Russia's Tactical Nuclear Weapons Exercises Are Meant To Deter A NATO Intervention In Ukraine

  With Macron sending the Legion to Ukraine and Putin ordering tactical nuclear drills we are edging closer to war by the day. The most amazing thing is that there are so few reactions. Markets are fine installed in their long term bubble. Amazing! 

  In 1962, the last time we were so close to war, people were nervous but they were talking. Now, nothing. I wonder if the Russian tactic of raising the pressure gradually is the right one knowing that both sides believe the war is existential (It may well be!) and that there is consequently no reverse speed. It looks like a slow motion, sliding towards Armageddon. How can we exit the madness?

Authored by Andrew Korybko via Substack,

Sputnik reported on Monday that the Russian General Staff is preparing to carry out drills for practicing the use of tactical nuclear weapons, which follows Foreign Ministry spokeswoman Zakharova warning over the weekend that NATO’s “Steadfast Defender” drills are possible preparations for war with Russia. Italy’s La Repubblica also reported over the weekend that NATO might conventionally intervene in Ukraine if Russia crosses into there from Belarus or carries out “provocations” against fellow members.

These developments follow GUR deputy chief Skibitsky telling The Economist last week that the front lines might soon collapse, which aligns with the Ukrainian Intelligence Committee’s worst-case scenario that they shared in late February. It’s also worth mentioning that Macron just reaffirmed his threat from that time to intervene in Ukraine (most likely around Odessa) in that event, that Poland is no longer ruling out doing the same, and the Ukrainian premier just said that he might request NATO troops.

It's little wonder then that Russia interpreted these signals as preconditioning the Western public to accept that possibility, ergo why its General Staff is now preparing to carry out drills for practicing the use of tactical nuclear weapons. La Repubblica’s report claimed that a whopping 100,000 NATO troops could flood into Ukraine if the decision is made, with the only realistic way to stop them from going beyond the Dnieper and directly clashing with Russian troops is to use tactical nukes in self-defense.

Everything is moving so fast that nobody can say with confidence exactly what will or won’t happen, but a reminder of each side’s interests as their policymakers conceive them to be can help obtain a better idea of how likely certain scenarios might be.

Russia wants to demilitarize and denazify Ukraine while NATO wants to stop them, with neither being able to achieve their maximum goals in this respect. The game-changing variable, however, will be what each does if/when the front lines collapse.

Russia will at least move to secure the full administrative borders of its four recently reunified regions, but it might go beyond that and potentially also open up more fronts in the north (whether from Belarus and/or around Sumy-Kharkov) in order to achieve as much of its aforesaid goals as possible. Should that happen, then NATO might panic depending on how far and fast Russia advances, thus serving to justify whatever pretext they concoct for commencing a conventional intervention in Ukraine.

The NATO-Russian security dilemma, which frames the abovementioned sequence of events, would unprecedentedly worsen since Russia might then panic depending on how far and fast NATO advances. The bloc might just occupy everything west of the Dnieper, but it could also cross the river and place its forces in position to attack Russia’s. Any perceived move in that direction, let alone actual ones, could prompt Russia to preempt that with tactical nukes. If they’re dropped, then the whole world will change.

The most effective way to defuse this apocalyptic security dilemma is for a neutral third party like India or the Pope to mediate between each side and discover their intentions to pass along to the other. If Russia doesn’t plan to march on Kiev once again and NATO doesn’t plan to cross the Dnieper, then neither might panic and overreact by inadvertently crossing the other’s red lines. A semi-orderly Ukrainian military withdrawal over the Dnieper to demilitarize the east as a buffer zone could then occur.

That would be the best-case scenario for de-escalating these dangerous dynamics, though it of course can’t be taken for granted since nobody is presently mediating between them, and one or the other might lie to whoever does in order to deceive their opponents. Nevertheless, hopefully someone steps up to try before the front collapses and their noble efforts are sincerely welcomed by both sides, since the reluctance to do so could doom the world to destruction in the worst-case scenario.

CIA Engaged In "Infinite Race" With China For AI, Other Tech

  If you agree that we may be heading towards war between East and West then without doubt AI will play a crucial role. Maybe not at the very beginning as enhancing human capabilities is just that but soon after with the birth of autonomous robots and drones. 

