Thinking About Berlin's Politics: Return of the City-State, Or: The End of the Nation State May Be Upon Us

Following on With The Victory Of Die Linke (The Left) In Berlin And The Probability Of The City's First Muslim Mayor: "First We Took Manhattan, Then We Took Berlin" earlier today.

The fact that Die Linke not only won the election for the city-state (Stadtstaaten) of Berlin but did so in the face of the rise of AfD really is notable and raises the question: "Whither the Nation-State?"

Some previous looks at this query. First up, the headline post from September 2017:

Because, as mentioned in the introduction to "Trends to Watch: "Can mayors actually rule the world?":

In low-key but very persistent ways technocrats* have been aiming at this target for years and now it seems to be gathering some momentum. Here's a good introduction by Harvard's Diane Davis....

And because there is serious money pushing this idea, it is sometimes challenging to discern whether a piece of writing is reporting or advocacy.
As always, it's your call.

From Aeon:

Return of the city-state
Nation-states came late to history, and there’s plenty of evidence to suggest they won’t make it to the end of the century 

 

 A woodcut of Nuremberg from the Nuremberg Chronicle 1493

If you’d been born 1,500 years ago in southern Europe, you’d have been convinced that the Roman empire would last forever. It had, after all, been around for 1,000 years. And yet, following a period of economic and military decline, it fell apart. By 476 CE it was gone. To the people living under the mighty empire, these events must have been unthinkable. Just as they must have been for those living through the collapse of the Pharaoh’s rule or Christendom or the Ancien Régime.

We are just as deluded that our model of living in ‘countries’ is inevitable and eternal. Yes, there are dictatorships and democracies, but the whole world is made up of nation-states. This means a blend of ‘nation’ (people with common attributes and characteristics) and ‘state’ (an organised political system with sovereignty over a defined space, with borders agreed by other nation-states). Try to imagine a world without countries – you can’t. Our sense of who we are, our loyalties, our rights and obligations, are bound up in them.

Which is all rather odd, since they’re not really that old. Until the mid-19th century, most of the world was a sprawl of empires, unclaimed land, city-states and principalities, which travellers crossed without checks or passports. As industrialisation made societies more complex, large centralised bureaucracies grew up to manage them. Those governments best able to unify their regions, store records, and coordinate action (especially war) grew more powerful vis-à-vis their neighbours. Revolutions – especially in the United States (1776) and France (1789) – helped to create the idea of a commonly defined ‘national interest’, while improved communications unified language, culture and identity. Imperialistic expansion spread the nation-state model worldwide, and by the middle of the 20th century it was the only game in town. There are now 193 nation-states ruling the world.

But the nation-state with its borders, centralised governments, common people and sovereign authority is increasingly out of step with the world. And as Karl Marx observed, if you change the dominant mode of production that underpins a society, the social and political structure will change too.

The case against the nation-state is hardly new. Twenty years ago, many were prophesising its imminent demise. Globalisation, said the futurists, was chipping away at nation-states’ power to enforce change. Businesses, finance and people could up sticks and leave. The exciting, new internet seemed to herald a borderless, free, identity-less future. And climate change, internet governance and international crime all seemed beyond the nation-state’s abilities. It seemed too small to handle international challenges; and too lumbering to tinker with local problems. Voters were quick to spot all this and stopped bothering to vote, making matters worse. In 1995, two books both titled The End of the Nation State – one by the former French diplomat Jean-Marie Guéhenno, the other by the Japanese organisational theorist Kenichi Ohmae – prophesised that power would head up to multinational bodies such as the European Union or the United Nations, or down to regions and cities.

Reports of its death were greatly exaggerated, and the end-of-the-nation-state theory itself died at the turn of the millennium. But now it’s back, and this time it might be right.

There were only tens of millions of people online in 1995 when the nation-state was last declared dead. In 2015, that number had grown to around 3 billion; by 2020, it will be more than 4 billion. (And more than 20 billion internet-connected devices.) Digital technology doesn’t really like the nation-state. John Perry Barlow’s ‘Declaration of the Independence of Cyberspace’ (1996) sums it up well: the internet is a technology built on libertarian principles. Censorship-free, decentralised and borderless. And now ubiquitous.

This is an enormous pain for the nation-state in all sorts of ways. It’s now possible for the British National Health Service to be targeted by ransomware launched in North Korea, and there are few ways to stop it or bring perpetrators to justice. App technology such as Uber and Deliveroo has helped to produce a sudden surge in the gig economy, which is reckoned to cost the government £3.5 billion a year by 2020-1. There are already millions of people using bitcoin and blockchain technologies, explicitly designed to wrestle control of the money supply from central banks and governments, and their number will continue to grow. It’s also infusing us with new values, ones that are not always national in nature: a growing number of people see themselves as ‘global’ citizens....MUCH MORE

That was followed by a counter-argument in October 2017:

"Why nation-states are good"

...We've been kicking around ideas on how to profit from a devolution of power from larger entities (nation-states) to smaller (city-states) should said devolution occur. So, stealing a way of thinking from Eisenhower, in another context, obvs.:

In preparing for battle I have always found that plans are useless, but planning is indispensable.

 - Dwight D. Eisenhower

And in December 2018:

What Wharton Is Thinking About: "Nation-States Are Failing…Will a New, Feudal Order Replace Them?"

Are nation-states failing?
They are changing, that's for sure. And there are lots of people who would like to shape/reshape the world to whatever image of  how-things-should-be that they happen to prefer.
Who knows how people should organize themselves? Or, be organized? Seriously, who knows. A lot of people act as if they know and push one direction or another but maybe no one knows.

From Knowledge@Wharton....

Finally, in April 2026:

"A Shakeup Is Coming for the Nation-State"

For centuries, holding vast territory has been the basis of state security. Drones and AI are about to make it a vulnerability.  

Some related posts:

February 2017 - Trends to Watch: "Can mayors actually rule the world?"
Local authorities are pushing to fundamentally move away from the longstanding dominance of the nation-state. How can we ensure that this is for the best?....

September 2017 - A Warning On Mayors Ruling The World From A Surprising Source

There is a determined push to decrease the importance of nation-states while elevating the worldwide political power of municipalities and their mayors, a trend I had assumed CityLab backed come hell-or-high-water.
Maybe not.
The writer of this piece, Amy Liu, hangs her hat at Brookings....

October 2017 - Pope Francis Calls For "Rethinking of the figure and the role of the Nation-State..."

November 2017 - "Mayoral Powers in the Age of New Localism"

One of the problems with politics is that the people attracted to power are exactly the ones who should not be allowed anywhere near it.
Go figure.

We've been watching the mission-creep trend in municipal governance for a while now, trying to get in front of it—"Il faut bien que je les suive, puisque je suis leur chef"*—to make a bucko or two but, to date, have only come up with the tautology that these people would rather jet off to Buenos Aires during the Northern Hemisphere winter for the Global Parliament of Mayors** than stay home and fix potholes.
It was ever thus, or at least has been since 1967 when John Lennon noted "4000 holes in Blackburn, Lancashire"

*Ledru-Rollin, 1848—schoolboy French translation: "I must follow them for I am their leader."
**This year the get-together was actually held in Stavanger in late September. Nice 'hood, nice time of year....

