On Singapore, the latest Imperial Tariff rate appears to have been set at 12.5% due to not complying with (America's) international law on banning goods produced with forced labour, which may apply to one-third of local exports to them. About this, one personally reckons it far cleaner were the U.S. simply to announce that they are imposing tariffs to try and balance their trade deficit - which everybody sort of does anyway - rather than bother with contriving excuses. Foreign Affairs has in any case just attributed yuan undervaluation as a major source of said imbalances for Team Blue, with The Economistforeseeing an inevitable trade war between Europe and China.
This was of course long posited as a likely consequence of the American tariffs last September by way of the Chickencoop Principle, with the world other than America necessarily having to eat larger deficits were the U.S. to reduce theirs - and Europe is indeed bearing the brunt of China's excess export capacity, leading to the German Chancellor proposing toughertrade measures; so much for free trade orthodoxy then, when you're not winning! Chinese officials have for their part been a broken record on repeatingthat they do not aim for a trade surplus, while (correctly) attributing such to China's moving upthe value ladder, with some sniping at Europe's refusal to export advanced equipment like lithography machines - though frankly, it won't be long before China corners that market too, if they did.
Anyway, China Dailyhas acknowledged the Chickencoop Principle in their own way by (accurately) stating that "...the notion that all economies can simultaneously enjoy trade surpluses is mathematically impossible" (i.e. we are certainly not going to be the suckers on running an aggregate trade deficit), but this neglects that all economies can theoretically run balanced trade with near-zero surpluses or deficits, following the old wisdom of "neither a borrower nor a lender be". As it is, Western manufacturing potential and expertise is withering away - with consequences to be explained very soon.
Singapore has not been spared in the ongoing (if largely underadvertised) trade wars, what with rebadged mattresses from China coming under scrutiny, and local banks taking a beating on China's new regulations on outbound wealth flows. While one can't knock the government's initiative on seeking a free trade agreement with eight East African countries, this doesn't look like it will cover a fraction of the loss in trade were the big boys (i.e. Great America and China mostly) to impose themselves. Our long-suffering DPM Gan has received some relief in the form of some 1000 much-needed jobs from U.S. semiconductor firm Applied Materials**, a rare carrot in the current era of enthusiastic American stick-wielding that may warrant a sincere "thank you" to the reigning GOD-EMPEROR.
It bears repeating that it does appear a seriously tough era to be a minister (or comparably highly-placed in the Singapore government), to the extent that one feels it only decent to tone down on the kopitiam-style criticism*, despite my naturally-contrarian sensibilities. The Defence Minister had for instance been panned for continually referring to his script in his address at the Shangri-La Dialogue plenary, but it does make sense to be extra careful about exactly what one says*** in an official capacity (well, unless you're GEOTUS), in the currently-tense geopolitical climate. Likewise for the comments on a Senior Minister of State for Manpower and Health returning to surgical practice, after originallyresigning for family reasons - there might well be a net increase in his contribution to society there!
Unto Elon AI, As Unto AdonAI
"If you want to know what God thinks of money, just look at the people He gives it to."
[N.B. She might know a bit about that, being born a Rothschild.]
Maybe not *quite* richer than God... but the comparison is understandable (Source: GPT Image 2)
The bumper SpaceX IPO from several days ago has provided a convenient staging point for the (macro)economics discussion to follow, beginning with how the offering of about 4.3% of the outstanding SpaceX stock at US$150 (up from US$135) on Nasdaq implied a company valuation of about US$2 trillion - which made founder Elon Musk theworld'sfirst U.S. dollar trillionaire. About a year ago, an interactive visualization of Bezos' wealth (US$139 billion then) had madesome waves online for illustrating how humongous even a single billion is, and an update may be in order given how Musk is now wealthier than the next four multi-billionaires (Bezos now in fourth) combined. Perhaps more remarkably, Musk is alsoricher than approximately the poorest half of the global population (46%, to be exact), which comes to, oh, 3.8 billion people.
This fact obviously makes absolutely no sense. Now, Elon Musk may be a pretty smart and accomplished fellow, a magnificent autist, and the world's topDiablo 4 player to boot, but has he really done as much for the world as roughly half of all living humans? This is a rhetorical question, by the way, to which the only resolution appears that money is not a very good measure of one's contributions; in fairness to Musk, he does have quite a lot of those in various domains, just perhaps not to the tune of a trillion bucks... but we will return to possible reasons soon. Perhaps he might consider reimbursing the local elderly lady who had spotted him six hundred grand in his hour of need?
Switching now to the (inter)national level, one trillion U.S. dollars is also larger than the annual GDP of all but twenty-one countries (Poland being the twenty-first, with either Taiwan or Ireland next depending on one's sympathies), every one of which Singapore wants to be friends with, according to our economics-trained**** PM at the SPC Eminent Speaker Series, along with a call for national cohesion amidst "mutually assured disruption" between the U.S. and China. This apparently includes Russia, where he will be visiting for high-level talks in a few days, which may seem problematic for Singapore's supposed "principles" on the surface given their invasion of Ukraine - but then, pragmatism is a principle too.
