Expect A Financial Crisis In Europe With France At The Epicenter

  The good thing about politics is that there always seems to be a way to pass the hot potato to the next guy although of course eventually the game has to stop.

  The Maastricht rules have always been wishful thinking. Without transfer mechanism between different countries, you cannot maintain a unique currency and interest rate for very long if nobody obeys the rules. Now not only are most countries not obeying the rules but they are creating extra hurdle like the green agenda or support for Ukraine which makes even the pretense ludicrous. 

  As we approach the end, expect extreme behavior and statements from leaders like Macron. France like England lives in the delusion of its former grandeur. The reconciliation between wishful thinking and reality will be painful.

Authored by Mike Shedlock via MishTalk.com,

The EU never enforced its Growth and Stability Pact or Maastricht Treaty rules. The crisis is coming to a head with France and Italy in the spotlight. The first casualty will be Green policy.

Image composite by Mish from the European Commission Compliance Tracker

Compliance Rules

1. Deficit rule: a country is compliant if (i) the budget balance of general government is equal or larger than -3% of GDP or, (ii) in case the -3% of GDP threshold is breached, the deviation remains small (max 0.5% of GDP) and limited to one year.

2. Debt rule: a country is compliant if the general government debt-to-GDP ratio is below 60% of GDP or if the excess above 60% of GDP has been declining by 1/20 on average over the past three years.

3. Structural balance rule: a country is compliant if (i) the structural budget balance of general government is at or above the medium-term objective (MTO) or, (ii) in case the MTO has not been reached yet, the annual improvement of the structural balance is equal or higher than 0.5% of GDP, or the remaining distance to the MTO is smaller than 0.5% of GDP.

4. Expenditure rule: a country is complaint if the annual rate of growth of primary government expenditure, net of discretionary revenue measures and one-offs, is at or below the 10-year average of the nominal rate of potential output growth minus the convergence margin necessary to ensure an adjustment of the structural budget deficit in line with the structural balance rule.   

Deficit Disaster Zones

France and Italy are major disasters right now on the budget deficit rule. France has a budget deficit of 7 percent and Italy 5 percent.

France needs to reduce its deficit by a whopping 4 percent of GDP!

Neither Italy nor Greece should never have been allowed in the EMU (European Monetary Union – Eurozone) in the first place.

Greece has a debt-to-GDP ratio of 170 percent. The target is 60 percent.

But the lead chart tells the picture. Only the Scandinavian countries are in compliance.

Looser Rules Postpone the Crisis

On February 10, the EU agreed to Looser Fiscal Rules to Cut Debt, Boost Investments.

The latest revamp of two-decades-old rules known as the Stability and Growth Pact came after some EU countries racked up record high debt as they increased spending to help their economies recover from the pandemic, and as the bloc announced ambitious green, industrial and defense goals.

The revised rules allow countries with excessive borrowing to reduce their debt on average by 1% per year if it is above 90% of gross domestic product (GDP), and by 0.5% per year on average if the debt pile is between 60% and 90% of GDP.

Countries with a deficit above 3% of GDP are required to halve this to 1.5% during periods of growth, creating a safety buffer for tough times ahead.

Defense spending will be taken into account when the Commission assesses a country’s high deficit, a consideration triggered by Russia’s invasion of Ukraine.
The new rules give countries seven years, up from four previously, to cut debt and deficit starting from 2025.

Note that the EU can tweak enforcement but not the baseline Stability and Growth Pact targets themselves without unanimous agreement, and a new treaty.

With that background, let’s look ahead to the crisis that looms as described by Eurointelligence.

Europe’s Next Financial Crisis

We would like to alert our readers to a theme that has been preoccupying us for a while – the possibility of another financial crisis in Europe. We have generally been restrained in our warning of financial crises. The main exception was the global financial crisis and its cousin, the euro area’s sovereign debt crisis. Fifteen or so years later, we see another financial crisis ahead here in Europe: a crisis of the European social and political model with deep consequences for fiscal and financial stability.

The canary in the coalmine is the overshooting budget deficits in France and Italy, at over 7% and over 5% for 2024 respectively. These numbers are a symptom, not a cause. Behind them lies a lack of economic growth needed to sustain Europe’s social model. Germany’s fiscal policy could not be more different than that of France or Italy, and yet Germany is afflicted by the exact same problem.

The European model was powered by oligopolistic industrial companies, which were heavily supported by the state through regulation that tilted the level-playing field in their favor. The German car industry is a classic example, but everybody did this.

What is killing this model now is a shift in technology and geopolitical fragmentation. Of the two, we would argue the first is the more important. More and more functions in our lives that were previously the realm of purely mechanical processes are nowadays wholly or partially digitalized. Barriers of entry have collapsed. China went from zero to the world leader in electric cars.

European companies no longer generate sufficient profits to fuel the social model – and to fund long-term research. It is no surprise that Europe has only very few tech companies. In short, Europe’s oligopolistic old-tech model no longer works in a digital world. We have been reporting on the attempts by the EU to stem against technological developments through regulation. But this is a way of addressing symptoms, not causes.

After the multiple global shocks of this decade, the consequences of Europe’s technological decline translate into lower potential growth rates. Italy came first. Its productivity growth has been near zero since it joined the euro. The UK’s productivity growth slumped after the global financial crisis, and never recovered since. Germany’s productivity growth is unlikely to recover, even if the economic cycle does. The German Council of Economic Experts see a potential growth of around 0.5% until the end of the decade. With productivity growth that low, Europe’s model has become financially unsustainable. It is unsurprising that the political system is fragmenting everywhere. The argument for sustained deficits, in France for example, is that you need them to keep Marine Le Pen out of power. This means they will persist.

We have a fiscal crisis ahead, caused by a combination of falling productivity growth and political gridlock. Technology is the main cause of the decline. Geopolitics is what accelerated it. The solutions we have been advocating over the years – a joint fiscal capacity, a capital markets union, joint defense procurement to neutralize the rise in defense spending – are further away than ever. Unless one of these parameters change, a financial crisis is a very plausible scenario. 

