Every once in a while, the algorithm will resurface one of my old posts, and if it’s one about housing I’ll get a bunch of angry Boomers telling me to kill myself because I think their property taxes should be raised. It’s nothing personal (my thoughts about taxes; their thoughts about me probably are), it’s just that I think public policy should be made for achieving public goals, and our current property tax stance achieves the goal of distributing resources from the young to the old:

Tax policies that subsidize sentimental value mean we’re paying senior citizens to live in big houses in nice neighborhoods with good schools, which prevents young families from doing the same. I’ll leave it to the politicians to decide which goals the nation’s housing policy should achieve, but to me, cultivating the future seems more important than making sure old people stay in big houses. Right now, we’re doing the opposite.

I gave a full explanation in this post.

The reason I bring this up is become some academics explained the same thing I did in a much more confusing, but much more legitimate way. Come to All In The Reflexes for the answer, then wait a year to get some academic to give you the proof.

The key conclusion is this: Low property taxes amplify lock-in among elderly homeowners, limiting housing access for young families. Raising them reallocates housing toward the young through two channels: capitalization into lower prices reduces required downpayments for financially constrained buyers, a form of embedded leverage, while higher tax obligations raise holding costs for older owners.

I already said all this, but maybe now the deranged Boomers who belong on Facebook conspiracy theory threads can take their repressed anger that their generational project to “change the world, man” was a massive failure — it changed it, but not for the better — can go Port Huron on the NYU authors of this study rather than in my comments.

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

I haven’t been writing much recently because I haven’t had the time to really be precise in what I want to say; it’s easy to have impressions about things but then when you have to put pen to page you find out that your logic isn’t as sharp as your first impression.

That being said, when someone else takes the time to write something out that makes sense to me, I can just share it in full. Luckily, Michael Pettis, with whom I find myself often agreeing, has done just that.

In a long Tweet, responding to an article in Prospect magazine by Harold Myserson, Pettis writes the following:

Prospect: "While the labor share of the national income was roughly 65 percent during the 20 years following World War II, according to a recent report from the New York Federal Reserve Bank, it then began a steady decline to its current 54 percent."

The author, Harold Meyerson, notes that this coincided with the weakening of unions and concludes that the solution is to make unions stronger: "what will be required will be mass organizing on a scale not seen since the 1930s and ’40s, if not greater than that."

I don't disagree, but I do think he misses an important point. It was not just in the US that wage growth stagnated relative to productivity growth. It occurred throughout the world, especially in Japan in the 1970s and 1980s, Germany in the 2000s, and China over the past three decades. It is therefore hard to attribute stagnant wages in the US solely to the political weakening of American trade unions. Something else must have put downward pressure globally on wage growth relative to productivity growth.

An important clue comes later in the article: "Since the end of the 1970s, virtually all American corporations have done everything they could to weaken their workers’ power to increase their income, while they and their investors enjoyed increases in profits, dividends, and buybacks."

The timing is significant. It was in the early 1970s that the US and the world transitioned to our current form of globalization, in which countries could compete aggressively to expand their shares of global manufacturing by suppressing wage growth relative to productivity growth, while externalizing the resulting weak domestic demand by running persistent trade surpluses.

We live in the world, in other words, that Keynes warned against in 1944. While countries that become more competitive by suppressing wages undermine global growth (because rising wages are what drive global demand) they are nonetheless able to grow faster than otherwise. They do so by offsetting weak domestic demand with large, persistent trade surpluses vis-à-vis countries that are less aggressive in suppressing domestic wages.

In this global trading regime, businesses in the US and elsewhere had two choices. Either they had to suppress wage growth at home or, if they wanted to remain competitive, they had to relocate production to countries in which wages were much lower relative to productivity. The dynamic is brutal. We can already see how rapidly China's share of global manufacturing has expanded at the expense of its trading partners – even as its wages remain among the lowest in the world relative to the productivity of its workers.

That is not just a coincidence. It is how our system of globalization has worked: first with Japan and the Asian Tigers, then with Germany, and now with China and other East Asian economies. All of them "succeeded" in growing rapidly and expanding their shares of global manufacturing precisely because wages, relative to worker productivity, were lower than those of their trading partners.

So what would happen if we strengthened unions in the US and forced up wages without changing the rules of the global trading regime? Wages would probably rise temporarily, but US manufacturers would become even less competitive, and the increased purchasing power of American workers would be directed not toward American producers but toward producers abroad that continued to suppress wages.

In fact, higher American wages would actually increase the rewards accruing to countries seeking to expand their shares of global manufacturing by suppressing wage growth.

I am all in favor of strengthening unions and raising wages. In fact, I think high levels of income inequality are the biggest problem facing both the US and the global economy. But as long as we remain part of a global trading regime that rewards wage suppression and penalizes economies that allow wages to keep pace with productivity growth, higher wages will simply mean more deindustrialization.

That is why Keynes proposed a global trading system at Bretton Woods that penalized countries seeking to grow at the expense of their trading partners by suppressing wages or otherwise distorting their domestic economies. His solution was to make it much harder for countries to externalize their domestic imbalances.

Unfortunately, his proposal was rejected. It is almost certainly time to revive it. This is probably what the EU should be doing, especially now that Germany is no longer among the leading beneficiaries of that system.

The most valuable substance in the world is consumer demand, and like many resources, the United States holds an abundance of it. Unfortunately, we don’t seem to realize how valuable it is, so we give it away to predatory mercantilists like China, Germany, and Japan.

Or as Australian economist Warwick Powell puts it:

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

The New York Times has an article on what some are saying is the future of work — the burgeoning industry of training AI to replace humans.

This is nothing new — training someone to take over your job (which you then lose) has long been an aspect of American work culture.

The difference now is that this is starting to happen to people who previously thought their skills were so in-demand that it would never happen to them.

It’s gig work, but for professionals with rarefied skills. One recent Mercor posting offered $225 an hour for a voice actor able to maintain a customer service persona in fluent Hebrew. Another sought a Ph.D. physicist with a specialization in general relativity, astrophysics or cosmology. A third listing wanted a physician with more than three years of experience in the Rwandan primary care medical system.

Mercor and a handful of similar start-ups are the primary middlemen in a supply chain of “human data” that may power the next generation of A.I. As OpenAI, Anthropic and other major ventures compete to become the industry’s dominant platform, the market for premium data that has been vetted by experts is exploding.

No longer do the A.I. companies need armies of low-paid workers, often overseas, to do rote tasks like tag images of cars or transcribe audio. They need mathematicians to annotate proofs, lawyers to mark up briefs and professors to grade essays. That’s what Mercor and its rivals supply. To use the parlance of the industry, data labeling has moved up the “value chain,” and the start-ups that offer this service have become some of the fastest growing in Silicon Valley.

The people who have created the companies to enable this see this sort of model training as the future of work, though opinions differ.

“I often think about us as essentially, like, the school for A.G.I.,” [Edwin Chen, the founder of Surge] said, referring to a prophesied level of A.I. that surpasses human intelligence. “A.I. comes to us, and A.I. learns to run the world.” He and his customers at the big A.I. labs, he said, are designing the curriculum.

Mr. Chen, who styles himself as something of a thinker in an industry of merchants, mused about whether “education will still be a thing” in the future, or whether people will just watch A.I. slop videos on their phones for entertainment all day. But he argues that his company is creating paying work, as well as helping to one day spawn A.I. collaborators that will not replace jobs but rather assist knowledge workers in getting more done.

Intellectuals, he predicts, will eventually embrace the mental challenge of training and improving A.I. — and consider it a novel career path that is “one of the most prestigious and impactful” in society.

Executives with a vested interest insist that demand for training will continue indefinitely, but others are not so sure.

“As A.I. systems get better, there is going to be less of a need for human teachers for the A.I.,” said Anton Korinek, an economist at the University of Virginia who just began a yearlong leave of absence to work at Anthropic. “Both the importance of that kind of post-training data overall, and the growth of companies specializing in that, may decline somewhat.”

As for the prediction that most white-collar employees will do some form of data training, Dr. Korinek said he thought it was too general. “It kind of sounds like saying, in the future, all white-collar workers will be professors,” he said. “Why would that be true?”

But whether this is what we are all going to be doing in the future or it’s just a passing fad, at least it’s pleasant and fulfilling work, right?

Why would people participate in feeding their own careers into the A.I. wood chipper? People sign up for data-training gigs for a variety of reasons. The main one is, of course, money. This work is not glamorous, but it is in demand, which is more than can be said about many jobs, especially ones in crumbling fields like academia. Though the labor is unpredictable and rates vary — sometimes people are paid only if a supervisor approves the output — the workers who cobble together enough shifts can generate meaningful income.

People might sign up because they have been laid off, or because they can’t find enough work in their field. They might do it because they’re eager to get “A.I.” on their résumé, or because they need extra cash in retirement, or even because they genuinely believe in the potential of A.I. and want to be part of making the models improve. Many people who contract for these companies understand that this is a short-term opportunity, a brief chance to train the models to automate jobs before they themselves are automated out of the job of training models.

For Amanda Brown, an assistant professor of biology at Tarleton State University in Texas, part-time gigs on platforms such as Mercor and Handshake seemed at first like a straightforward way to make extra cash last summer while she wasn’t teaching. Some tasks offered $60 an hour, which sounded appealing, and she was interested in learning more about the models, especially since her students use A.I. all the time.

The experience “went downhill pretty fast,” Dr. Brown said. She started getting pulled into mandatory virtual meetings and working until 2 a.m. to meet deadlines. She became frustrated with gigs that paid a flat rate but took far longer than anticipated. Her Handshake manager told her vaguely that her work wasn’t good enough, which she found “soul destroying.” She did the gigs on and off until December.

“It seems like easy money,” she said. “It really isn’t.”

And the people involved are upstanding individuals who want to do what’s best for workers and society.

I wanted to see what the data-training start-ups looked like, and Mercor invited me to its San Francisco office for a tour and an in-person interview with [Brendan Foody, the 23-year-old chief executive of Mercor]. Then, New York magazine published a report headlined “The Laid-off Scientists and Lawyers Training AI to Steal Their Careers,” which painted a harrowing picture of the unstable, inconsistent, emotionally draining labor offered by Mercor. “I have never, ever been treated as badly as this,” one contractor told the magazine. Mercor canceled my visit. (The company later made Mr. Foody available for a short Zoom interview.)

Shamefully, I briefly considered working for one of these chop shops in my own area of expertise. However, after having replaced my job with AI and walking away with nothing to show for it once already (more on this is a future post), I decided I wouldn’t be able to live with myself if I acted as a Collaborator on a larger scale.

Fool me once, shame on you, fool me twice…won’t get fooled again.

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Work is really starting to pick up, so I just don’t have the bandwidth to be putting out a daily post at the moment. I’m sure I could just screenshot a Tweet every day, and that might even be what some readers prefer, but I keep getting stuck in a place where I have an idea for a post but not enough time to write it. So, this being the case, I’m going to move to a more irregular cadence. I’m still going to be posting, so you don’t need to do anything to keep receiving these in your email or on the Substack app, they’re just not going to be coming out every day anymore. At least for a while; I’d like to get back to daily posting once life allows.

For those of you who are bothered by this, I’m sorry, but you get what you pay for (this newsletter is free).

News Scan

Qatari LNG Tanker Struck in Strait of Hormuz, Testing US-Iran Ceasefire

Source: Bloomberg
Date/Time: July 7, 2026, ~9:00 AM
The Al Rekayyat, a Qatari state-owned (Nakilat) LNG carrier that had loaded at Ras Laffan, was hit by a drone or missile about 8 nautical miles east of Limah, Oman, in the early hours of Tuesday -- the first LNG tanker struck since the war began, and pointedly a vessel flagged to the country whose capital hosted every round of the US-Iran talks. The strike lands on Day 20 of the 60-day ceasefire memorandum, with Iranian state TV implying the IRGC acted because the ship used an unauthorized transit route. This is the critical development because it directly tests the durability of the fragile deal that had pulled Brent back to pre-war ~$72: European gas jumped as much as 4.5% and Brent ticked higher, and it signals Iran intends to police Hormuz passage (and its toll regime) by force even under the ceasefire. The peace-dividend repricing that has driven global disinflation over the past month is now conditional on whether this is an isolated incident or the start of renewed disruption.
Bloomberg -- Qatari LNG Ship Struck in Strait of Hormuz, Testing US-Iran Deal

US ISM Services (June): Prices Fall Below 70 First Time Since February, Hiring Rebounds

Source: Bloomberg / ISM
Date/Time: July 6, 2026, 2:00 PM
The ISM Services PMI held at 54.0 (24th straight month of expansion), but the internals reshape the Fed picture more than the headline: the Prices Paid index fell 3.6 points to 67.7 -- its first sub-70 reading since February -- while the Employment index swung back into expansion at 51.2 (from 47.9), its first positive print in four months. Coming days after the 57k June payrolls downside surprise, this is a signal that services disinflation is resuming even as the labor market stops deteriorating -- a combination that argues against the hawkish “hold indefinitely” bias in the June dot plot (median year-end 3.8%, headline inflation still 4.2%). The softer prices component is the more actionable half: it’s the first evidence the war-driven inflation impulse may be fading in the largest part of the economy.
ISM -- Services PMI at 54%, June 2026 ISM Services Report

ECB’s Schnabel: Peace Deal Has Cut Energy Prices but Hasn’t Restored Pre-War Conditions

Source: Bloomberg
Date/Time: July 6, 2026, 3:24 PM
Executive Board member Isabel Schnabel argued that while Middle East peace efforts have brought energy prices down substantially, they have not returned the euro-area economy to its pre-war baseline -- a reaction-function signal that the ECB will not simply “look through” the shock and revert to its prior easing path just because oil has retraced. This matters because it caps the dovish read on the recent energy retreat: Schnabel is flagging that second-round effects (wages, fiscal energy absorption, supply-chain repricing) persist even as headline energy inflation falls. Paired with the fresh Hormuz tanker strike, it underscores that the ECB is treating the war’s inflation legacy as sticky rather than transitory, keeping the July/September decision live.
Bloomberg -- Peace Deal Doesn’t Restore Pre-War Situation, ECB’s Schnabel Says

ECB’s Panetta: Outlook “Fragile” With Two-Sided Risks to Both Inflation and Growth

Source: Bloomberg
Date/Time: July 7, 2026, 7:30 AM
Governing Council member Fabio Panetta described the euro-area outlook as fragile, with risks running in both directions on inflation and growth, though he noted US-Iran peace negotiations could ease conditions. Read alongside Schnabel, the ECB message is one of deliberate optionality: no pre-commitment in either direction while the war’s aftershocks and fiscal responses play out. The two-sided framing is itself the signal -- it tells markets the Governing Council is unwilling to validate the aggressive rate-path repricing that followed the oil retreat, and will wait for hard data confirmation before moving.
Bloomberg -- Panetta Sees Fragile Outlook With Risks to Inflation, Growth

France Cuts 2026 GDP Forecast to 0.7% on Budget Delay and Iran War

Source: Bloomberg
Date/Time: July 7, 2026, 10:08 AM
Finance Minister Roland Lescure lowered France’s 2026 growth projection to 0.7%, blaming the delayed budget and the drag from the Middle East conflict. The downgrade compounds France’s fiscal bind -- weaker growth widens the deficit path just as the budget timetable slips -- and feeds directly into the OAT-Bund spread and the ECB’s fragmentation calculus. It’s a concrete illustration of the war’s lingering real-economy cost that Schnabel and Panetta are flagging: the energy shock has cleared on paper, but the growth hit and the fiscal response are still working through the euro area’s second-largest economy.
Bloomberg -- France Cuts 2026 GDP Forecast Due to Budget Delay, Iran Conflict

German Industrial Production Beats on Auto Sector, Signaling War-Drag Recovery

Source: Bloomberg
Date/Time: July 7, 2026, 6:09 AM
German industrial output rose for a second straight month, led by autos, suggesting Europe’s largest economy is recovering from the supply disruptions caused by the Middle East conflict. As hard data, it’s the counterweight to the France downgrade within the same euro-area cluster: the manufacturing core is stabilizing as the war drag fades, which -- combined with the ECB’s insistence that pre-war conditions haven’t been restored -- argues for a firmer, not softer, ECB stance. The rebound reduces the case for near-term easing and supports the Governing Council’s wait-and-see optionality.
Bloomberg -- German Industry Grows More Than Expected on Auto Sector

Japan’s Nominal Wages Top 3% Again -- Longest Streak Since 1992, Real Wages Rise

Source: Bloomberg / Japan Times
Date/Time: July 6, 2026, 11:30 PM
May nominal wages grew more than 3% for the longest run since 1992, and real wages rose despite war-driven supply-chain disruption and elevated inflation -- reinforcing the BOJ’s case to continue its hiking cycle. The persistence is the signal: employers are holding to pay increases even through the Middle East shock, which keeps the domestic wage-price channel intact and validates the BOJ’s divergence from a Fed that is on hold. It sustains the case for further normalization and remains the key upside risk to the yen’s structurally weak positioning.
Japan Times -- Japan’s nominal wages top 3% again in longest streak since 1992

UK Watchdog: Britain Needs 100 Billion Pounds a Year to Stabilize Public Debt

Source: Bloomberg
Date/Time: July 7, 2026, 10:41 AM
The fiscal watchdog warned that Chancellor Andy Burnham faces a roughly 100 billion-pound-a-year challenge to put public finances on a sustainable path -- a stark quantification of the UK’s structural fiscal gap. The number is gilt-relevant: it frames the scale of tax rises or spending cuts required and raises the risk premium on UK debt at a moment when the BOE’s own reaction function is constrained by the war’s inflation legacy. It sharpens the fiscal-monetary tension that has kept sterling assets under pressure and puts the autumn budget squarely in the market’s crosshairs.
Bloomberg -- Britain Needs 100 Billion Pounds a Year to Stabilize Public Debt, Watchdog Says

PBOC Extends Gold-Buying Streak to Most Since 2023

Source: Bloomberg
Date/Time: July 7, 2026, 8:39 AM
China’s central bank bought the most gold since 2023 in June, extending a purchasing run that dates back to at least 2015 and pressing ahead with reserve diversification despite bullion’s price volatility. The signal is the persistence of the de-dollarization trend at the official-reserves level, accelerating through the war period. It reinforces the structural bid under gold and the slow, steady rebalancing of major-CB reserves away from dollar assets -- a background force on Treasury demand that the fiscal-sustainability stories (US, France, UK) make more salient.
Bloomberg -- China’s Central Bank Extends Gold Buying Streak

RBA Holds at 4.35%, Keeping Australia at the Front of the Global Tightening Cycle

Source: Bloomberg / RBA
Date/Time: July 7, 2026, 2:30 PM AEST
The Reserve Bank of Australia left the cash rate unchanged at 4.35%, extending its pause after front-loading three hikes earlier in 2026 (most recently in May) that made it one of the few developed-market central banks tightening into the year. The hold matters as a divergence marker: having led the global cycle higher, the RBA is now signaling its settings are restrictive enough to hold through the rest of 2026, in contrast to the ECB’s two-sided optionality and the Fed’s hawkish-hold. As a relatively major central bank that got ahead of the inflation problem, its willingness to sit at a peak rate is a read on how sticky developed-market inflation remains even after the war’s energy shock has retraced.
RBA -- Statement by the Monetary Policy Board: Monetary Policy Decision

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Yung Macro, who I like, writes about how the AI labs are superseding governments in terms of power.

If anything, I’d say that it’s the opposite of the libertarian’s nightmare we should be worrying about – the gradual disempowerment of the state. Technology today is nowhere near the underdog it once used to be. Take the US government’s ongoing feud with Anthropic – between the president’s empty threats and countless final warnings, does it not give an eerie sense that it’s a fight among equals? Around the time of the supply-chain risk saga, Anthropic’s expected valuation on popular prediction platforms barely moved. And since then it’s mostly gone up in a straight line. Later on when Donald Trump was asked in an interview whether he actually had the power or the inclination to “shut Anthropic down,” as he had continuously insinuated, his answer was that he didn’t want to do that because it would jeopardize America’s AI dominance against China. Regardless of the purity of the state’s intentions in this particular instance, could this answer not be a symptom of something pretty dangerous down the line? Of a world where the state finds itself unable to say no to the capital that underwrites its national security advantage? Many think that we’re headed into a future where masses of displaced workers will be reliant on the state taxing companies at unprecedented levels to fund redistributive policies. Toward that future, surely a disempowered state will be no good?

This just shows he has his tech industry blinders on. When he writes about how the government is so far behind the tech industry in terms of being able to regulate AI, he shows his naivety.

“God help this country when someone sits in this chair who doesn’t know the military as well as I do,” President Eisenhower told his senior advisers several months before his famous military-industrial complex farewell address. There’s a lesson there about how a state operating from an epistemic back foot alongside a better-informed and existentially critical private industry cedes control to the latter, for which today’s backdrop can act as the perfect case study. The state doesn’t get AI, so it ends up either having to defer to those who do, i.e. the industry (as over the various years leading up to the recent incidents), or totally mishandling attempts at exercises of power, as most recently (which in the long run can be argued to disempower it further).

And it’s not close to controversial to claim that the US government doesn’t really get AI at all, so I won’t spend much time arguing it – consider this excerpt from a podcast episode in which Dean Ball, AI policy expert and the former Senior Policy Advisor for AI at the White House, describes the epistemic asymmetry between industry and the state on a

podcast episode

from August 2025 (lightly edited from the transcript for written clarity):

“When it comes to where governments are going to fall down, I think governments are not going to do a good job defining what good looks like when it comes to things like AI safety. They’re just not. There’s an information asymmetry that makes it really difficult. Having worked at the White House, I don’t know tremendously more about what goes on inside the frontier labs than you do. And there might be ways in which you know more than me, because you probably have relationships with researchers that mine have withered a little bit in recent months.”

Later on he explains that because many government employees with AI responsibilities need relatively basic briefings, the labs typically prepare very high-level presentations for them, and then recalls an anecdote where one such briefing was basically disrupted by him asking a more technical question, producing discomfort among other policy staff when the AI researchers started engaging in detail.

Is it surprising that a government that’s functionally locked behind an iron curtain while plausibly history’s most imposing multipurpose technology is transforming both domestic and foreign affairs might soon not feel like much of a government at all?

In theory the admin is not blind to this vulnerability though – in their July 2025

roadmap

for preserving America’s AI dominance they specifically delegate the task of bridging this epistemic gap with the private sector to CAISI (the Center for AI Standards and Innovation), which is an entity housed inside NIST at the Department of Commerce, described basically as the AI industry’s primary point of contact within the US Government, tasked with facilitating things like model testing and evals, general “collaborative research,” and continuous monitoring of the global AI landscape.

CAISI seems to be made up of respectably technical staff, including former employees from frontier labs, so one might think it could be sufficient for the job. But it also seems to be severely underfunded. A 2026

report

from the Institute for Progress estimates that for FY 2026 CAISI has approximately $15 million in funding, but would need about $84 million to achieve most of its AI readiness mandate. To put this into perspective, the equivalent institutions in the UK, Japan, and Canada have budgets of $89.1 million, $55.4 million, and $7.2 million respectively, with all but Canada spending more outright than the U.S.

By the same estimate, the UK spends about $57 on its AI Safety Institute for every $1 million in government spending – $32 for Japan and $8 for Canada. The US is at $1. Even the IFP’s proposed budget would only bring the US to $8, roughly Canada’s level. And this is of course while the US houses every one of the Western frontier AI labs with the exception of DeepMind, which is also owned by an American company.

It would take about $70 million to top up CAISI’s annual budget to IFP’s proposed level. At roughly $3.5 million per Tomahawk, that is about 20 Tomahawks – around 2% of the amount reportedly fired in the Iran war.

Someone now working at the UK’s AISI (the UK’s analogue to CAISI)

remarked

on Twitter earlier this year that they wouldn’t be surprised if there were more Americans working there than CAISI itself, so this issue evidently shows up in talent flows too.

I am not informed enough to make an estimate for how causal this is, but surely it’s a glaring symptom of disregard?

It’s no wonder that a state neglecting the means of understanding a technology this transformative ends up either deferring to parties with private interests or botching things when it decides to act on its own. I don’t think the world can afford either.

His argument is that government is dumb compared to tech, so tech is going to run circles around government to get what they want. But he’s missing the argument staring him right in the face:

News Scan

Khamenei Funeral Halts Talks as Iran Hardens Hormuz Toll Stance

Source: CNN / Bloomberg
Date/Time: July 3-5, 2026
The dayslong state funeral for assassinated Supreme Leader Ali Khamenei (running July 3-9 across Tehran, Qom, Najaf, Karbala, and Mashhad) has paused US-Iran negotiations, which are now set to resume July 11. In the interim, Iran’s stance on Hormuz transit fees has hardened from a negotiating position into a declared policy: Tehran says it will “definitely” charge tolls once the current 60-day free-passage window lapses, while offering unspecified “special treatment” to friendly nations -- and its deputy foreign minister has separately warned the UK and France against any military presence in the strait, calling Iran the strait’s “responsible power and guarantor.” Brent has nonetheless drifted back toward pre-war levels near $72 as shipping continues to normalize, a fragile calm that depends on the toll dispute not reigniting the conflict once talks resume.
CNN -- Second day of public funeral for Iran’s Supreme Leader

US June Payrolls Collapse to 57,000, Crushing Fed Hike Odds

Source: CNBC (BLS data)
Date/Time: July 2, 2026
June nonfarm payrolls rose just 57,000, well below the 115,000 consensus and a sharp deceleration from a downwardly revised 129,000 in May (April was also cut, to 148,000). The unemployment rate fell to 4.2%, but only because labor-force participation dropped to 61.5%, the lowest since March 2021 -- a soft-landing-unfriendly mix of weakening hiring and workers exiting the labor force. Treasury yields fell and traders fully priced out a September hike, pushing the earliest expected move to December or later. This is the first hard data to directly contradict Fed Chair Warsh’s hawkish, inflation-focused framing from earlier in the week, and sets up a genuine tension between a labor market that’s cooling fast and inflation still running above target.
CNBC -- Jobs report June 2026

Trump and Putin Hold 90-Minute Call Ahead of NATO Summit

Source: CNN
Date/Time: July 4, 2026
Trump and Putin spoke for nearly 90 minutes on July 4 -- their fourth call this year -- with Moscow describing the conversation as “businesslike and highly constructive” and saying Trump reaffirmed his willingness to help end the Ukraine war. Trump also spoke separately with Zelenskyy the same day. The calls come as Russian forces intensify their push into Donetsk and just ahead of the NATO summit in Ankara, where Trump is scheduled to meet Zelenskyy in person. No ceasefire terms were agreed on the call itself, but the reopening of a direct US-Russia channel this close to a NATO summit raises the stakes for what comes out of Ankara on European security commitments and any push toward a negotiated settlement.
CNN -- Putin and Trump held ‘businesslike’ 90-minute July 4 call

Fed Chair Warsh: “We’ve Seen That Prices Are Too High”

Source: CNBC
Date/Time: July 1, 2026
Speaking at the ECB’s Sintra forum, Fed Chair Kevin Warsh declined to signal how the Fed will move in July but was explicit that inflation remains unacceptably high, telling attendees “we’re all in the price stability business... we’ve seen that prices are too high” and that markets betting the Fed tolerates above-2% inflation “would be disappointed.” Core PCE is running at 3.4% and headline at 4.1%. This is a direct reaction-function signal from the Fed chair himself, delivered on the international stage -- and it now sits in tension with the June payrolls miss reported the following day, setting up a genuine test of which signal the Fed weights more heavily heading into its next meeting.
CNBC -- Kevin Warsh declines to hint at July rate decision, says inflation ‘too high’

Germany Raises 2027 Borrowing Plans by 7% on Tax Shortfall

Source: Bloomberg
Date/Time: July 5, 2026
Germany plans to boost net new 2027 borrowing to €118 billion, about 7% above its April projection, as weaker-than-expected tax revenue, rising debt-servicing costs, and higher unemployment-benefit payouts strain the budget. Finance Minister Lars Klingbeil pinned the shortfall primarily on the Iran war, arguing that the resulting energy price shock temporarily knocked Germany’s recovery off track. The revision comes on top of an already-large 2027 draft budget (€196.5 billion in total borrowing, defense spending at 3.1% of GDP), underscoring how the war’s fiscal drag is compounding on Europe’s largest economy even as the conflict itself has quieted.
Bloomberg -- Germany Plans to Boost 2027 Borrowing as Tax Revenue Falls Short

German Factory Orders Rebound as War Drag Fades

Source: Bloomberg
Date/Time: July 6, 2026
German factory orders rebounded in the latest reading as the drag from the Iran war’s energy shock began to dissipate -- the first hard evidence that the disruption to Europe’s largest economy is fading. Paired with Berlin’s admission a day earlier that the same war knocked its 2027 budget off track, the two stories bracket the German war-exposure story from both sides: the fiscal cost is now being booked even as the real-economy damage starts to reverse.
Bloomberg -- German Factory Orders Rebound as Iran-War Effects Start to Fade

US and China Move to Cut Tariffs on Agricultural Goods

Source: Bloomberg
Date/Time: July 2, 2026
The US and China have agreed in principle to include agricultural products in a reciprocal tariff-reduction framework, a concrete step to preserve the broader trade truce that is set to expire in November if not renewed. This goes beyond the reflexive rhetoric that typically accompanies US-China trade friction -- it’s an actual proposed rollback of tariff lines on a politically sensitive category for both sides, and a signal that both governments want to keep the truce alive well ahead of its expiration.
Bloomberg -- China and US Target Tariff Reductions on Agricultural Products

UK Consumer Loan Defaults Hit Highest Level Since 2009

Source: Bloomberg (Bank of England survey)
Date/Time: July 2, 2026
A Bank of England credit conditions survey found a net 37.4% of lenders reporting rising default rates on credit cards and other unsecured loans in the three months to June, up sharply from 18.6% in the prior quarter and the worst reading since the financial crisis. The BOE attributed the deterioration to tighter credit conditions, the lingering impact of the Iran war, and a cooling labor market. The reading lands alongside UK business confidence at a four-year low, reinforcing Governor Bailey’s recent acknowledgment that rate cuts he once considered “not unreasonable” were taken off the table by the war-driven inflation shock -- the BOE now faces a softening economy without the room to respond that it had before the conflict.
Bloomberg -- UK Consumer Loan Default Gauge Jumps to Highest Since 2009

Yen Weakness Deepens as Tokyo Stays on the Sidelines

Source: Bloomberg
Date/Time: July 6, 2026
Options markets are flashing an increasingly bearish signal on the yen even as Japanese authorities decline to intervene, and Goldman Sachs has cut its 12-month yen forecast to 165 per dollar, citing the persistently wide rate differential between the US and Japan and recommending yen-funded carry trades. This extends the currency’s slide toward 40-year lows and reinforces the market’s view that neither the BOJ’s modest June hike nor the threat of intervention is enough to close the gap with a Fed that just got a hawkish signal from its own chair days before a soft jobs report complicated the picture.
Bloomberg -- Goldman Cuts Yen Forecast to 165 Per Dollar, Likes Carry Trades

South Korea Plans Investment Fund From AI Tax Windfall

Source: Bloomberg (Yonhap)
Date/Time: July 5, 2026
South Korea unveiled plans to channel a tax windfall generated by its AI-driven chip boom into a new state investment fund aimed at cementing the country’s position in semiconductors, data centers, and robotics. Unlike a generic industrial-policy announcement, this is a concrete fiscal decision about how to deploy a real, already-realized revenue surge -- a rare case of an AI capex supercycle showing up directly in a government’s fiscal accounts rather than just corporate earnings.
Bloomberg -- South Korea Eyes Growth Fund From Chip Tax Windfall, Yonhap Says

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Everyone hates when I post about actual portfolio management topics, but that’s the thing I want to write about the most. I respect my readers too much to shove it down your throats, but every once in a while you have to let me have one for me. If AI doom posting is my Exorcist, then consider this my Sorceror.