  But the real game changer would be a AI controlling the battle field and improving exponentially. We're not there yet but it is within scope. What we are missing is an incentive for massive investment which an all-out war would be. 

  Then the devil would quickly be out of the bottle. This is how punctuated evolution works. What is the chance that it would suddenly stop? We are truly on the edge of a precipice!

CIA Engaged In "Infinite Race" With China For AI, Other Tech

The CIA is engaged in an "infinite race" with China when it comes to AI and other top technologies, according to the agency's Chief Technology Officer, Nand Mulchandani, who outlined a strategy that prioritizes technological prowess as crucial to national security.

Speaking at the Hill & Valley Forum's gathering of top technology and government officials in Washington this week, Mulchandani’s made it clear that the agency is aggressively pursuing advancements in artificial intelligence (AI) to bolster both offensive and defensive capabilities, the Washington Times reports.

"We’re looking at transforming every single part of what the agency does," he stated, underscoring the depth of the CIA's commitment to integrating AI into its core operations. The agency's push includes the development of large language models, sophisticated algorithms that are the backbone of generative AI tools, aiming to enhance everything from field operations to analytical and support functions.

This strategic pivot comes as geopolitical rivalry with China is intensifying. The CCP has repeatedly expressed its ambition to dominate the AI sphere, which would present profound challenges and implications for global power dynamics. Mulchandani emphasized the need to rethink the concept of this competition as a "race," suggesting that viewing it as having a definitive end is a misstep. "This is an infinite race. This is not going to stop. It’s going to keep on going," he explained, framing the scenario as a continuous struggle for technological superiority.

The implications of this shift are profound. If the deployment of these new tools escalates to warfare, it will test America's position in the technology stakes, a scenario Mulchandani hopes will never materialize. He predicts the next major conflict will be "primarily a software war," driven by AI, changing the nature of warfare from hardware-dependent to software-driven.

The concerns are not just theoretical. At Stanford’s Hoover Institution, Herbert Lin of the Stanford Emerging Technology Review highlighted the shift in global tech leadership, with the U.S. losing its primacy in certain key areas like AI. Lin pointed out the critical need for a robust talent pipeline and a strategic vision, especially in fields like biotechnology, to maintain competitiveness.

Moreover, the CIA is particularly wary of AI-driven Ubiquitous Technical Surveillance (UTS), which threatens the secrecy of U.S. intelligence operations. In response, the agency is engaged in foundational infrastructure work, which Mulchandani described as the "sewer and plumbing work" necessary to navigate the AI revolution. This involves constant adaptation to rapid technological changes, ensuring that the CIA remains agile in its tech tactics.

"We talk about UTS, which is basically something that’s really, really killing us out in the field in terms of competitively, you know, biometrics, video cameras," he said. "Well, how do we turn it around [and continue] those operations in the face of this much AI being thrown at us is another big area that they’re looking at. So directorate by directorate, we’re rethinking, reshaping every part of what CIA needs to do in the face of using it and deploying it."

The urgency of these initiatives is echoed in the broader governmental plea for collaboration from Silicon Valley. House Speaker Mike Johnson's call to technologists and venture capitalists at the forum to guide and assist the government underscores the critical role of public-private partnerships in navigating the technological labyrinth.

As the U.S. and China continue their relentless pursuit of technological dominance, the narrative is clear: this is not a sprint with a finish line but a marathon without end, defining the future of global power, security, and technological innovation.

Big Mike Begs

No, not that Big Mike... House Speaker Mike Johnson (R?-LA), who implored the technologists and venture capitalists at the forum to help the government wherever they can.

"There are not many industries, not many leaders and experts, who we just openly plead for your counsel, but I am doing that here today," said Johnson. "Because a lot of the people who are of goodwill here, who want to do the right thing, could use some of your guidance along the way to make sure that we don’t step on any land mines that we don’t see. You have a much better vision, I think, on a lot of that than we do."

David Stockman On The $1.3 Trillion Elephant In The Room

  How do you fix a problem 50 years in the making?