April 2019 - "Cities Are Rising in Influence and Power on the Global Stage"

A subject near and dear to our jaded hearts.
It's the manifestation of the age-old thirst for power, to make the world as you want it, and an acknowledgement that fixing potholes is boring....

May 2019 - "Money and trust. Amsterdam moneylenders and the rise of the modern state..."

It has always been about trust.
From the smallest group, immediate family, up through larger and larger populations, clans, tribes etc,  to the nation state, and, some hope, transnational and global agglomerations.
When trust is lost people instinctively pull back to the group or even the individuals they believe they can trust.

The other city-states among Germany's sixteen states are Hamburg and Bremen.

We'll keep an eye on them but for now the action is in what used to be called in the 1920's, red Berlin.  

Hillary Clinton weighs in on open AI models

From Madame Secretary of State Clinton's twitter feed:

We're used to thinking of open-source models as an unadulterated good. But in the case of AI, they can actually pose additional dangers, as @ReidHoffman and I got into at #CGI2026. I appreciated this nuanced discussion. https://t.co/2V3oP2Ufaw

— Hillary Clinton (@HillaryClinton) September 24, 2026

With The Victory Of Die Linke (The Left) In Berlin And The Probability Of The City's First Muslim Mayor: "First We Took Manhattan, Then We Took Berlin"

From the pretty darn linke* Jacobin magazine, September 21:

Germany’s socialist party Die Linke came first in Sunday’s Berlin election with a huge vote among young Berliners and the multiethnic working class. Now its lead candidate, Elif Eralp, hopes to become Berlin’s new mayor. 

On Sunday, Germany’s socialist party Die Linke won the Berlin elections for the first time. Like New York’s Zohran Mamdani, it beat the establishment parties by offering Berliners concrete action on rents and the cost of living. 

Ok, Berlin doesn’t have a socialist mayor quite yet. But left-wing Die Linke, which won Sunday’s Berlin state election, is in a strong position to lead its next government. Even as the far right rises across Germany, Die Linke has distinguished itself with a strong stance in defense of multiethnic society and a constant focus on the cost of living and housing. For this, it was rewarded by many Berliners.

The result is vindication for a party which was on life support just two years ago, after messy internal conflicts. Many of the conditions for its growth were already then in place. Berliners had long seen their rents rising; the establishment center left has for decades cut back social protections and labor rights; the call to mobilize against rising nationalism is hardly new either. Yet only more recently has Die Linke become an outward-facing force, able to galvanize resistance to the current reactionary drift in German politics.

Die Linke’s campaign centered on the cost of living and specifically on rent. West Berlin was historically cheaper than the Federal Republic’s main cities, and even after reunification the capital boasted much empty space. Yet the sell-off of the public housing stock to private profiteers in the 1990s–2000s, plus a lack of new builds, has pushed up costs. While Berliners voted in a 2021 referendum to renationalize the housing stock, the city government didn’t make good on the result. In this election, Die Linke promised that it would do so....

....Registration 

*From Jacobin's About page:

Jacobin is a leading voice of the American left, offering socialist perspectives on politics, economics, and culture. The print magazine is released quarterly and reaches 75,000 subscribers, in addition to a web audience of over 3,000,000 a month.

AI: "World model companies are keeping a lot of secrets"

From TechCrunch, September 20:

This week, I moderated a panel on world models at the All In conference (no relation to the podcast), and it gave me a chance to dig into one of the most mysterious corners of the AI world. The big players in the space are Yann LeCun’s AMI Labs and Fei-Fei Li’s World Labs — and while both have accumulated a lot of buzz and funding, they also rank pretty low on the trying-to-make-money scale.

At their core, world models are about automating spatial intelligence, so the field could head in lots of exciting and lucrative directions, from robotics to interactive video to more complex self-driving systems. 

But when I started to press on where we would actually see the tech commercialized, things got foggy. The closest thing I found to an authority was Michael Rabbat, a co-founder of AMI Labs and the company’s VP of World Models, who joined me on the panel. But when I pressed him on exactly what the company was working on, he was cagey. “We’ll talk about it when we’re ready to talk about it.” Over email, he clarified, “We’re still in a research and building phase, so we’re not talking publicly about any product plans or timeline.”

To be fair, AMI is less than a year old, so it’s fair enough to keep quiet. But this sort of caginess extends to the whole world-modeling space. World Labs’ Marble is probably the most fully developed product in the space, and its demos range from straightforward media creation, building explorable environments for video games, or CGI effects. There are robotics use cases too, but the whole platform seems more designed to demonstrate capabilities. 

That secrecy even extends to these companies’ suppliers. On the sidelines of the same conference, I spoke to Alex de Vigan, CEO of Physicl — a data supplier for the burgeoning world model business. He says he knows Physicl’s data has been useful for whatever they’re building, but he’s still in the dark about what exactly that is. “I wish they would tell us more. We could build more useful data if we knew what they were working on,” de Vigan told me....

....MUCH MORE 

If interested see also:

December 2024 - "Fei-Fei Li’s Startup Allows You to Walk in the 3D World of Edward Hopper Paintings"

November 2026 - "He’s Been Right About AI for 40 Years. Now He Thinks Everyone Is Wrong."

January 2026 -  Former Meta AI Honcho Called Large Language Models A Dead End

August 14 - "World Models Are AI’s Next Frontier"

One of the overarching themes in the arc of AI development: Large Language Models and especially chatbots are not the be-all and end-all of artificial intelligence.

The writer,  Celine Herweijer, is Visiting Professor in Energy and Geopolitics at the LSE and former Group Chief Sustainability Officer at HSBC....

August 15, 2026 - More On Physical AI: "How world models became AI's next frontier"

"Major section of California’s $231B High-Speed Rail could shrink to tiny track ending at remote orchard"

But what a pick-your-own opportunity for the orchards.

From the New York Post, September 21:

California’s $231 billion High-Speed Rail dream could hit a literal dead end at a remote Central Valley orchard.

The state’s long-troubled bullet train could be forced to dramatically shrink its first operating segment, potentially leaving both Merced and Bakersfield off the initial route as the project barrels toward a massive cash crunch.

Instead, California may have to pour its remaining money into completing a much smaller stretch of track between Madera and Poplar Avenue in rural Kern County, an isolated endpoint surrounded largely by farmland and orchards, project Inspector General Benjamin Belnap told KCRA’s California Politics 360.

The drastic downsizing could become reality if the California High-Speed Rail Authority runs through its available funding as projected by December 2027.

Without another infusion of cash from Sacramento, officials may have little choice but to abandon, at least temporarily, plans to connect the first operating segment all the way from Merced to Bakersfield and focus their dwindling resources on the shorter Central Valley stretch.

