Value-Investors,
Surplus Energy Economics, The evolution of inverting scarcities - CAN WE DISINVEST IN MONEY?
Value is a function of scarcity, and few have yet recognised a dramatic tilt in the balance of scarcities in the economy.The material, long assumed to be almost limitless in potential supply, is turning out to be severely constrained. Money, hitherto limited in quantity by at least some degree of policy restraint, has latterly become recklessly super-abundant, to the point of looming value destruction.
There is a direct correspondence between the ending and reversal of meaningful economic growth and this rebalancing of scarcities. One of the most enduring myths in economics is the fallacy that a flagging material economy can be reinvigorated using monetary tools...
..Since 2005, and stated at constant values, global debt has grown by 150%, and broader financial assets (which are not disclosed in full) by not less than 175%.
Nothing in the material economy has come anywhere near these rates of monetary expansion. Over that twenty-year period, energy consumption has increased by 34%, all-important ex-cost surplus energy by 26% and material economic prosperity by 24%.
On the basis of inflecting comparative scarcities, investors should, ideally, be shorting anything monetary, and going long on the material...
..To do this, of course, we need first to recognise the critical conceptual distinction between the physical and the monetary. Properly understood, any reference to “the” economy is a misnomer. The “financial” economy of money, transactions and credit is a parallel and proxy for the underlying “real” economy of material products and services.Nothing in the material economy has come anywhere near these rates of monetary expansion. Over that twenty-year period, energy consumption has increased by 34%, all-important ex-cost surplus energy by 26% and material economic prosperity by 24%.
On the basis of inflecting comparative scarcities, investors should, ideally, be shorting anything monetary, and going long on the material...
This two economies conception is implicit in the nature of money. Irrespective of format, money is token, not substance – for the economic traveller, it’s map, not territory. Money has no intrinsic worth, and commands value only as an exercisable claim on those material things for which it can be exchanged... If the monetary out-grows the material, the only possible outcome is that shift in the monetary-material rate of exchange which is experienced as inflation...
..It is ... surely self-evident that the economy is primarily an energy system, yet concepts such as the rate at which energy use converts into value, and the proportionate Energy Cost of Energy, are nowhere to be found in standard texts...
..The “real” economy operates by using energy to convert other natural resources – minerals, non-metallic mining products, chemicals, biomass and water – into goods, and into those artefacts and infrastructures without which no worthwhile service can be supplied.....The rate at which raw materials convert into products and artefacts has been degraded gradually by depletion. The ... Energy Cost of Energy – has been rising relentlessly, climbing from 2.0% in 1980, and 4.3% in 2000, to more than 11% today...
..It has always been obvious that growth must end eventually, since infinite economic expansion is a logical impossibility on an ultimately finite planet. This wouldn’t matter all that much if the moment of inflexion lay 100 years or more in the future. What really matters is whether the economy will stop growing and start to shrink within a relevant timescale.This question has now been answered in the affirmative. We know, at very high levels of confidence, that meaningful economic growth is ending, and that contraction lies ahead... These conclusions have been reached through an analytical path from first principles, but have abundant observational confirmation in events and trends that we can see around us...
..Broadly speaking, there are two schools of thought about happens when growth ends and contraction begins. One predicts chaotic collapse, and the other a gradual and perhaps manageable decline...
..First, which economy are we addressing? Will it be the “financial” economy that either collapses or contracts, or does one or other of these fates lie in store for the “real” economy of the material?Second, neither set of prophecies takes account of the critical process of economic evolution. Growth has never been a matter of ‘a little more, year after year, of exactly the same thing’. The economy has always evolved in shape and character, and will not cease doing so as it moves from growth into contraction...
..What we should anticipate is that the polarity of economic evolution will reverse. Hitherto, evolution has taken the combined form of ever-greater complexity and ever-more financialisation. From here on, the trend of evolution will be towards the simplified and the de-monetised...
..Financialisation involves an increase in the amount of monetary activity associated with any given quantity of material economic output.It’s noteworthy that a high proportion of economic activity was informal at the start of the industrial age. It’s been reckoned that, in Early Modern times – roughly 1500 to 1750 – only 20-30% of economic activity was monetised at all... It’s hard to tax informal economic activity, and equally difficult to make much of a profit out of it. Monetisation proceeded only gradually in the wake of industrialisation...
