In today’s financial system, what many people take for granted as foundational truths are actually deeply flawed assumptions or outright deceptions.
Below is a breakdown of commonly misunderstood financial concepts—reframed to reflect a more accurate interpretation of how the system really works.
Myth #1: “Risk-Free” Returns
For decades, US government bonds were treated as the ultimate safe haven—where investors could stash cash with the promise of stability and zero risk.
That all changed in 2022, in 2022, the worst year for Treasuries in American history. The benchmark 10-year Treasury dropped nearly 18%, while the 30-year collapsed over 39%. Many bonds fared even worse.
Even stretching back 250 years, you won’t find a more devastating year for the so-called “risk-free asset” that underpins the global bond market.
That should have permanently buried the myth that Treasuries are risk-free. Yet many individuals—and nearly every major financial institution—still thoughtlessly cling to this belief.
Moreover, with the real rate of currency debasement far outpacing nominal interest rates, Treasuries have become a losing proposition. They no longer offer a “risk-free return.” What they deliver instead is “return-free risk.”
Myth #2: The Lender of Last Resort and Fictional Reserve Banking
The idea that central banks act as a backstop during crises—a “lender of last resort”—sounds noble.
In times of financial turmoil, they step in to inject liquidity and restore order. The narrative is that central banks prevent economic collapse by offering emergency funding when private lenders won’t. It’s a safety net, a stabilizer, a guardian of last resort.
However, when central banks create money out of thin air to rescue failing institutions, it’s really just legalized counterfeiting.
And let’s be clear: the money you think you have in the bank? It’s not actually there.
Most banks would collapse if even a tiny portion of depositors tried to withdraw their funds. That’s because of fractional reserve banking—a practice that would be considered outright fraud in any other industry.
Imagine a car dealership or jewelry store running on a fractional reserve model—creating more claims for cars or gold necklaces than they physically have. It’d be laughed off as a Ponzi Scheme. Yet, it’s not only legal in banking—it’s the standard.
The only reason it seems to work is because banks have the Federal Reserve as a backstop, the “lender of last resort.” When trouble hits, the Fed steps in to bail them out by creating more currency units out of thin air.
No such lifeline exists for car dealers or jewelers—because no one can create new cars or necklaces out of thin air to make things whole.
That’s why fractional reserve banking is really fictional reserve banking. The reserves don’t exist in any meaningful way—the system runs on smoke, mirrors, and a lot of blind trust. The illusion only holds because central banks stand ready with the money printer to bail it out when cracks appear.
So here’s the plain-English translation: “Lender of last resort” means legalized counterfeiting to backstop a legalized Ponzi Scheme.
Myth #3: Policymakers Are Just Central Planners in Disguise
We often hear about “policymakers” adjusting economic levers to keep things stable. But this is really central planning by another name—more in line with top-down command economies than the free markets we’re told we live in.
Myth #4: Many Elites Don’t Create Wealth
In many cases, those referred to as “elites” are not wealth creators but wealth extractors—parasites living off the productivity of others through favorable regulations, insider deals, seigniorage, cronyism, and bailouts. They are more accurately called parasites.
Myth #5: The Federal Reserve is a Free Market Institution
In The Communist Manifesto, Marx’s fifth plank calls for the “centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.” That’s a spot-on description of the Federal Reserve and other central banks.
In reality, the Fed is nothing more than a politburo of bureaucrats attempting to centrally plan the economy by tinkering with the money and interest rates—the most important prices in all of capitalism.
Even if we presume the Fed has benign intentions—which it doesn’t—central planning is an impossible task, and failure is inevitable.
That’s why the Fed is in a mission-impossible situation—much like it was an impossible task for the Soviets to centrally plan their economy.
The best thing you can do is recognize that the Fed can’t save the day any more than the State Planning Committee of the USSR could—and get positioned accordingly.
Conclusion
Many of the foundational beliefs propping up the modern financial system are riddled with contradictions, euphemisms, and carefully crafted illusions.
Scratch just beneath the surface, and it becomes clear: this isn’t a system rooted in free markets—it’s one driven by deception, control, and theft.
Seeing through the lies is no longer optional—it’s essential.
Because the conditions are in place for a major monetary reset… and soon. If history is any guide, a significant devaluation of the US dollar isn’t just possible—it’s all but guaranteed.
The first time the AI sector was rocked over fears of low/zero ROI, and gargantuan cash burn with nothing to show for it, was June 2024, when Goldman asked point blank if Gen AI was nothing more than “too much spend, too little benefit.” i.e., a giant capital drain that will never lead to positive long-term returns for investors.
As Goldman’s concern gained prominence, the tech/AI/ hyperscaler, etc sector saw its first major selloff in years, but since the market was already so flooded with liquidity, dip buyers quickly emerged and the brief tremor was quickly forgotten even as Goldman’s question was never answered; instead it was assumed that sophisticated, super smart corporate CFOs could not possibly be so dumb as to allocate trillions in capex for what is ultimately a $20/month chatbot used primarily by college-age kids to cheat on their essay writing skills. Fear not, they said, a huge and much more expensive use case will eventually emerge, they said.
Unfortunately, 6 months later – when another $100 billion in capex had already been burned “perfecting” the world’s most expensive chatbots/essay cheating platforms, no such use case had emerged. What did emerge however, was a major scare out of China which developed its notorious DeepSeek LLM, which was not only opensourced and massively cheaper than similar US offerings, but required far cheaper equipment than the latest NVDA superdupercard to run efficiently. Around this time we also got a handful of reports that companies like MSFT, GOOGL and META were quietly pulling back on their Capex spending (they were), and it all combined to result in the next big AI selloff, one which started in late January and continued until April, when everything collapse on Trump’s Liberation Day meltdown… and which also promptly sparked the biggest rally in stock market history after Trump realized he likes his stocks higher than his tariff revenues. Nonetheless, it was the first time we reminded readers that what is happening in the sector AI is not that different at all from what we saw during the build out phase of the first dot com bubble, when companies like Global Crossing were all the rage for 15 minutes… and then they went bankrupt.
You mean Global Crossing isn’t a trillion dollar company? (Bonus points if you know who that is without googling) https://t.co/d7d4uVl8l6
Which brought us to September when, with the AI bubble was now fully raging and singlehandedly pushing stocks to their highest valuation since the dot com bubble…
… Oracle crashed the AI bubble party on Sept 10 with all the grace of a bull in a China shop, when it unveiled one of the biggest circle jerk vendor financing deals of all time (more below), announcing a massive $300 billion, five-year cloud computing deal with OpenAI.
In retrospect, Oracle – which has since erased all of its gains from its deal announcement and almost all gains from its “batshit insane” hockeystick revenue projections which revealed the company added a mindblowing $317 billion in future contract revenue with just three different customers…
… could have been less painful had Oracle also not reminded everyone that it, drumroll, doesn’t actually have the money to pay for this spending orgy which is now projected to last well into the 2030s (without any recession on the horizon, of course, because nobody ever forecasts a recession).
Ah yes: vendor financing with cash from operations is one thing. Vendor financing with cash from debt is something totally different, and as luck would have it, one of the most erudite voices on Wall Street, JPMorgan’s Michael Cembalest did a very fine job of describing in simple terms what many of his peers have come to call the infinite money glitch “circular economy” of AI, and which looks something like this.
This is what Cembalest said in his latest Eye on the Market note (available here):
The Blob: the AI and data center takeover
I think this is well understood, but just to reinforce the point: AI related stocks (1) have accounted for 75% of S&P 500 returns, 80% of earnings growth and 90% of capital spending growth since ChatGPT launched in November 2022. AI is showing up other places as well. Data centers are eclipsing office construction spending and are coming under increased scrutiny for their impact on power grids and rising electricity prices.
Specialized power rates for most data centers aren’t enough to cover costs of a new natural gas plant (leaving other customers to foot part of the bill), and in the PJM region, 70% of last year’s increased electricity cost was the result of data center demand. The biggest medium-term risk I can think of for top-heavy US equity markets: China’s Huawei and SMIC pierce the $6.3 trillion NVIDIA-TSMC-ASML moat by creating their own supernode computing clusters and deep-ultraviolet lithography machines of comparable quality.