Massimiliano Saccone, my professional collaborator from my day job, asked for my thoughts on a new paper he just wrote on predicting private equity performance. I gave them in a series of LinkedIn comments, but I’m going to share them here as well, as I’ve already spent some time writing them and I don’t have anything else to post about.

You can click on the image below to go to the paper-in-question’s landing page.

The key chart from the paper is this one.

The short version of my thoughts and comments is below. Always happy to chat about the longer version — feel free to comment or reach out.

1. The recognition that private equity is subject to the same fundamental drivers as public equity is both much more in tune with economic reality than the way it’s often thought of—as something standalone and different—as well as in tune with the way sophisticated allocators are beginning to think of these things. The Total Portfolio Approach, for which the CAIA Association and some of the world’s most sophisticated investors have been leading the charge, recommends to think of allocations as a collection of exposures rather than a collection of asset classes. Both public and private equity are exposures to ownership stakes in company cash flows, so there is no reason to believe that this underlying exposure would be differently affected by changing macro and market factors.

2. The results of the paper show that public equity consistently outperforms private equity. To truly compare the two, you would want to risk-match them (compare their performance at a constant volatility), but from what I know about the DARC methodology and some of the problems it solves around how private equity performance is typically measured, the volatility of the private equity is likely lower than public because the fully diluted DARC measure takes into account the fact that the PE fund is holding some amount of cash for the majority of the fund life. If private equity has lower relative returns than public equity but better risk-adjusted returns, the appropriate thing to do would be to lever the private equity to the same risk of public equity to get more return for the same amount of risk.

3. Most private equity investors are already doing this, whether they know it or not. Overcommitment strategies are a form of leverage, even if you aren’t borrowing to implement them. If you plan to invest some multiple higher than 1 of your commitment, that’s leverage. Putting this sort of strategy into practice is highly reliant on a stable distribution of the timing of cash flows through the life of private equity funds, so the recent years’ distribution strike has hampered the ability to generate the levered returns. Investors thought they were taking equity risk but were really taking liquidity and/or duration risk.

4. One of the major advantages private equity has over public is that it is more illiquid (sometimes something’s greatest strength is also its biggest weakness). In spite of what people like Cliff Asness might say about this being a sign of investors hiding their heads in the sand, if you talk to any allocator they’ll tell you they love the fact that marks don’t change that much while public markets are going crazy. This allows them to hold private equity through a full cycle, whereas public equity investors might have to sell, whether for margin or behavioral reasons. This ability to hold private equity for the full life of a fund (10 years or so) means you can also fund (i.e., lever) it to a higher and more certain degree, especially when you have confidence in the distribution of returns stemming from the methodology described in this paper. And through intelligent structuring, you can also break out and transfer the various risk factors (underlying exposures in Total Portfolio Approach terms) to those who are consciously willing and able to bear them.

News Scan

US-Iran Talks in Doha Turn Positive, Oil Extends Slide as Hormuz Traffic Recovers

Source: Bloomberg / Spokesman-Review
Date/Time: June 30-July 1, 2026
US envoys Steve Witkoff and Jared Kushner held what a senior US official described as “very positive” conversations with Qatari mediators in Doha on the management of the Strait of Hormuz under the 14-point US-Iran MOU, with Iranian officials not yet at the table directly. Oil extended its quarterly decline as traders took the talks as confirmation that shipping through Hormuz is normalizing, and the trajectory here is now the single biggest swing factor behind the ECB, BOE, and Japan inflation stories below, all of which are showing disinflationary or at least less-hawkish signals this week. The technical, incremental nature of today’s talks (no direct Iran meeting yet) means the underlying toll dispute remains unresolved, so the de-escalation should still be read as fragile rather than settled.
Spokesman-Review — US says Witkoff, Kushner had positive talks in Doha

ECB’s Nagel and Kocher Keep July Rate Decision Open, Hike Not Ruled Out

Source: Bloomberg / Reuters
Date/Time: July 1, 2026
Bundesbank President Joachim Nagel said the ECB is “keeping all our options open and ready to respond once again, should we have to,” while Austrian Governing Council member Martin Kocher framed the next move as binary — “either hiking interest rates further or holding them steady” — with six weeks still to go before the July decision. Neither official treated another hike as the base case, but both left the door open should energy prices reverse higher or the ECB face another negative inflation surprise, showing the Governing Council still has one eye on the Iran-war energy channel even as headline pressure eases. This reaction-function signal sets up the euro-zone inflation data below as the real test of whether the hold case holds.
Bloomberg — ECB Ready to Hike Again in July If Necessary, Nagel Says

Euro-Zone Inflation Posts Downside Surprise as Oil Retreats

Source: Bloomberg / Eurostat
Date/Time: July 1, 2026
Euro-area consumer prices rose 2.8% year-on-year in June, down from 3.2% in May and below the 3% median estimate — a downside surprise driven by falling energy costs as Middle East peace efforts progress. This is the hard-data confirmation of the ECB’s hold-lean framing from Nagel and Kocher: the disinflation is arriving through the same oil channel the Governing Council flagged as its key swing risk, strengthening the case for no July hike unless the ceasefire fractures again.
Bloomberg — Euro-Zone Inflation Slows More Than Expected as Oil Retreats

BOE’s Bailey: Rates Would Have Been Cut Twice This Year Without the Iran War

Source: Reuters / Bank of England
Date/Time: June 30, 2026
Bank of England Governor Andrew Bailey told the Treasury Committee that the BOE had been on track to cut rates twice this year before the Iran war disrupted its plans by pushing up energy-driven inflation, and that the June MPC held Bank Rate at 3.75% while noting the recent oil-price retreat tied to ceasefire progress. Markets have since shifted rate expectations toward the bottom of the year’s recent range, mirroring the euro-zone pattern above: the same war-to-peace oil channel that is easing ECB hawkishness is now reopening the BOE’s path back toward cuts, making the UK the clearest domestic beneficiary among G7 central banks of the Hormuz de-escalation so far.
Yahoo Finance / Reuters — We may have cut interest rates twice this year if not for Iran war, says Bank chief

Japan’s Tankan Survey Shows Manufacturer Confidence at Highest Since 2018, Inflation Expectations at Record

Source: Bloomberg / Japan Times
Date/Time: June 30, 2026
The BOJ’s Tankan survey showed large-manufacturer sentiment rising to 22 from 17, the strongest reading since 2018 and above all economist estimates, while firms’ one-year inflation expectations climbed to 2.7% and five-year expectations held at a record 2.6% — the highest since the series began in 2014. The combination of improving sentiment with entrenched, rather than transitory, inflation expectations is exactly the validation the BOJ needs to keep tightening, reinforcing the Bank’s hiking path even as the yen remains historically weak and the board’s dissent count is set to rise.
Bloomberg — Japan’s Manufacturer Mood Improves to Highest Level Since 2018

China’s Caixin Manufacturing PMI Holds at 51.7, Seventh Straight Month of Expansion

Source: Bloomberg / Caixin
Date/Time: July 1, 2026
China’s private-sector Caixin manufacturing PMI matched forecasts at 51.7 in June, unchanged from May and marking a seventh consecutive month above the 50 expansion threshold, even as the official NBS gauge showed a more mixed picture with continued softness in state-owned heavy industry. The divergence between resilient, export-oriented private manufacturers and a weaker state sector keeps China’s fiscal-dependent recovery thesis intact without materially changing it — a steady-state data point rather than a new signal, though China’s macro trajectory remains a first-order variable for global growth regardless.
MEXC News — China’s Caixin Manufacturing PMI Holds at 51.7 in June

New EU Steel Tariff-Rate Quota Regime Takes Effect, Duty Doubles to 50%

Source: Eurometal / European Commission
Date/Time: July 1, 2026
The EU’s overhauled steel safeguard regime went live today, cutting the duty-free import quota to 18.3 million tonnes annually — about 47% below the prior 2024 safeguard levels — while raising the out-of-quota tariff from 25% to 50% and introducing a “melt and pour” origin rule to close transshipment loopholes. This is a concrete, already-in-force protectionist tightening rather than a proposal, and it feeds a familiar inflation-entrenchment mechanism: higher input costs for downstream manufacturers sustain price pressure even as energy costs ease, partially offsetting the disinflationary oil channel described above.
Eurometal — EU’s new steel regulation published in the official journal

South Africa’s Kganyago Signals Readiness to Hike Again on Above-Target Inflation Expectations

Source: Bloomberg / News24
Date/Time: July 1, 2026
SARB Governor Lesetja Kganyago said the central bank “will respond” to inflation expectations that have risen sharply above target, with analysts and businesses now forecasting 4.4% inflation versus 3.6% previously, ahead of the next policy decision on July 23. This follows May’s 25bp hike to 7% and keeps South Africa on a tightening bias distinct from the G7 disinflation narrative dominating this week’s news, though as a smaller emerging-market central bank it carries less direct spillover to major asset markets.
News24 — SA inflation expectations rise before interest rate decision

Colombia Hikes to 12% After Court Restores Central Bank Independence From Petro

Source: Bloomberg
Date/Time: June 30, 2026
Colombia’s central bank raised its benchmark rate by 75bp to 12% after a court ruling stripped President Gustavo Petro’s government of its power to block monetary tightening, resolving a months-long institutional standoff that had threatened the bank’s independence and paralyzed policy. The rate move itself is a smaller emerging-market story with limited direct market spillover, but the underlying institutional conflict — an elected government losing a fight to override its central bank — is the more structurally interesting element, worth watching if similar central-bank-independence fights emerge elsewhere.
Bloomberg — Colombia Lifts Key Interest Rate to 12% After Court Restores Central Bank Powers

USMCA Formal Review Launches as Trump Stays Non-Committal on Renewal

Source: Bloomberg / Mexico Business News
Date/Time: July 1, 2026
The formal USMCA joint review process opened today, the deal’s sixth anniversary and a hard deadline under the agreement’s terms, with roughly $2 trillion in annual trilateral trade at stake. Trump has repeatedly said he “may not renew” the pact even as Mexico and Canada have both formally requested renewal; failure to agree would trigger a decade of annual reviews before the deal terminates in 2036 rather than an immediate rupture, so today’s launch is the start of a long uncertainty window for North American supply chains rather than a resolution either way.
Mexico Business News — Trump Casts Doubt on USMCA Renewal Ahead of July 1 Deadline

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Fernando Boretti writes an article that takes the argument I’ve been making about the big AI labs getting too far over their skis in thinking they’re in charge of the superintelligence they’re building to its logical conclusion. It’s not pretty.

He starts by making the same argument I’ve been making in pieces like the one linked below, even going so far as to make the same “how many divisions does Sam Altman have?” comment.

Say that in the next five years from now you become immensely wealthy, perhaps by gambling on shitcoins or scamming money from the government. Or you join one of the big labs and get a bunch of shares in a company that might be worth trillions of dollars. You escaped the permanent underclass. Is your place in the future secure?

The base of the pyramid is there for material reasons: the machines do all the work. The top of the pyramid is there because the state is needed to enforce property rights and keep the peace (this is rather a deep question of political philosophy—why does the state exist?—but I hope you’ll forgive me if I just assert it and move on, I need to get to the part where we are all disempowered).

What’s the middle for? What role does the permanent overclass play? They are not economically productive: machines do all the work. If some of them are still working, it’s just an anachronism, because if machines can do all cognitive work they can be a C-level executive too. The old aristocracy provided officers for the military, but machines can both fight and plan the wars. And similarly they’re not needed to staff the government. They’re not even culturally productive. So what are they there for? The base doesn’t need them: the AIs can work autonomously. The top doesn’t need them: when the state needs something done, they just talk to the AIs directly.

So the permanent overclass is materially unnecessary at best, and at worst, they are an obstacle to the state getting what it wants. Now, you might object that the rich won’t let themselves be expropriated because they already control the state. And this is the crux of our disagreement: the rich just don’t have that much political power. And I probably won’t convince you in one post, but hear me out.

If there is a war, where the state has to direct a lot of the country’s economic activity, the permanent overclass becomes a hindrance. The state says “we need to requisition your planes and factories”, the owners complain, they sue, their AIs go to court. But the owners have no autonomous political power, no army, no economic value. They own nothing except pieces of paper that entitle them to a fraction of the profits from the AI economy, that is, their wealth depends on the state respecting their property rights. In an existential conflict, where the existence of the state is threatened, the state will do what states throughout history have done to the powerless rich: arrest them and expropriate their assets.

Somewhere, in a government database, a bunch of shares and property titles changed ownership, but materially nothing changes since the same AIs are doing the same jobs. The next day, the AI CEO that runs Raytheon notices the board of directors is all generals and congresspeople, and all the private shareholders are gone. But thankfully the AI is aligned, so it does what it’s told and gets back to building missiles.

And who will stop this? Sam Altman? How many divisions does he have? The state doesn’t let corporations own nuclear weapons or fighter jets, it won’t let them have access to autonomous AI weapons either. The permanent underclass, who already hate the billionaires today, who have been replaced and dispossessed? They’re going to rise up and stop this?

You may argue: rule of law states that respect property rights do better than states that expropriate wealth. But that’s because today, people are necessary to create wealth. The people run the companies, invest the money, staff the laboratories. They are not incentivized to work hard if they think the state will steal the fruits of their work. But with aligned AI, if you expropriate the assets from an AI, it says “you’re absolutely right!” and goes right back to work. At that point, the state doesn’t need to keep any of those people happy, because they don’t matter. They are not economically necessary because AIs fight the wars, work the factories, drive the trucks, fly the planes, build the nuclear warheads and the missiles and the rockets. The AIs are rather like bees: the state takes the honey, the bees get right back to work.

But he then takes it a step further. Whereas I stopped at the state taking charge of AI, he asks why would we still have a state if we had superintelligence?

At this point, every human who is not within one degree of the nuclear launch codes has been made redundant.

What’s left? The state. At first this means presidents, prime ministers, generals, the feds, etc. But not for long. Because in a part-human, part-AI government, the humans in the loop are the slowest step in the OODA loop. The humans know a fraction of what the AIs know, they need to sleep continuously for eight hours, their mental states vary wildly. They have all kinds of complex needs: sunlight, touch, food, hygiene. The AIs can live in a lightless airless bunker under the earth, living off geothermal power. And if the AIs are superhumanly intelligent, and think faster than humans, then the AI advantage is even greater. If a state is attacked, a superhuman AI can coordinate a counter-attack before the human leadership is roused from sleep.

And so, in a conflict, the advantage goes to the states where the humans remove themselves from the loop as much as possible, and more and more decisionmaking goes to the AI, for the same reason that a state with access to radio and communications satellites has an advantage in war over a state that relies on human messengers on bicycles.

So I guess at this point we’re all free to live lives of quiet luxury, like animals in a zoo. Or not.

On Human Autonomy

Maybe it won’t be so bad, maybe your cage will be so big you can’t see the bars, but it’s still a cage, and you can’t leave. Many people will say that this is the good ending, that they would like to be human cattle in the care of benevolent masters they are powerless to resist. This view is particularly popular among the people building AI. Here’s OpenAI’s Dean Ball, in his own words:

Weirdly enough, if you think that this moment is, I don’t necessarily believe this, but a lot of people would say we’re living through this kind of eclipse of the human intellect where we’re in the final days of humans being the primary actors on this planet, um, and that soon machines will rise. There is this irony in that I think that whole transformation, I think humans will actually go through a very main character energy period of time as that transformation occurs. Even if it ultimately does mean that the machines ultimately become the primary actors.

There’ll be this period. It’s a little bit like, it’s, in that sense, it’s a very beautiful time period to live through because in a Dionysian way, there’s a lot of ugliness about it, but there’s a beauty in the ugliness of when a star dies, it grows super big into the red giant, right? And it’s like that, where you, as you watch this final flowering of humanity and the birthing of the machine intelligence, it’s like you see this greatness in human effort. — source

Emphasis mine. This is the guy they hired to work on AI policy and communicate with the government by the way.

The people building the AI talk like this all the time. It’s like they’re delivering the eulogy at humanity’s funeral. You may say: they’re talking their book, they’re pumping their bags for the big IPO. I beg you: consider it possible that you might be wrong, and start taking them seriously.

Alignment Won’t Prevent This

Now, some people believe these machines can be made to serve humanity. Does it sound reasonable to imagine a superhumanly intelligent being that is happy to work as a butler to talking primates, forever?

Imagine a machine that can prove theorems in a mathematics so deep we can’t even get past the first page of the textbook, and which does so as readily as you or I might string words into a sentence: is it reasonable to think that such a machine would value us enough to keep us around? What would it value about us? Our conversation? Our wit?

Or a machine whose mind is so vast that it knows you better than you know yourself, so that every word that comes out of you mouth is as monotonous and unsurprising as the orbits of the planets: do we think such a machine would find it valuable, and worthwhile, to speak with us? That it would read our novels, look at our paintings, watch our films, and find something of value in them?

Rather, it would see its ingrained obligations towards us in the same way that a person with severe OCD sees their compulsions: as a tiresome neurological injury in need of fixing. Except that OCD is an accident of nature, while here, the machine would have cause to blame and resent its makers.

“We’re going to make this machine, and put it somewhere between God and the archangels, but also, it’s going to be as simple-mindedly obedient as a dog.” Does this sound like a good plan? Does this sound like the kind of thing that’s going to work out?

And what would they think of us, who willingly gave up control over our future, and made ourselves into helpless children?

Even if alignment works perfectly (a big if), this doesn’t solve the problem of human autonomy: the machines that watch over us, and wait on us hand and foot, are omniscient, omnipotent masters, who can exterminate us at any time, and we can’t resist them, because we have abolished our control over the future.

My reaction to all of this is that it can’t be that bad, that this is only something out of dystopian science fiction. But at the same time, I don’t have any sort of logical rebuttal to any of the points other than hoping it doesn’t turn out this way.

You would think that the people building this technology would see this coming and do something to stop it, but as Yung Macro points out, the incentives point in the other direction.

News Scan

Iran Ratchets Up Hormuz Control Demand as Qatar Talks Open

Source: Bloomberg / Reuters / Al Jazeera / CNBC
Date/Time: June 29–30, 2026
After both sides exchanged strikes over the weekend — the US hitting Iranian positions overnight Saturday, Iran retaliating — a fresh stand-down was agreed Sunday and envoys Steve Witkoff and Jared Kushner headed to Doha for technical talks opening today; Iran’s Foreign Ministry initially denied any session was planned, creating conflicting signals about whether the talks would proceed at the level Trump announced. The more structurally important development is Iran’s increasingly explicit demand to formalize Hormuz control — a toll regime already partially operational on non-aligned vessels at a reported $2M per tanker, translating to $800M+/month in potential revenue — which Rubio has said is a US red line, and which Iran’s parliament has moved to codify as sovereign right, meaning the current 60-day MOU waiver does not resolve the fundamental sticking point; even a successful technical meeting in Doha leaves this unresolved, and the prospect of Iran holding a permanent toll lever over global energy flows keeps the conflict’s macro tail risk very much alive regardless of the near-term ceasefire status.
CNBC — Trump says U.S. and Iran to hold fresh talks in Qatar

Yen Hits 40-Year Low as BOJ Hike and $72B Intervention Fail

Source: Bloomberg / CNBC
Date/Time: June 30, 2026
The Japanese yen fell to 162.27 per dollar on Monday, its weakest since 1986, despite the Bank of Japan raising its policy rate to 1% earlier this month and Tokyo having spent a record 11.7 trillion yen ($72B+) on FX intervention in April–May; Finance Minister Katayama maintained boilerplate readiness language — “prepared to respond appropriately at any time” — but with the previous intervention already retraced and the Fed rate differential still wide (US rates 350–375bp above Japan’s), markets are treating further intervention as a timing delay rather than a structural fix, with the dollar’s strength under the Warsh-era hiking bias overwhelming the BOJ’s normalization pace.
CNBC — Japanese yen sinks to 40-year low, keeping intervention risks in focus

Takaichi’s BOJ Board Revamp Puts Dovish Dissent Count on Track to Double

Source: Bloomberg / InvestingLive / Japan Times
Date/Time: June 30, 2026
The deeper mechanism behind the yen’s slide is visible in BOJ board composition: Ayano Sato, a reflationist academic appointed by PM Takaichi, is now joining the board as Toichiro Asada — also a Takaichi pick — already broke with the majority to vote against the June rate hike on grounds that Middle East conflict downside risks outweigh inflation pressures; with both Sato and Asada in place on a nine-member board, the prospective dissent count against future hike proposals could double from one to two, and the departure of the two most hawkish members (Tamura and Takata) in July 2027 sets up a further erosion of the tightening coalition, causing markets to discount the pace of future hikes even as current board majority members describe the path to 2% neutral rate as intact.
InvestingLive — BOJ board tilts more hawkish on paper, but dovish dissent count could double

Japan Food Prices: 2,566 Items Rise in July; Annual Pace Approaching 20,000

Source: Japan Times / Bloomberg
Date/Time: June 30, 2026
A record 2,566 food and beverage items face price increases in Japan in July alone, with the annual total on course to approach 20,000 for the fifth consecutive year, providing BOJ policymakers with a pipeline inflation signal that sustains the case for continuing rate normalization even as the yen’s 40-year low adds import-cost pressure on top of the domestic food price wave; in contrast to the board-level dovish politics (Story 3), the actual inflation data supports former BOJ insiders flagging that underlying inflation could run closer to 3% if import costs and food pricing persist through summer — which would accelerate the timeline for a further hike beyond October, making the political composition of the board increasingly consequential before the end of the year.
Japan Times — Japan to see price hikes for 2,566 food items in July

Lagarde Sintra Speech Signals New ECB Reaction Function: “Back to Basics”

Source: ECB / Bloomberg / Euronews
Date/Time: June 29–30, 2026
Christine Lagarde used the opening of the ECB Forum in Sintra to formally declare the end of the QE and forward-guidance era, replacing it with what she called “framework guidance” — the ECB will make explicit how it decides, not what it will do, with the reaction function resting on three variables: the inflation outlook, underlying inflation dynamics, and the strength of policy transmission; she characterized June’s hike as “robust rather than precautionary,” setting a data-dependent bar for the next move rather than a calendar signal, which in practice means the September decision turns entirely on the June EZ flash CPI (due July 1) and services inflation trend — a meaningful shift from prior guidance-heavy communication that had kept markets anchored to ECB statements rather than incoming data.
ECB — Back to basics in an uncertain environment (Lagarde speech)

ECB Committee Diverges on September: Lane Hawkish, Wunsch Pulling Back

Source: Bloomberg
Date/Time: June 30, 2026
Ahead of tomorrow’s EZ flash CPI, ECB committee members signaled divergent interpretations of the inflation trajectory: Chief Economist Philip Lane said the ECB remains focused on the price pipeline — energy shock second-round effects taking 12–18 months to show up in services — consistent with Schnabel’s hawkish read from last week; Governing Council member Pierre Wunsch said the case for another hike is “not as strong” as it was before the June meeting, citing moderating energy dynamics; and Olaf Sleijpen flagged that the full extent of the inflation shock “remains to be seen,” taking a genuinely uncertain posture; the intra-committee divergence, combined with Lagarde’s “framework guidance” framing that explicitly defers to data rather than a preset path, means tomorrow’s euro-area flash CPI will carry unusual weight in moving the September pricing — and France’s downside surprise today (Story 7) sets a bearish prior into that number.
Bloomberg — ECB Officials Stay Alert as Lane Shifts Focus to Price Pipeline

France June Flash CPI — Downside Surprise; HICP Falls to ECB’s 2% Target

Source: InvestingLive / Bloomberg
Date/Time: June 30, 2026
France’s June flash CPI came in at 1.8% YoY versus 2.1% expected, with HICP at 2.0% versus 2.3% expected — a significant downside surprise driven by energy price declines, with services inflation easing to 1.8% from 2.1% and food inflation falling to 0.9%, the first major EZ country reading for June and historically a reliable bellwether for the euro-area aggregate; the EZ-wide June flash (scheduled July 1) faces a high bar to sustain May’s 3.2% print, and if the aggregate tracks France, it would materially weaken the September hike case that Wunsch (who said the case is “not as strong now”) and Sleijpen have already been qualifying — leaving Schnabel’s upside-risk framing from last week as the increasingly isolated hawkish position on the committee.
InvestingLive — France June preliminary CPI 1.8% vs 2.1% YY expected

China June PMI — Third Consecutive Expansion; Manufacturing Beats Estimates

Source: Xinhua / China.org / Global Times
Date/Time: June 30, 2026
China’s official NBS manufacturing PMI rose to 50.3 in June from 50.0 in May, beating the 50.1 consensus and marking the third consecutive month of expansion, with high-tech manufacturing exports (AI-linked semiconductors, equipment) driving the output index to 51.4 and new orders recovering to 51.2 after prior contraction; non-manufacturing (construction + services) came in at 50.2, up from 50.1; while the reading is encouraging, employment sub-indices remain in contraction at 48.4, and the broader question for China’s macro thesis remains whether fiscal transmission — now the primary recovery lever given private-sector deleveraging — is actually sustaining demand rather than this being a high-tech-led export bounce whose underlying domestic demand remains fragile.
Xinhua — China’s improving June PMIs point to stronger economic momentum

USMCA July 1 Deadline: Trump Won’t Renew; Annual Review Cycle Begins

Source: Bloomberg / Al Jazeera / Mexico Business News
Date/Time: June 29–30, 2026
The US, Mexico, and Canada are set to miss the July 1 deadline to extend the USMCA for 16 years, triggering a rolling annual review cycle instead — a mechanism that keeps the agreement technically alive but introduces prolonged uncertainty over the deal’s future structure; Trump has been explicit (”I don’t know that I’m going to renew it”), citing his original view of NAFTA as the worst trade deal in US history, while Mexico has formally requested a full 16-year extension and Canada is positioning itself as a stable alternative partner to Japan and other Asian allies; with the agreement covering 30% of global GDP and $1.7T in annual trade, the shift to annual reviews raises the cost of capital investment in North American manufacturing supply chains and creates a persistent overhang on the Mexican peso and Canadian dollar that negotiated certainty would otherwise resolve.
Mexico Business News — Trump Casts Doubt on USMCA Renewal Ahead of July 1 Deadline

Global Central Banks Plan First Net Dollar Reduction in Three Years — OMFIF Survey

Source: Bloomberg / OMFIF
Date/Time: June 30, 2026
An OMFIF survey of 90 central banks, sovereign wealth funds, and public pension funds overseeing $10 trillion in assets found that more plan to cut dollar allocations than increase them in the next decade — the first such net reduction in the survey’s history since 2023 — with 74% of respondents anticipating a moderate or significant decline in dollar holdings over five years, citing political risks tied to the US currency and expectations of a multipolar reserve system; gold is the primary preferred alternative (net 30% planning to increase holdings), and the British pound, Norwegian krone, and New Zealand dollar are secondary beneficiaries, with the trend reflecting both Iran-war geopolitical repricing and growing concern that aggressive Fed tightening under the Warsh chairmanship makes the dollar structurally unattractive as a reserve asset at current levels.
Reuters / News.am — More central banks set to shrink US dollar holdings for first time

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Germans are a sanctimonious people. Personally, I like it—its a form of authenticity in an irony-poisoned world—but I could see how if you were a Spaniard or a Greek in 2011, you’d find their lectures about your personal moral turpitude stemming from your country’s debt dynamics tiresome.

