who helped him attack and undermine human rights around the world - are boo-hooing right now.

Always beware of powerful people pretending to be victims.

https://t.co/0A5D5eJFvL


But no one should react with glee. The president of the United States has been inciting violence, and Republican Party leaders, along with a willing, violent mob, have been aiding his attempts to overthrow the democratic process.

That's the real story here.

The dangers are real, and we've all seen them. That Twitter even had to contemplate banning any politician for inciting violence is awful. That they had to ban the sitting president for it is even worse.
Allow me to offer some commentary on several SCOTUS cases that are NOT the #moab, but which, considered in aggregate, will reveal my impressions on the #TRUMPSMASH #lawOfFunny

Can someone give me a google number or something? I want a party line.

https://t.co/SlJCsjWMUa


I'm sorry, but #lawOFFunny #nominologicaldeterminism.

#thomists


This one is important:

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A brief analysis and comparison of the CSS for Twitter's PWA vs Twitter's legacy desktop website. The difference is dramatic and I'll touch on some reasons why.

Legacy site *downloads* ~630 KB CSS per theme and writing direction.

6,769 rules
9,252 selectors
16.7k declarations
3,370 unique declarations
44 media queries
36 unique colors
50 unique background colors
46 unique font sizes
39 unique z-indices

https://t.co/qyl4Bt1i5x


PWA *incrementally generates* ~30 KB CSS that handles all themes and writing directions.

735 rules
740 selectors
757 declarations
730 unique declarations
0 media queries
11 unique colors
32 unique background colors
15 unique font sizes
7 unique z-indices

https://t.co/w7oNG5KUkJ


The legacy site's CSS is what happens when hundreds of people directly write CSS over many years. Specificity wars, redundancy, a house of cards that can't be fixed. The result is extremely inefficient and error-prone styling that punishes users and developers.

The PWA's CSS is generated on-demand by a JS framework that manages styles and outputs "atomic CSS". The framework can enforce strict constraints and perform optimisations, which is why the CSS is so much smaller and safer. Style conflicts and unbounded CSS growth are avoided.