Which brings us to the stunning punchline:
Other recent AI news: Oracle’s stock jumped by 25% after being promised $60 billion a year from OpenAI, an amount of money OpenAI doesn’t earn yet, to provide cloud computing facilities that Oracle hasn’t built yet, and which will require 4.5 GW of power (the equivalent of 2.25 Hoover Dams or four nuclear plants), as well as increased borrowing by Oracle whose debt to equity ratio is already 500% compared to 50% for Amazon, 30% for Microsoft and even less at Meta and Google.
In other words, the tech capital cycle may be about to change.
Capital Cycles and Debt: There is no way for Oracle to pay for this with cash flow. They must raise equity or debt to fund their ambitions. Until now, the AI infrastructure boom has been almost entirely self-funded by the cash flows of a select few hyperscalers. Oracle has broken the pattern. It is willing to leverage up to hundreds of billions to seize a share. The stable oligopoly is cracking…The implications are profound. Amazon, Microsoft and Google can no longer treat AI infrastructure as a discretionary investment. They must defend their turf. What had been a disciplined, cash-flow-funded race may now turn into a debt-fueled arms race.
Others, such as Goldman’s head of Delta One trading Rich Privorotsky, have been less polite when he describing what is essentially the same circular scheme:
Goldman’s head of Delta One slams Nvidia’s increasingly grotesque vendor financing circle jerk
“… definitely not old enough to have been around trading during the tech bubble and let’s level set, multiples are now where near that point in time. That said, vendor financing was… https://t.co/Dt6th2Eobt
As to the question where the funding for this AI revenue circle jerk will come from, regular ZH readers are aware that there is no such thing as a free lunch, and certainly no free data center. To be sure, there was a time when the growth in CapEx could be funded from Free Cash Flow, but now that CapEx has to grow at an ever exponential-er pace just to impress markets, the wheels are starting to fall off the bus.
We forecast roughly $2.9 trillion of global data center spend through 2028, comprising $1.6 trillion on hardware (chips/servers) and $1.3 trillion on building data center infrastructure, including real estate, build costs, and maintenance.
This translates into investment needs of over $900 billion in 2028. For context, the total capex spending by all companies in the S&P 500 index combined was about $950 billion in 2024.
Such large potential spending has significant macro consequences as well. Our economists expect that investment spending related to data center construction and power generation will add up to 40bp to US real GDP growth between 2025-26.
That’s the good news… which many will say is already largely priced in. The bad news, again, is who pays for all of this. And Morgan Stanley admitted as much:
By any measure, the capital requirements to support this level of investment are staggering, and mobilizing efficient and scalable capital becomes increasingly critical. We did a deep dive into this topic, exploring alternative avenues of capital to finance this expenditure, in a collaborative report published a few days ago. The key takeaway from the report is that credit markets – secured, unsecured, and securitized in both public and private markets – will play a growing role in financing data centers.
To be clear, capex related to AI and data centers has been in motion for the last few years. Spending from the hyperscalers alone has gone from ~$125 billion two years ago to ~$200 billion in 2024 and the consensus expectation is that it exceeds $300 billion in 2025.
Internal operating cash flows from the hyperscalers have been the source of this spending. However, our equity analysts expect the investment needs for data centers to rise sharply over the next few years. While cash flows from hyperscalers will remain a key source of capital to finance data center-related spending, these alone will no longer be adequate, after accounting for cash build and shareholder capital returns. Leveraging our equity analysts’ projections, we estimate that $1.4 trillion of hyperscaler capex may be self-funded with cash flows, leaving a sizable $1.5 trillion financing gap.
We think that credit markets, broadly defined to encompass both public and private markets of different flavors, will gain traction as more efficient providers of capital to bridge this gap. There is a favorable alignment of significant and growing dry powder across credit markets with attractive real yields on offer with appeal to a sticky end-investor base (e.g., insurance, sovereign wealth funds, pension funds, endowments and high net worth retail) looking for scalable, high-quality asset exposures that can provide diversification benefits. We think that this alignment of needs of capital and investment will pave the way for bridging the $1.5 trillion financing gap.
We size the different financing channels as follows: unsecured corporate debt issuance from issuers in the technology sector (~$200 billion); securitized markets in the form of data center ABS and CMBS (~$150 billion), private credit markets in the form of asset-based financing (~$800 billion), and other capital sources across sovereign, private equity, venture capital, and bank lending (~$350 billion). Of these, we think that private capital – in particular credit – will play a key role in meeting a majority of the remaining financing gap as it sits optimally at the intersection of significant expansion in AUM in a higher rate environment and the complex, global, and customized financing needs that are associated with AI build-out.
As MS concludes, “the point we want to drive home is that credit markets will play a major role in enabling AI-driven technology diffusion” and of all the available sources of credit, the chart below shows just how big the debt hole is that private credit will have to plug.
Incidentally it was about two months after we first highlighted the staggering $800 billion funding gap (which private credit will need to fill) when consulting giant Bain reached the same conclusion.
It is here that we encounter the first not so small problem: while one can pretend that equity growth is infinite, at least for the AI equity universe which as Cembalest above noted has contributed 75% of all S&P500 market cap gains since Nov 2022, when it comes to the fundamental analysis that at least some have done on the private credit backing these castles in the sky, things are turning very, very ugly: presenting exhibit A: the stock price of Blackstone’s Private Credit BDC, i.e. the Blackstone Secured Lending Fund: today, BXSL just hit a 2025 low taking out the April Liberation Day bottom and is at the lowest level in over two years, having massively diverged with the S&P.
It’s not just Blackstone: the big kahoona of private credit, Blue Owl, looks like it is about to fall off a cliff, having just traded at 2025 lows as well!
The problem for Blue Owl, Blackstone and all the other key players that will soon be expected to provide no less than $800 billion to keep the AI circle jerk alive, is that – as their stock prices makes clear – they have much bigger problems than just funding some data centers. Perhaps the biggest problem, as we noted last week, is that these private credit giants are already massively exposed to the weakest link in the US economy, the US consumer, and especially the low-income US consumer, that BNPL expert whose NPLs (ironic that you can’t spell BNPL without NPL) are about to skyrocket (especially now that student loans have to be repaid). No wonder why the Financial Review recently wrote that “Private equity is sitting on $5 trillion of existential dread” adding that “a staggering 18,000 private capital funds are trying to raise trillions of dollars. Something’s got to give, according to the industry’s biggest players.“
Judging by the accelerating plunge in the stock prices across private credit lenders, we won’t have long to wait. However, it begs the question: what happens to all the massive projected debt that private credit is supposed to provide if and when the entire industry is forced to shut down.
Keep in mind nowhere in the above analysis did we touch on the absolutely staggering funding needs to reboot America’s ancient power grid which is woefully insufficient and inadequate to fire up the dozens of data centers which will be needed across the country in as little as 3-4 years if any of the stratospheric AI revenue projections are to come true…
… and if the rest of the US has any hope of catching up to the state better known as “data center alley.”
But don’t worry, we will cover all of this in a subsequent post and make it clear how absent trillions in government spending starting yesterday, there is zero chance of any of these pie in the sky forecasts ever coming true.
One thing we did want to cover in this post before we go, is whether we are living in a bubble (arguably the biggest bubble in history) and whether the AI bubble will burst any time soon. The honest answer: we don’t know – with Nvidia stock just hitting a new record high, and its market cap rising to a staggering $4.5 trillion, clearly the AI thesis is still being bought.
Yet one bubble that has certainly burst is the the bubble in saying there’s a bubble.
As DB’s Adrian Cox writes today, the number of web searches for “AI bubble” has plummeted in the past month according to Google Trends.
Peak “AI bubble” was on Aug 21, shortly after a little-understood report from MIT appeared to suggest that hardly any organizations were getting a return from their investment in AI, and OpenAI CEO Sam Altman said investors might be getting “over excited”, prompting a 3.8% pullback in the Magnificent Seven tech stocks over five days (of course, that pullback is now long forgotten).
Since then, the number of web searches worldwide for “AI bubble” has fallen to 15% of that level. “AI boom” reached its own high a week earlier, at 40% of the “AI bubble” peak. Meanwhile, the bubble in “crypto bubble” references topped out in late January at a mere quarter of the AI version.
