Oh, what the heck . . .

Lunan wrote:some good points here. we have seen both worst and best case scenarios talked about. in reality there is lik;y to be a middle ground. also take the BIG BOYS the major cartels with massive wealth (think modern day apple with more free cash in the bank then the 70 or 100 poorest governments combined). So what happens if Haupmans starts making "micro" loans with long term repayment to other cartels/businesses/star system governments in talbot, silesa, and haven? Or grayson skydomes/blackbird. the Blackbird yards are gone, but the money that skydomes has is very large. so lets say the lady tells her finacial people to find 5 diffrent star systems that they can invenst 1 to 3 billion focused on manufacturing/shipyards. good long term investments that will pay off and its not like honor will notice the money being used.

They can't. They will be lucky to escape bankruptcy.

They lost a hugely expensive shipyard. They still owe money to the vendors who provide the parts to the ships that will never be delivered. They owe life insurance payments to the families of the workers killed. They likely have continuing obligations to those worker's families. They likely borrowed money against their scheduled deliveries of the ships to the RMN and others, and the banks expect that money back on time. And the growth in the facility was likely funded by loans that need to be repaid.

And they need to rebuild that shipyard. Which is likely worth the GSP of many planets. You say "But insurance" and the underwriters say "let me show you the 'act of war or terrorism' clause." Besides that, do you think the insurance companies have access to the reserves needed to pay out several years worth of Manticores entire Gross System Product? I don't. Certainly not without access to the SL financial system. So they will need to borrow money. Are they a good credit risk? What assets do they have to secure that loan? Who can lend them that kind of money without access to the SL financial system?

They you have their shipping line. You have tens of thousands of ships to service about 100 systems, ships that used to be the biggest shipper of over 2,000 planets. Everyone without solid contracts in those hundred systems will go broke. There just isn't enough business to go around in order to make the note on the ships. So the banks will seize thousands of them. There are a bunch of planets that are short of transport and shippers that want ships, so the logical customers are in the the SL via cutouts. But that's illegal, so nobody will pay close to the value of the note.
So they will be so busy treading water and trying to use all the tricks they know to avoid having to reprise their assets to market value and avoid having to tell someone 'I can't pay that note I owe'.

kzt wrote:They can't. They will be lucky to escape bankruptcy.

They lost a hugely expensive shipyard. They still owe money to the vendors who provide the parts to the ships that will never be delivered. They owe life insurance payments to the families of the workers killed. They likely have continuing obligations to those worker's families. They likely borrowed money against their scheduled deliveries of the ships to the RMN and others, and the banks expect that money back on time. And the growth in the facility was likely funded by loans that need to be repaid.

The big cartels will almost certainly have a very low level of net debt. They are the ones lending to individual ship owners and outside borrowers. A loss of income for them won't impact their debts service requirements much. As for Life insurance payments, that's what business insurance is all about. Insurance companies have just gotten crushed. If a big cartel decides to self insure, yeah, they're in pain. Even so they would have had assets backing their insurance liabilities in diversified assets, so although painful, not a cause for immediate death of the company. Otherwise, insurance companies will have assets not tied the yards they insured. What moron would invest assets to pay for claims on orbital shipyards in those very shipyards? No one. Assets used to secure obligation to those shipyard workers are invested in SEM/SKM bonds, corporate bonds in other completely unrelated industries. That sort of diversification in a war to the death would be de rigueur. They don't even have to believe the loss is likely, just secure against that low probability event.

In all likelihood the Crown will help the insurance industry cope with the loss, but coping doesn't mean pain free. It does however mean there will be sufficient aid to facilitate any post Oyster Bay recovery.

PeterZ wrote: As for Life insurance payments, that's what business insurance is all about. Insurance companies have just gotten crushed. If a big cartel decides to self insure, yeah, they're in pain. Even so they would have had assets backing their insurance liabilities in diversified assets, so although painful, not a cause for immediate death of the company.

What part of "acts of war or terrorism" did you miss?

https://www.irmi.com/online/insurance-g ... usion.aspx
war exclusion

"A provision found in nearly all insurance policies that excludes loss arising out of war or warlike actions. The loss can result from either declared or undeclared war but must be related to actions of a military force directed by a sovereign power. Prior to the September 11, 2001, terrorist attacks, the war exclusions in most liability insurance policies applied only with respect to contractually assumed liability, on the theory that private persons and organizations could not otherwise incur liability in connection with war. Following the September 11, 2001, terrorist attacks, "war and terrorism" exclusions that broadened the war portion of the exclusion beyond contractually assumed liability were quickly added to liability policies. That broadened war exclusion is now standard, regardless of whether terrorism is insured or excluded in the policy."

