Month: May 2023

Authored by Ben Weingarten via RealClear Wire,

Decoupling from Communist China in every strategically significant realm, from the capital markets to defense and pharmaceutical production, and information and communications technology is imperative if we are to counter its hegemonic ambitions and persist as a free and independent nation in something more than name.

Banning TikTok – a ubiquitous social media platform that masquerades as a proliferator of harmless dance videos while doubling as a likely tool of Chinese Communist Party surveillance and data harvesting, and certain tool of its information warfare, under de facto if not de jure CCP control via Beijing-based parent ByteDance – would logically be part of any such decoupling, and manifestly in the U.S. national interest.

But arguably the most prominent congressional effort putatively aimed at achieving a ban of TikTok, the bipartisan RESTRICT Act, raises concerns that the cure may be worse than the disease – to the extent it even ameliorates it.

If past is prologue, key language in the bill hiding in plain sight would seem to legitimize the very heretofore lawless targeting of domestic dissent under which Americans have suffered in recent years – undermining the values and principles the bills’ supporters purport to cherish.

Under the bill, one could easily see the likes of a Twitter, or any other platform or service out of favor with authorities nuked, or at minimum under existential threat.

The RESTRICT Act broadly authorizes the Secretary of Commerce to “review and prohibit certain transactions between persons in the United States and foreign adversaries.”

Among other provisions, it calls on the Secretary to “take action to identify, deter, disrupt, prevent, prohibit, investigate, or otherwise mitigate” any of a number of “undue or unacceptable” national security risks arising from a slew of transactions past or present, including “any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology product or service” to which entities tied to China or several other countries, or subject to their jurisdiction, have an interest.

The leading co-sponsors of the RESTRICT Act, Virginia Senator Mark Warner, a Democrat, and South Dakota Senator John Thune, a Republican, frame it as “a holistic, rules-based” effort “narrowly tailored to foreign-adversary companies” that is “more likely to withstand judicial scrutiny” than other proposed bills for combatting TikTok – bills that arose in part because the courts stymied President Donald Trump’s efforts to ban the application using existing executive authorities.

Some critics, including China hawks, contend that despite the broad authority the bill grants the Commerce Secretary, it may not ultimately lead to a TikTok ban. The bill does not explicitly call for the banning of the application. Nor does it mention it, or any other application, by name – rather listing broad categories of software and hardware that could be probed under the bill, linked to several foreign foes, including among them China.

Others liken the legislation to the Patriot Act, just for the digital age. This is not meant to be a compliment. They argue that the RESTRICT Act threatens civil liberties – namely free speech – in the name of security by granting the government sweeping powers to crush communication platforms under the guise of ill-defined risks with extensive criminal penalties. The vaguer the language, more pervasive the powers, and fewer the checks and balances, such critics surmise, the riper the opportunity for government to overreach.

While the bill’s backers may argue otherwise, the fears of those left and right who believe the legislation opens the door to censorious mission creep are well-founded. The danger becomes self-evident when one juxtaposes the roots and results of the mass public-private censorship regime imposed upon Americans in recent years, and the bill’s language.

Under said censorship regime, America’s national security apparatus and public health authorities, often government-linked and/or funded academic and research “counter-disinformation” organizations, and Big Tech have colluded to suppress dissenting views from prevailing Ruling Class orthodoxy on a plethora of contentious issues under the guise of public safety and health.

“Digital wrongthink generates real world harm,” the regime argues.

The speech-stiflers have exploited, if not helped fuel a moral panic over mis-, dis-, and mal-information (MDM) – this notwithstanding that such censorious authorities have often proven the most powerful and pervasive propagators of false or misleading information – which they claim threatens American democracy, to justify their actions.

The moral panic has its roots in claims of Russian interference in the 2016 election that proved at minimum highly overblown – with national security authorities framing the threat as primarily a foreign one, which put them on ostensibly stronger footing when it came to their surveilling, policing and/or out-sourcing of policing of speech on social media platforms.

The Capitol riot fanned the flames of the moral panic. Authorities claimed that the greatest threat to the homeland now emanated from, effectively, MAGA terrorists, and that it was dangerous MDM on elections that incited them. Such Wrongthink could incite domestic violent extremists to lash out, including at critical infrastructure, compelling a whole-of-society response.

Authorities, in truth, had already been targeting domestic Wrongthink, particularly on elections, in the run-up to the 2020 presidential contest – operating on the logic that questions about the election process and results represented, or could represent a threat to critical infrastructure including election infrastructure.

The shift in focus from foreign adversaries to domestic Wrongthinkers, and on an ever-growing array of issues, including under an elastic definition of infrastructure, can be seen in the evolution of the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency, a key cog in the censorship regime.

By the time the COVID-19 pandemic was in full swing, it only made sense that the censorship regime would expand to include policing speech antithetical to whatever authorities believed it imperative for Americans to believe, on matters from the pandemic’s origin, to masking, and vaccine efficacy.

The Biden administration would codify the combatting of domestic MDM, and countering “the influence and impact of dangerous conspiracy theories” in a bid to enhance “faith in government” and “American democracy” as a strategic imperative by way of its June 2021 National Strategy for Countering Domestic Terrorism.

Bear this background in mind – to say nothing of how government has used the most tortured of legal readings to justify its targeting of Wrongthinkers from ex-presidents, to engaged parents, to the pious, running roughshod over the First Amendment in the process – as we look at the language of the RESTRICT Act.

The bill empowers authorities to neutralize risks including those stemming from applications that could: have “catastrophic effects on the security or resilience of the critical infrastructure” of the U.S.; “interfer[e] in…the result or reported result of a Federal election;” or pose a risk of “coercive or criminal activities by a foreign adversary that are designed to undermine democratic processes and institutions or steer policy and regulatory decisions in favor of the strategic objectives of a foreign adversary to the detriment of the national security of the United States.”

