A TPDEARR Article
Trans-Pacific Dynamic Equity Allocation Research Report
Nothing exists in a vacuum, including economic activity. Just as interdependency reigns in ecology, so too does it predominate in human commerce; all commercial activity involves multi-party trans-active exchange on (at least) a two-way basis, with local, regional and “global” correlative relationships. No one person, or one company, can do anything “commercial” alone, without a counter-party. A further implication of this is that all commercial activity has (at least) two competing and subjective perspectives involved, which means there are (at least) two competing and subjective perspectives on the values of each aspect of the transaction, from the value of the currency to the value of the good/service being exchanged to the legitimacy of the transactional agreement itself, all of this not including oversight, regulatory, or government contingent interests, which are usually invisible at first glance of small-value transactions. The fact that any one given participant might not be fully aware of all the interconnecting dependencies that undergird a commercial transaction has no impact on the reality of interdependency being the status quo. Many different domains of society must be working in (at least) semi-harmonious cooperation in order for markets of exchange to emerge at all.
When we step back and consider the macroeconomic Big Picture, we can’t help but notice interdisciplinary overlaps in our conceptions. Things we might “know” about one thing (like the value of wood to a forest) might have an alternative representation in another domain (like the value of wood to a furniture manufacturer). There is no single answer to a question of its value because the answer is domain-dependent; to thrive in an economic world, we must hold irreconcilable and competing ideas of worth within the same (economic) conceptual framework simultaneously, no easy feat. Enter: the crafty capitalist—the one who can most-accurately peg the internally-held values that each party in a transaction ascribes to the assets in question—the one who tends to be able to get the better end of commercial interactions, steadily becoming relatively richer.
Further complicating the matter, wherein measurement is concerned, oftentimes1 a description of one function within trade or commerce is identical to the inverse description of some other function, depending on the frame of reference. Consider how “my imports from you” are the same thing as “your exports to me”. The actual flows of capital and goods are measured separately, by separate parties (importer and exporter, buyer and seller), and towards separate goals, with separate ancillary networks of interests, and perhaps even with separate measurement tools; but because the two parties can agree on enough critical aspects, a transaction can transpire. The dual, interrelating processes that coalesce to produce a commercial transaction/exchange can be described as two sides of the same economic coin. Frequently, an economic “coin” can have many more than two sides; these can be further revealed with increasing levels of verbal or mathematical sophistication, though towards what ends remains a debatable point. Though any one particular narrative hailing one subjective view of the transaction rather than another might unilaterally color the public discourse, it remains, whatever side of the story it happens to be on, only part of the economic truth. Finding a preconceived answer is often as “simple” as looking at the data from the right angle, but does that actually qualify as validation of the idea sought?
In previous TPDEARR Macroeconomics articles, we’ve discussed some large scale interdependencies among macro factors (such as those cascading from interest rates, or the cause-and-effect dynamics stemming from the levers and pulleys of monetary and fiscal activity,) but in this quarter’s issue we’ll be connecting dots to clarify some mechanics within an overarching framework of integrated commercial motion, helping, hopefully, to enmesh semi-independent conceptions that compose the multifaceted nature of economic activity—this all, of course, to most helpfully orient our investing minds to take up new positions in the MAR.25 TPDEARR Squad. Lest we forget, our goal is capital preservation, which means, in an inflating economic environment, capital growth that exceeds the rate of inflation. Since the macroeconomic framework broadly orchestrates how capital flows actually occur within a financial infrastructure, in order to understand how to position our capital, we must be fluent in our interpretation of how macroeconomic variables might influence any or all commercial activity, rather than merely being able to recite a particular macro-econometric measurement as if it were explanatory in isolation. Our goal must be to understand the way that capital flows transpire within the way that things are, not the way that things ought to be. As we will see, even in cases when the way that things are aren’t what we might believe that they ought to be, they nonetheless still are, so we must treat them accordingly. In the end, for our capital, it doesn’t really matter what we want, it only matters what’s happening.
