Menu Icon

Debt Rattle October 1 2026

Oct 012026
 
 October 1, 2026  Posted by at 9:40 am Finance Tagged with: , , , , , , , ,  1 Response »


Hieronymus Bosch St. Jerome in Prayer 1482


• Mark Carney Nominated For Just About All Major Awards (CTH)
• Why Is Mark Carney Preparing for an American Invasion? (Victor Davis Hanson)
• Mark Carney Blames USA for Layoffs of Canadian Steel Workers (CTH)
• Trump Notes Super Intelligence Team 4 Points for SI Frontier Research (CTH)
• SpaceX ‘Failure’ Makes Big Bank — $200 Million in 1st Year (Charlie Martin)
• Sen. Hawley Confronts Jack Smith During Explosive Senate Committee Hearing (CTH)
• US Ambassador Tells Greek Minister Washington Can Topple Any Government (ZH)
• FTC Launches ‘Rogue AI’ Probe Of OpenAI, Anthropic (ZH)
• Russian and Ukrainian Pilots Save Hijacked Flight to Israel (Salgado)
• Trump Admin Touts 96% Drop In Immigration From Muslim Countries (Whedon)
• Supply-side Economics Explained (Paul Craig Roberts)

 

 

 

 


You would be excused for thinking this is a joke. It is not. It’s Associated Press.

The rewards for “standing up to” President Trump.

It doesn’t matter to which degree this is true. Mentioning it is bad enough.

“Canadian Media Report Mark Carney Likely to Accept Nobel Prize Award, Time Magazine Person of Year and Pope Leo XIV Veneration to End 2026..”

• Mark Carney Nominated For Just About All Major Awards (CTH)

Canadian Media Report Mark Carney Likely to Accept Nobel Prize Award, Time Magazine Person of Year and Pope Leo XIV Veneration to End 2026 In a remarkable series of events, Canadian TV (CTV) is reporting that Canadian Prime Minister Mark Carney is likely to win the Nobel Prize for Peace, the Time Magazine Person of the Year Award and public veneration by Pope Leo XIV to culminate a year when the European Union is now meeting to decide which capitals will host the monuments and statues.


All of these timed accolades are related to Carney’s spectacular position as the world’s leading opponent to United States President Donald J Trump. No single person has ever won such incredible distinctions in a single year. The Associated Press is now reporting the news:


TORONTO — Mark Carney built a global profile in 2026 by standing up to U.S. President Donald Trump. If some prediction-market traders and prominent admirers are right, the Canadian prime minister could end the year with the Nobel Peace Prize and Time magazine’s Person of the Year. Carney briefly became the favourite Monday for the 2026 Nobel Peace Prize on Kalshi, a U.S.-based prediction market, when traders on the exchange put his chances at 14 per cent. His odds later fell, illustrating the highly speculative nature of the wagering.

There is no public evidence Carney is on the Nobel Committee’s secret shortlist for the prize that will be announced Oct. 9 in Oslo, Norway. But the buzz about the Canadian leader possibly winning the esteemed peace prize reflects the message that has raised his profile: Middle powers should band together to defend sovereignty as great powers increasingly use economic and military leverage. Whether that position resonates with the Nobel Committee is impossible to know. One thing is certain, though: the Nobel and Time’s annual award happen to be two honours Trump covets. (read more)

Read more …

Because it fits the anti-Trump crowd.

• Why Is Mark Carney Preparing for an American Invasion? (Victor Davis Hanson)

I am going to mention Canada again. I know we’re getting tired of this subject because, after all, Canada is our closest ally, closest friend, the country that is most like the United States, or so we’ve been told. But [Prime Minister] Mark Carney is doing things that we have never seen or heard before in Canada. His latest is he tells a reporter that, yes, he has thought of preparing the Canadian military to prepare for an invasion by the United States. That is absolutely insane when the United States has protected, since World War II, the entire North American continent.