Now consider a hypothetical post-RESTRICT Act world.

Imagine there is a U.S.-based social media platform on which Americans are raising questions about and criticizing the RESTRICT Act. At the same time, foreign adversaries, including the PRC, by way of its mouthpieces, are raising the same objections. Might authorities conclude that the proliferation of such ideas could lead to the bill’s repeal, leaving America open to “catastrophic effects on…critical infrastructure” – as evinced by the adversaries’ similar propaganda, one who seek a return to the infrastructure-threatening status quo?

Now, imagine that on that same platform, Americans are posting memes instructing people to vote for U.S. presidential candidates by texting fictitious phone numbers, and that hundreds or even several thousand people might be messaging accordingly. Might authorities conclude the platform is being used to “interfer[e] in…the result…of a Federal election?”

Lastly, imagine Americans are also using this hypothetical platform to raise questions about and criticize America’s continued involvement in the Russo-Ukrainian War. Russian mouthpieces are leveling similar arguments. Russians have been accused of engaging in criminal influence efforts using social media platforms before, including those impacting our politics. Might authorities conclude the platform poses a risk of enabling “criminal activities by a foreign adversary…designed to…steer policy in favor of the strategic objectives of a foreign adversary” by getting Americans to exert political pressure on their leaders to curtail American support for the war?

“But,” one might ask, “why would such a platform fall under the RESTRICT Act if it’s U.S.-based?”

Well, recall that the bill covers any of a slew of transactions in which a foreign adversary or affiliated entity is involved, or to which it is subject to the jurisdiction, “including through an interest in a contract for the provision of the technology or service” in question.

Might the company be targeted on grounds, however tenuous, of having taken a small investment from a person or entity who can be linked to an adversary government, or from a larger fund with ties to an adversary government, or for having used a subcontractor otherwise affiliated in some form or fashion with, or operating under the jurisdiction of an adversary government?

The hypothetical scenario we have conjured up is actually quite real. On Twitter you will find a whole raft of content critical of the RESTRICT Act. On Twitter Douglass Mackey posted the kind of meme described – one for which he was convicted of a federal crime and faces up to 10 years in prison. On Twitter, you will find many critics of U.S. involvement in the Russo-Ukrainian War – a platform that Russians used to allegedly “commit federal crimes while seeking to interfere in the United States political system” during the 2016 election.

What of Twitter’s ties to foreign adversaries? Well, among the co-investors in Elon Musk’s take private of Twitter is cryptocurrency exchange Binance, a company initially based in China, which put up $500 million in equity. Who knows, perhaps there are other links that could be found between Twitter and China, for example via a contractor or subcontractor with which it works or has worked. And this is to say nothing of Musks’s more significant exposure to China by way of Tesla.

The Biden administration, which has seemingly had Musk in its sights since he became interested in purchasing Twitter, and certainly post-acquisition and the release of the Twitter Files, reportedly will not be investigating Musk’s Twitter purchase under existing authorities via the Committee on Foreign Investment in the United States. Might that change under a RESTRICT Act that the White House has championed – this despite its disavowal of the idea that it wishes to decouple from China, and Democrats’ embrace of TikTok as a platform?

If this scenario sounds far-fetched, you are not being nearly imaginative nor cynical enough in this era of sophistry and illiberalism.

America should ban TikTok, but the means must not do more damage than the ends do good.

The prudent and judicious move would be for Congress to take a second look at any of several more tightly-written and straightforward bills aimed squarely at combatting TikTok – that is, if it is really serious about combatting the CCP, rather than granting authorities power-hungry presidents might use to emulate the CCP in silencing domestic opponents.

First BuzzFeed, now Vice: one by one all the woke “media giants” of the new normal are going broke.

Just two weeks after we reported that BuzzFeed News – which was instrumental in spreading fake news to get us suspended on twitter – was shuttering it not filing for bankruptcy just yet, today the NYT reports that the woke left’s disruptor darling and former “multi-billion media empire” Vice, which once upon a time charmed giants like Disney and Fox into investing hundreds of millions before its stunning crash-landing, is preparing to file for bankruptcy.

According to the NYT, the filing could come in the coming weeks, according to three people familiar with the matter who weren’t authorized to discuss the potential bankruptcy on the record.

The company has been looking for a buyer, and still might find one, to avoid declaring bankruptcy. More than five companies have expressed interest in acquiring Vice, according to a person briefed on the discussions. The chances of that, however, are growing increasingly slim, said one of the people with knowledge of the potential bankruptcy.

A Vice bankruptcy filing would be a fitting ending to the tumultuous story of Vice, a new-media Phoenix that rose out of the ashes with its iconoclastic, counterculture facade, then quickly sought to supplant the media establishment before persuading it to invest hundreds of millions of dollars. In 2017, after a funding round from the private-equity firm TPG, Vice was worth $5.7 billion. Around this time, the company realized that for the money to keep flowing, it would need to curb its rebellious ways and quickly turned woke, losing most of its fans in the process.

As a result, the company is now worth a fraction of the money it managed to squeeze out of existing media giants, and is now facing bankruptcy.

When Vice files, the company’s largest debtholder, hegde fund Fortress, will likely end up controlling the company. Vice could continue operating normally and run an auction to sell the company over a 45-day period, with Fortress in pole position as the most likely acquirer.

Unlike Vice’s other investors, which have included Disney and Fox, Fortress holds senior debt, which means it gets paid out first in the event of a sale. Disney and Fox, which have already written down their investments to zero, are getting wiped out.

“Vice Media Group has been engaged in a comprehensive evaluation of strategic alternatives and planning,” Vice said in a statement on Monday. “The company, its board and stakeholders continue to be focused on finding the best path for the company.”