  The short answer is: "You don't!" So politicians will keep adding oil to the fire until the economic machine blows. There are no other options. It's the only thing they know how to do and the only thing electors will vote for. Anything else is complex, requires sacrifices and compromises. "Out of the question!" is an understatement so explode the machine will!

  David Stockman is a voice of reason in an unreasonable world. It is safe to bet that absolutely nobody will listen to him in Washington!

Authored by David Stockman via InternationalMan.com,

These people have to be stopped!

We are talking about the nation’s unhinged monetary politburo domiciled in the Eccles Building, of course. It is bad enough that their relentless inflation of financial assets has showered the 1% with untold trillions of windfall gains, but their ultimate crime is that they lured the nation’s elected politician into a veritable fiscal trance. Consequently, future generations will be lugging the service costs on insuperable public debts for years to come.

For more than two decades these foolish PhDs and monetary apparatchiks drove the entire Treasury yield curve to rock bottom, even as public debt erupted skyward. In this context, the single biggest chunk of the Treasury debt lies in the 90-day T-bill sector, but between December 2007 and June 2023 the inflation-adjusted yield on this workhorse debt security was negative 95% of the time.

That’s right. During that 187-month span, the interest rate exceeded the running (LTM) inflation rate during only nine months, as depicted by the purple area picking above the zero bound in the chart, and even then by just a tad. All the rest of the time, Uncle Sam was happily taxing the inflationary rise in nominal incomes, even as his debt service payments were dramatically lagging the 78% rise of CPI during that period.

Inflation-Adjusted Yield On 90-Day T-bills, 2007 to 2022

The above was the fiscal equivalent of Novocain. It enabled the elected politicians to merrily jig up and down Pennsylvania Avenue and stroll the K-Street corridors dispensing bountiful goodies left and right, while experiencing nary a moment of pain from the massive debt burden they were piling on the main street economy.

Accordingly, during the quarter-century between Q4 1997 and Q1 2022 the public debt soared from $5.5 trillion to $30.4 trillion or by 453%. In any rational world a commensurate rise in Federal interest expense would have surely awakened at least some of the revilers.

But not in Fed World. As it happened, Uncle Sam’s interest expense only increased by 73%, rising from $368 billion to $635 billion per year during the same period.  By contrast, had interest rates remained at the not unreasonable levels posted in late 1997, the interest expense level by Q1 2022, when the Fed finally awakened to the inflationary monster it had fostered, would have been $2.03 trillion per annum.

In short, the Fed reckless and relentless repression of interest rates during that quarter century fostered an elephant in the room that was one for the ages. Annualized Federal interest expense was fully $1.3 trillion lower than would have been the case at the yield curve in place in Q4 1997.

Alas, the missing interest expense amounted to the equivalent of the entire social security budget!

So, we’d guess the politicians might have been aroused from their slumber had interest expense reflected market rates. Instead, they were actually getting dreadfully wrong price signals and the present fiscal catastrophe is the consequence.

Index Of Public Debt Versus Federal Interest Expense, Q4 1997-Q1 2022

Needless to say, the US economy was not wallowing in failure or under-performance at the rates which prevailed in 1997. In fact, during that year real GDP growth was +4.5%, inflation posted at just 1.7%, real median family income rose by 3.2%, job growth was 2.8% and the real interest rates on the 10-year UST was +4.0%.

In short, 1997 generated one of the strongest macroeconomic performances in recent decades—even with inflation-adjusted yields on the 10-year UST of +4.0%. So there was no compelling reason for a massive compression of interest rates, but that is exactly what the Fed engineered over the next two decades. As shown in the graph below, rates were systematically pushed lower by 300 to 500 basis points across the curve by the bottom in 2020-2021.

Current yields are higher by 300 to 400 basis points from this recent bottom, but here’s the thing: They are only back to nominal levels prevalent at the beginning of the period in 1997, even as inflation is running at 3-4% Y/Y increases, or double the levels of 1997.

US Treasury Yields, 1997 to 2024

Unfortunately, even as the Fed has tepidly moved toward normalization of yields as shown in the graph above, Wall Street is bringing unrelenting pressure for a new round of rates cuts, which would result in yet another spree of the deep interest rate repression and distortion that has fueled Washington’s fiscal binge since the turn of the century.