For some perspective, DB examined how the bursting of the “AI bubble” bubble reflects the pattern of past bubbles, why it might be happening now, how hard it is to time the market, what might be a better alternative, and how long this bubble may last unless, of course, “this time it’s different”.
The AI boom will stop but it may not pop. And while there may be a bubble, the moment everyone spots it may be the moment it is least likely to burst.
The internet is awash with reports and articles from experts, media organizations and – even – sell-side research houses offering variations on the theme “Is AI a bubble?”. For a sharp analysis, take a look at DB’s interview with leading AI expert Azeem Azhar at our recent technology conference – AI is not a bubble (yet) amid surging demand – and his original report here. The bank also wrote recently in “The Summer AI Turned Ugly: Part 2” about whether valuations were excessive by various metrics.
However, web search data seems to indicate that the broader public has already moved on.
DB confirmed this with an AI-assisted natural language analysis of English language publications since the start of the year. AI-related investment concerns in technology articles reached a high point of 7.3 on a 10-point scale in the last week of August and have since subsided to 5.1. (The previous high of 6.4 was around the US Liberation Day tariffs in March.) DB’s analysis of technology and finance Reddit posts mentioning an “AI bubble” showed the same trend.
Here, an old cliche: “identifying a bubble is almost impossible”, not least because no one agrees exactly what it is – typically it’s something like “when asset prices rise significantly above intrinsic values” – nor what the correct intrinsic values are, even after it bursts. Concern may act as a pressure valve, lowering valuations and encouraging a whole new round of bargain hunting.
It’s a twist on the Hawthorne effect, where workers in an Illinois factory almost exactly 100 years ago appeared to be more productive under different lighting but turned out to be instead picking up the pace when they were aware they were being observed.
“This is a serious bubble. It makes biotech in 1991 look like a picnic”: Michael Murphy, Murphy Investment Management, Nov 19, 1998
Bubbles are not neat linear processes. They typically inflate in several waves interspersed by dramatic falls. Looking at the dot-com bubble, the Nasdaq technology index surged and fell back by 10% or more seven times in the five years before it peaked on March 10, 2000. It also carried on shooting into the stratosphere well after talk of a bubble became
commonplace, doubling in the year to October 1999, then almost doubling again over the following five months until it turned.
Indeed, Bloomberg published a story on Amazon and Yahoo’s holiday earnings on Nov 19, 1998, quoting Michael Murphy, chief investment officer at Murphy Investment Management: “This is a serious bubble. It makes biotech in 1991 look like a picnic.”
That was when the Nasdaq was at less than 2,000, sixteen months before the bubble finally popped at over 5,000.
The decline of the Nasdaq from its peak was also far from linear or immediate. The index fell by more than a third in 10 weeks, then recovered two thirds of its losses before finally declining in a saw-tooth pattern to a 78 percent peak-to- trough loss in October 2002.
“The only thing we have to fear is fear itself”:Franklin D. Roosevelt, US President, 1933
There are four forces in the recent bursting of the “AI bubble” bubble:
1. New realism about what AI can and can’t do
OpenAI’s much-anticipated launch of GPT-5 in August turned out to be a dud, giving a slightly better user experience rather than the glimpse of artificial general intelligence that had been implied. Expectations got ahead of reality and the goalposts shifted. Capabilities that would have been greeted with astonishment 18 months ago were greeted with a shrug.
2. Infrastructure bottlenecks ahead
The rollout of AI has been faster than any previous technology, with ChatGPT getting 100 million users in two months and now on course for one billion weekly users by the end of the year. The basic foundations are in place and it is easy for consumers to use. Yet it will only pay off when enterprises can use it at scale, which depends on building – and financing – the most complex infrastructure ever created, comprising chips, data centres and energy.
3. Implementation depends on systems
A new technology itself is not enough. The hard yards are ahead in implementing it. That involves integrating it into well-governed enterprise systems that employees actually use. Evidence is still emerging of where the dollar and cents of value will come.
4. Human psychology: “that don’t impress me much”
There is an inevitable reaction to new technology reflected in the much-quoted Gartner hype cycle: innovation, inflated expectations, disillusionment, enlightenment and, finally, new productivity. In reality, these stages overlap and churn, with periods of overshoot followed by reality checks, after which the cycle resumes. Early humans probably had the same reaction to the wheel.
“The stock market has predicted nine of the last five recessions”: Paul Samuelson, economist, 1966
Vigilance is both prudent and a reminder of how hard it is to time the market.
Others are asking similar questions as various indicators flash warning signals, like the Cyclically Adjusted Price-Earnings (CAPE) ratio for the S&P 500, which is approaching a near-historic 38, albeit below the 44 it hit in January 2000.
Bridgewater Associates founder Ray Dalio told the Financial Times in January that there was already a “bubble” similar to 1998 or 1999 while Greenlight Capital founder David Einhorn said on Friday that expenditure on AI infrastructure is “so
extreme” that there is a “reasonable chance that a tremendous amount of value destruction is going to come through this cycle”.
“Markets can remain irrational longer than you can remain solvent”: John Maynard Keynes, economist
Timing the markets is notoriously hard. Evidence suggests that staying invested over a long time horizon seems to be the best way to capture the risk premium required to compensate equity investors for their risk.
Falls are rarely consistent as heightened emotions lead to volatility in both directions. If you had invested $10,000 at the start of 1996 it would have been worth more than $170,000 by the end of this June, but less than half as much if you’d missed the 10 best days and a quarter as much if you’d missed the 20 best days.
Indeed, five of the 10 best days from the start of 1996 to the end of June occurred within just one week of seven of the worst 10 days.
Stock prices have reached “what looks like a permanently high plateau”: Irving Fisher, economist, Oct 15, 1929, nine days before the Wall Street Crash
Earlier booms and busts followed similar patterns. The “railway mania” of the UK in the 1830s was derailed temporarily by the “Panic of 1837” emanating from the US, but then gathered steam once more en route to the bigger “collective hallucination” and crash of the 1840s. Likewise, the collapse of the “tronics” boom in 1962 was just a warmup for the meltdown in computing stocks at the end of the decade.
Radio was a 1920s analogue to the internet, spurring a race to invest in RCA and other technology companies more broadly, with companies such as General Electric, Dupont, Maytag, Chrysler and GM more than tripling between 1926 and 1929. The enthusiasm for the new technology was justified but premature, given that the network required a significant installed base of radios as well as broadcast networks and advertising to become commercially viable.
Bubbles have a variable lifespan, with the South Sea bubble blowing itself out in seven months while the dot-com bubble took five years to pop.
The question on everyone’s lips: how long until the AI bubble, arguably the biggest bubble of all, does the same?
Ahead of Tuesday hearings on the subject, the Senate’s Homeland Security and Governmental Affairs Committee (HSGAC) obtained documents showing three members of Congress, all Republicans, were followed under the TSA’s just-discontinued Quiet Skies program, which became infamous last summer when whistleblowers revealed bomb-sniffing dogs and Air Marshals were assigned to follow former Hawaii Congresswoman and future National Intelligence Director Tulsi Gabbard.
The members’ names have not yet been publicly released, but they were turned over to the Committee by the Department of Homeland Security, along with “TSA” notes explaining how they ended up on the list. Two of the three members made it onto the list before being elected, but as the Committee notes, “a cursory review would have revealed them to be a member of Congress, or a decorated U.S. veteran or service member.” The list below looks like four entries, but the second and third are the same member:
A wealth of other information — not just about Quiet Skies but other questionable TSA practices — has been produced to the Committee chaired by Kentucky Senator Rand Paul. Among the revelations:
Documentation showing the TSA approved “enhanced screening” and watchlisting for individuals merely “suspected of traveling to the National Capital Region” in conjunction with January 6th, and who are “believed to pose an elevated risk” but for whom “there is a current lack of specific information relating to unlawful entry into the U.S. Capitol”;
At least 24 people were put into the program for being associated with a group the protested mask mandates, and 12 were placed on a watch list for removing their masks in-flight. The latter act was described in one memo as being “an act of extreme recklessness in carrying out an act that represents a threat to the life of passengers and crew”;
Confirmation that Gabbard was indeed surveilled for eight flights last summer, as UncoverDC and Racket reported. The ostensible justification? She was listed as a “possible affiliate” of a member of the Terrorist Screening Database (TSDB), which at last count contained over a million people. Internal correspondence also shows that after the story was made public, “TSA is looking into the incident with regards to people with access to this information”;
Confirmation that the TSA pulled a web screenshot of Gabbard’s Congressional bio and not an official Passport or other government photo, as would be standard;
Confirmation that the TSA put Christine Crowder, wife of a Federal Air Marshal and upcoming witness Mark Crowder, under “Special Mission Coverage” due to “association of traveling on the same itinerary as a KST,” or Known or Suspected Terrorist. The TSA mistakenly believed Mrs. Crowder entered the Capitol on January 6th, and eventually conceded the episode was a case of “mistaken identity.”