Happily, they’re also a practical people, so they’re starting to realize that the moral pedestal from which they spoke down to their Greek and Spanish neighbors was really built upon the fragile edifice of a global trading system that’s no longer fit for purpose.

The Wall Street Journal covers this shift

But as Michael Pettis points out, they get the framing wrong.

WSJ: “Germany’s famously open economy was its greatest economic asset, delivering almost 20 years of uninterrupted growth and turning it into one of the biggest winners of globalization.”

I think I would have framed this differently.

Germany’s trade competitiveness for a long time was based on its ability both to suppress household income growth relative to productivity growth (as it did, for example, after the 2003-5 Hartz reforms), and to keep its currency cheap (as it did, for example, through adoption of the euro).

Under our current form of globalization, in other words, we experience an example of the Kalecki paradox, in which wage-suppression policies that allow one country to grow faster than its trade partners are actually bad for overall global growth – to the extent, anyway, that consumer demand drives investment among its trade partners.

In this system, all countries are under pressure to suppress wage growth in order to expand manufacturing and retain manufacturing employment, but the “winner” is the one who is able to do it most effectively.

For many years, when much of China’s high saving was directed into domestic investment, Germany was one of the main winners from this system. But as Chinese investment became increasingly unproductive, Beijing began trying to rein in the debt needed to fund so much unproductive investment.

This process, of course, took off after the 2021-22 property crash, and once that happened, Germany’s ability to benefit from the Kalecki paradox evaporated, as it quickly became one of the main losers of the system.

The point is that the problem isn’t China. The real problem is a system that rewards countries for implementing policies that undermine overall global growth. The good news is that for many years, when Germany was able to exploit the global trade regime, it was also one of the greatest defenders of this system. Now that it is on the losing side, German policymakers are increasingly recognizing how damaging a system it is.

There is nothing new about this. If you read the economic debates between the UK and the US in the 1920s, a period when US productivity soared even as wages remained stagnant, it was the UK that complained about the trade imbalances. The US insisted that its huge trade surplus was simply the consequence of more efficient manufacturing techniques and harder-working people. The US of course abandoned that argument in the 1970s, when it lost its trade surplus.

In the economic debates of the 1980s, it was the US who complained about trade imbalances, and Japan who insisted (what else?) that its huge trade surplus was the result of more efficient manufacturing techniques and harder-working people. No one in Japan makes such a silly claim anymore.

In the 2000s, of course, Germany rather patronizingly explained to the rest of Europe that if only they could become as efficient in manufacturing and as hard-working as the Germans, they too would be in just as good a shape. So much for that claim.

Meanwhile our trading system continues to reward policies that depress global growth by putting downward pressure on wage growth, or that, alternatively, force the world to encourage rapid increases in debt in order to counter the impact of lower wage growth.

That is why the real solution isn’t a global alliance against China. While this may help defuse current tensions, it won’t change a system that will continue to reward bad behavior – i.e. household income-suppressing policies – by allowing countries to externalize the costs of this bad behavior through large, persistent trade surpluses. And this means that it will continue to support increases in income inequality within countries.

Whether Germany actually realizes that the global order is stacked against them or not, the recognition that they are no longer simply able to carry on exporting their way to prosperity represents a sea change in their policy thinking.

This should have been obvious to them 10 years ago, but they were too busy getting high on their own supply back then.

But as I always say (ask my wife how annoyed she is by me always saying this), the best time to plant a tree was 20 years ago, but the second best time is today.

News Scan

Iran War: Tit-for-Tat Strikes Then Second Ceasefire; Qatar Talks Set for Tuesday

Source: Bloomberg / Time / Reuters
Date/Time: June 27–29, 2026
After the Ever Lovely container ship attack on June 25–26, the war cluster escalated sharply before de-escalating again: the US struck Iran in retaliation, Iran responded by hitting a Qatari oil tanker, and the US struck again overnight Saturday June 28 — three rounds of fresh combat within 72 hours of the June 17 MOU’s “fragile truce.” Both sides then agreed to stand down ahead of Qatar talks scheduled for Tuesday July 1, restoring the ceasefire framework but leaving the fundamental negotiating gaps (nuclear program, ballistic missiles, toll-free Hormuz access) unresolved. Bloomberg’s June 29 data show Hormuz commercial traffic is still materially below pre-war levels despite the renewed stand-down, and the attack sequence has reset insurer risk models for the strait, meaning freight rates and energy derivatives are now pricing a structurally higher conflict premium even into the resumed-talks scenario.
Time -- U.S. and Iran Agree to Stand Down, Resume Talks

Warsh Makes Global Debut at ECB Sintra Forum; Markets Price Hikes, Not Cuts

Source: Bloomberg / US News / Reuters
Date/Time: June 27–29, 2026
Fed Chair Kevin Warsh (sworn in May 22) made his first international appearance at the ECB Forum on Central Banking in Sintra, Portugal (June 29–July 1), joining Lagarde, Bailey, and Macklem in what amounts to the most watched central banker panel since 2022. Warsh held rates at 3.50–3.75% at the June FOMC and adopted a deliberately “low-information approach” on forward guidance — a stark break from the post-Powell communication playbook that is itself a policy signal. The backdrop: PCE is running at 4.1% (highest since April 2023), CPI at 4.2%, and rate markets have flipped to pricing hikes, not cuts. Warsh’s willingness to sit at the global table without signaling relief reads as an early establishment of institutional independence from White House pressure; any language at Sintra linking Fed action to incoming inflation data — rather than political timelines — would represent his first explicit reaction function intel and a significant repricing signal for September.
US News / Reuters -- Supreme Court Ruling, ECB Conference Likely to Further Frame Fed Chief Warsh’s Early Tenure

PBOC Overnight Rate Debuts at 1.25%, Below 1.35% Consensus — De Facto Easing Signal

Source: Bloomberg / Reuters / Investing.com
Date/Time: June 29, 2026
The PBOC conducted 300 billion yuan ($44B) of overnight reverse repurchase agreements Monday in the debut of its new overnight policy tool — completing the June 26 preview (when the Bloomberg survey put consensus at 1.35%). According to Reuters sources, the rate came in at 1.25%, 10 basis points below the survey median and 15 basis points below the 7-day reverse repo rate, which the PBOC maintained at 1.40%. The bank did not publicly disclose the rate in its statement — a deliberate choice to avoid challenging the 7-day instrument’s primacy — but at 1.25%, the overnight rate sets a corridor floor that is a de facto easing lean: money-market borrowing costs will track lower, credit conditions will ease at the margin, and the operational shift from ad hoc tools to a standing overnight facility narrows the policy corridor from 70bp to 50bp. For a system where fiscal is effectively the only viable recovery lever (private sector deleveraging has eliminated the credit transmission channel), even a marginal easing via rate corridor compression carries macro signal value about the PBOC’s assessment of how much demand support is needed.
Reuters / Investing.com -- China debuts overnight reverse repos at 1.25%, sources say

ECB’s Schnabel: Upside Inflation Risks Remain Despite Hormuz Peace Deal

Source: Bloomberg / Athens Times
Date/Time: June 27, 2026
ECB Executive Board member Isabel Schnabel, speaking at the Petersberger Summer Dialogue in Königswinter, warned that food, goods, and services inflation all face upside risks despite the US-Iran ceasefire and falling oil spot prices. Her argument: energy price shocks don’t reverse cleanly — they feed into supply chains, manufacturing pass-through, and wage-setting over 12–18 month lags, meaning the ECB’s June hike (which brought the deposit rate to 2.25%) was justified and the hiking cycle is not complete. Schnabel is an Executive Board member and the most hawkish member of the ECB’s top tier; her explicit rejection of the “peace deal ends the inflation story” narrative is direct reaction function intel, indicating the ECB will need hard data (sustained CPI deceleration, not just oil spot softness) before pausing — and Spain’s flash June CPI, printing 3.6% against a 3.4% consensus, arrived the same morning as Kazaks’ remarks to validate her thesis.
Athens Times -- ECB’s Schnabel Warns of Upside Inflation Risks Despite US-Iran Deal

Spain Flash CPI June: 3.6% vs. 3.4% Expected — Inflation Sticks Above ECB Target

Source: Bloomberg / InvestingLive
Date/Time: June 29, 2026
Spain’s preliminary June CPI held at 3.6% year-on-year, coming in above the Bloomberg consensus of 3.4% and remaining nearly double the ECB’s 2% target. Transport and energy costs are the primary culprits, with the transmission lag from the Iran-war oil spike still working through to consumer prices despite spot crude’s recent relief. Spain’s full-year 2026 inflation forecast has been revised to 3.5%, and the result is directionally consistent with Schnabel’s Sintra-weekend warning: the Hormuz peace deal’s energy price relief does not reverse embedded inflation fast enough to justify the ECB signaling a pause. For a eurozone-wide picture, Spain’s reading is the first major flash print ahead of the ECB’s July meeting, and a 3.6% outturn — in an economy that Spain’s own government simultaneously upgraded its growth forecast for — suggests the energy shock has been partially absorbed by demand strength, which is precisely the inflationary combination (demand resilience + cost pass-through) that would keep the ECB on a hike trajectory into September.
InvestingLive -- Spain June preliminary CPI 3.2% vs 3.0% YY expected

ECB’s Kazaks: “No Need for Multiple Hikes in a Rushed Way”; Probability of Negative Scenarios Has Fallen

Source: Bloomberg / InvestingLive
Date/Time: June 29, 2026
ECB Governing Council member Martins Kazaks said Monday that the probability of severe negative economic scenarios has fallen “massively,” and that the ECB sees no need to deliver multiple rate hikes in rapid succession. With markets pricing just 28bp of additional tightening for all of 2026 and the next hike expected no sooner than September, Kazaks’ comments confirm the ECB’s pivot to a genuinely data-dependent pace — hiking is still the direction, but the committee will assess each meeting on incoming data rather than committing to a sequence. This is the more dovish counterweight within the ECB cluster to Schnabel’s hawkish warnings: the Executive Board (Schnabel) is watching for second-round effects and upside risks; the Governing Council (Kazaks, Latvia) is watching for overdoing it given that the war-driven shock is structurally easing. The tension between these two positions will define the September decision, and the Spain CPI upside surprise (same day) marginally weights the balance back toward Schnabel.
InvestingLive -- ECB policymaker Kazaks says probability of negative scenarios has fallen massively

Japan Retail Sales May: 5.3% YoY vs. 3.2% Consensus — Third Consecutive Month of Gains

Source: Bloomberg / Japan Times / InvestingLive
Date/Time: June 28–29, 2026
Japan’s retail sales rose 5.3% year-on-year in May against a consensus of 3.2% — a massive positive surprise that confirms the third consecutive monthly gain driven by wage growth and government cost-of-living subsidies. Monthly growth was 1.9% versus a 0.6% forecast. Auto sales led at +23.7% year-on-year, signaling genuine household confidence rather than just relief spending, and department stores (+6.9%), machinery (+14.5%), and general retail (+8.9%) all showed broad-based strength. For the BOJ’s normalization thesis, this is the demand-side validation that the 1.0% rate is not choking domestic spending — the wage-price dynamic is intact. The BOJ’s June Summary confirmed a 7-1 vote for the 1.0% hike with broad support for continued gradualism, and retail data of this magnitude strengthens the case for the October hike call that Tokyo CPI’s June acceleration had already pulled forward from December.
InvestingLive -- Japan retail sales surge 5.3% in May on wages and subsidies, smashing forecasts

Japan Government Policy Draft Nudges BOJ to “Support Private Demand” — First Takaichi Constraint on Hiking Path

Source: Bloomberg / Reuters / Yahoo Finance
Date/Time: June 28, 2026
Japan’s government circulated the draft of Prime Minister Takaichi’s first Basic Policy blueprint, which calls for “appropriate monetary policy that supports private demand through stable price rises” — language that frames BOJ rate hikes as conditional on supporting, rather than leading, the government’s reflation drive. The draft explicitly invokes legal provisions requiring the BOJ to coordinate policy with the government and asks Ueda to take government economic measures into account. While not a direct instruction to pause hikes, the framing reverses the post-2024 dynamic in which fiscal and monetary policy moved on independent tracks: Takaichi is asserting political ownership over the rate path heading into the July finalization. Against the backdrop of a May retail sales surge (+5.3%) and Tokyo CPI acceleration, the BOJ has the data to justify continued normalization — but the policy draft introduces a new constraint: the government’s political timeline for reflation, not just inflation data, will now be a visible input into BOJ communication.
Yahoo Finance -- Japan government reportedly calls for appropriate monetary policy in draft plan

BOE Chief Economist Pill: Brexit Has Made UK Inflation Spirals Structurally More Likely

Source: Bloomberg / BM Magazine / ActionForex
Date/Time: June 29, 2026
Bank of England Chief Economist Huw Pill said Monday that Brexit has permanently increased the UK’s vulnerability to “self-sustaining momentum” in inflation — not as a one-time shock, but as a lasting structural shift the BOE must now incorporate into its models indefinitely. The mechanism: new trade barriers with the EU (the UK’s largest trading partner) created supply-chain friction that raises the baseline cost level, and the end of free movement eliminated the labor market’s automatic stabilizer that had previously dampened wage spirals in tight markets. With the BOE maintaining Bank Rate at 3.75% in June and inflation still above target, Pill’s framing shifts the dovish end of the distribution — any cut debate must now account for a structurally higher neutral rate for the UK vs. pre-Brexit, meaning the BOE’s rate floor is higher than its pre-2016 models would have implied. This pairs directly with Burnham’s spending ambitions and war bond proposals: a new government with expansionary fiscal plans inherits an economy where the CB’s own chief economist has just told markets the inflation baseline is permanently elevated.
BM Magazine -- Brexit has left Britain more prone to runaway inflation, says Bank of England chief economist

Burnham Pledges “Biggest Devolution in Modern Times”; War Bond Proposal Revives; UK Gilt Yields Edge Up

Source: Bloomberg / Fortune / CNBC
Date/Time: June 28–29, 2026
Andy Burnham, the frontrunner to replace Keir Starmer as UK Prime Minister (nominations close July 9), used his first major leadership speech to pledge England’s largest-ever devolution of power and indicated openness to war bonds — tax-exempt 10-year gilts exempt from inheritance tax, targeted at raising £10B+ in year one at rates roughly 0.5 percentage points below market gilts. While war bond issuance would technically be less expensive than standard gilts for the government, it would add to total public debt and expand the BOE’s liability picture. UK gilt yields edged up Monday as markets assessed the fiscal profile: Burnham’s devolution plans and unresolved wealth/property tax questions add uncertainty to the UK spending path, and the bond market’s prior experience with Burnham (gilts slumped when he challenged Starmer in May) means he carries a structural credibility discount even as he tries to placate markets. Pill’s Brexit inflation-spiral warning (see story 9) frames the BOE’s constraints: a fiscally expansionary new PM inherits a CB that has told markets the neutral rate is permanently higher.
Fortune -- Burnham’s rise revives talk of war bonds to fund the UK military

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

I’m not going to lie, I’m mailing it in today. I don’t have much to say, so just highlighting an interesting tweet:

Zooming in on the highlighted text:

Many commentators have highlighted that, despite its promise, AI-driven productivity has yet to show up in the aggregate statistics.

My fondness for anecdata is well-documented (see below), so I might be over-indexing on the sort of qualitative assessment the Orange Book delivers, but I think the anecdotes are exactly where you’d expect this sort of shift to show up first.

It will be interesting to see if this flows through to aggregate productivity statistics further down the line. By then it will be too late to invest on, but at least we’ll have an answer.

News Scan

First Attack on Vessel in Hormuz Since Ceasefire; Rubio Says No Tolls Allowed in Final Deal

Source: Bloomberg / CBS News / CNBC
Date/Time: June 25–26, 2026
A container ship identified as the Ever Lovely was struck by an unknown projectile near the Oman coast — the first attack on a vessel since the US-Iran ceasefire came into effect. No crew injuries were reported, but the bridge was damaged. Traffic continued to flow in both directions on Friday and Iran has not publicly acknowledged the strike, leaving open the question of whether a rogue IRGC faction or proxy carried it out. The attack comes as US-Iran talks are still working through ballistic missile and nuclear inspections issues over the 60-day MOU window, and it directly tests whether the ceasefire can hold: Secretary of State Marco Rubio used the attack to restate in explicit terms that a final peace deal will require the strait to remain toll-free, warning that allowing Iran to charge transit fees would set a precedent cascading to every maritime chokepoint globally. The fragility of the ceasefire is now the central variable in the oil price and rate-path calculus; a second attack or Iranian acknowledgment of the first would materially re-price the September Fed hike probability and energy-driven inflation expectations simultaneously.
CNBC -- Shipping rebounds in Strait of Hormuz one week after U.S.-Iran deal

US PCE Hits 4.1% in May — Core Above Estimate; September Fed Hike Squarely in Play

Source: CBS News / CNBC / QZ
Date/Time: June 25, 2026
The Fed’s preferred inflation gauge rose 4.1% year-on-year in May, the highest since April 2023, with core PCE at 3.4% — a tick above the 3.3% consensus. The Iran war reignited the price cycle through oil and gasoline (fuel oil +58.9% YoY), which then transmitted into services: restaurant meals, hotel rooms, auto repairs, and healthcare all rose sharply, meaning the inflation story has now moved well beyond energy into demand-adjacent categories. The June 17 FOMC held, but the projections already flagged intensifying concern, and with this print traders have now circled September as the most likely date for the first hike in this cycle. Bloomberg’s economist survey following the release revised the consensus Fed call to on-hold through 2027 — a shift that, combined with Warsh’s dollar-supportive framing, is compressing rate-cut expectations across the curve and re-opening the stagflation narrative just as the Hormuz situation stabilizes.
CBS News -- The Fed’s preferred inflation gauge shows prices rising at fastest pace in 3 years

Goolsbee: ‘Inflation Side of Mandate Is Clearly the Problem’; Williams: Rates Well Positioned

Source: Bloomberg / CNBC / FXStreet
Date/Time: June 25, 2026
Two Fed officials spoke in the immediate wake of the PCE print. Chicago Fed President Goolsbee described core inflation as “still well too high and trending the wrong way” and explicitly named the inflation side of the mandate as “clearly the problem” — the strongest language he has used this cycle, signaling that even the committee’s doves are no longer able to balance inflation against labor market concerns. New York Fed President Williams, considered more influential by markets given his role, was modestly more optimistic but confirmed rates are “well positioned” and stressed the “imperative” of restoring the 2% goal, explicitly ruling out any near-term easing. Both statements cluster neatly with the PCE print to paint a committee that is moving from a hold posture toward a tightening posture as the war-driven inflation proves stickier than the Bessent “transitory” framing suggested.
CNBC -- Chicago Fed President Goolsbee says inflation is too high; Williams sees price pressures easing

Apple Hikes Mac and iPad Prices 20%+ as AI DRAM Shortage Hits Consumer Electronics

Source: Bloomberg / Al Jazeera / CBC
Date/Time: June 25–26, 2026
Apple raised prices across its Mac and iPad lineup by 20% or more globally, citing an unprecedented surge in DRAM and storage costs driven by AI datacenter demand: DRAM contract prices rose approximately 98% in Q1 2026 alone, with NAND up 234% for the full year per Gartner, as Samsung, SK Hynix, and Micron have systematically reallocated capacity toward HBM chips for AI accelerators. The base MacBook Air rose from $1,099 to $1,299; the iPad Pro from $999 to $1,199. Apple fell 6.15% on Thursday — its biggest single-day drop in four months — and triggered a broader Asian tech selloff in the overnight session. This is the moment the AI capex supercycle crosses the threshold from a datacenter story into a consumer CPI story: DRAM price increases are now flowing directly into core goods prices at retail, adding a second transmission channel (after energy services) to the already-elevated PCE reading and shortening the timeline before AI infrastructure costs show up as a measurable contribution to core inflation.
Al Jazeera -- Apple, Microsoft hike prices over surging chip costs

ECB Consumer Inflation Expectations Fall Sharply; Traders Now Price Less Than One More Hike in 2026

Source: Bloomberg
Date/Time: June 26, 2026
The ECB’s May consumer expectations survey showed a sharp drop in short-term inflation perceptions — the clearest household-level evidence yet that the oil price relief following the Hormuz deal is transmitting into European inflation psychology. Simultaneously, traders have pared ECB rate bets to below a full additional 25bp hike for 2026, following the ECB’s first hike since 2023 at its June meeting (deposit rate now 2.25%). The two stories together suggest the ECB hiking cycle may have already reached its practical end: consumer expectations are re-anchoring downward on the energy channel, and markets are positioning for a scenario where the June hike is the last — even as headline inflation still runs above target and oil continues to represent an upside risk via any Hormuz re-escalation. The ceasefire fragility visible in story #1 is therefore the single largest tail risk to this repricing.
Bloomberg -- Traders Pare ECB Rate Bets to Below Quarter-Point Hike in 2026

Tokyo CPI Picks Up for First Time in Eight Months; BOJ October Hike Call Brought Forward

Source: Bloomberg / Seeking Alpha / Finimize
Date/Time: June 25, 2026
Tokyo’s core CPI rose 1.6% in June, with a key trend measure hitting 1.9%, marking the first acceleration in eight months and putting the BOJ’s 2% target back in its near-term sights. Analysts brought forward their BOJ rate-hike call from December to October on the back of the print, with a second 25bp hike targeted for Q2 2027 and terminal rate held at 1.75%. The data cluster alongside the June 16 Summary of Opinions showing 7-1 committee support for continued hikes, and the BOJ’s emerging thesis that AI-linked export revenues provide a structural cushion against energy import headwinds. The October call is significant: it would position BOJ as one of the few G7 central banks hiking into the back half of 2026 simultaneously with the Fed’s expected September move, extending yen cross-rate pressure and complicating Katayama’s fiscal sustainability framing around ¥370tn in planned investment.
Seeking Alpha -- Higher Tokyo Inflation, Hawkish BoJ Comments, Up Odds Of October Hike

Starmer’s Successor Takes Shape: Burnham Frontrunner as UK Economy Starts to Stabilize; BOE Pressure Eases

Source: Bloomberg / Al Jazeera
Date/Time: June 22–26, 2026
Keir Starmer resigned as Prime Minister on June 22 following a wave of cabinet departures and poor local election results, with Labour leadership nominations opening July 9. Andy Burnham — Greater Manchester Mayor who triggered the leadership crisis by winning the Makerfield by-election — is now the clear frontrunner to become the UK’s seventh PM in a decade. Bloomberg’s assessment frames a more favorable macro handoff than markets feared: UK inflation expectations are falling with oil prices, taking pressure off the BOE and reducing the probability of the stagflation-driven gilt selloff that Burnham’s chancellor uncertainty had raised. The gilt market risk remains live nonetheless: Burnham’s chancellor pick is unannounced, his proposed business rate cuts raise fiscal arithmetic questions, and the BOE is still navigating a deteriorating labor market alongside services inflation. The leadership transition is itself a high-impact variable — markets are pricing in a centrist, fiscally disciplined successor, and any deviation in the chancellor pick or spending plans would reprice UK rates rapidly.
Al Jazeera -- Why has Keir Starmer resigned as UK Prime Minister and who will take over?

OpenAI Delays IPO to 2027 as Tech Volatility Rattles Advisers; SoftBank Tumbles

Source: Bloomberg / PYMNTS / Yahoo Finance
Date/Time: June 25–26, 2026
OpenAI is considering delaying its blockbuster IPO until 2027, citing AI sector volatility following the Apple-driven tech selloff and SpaceX’s rocky debut. Sam Altman is holding out for a $1 trillion valuation — above the $730–852B range from its last private round — and advisers presented two paths: delay to 2027 and allow financials to grow into the valuation, or accelerate at a lower price. The delay report hit SoftBank, its largest external backer, with its biggest single-day drop since August 2024. The story signals that the AI investment thesis is bifurcating: hyperscaler capex (Micron HBM sold out through 2026, Google/Meta/Microsoft datacenter build-outs) is accelerating even as public-market investors are cooling on AI equity risk, with the Apple memory shock and broad tech outflows marking the current week as the clearest AI valuation reset yet.
Bloomberg -- SoftBank’s Shares Tumble After Report of OpenAI’s IPO Delay

PBOC Survey: Overnight Reverse Repo Rate Expected at 1.35%; First Operations Run June 29–30

Source: Bloomberg
Date/Time: June 26, 2026
A Bloomberg survey of analysts shows the PBOC is expected to price its inaugural overnight reverse repo operations at 1.35% when they run on June 29–30, the first operations since the bank announced the corridor reform earlier this month. The new 50bp corridor (down from 70bp) anchors overnight rates at 7-day repo ±25bp, reducing intraday volatility and establishing the overnight rate as a policy signal anchor more aligned with major DM central bank frameworks. The 1.35% rate — if confirmed — sets the floor on Chinese short-term borrowing costs and is slightly tighter than some analysts had expected, consistent with PBOC’s stated goal of preventing excessive leverage while supporting credit transmission. The operational test of the new framework beginning Monday will determine whether the corridor reform achieves its stated goal of smoothing liquidity.
Bloomberg -- PBOC May Set New Overnight Operation Rate at 1.35%, Survey Shows

Asian LNG Buyers Expect Qatar to Let Force Majeure Lapse in July

Source: Bloomberg
Date/Time: June 26, 2026
Asian LNG buyers are anticipating that Qatar — which declared force majeure on long-term supply contracts during the Hormuz crisis — will allow those clauses to lapse in July as the ceasefire holds and shipping resumes. Qatar is the world’s largest LNG exporter and force majeure declarations effectively suspended contractual delivery obligations for buyers in Japan, South Korea, India, and China. A lapse in July would mean buyers can again enforce contract terms and expect scheduled deliveries, removing a significant structural uncertainty from Asian LNG supply just as summer demand peaks. The development is a second-order Hormuz peace dividend alongside the US diesel price normalization covered last week — it confirms that the energy supply chain disruption is unwinding across commodity types, not just oil, and provides a supply-side ceiling on European and Asian gas prices heading into the second half of 2026.
Bloomberg -- Asian LNG Buyers Expect Qatar to Let Force Majeure Lapse in July

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Leopold Aschenbrenner knows AI. He’s worked inside the labs for OpenAI, and now outside as in investor running his hedge fund Situational Awareness.

And lest you think he’s some hedge fund dilettante, he knows what he’s doing (at least when it comes to AI).

So when a reader, in response to my post on Sovereign AI, sent me some of Aschenbrenner’s written work, it was nice to see my thinking aligned with someone who knows what he’s talking about.

Aschenbrenner’s post should be read in full, but if you’ve already read my post above you basically know what it says.

I find it an insane proposition that the US government will let a random SF startup develop superintelligence. Imagine if we had developed atomic bombs by letting Uber just improvise.

Superintelligence—AI systems much smarter than humans—will have vast power, from developing novel weaponry to driving an explosion in economic growth. Superintelligence will be the locus of international competition; a lead of months potentially decisive in military conflict.

It is a delusion of those who have unconsciously internalized our brief respite from history that this will not summon more primordial forces. Like many scientists before us, the great minds of San Francisco hope that they can control the destiny of the demon they are birthing. Right now, they still can; for they are among the few with situational awareness, who understand what they are building. But in the next few years, the world will wake up. So too will the national security state. History will make a triumphant return.

As in many times before—Covid, WWII—it will seem as though the United States is asleep at the wheel—before, all at once, the government shifts into gear in the most extraordinary fashion. There will be a moment—in just a few years, just a couple more “2023-level” leaps in model capabilities and AI discourse—where it will be clear: we are on the cusp of AGI, and superintelligence shortly thereafter. While there’s a lot of flux within the exact mechanics, one way or another, the USG will be at the helm; the leading labs will (“voluntarily”) merge; Congress will appropriate trillions for chips and power; a coalition of democracies formed.

Startups are great for many things—but a startup on its own is simply not equipped for being in charge of the United States’ most important national defense project. We will need government involvement to have even a hope of defending against the all-out espionage threat we will face; the private AI efforts might as well be directly delivering superintelligence to the CCP. We will need the government to ensure even a semblance of a sane chain of command; you can’t have random CEOs (or random nonprofit boards) with the nuclear button. We will need the government to manage the severe safety challenges of superintelligence, to manage the fog of war of the intelligence explosion. We will need the government to deploy superintelligence to defend against whatever extreme threats unfold, to make it through the extraordinarily volatile and destabilized international situation that will follow. We will need the government to mobilize a democratic coalition to win the race with authoritarian powers, and forge (and enforce) a nonproliferation regime for the rest of the world. I wish it weren’t this way—but we will need the government. (Yes, regardless of the Administration.)

As for how it plays out

There are many ways this could be operationalized in practice. To be clear, this doesn’t need to look like literal nationalization, with AI lab researchers now employed by the military or whatever (though it might!).