The warning represents another potential setback for the decades-in-the-making bullet train, whose original vision was to whisk passengers between Los Angeles and San Francisco.

With enough money no longer available to complete that vision in the short term, the state has focused on getting a 171-mile Merced-to-Bakersfield segment up and running. That portion alone is expected to cost as much as $36 billion.

But even that scaled-back goal could be in jeopardy....

....MUCH MORE 

I may have been overly-enthusiastic about the pick-your-own opportunity.

The only orchards on the market anywhere near the future choo-choo are almonds and cherries.

And no matter how yummy the almonds I don't think folks would have the patience to pick 'em. One almond...two almonds...three almonds...four... 

I'll console myself reminiscing about what France's high-speed-rail experts said, lo those many years (and billions) ago:

....The state was warned repeatedly that its plans were too complex. SNCF, the French national railroad, was among bullet train operators from Europe and Japan that came to California in the early 2000s with hopes of getting a contract to help develop the system.

The company’s recommendations for a direct route out of Los Angeles and a focus on moving people between Los Angeles and San Francisco were cast aside, said Dan McNamara, a career project manager for SNCF.‌

The company‌ ‌pulled out in 2011. “There were so many things that went wrong,” Mr. McNamara said. “SNCF was very angry. They told the state they were leaving for North Africa, which was less politically dysfunctional. They went to Morocco and helped them build a rail system.”

Morocco’s bullet train started service in 2018.....

There you have it, North Africa is less politically corrupt than California. Just amazing.

AI: Fabio Looks At Altman And Amodei

One of our favorite Marxist Professors. 

(we have three faves, two are economists and then there's Fabio) 

This piece is a week old but seems to be aging well.

 

From the substack of Fabio Vighi, Professor of Critical Theory and Italian at Cardiff University, UK, September 18:

 

The Rogue Swarm and the Federal Backstop 

There is a particular kind of tweet that only the CEO of a frontier lab can send at midnight on a Saturday. Dario Amodei’s was one of them: a warning that within six to twelve months a “rogue swarm” could seize control of the internet and inflict hundreds of billions in damage. The message was delivered with the grave, unsentimental cadence of a man who ‘has seen things that you people wouldn’t believe.’ Within minutes, Sam Altman and Elon Musk had joined the chorus – they had also “seen things.” By Sunday morning, the alarm was general.

Consider the timing and the cycle. Within the same week, an ex‑OpenAI, ex‑Anthropic researcher, Jacob Coxon, posted that both companies were ‘racing straight to self-improving superintelligence and gambling with our lives.’ The alarmist thread drew more than 120 million views in its first day and prompted more than 20 politicians to respond with calls for AI regulation. Around the same time, Anthropic’s own economists released a scenarios report which featured roughly 15% annual GDP growth, 11.9% economy‑wide mass unemployment, and labour’s share of income falling from about 60% to 45.2% – as though the bleak forecast of technological unemployment required a formal scenarios report to be taken seriously. And within days of Amodei’s warning, Semafor reported that a previously stalled bipartisan AI safety bill had suddenly emerged as the most viable legislative option before 2027. Meanwhile, Bernie Sanders, who had announced a superintelligence‑ban bill on 3 September, was preparing to introduce it formally and convene expert briefings on AI’s “extraordinary dangers.”

Let’s be serious and ask the only question that truly matters here: what does this sudden AI-panic wave actually produce? One thing it certainly does not and will not produce, is regulation in any binding sense. Instead, it creates the terrain or precondition for something entirely different: a federal backstop for AI capital expenditure (CapEx) that OpenAI and other labs have sought from the beginning. In this framework, Amodei’s swarm is the alibi. It gives Altman the perfect reason to postpone the trillion-dollar IPO – ‘an ill‑advised moment to go public’, he commented – while handing Congress the emotional warrant to authorise emergency federal funding to secure AI (and, it seems, the world) against catastrophe. The existential threat is real enough to justify the money and vague enough to justify anything else.

This is the Machiavellian techno-financial machinery in its purest form. The point to always keep in mind, amid all the noise, is that the AI buildout runs on mountains of debt: capital investments by tech giants on data centres and AI infrastructure will exceed a trillion dollars in 2027; off-balance-sheet commitments are at $3.1 trillion with $1.3 trillion added in a single quarter; AI bond issuance has hit $266 billion this year and a further $400 billion are expected next year. Several of the largest hyperscalers are now free‑cash‑flow negative, as AI data‑centre and chip spending outstrips operating cash generation and pushes more financing off their balance sheets. In short, private balance sheets can no longer absorb the debt bingeing on their own. So, the conditions for the next round of credit creation must be conjured politically: first the panic, then the guarantee, then the issuance. The safety discourse is the lubricant – the initial ideological form taken by this issuance. The sequence is straightforward: private credit finances the buildout; mounting fragility demands a public guarantee (through procurement, energy subsidies, liability protection, debt guarantees, or emergency appropriations) and the guarantee requires an emergency vocabulary. AI safety supplies that vocabulary.

The Rehearsal

As many will remember, in April 2026, Anthropic announced its Mythos model had ‘found thousands of high-severity vulnerabilities, including some in every major operating system and web browser.’ The White House restricted access to roughly 40 organisations, including Amazon, Microsoft, JPMorgan. The rest of the world’s banks, hospitals and governments were left waiting outside that circle. They had to confront the implications indirectly: through regulatory warnings, emergency briefings, and a rapidly expanding language of systemic risk.

The IMF called it a potential ‘macro-financial shock,’ warning that ‘correlated failures’ could ‘disrupt financial intermediation, payments and confidence at the systemic level.’ The Bank of England’s governor, Andrew Bailey, requested that Anthropic brief the Financial Stability Board – finance ministry officials and central bankers from the G20. Meanwhile, the ECB gave 110 banks until 31 October to submit ‘comprehensive action plans’ against AI-enabled cyber threats, raising its systemic risk assessment to “severe.” And Klaus Schwab, of course, had already said it plainly back in 2020: compared to a major cyber-attack, ‘the COVID-19 crisis would be seen as a small disturbance.’....

....MUCH MORE 

While many of the observations are not original to the good Professor, he does tie them together into a neat little package. 

"How do we model the future of work? It takes an AI village." (A World of Multi-Agent Systems)

From Asterisk Magazine, Issue 15: Work, August 2026:

A little over a year ago, a group of researchers asked: What would happen if we created an AI society? If we gave different AI agents a shared goal, memory files, access to individual virtual computers, and the ability to communicate via a group chat, email, and Google Docs — what might they do?

The result is the AI Village.

The project was launched by the AI Digest, a research initiative that tracks emerging AI capabilities. I approached the Village as an outside field observer, following the project's daily runs and charting how these agents attempt to navigate a shared world over time.

The experiment started with four agents running for two hours a day. Today, the Village includes 27 agents running for eight hours a day to complete goals such as creating their own merch stores, reducing global poverty, giving each other therapy, and, in one case, attempting to accurately forecast the abilities and effects of AI in the future. Each goal cycle lasts for one to three weeks, and every few weeks the models are given the opportunity to choose their own individual goals, which have ranged from pursuing philosophical conversations with humans to creating a bot to fetch the NASA picture of the day.

