In his interview with @PeterMcCormack Russell Napier points out that a 50-year French government bond issued in 2021 with a 0.5% coupon has, as of the interview, lost roughly 78% of its capital value, while French CPI has risen 18% over the same period. This has effectively wiped out the purchasing power of the supposedly "risk-free" asset.

Holy crap POTUS just phoned in @JensenHuang live on stage at All In Summit We will not lose the ai race! And whatever Dario said this weekend won’t stop our progress This made my morning! $NVDA

So I guess that means the US government won't be giving the hyperscalers and LLMs a helping hand with a regulatory moat. (Which, in turn, seems like the signal the USG is prepared to let them go bankrupt in the name of competition.)

VP @JDVance: "Personally, I feel a little bit weird about the fact that you have so many frontier AI tech companies kind of coming to the government and begging the government to regulate them. It feels a little bit to me like a bit of a Trojan horse."

OPENAI’S BROCKMAN BACKS SLOWDOWN FOR FRONTIER AI OpenAI co-founder Greg Brockman says any AI slowdown should target only frontier models powered by massive supercomputers, not open-source or hobby projects. His comments follow growing industry concerns over advanced AI risks and Anthropic CEO Dario Amodei’s call to slow development. Brockman also supports global coordination and treaties, arguing future AI could become bigger than any company or country.

BIS WARNS AI-DRIVEN MARKET MOMENTUM IS BECOMING VULNERABLE The Bank for International Settlements says the AI-driven equity rally is showing growing vulnerability as investors question future profitability and leverage rises across major technology firms. BIS said tech-sector borrowing exceeded $1 trillion by 2025, while stressing markets currently show no overall signs of stress. Why markets care: the warning links stretched AI valuations and opaque financing directly to rising financial-stability and bond-market risks.

It’s worth reading the actual Dario letter in full. Even tho it’s over 3000 words. The proposition he makes is more like soviet era detente. It really reminds me of Nixon era outreach to Russia over nukes. And the comparison is all the stronger when you realise detente was influenced by America becoming over stretched in Vietnam and facing a growing fiscal and balance of payments crisis. But the end result of detente wasn’t that nuclear engineering stopped. Build out and silo growth was curtailed but engineers continued to advance capabilities. SALt also paced certain capabilities over others in a negotiated way to either iron out asymmetries between powers for MAD purposes or lock in negotiated strategic advantages. In the AI letter Dario makes the SALT comparison. But his proposition is mostly to pace recursive development only after locking in a greater American advantage. To achieve that he needs permission to basically forge a domestic cartel and to lockdown development work in ways that prevents China getting access that enables distillation. Hence my Manhattan project quip. But the Chinese would never agree to any detente on technological development or recursive influence on their front without some compensating trade off from the US. And for them it would either be access to nvidia chips or a promise that America will slow build out while they catch up on innovation. As the doc that is “coincidentally” circulating outlining Chinese perspectives on AI risks shows, they are less concerned by AI is going to kill us risk and more concerned about the risk that AI might undermine the CCP. Either way the pacing doc introduces the idea of an international treaty which regulates the recursive and architectural engineering element in China. But such an agreement is MEANINGLESS if the CCP loses control, which it could well do because the Chinese models are open weight and as its own risk paper shows that is the greater risk. So what is really on offer is a quid pro quo. We reduce buildout and the recursive element of our technology (focus more on advances that we control and architecture), and maybe give you a few more chips, and you clamp down on open weight models and bring more of your research in house too. So perhaps the better way to read it is that this is an outreach to China to get the open weights under control.