As it is, the public debt is already growing at an accelerating clip, even before the US economy succumbs to the recession that is now gathering force. And we do mean accelerating. The public debt has recently been increasing by $1 trillion every 100 days. That’s $10 billion per day, $416 million per hour.

In fact, Uncle Sam’s debt has risen by $470 billion in the first two months of this year to $34.5 trillion and is on pace to surpass $35 trillion in a little over a month, $37 trillion well before year’s end, and $40 trillion some time in 2025. That’s about two years ahead of the current CBO (Congressional Budget Office) forecast.

On the current path, moreover, the public debt will reach $60 trillion by the end of the 10-year budget window. But even that depends upon the CBO’s latest iteration of Rosy Scenario, which envisions no recession ever again, just 2% inflation as far as the eye can see and real interest rates of barely 1%. And that’s to say nothing of the trillions in phony spending cuts and out-year tax increases that are built into the CBO baseline but which Congress will never actually allow to materialize.

What is worse, even with partial normalization of rates, a veritable tsunami of Federal interest expense is now gathering steam. That is because the ultra-low yields of 2007 to 2022 are now rolling over into the current market rates shown above—at the same time that the amount of public debt outstanding is heading skyward. As a result, the annualized run rate of Federal interest expense hit $1.1 trillion in February and is heading for $1.6 trillion by the end of the current fiscal year in September.

Finally, even as the run-rate of interest expense has been soaring, the bureaucrats at the US Treasury have been drastically shortening the maturity of the outstanding debt, as it rolls over. Accordingly, more than $21 trillion of Treasury paper has been refinanced in the under one-year T-bill market, thereby lowering the weighted-average maturity of the public debt to less than five- years.

The apparent bet is that the Fed will be cutting rates soon. As is becoming more apparent by the day, however, that’s just not in the cards: No matter how you slice it, the running level of inflation has remained exceedingly sticky and shows no signs of dropping below its current 3-4% range any time soon.

What is also becoming more apparent by the day is that the money-printers at the Fed have led Washington into a massive fiscal calamity. It is only a matter of time, therefore, until the brown stuff hits the fan like never before.

Europe Scraps Net Zero, Biden Should But Won't, Why?

  Net Zero is nonsense but worse than that, it's a suicide pact.

  The real problem is that while we're chasing chimeras, time is running out and investment is "real" energy like gas or nuclear is not being done. This matters because energy can only be long term. It takes a decade to build a plant and three to implement a new energy policy. So whatever you decide now will impact you in 10 to 20 years. Without energy you can't run a modern economy. Likewise, with green energy which is little more than a fad for rich people. This is not an opinion. With trillions of dollars and Euros of investment, green energies (which are often NOT green at all), have hardly moved the needle growing from 3 to 5% of our energy needs. At this speed, we'll be bankrupt much sooner than we have new, efficient energy sources.  

Authored by Mike Shedlock via MishTalk.com,

“Unaffordable climate commitments have two leftist British parties racing to exit stage left.”

Europeans Ditch Net Zero

The Wall Street Journal reports Europeans Ditch Net Zero, While Biden Clings to It

You know you’ve stumbled through the looking glass when European politicians start sounding saner on climate policy than the Americans do. Well here we are, Alice: Europeans are admitting the folly of net zero quicker than their American peers.

The latest example—perhaps “victim” is more apt—is Humza Yousaf, who resigned this week as Scotland’s first minister. That region within the U.K. enjoys substantial devolved powers over its own affairs, including on climate policy. An administration led by Mr. Yousaf’s left-leaning Scottish National Party had hoped to rush ahead of the national government in London in slashing carbon emissions.

Until, that is, someone noticed the costs. A recent report from the U.K.’s Climate Change Committee noted Scotland had fallen far behind on its climate goals. The government aimed to reduce by 20% the aggregate distance driven by Scottish motorists, compared with 2019 levels, but had no plan to accomplish the reduction in personal mobility by the 2030 deadline. To get back on track with the government’s goal of a transition to home electric heat pumps, Scotland would have to replace natural-gas fire boilers at a rate of more than 80,000 households a year by the end of the decade. That’s a big ask considering that in 2023 it managed 6,000 boiler replacements. The government resisted imposing an aviation tax to discourage excess flying. And so on.