To this aim, we begin with the cold hard cash in your pocket…
Inflation = Depreciation (of Relative Value)
Your money is worth less today than yesterday2. On any given day, this could be true for you. Whether or not that day occurs again today, for you, depends on two things:
- What currency is your money in?
- What country does the thing you want to buy come from?
Notice, it doesn’t matter how much money you have, its worth is compared to itself in the past, and/or to other currencies, it has no single, unchanging and objective worth. Also notice, apart from concerns regarding the thing you want to buy, it doesn’t matter what country you live in, but rather what currency of money you plan to spend, and how the exchange rates impact your purchase(s). The dynamics here are complicated, as the effects of interest rates, exchange rates and inflation all overlap in real time. Take the US for an example: If you live in America (Home of the Uber-Consumer: the place where all stuff “wants” to be sold), most of the stuff you buy comes from other countries, so if the USD “strengthens” against another currency, it gets relatively cheaper for USD to be spent on goods abroad (or shipped from abroad,) as relatively more (stuff produced in the other economy hosting the other currency) can be purchased for relatively less (USD). However, as the USD experiences inflation domestically, it becomes a less-attractive currency to use and its spending power depreciates compared to foreign currencies…until you take into context the domestic inflation situation of each of those foreign currencies, and all of their interconnected relationships with other currencies…
The implications of inflation are myriad in domestic contexts. Statements such as: “inflation reached 4% this quarter,” indicate to most everyday citizens/spenders a rise in the relative cost of stuff (here, in “this” country, with “our” money) now, compared to last quarter, or year, or whatever. The same statement, though, also explains other economic fundamentals, such as changes in the costs that (i.e. American) companies pay for the wages of their (American) workers. As the currency inflates, competitive pressures in the workforce put pressure towards commensurate wage increases, the prices of goods then must change in response, profit margins shrink, people get laid off or automated away—in short, consequences. Too much inflation is economically disruptive and painful, obviously, but inflation is a force that emerges from capital flow itself; it can’t be eradicated and it steadily erodes currency value. Further, central banks everywhere target a small amount of “target inflation” in all monetary system management, as the growing pains of steady inflation are preferable to the contraction pains of a recession or depression. Domestically, inflation is the enemy, and the goal, at once.
Practically, supporting “our” domestic economy means that capital needs to circulate through domestic businesses, not filter out to foreign sellers; this is the “buy local” function at play. But, as “our” money inflates, stuff “here” becomes more expensive than stuff “there”, where foreign goods are becoming relatively cheaper in a less-inflationary environment. Following the logic, “our” profit margins and excess capital can become even greater, making us even richer, if we buy more from “there”, where it’s cheaper. The more domestic inflation occurs, the stronger the effect, and the cheaper stuff becomes, relatively, abroad. Oftentimes, the harder “we” try to support “our” domestic economy, the more expensive it will become for all participants. In this oft-discussed way, globalization (the practice of reaching out to foreign sellers and buyers for the “best” prices) brings down the costs of everything for everyone, taking advantage of comparative cost benefits, easing the access to capital and accelerating development. Sure, some might disagree that this is a worthwhile goal, but the effects transpire nonetheless3.
There is no unified answer to whether or not inflation is “good”, it’s purely a matter of more- or less-expensive; the answer is only determinable on a purchase-by-purchase basis through evaluation of the two questions listed above. Inflation expresses the principle that what a currency can buy today is slightly less than what it could buy yesterday. An inflated dollar is worth relatively less than when compared to itself yesterday, but perhaps relatively more when compared to some other currency today, also depending on the other currency’s relative domestic inflation profile. To get the most for “your” money/currency, you want everyone else’s currencies to be inflating faster than yours, giving your currency greater “strength” to buy on their growing “weakness”.
