[Don’t be fooled by the em dashes—I just love them so much. As always, IPEwithSBB is AI-free.]

Good morning and welcome back to IPEwithSBB! Hope you all had a great summer. Thanks for your patience with my slow publication pace over the past few months. I have missed writing here on Substack and am glad to be back at it.

My son is back to school this week (5^th grade!) and my students are back on campus but I’m on sabbatical (I’m writing a new book) and excited to have a few dedicated months to focus on the project. This is the first fall in 20 years that I haven’t been on campus to teach. The plan is to write here on Substack at least monthly. If you hear from me more often, it means that I am procrastinating on the manuscript. As Oscar Wilde said, “I’ll never put off until tomorrow what I can possibly do the day after.”

(Image: “A teacher with the students riding the school’s bus in Oman”, UNICEF, located in UNESCO’s 2026 GEM report on global education, here.)

Turning to international education news, the Financial Times reported yesterday that Canada “poached” 48 top academics from the US, citing the “Trump administration’s assault on universities” as the major driver of the brain drain: “The academics, part of a group of 64 from around the world who were recruited through Canada’s C$1.7bn Global Impact+ Research Talent Initiative, include a number working in fields where funding has been slashed by the Trump administration, such as sustainability, climate and the environment.” The article goes on to note that the academic appointments coincide with a recent deterioration in US-Canada ties as trade relations sour (see this article from the BBC and this one from the Toronto Star on the US’s escalating trade war with one its most loyal traditional allies).

But it’s not just brain drain that is remaking the international higher ed landscape. It’s also the droves of students who have decided in recent years not to pursue study in the US, opting for other nations instead. The International Business Times reported earlier this week that international student enrollments at American universities plunged 17% for the 2025-26 academic year, following a roughly 7% drop the prior year: “The decline is now showing up earlier in the admissions pipeline as international applicants for the 2026-27 academic year fell about 10%, even as overall undergraduate application volume increased…The pullback marks a significant reversal for U.S. higher education, which has historically attracted some of the world’s largest populations of international students.” Problems with visa applications and processing, as well as uncertainty around the rapidly-shifting rules, are cited as key reasons for the continuing decline.

On a similar note, Asia Times noted yesterday that “families everywhere, not least in China, are repricing the upside reward and downside risk of a foreign degree.” Noting that new foreign enrollments at US universities are down roughly 20% (undergraduate) and 24% (graduate) this fall, the article continues:

The instinctive reading is a transfer of wealth: America’s loss, Asia’s gain. There’s evidence for it. Some 82% of surveyed Asia-Pacific institutions outside Australia reported growing international undergraduate numbers, against 47% in Europe.

Germany, Ireland, the Netherlands, Singapore and Hong Kong now compete openly on price, program flexibility and the odds of a job at the end…

Look at the two nationalities that supplied nearly half of America’s international enrollment before the pandemic. Indian students are diversifying: flows to Ireland and Germany have grown roughly 215% and 204% compared with 2019.

Mostly, Chinese students aren’t relocating at all. They’re staying home, held by fast-improving universities and a technology sector that actually hires. Chinese student arrivals in the US have fallen to about half their 2018 peak.

(Image: “In Bangladesh, Tawhida enjoys learning alongside her best friend, Tania Begum, 12, as they assist each other in their studies and share playful moments in their free time. With dreams of becoming a doctor, Tawhida’s journey illustrates the transformative power of education and the importance of community support in overcoming adversity”, UNICEF, located in UNESCO’s 2026 GEM report on global education, here.)

Moving on, the South China Morning Post reported earlier this month that roughly 2.4 million girls have been “denied access to secondary education since the Taliban returned to power in 2021”: “The Taliban administration, recognized solely by Russia, has imposed a series of restrictions on women that the UN has characterized as “gender apartheid”. Girls cannot study beyond primary school, a policy the Taliban authorities justify based on their interpretation of Islamic law.”

The Korean government is considering offering a tuition-free education for students attending regional national universities, a bid to encourage students to study and settle “where they are from.” The proposal is moving ahead at speed but has drawn the ire of private universities concerned about new competitive pressures with public institutions receiving the subsidy.

The Associated Press reported last week on the knock-on effects of the Iran war for primary and secondary school students around the world: “Unlike outright school closures during COVID-19, the Iran war’s impact on education is less visible. But it is falling first and hardest on the poorest families. Soaring fuel prices are making it more expensive for children and teachers to get to school, and for governments to fund education as national budgets come under strain.” The article noted that, if the war continues, an additional 23 million kids around the world will be pushed into poverty by year-end, the vast majority of them in Asia and Africa. Already, families are making difficult choices about household spending, with school fees trading off against gasoline, food, and medical care, among other necessities.

Action Aid Australia noted in June that families facing these stark choices are pulling their daughters from school before their sons, with women and girls generally absorbing the brunt of the risk and cost associated with rising fuel prices:

For many low-income households, higher fuel prices are translating directly into hunger, lost income and interrupted education,” said Dr. Selina Pasirayi, country director of ActionAid Zimbabwe. “A 40 percent increase in fuel prices can mean a girl missing school, a woman skipping meals, or a farmer struggling to produce enough food…The war on Iran did not create these inequalities, but it has deepened long-standing vulnerabilities rooted in colonial land inequality, patriarchal care burdens and dependence on imported fuel.

In Somaliland, gasoline prices are up almost 50% since the start of the war, 40% in Nepal, around 40% in Zimbabwe, 35% in Malawi, and 40% in Cambodia. Diesel prices have in most cases risen even higher.

Last, in a truly lovely and exciting turn of events in Sweden, students returning to school this fall will not be permitted to bring their smartphones. Since 2023, the Swedish government has “actively pursued a policy aimed at increasing reading time and reducing screen time, particularly among preschool students, by favoring books and other traditional learning tools.” The shift comes amidst growing evidence that Swedish students’ abilities to read and write have declined alongside the shift toward digital, screen-based educational models.

Things I’m keeping an eye on:

1. War: The US and what few of its allies remain are actively fighting the China-Russia-Iran alliance on two fronts. To be honest, it is maddening to see the US make the same bad assumptions about Iran as were made about Russia. In its failure to understand and accept the shape of the emerging world order, the US has, yet again, underestimated its opponent’s strength and leverage, overestimated its own capabilities and political capital, and started an unwinnable and counterproductive war. If you want to read more, my 2025 book How the Ukraine War Broke the West tracks these dynamics.

As you know, both wars are continuing now in parallel. NATO allies in Europe appear to be anticipating expanded Russian strikes as Ukraine continues to target Russian military industrial sites with drone strikes. Meanwhile, Iran continues to hold the Strait of Hormuz.

2. Sanctions, dollars and bonds: American leadership is even doing the whole sanctions thing again with Iran, the very same strategy that backfired spectacularly in the Russian case, catalyzing food and energy crises and spurring de-dollarization efforts back in 2022. Operation Economic Outcast (really, who comes up with these names?) was announced this week, a sanctions package targeting Iranian military officials and as well as trade partners that have been shipping and buying sanctioned Iranian oil and petrochemical products (the official announcement names the UAE, Singapore, China, and “Europe”).

I’m not sure who needs to hear this, but here it is again (see also here, here, and here for more): Sanctions and asset seizures don’t work for the US anymore. Every sanction, every frozen account, every SWIFT expulsion is just more free marketing for the new system the BRICS and their allies are developing. To this point, back in March, the Center on Foreign Relations described what happened with the CIPS system in the days following the start of the Iran war (the CIPS system is China’s answer to SWIFT, the organization that processes international dollar payments, and is responsible for processing international yuan payments):

CIPS volumes spiked in March, just after the U.S. attacks on Iran...there was a simultaneous spike in the stock price of CNPC Capital—the majority owner of the U.S.-sanctioned Bank of Kunlun. Both phenomena appear consistent with reports of Iran demanding large RMB toll payments in the Strait of Hormuz together with renewed U.S. threats to sanction countries aiding or trading with Iran. Payments that would normally have been routed in dollars through SWIFT now took place in RMB through CIPS. And traders marked up the value of Chinese financial institutions, such as CNPC Capital, able to operate outside the dollar system.

In related news, the SCMP reported in mid-August that the yuan may soon become Africa’s “most important currency” in part because using yuan helps “avoid sanctions”: “Beyond lowering transaction costs, expanding CIPS access offers African countries a buffer against the direct and indirect effects of Western sanctions…Even when African countries are not themselves the target of sanctions, they can still be caught up in their wider effects.” China is Africa’s largest trading partner, with bilateral trade topping US $200 billion in the first half of 2026.

Sanctions on Iran and its allies—alongside war-related inflationary pressures, longtime investor anxiety about the size of the US government’s debt, and an unwinding yen carry trade—conspired to wreak havoc on US bond markets this week. The irony is, of course, that US officials like Secretary Bessent are now openly admitting that the Iran war is about dollar supremacy (thanks, we know) and threatening to expel other nations from the “dollar system” even as the Treasury market deteriorates. A commentary in FT yesterday helps connect the dots:

One reason de-dollarization may persist lies in US Treasuries. For decades, they have underpinned the dollar’s international role by providing deep liquidity and a widely accepted store of value. As US public debt has risen and the international use of financial measures such as sanctions has expanded, some institutions have begun to re-examine their use of Treasuries. As a result, a clear divergence has emerged within dollar assets…Longer-term Treasuries, however, have become less attractive.

Author Miao Yanliang argues that the “convenience premium” on long-dated USTs has fallen, and in some cases gone negative, suggesting that investors now require higher returns in exchange for holding longer term US debt. Yields on the 10-year bond are hovering around 4.7% as this article goes to press.

Last week, President Trump threatened bond traders with military force.

3. Food and energy crises: Yet another twin food and energy crisis is ramping up across the global economy as the Iran war extends into its seventh month. Coming on the heels of the food and energy crises in 2020-1 and 2022-3, the world is ill-prepared. As always, risk hits poor households, communities, and nations first and hardest. The figures on fuel costs noted above, in some of the world’s poorest nations, are a preview of what’s to come.

On this note, the US reached Cushing tank bottoms in June, the SPR has been drawn down so far that experts are worrying about the integrity of the caverns used for storage, and crack spreads are volatile and rising (a.k.a., the “refiners margin”, the price differential between raw crude oil and refined products like gasoline and diesel). The EU is currently struggling with low natural gas reserves and rising prices, with one commentator noting this morning that, “The EU hoped that the crisis would “settle down” within months and LNG supplies would grow again. However, this is not happening, as there is no end in sight to the Iranian war.” (see also recent estimates from the International Energy Agency).

Turning to food, here’s the most recent Food Price Index levels from the UN Food and Agriculture Organization. Note rising food price levels since the US-Israel war with Iran began in late February 2026. The increase owes partly to to disruptions in fertilizer production and trade that prevented farmers worldwide from applying fertilizers this past spring. In some cases, farmers did not plant any crops at all.

(Image: FAO food price index, July 8, from the FAO, here.)

The FAO breaks food price increases into market segments as pictured below. Please note that vegetable oil and cereal grain prices are rising high and fast. These commodities are the most important source of calories for the world’s poor. Yesterday, wheat futures reached a 3-year high as traders weighed the likelihood of war returning to the Black Sea (recall that Russia and Ukraine are both major wheat producers).

(Image: FAO food price index, July 8, from the FAO, here.)

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I wanted to take a moment to share a few things with you, stuff I am busy with these days that might be of interest:

• Interview with Chris Sturr, editor for Dollars & Sense, about Trump’s foreign policy. The same interview is part of a roughly hour-long episode on the Economics for the People show on KKFI Radio (90.1 FM) out of Kansas City (Episode 28).

• Upcoming webinar on April 17 (this Friday), “Building Supply Chain Resilience”, part of the Tariff Navigation Series, sponsored by the World Trade Center Denver and the Colorado Office of Economic Development and International Trade. (registration is open)

• World Trade Day 2026 is on May 21, organized by the World Trade Center Denver. The conference theme is “A New Era in Trade: Globalization in Question”. I am doing a keynote talk that touches on many of the themes and dynamics I cover here in the newsletter.

• I signed a book contract with De Gruyter Brill last month. Commodities Markets after Globalization: A Political Economy of De-Financialization and American Imperial Decline is due out in 2027.

Thanks for subscribing to IPEwithSBB! I am very grateful for your support and encouragement. In June, I will have been writing here on Substack for four years…four years of global upheaval out of which a new kind of international system is rising. Thank you for sticking with me. If we have to travel these dark and winding geopolitical roads, which it seems we must, then it is better to walk together. Take good care, Sasha

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I wanted to share the link to my recent piece for Dollars & Sense, about the future of US foreign policy. It just came out over the weekend.

The article discusses Greenland and Venezuela and what these cases tell us about the current logic of US foreign policy. I wrote as follows in the conclusion as I drafted the piece in late January, anticipating the war the US just started with Iran, as well as recent suggestions from Trump about a “friendly takeover” of Cuba.

The United States’ “unipolar moment”—the period during which the U.S. enjoyed global superpower status with no serious rivals—is over; the international system is now “multipolar” and the United States exists in a world in which it has to compete aggressively with other great powers. The multipolar international system that replaced British hegemony in the 19th century lasted for almost 70 years, roughly from 1880 to 1945, and included both world wars. Odds are that the great power competitions we see emerging in U.S. foreign policy will be with us for some time. It is also likely that other great powers will move to counterbalance the United States with surprising foreign policy decisions of their own. The dynamics Mearsheimer outlines indicate that there is probably more to come. Personally, I am keeping a very close eye on developments in Cuba, Mexico, Iran, Taiwan, Ukraine, the Balkans, Nigeria, and the Philippines, among other locations of strategic significance that may ultimately get drawn in.

Thanks for checking it out. Sending you all my very best wishes during this difficult and scary time for the world.

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Good morning, hope you’re doing okay out there. I can’t tell if we are in the early stages of a global reckoning over elite accountability, or if we are about to see what happens when Power gets scared and moves decisively to re-consolidate control, or if the horrors will just persist less visibly under the heavy cover of propaganda and distraction. Whatever comes next, there are a whole lot of allegations (terrible, staggeringly awful allegations) currently levied against some of the world’s wealthiest and most powerful individuals and entities. Here we go, down, down, down into the abyss.

A press release from the United Nations dated February 17 was entitled “Epstein Files: ‘No one is too wealthy or too powerful to be above the law’”. The release goes on to share the findings independent human rights experts consulted by the UN Human Rights Commission who “warned that the alleged acts documented in the Files could amount to some of the gravest crimes under international law”. The release continued:

The reported conduct could amount to sexual slavery, reproductive violence, enforced disappearance, torture, inhuman and degrading treatment, and femicide, according to the experts.

“So grave is the scale, nature, systematic character, and transnational reach of these atrocities against women and girls, that a number of them may reasonably meet the legal threshold of crimes against humanity,” they said.

Under international criminal law, crimes against humanity occur when acts such as rape, sexual slavery, enforced prostitution, trafficking, persecution, torture or murder are committed as part of a widespread or systematic attack directed against a civilian population, with knowledge of the attack.

The experts said the patterns reported in the files may meet this threshold and must be prosecuted in all competent national and international courts.

Five days prior, on February 12, Thorbjørn Jagland—the former Prime Minister of Norway, former Norwegian Foreign Minister, former president of the Norwegian Parliament, former Secretary General of the Council of Europe, and Chairman of the Norwegian Nobel Committee, which awards the Peace Prize each year—was charged by authorities with “aggravated corruption”: “The charges stem from newly released documents by the U.S. Department of Justice (DOJ) that expose deep and long-running ties between the veteran statesman and the late convicted sex offender Jeffrey Epstein,” according to a report from The Nordic Page. The article notes that the roughly 3 million files recently released under the US’s 2025 Epstein Files Transparency Act included “revelations” about Jagland, including seeking financial assistance from Epstein, staying at his residences in New York and Paris “multiple times”, and brokering meetings between Epstein and Russian President Putin and Russian Foreign Minister Sergey Lavrov to “propose a Russian version of Bitcoin”.

The charges against Jagland came just days after Mette-Marit, the Crown Princess of Norway, publicly apologized “for her friendship with late sex offender Jeffrey Epstein, after it emerged they had exchanged messages for three years”: “The warm nature of the correspondence has come as a shock to Norwegians,” reported the BBC.

In England, Andrew Mountbatten-Windsor—Duke of York, son of Queen Elizabeth II, brother of King Charles, and formerly known as Prince Andrew until he was stripped of his royal title last October—was arrested by British police on February 19 on “suspicion of misconduct in public office”: “The arrest came after Thames Valley Police said it was assessing a complaint over the alleged sharing of confidential material by the former prince with late sex offender Jeffrey Epstein… It was the first time the former prince, who has faced numerous allegations over his links to Epstein, had been arrested,” according to the BBC.

Then, just a couple of days ago, Peter Mandelson—former adviser to PM Tony Blair, former member of the British House of Commons, former business secretary under PM Gordon Brown, and former British ambassador to the US—was also arrested on suspicion of misconduct in public office. The Daily Mail reported that, “Officers have been investigating allegations the politician leaked sensitive information to pedophile financier Jeffrey Epstein during his time as business secretary. Mandelson is understood to deny any wrongdoing.”

The allegations have raised additional concerns about British PM Keir Starmer’s relationships with Mendelson and Epstein, with the opposition party accusing Starmer of using Andrew’s royal arrest as a smokescreen to protect himself. The International Business Times UK’s Maybelyn Paden explained:

“Kemi Badenoch, the Conservative leader, went for the jugular on ITV’s Good Morning Britain, accusing Keir Starmer of hiding behind the royal uproar rather than dealing with Mandelson’s record and the choices around his return to high office. ‘This distracts from the real issue, which is what the prime minister did with Lord Mandelson,’ she said, adding that Starmer ‘would much rather we were focusing on Prince Andrew than on him.’​”

The Guardian reported earlier this month that Starmer admitted to knowing about Mandelson’s Epstein ties before he was appointed to serve as ambassador to the US.

Other international figures caught up in the Epstein allegations include: Slovak national security advisor Miroslav Lajčák’s who resigned her post on January 31 following “revelations” that she “exchanged messages” with Epstein; Indian President Narendra Modi, whose name appears in the Epstein Files, triggering a “major political controversy”; and, Ukrainian President Volodymyr Zelensky who is accused of having “links to human trafficking” based on revelations in the Files.

The Moscow Times reported that the word “Russia” appears 5,553 times in the recently released documents: “The Files show Epstein on multiple occasions expressing a desire to meet Putin, but there is no evidence that any such meeting ever took place.” And, The Week (out of India) reported that the US FBI revealed Epstein to be an agent of Israel’s Mossad: “An FBI document released by the US Department of Justice as part of the Epstein Files alleged that convicted sex offender and pedophile Jeffrey Epstein “trained as a spy” under former Prime Minister of Israel Ehud Barak.”

(Image: “A statue depicting President Trump and convicted sex offender Jeffrey Epstein holding hands popped up near the U.S. Capitol on Tuesday”, from NPR, 9/26/2025, here.)

In the United States—where an estimated 24,000 people (75% female, 40% minors) were trafficked in 2024, where one in five women report living through an attempted or completed rape, where one in four girls and one in thirteen boys experience child sexual abuse in their lifetime, and where Jeffrey Epstein was born and his network headquartered—no federal investigations have commenced nor have any charges been brought against the numerous current and former public officials implicated in the so-called Epstein Files. (Here’s a map of the massive network.)

Among those who appear repeatedly in the Files, including in pictures that make one want to crawl into a hole and never come back out, are two American presidents—Bill Clinton and Donald Trump. They appear alongside a lot of other names you probably recognize, names of folks alleged to be “public servants” in a system that is allegedly “democratic”.

US Representatives Thomas Massie and Ro Khanna, who are leading the official charge for transparency and accountability, continue to press the US Department of Justice for full release, including of materials allegedly withheld and/or redacted. Massie spoke on the floor of the US House of Representatives yesterday and stated, “Congress created the Department of Justice. Congress funds the Department of Justice. And Congress is responsible for the oversight of the Department of Justice. When will we see justice? I’ll tell you what I’ve not seen. I’ve not seen any arrests from the revelations in the Epstein Files” (transcribed from the video, here).

(Image: Political cartoon, “Justice denied”, by Liu Rui, in the Global Times, 2/10/2026, here.)

Aside from official legal action, the Epstein Files have also spurred a spate of resignations, leaves of absence, and cancelled events and contracts. Notable recent examples include:

· Bill Gates’ cancellation of his keynote speech at the India AI Impact Summit “amid controversy” around his relationship to Epstein (on February 19);

· Kathy Ruemmler’s resignation from Goldman Sachs, where she served as general counsel following her stint as White House Counsel under President Obama (February 13);

· Ongoing cancellations of school contracts with Lifetouch for student photographs following revelations that Lifetouch’s former owner Leon Black (CEO of Apollo Global Management) was linked to Jeffrey Epstein (e.g., in Arkansas, Texas);

· Former Director of the National Economic Council and Harvard economics professor Larry Summers’ decision to take leave from the university and resign from the board of Open AI over his relationship with Epstein (November 2025).

The contents of the Files force us to focus on some of the most difficult questions we confront as a species, questions about the value of human life, whether god exists, how we treat women and children and other vulnerable groups, how money and power really work, and about the corruption of those institutions and leaders we all depend on to survive and thrive.

Among a lot of other thoughts that have woken me up in the middle of the night, the Files speak to the existence of an elite financial network that operates outside of the formal systems and markets that I so often write about in these posts, the kind of secret network that thinkers like Karl Marx and Vladimir Lenin and Kwame Nkrumah struggled their whole lives to explain and prove to the rest of us. (I wonder when the textbooks get revised.) Among other glimpses we’ve gotten of this network, Le Monde reported on the relationship between Epstein and members of the Rothschild family (the investment banking dynasty), while the Financial Times noted that Epstein helped to “guide” Ariene de Rothschild through a “period of tumult for the private bank” in 2016.

Epstein’s victims have also been asking about the financial flows and connections that helped tie the Epstein network together, including in a recent class action lawsuit accusing Bank of America for “knowingly aiding Jeffrey Epstein’s sex trafficking by providing banking services to the disgraced late financier”. Late last month, U.S. District Judge Jed Rakoff in Manhattan rejected four of six claims alleged in the suit, permitting the case to continue in regard to two of them: “knowingly benefiting from Epstein’s sex trafficking” and “obstructing enforcement of the federal Trafficking Victims Protection Act”. Similar allegations have been made against Deutsche Bank, JP Morgan Chase, Bank of New York Mellon, and Goldman Sachs, among other major global financial institutions.