Vice began as a punk magazine in Montreal more than two decades ago. Over the years, it blossomed into a global media company with a movie studio, an ad agency, a glossy show on HBO and bureaus in far-flung world capitals. Disney, after investing hundreds of millions in Vice, explored buying the company in 2015 for more than $3 billion.

The deal never materialized, but the interest from Disney forced a comprehensive culture revolution within Vice, which lost its rebellious appeal and instead scrambled to appeal to woke snowflakes – the group that represents the core decision-making process at Disney – and not surprisingly, it lost virtually all of its readers and viewers in the process.

After it failed to convince a strategic partner to acquire it, Vice eventually succumbed to a bearish market for digital media companies. The company has been trying for years to turn a profit but has consistently failed to do so, losing money and repeatedly laying off employees.

Last week, we reported that Vice was closing its Vice World News, a global reporting initiative that covered world conflict and human-rights abuses. The closure of the world news operation was a blow to employees who saw the division’s aggressive coverage as in keeping with Vice’s roots in gonzo journalism, established when co-founder Shane Smith would report from risky destinations like North Korea.

As it has sought a buyer in recent months, Vice has dealt with turnover in its leadership ranks. Nancy Dubuc, the company’s former chief executive, left this year after nearly five years at the company. Jesse Angelo, the company’s global president of news and entertainment, also left the company.

Smith founded Vice with Suroosh Alvi and Gavin McInnes in 1994 as a magazine. He sold out his core vision of Vice in the coming years just so he could buy (and then sell) the legendary Beverly Hills Cop mansion for $50 million. In 2008, McInnes left Vice in 2008 and went on to found the Proud Boys. He has yet to sell out.

News of Vice’s coming bankruptcy reached as far away as El Salvador, whose president Nayib Bukele had a laconic comment.

It seems like Soros’ money also rans out 😂 https://t.co/SAcjuLKsZl

— Nayib Bukele (@nayibbukele) May 2, 2023

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Republican presidential candidate Vivek Ramaswamy said he would attempt to shut down the FBI and replace it with another entity if he’s elected president.

During an interview with “Meet the Press” on Sunday, Ramaswamy, a businessman, suggested that he does not want to “defund the FBI” after host Chuck Todd suggested it.

“I didn’t say defund the FBI. I said shut down the FBI and replace it with something new,” said Ramaswamy on Sunday. “I think it’s a new apparatus built from scratch that actually respects the law instead of making it up.”

“So you’re going to replace the old FBI with a new FBI?” Todd asked in response. “With a new institution built from scratch to carry out federal law enforcement,” Ramaswamy said, “because the existing FBI, the people who work there, have worked there for so long they’ll be getting in their own way.”

“I personally believe someone who’s running to actually run the executive branch of the government, when you have a bureaucracy whose culture becomes so ossified, every once in a while, you need to turn it over,” he told “Meet the Press.” He added: “We need federal law enforcement, but that institution has, in a bipartisan way, become so, I think ossified in its own norms, in its own corruption, that we need to rebuild it from scratch and have something new take its place.”

When Todd suggested that Ramaswamy wants to “replace the old FBI with a new FBI,” Ramaswamy stated: “The problem is there’s people who have worked there for decades.”

“What I say is, if I’m the U.S. president and I can’t work for the federal government for more than eight years—which I think is a good thing—then none of those bureaucrats reporting in to me should either,” he added. “There’s people who have worked there for decades,” he said.

Republicans in recent years have become increasingly critical of the FBI, accusing the agency of targeting the political opponents of Democrats while not investigating actual criminals. Former President Donald Trump has perhaps been the chief critic of both the FBI and the Department of Justice and said both agencies have engaged in a longstanding witch hunt to politically wound him.

Read more here…

Starting today, the Federal Housing Finance Agency’s mortgage pricing adjustments will increase fees for borrowers with high credit scores while reducing costs for those with subpar credit scores. This upside-down policy is blatantly socialism, and one can’t help but wonder if anyone in the Biden administration learned anything from the subprime mortgage meltdown that occurred more than a decade ago. 

As part of the Biden administration’s plan to make housing affordable for everyone (we’ve seen this story before), upfront fees for loans backed by Fannie Mae and Freddie Mac will be adjusted based on the borrower’s credit score. Borrowers with high credit scores will pay more in fees, while those with lower credit scores will pay less. 

The Wall Street Journal cited data from Evercore ISI that shows borrowers with credit scores between 720-759 who make around 15-20% down payments will see loan-level pricing adjustment (LLPA) costs rise by .750%. Inversely, under the new adjustments, risky borrowers with a credit score below 639 and who put down only 5% of the value of their home will only have to pay 1.750%, compared with 3.750% under old rules. 

Backlash over LLPA changes prompted the FHFA to publish a statement last week, calling such concerns “a fundamental misunderstanding.” The Biden administration ensures the new changes are meant to help those with poor credit scores obtain homes amid the worst housing affordability in a generation. 

According to the FHFA, the new adjustments will redistribute funds to reduce the interest rate costs paid by risky borrowers. This sounds like socializing home buying to us. 

Even more alarming is data from the American Enterprise Institute found that default rates of Fannie/Freddie owner-occupied 30-year fixed-rate purchase loans acquired in 2006-2007 were between 39.3% and 56.2% for borrowers with credit scores between 620 and 639 and less than 4% down payments. Those with credit scores between 720 and 769 and 20% down payments had default rates between 4.2% and 8.8%. 

The Biden administration is subsidizing irresponsibility, rewarding failure, and discriminating against people with high credit scores.

Meanwhile, 27 states revolted against Biden’s mortgage redistribution rule to subsidize risky borrowers… 

BREAKING: 34 state financial officers from 27 states have signed-on to a letter to the Biden Administration demanding that they end their new mortgage equity program, which forces buyers with good credit to pay higher rates to subsidize loans for riskier borrowers. pic.twitter.com/P8RHbj0zzf

— Will Hild (@WillHild) May 1, 2023

Sen. Tim Scott (R-SC) blasted Biden. 