Despite reports containing on-the-record sources in UncoverDC and Racket, and a letter to Congress sent by the well-known firm Empower Oversight on behalf of “multiple Federal Air Marshal whistleblowers” complaining about the episode, only Fox, The Hill, and the Washington Examiner and Times among legacy outlets covered the story. The fact-checking site Snopes waited a month to declare it unconfirmed and in need of “more research.” Only after Donald Trump was re-elected and news broke that Gabbard was his likely choice for the DNI position did the mainstream press bound into action — not to question surveillance of a high-profile politician, but to raise questions about Gabbard’s character.
Quiet Skies became known to the public in 2018, when The Boston Globe exposed that the TSA was following 30 people a day (later reports put the number closer to 50), despite the program never once leading to an arrest or preventing a terrorist incident. The program was both intrusive and wasteful, to extreme degrees. Each “selectee” was followed by three (and now, we learn, possibly more) members of the Federal Air Marshal Service (FAMS), in addition to being subject to special searches and examination by bomb-sniffing dogs. A 2019 report of the Homeland Security Inspector General found an astonishing $394 million — nearly half the Air Marshals’ $803 million budget — could have been “put to better use.”
If you were chosen for Quiet Skies coverage, Marshals trained to prevent terrorists from rushing cockpits would instead be asked to try to listen to your in-flight conversations, register the type of smartphone you used, even mark down “what exact times you went to the bathroom, so they could figure out the frequency,” as formal Marshal Robert MacLean put it.
At the time, this was not a partisan issue. The Globe’s hometown Senator, Ed Markey, grilled then-TSA chief David Pekoskie about why his agency would “monitor Americans who aren’t suspected of any crime” and “does the TSA monitor whether Americans go to the bathroom during flights?”
Over the years, however, party interest in Quiet Skies became curiously divided. In 2023, then-Democratic Chair of the same Homeland Security Committee Gary Peters released a report showing a number of concerning details likely unknown to most Americans. For instance, “U.S. travelers may be screened for at least 22 different reasons” (likely 21, now that Quiet Skies has been eliminated). The Peters report however stressed the notion that “certain communities — Muslim, Arab, and South Asian Americans in particular — claim they have been unfairly targeted,” at a time when the program was targeting all sorts of people, including people protesting mask mandates.
Meanwhile, the Trump administration and DHS Chief Kristi Noem ended the program because “since its existence has failed to stop a single terrorist attack while costing US taxpayers $200 million a year,” citing also episodes and documents that “highlight the inconsistent application of Quiet Skies and watchlisting programs, circumventing security policies to benefit politically aligned friends and family at the expense of the American people.”
In 2023, William “Billy” Shaheen, husband of New Hampshire Democratic Senator Jeanne Shaheen, also triggered a Quiet Skies rule by scheduling a flight with a “KST,” meaning a Known or Suspected Terrorist (reportedly immigration lawyer Celine Atallah). After two enhanced searches, Senator Shaheen contacted then-TSA administrator David Pekoske, after which Mr. Shaheen was excluded from Quiet Skies.
The TSA throughout the Gabbard affair maintained that entry into “Quiet Skies” only took place if a person was “matched to a risk-based rule.” The new documents do bear this out, showing for instance in the cases of the three members of Congress that each was put in the program after triggering a rule, identified by a multi-digit numeral. The “rules,” however, are in many cases just arcane combinations of demerits. While we’re unable to disclose the exact “derog” info that might entail, a hypothetical example might be: “A person who falls in a certain age range and traveled to the U.S. from a particular NATO Country and who traveled to one of four Middle Eastern countries in the last two years.”
Gabbard was ostensibly placed in the program because, as the Times reported, she attended an event “at the Vatican that was organized by a European businessman who appeared on an F.B.I. watch list.” Marshals were told this was the reason. The DHS documents include text exchanges between Marshals assigned to cover Gabbard from July 22 of last year. One section describes her as an “affiliate” with a member of the Terrorist Screening Database:
so Gabbard is an affiliate with a TSDB, and since she’s no longer in Congress that’s probably why she hit for the rule.
Yeah I talked with [redacted] about it and that’s the conclusion we came to as well.
cool cool
This explanation isn’t exactly seamless, however. Other well-known Americans should have triggered the same rule and did not. The use of Gabbard’s Congressional photo instead of an official one suggested to multiple former Marshals that there was at least human review of the episode.
“Obviously,” one former Marshal explained, “there is a way for human beings to influence the decision tree above our level.”
Quiet Skies wasn’t just a 9/11 anachronism that wasted taxpayer money and created a high risk of politicized use of federal enforcement resources. MacLean describes how the program complicated ordinary anti-terrorist surveillance, because Marshals were often seated in the backs of planes to watch members of Quiet Skies lists, and terrorists do not rush cockpits from rear seats. In a refrain that’s become common among current and former FBI agents as well as other enforcement or interdiction agents, MacLean complained, “The air marshal’s job is to protect the cockpit and the pilots. Let somebody else do the intelligence and criminal investigative work.” A Merit Systems Protection Board judge dismissed the complaint in early 2020, but the DHS IG agreed with MacLean later that year.
“For those flights covered by Federal air marshals,” it wrote, “seating positions on the aircraft, as well as aircraft layout, impeded sightlines and may have prevented air marshals from visually identifying potential threats.”
Another serious issue involved Marshals being asked to follow selectees all the way out of the airport to see who, if anyone, picks them up. They are asked to do this even overseas. “You’re basically telling air marshals to conduct foreign surveillance,” MacLean said. “It’s crazy.” He pointed to an incident in 2010 in which two Air Marshals had to flee Brazil on “alternate documents.” It wasn’t over Quiet Skies, but it underscores the risk of sending people not trained to operate overseas into the field abroad.
The elimination of Quiet Skies, along with programs like the Global Engagement Center, shows the administration is serious at least about eliminating the most obviously abusive and indefensible security programs. However, as I’ll be testifying this morning in the Senate, there are more. And they need to be reevaluated, and in many cases defunded. Thanks to Senator Paul and his staff for retrieving these documents.
Here we go again. As I write, politicians are trying to gin up a new panic over a looming “government shutdown.” We’ve seen this before as Democrats and Republicans play chicken over their clashing funding priorities, with a partial suspension of federal activities threatened if they can’t come to a deal.
Unfortunately, the government never really shuts down, and the two parties always work out an agreement that involves spending a lot more money. The worst that happens is that some people are inconvenienced for a few days, as the only things that really cease to function are public-facing operations such as parks and offices—deliberately so, to maintain the illusion that something important is happening. What might be different this time, though, is that there’s a chance to use the impasse to reduce the federal work force.
When Spending Too Much Isn’t Enough
The latest clash over passing a funding bill for the federal government is Democrats’ insistence that the legislation include extensions for Obamacare subsidies to address a problem that, as Paige Winfield Cunningham noted for The Washington Post, “even supporters of the Affordable Care Act fight admit is a flaw in the original law:It wasn’t generous enough to make plans affordable.” Having built much of their eroding reputation on the cobbled-together public-private health care coverage scheme, Democrats need to prop it up with more taxpayer money to keep it functioning.
Republicans aren’t especially interested in keeping the flagship Democratic legislation afloat. That doesn’t mean they’re necessarily thriftier. Having largely abandoned their small-government credentials (with a few notable exceptions), the GOP wants to spend too much money—though less than the Democrats—on its own projects. Those projects place special emphasis on defense and the Department of Homeland Security, with trillions of dollars in projected deficits for the foreseeable future.
