Ian Welsh

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

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The Next Big Crash Is On Its Way

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On October 1, 2025

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Ever since Greenspan took over the Fed and the 87 crash when they figured out their playbook, the US has only had unavoidable stock market crashes. The Fed is always there to juice markets higher and to jump in at the least sign of a normal (pre-Greenspan) market correction.

But sometimes the irrational stupidity overwhelms even the Fed, because they are both stupid and ideologically unwilling to ever force a correction. This happened twice: the dot-com boom and crash and the Mortgage backed security boom and crash (if we bundle shitty mortgages based on lies together, they become not shitty, because we’re pretending they aren’t all basically the same thing!)

Now we’re going to get the AI Boom crash. I’m well over 90% on this. The AI booms is in the “wildly stupid over-claiming” stage. It’s not that token based AI isn’t a real tech, or that it doesn’t have some uses, but the claims of it completely changing everything (replacing a third of the workforce, acting without human help to run things, being able to cure cancer and make huge theoretical breakthroughs) are obvious over-reaches. So far every academic study that comes in shows that AI isn’t even good at the one thing everyone anecdotally agreed it was good at: writing code. Right now it seems to mainly be a good way to cheat at university, to have a fake relationship, or to bypass Google’s shitty search (which is what I use it for.) It hallucinates, the hallucinations cannot be removed because they are integral to the tech, and the code it produces, even when it works, is a huge mess that will cause massive maintenance issues.

In addition:

  • Since it doesn’t actually mostly reason, it requires data sets bigger than all the data in the world if it is to keep improving;
  • If it uses the data it itself produces, it experiences model collapse.
  • None of the American AI companies make money per query. Every query costs more than they can charge.
  • It requires a vast build-out of energy and data centers, of the “over a trillion dollars” variety. There literally isn’t enough money to pay for OpenAI and Anthropic’s dreams, and there isn’t a product at the end of it that could pay back all that money.
  • About 40% of the US stock market is now based around NVidia and the AI companies.
  • NVidia has now invested in Open AI, so that they can turn around and buy more NVidia cards.
  • The Chinese offer an open source AI which is almost as good and with costs somewhere between one fifteenth and one-thirtieth as much, so that it might actually be profitable AND since it’s open source, Trump can’t have a mini-stroke and decide to cut you off at his whim.

It’s my annual fundraiser. This allows us to cover the changeover of hegemony from America to China, environmental collapse, internal US fascism, what a better society would look like, Gaza, AI, the coming stock market crash and various other issues. As of this writing we’ve raised about $2,700 out of a $12,500 goal, from over 25 people. It’d be great if you can help out (please don’t donate if your financial situation is dire.) You can Subscribe or Donate here or contact me at admin-at-ianwelsh-dot-net if you need another way to donate (mail, usually. A lot of cash apps don’t work in Canada.)

Throwing all this money at AI if it really was the epochal “tech to end all techs, the singularity, dude” that the tech-bros claim it is might make sense. But I don’t see the evidence that this is the case, and even if it is, why not use the Open Source Chinese variety?

In fact, my guess is that this version of AI, based on this model and this generation of chips, is not even as big a deal as the internet was. Everyone was right that the internet was going to be HUGE, they just over-invested before it was and before people knew who the winners (Google, Facebook, Amazon) were going to be.

But so far AI doesn’t even look as important as the internet, but the spend is way larger than the internet build-out of the turn of the millennium.

But even if AI turns out to be a HUGE deal, it’s going to crash out of this bubble and we’ll find out later who can make money doing what.

The Fed will paper the AI market crash over, making hundreds of billions or even a trillion out of thin air to save the rich from their own stupidity and greed. Again. But this will be the LAST crash the Fed will be able to save the capitalists from. The one after will either wipe the capitalists out, wipe out America, or both.

“AI” Insanity. Does This Industry Make Sense?

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On September 3, 2025

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AI’s a weird industry. So far almost no one is making any money, certainly not the major Western AI companies: Anthropic and OpenAI. Every query costs more than the revenue it generates. The primary beneficiary has been NVidia: they’re making money hand over fist, and suppliers of data centers and power have big customers in AI. But AI itself doesn’t make money. (Not Western, anyway. Deepseek, which is 20 to 30 times cheaper, probably is.

The energy required for Western AI is huge, and it’s mostly dirty energy. AI requires mostly 24/7 energy, which means renewables are out. It needs nuclear or carbon intensive sources like coal and natural gas and turbines. MIT did a massive dig into this in March.