Mr. Yousaf did the only thing he could under the circumstances: He all but abandoned net zero. His administration announced it is ditching firm annual emission-reduction targets in favor of fuzzier “carbon budgets.” The Green Party, with which Mr. Yousaf’s SNP governed in a coalition, balked. After a series of political machinations that were one part “Macbeth” and two parts “Comedy of Errors,” Mr. Yousaf’s administration collapsed and he was forced to resign.

Observe two salient details. First, the specific list of targets the country was missing. Scotland had reached the point where further net-zero progress would have made obvious and material demands of household budgets. That isn’t counting the additional costs of renewable power hidden in utility bills.

I have discussed the above ideas many times. There are farm protests in nearly every country on the main continent and Greens are likely to get clobbered hard in the European Parliament elections in June.

What About the US?

The Journal reports “The puzzlement is that the U.S. is headed in the opposite direction. President Biden is pressing ahead with aggressive net-zero policies such as an electric-vehicle mandate and pouring trillions of dollars of borrowed government and hard-earned household money into climate boondoggles.“

There is no puzzle. Biden is owned 100% by the Progressives.

They control climate policy, regulations, student loans, abortion, everything.

Please note Biden Promotes Climate Change at the Expense of More Global Poverty

The mad rush to deal with climate change, even if it works (it won’t), has a nasty tradeoff (more global poverty).

Biden will not do anything to offend the Progressives, even if it means he loses the election over it.

GPT-5 Launch Day is NEAR | The End of Privacy and "Digital People" (Video - 14mn)

  We are only days away from the release of GPT5 and it looks like it's going to be a game changer in some positive and possible many negative ways. 

  GPT4 was dumb in many ways but also extremely "intelligent" as an extension to your intelligence, meaning that it did know what you didn't and with the right prompt could understand what you were after. That and only that: Perfect.

  GPT5 is going to be very different, with many add-ons which may completely change the experience. Most people will see this as "progress" at least at the beginning but I am not sure at all! 

 The ability to take more "context" into consideration will make it closer to AGI. Good. Although, now it's going to take the past into consideration. How dangerous can this be? Could it be the beginning of the really never forgetting internet, in which case we truly do have a problem? Whatever you have done, wherever you have been, whoever you have met will now catch up with you retrospectively. No problem? Think again: Now thanks to AI we can make inferences. The machine will quickly "know" you better than you do. This is the key to "pre-crime" or more insidiously manipulation on a massive scale, individually. 

 With AI, any picture can retroactively be geo-localised. Persons identified. Past mails, letters, videos, pictures analyzed and understood in their context. How long before the AI creates a perfect "image" of you through time? What can be done with that?

 And that's just the past. What about the present? How long before you are recognized instantly on EVERY camera linked to AI? How much privacy will you have left if almost anybody can know where you are at any time? Remember Jason Bourne 20 years ago? The CIA using advanced computers could never quite figure where he was in real time. Now the AI will know where you are before you arrive where you want to be! If you are not yet frightened, you are not paying attention.  

 In the past, laws have always been voted with "good" or at least valid intentions in mind and soon after used for a completely different purpose. Here we'll get the problem on steroid. New laws about hate crime and misinformation in Europe and the US are already quite dangerous in themselves but with AI extensions, any malevolent government will soon be in a position to do things that the worst dictators could not have dreamed about. How much freedom can there be in such a world?  The more you think about it, the more the danger of the technology becomes obvious. We're on our way to giving birth to a monster!

Are We Destroying The Economy On Purpose?

  An interesting and different look at the market. The FED is stuck as is the bank of Japan. They can't meaningfully raise rates less the engine explodes and banks implode nor can they lower rates less they loose credibility and inflation goes through the roof. Interesting months ahead, but one thing is certain: We could tell right from the beginning that it would end this way. It always does.

Submitted by QTR's Fringe Finance

In one of the most fascinating discussions I’ve had in a while, I spoke last weekend with my friend Andy Schectman about the state of the world, markets, geopolitics and the economy.

What started as a friendly catch-up quickly turned into delving into angles on the state of our nation that I had never before considered — specifically, Andy laying out one theory that started in the 1960’s that could explain the chaos that it appears our economy — and nation — is devolving into.