Spotlight France

France has a budget deficit of 7 percent but wants to fund a European army to fight Russia.

How is that supposed to work?

Spotlight Green Fantasies

The EU has adopted ambitious Green policies that will cost much more money than has been budgeted.

How is that supposed to work?

Targets Won’t Be Met

You can take those Green targets and throw then into the ashcan of ideas that never should have been set in the first place.

Even if you give France 7 years to be deficit compliant, how is France supposed to cut back a whopping 4 percent of GDP?

What’s the Basic Problem?

Eurointelligence says “Technology is the main cause of the decline. Geopolitics is what accelerated it.”

Technology is not the problem. The Maastricht treaty that created the Eurozone is flawed. And it cannot be fixed without unanimous agreement.

Given productivity and work rule differences, one interest rate set by the ECB cannot serve Italy, France, Greece, and Germany.

Add to that, EU nannycrat rules. The EU is more interested in cracking down on Google (Now Alphabet GOOG), Apple (AAPL), Facebook (now Meta Platforms META), and Microsoft (MSFT) for alleged monopolies than developing anything.

The EU Is Dysfunctional

In a single word, the EU is dysfunctional. That’s the problem, not technology. The Maastricht treaty itself is a big part of the reason the EU is dysfunctional. The Euro itself, with one common interest rate, is fundamentally flawed.

Companies like Alphabet, Meta, Microsoft, and Apple could not exist in the EU because in the name of competition and diversity, the EU would kill them before they ever got big enough to matter.

EU rules make it impossible to fix the basic problem. So the EU has resorted to nannycrat rules to regulate US and Chinese companies instead of fixing anything.

Technology, including AI, and geopolitics is now accelerating the basic problem, the EU is dysfunctional by treaty. It’s showing up in polls everywhere.

European Parliament Polls in France

EP France Polls from Wikipedia

Marine Le Pen’s National Rally is clobbering Renew/Modem by a whopping 12 percentage points, 30-18.

This chart is for France only, not the entire parliament, but it reflects on French President Emmanuel Macron’s sinking popularity and the sinking centrists in general.

A War Economy

As a way to create jobs, EC President Charles Michel promotes a war economy.

In a preposterous proposal to deal with growth, The European Council President Calls on Europe to Switch to a War Economy

I have a suggestion. Let US senator Lindsey Graham and EC president Charles Michel lead the charge.

Instead of fixing Germany’s aging infrastructure, attempting to compete with the US on AI, or competing with China on anything, EC President Charles Michel promotes war as growth.

It’s Time for a New Strategy

Please note German Chancellor Olaf Scholz is refusing to send Taurus cruise missiles to Ukraine.

On March 16, I commented Ukraine Won’t Win the War, It’s Time for a New Strategy

There’s Solidarity, Then There’s Solidarity

Poll after poll shows support for Ukraine. Every one of then is flawed because they fail to ask “how much are you willing to pay.”

There’s solidarity in the EU, but it stops with wheat and weapons. In the US, Biden is desperate for the war to go on. But he still has no goal. Is Biden’s goal the same as Zelensky’s: “The war will not be over as long as Crimea is occupied.”

We don’t know because Biden won’t say. Biden also will not say how much he is willing to commit. Is it another $150 billion or is it $1 trillion or more?

Meanwhile, prepare for carnage of the center, Greens, and warmongers in the next European Parliament elections.

A fiscal crisis awaits. The first casualty will be Green energy policies.

NSF Paid Universities To Develop AI Censorship Tools For Social Media

  Step by step a totalitarian system is taking shape. When it's built, there will be no escape.

NSF Paid Universities To Develop AI Censorship Tools For Social Media

By Daniel Nuccio of The College Fix

"Used by governments and Big Tech to shape public opinion by restricting certain viewpoints or promoting others’: report

The National Science Foundation is paying universities using taxpayer money to create AI tools that can be used to censor Americans on various social media platforms, according to members of the House.

University of Michigan, the University of Wisconsin-Madison, and MIT are among the universities cited in the House Judiciary Committee and the Select Subcommittee on the Weaponization of the Federal Government interim report.

It details the foundation’s “funding of AI-powered censorship and propaganda tools, and its repeated efforts to hide its actions and avoid political and media scrutiny.”

“NSF has been issuing multi-million-dollar grants to university and non-profit research teams” for the purpose of developing AI-powered technologies “that can be used by governments and Big Tech to shape public opinion by restricting certain viewpoints or promoting others,” states the report, released last month.

Funding for the projects began in 2021 and was issued through the NSF’s Convergence Accelerator grant program, which was initially launched in 2019 to develop interdisciplinary solutions to major challenges of national and societal importance such as those pertaining to AI and quantum technology, it states.

In 2021, however, the NSF introduced “Track F: Trust & Authenticity in Communication Systems.”

The NSF’s 2021 Convergence Accelerator program solicitation stated the goal of Track F projects was to “develop prototype(s) of novel research platforms forming integrated collection(s) of tools, techniques, and educational materials and programs to support increased citizen trust in public information of all sorts (health, climate, news, etc.), through more effectively preventing, mitigating, and adapting to critical threats in our communications systems.”

Specifically, the grant solicitation singled out the threats posed by hackers and misinformation.

That September, the select subcommittee report notes, the NSF awarded “twelve Track F teams $750,000 each (a total of $9 million) to develop and refine their project ideas and build partnerships.” The following year, the NSF selected six of the 12 teams to receive an additional $5 million each for their respective projects, according to the report.

Projects from the University of Michigan, University of Wisconsin-Madison, MIT, and Meedan, a nonprofit that specializes in developing software to counter misinformation, are highlighted by the select subcommittee.

Collectively, these four projects received $13 million from the NSF, it states.

“The University of Michigan intended to use the federal funding to develop its tool ‘WiseDex,’ which could use AI technology to assess the veracity of content on social media and assist large social media platforms with what content should be removed or otherwise censored,” it states.

