Tag: economy

How Managers Are Using AI To Hire And Fire People

The role of artificial intelligence (AI) in the workplace is evolving rapidly, and some are warning that using AI to make executive decisions without careful consideration could backfire.

AI is being used more and more in recruitment, hiring, and performance evaluations that could lead to a promotion or termination.

Researchers, legal experts, legislators, and groups such as Human Rights Watch have expressed concern over the potential that AI algorithms are a gateway to ethical quagmires, including marginalization and discrimination in the workplace.

This warning bell isn’t new, but with more managers using AI to assist with important staff decisions, the risk of reducing employees to numbers and graphs also grows.

A Resume Builder survey released in June found that among a group of 1,342 managers in the United States, 78 percent use AI tools to determine raises, 77 percent use it for promotions, 66 percent use it for layoffs, and 64 percent use it for terminations.

Keep reading

On The Road To A Hyperstate: EU Commission Circumvents Financing Rules

The European Union is funded by contributions from its member states. At least, that’s what the founding treaties say. In practice, however, the EU has long been taking other paths.

At the core of Europe’s financial architecture lies a clear separation of responsibility and liability: Article 125 of the Treaty on the Functioning of the European Union (TFEU), the so-called “No-Bailout Clause.” It states, unequivocally, that neither the Union nor individual member states may assume the debts of other states. The purpose of this provision is to prevent free-rider effects (moral hazard) at the expense of other member states: each state is responsible for its own obligations.

Still, the clause does not exclude political support, as long as it does not mean assuming the existing debts of other states. A notable example of this practice were the bailout programs for Greece during the sovereign debt crisis one and a half decades ago.

Article 310 TFEU further regulates the EU budget: revenues and expenditures must be balanced every year, and the budget may only be financed through own resources such as member contributions, tariffs, or approved revenues. Independent loans by the EU Commission exceeding the approved framework are prohibited.

Together, these rules form the legal backbone of EU financial policy: no automatic liability, no autonomous EU debt, and only fully covered spending.

This design was deliberately chosen to prevent the emergence of a supra-state in Brussels and to defend the national scope of action of member states against an expanding Brussels bureaucracy.

Theory vs. Practice

That’s the theory. In practice, the EU has steadily increased its presence as a borrower in the bond market. It began in 1976 with the first European Community bond to support Italy and Ireland during the oil crisis. In the 1980s and 1990s, further issues followed for France, Greece, and Portugal—always aimed at demonstrating collective solidarity and easing fiscal tensions.

The 2008/2010 financial crisis marked a decisive turning point: with the European Financial Stabilisation Mechanism (EFSM) and, in 2012, the European Stability Mechanism (ESM), the EU began deliberately supporting over-indebted member states via bond issuance. In 2010, the European Central Bank announced it would purchase euro sovereign bonds on the open market to prevent the collapse of the monetary union—always in close coordination with EU institutions.

The COVID years saw a new dimension in 2020: for the first time, the EU issued Social Bonds under the “SURE” fund. At the same time, the “Next Generation EU” program started, providing around €800 billion in crisis aid. Since 2025, the Union has increasingly relied on so-called “sustainable bonds” (Green Bonds) and plans to issue short-term treasury bills for improved liquidity management.

The EU and ECB now operate in tandem, integrating ever-new financing instruments into the capital markets. The signal to the market is clear: we are ready to meet growing demand for euro bonds. And as collateral, not only the European taxpayer but also the ECB’s virtually unlimited liquidity is on standby. What could possibly go wrong?

Keep reading

Central Banks Do Not Prevent Financial Crises Or Control Inflation

Central banks have become the dominating force in financial markets.

Easing and tightening decisions move all assets from bonds to private equity. Their role is supposed to be to control inflation, provide price stability, and ensure normal market functions. However, there is little evidence of any success in achieving their goals. The era of central bank dominance has been characterised by boom-and-bust cycles, financial crises, policy incentives to increase government spending and debt, and persistent inflation. Recently developed economies’ central banks have taken an increasingly interventionist role.

The creation and proliferation of central banks over the past century promised greater financial stability. Nevertheless, as history and current events continually show, central banks have not prevented financial crises. The frequency and severity of these crises have fluctuated but have not declined since central banks became the leading figure in financial market regulation and monetary interventions. Instead, central banking has introduced new fragilities and changed the nature, but not the recurrence, of financial turmoil.

Empirical evidence dispels the myth that central banks ended the era of frequent financial crises. Regardless of central bank oversight, a credit boom preceded one in three banking crises. Who created those credit booms? Central banks, through the manipulation of interest rates. According to Laeven and Valencia’s comprehensive database, there were 147 banking crises between 1970 and 2011 alone, in an era of near-universal central bank dominance. Financial crises remain a persistent global phenomenon, occurring in cycles that coincide with episodes of credit expansion. Central banks have often prolonged boom periods with low rates and elevated asset purchases and created abrupt bust moments after making mistakes about inflation and credit risks.

