Business When the Bubble Bursts

Karl Denninger explains why businesses – indeed, entire industries – that work as long as credit is expanding fail rapidly once the debt-money supply begins to contract:

In a bubble economy, where the government is pressing new credit into the hands of the public, directly and indirectly, every business plan looks good.

When the impact of that action turns back into inflation, and it always does, wherever that inflation shows up ultimately detonates every one of those firms.

The truth is that every firm is only stable on an continuing concern basis if it can sell its goods and services at a profit without said excess credit creation.

If it can’t then the business model is bankrupt and said temporary success only occurred because of a scam, whether the firm was doing the scamming or they were riding a government scam.

One of the latest examples is “Toast”, which is a company that provides POS systems to restaurants and bars. You’ve probably seen it; I have, several times. They were a “darling” in the space and quite-rapidly took over, providing various services including online ordering. During the pandemic this looked really attractive to places that were not part of a national chain in that it “gave” them said online ordering presence that they otherwise wouldn’t have and couldn’t afford to individually develop.

The problem is that the company, which is publicly traded, is losing money. They partnered with Google and that apparently brought in less than it cost (gee, go figure, you all tried to ride the money-printing wave that came with the pandemic) and now they’ve added a “processing fee” behind the back of restaurants on online orders.

This is likely illegal, incidentally, and definitely is if not disclosed appropriately before the customer places the order. Further it may well breach the implied warranty of fair dealing with the restaurant which neither gets any of the fee nor were they apparently part of a negotiation to add it when they signed their service contract — this appears, from the above-linked story, to be something the firm unilaterally added.

But that’s the sort of thing that happens when you have a bankrupt business model that only “works” due to inflationary credit emission by the government, you appear to be “doing well” and then the inflation rebounds into your face and suddenly you have a big fat net loss.

The same sort of crap went on with the so-called “short-term rental” arbitrage market — AirBNB and VRBO, to name two of several. The embedded costs in this, including the platform fees, cleaning charges that someone has to eat between guests and similar, along with the pure arbitrage nature of these transactions in that the places being rented are neither built or maintained to commercial occupancy standards is obvious. This looks like a good deal but it only is due to inflationary credit creation; the business model is inherently bankrupt as the overhead exceeds that, by quite a bit, of a hotel or other lodging arrangement if the arbitrage and overhead costs are not available to be hidden via said credit creation. The belief in “free” feeds back into property prices which results in a further inflationary price spiral — this time in the acquisition price of said properties.

The reason these businesses tend to collapse so fast is because they live right on the edge. They’re always expanding as rapidly as they can, and funding that growth with debt, so the minute that either a) the growth slows or b) the cost of debt service rises, they can’t afford to continue servicing the debt and the business goes straight into bankruptcy despite being generally sound and profitable at the operational level.

This is why I don’t advocate using debt to grow your business, whether it is by acquisition or expanding production. Slow and steady doesn’t excite anyone, it won’t get you on the cover of any magazines, but it does lend itself to antifragility and long-term survival.

The smart boys in finance always think they’ll ride the wave and exit at the peak, and that’s at least theoretically possible if you’re just trading or in the VC game. But it’s not a viable approach to running an actual business that operates in the real economy.

UPDATE: Let’s not forget that everything in Clown World’s corpocracy is fake and gay.

DISCUSS ON SG

Preposterous!

Disney CEO Bob Iger strenuously denies the Devil Mouse is doing what it has observably been doing for decades. His quote was so remarkably absurd that it practically screamed out for a meme to preserve it for posterity.

What is “preposterous and inaccurate” is the Devil Mouse’s pretensions of being primarily motivated by a) corporate profit, b) the interests of the shareholders, and c) the desire to entertain its customers.

DISCUSS ON SG

Snow White and the Seven Diversities

Do you think losing tens of billions of dollars is going to slow Disney’s doubling down? Think again, because they’re going to double down even harder. Not only is the new Snow White movie going to feature a Latinx actress, in the place of the seven vertically-challenged people, it’s going to feature the Seven Diversities.

