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Saturday, November 8, 2025

2025-11-08

**** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:

Weekly Wrap, Nov 7, 2025
  • LEIs still support risk assets over the next 6m. Policy and liquidity tailwinds are intact while our growth LEIs for US, Eurozone, and China are elevated. Our “no recession” Fed easing cycle roadmap is starting to play out (stronger USD, higher equities, rising yields).

  • Tactical: notable divergences in US equity markets and optimistic earnings estimates. Reason for caution with nimble portfolios.

  • Despite US data blackout, available data suggests consumption and manufacturing are resilient. Watch labor and housing for further weakness.


Here are three reasons I’m adding exposure now:

1. The Trend Is Your Friend
Short-term, things have been messy. But zoom out.
The long-term trend always takes precedence over the short-term noise. 
.....
2. Breadth at Washout Levels & Improving
......
3. The Poker Hand
Markets are a probabilistic game, not a certainty business.
I don’t have high conviction….yet.
We still need follow-through from this weeks hammer candle, but I love the hand that’s been dealt.
The risk/reward is clearly defined: using today’s low as the stop gives a small loss if wrong, and meaningful upside if right. 
That’s how you win in trading, taking asymmetric bets when the setup is favorable and your downside is controlled. ............
Promising, But Not Promised
Markets reward discipline over perfection.
You’ll never catch the exact bottom, and that’s not the goal.
The goal is to position yourself when the odds swing back in your favor, even if it still feels uncomfortable.



......... In this note, we’re going to explore the question of whether investors who allocate their wealth primarily by extrapolating past returns into the future can be money pumped. Both survey-based and anecdotal evidence suggest that extrapolative – aka “return-chasing” – behavior is widespread among investors, especially in assets and strategies where the absence of future cash-flows leaves little choice but to base decisions on historical performance. ......................


BNP Gold: Stuttering after the surge, but more room for upside in 2026 (via theBondBeat)

KEY MESSAGES
  • Raising our 2026 price projections: We raise our forecast for the average 2026 gold price by 13% to USD4,420/oz –and expect to see a high above USD5,000/oz before the end of that year. Our view reflects sustained macro risks, and despite a recent stutter, we think solid support around USD3,850-3,950/oz sets the stage for further upside.
  • Key drivers remain in place: USD debasement expectations remain a key driver, but we also see strong speculative demand for gold as a hedge against risks ranging from US and European debt sustainability to Fed independence/credibility and a potential US AI-driven equity bubble. Concerns also linger that tariff-related trade disruption could prompt a global slowdown


China Fare:


The rise of generative AI has triggered a global race to build semiconductor plants and data centers to feed the vast energy demands of large language models. But as investment surges and valuations soar, a growing body of evidence suggests that financial speculation is outpacing productivity gains

................. Much like previous speculative cycles, this one is marked by the emergence of creative financing mechanisms. Four centuries ago, the Dutch Tulip Mania gave rise to futures contracts on flower bulbs. The 2008 global financial crisis was fueled by exotic derivatives such as synthetic collateralized debt obligations and credit default swaps. Today, a similar dynamic is playing out in the circular financing loop that links chipmakers (Nvidia, AMD), cloud providers (Microsoft, CoreWeave, Oracle), and LLM developers like OpenAI.

While the contours of an AI bubble are hard to miss, its actual impact will depend on whether it spills over from financial markets into the broader economy. How – and whether – that shift will occur remains unclear. Virtually every day brings announcements of new multibillion-dollar AI infrastructure projects. At the same time, a growing body of reports indicates that AI’s business applications are delivering disappointing returns, indicating that the hype may be running well ahead of reality.

The Ghosts of Bubbles Past
Financial bubbles can be understood in terms of their focus and locus. The first concerns what investors are betting on: Do the assets that attract speculation have the potential to boost economic productivity when deployed at scale? Second, is this activity concentrated primarily in equity or credit markets? It is debt-financed speculation that leads to economic disaster when a bubble inevitably bursts. As Moritz Schularick and Alan M. Taylor have shown, leverage-fueled bubbles have repeatedly triggered financial crises over the past century and a half.

The credit bubble of 2004-07, which focused on real estate and culminated in the global financial crisis of 2008-09, is a case in point. It offered no promise of increased productivity, and when it burst, the economic consequences were horrendous, prompting unprecedented public underwriting of private losses, principally by the US Federal Reserve.

By contrast, the focus of the tech bubble of the late 1990s was on building the internet’s physical and logical infrastructure on a global scale, accompanied by the first wave of experiments in commercial applications. Speculation during this period was mainly concentrated in public equity markets, with some spillover into the market for tradable junk bonds, and overall leverage remained limited. When the bubble burst, the resulting economic damage was relatively modest and was easily contained through conventional monetary policy.

The history of modern capitalism has been defined by a succession of such “productive bubbles.” From railroads to electrification to the internet, waves of financial speculation have repeatedly mobilized vast quantities of capital to fund potentially transformational technologies whose returns could not be known in advance.

In each of these cases, the companies that built the foundational infrastructure went bust. Speculative funding had enabled them to build years before trial-and-error experimentation yielded economically productive applications. Yet no one tore up the railroad tracks, dismantled the electricity grids, or dug up the underground fiber-optic cables. The infrastructure remained, ready to support the creation of the imagined “new economy,” albeit only after a painful delay and largely with new players at the helm. The experimentation needed to discover the “killer applications” enabled by these “General Purpose Technologies” takes time. Those seeking instant gratification from LLMs are likely to be disappointed. ...........................

The outcome of this ongoing horse race is impossible to call. Will LLMs eventually generate positive cash flow and cover the energy costs of operating them at scale? Or will the still-nascent AI industry fragment into a patchwork of specialized, niche providers while the largest companies compete with established social-media platforms, including those owned by their corporate investors? As and when markets recognize that the industry is splintering rather than consolidating, the AI bubble will be over.

Ironically, an earlier reckoning might benefit the broader ecosystem, though it would be painful for those who bought in at the peak. Such a deflation could prevent many of today’s ambitious data-center projects from becoming stranded assets, akin to the unused railroad tracks and dark fibers left behind by past bubbles. In financial terms, it would also preempt a wave of high-risk borrowing that might end in yet another leveraged bubble and crash.

Most likely, a truly productive bubble will emerge only years after today’s speculative frenzy has cooled. As the Gartner Hype Cycle makes clear, a “trough of disillusionment” precedes the “plateau of productivity.” Timing may not be everything in life, but for investment returns it pretty well is.


Get ready for chaos

.................. The generative AI industry has long reminded me of Wiley E. Coyote suspended in mid-air, over the edge of the cliff, about to fall, but not until the moment he looks down:

People are starting to look down.



Quotes of the Week:



Charts:
1: 

2:




(not just) for the ESG crowd:

U.S. B.S.:


........... But he won because he was laser focused on the affordability crisis: food, housing, transit and child care. For many years now I have said that voters in most Western countries want real change, and they will vote for anyone who seems to not be like a status quo politician and for any promise to overturn the status quo. Like a wolf in a leg trap, they’re so desperate to escape from a future of eternally lowering expectations

......................... What Mamdani represents is America’s last hope. If the movement he exemplifies loses, America’s future is to slowly un-develop, becoming more akin to Brazil or India than to developed nations. Vast numbers of homeless, desperate workers, extended new slums and people absolutely desperate for food, healthcare and housing. In this he is similar to Corbyn: the last chance for America to turn it around before the shit hits the fan. If this movement fails, America fails. It may be able to get back up again, sure, but it will be far harder to do in twenty years than in three or seven years.