You know why they do this? It's because it's a highly correlated risk. If one customer is impacted it's highly likely that many of your customers are impacted. It doesn't matter if they cover it or not, NOBODY has reserves equal to 10 years of the GSP. It's like the US insurance companies being handed a claim for $186 trillion. They don't pay, they declare bankruptcy.

Go ahead, look at your life insurance and house/renters insurance policy. Does it have a clause like this? USAA is pretty much the only company I know who covers people killed in war on their standard policy, because their primary customer base is military and hence they structure reserves to cover that. Everyone else requires you buy a separate policy to get that coverage.

kzt wrote:

PeterZ wrote: As for Life insurance payments, that's what business insurance is all about. Insurance companies have just gotten crushed. If a big cartel decides to self insure, yeah, they're in pain. Even so they would have had assets backing their insurance liabilities in diversified assets, so although painful, not a cause for immediate death of the company.

What part of "acts of war or terrorism" did you miss?

https://www.irmi.com/online/insurance-g ... usion.aspx
war exclusion

"A provision found in nearly all insurance policies that excludes loss arising out of war or warlike actions. The loss can result from either declared or undeclared war but must be related to actions of a military force directed by a sovereign power. Prior to the September 11, 2001, terrorist attacks, the war exclusions in most liability insurance policies applied only with respect to contractually assumed liability, on the theory that private persons and organizations could not otherwise incur liability in connection with war. Following the September 11, 2001, terrorist attacks, "war and terrorism" exclusions that broadened the war portion of the exclusion beyond contractually assumed liability were quickly added to liability policies. That broadened war exclusion is now standard, regardless of whether terrorism is insured or excluded in the policy."

You know why they do this? It's because it's a highly correlated risk. If one customer is impacted it's highly likely that many of your customers are impacted. It doesn't matter if they cover it or not, NOBODY has reserves equal to 10 years of the GSP. It's like the US insurance companies being handed a claim for $186 trillion. They don't pay, they declare bankruptcy.

Go ahead, look at your life insurance and house/renters insurance policy. Does it have a clause like this? USAA is pretty much the only company I know who covers people killed in war on their standard policy, because their primary customer base is military and hence they structure reserves to cover that. Everyone else requires you buy a separate policy to get that coverage.

A bit of a grey area, eh? I was speaking about he the civilian workforce building naval ships. Those families might well be covered. I do not assume the property is covered, I do assume life insurance for those civilian workers building ships and working the armaments plants are covered. There should be sufficient assets to liquidate and disburse to all claim holders.

Now as to those assets destroyed by OB, cartels that have managed to grow big and keep their balance sheets largely debt free can borrow their way to pay for new assets to build ships in the future. Start off slowly with dispersed yards, rebuild the larger more efficient orbital stations over time.

Sorry, but I don't see massive bankruptcies of the large Manticoran firms. I don't see individuals working in the ship building and armaments industries not receiving insurance payments. Civilians passing through the non-industrial areas of the stations may well receive no payouts, depending on future insurance contracts. Those losses are much less concentrated in any one industry. Those losses are certainly not as crucial to the SEM's war fighting capability. As spread out as those losses will be with respect to the industries those casualties belonged to, it will not have as large an impact on those industries.

So, yes, the recovery both short term and long term will march steadily along. Whatever the SEM suffers from those dislocations will be much smaller than what the SL will suffer.

Nothing is being “hand waved away.”

The Star Empire’s economy is hurting . . . a lot. At the moment, the primary cash flow is going into rebuilding its orbital infrastructure, but there’s quite a lot of civilian infrastructure left. In fact, there's more than they really thought there was, and they are discovering that they can repurpose it to a greater extent than they expected. Not in the manufacture of military hardware, but in the production of military infrastructure from which the hardware can be rebuilt. At the moment, however, neither Manticore nor Grayson is producing new ships (or spares) or ammunition. Fortunately, as I believe I have pointed out earlier on the Forum, if not in the books (and I think it was in the books, as well), they had the “downtime” when they were waiting for negotiations that were then canceled, etc., during which they continued to produce missiles at maximum wartime rates and their missile stockpiles were decentralized. They are also discovering that they have more readily redirected industrial “slack” which can be dedicated to rebuilding in no small part because Lacoön Two has reduced the demand for export goods from the civilian sector which continues to exist. In other words, people who have been thrown out of work because the export industry has tanked are finding good-paying jobs in rebuilding what Oyster Bay blew up.