(Image: Political cartoon by Jim Benton: “I read this article and it said that, apparently, there was a time in US history when we didn’t all stagger around in horrified disbelief.”)

In related news, US Representative Nancy Mace posted to X on February 23: “We are not convinced Epstein killed himself.” Reuters reported this week on its investigation into allegations that Jeffrey Epstein founded Bitcoin (he was an early investor, according to the Files): “There is no evidence for the authenticity of an email purportedly from late sex offender and financier Jeffrey Epstein to his associate Ghislaine Maxwell admitting that he is the pseudonymous inventor of bitcoin, Satoshi Nakamoto. And, newly republished documents from the US Central Intelligence Agency provide detail on Project Artichoke, “a top-secret Cold War program that explored mind control, behavior modification, and advanced interrogation techniques. The files detail proposals to administer chemicals covertly through food, drinks, cigarettes and even medical treatments such as vaccines or injections in an effort to influence human behavior.”

Things I’m keeping an eye on:

1. The Donroe Doctrine: Recent events in Cuba (attacks on alleged narco-boats, and a devastating oil blockade) and Mexico (assassination of El Mencho, a cartel leader) indicate a continuation of the same foreign policy agenda we saw in Venezuela and Greenland (I have an article on this coming out soon, will share the link when I have it), that is, attempting to re-consolidate control in the Western Hemisphere with an eye toward growing American power and counterbalancing the influence of Russia and China. Please note that Mexico is a major global producer of silver, it might be important.

2. Trade wars: The US Supreme Court ruled against the Trump Administration last week, triggering mass confusion as companies, consumers, and regulators began the task of securing refunds (which the Court noted would be a “mess”). Since the ruling, Trump has imposed new tariffs.

3. Iran: The US military has been building up its forces in and around the Middle East in recent weeks, US negotiations with Iran about sanctions and its nuclear program are ongoing (though it is unclear if the parties are negotiating in good faith), and Iran is now formally allied with China and Russia. The new “trilateral strategic pact” was signed last month and “explicitly combines the three powers in a coordinated framework, aligning them on issues ranging from nuclear sovereignty and economic cooperation to military coordination and diplomatic strategy”.

Among the naval assets the US has deployed to the Middle East is the world’s largest aircraft carrier, the USS Gerald Ford, which pulled into port in Crete yesterday, in part to manage overflowing toilets and raw sewage spilling out into the ship. Allegedly, sailors on the ship, who have already been deployed for more than eight months and may ultimately perform the longest continuous naval deployment in US history, are angry and depressed and eager to get back home.

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Good morning! I hope you’re doing well out there. And happy (belated) new year! Wow, 2026. Just wow. Let’s dive right in.

As always, there’s too much to cover, so I’m going to focus on some interesting developments in global finance. As I was putting this piece together, I was reminded of Henry Ford’s comment— “Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.”

To start, following decades of historically unprecedented financial market deregulation, the US government is flexing its regulatory muscles and tackling some of Big Finance’s worst excesses. On January 9, President Trump called for a one-year-long limit on credit card interest rates: “We will no longer let the American Public be “ripped off” by Credit Card Companies that are charging Interest Rates of 20 to 30%...I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%.” No hard plans have surfaced yet, nor has the White House responded to requests for comment, though Trump continues to push Congress to act.

India’s Economic Times commented on the “notable” timing of Trump’s announcement:

Household credit card balances crossed $1.08 trillion in late 2025, according to Federal Reserve data. Average annual percentage rates now hover around 21.4%, more than double levels seen just a decade ago. For many lower- and middle-income families, interest charges are growing faster than wages. Trump’s proposed one-year cap aimed to break that cycle, at least temporarily, as inflation pressures ease unevenly across the economy.

Of course, the bankers didn’t like it, not one bit. As the Financial Times reported, “A joint statement from several bank lobby groups said “evidence shows that a 10 per cent interest rate cap would reduce credit availability” and warned that “this cap would only drive consumers toward less regulated, more costly alternatives”. JP Morgan Chase CEO Jamie Dimon—who the Daily Mail calls the “world’s top banker” and who manages the bank’s roughly US$3.2 trillion in assets (roughly the GDP of France)—took to the podium at the World Economic Forum meetings in Davos, Switzerland to condemn Trump’s proposal, saying it would lead to “economic disaster”.

I am reminded of Mark Twain’s quip— “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”

(Image: Pen and ink cartoon depicting American financier J.P. Morgan grasping the Earth in his arms. Water-based ink drawing drawn by Albert T. Reid. Between 1895-1905. From the Kansas Historical Society, here.)

But Trump didn’t stop there. Five days after the call for caps on credit card rates, he issued a “proclamation” that invokes the government’s Section 232 authority to regulate critical minerals and metals markets in the interest of national security. (There’s a White House website page just for proclamations, which is, more or less, a digital version of Proclamation Wall erected by the Ministry of Magic at Hogwarts.) Critically important is the following passage, in which Trump suggests the possibility of government-imposed price restrictions for imports of certain raw and refined commodities:

The Secretary [of Commerce] further found that critical mineral markets are prone to price volatility. Price volatility hinders private sector investment; limits market-based economies’ willingness to maintain capacity; leads to facility closures; and threatens the long-term viability of domestic mining, processing, and downstream manufacturing capacity…I may consider alternative remedies in the future, including minimum import prices for specific types of critical minerals.

While I don’t have the space here to get into many of the specifics, I do want to emphasize that government management of commodities prices was very common historically, especially during wartime and economic crises. As the recent proclamation notes, price volatility in markets for raw materials required for defense-industrial production undermines national economic and security goals. Mitigating volatility typically requires management of prices and limits on speculative trading, as well as restraints on international trade. Indeed, there is no historical period and no country case I am aware of in which managed commodities markets coexisted with large-scale financial speculation. It was the disappearance of these managed arrangements—i.e., all of the international commodity agreements, quota systems, buffer stocks, government purchasing programs, fixed/managed prices, commodity boards, etc.—that permitted commodity derivatives markets to expand so dramatically beginning in the 1980s.

Concretely, if the US government resumes management of commodities prices—this was common practice for 40 years following the Great Depression—it will be necessary to limit/ban speculative commodities trading, for example, new restrictions on commodity derivatives, commodity ETFs, commodity index trading and the like. Large and liquid derivatives markets are an existential threat for managed price regimes. Rather than spending resources defending price bands/pegs from speculative attacks, governments tend to just ban speculation altogether. I’m especially interested in how this all plays out in silver markets, where speculation is widespread, industrial demand is climbing, and central banks are stockpiling physicals.

But Trump wasn’t even done yet. A few days ago, on January 20, he signed an executive order entitled “Stopping Wall Street From Competing With Main Street Homebuyers”. The EO reads as follows:

[A] growing share of single-family homes, often concentrated in certain communities, have been purchased by large Wall Street investors, crowding out families seeking to buy homes. Hardworking young families cannot effectively compete for starter homes with Wall Street firms and their vast resources. Neighborhoods and communities once controlled by middle-class American families are now run by faraway corporate interests. People live in homes, not corporations. My Administration will take decisive action to stop Wall Street from treating America’s neighborhoods like a trading floor and empower American families to own their homes.

According to Reuters, the US FHA and FTC will be reviewing acquisitions for anti-competitive practices, and federal agencies have been instructed to ensure that individuals and non-institutional investors are permitted to buy foreclosed properties at auction ahead of institutional investors. FT reported that private equity groups like Blackstone and Cerberus will be among the hardest hit by the EO, along with other big names like Invitation Homes and American Homes 4 Rent. Share prices fell on the news and investors sold off bonds issued by real estate investment trusts (REITs).

I wonder if Blackstone CEO Stephen Schwarzman—the world’s 33^rd richest man and one of Trump’s largest donors in 2024—will ask for his money back. As Gordon Gekko aptly noted in Wall Street, “[I]f you need a friend, get a dog. It’s trench warfare out there pal.”

Moving on, speculators are also in the crosshairs in China. Chinese securities market regulators took aim (again) at “flash boys” earlier this week, asking “brokers to remove client-dedicated servers from data centers in local exchanges”. Reuters explained in more detail: “High-frequency traders in China have long used servers situated at data centers run by futures and stock exchanges and owned by brokers to execute trades as the physical adjacency shaves off milliseconds or even microseconds….The tightening measure comes as the Chinese securities regulator steps up efforts to discourage market speculation and protect small investors…”.

According to India’s DevDiscourse, “Both Chinese and foreign high-frequency traders, such as Citadel Securities and Jane Street Group, will be affected by these new regulations.” Especially interesting to me was the following comment from CyberNews: “[C]ommodities futures exchanges in Shanghai and Guangzhou are among those that have ordered local brokers to shift servers for their clients out of data centers run by the bourses.” If I were an exchange operator or trading house in West, I’d buckle up. It’s going to be a long and bumpy ride.

In other news, the US Government captured/kidnapped/arrested President Nicolas Maduro in Venezuela on January 3, threatened to invade Greenland shortly thereafter, and just yesterday sent a carrier strike group to the Middle East following weeks of saber-rattling with Iran.

Things I’m keeping an eye on:

1. Bond markets: Investors are dumping Japanese bonds following PM Takaichi’s dissolution of parliament earlier this week. US yields also whipsawed as investors considered dumping US Treasuries following Trump’s threat to invade Greenland and Europe’s chilly response.

2. Shanghai-Hong Kong gold warehouse systems integration: The CCP-run China Daily reported this week that, “The Shanghai Gold Exchange has made a strategic move to bolster the Chinese mainland’s role in the global bullion trade by launching two new gold contracts and opening an offshore certified bullion vault in Hong Kong.” Pricing power in precious metals continues to move eastward...

3. Davos and the WEF: When self-appointed masters of the universe discuss our future without us, it’s important to listen. My favorite comment so far? No, not Mark Carney, if that’s what you were expecting. It was from Argentine President Javier Milei who, without even a trace of irony, quoted the ancient Greek philosopher Xenophon: “[E]conomics is a form of knowledge that enables men to increase their wealth”. Indeed.

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Not sure how your mind is faring these days, but I’m struggling to take in and organize the deluge of information and events pouring in. I’ve started and abandoned several drafts over the past six weeks and finally found a path through the swamp. Thanks for your patience. I hope you’re doing okay out there. And happy holidays!

1.

“In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences....Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs.”

-Joseph Stiglitz, 2010, quoted in the Tehran Times

Last month, I drafted an article about “secrets, scandals, and skeletons” in which I was going to discuss the news about what might actually be in a can of Campbell’s Soup (lab-grown meat?). I also wanted to discuss other corporate secrets, including the lawsuit against Bill Gates (CEO Microsoft), Albert Bourla (CEO Pfizer), and former NATO Secretary General Mark Rutte ongoing in the Netherlands. There are more than 15 named defendants in this case about the covid-19 vaccine rollout, with the suit originally brought by 7 Dutch citizens who claim they were sickened by the vaccine (See here and here for more background, and here for recent coverage).

To Stiglitz’s point above—about what he calls “ersatz capitalism”, i.e., an economic system in which profits are privatized and losses socialized—recall that Pfizer and other pharma companies received liability waivers from the US government that shield producers and administrators of the covid-19 vaccines from lawsuits (though this waiver doesn’t necessarily apply in foreign jurisdictions).

I had a second article partly drafted, too, tentatively entitled “tilting at windmills”, in which I discussed what’s happening in Venezuela. I was going to talk about the long and nasty history of US intervention in Latin America to install authoritarian governments friendly to the US and its multinationals. What happened in Guatemala in 1954—the CIA fomented and facilitated the overthrow President Juan Jacobo Árbenz Guzmánto to protect the interests of companies like United Fruit (now Dole)—is the archetype. But a similar series of events can be traced in other countries in the post-WWII period, including Brazil, Chile, Argentina, Cuba, Panama, and Honduras, among others. This isn’t even the first time the US has intervened in Venezuela (see here about FOIA requests to the CIA regarding US government involvement in the failed coup against then-President Hugo Chavez in 2002).

Further, I was going to tell you that US oil giant Chevron is the only company excepted from the recently-announced US naval blockade on Venezuela (shocker). Also central to the Venezuela story is that the China Concord Resources Group signed a major oil deal with Venezuela in August 2025, right before the first US attacks on suspected narco-traffickers: “The Chinese company’s plan entails pumping as much as 60,000 bpd from the two fields by the end of 2026 by reopening mothballed wells and developing new ones. The light crude from the fields would go to Venezuela’s state oil firm PDVSA, while the heavy crude is set to be shipped to China…”.

The German outlet DW noted this week that the US government has intervened heavily in recent years to support Chevron’s Venezuela operations: “In the wake of Russia’s invasion of Ukraine in 2022, Washington eased some restrictions on Venezuela, with the Treasury Department’s Office of Foreign Assets Control granting US oil major Chevron special licenses to resume exports from its Venezuelan joint ventures. In October 2025, the company received fresh authorization to produce oil there.” And, of course, the US military is now intervening to protect “American” interests in Venezuela, with a broader war now firmly on the table.

I wonder how American soldiers and taxpayers feel about bearing the high cost of supporting Chevron.

(Image: “Amazon Watch’s Mitch Anderson (L) and Han Shan (R) under arrest outside of Chevron’s Houston headquarters, before being taken to Houston City Jail”, from Mint Press, “Chevron Blasted for ‘Rainforest Chernobyl’ and Mob-like Tactics to Silence Critics”, January 23, 2014, here.)

There was also a third, partially drafted article about some of the more banal, work-a-day politics of global multipolarity. I was going to focus on the geopolitical and competitive dynamics at work between US-based Microsoft and China-based Kingsoft (which are competing in the market for word processing programs), and then also US-based COMEX and China-based Shanghai Futures Exchange (which are competing for the privilege of setting global metals prices and storing physicals).

The piece was going to reflect my growing obsession with what I think of as international “platform politics”, i.e., the politics and geography of competing structures to facilitate business and exchange. For decades, US companies have operated global platforms with little serious competition, leading to outcomes typical of monopolized markets—deteriorating product quality and higher prices. (What does Microsoft Copilot even do? Seriously, someone please tell me.) Competition from abroad is forcing US multinationals to rethink their business models. Microsoft lobbied for and received government protection. COMEX has yet to publicize a defensive strategy.

Finally, I realized that if I wrote the article in the way it appears to you now, I could at perhaps weave together a bunch of loose strands into a somewhat coherent discussion of corporate power.

2.

“Size, we are told, is not a crime. But size may, at least, become noxious by reason of the means through which it was attained or the uses to which it is put.”

-Louis Brandeis, 1913, Other People’s Money: And How the Bankers Use It, quoted in Too Big to Fail by Andrew Ross Sorkin

A defining feature of the globalized world economy that developed between the 1970s and the covid-19 pandemic was the outsized power of American multinational corporations. When I started teaching college students about them, I would often share a list of the world’s largest economies, which regularly included the biggest multinationals alongside sovereign nations.

For example, data from a 1999 report from Corporate Watch indicated that, of the 100 largest economies in the world, 51 of them were corporations. The largest companies on the list hailed from the “global triad”—North America, Western Europe and Japan—the regions of the world on which the global economy centered between the 1980s-2000s.

In rank order, the world’s largest corporations in 1999 were: General Motors, Wal-Mart, Exxon Mobil, Ford Motor, and DaimlerChrysler. GM alone was larger than the entire economy of Indonesia. Notice also the overwhelming dominance of American auto manufacturers here and, of course, a major oil company (Exxon) and the original retail juggernaut (Wal-Mart, which pioneered global sourcing and logistical systems). Following these American behemoths were a series of Japanese multinationals, including Mitsui, Mitsubishi, and Toyota. European companies such as Royal Dutch Shell (the Netherlands) and Volkswagen (Germany) were part of the top 20.

Fast forward to 2025 and the picture of corporate dominance has shifted both geographically and in terms of industry/sector. American multinationals still top the list, though the 20^th century industrial and petroleum giants have been replaced by 21^st century technology innovators such as Nvidia, Microsoft, Apple, Amazon, Alphabet, and Meta (6 of the Mag-7 companies that currently dominate the US S&P index; see this helpful graphic from Visual Capitalist).

Also significant is the relatively high rankings of American insurance and financial corporations (Berkshire Hathaway is #11, JP Morgan Chase #12, Visa #16), American pharmaceutical giants (Eli Lilly #14, Johnson & Johnson #22, and Procter & Gamble #23), and the big data/mass surveillance firm Palantir (#24).

So, does size matter? Yes, indeed it does, and for a whole bunch of reasons. The larger the corporation, the larger its impact on GDP and employment and the more influence it has over the distribution of income in a given economy. For example, Corporate Watch noted in 1999, “A full 5 percent of the Top 200s’ combined workforce is employed by Wal-Mart, a company notorious for union-busting and widespread use of part-time workers to avoid paying benefits. The discount retail giant is the top private employer in the world, with 1,140,000 workers.”

I’ve done a lot of research on how corporate giants organize and control global supply chains. Even companies that aren’t big enough to make the rankings exert tremendous pressure and power over the smaller firms and ordinary consumers with whom they regularly do businesses. In his masterful 2006 article entitled “Breaking the Chain”, Barry Lynn writes:

For a generation, big firms have enjoyed almost complete license to use brute economic force to grow only bigger. And so today we find ourselves in a world dominated by immense global oligopolies that every day further limit the flexibility of our economy and our personal freedom within it.

He goes on to discuss how firms like Wal-Mart and Tyson hold suppliers “captive”, prohibiting them from dealing with other buyers and limiting their profitability. A system that permits highly profitable and massive multinationals to leverage their market power to squeeze pennies from small bicycle makers and chicken farmers is a system in desperate need of change.

Oversized corporations also enjoy oversized political clout, with their deep pockets and expansive economic influence permitting extensive lobbying and campaign contributions, as well as tight relationships with regulators. Microsoft, for example, spent close to $25 million last year on lobbying and campaign contributions, including $2.5 million to Kamala Harris’ presidential campaign and another roughly $2 million to the DNC Services Corp. For it’s part, Chevron spent close to $20 million last year on lobbying and campaign contributions, including $4.5 million to the Republican Senate Leadership Fund. Seems like that investment has paid off in spades.

If I had more space, I’d walk you through the data on one of my favorite websites—Open Secrets—which methodically tracks not only lobbying and campaign contributions, but the “revolving door” between the C-suites of major American multinationals and the halls of government, a system that effectively ensures that industry regulates itself as meekly as possible.

Finally, because I’m running short on space, it’s important to note that economic systems anchored by a small group of poorly regulated, monopolistic multinationals is a fragile system, one that is highly vulnerable to disruption and poses systemic risk. Returning to the recent corporate rankings, the largest American multinationals today appear to have retained their historic dominance, even as other members of the global triad fall down the list (German and Japanese companies, for example, have fallen substantially in the rankings over the past two decades). The market capitalization of the top 6 companies—which together account for close to a third of the weight of the S&P 500 index—is roughly $17.5 trillion, only a little less than China’s GDP in 2025 (projected to be roughly $19.4 trillion).

Yet, these giants betray a rather less industrialized, and more precarious and fragile, sectoral distribution than in the past. US economic muscle is heavily concentrated among a handful of overvalued and tightly connected tech companies (see here for recent coverage of the Mag 7, valuations, and the AI bubble), and among several large financial corporations with substantial exposure to the weakening position of consumers, Treasury markets, and the AI bubble.

These days, costs are running higher than expected for JP Morgan owing to its consumer unit and AI-related investments, and Berkshire Hathaway unfortunately owns about 5% of the US Treasury market ($314 billion), making it the 4^th-largest holder. “Berkshire Hathaway’s large Treasury holdings doubled last year, which outpaced even the holdings of foreign banks, the Federal Reserve, Local Government Investment Pools, offshore money market funds, and stablecoin-backed reserves,” reported India’s Economic Times earlier this year.

I wonder when JP Morgan and Berkshire Hathaway will get bailouts.

3.

“It’s ridiculous to talk about freedom in a society dominated by huge corporations.”

-Noam Chomsky, The Common Good, 1998

In related news, Forbes reported last week that Apple CEO Tim Cook made a whopping $74.6 million in annual compensation in 2024, an 18% increase from the year prior: “[W]hen compared to the paycheck of everyday Americans, the difference is severe. With his $74.6 million package, it only takes around seven hours for Cook to outearn the typical U.S. worker—who takes home just $62,088 a year, according to 2025 first quarter wage data from the BLS.”

An influential 2005 study that proclaimed glyphosate safe for use—it’s an herbicide, the active ingredient in Roundup, designed for application to “Roundup Ready” crops, and manufactured by Monsanto/Bayer—was retracted: “The disavowal comes 25 years after publication and eight years after thousands of internal Monsanto documents were made public during US court proceedings (the “Monsanto Papers”), revealing that the actual authors of the article were not the listed scientists…but rather Monsanto employees. Known as “ghostwriting,” this practice is considered a form of scientific fraud,” reported Le Monde. Glyphosate has been linked to the development of cancer among those regularly exposed, and also to soil and water pollution.

Data-center construction and concerns over corporate electricity usage in the US are making international headlines. The Independent reported yesterday that, “AI running in data centers will likely produce more CO2 this year than many small countries or the entire city of New York, new research suggests.” Microsoft announced plans to invest in a data center in Portugal as a “leading hub for AI gigafactories”, BlackRock was named as part of a consortium of companies to takeover “one of the world’s largest data center operators” (Aligned Data Centers), and communities in Georgia are protesting the proposed development of a 4.3 million square foot data center in Coweta County: “The Stop Project Sail group is 3,600 citizens strong and [we] do not want these monstrosities in our neighborhoods.”

And, finally, the US House Oversight Committee leaked a new trove of photos from the so-called “Epstein files” yesterday. Among the 68 photos were images of Microsoft co-founder Bill Gates, Google co-founder Sergey Brin, former YouTube executive Salar Kamangar, billionaire Thomas Pritzker, former NY Times columnist David Brooks, pundit and Trump political advisor Steve Bannon, intellectual/academic Noam Chomsky, the UAE’s Sultan Ahmed bin Sulayem, illusionist David Blaine, and actor/director Woody Allen. The deadline for release of the remaining files is today, December 19.

Things I’m keeping an eye on: silver markets, China’s incoming ban on silver exports (effective in January), Section 122 of the 1974 Trade Act (a colleague spoke about this at a recent event and I’m really curious if Trump will use it to tackle ongoing problems with silver and gold exports, which are quickly moving Eastward to fill vaults in Asia).