That’s not a joke. That’s really them. It should be good fun naming them all.

DISCUSS ON SG

Everything is Fake

And it has been for a long time. Miles Mathis explains why he’s pretty sure that Wimbledon and other tennis championships have been scripted from time to time over the last 50 years, including Arthur Ashe’s 1973 title and Andy Murray’s 2013 defeat of Djokovic at the All England Lawn Tennis and Croquet Club.

I believe Connors was paid to throw Wimbledon to Arthur Ashe. See here for how staged it all was. Or you can watch highlights here, where I think it is blindingly obvious. Remember, Ashe was nine years older and had only been playing 3-set matches since 1973. So it is convenient he beat Connors 6-1, 6-1 in the first two sets at Wimbledon, in ludicrously short points. Watching that film will show you Connors didn’t disguise it very well. He is grinning like a naughty child the whole time. At several points, you can see that Connors is throwing it so clumsily, Ashe gets mad and hits the ball out on purpose himself. It is the sloppiest professional match of all time, and Connors has an ugly unforced error on almost every point. Looking back, it is difficult to believe the crowd didn’t riot or boo them off the court. Even the announcers are stunned into silence. How do you comment on someone throwing a Wimbledon final in such outlandish fashion? I have to believe someone pulled Connors to the side after the first two sets and ordered him to quit hitting every ball out.

They said, “C’mon, man, we are paying you to make this look real. This is just pathetic!” The misdirection on this match is awful to this day, with many people hired to misdirect, saying Connors choked, Ashe played him for a fool, etc. Some criminally miscount unforced errors. One guy claims Connors had 13 unforced errors in the match. You have to laugh. He had more unforced errors than that in the first three games. You can see more unforced errors than that in the brief highlights reel I linked to above at Youtube. As you study that highlights reel, I encourage you to also study the crowd. It just proves once again that people are zombies. They sit there quietly clapping on cue as this transparent crime against reality unfolds in front of them.

It’s not hard to imagine Jimmy Connors deciding to make it obvious for everyone, given his puckish personality. And I don’t think it’s an accident that these “stunning historic upsets” so often feature something like “the first Black champion” or “the first British champion in a billion years”. Remember, sports are first and foremost an entertainment business, so making money and producing memorable storylines are their priorities, not “providing all competitors with a level playing field”.

The fact that the International Olympic Committee is not inviting Russia and Belarus to participate in the Paris Olympics only underlines the fact that sports are subservient to the Narrative.

DISCUSS ON SG

The Media Knows

Never talk to the media. Observe that the media executives themselves never respond to inquiries from other media organizations. Notice that ESPN is resolutely refusing to respond to questions from Outkick and Fox News about a misleading edit of a clip it broadcast recently.

OutKick emailed ESPN Vice President of Communications Josh Krulewitz the following questions Thursday:

Josh,

I would like to send an inquiry about the ESPYs taking a video of Will Cain out of context to make him look bad.

Does ESPN stand by its decision to edit the video?

Who approved the clip?

What level of management approved the idea to edit the clip that way?

Does ESPN feel it should issue a statement correcting the record?

Krulewitz and ESPN did not respond. Nor did they respond to a Fox News inquiry.

If the media knows it’s foolish to talk to the media, then that’s all you really need to know. Keep your ego in check, don’t seek the attention they offer, don’t permit them to claim they talked to you, and thereby avoid giving them the evidence they require to make their usual strawmen.

DISCUSS ON SG

The Problem with Word Spells

Is that the words were originally created for a coherent and consistent reason. Michael Hudson explains that the purpose of the current US military doesn’t actually have much to do with historical military purposes:

Military, for the United States, is different from what the word ‘military’ meant in every other society from the beginning of time. When you say military, you think of an army fighting. You cannot conquer a country without invading it, and to invade it, you obviously need an army, you need troops. But the Americans can’t mount an army, of enough size, to occupy anybody except Grenada, or Panama, because the Vietnam War stopped the military draft. What America does have, what it calls military, is what you quite rightly linked it to: the military industrial complex. It makes arms. And weapons.

