Tag: economics

The AI Layoff Trap

Neither this paper nor the underlying idea are particularly new, but since non-economists are now starting to discuss it, I should probably take a look at it:

Two economists just published a mathematical proof that AI will destroy the economy.

Not might. Not could. Will — if nothing changes.

The paper is called “The AI Layoff Trap.” Published March 2, 2026. Wharton School, University of Pennsylvania. Boston University. Peer reviewed. Mathematically modeled.The conclusion is one sentence.

“At the limit, firms automate their way to boundless productivity and zero demand.”

An economy that produces everything. And sells it to nobody. Here is how you get there. A company fires 500 workers and replaces them with AI. A competitor fires 700 to keep up. Another fires 1,000. Every company is behaving rationally. Every company is following the incentives correctly. And every company is building a trap for itself.

Because the workers who were fired were also customers. When they lose their jobs faster than the economy can absorb them, they stop spending. Consumer demand falls. Companies respond by cutting costs — which means automating more workers — which means less spending — which means more falling demand — which means more automation.

The loop has no natural exit. The researchers tested every proposed solution. Universal basic income. Capital income taxes. Worker equity participation. Upskilling programs. Corporate coordination agreements. Every single one failed in the model. The only intervention that worked: a Pigouvian automation tax — a per-task levy charged every time a company replaces a human with AI, forcing them to price in the demand they are destroying before they pull the trigger.

No government has implemented this. No major economy is seriously discussing it. Meanwhile the numbers are already tracking the curve. 100,000 tech workers laid off in 2025. 92,000 more in the first months of 2026. Jack Dorsey fired half of Block’s workforce and said publicly: “Within the next year, the majority of companies will reach the same conclusion.” Nobody is doing anything wrong. Companies are following their incentives perfectly. That is exactly the problem.

I don’t have an opinion yet, since I haven’t read the paper, but I expect that I will find two things:

  1. Overrating the productivity of AI. I’m already using older AI models because they work better than the newer ones.
  2. An erroneous demand model.

But that may not be the case. Regardless, I will read it, Red Team it, and share my conclusions when they are ready.

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War and the Failure of Economics

Steve Keen points out how the economic models that Western military strategists are using are outdated and incorrect Neoclassical economic models that are going to make the ramifications of the war in the Middle East considerably worse regardless of the outcome for the US military:

The Trump-Epstein-Netanyahu War could cause more deaths than any war in history, including World War II. This will not be via its direct casualties, but via deaths caused by its economic and agricultural consequences across the planet. For someone who exalts in superlatives, Trump may be responsible for causing more deaths than any previous tyrant in human history.

This is because the world economic system resembles Trump himself: its self-image is one of robust power, but its inner nature is one of incredible fragility. One month ago, many people would not even have heard of the Strait of Hormuz—which Trump, in his bravado, has just referred to as “the Strait of Trump”. Now everyone knows where it is—if not precisely why it matters. We are about to learn the hard way, via the consequences of cutting off this vital artery in the global economy’s circulatory system.

This should have been common knowledge. But, just like Trump himself, our understanding of the global economy is based on an elaborate set of delusions. I am looking forward to the howls from mainstream “Neoclassical” economists when they hear that I blame most of those delusions on them.

Neoclassical economics has always lulled us into a false sense of security by its asinine assumption that most industries are “competitive”, as they define competition. A “competitive” industry, according to Neoclassical economics, is one in which there are a multitude of producers producing a homogeneous product. This definition is doubly delusional: most industries are dominated by a small number of very large firms; and all products are highly differentiated.

In the Neoclassical world, taking out a few producers would have only a trivial impact on total production, because there are thousands—millions!—of producers, and every producer’s output is a perfect substitute for all other producers’ output. In the real world, most industries are dominated by a handful of large firms, and one firm’s output cannot be easily substituted for another.

We are now finding this out the hard way in the TEN War: Venezuelan oil cannot replace oil from the Persian Gulf, and the key facilities which have been damaged—such as Qatar’s LNG processing plants—can only be repaired by a handful of companies.

Worse, those repairs will take years, whereas the canonical “supply and demand diagram” of Neoclassical economists completely ignores time. In the Neoclassical world, if you want to produce higher output, just increase the price and, hey presto, you move up the supply curve and produce a higher quantity.

In the real world, if you are 25 percent below the desired level of output of LNG—as the world is now, with not only the wartime destruction Qatar’s plants, but also the impact of tropical cyclone Narelle on Australia’s LNG plants—then it will take several years to move up that “supply curve”.