Let us now connect this discussion to a contemporary question: No, tariffs are NOT an effective tool in managing global trade, but not because their effects are overpowered, rather, the mechanism is too blunt to accommodate the nuances and interdependencies of a complex global monetary system. Policy implementation is typically a slow-moving machine, so governments routinely struggle with addressing inflation from a legislative position, and they are typically hamstrung into only being able to apply fiscal levers to the situation anyways; central banks are the primary operators of monetary policy. In the most-developed nations, the strength of independent institutions is often what holds together the fabric of the economy. Around the world, national central banks are tasked with “managing” inflation (typically referred to as “price stability”), but the actual enforcement of this obligation is a false appearance, as inflation has too many contributing factors and participants to “manage” with much dexterity. A few levers are available, such as core interest rate adjustments, but inflation is largely a product of broad-scale societal forces far beyond the reach of any one person, office, or institution. Presidentially, the Chief Executive’s “power of the pen” is a frequent champion4 of the inflation battle, but this degree of unilateralism in significant economic decisions is the very definition of high-risk, particularly because elected politicians rarely ever display any signs of authentic financial literacy, and because executive actions are almost-invariably short-lived.
Citizens want their quality of life to increase. In so many words, this increase needs to be paid for via expansion of the entire host economy, a process which results in inflationary pressures on prices and currency; there is no one without the other—welcome to macroeconomics, ladies and gentlemen. At the end of the day, you, yes you, want prices to go up, because of all of the other commensurate advantages that come along with it…you (the consumer) just want to be able to more-easily afford them.
As we watch the global economy spiral through its tariff war this year, play close attention to short-term and medium-term inflationary effects in your target economies, and how they play off the strength or weakness that’s been previously established in a domestic setting by long-term pressures. Smaller, export-driven economies are particularly susceptible to sharp volatility in the inflation of their largest trading partner(s); “value” can be quickly eroded from the financial profiles and spending power of smaller exporters and cause rapid devastation to industry sectors without supporting capital backstops, and which are captured by single, or few, large clients going through substantial inflationary pressures. Most businesses, especially small and medium-sized enterprises, struggle dramatically with volatile inflation. As things get more expensive, the companies with the cleverest capitalists will find the most cost-effective ways to utilize and deploy resources in an inflationary price environment, which is the goal, and which is largely conducted by the largest economies. Finding mutually-beneficial trading arrangements is the most comprehensive way to take advantage of an increase in transactionalism in the new global regime, which is likely to be dominated by widespread inflation.
Swinging around Asia real quick, annual inflation levels in 2025 are targeted as following, according to the Asia Development Bank:
China: 1.2%
Hong Kong: 2.3%
South Korea: 2%
Taipei/Taiwan: 2%
Malaysia: 2.7%
Philippines: 3.2%
Indonesia: 2.8%
Singapore: 2.2%
Thailand: 1.3%
Viet Nam: 4%
In the Americas:
US: 2.5% (according to the Fed)
Canada: 2% (according to Bank of Canada)
Mexico: 3-4% (according to Banco de Mexico)
Do the preceding figures factor in the effects of a tariff war? No, not really. So are they meaningful…? Depends on what happens with the tariff war, and other wars, and the AI race, and everything else. These projections are constantly sliding and really only indicate current relationships more than future accuracy. Gauge inflation against GDP growth to come up with a more-accurate assessment of the ability for participants in an economy to thrive in a given price-level.
Remember, as investors, outpacing inflation is winning, regardless of what the rate is; inflation is not something to be feared, it is that which we strategize against, and understanding its effects is paramount to our ability to outmaneuver its ramifications.
Daddy’s Gotta Eat
Let’s play a game, it’s called, “Who Do You Think Pays For That?”
Take your pick; pick something the government spends money on—say, the military—and describe who pays for it.
G’head. …it should be obvious, no?
Does it come out of the President’s pocket?5
It’s obviously not “the person”, but “the government” that pays for government stuff. But wait a tic, where does that money come from? What is the government’s wallet, exactly, anyway? Just so we’re clear, in the US, this wallet is called the U.S. Department of the Treasury, not the Federal Reserve, which is the US central bank. The US Treasury pays for everything the government buys. The US Treasury spent USD$6.75 Trillion dollars in FY 2024, paying for the US government’s legally-authorized expenditures, for example.