Republicans hold a majority, but Democratic votes are needed to move funding bills in the Senate. So far, Democrats have refused to budge in what The Wall Street Journaldescribed as “a stark turnaround for a party that often lambasted Republicans as irresponsible for threatening shutdowns in the past.”
About Those Phony ‘Government Shutdowns’
That means we get a kabuki-theater government shutdown. Museums and national parks will close and federal offices will furlough workers who will be unavailable to give their usual bad tax advice or slowly process forms while most of the non-public-facing work continues behind the scenes.
“The vast majority of the federal government is still in operation, shutdown or no shutdown,” attorney Timothy Snowball commented for the Pacific Legal Foundation in 2019. “Even among the 8% of the federal budget that is not currently funded because of the shutdown, only ‘non-essential’ programs and employees are affected. For ‘essential’ employees it is business as usual.”
Federal employees are, overall, better-compensated than their private sector counterparts. According to a 2024 Congressional Budget Office analysis, “The federal government would have decreased its spending on total compensation by 5 percent if it had adjusted the cost of pay for its employees to match the compensation of their private-sector counterparts.” Even so, federal workers will inevitably cry poverty for interviewers while they’re furloughed and not drawing pay—even though they’ll automatically get all back pay once the shutdown concludes.
At most, a government shutdown is usually just a new excuse for politicians to posture in front of television cameras. This time, though, there’s a chance the federal work force might come out the other end of the shutdown a little smaller.
This Time Could Be Different
“The White House is telling federal agencies to prepare large-scale firings of workers if the government shuts down next week in a partisan fight over spending plans,” The Guardianreported last week. “In a memo released on Wednesday night, the Office of Management and Budget (OMB) said agencies should consider a reduction in force for federal programs whose funding would lapse next week, is not otherwise funded and is ‘not consistent with the president’s priorities.'”
The mentioned OMB memo points out that “with respect to those Federal programs whose funding would lapse and which are otherwise unfunded, such programs are no longer statutorily required to be carried out.” It continues: “Therefore, consistent with applicable law, including the requirements of 5 C.F.R. part 351, agencies are directed to use this opportunity to consider Reduction in Force (RIF) notices for all employees in programs, projects, or activities (PPAs) that satisfy all three of the following conditions: (1) discretionary funding lapses on October 1, 2025; (2) another source of funding, such as H.R. 1 (Public Law 119-21) is not currently available; and (3) the PPA is not consistent with the President’s priorities.”
Importantly, the memo adds: “Once fiscal year 2026 appropriations are enacted, agencies should revise their RIFs as needed to retain the minimal number of employees necessary to carry out statutory functions.”
We could see more than the usual theatrical finger-pointing and interviews of suffering Department of Education employees this time around. The government could reopen its public-facing functions after a few days, or maybe a couple of weeks (the longest shutdown was 35 days from the end of 2018 through the beginning of 2019), with a trimmed payroll.
That would, of course, be the best government shutdown ever.
There’s no guarantee this will happen, of course. Politico‘s Sophia Cai suggests “OMB Director Russ Vought is using the threat of permanent job cuts as leverage” to get Democrats to drop their demands and approve the GOP spending plan. Democrats may blink and end the opportunity for easy work force reductions.
Then again, Our Revolution, a group backed by Sen. Bernie Sanders (I–Vt.), surveyed its members and found “overwhelming support for Democrats holding the line in the shutdown fight.” That’s an important signal for the increasingly left-leaning Democrats, and one that could clear the way for a shutdown and work force reductions.
Following the relative disappointment of the Department of Government Efficiency, we should seize any opportunity to shrink the government that we can. If that opportunity comes in the form of one of the rare government shutdowns that’s actually meaningful, so be it.
Leonardo DiCaprio’s Poorly Timed “Pro-Antifa” Movie Flops At The Box Office
Hollywood has been sliding into a financial abyss that the town may never recover from, so one might expect film industry moguls to back away from the woke cancer that put them on the bad side of the American public. The problem is, many production companies have projects that began principle filming before the 2024 election when the political left still naively believed that they were the national majority.
Now, those companies are stuck with these movies even when they know box office failure is guaranteed. One such movie is the latest from director Paul Thomas Anderson and lead star Leonardo DiCaprio, called “One Battle After Another”.
The movie is being hailed by the woke media as a “celebration of modern day Antifa revolutionaries”. Hollywood In Toto says the film “casts an Antifa-style group as its heroes,” while The San Francisco Chronicle described the film, referring to the protagonists as “an allegory that involves antifa-like left wing extremists, a well-funded right wing militia group, and immigrants avoiding ICE.” The Daily Beast called it a “gonzo Antifa rallying cry.”
The timing for such a project could not be worse. Woke films with leftist political messaging are already guaranteed to fail in theaters the vast majority of the time. Add to this the fact that the film is being premiered the same month that multiple mass shootings have been committed by leftist activists (including school shootings), Antifa mob attacks on immigration officers, as well as the assassination of conservative speaker Charlie Kirk committed by a gay man with a trans furry boyfriend using Antifa slogans written on his ammo.
There’s not a lot of public affinity for radical leftists at this time. No one wants to see a movie glorifying them as protagonists.
This is why “One Battle After Another” is flopping hard at the box office. The flick needs around $300 million to break even after marketing costs are included – It has only made $48.5 million globally. Keep in mind, half of all box office revenues go to theaters, the other half goes to distributors. And, a weak opening weekend usually portends a swift decline in ticket sales for the next few weeks after.
Ultimately, the movie is likely to lose hundreds of millions of dollars and probably end up on streaming services in the very near term with little fanfare. Get woke, go broke.
Paul Thomas Anderson’s otherwise excellent track record for dramatic films cannot overcome the intense gravity of the woke black hole. Few if any films escape its cold grasp. This is why it is suicide for content producers to jump onto political bandwagons; the movements they think are popular as usually not, and biases blind the creative process. The foolishness of chasing propaganda should be obvious, but not to the dimwits in Hollywood.
Syria’s government has asked factions within the military to prepare for operations against the US-backed Syrian Democratic Forces, the Syrian Observatory for Human Rights (SOHR) reported Monday.
According to SOHR, Turkish-aligned factions in the Syrian army were asked to “prepare for operations” against the SDF in Deir Hafer and the Tishreen Dam area. SOHR added that officials in Damascus have requested that a campaign against the SDF not take more than a week.
The operation would aim to pressure the Kurdish group into accepting the agreement signed with Damascus in March this year. Recent days have seen a significant buildup of both Syrian army forces and SDF troops in eastern Aleppo.
On Monday, SOHR reported escalating clashes in eastern Aleppo. More than 10 artillery shells struck areas around the Tishreen Dam following exchanges between the SDF and Turkish-backed Syrian factions.
Earlier in the day, SOHR sources confirmed that orders were issued to deploy “show-of-force” units with heavy vehicles, tanks, and artillery to the Deir Hafer frontline in anticipation of possible SDF operations.
There are also reports that the SDF has stationed kamikaze drones, rocket launchers, and long-range artillery near the local sugar factory.
Military reinforcements from Turkey also arrived at Kuweires Airport, while the Aleppo–Raqqa Road in Deir Hafer remained closed for a third consecutive day. Additional forces from both the SDF and Turkish-backed Syrian units have gathered around the Tishreen Dam, heightening concerns over an escalation.
SOHR added that an SDF drone strike destroyed two positions of Turkish-backed Syrian factions in Qashla village on Sunday.
There has been tension between the SDF and the government over a deal signed in March calling for the Kurdish group’s integration into Damascus’s forces. The two sides disagree about the deal’s implementation, particularly the SDF’s wish to remain under Kurdish command and enter the army as a bloc rather than dissolve and conscript.
Skirmishes between the SDF and the Syrian army have broken out several times since last month.
Ankara’s proxy, the Syrian National Army (SNA) coalition, was incorporated into Syria’s military after the fall of former Syrian president Bashar al-Assad’s government last year. These Turkish-backed forces have been at odds with the SDF for years and are responsible for war crimes against Kurdish civilians in northern Syria.