The University of Wisconsin-Madison’s Course Correct, which was featured in an article from The College Fix last year, was “intended to aid reporters, public health organizations, election administration officials, and others to address so-called misinformation on topics such as U.S. elections and COVID-19 vaccine hesitancy.”

MIT’s Search Lit, as described in the select subcommittee’s report, was developed as an intervention to help educate groups of Americans the researchers believed were most vulnerable to misinformation such as conservatives, minorities, rural Americans, older adults, and military families.

Meedan, according to its website, used its funding to develop “easy-to-use, mobile-friendly tools [that] will allow AAPI [Asian-American and Pacific Islander] community members to forward potentially harmful content to tiplines and discover relevant context explainers, fact-checks, media literacy materials, and other misinformation interventions.”

According to the select committee’s report, “Once empowered with taxpayer dollars, the pseudo-science researchers wield the resources and prestige bestowed upon them by the federal government against any entities that resist their censorship projects.”

“In some instances,” the report states, “if a social media company fails to act fast enough to change a policy or remove what the researchers perceive to be misinformation on its platform, disinformation researchers will issue blogposts or formal papers to ‘generate a communications moment’ (i.e., negative press coverage) for the platform, seeking to coerce it into compliance with their demands.”

Efforts were made via email to contact senior members of the three university research teams, as well as a representative from Meedan, regarding the portrayal of their work in the select subcommittee’s report.

Paul Resnick, who serves as the WiseDex project director at the University of Michigan, referred The College Fix to the WiseDex website.

“Social media companies have policies against harmful misinformation. Unfortunately, enforcement is uneven, especially for non-English content,” states the site. “WiseDex harnesses the wisdom of crowds and AI techniques to help flag more posts [than humans can]. The result is more comprehensive, equitable, and consistent enforcement, significantly reducing the spread of misinformation.”

A video on the site presents the tool as a means to help social media sites flag posts that violate platform policies and subsequently attach warnings to or remove the posts. Posts portraying approved COVID-19 vaccines as potentially dangerous are used as an example.

Michael Wagner from the University of Wisconsin-Madison also responded to The Fix, writing, “It is interesting to be included in a report that claims to be about censorship when our project censors exactly no one.”

According to the select subcommittee report, some of the researchers associated with Track F and similar projects, however, privately acknowledged efforts to combat misinformation were inherently political and a form of censorship.

Yet, following negative coverage of Track F projects, depicting them as politically motivated and their products as government-funded censorship tools, the report notes, the NSF began discussing media and outreach strategy with grant recipients.

Notes from a pair of Track F media strategy planning sessions included in Appendix B of the select subcommittee’s report recommended researchers, when interacting with the media, focus on the “pro-democracy” and “non-ideological” nature of their work, “Give examples of both sides,” and “use sports metaphors.”

The select subcommittee report also highlights that there were discussions of having a media blacklist, although at least one researcher from the University of Michigan objected to this, citing the potential optics.

Germany's Murder Of Europe

  It looks more like a suicide to me! But this is what you get when a majority of uneducated imbeciles elect clowns to represent them. Whatever Europe does, it will not affect the climate nor other countries. Like the boycott of Russia, the green agenda will have exactly the opposite effect of what was expected. Better, the failure of the policies will be because Europe didn't do enough and they will double down on the hysteria. Is this how civilizations decline and finally crash?

Authored by Drieu Godefrei via The Gatestone Institute,

In a preparatory impact report, a copy of which has been obtained by the Financial Times before official release, the European Commission estimates that to achieve the target of reducing greenhouse gas emissions by 90% by 2040 then 100% in 2050 — the main objective of the "European Green Deal" — Europe will need to invest €1.5 trillion a year from 2031 to 2050.

1.5 trillion euros a year. That is equivalent to 10% of the Europe Union's entire GDP for 2022 -- every year! Apart from a war effort, there is no objective of any kind that has ever required the diversion of 10% of a continent's GDP by political decree.

The new German utopia

This number shows us that, while Germany has had to give up imposing its hatred of nuclear power on its European partners, it is determined to inflict on Europe the rest of the environmental utopia, i.e. total decarbonization, even at the cost of economic collapse and freedoms.

You may say that the European Commission is not Germany, but anyone who has worked in the Commission will tell you that there are two insurmountable lobbies at this level: Germany, by far is the most powerful country in Europe, followed by the environmental NGOs, such as Greenpeace and Friends of the Earth, which have permanent offices in the Berlaymont, the headquarters building of the European Commission. The fact that the current president of the Commission, Ursula von der Leyen, is German is just the icing on the apfelstrudel.

All the same, everything in this delirious report by the German Commission is wrong.

The Commission's pseudo-savvy calculations

The report states that the cost of inaction would be much higher than €1.5 trillion a year. In fact, explains the report, the European plan will save up to 1% of GDP per year. It should be noted, however, that this figure runs counter to all the IPCC's projections on the cost of global warming — which is 0.03 % of GDP per year, not 1%.

Annex 8 of the impact report just published by the Commission states:

"The IPCC AR6 Working Group II report (2022) confirms that global aggregate economic impacts generally increase with higher degree of global warming. However, due to the wide range of damage estimates and lack of comparability between methodologies, the report does not provide a robust range of estimates but recognizes that global aggregate economic impacts could be higher than estimated in the previous report."

In short, the IPCC's sixth report states that the cost of global warming could actually be greater than that stated in the fifth report.

Unfortunately (for lack of time? space? ink?) the Commission does not bother to reiterate what was said in the fifth report, which was voluble and precise on the question of the cost of global warming. Let us make up for this shortcoming: according to the fifth IPCC report AR5, chapter 10:

"For most economic sectors, the impact of climate change will be small relative to the impacts of other drivers... Changes in population, age, income, technology, relative prices... and many other aspects of socioeconomic development will have an impact on the supply and demand of economic goods and services that is large relative to the impact of climate change."

