Markets/Econ
Are Trump Tariffs Triggering the Demise of Dollar Dominance?
Does this mean the end of dollar dominance? Probably not. The pre-eminent role of the dollar in trade, international finance, and reserve holdings is hardwired in place by network effects, institutionalized practices, and the lack of viable alternative currencies, and it will take time for them to erode. But it is clear that, at least during this episode, the dollar has stopped acting like a “flight-to-safety” currency, and the simultaneous rise in yields and fall in the dollar suggests a pullback from dollar assets that may reflect mounting concerns about the chaotic direction and implementation of US economic policy.
Kindleberger’s Trap is the danger that a fading hegemon lacks the ability but the ascendant one lacks the will to supply the world economy with vital public goods — such as a reserve currency. In the 1930s, the Bank of England lacked the ability to continue to serve as international lender of last resort, and the ascendant Federal Reserve lacked the will to do so.
A bestiary of leveraged Treasury market trades
In February, Barclays estimated that the scrapping of the “supplementary leverage ratio” alone could create about $6tn of “leverage exposure capacity”, which would in particular help Treasuries. As a result, hedge funds earlier this year went long Treasuries and short swaps in the expectation that the spread would flip from being deeply negative to closer to zero.
Related: What They Are Saying About Supplementary Leverage Ratio Reform
U.S. Treasury Secretary Scott Bessent (April 2025)
“I previously raised concerns about whether the leverage capital restrictions are too frequently binding. The bank regulators are now hard at work to develop a proposal to ensure that leverage capital functions as appropriate.”
International trade suppression and the demand for US Treasuries
Trump’s Tariffs: A Political World Turned Upside Down
And given that the impacts of China’s policy-driven emergence have been highly unequal, and not Pareto improving, there is not a purely economic basis to reject policy measures to offset it. The welfare triangles in textbooks or the theoretical possibility of compensating the losers do not provide a principled basis for rejecting offsetting measures that may reduce aggregate American wealth or income, but benefit many, especially those harmed by Chinese policies. Indeed, there is something of a let-them-eat-cake vibe given off by those who make such arguments
When banks rescue the government
An elegant analysis by Olivier Jeanne from Johns Hopkins University provides an intriguing answer. He shows that once debt/GDP-ratios climb above 100% to 120%, the demand for government bonds changes.
But once government debt surpasses the 120% threshold, banks and in particular the central bank step in as not only the major but the exclusive buyer of government debt. Practically 100% of newly issued debt gets bought by the central bank and banks in a form of financial repression designed to keep long-term government bond yields low.
Tariffs, The American Mittelstand and The Mighty Wurlitzer
Izabella Kaminska sharply observes that the tariff announcements for Liberation Day were suspended for 90 days. This means that the next big tariff announcement will be on the Fourth of July. This has all been remarkably carefully thought through. I’m betting Trump manages to drive stock prices through the roof just in time for the midterms.
It is easy to think about all this as a fight between the US and China. That’s the way it’s being framed. But, the tariff strategy also reflects a domestic fight between two distinct camps: The Corporatists and the Techno/Oligarchs. The latter is now in charge and signaling a serious change in the way capital will be allocated going forward. They want to disintermediate Wall Street and the handful of private equity firms that have decided who does and does not get capital. It was a small club. They only invested in potential unicorns. This left most of the entrepreneurs out in the cold. With these announcements, the TechnoOligarchs aim to shift more money into the hands of small and medium-sized businesses that may not be unicorns but which are reliable workhorses.
Table of Q1 returns in the press—
If it's crypto it's not money laundering.
Earlier this week the Department of Justice's deputy attorney general Todd Blanche sent out an internal staff memo saying that the digital asset industry (read: crypto) is "critical to the nation’s economic development." (Editor's note: it's not.) As such, staff have been instructed to stop targeting crypto platforms such as exchanges, mixers like Tornado Cash and ChipMixer, and offline wallets for the "acts of their end users."
If, as Blanche suggests, digital asset platforms are no longer to be targeted for the "acts of their end users," that's effectively saying that the second leg of a money laundering or sanctions violation is no longer a violation, at least not when a crypto platform is involved. So if cartel deposits dirty money at an exchange like Binance which facilitates their crypto transactions, the exchange won't be pursued. Only the cartel will be.
In effect the entire technology has been handed a get-out-of-money-laundering-jail-free card. A detached observer could safely assume that crypto platforms will respond by easing up on their compliance measures—they won't be indicted, after all—which, in turn, will allow more bad actors to make use of their services.
The New Market for Tariff Evasion
For smugglers, this is all very good news. By employing a crude formula to determine country-by-country tariffs, the Trump administration has created a new and exciting market for evasion arbitrage. The U.S. lacks the capacity to monitor its own imports, let alone transshipment occurring via third countries. And, even better, it has angered the very allies whose help is needed to enforce these levies. If Louis Mandrin was alive today, he’d be licking his lips.