It’s insane to go into what is an industrial war of attrition with knowingly faulty strategic models, because it guarantees that no matter what decisions you are making, they are going to be suboptimal at best, with real potential for catastrophe.

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The Bubble is Popping

ITEM: The American economy right now is running on a single, dangerously powerful engine — artificial intelligence. The latest macroeconomic data reveals a reality that should make investors deeply uncomfortable. While GDP figures look respectable on the surface, they mask a severe and spreading weakness underneath. The expansion of AI has been responsible for roughly half of total US GDP growth this year. That alone is staggering, but it becomes genuinely alarming when you strip out the frantic spending on data centers, information processing equipment, and software tied directly to the AI boom. Non-residential capital investment that has nothing to do with AI has contracted by about 3% over the past year.

ITEM: Uber’s operations chief, Andrew Macdonald, said it was becoming harder to justify AI costs within the company. He said that, based on talks with Uber’s senior engineering leaders, he realized higher token usage did not translate into a proportional increase in useful consumer features.

ITEM: Duolingo walked back its decision to include AI usage in performance reviews.

This is why I think many, if not most of the planned data centers will never be built. The massive investment into AI is the only thing presently propping up the US economy besides military spending, and the corpocracy’s demand for it has already peaked.

Now, I personally find AI to be incredibly useful and productivity-enhancing. But when I look at how the vast majority of the people I know are using it, to the extent that they’re using it at all, it’s little more than a search engine and a toy. It’s not the basis for a central economic engine upon which the stock markets have gambled.

Which is no doubt why the AI companies are beginning to alter the deal in preparation for a post-Bubble landscape.

On May 20, Meta laid off approximately 8,000 employees, roughly 10 percent of its global workforce, with notifications beginning at 4 AM Singapore time and rolling westward through Europe and the Americas. The company simultaneously eliminated 6,000 open positions and reassigned another 7,000 employees into AI-focused divisions. These cuts arrived during Meta’s most profitable quarter on record: $26.8 billion in net income on $56.3 billion in revenue for Q1 2026, a 33 percent increase from the year before.

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Replacement Theory in Britain

Remember when they said a) mass immigration was good for the economy and b) without immigrants there wouldn’t be enough workers?

Mass immigration is directly fuelling the crisis for young people trying to find work, research reveals. A staggering 27 migrants from outside the EU aged under 25 are hired for every British youngster, according to the analysis.

And while the young British workforce has grown by less than 1 per cent since 2020, the number of non-EU youth on the UK payroll has increased by 355 per cent in that time, the research from The Centre for Social Justice (CSJ) found.

Reform UK’s home affairs spokesman Zia Yusuf said last night that British workers are ‘being pushed to the back of the queue while mass immigration continues’. He added: ‘Young Brits should be first in line for jobs, training and opportunities in their own country, not forced to compete against record levels of imported labour.’

The CSJ think-tank’s research shows how young migrants are taking up roles at a much faster rate to young Britons, with them snapping up three times as many jobs as young Britons.

Between 2024 and 2025, the number of non-EU under-25s on payrolls increased by 33,200, while the number of UK-nationals of the same age fell by 32,200.

This is despite almost one million 16- to 24-year-olds in the UK currently not currently in education, employment or training (NEET).

And the research shows that migrants are mostly taking entry-level positions despite Alan Milburn saying today that the first rung of the career ladder is ‘simply out of reach’ for young Britons after he was commissioned by the Government to review soaring levels of youth unemployment in Britain.

The fact that the man speaking for the British youth is named “Zia Yusuf” is not a confidence-inspiring sign that Reform UK is the answer, though.

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Rethinking University

Now even women are beginning to realize that a college degree is a terrible investment of time and money that accomplishes little more than put a young person into lifelong debt. And this is in the UK, where the degrees are less expensive and the debt can be eliminated after 30 years.

