A matter of interest (1): The major economic indicators

I am very fond of the quote “How can I tell what I think till I see what I say?” because it captures what I have long been convinced of , that the ideas in one’s mind, even those that one thinks are clear, are often inchoate and confused, containing illogicality and errors that are only manifested when one openly articulates the ideas, especially in written form. The quote is attributed to E. M. Forster and can found in his 1927 book of essays Aspects of the Novel. But he is not the original source for the line. He is in fact approvingly quoting a character in André Gide’s novel Les Faux Monnayeurs. (The fact that this quote is a translation from the French explains why the quote is sometimes rendered differently, such as “How do I know what I think until I see what I say?”)

The reason for this preamble is that in most instances, my posts are not written from the point of view of an authoritative expert on the topic but rather consist of my efforts to try and understand something by putting it out there. And today’s topic is the first in a series on macro-economic indicators: what they are and what they mean. Since I am not only not an economist nor have I taken even a single course in economics at any level, this series of posts will consist of my attempts to put together a coherent picture based on my casual reading on the topic. The subject is dull. Economics is not known as the dismal science for nothing, but it is important, and I will try to stumble my way through it.

The main macro-economic indicators, at least in the US, are (1) the stock market, (2) the bond market, (3) the exchange rate for the US dollar in relation to gold and other currencies, and (4) size of the deficit, (5) the national debt, (6) the Gross Domestic Product, and (7) the trade balance. These things do not act independently of course. They are linked together in many ways but the link that I am going to focus on is interest rates, the cost of borrowing money.
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The rise of BRICS and the decline of SWIFT

One of Trump’s legacies will be the rearranging of global trade and alliances. Because of its powerful military and economic clout, the US has long been the guiding force in global affairs, able to dominate world trade and commerce and forming stable trade relationships and alliances with other major capitalist nations such as Canada, the European Union, Japan, South Korea, and other nations. Trump has undermined that with his unilateral actions.

There was a time when the Non-Aligned Movement (NAM) threatened US hegemony by creating an alternative power bloc comprised of developing countries (of which China was then one) that was broadly socialist in outlook and sought to be independent of the then two superpower blocs of the US and the Soviet Union. The US always disliked it, seeing any kind of independence as anti-US, and while that movement still exists, the US-backed coups in Indonesia and Ghana that overthrew their leaders Sukarno and Kwame Nkrumah (two of the five founders of the NAM) considerably weakened it. The deaths of the other three founders (Jawaharlal Nehru in India, Josef Tito of Yugoslavia, and Gamal Abdel Nasser of Egypt) further reduced its influence.

But a new bloc known as BRICS (named after the five countries Brazil, Russia, India, China, and South Africa) has arisen to try and find new ways to counter US hegemony. It has since expanded to include Egypt, Ethiopia, Indonesia, Iran, and the United Arab Emirates. As can be seen from its composition, unlike the NAM, it is all over the map politically, ranging from communist nations to right wing dictatorships to oil-rich oligarchies. What unites them is not politics but economics, the need to achieve some level of independence from US hegemony in trade and commerce.
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The battle over California’s billionaire tax

If you live in California, you will have been inundated with a barrage of ads over several propositions that are on the ballot in the upcoming elections. The main ones are Propositions 40, 41, and 42 and all relate directly or indirectly to a proposed wealth tax on billionaires. While Proposition 40 deals directly with this tax, the other two have been thrown in in an effort to confuse voters and stymie implementation of 40 even if it passes.

To understand the need for a wealth tax, we have to understand that while most people pay taxes on income, the very wealthy pay almost no tax. How do they do it? Because they do not receive any taxable income. For example, Google founders Larry Page and Sergey Brin receive salaries of just one dollar per year. They receive their massive compensation in the form of stock that become taxable only when they sell any of it, and even then they pay only the capital gains rate which is a maximum of 20%, much lower than the top income tax bracket of 37%. But they do not pay even that. What they do is keep their stock intact without selling and take out loans with the stock as collateral. Since these are loans, they are not taxed at all. So these people have access to huge amounts of money to spend lavishly without incurring any tax liability.
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The shaky business model behind AI

The New York Times Magazine has a very long article that asks the question, being posed in many quarters, as to whether we are in an AI bubble. The argument that we are hinges on the massive amounts of money that is being spent on data centers and computers estimated by Cory Doctorow to be currently running at about $1.4 trillion while the AI companies are getting revenues of only about $50 billion from subscriptions to their services. So where is the rest of the money coming from? From borrowing, as rich investors pour money into these AI companies in the belief that they will grow rapidly and be profitable at some point. This belief drives up the stock prices. As Doctorow says:

I’m pretty baffled that there’s people who say it’s not a bubble. Let’s just run the numbers again. Trillion dollars in expenditure this year, over $1.4 trillion total, $50 billion revenue. Seven companies, the magnificent seven that are 35% of the S&P 500. Six of them lose money on AI, and the seventh one makes money from the other six. [The ‘other six’ are Alphabet, Amazon, Meta, Microsoft, Oracle, and Anthropic and the seventh is the chip maker Nvidia – MS]
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That’s Nvidia, yes. They’re all passing around the same hundred-billion-dollar IOU really fast and pretending it’s in all of their bank accounts at once. The assets depreciate really quickly. They amortize those data centers and the GPUs in them over five years. They actually replace them every two to three years. The replacements, pretty intense.
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GPUs, data centers, and the AI that runs on them, right? They’re saying that these things are going to last them about five years. The reason that matters is if you spend $1 trillion on stuff that’s only going to last five years, then in five years, you’re going to need another $1 trillion if you want to stay in business at least. Nvidia is actually doing some pretty amazing things with new generations of chips every year.

