Tag: economy

Why The IEA Reinstated Its “Business As Usual” Scenario

  • The IEA has reversed course by reintroducing the “Current Policies Scenario” in its flagship World Energy Outlook, marking a significant policy shift.
  • The debate highlights the inherent subjectivity of data in energy modeling and the political stakes tied to forecasting fossil fuel demand.
  • U.S. political leaders and fossil fuel advocates pressured the IEA, arguing that its previous modeling discouraged oil and gas investment and threatened energy security.

A great debate is unfolding about the subjectivity of data in producing the energy outlooks that guide public policy and private spending, shaping the future of the global energy sector. The International Energy Agency has been caught in the crossfire of a partisan debate in which environmental and energy industry leaders vehemently disagree about what constitutes accuracy, truth, and good science in data, and particularly in the agency’s flagship World Energy Outlook report. And this year, the fossil fuels industry is getting its way.

It’s easy to forget that data is not objective, nor is it purely subjective. This false dichotomy, according to data expert Melanie Feinberg, “distorts the empirical realities of data collection, the challenging work of forcing unruly phenomena to speak in clean, distinct, ideally quantitative phrases.” Instead, good science is about recognizing the responsibility of being an active decision-maker to produce methods and outputs that most accurately represent complex realities. 

Human-led decisions and difficult choices are being made at every step of developing a report like the International Energy Agency (IEA)’s annual World Energy Outlook – from how to collect and clean the data to how to analyze and report on it.

One of those critical choices is how the agency chooses to construct its projected scenarios for the clean energy transition and the phaseout of fossil fuels. 

The choice that has recently come under scrutiny is whether to include a “Current Policies Scenario” along with the typical scenarios that the agency uses to make its forecasts.

The IEA based its “business as usual” outlooks on current policies until 2019, when the agency decided to switch to a “Stated Policies Scenario,” which it believed to be more accurate.

The difference is that the Stated Policies Scenario assumes certain future policy actions, such as the extension and renewal of policies with end dates.

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Business Flees California due to Overregulation

California has been repelling capital through overregulation. The energy sector high-tailed out of the state in recent years under Governor Gavin Newsom’s net-zero policies. Now, even retailers feel forced to evacuate as California becomes increasingly anti-business.

Bed Bath & Beyond announced that it must close all retail stores within the state of California. “This decision isn’t about politics—it’s about reality,” company head Marcus Lemonis said in a social media post. “California has created one of the most overregulated, expensive, and risky environments for businesses in America. It’s a system that makes it harder to employ people, harder to keep doors open, and harder to deliver value to customers.”

Newsom’s office commented that Bed Bath & Beyond was already a dead business, failing to take any responsibility. To begin, California’s minimum wage continues to rise year after year at a pace unsustainable for businesses. Automation is replacing the human workforce, and some studies have shown that minimum wage workers in California are simply receiving fewer working hours as employers aim to cut costs.

Newsom believes he can continue spending and rescue the state from the debt through taxation. Fleeing businesses can’t pay taxes, and California forces both businesses and residents to pay some of the highest taxes in the nation. All corporations operating in the state must pay a flat corporate income tax rate of 8.84% on net income. Banks and financial institutions pay a bit more at 10.84%. There is an annual franchise tax of $800 for businesses as well. But wait—corporations are still beholden to the 21% federal corporate income tax, which means businesses are paying roughly 29.84% on corporate income taxes alone.

Payroll taxes in California are higher than the national average, largely due to social programs like State Disability Insurance (SDI) and the Employment Training Tax (ETT), which must be paid in addition to Unemployment Insurance (UI). There is a personal income tax withholding of up to 14.63% that employers must withhold from employees as well.

The state was forced to overturn its policy regarding shoplifting and burglary after criminals used the minimum $950 amount for petty theft to avoid felony charges. Countless businesses shuttered their brick-and-mortar locations as a direct result of light-on-crime policies.

Capital flees excessive regulation and it’s almost a no-brainer for corporations to move beyond state lines where operating costs are drastically lower.

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These Are The US Cities Where Groceries Are The Most Expensive

Grocery bills vary dramatically across the U.S., and some cities are feeling the pinch more than others.

Adding to the strain are record meat prices, driving up up food price inflation 3% compared to June of last year. Meanwhile, vegetable prices are spiking as farmers struggle with labor shortages amid rising deportations.

This visualization, via Visual Capitalist’s Dorothy Neufeld, ranks the top 20 American cities with the highest cost of groceries, based on data from Numbeo.

Honolulu, Hawaii ranks far above all other U.S. cities with a groceries index of 120.2. That’s over 20% more than in New York City, the benchmark.

As an island state, Hawaii faces higher import and transportation costs, driving up the price of food staples. The state’s geographic isolation continues to make everyday goods, including groceries, particularly expensive.

Meanwhile, California and Washington state are well-represented in the top 20. San Francisco (100.1), San Jose (89.8), Sacramento (81.8), and Los Angeles (81.7) all make the list, as does Seattle (95.3) and Spokane (76.5).

These cities are known for higher costs of living in general, and groceries are no exception. Limited space for agriculture and strong demand from dense populations contribute to elevated food prices.

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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.

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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?

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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.

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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:

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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.

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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.

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‘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.’”

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