.@SenatorTimScott slams new federal mortgage rules punishing Americans with good credit scores and urges voters to ‘reverse the curse’ of the Biden administration.https://t.co/15mnVVO7F8 pic.twitter.com/8gXOuQANcq

— Fox News (@FoxNews) May 1, 2023

“Punishing responsibility—that’s the Biden way,” tweeted Sen. Tom Cotton (R-AR). 

Biden’s mortgage scheme will cost homeowners an extra ~$30k for having a high credit score.

Punishing responsibility—that’s the Biden way.

— Tom Cotton (@TomCottonAR) May 1, 2023

“While the changes may not be as bad as some headlines suggest, it still seems illogical to essentially penalize fiscally responsible borrowers in an effort to assist less qualified borrowers,” Federal Savings Bank loan officer Lewis Sogge told us. 

There’s no logic here, just progressive bureaucrats enacting policies that may ultimately lead to another future crisis. 

Authored by John Michael Greer via UnHerd.com, (emphasis ours)

The dollar is finally being dethroned…

Let’s start with the basics. Roughly 5% of the human race currently live in the United States of America. That very small fraction of humanity, until quite recently, enjoyed about a third of the world’s energy resources and manufactured products and about a quarter of its raw materials. This didn’t happen because nobody else wanted these things, or because the US manufactured and sold something so enticing that the rest of the world eagerly handed over its wealth in exchange. It happened because, as the dominant nation, the US imposed unbalanced patterns of exchange on the rest of the world, and these funnelled a disproportionate share of the planet’s wealth to itself.

There’s nothing new about this sort of arrangement. In its day, the British Empire controlled an even larger share of the planet’s wealth, and the Spanish Empire played a comparable role further back. Before then, there were other empires, though limits to transport technologies meant that their reach wasn’t as large. Nor, by the way, was any of this an invention of people with light-coloured skin. Mighty empires flourished in Asia and Africa when the peoples of Europe lived in thatched-roofed mud huts. Empires rise whenever a nation becomes powerful enough to dominate other nations and drain them of wealth. They’ve thrived as far back as records go and they’ll doubtless thrive for as long as human civilisations exist.

America’s empire came into being in the wake of the collapse of the British Empire, during the fratricidal European wars of the early 20th century. Throughout those bitter years, the role of global hegemon was up for grabs, and by 1930 or so it was pretty clear that Germany, the Soviet Union or the US would end up taking the prize. In the usual way, two contenders joined forces to squeeze out the third, and then the victors went at each other, carving out competing spheres of influence until one collapsed. When the Soviet Union imploded in 1991, the US emerged as the last empire standing.

Francis Fukuyama insisted in a 1989 essay that having won the top slot, the US was destined to stay there forever. He was, of course, wrong, but then he was a Hegelian and couldn’t help it. (If a follower of Hegel tells you the sky is blue, go look.) The ascendancy of one empire guarantees that other aspirants for the same status will begin sharpening their knives. They’ll get to use them, too, because empires invariably wreck themselves: over time, the economic and social consequences of empire destroy the conditions that make empire possible. That can happen quickly or slowly, depending on the mechanism that each empire uses to extract wealth from its subject nations.

The mechanism the US used for this latter purpose was ingenious but even more short-term than most. In simple terms, the US imposed a series of arrangements on most other nations that guaranteed the lion’s share of international trade would use US dollars as the medium of exchange, and saw to it that an ever-expanding share of world economic activity required international trade. (That’s what all that gabble about “globalisation” meant in practice.) This allowed the US government to manufacture dollars out of thin air by way of gargantuan budget deficits, so that US interests could use those dollars to buy up vast amounts of the world’s wealth. Since the excess dollars got scooped up by overseas central banks and business firms, which needed them for their own foreign trade, inflation stayed under control while the wealthy classes in the US profited mightily.

The problem with this scheme is the same difficulty faced by all Ponzi schemes, which is that, sooner or later, you run out of suckers to draw in. This happened not long after the turn of the millennium, and along with other factors — notably the peaking of global conventional petroleum production — it led to the financial crisis of 2008-2010. Since 2010 the US has been lurching from one crisis to another. This is not accidental. The wealth pump that kept the US at the top of the global pyramid has been sputtering as a growing number of nations have found ways to keep a larger share of their own wealth by expanding their domestic markets and raising the kind of trade barriers the US used before 1945 to build its own economy.

The one question left is how soon the pump will start to fail altogether.

When Russia launched its invasion of Ukraine in February 2022, the US and its allies responded not with military force but with punitive economic sanctions, which were expected to cripple the Russian economy and force Russia to its knees. Apparently, nobody in Washington considered the possibility that other nations with an interest in undercutting the US empire might have something to say about that. Of course, that’s what happened. China, which has the largest economy on Earth in purchasing-power terms, extended a middle finger in the direction of Washington and upped its imports of Russian oil, gas, grain and other products. So did India, currently the third-largest economy on Earth in the same terms; as did more than 100 other countries.

Then there’s Iran, which most Americans are impressively stupid about. Iran is the 17th largest nation in the world, more than twice the size of Texas and even more richly stocked with oil and natural gas. It’s also a booming industrial power. It has a thriving automobile industry, for example, and builds and launches its own orbital satellites. It’s been dealing with severe US sanctions since not long after the Shah fell in 1978, so it’s a safe bet that the Iranian government and industrial sector know every imaginable trick for getting around those sanctions.