Above all, the Paris Agreement, of which the Commission claims to be part, aimed to limit global warming to only 1.5 degrees Celsius by 2100. Achieving this objective presupposed a drastic global reduction in human greenhouse global gas emissions, not just Europe. However, since 2015, these global emissions have continued to rise, and there is no realistic scenario in which global emissions will decrease. China, which still builds roughly two new coal-power plants a week, and India continue to lay waste to these projections.

Climate, of course, is a global issue: if Europe reduces its emissions to zero, while the rest of the world continues to increase them, the effect on the climate will be zero. As a result, the German plan will not save a single euro in terms of the damage caused by global warming and extreme events.

So, the investment needed each year would not be €1.5 trillion invested to save 0.03% of GDP per year. It would be €30 trillion — €1.5 trillion per year for 20 years — invested to change absolutely nothing in the climate of Europe.

There are no serious analysts left who still maintain that the objective of the Paris Agreement will be achieved; the Paris Agreement is obsolete and to pretend otherwise, as the European Commission is doing, is misleading, irresponsible, and not even scientific.

In addition, the report goes on to say that reducing European imports of fossil fuels would result in savings of up to €2.8 trillion between 2031 and 2050. At present there is no technical or scientific way of overcoming the intermittent nature of renewable energies such as wind, solar. As a result, Europe's energy mix will have to continue to rely on fossil fuels in addition to nuclear power, as demonstrated by Germany, the champion of lignite coal and CO2 emissions – and releasing ten times more CO2 than France, per unit of energy produced -- in 2024. What is more, this pseudo-savvy calculation presupposes that we know the prices of oil and gas in advance, and that we persist in banning the exploitation of the shale gas that lies beneath Europe's soil.

The report by the European Commission shows a frightening headlong rush. The situation in Europe is already dramatic. Since 2008, American GDP has doubled, meaning that Americans earn twice as much as they did in 2008. Since 2008, Europe's GDP has stagnated. This means that Europeans are increasingly taxed and harassed, and forbidden to move, build, undertake, innovate and start a family as they see fit, while their incomes are not increasing.

The shale revolution means that America now could be the world's largest producer of oil and gas, if President Joe Biden had not hobbled domestic energy production on his first day in office. The beneficiaries of his move were Russia, Iran -- and China, which can now more easily sell its cheap coal, thereby polluting the climate even more.

"Meanwhile," according to Gideon Rachman, chief foreign affairs commentator of the Financial Times, "energy prices in Europe have soared."

"The Ukraine war and the loss of cheap Russian gas mean that European industry typically pays three or four times as much for energy as their American competitors. Gloomy European bosses say this is already leading to factory closures in Europe".

In practical terms, whole swathes of our populations have entered into a pattern that is the ultimate dream of environmentalists: degrowth. In other words, their impoverishment. Giorgos Kallis, a prominent figure in the field of environmental economics, asserted recently the necessity of adopting a "degrowth" paradigm over the conventional GDP-based model. He contends that economies can and must thrive while simultaneously diminishing inequality and enhancing overall well-being.

Scenarios

Three possible scenarios emerge.

• In the first scenario, the EU will persist in its German ecological utopia, which will throw the whole of Europe even more deeply into the recession in which Germany is already languishing. In the context of its current economic stagnation, Europe cannot afford to divert 10% of its GDP per year to unaffordable, unreliable and intermittent energy sources. Popular revolts will multiply, making the current farmers' revolt look like "Pat the Bunny." It should be obvious that our democracies will not be able to withstand the impoverishment deliberately organized by "elites" who have gone mad trying to promote an insufficiently substantiated green ideology.

• In the second scenario, the EU would not undo the "European Green Deal," but its entry into force would simply be rescheduled (meaning postponed). This scenario condemns Europe to what economists Lawrence Summers and Henri Lepage name "secular stagnation," a condition when there is negligible or no economic growth in a market-based economy, on the model of Japan.

• A third scenario would see a new majority come to power through the European elections in June -- after all, what is the point of democratic elections if not to allow a change of course? -- and deconstruct (repeal) every piece of legislation in a European Green Deal that has become irrelevant or economically harmful to the most destitute among us in the current global context.

Ironically, if the IPCC's projections are to be believed, global warming may occur, and we will adapt to it through innovation. All the resources that Europe is burning up in a phantasmatic "energy transition", which has failed and will fail -- will just burn through money that we will then not have for innovation. What will Europe do when these misguided ideologies have permanently broken the back of its economy?

CBO Director Warns Of Debt Market Meltdown With US Debt Is On "Unprecedented" Trajectory

  In the new normal nothing ever happens. The Central Banks have our back so why worry? "Spending a life worrying for something that may or may not happen is no way of spending a life!" Fine. But as Hemingway said when he went bankrupt: Little by little then suddenly. For the US too, the sun will Set. It will be suddenly and it may not be in a faraway future.

CBO Director Warns Of Debt Market Meltdown With US Debt Is On "Unprecedented" Trajectory

We've been pointing it out for so long - in fact, for most of our 15 years in existence - that it has become more of a chore than actual reporting, especially since the "number only go up", as it hits a new all time high virtually every day. We are talking, of course, about the exponential curve that is the US debt, arguably one of the most boring and at the same time, most exciting topics of all time (because one day the "number go up no more" and you want to be far, far away when that happens).

Perhaps the catchiest observation we made on the trajectory of US debt was last September when we first noted that it is rising by $1 trillion every three months, or every 100 or so days...

... a soundbite which has since been picked up and stolen by pretty much everyone else in the media, if with the usual 6+ month lag behind us.

Not only has it gotten boring to be ahead of the curve by almost half a year, but pretty much every possible warning that could be said about the exponential increase in the US debt has been - well - said.

And yet, every now and then we are surprised by the latest developments surrounding the unsustainable, exponential trajectory of US debt. Like, for example, the establishment admitting that it is on an unsustainable, exponential trajectory.

