Tag: economy

AI: False Savior of a Hollowed-Out Economy

The real story of the US economy isn’t about AI, it’s about an economy that’s run out of rope. AI is being hyped not just by promoters reaping billions of dollars in stock market gains, it’s being hyped by the entire status quo because it’s understood to be the last chance of saving an economy doomed by the consequences of decades of artifice.

The real story of the US economy is that decades of “financial innovations” finally caught up with us in 2008, when the subprime mortgage scam–a classic example of “financial innovations” being the cover story for greed and fraud running amok–pulled a block from the global financial Jenga Tower that nearly collapsed the entire rickety, rotten structure.

Our political leadership had a choice: clean house or save the scam. They chose to save the scam, and that required not just institutionalizing moral hazard (transferring the risks of fraud and leveraged speculation from the gamblers to the public / Federal Reserve) but pursuing policies–zero interest rate policy (ZIRP), quantitative easing, increasing the money supply, and so on–that had only one possible outcome:

An economy permanently dependent on inflating asset-bubbles that enriched the top 10% while the bottom 90% who depend on earned income fell behind.

The desired goal of permanent asset-bubbles is the “wealth effect,” the cover story for transferring all the gains into the hands of the top 10%, who can then go on a spending spree which ‘trickles down” to the bottom 90%, who are now a neofeudal class of workers serving the top 10% who account for 50% of all consumer spending and collect 90% of the unearned income and capital gains.

This arrangement is inherently unstable, as “financial innovations” suffer from diminishing returns. Eventually the debt-serfs can no longer borrow more or service the debt they already have, and every bubble being bigger than the previous bubble guarantees the next implosion will be larger and more devastating than the previous bubble-pop.

So what does a system that’s run out of rope do? Seek a savior. The rope has frayed, and the rocks are far below. The impact is going to be life-changing, and not for the better.

The choice remains: clean house, end the bubble-dependent frauds and scams, or find a way to inflate yet another credit-asset bubble. Clean house and lose all our bubble-wealth? You’re joking. The solution is to blow an even bigger bubble. Hey, it’s worked great for 17 years.

Never mind that the precarity of the bottom 90% is accelerating as both the state and Corporate America have offloaded risks onto households and workers; they have OnlyFans, 24% interest credit cards, zero-day-expiration options and side hustles to get by. Never mind that for many Americans, basic services are on the same level as impoverished developing-world economies. What matters is maintaining the wealth of the few at the expense of the many, by any means available.

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The White House Says Trump’s Tariffs Have Raised $8 Trillion in Revenue. That’s Not Even Close.

The White House celebrated Labor Day by announcing that President Donald Trump’s “protectionist trade policies have helped drive more than $8 trillion in new U.S. investment.” The accompanying photo refers to “$8 trillion in tariff revenue.” There’s a difference between $8 trillion in U.S. investment and $8 trillion in tariff revenue, but Trump’s trade policies have achieved neither.

The second claim is easier to refute. The Bipartisan Policy Center (BPC) calculates the gross tariff and excise tax revenue generated from January 1 to August 28 to be $158.8 billion, according to the Treasury Department’s Daily Treasury Statements. The customs and excise taxes collected from January 20, when Trump took office, to August 28 amount to about $156 billion.

According to the Treasury Department’s own data, the president’s policies have clearly not raised anywhere near $8 trillion; they’ve raised 2 percent of this figure. The Congressional Budget Office estimates that the tariffs Trump has implemented since January will generate an estimated $3.3 trillion over 10 years—significantly less than the $8 trillion that the White House is claiming the tariffs have already raised.

Gross tariff revenue isn’t even the most relevant statistic; net tariff revenue is. The BPC explains that the latter “removes ‘certain other excise tax revenue’ and accounts for refunds of tariffs,” i.e., the tariff revenue that stays in federal coffers. Although net tariff revenue is not available in the Daily Treasury Statements, the BPC was able to determine that net tariff revenue was $135.7 billion from January through July 31 using the Treasury’s Monthly Treasury Statements, which account for tariff refunds. Net tariff revenue as a percentage of total imports jumped from about 2.4 percent in March to 5.73 percent in April, reflecting the impact of Liberation Day’s “reciprocal tariffs,” and climbed to 10.31 percent in June.

Still, the net tariff revenue of $135.7 billion amounts to 1.7 percent of the White House’s claimed $8 trillion in tariff revenue. (That’s neglecting the fact that the Joint Committee on Taxation estimates that “$1 of excise tax revenue will lead to a $0.25 decline in income and payroll tax revenue,” according to the BPC.)