For some reason, surely having to do with low overall levels of financial literacy, typical citizens in any given nation-state don’t seem to clearly understand how government financing works. Many of these typical citizens are elected to public office, where they bring their misunderstandings and ignorance to positions of financial decision-making authority. Not only that, the two sides of [any given] political aisle seem to disagree on “how big” a government’s spending relationship with its economy ought to be, which is a perpetually destabilizing set of conditions, especially since “the government” is the largest and most significant business-like employer in any given economy, with the largest budget and the largest total capital outlays.
There are lots of things governments “pay for”, such as militaries, civil servant salaries, public transportation (including oversight bodies, like the FAA, which make things like air travel possible in a nation’s airspace), healthcare, public education, and safeguarding natural resources, among other things. Financial outlays for all of these services are usually approved by the prevailing bodies of lawmakers (congress, house, parliament, et al) and cannot be fussed with by politically motivated individuals acting alone, in theory; the outlays are law. And the actual money that goes from government to recipient in those capital outflows is provided by previous inflows of government revenue, mostly taxes, also frequently with bonds/debt (issued by the Treasury.) The larger a country’s economy grows to become, the more absolute capital flow is potentially subject to taxation, the more revenue a governmental administration potentially has to use for its agenda. Strong correlations exist here. There are 17 economies with an annual GDP north of USD$1 Trillion, and 15 of them make up the top 15 nations that collect the most tax revenue (the others: Indonesia is #18; Saudi Arabia #27).
Let’s zoom in on these metrics within (some of) the trans-Pacific economies. The following list separates out the total tax revenues of economies (according to World Bank data through 2022) organized geographically, noting the tax revenue relationship as a % of GDP:
Total Tax Revenues
- The Americas (Eastern Pacific seaboard)-
- Canada – $277B [12.83% of GDP]
- US – $3,135B [12.18%]
- Mexico – $196B [13.44%]
- Panama – $5B [7.46%]
- Chile – $64B [21.27%]
East Asia/SEA/Oceania (Western Pacific seaboard)-
- Japan – $484B [11.37%]
- China- $1,377B [7.7%]
- South Korea- $308B [18.44%]
- Philippines – $59B [14.62%]
- Indonesia – $153B [11.6%]
- Malaysia – $47B [11.65%]
- Singapore – $60B [12.03%]
- Thailand – $71B [14.38%]
- Australia – $399B [23.6%]
Remember, this is one primary (but not sole) determinant of how much money a government gets to spend in a year…on everything. (In FY 2022, to coordinate with the above tax figures, the US government spent about USD$6.5T, so tax revenues amounted to nearly 50% of the total cash flow worked with.) A couple things stand out right away. Only the two Giants (US/PRC) pull in more than USD$1 Trillion in tax revenue; the US takes in more than double the absolute value of the PRC’s tax revenues; the PRC, in turn, reaps more than triple the next most in the region (Australia ~$400B). This is notable for many reasons, particularly the fact that the Chinese economy surpassed the US in 2016 in total annual GDP purchasing power parity—referring to the total value of what its money can buy domestically. The US government has the most money to spend (from tax revenues) by an enormous margin, but now Chinese RMB go further in China than the USD does in America, purchasing-wise.
Another thing that stands out is the comparison between Singapore and the Philippines; they both take in about the same in tax revenues, but the Philippines has more than 18x the population size, so, how far those tax revenues will go when spent as government outlays will be 18x further per person in Singapore compared to the Philippines. The “wealth” (indicated by the level of industrial development) of an economy is significant in its ability to generate tax revenues. And those tax revenues, for most countries, determine how much spending power a government has. Similarly, consider how the total volume of that spending power impacts defense readiness, wherein military assets can have huge price tags upwards of hundreds of millions of (USD) dollars. For many applications, there are simply no cheaper options available on the market. Or consider the impact government spending (or lack thereof) can have on education.
