Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Author: Ian Welsh Page 5 of 417

Europe Affirms Its Vassalage In Trade Deal With the US

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On July 28, 2025

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This is a complete capitulation:

  • 15% tariffs on EU goods, 0% on US goods
  • EU to buy 750 billion dollars in LNG over the next 3 years (US LNG is more expensive than alternatives)
  • 600 billion EU investment in the US
  • 50% tariff on steel and aluminum to the US stays in place
  • A commitment to purchase huge amounts of US armaments

Japan has similarly capitulated, after previously standing firm.

Pathetic.

Ironically this leaves Canada as one of the only holdouts among America’s vassals. China, of course, has told the US to take a long flying leap off a short pier.

As I have noted before, the US has been cannibalizing its allies as it declines. This was true under Biden. Trump is only super-charging it. This cannibalization won’t change the trajectory, the US is DONE, but other countries accepting it means they will go down with the US

The EU was always in a hard place: it does export much more to the US than vice-versa. But it did have options, it just refused to take them. Cheaper energy from Russia is available, even during the war, Putin has been clear about that and it would mean much slower de-industrialization. Germany’s loss of industry has been, in particular, driven by high energy prices since the Ukraine war and the destruction of Nord Stream. German businesses which shut down in Germany have often moved to the US for the cheaper oil prices.

The way to strike back against the US was to hit America services: internet companies and break various copyright and patent laws. Hit the tax havens and take the money. (Ireland will squeal, but so what). This is where America really makes its money and it’s completely vulnerable. Meanwhile cut a deal with China, they’re the rising power.

The same is true for Japan, as it happens.

As Trump has shown, no deal is final. When politics change in Europe (and they will) this deal can be repudiated as the garbage it is. If that doesn’t happen soon, Europe’s decline will be much faster than it has to be.

What’s particularly interesting to me is the psychology of this. European elites are just so used to being vassals, and so completely without any pride (though they have plenty of vanity) that they are unable to stand up to America no matter what the humiliation. Russia was able to withstand far worse than what the US was doing, and even flourish, but Europeans can think of no way out but to capitulate. (To be sure, Russia had certain advantages the EU doesn’t have, but the reverse is true as well. The real issue is a lack of imagination and guts.)

Europe needs to get rid of its elite class, entirely, and find new leadership. Unfortunately it seems likely that they’re going to choose the idiot right, who will simply overcharge decline. After those morons fail, they may finally turn to decent leaders, but by then it will be too late to “save the garden” in most nations.

This capitulation has closed off one option: the third bloc. What could have happened is Europe, Canada, Mexico, Japan and other affected nations forming a unified trade bloc of their own, and taking unified steps against America. Such a coalition would have won the ensuing trade war and could have cannibalized the US rather than the other way around.

It is a pity, but unlike many historical vassals who resent their status, our current leadership seems to enjoy being house slaves. So all of this will be done the hard and ugly way.

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Open Thread

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On July 26, 2025

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Use to discuss topics unrelated to recent posts.

Uber’s Finally Profitable & Workers and Customers Will Pay Back Its Losses Fast

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On July 25, 2025

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Uber started in 2009. It incurred losses every year until 2023 except for a profit in 2019 which was due to selling subsidiaries in various countries. Numbers before the IPO are difficult to obtain, but it lost 31.5 billion from 2016 to 2022. Let’s assume a loss of equal to funding during the pre-IPO period, so 24.7 billion. This seems reasonable, since Uber never made a profit during the period.

So we’ll estimate Uber’s total losses at 86.2 billion from 2009-2022.

In 2023 Uber made a profit of 1.9 billion and in 2024 it made a profit of a little under ten billion. Prices for rides on Uber are between ten to twenty percent higher than taxi rides, rising to as much as 50% higher during surge pricing periods (when there’s the most demand.) Driver’s on average, get paid less than taxi drivers used to.

So–the workers get less, the customers pay more.

The strategy, as many people noted, including myself, was for Uber and Lyft to drive taxis out of business by undercutting their prices. Uber and Lyft didn’t need to make a profit, while taxi companies did. Once they had gained dominant market share, they raised prices and took oligopoly profits.

Everyone knew this was the play, and that people were getting subsidized rides now (Uber was much cheaper than taxis in the early years) in exchange for getting fucked over later. Well we’re now in the sandpaper condom period of “ride sharing”, where investors earn back their investment by hurting everyone else.