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Good morning! In April 2023, I published an article about the death of globalization and free trade. In a December 2023 end-of-year review, I shared an unpopular perspective on the US’s new role in the world: “Events this fall have mostly reinforced my strong sense that the US is no longer the leader of a globalized economic order, but rather has receded such that it now occupies a more middling and mediocre international position alongside many other countries, some of which are hostile to US interests and some less so. The US is no longer unique or special in the global economy.”

In recent weeks, mainstream American and European media have finally started reckoning with this harsh reality.

To start, the Economist wrote last week that,

China is winning the trade war”: “It has learned to escalate and retaliate as effectively as America. And it is experimenting with its own extraterritorial trade rules, thus changing the path of the world economy…Amid all the tit-for-tat, China is developing, by trial and error, a new set of global trading norms…It wants to build a Chinese-led system on the ruins of the old liberal trading order, one which will rival Mr Trump’s empire of tariffs. Already China has shifted the geography of its trade: in the year to September its goods exports grew by over 8%, even as those to America fell by 27%. China’s threats to limit rare-earth exports inspire fear because it dominates the market and could cripple Western manufacturing supply chains.

Thanks, Economist, for repeating what many of us have understood for years now. Indeed, it has been a recurring theme here on IPEwithSBB that the US has far less leverage against China than is typically assumed in the West. To give a couple of big examples, the sheer size of the Chinese economy has kept the Russian economy afloat over the course of the Ukraine War, permitting it to circumvent Western sanctions. The massive heft of the Chinese economy also lurks behind the de-dollarization process, as fear of future Western sanctions on China has pushed many of its trading partners to preemptively diversify away from the US in trade and financial arenas.

I have also repeatedly stressed US reliance on global markets for commodities procurement, including reliance on China for critical metals and minerals, a pressure point around which the US was and remains incredibly vulnerable. Over the past several years, IPEwithSBB has covered the global race for metals and minerals supplies; central bank gold stockpiling; Chinese controls on germanium, gallium, and graphite; the geography of rare earth production and refining, including China’s central position; and the trade-offs American policymakers face as they lose access to global markets for mined and extracted materials, including for critical metals like tungsten.

For its part, China continues to work to circumvent US trade aggression and establish new trade relations and partnerships. This week, China sealed a free trade deal with its neighbors in ASEAN: “The 11-member Association of Southeast Asian Nations is China’s largest trading partner, with bilateral trade totaling $771 billion last year… China is seeking to intensify its engagement with ASEAN, a region with a collective gross domestic product of $3.8 trillion, to counter hefty import tariffs imposed by U.S. President Donald Trump’s administration on countries around the world.”

Along similar lines, The Spectator reported last week that, “The American empire is consuming itself”. Referring to the recent spate of No Kings protests across the US, Olsen notes that,

For China and Russia, the spectacle of Americans turning on their own institutions confirms a long-held belief, namely that the United States is entering a phase of irreversible decline and may soon hesitate abroad…Xi’s doctrine of national rejuvenation rests on this contrast between order and disorder, endurance and exhaustion. His bet is that China does not need to defeat the West directly, only to wait for America to tire itself out.

Thanks, Spectator, for the “cutting edge” commentary. As my readers well know, the Presidency is not the only critical institution on which the US has turned. The self-inflicted American wounds upon which Xi is leveraging his country’s fate also include damage to the SWIFT system for processing international dollar payments (fatally wounded by sanctions on Russia, see, e.g., here and here for my prior coverage), the waning international integrity of American and European banks (which have frozen Russian and Chinese assets and even considered seizing them), and the international trading system that took the US many decades to build but just a few years to destroy (e.g., here and here), among many other recent examples.

And, the hits just keep on coming. In late September, the Dutch government nationalized Nexperia, a subsidiary of the Chinese semiconductor manufacturer Wingtech, which was put on the US “entity” list of sanctioned companies in December 2024. According to Reuters, the US had been pressuring the Netherlands to remove Nexperia’s Chinese CEO or risk Nexperia being added to the entity list—a “Dutch court document said records from a June 12 meeting between U.S. Commerce Department officials and the Dutch Foreign Ministry showed rising pressure to remove Nexperia’s Chinese CEO to help keep the company off the list”.

This serious escalation in the economic war has met with predictable consequences. China retaliated on October 4, banning Nexperia’s parent company from “exporting specific finished components and sub-assemblies manufactured in China”, which has in turn deprived European automakers of critical inputs: “Nexperia makes basic low-margin chips that are widely used in electronic systems in cars and control everything from lighting and airbag systems to locks and windows”. This week, Bosch announced furloughs for some staff and Volkswaagen is preparing for supply chain disruptions. American automakers are warning that the disruptions will cross the Atlantic any day now.

Chinese state media discussed the broader consequences: “[T]he Netherlands has set a dangerous precedent that private property rights can be suspended at the government’s whim whenever political winds shift… Should China then consider all Dutch investments in China as potential national security threats?” There are also some new, unverified social media reports that China has offered to re-start chip exports to the Netherlands in exchange for some major concessions, including use of the yuan for trade settlement. If this is true, China is upping its game and actively leveraging Western import dependence to internationalize its currency.

So, you can imagine my surprise and disappointment when I read the following headline in Foreign Policy this month: “Is globalization a lost cause?” Thanks, Foreign Policy, but we already know the answer.

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Things I’m keeping an eye on (all “big picture” items today):

1. Anti-imperialism: Revolutions against the old Western empires continue apace, especially in Africa among former French colonies. Similar to recent events in Mali, Niger, and Burkina Faso, this week the president of Madagascar, Andry Rajoelina, was officially removed from office by an elite military unit after the national assembly voted to impeach him. The military group seized control of the government and Rajoelina fled the country on a French military plane. According to Agence France-Presse, protestors decried French neocolonialism on placards and banners. “They are still colonizing us even though we are supposed to be independent,” said Koloina Andrianina Rakotomavonirina, a 26-year-old engineer.”

In this context, I’m also super interested in Colombia’s position on the US military buildup in the Caribbean off the east coast of Venezuela and missile attacks on boats accused of narcotrafficking. Colombia—which has long been an ally of the US and a critical partner in the War on Drugs—has recently taken a stand against US military action in the region, with Colombian President Petro accusing the US of “murdering” a Colombian fisherman on one of the boats: “Alejandro Carranza was reportedly killed on 15 September when US forces allegedly fired on his boat while he was fishing the Caribbean.” This most recent incident, which has prompted President Trump to cut off aid to Colombia, comes on the heels of Petro’s spicy speech at the United Nations. In his late September address to the General Assembly, Petro criticized the US war on drugs, climate denial, the conflict/genocide in Gaza, and US military operations in the Caribbean, prompting a walkout by US officials.

2. Can the US avoid military conflict with China? Historically, volatile and unstable international landscapes like the one we find ourselves muddling through today tend to “resolve” themselves, i.e., find some kind of new equilibrium or steady state, via destructive and dangerous upheaval. While there are obviously a lot of potentially troubling paths forward, the best-case scenario—US adaptation and adjustment in the interests of peace and stability—has not been entirely ruled out.

This week, I saw a series of “insider” reports on Trump’s efforts to reduce the influence of “China hawks” in the White House. For example, the Washington Post reported a few days ago that while certain factions favor a strict de-coupling and separation of the US and Chinese spheres of influence, Trump “has argued that the United States and China could solve all the world’s problems if they could just get along”. The article further notes that “some on the right are now increasingly anxious as Trump appears willing to back away from his tough talk on Beijing.”

All of my fingers and toes are crossed for luck. May he back away from the tough talk, and soon.

3. International military buildups: While I’m hoping for sunshine and peace—“Hope is the thing with feathers that perches in the soul,” wrote Emily Dickinson—the Great Powers are nonetheless preparing for rain. China is rushing construction of an airbase on its border with Tibet (including new hardened aircraft shelters) and showcasing its prowess in expensive military parades (including hypersonic missiles, drones, and laser-powered air defense systems). An op-ed in Asia Times a few days ago argued that “Despite all of these difficulties for China, if the downward trend of the armed forces of the United States relative to China continues, and China clearly would prevail in a fight over Taiwan, China could be tempted to cow Taiwan with a blockade, or even an invasion.”

The US is also trying to ramp-up military production, including proposals from President Trump to form a “golden fleet” of new navy vessels to “combat the threat from China”. (Any kind of conflict over Taiwan would require substantial naval capabilities.)

And in Europe, officials are trying to combat deindustrialization and US funding cuts through local military production. Germany is trying to build the continent’s “strongest army” but is running into opposition to plans for conscription by lottery. Bulgaria sealed a deal with German defense contractor Rheinmetall to produce gunpowder and artillery shells. France just introduced a new, modernized, nuclear-capable ballistic missile to bolster its “ocean-based” nuclear deterrence capabilities, part of what the Stockholm International Peace Research Institute refers to as a “new arms race”.

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Good afternoon and welcome back to IPEwithSBB! I’ve received some questions from readers about the ongoing trade wars and whether I think US President Trump’s approach is “working” for the US. While I know you’d probably love a straightforward answer, I just can’t do it. The Trade War is too big, too complex, and too complicated for me to offer a simple assessment. The answer depends on the specific context, i.e., who, what, where, and when, and on good information, which is hard to come by right now.

Today’s Trade Wars illustrate the scale and complexity of the modern international trading system. The conflict, if we can call it that, cuts across tens of thousands of distinct marketplaces for goods and services, hundreds of national political jurisdictions, and have been ramping up gradually over time, at least since the Great Recession ignited 17 years ago. There are too many markets, too many trade partners, too many policies, too many groups and sectors and constituencies, too many examples and episodes to gather them all under a single umbrella for description and judgment.

The issues at hand have also grown more complicated, convoluted and confused in recent months by the speed with which President Trump rolled out the Liberation Day tariffs back in April, the seemingly endless scope and breadth of the recent tariffs, the volatility of the policy decisions (roll outs, pauses, extensions, reversals, exemptions), the diverse and varied responses of trade partners to the tariffs, and the extensive government and corporate propaganda around tariffs and trade in the media, which makes the truth difficult to discern. This is the case even given my usual method of reading lots of international papers—propaganda and conflicting accounts are rife across a wide variety of outlets at home and abroad.

Making matters even more opaque, official governmental sources and documentation are scarce at the moment because so few of the new trade agreements have been formally agreed or codified. There have been a lot of negotiations, gentleman’s agreements, proclamations, and lofty commentaries, but vanishingly few hard sources that explicitly discuss mutually agreed terms.

The situation grows more complicated still owing to the broader geopolitical and economic environment in which the trade wars are embedded, which obscures the role of any single set of variables. The current global context is bedeviled by financial fragility, inflation, supply chain disruptions, and conflict and competition of all kinds. For example, the extent to which consumer price inflation today should be attributed to war, or to money printing, or to the effects of tariffs, or to other factors entirely, is an open question and the subject of much debate.

The waters are further muddied by the fact that I’m finding it difficult to clearly identify the US government’s goals with the trade wars. Evaluating “success” depends fundamentally on the outcome sought. Is the US trying to generate revenue to help offset short-term budget problems? Is the US trying to “contain” China and other rising powers? Is the US trying to re-industrialize, using tariffs as part of a broader industrial policy aimed at greater economic independence? Is the US having a trade temper tantrum over its waning international influence, striking out indiscriminately at the world in rage? It’s hard to tell.

Rather than speculate and pretend that a general analysis is possible at this time (it is not), I instead focus below on two agricultural products that are super important for the US, each of which has a somewhat different profile and character and have thus been affected by the Trade Wars in different ways: coffee and soybeans. Across these two, brief market case studies one gets a better sense of the complications and complexities associated with evaluating the success of Trump’s tariff policies.

It’s hard to say at this time what the tariffs mean for the nation as a whole and if they are or will be successful in the future. But what I can do is to start teasing out some of the most visible, short-term distributional consequences of Trump’s policies (see also my article on pharmaceuticals from April for a similar treatment of tariffs in a different market context). Different kinds of trade policies generate different distributions of costs and benefits. There are “winners” and “losers” that can usually be identified given a specific timeframe, policy intervention, and market setting.

Coffee

Coffee is not widely grown in the US (just a little bit in Hawaii) and the US relies almost exclusively on imports to satisfy domestic demand. Dynamics in the global coffee market help to illustrate what happens to import-dependent consumers as tariffs are applied and integrated into pricing dynamics. The coffee tariff story is the kind of tale that often informs popular arguments about tariffs causing increases in consumer prices.

Tariffs are taxes on the cross-border exchange of a particular good or service, and, all else equal, I would expect an import tariff to raise the domestic price of the good being subjected to it. The tax incidence, i.e., how much of the cost translates into higher consumer prices, is a different question—it depends on the ability of domestic middlemen to pass the cost of the tax onto the final consumer. If demand is relatively elastic, meaning that the good isn’t a necessity and/or there are more affordable and close substitutes, then the domestic middlemen typically bear a larger share of the cost, and consumer prices rise less. But, for goods like coffee, which is addictive, culturally beloved, and has no close substitutes (please don’t say tea), middlemen in theory will be able to pass the lion’s share of the cost onto final consumers, causing prices to rise more.

According to the USDA’s Economic Research Service, the US is the world’s 2^nd largest consumer of coffee and, “In 2023, about 80 percent of U.S. unroasted coffee imports came from Latin America (valued at $4.8 billion), principally from Brazil (35 percent) and Colombia (27 percent).” Back in April, Daily Coffee News reported that Trump’s Liberation Day tariffs included “new fees between 10% and 46% on imports from 15 of the world’s top 20 coffee-producing countries”.

Quoting National Coffee Association President William Murray, who unsuccessfully lobbied for tariff exemptions, the article continues on to explain the knock-on effects of tariffs on imported coffee beans: “Every dollar of coffee-related imports generates $43 in value for the American economy, and coffee supports 2.2 million U.S. jobs, all while being America’s favorite beverage…Since coffee beans cannot be grown in most of the United States, trade policies should take into account the essential role of coffee trade in Americans’ daily lives and in the U.S. economy, to ensure that Americans don’t face even higher coffee prices amid the current cost of living crisis.”

In addition to the April tariffs, in July, President Trump imposed a sweeping 50% tariff on Brazil, from which the US sources more than a third of its imports. Some product categories were exempted (e.g., copper, fertilizers, orange juice), but not coffee. International Valor reported that international coffee prices increased 33% in August alone as a consequence. As of a couple of days ago, US coffee prices were 39% higher than they were at the same time last year with Forbes reporting that “Bad weather and supply-chain disruptions (along with new tariffs imposed by President Trump) have contributed to that price boost, but tariffs on imports from Brazil and Vietnam—the world’s two biggest suppliers—are threatening to send prices soaring even more.” And, as is to be expected, coffee shops large and small all across the US are also feeling the tariff squeeze (see here and here for recent coverage).

Coffee price inflation has become so worrisome that members of the US Congress are taking action—in September, Don Bacon (R-Nebraska) and Ro Khanna (D-California) introduced the No Coffee Tax Act in the US House of Representatives. Trump, too, appears to be backing away from his commitment to coffee tariffs, with a recent executive order detailing products “not grown in the U.S. in sufficient quantities” as possibly eligible for future tariff exemptions.

To be sure, other global constituencies are winning as American consumers and coffee shops lose, for example Vietnam, which is now exporting more coffee to the US following the recent tariffs because the higher rate imposed on Brazil (50%) creates a competitive advantage in trade with the US (Vietnam’s tariff rate is only 20%).

Soybeans

Moving onto a different kind of trade tale, soybeans are one of the most widely produced agricultural crops in the US and are a major American export to other nations abroad. Last year (2024), American farmers produced 4.37 billion bushels of soybeans, accounting for 28% of global soybean production and making the US the world’s 2^nd largest producer behind Brazil (which accounted for 40% of global production during the 2024/25 season). Roughly 44% of the American soybean crop in 2024 was exported abroad to an array of trade partners, generating almost US$25 billion in export revenues. The chart below from the USDA’s Foreign Agricultural Service shows the top destinations for US soybean exports in 2024. Note that China is, by far, the most important destination and has been for many years.

(Image: US soybean export markets, 2015-2024. From USDA’s FAS, here, accessed on 10/1/2025).

The story of soybeans is a tale about the costs involved in escalating trade disputes with countries you depend on for export revenues. China has been responding to US tariffs with retaliatory tariffs and even outright import bans, focusing on markets and products in which both China and the US are dependent on, and thus vulnerable to, one another. This includes soybeans, but also other critical markets like rare earths and semiconductors.

For context, China imported a record quantity of soybeans from the US last year (2024), in advance of President Trump’s inauguration and in anticipation of trade war escalation (Trump had threatened tariffs on China during his campaign, and also imposed tariffs during his first term in office). But even before the inauguration, the composition of China’s imports indicated that China was moving away from reliance on an increasingly hostile US in favor of friendlier Brazil. According to Farm Policy News, “Brazil remained China’s top soybean supplier in 2024 as Beijing expanded its effort to reduce its reliance on the US and deepen cooperation with ‘Belt and Road’ countries to ensure food security…Brazil’s soybean market share rose to 71%, while the US share shrank to 21%.”

Now, as the trade wars escalate, China appears to be pulling the plug entirely. Late last month, researchers with the Purdue University Center for Commercial Agriculture reported on continued Chinese retaliation to US tariffs, noting that,

The U.S. soybean harvest began in September without any orders from the world’s largest buyer: China…

In 2025, U.S. soybean exports to China from January through August totaled only 218 million bushels – 29% of total exports for the period. In June, July, and August, shipments to China were effectively zero…

The combination of a 20% retaliatory tariff and China’s Value-Added Tax (VAT) and Most-Favored-Nation (MFN) duties has pushed the overall duty rate on U.S. soybeans to 34% in 2025. Although this new retaliatory rate is 5% lower than during the 2018 trade war, the added duties should keep U.S. soybean prices higher than South American supplies ahead of the U.S. harvest this fall…”.

Domestic and international news outlets have begun reporting over the past week or two about the impacts of tit-for-tat trade policies and retaliation (characteristic of mercantilist trading systems) on American farmers. The UK’s International Business Times reported that, “In Nebraska, Iowa and across the Midwest, soybean farmers are bracing for one of the most difficult harvest seasons in recent memory… Farmers warn the consequences could be devastating at a time when production costs are already climbing.” The Milwaukee Journal Sentinel provides more detail in a report today, “Without Chinese imports, total U.S. soybean exports are down 23% — a 20-year low and 12% year-over-year decrease… The USDA is expecting record soybean yields this year, and prices are down roughly 40% from their most recent peak in 2022.”

But, because trade dynamics are complex and impact depends on context, it is important to note that not all constituencies in the US are suffering owing to Chinese retaliation on American soybeans. Referring to major food processing conglomerates like General Mills, Post Holdings, and the Coca-Cola company, a recent analysis notes that they

use corn, soybeans, wheat, and other agricultural commodities as primary inputs. Persistently low commodity prices directly reduce their cost of goods sold, which can lead to improved profit margins and increased profitability. However, the full benefit to consumers might be delayed as these companies also contend with other supply chain costs, such as labor, transportation, energy, and packaging, which may remain high.

Further, one could imagine a (farfetched?) scenario in which Trump’s administration leverages farmer distress in the Midwest to help catalyze a revolution in American agriculture, one in which we reform the Farm Bill and other related policies to better support small and mid-sized family farms, focus on local production and self-sufficiency, improve food access and nutrition and health especially for poor and working class households, and build thriving rural communities. But I’ve yet to see anything like this proposed.

To sum up, tariff impacts are uneven and context dependent. If I had more space, I would have written up a third section on sugar, another unique and interesting case… Another time perhaps.

Things I’m keeping an eye on:

1. American stuff: Wow, it’s been a big few weeks for us here in the States, on all fronts.

- I’m keeping an eye on the economy (Mag 7 fragility, unemployment, inflation, bank stocks, subprime auto lenders, pensions, housing markets, data revisions, gold and silver prices, bond yields and rate cuts, government shutdown impacts),

- on domestic politics (government shutdown, National Guard deployments, changes to military policies and procedures, domestic terrorism initiative), and

- on foreign relations (ship deployments to the Middle East, tensions with Venezuela, possible new US arms shipments to Ukraine, H-1B visas).

2. New security agreements: Including a new Pakistan-Saudi Arabia defense pact, and the US offering new security guarantees to Qatar. More of these to come, I expect.

3. Chinese tech: The incredible technological innovations just keep on coming. Recently, I’ve been reading about a new bone glue to address breaks and fractures, modelled on how oysters fuse their shells to concrete. I’ve also started learning about salt batteries that eliminate dependence on lithium, as well as tests of a new Zeppelin-like “airship” that captures high-level winds for power generation at a lower cost than traditional wind turbines: “Unlike traditional turbines, the S1500 does not need a tower or deep foundation. This reduces material use by 40 percent and cuts electricity costs by 30 percent. The entire unit can be moved within hours, making it suitable for deserts, islands, and mining sites.”

(Don’t forget that trade protectionism like that which Trump is implementing, and like Biden implemented previously, is symptomatic of American industrial and technological decline, an issue to which I hope to return in subsequent posts).

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Good Morning and welcome back to IPEwithSBB,

Overwhelming, chaotic, turbulent, volatile, dangerous—all seem to be understatements. Everything is in motion, violent collisions are growing more numerous, the rules that governed global relations in the past are being rewritten everywhere all at once, and crises are starting to cascade and combine. At times like these, I try to think about one of my favorite science fiction authors, Philip K. Dick, who noted that “Everything in life is just for a while”.

The table below, downloadable so as to preserve hyperlinks/references, provides a partial summary of international events of the past roughly four weeks, focusing on inter-state conflict, intra-state conflict, and the economy. My goal today is to provide a birds-eye view of the current global landscape, with subsequent posts later this fall dedicated to closer analyses of specific cases, issues, and events.

Events Table 09152025

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In general, I observe a few general dynamics and patterns, ones I’ve discussed in prior articles but which continue to develop and evolve.

· As we’ve seen for months now, the United States is aggressively working to maximize leverage, and renegotiate trade, financial and security relationships, as its international military and economic footprint shrinks. I perceive a serious risk of overextension as the US pursues varying degrees of military engagement across several geographically disparate theaters (Europe, Middle East, South America), as well as sizeable and ongoing risks of economic and military backlash and retaliation.

· As usual, China is making hay while the proverbial sun shines, seizing on US vulnerabilities (e.g., Nvidia, gold/USD) and courting partners the US has alienated (e.g., India).