The researchers were clear that adoption of AI and the accelerated server technologies that power it has been the primary force causing electricity demand from data centers to skyrocket after remaining stagnant for over a decade. Between 2024 and 2028, the share of US electricity going to data centers may triple, from its current 4.4% to 12%.

AI companies are also planning multi-gigawatt constructions abroad, including in Malaysia, which is becoming Southeast Asia’s data center hub. In May OpenAI announced a plan to support data-center buildouts abroad as part of a bid to “spread democratic AI.” Companies are taking a scattershot approach to getting there—inking deals for new nuclear plants, firing up old ones, and striking massive deals with utility companies.

Nature came up with this chart. As they note, it’s lower bound, because if it was too high, AI companies would have said so.

AI’s a lot more intensive than traditional methods. For example, AI vs. a Google search (granted Google search sucks, but that’s because Google wants it to suck.)

It’s long been noted that one of the biggest issues with climate change is that we can expect it to reduce the amount of fresh water available. AI gobbles that:

AI is also thirsty for water. ChatGPT gulps roughly a 16-ounce bottle in as few as 10 queries, calculates Shaolei Ren, associate professor of electrical and computer engineering at UC Riverside, and his colleagues.

 

 

But here’s the kicker:

ChatGPT 5 power consumption could be as much as eight times higher than GPT 4 — research institute estimates medium-sized GPT-5 response can consume up to 40 watt-hours of electricity

Whoa! That kind of puts paid to rising by 10% a year and other such assumptions. It doesn’t look like new models are scaling linearly.

We have a climate change problem already: lots of extreme weather, disrupted rainfall patterns and massive wildfires. The permafrost is bubbling and releasing methane and arctic temperatures are absurd (hitting 30 celcius in some cases).

Now if this tech was truly transformative, if it made everything so much better, maybe it would be worth it. But so far, with a few exceptions (mostly running thru millions of combinations to assist research) it seems like it’s better search, automatic image generation, a great way for students to cheat and may make programming faster. (There’s some dispute about this, one study found it made coders slower.) So far agents are duds, unable to even run a vending machine.

On the downside, even AI boosters claim it’s likely to put vast numbers of people out of work if it does work, wiping out entire fields of employment, including SFX, illustrators, artists, writers, customer service and perhaps most entry level jobs. We’re told AI has a small but existential risk of wiping out humanity. It gobbles water and energy and causes pollution.

What, exactly, are we expecting to get from AI (other than NVidia making profits) that is worth the costs of AI? Does it make sense to be rushing forward this fast, and in this way? Deepseek has shown AI doesn’t have to use so many resources, but Western AI companies are doing the opposite of reducing their resource draw. Eight times as much energy? How much more energy with GPT-6 use?

It seems like we’re unable to control our tech at all. This used to be the killer argument “well, there’s no controlling it, so why even try?”

But China’s AI uses way less energy. Apparently China can control it, and we can’t? So it’s not about “can’t”, it’s about “won’t”. Using less resources would mean less money sloshing around making various Tech-bros rich, I guess, and we can’t have that.

And all this for an industry where the primary actors, OpenAI and Anthropic aren’t even making money.

Perhaps we could be using these resources in a better way? China is spending their money on producing three-quarters of the world’s renewable energy, and ramping up nuclear power. Their carbon emissions are actually down. Their economy is growing far faster than ours. They’ve almost completely moved over to electric cars, they have high speed trains, and their space program is going gangbusters. All this while reducing rent by over a third in the past five years.

You don’t have to be an AI skeptic to think “maybe this is a misallocation of resources?” Is it really going to change everything so much so that it “makes America great again”? Is western AI so much better than Chinese to make that difference even if AI is as big a deal as its greatest boosters say?

Maybe the US and Europe should be concentrating on more than just AI? Not letting China continue to march ahead in almost every field, while putting almost all the marbles on one big project that they barely have a lead in anyway?

I don’t want to overstate this issue. The amount of energy and water used doesn’t come close to, say, expected increases in air conditioning. (Though if increases in draw continue to ramp up similar to GPT-5 we’ll see. And, the more energy we use, the more air conditioning we need thanks to fairly obvious feedback.) But still, what are we getting for it?

Just some things to think about.