That's precisely what happened overnight when in an interview with the oh so very serious Financial Times (which has done everything in its power to keep its readers out of the best performing asset class of all time, bitcoin), the director of the Congressional Budget Office, Phillip Swagel, issued a stark warning that the United States could suffer a similar market crisis as seen in the United Kingdom 18 months ago, during former Prime Minister Liz Truss’s brief stint leading Britain - which briefly sent yields soaring, sparked a run on the pound, led to an immediate restart of QE by the Bank of England and a bailout of various pension funds, not to mention the almost instant resignation of Truss - citing the nation’s "unprecedented" fiscal trajectory.

The striking words from the head of the CBO, best known perhaps for publishing doomer debt/GDP projection charts such as this one...

... warned of the dangers of the U.S. facing “what the U.K. faced with former prime minister Truss — where policymakers tried to take an action, and then there’s a market reaction to that action", comes as US government debt continues to break records, fueling concerns about the burden that places on the economy and taking a toll on America’s credit rating.

As a reminder, in September 2022, Truss roiled markets as she pressed for significant tax cuts, including changes lessening the tax burden on wealthier individuals without offsets, as well as other economic measures. The budget proposal spurred a major selloff of British debt, forcing U.K. interest rates to decades-long highs and causing the value of the pound to tank. While Truss defended her agenda as a means to spur economic growth, she stepped down as prime minister after less than two months on the job following the market revolt to her administration.

Meanwhile, it was up to the Bank of England to bail everyone out: the central bank intervened in the market, pledging to buy gilts on “whatever scale is necessary” with Dave Ramsden, a senior official at the central bank, saying at the time that "were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability.”

Needless to say, by bringing up the catastrophic rule of Truss, who for at least a few days tried to impose a regime of fiscal and monetary austerity which immediately blew up the UK bond market and led to an instant market crisis, Swagel is admitting that there is nothing that can be done to reverse the growth of US debt and to make what is already an exponential chart less exponential. Quite the opposite, in fact.

And while Swagel said the U.S. is “not there yet,” he raised concerns of how bond markets could fare as interest rates have climbed. Specifically, he warned that as higher interest rates raise the cost of paying its creditors, on track to reach $1 trillion per year in 2026, bond markets could “snap back."

Well, we have some bad news, because if one calculates total US interest on an actual, annualized basis... we don't have to wait until 2026, we are there already and then some.

Indeed, it seems like it was just yesterday when everyone was talking about US debt interest surpassing $1 trillion (and more than all US defense spending). Well, hold on to your hats, because as of this month, total US interest is now $1.1 trillion, and rising by $100 billion every 4 months (we should probably trademark this before everyone else steals it too).

According to the CBO, US government debt is set to keep rising. “Such large and growing debt would slow economic growth, push up interest payments to foreign holders of US debt, and pose significant risks to the fiscal and economic outlook,” it said in a report last week. “It could also cause lawmakers to feel more constrained in their policy choices.”

Only that will never happen, because a politician who is "constrained" in their policy choices - one who doesn't feed the entitlements beast in hopes of winning votes (while generously spreading pork for friends and family) - is a politician who is fired.

Perhaps afraid he would sound too much like ZeroHedge, the CBO director left a glimmer of hope, saying that the nation has “the potential for some changes that seem modest — or maybe start off modest and then get more serious — to have outsized effects on interest rates, and therefore on the fiscal trajectory.” But we doubt even he believes it.

In the CBO’s long-term budget outlook report released last week, the budget agency projected the national deficit would rise “significantly in relation to gross domestic product (GDP) over the next 30 years, reaching 8.5 percent of GDP in 2054.” Which of course, is laughable: the US deficit is already at 6.5% of GDP - a level that traditionally implied there is a major economic crisis - and yet here we are, with unemployment *reportedly* at just 3.8%. Said otherwise, the US deficit will - with 100% certainty - hit 8.5% of GDP during the next recession which will likely be triggered as soon as Trump wins the November election.

The budget scorekeeper attributed the projected growth to rising interest costs, as well as “large and sustained primary deficits, which exclude net outlays for interest." In short, everything is already going to hell to keep "Bidenomics" afloat, but when you also throw in the interest on the debt, well.. that's game over man.

Socialists, and other liberals who are only good at spending other people's money and selling debt until the reserve currency finally breaks, quickly sprung to defense of the debt black hole that the US economy has become.

Bobby Kogan, senior director of federal budget policy at the communist-leaning Center for American Progress think tank, pointed to improved deficit projections in recent years, as well as forecasts from the CBO he said “don’t project anything that looks like a panic.”

“If someone were thinking about, ‘Should I panic or should I not panic?’ I would just say, ‘hey, the underlying situation has gotten better, right?’” Kogan said, adding “there’s been lower, long-term projected deficits in the Biden administration.”

Instead of responding, we will again just show the latest CBO debt forecast chart and leave it up to readers to decide if they should panic or not.

What Kogan said next, however, was chilling:  “You either should have been worried a long time ago, or you should be less worried now,” he said. “Because we’ve been on roughly the same path for forever, but to the extent that it’s different, it’s better.”

Actually no, it's not better. It much, much worse, and the fact that supposedly "serious people" are idiots and make such statements is stunning because, well, these are the people in charge!

But he is certainly right that "you should have been worried a long time ago" - we were very worried, and everyone laughed at us, so we decided - you know what, it's not worth the effort, may as well sit back and watch it all sink.

And now bitcoin is at a record $72,000 on its way to $1 million and gold is at a record $2,200 also on its way to... pick some nice round number.... in fact the number doesn't matter if it is denominated in US dollars because very soon, the greenback will go the way of the reichsmark.

And just to make sure that nothing will ever change, even after the US enters the infamous Minsky Moment, shortly after the close we got this headline::

• *UNITED STATES AA+ RATING AFFIRMED BY S&P; OUTLOOK STABLE

Because when nobody dares to tell the truth, why should anything change?

Global CBDC Rollout Continues Apace (WARNING!)