This should never have been allowed. Uber and Lyft violated massive numbers of laws and were just allowed to do so thru non-enforcement. The end result was obvious and it’s here now: worse wages, higher prices and less ability to regulate the industry.

This sort of stupid is why everything keeps getting worse. Every part of the “sharing economy” (which is no such thing) has made the lives of ordinary people worse. AirBnB in particular helped drive the rise in rental prices in hundreds of cities.

All that most tech-bro firms do is find a place where there isn’t market power, and try to add it. Same with Private Equity, which buys up entire industries in order to form oligopolies and monopolies, as it’s doing in the housing market now.

Market power always means more money for a few rich people and higher prices and worse income for everyone else involved in any given industry.

Welcome to the tech-bro future and remember, Soylent Green is people and so are high profits, always.

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Ending Resource Separatism in Alberta and Canada

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On July 24, 2025

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Alberta is a province in Canada with a lot of oil and a moderate but not yet dangerous separatism problem that polls a little below 30%. That’s far less than needed to win a referendum, but enough to support an insurrection or a large campaign of civil disobedience. It’s also a sufficient level of support for America to take advantage of in one of their patented color revolutions.

Though the level is higher than in the past, it’s nowhere near new. Growing up in the 70s and 80s in British Columbia I remember the anger.

Because there’s a lot of resentment in Alberta and out West in general it also gums up the works politically: the Premier of Alberta has been truculent and unwilling to join in on national efforts to resist Trump’s trade war, for example.

Alberta has oil. Lots of it. Most of it is crap, tar sands oil. It is because of Alberta oil that Canada has a trade surplus with America, in fact, we have a goods and services deficit.

Like all resource rich areas Alberta lives from boom to boom, and the good jobs are in the resource sector. At one time that resource sector was heavily taxed, but that’s far in the past and it is now heavily subsidized. So anything that seems to hurt the resource sector which the Federal government does, like environmental regulations or even renewable energy initiatives is resented. A lot of Albertans identify with oil company interests.

So, this issue needs to be dealt with. Its legs need to be cut out from under it.

The approach which will work is simple enough.

The federal government should either nationalize the oil industry or tax it at high levels when oil prices are high and take the money and just give checks to people in resource rich areas. (Not just Alberta, but also Saskatchewan in particular.)

Put 50% of profits or taxes into a sovereign development fund which invests in new non-resource businesses in resource areas in proportion to the income it receives from them (because resources always run out and one doesn’t want the West to turn into the Maritimes economically), and simply cut checks for the other 50% directly to people who live in the areas.

Make it so that the people of Alberta, Saskatchewan and other resource rich areas see the federal government as the one responsible for their prosperity and personal income, not oil barons.

Of course there are more steps which should be taken, but this is the first and fundamental one: reverse the underlying issue.

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CPI Isn’t: Health Insurance Cost Index

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On July 23, 2025

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The Consumer Price Index is taken as a proxy for how much consumers pay for goods and services. It isn’t, for a wide variety of reasons. Here’s another:

 

This is a component of overall CPI, but what it tracks is actually retained earnings. The justification is that if retained earnings are down, more of premiums are being spent on healthcare! Of course you don’t care about that, what you care about is how much your insurance costs.

Now there might be some technical argument for this IF all the other components of medical care costs were tracked accurately, but like everything else they are subject to hedonic adjustments and various other hand waving.

As a reminder, hedonic adjustments lead to conclusions like “there was recently a 20 year period during which car prices didn’t rise.”

I will be clearer, the US economy has been shrinking for some time. I’m not sure how long because the numbers are so poisoned it’s impossible to tell. The maximal case is since the early 90s recession (hedonomic adjustments for computers were off the charts, but the evidence finds no overall increase in productivity from computers.) The “almost for sure” case is from the financial crisis, so late 2007.

Almost everyone in the US is worse off, surveys find that two-thirds of Americans can’t afford a decent lifestyle and wealth is shrinking for everyone except the top 1%. This is all concealed by bullshit top line economic statistics.

Properly accounted for I doubt if the American economy is half the size of China’s, and where it matters (manufacturing and resources) it’s probably closer to a third the size. No, “will you have fries with that” and “my job is to write 1,000 page reports” jobs do not count. The second in particular is actively detrimental to the real economy, as is essentially everything done by finance, crypto, and at least half of what American tech companies do.

As I’ve noted before, Trump is accelerating the decline. We’ll go back to Trump’s “unique accelerationist genius” soon.