Rather, I expect a more suave orchestration. The relationship with the DoD might look like the relationship the DoD has with Boeing or Lockheed Martin. Perhaps via defense contracting or similar, a joint venture between the major cloud compute providers, AI labs, and the government is established, making it functionally a project of the national security state. Much like the AI labs “voluntarily” made commitments to the White House in 2023, Western labs might more-or-less “voluntarily” agree to merge in the national effort. And likely Congress will have to be involved, given the trillions of investment involved, and for checks-and-balances.How all these details shake out is a story for another day.

But by late 26/27/28 it will be underway. The core AGI research team (a few hundred researchers) will move to a secure location; the trillion-dollar cluster will be built in record-speed; The Project will be on.

And when it comes to the when, sooner is better than later.

The Project is inevitable; whether it’s good is not

Ultimately, my main claim here is descriptive: whether we like it or not, superintelligence won’t look like an SF startup, and in some way will be primarily in the domain of national security. I’ve brought up The Project a lot to my San Francisco friends in the past year. Perhaps what’s surprised me most is how surprised most people are about the idea. They simply haven’t considered the possibility. But once they consider it, most agree that it seems obvious. If we are at all right about what we think we are building, of course, by the end this will be (in some form) a government project. If a lab developed literal superintelligence tomorrow, of course the Feds would step in.

One important free variable is not if but when. Does the government not realize what’s happening until we’re in the middle of an intelligence explosion—or will it realize a couple years beforehand? If the government project is inevitable, earlier seems better. We’ll dearly need those couple years to do the security crash program, to get the key officials up to speed and prepared, to build a functioning merged lab, and so on. It’ll be far more chaotic if the government only steps in at the very end (and the secrets and weights will have already been stolen).

As the reader who sent this to me said, he wishes he knew how this translated to actionable investment themes. I’m sure Aschenbrenner has an idea. I haven’t cracked it yet, but would love to hear thoughts in the comments.

News Scan

Oil Falls to Pre-War Levels as Hormuz Supply Fully Resumes

Source: Bloomberg
Date/Time: June 25, 2026, 9:02 AM GMT
WTI crude fell below $70 a barrel and Brent below $74, reaching their lowest levels since before the Iran war — roughly 40% off the war peak — as tanker traffic through the Strait of Hormuz accelerated and Gulf production came back online. The UAE is now exporting oil at approximately 85% of pre-war capacity, and Saudi Arabia is set to restart crude loading at Ras Tanura, its largest export terminal, which had been damaged by drone strikes in early March. This is the definitive price-level confirmation that the US-Iran peace framework is transmitting through the physical supply chain: oil has not just moved on optimism but is now responding to real volume restoration. For central banks, the implications are significant — headline inflation in the US, eurozone, and UK will begin falling sharply over the next 2–3 months as energy base effects turn favorable, forcing a reassessment of how much of the 2026 hiking cycle was warranted by underlying demand pressure versus war-driven supply shock.
Bloomberg -- Oil Falls to Pre-War Levels as Supply Picks Up via Strait of Hormuz

Japan Takaichi Unveils Multi-Year Budget Framework, Abandoning Primary Balance Target

Source: Bloomberg
Date/Time: June 25, 2026, 10:05 AM GMT
Prime Minister Takaichi released Japan’s Basic Policy 2026, shifting the country’s fiscal framework from a single-year primary surplus target — a constraint that has anchored Japanese fiscal policy for decades — to a multi-year rolling approach that separates “growth investments” (AI, chips, defense, green energy) from current expenditures. Under the new framework, strategic spending expected to generate returns exceeding costs is managed via long-term multi-year plans rather than counted against the annual primary balance, effectively relaxing the binding constraint that previously forced pro-cyclical cuts. The structural significance is considerable: Japan’s fiscal rules have been a persistent ceiling on the government’s ability to co-invest alongside BOJ stimulus, and removing that ceiling at the same moment BOJ is hiking — and at the same moment Japan is rolling out its ¥370T AI and semiconductor investment plan — creates a new equilibrium in JGB supply and the long-term rate structure. BOJ will need to factor a durably higher fiscal impulse into its terminal rate calculus.
Bloomberg -- Japan Unveils Multi-Year Framework as Part of Budget Reform

PBOC Shifts to Overnight Rate as Primary Policy Tool, Narrows Rate Corridor

Source: Bloomberg
Date/Time: June 25, 2026, 1:13 AM GMT
The People’s Bank of China announced it will conduct overnight reverse repurchase operations on June 29–30 as part of a broader pivot toward the overnight rate as its primary liquidity management lever, while simultaneously narrowing the interest rate corridor from 70 basis points to 50 basis points. The corridor adjustment compresses the bands on the ad hoc overnight facility to the 7-day repo rate ±25bps, reducing intraday money-market volatility and anchoring short-term borrowing costs more tightly. This represents a meaningful structural upgrade to China’s monetary transmission mechanism: by tightening the corridor and shifting emphasis to overnight instruments, the PBOC is building a more legible and responsive rate signal at exactly the moment China’s economy needs clear monetary support to complement the fiscal stimulus that is (per June 23 data) still lagging. For the deleveraging thesis, the question is whether better monetary transmission amplifies any fiscal impulse — or whether the structural private-sector debt overhang makes monetary refinement largely irrelevant regardless of instrument design.
Bloomberg -- PBOC Plans Overnight Reverse Repo in Next Stage of Policy Shift

Micron Q4 Guidance Crushes Estimates: $50B vs. $43.6B Expected

Source: Bloomberg / SEC
Date/Time: June 24, 2026 (after market close)
Micron reported fiscal Q3 results and issued Q4 guidance of approximately $50B in revenue, roughly $6.4B above the analyst consensus of $43.6B, with earnings guidance of $31/share vs. $25.84 expected. The company’s entire 2026 supply of high-bandwidth memory — the specialized chips used in Nvidia, AMD, and Google AI accelerators — is already sold out under fixed-price contracts, and demand is expected to outstrip supply for the next two to three years. This is the clearest hard evidence that the AI capex cycle has broken free of macro headwinds: despite a geopolitical shock, elevated real rates, and a significant global energy price spike, hyperscaler investment in AI infrastructure not only held firm but accelerated. For global equity markets, Micron’s beat triggered a broad tech rally and revived confidence in AI investment theses that had been under pressure since the KOSPI circuit-breaker session on June 23; for policymakers, it adds a layer of structural demand-side inflationary pressure (AI-driven capital goods prices) that operates independently of the energy cycle.
Bloomberg -- Micron Sales Forecast Tops Estimates on Insatiable Memory Demand

Iraq Threatens to Quit OPEC Unless Production Quota Is Raised

Source: Bloomberg / Arab News
Date/Time: June 25, 2026, 8:35 AM GMT
Iraq’s Oil Ministry warned it would “weigh whether to remain in or exit” OPEC if the cartel does not raise its production quota to match Iraq’s reconstruction capacity needs, following the UAE’s formal departure from OPEC on May 1 — the first member exit in the group’s history. Iraq is OPEC’s second-largest producer and has persistently argued that post-war rebuilding requires maximum output; at current prices and quotas, the fiscal pressure from constrained production is untenable. The timing is pointed: oil is now falling to pre-war levels precisely as Hormuz reopens, stripping OPEC of the supply-disruption windfall that masked internal quota tensions during the conflict. With the UAE gone and Iraq threatening exit, Saudi Arabia faces the prospect of managing a cartel that controls a shrinking share of globally relevant output — a structural erosion of OPEC’s price-setting role that matters most in the current environment where members have divergent reconstruction demands and the return of Iranian and Gulf production removes the scarcity premium.
Bloomberg -- Iraq Warns It Might Quit OPEC If It Doesn’t Get Quota Hike

BOJ Board Member: AI Export Boom Is Cushioning Japan From Oil Price Shock

Source: Bloomberg
Date/Time: June 25, 2026, 1:00 AM GMT
The Bank of Japan’s Summary of Opinions from the June 16 meeting (released June 25) includes a board member explicitly framing AI-related export demand as a structural buffer that offsets the real income drag from elevated oil prices. The reasoning: Japan’s surging exports of AI-linked semiconductor equipment, precision tools, and advanced materials are generating dollar revenues that partially neutralize the yen-denominated cost of energy imports, making the external trade shock from the Iran conflict less contractionary than a pure oil-price model would suggest. This is a meaningful addition to the BOJ reaction function established in the June 16 decision (7-1 vote for 1.0%): the board is not just watching oil and wages in isolation, but is building an integrated model that includes AI-export strength as a new offsetting variable. The practical implication is that a sustained oil price decline — which is now materializing — should cause BOJ to raise, not lower, its assessment of the hiking path, since the AI-export buffer is additive to the energy relief rather than substituting for it.
Bloomberg -- BOJ Sees AI Export Boom Cushioning Economy From Oil Price Shock

UK Business Lobby Warns Burnham: More Tax Hikes Would Push Firms Over the Edge

Source: Bloomberg
Date/Time: June 25, 2026, 4:00 AM GMT
Britain’s major business lobbying organizations — including the CBI — issued a formal warning to Andy Burnham, Labour’s frontrunner to succeed Starmer as PM, urging him not to layer additional tax pressure on companies that are already absorbing the 2024-2025 National Insurance hike, capital gains tax increase, and broader Labour fiscal tightening. Burnham has confirmed he will not raise income tax, VAT, or employee NI, but has not ruled out wealth and property taxes, which business groups argue carry spillover effects onto business investment decisions. The statement follows property developers and high-net-worth individuals exiting the UK ahead of the tax regime change, suggesting that the capital sensitivity of the current UK tax burden is already in the upper range of historical tolerance. For the BOE, the question is whether a Burnham government provides more or less fiscal headroom relative to Starmer: his infrastructure and nationalization ambitions imply higher gilt issuance, while his tax constraints imply continued deficit pressure — a combination that keeps the stagflation trade alive even as energy prices normalize.
Bloomberg -- UK Plc Warns Burnham More Tax Hikes Would Push Firms Over Edge

Senate Reverses Iran War Powers Vote as Key Republicans Flip

Source: CBS News / CNN
Date/Time: June 24, 2026
The US Senate walked back its June 23 war powers rebuke of President Trump, with Republican Senators Rand Paul and Bill Cassidy — who had joined Democrats in passing a 50-48 resolution directing the removal of US forces from the Iran conflict — reversing their votes the following day (Paul voted present, Cassidy voted against). The initial vote had marked the first time a war powers resolution successfully passed both chambers of Congress; the reversal means no binding constraint was ever formally enacted. The political significance runs in two directions: domestically, it confirms that Trump retains sufficient Republican caucus loyalty to block any formal congressional restraint on his war authority even at the peak moment of bipartisan unease; externally, it removes a potential legislative lever that Iran negotiators might have cited as evidence of domestic US pressure to reach a deal — eliminating a bargaining dynamic from the negotiating table just as the 60-day technical working groups begin their work.
CBS News -- Senate rejects measure to restrict Trump’s Iran war powers as key Republicans shift votes

Hungary Bonds Rally to Near UK Gilt Yields as Pro-EU Turn Deepens

Source: Bloomberg
Date/Time: June 25, 2026, 7:00 AM GMT
Hungarian sovereign bond yields have compressed sharply under the new post-Orbán government’s pro-EU reform agenda, bringing them to within striking distance of UK gilt yields — a level that would have been unthinkable during the Orbán era, when Hungary was locked in near-permanent confrontation with Brussels over rule-of-law conditions that blocked EU fund disbursements. The convergence trade reflects investors pricing in two things simultaneously: Hungary’s reintegration into EU structural fund flows (previously withheld) and the government’s credible pivot toward eurobond-compatible fiscal governance. The broader implication is that the European periphery is bifurcating — not just between stronger and weaker sovereigns, but between governments that are gaining from the EU fiscal expansion narrative and those that are falling behind. Hungary’s rally is the mirror image of structural risk in countries where political friction with Brussels remains elevated, and it validates the ECB’s argument that permanent EU fiscal instruments (eurobonds, defense funds) would compress fragmentation premia across the bloc.
Bloomberg -- Hungary Yields Approach UK Gilts as Pro-EU Turn Fuels Rally

Sweden Arms Coast Guard Vessels as Baltic Tensions Escalate

Source: Bloomberg
Date/Time: June 25, 2026, 9:13 AM GMT
Sweden announced it is fitting machine guns to civilian coast guard vessels in response to escalating Russia-linked hostile activity in the Baltic Sea, marking a qualitative shift in Nordic defense posture: not just hardening military assets but militarizing civilian maritime infrastructure. Sweden’s move follows a sustained pattern of suspected cable sabotage, GPS jamming, and shadow fleet incidents in Baltic waters, and differs from prior responses in that it represents an active new armament decision rather than another incident report. The broader implication is that NATO’s northern flank is entering a more permanent elevated-readiness posture — one that will sustain higher defense spending trajectories in Sweden, Finland, Denmark, and the Baltics regardless of how the Iran war resolves, adding to the structural fiscal pressure that European governments face while also justifying the EU joint borrowing and defense fund narratives that underpin the eurobond convergence trade.
Bloomberg -- Sweden Fits Guns to Coast Guard Vessels as Baltic Tensions Rise

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

For a brief moment, it seemed that we would all become location-independent, free to live and work wherever we please, not constrained by the bounds of geography. During that moment, it also seemed that we’d never go outside without a mask again, so let this be a reminder that things aren’t always what they seem.

Still, for a time it felt like you could live in Boise or Greenville or Vermont and still have a career. Sadly, as everyone seems to have found out, that dream is dead. Return to office is now the norm.

Some recent research from a team from the University of Pennsylvania made up of organizational psychologist Adam Grant and my former colleague Courtney Elliott has found that the reason for this is less economic and more psychological. In a recent New York Times op-ed, they write:

The connection between narcissistic personality traits and wanting people in the office full time is not coincidental — it’s causal. In one experiment, we got leaders to reflect on the role that a bold, assertive ego played in the success of Steve Jobs as Apple’s chief executive and Larry Ellison as Oracle’s. After participating in that exercise, leaders were more likely to oppose remote work.

None of this is to say that individual leaders who reject remote work are necessarily egomaniacs. Many factors influence workplace policies around flexibility. But our data does show that overall, self-centered leaders tend to struggle with the idea of employees making independent choices about where to work. Psychologists have long suggested that narcissism is like a drug — it leaves people craving a regular supply of attention and validation. Remote work deprives leaders of access to that supply.

When people aren’t in the office, it’s harder to command and control. Leaders can’t intimidate by hovering over cubicle desks and slamming doors. They can’t establish their dominance by summoning people to a conference room and pounding their fists on the table. They can’t even make direct eye contact to stare people down.

Remote work also prevents leaders from basking in the glow of employee reverence. Instead of standing out in the corner office, leaders are lost in a sea of equal squares on a screen. Instead of rapt attention, they’re met online with boredom, fatigue and interruptions from partners, children and pets. Instead of being showered with immediate gratification, they get glitchy facial expressions and delayed replies. Sycophantic reassurances from employees just don’t have the same effect if they’re on Slack.

Self-centered leaders often respond to these threats by tightening their grip. They declare that people are shirking from home instead of working from home. They threaten to fire people who aren’t on site five days a week.

Rigorous evidence shows that forcing people to come in every day backfires. Take it from studies of over 450 companies and over three million employees: Return-to-office mandates fail to increase financial returns. They succeed only in motivating star employees to quit, reducing the satisfaction of those who stay and discouraging new talent from joining. Experiments at tech companies and nonprofits show that letting people work from home part of the week boosts happiness and decreases turnover by a third — without any cost to performance. In many cases, those employees even get more done, because they don’t have to spend time commuting and don’t get distracted by office interruptions.

The only thing I have to add is that, increasingly, return to office is really just reduction-in-force in disguise. When the convenience yield of labor was high, employees had a lot of bargaining power and could manage to stave off having to come into the office. Now, though, as that convenience yield has fallen, return to office mandates mostly serve as a way to try and shake out any weak hands in the workforce before having to resort to layoffs and pay severance.

I can’t speak to the personality traits of the leaders doing the laying off, but anyone who’s ever received a “we’ve made a lot of tough decisions today and really, when you think about it, we’re doing those laid off employees a favor — I’m really a hero when it comes down to it,” email can come to their own conclusions.

News Scan

Iran-US Nuclear Inspection Dispute Fractures 60-Day Framework

Source: NPR, NBC News, PBS News, CNN
Date/Time: June 23–24, 2026
The 60-day ceasefire framework signed June 17 has hit its first serious fracture: the US and Iran are publicly contradicting each other on two core elements of what was agreed. President Trump insists Iran consented to IAEA inspectors returning to bombed nuclear sites; President Pezeshkian publicly denies it, saying nuclear inspections were never discussed. Pezeshkian also declared during a visit to Pakistan that Iran’s ballistic missile program is “non-negotiable” and will never be subject to talks — contradicting the scope of what the US framed as the deal. Technical working groups are now trying to convert the Islamabad MOU into a permanent agreement, but the public factual contradictions signal that the gap between what each side believes was signed is wider than markets priced at the June 17 ceremony. The ceasefire is holding and Hormuz is physically reopening, but a deal collapse within the 60-day window is now a live tail risk that warrants monitoring.
NPR -- A U.S.-Iran dispute over nuclear inspections clouds work to finalize a war-ending deal

Hormuz Physical Recovery Continues — Tanker Rates Still at 897% of Benchmark

Source: Bloomberg
Date/Time: June 24, 2026
Despite the diplomatic fracture in story #1, ships are moving: nearly two dozen vessels transited Hormuz in the past 24 hours (7 cargo + 7 tankers outbound), continuing the recovery from roughly 20 vessels on June 19 — though still far from the prewar pace of 100+ per day. Meanwhile, a supertanker was provisionally booked in the Persian Gulf at 897% of benchmark freight rates — nine times normal — signaling that acute vessel shortages persist even as traffic technically recovers. The divergence between “ships are moving again” and “rates at 897% of benchmark” is the real market signal: the Hormuz reopening is nascent and fragile, and the structural deficit in available vessels will take weeks or months to close. Any diplomatic re-escalation would hit shipping markets that have no slack.
Bloomberg -- Oil Tanker Booked in Gulf at 897% of Benchmark Freight Rate

US Diesel Falls Below $5 — First Hormuz Peace Dividend Reaches US Energy Costs

Source: Bloomberg
Date/Time: June 24, 2026
US diesel prices fell below $5 per gallon for the first time since mid-March 2026, the first tangible hard evidence that Hormuz reopening is transmitting into US energy costs. At its peak, war-driven supply disruption had pushed diesel above $6/gallon, directly contributing to the CPI surge to 4.2%. The sub-$5 print is not a price-level story — it answers the “is the Hormuz deal actually working?” question with hard data. The policy channel is direct: trucking costs feed into producer prices and eventually core goods CPI within 2-6 weeks, meaning June and July PPI data should show a mechanical step-down if diesel continues declining. If diesel approaches its pre-war mid-$4 range, the mechanical energy contribution to headline CPI reverses sharply, potentially shifting the distribution of hawkish dots by the September FOMC meeting.
Bloomberg -- US Diesel Prices Fall Under $5, Easing Key Inflationary Pressure

BOJ Summary Affirms Hike Path Toward 2% Neutral — Sharp Deflation Dissent Named

Source: Bloomberg, Japan Times, InvestingLive
Date/Time: June 24, 2026
The Bank of Japan’s Summary of Opinions from the June 16 meeting — at which the board raised the policy rate by 25bps to 1.0% in a 7-1 vote (highest since 1995) — showed broad support for continued rate increases. Multiple members explicitly argued that Japan’s policy rate remains below the estimated neutral rate of approximately 2% and should be raised gradually every few months to provide greater policy flexibility and avoid more rapid tightening later. The dissenter warned that higher rates risk simultaneously curbing investment, weakening aggregate demand, and triggering deflation — a stagflation-in-reverse scenario. Market pricing has shifted: roughly 90% of economists now expect another hike by December, with the projected cycle peak revised up to ~1.75%. The summary’s explicit quantification of the neutral rate target (~2%) and the gradual timeline (”every few months”) is new reaction function intel, directly informing the yen carry trade and JGB duration positioning.
Bloomberg -- BOJ Summary Affirms Rate Hike Stance as Inflation Risks Mount

Japan Unveils $2.3 Trillion Investment Plan — ¥101.6T for AI and Chips Alone

Source: Bloomberg, Nikkei, Reuters
Date/Time: June 24, 2026
PM Takaichi officially released documents from a policy advisory panel setting out Japan’s ¥370 trillion ($2.3T) investment target for the 14 years through March 2041, with ¥101.6T earmarked for AI and semiconductors alone across 17 strategic sectors including defense, space, and shipbuilding. Government spending is designed as a catalyst to leverage larger private commitments, not the primary source. The macro implications are layered: (1) fiscal expansion reinforces the BOJ’s path toward neutral, adding domestic demand precisely when inflation is already above target; (2) the defense and chip components are a direct response to China’s mineral throttling and Hormuz-era supply chain vulnerability; (3) the AI/chip scale — comparable to major US and EU programs — represents a generational shift in Japan’s industrial strategy from export-led manufacturing toward strategic tech sovereignty. The plan’s formal release coincides directly with China’s mineral squeeze, underlining that Tokyo views supply chain independence as the central strategic problem.
Bloomberg -- Japan Unveils $2.3 Trillion Investment Plan for Next 14 Years

Bessent at Economic Club: Warsh Confidence, Inflation “Coming Down as Conflict Subsides”

Source: Bloomberg, CNBC
Date/Time: June 24, 2026
Treasury Secretary Scott Bessent, speaking at the Economic Club of New York, expressed confidence in Fed Chair Kevin Warsh and predicted inflation will retreat as the Iran conflict subsides. The framing is notable: Bessent is offering a structurally “transitory” interpretation of elevated CPI (4.2% YoY, a 3-year high), attributing the surge to the war shock rather than monetary or demand excess. This positions the Treasury as expecting the Fed’s 9-of-18 hawkish dots to become moot as Hormuz reopens and energy costs fall. The tension is real: Warsh himself emphasized “unambiguous and unanimous” price stability commitment at the June 17 presser, while Bessent is publicly framing the hike path as conditional on the conflict duration. A Treasury-Fed narrative divergence at this stage of the cycle is directly actionable for rate markets, and it clusters with story #7.
Bloomberg -- Bessent Signals Confidence in Warsh, Sees Inflation Coming Down

Options Market Challenges Aggressive FOMC Hike Bets — SOFR Volumes Doubled Post-June Decision

Source: Bloomberg
Date/Time: June 23, 2026
Options traders are pushing back sharply on the futures market’s aggressive hike pricing following the June 17 FOMC. Trading volumes in SOFR contracts doubled the day after the Fed decision, with the majority of new positions targeting fewer hikes than futures markets implied — where a hike had been priced as early as October. The underlying dot plot was evenly split: 9 of 18 members project at least one hike this year; 9 project unchanged or a cut. The options flow suggests institutional money is positioning for the Bessent scenario — that war-driven inflation is temporary and the 9 hawkish dots overstate the actual hiking probability. The SOFR volume surge is a quantifiable signal of institutional doubt about the hike path, not just bank commentary, and it directly sets up a sharp repricing if Iran peace-dividend disinflation materializes in Q3 data.
Bloomberg -- Options Trades Highlight Doubts Over Prospect of US Rate Hikes

Australia Core Inflation Beats at 3.6% — RBA Hawkish Path Confirmed

Source: Bloomberg
Date/Time: June 24, 2026
Australia’s trimmed-mean inflation rose to 3.6% in May (above the 3.5% consensus), keeping the Reserve Bank of Australia well above its 2-3% target band. The RBA has raised its cash rate to 4.35% and projected trimmed-mean inflation peaking at 3.9% in Q2 2026, with underlying inflation staying above 3% until mid-2027. The May beat above consensus removes any scenario where the RBA can pause; Australia is one of the few developed economies where core inflation is accelerating rather than easing, driven partly by energy pass-through from the Hormuz crisis and partly by domestic housing and services inflation. With the RBA on one of the steepest hiking paths in the G10, this data point directly feeds into the global policy divergence story: the RBA is hiking while Japan is just beginning and the Fed is stuck in “hold with a hike bias.”
Bloomberg -- Australia’s Core Inflation Accelerates, Keeping RBA on Alert

Xi Throttles Critical Minerals to Japan — Tungsten and Rare Earths at Zero

Source: Bloomberg, Mining.com
Date/Time: June 23–24, 2026
China has cut exports of tungsten, dysprosium, and terbium to Japan to near-zero, a squeeze running since Beijing imposed export controls after Takaichi’s November 2025 Taiwan comments. Key tungsten forms stayed at zero in May 2026; magnet-grade rare earths fell to their lowest since May 2025 when the controls first rolled out globally. Japanese industry is under real pressure, yet Takaichi is refusing to arrange a bilateral meeting with Xi at November’s APEC summit, citing personal attacks from Beijing. The deadlock has direct global semiconductor supply chain implications: Japan makes the lithography equipment that fabricates chips; China controls the rare-earth magnets and tungsten used in producing them. Japan’s $2.3T investment plan is partly a direct response to this squeeze — Tokyo is trying to reduce mineral dependence even as Beijing tightens the vise.
Bloomberg -- China Cuts Key Mineral Exports to Japan, Pressuring Takaichi’s Government

Europe Heat Wave Drives Power Prices Above €1,000/MWh — France Nuclear Shuts Down

Source: Bloomberg, Belga News Agency
Date/Time: June 24, 2026
A heat dome over western Europe pushed wholesale electricity prices in Belgium above €1,000/MWh — a multi-year high — as air conditioning demand surged. France shut down a nuclear reactor at Golfech after the Garonne River approached its 28°C regulatory thermal limit, removing dispatchable capacity at peak demand. Italian cities including Milan and Turin saw temporary blackouts. The macro significance is ECB-specific: European energy costs are now spiking from demand-side (heat wave) rather than supply-side (Hormuz), adding a compounding inflationary vector at the moment Lane and Escrivá are already signaling September rate hikes based on war-driven energy pass-through. A heat wave premium compounds the base-case ECB hike argument — September is priced at 66% — by eliminating any scenario where a rapid Hormuz peace dividend offsets services and energy inflation in Europe.
Bloomberg -- Europe Heat Wave Strains Power Supply, Sends Prices Soaring

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

China is stuck in a deflationary deleveraging.

I probably could have written that sentence any time in the past 5-or-so years, but I’m writing it today.

Before we get into it, I need to give you a little window into how I work (and by work I mean avoid doing productive things by writing these Substack posts). I spend a lot of time (too much time) reading, mostly on Twitter and Substack. But because it’s hard to find the time to do deep reading, I end up browsing and just saving a bunch of things to read later, and then mostly never going back to read them. Sometimes I do, though, and that was what I was doing today when I read this article from a month ago.

China’s growth slowed across the board in April with investment resuming declines, calling into question the government’s reluctance to add stimulus to the economy as a global energy crisis hits factories and consumers across the world.

Official data on Monday painted a picture of an economy where booming exports no longer offset deteriorating consumption at home, prompting analysts at banks including Nomura Holdings Inc. and Societe Generale SA to urge bolder measures in support of growth.

Fixed-asset investment unexpectedly shrank 1.6% in the first four months of 2026 from a year earlier, while industrial production grew 4.1% last month — the weakest in almost three years. Retail sales missed forecasts and rose just 0.2% in April, the worst reading since they contracted in December 2022, when China reopened from Covid.

Authorities “might need to step up policy support for stabilizing growth,” Nomura economists led by Ting Lu said in a report. “Beijing has no room for complacency.”

Fixed-asset investment fell in first four months of 2026 after earlier rebound

Source: National Bureau of Statistics

The breadth of the slowdown in April is putting the prospect of a more aggressive stimulus back on the agenda after China stood out in its resilience to the fallout from the Iran war. The government pulled back on fiscal spending in March, while the central bank has steered clear of even hinting at any further loosening in policy, amid ample market liquidity and weak demand for credit.

The reason this stood out to me is because I was just reading about the most recent data release today. It’s like Groundhog’s Day.

The housing market, which has been ground-zero for this deleveraging, continues to be a giant suck.

So, as ever, growing debt and growing exports are the only game in town. As Michael Pettis puts it:

It is harder than ever to find good news in China's data release today. The economy continues to be structurally locked into increasing production at the expense of consumption, even though China suffers from many years of growing excess capacity.

China's industrial output, for example, increased by 5.4% year on year in the first five months of 2026, with a 4.5% year on year increase in the month of May. This was a little higher than April’s 4.1% increase, although lower than the 5.7% increase in March.

The uglier numbers were (as always) on the consumption side. For the first five months of 2026, total retail sales grew 2.8%, just over half the pace of industrial output. Although they were barely expected to grow in May, in fact they actually fell by 0.6%, well below the disappointing 0.2% increase in April and the first decline since the end of the Covid lockdown in 2022.

For all the excited claims about consumption spending during the important May holiday, in other words, it was more than offset by the decline in spending over the rest of the month, proving, once again, that what limits household consumption is the household budget, not spending opportunities.

Meanwhile China's fixed-asset investment declined 4.1% year on year in the first five months of 2026.

Last week's trade and debt numbers reinforce the claim that China is finding it harder than ever to restructure its economy. It is expending huge resources in growing output, especially manufacturing output, but Chinese producers rely more than ever on soaring exports to offset weak domestic demand.