From the perspective of physical plant, Grayson is actually in rather better condition to recover than Manticore, in many ways. I realize that seems counterintuitive, but unlike Manticore’s orbital shipyards (which were also primary civilian industrial sites), Blackbird — the only part of the Grayson orbital infrastructure targeted — was solely the naval yard of the Grayson Space Navy. Some freighters were built there, but not in the last several T-years. When they were being built there, it was because Grayson had more free capacity (courtesy of the dispersed yards) than Manticore did at that time. What this means is that they took virtually a 100% hit on their naval/military building capability but the basic extraction industries, the industrial plant dedicated to consumer production, etc., is substantially closer to intact. I’m not saying they didn’t get hurt, or that they didn’t lose a lot of trained manpower they really, really need. I’m only saying their losses were much more focused in a specialized subcomponent of their total industrial structure.

Neither the Manticoran Alliance, nor the Republic of Haven, nor the Mesan Alignment counted on an alliance between Manticore, Grayson, Haven, and Beowulf when they were contemplating how long it would take to recover from the Yawata Strike. In essence, Beowulf is now producing the Grand Alliance’s ammunition. (“Now” in this case means about six months after Oyster Bay and a couple of months or so prior to the actual Beowulf secession plebiscite.) Production rates “now” are still fairly low, but they are beginning to ramp up. Actually building the new Manticoran hardware doesn’t present an enormous challenge to Beowulf’s industry, nor would it present one to the Solarian League, should the Solarian League, I dunno, find itself in a position to, oh, reverse-engineer the MDM, for example. It would be tougher for the League, in some ways, because the League wouldn’t have the advantage of the folks who were already actually building it before the Yawata Strike/Oyster Bay, but someplace like Technodyne could certainly manage it if they got their hands on working models. (Given the nature of Honorverse molecular circuitry — which assumes that mollycirc hardware is basically “programmed” into the base matrix, which can then be wiped, returning the matrix to a “blank slate” state and that military organizations failsafe their hardware with security protocols — getting working models is tougher for some bits and pieces than for others, of course.)

Manticore’s worst-case assumptions for rebuilding didn’t contemplate Beowulfan construction, as well as financial, assistance. Neither did the Star Empire — or the Mesan Alignment — in their wildest opium dreams contemplate that the Republic of Haven would be providing literally millions of construction workers to rebuild Manticore’s industry. So the labor force and the physical capacity to rebuild are present in ample measure. The financial aspect of it is more complicated, but the comparison to the UK at the end of World War II is somewhat suspect. (Except, perhaps, for the fact that both Haven and Beowulf are currently operating under the equivalent of “Lend-Lease” and that there is — or would be, if needed — the high likelihood that both those governments will simply write off most or all of their aid as a war expense much as the United States did after World War II.)

As far as current cash flow is concerned, Manticore is not permitting “toll-free” use of the Junction even to its allies’ merchant shipping. For that matter, it doesn’t permit “toll-free” use of the Junction to Manticoran merchant shipping; it simply permits its own shippers and those who belong to a “most favored nation” to pay substantially lower Junction fees.. And unlike the British Empire, the Manticoran Wormhole Junction isn’t going anywhere. Nobody (except your humble author) really knows what’s going to happen in the Solarian League post-war. It may dissolve into piracy and warlordism, and it may not. Even if it does, however, interstellar commerce is going to continue to move, both in physical goods and in financial transfers and transactions, and that means the Junction traffic is going to remain. The Star Empire of Manticore, even if it gives back every single wormhole it seized in Lacoön Two, still owns the Panama Canal, the Suez Canal, the Straits of Hormuz, the Straits of Gibraltar, the Northwest Passage, and the Bosporus. Indeed, if the League dissolves into a hotbed of piracy, use of the Junction and the “feeder” warp bridges will only go up, because that’s how you get from one well defended/patrolled (probably by the Star Empire and/or its allies) nexus to another well defended/patrolled nexus with zero possibility of interception by Bad People.