Last Gasp of the Landfill Economy
A friend was showing us his 1957 Chevrolet Bel-Air. Unlike the stainless steal and low-quality chrome of today, the original parts are still untarnished. Since the entire vehicle is analog, parts can be scrounged or fabricated or swapped out with a similar set-up.
Does anyone seriously believe that a chipset-software-dependent vehicle today will still be running 68 years from now? Analog parts can be cast or welded; customized chipsets and firmware coding cannot. The original components will all be history.
Foreign
Whatever its feasibility, the plan made one thing clear: Trump had no intention of following the Obama-Biden playbook in the Middle East—not on Gaza, not on Iran, not on anything. These early actions reveal the core of Trump’s foreign policy approach on the Middle East: a willingness to leverage American power while avoiding entanglement, oscillating between shows of force and diplomatic outreach—a strategic zigzag that confounds both allies and adversaries but consistently advances America’s position.
Yet it is certainly possible to arrive at a very different apprehension of Trump’s approach to foreign policy based on the statements of some of his most prominent supporters and advisers, especially if one spends a lot of time on social media. In the view of many who offer themselves up as speaking for Trump, or for his voter base, the true Donald Trump isn’t a nationalist leader in the Teddy Roosevelt mode, who may speak softly but is by no means averse to using the big stick of American military and economic power. Rather, he is—or should be—a kind of cross between a 1930s right-wing isolationist and a 1960s antiwar protester.
How to pay for European defense
Wulff et al. (2025) propose a European Defense Mechanism (EDM), set up by an intergovernmental treaty between governments. The objective is to transform how Europe funds and purchases defense capabilities.
Europe's defense financing challenge won't be solved by accounting gimmicks or interest rate subsidies. The fundamental problem is structural inefficiency and fragmentation that wastes resources and diminishes capabilities. The European Defense Mechanism offers a realistic path forward, combining fiscal flexibility with the transformative benefits of a true defense single market. While establishing such an institution would face political obstacles, the alternative - continuing Europe's inefficient, fragmented approach to defense - poses far greater risks in an increasingly dangerous world.
Related: The Brief – Give the world what it so craves, Eurobonds
Bombshell investigation exposes Ecuadorian president’s cartel conspiracy
Ecuador’s ports are a hub for world cocaine trafficking, while its dolarized, deregulated system is a laundering paradise, feeding a global need for narco cash. A well-oiled system, unpunished, essential, and deadly.
Türkiye still feels different to say the Arab Spring or Ukraine in 2004/05 or 2013/14 where there was a genuine feeling that the nation had overwhelmingly turned against the ruling party and leader. I still found plenty of people defending Erdogan, and a large section of the population (Kurds) are staying on the side-lines. The country is still polarised, is it 50-50, or 60-40, 45-55? I don’t know. But it is not 80% plus against Erdogan as seemed to be the case with Ukraine against Yanukovych in 2004/05 and again in 2013/14 - I was in Ukraine at both those times and that certainly felt to be the case.
Middle-Aged Man Trading Cards Go Viral in Rural Japan Town. Suspiciously wholesome.
The most popular of them all is probably All-Rounder Mr. Fujii (68), a former prison officer turned community volunteer. His card is so sought after that local kids have even started asking him for autographs.
“I was honestly shocked when they asked me to sign it,” Mr. Fujii said, laughing. “I never imagined I’d become a trading card, let alone have fans.”
Each card comes with different attacks and an assigned elemental type — just like a classic fantasy card game — but with a humorous, real-world edge.
Every island matters. That is why during the last great Pacific war so much blood and treasure was expended to hold and take them.
For far too long, this territory or that was either forgotten or dismissed as “not an atoll worth dying on” by people either ignorant of history, geography, or simply unserious people in serious jobs. The People’s Republic of China (PRC), especially when we were engaged in unwise imperial policing actions in Central and Southwest Asia, took advantage of the West’s neglect and moved it. A lot of work needs to be done to roll their advances back.
USA Culture/Politics
Everybody Hates Howard Lutnick
Lutnick is loathed for two reasons. The first is that he defeated efforts by Treasury Secretary Scott Bessent and National Economic Council chair Kevin Hassett to limit the size and scope of Trump’s tariffs, which, if we’re lucky, will tip the U.S. economy into a recession. (If we’re unlucky, the tariffs will tip the global economy into a depression.) The second reason Trump officials hate Lutnick is that nobody thinks he actually believes the hooey he spouts in furtherance of a maximalist tariff policy. In an administration overflowing with sycophants, no nose is burrowed more deeply inside Trump’s gluteus maximus than Lutnick’s.
Does Social Security have a dead beneficiary problem after all?
If that percentage turns out to be true – and, again, I’m having a hard time believing it – then SSA has a real problem on its hands. These figures would imply that over 16,000 dead Americans aged 100+ are currently collecting benefits. At an average monthly amount of about $1,776, according to SSA’s publicly-available data, that’s real money – about $340 million in lost benefits per year. Again, not the end of the world in a $1.6 trillion dollar annual Social Security benefit bill, but this may not be the end of the story.