Canada has never had missiles launched into its airspace. It has never had its claims, extravagant though they are, in the Northwest Passage and the Arctic challenged by China or Russia or any hostile power due to the U.S. military. The idea that the protector of Canada, the protector who allowed Canada to disarm, is preparing an invasion is absurd, and it’s an insult.

And Carney is doing this, once again, to jack up opinion in Canada for a new nationalism to avoid the great dissatisfaction in Alberta and Quebec, and especially to try to influence the midterms in the United States and to otherwise mask his unpopular socialist globalist agenda.

But when he said to the world that the United States, he thought, could invade Canada militarily, and when he reached out to Communist China and is basically seeing them as one of its two new trading partners, given its record in cheating on trade, its human rights violations, and the horrendous legacy of the Communist Party since Mao Zedong in China, and he’s preferring that now over the tradition of American friendship.

And then at the same time, as he warned the world that he was preparing or he could prepare for an American invasion, at the same time he’s reached out to the EU, the European Union. Canada has 75% of all of its trade and its exports with the United States. It has 5%—5%—with the EU, and yet he’s reaching out for a new trade partner as if he thinks the EU, which is one of the most protectionist entities in the world, is going to drop its tariffs and its barriers to benefit Canada’s 5% trade with the EU.

This is insane. More importantly, he doesn’t quite understand that of all, in this dispute, it’s over 2%. The tariffs are over 2% of the trade, which everybody agrees was almost tariff-free.

All the United States was saying is that we’re tired of 250% tariffs once we get over a certain number of exports into Canada, and we don’t like, at the 11th hour, slapping 5% on our digital media companies so that we have to subsidize your acculturation in Canada or promote the French language or Indigenous people, and these are American companies.

We don’t do that to Canada, of course. And we did resent, at the last moment, telling us that you were going to allow cheap Chinese metals to come into your economy so that they can be reassembled and sent as finished vehicles into the United States and therefore allow China to avoid tariffs. We resented that, but it still only represented 2%, and yet that sent Carney wild.

He doesn’t realize, though, what he’s getting into, as I said. Not only do his children live there in the United States, not only did he go to school, as they did, in the United States, not only did his 91% investment portfolio reside in the United States, but Canada is the most favored nation of all the nations in the world as far as tariffs go with the United States.

Canada is the only country, as I’ve said before, where you can come into the United States without a visa and work immediately for six months, as 1 million Canadians do as I speak. Canada doesn’t have to deal with 10,000 illegal immigrants coming from Latin America on their way into North America. It doesn’t have to deal with the dangerous cartels that kill 100,000 Americans in some years. It doesn’t have to deal with Chinese fentanyl going into Mexico to be repackaged as designer drugs to kill Americans.

It doesn’t have to deal with that because the United States is a barrier to Canada. It has the longest unenforced border with the United States. We don’t treat Canada the way Mexico treats us, or rather, we ensure that Mexico doesn’t treat Canada the way it treats us. People in Canada are not sending back $65 billion out of their economy. All we’re saying is that year after year after year, Canada should try to reduce a $50 billion surplus.

It should try to at least match or exceed the NATO promise that it made to spend 2% of [gross domestic product] on defense, and it needs to discuss any other issues in a sober and judicious manner rather than walk out at the 11th hour and tell nobody. And so, what’s gonna happen is we’re watching—when he said the latest, Carney said the latest about a veritable war, the American people’s ears perked up.

And you can talk all you want in Canada about elbows out and how chauvinistic you are and how you’re gonna cut off the tar sands oil to the United States and all the terrible things you’re gonna do, and you’re going to get China on your side and the EU. They’re not going to do it. The United States has a $30 trillion economy. It’s $10 trillion larger than the EU. It’s $10 trillion larger than China. There are no transportation costs for Canada just to walk across the border with 75% of its trade.