· Civil unrest in France and the UK appears symptomatic of broader political instability we’ve seen in recent years across Western Europe as the continent wrestles with energy crises, debt burdens, de-industrialization, and conflict with Russia (see here and here for prior coverage from IPEwithSBB).

· Civil unrest in Indonesia and Nepal have definite strategic significance, given the geopolitical and economic importance of events in these nations to their powerful neighbors (China and India, respectively).

· The Whole World Debt Crisis is playing out like a slow-motion train wreck. As I indicated in my recent article on dollar stablecoins, we’re at the part of the crisis where the US government is desperately throwing financial spaghetti at the wall to see if something will stick.

· Almost two years ago, I asked whether the world will ditch the dollar. With a group of student researchers, I answered in the affirmative and presented compelling evidence in support of the claim. It was an unpopular and controversial argument at that time, to say the least. Two years later, it seems quaint, almost anachronistic. Yes, the world was indeed ditching the dollar then and the process has only picked up speed since that time.

It probably goes without saying that there are a lot of events that did not make it into the table (a table that includes everything isn’t all that useful). For example, the recent meeting in Tianjin, China of the Shanghai Cooperation Organization (SCO), hailed in some quarters as marking a “return” of the “Russia-India-China Troika”.

(Image: The Russia-India-China Troika, in India’s Telegana Today, here. Left: Chinese President Xi; middle: Indian President Modi; right: Russian President Putin).

In another interesting financial turn, Tether announced a brand new dollar stablecoin this week, USA₮, different from the USDT coin I discussed last month because it is specifically designed to support US financial and regulatory needs: “Purpose-built to serve the U.S. market and support American regulatory standards, USA₮ will be the foundational rail for the next generation of American commerce, trade, and finance,” according to the announcement on the company’s website. Whether this development should be considered as a new public-private partnership, or as an episode of nationalization (which seems trendier in the US under President Trump), or as an indirect form of capital control, or perhaps all three, is anyone’s guess at the moment. Bo Hines, former executive director of the White House Crypto Council, has been appointed CEO of Tether USA₮.

And, because even during the most difficult times there is still good news to be had, I’ll conclude with the truly excellent news that the Australian government is creating a safe-haven for about 12,000 koala bears struggling with deforestation and habitat loss in New South Wales. The announcement follows a recent ban on logging in the area.

(Image: “After devastating bushfires and habitat loss, Australia is turning its attention to conservation. A huge national park is set to offer thousands of koalas a future. Another 100 endangered species will also benefit. Robert Michael/dpa”, from DPA International, here.)

Things I’m keeping an eye on: Everything, everywhere, all at once, but hopefully just for a while.

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I’m doing research on stablecoins, especially dollar stablecoins like USDt issued by the digital finance company Tether. As I noted in a July 2023 article, cryptocurrency markets are increasingly important for thinking about the current plight and future status of the US dollar:

[T]he dollar is in trouble, currently facing multiple threats from many quarters. Internally, the US is managing persistent inflation, an ongoing banking crisis, a commercial real estate crisis, and a debt crisis. Add to this increasingly fierce competition with China and massive self-inflicted wounds from the Ukraine war and Russia sanctions, which have induced concerted and cooperative efforts among non-Western countries to de-dollarize. This is the context within which I’m arguing we should understand the SEC’s and BlackRock’s recent moves in crypto markets—as part of the global Currency Wars—with entities in the US trying to defend the dollar against this multi-dimensional, multipolar onslaught. Seen from this vantage point, both the SEC’s regulatory crackdown and BlackRock’s Bitcoin invasion appear as tactical maneuvers to bring cryptocurrency markets into the “global domain of the dollar”, to tame them, domesticate them, control them, limiting the damage crypto can do to the dollar in the future.

The discussion below provides new evidence in support of this reading of events. Since his election, President Trump has fully embraced the strategy I previously identified—one that was only latent in the activities of regulators under President Biden in 2023 but has become explicit and more aggressive under Trump—that is, directing, domesticating, and regulating crypto markets such that they support, rather than compete with, dollar-denominated assets.

In July, with broad bipartisan support in Congress, President Trump signed the GENIUS Act into law. Trump declared that the bill “is going to make America the UNDISPUTED Leader in Digital Assets — Nobody will do it better, it is pure GENIUS! Digital Assets are the future, and our Nation is going to own it. We are talking about MASSIVE Investment, and Big Innovation.”

As I discuss below, among the bill’s provisions are new regulations for stablecoins that explicitly connect demand for dollar stablecoins to the US Treasury market. As Treasury Secretary Scott Bessent stated after Trump signed the Act: “The dollar now has an internet-native payment rail that is fast, frictionless, and free of middlemen. This groundbreaking technology will buttress the dollar’s status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for US Treasuries, which back stablecoins.”

The more I learn about dollar stablecoins, the more I worry about hidden risks and costs. These complex financial instruments are already connected to our daily lives and are poised to become even more so very soon. Our banks are investing in them, and so are the managers of our pension funds. The current US administration views stablecoins as a GENIUS! way to save the dollar and ensure continued demand for US debt. I’m concerned that these decisions may be much costlier than many currently believe.

Risk and Financial Innovation

Modern finance is built on abstractions. Following decades of deregulation and technological development beginning in the 1970s, today entire classes and categories of financial instruments are leveraged in flimsy and precarious layers on top of what economists call the “real” economy. Stocks, for example, are abstract financial bits of a real business that employs people who produce some kind of good or service. When you trade shares of Tyson Foods Inc. (TSN), for example, you’re buying a standardized, tradable unit of ownership in enterprise that produces broiler chickens, chicken nuggets, and other food products.

Then, in turn, equity futures and options markets rest upon the movements of the underlying stock markets, an abstraction to the second degree. The chicken nuggets are even further away now and hard to see. Equity options-based ETFs (an ETF is an “exchange traded fund”) are then leveraged on top of the equity derivatives markets, a third degree of abstraction that renders the chicken nugget virtually invisible.

But distance doesn’t imply disconnection. What happens in markets for financial abstractions affects the underlying markets and the people who rely on them. And vice versa. One of the reasons I enjoy studying finance is because I get to dig through all the technical complexity to identify and understand the connections that bind the abstract to the real—namely, flows of capital, information, and risk—and the consequences of those relationships for ordinary people like us.

To this point, novel financial products that initially appear useful and safe are sometimes revealed to be full of hidden risks and costs. Mortgage-backed securities (MBS) and credit default swaps (CDS) were initially hailed as mechanisms to support homeownership among lower-income households excluded from traditional mortgage markets. But then the Great Recession happened, illuminating the fragile chains of debt and liability that permitted US homeowner defaults to ripple outward, catalyzing a global financial crisis. Instruments that initially funneled liquidity into underserved communities were revealed as engines for systemic risk and financial crisis.

If I had more space to write and you had more time, I could tell you similar stories about other innovations. Like how the development of syndicated loans in the 1970s fed into the catastrophic 1980s debt crisis that devastated Latin American economies. Or about how commodity-index funds were initially situated as a hedge for institutional investors fleeing US mortgage markets in 2007 but ended up contributing to a global food crisis during which a billion people fell into poverty. Or about how over-the-counter energy derivatives trading caused the bankruptcy of a company that’s hard to forget (Enron!!) and catalyzed the 2000-2001 California electricity crisis.

Dollar stablecoins are not yet part of this dangerous financial cohort. But if they get much bigger, which seems almost inevitable at this juncture, they surely could be.

Tokens, Stablecoins, and the USDt

A “token” is a financial abstraction, a digital representation of value. “Tokenization refers to the process of constructing digital representations (crypto tokens) for non-crypto assets (reference assets)” (Carapella et. al. 2023, Federal Reserve Board of Governors, here). “Stablecoins” are specific kinds of tokens issued by private, non-bank entities the values of which are pegged to the value of the underlying reference asset (e.g., fiat currencies, cryptocurrencies, hard commodities). The stablecoins in circulation are backed by reserves from which the company can draw to honor redemptions (see here for an interesting discussion and comparison of tokenized bank deposits versus stablecoins).

According to Tether—the company issues the world’s most popular dollar stablecoin, the USDt, which had a July 2025 market cap of US$160 billion—"Tether tokens are assets that move across the blockchain just as easily as other digital currencies but that are pegged to real-world currencies on a 1-to-1 basis. Tether tokens are referred to as stablecoins because they offer price stability as they are pegged to a fiat currency. This offers traders, merchants and funds a low volatility solution when exiting positions in the market.”

[Notice the explicit emphasis from Tether on how stablecoins make for a smooth “exit”; what Trump is trying to do is to ensure that when investors exit dollar-based markets, they actually end up re-investing, indirectly, in dollar-denominated products, including US government bonds. Neat trick, huh?]

Tether’s website posts current circulation for various stablecoins (on 8/20/2025, there were just over US$167 billion USDt in Tether), as well as the size and composition of its reserves. On August 20, Tether held about 80% of its reserves in cash, cash equivalents, and short-term deposits, most of which (about 82%) are US Treasury bills (bills are short-duration Treasury bonds).

“Reserves” are the collateral that back the 1:1 peg to the dollar, and, in theory, they should cover or exceed the amount of USDt in circulation. If they don’t, stablecoins run the same risk of a “run” that traditional banks do.

Stablecoins, Treasuries, and the GENIUS Act

Writing for Forbes this past April, Carter notes that in 2024 alone, stablecoins processed more volume than Visa and Mastercard combined, facilitating more than US$27 trillion in volume. The author critically notes that the rapidly growing stablecoin market stems largely from the shifting global and macroeconomic environment:

Much of this transformation can be traced back to an imbalance that has been growing for decades. Over reliance on foreign manufacturing, ballooning trade deficits, and geopolitical tensions have chipped away at the U.S.’s unchallenged monetary position. In just the past few months, the Dollar has weakened more than 10% against a basket of global currencies — not because people stopped believing in the U.S. entirely, but because uncertainty is being priced in at the margins.

Jamie Dimon, CEO of JPMorgan, warned that adversaries are actively working to dismantle the Dollar’s hegemonic role. Larry Fink, CEO of BlackRock, said what once would have been controversial: that U.S. debt mismanagement could erode the Dollar’s reserve status.

The U.S. has long preserved Dollar dominance by keeping global demand high — from oil pricing to trade settlement systems. But the new levers of power are digital, decentralized, and dynamic.

Indeed, the US is working, quite frantically it seems to me, to both grow and gain control of the stablecoin marketplace so as to preserve the dollar’s dominant status. On the one hand, products like Tether’s USDt have worked to sustain demand for US government debt, and thus also the dollar, since the coin was first issued in 2020, with the market’s growth paralleling diminished global demand for the reference assets beneath (again, mostly Treasury bonds). Tether noted recently that, based on 2024 data, the company has become a major source of demand for US Treasuries and, if compared to sovereign nations, “would rank as the seventh largest foreign net buyer of U.S. Treasury securities in 2024, surpassing countries like Canada, Mexico, and Germany.”

It should come as no surprise in this context that US officials and agencies are actively promoting use and consumption of dollar stablecoins and other dollar-linked cryptocurrencies across the American financial system. For example, Executive Order #14178—“Strengthening American Leadership in Digital Financial Technology”—was signed by President Trump in March 2025 specifically to promote and protect “the sovereignty of the United States dollar, including through actions to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide”.

Also in March, the US Federal Deposit Insurance Corporation (FDIC) issued new guidance for banks that permits greater involvement with cryptocurrencies and digital assets: “The guidance affirms that FDIC-supervised institutions may engage in permissible activities, including activities involving new and emerging technologies such as crypto-assets and digital assets, provided that they adequately manage the associated risks.”

Then, in May 2025, the US Department of Labor’s Employee Benefits Security Administration rescinded prior guidance issued to 401k pension funds “that directed plan fiduciaries to exercise ‘extreme care’ before adding cryptocurrency to investment menus”. Cryptonomist’s recent analysis indicates the potential magnitude and impact of this change: “the U.S. 401k market involves about 84 million employees, with assets under management totaling approximately 7.3 trillion dollars. According to data collected by financial analysts who are experts in the retirement sector, this integration of cryptocurrencies into 401k plans could transform retirement accumulation strategies for the coming decades.”

[Note: Most US pension funds are already heavily invested in Treasuries, see here for a Fed chart that will blow your socks off.]

In June, Reuters reported that, “The potential for stablecoins to fuel demand for short-term U.S. Treasury securities was a hot topic at a money market fund conference in Boston this week, with investors expecting these digital tokens to absorb a huge supply of government debt later this year…Given expectations of looming Treasury supply of as much as $1 trillion by the end of the year, the market is looking for an incremental buyer that would be a source of new demand for U.S. government debt. Stablecoin issuers fit the bill, market participants said.”

Similarly, MarketWatch interviewed Michael Kelly, global head of multi-asset at Pine Bridge Investments, who expects “one stablecoin from among the many currently being mooted, to emerge as the most liquid and reliable and for this innovation to create demand for U.S. Treasuries and the dollar. He thinks this will prompt a redollarizing of central bank reserves, reversing the recent trend.”

On the other hand, Tether and its competitors (like Circle, which issues the USDC stablecoin) are private companies operating what amounts to an unregulated, offshore market in US government debt that could potentially work at cross-purposes with US needs and interests. Alongside promotional efforts, US President Trump and the US Congress are working in parallel to further regulate and domesticate cryptomarkets, including dollar-backed stablecoins, in an attempt to ensure that the free-wheeling and rapidly-growing global stablecoin marketplace doesn’t operate contrary to US national interests.

With strong support from both sides of the aisle, the GENIUS Act was signed into law in July and provides for greater regulation of cryptocurrencies, including stablecoins. Analysts at NYU’s Law School describe the Act’s provisions as follows:

On July 18, 2025, the President signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the GENIUS Act or the Act) into law. The GENIUS Act is the most significant United States law affecting the digital assets industry to date and reflects the Administration’s and Congress’ priorities of establishing a comprehensive framework for the United States’ approach to digital assets and related activities.

The Act is described as a consumer protection bill that establishes Federal safeguards to protect stablecoin holders and enhance consumer confidence in the payment stablecoin market (Steiner et.al. 2025, here).

Important for thinking about systemic risk, the GENIUS Act provides that “permitted payment stablecoin issuers must hold reserves of U.S. dollars or high-quality liquid assets at least equal to the total value of outstanding payment stablecoins (i.e., on at least a 1:1 backing). The reserves must be held in segregated accounts and cannot be commingled with assets of the custodian.”

An especially interesting provision places limits on the types of assets that are eligible to be held in reserve: “reserves are limited to cash, bank deposits and short-term, low-risk securities. Other types of assets such as cryptocurrencies and other securities are prohibited from being used as reserves.” Perhaps this is a measure to protect the financial security of Americans. But I don’t think that is what’s happening here. Rather, it’s a way to ensure continued demand for American government debt.

For its part, Tether celebrated the Act in a June 2025 “attestation report”, noting that they pave the way for more effective collaboration and “alignment” with the US government:

Total exposure to U.S. Treasuries – including $105.5 billion in direct holdings and $21.3 billion owned indirectly – exceeded $127 billion (~$8 billion increase compared to Q1 2025) at the end of Q2 2025, placing Tether among the largest holders of U.S. government debt globally. This milestone comes at a time when U.S. policymakers, through the GENIUS Act, have taken decisive steps to solidify the dollar’s global leadership in digital form. Tether’s reserves composition exemplifies how private innovation can align with public monetary goals, serving as a conduit for secure, on-chain access to U.S. dollar liquidity at scale.

Not so genius

For years, analysts and regulatory bodies have pointed (ironically) to the destabilizing potential of stablecoins. Speaking to the problem of “runs”, which stem from the reality (or perception) that stablecoin issuers do not hold in reserve enough to cover all coins in circulation, analyst Albert Morgan explains: “Unlike decentralized algorithmic stablecoins, there is no blockchain mechanism to algorithmically adjust supply or maintain the peg. Instead, users must trust that Tether Limited has sufficient reserves and will act responsibly as the custodian of those reserves.”

Similarly, Forbes analyst Zennon Kapron noted back in May that, “[T]echnology cannot outrun risk…Stablecoins still face run dynamics: USDC briefly de‑pegged during the 2023 Silicon Valley Bank panic, and the SEC hints large coins might be unregistered money‑market funds.” Researchers at the Federal Reserve discuss this issue at more length:

Tokenized assets with a redemption option might suffer from similar issues as those arising for collateralized stablecoins, such as Tether. Any uncertainty surrounding the tokens’ collateralization levels, especially if accompanied by a lack of disclosures and accurate information about the issuers, might raise investors’ incentives to redeem the reference assets, thus triggering a fire sale of tokenized reference assets (Carapella et. al. 2023, p. 8, here).

There are additional concerns that volatility in the stablecoin market can be transmitted under certain conditions to the markets for the underlying assets, not unlike how trouble in the MBS and CDS markets resulted in a liquidity crisis in the underlying mortgage market back in 2007-8. The fear is that volatility in the stablecoin market, for example if a run occurs, could introduce similar volatility in markets for reference assets such as Treasury bonds:

For example, at sufficient scale a fire-sale of tokenized assets might reverberate through traditional financial markets, as price dislocations in crypto markets provide incentives for market participants to buy the token, redeem it for its reference asset, and sell the latter. Therefore, tokenizations may provide a means for a shock to be transmitted from crypto markets to the market for the reference assets of crypto tokens” (Carapella et. al. 2023, p. 7, here).

In theory, the GENIUS Act should allay some of these concerns. The US Senate Committee on Banking, Housing and Urban Affairs argues that the Act provides solid consumer protections, including monthly public disclosures of reserves and reserve composition, as well as annual audits of financial statements. I have doubts. And not the same doubts as Representative Marjorie Taylor Green (about End Times, the Book of Revelations, and central bank digital currencies) or Senator Elizabeth Warren (about corruption and Trump privately profiting from his public office).

Already, there are signs of risk being amplified and diffused, and unintended consequences taking root. This week, bankers have been lobbying Congress to change language in the Act that they argue will allow stablecoin issuers to unfairly compete with banks, forecasting a US$6.6 trillion “drain from traditional bank deposits”. Who knows what happens to traditional banks as stablecoins pick up speed, but this is a massive estimated outflow that would undoubtedly have serious knock-on effects across the financial system.

Writing for the American Enterprise Institute, Kupiec raises questions about systemic risk, critically noting that the GENIUS Act “sidesteps the issue of payment stablecoin lender of last resort”. Lenders of last resort are entities with deep pockets that step in usually during times of crisis to recapitalize other financial entities. The FDIC, for example, is the lender of last resort for traditional banks and actually had to step in to bail out a stablecoin issuer during the Silicon Valley Bank episode in spring 2023:

To stop bank runs from spreading to other banks, the Treasury was forced to issue a blanket insurance fund guarantee for the failed banks’ depositors which included a large deposit from payment stablecoin issuer Circle. Circle reportedly held $3.3 billion of its $40 billion in payment stable coin reserves as uninsured deposits at SVB bank. Without the FDIC’s deposit insurance blanket guarantee, Circle would likely have lost most if not all of its $3.3 billion uninsured deposit.

The FDIC’s own funds were inadequate to cover all the SVB-related losses that piled up in early 2023 and it ended up having to borrow from the Federal Reserve. Kupiec notes, “There is nothing in the GENIUS Act that prevents this from happening again in the future.”

Finally, as stablecoin markets grow, holders will be exposed to greater levels of risk. Pensioners, bank depositors, young people who are excited to use stablecoins as payment—all of them are indirectly taking on the risk associated with mounting US debts and associated trouble in Treasury markets. Treasuries are not risk-free assets anymore and the growing risks holders entail are being diffused ever-wider as stablecoin circulation grows, and to populations that can ill afford to shoulder more financial risk.

Foreign investors no longer want to buy as much US government debt, so the plan is to ensure that ordinary people like us soak up the surplus. Further, as ordinary people come to indirectly support the Treasury market via dollar stablecoins, they become exposed not only to the risks at play in bond markets but also those at work in stablecoin markets themselves, as well as the amplified risk associated with the interplay between the two (e.g., the “fire-sale” scenario).

I’ll leave off with a bit of recent data from Tether on the many, small USDt accounts they host on their blockchain network, accounts held by lower-income people from around the world, folks of modest means who don’t have access to traditional banking services: “There are 18.7 million wallets that hold more than one cent and less than one dollar of USDT… There are then 31.5 million wallets that hold between $1 and $1,000 of USDT… The prevalence of low-balance wallets is a feature, not a bug, highlighting USDT’s accessibility to users who might otherwise be unbanked.”

It’s a feature, not a bug. Buyers beware.

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How the Ukraine War Broke the West was just released by Realtime Scholarship LLC in early August. Realtime is a new publishing venture of mine that combines the care and expertise of academic scholarship with the speed of the news cycle. The goal is to bring cutting-edge research and analysis to the general public quickly, quicker than traditional presses and journals can typically manage. The world is on the move and we need resources and publishing platforms that can help experts like me keep up with the breakneck pace of contemporary global events.

For teachers, the book—the first in a planned series of global current events guides—helps orient students to global affairs, exposes them to perspectives that are often discounted in mainstream conversations in the US, and encourages them to develop a critical and discerning perspective on news media and information consumption. Further, many of the short essays included in the volume introduce students to key concepts and ideas in international relations and political economy, making the book an easy-to-read complement to the standard textbooks and academic articles you assign for class. It is also a great foundation for activities and projects that combine international relations learning with skill development around argumentation, mixed methodological approaches, and critical media consumption.

For investors, market analysts, and economists, the book provides insights into the emerging landscape of geopolitical risk. Shifts in Great Power politics, new outlooks and policy approaches among major world governments, changes in commodities market structures, and transformations in foreign exchange markets, among other facets of the war, are markers of a new emerging global economic order that is fundamentally altering the way global business is conducted and how global markets operate. The future of finance and economics is going to look very different from the past; it pays to stay on top of macro-structural and geopolitical developments.

For Americans, the book is a refreshing antidote to the hyper-partisanship and sensationalism that characterizes our mainstream media ecosystem. As you know from reading my Roundups, I like to draw from a broad array of international sources that help to counterbalance, broaden, and diversify the domestic political perspectives that many of us have rightly grown tired of. The new global system taking shape today is one in which the US will be less powerful, less able to shape the global economy and political system in its own interests. Coming on the heels of decades of American supremacy in global affairs, this shift is already impacting our lives at home and will continue to do so in the decades to come.