Right after the start of the Ukraine war, Russia and Iran suddenly started inking trade deals to Iran’s great benefit. Clearly, one part of the quid pro quo was that the Iranians passed on their hard-earned knowledge about how to dodge sanctions to an attentive audience of Russian officials. With a little help from China, India and most of the rest of humanity, the total failure of the sanctions followed in short order. Today, the sanctions are hurting the US and Europe, not Russia, but the US leadership has wedged itself into a position from which it can’t back down. This may go a long way towards explaining why the Russian campaign in Ukraine has been so leisurely. The Russians have no reason to hurry. They know that time is not on the side of the US.

For many decades now, the threat of being cut out of international trade by US sanctions was the big stick Washington used to threaten unruly nations that weren’t small enough for a US invasion or fragile enough for a CIA-backed regime-change operation. Over the last year, that big stick turned out to be made of balsa wood and snapped off in Joe Biden’s hand. As a result, all over the world, nations that thought they had no choice but to use dollars in their foreign trade are switching over to their own currencies, or to the currencies of rising powers. The US dollar’s day as the global medium of exchange is thus ending.

It’s been interesting to watch economic pundits reacting to this. As you might expect, quite a few of them simply deny that it’s happening — after all, economic statistics from previous years don’t show it yet, Some others have pointed out that no other currency is ready to take on the dollar’s role; this is true, but irrelevant. When the British pound lost a similar role in the early years of the Great Depression, no other currency was ready to take on its role either. It wasn’t until 1970 or so that the US dollar finished settling into place as the currency of global trade. In the interval, international trade lurched along awkwardly using whatever currencies or commodity swaps the trading partners could settle on: that is to say, the same situation that’s taking shape around us in the free-for-all of global trade that will define the post-dollar era.

One of the interesting consequences of the shift now under way is a reversion to the mean of global wealth distribution. Until the era of European global empire, the economic heart of the world was in east and south Asia. India and China were the richest countries on the planet, and a glittering necklace of other wealthy states from Iran to Japan filled in the picture. To this day, most of the human population is found in the same part of the world. The great age of European conquest temporarily diverted much of that wealth to Europe, impoverishing Asia in the process. That condition began to break down with the collapse of European colonial empires in the decade following the Second World War, but some of the same arrangements were propped up by the US thereafter. Now those are coming apart, and Asia is rising. By next year, four of the five largest economies on the planet in terms of purchasing power parity will be Asian. The fifth is the US, and it may not be in that list for much longer.

In short, America is bankrupt. Our governments from the federal level down, our big corporations and a very large number of our well-off citizens have run up gargantuan debts, which can only be serviced given direct or indirect access to the flows of unearned wealth the US extracted from the rest of the planet. Those debts cannot be paid off, and many of them can’t even be serviced for much longer. The only options are defaulting on them or inflating them out of existence, and in either case, arrangements based on familiar levels of expenditure will no longer be possible. Since the arrangements in question include most of what counts as an ordinary lifestyle in today’s US, the impact of their dissolution will be severe.

In effect, the 5% of us in this country are going to have to go back to living the way we did before 1945. If we still had the factories, the trained workforce, the abundant natural resources and the thrifty habits we had back then, that would have been a wrenching transition but not a debacle. The difficulty, of course, is that we don’t have those things anymore. The factories were shut down in the offshoring craze of the Seventies and Eighties, when the imperial economy slammed into overdrive, and the trained workforce was handed over to malign neglect.

We’ve still got some of the natural resources, but nothing like what we once had. The thrifty habits? Those went whistling down the wind a long time ago. In the late stages of an empire, exploiting flows of unearned wealth from abroad is far more profitable than trying to produce wealth at home, and most people direct their efforts accordingly. That’s how you end up with the typical late-imperial economy, with a governing class that flaunts fantastic levels of paper wealth, a parasite class of hangers-on that thrive by catering to the very rich or staffing the baroque bureaucratic systems that permeate public and private life, and the vast majority of the population impoverished, sullen, and unwilling to lift a finger to save their soi-disant betters from the consequences of their own actions.

The good news is that there’s a solution to all this. The bad news is that it’s going to take a couple of decades of serious turmoil to get there. The solution is that the US economy will retool itself to produce earned wealth in the form of real goods and non-financial services. That’ll happen inevitably as the flows of unearned wealth falter, foreign goods become unaffordable to most Americans, and it becomes profitable to produce things here in the US again. The difficulty, of course, is that most of a century of economic and political choices meant to support our former imperial project are going to have to be undone.

The most obvious example? The metastatic bloat of government, corporate and non-profit managerial jobs in American life. That’s a sensible move in an age of empire, as it funnels money into the consumer economy, which provides what jobs exist for the impoverished classes. Public and private offices alike teem with legions of office workers whose labour contributes nothing to national prosperity but whose pay cheques prop up the consumer sector. That bubble is already losing air. It’s indicative that Elon Musk, after his takeover of Twitter, fired some 80% of that company’s staff; other huge internet combines are pruning their workforce in the same way, though not yet to the same degree.

The recent hullaballoo about artificial intelligence is helping to amplify the same trend. Behind the chatbots are programs called large language models (LLMs), which are very good at imitating the more predictable uses of human language. A very large number of office jobs these days spend most of their time producing texts that fall into that category: contracts, legal briefs, press releases, media stories and so on. Those jobs are going away. Computer coding is even more amenable to LLM production, so you can kiss a great many software jobs goodbye as well. Any other form of economic activity that involves assembling predictable sequences of symbols is facing the same crunch. A recent paper by Goldman Sachs estimates that something like 300 million jobs across the industrial world will be wholly or partly replaced by LLMs in the years immediately ahead.

Another technology with similar results is CGI image creation. Levi’s announced not long ago that all its future catalogues and advertising will use CGI images instead of highly-paid models and photographers. Expect the same thing to spread generally. Oh, and Hollywood’s next. We’re not too far from the point at which a program can harvest all the footage of Marilyn Monroe from her films, and use that to generate new Marilyn Monroe movies for a tiny fraction of what it costs to hire living actors, camera crews and the rest. The result will be a drastic decrease in high-paying jobs across a broad swathe of the economy.