..With the specialist exception of monopolies of colonial trade – as in the British and Dutch East Indies – no large commercial enterprises would exist until the railway boom of the 1840s. Indeed, nobody even saw a need for the limited liability corporate structure until the 1850s. Until then, the economy wasn’t monetised enough for this to be necessary, and small firms predominated...
..Only later would the commercial world start to experience the rise of big business, the emergence of an executive class and “the divorce between ownership and control”. In these terms, the development of the railway was a lot more significant than the harnessing of steam itself. Steam engines could power mills and factories, which remained small-scale enterprises – but railways needed standardised steel products in abundance, a big supply of literate and numerate labour, and access to large pools of capital. Financialisation has proceeded hand-in-hand with complexification, with the latter often used as a reinforcement for the former... Vehicles have always needed electrics – lights, ignition, instruments and so on – but electronics have added comparatively little in the way of utility for the consumer. Rather, the aim has been to impose post-sale financial liens on the customer. This was exemplified when BMW announced, in 2022, that the heated seats on its cars would cease to work unless purchasers took out an $18/month subscription. This was quietly dropped, perhaps because it was a too-blatant case... But the general direction of travel has remained that of value-extracting, over-the-air control of vehicles after sale, enacted through advanced electronics. For the manufacturer, one great advantage of this imposed complexity is that owners and small workshops cannot maintain and repair advanced electronics...
..Industry preference will have very little say in what happens from here. Just as prosperity is declining, so the real costs of energy-intensive necessities are rising relentlessly. If the automobile industry is to survive into this future of contracting affordability, cars will have to become both longer-lived and cheaper to purchase and maintain. In essence, changing economic conditions will impose simplification on the industry.....This simplification, with its associated de-financialisation, forms a tendency that Barry Cooper calls localism, a process whereby failing centralised, top-down systems are replaced by localised, bottom-up alternatives. Much of Cooper’s analysis is based on the elimination of costs associated with complexity... "In many private care homes, particularly those owned by private equity, debt repayment alone can account for 10–20% of total care fees”.
This, Cooper says, “is public money, not used to improve lives but to finance commercial borrowing”. It’s also something that can no longer be afforded.
Likewise, food has become excessively expensive because, during the long years of complexification, numerous interim stages have been interposed within extended supply-chains between the grower and the consumer of food...
..None of this – localism, informality of employment, at-home care for the elderly and the infirm, the replacement of top-down institutional systems and the elimination of intermediary stages – might sound like a winning political manifesto. But this is beside the point, since – as with the automobile industry, cited earlier – alternatives will be eliminated by the ending and reversal of growth.This, Cooper says, “is public money, not used to improve lives but to finance commercial borrowing”. It’s also something that can no longer be afforded.
Likewise, food has become excessively expensive because, during the long years of complexification, numerous interim stages have been interposed within extended supply-chains between the grower and the consumer of food...
“Middle-men” will be removed from supply systems by the same processes that are already depressing the affordability of discretionary (non-essential) products and services. The employees made redundant by these trends will be absorbed into an economy in which human labour starts to replace declining supplies of exogenous energy.
For the planner, the point to grasp is that the ending and reversal of growth – a process that we cannot prevent – will introduce trends tending irresistibly towards simplification and de-financialisation.Governments will need to seek solutions of quality, now that solutions of quantity, predicated on growth, have ceased to be possible. Businesses will be driven by practical conditions towards simplification of product and process.
Ultimately, there’s no reason why the “real” economy of the material shouldn’t contract in a reasonably manageable way. But the complex will fail. https://
Hegseth is the wife-beating "traitor" IMHO: 'Betrayal': Internal Pentagon Spat Emerges Over Leaked Middle East Deployment Plans
A number of US military top generals have taken the rare step of formally registering warnings to Pentagon chief Pete Hegseth over potential plans for a new phase of strikes against a non-compliant Iran.
The warnings reportedly emerged through the Secretary of Defense Orders Book, which enumerates the availability of US military resources and force posture around the world - with direct input from American regional commanders. That section from the WaPo report reads as follows: Army and Air Force leadership concurred with Hegseth’s desire to extend their deployed forces, but each emphasized that doing so would come with significant risk, these people said.