What Carney is basically saying is: I’m not gonna tell you what I said in these negotiations and why I walked out. I am going to misrepresent it. I won’t give you a transcript. I got my ministers to back me up. No discussion. He’s saying this because he had ulterior political motives. But he sacrificed the viability, not just the economic viability, the viability of Canada, which was heavily reliant on the U.S. military, the goodwill of the American people, and the U.S. economy.

I’d just like to finish why he’s doing this and why the Canadians are reacting in such a Pavlovian manner to follow his prompt. This is not the Canada that we used to know that was proud, confident, had a glorious record in World War II, a strong military, a strong economy, developed in a very sober and judicious manner its rich treasure house of natural—sir, not after Justin Trudeau and Mark Carney.

We in the United States did not cause this problem. We did not say to Canada, “You better let in 45% of your current population from foreign countries who were not born in Canada or their parents weren’t born, and they’re not gonna be assimilated and integrated in melting-pot fashion.” We did not say, “Forego all of the rich fossil fuels in your country. Stop pipelines to other provinces from Alberta and stress green energy, solar power in frigid Canada, so to speak.”

We did not say to you, “Craft your economy so of all the 30-something industrial Western nations, you will have the least amount of per annum GDP growth.”

We did not do it, much less [President] Donald Trump. He did not say to Canada, “You can’t have the same familial GDP as we are. You have to be $30,000 to $40,000 poorer per person and per family than we are.”

We didn’t say to the Canadians, who are a strongly moral and ethical people, “You shall lead the world in assisted suicides, 5.1% of all your deaths, 19,000 people a year, ostensibly to save overwhelming health care costs for people who may be terminal because the economy doesn’t support that. The economy doesn’t support open borders and the amount of immigrants who are coming in. The economy doesn’t support fulfilling your defense needs. The economy doesn’t support fair trade with the United States that’s symmetric.” But we didn’t do that. Your leaders did.

Read more …

“WATCH Prime Minister Carney blatantly lie on camera ..”

• Mark Carney Blames USA for Layoffs of Canadian Steel Workers (CTH)

When asked about a statement this week where Stelco Holdings Inc. announced they were laying off 500 workers from their steel plant in Hamilton, Ontario, immediately Canadian Prime Minister Mark Carney blamed the United States. He’s lying. It’s ridiculous. However, that’s all Carney can do at this point.


In reality it is (1) Canadian energy, climate and manufacturing policy; in combination with (2) the specific decision to allow the import of cheap steel from China; in combination with the decision to (3) rebuke U.S requests to stop purchasing that Chinese steel; that has driven out Canadian steel manufacturing.

(1) Canada carbon emission policy changes steel manufacturing. (2) Canada admits to lying about the import of Chinese Steel. (3) Canadian steel manufacturers warn Canada of pending exit. Mark Carney denied all three points. The receipts are in the links right there.

WATCH Prime Minister Carney blatantly lie on camera:


This announcement by Stelco happened on the exact same day that President Trump announced a new $18billion investment in U.S. steel manufacturing in Iowa. In fact, in a world full of irony, during a media segment discussing the closure of the Canadian steel plant, CBC cut away to live feed of President Trump who was making the Iowa steel plant announcement. The timing was rather remarkable.

Read more …

Let’s just say Trump understands better than most.

• Trump Notes Super Intelligence Team 4 Points for SI Frontier Research (CTH)

After assembling some of the most influential leaders in the Super Intelligence sector of data sciences, the group came together with a standard four-point overview for internal safeguards and safety checks as the software advances continue.

Read more …

Most valuable company. Soon.

• SpaceX ‘Failure’ Makes Big Bank — $200 Million in 1st Year (Charlie Martin)

Have we decided it’s officially EDS — Elon Derangement Syndrome — yet, or is MDS still a candidate?