In short, Manticore’s postwar economic position will be even stronger than it was preclauses will gain war.

Now, about that economic business. As someone has pointed out, the insurance industry just took a truly cosmic hammering, although the “act of war/act of God” in some of those policies are going to provide at least limited fire escapes for the insurers who wrote them. Their pain will be the rest of the Star Empire’s economy’s gain, however, and even the insurers are unlikely to go under entirely (as a whole; some individual insurers definitely will collapse), given the diversification of their investment portfolios both inside and outside the Star Empire.

I invite you to remember that, as has been pointed out several places, both in the books and in discussion here on the Forum, Manticore has been sort of the equivalent of Zürich, the New York Stock Exchange, and the Cayman Islands, as well. The big cartels, like Hauptman’s, have enormously diversified holdings throughout interstellar space. The size of the Manticoran merchant marine and its non-military export industry pumped a very large and very steady stream of cash into the Star Kingdom which then had to be invested somewhere outsid e the Star Kingdom to prevent the economy from overheating. That was a pattern which had built up literally over centuries before the first Manticore-Haven war. The costs of that war were (you should pardon the phrase) astronomical, and as the war years dragged on, they began adversely affecting Manticore’s governmental revenue streams. The economy as a whole continued to grow. Indeed, it grew more rapidly during the war years that it had during peacetime, but a government which had always eschewed deficit spending (and had no need for it, given the Junction) found itself borrowing more and more heavily to finance its construction programs and growing military establishment. So, for the first time in several hundred T-years, the Manticoran national debt represents a significant slice of the pre-Oyster Bay GSP and paying it back down will be a nontrivial challenge.

However, like Germany during World War II, there is a Whole Big Bunch (to use a technical term) of Manticoran private investment tucked away outside the Star Empire. In many respects, one of the bigger things the Marshall plan did for Germany post-World War II was to provide a sort of a bridge loan until private German funds could reemerge from places they’d been stashed away — like Argentina, for example — and return to all of those suddenly available investment opportunities in the Federal Republic. I wouldn’t be at all surprised <he said innocently> is something like that were to occur in Manticore, too.

Nobody in the books to date, other than the post-Oyster Bay cabinet meeting I shared with you, has been agonizing over the financing of postwar reconstruction (a) because they have bigger (and more immediate) concerns (like staying alive until they get to the postwar reconstruction) and (b) because they realize the inherent strength of Manticore’s economic position depends far more on its astrographic position and possession of the Junction than on any other single factor, or probably even any other combination of factors.

They have been worrying about things like ammunition expenditures, which you have seen, and the need to conserve ammunition has been one factor (among several) in their decision against taking the war to the Solarian League. Mycroft is eating up a significant percentage of their total Mark 23 stockpile, which is one of the reasons they have been depending on Mark 16s (and Mark 16-armed units) for Lacoön and the reason Tenth Fleet has very few Mark 23-armed podnoughts. When Second Fleet was dispatched to reinforce Mike Henke, one reason it was chosen was because its wallers aren’t Mark 23-armed. Havenite MDMs, even without Apollo, are more than enough to get the job done against any opponent who doesn’t have them. And the Republic’s missile production lines were untouched by Oyster Bay, just as Bolthole was never attacked. With Beowulf’s Mark 23 and Mark 16 production coming online in a steadily strengthening stream, ammunition concerns will pretty much disappear over the next few months, as well.

When it seems to me that the economic/industrial situation is germane to the story line, I’ll talk about. When it doesn’t seem germane to me, then I won’t talk about it. I am, however, aware of the factors involved in its present state and future evolution, and if anyone in the Star Empire thought that Manticore was going to experience some sort of catastrophic economic collapse postwar, I would’ve told you about that already. That doesn’t mean Manticore won’t experience a period of what feels — particularly to the Manties in light of their collective experience over the last couple of centuries of peace — like painful economic retrenchment while it finishes rebuilding and paying off the various loans and bond issues upon which it is currently depending. Most places in the Fringe would be simply delighted if their economies were even remotely as good as Manticore’s “straitened circumstances” will be, however.

And unlike those places in the Fringe, Manticore’s difficulties will be transitory.

kzt wrote:

PeterZ wrote: As for Life insurance payments, that's what business insurance is all about. Insurance companies have just gotten crushed. If a big cartel decides to self insure, yeah, they're in pain. Even so they would have had assets backing their insurance liabilities in diversified assets, so although painful, not a cause for immediate death of the company.