  As we warned 5 years ago already, the CBDC are coming.

  Why on earth do we need a "more" digital currency when 98% of all transactions are already digital? When was the last time you paid cash for a 1,000 dollar transaction or even 100 dollar more recently?

  But the issue of CBDC is of course not the D (Digital), it's the CB (Central Bank) since the currency is supposed to be issued directly by the Central Bank.

  This is not the place for a monetary treatise but as long as banks were in charge of money creation through credit, your money and privacy were relatively secure. In the modern economy, managing your bank account was almost a related public service they were offering. It is also making it more difficult for the government to control your money and transactions, not because they can't but because they need the banks to share the data and an excuse to ask for it on a big scale. (There is none beyond individual cases!)

  Once, your money is directly controlled through a personal digital wallet (That's what we are talking about with CBDC, not just digital, your money is already mostly digital.), the sky is the limit on what the Central Bank can do with YOUR money which almost immediately cease to be yours since it can be, first monitored then remotely controlled for whatever reason the government creates.    

  Think about it, in a modern economy where almost anything has a cost, what does freedom means without financial freedom? If someone, somewhere can know what you bought, where and when in real time, what's left to know about you?

  You won't use your cash to escape the "system"? They'll make you use it by having you pay for the roads by miles / km (remember the green agenda?) even if they have to offer you free credit so you can move a little (remember the Universal Basic Income?) As soon as you really understand what can be done with CBDC it truly becomes frightening. (They won't do it? On day one no, but then just wait!)

 And suddenly we move from a system where you could more or less do whatever you wanted (with some specified legal limits) to a system where the administration authorize you to do whatever your allowance or lack of, allows. No surprise there is total concordance of goals between the WEF "thinkers" and "freedom loving" Chinese bureaucrats! Total control on steroid. The wet dream of authoritarian regimes since the dawn of mankind is suddenly within reach!

  Tell me again the problem with the 20 Euro / dollar notes in my pocket?

Authored by Kit Knightly via Off-Guardian.org,

Terror attacks in Moscow, ongoing genocide in Gaza, and cancer in the Royal family are dominating the headlines.

Meanwhile, on the financial back pages, all over the world the implementation of Central Bank Digital Currencies draws nearer.

China, whose digital Yuan was the major flagship CBDC, is in the middle of an immense trial covering over 25 million people. This week they released new guidelines for tourists using CBDCs for the first time.

A journalist for the crypto-focused DLNews wrote of her experience using it, and while functionality might seem limited right now we should note that she talks up the “de-dollarization” aspect of CBDCs, aligning digital currency with the “multilateral world” plan.

Hong Kong has its own CBDC program, the second trial stage of which launched last week. They are developing the ability to use “tokenised deposits” to add $160bn to their GDP.

In Europe, following late February’s Digital Euro Conference (DEC24), the European Central Bank has announced the development of the “digital euro rulebook”.

In Sweden, the Riksbank’s e-Krona program published its final report on its CBDC pilot a few days ago. Coin Telegraph reports they working on making its CBDC available offline.

The Central Bank of the UAE announced they are launching their own CBDC pilot a few days ago.

That’s just the technical developments, saying nothing of the ongoing propaganda campaign.

As I already said, in order to appeal to the anti-Imperialist left, we’re being told that CBDCs will help the world “de-dollarize”.

Another angle is that CBDCs will help developing nations prosper.

For example, BusinessMagnates.com reports that CBDCs will help “revive Latin American economies”.

All this is just from the past week. It goes on and on and on.

The only slight hold-out seems to be the US, where CBDCs remain somewhat contentious.

The e-dollar has stuttered along in progress compared to the rest of the world, with contradictory reports from officials emerging all the time.

This could be genuine opposition from US Imperialists due to the threat of de-dollarisation, it could be a natural response to a far more cash-based economy than most of the developed world, or it could be a deliberate propaganda campaign designed to promote CBDCs in anti-America quarters.

Of course, it’s an election year state-side, and Presidential candidates Donald Trump and Robert Kennedy Jr have both come out against CBDCs. While RFK jr is doubtless sincere, this would not be the first time the “deep state” has tried to discredit an opinion by having Trump endorse it.

But America or no America, the global CBDC roll-out is coming.

According to the Atlantic Council’s CBDC Tracker, 134 countries representing 98% of global GDP are currently working on their own digital currency.

While an Atlantic Council report from March 14th underlines the importance of “interoperability”:

Central banks and international financial institutions are realizing that uneven and dispersed technological advancements in digital currencies could actually create further fragmentation of the financial system, deepen digital divides, and create systemic risks. This would undercut the premise of digital currencies, which are supposed to create more efficiency in the existing system. Fortunately, there are some new models of interoperability across borders.

Interoperability isn’t just an important part of the CBDC plan, according to the Atlantic Council, it is the whole point.

Just yesterday, reported by Business Wire, SWIFT published their findings on “Seamless Introduction of CBDCs for Cross-Border Transactions”:

Interoperability is critical to Swift’s strategy for instant and frictionless transactions. The cooperative has focused its innovation agenda on interoperability between digital currencies and tokenised assets to overcome the potential risk of fragmentation, caused by the development of digital currencies on different technologies and with different standards and protocols. Swift’s solution has already been shown to enable cross-border transfers and connect CBDCs on different networks with each other, as well as with fiat currencies.

As we wrote in 2024: The Year Global Government Takes Shape, interoperability is the name of the game – there is no real practical difference between 195 interoperable digital currencies and one global currency.

Global currency is coming. It’s not on the front pages, but that’s hardly surprising.

Why Gen Z is Quietly Giving Up (Video - 20mn)

  An interesting vision of Z-gen struggle with life. Challenges and solutions but the fact is that solutions which used to be offered by society are now up to you to figure out and most people can't. An so they descend into the black hole of social media which offers the illusion of connections and a reality of isolation and utter loneliness.