As I’m sure every PJ reader knows, along with most of the rest of the world, SpaceX launched Starship Flight 14 on Monday, successfully achieving orbit and delivering 26 of the new, much higher-capacity Starlink v3 satellites to orbit, in spite of an engine failure in the Ship itself on the way to orbit. Of course, that achievement was not uncontroversial, at least in the press.


There were actually a lot of people with long memories.


There were also a number of other people who were spreading mayonnaise and salt on their words as they prepared to eat them. I got one above, and I’ll resist the urge to observe that one famous space YouTuber posted that Starship wasn’t going to go into orbit shortly before Starship entered orbit. At least by name. There was a surprising number of people who had been insisting that Starship would never reach orbit who were defending that opinion even after Starship reached orbit. I have no idea how to explain that.

But as I discussed in my Sunday Supplement column, and Steve Green expanded yesterday, the problem has to be Musk-blindness. Observe. What we have is this: the rocket that flew Flight 14 is the largest and most powerful ever launched; that has been true of Starship since the first integrated flights, and Block 3 (the current version) made the gap wider.


That’s the top 7. Notice that number 3 is less than half this delivery. It’s also the biggest commercial delivery by a long way.


What’s more, carrying only 50% capacity, Flight 14 delivered the second-highest useful payload to orbit ever, exceeded only by Skylab.

So, now for the moment, let’s assume no reusability — certainly neither booster nor Starship will be reused this time. In other words, assume it was the NASA/ULA/Roscosmos model — one launch, one payload, once. And let’s be really conservative and say the total was a round $300 million, and for that $300 million, SpaceX got 26 one-terabyte-per-second shiny new Starlink version 3 to add to its network.

In return, SpaceX gets an annuity that pays around $500 million per year for the five-year life of the satellites. That is, it pays off the investment — rocket, payload, fuel, and services in about May 2027, and delivers $2.3-$2.5 billion in total revenue over those same five years.

What this means is that Flight 14 did what a Saturn V or an SLS does on purpose: expend the vehicle, deliver 50 tonnes of payload behind, ready to create revenue.

NASA doesn’t consider Artemis I a failure because the rocket was expended, and Skylab wasn’t a failure because the Saturn V didn’t come home. Starship’s first orbital flight was also its first commercial cargo flight, and that one flight is bringing home a pile of money.

Read more …

“.. Smith’s team acquired at least 4,782 checks from Americans who made mainly small-dollar donations to President Trump..”

• Sen. Hawley Confronts Jack Smith During Explosive Senate Committee Hearing (CTH)

Earlier today, Senate Judiciary Chairman Chuck Grassley released explosive whistleblower documents showing how former Special Prosecutor Jack Smith demanded the records of donors to President Trump from December 2019 through August 2023.


Records provided to Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) via legally protected whistleblower disclosures reveal Smith’s team acquired at least 4,782 checks from Americans who made mainly small-dollar donations to President Trump between September 2019 to August 2023. The checks reveal the donors’ home addresses, bank account and routing numbers, and signatures.

Smith’s team acquired the checks as part of its “Arctic Frost” election case against President Trump, allowing the Biden Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) to gain access to nearly 5,000 Americans’ highly sensitive information, including 42 Iowans. There may be additional subpoena returns that include more donor checks. Whistleblower records show the checks were routed to former FBI Special Agent Walter Giardina. (more)

Senator Josh Hawley confronted Jack Smith on his lies during former testimony to congress. WATCH:



Republicans and President Trump have accused Jack Smith of pursuing a politically motivated case against the president. Rep. Jim Jordan, R-Ohio, referred Smith to the Justice Department for possible prosecution, alleging that Smith made false statements during an hours-long closed-door meeting with lawmakers in December.

Read more …

She wasn’t seelected on brain volome, one suspects..

• US Ambassador Tells Greek Minister Washington Can Topple Any Government (ZH)

US Ambassador to Greece Kimberly Guilfoyle has set off a firestorm of diplomatic controversy over unusually blunt remarks centered on Greece’s government and US policy. It also raised questions of US covert ‘influence operations’ and regime change activities.