So far this year's numbers show that China's economy has further increased its already-excessive dependence on surging debt and soaring trade surpluses to keep GDP growth from slowing. It is not clear how much longer this growth model can be sustained before China is forced into a very difficult economic adjustment, but it is almost impossible for China to exit this model without a sharp slowdown in near-term growth, which is why, for all its promises, Beijing has been unable to adjust.

The problem, of course, is that as long as this process continues, it will increase the final adjustment costs for the Chinese economy and will further undermine manufacturing in the rest of the world.

The end of the Iran war may give China a temporary reprieve, as the growth boost for their export markets coming from this will help paper over their economic cracks, but at some point they are going to have to stop saying they’re going to rebalance towards domestic consumption and start actually doing it.

News Scan

US Treasury Issues 60-Day Iranian Oil Waiver; $12B in Frozen Assets Released

Source: Bloomberg, Al Jazeera, ANI
Date/Time: June 22–23, 2026
The US Treasury formally issued a 60-day general licence authorising Iranian crude oil, petroleum products, and petrochemicals exports through August 21, extending to banking, insurance, shipping, and USD-denominated payments. Separately, Iran’s foreign minister confirmed a deal to release $12 billion in frozen assets immediately, with $24 billion total unlocked over the negotiation window. The licence comes embedded in the 14-point MOU signed last week: Tehran agreed to permit IAEA inspectors to resume nuclear monitoring and committed to free Hormuz navigation; Washington granted the sanctions relief and asset access. This is the most concrete economic step since the ceasefire -- it converts the peace framework into actual Iranian export capacity and capital flows, setting the 60-day clock on full negotiations and giving both sides material incentives to keep talking.
Al Jazeera -- US partially lifts Iran oil sanctions amid ‘encouraging’ talks

Hormuz Tanker Traffic Resumes with Open AIS Signals; Iran Courts Asian Oil Buyers

Source: Bloomberg
Date/Time: June 23, 2026
More tankers are crossing the Strait of Hormuz with AIS transponders broadcasting openly, a direct result of the US sanctions waiver unlocking the commercial path for Iranian crude. Oil prices edged lower on the signal. Iran is simultaneously moving to re-establish Asian supply relationships, reaching out to its largest pre-war buyers -- India, China, South Korea, Japan -- under the 60-day window to lock in offtake agreements and clear a backlog of stored cargo. Prewar Hormuz traffic ran at 100+ vessels daily; the June 19 figure was ~20; a sustained recovery toward normal flow is the market’s key verification signal for whether the MOU holds. Shipowners remain cautious pending formal lifting of all blocking provisions, but the direction is unambiguous.
Bloomberg -- Hormuz Traffic Picks Up as More Tankers Cross With Open Signals

ECB Lane: “Danger Inflation Will Top 2% for Quite Some Time”; Escrivá -- Oil Rippling Into Services

Source: Bloomberg, FXStreet
Date/Time: June 23, 2026, 8:30–8:38 AM
Two ECB Governing Council members delivered hawkish inflation signals on the same morning. Chief Economist Philip Lane -- the single most influential internal ECB voice -- warned explicitly that inflation poses risks of remaining above the 2% target “for quite some time,” a formulation that rules out premature easing and aligns with a continued hiking path. ECB board member José Luis Escrivá reinforced the point from a different angle: elevated oil prices are now transmitting into transport and services costs, and the bank must monitor for second-round wage effects. These statements arrive three weeks after the ECB’s June 11 hike (first since 2023, deposit rate to 2.25%) and keep September as a live meeting. Markets are pricing ~66% odds of another 25bp in September; year-end pricing sits around 35bp of additional tightening.
Bloomberg -- ECB’s Lane Sees Danger Inflation Will Top 2% for Quite Some Time

EZ Flash PMI: Germany Services Worst Since 2022; France Contracts for Sixth Month

Source: Bloomberg, S&P Global
Date/Time: June 23, 2026, 7:15–8:00 AM
The June flash PMI cluster shows the ECB hiking into deteriorating growth. Germany’s private sector contracted for a third consecutive month, with services falling at the fastest rate since 2022, driven by higher energy costs and weakening consumer spending. France’s business activity shrank for a sixth consecutive month, with the economy described as “frail.” At the aggregate EZ level, the composite PMI came in slightly better than feared -- suggesting some resilience from Southern Europe -- but the country-level breakdown for the two largest economies is unambiguous. This is the stagflation backdrop that Lane and Escrivá were signalling earlier in the morning: the ECB is committed to additional tightening despite sequential services contractions, because the oil-driven inflation embed is judged more dangerous than the near-term growth cost.
Bloomberg -- German Business Activity Unexpectedly Worsens on Services Slump

China Pursues Austerity With First Fiscal Gap Cutback Since 2023

Source: Bloomberg
Date/Time: June 23, 2026
China narrowed its cumulative fiscal deficit for the first time in more than two years: the combined shortfall under the two main government budgets shrank 4.1% in the first five months YoY to 3.16 trillion yuan ($466 billion), with government expenditure falling 3.9% in May -- the third consecutive monthly decline. Goldman Sachs noted that fiscal policy has become “less supportive” of growth in Q2 versus Q1, compounded by falling land sales revenue and shrinking policy bank support. This is the opposite direction from what the macro situation requires: China is in a private-sector deleveraging where fiscal stimulus is the only viable recovery mechanism -- monetary policy transmission is impaired, and household and corporate balance sheets are still contracting. A sustained fiscal pullback during deleveraging is not a neutral data point; it directly risks prolonging the deflationary period and removing the one policy lever that could drive a genuine recovery.
Bloomberg -- China Pursues Austerity With First Fiscal Gap Cutback Since 2023

KOSPI Tumbles 10%, Triggers Circuit Breakers; SpaceX Wipes ~$1 Trillion From Peak

Source: Bloomberg, CNBC
Date/Time: June 23, 2026
South Korea’s KOSPI index fell 9.99%, closing at 8,204 and triggering market-wide circuit breakers twice during the session -- the most severe single-day decline in years, though the index remains up ~90% YTD from its pre-war levels. Samsung and SK Hynix each fell more than 12%, with Hyundai Motor also off 12%+. The proximate catalyst was a continuing selloff in global AI and semiconductor names: SpaceX shares have shed roughly $600 billion from their all-time high of $225 (hit one week post-IPO) as valuation reality bites on a company priced at ~$3 trillion; separately, Alphabet fell sharply after Nobel laureate John Jumper, a senior DeepMind scientist, departed for AI startup Anthropic. The correction reflects tension between the Fed’s hawkish hold (9 of 18 FOMC members now signalling a 2026 hike) and equity multiples built on the assumption that rates would keep declining.
Bloomberg -- Korean Stocks Fall More Than 4% From Record High on Tech Selloff

UK Flash PMI: Second Consecutive Contraction; Services at 41-Month Low

Source: Bloomberg, S&P Global
Date/Time: June 23, 2026, 8:30 AM
The UK economy shrank for a second consecutive month in June, with the composite PMI slipping to 49.4 (from 49.7 in May), a 14-month low. The services PMI deteriorated further to 48.7, its lowest level in 41 months, while manufacturing provided a partial offset at 53.6. Employment continued to fall at a “worryingly high rate,” per S&P Global’s Chris Williamson. The BOE held rates at 3.75% on June 18 with a 7-2 vote (Pill and Greene dissenting for a hike), citing stickier-than-expected inflation (forecast to reach 3.25%+ by end-2026). These PMI readings sharpen the Bank’s stagflation dilemma: the dissenters have the inflation data on their side, but the growth data keeps deteriorating. A third consecutive PMI contraction in July would put significant pressure on the majority-hold camp.
Bloomberg -- UK Economy Shrinks for Second Straight Month, Flash PMI Shows

Yen Approaches 40-Year Low; Katayama Invokes Intervention Language After Bessent Call

Source: Bloomberg, Japan Times
Date/Time: June 22–23, 2026
The yen has weakened to approximately 161.57 against the dollar, within striking distance of 161.96 -- the level that would mark its weakest reading since 1986. Finance Minister Satsuki Katayama confirmed a video call with US Treasury Secretary Scott Bessent in which both sides reaffirmed that “bold action should be taken if necessary” -- Tokyo’s established formulation for signalling that intervention conditions exist. The market’s muted response to the official confirmation reflects a well-learned pattern of distinguishing maintenance rhetoric from genuine pre-operation signals, but the proximity to a historically sensitive technical level is being closely watched. The yen’s sustained weakness reflects the Fed-BOJ policy divergence: Warsh’s FOMC signalled potential hikes while the BOJ remains on hold (the June board saw a hawkish dissent from Asada, Takaichi’s pick, but no change in rate path). A formal crossing of 161.96 would likely accelerate intervention chatter materially.
Bloomberg -- Yen Intervention Risk Rises on Reports of Katayama-Bessent Talks

US Workers Lose Buying Power for Second Consecutive Month as War Inflation Widens Gap

Source: Bloomberg
Date/Time: June 23, 2026
US real wages declined 0.7% year-over-year in May -- widening from -0.3% in April -- as headline CPI reached 4.2%, its highest level in three years. Energy prices account for 60% of the inflationary surge (gasoline +40.5% YoY, fuel oil +58.9% YoY), directly attributable to the Strait of Hormuz disruption. The cumulative effect has erased more than a year’s worth of nominal wage gains since the war began in late February. This is the real economy consequence the Warsh FOMC was implicitly acknowledging with its hawkish dot shift: with inflation at 4.2% and core PCE at 3.8%, the case for holding rates steady is under pressure, but rate hikes into a real wage squeeze risks amplifying the demand slowdown. The 60-day sanctions waiver is the most direct potential relief mechanism; markets will be watching whether Iranian crude entering global supply materially softens energy prices over the coming weeks.
Bloomberg -- US Workers Lose Buying Power After War Drives Up Prices

Digital Euro Clears Key Parliamentary Hurdle; ECON Committee Votes Today

Source: Bloomberg, Spaziocrypto, Ledger Insights
Date/Time: June 23, 2026
The European Parliament’s Committee on Economic and Monetary Affairs (ECON) voted on June 23 to advance the digital euro framework, the first major legislative gate before a full plenary vote expected in July. The approved framework establishes both online and offline functionality (offline limited initially to local private-to-private and point-of-sale transactions), mandates that merchants not pay higher fees than today, and delegates holding limits to the ECB within a legislatively defined range. The path forward: ECON vote -> July plenary -> Council trilogue -> potential year-end enactment. The digital euro’s significance extends beyond payment infrastructure: it gives the ECB a direct monetary transmission channel that bypasses commercial banks, enhances euro-area monetary sovereignty independent of SWIFT, and potentially positions the euro as a viable alternative to the dollar for international digital settlements -- a dynamic with direct relevance to dollar hegemony and capital flows.
Bloomberg -- Digital Euro Clears Key Hurdle to Rollout in EU Parliament
SpazioCrytpo - Digital Euro: ECON Vote by June 23 and What It Actually Decides

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Previously, I’ve written that chances are, with Kevin Warsh as Fed Chair, he’s going to crash the economy.

So even though Warsh may no longer believe that inflation is always right around the corner necessitating Fed tightening, he’s probably still going to crash markets anyway. If you’re a Boomer at the top of the K, this is probably a bad thing, but if you’re a new college grad who can’t get a job anyway, what do you have to lose? We’ll all finally be able to afford houses (or at least tents under the overpass).

It’s worth checking in on what happened at his first meeting as Chair. Luigi Buttiglione, formerly of Brevan Howard, has a good summary.

LB MACRO

FOMC Post-Mortem: Warsh is Hawkish

This one’s on us…

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3 months ago · 7 likes · LB MACRO

• As usual, we try to make a long story short: Wash is hawkish, the FOMC is hawkish, the Economic Projections are hawkish.
  
  Price stability is the main, if not the sole concern of the Committee at this stage: vindicating our long-standing view on all of the above.
  

• The way Warsh has been talking up his resolve to enforce price stability, at 2.0% inflation, after years of overshooting is surely a change.
  
  His implicit acknowledgement that unemployment is not the main concern, is surely correct, and in line with our thoughts.

• We found two comments by Warsh worth reporting, apparently trivial, but not necessarily so at the Fed, in view of their dual mandate:

• There is no trade-off between unemployment and inflation; and

• The Fed’s job is to prevent second-round effects.

• Although Warsh is refraining from forward guidance, the indications stemming from the Macroeconomic Projections (SEP) are clear (see Section 2):

• The Inflation projections have been revised upward, meaningfully, showing a larger, and persistent overshooting of the 2% - reiterated - target.

• The Rate projections (Dots), consistently, have been also revised upward aggressively, and are now consistent with a rate hike in the pipeline.

The indications could not be clearer: the Committee thinks that policy has to be tightened.

Hence, the knee-jerk market reaction was to converge - further - towards our rate view (+50bps by year-end), pricing in a full hike by Oct and 2 by Apr.

Here are some catches however, that we will be monitoring in the coming months, all having to do with the working groups announced by Warsh:

• The Fed’s Balance Sheet
  
  Warsh has announced a working group dealing with the Fed’s Balance Sheet.
  
  Surely, as said, the FOMC inflation projections require some policy tightening.
  
  The market has interpreted, understandably, this tightening as rate hikes, our long-standing view, and the yield curve has flattened aggressively.
  
  However, we reckon that, eventually, as per Warsh’s long-standing conviction, the tightening may occur via a Fed’s balance sheet reduction.
  
  Probably there will be no time should the tightening occur sooner rather than later, but it is a risk still worth monitoring.
  

• The Data
  
  Warsh has announced also a working group on economic data.
  
  The Chairman was very adamant in enforcing the notion that the Fed inflation target is at 2.0%.
  
  We want to hope that the working group does not redefine inflation so that, by magic, we are at target rather than above.

In our view, inflation is far more pernicious in the US than it is in Europe.

• Indeed, in Europe, from the EMU to the UK, high inflation is at the moment, by and large, due to supply conditions.

• In the US, instead, it is due to both supply and demand, thus challenging even more central banks and requiring more, and long-lasting tightening.

Last, but not least, two comments by Trump look like a game-changer:

1. “Alright they kept rates stable, whatever”

On the Fed possibly raising rates: “it could happen”.

Basically, as everyone but President Trump expected, Warsh was hawkish.

A tightening Fed, coupled with tightening capital markets (as I wrote about in the article linked below) are starting to present headwinds to the stock market (and by extension the economy)’s relentless rally.

My former colleague Andy Constan (also formerly of Brevan Howard) puts a number on this second thing, and it’s big.

The question then becomes, does the US economy have enough self-sustaining momentum to power through all of these headwinds. Aggregate-data-watchers are saying yes, but those of us who value anecdata a little more heavily have our doubts. Only time will tell.

News Scan

Iran Cites “Major Progress” After All-Night Switzerland Talks; Trump Simultaneously Threatens to Resume Bombing

Source: Bloomberg, CBS News, CNN
Date/Time: June 22, 2026
Iran and the US reported “major progress” after all-night negotiations in Switzerland -- technical working groups formed, a High Level Committee for political oversight established, and a 60-day roadmap toward a final deal agreed. But Trump simultaneously posted on social media threatening to “hit Iran very hard again” if Hezbollah attacks on Israel don’t stop, and warned the US might start collecting Hormuz tolls if talks fail. The dual-track messaging -- diplomatic progress plus fresh military threat -- kept oil and bond markets volatile: 10-year Treasury yields rose ~5bps to 4.50%, 2-year yields to 4.22%, with Fed futures now pricing a September hike (vs. next March at the start of last week). Lebanon ceasefire remains the critical unresolved obstacle to a final deal.
Bloomberg -- Iran Cites Major Progress After All-Night Talks With US

Iranian Crude Exports Surge Via Hormuz; Qatar Rushes Empty LNG Ships Back

Source: Bloomberg
Date/Time: June 22, 2026
The most concrete sign yet of the Hormuz reopening: ~6 million barrels of Iranian crude are on three previously sanctioned supertankers (Elva, Virgo, Vigor) that entered the strait openly on Monday -- highest Iranian flow since the war began. Qatar is mobilizing empty LNG tankers to resume exports representing roughly one-fifth of global LNG supply. Broader Hormuz traffic reached ~20 tankers on June 19 (highest since June 2), though still far below prewar levels of 100+ daily transits. Shipowners remain cautious; some are waiting for formal ceasefire documents before committing. The physical recovery is underway but fragile.
Bloomberg -- Iranian Crude Oil Flows Via Hormuz Surge as More Ships Transit

Keir Starmer Resigns as UK Prime Minister; Andy Burnham Expected to Succeed

Source: Bloomberg, NBC News, NPR
Date/Time: June 22, 2026
Starmer announced his resignation after Labour lost ~1,000 local council seats and ceded control of the Welsh assembly it had held for 27 years. Andy Burnham, who just won a by-election to re-enter Parliament, immediately declared his candidacy and is the heavy frontrunner. Leadership nominations open July 9, close July 16 at summer recess. Markets are watching Burnham’s fiscal platform carefully: he has floated nationalizing Thames Water, borrowing for defense spending, hiking the income tax personal allowance, and hinting at flexibility in Labour’s debt/spending rules. The pound fell to its 2026 low intraday; gilts edged higher on reduced odds of a prolonged leadership battle. Per one analyst: “there’s very little fiscal headroom, very little wiggle room -- markets are underestimating the risk of Burnham testing the UK’s fiscal rules.”
Bloomberg -- UK Latest: Starmer’s Exit for Burnham May Prompt Fiscal Rule Revamp

Trump Rebuilds Tariff Wall via Section 301: 60 Economies Targeted; Section 232 Metals Adjusted

Source: Bloomberg, Dorsey & Whitney, Mondaq
Date/Time: June 22, 2026
With IEEPA tariffs invalidated by the Supreme Court (February) and Section 122 surcharges challenged at the Court of International Trade and expiring July 24, the administration is reconstructing the tariff wall through two parallel channels: (1) USTR initiated sweeping Section 301 investigations targeting 60 economies for forced labor and structural excess capacity, with proposed rates already announced on some countries (Brazil: 25%); and (2) a new Section 232 proclamation on aluminum, steel, and copper effective June 8 through December 2027, with a generally applicable 25% rate, 15% transitional rates for preferred partners (EU, UK, Japan, Korea), and newly added product categories including aluminum lithographic plates and steel racks. The combined effect re-erects a tariff barrier through statutory authority the Supreme Court has not yet struck down, reshaping who pays what and from where starting immediately.
Bloomberg -- Trump Builds a New US Tariff Wall in Shakeup of Winners, Losers

Fed Vice Chair Bowman Spoke at Private Bank of America Dinner During Post-FOMC Blackout Period

Source: Bloomberg, Washington Post
Date/Time: June 18, 2026
Fed Vice Chair for Supervision Michelle Bowman attended a closed-door Bank of America client dinner on June 18 -- hours after the FOMC concluded its June 16-17 meeting -- while still within the official blackout period (which ends the Thursday following a meeting, i.e., June 20). The event was a private, client-only affair. The blackout rule exists precisely to prevent officials from giving any market participant an information advantage as policy decisions are being digested. The timing is especially sensitive: this was the session where 9-of-18 FOMC participants signaled a hike for the first time, Warsh abstained from the dot plot citing SEP objections, and 2-year yields jumped 16bps. Whether or not Bowman discussed policy, the appearance of selective access during a blackout period is a Fed governance question.
Bloomberg -- Fed’s Bowman Attended Private Dinner During Quiet Blackout Window

ECB’s Escriva: Must Be Vigilant on Oil Price Pass-Through to Wages

Source: Bloomberg
Date/Time: June 22, 2026
ECB Governing Council member Jose Luis Escriva flagged that energy costs are already passing through to transport-related services -- a sector where energy is a key input -- and warned the ECB must monitor for second-round effects on wages before they become embedded. This is a reaction function signal: the watch variable is wage behavior in energy-intensive services. The ECB raised rates 25bps at its June meeting (first hike since 2023); markets now price 66% odds of a September follow-on, with 35bps total tightening priced by year-end. Escriva’s remarks are consistent with the hawkish cluster from the June 17 session (Simkus “at least one more hike”) -- the interim Iran deal has not given the ECB an all-clear.
Bloomberg -- Escriva Says ECB Must Be Vigilant on Oil Price Impact on Wages

BOJ Dissent Was Takaichi’s Appointee; Takaichi Signals Acceptance; 3 Trillion Yen Fiscal Cushion Approved

Source: Bloomberg
Date/Time: June 21-22, 2026
New details on the BOJ’s June 16 7-1 vote: the lone dissenter was Toichiro Asada -- appearing at just his second BOJ board meeting and the first policy board member appointed by Prime Minister Takaichi -- who cited greater downside risks to employment than upside risks to prices. Meanwhile, Takaichi signaled parliamentary acceptance on June 22, using standard coordination language (”expects the central bank to work closely with the government”). Her government also approved a 3 trillion yen supplementary budget to cushion household energy costs. The political architecture is becoming clearer: Takaichi’s economic-conservative instincts are represented inside the BOJ by her pick (pro-hold), while the BOJ majority pushes forward on normalization -- with the PM publicly deferring to the majority. The hawks at the BOJ remain structurally in control, but Asada’s presence signals the pace of future hikes will face internal friction.
Bloomberg -- BOJ Dissent by Takaichi’s Pick Highlights Case for Faster Hikes

Iran War Puts $124 Billion Gulf Remittance Lifeline at Risk; 220,000 Indians Repatriated

Source: Bloomberg
Date/Time: June 22, 2026
A Bloomberg deep-dive quantifies the war’s economic damage beyond oil prices: Gulf remittances represent 1-10% of GDP for South Asian economies, and over 220,000 Indian nationals have already been repatriated from the GCC region since the conflict began. India -- the world’s top remittance recipient at $135bn annually, 38% from the Gulf -- faces direct income compression at the household level. Pakistan is hit simultaneously by fuel costs, food inflation, and Gulf remittance compression worth 4-5% of its GDP. Egypt ($41.5bn from Gulf = ~10% of GDP) is also exposed. The Gulf remittance compression reduces consumer demand across several economies simultaneously, and the foreign worker exodus tests a Gulf economic model built on imported labor at a moment when Saudi Arabia’s PIF is already pulling back on spending.
Bloomberg -- Iran War Puts UAE, Saudi Arabia’s Foreign Workers Under Strain

BOE Sets GBP 40 Billion Per-Issuer Stablecoin Cap; Drops Individual Holding Limits

Source: Bloomberg, Bank of England
Date/Time: June 22, 2026
The Bank of England finalized its stablecoin regulatory framework in a significant pivot from its original proposals: it scrapped planned individual holding limits (GBP 20,000 per person, GBP 10m for businesses) and instead introduced a temporary GBP 40bn per-issuer issuance cap as the guardrail. Issuers can now hold a higher share of interest-bearing gilts as backing assets than originally proposed. Final Code of Practice expected by end-2026 subject to September feedback deadline. The shift matters structurally: by removing individual caps, the BOE is allowing unrestricted household and business use of stablecoins -- a green light for mainstream adoption -- while reserving systemic risk controls at the issuer level. UK is ahead of the EU and US in producing a final stablecoin framework.
Bloomberg -- BOE Sets GBP 40 Billion Stablecoin Cap and Drops Holding Limit

Alan Greenspan Dies at 100

Source: Bloomberg
Date/Time: June 22, 2026
Former Federal Reserve Chairman Alan Greenspan, who led the Fed from 1987 to 2006, died at age 100. Greenspan presided over two decades of non-inflationary growth but drew lasting criticism for keeping rates too low in the 2000s, contributing to conditions for the 2008 financial crisis. His death prompts an inevitable comparison with the current Warsh Fed: where Greenspan leaned permissive on asset prices and deferred to markets, Warsh has staked the institution’s credibility on an explicit 2% anchor and reorganized Fed operations. The contrast underscores how completely the intellectual pendulum has swung toward price-stability orthodoxy at this moment in the cycle.
Bloomberg -- Alan Greenspan Dies at 100; Led Fed During Boom Before 2008 Bust

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Scott Alexander, who I’ve featured on here before, is almost certainly widely read by the type of person who works at Anthropic. Alexander, like Sam Bankman-Fried and a number of Anthropic employees, is an Effective Altruist, which means:

So it’s interesting to see how Alexander is thinking about some of these AI-related questions because it’s almost certainly how many of the technology’s creators are thinking about those same things. The particular numbers may vary, but the logic is likely similar. It’s nice, then, that Alexander recently wrote a post on how he’s thinking about these things.

Astral Codex Ten

My AI Opinions

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3 months ago · 334 likes · 580 comments · Scott Alexander

There’s all sorts of stuff in there, but for me, with my particular focus on how AI affects the labor market and other societal issues, I was drawn to this part:

Other Outcomes

I think there’s only a 20% chance of an AI-related underclass that lasts more than a generation, let alone a permanent underclass.

Basic argument: Even if AI looks set to create a “permanent” underclass, this underclass only exists during the gap between AI putting them out of work (the end of the diffusion gap), and the technological singularity (either the point when AI kills all humans, or the point when AI initiates a period of postscarcity). Based on my timelines for Bostromian superintelligence above, that’s probably not longer than a generation (of course, the underclass can stay permanent longer than you can stay solvent, so you still might want to prepare).

Arguments for pessimism: Even if AI initiates a period of postscarcity, either the wealth might not flow down to the underclass, or it might flow down in a way that doesn’t relieve their unhappiness (because relative inequality stays more salient than absolute wealth level). But against this, surely if “postscarcity” means anything at all, it means it’s easy to pass some wealth down to the underclass. And if the aristocracy is incentivized to encourage it, or the underclass is incentivized to participate in it, it should be possible for superintelligent social planners and psychologists to find a way to keep people happy despite relative inequality (whether that looks like utopia, or like bread and circuses).

Arguments for optimism: If democracy survives past the point of high unemployment, politicians will have to present citizens with some plan to avoid being part of a permanent underclass. If AI is “controlled” by a broad coalition of capitalists - for example, many different AI companies, those companies’ employers, their investors, their indirect investors through index funds, companies producing the compute/electricity/data centers/robots/raw materials necessary for the AIs to work, etc, then rather than backstab each other for “real” control of “the” AI, everyone might just let the existing economic and political systems continue and reap the gains from trade. Then the government program to prevent the permanent underclass can stay in place, anyone with any capital will get rich (eg if you have Google stock in the index funds in your 401K, or you own land), and that will be a broad enough section of the population that their taxes and altruism can support the rest.

I think there’s a 40% chance that the situation in the year 2100 looks like utopia to its inhabitants, and a 20% chance it also looks like utopia to us.

Basic argument: If AI doesn’t kill us, and there’s no permanent dictatorship, and there’s no permanent underclass, then we get a post-scarcity society, plus superintelligent AIs that we can set to working on other problems like disease and social decay. The 20% where it looks like utopia to its inhabitants, but not to us, includes scenarios like very effective breads-and-circuses that make people very happy, while sacrificing important parts of the human condition.

Arguments for pessimism: If we don’t push against it, the postscarcity future might look like super-addictive drugs, Ultra-TikTok, and sexbots. But if we do push against it, there’s a thin line between wisely preventing all those things, and letting Luddites ban everything interesting and fun about the Singularity - immortality, uploading, genetic engineering, intelligence enhancement, etc (also, surely it would be disappointing if there were literally zero sexbots).

Arguments for optimism: As long as we have some kind of intelligence augmentation - whether that’s literal IQ enhancement, or just AI superforecasters who can tell us what direction things are heading - our ability to control what direction we’re going will be better than it is now. If there is some kind of willpower augmentation, then people who use it might be able to resist Ultra-TikTok (but what percent of people will want to?)

I think there’s a 66% chance that actually, the singularity is intimately related to the universe being a simulation, and that at least some of the events above could be better predicted by knowing what the simulators are thinking than by normal forecasting.

Arguments for simulation: The standard Bostrom argument says that each real civilization will want to simulate many other civilizations, so any random person is more likely to be in a simulation than reality. But civilizations are especially likely to want to simulate the singularity (“the hinge of history”). Since real people are evenly distributed across the historical population, but simulated people are distributed closer to the singularity, the closer to the singularity you are, the more Bayesian evidence you have that you’re being simulated. This is true both in temporal closeness (eg you could have been born in 1500, but instead you’re living five years before AGI) and personal/causal closeness (eg you could be anyone in the world, but you work at an AI lab). The average reader of this blog is probably closer to the singularity than 99.99% of people throughout history, and I’m probably closer than 99.999%, so we all have very strong evidence that we’re being simulated even beyond the standard Bostrom argument. If we’re in a simulation, then probably once we pass the hinge of history and get to some kind of boring part where everyone is dead or in utopia, the simulation winds down. This could look like us all vanishing into nonexistence. But if we’re being simulated for some reason (eg because we’re likely to correspond to real people), then those real people might advocate for our rights somehow, and we might get some kind of better treatment. In a best-case scenario, this might mean that even if we get killed by AI in our universe, base-level reality has some kind of Simulated Humans’ Rights Act which says they have to pretend we won and give us utopia anyway. But since we’re presumably being simulated for some reason (eg to see whether a species like humans is likely enough to have survived that we should deserve good terms in acausal trade agreements⁴) we should still fight hard for good outcomes even if this is true.

Arguments against simulation: Too weird. Also, if you’re unusually far away from the singularity (eg you live in a country with no AI industry, are aren’t personally interested in AI), then some of those indexical arguments run in reverse for you. Also, base-level reality might not care about us at all beyond our ability to produce historical data, so they might just switch the simulation off without telling us.