The first claim is more slippery; it’s unclear what the White House means by saying Trump’s policies “helped drive” investment. One interpretation is that it is crediting Trump’s reciprocal tariffs and hostile negotiations for producing more foreign direct investment (FDI) in the U.S. than would have otherwise existed. Even assuming that all FDI since January is the direct result of Trump’s protectionist policies, it is completely inconceivable that $8 trillion has been raised as a result.

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Washington’s Fiscal Doom-Loop

With U.S. gross debt now at a staggering $37 trillion—roughly equivalent to the combined debt of all other major advanced economies—Washington is trapped in a fiscal doom loop of its own making. Decades of bipartisan overspending have pushed the nation to a point where a mere 1% increase in mean Treasury interest rates adds $370 billion to annual debt service costs. The arithmetic is unforgiving. Yet, Donald Trump’s second administration is doubling down, pursuing policies that risk accelerating the crisis.

Consider the following combination: President Trump’s push for the Federal Reserve to slash interest rates by as much as 3%, his aggressive mix of tax cuts, tariffs, and subsidies aimed at “reshoring” American manufacturing, his championing of increased military spending and expanded domestic outlays. Absent fanciful projections about growth rates, it is overwhelmingly likely that tax revenues would plummet while spending obligations soar, widening the already yawning fiscal gap.

Already the Committee for a Responsible Federal Budget (CRFB) estimates annual deficits of 6-7% percent of GDP over the next decade, regardless of which party controls Congress. Trump’s first term saw the national debt rise by $7.8 trillion, driven by the 2017 Tax Cuts and Jobs Act (TCJA), COVID spending, and bipartisan spending increases. Biden picked up where Trump left off, and Trump in his second term is promising more of the same, with proposals to extend the TCJA and cut corporate taxes further, potentially adding an additional $5 trillion to $11.2 trillion to the debt by 2035.

Those hoping the Federal Reserve will be able to do anything to help, including President Trump, are bound to be disappointed. In the case of hoping for lower interest rates to finance yet more spending, while the Fed does control short-term rates, longer-term yields are market-driven. Aggressive rate cuts could spark inflation fears, pushing up 10- and 30-year bond yields, as economists Ryan McMaken and Kenneth Rogoff have noted. Long-term rates will likely rise despite the cut. This dynamic is already evident, with markets resisting Fed dovishness by increasing Treasury borrowing costs.

The Fed faces a trap: tightening policy balloons debt service costs, while loosening invites market backlash, undermining the dollar and raising long-term rates. In 2024, net interest payments reached $879.9 billion, surpassing defense and Medicare spending. With the debt-to-GDP ratio at 119.4% in mid-2025, the Fed’s room to maneuver is shrinking.

Then there is the fading “Dollar Discount”: For decades, the dollar’s status as the world’s reserve currency has shaved 0.5 to 1% off annual Treasury borrowing costs. However, in an increasingly multipolar world—where China, Europe, and others are developing parallel payment systems and central banks are diversifying their holdings—this “exorbitant privilege” is at risk. The so-called “Mar-a-Lago Accord,” a rumored proposal for selective default on foreign-held debt, has heightened doubts about U.S. creditworthiness. Moody’s downgrade of the U.S. credit rating in 2025 cited unsustainable deficits and growing interest costs, warning that the debt-to-GDP ratio could hit 134% by 2035. Eroding confidence in the dollar will drive borrowing costs higher, compounding the crisis

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Large US Companies Are Going Bankrupt At The Fastest Pace Since The Global Financial Crisis

Is the fact that large companies are filing for bankruptcy at the fastest pace in 15 years a good sign for the economy or a bad sign for the economy? I don’t even have to answer that question because all of you already know the answer. And as you will see below, other types of bankruptcies are soaring as well. We are a nation that is absolutely drowning in debt, and now bubbles are bursting all around us. I hope that you have positioned yourself for what is about to happen, because the months ahead are going to be rough.

According to Newsweek, 446 large companies filed for bankruptcy during the first seven months of this year.  That is the highest total that we have seen since 2010…

The U.S. saw a sharp increase in corporate bankruptcy filings in July, according to a recent report, reaching a post-COVID peak and placing 2025 on track to surpass last year’s total.

S&P Global Market Intelligence, the research and data arm of the credit-rating agency, found that filings by large public and private companies rose to 71 last month from 66 in June, marking the highest monthly tally since July 2020. So far in 2025, meanwhile, the total of 446 bankruptcy filings is the highest for this seven-month stretch since 2010.