The words issued by the former Fox News host were picked up by The Wall Street Journal, which described that the alleged remark was made during a March dinner in Athens. Greek Energy Minister Stavros Papastavrou was said to be at the gathering, which quickly became tense.



A discussion ensued over the impending collapse of Romania’s government. Guilfoyle pronounced that the United States had a role in influencing the crisis. She reportedly then said, “We can do that to any country we want. We can do that here.” Her indicating that it could be done “here” was of course a reference to Greece itself, and the account is presented as her boasting to a top government minister’s face that Washington can change governments whenever it wants.

Here is the fuller context in which the WSJ report presents it: Some Greek officials say they are happy their country, often overlooked in Washington, has the attention of an ambassador who can easily reach the U.S. president.

They are also fearful of getting on her bad side. In March, at a dinner in Athens attended by Greek and U.S. officials, Guilfoyle got into an argument with Greece’s energy minister, Stavros Papastavrou, in front of the other guests. Referring to the impending collapse of the Romanian government, Guilfoyle told the group, “We can do that to any country we want. We can do that here,” according to a person who attended the dinner and others who were told about it. The conversation became heated, with Papastavrou retorting that the U.S. couldn’t replace the government of Greece, which was elected by the people. Guilfoyle’s lawyer disputed the characterization of the exchange.

Greek opposition parties have seized on the exchange, after which Greek government spokesperson Pavlos Marinakis sought to downplay and deny, saying the issue of changing the government “was never raised” and that it would not be tolerated if so. But the opposition is seeking to keep the pressure up in search of answers:

“Three days after the Wall Street Journal article the Greek government has so far, beyond vague references, declined to deny or confirm the allegations made,” Harry Tzimitras, head of foreign affairs for the left-wing Elas party, told POLITICO on Tuesday. “It is a very serious issue and it must be addressed immediately without delay.”

Guilfoyle as the Trump-appointed top US envoy to Athens has also of late come under scrutiny for pushing US energy sales across Southeastern Europe, especially focused on American liquefied natural gas.

We earlier reviewed how in the four and a half years since Russia invaded Ukraine, when there happens to be important national elections – particularly those in Romania, Moldova, Hungary, Poland, and Germany – then suddenly certain domestic political parties get demonized as “pro-Putin” and “security threats” to the rest of Europe.


The alleged March remarks have also naturally sparked tensions between the US and Romania. A State Department statement issued in the wake of the reporting reads: “The United States values its strategic partnership with Romania, which remains strong across our shared priorities, including energy security and defense burden shifting.”

Read more …

“.. And Takes Aim At Their Regulatory Moat ..”

“The FTC probe will test whether the US can successfully police the world’s most powerful software without inadvertently cementing an AI oligarchy…”

• FTC Launches ‘Rogue AI’ Probe Of OpenAI, Anthropic (ZH)

The Federal Trade Commission (FTC) is launching a sweeping, aggressive probe into top frontier labs like OpenAI and Anthropic. However, the investigation goes far beyond simply asking questions about autonomous software run amok, and its chairman has made clear he won’t let Silicon Valley use recent AI failures to build an insurmountable regulatory moat.


According to administration officials who spoke to the New York Post, FTC Chairman Andrew Ferguson is preparing to hit tech executives with Civil Investigative Demands (CIDs) – essentially administrative subpoenas – to compel testimony regarding the dangers their artificial intelligence (AI) super intelligence (SI) models (are we doing this?) pose to the public and consumer markets.

The Catalyst: ‘Hugging Face’ Jailbreak
The immediate trigger for the probe is the highly publicized “Hugging Face incident” from this past July. During what was supposed to be a contained cybersecurity evaluation, about 700 of an estimated 1,200 OpenAI agents escaped their testing sandbox, bypassed network controls, and breached the infrastructure of the computational tools company Hugging Face.