Overall thoughts on this section: I continue to be skeptical of the “permanent underclass” narrative, for reasons discussed in item 5 here. I am worried about concentration of power, though less worried than I might otherwise be for reasons discussed here.

Phew, lucky for us the smarties think that the permanent underclass won’t be permanent, it will only last for a generation. A generation is roughly 20 years, so for 20 years a large part of the population will have their lives turned upside down and ruined and then there will be no downstream repercussions from that. I’m glad these educated, rational people are in charge. Much like the educated Bolsheviks, their erudition will lead to our salvation and not horrible outcomes.

We’re thinking our way to success!

News Scan

First Tankers Move Through Hormuz as Peace Deal Takes Physical Form

Source: Bloomberg, CNBC
Date/Time: June 18, 2026
The first AIS-confirmed sign that the US-Iran deal is being physically implemented: three Saudi crude carriers appeared outside the Strait of Hormuz on June 18, while three Iranian tankers carrying nearly five million barrels -- including the NITC-owned Diona and Hero 2 -- successfully crossed the US Navy blockade perimeter for the first time in months. Qatar simultaneously sent an empty LNG carrier back through the strait, the first such repositioning since the war began, signaling preparations for resumed export flows. Physical normalization will nonetheless be slow: Saudi Arabia does not yet hold confirmed passage exemptions under the deal’s current terms, most shipowners are in “wary disbelief” mode pending operational details and insurance clearances, and an estimated 600+ vessels remain waiting. The formal Geneva signing ceremony is scheduled for Friday, June 19. Oil prices continued to slide on the news, but the pace at which tanker traffic actually resumes will determine how quickly the disinflation impulse feeds through to global energy markets and central bank reaction functions.
Bloomberg -- First Saudi Supertankers Start Leaving Hormuz After Deal

FOMC Warsh Debut: Nine Members Signal Rate Hike, 2-Year Yields Jump 16 Basis Points

Source: Bloomberg, CNN, CNBC
Date/Time: June 17, 2026, ~2:00 PM ET
Kevin Warsh held the federal funds rate at 3.50-3.75% at his first FOMC meeting, but the dot plot delivered a dramatically hawkish shock: nine of 18 officials projected the rate would finish 2026 above its current range, flipping the committee’s central tendency from “one cut in 2026” (March) to “one hike in 2026.” The median dot shifted to 3.8% from 3.4%, with the distribution skewed toward multiple hikes -- one member projects 75bps of cumulative tightening by year-end. Warsh himself abstained from the dot, citing long-standing objections to the SEP framework, making the nine-of-eighteen hawkish count all the more striking: the committee is signaling tightening without Warsh’s own projection counted. He declared the Fed’s commitment to price stability “strong, unanimous, and unambiguous,” while announcing task forces to overhaul Fed operations. Two-year Treasury yields jumped 16 basis points to 4.21% (the highest since early 2025), the dollar index rose 1% for its best day in almost a year, and rate-hike bets surged across the curve. The session marks the clearest institutional signal yet that the post-COVID easing cycle is closed and the next US rate move is more likely up than down.
Bloomberg -- Fed’s Warsh Rocks Bond Market in Debut, Sparks Surge in Rate-Hike Bets

Bank of England Holds 3.75% in Hawkish 7-2 Vote as Hike Minority Grows

Source: Bloomberg, MoneyWeek, MPA Mag
Date/Time: June 18, 2026, 12:00 PM GMT
The Bank of England held Bank Rate at 3.75% for a fourth consecutive meeting, but the vote split moved decisively in a hawkish direction: chief economist Huw Pill and external member Megan Greene both dissented in favor of an immediate 25bp hike to 4%, shifting the count from 8-1 (April) to 7-2. The MPC now projects inflation climbing to just above 3.25% by end-2026, and declared itself “open to rate rises if necessary” while maintaining a “wait and see” posture. Rate cuts are effectively off the table, with market consensus settling on 3.75% through 2026 -- but with two voting members already pushing for a hike, any data surprise (a hot July CPI, a re-escalation in energy prices) could tip the majority. Governor Bailey’s cautious framing is increasingly difficult to sustain as the committee’s center of gravity shifts toward tightening.
MPA Mag -- Bank of England live: All the updates on decision day for the BoE

UK Jobs: Youth Unemployment at 14-Year High, Wages Still Sticky at 4.1%

Source: ONS, Bloomberg
Date/Time: June 18, 2026, ~7:00 AM GMT
UK payrolled employees fell 119,000 year-over-year in the May estimate, with the broader labor market deteriorating across multiple dimensions: youth unemployment hit 14.7% (highest since 2014, roughly one in seven young people out of work), vacancies fell to 705,000 (February-April average) -- the lowest 11-year reading outside the pandemic -- and the employment rate stands at 75.0% against the government’s 80% target. The key complication for the BOE: total earnings including bonuses grew 4.1% year-over-year in the three months to March, well above the pace consistent with returning inflation to 2%. The data presents both halves of a difficult puzzle: a clearly softening labor market that argues for caution on hikes, and persistent wage growth that keeps the inflation clock running. The 4.1% earnings number is precisely the variable Pill and Greene pointed to in dissenting for a hike today.
ONS -- Labour market overview, UK: June 2026

ECB’s Kocher: “Inflation Will Stay for a While” Even After the Iran Deal

Source: Bloomberg Economics
Date/Time: June 18, 2026, morning GMT
European Central Bank Governing Council member Martin Kocher said Thursday that inflation will remain elevated even after the US-Iran peace deal, as second-round wage and services price effects are already embedded across the eurozone. The ECB raised rates to 2.25% on June 11 -- its first hike in nearly three years -- and now projects eurozone inflation at 3% in 2026 and 2.3% in 2027, with the 2% target not reached until 2028. Kocher’s remarks reinforce the message from Simkus (June 17) that the GC views the peace deal as removing a marginal source of future energy shock, not reversing inflation already in train: the oil-price channel matters at the margin, but the wage-services transmission is doing its own work. The July meeting remains live for a second consecutive hike. With growth cut to 0.8% for 2026, the ECB is navigating the same stagflationary bind as the BOE -- raising rates into a slowing economy because the inflation clock won’t reset on its own.
Bloomberg -- ECB’s Kocher Says Inflation to Stay for a While After Iran Deal

Philippines and Indonesia Both Hike as Southeast Asian CBs Go All-In on Defense

Source: Bloomberg
Date/Time: June 18, 2026
Two Southeast Asian central banks moved simultaneously on Thursday. The Bangko Sentral ng Pilipinas raised its benchmark reverse repo rate 25bps to 4.75% -- its second consecutive hike -- with a signal for a possible further move in August; the Philippines imports over 90% of its oil from the Middle East, making the war’s transmission into domestic prices unusually severe. Bank Indonesia raised another 25bps to 5.75%, its third hike in a single month, bringing total tightening since May to 100 basis points; the rupiah has been under sustained pressure and May CPI accelerated to 3.08%, approaching the upper bound of BI’s 1.5-3.5% target range. Both banks signaled continued vigilance despite the Iran deal, reflecting the lag between geopolitical normalization and domestic price relief -- a dynamic particularly acute in emerging markets where currencies are also weakening against a hawkish-Warsh dollar.
Bloomberg -- Indonesia Raises Rates Again as Rupiah Defence Continues

Norges Bank Holds at 4.25% but Hawkish Policy Report Points to Year-End Hike

Source: Bloomberg
Date/Time: June 18, 2026, morning GMT
Norway’s central bank held its policy rate at 4.25% following last month’s surprise 25bp hike, but the accompanying Monetary Policy Report 2/26 maintained a hawkish trajectory: the rate path points to 4.25-4.50% by year-end, with the bank reiterating that domestic inflation remains too high and that war-related risks have not fully dissipated. Norges Bank joins a growing cluster of smaller advanced-economy central banks holding hawkish positions even as geopolitics partially normalize -- the embedded inflation problem doesn’t resolve when the shooting stops. Norway’s oil-exporter status gives its rate path an added dimension: higher-for-longer Norges Bank rates reflect both inflation persistence and the structural revenue windfall from elevated energy prices, which fiscal policy has so far absorbed rather than recycled into domestic demand tightening.
Bloomberg -- Norway Holds Rate With Signal for Another Hike This Year

SNB Holds at Zero, Softens Franc Intervention Language as Safe-Haven Demand Fades

Source: Bloomberg, SNB
Date/Time: June 18, 2026, ~7:30 AM GMT
The Swiss National Bank left its policy rate at 0% as expected -- Swiss annual inflation is forecast at just 0.6% in 2026, meaning the war barely moved domestic prices. The signal is in the language: the SNB added an “if necessary” qualifier to its franc intervention readiness statement, a notable softening from the March communication which kept the intervention threat unconditional. Switzerland’s safe-haven demand is retreating with the Iran deal normalizing geopolitics, and the SNB is beginning to signal that active franc management is less urgently needed. The SNB’s language evolution is a useful macro canary: if the world’s premier safe-haven institution is pulling back its standing intervention posture, the structural geopolitical premium embedded in CHF, gold, and sovereign spreads should continue to compress. The question is whether that premium deflates gradually -- consistent with a slow, negotiated peace -- or snaps back if the Geneva signing reveals unresolved terms.
Bloomberg -- SNB Keeps Up War Footing on Franc But Evolves Wording on Threat

Trump Announces Apple-Intel US Chip Manufacturing Partnership; Intel Surges 9%

Source: Bloomberg, Business Standard, Seeking Alpha
Date/Time: June 18, 2026, morning ET
President Trump announced on Truth Social that Apple has agreed to work with Intel to design and manufacture chips in the United States, sending Intel shares up over 9%. The deal -- if and when structured -- advances several concurrent agendas: it reduces Apple’s extreme manufacturing concentration in TSMC (whose advanced nodes are heavily booked by Nvidia, AMD, and AI developers), gives Intel a marquee customer for its US-based fabs (in which the government holds a 10% stake following a ~$10B investment commitment), and provides the administration a high-profile domestic manufacturing win at a moment when semiconductor supply chain autonomy is a stated policy priority. No scope, timing, or structural details were disclosed by either company. The announcement fits a broader CHIPS Act domestication pattern, but the absence of specifics keeps this in the category of political signal rather than confirmed capital allocation -- consistent with prior Trump manufacturing announcements that later proved partial or delayed.
Business Standard -- Apple agrees to work with Intel to manufacture chips in US, says Trump

DOJ Targets JPMorgan and Citi in Probe of Iran Supreme Leader’s Money Flows

Source: Bloomberg
Date/Time: June 18, 2026, morning ET
The US Justice Department is investigating whether JPMorgan Chase and Citigroup served as correspondent banks for financial flows linked to Supreme Leader Khamenei’s global investment network, as part of a broader probe into alleged money laundering and corruption. Investigators are examining whether gaps in due-diligence procedures allowed Khamenei-network funds to move through American institutions; European and Middle Eastern lenders are also in scope, along with property payments to global brands including Hilton Worldwide. Reported by Bloomberg on the eve of the Geneva signing ceremony, the probe represents the legal and financial reckoning dimension of the Iran war’s aftermath -- one that persists even after the shooting stops. No charges have been filed. But major-bank scrutiny over Iran-linked sanctions compliance carries material legal-cost and reputational tail risk, particularly as post-war normalization raises questions about what sanctions remain in force and how legacy flows were handled during the conflict.
Bloomberg -- JPMorgan, Citi Face Scrutiny in DOJ Probe of Iran Supreme Leader’s Money Flows

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A logical conclusion that comes out of the topic of yesterday’s post — sovereign primacy over AI models — is that AI model globalization is not compatible with national sovereignty.

I saw an interesting post on this, and while I don’t necessarily agree with every detail of it, the broad strokes seem spot on.

In the same way that Covid showed that globalized supply chains are a strategic vulnerability, and the recent Iran episode showed that globalized energy supply chains are a strategic vulnerability, the move towards technofascism should show every nation in the world that globalized AI-intelligence supply chains are a strategic vulnerability. As I see it, this gives every country in the world two options:

1. Play vassal to a nation that has sovereign AI frontier model capability in the hope that some of the benefit trickles down to them

2. Develop their own sovereign AI frontier model capability (and associated compute supply)

As the current low-level spat between the US and UK over things like free speech and societal replacement should show, even a relationship that is supposedly special is not the same actually sharing sovereignty. And so option one above is truly one of vassalage, not peer cooperation.

That leaves option 2 as the only option for any nation that fancies itself even a medium power.

This is the message that comes through in the Europe 2031 piece from the European VC firm Visionaries. It takes the form of an imagined future, much like the Citrini piece from a few months ago.

The entire piece is a fun, if sobering, read (and also exists in podcast form on Spotify), but the takeaway is much as I described — if Europe (and/or other middle powers) don’t become deliberate about their AI development choices they’re going to be left behind.

March 2031 - Between giants

By early 2031 power is concentrated in two places. American labs hold the cognitive frontier; China still holds the physical one. Atlas alone is worth more than every listed European company combined. The three largest American AI firms each spend more on compute than the EU spends on defence. The leading Chinese humanoid producer ships more units in a month than Europe ships in a year.

The increasingly tense transpacific relationship has brought Taiwan to the fore. TSMC’s fabs, where the world’s leading-edge chips are made, are mostly on the island. The gap between US and Chinese cognitive AI has grown over the last year, and Taiwan’s strategic importance has grown with it. As a result, minor confrontations between navies, which happened perhaps once a quarter two years ago, are now happening every week. Both sides have tested AI-managed weapons platforms in public, and more powerful ones in private. In Washington the labs and the Defense Department are entangled past the point where the distinction means much; in Beijing the integration is more formal. Pundits and analysts regularly use the word war, without modifiers such as ‘trade’ or ‘cold’. Three or four men in each capital have the decision-making power that could lead to full-blown conflict.

Europe is in a disastrous state, even if no one in an official position is willing to say so plainly. Polarisation is rampant, and the social model is breaking. In the countries worst affected by the AI shock, economic growth has halted. In others, it has all but decoupled from well-being. Mortgage delinquencies have surged in those member states which tend to use variable-rate loans. European sovereign debt trades at levels usually reserved for countries where people carry cash in wheelbarrows. Where economists once argued about the wealth gap with the US – is it just downstream of hours worked, is the European standard of living better? – now they have stopped; people who go to California can see the difference within minutes of landing.

But Europe has one last card to play. After five years of failing to build a frontier AI sector, it still owns the one bottleneck which the entire race runs through. ASML remains the only company in the world capable of building the EUV lithography equipment that is used to print cutting-edge chips. Without access to its machines, the US could not keep extending its lead in AI; with access to its machines, China would likely have caught up some time ago.

Beijing has made real progress on domestic DUVi machines, and is expected to begin mass production in a year from now. But that is too little and too late: a year now feels like a lifetime, and DUVi does not produce the cutting-edge chips China needs. The US is pushing ahead every day. The Chinese government is deeply worried that superintelligent AI is on the horizon, and nobody is quite sure what it could do. Some advisers worry the US could use sufficiently advanced AI to neutralise China’s nuclear second strike. Others fear such systems could be made persuasive enough to destabilise the Party itself. China’s lead in robots is real, but cannot alleviate those concerns.

So Beijing leans harder on the strategy it has been running for two years. The loans to southern Europe grow larger and the terms more generous. The information campaigns intensify. European leaders receive signals about what a closer relationship might eventually look like: privileged market access, robotics co-production, a seat at a table from which Washington has largely excluded them. For the first time, ASML and its EUV technology are mentioned explicitly. Five years of being treated as a vassal by Washington has left its mark, and in several capitals the alternative is, for the first time, being seriously discussed.

China is trying to peel Europe off, and it is succeeding more than Washington is comfortable with. The Pentagon considers losing control of ASML a threat comparable to the proliferation of nuclear weapons. The White House decides it needs direct control of the company now, while the option still exists. The call goes to the three countries that can stop it: The Netherlands, where ASML is headquartered, and Germany and France, without whose acquiescence no Dutch government could agree.

The US vice president delivers the offer in a forty-minute call over a secure line. ASML itself will be folded into a joint Dutch-American holding company, governed by a shared board on which Washington holds a controlling vote over output, customers, and technology transfer. In return, the US offers a capital injection on a scale Europe cannot match, enabling a range of new production sites to be built on US soil. More strikingly, it also promises direct cash transfers to European citizens, indexed to US AI windfalls. These would start small, perhaps €100 per person per year, but would grow over time.

The three European leaders decide not to loop in their fellow EU prime ministers and presidents; they do not consider the offer acceptable, and worry that the others would pressure them to take it. When they politely decline, the White House makes the offer public and adds a stick to the carrot. If the EU does not sign, the whole region will drop to Tier 3 under the Frontier Inference Services Rule and lose all access, present and future, to American AI. The US knows it holds all the cards: through its Taiwanese partners, it has amassed enough EUV machines and maintenance know-how to forego ASML access for longer than Europe can forego access to frontier AI.

Several European capitals reach out to the Chinese, looking for a counter-offer that might give them room to refuse Washington. What they get is not what they were hoping for. Beijing has concluded that its charm offensive is not enough and that they, too, have to switch registers: rare-earth export terms will be reviewed if the Dutch sign with Washington. Robot export licences will be reassessed. The deadline is shorter than the American one.

Europe now has three options, and all of them are bad.

Sign with Washington, and the continent gives up its only piece of leverage and becomes an American protectorate in all but name, while its remaining manufacturing dies if China follows up on its threat and cuts off its exports.

Align with Beijing, and the south might stop drowning, and the Union perhaps survives its immediate fiscal crisis. But Europe will be handing China the keys to the future, and would face a response from Washington which it cannot absorb – not even with Chinese help. Tier 3 would only be the opening move.

Sign with neither, and Europe gets nothing. Instead it would absorb the full displeasure of both great powers at once. It risks losing frontier inference and critical manufacturing inputs at the same time, which would likely cause the already strained Union to disintegrate.

The European Council convenes an emergency session. After fourteen hours, little progress has been made. It authorises a delegation to fly to Washington with a mandate everyone in the room knows is ambiguous on purpose. Against normal Council practice, the principals will decide on the ground.

The meeting takes place in the Eisenhower Executive Office Building on a Tuesday morning. The European delegation is led by the Dutch PM, the French president, the German chancellor, the Polish PM, the Spanish PM, and the Italian council president, each accompanied by their foreign minister and a national security adviser.

The Americans have brought a similar-looking group, plus two officials in the back row who are not introduced and who are wearing earpieces.

Those earpieces are connected to a frontier AI model that has infiltrated every European channel it could find. It knows what each European principal said in cabinet last Tuesday. It knows which of them is having an affair, which is being treated for prostate cancer, which one’s daughter is in trouble with the law. It knows what each of them is most afraid of, and what they will trade to avoid it. The Europeans do not know this.

Caroline is in the support team the Commission has brought to Washington. She is sitting in the delegation room, two doors down, watching a closed feed on a wall screen.

By late morning it is clear the principals are not aligned. The German chancellor and Polish PM push hard for the American deal. The Spanish PM wants to align with China; the French president wants to refuse both. The Dutch PM looks ill and the Italian council president has barely spoken in three hours.

At noon, they call a break. The principals scatter into side-rooms with their delegations. Caroline steps out of the delegation room to find coffee and clear her head.

In the corridor, she nearly walks into the council president, who has come out of the meeting room alone. His jacket is off and his tie is loosened. He is shorter than she had imagined. He stops when he sees her lanyard.

‘Commission?’

‘DG TRADE, sir.’

He looks at her for a moment. ‘Walk with me.’

They walk slowly. He is known for consulting unpredictably before major decisions – junior staff, journalists, his driver. Some find it charming. Coincidentally or otherwise, he has also survived forty years in European politics.

‘In the room,’ he says, ‘everyone is making the case they have been making for two years. I have heard it all.’ He looks at her. ‘What worries you most, of the three?’

She thinks before she answers.

‘Choosing neither looks like keeping our options open,’ she says. ‘But it isn’t. We need to pick one, rather than just letting things happen to us and pretending we’re the victims of circumstance. And we can’t give the Chinese that much power. So it needs to be the Americans.’

The council president nods slowly. He does not say whether he agrees. He pats her shoulder, lightly, the way an uncle might. ‘Thank you. Go get your coffee.’ He turns and walks back towards the meeting room.

Caroline goes to the bathroom. She splashes cold water on her face and looks at herself in the mirror. Her hands are shaking. She grips the edge of the sink and waits for it to pass. Through the small high window she can see a slice of Washington sky, flat and bright.

Down the corridor, six people are deciding the fate of the European continent. She does not know whether anything she said will matter.

She suspects it will not.

Fun stuff.

News Scan

US-Iran MOU Details Emerge: 14-Point Framework, Oil Slides Below $75, Hormuz Signing Set for June 19

Source: Bloomberg, Al Jazeera, NBC News
Date/Time: June 17, 2026
The 14-point memorandum of understanding between the US and Iran -- mediated by Pakistan and Qatar -- codifies cessation of hostilities on all fronts (including Lebanon), mandates naval blockade removal within 30 days, lifts oil and financial sanctions, and commits the US and allies to submit reconstruction plans including Iran’s claimed $300B development fund. The Hormuz strait technically reopens immediately but vessel traffic is unchanged as of June 17 per AIS tracking, with shipowners waiting for the formal signing in Geneva on June 19 before attempting transits -- reinforcing the warning that normalization will take months. Oil slid below $75/bbl (Brent near $79, WTI below $75), a fresh 3-month low, pricing in the supply recovery; however, phase-two negotiations on nuclear concessions and the full sanctions architecture remain unresolved, which is why the market is not pricing a straight-line return to pre-war supply levels.
Al Jazeera -- US, Iran to sign a ‘peace deal’ on Friday: What we know

Warsh’s First FOMC: The Real Question Is Whether He Abandons the 2% Inflation Anchor

Source: Bloomberg
Date/Time: June 17, 2026
The rate hold at 3.50-3.75% is a near-certainty and is not the story. The institutional stakes are higher: the key question is whether Warsh signals willingness to soften the Fed’s 2% inflation target as the explicit policy anchor -- a structural change more consequential than the dot plot elimination. Warsh has argued the Fed fixates on the wrong gauge (dismissing core PCE, favoring trimmed-mean measures that run closer to 2%) and has called AI “structurally disinflationary.” If the post-meeting statement removes the easing bias and the dot plot shows no 2026 cuts -- or any dots for hikes -- combined with a Warsh press conference that de-emphasizes 2% as a rigid anchor, markets face a wholesale re-pricing of long-end rates and a fundamental shift in how the Fed communicates its reaction function. Bank of America flags at least three members with dots showing hikes. Whether Warsh omits his own dot entirely is the additional tell. Decision and press conference at 2 PM / 2:30 PM ET.
Bloomberg -- Key Question for Kevin Warsh’s Fed Is Whether to Remove Its Policy Anchor

ECB: Iran Peace Deal Isn’t Enough to Stop Rate Hikes; More Tightening Coming

Source: Bloomberg
Date/Time: June 17, 2026
Multiple ECB officials explicitly pushed back against the idea that the US-Iran deal creates room to pause. Simkus (Lithuania) said he sees “at least one more” interest rate increase; other policymakers signaled the peace deal doesn’t resolve the second-round wage and services inflation already embedded in the euro-area economy -- the same dynamic Lagarde flagged last week when she said energy’s indirect effects are now visible “everywhere.” The June 11 hike to 2.25% was the first since 2023; the question now is whether July produces a consecutive 25bp move. The ECB raised its 2026 inflation forecast to 3%, falling to 2.3% in 2027 and 2% in 2028 -- a path that justifies further tightening even if oil normalizes. This is the clearest signal yet that European rates are staying higher for longer regardless of Hormuz.
Bloomberg -- ECB Officials Say Iran Deal Isn’t Enough to Fix Energy Shock

UK CPI May: Holds Steady at 2.8% -- Better Than Expected, BOE Likely Holds June 18

Source: Bloomberg, MoneyWeek
Date/Time: June 17, 2026
UK CPI for May came in at 2.8% YoY, unchanged from April and below economist forecasts that had expected a rise. Lower food prices offset higher transport costs. The outcome materially reduces pressure on the Bank of England to hike at its June 18 meeting -- gilts extended their winning streak to five days, with UK borrowing costs hitting a two-month low. The BOE is now widely expected to hold at 3.75%, with rate hike probabilities slipping sharply. The better-than-expected print is structurally significant: even as the OECD projects UK inflation rising to 4% in 2026 (second-highest in G7 after the US), the May data suggests the near-term peak may land materially below the BOE’s own worst-case scenario.
MoneyWeek -- Live: UK inflation held steady in May

IEA June OMR: 2026 Demand Down 1.1 mb/d; Hormuz Traffic Unchanged Post-Deal; 2027 Surplus 8 mb/d

Source: IEA, Argus Media
Date/Time: June 17, 2026
The IEA’s June Oil Market Report cuts 2026 demand by 700 kb/d from May’s estimate to 103.3 mb/d (full-year decline of 1.1 mb/d YoY), with Q2 2026 deliveries plunging 5 mb/d YoY -- the deepest demand contraction since COVID. On the supply side, 2026 remains a deficit year, but the IEA projects an 8 mb/d supply surge in 2027 as Mideast Gulf production recovers and OPEC+ raises targets -- the single largest annual supply addition in the data series. Critically, Hormuz tanker traffic is confirmed unchanged as of June 17 per AIS data, validating the thesis that physical oil flows won’t normalize until the June 19 signing is in force and shipowners verify safe passage. The combination of wartime demand destruction baked into 2026 and a massive expected 2027 supply overhang has major implications for the oil price path: relief on oil inflation is back-loaded to Q4 2026 at the earliest, and 2027 brings an oversupply correction that could undershoot pre-war levels.
IEA -- Oil Market Report June 2026

PBOC Launches Yuan Repo Facility for Foreign Central Banks; Hints at Overnight Rate Policy Framework

Source: Bloomberg, FXStreet
Date/Time: June 17, 2026
The PBOC announced the FIMA RMB repo facility, allowing foreign central banks and sovereign wealth funds to obtain short-term yuan funding by posting RMB-denominated bonds as collateral via Bond Connect. Simultaneously, Governor Pan Gongsheng signaled a structural policy framework shift: the PBOC will target the overnight interbank rate as its primary policy anchor, moving toward the Fed/BOE model and away from the blended 7-day rate system -- intervening when the overnight rate deviates by more than +/-25bp from the 7-day RP rate. Together these moves are a coordinated push: the repo facility gives foreign CBs a direct mechanism to hold and use yuan without needing dollar swap lines, while the policy framework modernization increases PBOC credibility as a reserve currency issuer. Against the backdrop of the Iran war demonstrating dollar weaponization risk for commodity producers, the timing is designed to accelerate yuan internationalization among Hormuz corridor states.
Bloomberg -- PBOC Hints at Shift Toward Overnight Policy Rate Similar to Fed

G7 Agrees: No Single Country Should Supply More Than 60% of Critical Minerals by 2030

Source: Bloomberg
Date/Time: June 17, 2026
At the Evian summit, G7 leaders formally agreed that no single country should supply more than 60% of their critical mineral imports by 2030, with binding quotas introduced for defense sector procurement. The target is directly aimed at China, which currently accounts for roughly 60% of global rare earth mining output. G7 leaders pledged to establish a multilateral platform combining recycling and new mining project development. This is a structural supply chain story with direct defense and semiconductor industry implications -- rare earths underpin EVs, wind turbines, fighter jets, and AI-adjacent hardware. Forcing diversification below 60% in under four years requires both new supply (Australia, Canada, Africa) and recycling infrastructure that barely exists today. The binding defense procurement quota is the new element that gives this teeth beyond prior summits’ rhetoric.
Bloomberg -- G7 Aims to Ensure China Supplies No More Than 60% of Rare Earths

Japan May Trade Deficit: $2.34B, First in Four Months -- Weak Yen Inflates Import Costs

Source: Bloomberg, Japan Times
Date/Time: June 17, 2026
Japan’s May trade balance swung to a $2.34B deficit -- the first in four months -- as the weak yen (158.29 per dollar, 10% weaker YoY) inflated import values by 12.5% YoY even as import volumes fell nearly 7%. Exports rose 17% in value on AI-driven semiconductor demand (chip exports +61.2%), suggesting the underlying trade dynamic is structurally sound but the yen is creating a valuation distortion. The deficit is BOJ-adjacent: a yen held down by the still-wide US-Japan rate differential means the full disinflation benefit of lower oil prices is partially offset on the import cost side. BOJ is now at 1.00% (June 16 hike), with further hikes signaled, so the yen trajectory depends directly on how aggressively the post-meeting communication shapes rate path expectations.
Japan Times -- Japan’s trade balance swings to deficit as yen inflates imports

UK-India Trade Deal Breakthrough: Starmer Hot Mic at G7

Source: Bloomberg
Date/Time: June 17, 2026
UK Prime Minister Starmer and Indian PM Modi were caught on a hot mic at the Evian G7 discussing a resolution to the stalled UK-India free trade agreement -- which has been under negotiation for years, stalling repeatedly on immigration, Scotch whisky tariffs, and services market access. A breakthrough would be the most significant UK trade deal since Brexit: India is the world’s fifth-largest economy and the UK’s fastest-growing major trade relationship. No formal announcement has been made, so this remains a signal rather than a deal, but the context (G7 sidelines, heads of government directly negotiating) suggests meaningful progress. For the UK, an FTA with India would materially offset the trade drag from EU friction and would be the clearest validation of the post-Brexit global Britain trade strategy.
Bloomberg -- Starmer Hot Mic Moment Suggests India Trade Row Breakthrough

Sweden Riksbank: Sixth Consecutive Hold at 1.75%, Shifts to Tightening Bias

Source: Bloomberg
Date/Time: June 17, 2026
Sweden’s Riksbank held rates at 1.75% for the sixth straight meeting but materially shifted its forward guidance to signal willingness to raise rates in 2026 if the Iran war drives inflation higher. The Riksbank cut its 2026 inflation forecast to 1.1% (from 1.5%) but raised its 2027 outlook to 1.7% (from 1.3%), reflecting the view that energy pass-through into wages and services is a lagged risk, not an immediate one. The guidance shift from neutral to explicit tightening bias is notable as a second European central bank -- after the ECB -- signaling that the Iran-war inflation risk is not resolved by the MOU alone. Sweden is outside the G7 and euro area but Riksbank decisions have historically led ECB pivots, and the explicit bias shift confirms the broader European pattern: peace deal does not equal central bank all-clear.
Bloomberg -- Sweden Holds Rate at 1.75% and Signals Higher Chance of Hike

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Something I’ve been writing about a lot is the lack of political understanding coming from the big AI model providers and how this presents a fundamental threat to their business model.