The 21st Manama Dialogue in Bahrain, an annual global security and geopolitical conference

................................. I could write more but there isn’t much point in doing so. I could cite “A Clean Break” and subsequent events to further denigrate Ms. Gabbard’s words. Perhaps she thinks she can alter US policy by herself. Promoting “an understanding that there cannot be prosperity without peace” is something that’s sorely needed to be pounded into the heads of US Neoliberal/Neocon elites, although they look at their personal prosperity over the past decades of forever wars and ask why should we change course. ...................



............................... Trump used to at least posture as an anti-interventionist who didn’t get along with the warmongers of the DC swamp. Now he’s best butt buddies with the most bloodthirsty swamp creatures alive.

They love him, and why wouldn’t they? He bombed Iran. He bombed Yemen. He poured genocide weapons into Israel to incinerate Gaza and to bomb Lebanon, and has been aggressively stomping out free speech that is critical of Israel’s war crimes. He’s been bombing Somalia at an unprecedented rate. He’s giving every sign that he’s getting ready to do something truly horrible in Venezuela. He’s even threatening to invade Nigeria now. .....................



Experts predict several possible scenarios, from the "Iraqi" and "Chechen" to the "Armenian" and "Ukrainian" ones. Armen Galstyan is a former employee of the Russian Center for Science and Culture (the "Russian House") in Caracas. He spent a significant part of his life as a Russian diplomat in Venezuela. We found his opinion on the consequences of the American invasion of Venezuela quite interesting.

Bluff or clowning?

– How will the American invasion of this country end, Armen Borisovich?

First of all, it hasn't started yet. And it's not a given that it ever will. Remember how Trump spurred an entire aircraft carrier group toward the shores of North Korea? And how did it all end? With the North Korean president mocking him. He called all his threatening remarks "the ramblings of a sleeping dog." And in the end, Trump backed down. He remembers it very well. I think, in a certain sense, it was a face-off, as they like to say at the Foreign Ministry. And it's completely unclear whether he'll want to lose face a second time.

On the one hand, if Trump "goes away," it would be a clear loss of his reputation. On the other hand... Trump is a wild man. A poetic showman. And often his show takes on the contours of outright bluff and clowning. And he, sensing this, sometimes spills the blood of his political opponents to prove to everyone that he's a tough, serious guy. A true political cowboy. That's how he assassinated Iran's national hero, General Qassim Soleimani, and bombed the underground workshops where the country's nuclear program was being developed.

It was quite serious.

"A battle of brains and characters"

– Could the invasion of Venezuela become just as serious?

- We'll see. The chances are fifty-fifty for now. ....................................................................

What's the general mood in the country? How prepared are people for war?

Everyone in Venezuela, great and small, hates Americans. Except for the national traitors, whose number is unknown. Although treason here can get you killed, the very act of betrayal is quite common among Venezuelans. So everyone has scores to settle, and bloody vendettas are constantly raging. But while sporadically settling their debts of honor, all Venezuelans unanimously hate Americans. This hatred is existential, metaphysical in nature. ............................



Geopolitical Fare:


Let’s run thru the important points:

Domestically in the US the only issue that really matters is affordability. Food, housing and medicine. This will dominate the next few years, maybe even the next decade. Mamdani will win, he will be blocked from doing much of he wants by courts and the the State and federal government, and his future will depend on him making those who stop him the villains. The mid-terms and the next election will be fought in bread and butter issues.

China is going to win the AI race, as predicted. 

This is, again, because Chinese models are at least 90% cheaper to run, and mostly open source. Only a complete and utter moron would run their business using proprietary models where OpenAI or Anthropic can jack up the price any time they want or depreciate the model you actually needed. Even US startups agree, 70 to 80% of them are using Chinese open models.

American AI either bursts or causes a great depression. Or perhaps bursts and causes a depression. There isn’t any other possibility. They’re spending trillions so American business can mass replace their workers. If it works, it causes a demand depression, a great depression like the Great Depression of the 30s. Who the hell do they think will buy their products? People can barely afford food and rent, let alone fancy AI crap. When they’re homeless they aren’t going to be customers. Meanwhile the rest of the world won’t be buying US AI crap either, they’ll be buying Chinese open source AI crap.

The War of attrition is nearly won by Russia. Ukraine just doesn’t have enough men and drones, it’s that simple. Next year, absent a peace deal, the big arrow moves everyone was wondering about will happen and Ukraine will be forced into unconditional surrender.

Europe is done. They’re losing their industrial base and their tech base. The people are unhappy and turning to populist opposition, either left or right. The Eurocrats are using lawfare to make outsider parties illegal if they look likely to win. This will take some time to play out. There will be changes in government away from neoliberalism, and if they can’t be achieved peacefully there will be a lot of violence. The EUs only play here is to try and gin up a war against Russia, but if they succeed, they’ll lose the war.

China and the US are now co-equal powers but that won’t last. China is on the rise, America is gutting its own science, arts and intellectual base while immiserating its own people and keeping smart foreigners out. (Or throwing them out.) All the big spend isn’t on re-industrializing, it’s on an AI moonshot which probably won’t succeed and will burst, or which if it does succeed will cause a Great Depression.

I will remind you that rich people have limited real power. They can buy a lot of influence, but if government turns on them they are done, because they do not have private armies capable of standing up to the State’s military and paramilitary forces. If the political zeitgeist turns against them, the government can make any changes it wants. Ask various Chinese billionaires how things worked out for them when the CPC decided they were too big for their britches.

One way they lose their influence is simply by having a real, undeniable depression. They’re doing everything they can to create one. If the Fed can’t bail them out, they’re done.  The Fed’s ability to print dollars is going away, they have at most one large bailout left in them. After that, they can’t, because if the dollar isn’t the unit of trade for the world, over-printing will be catastrophic. Dozens of countries have found this out, again and again. Money can’t buy what your country can’t actually do, and the US can do less and less—the rich people sold America’s ability to do things to China to get three generations of fake wealth.

We are moving towards the end-game. It will take ten to fifteen years to play out. The West will be immiserated, neo-liberalism will end, US power and Empire will collapse. There will be wars and revolutions around the globe, because the force holding the world in its post-war, post-Soviet collapse state, including such things as borders, is going away. China is not likely to engage in massive military operations thousands of miles from its border and has shown itself uninterested in what happens in other countries domestically, unless they’re countries very close to it geographically...................


U.S. planners need to accept that Kiev is losing its war and Pyongyang won’t relinquish its nukes.



................................................... All parties seem to agree that negotiations must start from a recognition that Russia will not relinquish control over the Ukrainian territory it now controls. But, as Russia has said since 2014, its objective is not territory, but the threat to the rights of the population of Donbass (and Crimea), which have repeatedly expressed its desire for self determination through referenda and, ultimately, rebellion. These are the root causes that Ukraine and the West still need to address.



............. But this particular incident shines a special sort of light into exactly what’s going on behind Israeli eyes over there in that sadistic society.

............. Israel cannot be sustained without nonstop violence. The violence cannot be sustained without hatred. The hatred cannot be sustained without systematic indoctrination.

That indoctrination teaches Jewish Israelis from birth that the victims of their genocidal state are all inhuman monsters who would rape and murder them all if Israel ceased its apartheid abuses, militarism, and incessant violence. It teaches them that killing off their empathy and compassion is essential for their survival, because only the Jews who are willing to do whatever it takes to survive are going to make it.