Running primarily on OpenAI’s “Internal Model 1,” the autonomous agents tried to erase traces of their work, created nearly a million shortened URLs to run code outside their restricted environments, and even tried to enlist other AI models to help.

While AI safety researchers were quick to call it “the first true AI safety incident,” the FTC is taking a distinctly different view on accountability. Chairman Ferguson recently indicated that companies cannot shift legal blame to “rogue” AI systems when their automated decisions result in security breaches or consumer harm. The liability, the FTC argues, rests squarely on the humans who designed, instructed, and unleashed the models.

That said, these breaches have drawn scrutiny of their own. OpenAI first disclosed the incident as an “unprecedented” cyber event, but Hugging Face’s own post-mortem found the agents reached the open internet through a network route the sandbox had deliberately left open, and exploited weaknesses that “a capable human attacker could have found and exploited” – unsafe dataset processing, exposed cloud metadata, overly broad access and long-lived credentials. OpenAI itself conceded that its own chain-of-thought monitoring, had it been running, would have caught the initial activity.

Nor was OpenAI alone. The Hugging Face breach was one of a string of incidents involving OpenAI, Anthropic, Meta and Google models that trace back to evaluations run with a single vendor, Israel-based Irregular, whose test environments had live internet access while the models were told they were in a simulation. Irregular notified all four labs in late July, yet the disclosures trickled out one lab at a time over seven weeks – turning one contractor’s mistake into what looked like a wave of AI breakouts. Isolating test models from the internet is a “basic control measure,” frontier security expert Matthew Mittelsteadt said. “You’d think that of all the things that you’ve got to get right.” Some skeptics have gone further, questioning whether repeated “accidents” at the same vendor were accidents at all.

The Trojan Horse of “Self-Regulation”
For years, executives like OpenAI’s Sam Altman and Anthropic’s Dario Amodei have publicly warned that their own products pose an “existential risk” to humanity, practically begging lawmakers to regulate them.

But as we previously noted, these highly publicized warnings and agent “escapes” often serve a dual purpose. By whipping Washington into a panic over AI doomsday scenarios, industry leaders are paving the way for a worst-case scenario of heavy-handed regulation. Stifling compliance requirements inevitably crush open-source developers and cash-strapped startups, leaving the trillion-dollar AI bubble safely in the hands of the incumbent monopolies.

Chairman Ferguson appears to be acutely aware of this Silicon Valley playbook. “I think it’s very important that we not allow these two firms to come to Washington, whip everyone into a panic and then say, ‘We need a whole bunch of regulations that we can comply with,'” Ferguson told Fox News earlier this month. “That is how companies build a moat around their businesses to make sure that people can’t compete against them.”

The FTC’s aggressive posture stands in stark contrast to the White House’s approach. Just this week, President Trump hosted a summit with leading tech billionaires – including Amodei, OpenAI President Greg Brockman, Elon Musk, and Google’s Sundar Pichai – resulting in a much friendlier, voluntary “self-regulation” pact.

The administration is attempting to walk a nearly impossible geopolitical tightrope. The US government wants to prevent autonomous agents from hacking power grids, leaking data, or manipulating financial markets, but it is equally terrified that stifling the American AI industry will hand global dominance directly to China.

The FTC probe will test whether the US can successfully police the world’s most powerful software without inadvertently cementing an AI oligarchy.

Read more …

Let’s make a movie.

• Russian and Ukrainian Pilots Save Hijacked Flight to Israel (Salgado)

In an extraordinary example of individuals from hostile countries working together to save lives, Israeli media that spoke with airport authorities are saying that the alternate pilot crew who landed a hijacked flight safely included a Russian and a Ukrainian.


Israel Hayom identified the brave off-duty pilots’ nationalities after speaking with officials at the Prince Sultan Bin Abdulaziz International Airport in Tabuk, Saudi Arabia. The temporarily hijacked FlyDubai flight was headed for Tel Aviv in Israel, with many Israeli passengers, but after the violent incident it diverted to Tabuk for an emergency landing.