First, we talked about the bond market, excessive fiscal spending and why gold continues to be the answer. Andy told me: "I think it's a lot deeper than that, too. I think that we have proven to the rest of the world, largely through weaponizing of the dollar, that if you don't align ideologically with us, well, that's even a bigger problem. So, yeah, when you look at what gold has done over the past 25 years, it's outpaced the bond market, but it doesn't have the counterparty risk.”

“And I think that's really the big problem here,” he continued, explaining why he thinks the bond market will eventually lose its footing. “It's counterparty risk on top of brain-dead monetary policy and as irresponsible a fiscal policy as you could ever imagine. So, yes, I do think it is. And I don't know if 5% is the line in the sand. I mean, it just seems as though, according to Jim Willey, we can hand money to Ireland and the Caymans and the United Kingdom under the table to continue to, you know, continue the facade, if you will. as to who would be stupid enough to buy any treasuries of maturity, any U.S. bonds of length of maturity, 10-year or greater, who in their right mind would do that?"

Speaking about the Fed potentially cutting rates, Andy said: “Look, I think by cutting, we've lost all credibility at that point, complete and total credibility. And I don't think there is any way that they can lower rates. I really don't think that there is.”

“And I think there's nothing but inflation and higher rates ahead of us. But if I had to guess, it will be range bound, you know, just like there was no inflation and then it was transitory and then it was structural, then it was gone, then it was back. It'll be the same thing here,” he added.

As an example: “Well, the economy is a, you know, the economy is a little bit hotter than it was supposed to be. And also we're not going to be higher for longer. And, you know, but we're thinking of lowering and maybe we'll do two rate cuts by the end of the day. Okay. Maybe one, well, maybe we're not going to do it. They're not going to do shit. And I don't think they really can do much of anything.”

Andy says: “You know, they can't really raise rates because we have to sell $14 trillion in bonds this year to retire the maturing debt and also pay the current bills. And a lot of this debt's going to cost far more than the debt it's replacing, which could lead to even more printing to cover that cost. So you can't really raise rates.”

Andy then told me about a theory that changed the way I thought about the economy...(READ THIS FULL INTERVIEW AND LISTEN TO THE PODCAST HERE).

Inside China's Failed $100 Billion GHOST CITY in Malaysia (Video - 29mn)

  You only need to watch the first 10mn to understand what's going on here.

  China Country Garden (famous for it's 2023 bankruptcy) invested in a huge project close to Singapore. Expensive apartments and villas to attract rich Chinese abroad. Two problems: The rich Chinese didn't want to go in the Middle of Nowhere and more importantly, the Chinese government in the end, recently restricted how much they could invest overseas to the equivalent of USD 50,000 which is a fraction of the cost of an apartment or a villa. 

 The project is therefore stopped. The prices are beyond the ability of Malay people to pay and without Chinese individual investors, the prospects are grim.

 I have never visited the place, but flying out of Singapore a few years ago you could see the huge earthwork on-going on what was mostly mangroves at the time. Out of the total 100 billion, it looks like about a third as already been invested. But without clients nor new funding, it is difficult to imagine what this city will become, knowing that in the harsh tropical environment of Malaysia, properties tend to degrade fast. 

 Another nail in the coffin of the current, giant world bubble? This project must concern mainly Chinese banks but also to some extent Malaysian banks. Still, at some stage, someone, somewhere will have to absorb the loss...

 

Israel is Destroying America (Video - 16mn)

  It is now time to take a stand: Netanyahu is a dangerous man who represents a danger for Israel and the world. He must be removed!

 

Is Netanyahu a war criminal? This Is What They’re NOT Telling You by Russell Brand (Video - 11mn)

  Who indeed are the real criminals? When the empire makers are accusing you to be a war criminal, isn't it a travesty of justice? (The first 5mn cover the issue.)

Central Bank Digital Currency CBDC is Coming (Video - 32mn)

  It is unfortunate that Ed Dowd is so difficult to follow because what he is saying is very interesting. Banks insolvency in the US may indeed precipitate the adoption of CBDC. Hopefully people will resist but what if the shock is big enough?