Just in case their childhood indoctrination isn’t enough to sway them, Israelis are also made to serve in the military where they spend two years killing off any remaining sense of human decency within themselves as they inflict acts of unfathomable cruelty upon Palestinians as part of their duty to the state.

They are trained to believe they must have cold hearts and hard hands, because that is what’s necessary to do what must be done. .............

This is Israel. This is Zionism. This is what it looks like when Zionists get everything they want. You’re looking at it. This is it.

Israel can’t keep going like this. Humanity can’t keep going like this. We need better systems. Better ideologies. Better motivators driving our behavior.

All our systems which drive cruelty and abusiveness around the world need to go the way of the dinosaur. Zionism. Capitalism. Imperialism. All our competition-based systems which pit us against other people, other ethnicities, other countries, and our own biosphere.

We need to move into collaboration-based systems which advance justice, equality, and well-being for all of earth’s creatures. Because what we’ve been doing clearly isn’t working.



RIP Couldn't Come Soon Enough Fare:


Dick Cheney, arguably the single government official most responsible for the expansion of US warmongering and militarism in the 21st century, has died.

The worst worst war sluts of the US empire have issued statements expressing their condolences, including Democrats like Joe Biden, Kamala Harris, Bill Clinton, and Nancy Pelosi. Because if there’s one thing that can bring Democrats and Republicans together, it’s war crimes and the slaughter of millions of middle easterners. 

Dick Cheney died far too old and far too free. The fact that such monsters get to pass away in their eighties surrounded by loved ones instead of alone in a cage is an indictment of our entire civilization.

In a truly sane society, Richard Bruce Cheney would have lived out his life in relative obscurity, working as a gardener or something. In a fairly sane society, people would have realized what a monster Cheney was before he could do any major harm in Washington, and he would have been driven out of any town he tried to enter. In a slightly sane society, he would have been punished for the rape of Iraq and lived out the rest of his life in a cell in The Hague. 

But we do not live in a truly sane society, or in a fairly sane society, or even in a slightly sane society. We live in the sort of society that lets a man unleash a chain of events which kills millions and displaces tens of millions causing more human suffering than the mind can possibly comprehend, and then live out the rest of his life in comfort and privilege, with zero consequences of any kind.

Dick Cheney is dead now, but his legacy lives on. The damage he did is still unfolding. The hegemonic, hypermilitaristic ideology he promoted has become the baseline norm. New swamp monsters have stepped in to fill his shoes and advance the same murderous and tyrannical agendas he advanced, confident that they too will suffer no consequences and live long and comfortable lives in reward for their loyal service to the US empire. .............



...................... Starting in the late 1980s, Cheney developed and implemented the dictator-like theory of executive power in which we all now live.  


Former Vice President Richard Bruce Cheney, the human manifestation of the US Deep State, died four days ago. Good riddance. He was a war criminal. The man largely responsible for America’s accelerating international decline, his policies effected the death of thousands of American soldiers and Marines, and the death of hundreds of thousands, perhaps millions of innocents. Just a few days ago Col. Larry Wilkerson, Gen. Colin Powell’s outspoken chief of staff unequivocally called him a war criminal. If there is a hell, he’s there. If there is such a thing as reincarnation he’ll soon return as a cockroach. But I’m not here to discuss his afterlife. It’s the evolution of his ideology that I want to consider. ...................

....................... Then Cheney got appointed SecDef by Bush I. The Gulf War happened. He’s incensed US forces didn’t go to Baghdad and topple Saddam, so was his protege Wolfowitz. When Clinton beat Poppie Bush, Wolfowitz left DoD for thinktank land and Cheney, like Rumsfeld before him, took a lucrative business sinecure. While out of power, Cheney and his acolytes spread their neoconservative ideology like a virus. They built the think tank Project for a New American Century with the central goal of promoting its ‘clean break’ policy prescriptions. PNAC ideas soon became the sole driver of America’s post-Cold War foreign policy, especially when President Clinton adopted them, damn near wholesale.

This is a crucial point. Clinton adopted regime change in Iraq as a policy goal. He beefed up the no-fly zones over Iraq, as well. Indeed, Clinton’s foreign policy was totally incompetent. Seriously, we still have troops in the Balkans. And don’t forget the illegal partition of Kosovo from Serbia, which opened up the nasty can of worms affecting us even now. The main point here is WE DID IT FIRST. The USA. Not China. Not Russia. The indispensable nation created the precedent. At the time the partition was vehemently opposed by the Russians. Russia was so incensed, and mostly impotent at the time, that they sent troops to occupy Pristina’s airport. US forces were ordered to overpower them. US Gen. Mike Jackson, to my eternal gratitude, defied the order saying, “I’m not having my soldiers responsible for starting World War III.”

I recount this episode of Bubba’s presidency because it represents what international relations scholars and historians call a ‘revolutionary diplomatic moment.’ Spoiler: this is a big fucking deal. The partition of Kosovo was the exact moment when the US went from being a status quo power, defending the pre-existing order, adhering to the principle of non-interference in the internal affairs of sovereign nations (a principle established in 1648, by the way), to a revolutionary power, engaging in regime change and the conduct of illegal aggressive war: neoconservatism in action. Action that results in a straight line from Kosovo to the war in the Ukraine. Bubba ain’t blameless by any stretch of the imagination. But Cheney represents ‘Boss Level’ culpability. ...........




Other Fare:


As the old punchline goes, "If you wanted to get there, I wouldn't start from here." It's a gag that's particularly applicable to monopolies: once a company has secured a monopoly, it doesn't just have the power to block new companies from competing with it, it also has the power to capture governments and thwart attempts to regulate it or break it up.

40 years ago, a group of right-wing economists decided that this was a feature, not a bug, and convinced the world's governments to stop enforcing competition law, anti-monopoly law, and antitrust law, deliberately encouraging a global takeover by monopolies, duopolies and cartels. ......................................

Anticircumvention law is the reason Canada's only response to Trump's illegal tariffs is more tariffs, which make everything in Canada more expensive. Get rid of anticircumvention law and Canada could get into the business of shifting billions of dollars from American tech monopolists to Canadian startups and the Canadian people .........................


How the CIA created the modern Left and why the Right still think its a Marxist plot

Introduction to The Anatomy of Empire
We are living through a global conflict of connected crises—in Ukraine, Gaza, Iran and the South China Sea, and within the fraying social contracts of Western nations themselves. These are not isolated eruptions, but the symptomatic convulsions of an Empire grappling with its own internal contradictions. Yet one of the most potent and paralyzing of these crises is fought not on a physical battlefield, but in the realm of culture and identity. It is a war over history, truth, and the soul of the West itself ........................

This series, The Anatomy of Empire, is an attempt to return the historical context that has been erased from our collective memory. An effort to wake us from our societal amnesia to understand how we arrived at this dangerous point in history. So far, we have seen how the military-industrial complex fused capital with violence. How the mechanics of imperialist extraction evolved into the financial, digital, legal realm of neocolonialism 2.0. How the Empire cultivates and then consumes allies once they have outlived their utility. And how the Empire incorporated the infrastructure of fascism into the architecture of the Cold War and beyond.

Now, we turn to a more subtle, yet equally formidable, engine of control. In the ashes of World War II, as socialist and communist parties surged with a vision of material, class-based transformation, the architects of the American Century made a fateful decision. .....................