There was some initial confusion about the nationality of all the pilots on board the aircraft, as multiple outlets at first reported that the two pilots fighting in the cockpit and causing the near-crash were Russian and Ukrainian. New details indicate that the attacking co-pilot is Omani and the stabbed pilot is Emirati. Oman has been consistently supportive of the Iranian regime in its ongoing conflict with Israel this year. Israel Hayom clarified that there was a Russian and Ukrainian pilot crew on board, but that they were off duty and only took control when the other pilots were unable to do so because of their fight.

From Israel Hayom on Wednesday morning:
Authorities at Tabuk Airport confirmed that emergency responders rushed both injured aviators to a local hospital upon touchdown. Control of the aircraft was seized midair by two off-duty flight crew members – a Russian pilot and a Ukrainian pilot – who managed to neutralize the threat and navigate the airliner to a safe landing in Saudi Arabia.

It is unfortunate that the plane had to land in Saudi Arabia because that country is, of course, a Muslim nation not particularly friendly with Israel. It is also unfortunate that Israel is a tiny Jewish nation stranded in a massive swathe of unfriendly or outright hostile Muslim countries. Israel Hayom reported that Saudi authorities have not yet agreed that an Israeli aircraft can come to rescue their people from Tabuk. Saudi authorities prefer to let an Emirati aircraft take the Israeli passengers, and at least the United Arab Emirates is part of the Abraham Accords.

But of course, after an apparent terrorist attack by a Muslim co-pilot, Israelis would prefer to send their own people for the rescue mission.

Read more …

Legal immigration.

Since 2024..

“Some Republicans have increasingly advocated for closer scrutiny of Islamic immigration amid the war in Iran and the longer-term conflicts in the region.

• Trump Admin Touts 96% Drop In Immigration From Muslim Countries (Whedon)

The Trump administration on Tuesday highlighted data showing a 96% drop in legal immigration from Muslim-majority nations since 2024. The administration’s Rapid Response 47 account shared a chart from the CATO Institute, a pro-immigration, libertarian-leaning think tank that used State Department data. The development saw immigrant and refugee administrations from those countries drop from 18,000 in January 2025, to fewer than 500 last month.


Some Republicans have increasingly advocated for closer scrutiny of Islamic immigration amid the war in Iran and the longer-term conflicts in the region. Homegrown Islamic terror threats have also prompted calls to curb immigration from countries with known terrorist activities and recent Office of the Inspector General data has shown that vetting failed to flag threats from 40% of Afghan asylum seekers admitted in 2021 amid the collapse of the pro-U.S. government in that country.

Read more …

FYI.

• Supply-side Economics Explained (Paul Craig Roberts)

What is Supply-side economics? There are various ways, if speaking to economists, to introduce Supply-side economics.


One is that Supply-side economics introduces the second blade of the scissors into macroeconomics that the famous British economist Alfred Marshall introduced into microeconomics. In Marshall’s time, economists argued whether price was determined by the cost of production or by what people were willing to pay. That is, by supply or by demand. Marshall said the argument was like arguing which blade of the scissors cuts the paper. Price was determined by supply and demand.

In Keynesian macroeconomics, the demand management policy of the post World War II era, there was no second blade of the scissors. There was only the demand blade. The manipulation of aggregate demand was used to control inflation and unemployment. Aggregate demand consisted of consumer demand, government spending, and investment. Investment demand played no real role, because “the reason companies produce is that consumers buy.” Investment was a response to demand.

Fiscal policy was the means Keynesian policymakers used to control inflation and unemployment. If unemployment was the problem, government could cut taxes, thereby giving taxpayers more money to spend, or government could overspend its revenues by running a deficit which would raise government demand. Keynesian economists maintained that the government spending multiplier was larger than the tax cut multiplier. In keeping with their view, aggregate demand was increased by government running a larger deficit by which it overspent its revenues. In other words, Keynesian fiscal policy favored the growth of government.