Overall, the tenor from the military leadership is that the ongoing Iran operation, having reached the six-month mark, has been “too much for too long,” said one person familiar with the assessment.
The military’s warning to Hegseth, which has not been previously reported, offers new insight into the administration’s dilemma as Trump seeks to end the conflict on terms favorable to the United States while Iran, cognizant of the war’s unpopularity with most Americans and its mounting toll on the U.S. arsenal, refuses to capitulate...
Overall, the tenor from the military leadership is that the ongoing Iran operation, having reached the six-month mark, has been “too much for too long,” said one person familiar with the assessment.
The military’s warning to Hegseth, which has not been previously reported, offers new insight into the administration’s dilemma as Trump seeks to end the conflict on terms favorable to the United States while Iran, cognizant of the war’s unpopularity with most Americans and its mounting toll on the U.S. arsenal, refuses to capitulate...
Details from Times of India: 4 General & Admirals disagreed with continuation of Iran War, a "Non-Concur" documented in writing.
Iran's Pezeshkian Gets Red Carpet Treatment Alongside Putin, Xi, Modi & Erdogan At Eurasian Summit Iranian President Masoud Pezeshkian is busy getting the red carpet treatment while attending the annual Shanghai Cooperation Organization (SCO) Summit. Chinese President Xi Jinping, his Russian counterpart, Vladimir Putin and Indian Prime Minister Narendra Modi have arrived in Kyrgyzstan's capital Bishkek for the annual Shanghai Cooperation Organisation (SCO) Summit - the primarily China/Russia founded Eurasian political, economic and international security organization which is now made up of ten member states. https://www.
Gold & Geopolitics, Daily digest: 2026-09-01
Two things genuinely broke overnight: the Japanese government bond curve (10Y through 3% for the first time since 1996, 30Y at an all-time high) and the Hormuz shipping truce, with a Saudi VLCC struck by three missiles and Maersk reporting two supertankers hit. Everything else is continuation with harder numbers - the SPR is at a 44-year low with 34 million barrels of statutory headroom left, the US diesel crack is knocking on $100/bbl, and Russia has taken Odesa's port complex offline. The one genuinely new institutional story: the Army Secretary and his deputy both walked inside 24 hours...
..The Kharg Island footage was synthetic. Trump posted video captioned as Kharg being destroyed; the Defense Department then denied the US struck it. shanaka86 has the full chronology including Reuters' AI-detection result and NIOC's response. Corroborated by financialjuice and thesiriusreport. The actual operation was 660km east: two rocket launchers on Larak Island...
..On Larak: Mark4XX relays a Malcolm Nance reading that the Fajr-5 launchers were positioned to deliver smart mines into the Fujairah anchorage rather than the strait itself - the tanker parking lot the mine-clearance announcement never covered. Single-source, but a coherent explanation for why Larak specifically...
..Bonds: the JGB break drags every sovereign curve with it - Japan's move is not isolated. France's 30Y hit 4.9274%, highest since September 2008 (DeItaone); the French 10Y is at post-GFC highs (Barchart); Germany's 10Y Bund at 3.31%, highest since 2011 and ~18bp below the 2011 peak (Schuldensuehner); Australia's 10Y at its highest since 2011; Italy's 10Y up 5bp to 4.15% (zerohedge).
The US 10Y topped 4.75%, highest since January 2025, and zerohedge flags that the move is being driven by TIPS with breakevens barely moving - so it's supply, demand, or growth, not inflation expectations.
Twelve days after the Treasury's buyback intervention was announced, yields are at a 19-month high (KobeissiLetter)...
The US 10Y topped 4.75%, highest since January 2025, and zerohedge flags that the move is being driven by TIPS with breakevens barely moving - so it's supply, demand, or growth, not inflation expectations.
Twelve days after the Treasury's buyback intervention was announced, yields are at a 19-month high (KobeissiLetter)...
..SPR: 34 million barrels of headroom, and Venezuelan crude that physically will not go in the caverns. https://no1sdailydigest.
Two independent physical objections, from people who do this for a living: the SPR caverns cannot store 10-gravity Venezuelan heavy in their current configuration (DonMiami3, oilmutt - and chigrl publicly thanked him for the correction).