In 2010, we were experiencing the tail end of the global financial crisis.

So there was a very good reason for why so many large companies were going bankrupt at that time.

What reason do we have for what we are witnessing right now?

Of course it isn’t just large companies that are going bankrupt in staggering numbers…

Personal and business bankruptcy filings rose 11.5 percent in the twelve-month period ending June 30, 2025, compared with the previous year.

According to statistics released by the Administrative Office of the U.S. Courts, annual bankruptcy filings totaled 542,529 in the year ending June 2025, compared with 486,613 cases in the previous year.

Business filings rose 4.5 percent, from 22,060 to 23,043 in the year ending June 30, 2025. Non-business bankruptcy filings rose 11.8 percent to 519,486, compared with 464,553 in the previous year.

Wow.

I had no idea that the bankruptcy numbers were that bad.

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The Price of Genocide: How US Funding Sustains an Unraveling Israeli Economy

In an important step toward the economic isolation of Israel due to its genocide in Gaza, Norway’s Government Pension Fund Global has decided to divest from yet more Israeli companies.

Norway’s sovereign wealth fund is the world’s largest, with total investments in Israel once estimated at $1.9 billion. The decision to divest was taken gradually but is consistent with the Norwegian government’s growing solidarity with Palestine and rising criticism of Israel.

Taking a leading role along with Spain, Ireland, and Slovenia, Norway has been a vocal European critic of the Israeli genocide and man-made famine in Gaza, actively contributing to the International Court of Justice’s investigation into the genocide, and formally recognizing the state of Palestine in May 2024. This diplomatic and legal stance, coupled with its financial divestment, represents a coherent and escalating effort to hold Israel accountable for the ongoing extermination of Palestinians.

The Israeli economy was already in a state of freefall even before the genocide. The initial collapse was related to the deep political instability in the country, a result of Israeli Prime Minister Benjamin Netanyahu and his extremist government’s attempt to co-opt the judicial system, thus compromising any semblance of “democracy” remaining in that country. This resulted in a significant lowering of investor confidence.

The war and genocide, beginning on October 7, 2023, only accelerated the crisis, pushing an already fragile economy to the brink. According to reports from the Israel Ministry of Finance, foreign direct investments in Israel fell by an estimated 28% in the first half of 2024 compared to the same period in 2023.

Any supposed recovery in foreign investments, however, was deceptive. It was not the outcome of a global rallying to save Israel, but rather a consequence of a torrent of US funds pouring in to help Israel sustain both its economy and the genocide in Gaza, along with its other war fronts.

Israel’s Gross Domestic Product was estimated by the World Bank to be around $540 billion by the end of 2024. The war on Gaza has already taken a considerable bite out of Israel’s entire GDP. Estimates from Israel itself are complex, but all data points to the fact that the Israeli economy is suffering and will continue to suffer in the foreseeable future. Citing reports from the Bank of Israel and the Ministry of Finance, the Israeli business newspaper Calcalist reported in January 2025 that the cost of the Israeli war on Gaza had already reached more than $67.5 billion. That figure represented the costs of the war up to the end of 2024.

Keeping in mind that the ongoing war costs continue to rise exponentially, and with other consequences of the war – including divestments from the Israeli market by Norway and other countries – future projections for the Israeli economy look very grim. The Israeli Central Bureau of Statistics reported that the Israeli economy, already in a constant state of contraction, shrunk by another 3.5% in the period between April and June 2025.

This collapse is projected to continue, even with the unprecedented US financial backing of Tel Aviv. Indeed, without US help, the precarious Israeli economy would be in a much worse state. Though the US has always propped up Israel – with nearly $4 billion in aid annually – the US help for Israel in the last two years was the most generous and critical yet.

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Europe on the Path to a War Economy

In Unterlüß, Lower Saxony, Europe’s largest ammunition factory began production last week. What started clandestinely is now being publicly scaled with full firepower: the European Union is building its own war economy.

In the good old days in Germany, recessions were typically masked by state-funded infrastructure programs. The concept worked as long as the state did not overgrow, overregulate, or force the private sector into a destructive ideological agenda, as is the case with the green transformation. In other words, the economy was always able to clear away the debris left behind by the state.

Southern Europe Could Never Recover

In Southern Europe, where the state’s role has traditionally been high, monetary policy generous, and handling of public funds notoriously lax, this policy left nothing but infrastructure ruins and industrial wastelands. Local economies were never able to productively absorb the artificial credit distributed by Brussels. The fatal consequences of this pseudo-boom still shape the landscape today.