What part of "acts of war or terrorism" did you miss?

https://www.irmi.com/online/insurance-g ... usion.aspx
war exclusion

"A provision found in nearly all insurance policies that excludes loss arising out of war or warlike actions. The loss can result from either declared or undeclared war but must be related to actions of a military force directed by a sovereign power. Prior to the September 11, 2001, terrorist attacks, the war exclusions in most liability insurance policies applied only with respect to contractually assumed liability, on the theory that private persons and organizations could not otherwise incur liability in connection with war. Following the September 11, 2001, terrorist attacks, "war and terrorism" exclusions that broadened the war portion of the exclusion beyond contractually assumed liability were quickly added to liability policies. That broadened war exclusion is now standard, regardless of whether terrorism is insured or excluded in the policy."

You know why they do this? It's because it's a highly correlated risk. If one customer is impacted it's highly likely that many of your customers are impacted. It doesn't matter if they cover it or not, NOBODY has reserves equal to 10 years of the GSP. It's like the US insurance companies being handed a claim for $186 trillion. They don't pay, they declare bankruptcy.

Go ahead, look at your life insurance and house/renters insurance policy. Does it have a clause like this? USAA is pretty much the only company I know who covers people killed in war on their standard policy, because their primary customer base is military and hence they structure reserves to cover that. Everyone else requires you buy a separate policy to get that coverage.

Also insurance companies will buy insurance for there policies against major disasters. I believe it's called the secondary insurance market.

RFC's comments are appreciated and savored as usual. Also as usual, they spark further speculations and debate. Yipee!

Now that he has confirmed Manticore has both the cashflow and existing assets to rebuild as quickly as they can train workers for their new yards and armament plants, we can speculate on where else those off-world assets will be redistributed. Lots of Manty owned SL assets will be liquidated and reinvested in the Verge around Talbot and Maya. Talbot will have 3 wormhole termini within something like 200 LY diameter; Wloclawek to Sarduchi in the Core, Mesa to the edge of the core and Lynx to Manticore. That makes that region of space very attractive for investors wanting to diversify away from Core Solarian League assets.

Selisia will have the Andermani competing to provide goods and services.

Haven is busy trying to expand their exports to their old occupied territories. Penetrating those market will be tough.

The Old SKM Alliance worlds are largely bootstrapped to near SEM standards.

Only the verge worlds are left for seriously large investment returns. There are enough of those worlds to provide significant returns for Haven, Beowulf and the SEM.

Well, given that the books are a story about people and not a treatise on economies during wartime, I suspect an aweful lot of the consequences and recovery actios are being hand waved away as background minutia.
At least as far as we the reader will ever see anyway.

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saber964 wrote:Also insurance companies will buy insurance for there policies against major disasters. I believe it's called the secondary insurance market.

The vast majority of the wealth of humanity is in the SL. So where would Manticoran companies have found someone with trillions in reserves to provide reinsurance? I seem to remember that Manticore declared war on the SL. So I suspect a lot of "Due to events beyond our control we regret to inform you..." responses to their requests for the money they are contractually owed.

I don't recall anything about Manticore seizing SL owned assets. They were very specific about turning SL flagged shipping away from any of thier own wormholes and you have guess that the same will apply to anthing they allow to used wormholes captured in Lacoon II.
The could have at least intervened those ships rather than "only" force them to have to use hyperspace all the way home or on to deliver their cargos. Nothing has really floated up about denying passage to any SL owned goods being shipped through the Manticore Junction.

You might have expected that by now the SL buracracy would have taken steps to seize or nationalize assets of Manticorian citizens or companies but we haven't been treated to that yet. It was one of the things that Lacoon I was designed to prevent from taking all those Manticor flagged or owned vessels (and cargos and crews) should things go in the crapper. Get the crews and shipping out of harm's way.

Not sure if the League Consitution or it's various Administrative Rules and Regulations have provision for nationalizing assets or siezing assets of nationals of systems/ Star Nations which are in the situation now facing the League. They could, of course, remedy that but it might just be a bit much at this point as it would depend on who would be charged with actualy doing it and how much pressure they would have to put on Member Worlds to enforce it within their own systems and their own flagged vessels.
Messy, very messy.