But again, these are a funny kind of weapons. Suppose you had a winery that made wine that was so good, that really wasn’t for drinking. It was for wealthy people to buy, and to trade. And as the years go by, the wine would turn to vinegar. It’s not wine for drinking. It’s wine for making a profit, a capital gain.

Well, you can say the same thing about America’s military arms, as we’re seeing in Ukraine right now — or as President Biden calls it, Iraq. The arms, basically, are there to create a huge profit for Raytheon, and the other companies in the military industrial complex. They’re for buying, and they’re for giving to the Ukrainians, to let Russia blow them up.

But they’re not for fighting. They’re not for winning a war. They’re for being used up, so you have to replace them now, with yet new buying. And so the United States State Department has asked Germany and other European countries, well, you’d promised to pay 2% of your GDP on military arms to enrich our military industrial complex.

But now that we’ve given all these tanks and missiles away – Russia just blew up 12% of all the tanks in just one week – so we only have a few weeks left to go before they’re all wiped out. Because they really don’t work on the battlefield. They’re not for fighting, they’re for being blown up. Now we want you to actually increase your spending to 4%, to replenish all of the stocks, you’ve just depleted, 10 years, maybe 20 years, of your arms stocks. And you have to now replenish them very rapidly, in order to meet the NATO targets, that we and the State Department, have set. So military today isn’t really how you control other countries. America’s found it much easier to do this by financial mechanisms.

You conquer a country financially, you conquer a country by getting it to submit to austerity programs by the International Monetary Fund, again, to impose austerity, to keep its local wages down. So you use finance as a means of imposing post-industrialization and depression, in order to prevent democracy from developing.

So any country that is seeking to promote a democracy by public spending on basic infrastructure, or banking, like China is doing, is called an autocracy. And every autocracy that has imposed a client oligarchy, to fight against labor, and to prevent these policies that would help enrich and industrialize the economy, is called a democracy, not an autocracy.

So we’re back in the Orwellian logic to describe a situation, that probably even the cynical George Orwell, would not have thought could go quite this far.

Much like the famous aphorism about the Holy Roman Empire, the Military-Industrial Complex can’t wage war, has no industrial capacity, and really isn’t difficult to understand.

Redefine a word all you want, but don’t expect the redefined version to perform its original function.

DISCUSS ON SG

Devil Mouse Doubles Down

The Dark Herald reports that Disney is extending Bob Iger’s contract through 2026:

Bob Iger is the one that has put Disney in the disastrous position it’s in today. He overpaid drastically for Fox Entertainment by a factor of 100%, he let Kevin Fiege dismantle the machinery that had turned Marvel into a box office juggernaut, he allowed Kathleen Kennedy to continue driving the LucasFilm cart into the ground long after the wheels were sold off on eBay and he fired John Lassetter, replacing him with the utterly hopeless Pete Docter. The parks are empty at the height of the busy season, with the disastrous launch of Indiana Jones V the film division has lost a billion dollars since the collapse of Lightyear, and there are still two more candidates for box office martyrdom waiting in the wings before New Year’s Day. Also, Disney+, the thing that was supposed to spearhead Disney’s drive to complete streaming dominance has lost $1 billion per quarter since it was launched, and it just dropped behind Warner Brother’s Max streaming service.

According to Disney’s own documents they only have $10 billion in cash, that is somewhere between 3 to 6 weeks of operating capital on hand at any given time.

I think it would be beneficial for Karl Denninger and other materialists who sincerely believe that money, and the pursuit of it, is the primary cause of evil in the modern world to revisit their assumptions in light of the observed behavior of the corpocracy and the Western governments over the last two decades.

I assert a review of the available evidence and the application of Ockham’s Razor will inevitably lead to the conclusion that a) spiritual wickedness and b) control over the public are the primary motivating forces for the evil that we see indefatigably at work in the corpocracy today.

How much more money do they collectively have to lose in the pursuit of unprofitable evil for it to become inarguable that the evil is a motivation rather than an unfortunate and happenstantial coincidence?

DISCUSS ON SG