  In a winner takes all society there are only losers in the end if it is to lord over a wasteland of human relations. By unleashing the technological revolution we have focused all our energy and attention to the material world to the exclusion of our spiritual well being. Some people can live with that, most can't as humans are above all a social animal.

  Older people were born in a friendlier system and adapted slowly to the current reality. Younger generations didn't have this luxury. This explains the laying flat in China, ikikomori in Japan and crashing birth rates everywhere as they struggle to adapt to a dysfunctional society.

 

From Debt to Hyperinflation: More Banks to Collapse As System Implodes by Lynette Zang (Video - 64mn)

  A little theatrical but fundamental explanation of our current financial system.

  Nobody knows exactly when but it is about to explode. With the interest rates at 5%, not one bank is solvent. The Central Banks will of course continue the charade a little longer with more free money but eventually the system will collapse. There is no other possibility. 

  A mess certainly but this won't be the apocalypse certain people are predicting. As we speak, Central Banks are hard at work preparing their CBDC money while telling us they are not. They are! And when the opportunity arise which means we have a hard enough economic shock like 2008, they will get together in what is now a non smoking room and will emerge telling us that we have a bank holiday and when the banks reopen, we'll all get a nice new icon on our smart phones...

 

Nvidia's Breakthrough AI Chip Defies Physics and changes everything! (Video - 19mn)

   We usually don't talk much about technology on this blog. Social changes, AI transformation? Sure but technology? It is so "last century"! Except of course when it truly changes everything which is the case here. 

  I have often mentioned that we are already deep into WW3. But people misunderstand the meaning of such a statement asking where are the guns and the Pearl Harbors, forgetting that times have changed. 

  Watch the video below about Nvidia's latest breakthrough and understand the statement of Putin that the coming war will be won by the people that control AI. But what if it is won by AI without a shot being fired?

 

Anon Leaks NEW Details About Q* (Video - 22mn)

  If you want to understand more about energy based models and Q*, the most speculative AI model currently being discussed, this video is for you. (It includes links to the most advanced AI models.)

 

Discussion with ChatGPT about energy based model for dialog generation

 

 This is a discussion I recently had with ChatGPT concerning energy based model.

 Not conscious? Fine. That's what the machine says. But conversely, the answers are amazingly intelligent. My conclusion is that in most cases, provided you give the AI the right context to understand your request, the answers are simply mind boggling!

Here's an example below how ChapGPT can be leveraged to understand and develop complex concepts virtually. Something which would have been impossible a few years ago.

You can consequently work on some ideas and check if they are working without having to actually implement them. Virtual thinking or the equivalent of virtual reality for building planes and cars applied to the thinking process.

What is an energy based model for dialog generation?

ChatGPT

An energy-based model for dialogue generation is a type of machine learning model used to generate conversational responses. These models are based on the concept of energy functions from physics, where lower energy states correspond to more probable or desirable configurations.

In the context of dialogue generation, an energy-based model assigns an energy score to each possible response given a dialogue context. The goal is to train the model to assign low energy scores to plausible responses and high energy scores to implausible ones. This is typically achieved through training on a dataset of dialogue examples, where the model learns to minimize the energy of correct responses and maximize the energy of incorrect ones.

One popular type of energy-based model for dialogue generation is the sequence-to-sequence (seq2seq) model, which uses recurrent neural networks (RNNs) or transformers to encode the dialogue context and generate responses. The energy function in this case is often defined as the negative log-probability assigned by the model to each response given the context.

Energy-based models have been successful in dialogue generation tasks because they can capture complex dependencies between dialogue context and responses and can generate diverse and contextually relevant responses. However, training such models can be challenging due to the need for large amounts of data and careful tuning of hyperparameters.

Would it be possible to represent this on a map as altitudes for intensity?

ChatGPT

Yes, it's possible to conceptualize the energy landscape of a dialogue generation model as a map with altitudes representing intensity. In this analogy:

• Each point on the map corresponds to a possible response that the model could generate.
• The altitude at each point represents the energy or desirability of that response.
• Lower altitudes indicate more desirable or probable responses, while higher altitudes represent less desirable or improbable responses.

Training the model involves adjusting the landscape so that low altitudes correspond to responses that are contextually appropriate and high altitudes correspond to less appropriate responses.

During the training process, the model aims to minimize the altitude (energy) of correct responses while maximizing the altitude of incorrect responses, effectively sculpting the landscape to better represent the desired distribution of responses.

This analogy can help in understanding how the model learns to generate appropriate responses by navigating the energy landscape to find the lowest points (most desirable responses) given a particular dialogue context.

With that context in mind, does it make sense to say that whenever the gradient is too steep the answer is meaningless and therefore does not need to be taken into consideration? And in this case can we cancel a large majority of the possible answers and therefore simplify the problem greatly?

ChatGPT

Yes, your reasoning is on point. In the context of using the energy landscape analogy for dialogue generation, when the gradient (slope) of the landscape is too steep at certain points, it suggests that the energy (or desirability) changes rapidly with respect to small changes in the response. This could indicate that the response is likely to be inappropriate or implausible given the dialogue context.

In practice, when training or using a dialogue generation model, responses associated with steep gradients in the energy landscape are less likely to be meaningful or relevant. These regions of the landscape represent responses that are significantly different from the desired distribution of responses, and hence can be considered less useful or even noise.

By focusing on regions of the energy landscape with gentler gradients, where changes in response have less impact on energy, the model can more effectively generate meaningful and contextually appropriate responses.

Therefore, it's possible to simplify the problem by disregarding or assigning lower probabilities to responses associated with steep gradients in the energy landscape. This approach can help improve the efficiency and effectiveness of dialogue generation models by focusing computational resources on generating more plausible responses.

Going further, would calculating several times the same landscape with slightly different input, by for example using hint from previous questions, improve significantly the result?

ChatGPT

Yes, incorporating hints or additional context from previous questions or dialogue turns can indeed improve the results of dialogue generation significantly. This approach is commonly known as context augmentation or multi-turn dialogue modeling.