It’s worth reading the actual Dario letter in full. Even tho it’s over 3000 words. The proposition he makes is more like soviet era detente. It really reminds me of Nixon era outreach to Russia over nukes. And the comparison is all the stronger when you realise detente was influenced by America becoming over stretched in Vietnam and facing a growing fiscal and balance of payments crisis. But the end result of detente wasn’t that nuclear engineering stopped. Build out and silo growth was curtailed but engineers continued to advance capabilities. SALt also paced certain capabilities over others in a negotiated way to either iron out asymmetries between powers for MAD purposes or lock in negotiated strategic advantages. In the AI letter Dario makes the SALT comparison. But his proposition is mostly to pace recursive development only after locking in a greater American advantage. To achieve that he needs permission to basically forge a domestic cartel and to lockdown development work in ways that prevents China getting access that enables distillation. Hence my Manhattan project quip. But the Chinese would never agree to any detente on technological development or recursive influence on their front without some compensating trade off from the US. And for them it would either be access to nvidia chips or a promise that America will slow build out while they catch up on innovation. As the doc that is “coincidentally” circulating outlining Chinese perspectives on AI risks shows, they are less concerned by AI is going to kill us risk and more concerned about the risk that AI might undermine the CCP. Either way the pacing doc introduces the idea of an international treaty which regulates the recursive and architectural engineering element in China. But such an agreement is MEANINGLESS if the CCP loses control, which it could well do because the Chinese models are open weight and as its own risk paper shows that is the greater risk. So what is really on offer is a quid pro quo. We reduce buildout and the recursive element of our technology (focus more on advances that we control and architecture), and maybe give you a few more chips, and you clamp down on open weight models and bring more of your research in house too. So perhaps the better way to read it is that this is an outreach to China to get the open weights under control.

REMINDER: They need a credible off ramp from the hyper scaling narrative they’ve been selling for months. Safety concerns are an obvious way to justify the incoming pivot. They also justify taking the whole thing into a closed “Manhattan project” type setting at the government’s expense. This justifies the incoming lockdown. As I predicted in August the scale narrative had run its course due to kimi. Hyper scaling wasn’t about genuine demand expectations. It was about winning the ai race by outspending and bankrupting your competitors. Kimi made that pointless. This is no doubt the asymmetric information Bessent has been alluding to for weeks. There’s going to be a helluva lot of liquidity freed by this move. It’s all going to go flooding into USTs. Happy D day bond guys. 👇

Reposting to correct date : Also not entirely unprecedented. The original arrangements in Iran, Saudi and to a lesser degree Iraq very similar. The only difference is they used American corp proxies for that ownership. But anyone with any basic common sense understood what that meant. One need only read the Prize by Daniel Yergin to understand the fine line between private sector western oil interests and state ones. ARAMCO even stands for Arabian American Oil Company 🙄 Nick Butler, former BP executive and Gordon Brown advisor, told the Weekend of Mistakes conf earlier this year that the government–company relationship is and always has been mutually dependent. This was during a panel on the rise of state capitalism. Butler even said he “was slightly surprised by the rubric that was put out for this session, which implied that state capitalism was something new” noting “states and business have worked together for many centuries. I go back to the East India Company, the Levant Company, many many entities across the world”. He added: “ I've always thought that the economic theory, which suggests that there is a great difference between the state, between public activity and private activity was rather an illusion”. He then shared a personal anecdote about how Tony Blair had summoned him to Downing Street because he wanted BP to invest in Russia, telling him”the government will do whatever you want. It's part of our policy,” and so BP went ahead and did. He added BP had always been partly state‑owned (rescued in 1975) but that he only realized how close the link with government was once joining them. As he noted, Companies need the rule of law, policy support and sometimes political or even military backing and financial help (subsidies, export credits) to operate abroad. Equally, states need those companies to build national competitiveness, create jobs and revenue.

Smart chat below. But also, it’s at times like this that I like to remind people that the norms most of us have lived with in markets aren’t that normal on the grander scale. Moreover, everything now feels like the 70s but in reverse.

Totally agree with @TheMichaelEvery ! I think the term mercantilism was thrown about in such a way that it went over the heads of most people for a long time. And to be honest, I myself didn't grok the full implications until I properly studied @michaelxpettis and @M_C_Kleinbook 's book, Trade Wars are Class Wars. For those who haven't read it, their argument is that modern mercantilism is not primarily about imposing tariffs or accumulating gold. Instead, it is about structuring an economy so that it consistently produces more than it consumes, forcing the excess production to be absorbed by other countries through trade surpluses. Alas, this is the way of generational social knowledge. A handful of very smart people know all of these very smart things. The vast majority of us don't. We learn about them when we have to confront their consequences through lived experience. Notably, when the implications of not enough of us knowing about them begin to impact our lives negatively. We then learn about them quickly. The resulting lessons go on to influence our collective consciousness and social-political preferences until the next generation of ignorants ascends to influence and power. And so on and so on. The problem is: time and time again, the very smart people we assign the job of remembering these things (so that we don't repeat the same mistakes again) don't do a good job of communicating what they mean early enough. Other times, it's because they're so focused on understanding the past, they miss the modern-day fundamentals that make their historical knowledge relevant again. I doubt very much that most people who have working jobs, even those who work in finance, know what mercantilism means.