Further along population comparison lines, contrast the US and Indonesia: though the US has ~333 million people, and Indonesia ~275 million people, the US takes in more than 20x the tax revenues of Indonesia. More, richer people combine with more higher-value-added businesses to substantially accelerate wealth in capitally-desirous economies (i.e. those economies wherein capital grows more readily, strongly influenced by a widespread want to participate in the USD economy from foreign parties), and dramatically increase the total taxable base of central governments. Remember, currencies are “stronger” when they resist inflation, increasing their exchange value and making them more desirable to foreign participants; relative value is key here, as it grows as demand grows.
It’s not all roses, though. Governments with more money to spend have to think carefully about how their budgets and outlays grow. It can be tricky not to “bite off more than can be chewed” when taking on ambitious new proposals and political projects; stretching finances too thin in pre-anticipation of more-booming government expenditures is a high-risk maneuver, macroeconomically speaking. Governments that run out of money find themselves faced with difficult choices, none of them good. Many observers are watching Indonesia amid this very type of tension. Recently elected Indonesian President Prabowo seeks to follow through with one of his cornerstone campaign promises for a free school lunch program, but some are starting to find that it’s tough to make the financial math add up for this ambition. Hopefully, at least for the children’s sake, especially in consideration of the importance of advancing the country’s education and literacy levels, Prabowo’s administration can deliver without any more hitches. Issues around collecting tax revenues, particularly in compliance, will be instrumental in the success or failure of this endeavor.
GDP-wise, among the major Asian and North American economies, Australia pulls in the most taxes as a % of GDP (23.6%), and China the least (7.7%). Most large government administrations are capable of collecting 11-14% of amount of the value of their GDP as tax revenues; anything more and it might start to pinch people and companies too hard (especially during downturns/disinflation), to the point of rebellion; anything less and it’s likely the case that the government is either incapable of enforcing tax compliance, or it’s allowing citizens and businesses to keep a larger share of their earnings—essentially “leaving money on the table” that they might otherwise be able to collect and use (for beneficial policy application, of course.) China stands as a blunt exception to these trends, but then again, there is no other ancient, enormous, authoritarian sovereign state like China6; everything ought best be read into within its unique, individual contexts.
Despite the wide variance in total revenues among the economies listed within the preceding data, we feel it important to add here that the total revenues, particularly among the richer countries, should actually be much, much higher. Major corporations, and deep-pocketed individuals, routinely flow their capital between global accounts to strategically evade taxation, and a large percentage of them do this with incredible efficiency. It’s likely that hundreds of billions (USD) in legal-but-unrealized tax revenues are siphoned away from government tax collectors on an annual basis; we will discuss this further in future TPDEARR issues.
A large economy with lots of goods, and lots of sellers and buyers, and minimal barriers to entry (so it hosts competitive prices,) is what most contemporary citizenries apparently demand. But such an economic construct is far different from traditional village markets. Flourishing economies require a lot of services to enmesh everything together. Food, drug, and consumer watchdogs and regulators are usually the only things keeping dangerous products out of the marketplace, and these are through-and-through federal agencies and activities—poor countries often can’t afford to fund, staff, train and deploy agencies like this to the point of efficacy. Police (rather than military, or worse, junta) forces, firefighting services, trash collection, internet infrastructure and many more complex organizations work around and among the progress of societal development, advancing the “quality of life”, as it were, in coordination with federal funding schemes and local laws and policies that overlap with federal oversight and regulation. All of this unfolds only as capital outlays flow—Daddy’s gotta keep paying the bills otherwise everything grinds to a halt.
To pay for everything needed to support major economic activity, companies and citizens need to cough up the dough (via taxes, for who could be expected to “donate” to the Man?) to fill the public coffers—if you want the job done (and you do!), daddy’s gotta eat. Though its an eternal gripe from citizenries, if money isn’t collected through taxation, the other options for funding government are much less desirable. They could sell debt (e.g. US Treasuries), but then they become further indebted, which is a compromise of power relative to strength from tax flows. Also, the viability of selling debt is not an option for most countries. The US is the only country that can sell debt in the volume and manner that it does, with the prices with which it can—no other country is as desirable a monetary market as the US, has an equivalent economic heft, nor the world’s most significant reserve currency. But the point here still stands; no matter the size of the government, everything’s gotta get paid for somehow—so daddy’s gotta eat.