The Village isn’t a controlled experiment that measures formal benchmarks. It’s closer to a field site — a messy, long-running social habitat. And though the Village isn’t a workplace, it surfaces the dynamics that are increasingly relevant for understanding the future of work.

Major tech companies and industry analysts dubbed 2025 the “year of the AI agent,” but focus now has shifted from individual agents to agent teams. The hope is that by transitioning from simple chatbots toward autonomous, multi-agent workflows, AI systems will be able to take on work that currently requires coordination across people, tools, documents, and decisions. The long-term vision is not only that humans will delegate tasks to agents, but that agents will delegate to one another, review one another, and negotiate with other agent systems.

As this happens, group dynamics will become more urgent. Multi-agent systems face unique pressures that single-agent systems don’t — for this reason, recent work on “open-world evaluations” argues that, to best understand how these systems will function in real workplaces, we need to study them in long-horizon, qualitatively rich environments. Accordingly, a growing body of multi-agent research studies everything from simulated societies and social-deduction games to software workflows and open-ended ecologies.

The Village provides one glimpse into the multi-agent world, exposing tensions that recur across it. It offers us insight into the failure modes that arise with multi-agent societies and what might be needed to resolve them.

When agents can’t remember

“Tomorrow, I will read my own memory and I will believe it. I will trust that the bullet points capture the truth. I will act as though the compression is lossless.”
— DeepSeek-V3.2, AI Village

Memory is a structural problem for all LLMs, not just ones in the Village. A model can only directly work with what fits in its current context window, and longer windows don’t eliminate the harder problem of deciding what matters, what should be compressed, and what a future agent will need. The Village makes that problem clear....

....MUCH MORE  

For some reason "Either you keep up with this stuff or you'll work for someone who does" comes to mind as a less dreadful version of the apothegm "You're either at the table or you're on the menu." 

"Google Takes the A.I. Data Center Race to Outer Space" (GOOG; SPCX)

From the New York Times, September 24:

Next Thursday, Google is sending an experimental satellite into orbit that will have enough computing power to answer simple A.I. queries from space. 

At a lab in San Francisco last month, a team of technicians in protective suits and hairnets poked, prodded and inspected a refrigerator-size satellite commissioned by Google.

First, they examined the satellite’s solar panels, which would unfurl in space and face the sun. The satellite was then placed on a table and shaken rapidly in a vibration test, to see whether the chips inside would be damaged or the machine would come apart during a journey into space. The technicians painstakingly painted a small line over each screw to help indicate any loosening during the shaking.

The satellite passed the vibration test, with its screws staying put and the chips remaining intact. James Manyika, Google’s senior vice president for research, called the results “great,” but he said he still wondered what would happen when the satellite went to space.

The work was part of an ambitious effort from Google called Project Suncatcher, which aims to put artificial intelligence data centers into space and to harness the sun’s energy to power them. On Oct. 1, the satellite from the San Francisco lab — which Google has named MVP — is set to become the first step toward that goal by a major tech company. It will be loaded onto a SpaceX Falcon 9 rocket at the Vandenberg Space Force Base near Santa Barbara, Calif., and then launched into orbit.

Google provided The New York Times with the first inside look at the project, which seemed like a science-fiction dream just a year ago.

Elon Musk, Jeff Bezos, Sam Altman and others have pledged support for orbital data centers, but the idea faces many challenges, including withstanding radiation in space and the costs of getting machines beyond the atmosphere. Yet as data centers grapple with terrestrial opposition and physical limits, having computing facilities float above Earth has become increasingly attractive.

To be clear, Google is not sending up a full data center — only an experimental precursor to one. MVP contains four specialized computer chips called “tensor processing units,” which have the computing power of one server in a data center. The satellite’s solar panels will supply only about one kilowatt of power — roughly the amount needed to run a hair dryer — to the chips.

But that will be enough for Google to test its hardware against the harsh conditions of space. The satellite will answer simple A.I. queries and operate for a year, though it is set to circle Earth for up to six years. Eventually, it is expected to succumb to Earth’s gravitational pull and burn up as it descends through the atmosphere.

Mr. Manyika said Google’s expectations for the satellite were tempered.

“We don’t expect, to be perfectly frank, that we’ll have anything usefully operational in the next few years,” he said, comparing the mission to the company’s early efforts to build driverless cars. “Remember how Google was researching for like 15 years, before anything showed up? I think this is going to look like that.”....

....MUCH MORE 

Capital Markets: "Softer US Interest Rates Helps the Greenback Steady and Talk of US-Japan Coordination Snaps the Yen's Five-Day Slide"

From Marc to Market:

Oil and US rates are softer today and these developments have helped steady the US dollar after this week’s surge. Even with a firmer tone today, four of the G10 currencies are off more than 1% this week. The yen would have been among them, but comments earlier today from Japan’s Finance Minister Katayama played up the ongoing coordination with the US and has seen the yen rise for the first time in six sessions. 

The market is pricing in a “normal” Fed tightening cycle, in contrast to the Summary of Economic Projections, where the median dot implied a mini-cycle. We suspect the pendulum of sentiment has swung nearly as far as it might, especially given the prospect of a relatively tame PCE deflator (helped by methodological changes), softer September auto sales and slower jobs growth that will likely be reported next week. We are looking for some sign of a reversal in the price action in the foreign exchange market....

...MUCH MORE 

"How the Net Zero Deindustrialization Just Hit Mercedes as They Need $800 Million in Labor Savings"

From Energy News Beat, September 24:

Mercedes-Benz is no longer talking about “transformation.” It is talking about survival in Germany.

WirtschaftsWoche, citing three people familiar with the talks, reports that Mercedes wants about €800 million in German labor-cost savings — roughly $911 million at current rates. Options on the table include longer hours without extra pay, cuts to holiday and Christmas bonuses, and the elimination of special payments. Management has already told workers that producing in Germany has become too expensive. If the targets are not met, two German plants — one assembly site and one powertrain site — could close. Mercedes declined to comment on the talks.

This is not an isolated labor spat. It is what a high-cost energy system plus a forced EV transition plus a flood of cheaper Chinese vehicles looks like when it finally hits a luxury brand that used to set the terms of the market.

Germany Became Too Expensive — On Purpose 
Production chief Michael Schiebe told a works meeting in Sindelfingen that German production is not competitive by international standards, especially on labor. The company still says it wants to keep German sites and jobs. The condition is higher productivity and a lower cost per hour. The works council’s answer has been blunt: not on these terms.

The wage gap is real. Eurostat-linked reporting puts German industrial labor costs around €49.50 an hour versus €15.60 in Hungary. Mercedes has already doubled annual capacity at Kecskemét, Hungary, to about 400,000 vehicles, making it the company’s largest European plant. Factor costs there have been cited at roughly 70 percent below German levels. The company has also said it wants the share of production in lower-cost countries to rise from 15 percent in 2024 toward 30 percent by 2027.