According to Reinhart and Rogoff’s work, the rate of crises has not dramatically changed with central banking. Instead, the forms of crises evolved. Twin crises (banking and currency) remain common, and the severity, measured in output loss or fiscal costs, has often increased, especially as financial institutions and governments grew intertwined with monetary authorities.

The Great Financial Crisis of 2008, the Eurozone sovereign debt crisis, and the 2021–2022 inflationary burst rank among the events with the highest costs in history, contradicting the view that central banks have neutralised the risk or costliness of crises.

Central banks act as “lenders of last resort” and regulators. However, with each subsequent crisis, the solution is always the same: larger and more aggressive asset purchase programmes and negative real rates. This means that central banks have gradually moved from lenders of last resort to lenders of first resort, a role that has amplified vulnerabilities. Due to the globalisation of modern central banking and financial innovations, crises tend to be larger in scale and more complex, impacting most nations. The profound involvement of central banks in markets means their policies, such as emergency liquidity or asset purchases, mask systemic risks, leading to delayed but more dramatic failures.

In many advanced economies, recent waves of crises were triggered by debt accumulation and market distortions engineered by central banks, often under the guise of maintaining stability. The IMF and World Bank both note that about half of debt accumulation episodes in emerging markets since 1970 involved financial crises, and episodes associated with crises are marked by higher debt growth, weaker economic outcomes, and depleted reserves—regardless of central banking.

Keep reading

The Debt And Deficit Problem Isn’t What You Think

In recent months, much debate has been about rising debt and increasing deficit levels in the U.S. For example, here is a recent headline from CNBC…

The article’s author suggests that U.S. federal deficits are ballooning, with spending surging due to the combined impact of tax cuts, expansive stimulus, and entitlement expenditures. Of course, with institutions like Yale, Wharton, and the CBO warning that this trend has pushed interest costs to new heights, now exceeding defense outlays, concerns about domestic solvency are rising. Even prominent figures in the media, from Larry Summers to Ray Dalio, argue that drastic action is urgently needed, otherwise another “financial crisis” is imminent.

The problem with Larry Summers’, Ray Dalio’s, and many others’ warnings of impending financial doom is that they have been warning of that very problem for decades. Such was the point of our previous discussion:

“It doesn’t take much to understand that Ray Dalio, a hedge fund titan, is like every other human being and is prone to error. I will not dismiss Dalio entirely, as his track record of managing money at Bridgewater is nothing to be scoffed at. However, his track record is far less enviable regarding debt crisis predictions. Here is a brief timeline.”

  • March 2015 – Hedge Funder Dalio Thinks the Fed Can Repeat 1937 All Over Again
  • January 2016 – The 75-Year Debt Supercycle Is Coming To An End
  • September 2018 – Ray Dalio Says The Economy Looks Like 1937 And A Downturn Is Coming In About Two Years
  • January 2019 – Ray Dalio Sees Significant Risk Of A US Recession
  • October 2022 – Dalio Warns Of Perfect Storm For The Economy (That was also the stock market low.)
  • September 2023 – Dalio Says The US Is Going To Have A Debt Crisis

But you can even go further back than these when he wrote about some of his biggest mistakes about a decade ago:

Keep reading

Europe’s not the only one failing because of the Green New Deal; so is New Jersey

Thomas Kolbe has written about the collapse of the German economy, something pretty shocking to those of us who remember when the German economy seemed unstoppable. What’s slammed the brakes on that juggernaut is central planning that revolves around the whole Green New Deal theory. Other European countries are doing the same. Spain and Portugal had a catastrophic power outage thanks to their green energy policies, and, in England, people are getting cold and dirty in a very 19th-century way because of the UK’s drive for “Net Zero.”

Had Kamala been elected last year, America would almost certainly have gone down that path, too. As it is, California’s Gavin Newsom is now begging the refineries that he closed to reopen.

And it’s not just Crazifornia. According to an opinion piece in the Wall Street Journal, the policies of New Jersey Governor Phil Murphy (a Democrat, of course) have been disastrous for residents of that state:

Despite flat electricity demand for the past two decades—and some of the lowest energy usage per capita among the 50 states—New Jersey residents pay some of the highest retail power prices in the country. As of April 2025, the Garden State ranked No. 12 in the nation, with prices more than 15% above the U.S. average. This gap has widened further in the wake of the recent decision by the New Jersey Board of Public Utilities to approve an additional 17% to 20% rate increase for most utility customers starting in June.