Trump Mulling New 'Limited' Strike Package, After Iranian Attack On Jordan Base https://www.zerohedge.com/
Gold & Geopolitics, Daily digest: 2026-08-31
The Iran war restarted overnight after five quiet weeks: the US hit missile launchers on Larak Island, Iran answered with ballistic missiles at two US airbases in Jordan and drones at Al Minhad in the UAE, and a supertanker in the US-escorted southern Hormuz corridor caught fire on two naval mines. Brent gapped back above $90 and Hormuz transits collapsed to five vessels a day. Everything else - Sumy villages falling, ag futures streaking, Warsh's hawkish hangover - is continuation, but the Patriot interceptor burn rate and the leaked Pentagon "non-concur" are the two numbers that actually changed the picture.
US strikes Larak Island; Iran retaliates against US bases in Jordan and the UAE. First US strike on Iranian territory in ~30 days per HormuzLetter, targeting two IRGC missile launchers (Axios via zerohedge, MenchOsint). IRGC says the strike killed and wounded soldiers and civilians (BRICSinfo); MoloWarMonitor reports two IRGC soldiers killed and several injured, drone launched from a base in Jordan. Iran's response: ballistic missiles and Shahed-136 drones at two Jordanian airbases (jonelmer), drones at Al Minhad in the UAE (AJENews, ejmalrai), sirens in Qatar over Al Udeid (MenchOsint), and an MQ-9A downed (MenchOsint)... US line: "no significant impacts, nearly all incoming intercepted" per a Fox source (CrusadeAgain). IRGC claims destroyed jets and technical/repair infrastructure at both bases.
Patriot magazine burn is the strategic story, and the numbers diverge. HormuzLetter counts 96–160 PAC-3 MSE fired at 32–40 Iranian ballistic missiles - 3–4 rounds per inbound, $380–640M in one night - and notes two or three more nights like it empties the Jordan magazines, with each MSE taking ~2 years to build. Intel_Sky puts it at 80 to over 100 MIM-104F from two batteries relocated from Ansbach, Germany. Sources disagree on the count.....Pataramesh reads Iran's calculus as exactly that: depleting PAC-3 stocks and adding MQ-9 kills, and finds it odd the US voluntarily re-entered the cycle. Classified Pentagon assessment: prolonged Iran ops are unsustainable, and four commands filed "non-concur". Leaders of EUCOM, PACOM, SOUTHCOM and the Navy's top admiral formally disagreed with the Secretary of Defense's orders while agreeing to execute them, per the Secretary of Defense Orders Book (prestonstew_, WaPo). HormuzReport adds the substance: munitions stockpiles critically depleted, logistics and personnel at breaking point, exposure to opportunistic escalation by Russia or China. MarkAmesExiled frames the leak wave as the closest thing to a senior command mutiny...
..Venezuela: the SPR "gift" meets tank specs and 20x arithmetic - Trump says he'll fill the Strategic Petroleum Reserve with Venezuelan crude, calling it a "gift" (KobeissiLetter, DeItaone, MenchOsint). zerohedge reports the Pentagon taking a 35% equity stake in Venezuelan oil. .Two independent physical objections, from people who do this for a living: the SPR caverns cannot store 10-gravity Venezuelan heavy in their current configuration (DonMiami3, oilmutt - and chigrl publicly thanked him for the correction).
The scale objection: 65 billion barrels of proven reserves is meaningless on this timeline, because Venezuela would need to raise production roughly 20x to offset the Hormuz shortfall, which takes years, while the SPR runs critically low before end-2026 (MBAeconomics1)...
..Sovereign debt: 18.5% of federal revenue goes to interest, a new record - US annual interest expense hit 18.5% of federal revenue, above the 1991 record of 18.4%, at $1.25 trillion - quadrupled in four years. The 30Y sits at ~5.21%, 13bps from its highest since 2007. The 1991 comparison is brutal: back then the 30Y was near 8.00% (KobeissiLetter). https://no1sdailydigest.Army Secretary Dan Driscoll Submits Resignation Amid Tensions With Hegseth https://www.zerohedge.com/
The Financial Times reported there is no evidence of oil money returning to Venezuela, as claimed by Trump, and that Venezuela’s GDP in the first quarter was its lowest in five years. Oil makes up virtually a quarter of the country’s GDP.