I was 18, full of hope and expectation, with three years ahead of me studying English Literature and the authors I loved, from Chaucer and Shakespeare to Virginia Woolf.Seven years on, though, and life looks very different.
Yes, I had a great time. I read a lot of books, made lifelong friends and played masses of sport. But was any of it truly worth it? Financially, professionally, socially and even in terms of ‘real’ education – would I have been better off turning around, dumping my gown on the floor of my halls, heading back down the M1 and buckling down to a proper job?
Let’s take the money first. By the time I’d finished my undergraduate degree in 2022 – followed by a one-year Masters in English Literature at Bristol University then a journalism qualification – I’d borrowed nearly £60,000, despite doing part-time jobs throughout.
Two years on from finishing my further education, and now that I’m earning a fairly typical graduate salary, thanks to the appalling interest rate my student loan balance stands at £76,227.49. In the past five months, I’ve contributed £335 towards the loan, yet the total amount has risen by £627.49.
I’m essentially paying a ‘graduate tax’ of nine per cent of my gross income for the course of my working life. I may never pay the loan back – 44 per cent of graduates won’t, according to the Government’s own figures – and it’s only scant comfort that the debt will be wiped after 30 years.
Durham is generally seen as one of Britain’s better universities, perhaps second only to Oxbridge. So if I feel like this, what about the 2.86 million other students currently enrolled in other universities across the country?

Only ten percent of men used to attend university back in the time when a university degree actually meant something, and that was largely because only the true cognitive elite attended. There is absolutely no reason for most men and virtually all women to pursue a university degree, as doing so virtually guarantees a suboptimal life track compared to not wasting 4-5 years out of the workforce, gaining no experience, being ideologically indoctrinated by wicked retards, and ending up saddled with lifelong debt.

UPDATE: Here is a comprehensive return-on-investment calculator for virtually every institution of post-high school learning in the USA, but keep in mind that the return-on-investment doesn’t include debt, so the debt calculations need to be compared to the hypothetical ROI.

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Who’s Locking Out Who?

The EU attempting to sanction China tends to remind one of Rorshach. They’re not locking China out of the global economy, they’re locking themselves out of it.

The European Union has taken yet another step in its long-running confrontation with Russia. But what now stands out is not only the scale – it is the restless, almost reflexive expansion of sanctions as a default instrument of policy. In April, EU authorities unveiled their 20th round of sanctions targeting Russia and Belarus, while pointedly extending their reach toward China.

What was once framed as a targeted response now resembles a sanctions regime without clear geographic or strategic limits. By including 56 designations tied to Russia’s military-industrial complex – 17 of them in China, the United Arab Emirates, Belarus, and Central Asia – the EU has effectively dissolved the boundaries of its own confrontation. Another 60 entities now face tightened export controls tied to alleged contributions to Russia’s defense sector.

For the first time, even a Chinese state-owned entity has been targeted by anti-Belarusian sanctions. In Brussels, this is justified through the language of “dual-use” goods. But outside Europe, the perception is of a growing tendency toward economic coercion that stretches legal authority across borders, fueled by an escalating appetite for pressure.

China’s response was swift: officials condemned what they described as “long-arm jurisdiction,” rejecting the EU’s attempt to discipline Chinese firms operating far beyond European territory. More importantly, Beijing read the move as a signal of the EU’s shifting posture toward China itself. Within a day, China placed seven European entities on its control list over arms sales to Taiwan, imposing restrictions that mirror the EU’s own extraterritorial reach. These measures prohibit the transfer of Chinese goods to the targeted firms, extending the ripple effects well beyond those directly sanctioned.

These EU leaders don’t seem to understand that they don’t really matter anymore. They can preen and posture all they like, but there is nothing that Europe has that China needs. It’s understandable if the US politicians don’t grasp that they’re no longer the center of global power, since the lessons of the recent debacle in the Middle East are still being learned.

But all the nations of Europe can’t even defend themselves against invasion from the south and east; their ability to do anything at all about China is nonexistent. They can’t even do much about Russia except hold their own breath, refuse to buy Russian energy, and kill their own economies.

It does seem that those whom the gods would destroy, they first make mad.

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Two Can Play That Game

China will seize property of corporations that respect US sanctions:

On April 7 and 13, 2026, China’s State Council enacted two new regulations, [Decree No. 834 (Supply Chain Security)] and [Decree No. 835 (Countering Foreign Improper Extraterritorial Jurisdiction)], allowing the seizure of assets from foreign entities deemed to violate China’s anti-sanctions laws or disrupt industrial supply chains.

These regulations, effective immediately, allow for freezing assets, restricting transactions, and visa bans, targeting companies that comply with foreign sanctions against China.

Key Aspects of the New Regulations

Regulations on Countering Foreign Improper Extraterritorial Jurisdiction (Decree No. 835): Focuses on preventing foreign states’ sanctions from being enforced on Chinese entities and allows for lawsuits against those enforcing such measures.

Regulations on the Security of Industrial and Supply Chains (Decree No. 834): Targets “malicious entities” that disrupt Chinese supply chains through unfair restrictions or, for example, complying with US-led, or similar, “de-risking” efforts.