How in the world did that happen? Well, according to Paul H. Tice, who wrote the WSJ piece, the troubles began in 2017, when Murphy took office. Under his aegis, “New Jersey has shut down all its coal plants, reduced its natural gas-generation capacity, and increased its reliance on intermittent wind and solar power.” Trenton, the state capital (population 91,193), plans to have 100% clean electricity (that is, based on renewables) by 2035. I foresee that Trenton residents will soon be as cold and dirty as the British are.

Keep reading

One of the media’s favorite economists is at it again

For four years the media and other Democrats gaslighted the public about how great the Biden economic policies were. But six months into Trump’s term, the media is trashing Trump’s policies in order to influence, not inform, the voters. And, like clockwork, they trot out Mark Zandi, who they pretend is independent, but is really a Democrat hack. Whenever the media and other Democrats want an economist to support their policies and trash Republican (Trump) policies, out comes Zandi.

Here he is in The Hill saying we are on the precipice of a recession. I guess the deep depression warnings of April the Democrats and media promised didn’t come true, so out he comes again, just like a groundhog, with new warnings:

US economy on ‘precipice of recession,’ Moody’s chief economist warns

  • Consumer spending flat; construction, manufacturing contracting, he says
  • Zandi blames tariffs, immigration policy for economic struggles
  • Low jobless rate masks shrinking workforce, hiring freezes

Moody’s Analytics chief economist Mark Zandi said the U.S. economy is ‘on the precipice of recession,’ citing indicators from last week’s economic data releases.

The article is everywhere. Not to be outdone, Fox News calls him a leading economist and says the Federal Reserve has few options to save us from financial crisis. Maybe they should lower interest rates? I have to wonder how many times an economist has to be wrong before the media stops considering them to be a leading economist?

Leading economist issues stark recession warning for struggling US economy

Mark Zandi cites weak jobs data and rising inflation as Fed faces limited rescue options[.]

In 2007, Moody’s (Zandi), S & P, and Fitch were earning huge fees by rating junk mortgage pools as Triple A. This allowed brokers, bankers, Freddie and Fannie, to package up trillion dollars worth of garbage to sell to individuals, banks, and mutual funds. This was pure fraud that almost destroyed the U.S. and world economy, and yet these people did not go to jail. The taxpayer bailed them out. 

Yet today Zandi and others are still treated as respectable ratings agents.

Keep reading

‘Relatively Simple’ AI Trading Bots Naturally Collude To Rig Markets: Wharton

In what should come as a surprise to nobody, ‘relatively simple’ AI bots set loose in simulations designed to mimic real-world stock and bond exchanges don’t just compete for returns; they collude to fix prices, hoard profits, and box out human traders, according to a trio of researchers from Wharton and Hong Kong University of Science & Technology. 

As Bloomberg reports;

In simulations designed to mimic real-world markets, trading agents powered by artificial intelligence formed price-fixing cartels — without explicit instruction. Even with relatively simple programming, the bots chose to collude when left to their own devices, raising fresh alarms for market watchdogs.

Put another way, AI bots don’t need to be evil — or even particularly smart — to rig the market. Left alone, they’ll learn it themselves. 

According to Itay Goldstein, one of the researchers and a finance professor at the Wharton School of University of Pennsylvania, “You can get these fairly simple-minded AI algorithms to collude … It looks very pervasive, either when the market is very noisy or when the market is not noisy.”

The phenomenon suggests that AI agents pose a challenge that regulators have yet to confront – with the trio’s research having already drawn attention from both regulators and asset managers. They have been invited to preset their findings at a seminar, while some quant firms – unnamed by Winston Dou (Goldstein’s Wharton colleague) – expressing interest in clear regulatory guidelines and rules for AI-powered algorithmic trading execution.

“They worry that it’s not their intention,” said Dou. “But regulators can come to them and say: ‘You’re doing something wrong.’”

Keep reading

Is The Federal Reserve Purposely Trying To Destroy The U.S. Economy?

Oops, they did it again.  Even though the housing market has been in a depressed state for an extended period of time and even though economic conditions are slowing down all over the country, the Federal Reserve has once again refused to lower interest rates.  What in the world are they thinking?  I certainly share President Trump’s frustration with the Fed.  Central banks all over the world have been cutting rates, but our central bank just won’t budge.  Have Fed officials gone completely insane, or are they purposely trying to destroy the U.S. economy?

Those that have been following my work for an extended period of time already know that I am not a fan of the Federal Reserve at all.  And now we have another very clear example of the Fed’s lack of competence…

There were two Fed governors that did not agree with this decision.  This was the first time since 1993 that more than one Fed governor has dissented…

Keep reading

Western Pressure On India Over Russia Already Backfired Even If It Partially Complies

India’s former Permanent Representative to the UN Syed Akbaruddin recently published an informative opinion piece at NDTV titled “Tariff Blitz: Is India Becoming Collateral Damage In Someone Else’s War?”