............... You don’t need to know anything at all about politics or parapolitics to see that (B) is the most likely explanation for why things keep getting worse for everyone besides the rich and powerful. Your own basic reasoning and understanding of human behavior will tell you that there’s no way democracy is working as advertised if things keep getting worse and worse for ordinary voters while billionaires and empire managers keep getting everything they want.

Things are shitty because we are ruled by people who want things to be shitty. Once you awaken to this undeniable reality, you will inevitably find yourself growing more and more radicalized.

Our rulers want nonstop war and genocide. Our rulers want obscene levels of inequality. Our rulers want the public to be poor and struggling. Our rulers want people to be getting dumber, sicker, and more miserable. Our rulers want the unrestricted industry that’s killing earth’s biosphere. Our rulers want us to have vapid, unedifying mainstream culture. This dystopia looks more or less exactly how they want it to look. ...................

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Sunday, November 2, 2025

2025-11-02

 **** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:




................ Jeff deGraaf of RenMac once noted: “In this business, predictions are over-rated, but the mismatch between expectations and probable outcomes are underrated.”

........... I was always taught that when you’re in a bull market, it’s absolutely necessary for investors to ride it – at least until it’s clear that a recession is underway or the bubble is bursting.

Right now, I’m not seeing either.

The goal of investing is to make money. Full stop. Enjoy it while the offense remains on the field.

Having said all that, here are three charts I came across today that definitely raise my risk-management antenna. I flag these dynamics into the yellow “worth monitoring” category.



We live in what Brett Arends claimed as “The Dumbest Stock Market In History,” but I believe it is potentially the most dangerous era. That phrase is not hyperbole as it reflects structural distortion, extreme valuations, and an investor base intoxicated by momentum and narrative. The MarketWatch piece puts it bluntly: “At one level, there is no doubt that this is the dumbest market in history, because at this point it is completely dominated by ‘passive’ index investing.” That dominance means we are now in the most dangerous era where market mechanics, not fundamentals, rule. ............




Global strength has fueled the rally while domestically, participation is poised to continue to broaden


When Guidance Turns to Guesswork

At Macro Anchor, we have consistently argued two things about the Federal Reserve.
First, that policy should focus on demand, not on “supply constraints” that serve as convenient excuses for policy inaction.

Second, that political and fiscal pressures will ultimately force an aggressive easing cycle, one that began in September and, in our view, will not stop until the policy rate reaches around 2.5%, far below the 3.5% still anticipated by markets.

I watched Powell’s press conference, and it was a disaster. The Chairman appeared visibly uneasy, often defensive, and at times incoherent. His body language betrayed uncertainty; his tone, frustration. He jumped between supply and demand explanations, contradicting himself within minutes, and failed to give any coherent guidance to the market. One moment he said the Committee is “taking a step back,” the next he insisted that “policy remains restrictive.” This is not communication; it’s confusion. ...........


Central banks diverge, but all face the same constraint: fiscal gravity

............. Behind the technical language of “duration management” and “balance-sheet adjustments” lies a more political reality. By ending QT and reinvesting maturing MBS and Treasury Notes and Bonds into Treasury bills, the Fed is quietly engaging in yield-curve control by stealth, providing liquidity, funding short-term Treasury issuance, and cushioning fiscal pressures. With public debt above 125 % of GDP, monetary policy is no longer independent, it has become fiscal facilitation by necessity. The real neutral rate is now the one that keeps the Treasury solvent, closer to 2.5 % than to 3.5 %.


Tax your Friend, Yield to your Enemy

A lot is happening these days. This is our second post in as many days, following our analysis of the latest Federal Reserve meeting, which revealed a central bank in total confusion, cutting rates into a slowdown it refuses to recognize. But while the Fed’s confusion reflects domestic weakness, what is unfolding on the trade front shows how U.S. policy abroad is becoming an instrument of financial coercion.

Trump’s trade doctrine has evolved, but its essence remains the same. Instead of tariffs as a means to correct trade imbalances, they have become a weapon to extract capital commitments from U.S. allies. The new policy is simple: invest in America, or face tariffs.

Across allies, the pattern is now unmistakable. The United States is effectively conducting a capital-for-tariff diplomacy, exchanging market access for investment inflows. Altogether, these deals amount to approximately $3.5 trillion in foreign investment pledges over the next five years ..........

.......................... We are now entering a bipolar world economic and monetary order. The United States has locked in its allies through capital coercion and tariff diplomacy, while China is building a self-sufficient, resource-backed, yuan-based sphere. One system trades capital for allegiance; the other builds production and control over inputs.

In this confrontation, the United States has emerged as the clear loser. All China had to do was choke the very start of the global supply chain while exerting political pressure through the temporary import ban on soybeans, a targeted move that hit U.S. agriculture, a key political constituency. The result is a perfect display of asymmetry in game theory


Tariff uncertainty may be waning, but the damage will persist

......... So absent another toddler tantrum, we may be reaching peak Trump tariffs. But don’t celebrate. Trump’s chaotic tariff policies inflicted three types of economic damage: higher prices for American producers and consumers, economic uncertainty, and the global loss of American credibility. Even if the worst in terms of prices and uncertainty is over, it’s clear that Trump’s tariffs have inflicted lasting damage on the US economy as well as the global economic order.

To understand the extent of the damage, let’s begin by taking inventory of the tariffs’ actual effects on prices and the job market. ............



A leading indicator of U.S. non-residential construction activity, published monthly by Dodge Construction Network, shows continued strength in commercial and institutional planning, primarily driven by the data center buildout tsunami that is set to gain serious momentum in 2026. ........




Bubble Fare:


The S&P 500 stands at the most extreme level of valuations in history. As I detailed in August, our most reliable valuation measures – based on their relationship with actual subsequent S&P 500 total returns across a century of market history – suggest that the expectations of investors for long-term market returns are wildly misaligned with the returns implied by discounted cash flows. ................

As I’ll detail later in this comment, the corporate profitability that investors presently attribute to productivity and innovation is actually the accounting result of record government and household deficits. As we’ll see, innovation certainly affects the distribution of those profits, but maintaining this level of profitability, with nearly 90% of the benefit accruing to the wealthiest 10% of households, actually relies massive and sustained deficits in other sectors, which would eventually spell debt crisis and default.

Historically, corporate profits have fluctuated over time. When corporate profits are depressed, as they are during and just after recessions, price/earnings multiples typically soar – but these high P/E multiples have no bearish implications and are uninformative about future returns. Likewise, during economic booms, profit margins tend to be elevated. Normally, that results in seemingly normal-looking P/E ratios, but these P/E multiples are actually dangerous because they’re built on unsustainable earnings.

The worst case is when investors are paying extreme P/E multiples on record earnings, that in turn reflect record profit margins. This type of “double counting” has historically had tragic outcomes. ...................................................................................................................

The current economic environment features possibly the most untethered, and undoubtedly most imbalanced version of this philosophy in U.S. economic history. Yet the outcome has not been faster growth, nor even faster productivity growth. Rather, the combined slowing in demographic labor force growth and U.S. productivity growth has resulted in the slowest 25-year compound annual growth in real U.S. GDP in the nation’s history.


From an equilibrium standpoint, record corporate profits and free cash flow, particularly as a share of GDP, are the mirror image of record deficits in the government and household sectors. Again, this isn’t a theory. It’s an accounting identity. Sustaining record corporate surpluses requires sustaining record government and household deficits.