The SDF is made up predominantly of People’s Protection Units (YPG) forces. The YPG is the Syrian branch of Turkiye’s enemy, the Kurdistan Workers Party (PKK).
While Jolani basked in praise at the UNGA, his forces in Syria continued persecuting minorities and attacking the SDF.
The Turkish army, which occupies Syria and has operated against the SDF in the past, may be gearing up for a new campaign, self-appointed Syrian President Ahmad al-Sharaa said earlier this month. Turkey “may act militarily if full integration is not achieved by December,” Sharaa warned. In late May, Turkish President Recep Tayyip Erdogan warned the SDF to “quit stalling” and integrate with the Syrian army.
Turkey is currently training Syria’s new extremist-dominated military. The Nationalreported on August 17 that Damascus is assembling a force of 50,000 to capture Deir Ezzor and Raqqa from the SDF.
“The Implications Are Profound”: Trump May Have Helped Resolve A Key Global Conflict
By Michael Every of Rabobank
In classic The Economist-style timing, Foreign Affairs just ran a lead ‘China Goes on Offence’ which underlined “Beijing’s Plans to Exploit American Retreat.” Subsequent developments in the Middle East underlined the complete opposite.
With wild headlines such as ‘Trump to run Gaza with Blair’, a Trump-Netanyahu joint White House press conference officially unveiled the former’s 20-point plan to end the Gaza war and move towards a resolution of that issue – which Netanyahu has signed up to alongside the Gulf Cooperation Council and a slew of leading Muslim countries.
The deal is basically this: Hamas releases all remaining hostages in 72 hours; disarms; and its members who wish to will be given safe passage to third countries; a new US and Arab-backed security force will step in as Israel pulls back in stages; Trump will act as head of a new body called the Board of Peace alongside Blair and other global technocrats; no Gazans will be forced to leave; Israel will not annex any land; and massive deradicalisation efforts will proceed in tandem with reconstruction. The issue of a Palestinian state is kicked into the long grass until the foundations are literally placed for a stable polity and economy. There will also be a US-Qatar-Israel trilateral forum to try to find ways to cooperate.
Of course, Netanyahu has his far-right government coalition parties to deal with – but he has the support of opposition parties if he needs them. That leaves Hamas. There, the crucial point is that, following an official apology to Qatar from Netanyahu for his recent strike in it, even Doha is pushing it to agree – it looks like it is feeling US pressure as much as Israel is. Indeed, if Hamas don’t agree, the US and other Muslim countries behind the deal will allow Israel to crush it and then hand over those territories it liberates to be run and rebuilt as above one by one. In short, this looks like it is going to be done, as was said, “either the easy way, or the hard way.”
If so, the implications are profound. Trump would have helped resolve a key global conflict; the Abraham Accords could rapidly expand, and even to places like Indonesia; and the Middle East would be even more clearly under the US umbrella. Where were China and Russia as this happened? Nowhere. Equally, where was Europe? Where it has been for decades now.
China is instead mentioned in foreign affairs via the Australia’s ABC, which claims classified US intelligence is warning of China’s preparation for a Taiwan invasion. That’s as the Wall Street Journal reports the Pentagon is pushing to double US missile production for a potential China conflict, where suppliers have been asked how they can hit 2.5 times higher output in just 6–24 months, with private capital and licensing options therefore on the table.
Moreover, the Nikkei Asia reports the China-focused AUKUS defence pact has apparently survived an internal Pentagon review, and the planned US nuclear submarine sale to Canberra is to proceed – but will that mean the US making even greater reforms to speed up military production and/or Australia spending 5% of GDP on defence like NATO? To say there are major market implications in these dramatic geopolitical headlines is an understatement.
Russia is mentioned as Medvedev warned Europe of the danger of nuclear danger ahead and Germany’s Chancellor Merz said Europe is “no longer at peace” with Moscow. As one global front may cool down, will another then heat up?
Which one though? Colombia’s President Petro is seeking to revise the US-Colombia trade deal following his recent expulsion from the US after his visa was withdrawn for participating in a political protest, and Venezuela’s President Maduro signed a decree granting himself additional security powers, including the ability to mobilize armed forces nationally, as well as placing public firms under military control, obviously in response to US military statecraft nearby. So, the US has Venezuela, Brazil, Argentina, and Colombia –and Panama and Greenland– to focus on under the Monroe Doctrine. That’s on top of Ukraine-Russia, and the Middle East, and the Indo-Pacific.
In geoeconomics, we see a slew of related news. A Saudi real estate developer is to build a $1bn Trump plaza in a Red Sea port; the Saudis also acquired Electronic Arts for $55bn as part of a plan to build a gaming hub; and Riyadh is “Losing its appetite for oil”, says Bloomberg, arguing it’s becoming Solar Arabia.
The US tightened export controls on Chinese companies where subsidiaries of blacklisted firms now are too, as China’s US ambassador chided it for “closing doors” and enacting tariffs, and Huawei announced it will double its output of top AI chips. The US also put tariffs on lumber to prop up that sector.
In politics, with no deal reached, a US government shutdown seems to loom; the UK’s PM Starmer is to tell his party conference that GDP growth is the ‘antidote to division’ – as Chancellor Reeves warns against ditching the fiscal rules that don’t allow for more fiscal stimulus; and France’s socialists are threatening to topple Macron’s new PM Lecornu for his “unreasonable” deficit-reduction plans. Can you spot a pattern there?
In markets, “The US and Switzerland reconfirmed they have undertaken under the IMF Articles of Agreement to avoid manipulating exchange rates or the international monetary system to prevent effective balance of payments adjustment or to gain an unfair competitive advantage,” in a joint official statement. Ironically, here it took geopolitical pressure to get a country to say, “OK, because markets!” rather than the opposite, which is the general economic statecraft trend.
Moreover, the key Swift system pledged to build a blockchain-based ledger for banks and financial firms, literally to make it swifter, as the geopolitical, geoeconomic, and global financial architecture all goes into joint flux.
Meanwhile, Aussie building approvals -6.0% m-o-m vs. +2.6% expected and China’s manufacturing PMI at 49.8 vs. 49.6 consensus, and non-manufacturing at 50.0 vs 50.2 are the kind of market minutiae that some might want to focus on instead.
The RBA left rates on hold at 3.60%, as expected and said growth in unit labour costs was too high, there are uncertainties over the domestic economic outlook (only the domestic?), and for now it was judged as better to “remain cautious.” Growth risks to the downside and inflation risks to the upside? This wasn’t supposed to happen.
Then again, neither were all of the foreign affairs developments we now see – which seem to have surprised some experts in Foreign Affairs.
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Oklo Secures Accelerated NRC Review For Advanced Reactor Criteria
SMR startup Oklo said in a release today that the U.S. Nuclear Regulatory Commission (NRC) has accepted for review its Principal Design Criteria (PDC) topical report under an accelerated timeline, with regulators also proposing a reduced review schedule. The move signals the NRC’s push to modernize licensing for next-generation reactors while keeping safety standards intact.
The PDC report sets the safety, reliability, and performance criteria that will guide Oklo’s future reactor designs and licensing applications. Once approved, it can be referenced across future filings, avoiding duplicate reviews and streamlining regulatory steps — a key factor for Oklo’s plan to deploy its reactors rapidly and at scale.
Oklo noted it received acceptance just 15 days after filing, compared to the standard 30–60 days. The NRC told the company it expects to issue a draft evaluation in early 2026, less than half the traditional timeline.
“This is a reflection of the work by the Oklo team, and the NRC’s commitment to timely oversight,” said co-founder and CEO Jacob DeWitte. “Recent legislation and executive orders have called for the delivery of more nuclear power for clean, reliable energy on accelerated timelines, and this is how it’s done. Modernized, non-duplicative processes are key enablers for how advanced nuclear can scale rapidly and safely.”
The NRC’s acceptance dovetails with broader federal efforts. Executive orders issued in May 2025 direct agencies to streamline licensing, while the ADVANCE Act establishes a clearer path for advanced nuclear deployment. Together, they highlight Washington’s interest in accelerating clean energy innovation.