Targeted Measures: Authorities can seize or freeze assets located in China, restrict transactions with Chinese partners, and ban entry to individuals connected to the targeted foreign entities.

Malicious Entity List: A, created list will identify foreign organizations or individuals that act in ways that are deemed harmful to Chinese sovereignty or security.

Context: These measures expand on the 2021 Anti-Foreign Sanctions Law (AFSL), providing a legal framework for retaliation against foreign governments and firms.

These rules increase risk for multinational corporations, particularly those in high-tech sectors, as compliance with foreign sanctions may directly violate Chinese law.

And so the Great Bifurcation continues. Now we get to find out who the real economic big dog is.

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Scratch and Claw

On the one hand, it’s a very bad sign that the middle class is now beginning to sell plasma in order to meet their debt burdens. On the other, it’s good that people are finally beginning to get a little more realistic about the fact that this is the new normal and multiple revenue streams are vital for families as they used to be prior to the post-WWII era.

Pressure is starting to show up in places people do not usually look first, and the numbers behind it suggest households and small businesses are both getting pulled tighter at the same time.

Middle class Americans are selling plasma to make ends meet while small businesses are dealing with rising cost pressures tied to tariffs and fuel prices, according to recent reporting from NBC News alongside related coverage on small business conditions.

On the household side, plasma donation has become a recurring source of cash for a growing number of Americans, with roughly 200,000 people donating plasma each day across the country, a scale that reflects how widespread participation has become.

The most important thing is to shed debt. That’s not news to most people here, but it remains far and away the most important thing. The second most important thing is to reduce unnecessary expenses. Do you really need that solo apartment? Is a vacation in Florida really vital or can you simply enjoy an excellent staycation at home for one-quarter the cost?

You don’t need to degrade your quality of life in order to lower your expenses. But you do need to think about what your priorities are. I can personally testify that staying home surrounded by excellent books to read is among the very highest qualities of life to which one can ascend.

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No Children, No Economy

By the time the next economic depression bottoms, it will be illegal for women to not have children in many countries:

Underneath all of this, slower than any war and more permanent than any crisis, is something the financial press doesn’t really mention:

People aren’t having any children.

US fertility hit an all-time low in 2024. The general fertility rate is still falling. IMPLAN puts 1.4 million fewer Americans contributing to housing demand, retail spending, and service consumption in 2025 than trends would have predicted. To put that in numbers: $104 billion in GDP. Not exactly gone, not really disappeared. It just never existed in the first place.

It’s a vicious circle: housing is too expensive, so young people delay children. Fewer children means less future housing demand. Which should eventually reduce prices, except the lag is 20-30 years, and in the meantime housing stays expensive, so the people who couldn’t afford a house still can’t, still don’t have children, and the loop tightens at its own pace regardless of what the Fed does or what happens somewhere in the narrow waterways in exotic places.

Added: the boomers are saying bye sayonara.

The generation that inflated every asset class for 40 years through automatic 401k contributions is, somewhere around now, flipping from net buyers to net sellers. Of course it’s impossible to say like “March, 17: boomers start to cash out their 401ks”… Nope, the tide just turns. The same passive machine that provided an inexorable, automatic bid for equities and bonds and real estate – every payday, every year, for four decades – begins to redeem. Quietly. Continuously. For the next twenty-some years. Every asset they inflated on the way up faces a headwind on the way out. Not a crash. A long, grinding, demographically-inevitable ratchet.

That’s why the central planners of the world turned toward mass immigration. You need consumers to keep the GDP growth going, and with fewer children, there were going to be fewer consumers. Of course, the problem is that the macroeconomic models don’t account for quality of consumer, so it’s only very recently that the mainstream economists have begun to realize that lending to immigrants from grasshopper cultures is absolutely guaranteed to crash the banking system because none of those loans will ever be repaid.

And this is just on the consumption side. Imagine what lowering IQ, time preferences, and productivity does on the production side, although you don’t need to imagine it anymore. We already know what a calamity diversity and inclusion have turned out to be for the US corpocracy.

Indeed, based on a 2025 Danish study, it may even be necessary to ban paid female employment. Such a policy would indubitably be sexist, anti-feminist, and currently illegal in most Western countries. But no one living in any society that elects to show up for the future is going to care what the norms of a few long-dead 21st-century societies happened to be.

Egalitarianism is already conceptually dead. It won’t be many more decades before people stop believing in it.

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