And back to the implications of Musk's trillion dollars. As a reminder, Musk didn't sell SpaceX for a trillion (and change); he sold about 4% of the company, while owning about 46%. His fortune, then, is derived by extrapolating the per-share cost of the actually-bought shares, to the remainder of the stock. Clearly, if Musk were to attempt to divest all of his 46% on the open market, this would move the share price (almost certainly for the worse), resulting in a reduced amount of cold, hard cash.
To further illustrate this issue with valuations, let us try a little game, for which you would need a trusted† friend (or pet) and a notepad. Firstly, create ten trillion NotePadCoins by tearing out two pages of the notepad, and writing "5 trillion NPCs" on each page. Rest assured, there's (probably) no law against this - call them "tokens" if you have to. Next, gift 5 trillion NPCs to your friend, while retaining 5 trillion NPCs for yourself. Finally, trade a dollar for one of your friend's NPCs. Now, from known market valuations, each of you own assets worth approximately five trillion U.S. dollars on paper, if admittedly with minor concerns about liquidity, so don't go wild with purchasing yachts just yet!
This so happens to be basically Musk's favourite joke on two economists consuming poop to goose the GDP, and also describes the non-fungible token (NFT) craze/scam circa 2021 (remember them?), which hasconcluded with nearly all NFTs being next to worthless, Exhibit A being Justin Bieber's Bored Ape Yacht Club NFT that went from US$1.2 million in 2022, to (maybe) US$12000 today. To clarify, the mechanism seems fairly straightforward: NFT creators and insiders just listed and (re-)sold the NFTs for astronomical prices between themselves, as easily as one might trade paper NotePadCoins with one's pals (or pets). The real profit is made only when it circulates to an outsider/sucker, who injects actual funds into the ecosystem.
And he saith unto them - whose is this image and superscription? [N.B. Just in case it wasn't obvious enough...] (Source: nypost.com)
And finally, for the main realization and hypothesis, consider some American monetary history. While the concept of a trillion perhaps first came to the fore of their public consciousness in 1981, when the national debt first crossed that mark, there had been a revival in late 2012, when the idea of minting a trillion-dollar coin to bypass the debt ceiling was floated by the Democrats, apparently with support from Krugman, The Economist and the New York Times. This possibility hadregainedattention in recent years from Rashida Tlaib and other congresspeople for funding purposes, and the conclusion seems to be that the Treasury does have every legal right to mint such a coin by the Coinage Act... as long as it is made of platinum.
From another perspective, the minting is somewhat superfluous - the Fed can (and has) just perform Quantitative Easing (QE) by buying assets in open market operations. There are some differences, however, in that the U.S. Treasury would theoretically have (fairly broad) oversight over howto spend the spanking new one trillion dollars that just appeared in their deposit account at the Federal Reserve (effectively via Modern Monetary Theory). This would be expected to go towards paying down the debt by redeeming bonds, though the Treasury has bought currencies and equities in exceptional situations, such as for the Troubled Asset Relief Program (TARP) in 2008.
Both the trillion-dollar coin minting and regular QE have some major drawbacks, however. Specifically, a trillion-dollar coin would very obviously be "printing money", while QE relies ontransmission through banks by lending (and creditors through borrowing), which may be ineffective if one or both remain unwilling (i.e. "pushing on a string"). Both are moreover likely to erode confidence in the U.S. dollar, in the longer run. The "proper" way then is to borrow via issuing Treasury bonds (debt) and/or tax the citizenry, but the former is getting outof control, and the latter won't keep a party in government for long.
So we come to: if just printing money one way or the other is no good, allocation through the banks is unreliable, borrowing is unaffordable, and taxation entirely unpopular... how about manufacturing a useful craze in technology (yes, and artificial intelligence, for which a "circular economy" has been observed for some months now), and encouraging domestic organizations and consumers to pay their taxes invest in the new hotness - often mandated by automatic buying of index funds, as is increasingly happening with a third of U.S. household wealth now in the stock market, up from less than ten percent in the 1980s. Best hope that trillion-dollar Eloncoin holds up, then!
Approachable video explainer
[*For example, I was considering penning a rebuttal against theproposed increase in ministerial salaries in February, only to realize that I had, to my shame, not been making less than them for the past decade or so, perhaps those with multiple portfolios and serendipitous property windfalls excepted. Given this, it just felt entirely hypocritical to complain, now all the more as the raise has been shelved due to Hormuz senjata.]
[**They might hopefully give some consideration to locals, from how a recent recruitment drive for Micron Singapore reportedly explicitly invited only Malaysians to apply.]
[***This includes on recent anti-Indian social media posts, which the Law Minister was careful to state that there was no evidence to suggest that they were part of a coordinated campaign by any government, despite likely originating from a China-based platform. As said last month, China probably has a lot to learn about effective propaganda ops anyway.]
[****Which extends to the "stylish retro mullet", as referenced in our explanation of the Grocery Store Analogy from last year.]