For economic historians, present-day Europe has long been a fascinating case study. Crisis followed crisis, with the public sector intervening each time with increasing volume. The attempt to install the Green Deal, a Keynesian pseudo-economy, must be understood in this context. The new Rheinmetall plant fits into this narrative.

The company invested half a billion euros to provide an annual capacity of up to 350,000 rounds by 2027. 500 new jobs are to be created, celebrated by politicians as a turning point and the beginning of a pan-European defense architecture.

Ceremony and Half-Truths

Rheinmetall CEO Armin Papperger expressed satisfaction: “It was not easy for us to invest half a billion without orders. I am very grateful to you” — the words were directed at Defense Minister Boris Pistorius — “for keeping your handshake agreements. You are a man of word and deed.” A heavy dose of pathos and self-congratulation is evident here — politics and the defense industry are long intertwined.

Of course, this is only half the truth. Beyond the usual behind-the-scenes deals, politics has made it clear that it is ready to mobilize all means to build a German defense industry and provide sector companies with guarantees and subsidies where necessary. Big business, no risk.

After the collapse of the green economy, politics is now betting everything on the next pseudo-economy. The aim is to loosen dependence on America while exploiting the media spin that stylized Vladimir Putin’s Russia over years as a potential European invader. Whether this fear campaign will work in the long term remains to be seen.

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National debt to rise to 120% of GDP by 2035, budget watchdog warns

The national debt is projected to rise from 100% of the U.S. Gross Domestic Product (GDP) at present to 120% of GDP by 2035, according to the latest figures from the Committee for a Responsible Federal Budget (CRFB), a nonpartisan fiscal policy think tank, based on baseline budget data from the Congressional Budget Office.

The CRFB released an adjusted August 2025 baseline, which found that annual deficits will “remain above 6% of GDP throughout most of the decade,” which is “more than twice the 3% target advocated by some policymakers.”

The budget watchdog group estimated that bringing the federal deficit down gradually to 3% of GDP would require around $3.5 trillion in savings over five years, including interest, or $7.5 trillion over ten years.

“To hold debt at 100% of GDP, approximately $4 trillion is needed over five years, or $9 trillion over the decade,” read their analysis.

The CRFB found that achieving a deficit equal to 4% of GDP would require about $5 trillion in savings while balancing the full federal budget, including interest, would require about $15.5 trillion in total savings.

The watchdog group noted that economic growth alone cannot solely take the place of major fiscal policy changes to get the fisacl situation in the U.S. under control. The CRFB recommended that the U.S government implement “super PAYGO” as well as trust fund reform and other spending reduction initiatives.

“Under Super PAYGO, every dollar of new spending or tax cuts would be offset by at least two dollars of revenue increases or spending reductions, thus ensuring that new tax cut and mandatory spending legislation also includes deficit reduction,” the CRFB said.

CRFB noted that “faster growth can make these fiscal goals easier.” However, the watchdog group said that “thoughtful pro-growth deficit reduction and reform is likely the best way to put the country on a sustainable fiscal path.”

The CBO recently released a separate estimate which found that the Trump administration’s tariffs will cut the U.S. federal deficit by $4 trillion through 2035. 

The analysis found the tariffs would lead to $3.3 trillion in direct tariff revenue and $700 billion in savings from lower interest payments on borrowing. These projections are revised from CBO’s earlier estimates. In June, the CBO had estimated that tariffs would offset budget shortfalls by $3 trillion.

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Venezuela’s Crypto Adoption Surges Amid Inflation Surge And Currency Collapse

Cryptocurrencies are becoming a core part of the economy in Venezuela as citizens turn to digital assets to shield themselves from a collapsing currency and tighter government controls.

From small family stores to large retail chains, shops across the country now accept crypto through platforms such as Binance and Airtm. Some businesses even use stablecoins to pay employees, while universities have begun offering courses dedicated to digital assets.

“There’s lots of places accepting it now,” shopper Victor Sousa, who paid for phone accessories with USDt, told the Financial Times. “The plan is to one day have my savings in crypto.”

Venezuela ranked 13th globally for crypto adoption, according to the Chainalysis 2024 Crypto Adoption Index report, which noted a 110% increase in usage in the year.

Bolívar’s crash pushes Venezuelans into crypto

The continued slide of the bolívar currency has intensified demand for crypto. Since the government stopped defending the currency in October, it has lost more than 70% of its value. Inflation reached 229% in May, according to the Venezuelan Finance Observatory (OVF).