Recall days ago, Goldman Sachs initiated coverage on Oklo with a Neutral rating and a $117 price target. Meanwhile, shares have already surged nearly 20x from when Jim Cramer dismissed the stock in the high single digits…
Can the public trust health recommendations from the Department of Health and Human Services (HHS)? Be cautious.
HHS and its associated agencies have an imperfect record when it comes to promoting the health of Americans. For example, HHS’ food pyramid recommended substituting carbohydrates for fats, which ultimately contributed to increased rates of obesity. Under President Joe Biden, HHS began to impose price controls on pharmaceuticals, which will harm patients by slowing biomedical innovation. The National Institutes of Health financed viral gain-of-function research in China that may have resulted in unleashing the COVID-19 pandemic. HHS’ six-foot social distancing rule during the pandemic was not underpinned by any research.
Now, under Secretary Robert F. Kennedy Jr.’s leadership, there is even more reason to be particularly wary about pronouncements emanating from the agency.
It was well known coming into the Trump administration that Kennedy founded one of the nation’s leading anti-vaccine activist groups. As secretary of health and human services, he sacked the 17 vaccine experts on the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) and seeded the committee with anti-vax advocates. In June, the panel voted to remove the preservative thimerosal from flu vaccines though there was no scientific evidence of harm.
In September, the new ACIP panelists voted for a standalone chickenpox vaccination, citing a low risk of febrile seizure from a vaccine that combined chickenpox protection with protection against measles, mumps, and rubella. The American Academy of Pediatrics decried this limit on parental choice, though it is worth noting that 85 percent of parents already opt for separate vaccines.
In the meantime, Kennedy’s watch saw the U.S. experience its largest outbreak of measles in the past 33 years.
Recall that Kennedy infamously asserted back in December 2021 that the COVID-19 vaccine “is the deadliest vaccine ever made.” Reams of subsequent research have found that COVID-19 vaccines are in fact generally safe and effective. Nevertheless, Kennedy has sought to limit universal access to annual booster shots. In August, the Food and Drug Administration (FDA) limited boosters to adults over 65 years old and those with underlying conditions that increase their risk for severe disease. In a June editorial in the New England Journal of Medicine, FDA officials previewed the new August limitations and said they are broadly in line with booster recommendations in Europe, Australia, and Canada. In contrast, the ACIP in September essentially enabled all Americans over 6 months old to access COVID-19 boosters by unanimously recommending that vaccination be determined by individual decision-making.
In June, Kennedy falsely stated that the Centers for Disease Control had suppressed a hepatitis B vaccine study in newborns in 1999 that found “an 1,135 percent elevated risk of autism among the vaccinated children.” In fact, the researchers cited by Kennedy reported in 2003 that they found “no consistent significant associations” between the vaccine and autism. Infants infected with hepatitis B via mother-to-child at birth or during their first year of life have a 90 percent chance of developing a chronic infection—of which 15 to 25 percent will eventually die of cirrhosis or liver cancer. Since vaccination for all newborns was approved in 1991, infections with the hepatitis B virus in children and teens have decreased by 99 percent.
Fortunately, even Kennedy’s handpicked ACIP panel could not bring itself in September to vote against providing newborns with the hepatitis B vaccine. President Donald Trump, on the other hand, was not so reticent, asserting that since hepatitis B is “sexually transmitted,” vaccination should “wait till the baby is 12 years old.”
Kennedy has notoriously been a vocal proponent of the discredited claim that vaccines cause autism. In April, Kennedy promised that by “September, we will know what has caused the autism epidemic and we’ll be able to eliminate those exposures.” Surprisingly, he zeroed in not on vaccines but on acetaminophen, the chief ingredient in the painkiller Tylenol. Trump claimed that taking acetaminophen “can be associated with a very increased risk of autism.” He advised pregnant women experiencing pain or fever to “tough it out a little bit” and to “fight like hell not to take it.”
A recent meta-analysis of 46 studies mentioned at the press conference suggested a possible link between prenatal use of acetaminophen and autism. (One of the authors of the study was paid $150,000 as an expert plaintiffs’ witness in lawsuits against the maker of Tylenol.) At the press conference announcing the alleged acetaminophen connection, FDA chief Marty Makary acknowledged: “Sure, you’ll be able to find a study to the contrary.”
Actually, a lot of studies.
For example, another meta-analysis evaluating 56 studies published last year concluded that taking acetaminophen during pregnancy is “unlikely to confer a clinically important increased risk of childhood [attention-deficit hyperactivity disorder] or [autism spectrum disorder].” Last year, a Swedish study found “no evidence” of increased autism risk in children whose mother used acetaminophen during pregnancy.
Makary’s subsequent notice to physicians about acetaminophen did not urge pregnant women to “fight like hell not to take it.” Makary’s notice more circumspectly observed that “a causal relationship has not been established and there are contrary studies in the scientific literature.” He added that “acetaminophen is the safest over-the-counter alternative in pregnancy among all analgesics and antipyretics; aspirin and ibuprofen have well-documented adverse impacts on the fetus.”
At the press conference, Kennedy touted leucovorin as a treatment for autism. Leucovorin, a medication similar to the B vitamin folic acid, is generally used to counteract the effects of cancer chemotherapy. Some small preliminary studies suggest that it can be helpful in treating autistic patients with cerebral folate deficiency. Depending how it’s measured, between 7 percent and 30 percent of autistic patients experience low levels of folate. The FDA is working to make it available to such patients. The Coalition of Autism Scientists, however, cautioned that “it is premature to claim that leucovorin is an effective treatment for autism.” Since the side effects of the drug taken alone are rare and generally mild, there appears to be little downside to trying it.
Despite the focus on Tylenol, Trump could not refrain from suggesting that “pumping” vaccines into “a little fragile child” is linked to autism. Kennedy supported Trump, claiming that for three decades “research on the potential link between autism and vaccines has been actively suppressed.” He vowed that this department “will take the time for an honest look at this topic by scientists.” As part of “an honest look,” the Department of Health and Human Services has hired David Geier, a long-time proponent of the claim that vaccines cause autism, to oversee a new study probing the possible links between vaccinations and autism.
In April, Kennedy declared that “sugar is poison.” Varying estimates of average added sugar consumption converge to around 17 teaspoons daily, which amounts to about 64 pounds annually per American. Accumulating evidence suggests that the secretary has a point; consumption of added sugar contributes to increased obesity rates, Type 2 diabetes risk, and fatty liver disease. Kennedy has commended Coca-Cola and Tyson Foods for replacing high fructose corn syrup with cane sugar. One problem: There is essentially no nutritional difference between them. That said, health-conscious Americans would do well to heed Kennedy’s call to consume less sugar.
As for food dyes, as recently as 2023 the FDA concluded that the totality of the evidence showed no adverse effects when children consume foods containing color additives. That was then, but this is now. In April, Kennedy denounced synthetic food dyes as “poisonous compounds.” At the time, he laid out a timeline for the food industry to transition to natural alternatives by 2027.
He also turned his eye toward fluoride. Since 1945, many American towns and cities have added minute amounts of fluoride to their drinking water as a way to significantly prevent tooth decay. Back in November, Kennedy described fluoride as “industrial waste” and pledged to have it removed from public water supplies once in office. In April, Environmental Protection Agency chief Lee Zeldin promised without prejudging outcomes to expeditiously review drinking water fluoridation science. In fact, a recent meta-analysis found that drinking water containing more than 1.5 milligrams per liter of fluoride slightly lowers children’s I.Q. scores. Keep in mind, though, that the recommended level of fluoridation in the U.S. is 0.7 milligrams per liter. A 2023 meta-analysis found that the level of fluoride in community water systems “is not associated with lower IQ scores.”
The Department of Health and Human Services is a sprawling bureaucracy that encompasses the Centers for Disease Control, the FDA, the National Institutes of Health, and the Centers for Medicare & Medicaid, among other offices. The agency spends about $2 billion per day. The federal government was responsible for $1.9 trillion of the $4.9 trillion spent on health care in 2023, and FDA-regulated products account for about 21 cents of every dollar spent by U.S. consumers. As the scope of Kennedy’s initiatives show, his agency’s vast powers allow him to inflict his peculiar obsessions on the health and lives of Americans—for good and for ill.