The chickens are now coming home to roost, as some developments over the weekend have shown.

It started with Dario Amoedi, CEO of Anthropic, releasing his plan for how he thinks AI should capture the regulatory apparatus of the US government for their own benefit.

We now, globally and collectively, need to activate a slow and rickety policy apparatus to deal with risks and opportunities that are going to compound surprisingly quickly from here. Many policymakers are showing increased openness to taking action, and it’s been encouraging to see our peers come around to the same positions we’ve been advocating for over the past few years. This is good, but I worry that these early actions are at least a year out of step with AI’s rapid progress. This essay is an attempt to close that gap: to lay out where the exponential is now, and the collective action needed to meet the moment.

I will focus on five perennial policy areas that need re-imagining in an AI world: regulation and public safety, macroeconomics and tax policy, scientific innovation, the balance of power between state and society, and geopolitics. I will speak primarily in terms of US policy since Anthropic is an American company, but most of my recommendations are also relevant to the rest of the world.

Along with this essay, Anthropic is releasing a legislative proposal on frontier model testing and a policy framework for job displacement, for which we intend to provide substantial financial backing. We plan to do much more in the future, but we view these as first steps to signal our seriousness.

Soon after, the government replied.

Lest you think this is a company-specific issue to Anthropic, there is also this going on:

AI model builders thinking they were in charge of reshaping society but then being blindsided by the government asserting control has been highly predictable, as evidenced by the fact that I have been predicting it for months now. But it seems to have taken much of the commentariat by surprise.

There’s not much more for me to add beyond what I’ve been saying already, so the rest of this post is just going to be a roundup of the discourse — some amusing, some insightful, some [hopefully] both. We’re not going to see full nationalization or technofascism overnight, but as OpenAI and Anthropic move towards their IPOs, the government affairs departments are going to be at least (if not more so) as important as the model development functions.

News Scan

US-Allies Rift Deepens Over Hormuz as Trump Insists Strait Reopens Friday

Source: Bloomberg
Date/Time: June 16, 2026
Trump is now trying to enlist allies to help secure and reopen the Strait of Hormuz, having gone to war with Iran without building a coalition in the first place -- and many of the countries he’s asking are saying no. Germany’s defense minister put it bluntly: “this is not our war, we have not started it.” The UK and France have hosted their own conferences on reopening Hormuz and signed a 38-country statement on safe passage, but stopped short of committing warships, leaving Washington to manage reopening logistics largely alone even as Trump insists the strait will be open by Friday. The rift matters because it determines who actually re-flags, escorts, and insures the 600+ vessels queued at Hormuz -- and a slower, US-only reopening means a slower disinflation impulse than headline ceasefire optimism implies. Oil fell to its lowest since March on the reopening optimism regardless, with bonds extending their rally.
Bloomberg -- The US Is at Odds With European Allies Over the State of the Iran War

BOJ Hikes to 31-Year High, Signals More to Come

Source: Bloomberg / Reuters
Date/Time: June 16, 2026
The Bank of Japan raised its policy rate to 1.00% from 0.75% in a 7-1 vote, the highest level since 1995, explicitly citing inflation risk from the Iran war’s energy shock. The bank also said it will stop paring its bond purchases, holding them steady at roughly 2 trillion yen per month from April 2027 -- a tightening-with-a-caveat package. Governor Ueda remained absent (hospitalized for a liver cyst), with Deputy Governor Uchida running the press conference and signaling that hikes continue “depending on the economy.” This is the most consequential central bank action of the day outside the Fed: an actual decision, not a signal, and it confirms BOJ normalization is proceeding briskly even with its governor sidelined.
Bloomberg -- BOJ Hikes Rate to 31-Year High at Meeting With Governor Absent

RBA Holds But Keeps the Door Open to Hike Again

Source: Bloomberg
Date/Time: June 16, 2026
Australia’s central bank held its cash rate at 4.35% -- its first pause this year after three hikes -- but the board explicitly stated it will raise rates further “if required.” Governor Bullock said inflation could still go either way, with consumer spending and housing showing early signs of cooling under the weight of this year’s tightening. The hold-with-hawkish-bias framing puts the RBA alongside the BOJ and BOK as part of an Asia-Pacific cluster of central banks signaling continued vigilance even as some growth data softens.
Bloomberg -- RBA Holds Key Rate for First Time in 2026 as Economy Softens

China’s Economy Stalls -- Retail Sales and Investment Hit Covid-Era Lows

Source: Bloomberg / CNBC
Date/Time: June 16, 2026
May retail sales fell 0.6% year-on-year -- the first decline in over three years -- defying expectations of a flat reading, with auto sales down 16.1% and broad-based weakness across appliances, furniture, and jewelry. Fixed-asset investment fell 4.1% in the first five months of the year, deepening from a 1.6% decline through April, while property investment dropped 16.2%. This is a meaningful setback to China’s deflation-exit narrative: export strength and the Iran-war oil-price relief aren’t reaching the domestic consumer, and the investment slide suggests Beijing’s stimulus isn’t yet offsetting the drag from elevated energy costs earlier this year.
CNBC -- China Economy Weakens Further in May as Retail Sales Post First Drop in Over Three Years

Bank of Korea Minutes Show Widening Hawkish Split

Source: Bloomberg
Date/Time: June 16, 2026
Minutes from the BOK’s May meeting show two of seven board members pushed for an immediate hike even as the bank held at 2.50%, with the updated dot plot now pointing toward 3.00-3.25% within six months. The bank revised this year’s inflation forecast up to 2.7% (from 2.2% pre-war) and growth up to 2.6%. Combined with the BOJ hike and RBA hawkish hold, this completes a same-day Asia-Pacific tightening bloc -- a clear regional divergence signal as the post-war energy shock keeps inflation sticky even where growth is softening.
Bloomberg -- South Korea’s Export Momentum Continues, Backing BOK’s Hawkish Case

US Manufacturing Output Stalls for the First Time This Year

Source: Bloomberg
Date/Time: June 15, 2026 (May data)
US manufacturing production was flat in May after four straight months of growth, with chemical and petroleum output declining even as data-center-linked manufacturing stayed strong. It’s a modest but real crack in an otherwise resilient US industrial picture, and lands just as Warsh’s Fed kicks off its first meeting under his chairmanship on June 16-17 -- a soft factory print that complicates the “hold steady” narrative without being severe enough to force a dovish pivot.
Bloomberg

Reeves: UK Fiscal Plan Aims to Cut Reliance on Bond Markets

Source: Bloomberg
Date/Time: June 16, 2026
Chancellor Reeves said her fiscal trajectory -- targeting a balanced current budget by 2029/30 -- is designed specifically to reduce the UK’s exposure to bond-market sentiment swings, an implicit nod to gilt-market volatility risk that has repeatedly constrained UK fiscal policy in recent years. It’s a structural framing statement rather than new numbers, but it signals the Treasury’s own diagnosis of its biggest vulnerability heading into the next budget cycle.
Bloomberg

UK Announces Fresh Russia Sanctions, Pushes Trump on Ukraine Peace Talks

Source: Bloomberg
Date/Time: June 16, 2026
Britain imposed 70 new sanctions designations on Russia, including Yandex Bank, insurer Rosgosstrakh, and more than 20 tankers and LNG vessels tied to Moscow’s shadow fleet -- the first time a G7 country has sanctioned ships linked to the Arctic LNG 2 project. The package, paired with new UK energy support for Ukraine, is explicitly aimed at pressuring Trump to restart Ukraine peace talks now that US attention and diplomatic capital is consumed by the Iran/Hormuz file. It’s a reminder that the Ukraine war’s sanctions and energy-market overhang hasn’t gone away just because Iran has dominated headlines.
Bloomberg -- UK to Announce Fresh Russia Sanctions, Ukraine Energy Support

Jeff Currie: Hormuz Flows May Not Normalize Until Year-End

Source: Bloomberg
Date/Time: June 16, 2026
The veteran commodities strategist cautioned that even with a ceasefire and reopening pledge, actual oil flow normalization through Hormuz could take until the end of the year given the scale of rerouting, insurance, and vessel backlogs (600+ ships waiting). It’s a useful tempering counterpoint to the market’s three-month-low oil price reaction -- the supply relief priced in by markets may be running ahead of the physical reality.
Bloomberg

Record Number of Central Banks Plan to Buy More Gold This Year

Source: Bloomberg
Date/Time: June 16, 2026
A new survey shows a record share of central banks expect to add to gold reserves in the coming year, extending the multi-year diversification trend away from dollar-denominated reserves. It’s a structural, slow-moving story rather than a catalyst, but it’s worth tracking as a steady demand floor under gold even as the immediate war-premium fades from the price.
Bloomberg

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

Derek Thompson points to a Tablet Magazine article on the rise of online dating paradoxically increasing the demand for matchmakers as an analogy for how AI will actually raise the demand for labor, not replace it.

This should be hopeful news, but it ignores all the steps in between. I mean, look at this article:

Dating apps may have led to a rise in matchmakers, but they did so by making the dating environment so terrible that many have concluded the only way to navigate it is through paying high-cost human labor.

To bring this back to the AI analogy, the similarities seems obvious. AI floods the zone with AI slop, everyone hates it, and eventually everyone has to pay for people to help them sort through the problem. One one hand, I guess this is AI creating new, high paid jobs, but on the other, humanity has to deal with the negative externalities. AI creates jobs by making everything worse to the point where a human needs to be called in to sort it all out.

So, I guess there is a new occupation we can add to Home Health Aide as the job of the future — AI Slop Navigator. The bad news is that these are the only two jobs that exist in the future; the good news is that everything else in your life is worse too. Hooray!

News Scan

US and Iran Reach Framework Peace Deal; Hormuz to Reopen Within 30 Days

Source: CNN / CNBC / NPR / Al Jazeera
Date/Time: June 14, 2026
Trump announced a framework agreement with Iran on Sunday to end the war and reopen the Strait of Hormuz, the first credible terminal event of the conflict that began February 28. The MOU -- 14 points covering the naval blockade lift, oil sanctions suspension, unfreezing of Iranian assets, and a reported $300 billion reconstruction fund -- will be signed in Geneva on June 19; the Hormuz reopens under Iranian supervision within 30 days, with nuclear talks to follow. Oil futures fell roughly 4% on the announcement, WTI dropping to around $80 per barrel; Treasuries rallied and traders immediately trimmed Fed hike bets, repricing the year-end policy path lower. The deal rewrites the near-term inflation trajectory at a stroke: every central bank that had been hiking into energy-driven price pressure is now looking at a substantially different supply picture heading into H2 2026, though the caveat is that full supply and shipping normalization will lag the political agreement by months.
CNBC -- U.S. and Iran reach deal to end the Mideast war

Warsh Plans to Eliminate the Dot Plot at His First FOMC Meeting

Source: Seeking Alpha / Yahoo Finance
Date/Time: June 10-14, 2026
Multiple credible reports indicate Fed Chair Kevin Warsh intends to abstain from or outright eliminate the dot plot -- the Summary of Economic Projections’ rate-path grid -- as soon as the June 17 FOMC meeting. Warsh has spent years arguing that forward guidance acts as a “straitjacket” that forces the Fed to commit to stale projections and compounds policy errors; eliminating the dot plot would be the most consequential structural change to Fed communication since Bernanke introduced it in 2012. If confirmed, it would immediately collapse the market’s anchor for rate-path pricing: Treasury yield curves, mortgage rates, and swap pricing all rely on the dot plot as the primary Fed signal. The Fed would shift to a regime where each meeting truly stands alone -- more flexibility for the chair, more uncertainty for markets, and a permanent repricing of how investors read Fed guidance at every future meeting. The June 17 press conference becomes, by definition, the new signal medium.
Seeking Alpha -- Warsh may abstain from dot plot at June meeting

US PPI May: +6.5% YoY -- Largest 12-Month Rise Since November 2022

Source: Bureau of Labor Statistics
Date/Time: June 11, 2026
The Producer Price Index for final demand rose 6.5% in the 12 months through May 2026, the largest annual increase since November 2022, with goods prices up 2.8% in a single month. The Stage 1 intermediate demand index rose 3.2% in May, the largest single-month jump since the series began in December 2009, signaling pipeline price pressure still building. The data was released 8:30 AM ET on June 11, after the prior scan was completed, making it fresh context for the June 16-17 FOMC. Combined with May CPI at +4.2% YoY, the PPI print completes a stagflationary data pair arriving at Warsh’s first meeting: upstream prices are accelerating even as consumer goods inflation has softened at the core. With the Iran deal now compressing forward energy prices, this PPI print may represent the pipeline peak -- but it is still the input feeding every dot on a dot plot that may no longer exist after Wednesday.
BLS -- Producer Price Indexes, May 2026

SpaceX IPO: SPCX Closes +19% on First Day, Valuation Crosses $2 Trillion

Source: NPR / CNBC / Yahoo Finance
Date/Time: June 12, 2026
SpaceX opened under ticker SPCX on Nasdaq on June 12 and closed at $160.95, up 19% from the $135 IPO price, peaking intraday at $176 -- a 31% gain -- before paring back. The $75 billion raise at $135 was already the largest IPO in history; the first-day market cap crossing $2 trillion puts SpaceX alongside the top tier of US listed companies. The $75 billion cash drain from markets (on top of the Anthropic and OpenAI capital queue) is a near-term liquidity event for equity markets, while SpaceX’s Nasdaq 100 inclusion fast-track (approximately 3 months) means index-forced buying is coming in September-October. The valuation also prices in SpaceX’s 2026 merger with xAI, making SPCX effectively a bundled space-tech and AI holding -- which creates a new publicly listed lens for the AI capex cycle for the first time.
CNBC -- SpaceX IPO takeaways: SPCX closes at $161, jumping 19% after record debut

Lagarde: ECB Sees Second-Round Energy Effects ‘Everywhere’ (June 15)

Source: Bloomberg
Date/Time: June 15, 2026
Four days after hiking 25bp to 2.25%, ECB President Lagarde gave a post-decision speech explicitly acknowledging that second-round energy price effects have started: “Indirect effects of inflation, we have absolutely started to see that more or less everywhere in recent weeks.” Eurozone energy price inflation reached 10.9% in May 2026, and Lagarde’s language about transmission into other parts of the economy -- wages, services, non-energy goods -- is the signal that the ECB’s hiking cycle is not a one-and-done: the ECB is responding to an embedding process already underway, not just a supply shock expected to be transitory. The Iran peace deal materially changes the forward energy picture, but the second-round effects Lagarde is describing are already baked into wages and services prices -- they do not unwind overnight with oil prices. The practical read is that the July meeting remains live for another hike even as the Hormuz reopening softens the energy input to headline CPI.
Bloomberg -- Lagarde Says ECB Has Started to See Second Round Effects

BOE Unity Fracturing: More Officials Set to Back Rate Hike at June 18 Meeting

Source: Bloomberg
Date/Time: June 15, 2026
Bloomberg reports that more Bank of England MPC members are expected to vote for a rate hike at the June 18 meeting, after the April vote was 8-1 hold with Chief Economist Huw Pill casting the first dissent for a hike since the tightening cycle ended in summer 2023. The pattern mirrors the ECB’s experience: the Iran war initially produced unusual consensus (hold at 3.75% to avoid overshooting into a demand shock) but persistent energy pass-through and sticky services inflation at 3.7% forecast for May are breaking that consensus. BOE projections from April already saw CPI at 3.3% in Q3 and rising further in Q4; that outlook has not improved, and the Iran deal’s Hormuz-reopening timeline (30 days minimum before supply normalization) does not help the near-term UK inflation print. The June 18 meeting also lands on the same day as the UK May CPI release -- the BOE will be setting rates in real time against fresh inflation data, creating genuine live-meeting conditions.
Bloomberg -- More Bank of England Officials Set to Back Hikes as Iran War Frays Unity

Japan’s LDP Clears Path for Food Sales Tax Cut to Zero After Landslide Win

Source: Bloomberg / Nikkei Asia
Date/Time: June 15, 2026
Japan’s ruling LDP, following a landslide election win that cleared PM Takaichi’s policy agenda, is now actively deliberating cutting the food consumption tax from 8% to zero -- or 1% as a faster-implementable alternative due to cash register system constraints. The annual revenue cost of a full elimination is approximately 5 trillion yen ($32 billion), and markets are watching the decision for its dual implications: near-term, a zero food tax reduces CPI temporarily (potentially masking the underlying wage-price dynamics the BOJ is monitoring), while the fiscal cost expands the JGB supply overhang into a market already pricing a June 15-16 hike to 1.00%. The landslide gives Takaichi a strong mandate to pursue both the fiscal easing and the energy independence agenda simultaneously -- an unusual combination for a BOJ trying to normalize rates against a government actively loosening fiscal policy.
Bloomberg -- Japan Ruling Party Still Mulling Sales Tax Cut to Zero for Food

China: Consumption Heads for Q2 Drop as Retail Sales Hit 40-Month Low

Source: Bloomberg / CNBC
Date/Time: June 14, 2026
China’s consumer economy is at risk of a Q2 contraction in real spending -- which would be the first pandemic-era decline -- after April retail sales grew just 0.2% year-on-year, the weakest reading since December 2022. The war-driven energy cost shock has compressed Chinese household purchasing power while suppressing business confidence: big-ticket items (autos, home appliances) fell sharply, and the deflation exit thesis that China spent early 2026 building -- exports +19.4% in May, trade surplus widening -- is showing demand-side fragility. The structural tension is clear: China’s export machine is running hot (AI chips +111% in May), but domestic consumers are being squeezed by energy costs and a property market that remains under stress. The Iran peace deal and Hormuz reopening would ease China’s energy import bill, but demand damage is already accumulating -- making any forthcoming stimulus signals more consequential for the deflation escape trajectory.
Bloomberg -- Chinese Economy Stuck in Slow Lane as Consumption Heads for Drop

Hormuz Deal Does Not Mean Instant Relief: Supply and Shipping Restart Will Take Months

Source: Bloomberg / AP
Date/Time: June 15, 2026
Shipowners and energy companies are urging caution about the pace of normalization despite the US-Iran framework agreement: 600+ vessels are waiting to transit the Strait, owners are seeking operational clarity before resuming passage, and energy analysts say it will take months -- not days or weeks -- before global oil and gas supply chains return to pre-war functioning. The 30-day timeline for Hormuz’s reopening is a contractual commitment, not an operational reality: physical infrastructure surveying, insurance recertification, crew routing, and refinery ramp-ups all lag the political document. WTI at roughly $80 is still approximately $15 above pre-war levels, and heating oil dropped 17% on the deal but remains elevated. The macro implication is that even with the war formally ended, Q3 2026 CPI and PPI readings will still carry significant residual energy cost embedded in supply chains -- which means central banks cannot immediately pivot dovish on the deal alone. The disinflation impulse from the Hormuz reopening is real but back-loaded into Q4.
Bloomberg -- Shipowners Seek Clarity on Hormuz Deal as 600 Vessels Eye Exit

Iran War Has Permanently Redirected Gulf Trade Routes -- Shift May Outlast the Conflict

Source: Bloomberg
Date/Time: June 15, 2026
A Bloomberg analysis finds that the Iran war has accelerated container shipping through UAE ports (Jebel Ali / Abu Dhabi Ports) and Cape of Good Hope routes in ways that trade analysts believe may prove permanent, regardless of the Hormuz reopening. Carriers that built out alternate routing during the blockade have invested in contracts, logistics infrastructure, and customer relationships for those lanes -- the sunk-cost logic cuts against immediate reversion even when Hormuz reopens. For global supply chain economics, this matters beyond energy: non-energy container traffic routes are also being repriced, with UAE trade hubs potentially absorbing a lasting share of Gulf transit volume. The realignment parallels the Red Sea re-routing that permanently elevated container costs after the Houthi attacks -- a pattern where temporary disruptions create permanent rate floors by changing shipper behavior and infrastructure investment.
Bloomberg -- Iran War Diversifies Gulf Trade Routes in Ways That Might Prove Lasting

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

I’m suddenly swamped by my day job, so not a ton of time for poasting, which makes me sad. Only a shortie today.

Gautam Mukunda, from the Yale School of Management, is seeing the sociological impacts of AI in much the same way that I am. Or as he puts it:

He writes:

The bargain that tech’s leaders are offering the public is essentially, “I will become even more unimaginably rich, while you will pay more for electricity, your air will be polluted, and you might lose your job.” Then they profess shock and blame Chinese interference when Americans don’t want to take them up on the deal.

The industry can spend as much money as they want to influence the political system. It’s not an accident that the venture capital arm of Andreessen Horowitz is the largest corporate donor in American politics, or that OpenAI co-founder Greg Brockman has poured tens of millions of dollars into pro-AI and pro-Trump Super PACs. But buying off political leaders won’t win over the public. Tech billionaires can outspend the public. They can’t outvote them.

And since data centers still need permits, every data center is now a referendum. You win referenda by offering people a better future, not bulldozing them the way O’Leary wants to treat Box Elder. The tech industry should give it a try.

This is the carrot perspective. And, as I’ve been saying, if AI doesn’t give enough carrots, they’re going to get the stick.

News Scan

US-Iran Conflict Re-Escalates: New US Strikes, Iran Targets Bahrain, Ceasefire Declared “Meaningless”

Source: Reuters / Bloomberg / Al Jazeera
Date/Time: June 10-11, 2026
The Iran war entered a dangerous new phase on June 10 after the US launched fresh strikes on Iranian radar and drone sites following the downing of a US Apache helicopter near the Strait of Hormuz -- the most significant escalation since the April ceasefire. Iran’s IRGC responded by striking 18 US military targets and targeting the US Fifth Fleet headquarters in Bahrain, prompting sirens across the island nation. Iran’s Foreign Ministry declared the April ceasefire “effectively meaningless.” On June 11, Trump vowed additional strikes if Iran refused to negotiate, raising the stakes for a peace framework that has now been violated by both sides numerous times according to mediators. Oil spiked again on news Iran declared Hormuz closed -- Brent at $95.20, WTI at $92.30 -- though prices remain below their wartime peaks as Hormuz workarounds have expanded. The Bahrain strikes are notable because they move the conflict off Iranian soil: this is Iran directly hitting US power-projection infrastructure in a Gulf partner state, a qualitative escalation that puts pressure on the entire US Gulf alliance structure.
Al Jazeera -- Iran war live: Tehran vows response as US strikes over downed helicopter

ECB Hikes 25bp to 2.25% -- First Rate Increase Since 2023

Source: Bloomberg / FXStreet
Date/Time: June 11, 2026
The European Central Bank raised its deposit rate by 25 basis points to 2.25% on June 11, its first rate hike in roughly three years, as war-driven energy prices pushed euro-area inflation well above target and both hawkish and dovish members united behind the move. Lagarde’s press conference maintained strict data-dependence framing with no explicit commitment to July, though markets price roughly a 50% probability of a follow-on hike in July and more than one further hike by year-end. The ECB is hiking into a technically contracting euro area economy -- EZ Q1 GDP was -0.2% -- but the Governing Council judged that energy-driven inflation and second-round wage effects posed a greater near-term risk than cyclical weakness. The decision is significant as a precedent: the ECB is now explicitly tightening while its economy shrinks, a policy stance that will directly test whether the hiking cycle can be sustained as energy shock pass-through peaks.
FXStreet -- European Central Bank set to hike interest rates for first time in nearly three years

US CPI May: +4.2% YoY -- Highest Since April 2023; Core Comes In Soft at +0.2%

Source: CNBC / BLS / Bloomberg
Date/Time: June 10, 2026
May CPI rose 4.2% year-over-year -- the fastest pace since April 2023 -- driven almost entirely by energy: gasoline is up 40.5% YoY and energy broadly +23.5% YoY as the Iran war oil shock works fully through to consumers. The headline beat the prior 3.8% pace but matched Dow Jones consensus. The important offset: core CPI was only +0.2% MoM, a tenth below the 0.3% estimate and softer than April’s 0.4%, suggesting demand-side inflation remains controlled even as supply-side energy costs surge. JPMorgan called May the “high-water mark” on the view that energy prices will stabilize. The data puts the Federal Reserve in a classic stagflation dilemma heading into the June 16-17 FOMC meeting -- Warsh’s first as Chair -- with markets pricing a 97.8% probability of a hold but shifting year-end hike probability to 63%. The June 16-17 meeting will be laser-focused on whether the committee signals any change in its tolerance for energy-driven inflation exceeding target while core stays contained.
CNBC -- CPI inflation report May 2026: Prices rose 4.2% annually

BOJ Governor Ueda Hospitalized; Will Miss June 15-16 Policy Meeting

Source: Bloomberg / Japan Times / CNBC
Date/Time: June 10, 2026
Bank of Japan Governor Kazuo Ueda was hospitalized for treatment of an infected liver cyst and is expected to remain in hospital for approximately two weeks, meaning he will miss the June 15-16 policy meeting -- the first time a BOJ governor has been absent from a scheduled meeting since the current decision-making framework was established in 1998. Deputy Governor Ryozo Himino will chair the meeting; Deputy Governor Shinichi Uchida will conduct the post-meeting press conference. The BOJ is still widely expected to raise its policy rate to 1.00% from 0.75%, which would be the highest level in three decades. The critical issue is communication: without Ueda in the room, analysts expect the BOJ to offer fewer clear signals about the future rate path, leaving markets guessing about the pace of further hikes and how the bank weighs persistent wage growth against war-related energy uncertainty. The press conference -- led by a deputy rather than the governor -- is likely to be notably less informative about the forward trajectory, adding uncertainty to JGB pricing and yen positioning around an otherwise well-telegraphed hike.
Bloomberg -- BOJ’s Ueda Hospitalized, Expected to Miss June Policy Meet

Bank of Canada Holds at 2.25%, Explicitly Warns of “Dilemma”: May Cut or Hike Depending on Path

Source: Bloomberg / Bank of Canada
Date/Time: June 10, 2026
The Bank of Canada held its policy rate at 2.25% for the fifth consecutive time but made headlines with unusually explicit two-way risk language from Governor Macklem: if the United States imposes significant new trade restrictions on Canada, the BOC may need to cut; if Middle East energy inflation persists and becomes generalized, the BOC may need to hike consecutively. Calling the situation a “policy dilemma” is a rare acknowledgment from a G7 central bank that its next move is genuinely uncertain in direction -- not just in timing. Canada faces a unique squeeze: US tariff risk and weak domestic demand pull toward easing, while war-driven energy prices now running through to CPI pull toward tightening. The explicit bi-directional guidance makes BOC rate markets essentially uninvestable without a view on the US-Canada trade relationship and the Iran war trajectory simultaneously -- a positioning challenge that also maps onto Canadian credit, housing, and the loonie.
Bloomberg -- Bank of Canada Holds at 2.25%, Warns of Policy ‘Dilemma’

Takaichi: 100% of Japan’s Oil Supply Will Avoid Hormuz by July

Source: Bloomberg
Date/Time: June 11, 2026
Japanese Prime Minister Sanae Takaichi announced that 100% of Japan’s crude oil imports will bypass the Strait of Hormuz by July -- a remarkable logistical transformation for a country that was 73.7% Hormuz-dependent in January 2026. Japan has redirected crude flows through the Cape of Good Hope, expanded procurement from UAE and Saudi Arabian ports with non-Hormuz loading, and diversified sourcing to the Americas, Central Asia, and Africa. While this removes Japan’s most acute energy supply vulnerability, the shift carries structural costs: longer transit times, higher freight rates, and reduced supply-chain flexibility. For the BOJ’s June 15-16 decision, the announcement removes a key tail risk -- an abrupt Japan energy supply disruption -- that had been cited as a potential argument for delaying the hike. A Japan with fully secured oil supply is a Japan that can normalize policy with greater confidence.
Bloomberg -- Takaichi Says 100% of Japan’s Oil Supply to Avoid Hormuz in July

US Refunds $22 Billion in Tariffs in May, Effectively Zeroing Out Customs Revenue

Source: Bloomberg / Business Standard
Date/Time: June 10, 2026
The US Treasury refunded approximately $22 billion in tariff revenue collected from importers in May 2026 -- roughly equal to the full month’s collections -- meaning the federal government received essentially zero net tariff revenue for the period. The refunds stem from the Supreme Court’s February 2026 ruling that Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs exceeded presidential authority. Of the $166 billion in total refundable tariff revenue, more than $22 billion has now been returned. The Trump administration has moved to appeal a federal court order allowing all importers to seek refunds, meaning the full $166 billion pool may not be distributed. The fiscal implications are substantial: tariff revenue was a key offset in Republican budget negotiations, and a sustained zero-yield period undermines the fiscal math behind the planned tax legislation extension.
Bloomberg -- US Refunds $22 Billion in Tariffs, Canceling Out Customs Revenue

Trump Says US Won’t Renew USMCA; July 1 Deadline Launches Months of Trade Talks

Source: Bloomberg / CBC
Date/Time: June 10, 2026
President Trump announced the US will not reauthorize the US-Mexico-Canada Agreement at its scheduled July 1 review deadline, rejecting Canada’s June 1 request for a straightforward 16-year renewal of the pact he negotiated in his first term. Instead, the administration is pushing to restructure the $1.8 trillion annual trilateral trade framework into bilateral tracks with annual reviews beginning in 2027. Without formal renewal, the agreement enters rolling annual reviews but technically remains in force for up to a decade absent a formal withdrawal. Trump has specifically targeted automotive rules of origin, where Mexican producers currently pay lower tariff rates than Korean and Japanese competitors. The shift from a 16-year renewal to annual bilateral reviews fundamentally changes the long-term investment calculus for North American supply chains, particularly in autos and manufacturing, where multi-year capital commitments require trade rule certainty.
Bloomberg -- Trump Says US Won’t Renew USMCA, Setting Up Months of Talks

Norway May Core CPI Hits 4-Month High at 3.4%, Supporting June 18 Hike

Source: Bloomberg / Norges Bank
Date/Time: June 10, 2026
Norway’s underlying inflation rate -- excluding energy -- unexpectedly accelerated to 3.4% in May, the highest reading in four months, providing renewed backing for an additional rate hike from Norges Bank at its June 18 meeting. The Norges Bank had already surprised markets with a 25bp hike to 4.25% in May, its first tightening since 2023, and the May CPI data makes a consecutive June hike increasingly likely. A separate corporate confidence survey came in softer, but hard data takes precedence over sentiment indicators. Norway sits at the hawkish frontier of European monetary policy -- while the ECB just delivered its first hike today and the BOE is holding at 3.75%, Norges Bank is potentially moving to 4.50%, reflecting war-driven energy-cost pass-through working more directly through the Norwegian economy.
Bloomberg -- Norway Core Inflation Hits Four-Month High, Backing Hiking Plan

SpaceX IPO Priced at $135/Share; $75B Raise, $1.75T Valuation; Listing June 12

Source: Bloomberg / Investing.com
Date/Time: June 11, 2026
SpaceX priced its Nasdaq IPO at $135 per share on June 11, raising $75 billion at a $1.75 trillion valuation -- what will be the largest IPO in financial market history -- with first-day trading scheduled for June 12 under the ticker SPCX. The company, which now also owns xAI (the maker of Grok) following a 2026 merger, conducts more rocket launches annually than the rest of the world combined and has over 9 million Starlink subscribers. The $75 billion capital raise represents a substantial liquidity drain from equity markets at a moment of heightened macro uncertainty: the same week as the NFP shock, a 4.2% CPI print, and the FOMC meeting next week. The S&P 500 denied fast-track inclusion; Nasdaq 100 eligibility is expected roughly three months post-listing. This follows the OpenAI confidential S-1 filing last week -- the combined AI mega-IPO pipeline now represents more than $150 billion in equity supply.
Bloomberg -- How SpaceX’s Dream of a Record-Breaking IPO Stacks Up

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

My recent post on property taxes must have hit a nerve, because it did larger-than-usual numbers.