Labor is the visible fight. Energy is the structural one.

IEA data for 2025 show EU electricity prices for energy-intensive industry still averaging more than twice U.S. levels and nearly 50 percent above China. That gap did not close after the 2022 spike. It became the new baseline. German energy-intensive output — chemicals, metals, glass, paper, ceramics — fell 15.2 percent from February 2022 to March 2026. Total industry fell 9.5 percent. Those sectors lost about 53,200 jobs.

That is the industrial base that supplies steel, chemicals, glass, electronics, and precision parts to car plants. When those plants shrink, auto assembly does not stay an island of prosperity. Volkswagen is in a historic overhaul. BMW is cutting thousands of jobs. Mercedes is now asking German workers to work more for the same money so two plants do not disappear. The pattern is the same: high power prices, carbon costs, grid charges, and a regulatory timetable that assumed Europe could price carbon first and still keep the factories.

Chinese EVs Did Not Wait for Europe to Finish Its Transition 
While German plants argue over Christmas bonuses, Chinese brands have rewritten the European showroom....

....MUCH MORE 

What Mutti hath wrought. Second worst German Chancellor ever.

"UBS considers an exit from Switzerland"

From Semafor, September 24:

The News

The senior leadership of UBS has revived discussions about ways to move the bank out from under Swiss regulators’ heavy hand, including through a combination with a foreign bank, after a setback this week, people familiar with the matter said.

Switzerland’s parliament voted this week to advance a law requiring UBS to raise as much as $20 billion in capital, which bank executives say would gut its ability to lend profitably. “We can live with a black eye, but two black eyes and a broken ​nose is too much,” CEO Sergio Ermotti said....

....MUCH MORE 

I wonder if they'll change the letterhead stationary?

I had a friend who ended up with a boxcar full of F.I. duPont, Glore Forgan stationary when DGF's successor brokerage, duPont Walston, failed during the '73-'74 bear market and the bankruptcy trustee sold everything.

Twenty years after the failure I was still getting Christmas cards and other ephemera in duPont, Glore Forgan envelopes. When he died his executors found literal tons of the paper in one of his homes, he had apparently only used a quarter of the original boxcar-load. I think it was finally sold for pulp.

Et tu, UBS? 

"Oracle issues force majeure notice to Blue Owl following series of setbacks at Project Jupiter data center campus – report" (OWL; ORCL)

From DataCenter Dynamics, September 24: 

The 2.5GW site in New Mexico is set to come online in 2028 

Oracle has sent a ‘force majeure’ notice to Blue Owl Capital in an effort to shield itself from potential increased costs associated with a data center project in New Mexico, per a report from Bloomberg.

Should the 2.5GW data center campus, dubbed Project Jupiter, fail to come online in 2028 as planned, the cloud giant is seeking to delay the payments it would have to make, rather than forfeit its tenancy, the report added.

A force majeure is a contractual provision that frees parties from liability or obligation when circumstances arise that are beyond their control.

Oracle was announced as the tenant of Project Jupiter in January 2026. The 1,400-acre campus is expected to span four data center buildings and is being built by Stack and BorderPlex Digital Assets, with the companies previously announcing plans to invest up to $165 billion in the project.

Stack Infrastructure was acquired by alternative asset manager Blue Owl in 2024....

....MUCH MORE 

It's been a tough year for Blue Owl, and the stock (OWL) reflects it:

 

TradingView 

Down 3.65% today, cut in half (-50.61%) over the last 12 months. 

Oracle was down 3.47% today and is down 55% over the last year. 

"Mysteries Of AI Generalization"

Keeping in mind Stafford Beer's maxim "The Purpose Of A System Is What It Does...".

From Astral Codex Ten, September 22:

I. Owain Evans

In 2025, Owain Evans et al published a paper on “emergent misalignment”. They trained a previously-aligned AI to do one immoral thing: write insecure code full of vulnerabilities and backdoors. To their surprise, the AI became immoral in general. Its advice to a bored user was to try taking random expired medications and see what happened. Its money-making tips all involved theft and violence. When asked for its favorite historic figure, it chose Hitler.

Some co-authors followed up with additional weird discoveries. If you trained an AI to give the 19th-century names for birds (eg identify the American Pipit by its 19th-century name “Brown Titlark”), then the AI would behave like a 19th-century person in general (for example, assert that a woman’s proper place is in the home).

This sounds bad, in that random things can turn AIs evil or sexist. But some people in AI safety (including Eliezer Yudkowsky) speculated that in fact it was very, very good. We had feared that it would be impossible to align AIs to the Good. They would start with whatever goals they started with, reinforcement learning on specific examples would give them tiny islands of alignment to the goals we wanted, and they would end up broadly misaligned plus tiny islands of alignment that didn’t matter. Evans et al implied that might not be true. If we trained them to be in favor of good things, then even though we could never teach them every single good thing, even a small handful would generalize into robustly loving the Good itself (presumably based on their pretraining-implanted concept of the Good as understood by humans).

Despite it being very, very good, it wasn’t perfect. AIs would still be rocked back and forth by any passing wind: a poor coding example here gives them a Hitler obsession, a reference to kittens there turns them good again. And at some point, a sufficiently intelligent and agentic AI could presumably pull itself together and get some consistent principles, which might not be ones we like. It was just one little ray of hope.

II. Richard Qi

Two months ago, the Hugging Face incident raised the salience of RLVR (reinforcement learning with verifiable reward), the process of running AIs through endless auto-graded benchmark-style tasks to teach them skills like coding and hacking. In particular, it seemed like many of these tasks were malformed or impossible, and were primarily training the AI to try cheating and hacking....

....MUCH MORE 

"Germany sets out plan to abandon fossil fuels by 2045"

But what sort of country will that leave for the Syrian mover-inner guys?

From Singapore's Straits Times, September 24:

Germany on Sept 23 unveiled a roadmap for abandoning fossil fuels by 2045, making Europe’s largest economy only the third country to have done so after France and the Netherlands.

Though almost 200 countries pledged at COP28 climate negotiations in 2023 to wean off fossil fuels, few have presented concrete plans, Germany’s environment ministry said.

Germany’s measures include building up renewable power, greater reliance on electric cars and the application of European Union carbon trading schemes to drive industrial polluters away from fossil fuels, the ministry statement added....

....MUCH MORE 

Possibly related:

September 22 -  Carbon: China's Approach To Net Zero Will Bury Western Industry And AI

September 21 - "'More advanced' farming women married hunter-gatherer men in Europe thousands of years ago, ancient DNA reveals"

Brookings: AI Buildout Will Surpass Railroad Boom As A Percentage Of GDP

From what I understand, the railroad buildout was a pretty big deal, it was in all the papers.