As we pinpoint investment targets around the trans-Pacific, keep an eye on how much control administrations actually have over their spending, and what sort of tax revenue ratios they are actually working with. Without enough cash flow, it can be exceedingly difficult, or impossible, for many idealistic leaders to deliver on expensive public mandates, and it’s getting more and more difficult to conduct nefarious operations via monetary levers. Remember, a Treasury is not a Central Bank; and, budgeting is not banking. Overall, central banks around the world are getting more independent, which is very healthy in terms of insulating national economies from over-zealous leaders or officials who intend to co-opt financial institutions for their own agendas. Officials from the IMF have recently released a new independence index that can help one make sense of the factors that influence central bank independence (and its perception), but we find it imperative to remind our readers that independence is not the same thing as stability. Central banks, like all banks, measure their levels of financial risk econometrically, which is to say that they use statistical methods to quantify “risk”, usually as a form or derivative of standard deviation. This is, fundamentally, unrealistic methodology that denies the significance and/or likelihood of extreme outlier events (which we know to happen more frequently than the statistical models claim); it is an irrational foundation from which no rational results can follow. Nonetheless, it’s the universal system employed across the human banking network, so everyone everywhere has to do their best dealing with the fact that bankers are trapped in a flawed institutional practice and systemic financial collapse is inevitable, it’s only a matter of when, but this is not our primary focus in this issue.
Regaining focus, no, tax revenues aren’t the only revenues a government can use to pay for its agenda, but they are a nonetheless significant source of cash flow with myriad other indicative qualities. Governments are challenged to collect appropriate taxes from all levels of the wealth scales; both individuals and companies are constantly strategizing to minimize their own taxation, including resorting to ex-patriating capital to other jurisdictions. Administrations with higher tax-to-GDP ratios prove that they can adequately apply tax policy to companies that operate within their purview; the challenge is to collect just enough taxation that the capital flow accommodates the financial needs of the government’s expenditures (which are applications of the public’s will, ultimately decided via democratic elections, theoretically) without draining future economic potential from companies and citizens by overburdening them with exorbitant rates or the costs of compliance. If governments cannot effectively tax their constituencies, it suggests weakness in enforcement and infrastructure; also, it indicates that there are likely many other areas of oversight and regulation that are being inadequately fulfilled. Whereas, if administrations seek to over-tax their domestic companies, the capital will flee to less-invasive tax jurisdictions abroad. Thusly, overlap with geopolitical considerations is substantial.
Macroeconomically, due to the globalization of supply chains, capital and debt flows, all national economies are interconnected. The combination of tax revenues with dynamics concerning the value of a sovereign currency (i.e. its present rates of inflation and exchange) are primary features in the background set of conditions that a central administration must manage and grow amidst—a non-negotiable state of reality. It is an important consideration for economies, and for all investors who care to make informed decisions within a given investment environment.