“Trump’s invasion of Venezuela has been about oil, power, and graft from the very beginning, with billions of dollars in Venezuelan oil revenue being controlled by the Trump administration without transparency or safeguards,” Democratic Representative Joaquin Castro told the FT.
Swiss company Vitol is involved in shipping Venezuelan oil to Israel, which is used in part to fuel its apartheid and ongoing genocide against Palestinians in Gaza and attacks on Shia communities in southern Lebanon. Vitol’s Saras refinery in Sarroch, Sardinia, Italy provided 17% of Israel’s imports of oil and refined products.
“At a time when Palestinians are being slaughtered, ethnically cleansed, and deprived of the most basic necessities,” declared Maren Mantovani with the Palestinian-led BDS movement, “any company fueling Israel’s genocide, apartheid and military occupation is deeply complicit and must be held accountable—as should its executives and board members, according to international law.”
In February, it was reported the first shipment of heisted oil went to Israel. The shipment was not the result of a decision made by Venezuela or its Petróleos de Venezuela (PDVSA), but rather as “an indirect consequence of the reconfiguration of the global energy market orchestrated by Washington,” writes Misión Verdad for the Orinoco Tribune.
On February 10, Bloomberg Línea, a Spanish and Portuguese language news website, reported the oil cargo was transported to the Bazan Group, an oil refining and petrochemicals company located in Haifa Bay, Israel. It is the largest refinery in Israel. https://www.globalresearch.
“Trump’s invasion of Venezuela has been about oil, power, and graft from the very beginning, with billions of dollars in Venezuelan oil revenue being controlled by the Trump administration without transparency or safeguards,” Democratic Representative Joaquin Castro told the FT.
Swiss company Vitol is involved in shipping Venezuelan oil to Israel, which is used in part to fuel its apartheid and ongoing genocide against Palestinians in Gaza and attacks on Shia communities in southern Lebanon. Vitol’s Saras refinery in Sarroch, Sardinia, Italy provided 17% of Israel’s imports of oil and refined products.
“At a time when Palestinians are being slaughtered, ethnically cleansed, and deprived of the most basic necessities,” declared Maren Mantovani with the Palestinian-led BDS movement, “any company fueling Israel’s genocide, apartheid and military occupation is deeply complicit and must be held accountable—as should its executives and board members, according to international law.”
In February, it was reported the first shipment of heisted oil went to Israel. The shipment was not the result of a decision made by Venezuela or its Petróleos de Venezuela (PDVSA), but rather as “an indirect consequence of the reconfiguration of the global energy market orchestrated by Washington,” writes Misión Verdad for the Orinoco Tribune.
On February 10, Bloomberg Línea, a Spanish and Portuguese language news website, reported the oil cargo was transported to the Bazan Group, an oil refining and petrochemicals company located in Haifa Bay, Israel. It is the largest refinery in Israel. https://www.globalresearch.
UN ‘very concerned’ over Gaza civilian deaths as Israel continues ceasefire breaches
Spokesperson Stephane Dujarric warns funding shortages and Israeli restrictions are impeding flood-risk mitigation ahead of Gaza's rainy season https://www.aa.com.tr/en/
Spokesperson Stephane Dujarric warns funding shortages and Israeli restrictions are impeding flood-risk mitigation ahead of Gaza's rainy season https://www.aa.com.tr/en/
All Christian schools in Jerusalem shut after Israel refuses entry to Palestinian teachers - Israeli authorities have reportedly not renewed access permits required for educational staff to enter the Holy City https://www.rt.com/news/
Five Palestinians killed, others wounded in Israeli attacks in Gaza https://english.palinfo.com/
‘I Am an American Citizen Under Siege by Israeli Settler Extremists’ - Palestinian-American Loui Ridi speaks to Prem from his home in the occupied West Bank, which has been surrounded by settlers for weeks while Israeli soldiers and the U.S. government largely sit by. https://israelpalestinenews.
Meryl Nass MD, NY Times features Israeli settler terrorism in deep article - It seems even the Times realizes this will lead to the end of Israel and is finally being honest about it. https://merylnass.substack.