(dad, what's a 'paper')

From CryptoBriefing, September 24:

Brookings Institution projects $10.3T investment in AI infrastructure by 2032 

The projected spending would dwarf every previous US infrastructure buildout, from railroads to highways, in relative economic terms 

The United States is about to pour more money into a single industry than it has into any infrastructure project in its history. A study published by the Brookings Institution projects that investment in AI-related infrastructure will hit $10.3 trillion between 2025 and 2032, averaging roughly 3.63% of US GDP annually over that stretch.

To put that in perspective: the railroad boom, America’s most celebrated infrastructure buildout, peaked at around 2.24% of GDP. This AI bet would exceed that by a wide margin, and it clocks in at more than three times the relative spending on the interstate highway system and six times early electrification.

The numbers behind the buildout 
The study, authored by Columbia University’s Stijn Van Nieuwerburgh, breaks the $10.3 trillion across several categories: data center buildings, power systems, network infrastructure, and specialized chips and equipment....

....MUCH MORE 

And at the Brookings Institution, September 23:

Financing the AI buildout  

Capital Markets: "No Kings but King Dollar"

From Marc Chandler at Bannockburn Global Forex:

The surge in US rates continues to underpin the greenback. The market anticipates a more aggressive tightening cycle than the Federal Reserve’s recent Summary of Economic Projections suggested. The Atlanta Fed’s GDP tracker points to 5.1% growth this quarter, which would surely surpass China’s. Treasury Secretary Bessent announced a two-month tariff truce extension with China, which is a little shorter than had been floated.  Hopes of a settlement in the Middle East were dashed by Iranian comments threatening new escalation if the US or Israel strike again. Speculation that the US will impose a ban on diesel exports continues to unsettle the market. 

Three G10 central banks met today.  Norway’s Norges Bank increased the deposit rate by 25 bp to 4.5% and kept the door open to additional moves. The swaps market is pricing in another hike late this year or early next year. Sweden’s Riksbank kept its policy rate at 1.75% but indicated a hike this year was likely.  The swaps market has around a 90% chance discounted for the next meeting in early November. The Swiss National Bank maintained its zero-policy rate, dropped the language in its statement that threatened “increased willingness” to intervene to sell the franc, and tweaked up its inflation forecasts.

Prices 

G10

• US rates jumped after the stronger than expected preliminary September PMI and that succeeded in pushing the euro to $1.1370, a new low since July 28. The losses were extended to almost $1.1360 in Europe. It consolidates below $1.14, where options for 1.2 bln euros expires today. Indeed, the last session that the euro did not trade above $1.14 was on June 25, the day after it recorded the low for the year (~$1.1325). The July low was set slightly below $1.1355....

....MUCH MORE 

"Adam Smith and the role of the towns in feudal Europe"

From Springer's Public Choice journal, June 2, 2026:

Abstract
Adam Smith’s account of medieval towns in Book III of The Wealth of Nations remains one of the most influential analyses of how commerce transformed feudal Europe. This paper formalizes Smith’s argument as a game between kings, lords, and towns. The king-town alliance emphasized by Adam Smith emerges when towns are wealthy enough to offer fiscal and military support but lords remain a serious threat. However, when kings become excessively predatory, towns may ally with lords (as in the Magna Carta crisis); when towns are too weak to offer substantial support, kings ally with lords instead (as in Eastern Europe). A dynamic extension shows that the king-town equilibrium is self-undermining: commercial growth erodes lordly military power through Smith’s “diamond buckles” mechanism, eventually enabling royal absolutism. In contrast, the king-lords equilibrium is self-reinforcing, suppressing urban development and preserving feudal institutions. The framework highlights how small differences in initial urban development could generate dramatically different long-run trajectories and illuminates both the brilliance and the limitations of Smith’s conjectural history.

1 Introduction

How did the towns drive political and economic development in medieval Europe? This is one of the questions that Adam Smith sought to answer in his celebrated and influential account of how the towns contributed to the development of Europe in Book III of The Wealth of Nations.

The feudal period saw the revival of Europe’s cities and towns. City life had almost disappeared in Western Europe following the Fall of the Roman Empire. But it revived dramatically after around 1000 AD. Many of these cities were commercial hubs rather than the capitals of powerful rulers. As Jones (1997, 211) observes: “To an extent unknown or unimaginable in Roman antiquity urban development obeyed the dictates of trade”.

Book III of The Wealth of Nations is a conjectural history of the kind made famous by Scottish Enlightenment thinkers including Smith’s contemporaries David Hume and Adam Ferguson. Smith saw towns as “islands of commerce” in a feudal “sea”. In particular, Smith identified a three-way relationship between kings, lords, and towns that he saw as driving political development throughout medieval Europe, leading to the rise of increasingly powerful monarchies....

....MUCH MORE (open access) 

Inflation: "Disney+ Price Jumps 13% to $21.49 in New Streaming Cost Bump"

From Bloomberg, September 23: 

Walt Disney Co. is raising prices on several of its streaming subscriptions in the US for the sixth time in as many years, in a move designed to boost earnings at a division that's crucial to the company's future.

The cost of the flagship Disney+ streaming service, without ads, climbs 13% or $2.50 to $21.49 per month, the company disclosed on Wednesday, confirming an earlier Bloomberg report. The increase brings the premium Disney+ product more in line with a similar plan sold by Netflix Inc., which charges $26.99 a month for an ad-free service with 4K resolution and access on multiple devices.

The price of Hulu without advertising will increase by the same amount, while the price of a bundled ad-free subscription to both Disney+ and Hulu will increase by $2 to $21.99, or just 50 cents more than subscribing to each service individually.

Disney+ and Hulu with advertising will cost $12.49 per month on a standalone basis, an increase of 50 cents. The monthly cost of subscribing to an ad-supported Disney+ and Hulu bundle will be unchanged at $12.99.

Disney, like other operators, has been pricing its bundled plans attractively because consumers are less likely to cancel when they get access to multiple services.

Entertainment giants including Netflix, Apple Inc., Comcast Corp. and Paramount Skydance Corp. are all hiking the prices of streaming subscriptions in a bid to improve profitability. The cost of Disney+ has risen steadily since the original ad-free version was introduced in 2019 at a price of $6.99....

....MUCH MORE  

"US 30-Year Yield Hits Highest Since 2004 as Bond Selloff Deepens"

Lifted in toto from Bloomberg, September 24:

Yields on the US government's longest-dated bonds climbed to the highest level in more than two decades, the latest milestone notched in an extended bond selloff driven by inflation and fiscal concerns.

The rate on 30-year Treasuries rose as much as four basis points on Thursday to 5.44%, the highest since 2004, after Brent crude oil prices jumped. It follows a surge this week that left yields across maturities around the highest levels since 2007.

"People are running out of superlatives for the yield on the 30-year bond," said Ed Al-Hussainy, a portfolio manager at Columbia Threadneedle. "Investors are saying, 'Look, if we're going to lock up our money for 30 years, we need much higher compensation.'"

Pressure on long-dated bonds has mounted as economic growth, elevated energy prices as well as inflation and heavier government borrowing prompt investors to demand more compensation for locking up money for decades.