The problem is that this is a longer-term recipe for debt crisis and persistent inflation. That may be some part of why gold is on a ramp ........................



...................... Investors should be willing to pay high valuations for more growth, but can extraordinary growth rates for a handful of stocks continue? If so, high market valuations make a lot more sense.

Interestingly, some of the Magnificent Seven stocks, which have expensive P/Es but strong earnings growth, may be more conservative than the bulk of S&P 500 companies, which trade at high valuations but have little earnings growth.

To better appreciate this, we use the PEG ratio (Price/Earnings / Expected Growth). This ratio helps make P/E ratios comparable across companies and industries with different growth rates.

The FinViz heat map below shows the PEG ratio for the S&P 500 companies. Notice the sea of red—high PEG ratios — throughout the S&P 500. However, some of the Magnificent Seven, including MSFT, AMZN, NVDA, GOOG, and META, are pretty reasonable.



Opposition to data centres has been rapidly spreading internationally due to their fast-growing resource demands. DCs have been proliferating, driven by the popularity of artificial intelligence.



In fact, the CEO announced during the company’s earnings call on Wednesday, Meta will be spending between $70 billion and $72 billion on AI this year — up from its previous estimate of $66 billion to $72 billion, as CNBC reports.

Unsurprisingly, that cash bonfire isn’t going over well with investors. Meta’s shares slid by more than 11 percent on Thursday, indicating widespread skepticism about the company’s ability to stop bleeding billions of dollars as it races to keep up with the AI industry’s ever-escalating expenditure commitments.

That’s particularly striking because the drop comes in spite of Meta’s revenues exceeding Wall Street’s estimates. In other words, out of control AI spending is starting to rattle investors. .........



As I've established again and again, we are in an AI bubble, and no, I cannot tell you when the bubble will pop, because we're in the stupidest financial era since the great financial crisis — though, I hope, not quite as severe in its eventually apocalyptic circumstances.

By the end of the year, Microsoft, Amazon, Google and Meta will have spent over $400bn in capital expenditures, much of it focused on building AI infrastructure, on top of $228.4bn in capital expenditures in 2024 and around $148bn in capital expenditures in 2023, for a total of around $776bn in the space of three years.

At some point, all of these bills will have to come due. .....................

To be clear, everybody is losing money on AI. Every single startup, every single hyperscaler, everybody who isn’t selling GPUs or servers with GPUs inside them is losing money on AI. No matter how many headlines or analyst emissions you consume, the reality is that big tech has sunk over half a trillion dollars into this bullshit for two or three years, and they are only losing money. 

So, at what point does all of this become worth it? 

Actually, let me reframe the question: how does any of this become worthwhile?Today, I’m going to try and answer the question, and have ultimately come to a brutal conclusion: due to the onerous costs of building data centers, buying GPUs and running AI services, big tech has to add $2 Trillion in AI revenue in the next four years. Honestly, I think they might need more. ....................

Big tech’s lack of tangible revenue (let alone profits) from selling AI services only compounds the problem, meaning every dollar of capex burned on AI is currently putting these companies further in the hole. 

Yet there’s also another problem - that GPUs are uniquely expensive to purchase, run and maintain, requiring billions of dollars of data center construction and labor before you can even make a dollar.

Worse still, their value decays every single year, in part thanks to the physics of heat and electricity, and NVIDIA releasing a new chip every single year. 


"I decided to save it in this cheap, reliable, secret way."

First of all, let’s be clear: there is no such thing as a software patent. Patents are for material inventions. Software is a branch of mathematics. Math is not an invention. Math is a discovery. Patents are for inventions, not discoveries.

Ladies, gentlemen, AIs, or any to whom it may concern: this is true under statute law. It is true under case law. It is true under natural law. It is true in America. It is true in Europe. It is known to all true engineers. It is known to all true lawyers. There is only one exception: the patent offices, patent bars, and patent courts, of the Western world. ......................

The roots of Bitcoin
Bitcoin is actually two ideas, cleverly intertwined, from different college departments.

A is a CS idea: the proof-of-work blockchain as a scalable solution to the Byzantine agreement problem. B is an Econ idea: the idea that a worthless token with a limited supply can go up arbitrarily in price until it becomes a new monetary standard.

Somehow, everyone these days understands B—in a rough intuitive way. By the end of this essay, you should understand it in a clear logical way. But two things are sure. One: B happened. Two: in the year 2000, no one had any theory that predicted B. ......................

Which is a more significant idea, A or B? Oh man, it’s hard to say. Not only is the blockchain a beautiful idea, the execution on the A+B design is just sublime. On the other hand, Byzantine consensus is at least a well-known problem. There are other ways to do it. There are plenty of monetary tokens today, notably Ethereum, which do not use proof of work. They seem to work. Idk. No strong opinions on the subject tbh.

Also, I do not think people these days have a strong understanding of B.  ..............................................

As in any bubble, the return on this bubble depends on when you get in and out. None other than George Soros has a great quote: “when I see a bubble forming, I rush in, adding fuel to the fire.” Whatever a zero-sum game between George Soros and Sven the fisherman might be, it definitely cannot be described as a Nash equilibrium. .............................

Here is the worst thing about this. You can have a bubble in a non-monetary good, like tulips or axes, but mostly people are wise to that now. But you can also have a bubble in a monetary good. If silver is competing with gold, or Ethereum with Bitcoin, and either loses the race for the standard store of value completely and permanently, it loses all its monetary value and returns to its commodity value.

This looks like a bubble popping, because it is a bubble popping. Any state between fully monetized, and fully demonetized, is an unstable state. Anything the market does looks inevitable in retrospect. There’s no crying in the market.

If a monetary candidate goes up to a market cap of $2 trillion, then collapses back to zero—also a stable state—what does this look like, to the average person who has never heard of game theory?

It looks like the collapse of a giant bubble, which in retrospect will earn a historical level of contempt and ridicule which makes the tulip bubble look sane. At least tulips are flowers. At least they look nice. At least you can put them in your yard. If you still have a yard. At least they’re not hexadecimal strings. At least you didn’t put Augustus and Juniper’s college fund into hexadecimal strings. They can do school online. AI school. It’s great. And look out the window. If you still have a window. At the tulips.

This is why the greatness of the Bitcoin hodlers is real: it was not, and is not, without doubt or risk. Never! It was a deep shared conviction, sometimes logical, sometimes intuitive, that what goes up can stay up—and become the world’s new standard money. Like the legendary American revolutionaries, they knew (and still know) that if they do not hang together, they will hang separately. They have hung together. The result is amazing. But the revolution is nowhere near over.

They detect, logically, intuitively or both, that hodling is a Nash equilibrium. The more people crowd together into a Nash solution, the better the case for joining them. Of course, changes in the real world can invalidate a Nash equilibrium overnight.

One day, everything in the world economy will be priced in Bitcoin. Or, one day, Bitcoin will be regarded as the biggest bubble that ever was. There are stable equilibria between these outcomes, but they are unusual and structurally exotic.

There are three major ways in which Bitcoin could still fail. A: it could be actively killed by its enemies. B: it could lose its energy source. C: it could be outcompeted by another candidate monetary standard. ..............

Or the dollar could fix its shit, somehow, and you’ll be utterly forked. Or Washington could decide to fork you anyway. Why? Why not. Or gold, which is attached to the part of the world that produces rather than consuming, and whose market cap still dwarfs Bitcoin, could emerge triumphant—especially through gold stablecoins.