For my readers who live abroad—in Africa, Latin America, Europe, Asia and the Middle East—the pages of this book detail parts of a massive global transformation, one that is lifting up people around the world who have long suffered under neoliberal globalization and American empire. At the same time, the volatile and conflict-ridden transition period in which we live today has so far been most difficult to manage for those communities who can least afford it. The Ukraine War empowered the BRICS countries and created a context for growing political and economic cooperation among rising powers. But it also generated upheaval and crisis in markets for food, energy, and other basic necessities, with the associated risks hitting poor and working people hardest (as always).

For all of us, the Ukraine War is an object lesson in systems thinking and unintended consequences. Complex systems generate complex networks and feedback loops. New events expose the connections and dynamics that were previously more difficult to see. Seemingly straightforward policies and approaches can have surprising and sometimes devastating consequences. As systems scientist Peter Senge notes, “The world is made of circles, but we think in straight lines.”

How the Ukraine War Broke the West: A Guide to Current Events is available as an e-book and paperback here. Sharing my work with you all here on Substack over the past three years has given me the courage I needed to try something new and unconventional. Thank you. Couldn’t have done it without you.

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Good Morning and welcome back to IPEwithSBB. What a turbulent month June has been. Trade wars were on and then off and then maybe on again as we approach the end of the 90-day pause on Liberation Day tariffs imposed by US President Trump (the 90 days is up on July 8). Markets were up and then down and then up again as Japanese and US bond markets struggled and geopolitical risk worried investors.

Continued talk about Ukraine peace alternated with continued military action on both sides (the first-ever prisoner swap between Ukraine and Russia happened on June 9, an outcome of the recent agreement in Istanbul). And, the US and Israel started a war with Iran that resulted in a ceasefire 12 days later. Until I have a better sense of what, exactly, transpired in the "12 Day War”, I’ll refrain from additional comment—as you’ve probably discovered, there are a lot of competing accounts of what occurred, what damage was sustained on the Iranian and Israeli sides, and the rationales and quid pro quos behind the ceasefire.

While I’ve been tracking these major stories closely, there was another bit of important news about the global Currency Wars that drew far less international attention. This week, China took major steps to expand its influence over global gold markets and elevate the global status of the yuan (or renminbi). The Shanghai Gold Exchange (SGE) expanded outside of the mainland for the first-time ever, offering two new gold contracts to foreign traders and opening a bullion vault in Hong Kong to provide services to international investors. Previously, the SGE was accessible only to Chinese traders and operated no vaults outside the mainland, with the US-based Comex and London-based LBMA enjoying a veritable monopoly on global gold trading and bullion storage.

Commentators noted that, “As the world’s top producer and consumer of gold, China wants to wield greater influence in pricing the commodity. The denomination of the SGE’s new contracts is particularly important given Beijing’s ambition to reduce reliance on the US dollar and promote wider use of the yuan in international trade.” The gradual movement of commodities pricing power from West to East, including not only gold but also rare earths and other critical materials, is a symptom of US decline and the rise of China as a counterweight to US influence in global markets and the monetary system (gold sold in China is priced in yuan, not dollars).

(Image: The Shanghai Gold Exchange, courtesy of Holland Gold, here).

Back in April, when China and the SGE first announced their plans to expand the exchange’s global footprint, an opinion piece in the Jerusalem Post pointed to a key distinction between how the SGE handles gold relative to the US’s Comex:

COMEX, the dominant U.S. futures exchange, operates largely on paper contracts, with less than 1% of trades requiring physical delivery. This system relies on rehypothecation—reusing the same gold bars as collateral for multiple trades—to sustain liquidity… In contrast, the SGE mandates physical settlement for 94% of its trades, creating relentless demand for tangible metal. Chinese buyers, including the People’s Bank of China (PBoC), have exploited price differentials for years, buying discounted London or COMEX gold and selling it at a premium in Shanghai. Now, with SGE’s planned overseas warehouses, this arbitrage will intensify. Gold shipped to these facilities—strategically placed in global hubs—will be permanently locked into China’s ecosystem due to SGE rules barring re-entry of withdrawn bars without remelting.

Given current market conditions, as Chinese market power grows, I would expect an increase in physical gold prices. Because you don’t need to buy or sell real gold to trade gold contracts on the Western exchanges, gold trading on Comex and LBMA is historically net short, meaning that trade in paper gold worked to suppress the price of physical gold. This is the system that China’s expansion threatens.

Just in case you needed a reminder about why central banks and governments, especially in Asia, Latin America, Africa and the Middle East, are so interested in gold these days, the World Gold Council put it well in its weekly report published this morning: “The reasons for this increased appetite from emerging market central banks for greater gold reserves are multiple, e.g. diversification, geopolitical risks, and gold’s performance in periods of crisis.” Critically, gold is increasingly seen as an alternative to US Treasury bonds, providing investors with a safe haven asset that is better insulated from “economic and trade policy uncertainty”. As investors move away from US assets and toward gold, dollar weakness, rising bond yields, and higher gold prices result.

It’s hard to overemphasize the significance for global finance, and for the American economy, of the global shift in asset allocations away from US government bonds. In the past, worldwide investment in US government bonds created an incentive for other countries to care about the fate of the US economy and its financial markets because widespread Treasury holdings meant that what happened in the US mattered for the rest of the world. As portfolios diversify away from US assets, so does interest in supporting US markets when financial crises occur. These days, I would not bet that foreign central banks and private investors rush to bail out the US like they did when financial markets collapsed during the Great Recession.

Moreover, foreign purchases of US Treasury bonds not only finance US government spending on everything from agricultural subsidies to defense contracts but also influence the value of the dollar in global markets for foreign exchange (currencies). In turn, the relative value of the US dollar impacts the prices American consumers pay for imports and the prices American producers receive for exports, with the net effect reflected in the trade deficit/surplus as well as GDP. I’ve seen a lot of US publications recently discussing the impact of a weak dollar on the cost of vacations abroad (it makes them more expensive) and the inflationary impact of higher import costs (see, e.g., here in Time).

[As an aside, it’s interesting that US publications are only now starting to sound an alarm about the dollar’s future, an issue that I started writing about in 2022 and that other researchers have long warned of. For example, economic historian Barry Eichengreen has been writing about this since at least 2012, including in his excellent book Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System].

In related news, headlines this morning discussed a trade deal reached between the US and China. Recall that, following the US’s imposition of Liberation Day tariffs back in April, those tariffs were paused for all countries except China (and Mexico and Canada, where tariffs had been imposed earlier in a separate US intervention). In retaliation and also to create leverage for future negotiations, China banned the export of rare earth minerals abroad, a move that hit the US especially hard. It appears that China’s gamble has paid off. According to The Independent, the US expects rare earth exports from China to resume promptly, in exchange for withdrawal of “a series” of US restrictions. But, and I found this super interesting, China’s commerce ministry “said China will approve export applications of controlled items in accordance with the law. It did not mention rare earths.” Similar, strategically vague statements appeared this morning in Chinese state media. It seems that China is perhaps trying to ensure room to maneuver in the future should the negotiations stall or fall apart.

Things I’m keeping an eye on:

1. BlackRock: The world’s largest asset manager announced plans this week to expand its portfolio to include retirement plans: “Retirement money is a core business for BlackRock and accounts for more than half of the money the company manages… BlackRock's approach would include a 5% to 20% allocation to private assets in the retirement plans, depending on the investor's age, according to a research paper released on Thursday. While the demand for exposure to private assets has grown, some sponsors have concerns around adding them to retirement plans for reasons such as liquidity, transparency and litigation risk.”

This story caught my eye for a couple reasons, including the sheer horror of this monstrous financial firm wielding such massive influence over retirees and their futures. But I also found it interesting that, like China and Japan and other major holders of US government bonds, BlackRock is perhaps looking to reduce the exposure of its retirement investments to public assets like US Treasuries. According to the Federal Reserve Bank of St. Louis, US pension funds collectively own close to US$1 trillion in Treasury bonds. I’m really hoping that “private assets” don’t mean cryptocurrency…

2. Crypto-backed mortgages: Looks like the NINJA loans that contributed to the 2008 Great Recessions are making a comeback in disguise (NINJA = no income, no job, no assets): “The regulator overseeing Fannie Mae and Freddie Mac on Wednesday ordered the housing giants to consider cryptocurrency as an asset for single-family mortgage loan risk assessments, a move that could potentially open the door to borrowers using crypto investments to qualify for home loans… Cryptocurrencies are known for being highly volatile and are often subject to wild price swings, sometimes for no clear reason.”

As I noted in a rather speculative article I penned back in 2023, I suspect that US government interest in crypto runs parallel to the deterioration of the dollar, with demand for crypto on US exchanges funneling capital flight from stock and bond markets back into dollar-denominated assets. In other words, my working hypothesis is that crypto is increasingly functioning as controlled opposition to the dollar. Relatedly, back in March, US President Trump issued an executive order to create a strategic Bitcoin reserve: “President Trump promised to make the United States the “crypto capital of the world,” emphasizing the need to embrace digital assets to drive economic growth and technological leadership.”

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Hello and welcome back to IPEwithSBB,

The United Nations Development Program (UNDP) released its annual Human Development Report earlier this month. One of the report’s most prominent features is the Human Development Index (HDI), which measures and compares ‘development’ across countries. The UNDP introduced the index in 1990 and made big waves at the time because it upended the conventional view that development and poverty alleviation efforts should focus exclusively on economic growth and raising national income. The index represents a different perspective, i.e., that there are other important things in life besides money, like good health and access to education, things that high national incomes don’t guarantee.

Indeed, countries with high average incomes sometimes do rather poorly on health and education, for example, if income is distributed too unequally or if health and education infrastructure is inadequate or poorly organized or if certain groups face persistent obstacles and challenges. Conversely, a low or moderate average national income does not necessarily confine nations to poor health and education, if, for example, there are robust political and social mechanisms that ensure that national income is redistributed to the poor and working classes via social supports such as fixed food prices, subsidized school fees, and free infant and maternal healthcare. These general points are helpful to keep in mind as you peruse the (abridged) rankings below, especially in pondering the data in column 3.

This year’s rankings, based on 2023 data (there’s always a lag in official data reporting), are as follows. I selected a handful of data points and moved them into a smaller table to save space (the full table with all countries is too big to reproduce, but can be found in the full report, here, Tables 1 and 2 on p. 274-282). The 3^rd column shows the country’s rank for gross national income (GNI) per capita minus its HDI rank: “A negative value means that the country is better ranked by GNI than by the HDI”, according to the UNDP, meaning that they rank better on average real incomes than they do on standards of living more generally.

Among other interesting features of the rankings, we can see that various northern and western European states continue to top the list, with relatively little movement in those top spots since 2015. The US tied Lichtenstein and New Zealand for 17^th place, just below Canada and the UAE and just above Korea and Slovenia, with no movement in its rankings at all between 2015-2023. The US and Lichtenstein are doing better on average income than on human development, while New Zealand is doing better on human development than on average income. Japan has lost 3 places in the rankings since 2015, with the Russian Federation (-12) and Ukraine (-10) also (unsurprisingly) posting fairly large rankings losses. Over the period 2015-2023, the UAE moved up a massive 27 places in the HDI rankings, China moved up 16 places, Saudi Arabia moved up 9, India 5 places, and Brazil 4. South Sudan, one of the world’s newest and poorest nations, took last place at 193^rd.

Two themes dominated this year’s HDR: artificial intelligence and the global economic slowdown. Let’s start with the latter, the global economic crisis, about which the UNDP notes as follows: “Wounds from the 2020–2021 declines in global HDI value have not healed, and the rebound since may be losing steam. Just a few years ago we were on course to live in a very high HDI world by 2030. That world was delayed by a few years based on the 2021–2024 trend. Now it is projected to be delayed by decades…” (p. 4).

In a press release earlier this month, the UNDP stated, “Human development progress is experiencing an unprecedented slowdown…Instead of seeing sustained recovery following the period of exceptional crises of 2020-2021, the report reveals unexpectedly weak progress. Excluding those crisis years, the meagre rise in global human development projected in this year’s report is the smallest increase since 1990.”

As always, it has been the world’s poorest nations that are bearing the brunt of the slowdown:

For the fourth year in a row inequality between Low HDI and Very High HDI countries continues to increase, according to the report. This reverses a long-term trend that has seen a reduction in inequalities between wealthy and poor nations. Development challenges for countries with the lowest HDI scores are especially severe - driven by increasing trade tensions, a worsening debt crisis and the rise of jobless industrialization.

The figure below shows pre-pandemic estimates of regional HDI scores relative to actual progress since that time.

AI is presented as a “development wildcard” in this broader, stagnant economic context: “If AI is seen simply as a supercharged extension of earlier digital technologies deployed to automate work, labor is condemned to cede the remaining ground to machines, further eroding development options. Is this what is in the cards?” (see also my prior post on workers and the rise of the machines).

The report digs deeply into the implications of AI for workers and the development and industrialization processes more generally. On the one hand, AI might “augment” economic opportunity, creating new possibilities for workers. On the other hand, AI might replace human workers as tasks are automated. In most instances, the data suggest that we just do not know exactly how AI will impact work and jobs. The graph below shows the share of total employment in various HDI groupings exposed to AI and the nature of that exposure (augmentation, automation, or unknown). Note also that a higher percentage of jobs in very high HDI countries are exposed to AI than in lower HDI countries. The UNDP notes: “AI’s ability to carry out work once thought of as exclusively in the realm of humans—such as com­plex cognitive or creative tasks—is now challenging the belief that automation technology affects mainly lower-skill workers engaged in routine tasks…” (p. 165). As I’ve discussed previously, jobs historically considered “white collar” appear to be highly vulnerable to automation, the kinds of jobs that are currently concentrated globally in high and very high HDI countries and in urban centers around the world (from human resources and accounting to legal and finance).

One of the most interesting parts of the report for me were the passages on “jobless industrialization”. For many low- and middle-income countries, industrialization in recent decades occurred via integration into global supply chains that connected businesses in poorer economies with those in more advanced industrial ones. The UNDP explains, via economist Dani Rodrik’s work, that in many cases, low- and middle-income countries were employed to do more routine tasks, ones that do not require advanced education, training, or apprenticeships and thus could be more easily outsourced to nations with low-paid, semi-skilled workforces (p. 25). But, today, it is precisely these more routine tasks that are being automated, indicating that nascent industries in less developed countries might be among the most vulnerable to AI, paving the way for future industrialization that relies less on humans and more on robotics. Even further, as industrial economies continue to automate routine tasks at home and as robotic technologies grow cheaper and more effective, there will be dwindling incentives to outsource at all.

There was too much covered in the report to summarize it well in the space I have here, so I’ll just highlight a few other facts and figures that blew my mind:

• AI usage data among survey respondents across 21 countries indicated relatively low current usage in health-, education-, and work-related arenas (19% in the very high HDI countries, 24% in high HDI countries, and 14% in low and medium HDI countries). But the survey indicated that within one year these figures will grow rapidly, with 46% of respondents in very high HDI countries saying they will use AI this coming year, 69% in high HDI countries saying the same, and 66% in low and medium HDI countries. If the estimates pan out, this would imply a massive uptake of AI around the world in the coming year, with the largest growth in usage expected in the countries with lower human development scores (p. 3).

• The UNDP also discusses trends in mental health and wellbeing among young adults around the world: “Until recently, one of the most well-established em­pirical regularities across countries was that subjec­tive measures of wellbeing (such as life satisfaction) followed a U-shaped pattern with age: younger and older people reported higher wellbeing than those in middle age (late 40s to early 50s). About 10–15 years ago that began to change in some countries. Despair among young people shot up, and life satisfaction tanked. Young women fare worse than young men…That the trend is most evident in some very high HDI countries and parallels the broader diffusion of smartphones has implicated digital technologies. In a global survey of people with access to the internet, the typical U-shape curve is completely absent” (p. 7). Data also show that young people are more concerned than older people that they will lose control of their lives due to AI; (p. 9).

The following graph is included and shows staggeringly low mental health scores for younger people aged 18-34 across every world region relative to older groups:

Moving on to related news, the Straits Times reported this week that US-based Nvidia, the world’s largest manufacturer of artificial intelligence chips, posted 69% growth in quarterly sales, and additionally “warned of more risks to its business emerging in the technology conflict between the United States and China”: “Nvidia for the first time said that restrictions on the use of open-source AI models from China such as DeepSeek and Qwen could hurt its business, as could US rules barring connected vehicle technology from China, where Nvidia’s long-struggling car chip business has finally flourished.”

The first-ever humanoid robot fighting competition was held in Hangzhou China on May 25, with the model named “AI Strategist” and (human) operator Lu Xin taking the title. The Chinese state-media outlet Global Times noted as follows about the contest, the first in a series intended to create “a ‘train-through-competition’ talent pipeline for China's fast-growing robotics sector”: “Driven by rapid advancement in embodied intelligence, China's humanoid robots are evolving at an accelerated pace, extending their reach into both industrial and household applications. According to the Chinese Institute of Electronics, China's humanoid robot market is projected to reach 870 billion yuan ($120 billion) by 2030.”

(Image: “The first-ever humanoid robot fighting tournament kicks off on May 25, 2025 in Hangzhou, East China's Zhejiang Province. Photo: Courtesy of Unitree Robotics”, from Global Times 05/26/2025, here.)

Last, Le Monde reported yesterday that the New York Times made a deal to allow Amazon use its content to train AIs: “Several media groups have already struck similar deals with major tech companies, but The New York Times had previously refused to allow its content to be used in the artificial intelligence race. Amazon is adding the technology to its Alexa voice assistant, and the deal opens the door for New York Times content to be used by Alexa and its connected devices. Financial terms were not disclosed.” The newspaper previously sued OpenAI and Microsoft for copyright infringement related to unauthorized content use to train chatbots.

Things I’m keeping an eye on:

1. Ukraine: China cut drone shipments to Ukraine but not to Russia, while Russian state media extended a thank you to the North Korean troops that previously helped fight in Kursk. Germany just announced a new collaboration with Ukraine to jointly produce long-range missiles that could strike “deep inside Russia”. I’m really hoping that a second round of ceasefire talks may be upcoming between Russia and Ukraine in Istanbul, following an initial discussion earlier this month.

2. Gaza: The White House reported that Israel signed off on a ceasefire agreement yesterday, one put forward by the US calling for a 60-day halt to the conflict. Hamas has reported that it has the document and is “reviewing its contents”. The BBC reported on Wednesday that 47 people were shot near a private aid distribution site in Rafah, a city on the Gaza Strip. UN officials stated that Israel’s defense forces fired the shots, while the IDF claimed troops fired only "warning shots” into the air. The Gaza Humanitarian Foundation (GHF) spokesperson interviewed by BBC said the “GHF's aid system uses US security contractors and bypasses the UN, which it says is unworkable and unethical…”. UN officials were also critical of the system, calling it a “weapon of war” intended to control the population via access to food.

3. Tariffs and supply chains: COFCO, a Chinese-based multinational agribusiness giant, facilitated China’s first-ever bulk import of durum wheat from Canada a few days ago (durum is mostly used to make pasta/noodles). Canada’s wheat sector, alongside oilseeds, pork, and beef, have been hard hit by US tariffs that have reduced access to the US consumer market. Much like it did with Russian oil and gas in the wake of US and European sanctions, China continues to leverage its massive consumer market to fill the void left by prohibitive US economic policies.

It takes a lot of time and effort to retool supply chains in the face of shocks and disruptions; the relationships that are being destroyed now cannot and will not be easily reset. I wonder a lot these days where the US is going to get all its resources from as access to global markets continues to be curtailed by military conflict, economic warfare, and shifting international alliances...if they don’t come from abroad, we will have to produce them at home, develop/adopt close substitutes, or reduce/eliminate consumption. Some combination of these options seems likely. Indeed, US imports were down 20% in April, the biggest fall on record.

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Good afternoon and welcome back to IPEwithSBB,

The US debt and currency crisis can no longer be ignored or denied. On Friday, Moody’s downgraded the US’s credit rating from AAA to AA1, bringing it in line with the other two major agencies (S&P downgraded in 2011; Fitch did the same in 2023). SCMP reported earlier this week that China continues to reduce its holdings of US Treasury bonds, with the UK overtaking China this month as the US’s second-largest foreign creditor (China dropped into 3^rd place). Yesterday’s Treasury auction saw “soft demand” for 20-year bonds “with investors worried about the country's increasing debt burden as Congress wrangles with a tax and spending bill that is expected to worsen the fiscal outlook”. Stocks and the dollar dipped in response, Treasury yields rose, and gold prices hit US$3300/oz. as investors swapped Treasuries for more reliable safe haven assets.

As the risks and costs of doing business with the US continue to grow—economic warfare is now the norm and US debts are exploding like a fiscal mushroom cloud—substantive alternatives are lining up to fill the void. De-dollarization efforts have leveled up in recent months, with big ideas proposed in years past turning into concrete and increasingly viable substitutes for the older, dollar-based system. I provide a few updates below, focusing on items I haven’t seen covered much in US media.

[Background info: Recall from my prior articles (e.g., this one) that the US dollar is not being replaced by a single, alternative currency. This is not a cage match that pits superpower currencies against one another in a battle for total world domination. Rather, the dollar is being downgraded, gradually diminished in stature and relevance, as alternatives become more competitive. The alternatives I’ve documented and discussed previously include barter, certain precious metals (e.g., gold, silver, palladium), digital and crypto-currencies (e.g., Bitcoin), and national currencies that until recently were unable to compete with the dollar at all. There may be a time when one or two currencies again become dominant and out-compete all the rest, but that time is not now. What I see out there is more like a creative monetary stew, with lots of neat ingredients and zesty seasonings all bubbling together in the global pot. It’s still hard to say what it will taste like in the end.]

Let’s start with the BRICS. A rather sensational headline this week on their website read: “BRICS Launches a New Payment Network, Signaling the Decline of Western Control over Global Finance.” The article, a reprint from India’s Eastern Herald, notes, “For decades, the US weaponized its grip on SWIFT—a Belgian-based cooperative underpinning most cross-border payments—to enforce sanctions and surveil global capital flows. China’s alternative, with Russia as a vocal supporter and technical partner, is engineered to neuter these financial tools. “This is financial emancipation,” said a senior Chinese official, “and the first step toward insulating our economies from arbitrary Western diktats.”

BRICS Pay is a local currency trade settlement system described on its website as an “effective alternative and complement to existing centralized payment technologies and services” (see also my prior post on the payment system, here). The BRICS Business Council began formally discussing alternative trade settlement mechanisms at the 2018 summit in Durban, South Africa. The “BRICS Pay” name and logo was developed in 2019 and technological and infrastructural development was ongoing between 2019-2023. Among its key features is the use of blockchain-based encryption to ensure transaction speed and security.

