On Tuesday I listened to Prime Minister Mark Carney’s address at the World Economic Forum in Davos and found myself nodding along with nearly every point. He is undoubtedly one of the finest financial minds of our generation, and his diagnosis of the geopolitical landscape is sharp.
However, I want to offer a counter-perspective to one specific premise.
Carney argues that the rules-based order is fading, citing Thucydides: “The strong do what they can, and the weak suffer what they must.”
Respectfully, the events of this past week suggest the opposite. The “strong” (the Trump administration) tried to do what they wanted by threatening the sovereignty of a NATO ally. But they didn’t do “what they can”; they did only what the bond market allowed.
In my professional lifetime alone, the global financial system has endured three systemic stress tests: the Global Financial Crisis, the European Debt Crisis, and COVID-19. In every instance, the system proved to be a behemoth that didn’t break. Instead, it used its sheer weight to force relevant actors to act and save it.
We saw this mechanism trigger again this week. When the administration threatened to break the geopolitical order, the global financial system acted as an automatic stabilizer.
The rules-based order is using one of its most important tools, the global bond markets, to defend itself. The mechanism of enforcement has simply shifted from diplomatic norms to financial necessity. The order is currently being stress-tested, yes, but so far, the margin clerks are winning against the strongmen.
It is worth noting the irony: those currently testing the system are, without question, the greatest beneficiaries of the rules-based order that has existed for the past 80 years.
Annapurna
This week, President Trump could send a powerful and stabilizing signal to financial markets by naming Fed Governor Christopher J. Waller as his nominee for Federal Reserve Chair. Such a move would counter fears of an outsider appointment by selecting an experienced professional with an impeccable resume in monetary economics.
Waller is a Fed insider, having built a distinguished academic career before serving over a decade as the research director at the St. Louis Fed and, since 2020, as a Governor. His entire career points to a policymaker who is rigorously data-driven, famously employing a “no murder mysteries” approach to transparently explain the economic evidence behind his views.
Waller has demonstrated both foresight and fierce independence. He was one of the first Fed officials to call for aggressive rate hikes to fight surging inflation in 2022. More recently, he was one of the first to argue for rate cuts in 2025 as the data showed the economy weakening, a view he backed with a formal dissent. This track record suggests an agile policymaker who is ahead of the consensus. His nomination would place the Fed in the hands of a respected, independent, and data-driven leader whose policy judgment has been consistently sharp, and I think the markets would welcome that positively.
I think this is a good plea since it will be very difficult to coordinate a reduction of alcohol consumption at a societal level. Alcohol is a significant part of most societies and cultures, and it will be hard to remove. Change is easier on an individual level.
I stopped drinking on October 1, 2022, but it required a lot of effort in reprogramming myself to feel comfortable in social settings (Because what Seth’s comment said is correct: alcohol is very useful for social bonding). It helps a lot that my spouse seldom drinks and when she does, it is very little.
When reading The MANIAC I knew it was historical fiction going in, but in certain parts when I had doubts I researched them. While the author dramatizes the point for the story most likely, the point was generally accurate.
Hackneyed I guess. I used Gemini to correct grammar, but not to write full sentences.
I was trying to convey the excitement I got when reading this book. I am also writing this review to an audience of normies, who probably have never heard of von Neumann and his contributions. LW crowd is not my target audience, as I assume most of you know more about von Neumann than I do.
I am looking for people to challenge my draft thesis. See below:
Bitcoin’s reliance on Proof-of-Work makes it inherently energy-intensive. As AI development accelerates, it will demand an increasingly large share of global energy and infrastructure resources. This creates a potential conflict: both industries need significant capital investment and specialized workforces.
My thesis posits that within the next five years, if the demand for AI infrastructure continues to grow exponentially, it will drive up energy costs and potentially divert capital away from Bitcoin mining. Simultaneously, if Bitcoin experiences a price pullback due to market cycles or external factors, mining operations could become unprofitable.
This scenario could trigger a mass exodus of miners to the more lucrative AI sector. As a result, the Bitcoin network’s hashrate would plummet, making it vulnerable to 51% attacks. This loss of security could further erode trust in Bitcoin, causing a price decline and creating a negative feedback loop.
While Bitcoin’s difficulty adjustment mechanism is designed to maintain network functionality, it cannot guarantee profitability. If energy costs rise too high and Bitcoin’s price stagnates, mining could become unsustainable. This poses an existential threat to Bitcoin’s long-term viability.
In my anecdotal experience going to schools like this, the Arias of the elite world have this ‘lack of purpose’ and thus rebellious / self destructive behavior either due to psychological issues or parental / guardianship neglect.
They were also in the minority. I know plenty of people who have been showered in abundance since birth that are happy with their lives.
I agree entirely with this comment. I would like to add that at the same time as doing what Dagon suggests, Canada should seek to strengthen trade agreements with other countries, especially those who are also affected by President Trump’s trade policies (like Brazil).
No need to be very public about this, just do it. It will be help soften the blow from President Trump’s protectionist policies.
I don’t want to elevate just stay at home motherhood. I want to elevate stay at home parenting.
I hope we can make it cool to be a stay at home father or mother. I think this will raise fertility rates.
Why is there so little discussion about the loss of status of stay at home parenting?
When my grandmother quit being a nurse to become a stay at home mother, it was seen like a great thing. She gained status over her sisters, who stayed single and in their careers.