The outcome of all this? Well, one lot of pundits will insist at the top of their lungs that nothing will change in any way that matters, and another lot will start shrieking that the apocalypse is upon us.

Those are the only two options our collective imagination can process these days. Of course, neither of those things will actually happen.

What will happen instead is that the middle and upper-middle classes in the US, and in many other countries, will face the same kind of slow demolition that swept over the working classes of those same countries in the late 20th century. Layoffs, corporate bankruptcies, declining salaries and benefits, and the latest high-tech version of NO HELP WANTED signs will follow one another at irregular intervals. All the businesses that make money catering to these same classes will lose their incomes as well, a piece at a time. Communities will hollow out the way the factory towns of America’s Rust Belt and the English Midlands did half a century ago, but this time it will be the turn of upscale suburbs and fashionable urban neighbourhoods to collapse as the income streams that supported them disappear.

This is not going to be a fast process. The US dollar is losing its place as the universal medium of foreign trade, but it will still be used by some countries for years to come. The unravelling of the arrangements that direct unearned wealth to the US will go a little faster, but that will still take time. The collapse of the cubicle class and the gutting of the suburbs will unfold over decades. That’s the way changes of this kind play out.

As for what people can do in response this late in the game, I refer to a post I made on The Archdruid Report in 2012 titled “Collapse Now and Avoid the Rush”. In that post I pointed out that the unravelling of the American economy, and the broader project of industrial civilisation, was picking up speed around us, and those who wanted to get ready for it needed to start preparing soon by cutting their expenses, getting out of debt, and picking up the skills needed to produce goods and services for people rather than the corporate machine. I’m glad to say that some people did these things, but a great many others rolled their eyes, or made earnest resolutions to do something as soon as things were more convenient, which they never were.

Over the years that followed I repeated that warning and then moved on to other themes, since there really wasn’t much point to harping on about the approaching mess when the time to act had slipped away. Those who made preparations in time will weather the approaching mess as well as anyone can. Those who didn’t? The rush is here. I’m sorry to say that whatever you try, it’s likely that there’ll be plenty of other frantic people trying to do the same thing. You might still get lucky, but it’s going to be a hard row to hoe.

Mind you, I expect some people to take a different tack. In the months before a prediction of mine comes true, I reliably field a flurry of comments insisting that I’m too rigid and dogmatic in my views about the future, that I need to be more open-minded about alternative possibilities, that wonderful futures are still in reach, and so on. I got that in 2008 just before the real estate bubble started to go bust, as I’d predicted, and I also got it in 2010 just before the price of oil peaked and started to slide, as I’d also predicted, taking the peak oil movement with it. I’ve started to field the same sort of criticism once again.

We are dancing on the brink of a long slippery slope into an unwelcome new reality. I’d encourage readers in America and its close allies to brace themselves for a couple of decades of wrenching economic, social, and political turmoil. Those elsewhere will have an easier time of it, but it’s still going to be a wild ride before the rubble stops bouncing, and new social, economic, and political arrangements get patched together out of the wreckage.

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One month ago, to much dismay and widespread denial, Goldman predicted that AI could lead to some 300 million layoffs among highly paid, non-menial workers in the US and Europe. As Goldman chief economist Jan Hatzius put it, “using data on occupational tasks in both the US and Europe, we find that roughly two-thirds of current jobs are exposed to some degree of AI automation, and that generative AI could substitute up to one-fourth of current work. Extrapolating our estimates globally suggests that generative AI could expose the equivalent of 300 million full-time jobs to automation” as up to “two thirds of occupations could be partially automated by AI.”

Yet while Goldman’s forecast was met with a emotions ranging from incredulity to outright mockery, it may not have been too far off the mark.

Consider that just last week, Dropbox said it would lay off 16% of the company, some 500 employees as the company sought to build out its AI division.  In a memo to employees, Dropbox CEO Drew Houston said that “in an ideal world, we’d simply shift people from one team to another. And we’ve done that wherever possible. However, our next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development. We’ve been bringing in great talent in these areas over the last couple years and we’ll need even more.”

The changes we’re announcing today, while painful, are necessary for our future,” Houston notes. “I’m determined to ensure that Dropbox is at the forefront of the AI era, just as we were at the forefront of the shift to mobile and the cloud. We’ll need all hands on deck as machine intelligence gives us the tools to reimagine our existing businesses and invent new ones.”

But while Dropbox’s layoffs were lateral, and meant to open up space for more AI linked hires, in the case of IBM, it is AI itself that is making workers redundant.

As Bloomberg reports, IBM CEO Arvind Krishna said the company expects to pause hiring for roles it thinks could be replaced with artificial intelligence in the coming years. As a result, hiring in back-office functions — such as human resources — will be suspended or slowed, Krishna said in an interview. These non-customer-facing roles amount to roughly 26,000 workers, Krishna said. “I could easily see 30% of that getting replaced by AI and automation over a five-year period.” That would mean roughly 7,800 jobs lost.

Part of any reduction would include not replacing roles vacated by attrition, an IBM spokesperson said.

Krishna’s plan marks one of the largest workforce strategies announced in response to the rapidly advancing technology; it certainly won’t be the last as virtually all companies follow in IBM’s footsteps and layoffs tens if not hundreds of millions of workers in the coming years.

Mundane tasks such as providing employment verification letters or moving employees between departments will likely be fully automated, Krishna said. And while some HR functions, such as evaluating workforce composition and productivity, probably won’t be replaced over the next decade, it is only a matter of time before these roles are also replaced by AI.

IBM currently employs about 260,000 workers and continues to hire for software development and customer-facing roles. Finding talent is easier today than a year ago, Krishna said. The company announced job cuts earlier this year, which may amount to about 5,000 workers once completed. Still, Krishna said IBM has added to its workforce overall, bringing on about 7,000 people in the first quarter.