(Image: BRICS Pay logo.)

The BRICS advertise “sovereignty” as a core value and benefit of using the platform, which appears to be fully operational, or very close to it: “Sovereignty ​in finance empowers a nation to independently manage its financial resources and relationships, both domestically and internationally. It entails the freedom to make financial decisions and take financial actions without external influence or coercion from other countries or ​supranational entities.”

The platform offers both retail payment services and business-to-business services. Noting that Visa and Mastercard, national payment cards, and national fast payment systems don’t work in many countries, BRICS Pay for Retail Payments involves a QR-code based application for retail transactions that can be downloaded onto one’s cell phone. Described as follows, the new system was tested at the BRICS Business Forum in Moscow in October 2024, with some 5,000 attendees downloading the BRICS Pay Retail app and using it to make local purchases. Note especially the assertion that the platform is ‘not directed against’ any existing systems (hint, hint, wink, wink, looking at you, USD):

BRICS Pay for Retail Payments (BRICS Pay QR) is being developed as a system of bridges and payment gateways between existing international, national, and commercial payment systems. The goal of BRICS Pay is to provide seamless, reliable, and secure payments using QR codes in any country within the BRICS+ framework. BRICS Pay aims to integrate with existing national payment systems and offer online wallets accessible through mobile applications, enabling users to make payments in their national currencies using smartphones. BRICS Pay is not directed against any payment systems, the focus is on cooperation and methods of diversifying payments, as well as providing cashless payment services around the world and especially for the poorest countries.

For businesses, BRICS Pay B2B offers a “decentralized and independent payment platform based on the infrastructure of financial institutions of the BRICS member countries”, boasting the capability to connect businesses to “75 countries in one day”. The platform can facilitate payments in 23 national currencies, leveraging the SWIFT memberships of BRICS nations to ensure rapid SWIFT confirmation and transfers of funds.

Late last month, as the US-China rivalry was escalating to new heights and BRICS ministers met in Rio de Janeiro Brazil, Russian state news noted substantially reduced reliance on the dollar among BRICS countries currently: “Payments in national currencies in trade among BRICS countries total more than 65% and the dollar’s share dropped to one third, Russian Foreign Minister Sergey Lavrov said after the BRICS Foreign Ministers Meeting in Brazil…The dialogue on creation of the BRICS Pay system is moving forward progressively…”.

According to ETV Bharat out of India, “BRICS Pay is designed to handle multiple currencies, including the Russian ruble, the Chinese yuan, the Indian rupee, the Brazilian real, and the South African rand. It allows users to convert between these currencies seamlessly, making cross-border payments easier.” The article continues on to note that, “Russia has been especially proactive in advocating for an independent payment network due to its exclusion from SWIFT. Its Mir payment system, launched after the 2014 Crimea annexation sanctions, is likely to play a central role in BRICS Pay.” This point is key. BRICS Pay is not a centralized payment system; rather, it is a decentralized network of member and partner institutions and affiliates (formed into a ‘Constortium’) that use their own, existing infrastructure—including but not limited to SWIFT—to help facilitate payments using advanced digital technologies.

And it’s not just Russia seeking to leverage BRICS Pay to promote Mir and the ruble. China is doing the same, most recently with its March 2025 announcement about expansion of its digital RMB cross-border payment system (RMP = renminbi, China’s currency, also called the yuan). According to African Property Magazine, “On March 17, 2025, the People’s Bank of China made a groundbreaking announcement, revealing that the digital RMB cross-border settlement system is now fully connected to the ten ASEAN countries and six Middle Eastern nations. This strategic move signifies that 38% of global trade will bypass the US-dominated SWIFT system, marking the dawn of what experts are calling the “digital RMB moment.” Whereas SWIFT payments can take 3-5 days to clear, the digital yuan system uses blockchain technology to reduce settlement time to a mere 7 seconds and associated handling fees by 98%. Clearly, China intends to integrate the digital RMB platform into BRICS Pay to more broadly facilitate yuan-based payments.

India’s Economic Times elaborated on the global significance of the development: “The first successful real-time settlement between Hong Kong and Abu Dhabi using digital RMB has already demonstrated its disruptive potential. By bypassing SWIFT and eliminating reliance on correspondent banks, China has effectively engineered an alternative financial network—one that reduces the influence of US-dominated monetary systems and reshapes the global trade paradigm.” They go onto note that RMB-based trade settlement has increased 120% since 2021.

In related news, Argentina’s government has paved the way for residents to spend US dollars “stashed away in mattresses”: “Argentina is easing foreign currency reporting rules to encourage residents to start using an estimated $271 billion in cash dollars squirreled away in mattresses and foreign bank accounts, long held by Argentines as a hedge against decades of economic turmoil… Argentines will be able to use dollars without declaring where they came from, presidential spokesman Manuel Adorni said at a press conference on Thursday. Previously, the dollars could not be used without declaring their origin, which triggered taxes.”

The Central Bank of Brazil (BC) signed a currency swap deal with China earlier this month (May 13): “[T]he BC stressed that it intends to sign more agreements with other countries similar to the one signed with China’s PBoC. “Such currency swap agreements have become common among central banks, especially since the 2007 crisis”… the People’s Bank of China has 40 similar currency swap agreements with monetary authorities in countries such as Canada, Chile, South Africa, Japan, the UK, and the European Central Bank”, according to Agencia Brazil.

And, Nigeria and China are poised to sign a deal to collaborate on a digital currency exchange that would allow Nigeria to covert its local currency (the naira) directly into digital yuan, reducing the need for dollars in bilateral exchanges. According to Legit out of Nigeria, the proposed currency exchange builds on the success of a recent China-Nigeria currency swap agreement: “Signed in 2018 and renewed in December 2024, the agreement allows Nigerian and Chinese businesses to settle transactions directly in naira and renminbi, bypassing the U.S. dollar. This simplifies trade settlements and reduces the strain on Nigeria's dollar reserves, ultimately lowering business costs and enhancing trade competitiveness.” China is Nigeria’s largest trade partner, as of last year.

Things I’m keeping an eye on:

1. The US isn’t the only country experiencing bond market and currency problems. I’m looking at you, UK and Japan. In Japan, yields are up a full point just since April, as bond prices fall under pressure from alleged “bond vigilantes”. “That sort of thing just isn’t supposed to happen in the developed markets; bonds are supposed to be the safe asset class,” read an article today in the Financial Times. In the UK, yields are higher now than they were when the gilt market almost collapsed back in fall 2022 during Liz Truss’s short stint as Prime Minister.

2. Banks and pensions: Whenever bond markets get nasty, I get really worried about bank solvency (banks hold a lot of government bonds and are sitting on boatloads of unrealized losses right now; this data from the USG’s Office of Financial Research is informative and also scary as it predates the recent bond market turbulence), and about pensions (pension funds are institutional holders of government debt, an issue in the 2008 Great Recession in the US as well as in the fall 2022 UK gilt crisis). News on pensions was surprisingly thin, though I expect to see it coming in if market conditions continue to deteriorate.

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Good afternoon and welcome back to IPEwithSBB.

Well, it’s clear that President Trump and his administration learned very little from the policy mistakes of the Biden administration. Recall that, following Russia’s invasion of Ukraine in early 2022, the US and its NATO allies imposed a series of punitive economic measures on Russia, including sanctions, SWIFT expulsion, and freezing Russia’s central bank assets. I’ve written at length about how the international community interpreted these moves—it was perceived as a direct threat and, predictably, motivated other countries to diversify away from the US to reduce their exposure (see here, here, and here).

Well, also predictably, Trump’s Liberation Day tariff gambit was received in a virtually identical way and is being met with almost the exact same response. It’s just playing out on a much larger scale. The Liberation Day tariffs initially targeted all nations with a trade surplus vis-à-vis the US, and all the levies but for those on China were “paused” less than a day after they took effect (the effective US levy on Chinese exports stands at 145%; preexisting tariffs on Canada and Mexico also remain in place). What’s emerged since the pause is a vicious showdown between the US and China that is rapidly reshaping international trade patterns, transforming alliances, and shaking up financial markets.

There’s too much trade war news right now to cover it all. I highlight below some of the items that caught my attention.

• Trouble in US bond markets since Trump’s tariff plans were announced in early April indicates that global distrust in US financial markets and dollar-denominated assets has perhaps reached an all-time high.

Free Malaysia Today noted that, “US President Donald Trump’s tariffs have rattled faith in US assets and even though numerous backdowns have helped the S&P 500 recover much of its early April losses, the dollar has managed only to steady, without a big rebound.” FT reported this week that the first 100 days of Trump’s presidency have been the worst for stock markets since Gerald Ford took office. And, earlier this month, Goldman Sachs noted possible impacts of the escalating trade war on financial markets: “US investors could be forced to sell nearly US$800 billion of Chinese stocks trading on American exchanges in case of a decoupling…On the flip side, China could liquidate its US Treasury and equity holdings amounting to US$1.3 trillion and US$370 billion, respectively…”.

Interestingly, and related to speculation that the yen carry trade may be unwinding, FT also reported last week that Japan sold US$20 billion in US bonds this month: “Japan holds $1.1tn in US Treasuries across the public and private sectors — the biggest international stockpile in the world — so its transactions are closely monitored and considered a proxy for buying or selling of US government debt.”

• The US continues to alienate its traditional allies, including Canada, Western Europe, and even Japan, all of which seem to be reorienting politically and economically, distancing themselves from the US.

This week, Canada elected a new prime minister, with Mark Carney’s massive turnaround in the polls largely attributed to his anti-Trump stance, which appealed to Canadians angry about the tariffs and Trump’s comments about Canada becoming the 51^st US state. As The Independent reported, “In his victory speech in Ottawa, Mr. Carney declared that Mr. Trump “is trying to break us so America can own us. That will never happen.”

In Europe, French President Macron has called for suspensions of investment in the US, and French Economy and Finance Minister Eric Lombard suggested more strict regulation of US Big Tech operations in Europe. In Germany, which got some relief from the 90-day tariff pause as well as recent exceptions made by the US for auto manufacturers, one commentator noted that the outlook for German markets was good, owing to “the end of US exceptionalism” and efforts to re-militarize the continent (defense manufacturing boosts industrial output and thus also financial markets). A similar commentary from March argued that “Investors are making a sharp pivot from the United States to Europe, betting that the era of American exceptionalism has peaked while positioning for a European resurgence, driven largely by Germany’s fiscal stimulus and increased defense spending.”

But it was Japan’s stance on the tariffs that struck me most, especially given the bond market sell-off discussed above. In early April, Prime Minister Shigeru Ishiba stated that Trump’s tariffs required an “unprecedented response” from Japan. In trade negotiations with the US last week, Japan's tariff negotiator Ryosei Akazawa demanded “a review of tariffs on automobiles and steel”, to which the US said ‘no’ owing to its inability to “give special treatment to Japan alone”. The Japan Times reported a few days ago that, “Japan intends to push back against any U.S. effort to bring it into an economic bloc aligned against China because of the importance of Tokyo’s trade ties with Beijing…”. Meanwhile, China has been courting Japan, encouraging a joint response to US tariffs in which the two nations fight “protectionism together”. A Japanese delegation is headed to visit Washington for a second round of negotiations this week. I expect that Treasury markets will let us know how it went.

• China is making hay while the sun shines, using the context created by the Trump tariffs to court new allies and partners, e.g., Japan (above), and speak out against US power internationally. The Chinese government has made a lot of strong statements about the US recently, but the commentary coming out of Beijing this past month about trade has knocked my socks off, especially a video released earlier this week by the Chinese Ministry of Foreign Affairs.

Entitled “China Won’t Kneel”, the video suggests the world is in the “eye of a storm”, portrays the US as a global “bully”, and encourages other countries to join together to resist: “Bowing to a bully is like drinking poison to quench thirst, it only deepens the crisis.” I encourage you to watch it, not because it was intended for an American audience (it’s not), but for how it draws upon the history of US economic and foreign policy to create a sense of common cause among other nations around world, a sense of common oppression (including with Europe; one of the examples is France). If nothing else, it’s a masterful work of public relations delivered with near-perfect timing.

(Image: “China has issued scathing criticism of the United States in a bold propaganda video, calling its Western rival a 'small, stranded boat' in the wake of Donald Trump's tariff peddling”, in the Daily Mail, 04/30/2025, here.)

• Savvy non-aligned countries, India for example, are also seizing opportunities as they arise from the chaos (see this prior post for a longer discussion of non-aligned nations, including India, Turkey, and Saudi Arabia, among others).

By all accounts, India’s trade negotiations with the US are going very well as it looks to capitalize on reduced US trade with China: “New Delhi is prepared to include a sweetener in trade talks with Washington that would "future-proof" a deal by ensuring no other trade partners could have superior terms, as it pushes for a quick agreement with the Trump administration…The "forward most-favored-nation" clause, rarely granted by India in previous trade negotiations, would automatically apply to the U.S. any more-favourable tariff arrangements that might be agreed with other countries…”. Some rumors indicate that pharmaceuticals are in this mix, though I cannot confirm (see my last post for a discussion of tariffs in this context). Other nations currently negotiating with the US on trade include some of China’s neighbors and regional partners, such as Singapore, Korea, the Philippines, and Vietnam.

• In the short- and medium-term, it appears that the escalating Trade Wars are going to be pretty painful for Americans. US GDP contracted in the first quarter, as imports surged ahead of tariff implementation. We’re also likely headed for shortages and price increases across an array of goods typically imported from China. Reports in recent weeks indicate declining shipments from China to US ports on the west coast, including an expected 35% drop in cargo shipments into the port of Los Angeles next week and lower-than-usual shipping traffic in Elliot Bay in Seattle.

US exporters are also racking up trade war losses, including in soybeans and pork, as China shifts away from the US (Brazil, Argentina and Australia are helping replace supplies formerly sourced from the US). China’s ban on exports of rare earth minerals imposed earlier this month is also causing trouble for US manufacturers (it is a blanket ban, on all exports, with national security cited as the primary motivation). These raw materials are essential to defense production, electronics and semiconductors, and clean energy, among other sectors. As the ban underscores and as I’ve noted repeatedly (e.g., here), these commodities are a critical source of Chinese leverage over other nations, including the US.

Turning to India and Pakistan, the two nations may be on the brink of war following a suspected terror attack in Kashmir last week that killed 26 people. Al Jazeera explains, “Suspected rebels killed at least 26 people in the picturesque tourist resort of Pahalgam in the deadliest such attack in a quarter-century in Indian-administered Kashmir, setting off a chain of tit-for-tat moves by India and Pakistan and raising the spectre of a full-fledged conflict between the nuclear-armed neighbours.” Twenty-five of the 26 individuals who perished in the attack are Indian (one person from Nepal also died). Pakistan has denied involvement, though, according to Asia Times, “India’s defense minister, Rajnath Singh, openly accused Pakistan” and threatened: “We will not only target those who carried out the attack. We will also target those who planned this act in the shadows, on our soil.” Late last week, India retaliated by suspending its participation in the Indus Waters Treaty, and Pakistan subsequently “warned” India that any “disruption to its water supply” would be considered an “act of war”. Both countries are calling on the US for support, and US Secretary of State Marco Rubio is expected to speak with Indian and Pakistani leaders this week.

Last, a large-scale power outage struck Spain and Portugal on Monday, with power now mostly restored to affected regions. Airports saw thousands of flights cancelled, trains stopped running, mobile networks didn’t work, and hospitals were delaying surgeries and resorting to backup generators. “Nobody was expecting a thing like this,” said a butcher in Madrid in an interview with Euronews, as he worried about his inventory spoiling.

While European officials blamed a “rare atmospheric phenomenon” for the outage, according to Le Monde, Spanish authorities were warned last year by grid operator Redeia that “the high penetration of renewable generation without the necessary technical capacity to deal adequately with disturbance” could “lead to production cuts”, even noting that severe blackouts were possible when production lagged demand. Today, the Guardian reported that “Spain’s environment minister has warned against attempts to blame Monday’s unprecedented blackout across the Iberian peninsula on the increasing use of renewable energy, defending the reliability of the national grid and promising a “complete audit” to establish the causes of the outage.”

(Image: “The empty tennis court on day seven of the Mutua Madrid Open tennis tournament on Monday; Julian Finney/Getty Images”, 04/28/2025, from Business Insider, here).

Things I’m keeping an eye on:

1. Gold: Prices continue to climb, up 38% for Q1 over the prior year, setting multiple new record highs in 2025. The World Gold Council summarized the reasons for these historic highs in its quarterly report, released just this morning—"the spectre of US tariffs, geopolitical uncertainty, stock market volatility and US dollar weakness”. Indeed.

2. Copper: I saw battling reports this week, some saying that Chinese demand for copper has slumped as tariffs bite into industrial production, and others saying that Chinese copper stockpiles are being rapidly depleted as buyers rush to get ahead of the tariffs. Copper is among the most important industrial metals in the world, if not the most important, used for electrical wiring, plumbing, industrial machinery, and clean energy production, among other critical uses. I’m interested to see what prices do in the coming weeks.

3. Tungsten: I wrote about this a couple of months ago, and China’s recent metal and mineral ban has only aggravated an already-tight marketplace. In March, President Trump signed an executive order authorizing new exploration for metals and minerals on Federal lands, among other provisions, drawing on the authority granted in the Defense Production Act (Biden did something similar). Still no news about tungsten mining in Colorado, I’ll keep you posted.

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Good morning and welcome back to IPEwithSBB. Wow, what a wild time to be alive. Things are moving so quickly, it feels like years and decades are being compressed into mere weeks and months. Such has been the case with US President Trump’s April 2^nd ‘Liberation Day’, the broad and aggressive levying of tariffs by the US on a long list of countries and which officially went into effect on April 9 (Tuesday). Predictably, China retaliated, the US Republican Party took to infighting, the stock markets were despondent, bond markets were downright angry, and the debate over Trump’s policies exploded in the media. But, then, on April 10 (Wednesday), about 12 hours after the tariffs were implemented, U.S. President Donald Trump “authorized a 90-day pause as part of his tariff plan” and also raised “the tariff rate for China to 125%, effective immediately.”

(Image: Political cartoon: “Senseless moves.” From China’s Global Times, 04/07/2025, here.)

Ideologies, interests, and trade politics

When I teach about international trade, I often include the debate surrounding the passage of the 1846 British Corn Law (“corn” in this context refers to cereal grains such as wheat, oats, and barley). The case illustrates different ideological and political positions and shows in general terms how the imposition of a tariff influences different sectors and groups.

The “mercantilists”, farmers, and landholders advocate for tariffs on imported corn. The mercantilists argue that protecting a vitally important sector like agriculture from competition from abroad ensures that the country won’t become dependent on the whims of foreign suppliers. The farmers want the tariff mostly because it provides protection and higher profits, insulating them from competition with producers abroad who make cheaper corn and keeping prices higher than they would be with free trade (in this case, agriculture is the import-competing sector). Higher corn prices mean higher prices for the land the corn grows on, which the landholders, of course, prefer.

The ideological “liberals”, as well as the industrialists who own textile factories and merchants who facilitate international trade, advocate against the tariff and in favor of free trade. The liberals argue that free trade benefits society at large by allowing everyone to consume greater amounts and varieties of products than we would be able to of we had to rely only on our own, domestic workforce and resources. The industrialists want free trade mostly because importing cheaper corn from abroad means they can lower the wages of factory workers as the cost of living falls (in this case, the textile industry is the export sector). And, of course, the merchants just want as much trade as possible, as they take a cut of every transaction.

But, then, the “radical”, in this case a labor organizer and advocate, steps into the debate and argues that the debate doesn’t really matter for the working class. If the tariff goes into effect, the price of grain will rise, real wages will fall, workers won’t be able to afford to eat as much bread, and they’ll end up mixing sawdust into their dough to make the wheat stretch further (there’s a few pages in this particular reading about how bread was adulterated with a variety of fillers by struggling workers who couldn’t afford flour). But, if free trade prevails, bosses will lower wages as food prices fall and the factories they work at will eventually end up struggling to compete with textile weavers from India, causing unemployment to rise, wages to fall even further, and then even more sawdust in the bread.

Pharmaceutical production and trade

I’ve been thinking about the Corn Law debate a lot recently as the trade wars escalate. Take, for example, the production and trade of pharmaceuticals and active pharmaceutical ingredients (API), a category of products that were exempted from the Liberation Day policies, but that Trump has threatened to “slap” with new tariffs: "We're gonna tariff our pharmaceuticals, and once we do that, they're gonna come rushing back into our country because we're the big market. The advantage we have over everybody is that we're the big market," Trump said on Tuesday, according to the Irish Examiner. This statement comes on the heels of a similar statement last week: "Pharma (tariffs) is going to be starting to come in, I think, at a level that you haven't really seen before.”

The US pharmaceutical industry—which, according to one of my favorite websites, Open Secrets, “is consistently near the top of all spenders when it comes to federal campaign contributions and lobbying spending”—has been lobbying the Trump Administration in recent weeks for phased tariffs in order to “reduce the sting”. Trump’s announcement on Wednesday of the 90-day pause also postponed the pharma tariffs, which, in theory at least, leaves the existing exemption in place for now, except for China. In early March, the US increased its China levies to 20%, including for pharmaceuticals. They were hiked another 125% this week, but possibility of exemption from the new increase is unclear.

Graph: Federal-Level Lobbying Expenditures by the Pharmaceutical and Health Product Industry, 1999-2018 (from Wouters 2020, in JAMA Internal Medicine, here).

Like so many other goods and services these days, contemporary pharmaceutical production takes place via long, complex and geographically fragmented supply chains that rely heavily on open international trade to function properly. Different kinds of drugs, and their ingredients, parts, and components, are produced in different parts of the world, with all of the bits and pieces traded back and forth and ultimately assembled into a final product that’s sold to the consumer.

Writing for the American Institute for the History of Pharmacy, Arthur Daemmrich notes that pharmaceutical markets have been somewhat globally integrated since the 19^th century, but that by “the 1990s, manufacturing was highly specialized and involved complex production chains that often spanned multiple countries.”

[Fun fact: Merck & Co., one of the largest pharmaceutical companies in the world by market capitalization, started out as an apothecary shop, the Angel Pharmacy, in Darmstadt, Germany in 1668. In the early 1860s, Merck began manufacturing cocaine for commercial distribution, derived from coca leaf imported from South America, which, along with codeine and morphine, fueled the company’s late 19^th century expansion. They sold the first commercially used smallpox vaccine in 1898.]