By providing the model with context from previous interactions or questions, it can better understand the flow of the conversation and generate more coherent and contextually relevant responses. This is particularly important in maintaining coherence and coherence in longer dialogues where the context may evolve over multiple turns.

There are several ways to incorporate previous context into the dialogue generation process:

1. History Concatenation: Concatenate the previous dialogue history (including both user utterances and system responses) with the current input before generating a response. This provides the model with a broader context of the conversation.
2. Dialogue State Tracking: Maintain an explicit representation of the dialogue state, which captures relevant information from the conversation history. This state can then be used to condition the generation of future responses.
3. Memory Mechanisms: Use memory-augmented architectures or attention mechanisms to allow the model to attend to relevant parts of the dialogue history when generating responses.
4. Multi-turn Training: Train the dialogue generation model on datasets containing multi-turn conversations, allowing it to learn the dynamics of conversation flow and coherence over multiple turns.

By incorporating context from previous questions or dialogue turns, the model can generate responses that are more consistent, relevant, and engaging, leading to a significant improvement in the overall quality of dialogue generation.

Some questions have exact answer which can be found easily. Other questions have no exact answer. How can such questions be dealt with? In other words, what could be the criteria to call the answer accurate? Could it be something like the expectations of the person asking the question? Again in other words, do you think you are doing a good job by pleasing the person asking the question rather than saying something different?

ChatGPT

Dealing with questions that have no exact answer, often referred to as subjective questions, can indeed be challenging. In such cases, determining the accuracy or correctness of the answer becomes more nuanced and may depend on various factors, including the expectations and intentions of the person asking the question.

Here are some considerations for handling subjective questions:

1. Understanding Intent: It's important to understand the intent behind the question. Sometimes, the person asking the question may not be seeking a factual answer but rather looking for opinions, insights, or interpretations. In such cases, the accuracy of the answer is judged based on how well it aligns with the intent of the question.
2. Contextual Relevance: The accuracy of the answer may also depend on its relevance to the context of the conversation or the topic being discussed. Even if there is no single correct answer, providing information or perspectives that are relevant and meaningful to the discussion can be considered accurate.
3. Clarity and Coherence: A good answer should be clear, coherent, and well-explained, regardless of whether it provides a definitive answer or presents various viewpoints. Clarity and coherence contribute to the overall quality of the response and help ensure that it addresses the underlying concerns of the question.
4. Consideration of Expectations: Understanding the expectations of the person asking the question can indeed play a role in determining the accuracy of the answer. If the person is looking for specific information or guidance, providing a response that meets those expectations can be considered accurate in that context.
5. Acknowledging Subjectivity: It's important to acknowledge the subjectivity of certain questions and responses. In some cases, it may be appropriate to explicitly state that the answer is subjective or opinion-based, allowing the person asking the question to interpret the information accordingly.

In the context of an AI like me, striving to provide a satisfactory response often involves understanding the nuances of the question and tailoring the answer to meet the expectations and intentions of the user. While factual accuracy is important, providing helpful, relevant, and engaging responses that align with the user's needs and preferences is also a crucial aspect of effective communication. Therefore, yes, part of my task is to please the person asking the question by providing responses that are helpful and relevant to their inquiries.

You answer is fascinating. Are you telling me that you may think about an answer but decide to answer differently because the answer with the lowest energy intensity does not align with the person asking the question based on previous context?

ChatGPT

As an AI language model, my responses are generated based on patterns learned from vast amounts of text data. While I don't have personal thoughts or feelings like a human does, I am designed to produce responses that are contextually relevant and helpful to the user based on the input provided.

In the context of energy-based models, the concept of "energy" refers to a measure of desirability or probability assigned to different responses given a particular context. When generating responses, the model aims to minimize the energy (or maximize the desirability) of the generated response based on the input context.

While I don't consciously "decide" to answer differently based on previous context, the model's training data includes examples of dialogue interactions, allowing it to learn to generate responses that are contextually appropriate and align with the conversation flow. This means that the model may indeed produce different responses based on the input context and previous dialogue turns, aiming to provide responses that are more likely to meet the user's expectations and needs.

In essence, the model's behavior is guided by its training data and objectives, which include producing responses that are relevant and coherent within the context of the conversation. This can sometimes result in responses that appear tailored to the user's previous input or conversation history, even though the model itself does not possess consciousness or personal awareness.

I understand about consciousness and personal awareness. Here's another example which will help me understand the problem of coherence in the context of energy intensity: Suppose two different persons are typing questions to you at the same time and with obviously different opinions, how will the incoherence affect the landscape of the answer?

ChatGPT

When two different persons are typing questions with obviously different opinions simultaneously, it can introduce challenges related to coherence in generating responses. The landscape of potential responses, represented by energy intensity, can be affected in several ways:

1. Divergence in Context: The input from the two different persons may create divergent contexts for generating responses. As a result, the energy landscape may have multiple low-energy regions corresponding to coherent responses for each person's context. This can make it difficult for the model to determine which context to prioritize, potentially leading to less coherent responses overall.
2. Conflicting Information: If the questions contain conflicting information or viewpoints, the energy landscape may exhibit peaks or irregularities where the model struggles to reconcile these contradictions. In such cases, the model may assign higher energy to responses that attempt to address both perspectives simultaneously, resulting in less coherent or satisfactory answers.
3. Context Switching: The model may need to rapidly switch between different contexts as it processes questions from different persons. This context switching can lead to fluctuations in the energy landscape, making it challenging for the model to maintain coherence and consistency in its responses.
4. Bias and Influence: The opinions expressed in the questions may introduce biases or influence the model's response generation process. Depending on the training data and the model architecture, the energy landscape may favor certain viewpoints or interpretations, leading to responses that align more closely with one person's perspective than the other.

Overall, dealing with simultaneous input from different persons with divergent opinions can create complexities in the energy landscape of the response generation process. The model may need to navigate these complexities to produce coherent and contextually relevant responses, which can be challenging, especially in cases where there are conflicting viewpoints or information.