“Venezuelans started using cryptocurrencies out of necessity,” said economist Aarón Olmos. He noted that they face inflation, low wages, foreign currency shortages and difficulty opening bank accounts.

However, access is not always smooth. With US sanctions on Venezuela’s financial sector, Binance restricts services linked to sanctioned banks and individuals. Connectivity issues also hinder widespread use. Still, experts say the ecosystem is resilient, per the FT report.

The government’s stance on crypto remains inconsistent. Venezuela launched its own digital currency, the petro, in 2018, but the project collapsed last year. The main exchange regulator was shut down in 2023 following corruption allegations tied to oil-linked transactions.

Cointelegraph reached out to Binance for comment, but had not received a response by publication.

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The Modern American Dream?

Popularised after the Second World War, the idea of the American Dream has long centred around the idea that anyone, from any background in the United States, can achieve prosperity and success.

For nearly 75 years, this idea has often been symbolically represented by a middle-class family with two dogs, two kids, an American-made car and a suburban home with a white picket fence. While the “Modern American Dream” continues to include pets and children (increasingly more pets than children) and an automobile (now more evenly split between American pickup trucks, electric vehicles, and various international brands), one piece of this dream is becoming increasingly unattainable for the average American: owning a home.

Supply/demand imbalances of housing stock in the US, exacerbated by an ageing population clinging to homes that they either own outright or with extremely low mortgage rates, combined with a large pullback from developers following the 2008 financial crisis, continue to ripple through the economy and the fixed income universe in unexpected and meaningful ways.

Where are we today?

Activity in the US housing market has ground to a halt, as older homeowners who have locked in low interest rates, or have paid off their homes altogether, are choosing to hold tight to significant amounts of housing inventory. Originations of mortgages in the US (which include new financing and refinancing) could hit two-decade lows, with the majority of transactions among the highest income (highest credit score) borrowers.

The median age of both first-time and repeat homebuyers continues to rise, as the combination of an undersupply of homes (both new and existing) and higher mortgage rates continues to keep younger buyers on the sidelines, with wages unable to keep up with parabolic increases in homeownership costs.

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The Smear Campaign Against Trump’s Bureau of Labor Statistics Nominee E.J. Antoni

President Trump’s nomination of economist E.J. Antoni to lead the Bureau of Labor Statistics has triggered those infected with Trump Derangement Syndrome. That’s too bad, because Antoni has some exceptional ideas to modernize economic data collection and reporting. 

Regardless of this latest TDS outbreak, it is time for the Bureau to modernize data collection and use available technology to get markets the most accurate and comprehensive information possible.

I’m no economist. I changed majors from economics to English before my junior year. But I can still hear my late father every month complaining about two things – the inflation report and the jobs report. My dad lived in the markets. CNBC burned like a log fire in our house. And those damn inflation and job reports were always flawed to my dad.

Inflation reports underreported some things and overreported others. The jobs report also has flaws. The current methodology at the Bureau is already flawed. Antoni knows exactly why and could make them better.  

The reports, for example, downplay inflation by underemphasizing things we all consume. 

The jobs report is also often a snow job. Goldman Sachs estimates that upcoming revisions to the Bureau’s 2024 jobs data may show a drop of up to one million jobs.

Antoni notes that the Bureau fails to differentiate between full-time and part-time jobs.  

This methodological failure has masked labor market weakness. After COVID, many Americans began piecing together multiple gigs. America met JD Vance’s grandmother, Mamaw, in “Hillbilly Elegy.” She worked multiple part-time jobs to get by.  

Yet the status quo at the Bureau of Labor Statistics is to count the part-time jobs as full-time jobs.

Changing this flawed methodology, as Antoni suggests, seems sound. 

Antoni has been pushing for refinements to the system from his perch at the Heritage Foundation, where he is the chief economist.

Did I say Heritage Foundation? Indeed, and thus we arrive at another triggering event for the hatred of Antoni. He comes from the premier conservative think tank, not the halls of Harvard. 

To sink Antoni’s nomination, his foes have turned to a ninety-year-old ship. 

Full disclosure. When I was a child, I built plastic model airplanes. My models included the ME-109, the iconic fighter in the Luftwaffe, as well as the RAF Spitfire. These two planes dueled over the skies of southern England to decide the fate of Western civilization. I even built models of the stubby, ridiculous-looking ME-163 Komet. You could buy the plastic model kits at the mall toy store for about $5. I don’t remember if they included the authentic swastika decals or if I threw them out. Even more damaging for my career, I displayed the models on my bookcase!

What does this have to do with Antoni, a naval history enthusiast? 

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