The Armonk, New York-based IBM beat profit estimates in its most recent quarter due to expense management, including the earlier-announced job cuts. In the past IBM had managed to manipulate its stock higher thanks to billions in stock buybacks (at much higher prices). But once its debt load grew too big, the buyback game ended, Warren Buffett sold his shares, and the stock price has languished for over half a decade. And since the company’s revenue is stagnant at best, its only hope is to drastically cut overhead.

Enter AI: new “productivity and efficiency” steps – read replacing workers with algos – are expected to drive $2 billion a year in savings by the end of 2024, Chief Financial Officer James Kavanaugh said on the day of earnings.

Helping the company’s imminent transition to an AI-staffed corporation will be the coming recession. Until late 2022, Krishna said he believed the US could avoid a recession. Now, he sees the potential for a “shallow and short” recession toward the end of this year, although it remains unclear just how once can determine that a recession will be “shallow and short”.

Authored by Steve Watson via Summit News,

More than two dozen Democrats in the state of Colorado have voted against legislation that would make it a felony for anyone to indecently expose themselves to children, reasoning that it could lead to the banning of drag shows.

Currently, in Colorado it is only considered a class 1 misdemeanor if a person indecently exposes themselves in the view of a child, if it is the first offence.

Speaking about the legislation to make it a class 6 felony, one of the Democratic Representatives, Leslie Herod said, “These types of laws have been used to ban drag shows, to target individuals who use the restroom of the sex that they identify with—a public restroom—to charge them with felony charges.”

“I am very concerned about the attacks against the transgender community that are happening across the country,” she added.

🚨🚨 27 DEMOCRATS VOTE AGAINST MAKING INDECENT EXPOSURE TO MINORS A CLASS 6 FELONY!

A Democrat attacked the bill for “targeting” the transgender community in her dissent. #copolitics #coleg

📜BILL: https://t.co/Lgle6vX25U

🎧Listen for yourself: pic.twitter.com/Tq9wiryLMu

— Colorado House Republicans (@COHouseGOP) April 29, 2023

HAPPENING TODAY‼️

HOUSE DEMOCRATS filibustered for nearly three hours today AGAINST felonizing #IndecentExposure to minors.

Rep. Mary Young (D) argued AGAINST jailing perpetrators — incase they might be mentally impaired. HB23-1135 #CoPolitics pic.twitter.com/Uki3xQhlq9

— Roger D. Hudson (@RogerHudsonCO) April 28, 2023

pic.twitter.com/03AditcSyL

— Colorado House Republicans (@COHouseGOP) April 29, 2023

First of all, what attacks?

Secondly, this has nothing to do with transgenders, it’s a bill to make flashing at kids a felony.

Despite the Democratic opposition, the bill reportedly did pass on Saturday, but with amendments to not apply the law if the exposure is in a public place with other adults present.

It’s still ok for drag queens to get their junk out in front of kids then.

Drag Queen Flashes Children During Story Hour

So this is an admission that drag shows may involve indecent exposure to minors. How else could it be seen as targeting them?

— Jolene Campbell (@JoleneCampbel65) April 29, 2023

If a man flashes my daughter while she’s walking home from school, it should not be a felony because we need to protect trans people?

Once again, trans ideology trumps girls’ safety.

— Eyes Wide (@ShannaDarkness) April 29, 2023

So it’s ok to show your junk to a minor? Sick democrats, nothing justifies this, nothing.

— Pmtrader (@Pmmoontrader) April 29, 2023

GROOMERS!

— Nat Nat (@media20148) April 30, 2023

*  *  *

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Bad loans, worse banks, but “it’s not nearly as bad as it was in 2008” if you believe Charlie Munger.

Having admitted over the weekend in an interview with The FT that American banks are “full of” what he said were “bad loans”, thanks to the plunge in commercial property prices, the 99-year-old warned ominously that “trouble happens to banking just like trouble happens everywhere else. In the good times you get into bad habits… When bad times come they lose too much.”

Quite notably, while the Biden administration is deftly attempting to paint SVB, SI, and now FRC as “outliers” and “unique”, the latter is far from ‘unique’ and that is a problem as Munger later noted that “it’s not that damned easy to run a bank intelligently, there are a lot of temptations to do the wrong thing.”

Karine Jean-Pierre says they are “very confident” no more banks will fail — despite the second-, third-, and fourth-largest bank failures in history happening during the Biden presidency. pic.twitter.com/KnAXVuMaOK

— RNC Research (@RNCResearch) May 1, 2023

More specifically, their loan books are now plagued with CRE loans (a topic we warned about extensively – before the mainstream media picked up the torch).

“A lot of real estate isn’t so good any more,” Munger said.

“We have a lot of troubled office buildings, a lot of troubled shopping centres, a lot of troubled other properties. There’s a lot of agony out there.”

And while the grumpy old man has slammed bitcoin (we don’t blame him for not understanding that), he is certainly far more versed in the details of commercial property loans and banking, which is why we take him seriously and at today’s Milken Conference, Munger’s message was echoed loud and clear by investment leaders from Apollo’s Marc Rowan to Cain’s Jonathan Goldstein and Citi CEO Jane Fraser.

“It’s a bad day to be an office owner in San Francisco and Chicago,” Marc Rowan, co-founder and chief executive officer of Apollo, said Monday.

“We are going to see losses,” he said, adding that the stresses will be concentrated and not systemic.

“Every piece of real estate, everywhere in the world, that was purchased pre-the run up in interest rates, as a result of the change in interest rates, is now worth less,” Rowan continued.

“It does not mean it won’t come back. It does not mean it won’t ultimately be a good investment, but in the short term, we have significant dislocation.”