What if the dead beneficiary problem weren’t restricted to individuals aged 100 and over. Why not a person who died at age 85, but whose death wasn’t reported to SSA? Presumably the dead-beneficiary rate would be much lower, but there also are a lot more Americans in this age group. You can see where this is going, and the numbers are potentially large. (Potentially.)
If This Is What It Looks Like, NY AG Letitia James Is In a World of Trouble. Unfortunately for Letitia James, political opponents likely won’t benefit from the Trump Administration’s live and let live attitude regarding most fraud.
If she did not take up residency, as she claimed in her POA, then a case can be made that she committed fraud to gain more favorable real estate loan rates — the very crime she hung on Trump. "This would be particularly problematic for someone who has prosecuted others for similar misrepresentations in property matters," Antar notes drily.
But it could be even worse than that for James: she may well have tripped federal wire fraud charges with this maneuver. These can carry a fine of up to $1 million and/or 30 years in the slammer.
Given that any future large scale combat operation is likely to be preceded by an extended period of competition below the threshold of armed conflict, the question of when the US can begin laying the foundations of its wartime deception narrative is critical. If we wait until war is declared or bullets are flying, we are probably too late. With the existing conflicts around the globe that the nation is already on the peripheries of, the US would be prudent to recognize the wisdom of setting conditions to create or maintain advantages in the information dimension sooner rather than later. The bodyguards of lies need to start getting into position to protect America’s precious truth.
Science/Tech/Health
Breakthrough Prize Winner Gerard ’t Hooft Says Quantum Mechanics Is ‘Nonsense’
Many people who write papers on quantum mechanics like to keep some sense of mysticism about it, as if there’s something strange, something almost religious about the subject. I think that’s totally false. Quantum mechanics is based on a mathematical method used to describe very ordinary physical effects. I think the physical world itself is a very ordinary one that is completely classical. But in this completely classical world, there are still too many things that we don’t know today, there are “steps” we’re basically missing on our path to deeper understanding.
Okay. So what is quantum mechanics?
Quantum mechanics is the possibility that you can consider superpositions of states. That’s really all there is to it. And I’d argue that superpositions of states are not real. If you look very carefully, things never superimpose. [Erwin] Schrödinger asked the right questions here: You know, take my cat, it can be dead; it can be alive. Can it be in a superposition? That’s nonsense!
their quantum computers may be more powerful than anything else for certain applications because they understand “quantum mechanics”—by which I mean they understand how these microscopic systems actually act, in great detail, because this is something that actually came out of studying the quantum world. Yes, we know how small objects react and interact. But our problem is that, at present, we can only make statistical predictions. And as soon as a quantum computer gives you statistical distributions instead of correct answers, well, that’s the end of your “computer”; you can’t use it for most applications anymore.
The dire wolf isn’t the only animal that Colossal, which was founded in 2021 and currently employs 130 scientists, wants to bring back. Also on their de-extinction wish list is the woolly mammoth, the dodo, and the thylacine, or Tasmanian tiger.
Related: Howl—The dark side of wolf reintroduction. It’s almost like animals exist/evolve in specific environments and rather than forcing the reintroduction of unfit/extinct species or modding endangered ones, you should focus on restoring as much natural function to the land as practicable.
The wolves didn’t need to be rushed back to the Northern Rockies on the enthusiasm of their human advocates. At the slower pace of natural recovery, Boyd said, “the wolves could have had time to adapt and adjust to being more around people. Some of that adjusting means wolves who are too bold will die. Some individuals who have an innate tendency toward mixing with livestock aren’t going to make it. But other individuals can learn from ones who were shot and stay away from livestock. I just don’t get it. It’s not, ‘Would they have made it?’ They were already making it.”
Related: The Colossal website. I am torn as to whether or not their website intimates an undercurrent of fraud or Bond villainy.
Minimum Viable Muscle: The Least You Must Do To Not Fall Apart
The evidence establishes a clear minimum: each major muscle group must experience mechanical tension at least twice weekly to maintain tissue integrity.
Research establishes the minimum daily movement threshold at approximately 22 minutes of moderate activity. Falling below this floor accelerates mortality risk substantially, with sedentary behavior strongly associated with increased all-cause mortality.
One weekly session approaching maximum effort, whether through heavy resistance training, sprint intervals, or high-intensity circuit work, maintains mitochondrial function, anabolic hormone sensitivity, and cardiovascular capacity that otherwise deteriorate. The molecular mechanism involves substantial but temporary disruption of homeostasis, triggering adaptation pathways that moderate activity never activates.
The Worst Longevity Idea Ever Conceived
I have heard it said that rapamycin is the leading longevity molecule because of the robustness of the literature in mice.
But what the literature in mice robustly shows is that it causes cataracts, testicular atrophy, and impaired glucose metabolism at doses beneath those that lengthen lifespan. When you get into lifespan-lengthening doses, this just gets worse. And other problems are added, like fatty liver and heart scarring.