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The Best Short Summary of Why China Is Winning & the West Fading

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On June 2, 2025

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It’s about living in reality:

The main difference between American and Chinese society today is less that one has more dumb people and one has more smart people and more that within public life, being stupid is relentlessly shamed as stupid in one and being smart is relentlessly shamed as stupid in the other.

These days, American society assigns intelligence credentials based not on who can demonstrate a meticulous, well-developed understanding of how anything works, but on who can give the smartest sounding, post-hoc rationalization for the half-baked ideas people desperately want to be true.

If you do the former, and it yields answers people don’t like, they’ll reach deep into their bag of fantasyland narratives to try to invalidate your credibility. If you provide the latter, you’re celebrated — not only as a genius, but a champion. When things don’t work as promised?

They’ll have already sunk so much personal credibility and self esteem into the fantasy they’d rather burrow deeper into delusion than backtrack. In other words, “smart” is whatever helps nurse fragile self esteems rather than whatever helps them understand and work with reality.

In Chinese society today, intelligence is still very much a consequential trait that demands its keep via real, effective results. In the US, it’s turned into another fake self esteem signifier in a culture that’s long stopped caring about anything but fake self esteem signifiers.

I observed this a long time ago, personally. I had predicted the financial crisis, right down to the month. I had been right about Iraq and a variety of other important issues. I was discussing the “Arab Spring,” and said, “It isn’t over till the army votes.”

There was argument back and forth, and I said, in effect, “Look, I have a track record, and so do you. I’m usually right, and you’re usually wrong.”

The response was furious, and I was booted off that particular forum.

In my last major blog role as managing editor, I was able to increase traffic by 60 percent in less than a year, and I felt onto most of it after the election of Barack Obama. Other Netroots sites were bleeding readers, but not us. I could say exactly what had been done to increase traffic. But the publisher was sure they knew better, so I left. That site no longer exists.

People who were for the Iraq war, who made claims that it would work and be easy are now major pundits. Both Matt Yglesias and Ezra Klein were for the war. Indeed, Yglesias wanted to take out all of Iraq, Iran, and North Korea. A study in the L.A. Times found that media figures against the war were fired, laid off, or had their careers stagnate. Those who were for it had their careers prosper.

A correspondent once did a serious search on who had been right, in public and in advance, about the financial crisis. The number was in the 40s. That means that almost no economists, the people who, you know, study this stuff and claim to know something, predicted an obvious bubble. You only had to look at a couple charts. It wasn’t rocket science.

For most of my life, development economists claimed that free trade without protection for local industry was how countries should industrialize and that they should move to cash crops and sell commodities. Every country that tried this failed. The ones who succeeded at industrializing did so behind some form of protection for new industry: China, Japan, South Korea, Taiwan, and so on. They certainly didn’t double down on commodities. The only thing that has ever worked is exactly what development economists advised against.

Fools like Francis Fukuyama became famous and wealthy by saying nonsense things like how “democracy and capitalism are two sides of the same coin” and “the end of history has arrived.” Those of us who warned that it mattered where industry was, and that sending your industry to other countries was the equivalent of shipping away your power and prosperity, were sneered at.

Climate change has, for decades, come in “over,” which is to say worse, than the consensus predictions. Almost every single bad event has happened sooner than the IPCC said it would. You’d think, after a while, they’d ask themselves, “Why are we getting this wrong all the time?” and self-correct. If you can’t figure out why, just look at the windage, make your predictions, then add the average error rate. “Events usually happen X percent sooner than our models predict, so here’s the dates taking that into account.”

It’s not rocket science.

Most Western pundits thought that Ukraine would “win” a war against Russia. No. Pundits told us over and over again that NATO expansion wouldn’t cause a war. Wrong. Pundits told us that Russia was weak compared to NATO and that GDP accurately measured their strength. Pundits thought that sanctions would collapse the Russian economy, not taking into account that China had a veto over that, and a reason to use it.

In every single case, the discourse had, and has been, seized by what people want to believe, or what oligarchs want people to believe. They want people to believe what pays, not what is true. There are no consequences for being wrong and no self-awareness. I am bad at electoral predictions. So when I make one, I always note that I suck and am probably a negative indicator. (I thought Harris would win, for example, though I did get the Canadian election right.)

Now, it isn’t entirely true that there’s no accountability in the West. There is. There is only one rule that the West insists always be followed:

The rich must keep becoming richer, no matter the cost to anyone or anything else.

Because that is the only form of Western accountability, the West will keep losing, because richer rich and higher inequality do not cause or even correlate with any of the main constituents of power, prosperity, or technological progress

Our entire discourse system, our entire media, and our entire elite class have zero accountability outside of ensuring the rich get richer.