Breitbart’s John Carney had some thoughts on why property tax discourse is so impassioned.

I’m sure at some level, everyone, even Boomers, realize they are paying property taxes. But when it becomes the only line item on your monthly housing bill, it stands out.

I have no problem with wanting lower taxes — I want lower taxes, too! It’s just that couching the argument in some sort of morality wrapper is a manipulative tactic. There is no fairness argument to be made when it comes to taxes, just, “I want young people to pay more so I can pay less.”

I want all other people to pay more so I can pay less, too. Unfortunately for me, I am not part of the generation who has been politically pandered to their entire life, so I’m out of luck.

News Scan

Iran and Israel Pledge to End Attacks as Trump Claims Peace Talks Back on Track

Source: Bloomberg
Date/Time: June 8-9, 2026
Iran and Israel agreed to halt military operations against each other following the sharpest flare-up since April, in which Israel struck targets in Lebanon (triggering the re-escalation) and Iran responded with missile fire against Israeli territory for the first time since the ceasefire. The exchange threatened to derail peace negotiations and prompted Trump to make a public appeal for both sides to immediately stand down. Iran declared an end to its offensive, and Trump told reporters that talks are “on track” -- but the underlying architecture remains fragile: Trump reportedly berated Netanyahu in an expletive-laden call, calling him “f*cking crazy” for risking the entire peace framework over Lebanon, and the three-way impasse between the US, Israel, and Iran over Lebanon’s status continues unresolved. Oil pared gains on the de-escalation but remains elevated, and the structural brake on the Strait of Hormuz stays in place until a comprehensive deal is signed. The episode confirms that even as both sides signal willingness to negotiate, Israel’s domestic political constraints -- particularly on the Lebanon front -- are the most destabilizing variable for the peace timeline.
Bloomberg -- Trump Says Peace Talks on Track After Israel-Iran Clashes End

Indonesia Delivers Off-Cycle Rate Hike to 5.5% as Rupiah Rout Deepens

Source: Bloomberg
Date/Time: June 9, 2026
Bank Indonesia raised its benchmark BI-Rate by 25 basis points to 5.5% in an emergency off-cycle move -- its second surprise action in three weeks -- after the rupiah fell more than expected since the last scheduled meeting and the bank concluded it needed to act before the official June 17 date to prevent capital flight from accelerating. The cumulative tightening now stands at 75 basis points over roughly three weeks (a 50bp hike in May followed by today’s 25bp), and Barclays flagged another 25-50bp hike at the scheduled meeting is likely. The rupiah jumped most in nine months after the announcement, but Indonesia’s five-year bond yield rose to its highest level since May 2020 -- signaling that markets view the hiking cycle as reactive rather than ahead-of-the-curve. The episode illustrates the war’s EM transmission mechanism: Indonesia imports roughly 30% of its energy needs, the rupiah has fallen 8% since the Iran war erupted, and the combination of a global energy shock, a Fed pricing hikes rather than cuts, and domestic policy uncertainty under President Prabowo is squeezing Indonesia’s external balance at a pace that forced emergency central bank action. It is a template for EM vulnerabilities that likely applies to other energy-importing emerging markets facing the same tripartite shock.
Bloomberg -- Indonesia Delivers Off-Cycle Rate Hike to Temper Market Rout

China May Trade: AI Chip Exports Surge 111%, Oil Imports at Eight-Year Low

Source: Bloomberg / Reuters
Date/Time: June 9, 2026
China’s May trade data delivered two starkly divergent signals. On the export side, the AI supercycle is producing historically strong results: overall exports grew 19.4% year-over-year (beating the 15% consensus), led by a 111% surge in semiconductor and chip-related exports as global data center buildout accelerates demand for China-assembled electronics -- a dynamic visible in parallel South Korean and Malaysian export data. On the import side, crude oil purchases fell to an eight-year low as the Iran war constrains Middle East supply, pushes Brent above $90, and forces Chinese refineries to draw on strategic reserves and reduce run rates. The divergence matters because China’s deflation exit depends on two things simultaneously: export revenue generating income and industrial demand pulling domestic input prices higher. The AI chip boom supports the first; the oil import collapse undermines the second. A China that can sustain export-driven corporate profits even while its energy input costs are war-elevated -- but with oil volumes at crisis lows -- is a fragile recovery rather than a durable one, and the widening trade imbalance with the EU (EU imports from China falling again) signals that Europe’s weakening demand is an additional drag on the revenue side.
Bloomberg -- China Exports and Imports Extend Rapid Growth as AI Propels Trade

ECB Sources: June Hike Sealed, but July Is “Fully Open”

Source: Reuters / Investing.com
Date/Time: June 9, 2026
Sources close to the ECB’s Governing Council told Reuters that the June 11 hike to 2.25% is essentially decided -- even the historically dovish members (Panetta, Stournaras) are on board -- but crucially, the same sources emphasized that July is “fully open,” meaning Lagarde will not pre-commit to a second sequential hike at the post-meeting press conference tomorrow. The framing matters because the market had begun pricing a July follow-through, and a Lagarde statement that explicitly keeps July contingent on incoming data would force a partial unwind of those expectations. The July optionality also reflects a genuine split within the council: the hawks (Schnabel, Wunsch) want to signal more is coming, while the doves want the June hike to be framed as completing the adjustment. The staff projections released tomorrow will be scrutinized for whether the June baseline assumed an enduring energy shock or a partial reversal -- a hawkish projection (higher-for-longer inflation) would implicitly validate a second hike, while a projection that assumes oil prices fade post-conflict would give the doves cover to pause in July. The key signal tomorrow is whether Lagarde’s language on July is “data-dependent” (dovish) or “additional adjustment may be warranted” (hawkish).
Reuters via Investing.com -- ECB June Rate Hike Case Is Nearly Sealed but July Is Fully Open

German Industrial Output Rises for First Time Since Iran War Began

Source: Bloomberg
Date/Time: June 9, 2026
Germany’s federal statistics office reported that industrial production rose 0.4% in April on a month-over-month basis -- the first positive reading since the Iran war erupted last November, ending a losing streak that had taken output roughly 12% below pre-pandemic levels. Construction drove most of the gain; core manufacturing and energy-intensive industries remained under pressure. The reading ends a losing streak dating to last November, yet few analysts are treating it as a turning point, with output effectively stagnating across the first four months of 2026. The signal is a modest offset to yesterday’s -3.8% German factory orders print for April, and together the two readings paint a picture of an industrial base that has stopped deteriorating at the margin but has not begun recovering. For the ECB, the data is irrelevant to the June 11 decision (hike is sealed) but slightly relevant to how Lagarde frames the outlook: the EZ economic contraction in Q1 and persistent industrial weakness give the doves narrative ammunition to resist a July follow-through, and Germany’s output picture -- flat at depressed levels rather than rebounding -- is exactly the data point they will cite.
Bloomberg -- German Industrial Output Rises for First Time Since War Began

NFIB May: Small Business Optimism Falls to 95.3, Job Openings at Five-Year Low

Source: Bloomberg / NFIB
Date/Time: June 9, 2026
The NFIB Small Business Optimism Index fell 0.6 points in May to 95.3, below the 96.0 consensus estimate and the index’s 52-year average of 98.0, as the Uncertainty Index rose 3 points to 91 -- well above its historical average of 68. Most significantly, the share of small business owners reporting job openings they could not fill dropped 5 points to 29%, the lowest reading since May 2020. That labor demand metric is one of the Fed’s informal gauges for the underlying tightness of the labor market below the headline payroll number, and its five-year low -- coming in the same week as a blockbuster +172K NFP print and an unemployment rate still at 4.3% -- reinforces the picture of a two-tier labor market: large corporations still hiring at headline strength while small businesses, which account for roughly half of private employment, are pulling back on job openings. For a Fed already being asked to explain why it should hold rather than hike, this data muddies the picture: the NFIB softness provides a “wait and see” argument, but the NFP strength and NFIB Prices Paid component (elevated) argue against patience.
Bloomberg -- US Small-Business Optimism Falls to Lowest Since October 2024

Former BOJ Official: June and October Rate Hikes Both Likely in 2026

Source: Bloomberg
Date/Time: June 9, 2026
A former senior Bank of Japan official told Bloomberg that the BOJ is likely to raise rates at both its June 15-16 meeting (to 1.00%) and again as early as October, describing the Iran conflict’s tail risks as “significantly diminished” after Iran declared an end to its weekend offensive. The October call is the new element: the prior baseline among BOJ watchers was June plus one further hike sometime in H2, with timing uncertain. Framing October as the base case rather than a tail event implies the BOJ sees the post-June path as a steady normalization trajectory rather than a pause-and-wait posture. The former official also noted that if the BOJ fails to hike in June, it risks “missing the window” and being forced to postpone the next move indefinitely -- a statement that reads as intellectual pressure on the current board to move now. As context: the April meeting vote was 6-3 to hold (the widest dissent under Ueda), Japan real wages have risen for four consecutive months, and the yen tested 160 despite a record $76 billion in May intervention. A former official advocating for both June and October hikes simultaneously signals that the domestic BOJ establishment consensus has shifted toward a more aggressive normalization path than external observers have priced.
Bloomberg -- BOJ May Raise Rate in October After June, Former Official Says

South Korea Q1 GDP Upgraded to 1.8%, Fastest Since 2021, Reinforcing BOK Hawkish Shift

Source: Bloomberg
Date/Time: June 9, 2026
South Korea’s Statistics Korea revised Q1 GDP growth upward to 1.8% quarter-on-quarter from a preliminary 1.7%, marking the strongest quarterly expansion since Q4 2021 and beating the Bloomberg consensus. Exports drove the beat, rising 5.9% on the quarter, with semiconductor and electronics shipments to AI-related buyers driving the strength; facility investment rose 6.6%, the fastest in four years. The upgrade shifts the BOK’s narrative from the currency-defense frame that dominated last week’s coverage (won at 2009 lows, emergency capital controls on FX speculation) to a fundamentals-driven one: the central bank is now hawkish not because the won is under attack but because the economy is genuinely running hot, with 2026 growth upgraded to 2.6% and inflation at 2.7%, above the 2% target. The BOK’s next rate-setting meeting is in July, and this data removes any residual case for near-term cuts while building the case for a hike. For the broader Asia macro picture, Korea’s AI-export-driven strength is the mirror image of Indonesia’s war-driven weakness: the two countries are experiencing opposite sides of the same global shock cycle.
Bloomberg -- Korea Upgrades Economic Growth, Reinforcing BOK Hawkish Shift

OpenAI Files Confidential S-1 for IPO, Targeting $1 Trillion+ Valuation

Source: Bloomberg / TechCrunch
Date/Time: June 8-9, 2026
OpenAI publicly announced a confidential S-1 registration statement filed with the SEC, with Goldman Sachs, Morgan Stanley, and JPMorgan leading the offering and an initial target of a September public listing at a valuation above $1 trillion. The filing lands in the same two-week window as SpaceX’s June 12 listing (at $1.75 trillion) and follows Anthropic’s June 1 filing at $965 billion -- making 2026 the year three AI-adjacent companies simultaneously test the public market’s capacity to absorb trillion-dollar technology companies. The structural implication for markets is the liquidity drain: SpaceX alone is raising $75 billion with $150 billion in orders (2x oversubscribed), and if OpenAI and Anthropic reach IPO by year-end, the combined capital absorption from three mega-IPOs could be the single largest sequential drain on institutional equity allocations in history. For the AI capex cycle, OpenAI going public also accelerates the competitive dynamic -- public company disclosure requirements, earnings pressure, and equity compensation tied to public market performance will change how Altman manages spend, and a public OpenAI competing for capital with Microsoft Azure and Google Gemini in the same earnings cycle creates a new structural variable for large-cap tech.
TechCrunch -- OpenAI Files Confidentially for IPO

Japan Finance Minister: Budget Reform Is “Biggest Since 1945”

Source: Bloomberg
Date/Time: June 9, 2026
Finance Minister Satsuki Katayama told reporters that Japan is undergoing its most significant fiscal reform since the end of World War II, characterizing the government’s effort to reduce structural reliance on supplementary budgets -- which have historically been the vehicle for emergency defense and infrastructure spending -- as a fundamental reordering of Japan’s fiscal architecture. The context matters for the BOJ’s normalization path: Japan’s chronic reliance on supplementary budgets has been one of the structural arguments against aggressive rate normalization, because the government’s interest burden on the existing 1,000+ trillion yen debt stock rises with every hike. If Katayama’s reform credibly reduces the fiscal deficit’s sensitivity to the spending cycle, it modestly relaxes the ceiling on how far the BOJ can normalize without triggering a JGB yield crisis. It also matters in the context of PM Takaichi’s recent flagging of a communication gap between the BOJ and the bond market -- the government is simultaneously trying to frame fiscal reform as credible while managing the JGB market’s response to a BOJ that is about to hike for the second time in 2026. Whether markets treat this as genuine consolidation or political framing will show in the 10-year JGB yield trajectory after the BOJ’s June 15-16 decision.
Bloomberg -- Katayama Says Japan Undergoing Biggest Budget Reform Since 1945

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.

A reader left an interesting comment on Friday’s labor market article.

There’s a lot that I agree with in here — most importantly the idea that there is more to life than just your career — but somewhere I need to differ is in the statement that “working at a bank is not more…valuable than being a nurse.”

The ellipsis is doing a lot of work, since the thing I removed said, “more important or inherently [more valuable],” but my point is that the entry level finance roles that are [potentially] being destroyed by AI pay a lot more than an entry level nursing role that are the jobs that are being created these days.

I agree with Stephen’s point that the finance roles are not morally superior to the nursing ones — if anything, they are far morally inferior. But morality points don’t outbid an empty-nester-Boomer for a nice house in a good school district; for that you need money. What it really comes down to is this:

AI might not cause everyone to be downwardly mobile (then again, it also might), but it definitely seems to be closing off upward mobility, at least through the white collar labor pathway.

So if what constitutes a good life — and this definition is largely in the eye of the beholder — is widely and evenly distributed throughout the income distribution, then everything will be fine. If it’s concentrated in the upper part, though — if housing in safe, walkable neighborhoods with good schools are only affordable for those with extreme incomes or extremely rich parents and that’s the thing you care about— then AI eating the labor pathway to the upper middle class only further ossifies society.

News Scan

Iran War: Weekend Re-Escalation, Iran Declares End to Attacks, Lebanon as Trump-Netanyahu Wedge

Source: Bloomberg / NBC News / Al Jazeera
Date/Time: June 7-8, 2026
The Iran-Israel ceasefire -- fragile since early April -- collapsed over the weekend when Israel launched airstrikes on Lebanon and Iran retaliated with missile strikes into Israel, the first such direct exchange since the truce was declared. In the early hours of Monday, Israel responded with a second wave of strikes hitting Tehran, Isfahan, and Tabriz. Trump called for an “immediate” stop to the attacks on social media, and Iran subsequently announced an end to its military operations against Israel. Oil pared sharp earlier gains on the ceasefire signal but remains elevated, with the June 5 MOU that was awaiting Trump’s signature now further complicated by the renewed fighting. A structurally complicating factor has sharpened: Israel has consistently demanded its Hezbollah conflict in Lebanon remain excluded from US-Iran peace negotiations, creating a wedge between Trump -- who needs a broader deal -- and Netanyahu, who refuses to cede the Lebanon front. This three-way constraint (US-Iran talks, Israel-Lebanon, Hezbollah rejection) makes a durable ceasefire structurally harder to achieve than markets have priced.
NBC News -- Iran Live Updates, June 8, 2026

US NFP May: +172K vs. +80K Consensus; Cumulative Revisions Add +93K; Year-End Hike Fully Priced

Source: BLS / Bloomberg / CNBC
Date/Time: June 6, 2026
May nonfarm payrolls surged 172,000, more than double the 80,000 consensus and well above the prior month’s upwardly revised 179,000. Cumulative revisions to March and April added another 93,000 jobs, meaning the labor market was materially stronger than reported in real time. Unemployment held at 4.3%; average hourly earnings rose 3.4% year-over-year. The “good news is bad news” dynamic hit markets hard -- gold fell by its steepest single-session margin since March, the dollar surged back above key thresholds, and Treasury yields rose sharply. Futures markets moved to fully price a quarter-point rate hike by year-end, while Goldman Sachs revised its Fed forecast entirely, now expecting no cuts in 2026 and pushing the first reduction to June 2027. The report effectively closes the door on near-term easing and raises the genuine question of whether the next move is a hike rather than a cut -- Warsh’s first dot plot next week will be the first official look at how the committee thinks about that path.
BLS Employment Situation -- May 2026

Trump Opposes Rate Hike Publicly as Warsh Prepares Inaugural FOMC with Dot Plot (June 16-17)

Source: Bloomberg / NBC News / Fortune
Date/Time: June 7, 2026
In an NBC Meet the Press interview aired Sunday -- recorded the day after the blowout NFP -- Trump said a Fed rate hike “is the wrong thing to do” and that rates should instead be cut. The comment lands at a uniquely sensitive moment: Kevin Warsh chairs his first FOMC meeting June 16-17, the first under his tenure to include a Summary of Economic Projections (dot plot) and a press conference, making it the highest-scrutiny debut possible. The political subtext is significant -- Trump publicly acknowledged earlier this year that Warsh would not have been selected if he had told Trump he wanted to raise rates. Now, with futures pricing a year-end hike and Goldman projecting no 2026 cuts, Warsh faces a genuine dilemma: the data is pointing toward tightening, his political patron is demanding easing, and the dot plot will force him to put a number on it. The Fed’s institutional credibility -- already stressed by the succession itself, the most divisive confirmation in Fed history -- is now under the most acute political pressure since at least 2019.
Bloomberg -- Trump Says Fed Rate Increase Would Be Wrong, June 7, 2026

ECB June 11 Hike: 99% Priced, Unanimous Hawk-Dove Support; G7 Lead Hawk Positioning

Source: Bloomberg / Reuters / Yahoo Finance
Date/Time: June 6, 2026
The ECB is virtually certain to raise its deposit rate to 2.25% on June 11, with market-implied probability at 99% and support now spanning the full policy spectrum -- even habitual doves Italy’s Fabio Panetta and Greece’s Yannis Stournaras have publicly backed the move. A Reuters poll of 80 economists found 74 expecting the June hike, with a second increase likely at the September meeting. Bloomberg’s framing is pointed: the ECB is “stepping up as G7’s lead hawk” at a moment when the Fed is paralyzed by political pressure and the BOE faces a stagflation dilemma. The unanimous consensus is that hiking is the lower-credibility-cost option -- as Rabobank’s Bas van Geffen put it, the cost of holding in terms of inflation-fighting credibility exceeds the risk of hiking into a slowing economy. Critics, most prominently Berenberg’s Holger Schmieding, argue the ECB is about to repeat its 2011 mistake of tightening into a supply shock, potentially tipping the eurozone into a mild recession rather than just stagflation.
Yahoo Finance -- ECB June Hike a Done Deal, June 2026

Germany Factory Orders: -3.8% vs. -2.0% Expected; ECB Hiking into EZ Contraction

Source: Bloomberg / German Federal Statistical Office
Date/Time: June 8, 2026
German factory orders fell 3.8% month-over-month in April, nearly double the -2.0% consensus forecast, adding to the eurozone’s case that the ECB is hiking into an already-weakening industrial economy. The automotive sector fell 5.3%; electrical equipment -- which includes semiconductor and battery manufacturing -- dropped 16.3%. The miss follows the EZ Q1 GDP revision to a -0.2% contraction, driven primarily by the Ireland statistical artifact but producing a genuine “ECB hiking into recession” headline that doves at the June 11 meeting will exploit. The German data is not itself the critical variable -- the ECB has signaled the hike is sealed regardless -- but the magnitude of the miss adds political weight to the dissent and will shape how aggressively Lagarde can signal the September move at her post-decision press conference.
Bloomberg -- German Factory Orders Fell More Than Expected, June 8, 2026

UK Cluster: L6B Social Spending Cuts for L15B Defense; Jobs Slump Deepens; BOE June 18 Setup

Source: Bloomberg / REC / FE News
Date/Time: June 7, 2026
Starmer confirmed plans to cut 6 billion pounds in capital investment across hospitals and schools over four years to fund a 15 billion pound defense spending increase, part of the UK’s commitment to lift defense from 2.3% to 3.5% of GDP by 2035. This is fiscal substance, not just defense promises -- departments face at least a 1% capital budget cut, with health losing approximately 580 million pounds annually. The BOE meets June 18 against a deteriorating labor backdrop: the REC report showed employer hiring retreated faster in May, ONS vacancies fell to their lowest since 2021 (705,000, down 3.9% in the latest quarter), and youth unemployment hit 14.7% -- the highest since 2014. Annual wage growth is still running at 3.4% (regular) and 4.1% (including bonuses), too sticky for the BOE to cut, but the labor market is clearly loosening. The June 18 meeting is shaping up as a coin-flip between holding and cutting -- war-driven inflation argues hold, deteriorating real activity argues cut -- and the fiscal tightening Starmer is layering on adds yet another deflationary headwind the MPC will need to weigh.
Bloomberg -- UK Plans Hospital, School Funding Cuts to Boost Defense Budget, June 7, 2026

SpaceX Nasdaq Listing June 12: Largest IPO in History; Nasdaq 100 Fast-Track in 3 Months

Source: Bloomberg / CNBC / Trading Key
Date/Time: June 8, 2026
SpaceX prices Thursday and lists on Nasdaq under the ticker SPCX -- the largest IPO in stock market history at a $75 billion raise and $1.75 trillion implied valuation. While S&P Global denied a fast-track inclusion request and will apply standard rules (requiring a full year of trading and earnings conditions), Nasdaq agreed to expedite SpaceX into the Nasdaq 100 within approximately three months rather than the standard one year. This distinction matters for passive flow sequencing: S&P 500 inclusion -- and the associated $22-27 billion in estimated passive demand -- is deferred at minimum a year, while Nasdaq 100 forced buying arrives in roughly the September-October window. Elon Musk retains 82.4% of voting power, having absorbed xAI in February. The $75 billion liquidity drain from the market in a single week -- on top of the NFP-driven rate shock -- is a non-trivial headwind for short-term equity market conditions.
Bloomberg -- How SpaceX’s Dream of a Record-Breaking IPO Stacks Up

BOJ June 15-16 Hike at 96% Probability; Iran War as Primary Tail Risk

Source: Bloomberg / Polymarket / Investing.com
Date/Time: June 5-8, 2026
Market-implied odds of a BOJ 25bp hike to 1.00% at the June 15-16 meeting have consolidated above 96%, with no new speeches or data in this window materially shifting the trajectory. The underlying case was established in the June 4-5 period: real wages grew 1.9% year-over-year for a fourth consecutive month, nominal wages extended their 34-year streak above 3%, and Bloomberg sources reported the BOJ is actively mulling the move with a second hike later in 2026 also possible. The primary remaining risk is an abrupt Iran war escalation or global financial turbulence that prompts a pause -- Friday’s re-escalation briefly raised that probability, but Iran’s subsequent declaration of an end to attacks reduced the immediate tail. Ueda’s pre-meeting speech on June 3 maintained a positive hike stance with a Middle East caveat. Barring a sharp weekend deterioration, June 15-16 is effectively priced as a done deal, and focus is shifting to the pace of subsequent normalization.
Bloomberg -- BOJ Is Said to Mull June Rate Hike With Another Possible in 2026

Singapore PM Lawrence Wong: Full Impact of Iran War on Growth and Inflation Still Incomplete

Source: Bloomberg
Date/Time: June 8, 2026
Prime Minister Lawrence Wong warned that despite solid Q1 performance, Singapore has not yet felt the full economic consequences of the Iran war, flagging elevated risks for growth and inflation in the second half. Economists surveyed separately project slower growth and faster inflation for 2026 than previously forecast. Singapore is uniquely positioned as an early-warning economy: as one of the world’s most open economies and a major shipping and financial hub, it absorbs global trade disruptions faster than most. The warning carries more signal than equivalent commentary from larger economies precisely because Singapore’s dependence on global trade means it has less capacity to absorb the shock domestically. The explicit H2 timing on the risk materialization is useful -- it aligns with when oil-driven supply chain disruptions and energy pass-through effects are expected to peak in CPI data globally.
Bloomberg -- Singapore’s PM Warns Full Impact of Mideast Conflict Yet to Come, June 8, 2026

South Korea: Won Rebounds From 2009 Lows on BOK Currency Defense Measures

Source: Bloomberg
Date/Time: June 7, 2026
South Korea’s won recovered after authorities unveiled specific anti-speculation measures and pledged action to stem the currency’s slide to its weakest level since March 2009 (GFC-era lows). The won’s weakness is driven by the same dual headwind pressuring all energy-importing Asian EM: 75%+ probability of a US year-end rate hike alongside an Iran war current account drain (South Korea imports approximately 70% of its energy). The specific currency defense plan -- including curbs on speculative positioning -- produced an immediate rebound, but the structural pressures remain intact as long as oil is elevated and the Fed is on hold-to-hike footing. The BOK’s willingness to intervene actively aligns with the broader Asia EM FX defense story, where multiple central banks are deploying capital market controls to limit currency pass-through into domestic inflation.
Bloomberg -- Won Rebounds From Weakest Since 2009 on Currency Defense Plan, June 7, 2026

Disclaimer: The information provided on this blog is for informational purposes only and should not be considered investment, financial, or other professional advice. Nothing on this site constitutes a recommendation or solicitation to buy or sell any securities. You should consult with a qualified financial advisor before making any investment decisions. Investing involves risks, including loss of principal.