Whatever Trump’s position on the pharma tariff issue turns out to be, it remains that the US is highly reliant on imports. The US imports and exports pharmaceuticals, and is the largest market in the world in this product category, making assessments of the impact of a potentially wide-sweeping set of new tariffs difficult to estimate. The US Congressional Research Service (CRS) noted in a 2021 report on medical supply chains that, “In general, the U.S. government does not gather data on the domestic production of specific items…nor does it track how much of this production is ultimately consumed in the U.S. market.”

A 2022 “consensus study report” from the National Academies of Science, Engineering, and Medicine elaborates, “Despite this lack of specific data, it is clear that the United States is heavily reliant on other countries for medical products, including China, India, the European Union (EU), Mexico, and Canada (CRS, 2020b). Whether a finished medical product is manufactured in the United States, Germany, or China, it is likely that the product is composed of component parts—active pharmaceutical ingredients (APIs), excipients, glass vials, device components—that were manufactured by different firms in various countries (p. 70).”

The US relies on Europe especially for “for more complex medical products, such as biologics and medical machinery”. India and China support US demand for APIs, finished dosage products (i.e., tablets, capsules, and solutions that have at least one API), and other parts and components of the production process: “A primary factor is that manufacturers are seeking to lower costs by sourcing finished dosage forms (FDFs), APIs, and other components from facilities in countries that can offer lower costs than U.S. facilities for labor, purchasing and shipping raw materials, and operations, including electricity, water, and coal” (p. 72). The National Herald India reported this week that, “India is a critical supplier of affordable generic and biosimilar medicines to the US, providing over 45 per cent of all generics and around 15 per cent of biosimilars used there.”

The chart below is drawn from the National Academies report cited above and shows how US imports of pharmaceuticals and medical equipment, products, and supplies are distributed geographically.

(Image: “FIGURE 3-1 U.S. imports of pharmaceuticals and medical equipment, products, and supplies in 2019; accessed 04/09/2025, here.)

Shortages, inflation, and monopoly

The US pharmaceutical industry has historically been plagued by shortages, price inflation (see graph below), and large and uncompetitive companies that enjoy generous patent protections. The prospect of tariffs has raised serious concerns about pharmaceutical availability and affordability, and how reduced access to foreign markets will negatively impact individuals and households. Tariffs on pharmaceutical imports, including generic drugs and component ingredients, would increase the price of medicines and reduce the variety of them available to Americans (these are the “gains from trade”, i.e., lower prices and greater variety for consumers; the gains are reduced in the presence of trade barriers). While some have argued that Trump is “taking on Big Pharma”, it seems fairly likely that US-based manufacturers, already insulated from competition, will enjoy extra profits in the short- to medium-term as new domestic production ramps up.

Even in the absence of new tariffs, shortages and high prices are a persistent issue. The US Department of Health and Human Services raised special concerns last year about “generic sterile injectable (GSI) drugs that form the basic layer of hospital care and make up the majority of shortages – which occur across therapeutic areas”. The American Society of Health-System Pharmacists (ASHP) lists current shortages of injectables such as sodium chloride, dextrose, acetaminophen, and various anticoagulants, as well as bacitracin ointment to use on one’s eyes and oral antibiotics such as amoxicillin. [Fun fact: 71% of the world’s 6-APA, an organic compound used to synthesize amoxicillin, is manufactured in China.]

Shortages have occurred against a backdrop of general increases in pharmaceutical prices for consumers over the past roughly two decades. According to a 2022 HHS report, “…U.S prescription drug prices were 2.56 times those in 32 comparable countries, and 1.90 times as high when rebates and other discounts are taken into account. The United States also spends more on prescription drugs on a per capita basis than other countries in the Organisation for Economic Co-operation and Development (OECD).” For more than 20 years, drug price increases have consistently outpaced the overall rate of inflation, as indicated in the graph below from the Federal Reserve Bank of St. Louis.

(Image: Graph of producer price index for pharmaceuticals from the Federal Reserve Bank of St. Louis, accessed 04/09/2025, here.)

A sobering 2020 article by Rajkumar in a prominent medical journal explains the relationship between pharmaceutical company monopolies and drug prices, using cancer treatments as an example:

The most important reason for the high cost of prescription drugs is the existence of monopoly. For many new drugs, there are no other alternatives. In the case of cancer, even when there are multiple drugs to treat a specific malignancy, there is still no real competition based on price because most cancers are incurable, and each drug must be used in sequence for a given patient. Patients will need each effective drug at some point during the course of their disease. There is seldom a question of whether a new drug will be needed, but only when it will be needed. Even some old drugs can remain as virtual monopolies. For example, in the United States, three companies, NovoNordisk, Sanofi-Aventis, and Eli Lilly control most of the market for insulin, contributing to high prices and lack of competition.

Last, a Gallup poll released last week reported increasing medical and health related inequality, with the portion of Americans considered “cost insecure” and “cost desperate” rising several points, especially among people younger than 50. Gallup notes that the increase in healthcare unaffordability has “impacted Black, Hispanic and lower-income households disproportionately in the past year, revealing that the already-existing gap between haves and have-nots in affording care is now bigger than ever.”

Things I’m keeping an eye on:

Everything. There’s just so much. But especially the impacts of the trade wars on the world’s smallest and poorest economies. Also S&P 500 (and pensions), the VIX, US bond markets (and pensions), gold and silver prices, the path of the yuan, and the recent test by China of a yuan-based blockchain trade settlement system that reduced trade settlement costs by 75%.

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Good Morning,

Lots of news this week on a possible peace deal in Ukraine, one that looks like it might stick. US President Trump and Russian President Putin had a productive phone call about a week ago and then top officials from both countries met in Saudi Arabia for further talks a few days later. Representatives from Ukraine and its European supporters were not invited. Reuters reported yesterday that undisclosed meetings between the US and Russia have also been held recently in Switzerland.

In reference to the shift in US strategy, Defense Secretary Pete Hegseth explained “that a return to Ukraine’s pre-2014 borders was ‘unrealistic’. Hegseth added that the Trump administration does not view Nato membership for Kyiv as part of a solution to the war triggered by Russia’s invasion.” For his part, Trump called Ukrainian President Zelensky a “dictator”, demanded repayment of wartime funding with US$500 billion in Ukrainian rare earth minerals, and blamed Zelensky for Ukraine’s poor fortunes in the war. Meanwhile, Vice President JD Vance presented the shift as a win for the American taxpayer and American values: “Germany's entire defense is subsidized by the American taxpayer. There are thousands upon thousands of American troops in Germany today. Do you think that the American taxpayer is gonna stand for that if you get thrown in jail in Germany for posting a mean tweet?”

But not everyone agrees. In the US outlet Newsweek, the headline on February 14 was brief: “Putin won.” A February 19 op-ed in the UK’s outlet the Daily Mirror made a sensational comparison between the current situation for Europe and WWII-era “appeasement” policy: “'There's only one way Donald Trump and Vladimir Putin can be defeated – remember 1938'.” French President Emmanuel Macron echoed this sentiment, noting that “Peace that is a capitulation" would be "bad news for everyone”. Russian media outlet Russia Today conveyed Moscow’s “concern” about recent reports that [European] NATO members are considering sending troops to Ukraine.

Yet, beneath all the bluster and trolling and threats and flimsy rationalizations, it is hard to avoid the reality that, after 3 years of suffering, destruction and brutality, this conflict has not achieved what the US, Europe, Russia, or Ukraine hoped it might and, instead, has cost the world—all of us—a great deal.

I started writing these Roundups in June 2022 just a few months after the war began, documenting both the course of war itself as well as its impact on the global economic and political system. For today’s post, I curated parts of the IPEwithSBB archive—bits and crumbs scattered across a wide swath of articles—creating a partial timeline of events that capture some of the breadth and depth of the damage done. One of the themes that stood out to me as I pieced things together was how many missed opportunities there were along the way to make peace. May the current attempt not be one of them.

(Image: “Moscow blames Ukrainian missile attack for deaths in south Russian city”, from Reuters, 07/03/2022, here.)

(Image: “Buildings in Kharkiv in ruins after sustained Russian bombings”, from the BBC, 03/05/2022, here.)

June 24, 2022

UN World Food Program (WFP) chief David Beasley warned this week of “frightening” shortages and an “unprecedented” food crisis on the horizon. The UN Conference on Trade and Development (UNCTAD) likewise noted earlier this month that “The war in Ukraine has trapped the people of the world between a rock and a hard place…”

In Ethiopia, farmers are struggling to access fertilizer and seeds, and “are in serious danger of losing the main planting season (June-August) if they do not receive urgent support from the international community to sow their fields, which would further deteriorate the already serious food security situation in the region.” In Sudan, “a record 11.7 million people, almost a quarter of the country's population, are projected to be facing acute hunger at the height of the lean season in September— an increase by nearly 2 million people compared with the same period last year.” In Afghanistan, where the US has tried to limit the Taliban’s access to resources by blocking access to external finance (including foreign aid), rising food prices are outpacing the capacity of residents and policymakers to cope: “The Taliban regime is not in a position where it can feed the Afghan people. A large number of Afghans are facing a hunger crisis for the first time. Hunger is evident in every town, village and street across the country. Long queues outside bread shops and scuffles over food in different parts of the country are now a daily sight.”

September 9, 2022

Predictably, domestic support for European policy toward Russia and Ukraine is collapsing as catastrophically high energy prices put growing pressure on households and businesses. On Saturday, 70,000 people gathered in Prague to demonstrate against the government of the Czech Republic, with both far-left and far-right groups protesting together… “The protesters condemned the government for supporting sanctions against Russia over its war in Ukraine and accused it of being unable to cope with soaring energy prices”, reported Deutsche Welle…

Also on Tuesday, Russia announced, with China, a new arrangement for oil sales between the two countries to be conducted in rubles and yuan, a clear rebuff of the G7 [oil] price cap proposal. “Putin said Russia is abandoning the use of the US dollar and British pound, as the US has undermined the foundation of world economic system and the two currencies have thus lost credibility”, reported the CCP-backed Global Times, which further noted that Chinese ally Myanmar will also be purchasing Russian products in rubles moving forward.

November 18, 2022

[Indonesian] President Widodo opened the [G20] summit “with a call for the world to “end the war” and bridge “wide differences” amid rifts over Russia’s invasion of Ukraine.” He continued, “I understand we need huge efforts to be able to sit together in this room.” Other G20 leaders, including Argentine President Alberto Fernandez and French President Emmanuel Macron, expressed similar hopes that the summit could be a forum for diplomatic resolution of the conflict between Russia and Ukraine…

…the final version of the joint statement clearly reflected the competing perspectives among members states: “Most members strongly condemned the war in Ukraine and stressed it is causing immense human suffering and exacerbating existing fragilities in the global economy – constraining growth, increasing inflation, disrupting supply chains, heightening energy and food insecurity, and elevating financial stability risks…”.

December 9, 2022

Late last Friday, the EU agreed on a price cap of $60/barrel or less, to be enforced via bans on maritime insurance provision to parties that transport Russian oil to third-party buyers over the cap. It went into effect on December 5. As we’ve seen generally since February, these prohibitions on trade with a major global producer are working to rapidly restructure global oil markets. In anticipation of the new sanctions, Russia has been amassing a “shadow” fleet of oil tankers to take the place of the US and European commercial fleets that currently dominate global oil shipping (the US and Europe also dominate global provision of maritime insurance).

January 6, 2023

Relatedly, over the past few weeks, Russian missile strikes on Ukraine have gotten more intense, targeting major cities and civilian infrastructure. Civilian casualties are mounting, and water and electricity supplies have been interrupted. This past week a US-supplied HIMARS missile struck a Russian barracks, killing at least 63 people. Russia is blaming both Ukraine and the US for the attack, and on Wednesday Putin announced the deployment of a hypersonic missile-capable frigate, the Admiral Gorshkov, to the Indian and Atlantic Oceans. Putin also called a 36-hour ceasefire for Orthodox Christmas that began this morning. Ukraine is not participating, believing it to be a “trick”.

February 10, 2023

“American journalist says US Navy planted explosives under Nord Stream 2 in June 2022.” So read the headline of an article that popped up on Russian state media on Wednesday morning, referring to the explosions last September that destroyed the Nord Stream 1 and 2 pipelines running between Russia and Germany. The article from TASS continued: US Navy divers, under the cover of the Baltops exercise, planted explosive devices beneath Russia’s Nord Stream 2 gas pipeline last June, US investigative journalist Seymour Hersh said in an article published on Wednesday. [Hersh’s piece is here.]…

The United Nations—which hosted Pink Floyd’s Roger Waters this week, at Russia’s invitation, to hear his ideas on peace in Ukraine—said they are unable to verify Hersh’s report. In response to questions from TASS on Thursday Hersh said, “I've already had [US] senators call me up and I say to them, I can't help you it’s your problem, not mine.” Hersh also said he would not be visiting Russia.

February 17, 2023

As the trade deficit (and also public debts) continue to grow, it is unclear for how long Europe will be able to sustain the massive spending that has helped ordinary people stay afloat. Over the past year since the Ukraine war started, Germany allocated almost 10% of GDP to “shield households and firms from the energy crisis”; Slovakia allocated over 9% of GDP, Italy close to 5%, the UK almost 4%...

Meanwhile, Europe has been wracked by protests over the past year—in the UK, Germany, and France, among others—as residents and small business owners struggled with inflated energy costs. The Economist noted last fall that it is Europe’s smallest businesses that are struggling most as energy costs bite, though larger firms involved in energy-intensive production (e.g. chemical manufacturing) are also experiencing serious difficulties.

February 24, 2023

On Tuesday, the India West Journal and a bunch of other Indian outlets ran a piece quoting a recent report from GIS (a prominent European geopolitical risk consulting firm). The original report from February 13, authored by Rudolf G. Adam, a former vice president of Germany’s Federal Intelligence Service, argued as follows about the consequences of the Russia-Ukraine-NATO conflict and the geopolitical shifts it signifies:

The geopolitical distribution of power will see a fundamental shift. Traditional political alignments will harden. The world will remain divided into three groups that face each other with suspicion and open hostility:

-Western liberal democracies (U.S., Canada, EU, UK, Japan, South Korea, Australia, New Zealand)

-Russia, Belarus, Iran, Syria, Venezuela and North Korea, with China staying close. Regimes in these countries despise legal constraints both in dealing with other international actors or with their own subjects

-Developing nations of the South Asian subcontinent, the Arab world, and South America

International institutions like the United Nations or the Organization for Security and Cooperation in Europe (OSCE) are paralyzed; regional associations will gather strength… The main beneficiaries of Russia’s war are China, India, Turkey, Iran and North Korea. They exploit trade opportunities that Western sanctions open for them. They profit from Russian oil at discount prices.

March 3, 2023

“Bakhmut has been reduced to a blasted wasteland, with a few thousand of its 70,000 pre-war civilian population still inside as armies battle street-by-street. Russian troops, bolstered by mercenaries of the Wagner private army, have been advancing north and south of the city to cut it off.” The WSWS reported earlier this month that the Ukrainian government has been ramping up efforts to deter soldiers in Bakhmut from deserting their posts: “Amidst a major escalation of the war in Ukraine by NATO, the government of Ukrainian President Volodymyr Zelensky has begun cracking down on “refuseniks,” or deserting soldiers, as bloody fighting continues with Russian forces for control of Bakhmut.

May 23, 2023

These six nations [South Africa, Egypt, Uganda, Senegal, Zambia, and the Republic of Congo] are not the only ones that have offered to mediate a truce in Ukraine or suggest terms for a peace settlement. Turkey mediated early negotiations between Ukraine and Russia in late February and March 2022, right after the war began. China has been trying to grow support for its own peace plan, with a Chinese envoy visiting leadership in Europe last week to encourage their participation. Spanish Prime Minister Pedro Sanchez is hoping to facilitate peace, in part by encouraging US President Biden to agree to peace negotiations and “listen” to the voices of non-Western countries that have suffered mightily from the war. Brazilian President Lula recently offered to mediate between parties to the conflict, Pope Francis recently disclosed his own “secret peace mission”, and a report from Wednesday indicated that Eastern European countries such as Poland and Hungary are moving behind the scenes to bring Zelensky to the negotiating table.

May 26, 2023

Putin’s announcement came on the heels of a similar declaration by the head of the Wagner military group—a private mercenary company contracted by the Russian government—Yevgeny Prigozhin, who declared victory “in a video in which he appeared in combat fatigues in front of a line of fighters holding Russian flags and Wagner banners”: “Today, at 12 noon, Bakhmut was completely taken. We completely took the whole city, from house to house”…

In the wake of Russia’s victory, there has been speculation that Prigozhin’s widely publicized and often theatrical commentaries were designed to lure Ukrainian forces and trap them in the Bakhmut “meat grinder”…

On Thursday, it was reported that Russia is deploying tactical nuclear weapons to Belarus.

September 1, 2023

The joint declaration that came out of the BRICS summit was a super interesting read, not least because every enumerated item in the document was, more or less, a critique of Western policies, practices, and institutions. The “Johannesburg II Declaration” takes aim at the Ukraine war and the prospect of Western intervention in Niger (the BRICS call for “peace” and “diplomacy”), at US and European sanctions (which the BRICS called “unilateral illegal measures”)…

October 2, 2023

But the United States and its partners didn’t stop with SWIFT restrictions and sanctions. Like many other central banks, before the [Ukraine] war, Russia’s central bank held a lot of its dollar assets in U.S. banks and its euro assets in European banks, making it vulnerable to asset freezes after the war began. Not only were Russian central bank assets frozen early in the war, but in fall 2022, U.S. and European officials began proposing to seize the assets outright and redistribute them to Ukraine to pay for war reconstruction. This sent chills across much of the non-Western world, especially as they thought ahead to the possibility of the United States also pursuing war with China (a major trade partner for most of the world’s economies).

At a meeting of finance ministers and central bank governors from the member countries of the Association of Southeast Asian Nations (ASEAN), Indonesian President Joko Widodo spoke in support of the group’s plan to implement more trade in local, non-dollar currencies, saying that it would avoid the “possible geopolitical repercussions” of relying on Western payment systems like SWIFT. A recent commentary in the Chinese state-run outlet Xinhua agreed that “sweeping U.S.-led Western sanctions against Moscow” and “anxiety” about “America’s ability to settle its bills in the long run” have been “driving [other countries] away from the U.S. currency.”

May 17, 2024

“Mr Mnuchin argued that blocking others' access to the US financial system "would undermine the status of the dollar as the world's reserve currency and encourage others like Russia and China to conduct transactions in euros or through counter trade and other techniques”…

The war in Ukraine continues and Russia has captured most of Ukraine’s territory east of the Dniper River. This week, international outlets reported additional Russian gains associated with its offensive around Kharkiv (see, e.g., here and here).

December 6, 2024

A week and a half after the US elections—which at the federal level cost Americans US$5.4 billion in campaign contributions alone according to estimates by Germany’s Deutche Welle, a figure that exceeds the combined 2023 GDPs of Burundi and the Central African Republic—US President Biden authorized Ukraine to use US-made missiles to attack targets inside Russian borders. While Ukraine has been striking inside Russia for some time with arms provided by Western allies, Biden’s explicit and public declaration of US involvement was widely seen as a dramatic escalation of the war.

On Nov 21, Russia demonstrated a new weapon on Ukraine, a hypersonic, nuclear-capable intercontinental ballistic missile (ICBM) called Oreshnik that was armed only with conventional warheads and travelled at speeds in excess of Mach 10…

Things I’m keeping an eye on (super short): Gaza, humanoid robots, gold and silver prices.

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Hello and welcome back to IPEwithSBB,

On Tuesday February 4, with the White House citing threats posed by the US trade deficit and fentanyl production in China, the US’s new 10% tariff on Chinese goods took effect, raising the effective tariff rate on Chinese imports to 35% (25% tariffs imposed during President Trump’s first term + 10% new this term). The Chinese government responded swiftly with retaliatory tariffs on US liquified natural gas (LNG), coal, oil, farm equipment, and certain autos (including pickup trucks). The CCP-run outlet Global Times explained China’s position, “The US government's decision to impose additional tariff on all Chinese goods is a unilateral tariff increase by the US, which seriously violates the rules of the World Trade Organization, said the Customs Tariff Commission of the State Council, noting that the move not only fails to address the US' own issues but also undermines normal economic and trade cooperation between China and the US.”

While tit-for-tat economic warfare has by now become commonplace and is clearly poised to ratchet up as inter-state rivalries and conflicts mount, what most interested me was China’s imposition of “export controls on some rare earth minerals and metals central to the booming US tech industry and its green energy industry”, a strategy we’ve seen before in the ongoing Chip Wars in which China imposed similar controls on gallium and geranium exports. Al Jazeera noted as follows,

If diplomacy fails and China, the world’s largest consumer of energy, follows through on its threats to retaliate, the US will be hit with tariffs on its LNG, coal and crude oil in what Song [chief economist for China at the Dutch firm ING] called a “reasonably measured response”.

China’s antimonopoly regulator also announced investigations into Alphabet’s Google while including PVH Corp, the holding company for brands including Calvin Klein, and biotechnology company Illumina on a list of potential companies that could be targeted with sanctions.

Electric trucks imported from the US will also be hit with a 10 percent tariff, potentially impacting Trump ally Elon Musk’s Tesla, which has been promoting its electric trucks in China.

China’s move to curb the export of critical minerals and metals used in things like electronics, military equipment and solar panels comes at a time when Beijing is strengthening its dominance over the mining and processing of these materials.

The new controls, which came into effect immediately and are not subject to Monday’s deadline, cover the metals tungsten, tellurium, bismuth, indium and molybdenum and their related products.

(Image: “Wolframite: An example of the element Tungsten”, from periodictable.com, here.)

As it turns out, tungsten, which is symbolized with a ‘W’ on the periodic table, has an atomic number of 74, and an atomic weight of 183.84, is a really interesting metal. And, owing to its importance in a variety of manufacturing processes, it occupies an increasingly central geopolitical position. Tungsten, which is incredibly hard and has a very high melting point (6177° F, 3414° C), is used as follows according to the Royal Society of Chemistry (RSC):

Tungsten was used extensively for the filaments of old-style incandescent light bulbs, but these have been phased out in many countries. This is because they are not very energy efficient; they produce much more heat than light.

Tungsten has the highest melting point of all metals and is alloyed with other metals to strengthen them. Tungsten and its alloys are used in many high-temperature applications, such as arc-welding electrodes and heating elements in high-temperature furnaces.