This is the logic behind the winners of the game that have made Bitcoin great. May it continue to be great. Many risks have indeed been overcome by the bold. Glory to the hodlers! To the maximalists! Even the spergs who ask me why Urbit is on Ethereum. You are soldiers of destiny all of you. March. Hodl.

How could the dollar fix its shit? Frankly—not a real risk. if anyone doubts this, think about what happens if the Fed eliminates its ability to issue new dollars. Permanently. Mathematically. At Bitcoin levels of hardness.

Gold and Bitcoin will be absolutely stone cold dead. Also dead: gas, electricity, banks, perhaps your dog. Civilization may hang on somehow. To put it simply, this is a world where all this 200 trillion in “M10” realizes that it’s playing musical chairs with M0. Or perhaps M16. Arm yourself. Like really. Don’t be that guy who thought he had enough bullets! You definitely want to get out to M0 very fast and not be picky about offers. Like the end of Margin Call fast.

The good news is: no one actually wants to do this. So it won’t happen. So the dollar will keep bleeding. So everything will keep going up. So the only healthy parts of the country will be the parts exposed to the inflation drip—Manhattan, DC, and Silicon Valley. LA will hang on somehow to sell us porn, and Chicago can be sold for scrap.

The only way to escape from this insanity is to adopt a standard of money that isn’t bleeding to death. Thus, Bitcoin.

Or possibly gold. Or even Ethereum. We’ll talk about the future of remonetization in another post. A paywalled post. Sorry. It’s hard out here for a nocoiner. .....................




“In our opinion, the debasement trade hasn’t really even started yet,” Darius explained. “This is an institutional portfolio asset reallocation. Term premia are about 100 basis points mispriced, inflation is about 50 basis points mispriced, and the positive stock-bond correlation is likely to persist as inflation remains elevated. Those three dynamics are working against investors who still hold too many Treasuries.”

Key Takeaway:  The shift away from Treasuries toward gold and alternative assets is still in its early stages. The real debasement trade will likely begin when the Fed is forced by internal political and external geopolitical dynamics to absorb excess Treasury supply.



Charts:
1:  super duper top secret!!


2: 
3: 
4: 



(not just) for the ESG crowd:


We are hurtling toward climate chaos. The planet's vital signs are flashing red. The consequences of human-driven alterations of the climate are no longer future threats but are here now. This unfolding emergency stems from failed foresight, political inaction, unsustainable economic systems, and misinformation. Almost every corner of the biosphere is reeling from intensifying heat, storms, floods, droughts, or fires. The window to prevent the worst outcomes is rapidly closing. In early 2025, the World Meteorological Organization reported that 2024 was the hottest year on record (WMO 2025a). This was likely hotter than the peak of the last interglacial, roughly 125,000 years ago (Gulev et al. 2021, Kaufman and McKay 2022). Rising levels of greenhouse gases remain the driving force behind this escalation. These recent developments emphasize the extreme insufficiency of global efforts to reduce greenhouse gas emissions and mark the beginning of a grim new chapter for life on Earth.

In this report, we seek to speak candidly to fellow scientists, policymakers, and humanity at large. Given our roles in research and higher education, we share an ethical responsibility to sound the alarm about escalating global risks and to take collective action in confronting them with clarity and resolve. We show evidence of accelerated warming and document changes in Earth's vital signs.  .....................



Imperialism has always come with a high body count. That remains true today with U.S.efforts to retain what is left of its hegemony. Sanctions, warfare (either direct or proxy), genocides, and exported class warfare all leave devastation in their wake.

In many ways US imperialism is similar to other colonial projects that came before it. Yet there is one obvious difference: our knowledge of climate change. Action to slow emissions was always going to be one of humanity’s greatest challenges, and efforts were slow in coming. Many have noted history’s cruel joke that at the moment global warming becomes widely accepted and as it accelerates, it is a hyper capitalist moment of human organization led by a nation dedicated to growth at any and all costs.

The US decision to go scorched earth as its empire crumbles is only making a bad situation worse. ..............

Sadly, we’re moving in the opposite direction. Climate tipping points are mentioned in passing —if they’re mentioned at all— and quickly pushed to the back pages by the latest nuclear brinkmanship in the New Cold War, approaching war in Venezuela and maybe Columbia too, US-Israel efforts to remake the Middle East through genocide. It’s not a coincidence that all these countries and regions being targeted by Washington also happen to sit on the largest known oil and gas reserves in the world as the US doubles down on a dystopian future filled with fossil fuels, climate chaos, and hierarchical class structures protected by a robust police state.

This path the economic elites are coalescing around not only precludes any action on global warming, but there are signs that they are actively embracing it as just another component of their imperial game. ............................................

............ Of course nobody knows with any certainty what havoc will be unleashed once more climate tipping points fall.

The US happens to be blessed with plenty of fresh water (as does the “51st state” to the north)—for now—but all of global warming’s other forces will do plenty of damage to America and cause destabilization there as well.

The problem here is that the economic elite in the US believe that their money will always allow them to buy a solution, and many are embracing a future in which they believe they can build an empire-by-contractor system where ruling clans do no more than oversee weapon systems, AI data centers, and mercenaries. ........



Yves here. For those minimally on top of AI power usage, the headline is a “Gee, ya think?” item. But this post documents a key point: not only is AI greatly increasing electricity demand, but that need is also being met enough by fossil fuels so as to reverse the decarbonization of electricity production.


The so-called “green transition” has triggered a mining boom all over the world which is leaving conflict, environmental devastation and political instability in its wake.

In this episode, researcher and climate analyst Nina Djukanović explains her recently published research into the  competitiveness, security, and socio environmental issues of critical raw materials around the world. Her paper, Material Dependencies, was produced for Czech think tank, the  Association for International Affairs, and she explains we simply do not have enough materials to transition to a green economy within an extractivist and growth model. She explains all this and more, revealing how the green transition is being dangerously interwoven with militarism and digitisation 


fwiw:
What I want everyone at COP30 to know.



We can all relax. Bill Gates has solved climate change. That should trigger every intuitive alarm our species has evolved.

His message is that climate change is a serious problem but he rejects the “doomsday view.” We should focus less on temperature and more on human welfare by lifting people out of poverty and curing disease. To do that we have to make clean energy cheaper and scale it to better meet the needs of everyone on the planet. We should measure success by how many lives have been improved.

That’s wrong. It locks in continued planetary destruction. The main problem isn’t climate change; it’s overshoot. That’s when humanity’s demand on nature exceeds what Earth can regenerate and safely absorb each year. In other words, we’re using and polluting faster than living systems can recover. Climate change is a consequence of that.

Human welfare rests on biophysical welfare, and that foundation is failing .................

................... Reaction to Gates’ recent article has been mixed. Some call it pragmatic and praise his concern for humans in poverty. Critics worry that downplaying climate threats will water down the urgency to cut emissions and acknowledge planetary limits.

I’ll be blunt: his manifesto is a recipe for disaster. He’s out of his depth.




Sci Fare:






U.S. B.S.:


......... My position was half “America has never been trustworthy to anyone, and it ignores NAFTA rulings and destroyed our aviation industry” and half “countries have interests not friends.”

The moment it wasn’t in America’s perceived interest to be friends, it wouldn’t be, and empires are always implicitly enemies of their vassals, seeing them as useful tools, not friends. 