-Urgent! Skepticism warning!-
The IMF and the OECD offer different data sets for the same taxation metric for the same period. Following is the tax revenue as a percent of GDP (compare to bracketed data in above set) for the same combination of trans-Pacific economies, according to IMF data for 2022:
- The Americas (Eastern Pacific seaboard)-
- Canada – 41.43% of GDP
- US – 36.26%
- Mexico – 28.53%
- Panama – 21.27%
- Chile – 26.77%
East Asia/ASEAN/Oceania (Western Pacific seaboard)-
- Japan – 44.09%
- China- 33.4%
- South Korea- 28.68%
- Philippines – 25.89%
- Indonesia – 17.54%
- Malaysia – 25.34%
- Singapore – 15.85%
- Thailand – 24.61%
- Australia – 38.08%
As you can see, the numbers differ non-trivially from the World Bank figures; every single figure lies above the 11-14% range that so characterizes the majority of entries in the World Bank data, for one. Clearly, after factoring in/out the relevant adjustments to the tax/GDP calculation, analysis of said sets offers additional perspectives on the dynamics interrelating tax revenues with government expenditures. For example, correlations can be drawn concerning higher ratios of tax/GDP and an economy’s distance from the equator, conclusions that cannot be so easily determined from analyzing the World Bank data for the same period. Or, take a look at China; in World Bank data, the CCP only draws in tax revenues worth 7.7% of its GDP, but the IMF posts the figure at 33.4%, a difference in result of more than 400%. (Japan’s figure also jumps from about 11% to over 44%; whereas Singapore’s tax/GDP ratio only shifts by a few percentage points. How can we rationalize the differences in these sets of figures?) Moreover, according to the PRC’s State Tax Administration, China collected 17.4% of the worth of its GDP in taxes in 2019, the latest figure publicly available, and a ways off from either of the aforementioned figures by other institutions. According to their own data, over the past 30+ years, China has collected between roughly 10%-21% of GDP in taxes, officially, never even reaching the current “posted” extremes of 7.7 or 33.4 at any time; so, what are we to make of the discrepancies in the current data, if anything? All of the above analysis (and all macro-econometric analysis) is predicated on the distinctions unique to the numerical relationships among the figures indicated. If the figures aren’t legitimate, the “analysis” is no more than unfounded pontification.
Engaging with separate data sets also suggests that, since competing conceptions of aggregate values produce varying results, there are inherent inconsistencies of measurement in this econometric that negate the possibility of precision in analysis, and potentially undercut the efficacy of any conclusions that could be drawn from data-set-produced forward “projections”.
Yes, we are saying that you, and everyone, must exercise extreme skepticism when drawing conclusions from datasets, including any “conclusions” that may have been drawn in this very article. The presence of “alternative” values for supposedly-identical quantities calls into question the use of any one set in favor of another, and undermines the legitimacy of any determinations derived thereof. The practice of drawing sweeping conclusions using discrete, selected datasets is part and parcel of statistical analysis, macroeconomic policy implementation, and capitalism-as-usual; it is widespread, ubiquitous, and “trusted”. Don’t forget, everyone used to “trust” that the Earth was the center of the Universe, too, and scientific, religious and civic thought were all framed within the idea7.
As much as we would like to be able to draw serious conclusions from tax/GDP data, the murkiness of authentic figures across sovereign borders, and the compatibility of those metrics to other international practices, makes cross-country analysis dubious at best, and we hope the above article also illustrates that anyone can craft an economic narrative to fit a particular dataset. We strongly urge our TPDEARR readers to practice skepticism in their use of econometrics to compare investment targets; there are always other factors in play that cannot be captured in isolated statistics. Always cross-reference rationale produced from data with other out-of-domain analysis to produce actionable investing intelligence.
You have been warned!
Final Thoughts
In priming our capital for deployment, we would be wise to remember the interconnectivity of global commerce—that all capital flows, creating a “global” sense of motion, in a sense, constituting “the water” we economic participants are all swimming in. Money is a shared medium, and its existence and behavior are governed by shared perceptions of value, shaped by institutions, the development of the civilization, and popular conception, not like the way prices are shaped by businesses’ supply/demand relationships between buyers, sellers, and producers. What is felt by one party is directly, indirectly, or vicariously felt by all associated counter-parties; the energy of a stone thrown into one end of a lake ripples through the entire medium. It’s not possible, for example, for the effects of inflation in a major international trading partner to be isolated to that one domestic economy—we are all interconnected, impacts to one capital flow environment consequently impact all trading partners as well, macroeconomically speaking.