Tungsten carbide is immensely hard and is very important to the metal-working, mining and petroleum industries. It is made by mixing tungsten powder and carbon powder and heating to 2200°C. It makes excellent cutting and drilling tools, including a new ‘painless’ dental drill which spins at ultra-high speeds.

Calcium and magnesium tungstates are widely used in fluorescent lighting…

The principal tungsten-containing ores are scheelite and wolframite. The metal is obtained commercially by reducing tungsten oxide with hydrogen or carbon.

The map below shows global reserves, mines, and producers of tungsten (W).

(Image: “World Map of Main W deposits, mines, and producers”, 2018, from Frontiers in Chemistry and ResearchGate with data from the USGS, here.)

China controls roughly half of the world’s proven tungsten reserves, produced over 80% of global supplies in 2023, and is the world’s largest exporter, ahead of Vietnam and Russia, among other producers. The US Geological Survey’s (USGS) 2025 report notes that the US has not mined tungsten commercially since 2015, instead relying heavily on imports from China (27%), Germany (14%), Bolivia (8%) and Vietnam (8%), among other sources.

In addition to the industrial applications noted in the RSC’s write up, tungsten’s high melting point and hardness makes it essential for the production of electric car batteries, semiconductors, and weapons and munitions, including “military-grade steel production, aerospace components, munitions, and ground vehicle armor.”

While the US Department of Defense has been working overtime to develop new sources of tungsten—including using Ukraine war appropriations to “accelerate development” of a tungsten mine in Yukon, Canada—they will not come on line quickly enough to mitigate the short-term pain of economic warfare. Indeed, China’s new tungsten tariffs come on the heels of tariffs on tungsten imports from China imposed by the Biden Administration last year, creating strong economic pressures and incentives to develop domestic sources as access to global supplies is curtailed (the 2022 US REEShore Act further forbades the use of Chinese tungsten in US military manufacturing).

To this point, tungsten mining operations are coming back online, with old mines reopening across the Rocky Mountain West. Back in mid-December, Guardian Metal Resources signed a binding letter of intent with Hinkinite Resources LLC to purchase the Tempiute Tungsten Mine & Mill—formerly known as the Black Dog mine—located about 150 miles north of Las Vegas, Nevada (“Hinkinite is a privately held Utah-based company focused on the prospecting and development of precious, base-metal and industrial mineral deposits, as well as revitalising historical mining operations located throughout the western United States”). Guardian Metal CEO Oliver Freisen noted that the mine will help “the US significantly reduce its dependence on foreign sources for this key defense and industrial metal.”

Just this week in Idaho, Canada-based American Tungsten acquired new mining rights at the IMA mine, “a past-producing underground tungsten mine situated on 22 patented claims located in east-central Idaho”: “Between 1945 and 1957, the property produced about 199 449 t of tungsten oxide and was subsequently explored for molybdenum and tungsten by various operators between 1960 and 2008.”

For readers in the Denver area, you might be interested to know that tungsten was discovered in Colorado in the 1870s, with extensive mining operations ramping up in the years preceding WWI. The lion’s share of Colorado’s tungsten mines, which for now appear to still be offline, were located in Boulder County, “near Nederland and Caribou. In fact, at one time there was even a town in Boulder County called Tungsten. A few tungsten mines were also found in southwestern Colorado, especially San Juan County, as well as in the central mountains.” I’ve so far seen no news about tungsten mines reopening in CO, but I’ll keep you posted.

As a last note on tariffs, one of my favorite annual reports was released this week, the Transnational Institute’s State of Power report, which focused this year on the “geopolitics of capitalism” and covers many of the dynamics I’ve discussed at length in these Roundups, including multipolarity, mercantilism and inter-state rivalry, and economic warfare and trade protectionism. As headlines continue to focus on US President Trump’s new tariffs, it’s good to be reminded that this massive shift in global economic relations is long-term, global and structural, not new, US-based, or partisan. The graph below shows the rise in global trade protectionism between 2010-2022.

(Image: Infographic, “Number of Trade Restrictions Imposed Annually Worldwide (2010-2022)”, from State of Power 2025, TNI, p. 121, here.)

Things I’m keeping an eye on:

1. US inflation data: Another hot CPI print this week, with inflation running around 3%, the fastest pace in a year and a half. Food (eggs!), gas, housing prices continue to rise, with clear negative impacts for households and the bond market. Doesn’t look like interest rates will be coming down anytime soon (My controversial personal thesis is that the US is in a currency crisis, among other converging financial crises, with inflation and high rates an expected consequence; see also this article from 2023).

2. Baltic Sea telecommunications cables mystery: Undersea cables keep getting damaged and cut, roughly a dozen over the past 15 months or so, cables that connect Finland, Germany, Sweden, Denmark, the Baltic states, and Russia. The West suspects Chinese and/or Russian sabotage, while Russia claimed this morning that it has also been victimized.

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Good morning, happy (belated) new year, and welcome back to IPEwithSBB. I’m going to experiment a bit over the next few months with the length of these Roundups (shorter), frequency (more often), and publication day (not just Fridays). As always, thanks for reading my stuff, I’m grateful for your subscriptions, shares with others, and comments on my posts. Let’s get going.

It's hard not to be drawn to the news coming out of the US these days, with newly-elected-for-the-second-time President Donald J. Trump capturing headlines everywhere I look. Trump—who once said that “if you are a little different, or a little outrageous, or if you do things that are bold or controversial, the press is going to write about you” and who has handed down at least 220 executive orders in the 10 days since he officially took office—has, among other foreign policy decisions, pulled the US out of the WHO, threatened to exit the Paris Accords, froze US foreign aid disbursements for 90 days, and rampantly deployed threats of tariffs, including against traditional US allies and partners (e.g., against Canada, Colombia, and Denmark).

(Image: “Colombia has backed down on barring repatriation flights from the US carrying illegal aliens after US President Donald Trump threatened to hit the South American country with hefty sanctions. Picture: Win McNamee/Getty Images”, from Sky News Australia, 1/27/2025, here.)

While it is a new year with a new-ish American president, so far I’m still seeing the same kinds of global structural dynamics at work as I did last year—political and economic fragmentation, concretized military-economic blocs anchored by increasingly close alliances among their core members, trade wars and other conflicts over territories and resources, financial instability, political crises in formerly stable Western democracies, strengthening anti-imperial and anti-Western dynamics in West Africa and other parts of the global South, and the rise of new powers in regions of the world long regarded as “peripheral” and “developing”. If anything, Trump’s “America First” agenda will only expedite these trends and processes, building on the Biden’s administration’s similar penchant for economic warfare and international conflict as the US tries, and fails, to restore its global hegemonic status (a “hegemonic” system is one dominated by a lone superpower that has no real international competitors).

In apparent defiance of Trump’s assertion in his 1987 book The Art of the Deal that “most people think small because they are afraid of success, afraid of making decisions, afraid of winning”, some interesting deals have been struck over the past month elsewhere in the world by governments who seem like they really want to win. In the West African nation of Mali, currently ruled by a military government that took power in 2020, authorities seized 3 metric tons of gold from Canadian mining corporation Barrick Gold. The confiscation is part of a legal dispute over “the share of revenue owed to the West African state” by Barrick, according to Africa News: “Mali is one of Africa’s leading gold producers, but it has struggled for years with jihadi violence and high levels of poverty and hunger…the government has placed foreign mining companies under growing pressure as it seeks to shore up revenues.”

Indonesia—the largest economy in southeast Asia, the world’s fourth most populous nation and its 10^th largest economy in purchasing power terms, and which the World Bank today classifies as an “upper middle income” economy—struck a deal with the BRICS, joining up as a full member on January 1. The Brazilian foreign ministry stated that Indonesia “shares with the other members the will to reform the institutions of global governance and contribute positively to cooperation within the Global South" (Brazil holds the BRICS rotating presidency this year). Indonesia’s foreign ministry noted “Indonesia's increasingly active role in global issues and commitment to strengthening multilateral cooperation to create a global structure that is more inclusive and fair”. Al Jazeera rightly situated Indonesia’s accession within an increasingly competitive and rivalrous international system in which many nations were seeking to diversify away from the US’s sphere of influence:

BRICS is increasingly viewed as a counterweight to the West, with the “de-dollarisation” of international trade a key goal. Many members accuse Washington of using the greenback as a political tool, and the group has proposed a common currency.

US President-elect Donald Trump has threatened 100 percent tariffs on BRICS nations if they replace the dollar in international trade.

However, Brazil has indicated that it aims to boost the effort during its presidency of BRICS. President Luiz Inacio Lula da Silva’s government has said its objective is the “development of means of payment” to facilitate trade between member countries.

Among many other economic strengths, Indonesia is a major exporter of oil, iron, steel, and nickel. In addition, a slate of new countries became BRICS “partner countries” this month, a new affiliate category developed last year at the Kazan meeting, including Belarus, Bolivia, Kazakhstan, Cuba, Malaysia, Thailand, Uganda, and Uzbekistan.

And, last, earlier this month, Russia and Iran inked a strategic partnership agreement to bring “friendly interstate relations to a new level” and “give them a comprehensive, long-term and strategic character, as well as strengthening their legal foundations”. Some observers view the agreement—which provides for increased military and security cooperation—as a defensive move against the Trump administration’s tough stance on Iran and a consequence of Russia’s “waning” power in the Middle East following the defeat of the Assad regime in Syria. Russian state media, which framed the deal as a means of counterbalancing Israeli (and thus also US) power in the region, explained that it is not a collective security agreement, but, rather, “The signatories pledged not to help aggressors in case of an attack on Russia or Iran, but the document does not imply military assistance in case of an armed attack on one of the parties to the agreement.”

Things I’m keep an eye on:

1. The Magnificent 7: The Mag 7—Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia, and Tesla, which by mid-2024 accounted for about 35% of the S&P 500—took a beating over the past week and half, following China’s January 20 release of DeepSeek, an artificial intelligence/chatbot as smart and capable (or more so) as Open AI’s ChatGPT but developed at around 10% of the cost and without Nvidia’s sophisticated semiconductors. Nikkei Asia reported as follows,

The Chinese company's sudden release of a chatbot that it says was radically cheaper to develop dropped a bomb on an industry that for the past two years has operated under the assumption that the only way forward in AI was to have more computing firepower…

if powerful AI models can be developed without Nvidia's pricey hardware, the bullish case for AI spending suddenly looks a lot shakier.

"If" being the operative word. DeepSeek puts its achievements down to innovation and clever use of less powerful chips. More skeptical observers say it may be piggybacking on Western technologies or relying on more advanced U.S. hardware than it claims.

2. Gold stocks at the LBMA: The London Bullion Market Association, a major global bullion bank and custodian for physical gold held by some of the world’s largest financial institutions, including central and investment banks, was reported this week to have a 4-8 week delay in fulfilling requests for repatriation, a product of a wave of recent large withdrawals. According to Reuters, “London bullion market players are racing to borrow gold from central banks, which store bullion in London, following a surge in gold deliveries to the United States on speculation of potential import tariffs there, two sources familiar with the matter said. The minimum waiting time to load gold out of the Bank of England, which stores gold for central banks, has reached four weeks, one of the sources said. In normal times, the release time is a few days or a week.”

While most of the commentary I’m seeing is framing the issue in terms of possible future US tariffs that could, depending on the specifics, raise the cost of gold repatriation from London, motivating investors and speculators to obtain physical supplies before the tariffs take effect. That said, I can’t help but see these empty vaults as a predictable outcome of global financial instability, dollar weaponization, and central bank gold stockpiling in recent years, with the governments of China, Singapore, India, and other rising powers accumulating large gold stocks to manage monetary and financial risk, settle trades, and facilitate de-dollarization. I wonder when futures markets catch up to the reality of low physical supplies (the world trades a lot of “paper gold”, i.e., gold futures, options and other gold-based derivatives and securities, many millions more ounces a year than actually exists in the world).

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Good Morning, It’s been about a month since Donald J. Trump was reelected to the American presidency, and, while this fact continues to dominate domestic headlines, the likely influence of a changing US administration on the general course of international events is unclear and may be less impactful than many pundits seem to believe. The dynamics and transitions that underpin current global relations are structural and long-term and, as such, are not easily manipulated by a single national leader or political party working over a four-year period. International conflicts in Europe and the Middle East continue to escalate and spread as the US falls behind in the new global arms race, political instability among US allies in Europe and Asia continues to deepen, and Western economies continue to deteriorate and deindustrialize as debts skyrocket and international trade wars ramp up further.

(Image: “Extremely expensive election”, by Liu Riu, in the Global Times, 11/05/2024, here.)

A week and a half after the US elections—which at the federal level cost Americans US$5.4 billion in campaign contributions alone according to estimates by Germany’s Deutche Welle, a figure that exceeds the combined 2023 GDPs of Burundi and the Central African Republic—US President Biden authorized Ukraine to use US-made missiles to attack targets inside Russian borders. While Ukraine has been striking inside Russia for some time with arms provided by Western allies, Biden’s explicit and public declaration of US involvement was widely seen as a dramatic escalation of the war.

On Nov 21, Russia demonstrated a new weapon on Ukraine, a hypersonic, nuclear-capable intercontinental ballistic missile (ICBM) called Oreshnik that was armed only with conventional warheads and travelled at speeds in excess of Mach 10. The Russian government gave advance notice to the US before the missile launch. The following week, top Russian security official Dmitry Medvedev “said that if the West supplied nuclear weapons to Ukraine then Moscow could consider such a transfer to be tantamount to an attack on Russia, providing grounds for a nuclear response”.

Russia continues to push westward into Ukraine and Ukraine continues to attack inside of Russia: “Moscow's use of cost-effective "suicide" drones and decoy UAVs aims to overwhelm Ukraine's air defenses, according to officials in Kyiv. Zelenskyy has called on international allies to ramp up support for Ukraine's air defense systems and to cut off the supply of components that enable Moscow's weapons production,” reported the Business Times out of China last week. India.com reported yesterday that US defense contractors continue to grapple with supply chain problems that are interfering with weapons production, while Russia “has effectively prepared its economic and industrial resources for war”, increasing defense spending 24% last year and another 70% this year, with spending growth expected through 2027. The WSWS further noted that Germany this week committed to being the “strongest supporter of Ukraine in Europe”, and is paralleling the US’s recent efforts to ramp up arms deliveries, with almost US$700 million in armaments scheduled for delivery later this month.

Meanwhile, in the Middle East theater, diplomats and officials worked to broker a cease-fire in Lebanon while new flash points developed in Syria. The cease-fire deal between Israel and Lebanon entered into force on November 27, though reports from media outlets in the region indicate that Israeli strikes continue, with at least 130 Israeli violations counted by Lebanon as of yesterday.

In Syria, President Assad was caught unaware last week by a surprise attack by Turkish-backed rebel groups, which have since captured Aleppo, Syria’s 2^nd largest city. A report yesterday in the Middle East Eye explained that the US was working with Israel and the United Arab Emirates to offer a deal to President Assad, the terms of which were communicated before the rebel attack: “The US told Syrian President Bashar al-Assad that it was willing to withdraw American soldiers from northeast Syria and reduce sanctions in return for him shutting down Iranian arms supply lines.” Israel has been launching attacks against strategic targets in Syria controlled by Hezbollah (which is based in Lebanon and backed by Iran), and the US has been following suit, for example with missile strikes this past Tuesday on targets considered threats to US troops in the region. Anti-Assad rebels then captured the city of Hama yesterday; the city of Hama was the cite of several massacres in 1982 ordered by Assad’s father, Hafez al-Assad, who was president at the time.

Mercenaries from Central Asia and the Caucasus also appear to be entering the fray, which led the Armenian Weekly to speculate about Turkey’s motivations, the possible future course of the war, and the possible role of the US election in the surprise attack:

The timing of this offensive also seems tied to the possibility of a U.S. withdrawal from northern Syria under Trump’s administration. This would leave Turkey alone to fill the power vacuum to prevent the emergence of a solidified Kurdish entity near its borders.

Russia and Iran, the main allies of the Syrian government, pledged their support to Damascus in its fight with the rebels. Hundreds of pro-Iranian militias crossed the Iraqi-Syrian border to support the Syrian army, while Russian jets continued bombing rebel areas in Idlib and Aleppo. The involvement of Russia, Iran and Turkey on opposite sides of the battle may also endanger the status quo in the South Caucasus… Could the intensification in the region and the potential clash between Iran and Israel as well as Iran and Turkey via their proxies affect the South Caucasus?

Assad has launched a counteroffensive against the rebel forces. Russia, which has long supported Assad and is allied with Iran, is also launching strikes, targeting rebel positions in Aleppo and Idlib. Reports from the last couple of days indicate that Iran-backed militias from Iraq have deployed to Syria to back the government counteroffensive (see, e.g., here and here).

Moving on, on both sides of the Atlantic, political and economic instability continue to mount. While I’m sure my readers are deeply familiar with the American version of political instability, it’s worth noting that similar dynamics continue to roil allied governments in Europe. Following years of worker protests, farmer protests, and governmental upheavals and collapse (e.g., see prior posts on the UK and Liz Truss, Netherlands and Mark Rutte, Germany and Olaf Scholz, and France and Emmanuel Macron), political upheavals are back with a vengeance over the past month or so.

The Turkish outlet Anadolu Ajansi described events in France this week: “French President Emmanuel Macron on Thursday accepted the resignation of Prime Minister Michel Barnier, a day after opposition lawmakers toppled his government…The country has been in political upheaval since June when Macron's centrist bloc failed and the far-right National Rally (RN) won the European Parliament elections. In the UK, Political Europe reported that Prime Minister Keir Starmer, who has had a “a bumpy five months in office”, “really doesn’t want to end up like Joe Biden”. Starmer’s approval ratings are hovering around 30%, with 62% disapproving.

Then, in a strange and worrisome series of events, Korean President Yoon Suk Yeol declared martial law, vaguely referencing internal opposition linked to North Korea, only to have the ruling reversed several hours later by the national parliament. Protests that began several days ago have continued throughout the week, with protestors calling for Yoon’s resignation. “People Power Party Chair Han Dong-hoon maintained his stance that President Yoon Suk Yeol should be "suspended from his position”, reported the Korea Herald this morning.

Turning to the economy, German deindustrialization—which I discussed previously in the context of rising energy prices, the Ukraine war and sabotage of the Nordstream pipeline—has sped up over the past month or so since Volkswagen announced its plans to close 3 German factories and cut tens of thousands of jobs. Industrial giant Thyssenkrupp Steel is cutting 11,000 jobs, Bosch is cutting working hours for over 10,000 employees, and Ford is planning to lay off nearly 3000 workers at its plant in Germany. Ford noted that “Automakers face “intense competitive and economic headwinds,” as well as a “misalignment between CO2 regulations and consumer demand for electrified vehicles”. Audi and Mercedes are also planning for cuts, according to India’s FirstPost.

In the US—which began deindustrializing via outsourcing in the 1980s and now relies on services production for more than 75% of its national income, with 20% of GDP accounted for by the finance, insurance, and real estate sector (FIRE) alone—the FIRE sector appears seriously and increasingly unwell. US deliquency rates on commercial estate (CRE) loans reached their highest levels in a decade last month: “Looking closer at the CRE sector, loans secured by offices, especially those in major cities, remained the top concern,” noted the Fed in mid-November. Treasury bond yield volatility is worrisome, parallelling skyrocketing government debt levels (we’re now above US$36 trillion), rising inflation (again), and stock and crypto market behavior that has reached truly ludicrous proportions (I’m looking at you Microstrategy, Bitcoin, and Hawk Tuah coin).

(Image: “‘Hawk Tuah Girl’ Hailey Welch is facing accusations of scamming investors after her crypto coin plummets in value just hours after launch”, from The Independent, here.)

In loosely related news, US president-elect Trump recently offered to Canadian Prime Minister Justin Trudeau that Canada could become the 51^st US state, threatened the BRICS with tariffs over de-dollarization, and shared a plan to introduce 200% tariffs on Mexican auto exports to the US.

US president Biden made a visit to Peru in mid-November, overlapping with Chinese President Xi’s visit to celebrate the opening of a new deep water port funded by the Chinese government. The White House’s summary of the meeting reads like a stern and patronizing lecture from a grandparent, with Biden criticizing China’s human rights record, trade policies, and position on Taiwan. The meeting summary in Chinese media indicated that Xi rejected (and resented?) Biden’s critiques: “The Chinese President said that the Taiwan question, democracy and human rights, China's path and system, and China's development right are four red lines for China, which must not be challenged or crossed.”

And, finally, China showcased some new technologies last week at the China-Singapore Exercise Cooperation-2024, including a “an explosive ordnance disposal robot, a wall-climbing robot, an armed reconnaissance unmanned vehicle and a window-breaching aerial drone.” A few days before the exposition, the Times of India reported on an odd robot-related incident, clearly to been taken with a grain of salt:

CCTV footage of an eerie moment in a Shanghai showroom shows a small robot entering the facility and asking about the work-life balance for bigger machines. As reported by the US Sun, the robot questioned, “Are you working overtime?” to which another bot replied “I never get off work”. “I don’t have a home,” one robot lamented. “Then come with me,” the small robot urged, leading the other machines out of the showroom.

Things I’m keeping an eye on:

1. Escalation in Ukraine: An article published yesterday in the Russian state news outlet TASS described an interview conducted this week with Foreign Minister Sergey Lavrov and American journalist Tucker Carlson, a stunt obviously designed to ensure that Russia’s message reached American audiences: "Well, we officially are not at war. But what is going on in Ukraine is that some people call it hybrid war. I would call it hybrid war as well, but it is obvious that the Ukrainians would not be able to do what they're doing with long-range modern weapons without direct participation of the American servicemen. And this is dangerous, no doubt about this," Lavrov noted.

(Image: Russian Foreign Minister Sergey Lavrov, in an interview with US journalist Tucker Carlson. From Pravda, 12/06/2024, here).

2. Syria: The proxy war between the US and Russia in Ukraine is bleeding over into another proxy conflict in Syria, one that also involves Iran and Israel. I send all of my best wishes, hope, and gratitude to the diplomats backchannelling behind the scenes to help stave off a broader conflict (see here for more on the possibility of diplomatic and peaceful resolution).

3. The US economy: I’m not sure how much longer this house of cards can remain standing. The fundamentals are awful, there is serious debt distress almost everywhere one looks (public, household, corporate), I’m seeing signs of a deepening liquidity crunch (low liquidity amplifies market volatility), and geopolitical risk levels are extremely high. The Hawk Tuah coin episode is tempting me to call the top.

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