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 🐇

To be honest, I think this is just the effect of Twitter.

If you're on Twitter all the time - as every political commentator now is - it's easy to think that whiny, big-talking Twitter slacktivists are "the Dems".

But what's happening out there on the ground?


This is another reason I think Twitter is so bad for society.

It convinces intellectuals and commentators that practically everyone who's on their side is an extremist.

Which makes them tolerate extremism out of a (false) feeling of necessity.

If you stay on Twitter too much (which we all do now), you start to think that the typical left-of-center person is some British wanker who quote-tweets "Imagine thinking this" to anyone who doesn't like the idea of "ending capitalism".

But he is not typical.

A majority of Americans are not on Twitter.

But *every* journalist, commentator, and intellectual *has* to be on Twitter.

So every journalist, commentator, and intellectual comes face to face with big-talking slacktivist faux-extremists day in and day out.

It's a problem!!

Online bubbles full of shouty faux-extremists are, in general, fine.

The difference is that every journalist, commentator, and intellectual is essentially forced to exist in THIS bubble, because their jobs require it.

Twitter is a dystopian technology.

(end)

More from Trump

To those who want to actually help Claudia Conway after her mom (Kellyanne Conway, Trump’s former aide) posted her underage daughter’s nudes to Fleets, fill out a report on the NCMEC CyberTipline.
CPS refused to help her.
#HelpClaudia


Kellyanne Conway has a well-documented history of verbally abusing, gaslighting, and threatening her daughter. It gets worse when highly public things go viral (such as exposing the truth about Trump and Conway catching COVID-19 last October). Kellyanne coerces false statements.

Insider did a thorough chronological background of the history of exposing her parents abuse and control of her here:
https://t.co/ncjaEyLOSC

We all know that “statement” last year was coerced. She talks constantly about being abused by them.


Personally? I suspect Kellyanne is a narcissist. From my own experience being sexually and emotionally abused by a narcissist, they are obsessed with controlling the narrative (coerced typed statement), discrediting their victim (posting her nudes) & gaslighting

If you haven’t experienced gaslighting or aren’t familiar with it, it’s when someone causing you harm (physical, emotional, sexual, financial, etc) twists the facts and asserts that reality is just you being delusional and you don’t actually understand what happened.

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