One of the ways they’re getting such performance out of these chips every year is they’re throwing away one of the principles that normally constrains new technology manufacturers, which is backwards compatibility. These new chips, they have really different heat dissipation, networking, power consumption, and often you can’t put them in the same building. You need to basically tear the data center down to the foundation’s lab and build another one for the next generation of chips.
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These are not durable assets in this model. A third of the stock market, their assets depreciating every three years. They’re spending $1 trillion a year. They’re making $50 billion a year.

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NFTs are now largely worthless

Remember the craze just a few years ago over Non-Fungible Tokens (NFTs)? People were paying millions of dollars to purchase various images, with one series known as the Bored Ape Yacht Club being particularly hyped.

The NFT hype benefited from the crypto craze because people seemed impressed with the blockchain process used to certify ‘ownership’ of this asset even if they did not understand it. It made absolutely no sense to me right from the get-go that cartoons and other images that can be copied freely could have any value but many people seemed to think that they did and rushed to ‘purchase’ them even though it was not clear what ‘ownership’ entitled them to.

The ownership of an NFT as defined by the blockchain has no inherent legal meaning and does not necessarily grant copyright, intellectual property rights, or other legal rights over its associated digital file. An NFT does not restrict the sharing or copying of its associated digital file and does not prevent the creation of NFTs that reference identical files.

This phenomenon had all the markings of a bubble and sure enough, the bubble popped.
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Trying to explain stock market gyrations

I recently posted about my puzzlement as to why the stock market indices gyrate wildly based on Trump’s utterances when we all know that he both lies and changes tack on what seems like whims. Several commenters had valuable insights and now this article from yesterday tries to explain what is going on.

Markets are rallying on a familiar bet: That President Donald Trump will, once again, back down. (It’s not called TACO Tuesday for nothing.)

The Dow, S&P 500 and the Nasdaq just had their best day since May 2025, roaring higher Tuesday in large part because of a report (and semi-confirmation) that the White House is considering an end to America’s involvement in the Iran war without reopening the Strait of Hormuz. CNN later confirmed Trump and his administration increasingly believe that they can’t promise to reopen the strait as a prerequisite to declaring an end to hostilities with Iran.
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Cory Doctorow on ‘enshittification’ and how to combat it

The writer and digital rights activist coined the term ‘enshittifcation’ to describe the deterioration of the internet and it caught on. I wrote about it a couple of times (see here and here). He now has a book with that title that I will get and read soon.

In this interview with Ronny Chieng on The Daily Show Doctorow explains succinctly how enshittification comes about and what can be done about it. It is an excellent informative interview.

What recent Democratic upset wins might mean

Democratic socialist Zohran Mamdani upset the political establishment by winning the mayoralty of New York City but now comes along another upset, this time in the city of Miami in deep-red Florida.

Miami’s new mayor, Eileen Higgins, hailed it as “a new day” for the city after the Democrat ended three decades of Republican rule on Tuesday night in a stunning election triumph.

In reality, the result is more of a seismic shifting of sands given the magnitude of her victory over the Donald Trump-backed Republican candidate, Emilio González, in the most populous city in Miami-Dade county, which the president won in 2024 by 12%.

Higgins won the run-off with almost 60% of the vote, according to preliminary results reported Wednesday by the Miami Herald. More than just further evidence of a growing national backlash against Trump’s policies on the national stage, particularly immigration, her win has reset Miami’s political landscape in a manner not seen in some ways in 28 years, and in others not at all.

Higgins is the first woman to hold the office; the first Democrat to win it in 28 years; and the first non-Hispanic candidate since the 1990s. As if to bookend neatly the passing back of the Republican torch, the outgoing incumbent, Francis Suarez, is the son of the most recent Democratic Miami mayor, Xavier Suarez, who was elected in 1997.
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The swing back towards Democrats was notable given that Hispanic voters contributed to the red wave that last year saw Trump become the first Republican presidential candidate to win Miami-Dade county since 1988.

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The Business Idiot and Tesla

Commenter Dunc pointed me to a long but fascinating article by Edward Zitron titled The Era Of The Business Idiot where he brutally analyzes how US businesses seem to have been taken over by owners and a managerial class that he calls Business Idiots who have become alienated from the actual manufacturing process of whatever their company produces, and make decisions that tend to work against actual productivity and quality in favor of things that advance their own careers and income. (The thrust of the article is similar to Cory Doctorow’s evisceration of the internet that he calls enshittification and the extension of that idea more broadly to American power.)

The Business Idiot thrives on alienation — on distancing themselves from the customer and the thing they consume, and in many ways from society itself. Mark Zuckerberg wants us to have fake friends, Sam Altman wants us to have fake colleagues, and an increasingly loud group of executives salivate at the idea of replacing us with a fake version of us that will make a shittier version of what we make for a customer that said executive doesn’t fucking care about. 

They’re building products for other people that don’t interact with the real world. We are no longer their customers, and so, we’re worth even less than before — which, as is the case in a world dominated by shareholder supremacy, not all that much.

They do not exist to make us better — the Business Idiot doesn’t really care about the real world, or what you do, or who you are, or anything other than your contribution to their power and wealth. This is why so many squealing little middle managers look up to the Musks and Altmans of the world, because they see in them the same kind of specious corporate authoritarian, someone above work, and thinking, and knowledge.

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