At this they have succeeded and at nothing else.

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China Is Going to Win the AI Race

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On May 28, 2025

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Yeah, it doesn’t seem that way, but it’s how it will turn out. What China’s doing is embracing actual open AI (unlike the company named Open AI). Open source and open standards. Everyone outside North America and maybe Europe is going to prefer that, and those who set the standards control the tech. On top of that, American AI is frighteningly expensive; no one in the US is making any money. Every query costs more to produce than is earned, even from customers who are paying, let alone all the free accounts.

Deepseek is much less expensive per query, however. The idea of capitalism is to, y’know, make money? There’s a limit to how much money Softbank can throw at AI if it doesn’t start providing at least some returns.

Further, American-style AI requires massive amounts of energy, and guess who produces the equipment needed to quickly build more generation capacity? (If you need more than one guess, you haven’t been paying attention.)

Every hyper-scale or “AI-ready” data-centre campus needs its own sub-station and a bank of step-down transformers big enough to deliver 50-150 MVA per site. Add the grid-side upgrades that utilities must make to back-feed those loads, and each incremental gigawatt of GPU capacity pulls several hundred megavolt-amps (MVA) of new LPT demand.

Roughly 80 percent of U.S.’s large power transformers (LPT≥100 MVA) are imported and lead-times have ballooned from 50 weeks (2021) to 120-210 weeks (2024), and the lone domestic GOES mill provides only a fraction of what new AI loads will require.

China dominates both finished-unit exports and nearly half of global GOES output; it also supplies critical sub-components such as tap-changers and bushings. GOES now fall under Beijing’s 25 percent retaliatory-tariff list and new export-licence regime.

Export licensing is China’s retaliation for the US “don’t sell China chips or lithography machines” regime. I’m sure they won’t drag their feet or outright deny exports to the US, when the US has explicitly restricted “AI” chips to attempt to cripple China’s AI industry. I mean, turnabout isn’t fair play, amiright?

Thing is, China has proved very good at using what they can get, or make themselves, and they’re making fast progress on chips, with the possibility of creating a new class of chips which out-performs anything the US has looking very likely. The US, on the other hand, cannot ramp up production of transformers on any reasonable timescale.

Reap, sow. Fuck around, find out, etc.

As for AI destroying all jobs, well, no. It makes mistakes too often, and in anything that matters even a one or two percent serious error rate is unacceptable.

I, at least, will laugh myself sick when Silicon Valley gets its lunch eaten by the Chinese on AI. I mean, it’s sad, because Silicon Valley bros are so humble, never brag and never lord it over anyone else. It’s not like they’re assholes whose entire business model is based on gouging and taking value from everyone else, and it’s not like modern “AI” is based on the most vast theft of other people’s work in history.

And them Chinese, man, who do they think they are? Embracing open licenses and open standards and actually trying to make a profit, like they have real competitive markets or something? Commies can’t do Capitalism better than America!

 

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AI Will Degenerate In Much The Same Way Google Did

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On January 30, 2025

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If you’re old enough to remember search before and after Google, you remember how good Google search was at the beginning.

Google used links to rank what to show to searchers. In the old web, before Google, every link was, in essence, an endorsement. We linked to what we thought was good, that other people should read.

It was a pristine “state of nature” system.

But the minute Google became dominant in search, everyone started manipulating links and metadata and everything else to get Google to send them more traffic. Links were no longer organic, no longer endorsements, but attempts to manipulate the algo. The more that was true, the more it became necessary to engage in “search engine optimization”, and the more algorithmic search engines sucked. Of course, Google also self-sabotaged, by trying to optimize search results so that Google would make the most money possible.

I recently read a regular traveler saying he never reads travel blogs and magazines any more, because AI is so much better. I’m sure he’s right.

But AI is better because it’s reading all the travel blogs and magazines, sorting and summarizing. AI being better, readership is cratering, and so the blogs and magazines will slowly die off. Travel’s one of those activities where you need relatively recent information, where was great to stay years ago isn’t very helpful. So, as the blogs and magazines die, the AI’s results will slowly get worse, until they’re crap scraped from official websites of hotels, museums and other travel destinations, since that’s all that will remain.

AI, in other words, in this and other ways, many of them similar, will destroy the ecosystem required for it to be good, same as Google did.