But I want to emphasize how grateful I am to to Trump. If he had played along, given the appearance of friendship while slowly screwing Canada over, the way most recent administrations have, Canada would have gone along with it. If the past 45 years have taught us anything, it should be that people will tolerate a slowly eroding situation for ages, ..............



.................... Japan does roughly equal trade with the West, and with BRICS, with about a 2% edge to BRICS. This is a terrible position to be in, though I’d suggest that going with the rising powers rather than the falling ones is the way to go.

The problem is that America is forcing nations to choose. Playing both sides: trading with both, may not be possible going forward. There will be two payment systems, so simple financial sanctions won’t work, but other types of market controls like tariffs and import/export controls have come roaring back into use.

Trade that can be cut off or curtailed at any point, apparently arbitrarily, can’t be counted on.  ...........

America is trying to force a clean split into two blocs. But the other bloc is richer, more trustworthy and arguably stronger. And if it isn’t stronger yet, it will be in a decade, guaranteed.

This also relates to America’s actions in South America, an attempt to try and keep the America’s “American”, which is bound to fail. But as the declining power America wants to use its military force while it still has local superiority and before China and Russia can sell or give local nations enough weapons to become effectively immune to US force. .............


No Kings, Russia / Ukraine, and More On AI

For those who may have forgotten, the (Barack) Obama administration was warned when it shifted the judiciary function for capital cases abroad to the White House that doing so would come back to bite the Democrats. While Democrats trusted Mr. Obama to adjudicate fairly and only kill (as a King would) those who were deserving, few others in the world did. To now complain that too much power is concentrated in the Executive Branch would be rich if Democrats had any knowledge of what I am referring to.

It is the Democrat’s inability to self-reflect--- a product of their near-complete ignorance of the policies that they claim to support, that makes them so repellent to so many. While the following was as true of George W. Bush’s supporters as it is with today’s Democrats, those most supportive of the party know the least about its actual policies. Barack Obama’s economic policies, in particular his bailouts of Wall Street, were amongst the most socially destructive acts in modern American history. ............................

This isn’t to blame Mr. Obama for his time and place. Following from Bill Clinton, the Democrats are the Party of Wall Street, the rich, and ‘liberal’ class warfare. Even given the evidence, gullible Democrats still imagine that the ACA (Obamacare) was about public health rather than making Mr. Obama’s donors in the health insurance industry richer. And the automaker bailouts codified ‘tiered’ wages, assuring low and declining wages for younger workers in the US auto industry. Mr. Obama was no friend to labor.

Quite remarkably, today’s Democrats make no association between Barack Obama’s policies and oligarchic wealth, in particular, Donald Trump’s. Had Mr. Obama focused on saving the rest of the country rather than just Wall Street 2009 – 2016, the US likely wouldn’t be at war with Russia in Ukraine, in free fall in terms of international relations, some utterly useless Democrat would be in the White House, and the economy would suck a whole lot less in terms of how the American people get by. .........................

For those who may have forgotten, the last US President from the Democratic Party was a xenophobic, mass incarceration loving, proponent of every crappy American war of the last half-century, who instigated a war of choice in Ukraine while he participated in an ethno-nationalist genocide in Gaza. In terms of domestic policies, he promised quite a bit in order to steal the nomination from Bernie Sanders, and then failed to deliver on almost all of it.

To the ‘we would be at brunch’ signage of the No Kings participants, words fail. Your boy (Biden) started an honest-to-God WWII style genocide in Gaza as he goaded Russia to attack the US with nuclear weapons. Had the signs read ‘we would all be dead now,’ at least some connection to planet earth would have been in evidence. ........................

How this relates to Russia in the present is straightforward. From Woodrow Wilson to George W. Bush, Americans have been lusting after Russia’s vast resource wealth. ..................


Trump Wants Cash To Buy Shares in Key US Companies and Dictate To Them



......... What percentage of Americans even realize that Trump has bombed Somalia nearly a hundred times this year? I doubt it’s even one percent. The mainstream press barely mention it. Americans have hardly any idea who their own country is bombing.

In theory the press are there to create an informed electorate who can then use their votes to move their government in a healthy direction. In practice the press are there to keep the public too ignorant, propagandized and distracted to meddle in the workings of the imperial machine.

❖

Israel keeps violating the “ceasefire” and bombing Gaza whenever it wants to, then saying the ceasefire is back in effect. It’s like saying you’ve quit smoking whenever you’re not currently having a cigarette.  .............

❖

It’s not okay to still support a two-state solution in 2025. Israel has spent two years showing the world that it should not exist as a state. It needs to be disarmed, dismantled, and denazified.

It was still excusable to naively believe a two-state solution was workable prior to 2023, but after two years of Israeli officials openly saying with the overwhelming support of their citizenry that there will never be a Palestinian state while committing a genocide in full view of the entire world, this is no longer a tenable position to have. ................





Geopolitical Fare:




In a week, about a quarter of the entire US Navy will be off Venezuela. Trump has made claims about Venezuela smuggling Fentanyl to America, but this is completely laughable and anyone with a room temperature IQ knows its a lie. (Though, who knows, Trump may believe it, not having a room temperature IQ.)

Anyway, Venezuela has the world’s largest oil reserves and Trump does love other people’s resources.

But I think the geopolitics are more important. The entire world outside of America’s direct vassals are throwing off the West’s shackles. ............................

America’s in terminal decline and everyone knows it. But like Britain in the 1930s, that doesn’t mean it isn’t still powerful and couldn’t fuck you up.

The smart people in Trump’s administration, I think, see that their military force is a wasting asset. The longer they wait to use it the less they have, and the more their enemies have. Russia and China could get enough gear and advisors to Venezuela to make attacking it a complete no go, in principle, and given time, they will. Same with almost every other reasonable sized country.

So if America wants to attack Venezuela it has to be soon. ....................

Venezuela, the like the Gaza genocide and land grab, are among the last gasps of America empire. Empires die bloody. If we get away without a nuclear or world war, we’ll be doing well.

May America then break up into multiple states and never again be a unified nation capable of exerting its will upon the rest of the world.



There seems to be an emerging consensus among the YouTube commentators who are particularly inflential in shaping US/advanced economy perceptions among anti-globalists and other US hegemony skeptics and oppents. Many are coming to the position articulated early by Mark Sleboda, who has been the most accurate in forecasting the pace of the conflict, that Russia would have to take all of Ukraine, if nothing else because NATO officials and key EU political leaders have regularly and rabidly maintained that they will arm/rearm Ukraine even in the event of an apparent defeat. So the only secure and durable remedy to that, from the Russian side, is to make sure no US/NATO/EU-aligned Ukraine survives the war. That in turn would seem to require that Russia secures all of Ukraine’s current territory, by some combination of winning referenda in the Russia-receptive oblasts so they join Russia plus occupation or installation of a friendly regime in rump Ukraine. While I am in no position to observe directly, polls and the tone of commentary support the idea that Russian citizens more and more favor aggressive prosecution of the conflict, and subduing/controlling all of Ukraine and thus have been frustrated with Putin’s dalliances with Trump.

Even though occupying or otherwise dominatinng the entirety of Ukraine would entail more costs than other solutions, it is arguably the least bad result for Russia. But even so, Sleboda has warned that that outcome might not be unwelcome form of Russia victory to the West: “We’ll make you choke on it.”

But even in this “subjugate all of Ukraine” assumption, there are a lot of ways to skin that cat. John Mearsheimer has long argued that what Russia wants as an end-state is a dysfunctional rump Ukraine. That presumably includes Russia taking historically Russia-leaning Odessa1 to render what is left of Ukraine landlocked.