Israel bars access to new lands east of Jerusalem as Hamas warns of settlement expansion https://english.palinfo.com/
Israel Restricts Cooking Gas Into Gaza, So We Must Burn Toxic Plastic to Cook https://israelpalestinenews.
American news crew attacked by masked Israeli settlers in West Bank https://www.arabnews.com/middle-east/american-news-crew-attacked-by-masked-israeli-settlers-in-west-bank-2656319
Israel continues enforced disappearance of thousands of Gaza detainees for third consecutive year https://english-wafa-ps.translate.goog/Pages/Details/174216?_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=wapp
School starts soon in Lebanon but thousands still shelter in them during war https://apnews.com/article/lebanon-displaced-schools-shelters-israel-war-e2fbcb914de19fd9b24e79498e219e43
Lebanon will not waive right to sue Israel over ‘genocide crimes’: Parliament speaker - Nabih Berri rejects June framework agreement and questions outcome of 7 rounds of Lebanon-Israel talks https://www.aa.com.tr/en/
AI-enabled Cyber Attacks Pose Major Threat to Global Financial System, Warns Financial Stability Board ,Nick Corbishley
G20 finance ministers are being urged to prepare for “more severe scenarios involving simultaneous disruption across multiple firms or shared technology dependencies”.
The main players ex Nvidia are showing paltry revenues on their huge and growing capex, let alone anything that could be charitably called profit, and no prospect of the needed monster increases in both overall consumption and payments per user and/or task1 Ponzi-like circular financing is a huge red flag.
Yet the overall trajectory seems clear: massive and growing and allegedly absolutely necessary increases in outlay, with no prospect of even adequate returns. Even the once very cash-rich Big Tech incumbents who are all in on this break-the-economy wager lack sufficient internal resources. They also recognize that even equity issuance will not provide enough dough. So they have been and expect to continue to rely on debt. As established readers likely know, it is excessive private debt that causes financial crises. If it is merely one layer of leverage (think the Japan real estate and stock market bubbles), the outcome even with a very very big overhang tends to be a deep downturn and what Richard Koos has called a balance sheet recession. If the borrowings are also levered, as in the runup to the 1929 Great Crash2 or the 2007-2008 crisis, the result can be a catastrophic fast meltdown that imperils the payment system, and not just wealth...
Merz Warns Right-Wing Victory Will Hurt Germany, But Nomura Says Investors Aren't Buying It https://www.zerohedge.com/political/merz-warns-right-wing-victory-will-hurt-germany-nomura-says-markets-arent-buying-it
[I think Hasan Piker is a Mossad asset, myself] Caitlin Johnstone, Israeli Officials Promote Antisemitic Conspiracy Theories About Israel https://www.caitlinjohnst.
EU Commandos Board 6th Russian 'Shadow Fleet' Tanker After Putin Threatened Reverse Action
Another Russian 'shadow fleet' tanker has been boarded by European forces - and this time the provocative action took place in Mediterranean waters. In a Monday post on X, Kaja Kallas announced the action by troops under the EU's Operation Irini. They boarded the MV Sun tanker for "flag verification," following suspicions that the vessel was in violation of international law.
"Illegal oil sales from shadow fleet ships are a critical lifeline for Russia’s war in Ukraine, and we’ll continue to cut them off," Kallas wrote of what marks the sixth shadow fleet ship to be boarded in recent months. https://www.
"Illegal oil sales from shadow fleet ships are a critical lifeline for Russia’s war in Ukraine, and we’ll continue to cut them off," Kallas wrote of what marks the sixth shadow fleet ship to be boarded in recent months. https://www.
Moon of Alabama, Attacking Russian refineries and civilians made Russia respond harshly. How Ukraine’s 40-Day Campaign Has Influenced Russia https://www.moonofalabama.
Gilbert Doctorow looks at potential Russian "5th Generation Warfare": New Kremlin War Strategy: make Kiev uninhabitable, create flood of refugees to destabilize Europe https://gilbertdoctorow.
Caitlin Johnstone, Today In Dystopia: ICE Robots And Pentagon Puppets
I guess it makes sense that the empire’s mad rush to normalize police robots would be spearheaded by the department responsible for persecuting immigrants; there’d be more domestic pushback if these dystopian machines were patrolling the streets targeting less marginalized populations. I still can’t stand how the western political/media class keeps calling these things “dogs” to make them seem cute and familiar so that people won’t recognize them for the autonomous dissent suppression weapons they are intended to become. https://www.caitlinjohnst.G20 finance ministers are being urged to prepare for “more severe scenarios involving simultaneous disruption across multiple firms or shared technology dependencies”.