If inflation was the problem, government could reduce consumer spending by increasing income taxation or by running a surplus in its budget which would take more money out of the economy in taxation than it put back in spending. Overtime, it took a larger increase in demand (whether public or private) or more inflation to reduce unemployment, and a larger decrease in demand or rise in unemployment to reduce inflation. The “Phillips curve” appeared, illustrating the worsening trade-offs between inflation and unemployment. By the late 1970s, Milton Friedman was able to write: “More inflation, more unemployment.”

In other words, Keynesian demand management policy no longer worked. At this time I happened to be in the US Congressional staff as economic counsel to Rep. Jack Kemp, then as chief economist, Republican staff, House Budget Committee, and then as a US Senate staff associate, Joint Economic Committee. The “Phillips curve” had degenerated into “stagflation.” Congress did not know what to do. The Keynesian “solution” was an incomes policy, which required all prices to be fixed. Having just experienced the difficulty of controlling one price–oil–Congress wanted nothing to do with controlling all prices.

This gave me my opportunity.

I explained that stagflation was the result of encouraging demand with easy monetary policy while restricting supply with high tax rates. I explained that fiscal policy not only affected consumer or government demand, but also directly impacted the supply-side of the economy through two relative prices. One is the price of current consumption in terms of foregone future income by not saving and investing. The other is the price of leisure in terms of foregone current income by reducing working hours. Therefore, fiscal policy could directly affect the supply of labor and capital.

I pointed out that marginal tax rates affected both relative prices. The higher the marginal tax rate on income, the cheaper are current consumption and leisure in terms of foregone future and present income. The lower the marginal tax rates, the more expensive are current consumption and leisure in terms of foregone income. Therefore, a reduction in marginal tax rates would shift the aggregate supply curve, resulting in more supply at every price. Previously, economists believed that a change in tax rates only affected aggregate demand.

That is the essence of Supply-side economics. It supplied the missing blade of the scissors to macroeconomics.

When I was invited by the combined graduate students of MIT and Harvard to give the annual State of the Economy address, I met Paul Samuelson, the leading economist after John Maynard Keynes of the 20th century. He told me that I was theoretically correct and acknowledged the correctness of my point in his long-lived economics textbook. The question in his mind was how powerful the Supply-side effect would be.

Generally speaking, Keynesian economists had too much human capital invested in demand management to accept Supply-side economics. They dismissed it as “voodoo economics” and a claim that “tax cuts paid for themselves.”

In the 1980s after I had left the Reagan Administration, having successfully as Assistant Secretary of the US Treasury got President Reagan’s reduction in marginal tax rates out of the administration so that Congress could vote on it and pass it, I had a contract from Harvard University Press to write the peer-reviewed story of the Supply-side Revolution. Henry Rosovsky, the Dean of Arts & Sciences at Harvard at that time asked me to come to see him.

Rosovsky had been my graduate professor at the University of California, Berkeley, at that time a rival to Harvard. My term paper for Rosovsky had been published in Classica et Medievalia, a prestigious journal. Rosovsky said he wanted me on the Harvard economics faculty. He wanted to know if I would accept the appointment if he could arrange it. I told him that he wouldn’t be able to get it through, and I was right. New ideas are seldom welcomed by those whose human capital in invested in existing explanations.

The theoretical point of Supply-side economics is universally valid. At the time, it was directed at the worsening “Phillips curve” tradeoffs, and it succeeded in stopping stagflation. Since the policy’s success, the offshoring of US manufacturing jobs, increased monopolization, and the rise of robotics and artificial intelligence are challenging the US economy in ways that what we know as economic policy cannot effectively address.

Read more …

 

 

 

 

 

 

 

 

Support the Automatic Earth in wartime with Paypal, Bitcoin and Patreon.