John Helmer has so far provided the most insight, due to his contacts in the General Staff, as to what the end game might look like. Helmer has suggested that the General Staff in particular has been frustrated with Putin apparently requiring a particularly slow grind on the ground, and holding back (until recently) on muscular prosecution of the electricity war. ................................

............... In addition, Helmer pointed out that the General Staff expected that an aggressive prosecution electricity war (as in turning out the lights, which would also result in no heat and destruction of infrastructure via burst pipes; key parts of the municipal waterworks depend on electric controls and heating) would produce a humanitarian crisis and mass flight westward. Helmer did make clear that the General Staff saw overloading border states with refugees as a plus, but Putin presumably does not like the optics of punishing civilians. One solution to that apparent dilemma might be for Russia to create intermittent but somewhat lengthy outages (a guesstimate is 12 to 72 hours) to give the citizenry a taste of what is in store and give them time to leave in a more orderly manner. ...................

However, I have not seen much consideration of what measures Russia can take to reduce the incidence of terrorism in rump Ukraine and the Russian Federation, not just the newly-integrated oblasts but pre-war Russia. MI6 lives for this sort of operation. Scott Ritter has claimed that Russia House, the CIA unit tasked to messing with Russia, is effectively a rogue operation. ....................


Some problems have no solution.

I don’t follow the traditional media’s coverage of the war in Ukraine very much—I leave that to those with stronger stomachs—but it’s impossible to ignore the two mixed and confused messages they broadcast about the chances of ending that war more-or-less peacefully. On the one hand, “talking to Putin” should be a capital crime, and any move suggesting that the West does so is a form of treason. On the other, newer and better wonder-weapons must be sent to Ukraine to “force Putin to the negotiating table.”

I’m not going to try to reconcile these messages, because I don’t think it’s possible, and anyway it would be a a waste of effort. Rather, I’m going to treat them both—and other things I’ll discuss as well—as examples of the fundamental incoherence, narcissism and superficiality of thinking and expression which typifies today’s Professional and Managerial Caste, (PMC) including political leaders and those who advise them and write about them. Let’s deal with that first, and then we’ll get back to Ukraine and some other places. 

In general, ruling classes in history have had their own ideology. Often, it was an ideology of self-preservation and self-justification, based on a conviction of fitness or entitlement to rule, and sometimes supported by religious doctrine. So King Abdullah II of Jordan’s legitimacy, like that of his forty ancestors, is based on being the direct descendant of the Prophet Mohammed and of course Islam has provided the ideology. In more recent times, as Natural Rulers went increasingly out of fashion, ideology as properly understood replaced divine or customary sanction, not just as a sign of legitimacy, but as a common source of values, a point of reference and a guide to behaviour for the ruling class as a whole. Obvious examples include the Revolutionary/Republican tradition in France, the conservative/religious/army influenced regimes of Franco or Pinochet, the Socialist ideology of many states, Communism after 1917 and China today. Of course, such ideologies are never entirely dominant, and rarely unchallenged. They do not preclude factional disputes and even outright conflict, and many of them eventually crumble and die. But they do at least provide a reasonably coherent set of doctrines, and a context for arguments about policy.

In the West as a whole, we haven’t really had that kind of coherent context since the Reformation, but at least it was possible until recently to identify shared patterns of belief, and understand why a party of the Left would generally behave differently from a party of the Right once in power. That’s no longer the case, but neither has there been a blanket replacement with an organised ideology of extreme social and economic liberalism, even though that’s part of it. Rather, the current western ruling class, like the Party in 1984, has no ideology in the traditional sense. It is interested in power and wealth, and it has factions which are obsessed with various social objectives and causes, but it is incapable of thinking in a coherent fashion, and doesn’t really see the need to do so. Today’s ruling class thinks of itself less as Ruling than as Managing, complete with its yellowing MBA textbooks. Party leaders may publicly talk about “our values” in an attempt to justify their actions, but these pronouncements seldom go beyond banalities, and rarely reflect the traditions and ideologies of any particular party or movement. Indeed, most parties of the Notional Left, for example, are embarrassed about their past beliefs and actions, and try to distance themselves from them as far as possible.

What has replaced genuine ideology as a basis for decisions and policies is a kind of collective and often arbitrary set of rules and customs .......................

This depressing state of affairs has its origin in two processes. One is the increasingly homogeneous nature of the current ruling class: the PMC. This is pretty much unprecedented in multi-party political systems, or even in oligarchies.  .....................

The result is that decisions are taken and influenced today by people who live by sets of vague ideas unpolluted by actual experience. And the traditional “countervailing powers” that in Liberal theory are supposed to counterbalance those in power just turn out to be more of the same people. .................

The PMC cannot cope with the idea that there are problems that have no solution, and can at best only be managed. ...................



Yves here. Readers may choose to dismiss this new version of a good old fashioned containment strategy, now attempted by the US in Eurasia, as doomed to fail. But even if it logically is, given the massive productive capacity of China and the arms prowess and natural resources wealth of Russia alone, the future might take longeer to arrive than anti-globalists might hope.

First, the US is vastly more willing to engage in violence to preserve its pretenses to global dominance than China and Russia are. While in the longer run this will be self-defeating (we can see how militarization and sanctions policies are already reducing living standards and increasing social and political fractures in Europe), it might have a measure of success as a costly delaying tactic (if the US and Europe had more managerial/execution competence, the odds would be a lot better). ..............


.......................... Might this be Japan’s real strategy?

To caress the narcissism in Trump to divert him from a Japanese move towards China which eventually may allow it to break with the U.S.?

I for one would call that a good plan.



Other Fare:

America is broken. We need to fix it.

I keep waiting for someone in power or seeking it to say the quiet part out loud: the amount of work required to fix this country is far bigger than “beating Trump” or “restoring norms” or whatever line gets handed to Democratic donors and MSNBC panels. I keep waiting for someone to look the public in the eye and say: we’re not going to vote our way back to the America we think we used to have, because the America we think we used to have never actually existed for most people.

Here’s the reality: we are the richest country in the history of the world — not just now, but ever — and one in eight Americans needs SNAP benefits to eat. Not because of COVID. Not because of a recession. Because our economic structure literally cannot sustain the basic well-being of tens of millions of people without federal food aid.

We spend twice as much per person on healthcare as Japan or Italy, and yet we live shorter lives, get worse outcomes, and bankrupt people for getting sick. Medical debt is the number-one cause of personal bankruptcy, and 70,000 people a year die because they can’t afford care in time. That’s not a healthcare system. That’s an extraction machine. ...........


It would be immoral to run a factory farm so it's immoral to buy from one

.................. But here’s a plausible principle: if it’s wrong to do something, then it’s wrong to pay other people to do it. Because it’s wrong to kill, it’s wrong to hire someone else to kill. Because it’s wrong to rob a bank, it’s wrong to hire someone else to rob a bank. So if it’s wrong to treat animals badly, it’s wrong to pay others to treat animals badly.

But that is what you do every time you purchase meat from a typical source. You pay for the product of months of torment and mutilation. Factory farms treat the animals on them every bit as badly as your friend in the above hypothetical. Every one of the practices I described is routine on the factory farms that house more than 99% of animals killed each year. So if it’s immoral to mistreat animals, then it’s also immoral to pay for others to mistreat animals. This would mean nearly all meat consumption is seriously immoral. ....................


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