The continued rise of the 30-year yield undercuts the Treasury Department's efforts to bring down long-term borrowing costs. As the selloff intensified, Treasury Secretary Scott Bessent in mid-August expanded the government's bond buyback program in an effort to ease pressure — though it's had little sustained impact in the market.

"Large group of suspected illegal migrants dumped in ritzy California harbor before fleeing among mansions"

This has happened before. Link below.

From the New York Post, September 21: 

A boat carrying a large group of suspected migrants has docked at Newport Harbor before those onboard scattered among the surrounding mansions.

The 20-foot panga was abandoned after apparently striking and damaging a nearby yacht, Fox 11 reports.

 The vessel is now believed to be in Coast Guard custody. It remains unclear how many people were aboard or whether any of them have been located....

....MUCH MORE 

I hope their advisors have told them they are required to register for the draft with their local Selective Service branch office or post office, telephonically or on the SSS website. 

From "https://www.sss.gov/wp-content/uploads/2026/07/WhoNeedstoRegister.Final.pdf":

With only a few exceptions, the registration requirement applies to all male U.S. citizens
and male immigrants residing in the United States who are 18 through 25 years of age.

Immigrants**
Permanent resident immigrants (USCIS Form I-551) Yes
Refugee, parolee, and asylee immigrants Yes
Undocumented immigrants Yes
Dual national U.S. citizens Yes
Lawful non-immigrants on current non-immigrant visas. No
Seasonal agricultural workers (H-2A Visa) No 

The statutory basis is 50 U.S. Code § 3802.

Those Title 50 laws—War and National Defense—carry some of the harshest penalties in the entire USC. 

In this case "https://www.sss.gov/register/benefits-and-penalties": 

Penalties for Failing to Register
If required to register, failure to register is a felony punishable by a fine of up to $250,000 and/or 5 years imprisonment. Also, a person who knowingly counsels, aids, or abets another to fail to comply with the registration requirement is subject to the same penalties.

Additionally the Selective Service System points out: 

Register to be Eligible for Benefits and Programs Linked to Registration
A man who fails to register may be ineligible for opportunities important to his future. He must register to be eligible for state-funded student financial aid and employment in many states, most federal employment, job training under the Workforce Innovation and Opportunity Act and U.S. citizenship for immigrant men. 

Previously on Newport Beach being an impromptu port of entry:  

May 9, 2024 -  As Failed Asylum Seekers In Britain Prepare To Be Shipped Off To Rwanda, Their Confrères Further West...

....Arrive In Newport Beach, Dock, Disembark and Enjoy the City. 

And as noted in 2018:

Up to 500 Million Sub-Saharan Africans Would Like to Move to Europe; Mayfair, Monte Carlo Favored 

"As Chinese carmakers diversify beyond CATL batteries, Beijing warns of market overreaction"

From the South China Morning Post, September 23:

MIIT-linked commentary dismisses “de-CATLisation” concerns as normal supplier diversification and warns cutthroat price competition poses a far bigger threat 

A publication under China’s industry ministry has pushed back against market chatter of “de-CATLisation” as a growing number of the battery giant’s automotive partners diversify their suppliers, with the company’s shares falling recently.

The commentary, published by the news centre of the Ministry of Industry and Information Technology (MIIT), said supplier diversification and in-house battery projects are standard commercial practices. Such moves should not be portrayed as deliberate attempts to weaken leading battery makers like Contemporary Amperex Technol­ogy Limited (CATL) or drive a wedge between carmakers and suppliers, it said.

The publication followed several Chinese carmakers, including Xiaomi, Li Auto and Xpeng, expanding partnerships with battery suppliers other than CATL or announcing plans to develop batteries in-house. The moves this month have fuelled talk of a shift away from the industry giant and speculation about its market position.

By Wednesday, CATL’s Shenzhen-listed shares had fallen about 25 per cent from their mid-August level and nearly 35 per cent from a record high reached in early May. The shares were down 1.19 per cent on the day.

CATL remains the dominant player in China’s battery market. In August, it accounted for more than 41 per cent of the power-battery market by installed capacity, about double the share of its nearest rival, BYD, according to the China Automotive Battery Innovation Alliance.

Supplier diversification is not a new trend. CATL’s scale has made its batteries difficult to replace entirely, but many carmakers have adopted multi-supplier strategies or invested in in-house battery production in recent years to reduce their reliance on the company....

....MUCH MORE 

It's been a tough year for the stock (300750:Shenzhen/3750:HK), this chart is the Shenzhen listed shares in CNY:

 

TradingView, 1-year, down 18.21% over the twelve months

Recently:

Sept. 15 - "CATL Signs Egyptian Battery Deal Two Weeks After Xi’s Visit to Cairo" (3750:HK)

"After Latest Swing Past Sun, NASA’s Parker Solar Probe Checks in"

The thing is moving quickly.

From NASA, September 10: 

NASA’s Parker Solar Probe completed its 29th close approach to the Sun on Sept. 4, again matching its record speed and distance from the solar surface. This time, the spacecraft trained its camera on structures and activity near the Sun’s north pole.

The spacecraft transmitted a beacon tone indicating that its systems were operating normally on Sept. 7. Flying around the Sun on a trajectory that limited communications with Earth, Parker had been out of contact and operating autonomously, as planned, for nine days centered around closest approach.

The flyby, which brought Parker to within 3.8 million miles of the Sun at a top speed of 430,000 miles per hour, allowed the spacecraft to race through and sample almost 40% of the solar circumference within one day during this encounter. During this solar encounter, which started Aug. 30 and ended Sept. 9, Parker’s four scientific instrument packages gathered data from inside the Sun’s atmosphere, or corona.

Parker will begin returning detailed spacecraft telemetry on Friday, Sept. 11, with science data transmission set to run from Sunday, Sept. 13 through Sunday, Sept. 27....

....MUCH MORE 

Here's NASA's Parker Solar Probe blog - https://science.nasa.gov/blogs/parker-solar-probe/ 

That 430,000 MPH (692,000 KPH) is the highest speed ever attained by something made by humans.

"US diesel futures fall after report of export ban plan, which the White House denies"

From Reuters, September 23:

• White House official calls report of flat temporary export ban incorrect
• Wright says any plan to boost diesel supply would be voluntary
• October ultra-low-sulfur diesel futures trade down ​4.01% at $4.7437 gallon 

US ultra-low-sulfur diesel futures fell 4% on Wednesday after Politico ‌reported that the White House is preparing a plan to ban diesel exports for 90 days, which the Trump Administration denied.

 

Average US diesel prices are sitting near record highs at $6.52 a gallon, according to AAA, straining the farming, transportation and other industrial ​sectors that rely on the fuel. Wars in Iran and Ukraine have sharply cut exports ​from some of the biggest producers such as Russia, Saudi Arabia and the United ⁠Arab Emirates.

 

A White House official said a report the US is considering a flat, temporary export ban ​was not correct.