The data centres not only threaten to wreak unprecedented environmental damage or facilitate cyber attacks on the financial system, as Daniela Gabor notes above; they are also the backbone of the digital surveillance state that is quickly taking shape around us, allowing vast amounts of personal data to be collected, stored, and analysed by AI systems at unprecedented scale. https://www.nakedcapitalism.
Yves Smith, AI Off-Balance-Sheet Obligations Hit a Subprime-Like Reset Wall in 2027 and 2028
Yet the overall trajectory seems clear: massive and growing and allegedly absolutely necessary increases in outlay, with no prospect of even adequate returns. Even the once very cash-rich Big Tech incumbents who are all in on this break-the-economy wager lack sufficient internal resources. They also recognize that even equity issuance will not provide enough dough. So they have been and expect to continue to rely on debt. As established readers likely know, it is excessive private debt that causes financial crises. If it is merely one layer of leverage (think the Japan real estate and stock market bubbles), the outcome even with a very very big overhang tends to be a deep downturn and what Richard Koos has called a balance sheet recession. If the borrowings are also levered, as in the runup to the 1929 Great Crash2 or the 2007-2008 crisis, the result can be a catastrophic fast meltdown that imperils the payment system, and not just wealth...
..Here is the guts of Groundbreaker’s explanation of why the upcoming take-or-pay compute obligations are not properly accounted for and will create a huge shock when they come due:
The take-or-pay compute contract – the instrument at the center of the AI build-out – has a structural feature that almost no one prices: its payments do not begin at signing. They begin at delivery. A lab signs a multi-year capacity commitment today, but the payments do not start until the data center is energized, the capacity is accepted, and the contractual ramp schedule commences – an interval set not by finance, but by construction: siting, powering, and filling a gigawatt-scale campus takes 24-to-36 months from signature – mirroring the two-to-three-year teaser of a subprime ARM.
More than $2.3 trillion of compute contracts now sit on the books of the four largest American cloud providers as remaining performance obligations and contracted backlog – signed, celebrated, capitalized into equity prices, and, critically, not yet billing.
During the teaser period, everyone wins. The seller reports backlog growth that compounds at rates no operating business has ever sustained – Oracle’s RPO grew 363% in a single fiscal year. The buyer – a frontier lab burning cash at historic rates – books no expense because the capacity does not yet exist. The market capitalizes the booked number as if it were revenue and ignores the billed number as if it were a technicality. And then, on a schedule fixed at signing, booked compute becomes billed compute. The take-or-pay clock starts. From that day forward, the frontier labs and the hyperscalers incur those costs regardless of utilization. The invoice is a function of the contract, not of demand. That is the reset.
The parallel to 2006 is exact and it explains the single most-cited absurdity of this cycle: How does OpenAI, a company with some $40 billion of run-rate revenue, sign $1.4 trillion of compute commitments? The same way a household with $60,000 of income signed a $600,000 mortgage: because the terms at signing do not require the payment yet, and because everyone at the table – borrower, lender, and the market – believes the growth will arrive before the payment does...
..The take-or-pay compute contract is the financing innovation of this cycle the way the 2/28 was the financing innovation of the last one, and it emerged for the same reason: an asset too expensive for its natural buyer had to be made buyable. The take-or-pay compute contract – the instrument at the center of the AI build-out – has a structural feature that almost no one prices: its payments do not begin at signing. They begin at delivery. A lab signs a multi-year capacity commitment today, but the payments do not start until the data center is energized, the capacity is accepted, and the contractual ramp schedule commences – an interval set not by finance, but by construction: siting, powering, and filling a gigawatt-scale campus takes 24-to-36 months from signature – mirroring the two-to-three-year teaser of a subprime ARM.
More than $2.3 trillion of compute contracts now sit on the books of the four largest American cloud providers as remaining performance obligations and contracted backlog – signed, celebrated, capitalized into equity prices, and, critically, not yet billing.