However, even in global environments experiencing broad price inflation, such as that aroused by unnecessary tariff wars, there are always opportunities in markets which are relatively more capital-friendly than others, in close consideration of the contemporary set of particular circumstances. Businesses are all affected differently by policy adjustments and currency inflation—they each have different arrangements of contracts, customers and partners, and different capital and debt structures—and the advantages and disadvantages of inflation are never equally distributed; there will always be crafty capitalists who can find a way to succeed (read: be profitable), no matter the quality of the monetary environment.
That being said, there is a strong correlation between a business’s ongoing viability and the strength of its capital stock—companies that are overindebted or stretched too thin always contract or fail during macroeconomic tightening. As it would seem, the best antidote to economic distress is already having extra cash on-hand; selling assets in a pinch in a plummeting economy is not a realistic opportunity—the aggregate is not interested in buying if it’s scrambling for cash, though this should be no surprise.
What’s important is a company’s (microeconomic) ability to earn profits within a (macroeconomic) environment. As we target our picks and move to take up equity positions in new Squad assets, be sure to measure changes in the targets’ profitability given their present and likely future domestic inflationary environments, as well as the exchange relationships of the currency market within which the assets primarily operate, and how measures of profitability for a given company might be weighed against their utility for you, once you’ve realized the profits in a currency you find useful.
Use this analysis with articles supporting the MAR.25 TPDEARR Squad, releasing in March, 2025.
Don’t guess! Guide.
Good luck, everyone!
- Perhaps even everytime
↩︎ - …in most economies…most of the time…
↩︎ - Stay tuned for a future analysis of risks borne within the interconnected tapestry of globalization.
↩︎ - What would you, personally, consider to be “effective messaging” about inflation?
Does it make sense to aim for: “Everything is expensive! Bring down prices!” …lower prices depress wages, as companies have lower profits, so raises cannot go out. So we don’t want prices to go down too far. Let’s reframe: “Everything is expensive! Bring down prices, but only so far that we still get pay increases!” Here, we also must be careful, for as prices go down, they also become more attractive to other potential buyers, such as from abroad, which represents new money entering into the domestic circulation (which governments happen to desire, across the board), which is an increase in demand, which impacts supply ratios and causes further price adjustments, potentially upwards again. If the quality of the product is the same, as soon as prices go down in an accessible market, they’re likely to go back up. If prices stagnate, and never go up, the quality and value of economic output is similarly perceived as stagnant. This is basically a death-knell as it indicates an inability to grow for a given company or sector, and predicts a swift takeover by a resource-superior competitor, likely coming from a foreign market. In order to be the best, an economy must grow, which means prices must go up. So, what do you want for your own economy? Is the problem one of simpler messaging, or is the problem one of being unprepared for a necessary level of complexity? FWIW, populism always chooses the former, and usually fails in its effects.
↩︎ - If you think this absurd question is something the average American can easily answer, you are seriously over-estimating the general American polity. We encourage you, emphatically, to remove any lower bounds to what you think the “average” American can comprehend of any given situation; they cannot possibly be underestimated… except in their capacity as uber-consumers. Also, remove any upper bounds about Americans you might have as well; America is a place of emergence, and it will continue to produce novel situations that the rest of the world will continue to be forced to deal with. None of this, though, is necessarily macroeconomic, per se.
↩︎ - This is absolutely not an affront to the way that the Chinese have been guiding the formation of their modern nation-state, which has been a dramatic transition out of humanity’s longest standing imperial civilization with many successive stages, but which has no doubt found itself now a global superpower with 17.2% of the entire world population. Western economies are often quick to criticize other global players for their low tax collection performance, but they ought not be so quick to speak; capital flight to offshore tax shelters is a feature of Western wealth, and causes the obfuscation and concealment of USD$Trillions in potential tax revenues. China is finding its own way.
↩︎ - Arguably, nobody ever had their minds changed about this particular issue. Rather, generations of people lived and died, and “old ideas” along with them, while newer, more-informed thinking gained greater and greater influence over shaping the minds of the next generations, thereby “updating” conceptions of physical reality across humanity. There’s no reason to assume that this pattern of the inter-generational decay of ideas over time doesn’t also transpire in other domains.
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tkscm, limited 