When my mother quit her office role to become a stay at home mother, it was accepted, but not celebrated. She likely loss status in society due to her decision.
I am a mid 30s millenial, and I don’t know a single woman who would leave her career to become a stay at home mother. They fear that their status in society would drop considerably.
Note how all my examples talk about stay at home motherhood. Stay at home fatherhood never had high status in society.
What can we do as a society to elevate the status of stay at home parenting?
Just 13 days after the world was surprised by Operation Spiderweb, where the Ukrainian military and intelligence forces infiltrated Russia with drones and destroyed a major portion of Russia’s long-range air offensive capabilities, last night Israel began a major operation against Iran using similar, novel tactics.
Similar to Operation Spiderweb, Israel infiltrated Iran and placed drones near air defense systems. These drones were activated all at once and disabled the majority of these air defense systems, allowing Israel to embark on a major air offensive without much pushback. This air offensive continues to destroy and disable major military and nuclear sites, as well as eliminating some of the highest ranking military officials in Iran with minor collateral damage.
June 2025 will be remembered as the beginning of a new military era, where military drones operated either autonomously or from very far away are able to neutralize advanced, expensive military systems.
Don’t organic memories typically degrade over time?
Agreed. I do think we are reaching a point that the market will force the Government’s hand.
By the way, this is something many other developed nations are facing, to varying degrees. There’s been a lack of fiscal conservatism governance for decades. Watching President Milei succeed in Argentina gave us fiscal conservatives some hope that the same would happen in The US and other countries. But I have lost that faith.
The U.S. 30-year Treasury rate has reached 5.13%, a level last seen in October 2023. The last time this rate was at this level was in 2007, when the U.S. federal debt was about $9 trillion. Today, that debt is nearing $37 trillion.
I believe bond market participants are signaling a lack of confidence that the fiscal situation in the United States will improve during President Trump’s second administration. Like many financial professionals, I had high hopes that President Trump’s election would bring the fiscal situation in order. Unfortunately, the “Department of Government Efficiency” has not been as efficient as many had hoped, and U.S. Congress seems completely uninterested in reducing federal spending in a meaningful way.
The tax cut bill currently moving through Congress, fully backed by the White House, will exacerbate the fiscal situation. If this trend of rising long-term Treasury rates continues, the United States will soon face very tough decisions that neither Wall Street nor Main Street is ready to face.
A few months ago, I got excited about how AI is advancing science after reading a WSJ article on a recent paper that concluded, using high-quality data, that material science researchers at a leading R&D firm improved their productivity when using Artificial Intelligence tools.
I was disappointed to learn that the paper, by ex-PhD candidate at MIT Aidan Toner-Rodgers, was entirely fraudulent.
MIT Press Release: https://economics.mit.edu/news/assuring-accurate-research-record
WSJ Article covering the retraction: https://www.wsj.com/tech/ai/mit-says-it-no-longer-stands-behind-students-ai-research-paper-11434092?st=wTbfjh&reflink=desktopwebshare_permalink
Substack post with more details: https://thebsdetector.substack.com/p/ai-materials-and-fraud-oh-my
Google revealed yesterday that it has a model capable of original, novel thought in the algorithmic domain. This model has been used inside Google for the past year and only yesterday they’ve began to invite researchers to try it out.
“While AlphaEvolve is currently being applied across math and computing, its general nature means it can be applied to any problem whose solution can be described as an algorithm, and automatically verified. We believe AlphaEvolve could be transformative across many more areas such as material science, drug discovery, sustainability and wider technological and business applications.”
If you are interested in cutting edge application of frontier Artificial Intelligence models, I urge to read the post below.
Having attended some of the Toronto AI Safety events, I can confirm that the space is legit, the talks are interesting, and the attendees and hosts are serious about advancing AI knowledge, governance, and safety in Toronto.
Congrats on formalizing your organization.
Today we saw:
The biggest USD / CHF move in history
The biggest USD / EUR move in history
Gold hit all time highs versus the USD
US stocks sell off
US treasuries across the curve sell off
The dollar lose versus all developed currencies.
Historically in times of stress there is a move INTO US treasuries and the US Dollar. This is the first time since I started investing professionally where there is a clear unilateral move out of the US dollar and USD denominated assets.
This past weekend I have read several takes from prominent accounts on social media saying that because long end US treasury rates have dropped and will continue to drop in the near future, businesses will be able to borrow at a lower rate.
These people completely ignore that business borrowing rates are a component of the reference rate + a credit spread. While it is true that the reference rate has dropped in the past few days, credit spreads have materially increased.
For companies with lower credit ratings, it is more expensive to borrow today than it was last week. If the turmoil continues, the cost of borrowing will increase, meaning companies will likely slow or stop projects that require borrowing. This will have immediate negative effects on the economy.
The equity market is pricing an AI growth trajectory that does not fully account for the roadblocks that are starting to emerge.
AI investment has been one of the main drivers of equity returns, but sustaining that growth requires enormous amounts of infrastructure, capital and power. Political resistance to data centres is increasing, permitting and infrastructure constraints are becoming more relevant, and higher long-term interest rates are making the buildout more expensive.
I don’t think AI spending needs to collapse for this to matter. If these constraints cause AI investment and earnings growth to come in below what the market currently expects, that could be enough to drive meaningful weakness in equities, particularly given how much of the market’s recent performance has been tied to the AI theme.
I have now substantially reduced my equity exposure to the AI theme*
*this is not investment advice.