During the teaser period, everyone wins. The seller reports backlog growth that compounds at rates no operating business has ever sustained – Oracle’s RPO grew 363% in a single fiscal year. The buyer – a frontier lab burning cash at historic rates – books no expense because the capacity does not yet exist. The market capitalizes the booked number as if it were revenue and ignores the billed number as if it were a technicality. And then, on a schedule fixed at signing, booked compute becomes billed compute. The take-or-pay clock starts. From that day forward, the frontier labs and the hyperscalers incur those costs regardless of utilization. The invoice is a function of the contract, not of demand. That is the reset.
The parallel to 2006 is exact and it explains the single most-cited absurdity of this cycle: How does OpenAI, a company with some $40 billion of run-rate revenue, sign $1.4 trillion of compute commitments? The same way a household with $60,000 of income signed a $600,000 mortgage: because the terms at signing do not require the payment yet, and because everyone at the table – borrower, lender, and the market – believes the growth will arrive before the payment does...
A frontier lab cannot fund a gigawatt campus out of revenue, just as a subprime borrower could not fund a house at the fully-indexed rate. In both cases the solution was an instrument that splits time in two – a cheap phase that gets the deal signed, and an expensive phase scheduled far enough out that the market ignores it...
..However, AI spending is a far bigger contributor to GDP growth now than residential housing was in 2007. It’s been estimated at nearly half. So a sudden fall in AI capex would drag down any growth, even before getting to the recessionary-or-worse impact of an AI equity bubble implosion. And we don’t know how much damage-multiplying leverage on leverage is at work, but there is some and perhaps quite a lot. https://www.nakedcapitalism.
He found a limiting spot: "Profound Game-Changer": Musk Launching New Turbine Blade Factory To Solve Shortage Threatening AI Boom https://www.zerohedge.com/technology/profound-game-changer-musk-launching-new-turbine-blade-factory-solve-shortage
Holding a month's worth of cash might not be wrong, "Prepare For More Severe Scenarios": Bank Of England Chief Warns Of AI Threat To Global Financial System https://www.zerohedge.com/ai/prepare-more-severe-scenarios-bank-england-chief-warns-ai-threat-world-financial-system
The FCC has 30 days to explain why it hasn’t complied with a 2021 court order requiring the agency to reveal how it determined that current radiofrequency radiation exposure limits adequately protect people and the environment. The ruling stems from a petition Children’s Health Defense filed earlier this year to obtain the information. https://childrenshealthdefense.org/defender/court-gives-fcc-30-days-respond-chd-petition-wireless-harms/
The controversial 2025 Danish study claimed to find no link between aluminum in childhood vaccines and 50 negative health outcomes, including autism, asthma and autoimmune disorders. However, a new peer-reviewed article by Children’s Health Defense scientists outlines how the Danish study’s own data contradict the authors’ conclusion. https://childrenshealthdefense.org/defender/danish-study-claim-aluminum-vaccines-safe-chd-scientists-call-for-retraction/
Recent legislation in Michigan would mandate health coverage for Pediatric Autoimmune Neuropsychiatric Syndrome (PANS). Parents cite greater need for expanded federal insurance coverage for children suffering from the condition. “Many people say PANDAS and PANS are controversial disorders,” one parent wrote. “But those of us who have lived it know too well that this illness is real.” https://childrenshealthdefense.org/defender/brain-fire-parents-fight-insurance-coverage-children-pans-pandas/
Steve Kirsch, President Trump retweeted my tweet on autism and the Amish - My post on Amish unvaccinated kids not having autism got picked up by President Trump. - Nobody in the Amish community has ever heard of an unvaccinated Amish kid with that autism. https://kirschsubstack.com/p/president-trump-retweeted-my-tweet
Meryl Nass MD noticed, too: President Trump just published this on Truth Social
It seems he is serious about getting the millions who want informd consent for vaccination back on his side. https://merylnass.substack.com/p/president-trump-just-published-thisClimate Physicist, Anastassia Makarieva, Biotic Pump Q&A #4: Why Is There So Little Summer Rain on the Forested Oregon Coast? https://bioticregulation.substack.com/p/biotic-pump-q-and-a-4-why-is-there
Waiting For Rain (pictured with tall okra and young black-eyed peas)