David Steinbach, global chief investment officer at real estate investment firm Hines, said Monday during one panel that commodity office buildings – older office buildings that lack amenities – would face particular pain, with Amherst CEO Sean Dobson pointing to office towers in central business districts as a particular rough spot for the industry.

“I do think we’ve got a period of pain and I don’t think we’ve yet reached the bottom of that,” Cain’s Goldstein said.

“But there will be opportunity that comes out when people do begin to sense that the bottom’s been reached.”

As Bloomberg reports, Fraser said she’s most worried about real estate with debt that’s been packaged into lower-rated commercial mortgage-backed securities.

“It’s the return-to-office phenomenon that’s driving it,” Fraser said Monday during a panel discussion at the Milken Institute Global Conference in Beverly Hills, California.

“We’re not talking about the local doctors’ office, we’re not talking about all of the office space either.”

Finally, TCW Group President and CEO Katie Koch warned that cracks are starting to show in the private credit market and that investors should prepare for “major accidents” in the red-hot sector over the next 12 to 18 months. 

“We have had five years where ‘diligent light’ became a term,” Koch said.

“That is not going to be fun over the next five years if you arrived at it from that perspective.”

Koch said investors should be “very underweight” regional banks.

“The globally systemically important banks are a good place to be invested,” Koch said.

“Regional banks is an area we are concerned about because of deposit flight, and also they have the highest exposure to commercial real estate, which is an area we are concerned about.”

Marc Cowan had perhaps the most important comment though for ‘average joe’ and his 401(k), warning that “equity has adjusted somewhat, but not nearly as much as credit.”

Authored by Rick Whitbeck via RealClear Wire,

Now that President Biden has made his 2024 run official, he has plenty of work to do if he hopes to shore up his lagging support among key constituencies. According to a recent NBC News survey, a full 70 percent of Americans do not want the President to run again. One demographic to watch is younger voters, who backed Biden by a wide 61-36 margin in 2020. 

Younger Americans are exceptionally aggressive and vocal on climate policies. Nearly two-thirds (62%), support phasing out fossil fuels entirely, said Alec Tyson, an associate director of research at Pew Research Center.  According to a recent Harvard Kennedy School Institute of Politics poll, an amazing half of those polled prefer the government do more to curb climate change, even if U.S. economic growth is damaged in the process.

As friendly as Biden has been to the eco-left, and outright hostile to our domestic, traditional energy industries, he is still facing backlash from these eco-centric voters over three recent decisions dealing with energy development. As always, my state of Alaska is at the epicenter. 

First, the President – through the Department of Interior – approved Alaska’s Willow oil and gas development project last month. His decision elicited a collective groan of disgust and disapproval from the environmental movement.  They’d dedicated years opposing the project, and spent the weeks ahead of the final decision bombarding social media, protesting outside of the White House and using their extensive, inside access to stop Willow from progressing.  

Afterward, they vented.

“Biden approved [Willow] knowing full well that it’ll cause massive and irreversible destruction, which is just appalling, particularly coming from an administration who has pledged to address the climate crisis, has pledged to address environmental injustice, has pledged to address the extinction crisis,” said Kristen Monsell, a senior attorney at the Center for Biological Diversity, who, along with other activist organizations, promptly took legal action to oppose the decision.

Next, Biden greenlit the export plan for Alaska Gasline Development Corp’s goal to build an 800-mile pipeline to bring trillions of cubic feet of gas from the North Slope to homes, businesses and eventually a tidewater port for export to Asia and other Pacific Rim countries.  Having previously been held up under the guise of environmental and Indigenous justice reviews, the approval on April 14 gave a significant boost to the $43 billion project.  

Environmentalists went apoplectic. “Joe Biden’s climate presidency is flying off the rails,” said Lukas Ross of Friends of the Earth. Ross pointed out this was the second U.S. approval of a “fossil-fuel mega-project” in as many months.  

Finally, the tipping point for climate activists may have come on April 21, when Energy Secretary Jennifer Granholm penned a letter to the Federal Energy Regulatory Commission (FERC), asking to “expeditiously” approve regulatory authorizations for the Mountain Valley Pipeline in West Virginia. Granholm noted the gas pipeline can “play an important role as part of the clean energy transition”.

Once again, green activists hit the roof, including former National Resources Defense Council (NRDC) attorney and current Congressman Jared Huffman (D-CA), who stated bluntly, “She (Granholm) sounds like a cheerleader for the fossil fuel industry; it’s really quite pathetic.”

The same groups who previously cheered when the Green New Deal was introduced, celebrated when the Keystone Pipeline was shuttered and nearly danced in the streets when copper mines in Alaska and Minnesota were ruled off-limits to development are now blasting Biden for losing his way on what they see as an ‘existential threat’ to their survival, and turning his back on mankind.

The group Gen-Z for Change recently put out a statement that clearly spells out the position of many young voters. “There is no deeper form of betrayal than watching a president who has claimed to value the voices of youth…blatantly disregard one of our generations’ largest and clearest movements.”  Congressman Jamaal Bowman (D-NY) was even more blunt: ”Young people are plugged in and more informed than they have ever been about climate change,” he said. ”Now they’re feeling stabbed in the back.” If Mr. Biden doesn’t reverse course, ”young people stay home in 2024, that’s the consequences.” 

Make no mistake: Biden is a dedicated disciple to the green cult. If given another four years, he will take steps toward fulfilling his promise to “end fossil fuel.” The next 17 months will determine whether Joe Biden will turn 86 in 2028 as a two-term President or defeated, one-term leader.  Ironically, voters much younger will make or break his fate, and they see the world through a very green lens. Right now, they’re seeing red, and that spells trouble for Team Biden.

Rick Whitbeck is the Alaska State Director for Power The Future, a national nonprofit organization that advocates for American energy jobs and opportunities. Contact him at Rick@PowerTheFuture.com and follow him on Twitter @PTFAlaska.