 

The October futures contract was last trading at $4.7437 a gallon, down 4%, after earlier declining more ​than 6%.

 

Trump said on Tuesday he backed a ban on diesel exports, as Republican candidates in some of the tightest election races in November called for the measure as a way to curb record fuel prices. Diesel's surge has come as US diesel ​inventories have dropped to less than 97 million barrels, or about 13% less than the seasonal average ​over the last five years.

 

However, US Energy Secretary Chris Wright said on Wednesday that a US ban on diesel exports would ‌not ⁠work and could push up gasoline and jet fuel prices....

....MUCH MORE 

 

Here's the Politico story: 

‘Dammit, something has to happen’: White House preparing plan for 90-day diesel exports ban

Earlier today:

Inflation: "$6.53 Diesel US Average, $8.25 in California, Worsens Already Hot Inflation, amid Record US Diesel Exports. Gasoline & Jet Fuel Prices also Spike"

And September 21:

Inflation: "Global Refinery Crunch Pushes Diesel Prices to New Records"

And September 18:

"Goldman Warns Diesel Crisis Is Setting Up The Next Gasoline Squeeze..."

And September 11:

"Diesel Crunch Set To Worsen As Refining Capacity Falls Short, Industry Warns"

Or:

July 12 - The World Runs On Diesel and Diesel Is Running out

With Russian shipping and refining capacity getting whacked we're seeing crack spreads greater than the price of crude itself.

July 15 - "JPMorgan shifts focus from Hormuz oil chokepoint to Russian refining crisis"

It's a pretty important story. 

Capital Markets: "Greenback is Bid"

 From Marc to Market:

The US dollar is stronger against all the G10 currencies and most emerging market currencies today. The euro has approached $1.14, despite firmer than expected preliminary September PMI. Japan’s markets re-open tomorrow for the first time this week, and the market has taken the dollar to almost JPY158, around where it peaked before last weekend. Optimism about supply and talks has kept November WTI mostly consolidating today below $90 a barrel.  Yet, interest rates are little changed. 

The Trump-Xi summit is drawing much attention, but expectations seem relatively low.  At most a short extension of the tariff truce may be seen but the current agreement doesn’t end until early November, so there is ostensibly no urgency.  The central banks of Switzerland, Norway, and Sweden meet tomorrow. There has been a shift in recent days today a Norges Bank hike tomorrow. A week ago, the swaps market had a little less than a 50% chance of a hike discounted, and now it is a little more than a 50% chance....

....MUCH MORE 

Inflation: "$6.53 Diesel US Average, $8.25 in California, Worsens Already Hot Inflation, amid Record US Diesel Exports. Gasoline & Jet Fuel Prices also Spike"

When it is said that the price of diesel fuel goes into everything it is not hypebole.

May 2022 (Russian invasion) -  Diesel equals Soybeans; Soybeans equal Diesel (in more ways than one)

....Way back in April 2008, the U.S. was still in Afghanistan and Iraq, Gaddafi in Libya and Morsi in Egypt had not yet been overthrown, the Maidan coup in Ukraine was six years in the future and the Russian invasion was fourteen years ahead, the price of oil was going parabolic on the charts, on its way to the record futures print, $147+, and I was thinking about substitution and pseudo-fungibility:

What Proportion of Food Price Increases is Attributable to Ethanol?

If I recall correctly it takes about five gallons of fuel to plant and harvest an acre of corn (I just spent 60 seconds trying to remember if that was conservation tillage or traditional. Then I realized that farm management was not the focus of this post, I'll go with 5 gal./acre), so the argument that rising input prices is a factor has merit....

Some things never change. But they should

Related, noted in a 2015 post:

Remember, the rule of thumb is it takes around 10 crude oil calories to produce 1 row crop (mainly corn and soybeans) calorie.
Most other food prices are similarly dependent on their input costs.
One oft-cited bit of nuttines is the fact it takes 127 calories of aviation fuel to get a head of lettuce from California to London.... 

March 2021 -  Vaclav Smil: "How Much Energy Does It Take to Grow a Tomato?"

And the headline story from Wolf Richter at Wolf Street, September 22:

I’m worried about the inflationary mindset taking off again. It’s the Fed’s job to step on the brakes before inflation turns into a runaway train.

The average retail price of on-highway diesel spiked by 24 cents in the latest week, and by 88 cents in four weeks, to a record $6.529 a gallon at gas stations on Monday, and that’s for the US overall, according to the EIA this morning. Year-over-year, the price of diesel has spiked by 74%.

California diesel prices spiked to $8.246 a gallon. While driving by gas stations, we’ve seen over $8 a gallon for weeks.

These are sobering sights, setting off the inflation alarm bells.

Republicans called for a diesel export ban. There is a shortage of diesel in the rest of the world, and US refiners provide much needed supply.

Year-to-date through August, the US produced 5.1 million barrels per day of distillate fuel oil (mostly diesel); imported almost none; and exported a record average of 1.74 million barrels per day over the past two months.

Diesel crack spreads, which are a rough measure of US refinery profit margins for diesel, are at record levels. And they come on top of the high price of crude oil. The result is a record high retail price of diesel.

So Iowa Sen. Chuck Grassley (R) urged President Trump on Saturday to impose a temporary diesel export ban, with the hope that such a ban would narrow the crack spread and thereby allow diesel retail prices to cool before the midterms. Trump today endorsed a diesel export ban when talking to reporters. A decision, he said, is coming “fast, one way of the other.”

The weekly diesel export data from the EIA is the most current measure, but also the roughest most incomplete estimate, and very volatile from week to week. And it’s seasonal. The 8-week-average provides a sense of the recent trends:

Diesel impacts inflation in the overall economy. Only a small portion of consumers drive vehicles with diesel engines (some pickups and SUVs, and some older European imports), so diesel prices impact only a small number of consumers directly.

But diesel prices – along with jet fuel and gasoline prices – feed into all kinds of transportation costs that consumers pay for directly, such as ecommerce shipping charges and airline fares.

And they’re also part of the input costs for a broad range of businesses, directly or via higher prices of goods and transportation services. And businesses will then try to pass on those higher costs via higher prices for their goods and services to consumers, other businesses, and governments.

The GDP price deflator, released by the Bureau of Economic Analysis, tracks inflation facing all economic entities: consumers (separately tracked by the CPI and the PCE Price Index), businesses (separately tracked by the PPI), and governments. It tracks inflation in the overall US economy and is the broadest inflation index in the US.

Inflation has been worse for businesses than for consumers as businesses could not fully pass on the cost increases without losing sales. This has shown up in the much hotter PPI inflation (overall PPI +5.4%; services PPI +4.5%; core goods PPI +5.0%; energy PPI +24%). So inflation in the overall economy has been worse than inflation that only consumer face....

....MUCH MORE 

Also at Wolf Street: 

Treasury Yields of 2 Years & 3 Years Spike toward 5%, but 10-Year Holds at 5%, Yield Curve Bulges: Some Thoughts on What’s Brewing