Happy Tuesday, and welcome to another edition of Rent Free. This week’s newsletter includes stories on:
New York City’s plan to make housing more expensive by requiring that plumbers install your stove
Los Angeles’ consideration of a proposal to tighten the city’s rent stabilization ordinance
The housing policy implications of the looming federal shutdown
But first, our lead story evaluating the surprisingly pro-housing legacy of Mayor Eric Adams as he exits the political scene.
The Housing Hero Gotham Deserved
When New York Mayor Eric Adams announced that he was ending his bid for a second term on Sunday, few were shocked by the news.
Despite being the incumbent mayor of a city experiencing relative peace and prosperity post-pandemic, Adams was polling in a distant fourth place, behind a socialist, a disgraced ex-governor, and perhaps most embarrassingly of all in deep blue New York, a Republican.
With electoral prospects that dismal, it’s little surprise that Adams decided to drop out instead of going down with the ship.
It’s a remarkable fall from his mayoral win in 2021, when there was buzz that the former cop could offer an alternative model of big, Democratic city governance that avoided the party’s woke excesses.
More keen observers of New York politics than I will have more comprehensive explanations for why Adams will close out his term so unpopular. Constant personnel chaos and a damning federal corruption indictment involving the alleged exchange of favors for Turkish Airlines upgrades certainly didn’t help.
As he exits the mayor’s race, and therefore office, within a few months, it is worth highlighting one of the things that Adams got right: housing.
Throughout his term, Adams talked and acted like a mayor who believed that building more housing in New York City was a good idea, and that cutting government regulation was necessary if that idea was going to become a reality.
Early into his term, Adams set a “moonshot goal” of building 500,000 new homes over the next decade—a doubling of New York’s housing production.
This was followed by a series of policy initiatives, including his signature “City of Yes” plan and his “Get Stuff Built” initiative, that fleshed out more specific reform ideas for lifting density limits, eliminating minimum parking requirements, and streamlining approval processes.
Though the process was long and a number of compromising amendments were made to it, Adams’ City of Yes did eventually pass into law late last year.
There are criticisms one could make about the plan, primarily that it was, all things considered, a modest increase in zoned capacity that wouldn’t accomplish Adams’ “moonshot” goal.
Still, it was the most comprehensive rewrite of the city’s zoning code in over 60 years and one that unambiguously shifted the city’s housing regulations in a more pro-growth direction.
That’s an accomplishment by itself. It’s extra impressive that Adams was the one to get it done, given that he had to buck his base to do it.
In the 2021 Democratic primary, Adams performed the best in the outer borough neighborhoods of Brooklyn and Queens. These same areas were also the most opposed to City of Yes.
The community boards in the most pro-Adams neighborhoods of the city voted uniformly to oppose the mayor’s rezoning initiative.
One can easily imagine an alternate history where Adams chose not to ruffle the feathers of his largely anti-development supporters, and New York City did nothing of consequence on housing under his tenure.
Instead, he courted some heat from his supporters to make positive, if modest, progress on one of the most pressing issues facing ultra-expensive New York City.
It’s true that Adams didn’t pick other necessary housing fights.
He left untouched the city’s Mandatory Inclusionary Housing program that weighs down the financial feasibility of new construction with housing affordability mandates. He did not advocate for changes to New York’s rent stabilization system, which is slowly but steadily bankrupting a significant portion of the city’s housing stock.
Perhaps, if he hadn’t been embroiled in serious corruption scandals and had been a little more normal generally, he’d have had the political capital to push for reforms in those areas too. Perhaps that’s something he was never going to be interested in.
Regardless, as New York City gets closer to electing a socialist with many bad ideas (including more than a few on housing), I can’t help but be a little nostalgic for the sunsetting Adams years.
How Hot Can a Stovetop Be?
While New York City might have made progress on zoning reform in the Adams years, the city government continues to find other ways to make finding and maintaining a home more expensive.
On Thursday, the New York City Council voted 47–1 in favor of an ordinance that would expand the definition of “ordinary plumbing” work that a licensed plumber is required to perform to include the installation of gas appliances, such as stoves and dryers.
Council Member Pierina Sanchez, who sponsored the initiative, has defended it as a commonsense safety regulation.
Rental property owners counter that the bill won’t improve safety but will raise costs by requiring the use of licensed plumbers for work that homeowners, building superintendents, and contractors already perform.
In a New York Post op-ed, New York Apartment Association CEO Kenny Burgos argues that gas explosions are caused by illegal gas piping and gas main leaks, not home appliance installations.
He estimates that the city’s new mandate will add $500 to the cost of installing covered appliances and create weekslong wait times to get the job done, given the small number of licensed plumbers in the city.
Los Angeles Considers Tightening Rent Controls
Tomorrow, the Los Angeles City Council’s Housing and Homelessness Committee will consider a suite of proposals for tightening the city’s rent stabilization ordinance, which governs rent increases across some 650,000 units in the city.
The city’s current rules allow landlords to raise rents by at least 3 percent each, and as much as 8 percent depending on the rate of inflation as measured by the Consumer Price Index (CPI).
They can also raise rent an additional 2 percent if they cover gas and utilities. Los Angeles has vacancy decontrol, meaning landlords can raise rents to market rates once a current tenant moves out.
The proposal before the City Council would lower the minimum rent increase allowance to 2 percent, lower the maximum allowable increase to 5 percent, and eliminate the utility surcharge.
The proposal would also tip the scales in favor of lower allowable rent increases by excluding shelter costs from the CPI calculation.
Landlords have argued that allowable rent increases should be based on the actual costs of housing provision, not a general CPI measure of inflation. Excluding shelter entirely from the inflation calculation makes a rough measure even rougher.
A report prepared by Beacon Economics argues that lowering allowable year-over-year increases will merely result in larger rent increases between tenants.
Rent-stabilized owners have been squeezed by rising maintenance and insurance costs on the side and a four-year rent freeze imposed during and after the pandemic, the report notes.
With tighter rent controls, it’s reasonable to assume that people will invest less in rent-stabilized buildings, with the result being deferred maintenance and declining unit quality.
While Los Angeles’ rent stabilization ordinance does not generally apply to new construction, it does say that if rent-stabilized units are withdrawn from the market, any new housing built on the same site within the next five years must also be subject to rent stabilization.
If rent stabilization gets stricter, that could suppress builders’ willingness to undertake redevelopment projects that would require creating new rent-stabilized units, thus reducing supply.
Rent control has a terrible track record everywhere. Cities should be looking for ways to eliminate it, or at least reform its worst aspects, instead of making binding price controls even tighter.
The Housing Policy Implications of a Federal Shutdown
With Congress seemingly deadlocked on a spending deal that will keep the government funded past midnight tonight, a shutdown is looking increasingly likely.
The Trump administration has already told agencies to prepare lists of employees who could be laid off in the event of a shutdown—as opposed to just temporarily furloughed, as is more typical during government shutdowns. It’s also said that when funding resumes, agencies should look to bring back the minimum number of employees necessary.
As the National Low Income Housing Coalition’s Kim Johnson notes in a recent memo, this could mean a major reduction of staff at the U.S. Department of Housing and Urban Development (HUD).
The White House has shrunk staffing at the housing agency by nearly 25 percent, and proposed in the past to reduce agency staffing by half. HUD has also been one of the agencies where the Trump administration has been the most proactive in terms of freezing grant awards and reducing enforcement activities.
Should a shutdown happen, it’s possible we’ll be left with an even smaller federal housing agency.
Quick Links
Tobias Peters at the American Enterprise Institute (AEI) offers a critical assessment of the bipartisan ROAD to Housing Act, which passed unanimously out of the Senate Banking Committee back in July. The bill proposes a long list of regulatory tweaks and some new spending, with the general goal of increasing housing production. Peters argues the bill mostly serves to expand the cost and invasiveness of federal grant programs that should instead be eliminated. You can read Rent Free‘s past coverage of the bill here.
The Scottish Parliament is considering legislation that would allow local governments to impose rent caps of inflation plus 1 percent.
Chicago passes a heavily compromised accessory dwelling unit (ADU) ordinance that allows “granny flats” and “coach houses” in most areas of the city, while still allowing individual aldermen to block their development in single-family districts. New ADUs will also have to be built with union labor.