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The Serious Starvation Deaths Are About To Begin In Gaza

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On July 21, 2025

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I’ll keep this one brief. Almost no food or water has gone into Gaza for months. What I’m seeing is that it’s hit the crisis point. I’d expect a few hundred thousand more people to die in the next two to three months. The minimum death toll pre-Trump was about 400K as I read it, and probably more.

This is a holocaust.

There wasn’t much anyone who reads this site could have done about it, but I hope, for your sake, that you were consistently against it.

As for Israel, they have damned themselves and so has every politician and corporate executive in the world who could have done something and didn’t.

Forgive the lack of a long article with sources. We’re past that. Anyone who doesn’t see this and doesn’t expect it at this point simply doesn’t care to know.

AI May Be The End Of Serious Human Advancement

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On July 21, 2025

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To set the stage, this comment from GM:

AI music is what really spooked me about the whole thing. I work in a very technical field and I have yet to see AI be useful for anything in it, because it just doesn’t truly know, and most importantly, UNDERSTAND anything at a level approaching a human expert. But then since early 2025 or so the AI-generated music started to be pretty hard to distinguish from the real thing, and making music is quite a complex thing.

You can still kind of hear it’s AI in the vocals, as those have a certain hiss/distortion to them, but instrumental music alone is pretty damn indistinguishable from what humans record.

Is it great? It never reaches the heights human music does, especially when it comes to the highly technical extremes.

But most human-made music doesn’t either.

And from what I’ve heard from AI, it makes truly awful music at a lower rate than humans do. It produces a lot of average-to-good, while humans mostly generate average-to-bad.

Which is not good news for humans, because most popular music is not all that complex at all (and has in fact been getting more and more simplified over time). With further improvements in AI, the average listener, who never cared all that much about music anyway, won’t either be able to tell or care much about the difference.

That will have a perverse second-order effect — humans will be discouraged from going into that line of work, because what is the point, you can’t make a living out of it. Sure, there will be live bands touring (although even there you can imagine at one point having AI bands “playing live” as holograms, no humans involved), but the market for highly skilled studio musicians and engineers will largely evaporate.

And that will have a devastating effect on the quality of music in the future, because good music comes from those people, and musical innovation comes from such highly skilled musicians improvising in the studio. Maybe one day AI will be so smart and advanced it will be able to jam on its own and come up with new ideas, but as it is structured right now, it just provides new variations of patterns it has already been trained on, not anything new.

Thus the short- to mid-term future is quite bleak. Already there was a rather bad problem with stagnation in music — not much really new in terms of fresh ideas has appeared for quite a while, which trend coincided with the transition to using computers for making music. Now with AI? Well…

Here’s the thing: AI isn’t creative. As GM says it offers variations on already existing methods or paradigms. It’s reliant on scooping up an entire volume of work on subjects, but it can’t advance to new paradigms. In other words, AI is (potentially) great for solved paradigms. It doesn’t, yet, work in all fields because it lacks judgment, but it works in some areas, at least well enough if mediocre is good enough, which, let’s be honest, it often is.

The problem is that the ladder of most careers is “learn how to do what’s already be done, then do variations on that, then start creating new stuff.” Most people never move much beyond the first two stages, and if they do they often create only one or two really new things.

As GM points out, AI is going to cut out the first step and in many cases (music being his example) the second step. That means that step three “create actually new stuff” won’t happen very much, because AI can’t do it (not this form of “AI” anyway, because it doesn’t actually understand anything it’s spewing) and there will be hardly any new practitioners, since they can’t make a living during the “learn old stuff” and “variations on old stuff” phases. Those aren’t fast phases. The 10K hours/10 years paradigm isn’t technically correct, but it does take many years to master the old stuff in a field and reach the level of mastery required to create new paradigms.

Add this to the fact that studies coming in are showing that using AI degrades the skills and reasoning ability of people who use it and you have a dismal picture: we hand over to AI our culture, and AI is unable to advance it, but reliance on AI makes it impossible for us to advance it because we no longer produce the people who can do so.

Not a pretty picture. (Also will be forestalled by civilization collapse, but means we are even more likely to be unable to avoid civilization collapse.)

More on civilization collapse and “AI” soon.

If you’ve read this far, and you read a lot of this site’s articles, you might wish to Subscribe or donate. The site has over over 3,500 posts, and the site, and Ian, take money to run.

Open Thread

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On July 19, 2025

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Use to discuss topics unrelated to recent posts.

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