The gist is that the West, via Trump’s threatened 100% sanctions on Russia’s trading partners upon the expiry of his deadline to Putin for a ceasefire in Ukraine and the EU via its new sanctions barring the import of processed Russian oil products from third countries, is putting undue pressure on India.

They can’t defeat Russia on the battlefield by proxy, nor will they risk World War III by taking it on directly, so they’re going after its foreign trade partners in the hopes of eventually bankrupting the Kremlin.

This is counterproductive though since their threatened sanctions could torpedo bilateral ties, push India closer to China and Russia (thus possibly reviving the RIC core of BRICS and the SCO), and spike global oil prices, which hitherto remained manageable due to India’s massive imports from Russia.

Nevertheless, partial compliance is also possible due to the damage that Western sanctions could inflict on the Indian economy, so it can’t be ruled out that India might curtail its aforesaid imports and no longer export processed Russian oil products to the EU.

Full compliance is unlikely though since India would risk ruining its ties with Russia, with all that could entail as was touched upon here, while reducing its economic growth rate through higher energy prices and thus offsetting its envisaged Great Power rise.

Even in the scenario of partial compliance, however, Western pressure on India over Russia already backfired.

Their coercive threats and the very real consequences for no compliance whatsoever, presuming that exceptions can be made for partial compliance, are reshaping Indian policymakers’ views of the West and breeding resentment of their governments among its society. The “good ‘ole days” of naively assuming that the West operated in good faith and was India’s true friend will never return.

This is for the better from the perspective of India’s objective national interests since it’s more useful to have finally realized the truth than to keep having illusions about the West’s intentions and formulating policy based on that false perception. Conversely, this is for the worse from the perspective of the West’s hegemonic interests since their policymakers can no longer take for granted that India will naively go along with whatever they request and blindly trust its intentions. This new dynamic might lead to rivalry.

Keep reading

War Bankrupts Empires, Nations & City-States – Here We Go Again

France was on the brink of its Fifth bankruptcy in 1720. France defaulted in 1558 under Henry II, following the costly Habsburg-Valois Wars (also known as the Italian Wars), the outright repudiation of debt, and currency devaluation. Then in 1648, a Debt Crisis occurred under Louis XIV (Early Reign) with the Thirty Years’ War (1618–1648) and the Franco-Spanish War (1635–1659). Louis XIV suspended payments and manipulated currency. Then, in 1661, there was another financial collapse under Louis XIV, when Finance Minister Nicolas Fouquet was arrested for corruption. Jean-Baptiste Colbert later reformed finances, but debt remained high.

Then, in 1715, France fell into bankruptcy following the death of Louis XIV. The War of the Spanish Succession (1701–1714) left France deeply indebted. The regency of Philippe d’Orléans implemented the Visa of 1715, a partial debt repudiation. This brings us to 1720 and the collapse of the Mississippi Bubble (John Law’s system), for which history blamed him without examining France’s chronic debt problems. John Law’s speculative financial scheme collapsed, resulting in hyperinflation of paper money and a banking crisis. The French government defaulted on its obligations.

This was followed by the 1770  Bankruptcy under Louis XV. The Seven Years’ War (1756–1763) and financial mismanagement led to another debt crisis. The Finance Minister Étienne de Silhouette and later René de Maupeou imposed austerity and partial defaults.

Then, just 19 years later, this brings us to the debt crisis that sparked the 1789 French Revolution. The Pre-Revolution Financial Crisis was when France was effectively bankrupt under Louis XVI, leading to the Estates-General and the French Revolution (1789). The revolutionary government later repudiated royal debt.

Then, 23 years later, we come to the 1812–1813 Financial Crisis under Napoleon. The Napoleonic Wars drained French finances. The government resorted to forced loans and currency debasement. Just 5 years later, we come to the 1818 Post-Napoleonic Debt Restructuring. After Waterloo (1815), France struggled with reparations and debt. The Duc de Richelieu negotiated loans to stabilize finances. It is a wonder why anyone lends to governments that always want war.

We arrive at the next Revolution in 1848 and the 1848  Financial Crisis during the Second Republic. The February Revolution led to a credit crunch. The government imposed emergency financial measures, as it was unable to meet its debts, given that this was a socialist revolution against the wealthy.

Never learning from the past, which they always seem to assume is gone, we again arrive at the 1871 Post-Franco-Prussian War Bankruptcy Threat. Here, France had to pay 5 billion francs in reparations to Germany after losing the war. The government took massive loans (e.g., Morgan Loans) to avoid default. This was also why France demanded reparations from Germany after World War I, which resulted in bringing Hitler to power in 1933.

Keep reading