This is “eating the seedcorn/destroying the soil’s fertility” type of stupidity. If you destroy an ecosystem you’re dependent on (and we’re all dependent on some ecosystems) then whatever you’re doing is only short term viable.

So enjoy AI as an alternative to search for now (but always check its source, because it does hallucinate) but understand this is a moment in time, a moment which is destroying what makes it possible.

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Small Chinese Company Hilariously Crushes American AI

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On January 27, 2025

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So, a Chinese financial firm (not even a software or computer company) has put out an open source AI model which is 50 times more efficient than Chat-GPT or any other American AI. It’s so simple you can run it on some phones, it doesn’t have to call home.

The sound you hear is Sam Altman screaming at the Devil as he realizes he sold his soul to become the world’s richest man, and it ain’t gonna happen.

(Faintly, in the background, the devil laughing his ass off.)

Absolutely hilarious. Oh, and they did it with a tiny team for hardly any money. Didn’t take billions. Doesn’t require massive amounts of energy.

And that whole open source thing matters: everyone else can build off their model. Deepseek, being Chinese, has some censorship in it (type Xi Jingping’s name to see it in action), but you can build your own without the censorship.

One of the interesting things is that it was built by a team of quants. Seems that the Chinese have been crushing the finance industry lately, since they saw what it has done to the West, so the Quants decided to try their hand at a bit of optimized AI code.

This chart is one of the most illustrative of Xi’s policy over the last six years or so:

Seems Xi has also figured out (as I’ve noted in the past) that billionaires suck. They form a power center outside the party and they act against the best interests of everyone in society but themselves.

Turns out that having lots of billionaire is a policy choice. The West made that choice and so did China, for a while, but when they saw how dangerous and harmful billionaires are, they reversed themselves and changed policy to crush them. They’ve even thrown them in prison. (Vietnam recently executed a mogul, though she wasn’t quite a billionaire.)

China’s CCP wants prosperity for everyone in the country. It’s the best way for them to stay in power, and hell, there’s every indication they really believe it’s the right thing to do. They’ve deliberately crushed their housing bubble and the state is moving heavily into building housing, they cracked down on exam-prep tutors, because that’s a red-Queen’s race which favors the rich and hurts everyone else, including kids. They built recreation centers just for delivery workers and forced companies to treat them better.

And they have the tech lead in about 80% of fields, plus, it appears, one more now. Just as Trump announces his five hundred billion dollar AI fund, launches his own shitcoin so people can bribe him without having to stay at one of his hotels and juices crypto, a fraudulent field which caters to the Western desire to get rich without actually doing anything useful for society.

America’s flailing around. Their only real plans is “let’s loot our vassals and satrapies”, and they’ll manage to do more of that. But it isn’t going to change America’s trajectory. It’s a failing Empire, it’s swirling the drain and nothing is going to stop that, since the actual necessary steps require policies like, y’know, slashing home prices, gutting billionaires, raising taxes on the rich, taking utilities and other public goods back into public control and so on: all the stuff no one, Trump included, wants to do.

Empires die hard, and a lot of suffering goes with that. But die the American Empire is, and will. China has already won, and they deserve to.

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The Tik-Tok Ban Is Hypocritical Nonsense

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On January 17, 2025

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The justification for the TikTok ban is that it supposedly collects a ton of data.

TikTok’s data collection practices are insane. The app gather data that other apps normally consider off limits, including the content of users’ private messages, and the full contents of a user’s device contacts.

I agree, this is insane. But it isn’t unusual, and it isn’t even the worst in class.

That’s a lot of data – but it’s worth noting that TikTok does not seem to collect more data than other social media companies. A privacy researcher working with the Washington Post found that TikTok gathers less data than Facebook in some cases.

So it’s obviously not about data collection. As for sharing with the Chinese government, well, Google sells user data to the Chinese thru third parties.

Perhaps it has something to do with TikTok users being against genocide?

But most revealing of all is that Biden and Trump are both trying to avoid a TikTok shutdown. See, what Congress wants is the Chinese parent company to sell TikTok to an American. But TikTok has refused and has said it will shut down on the 19th.

And here Biden is saying he won’t enforce the shutdown, and Trump saying he wants to find a solution.

It’s a shakedown.

Whatever it is, it isn’t because Congress has suddenly decided to crack down on apps collecting too much user data.

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The End Of Zoom & Video Evidence

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On April 8, 2024

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Back in February, deepfake technology was used to steal $25 million dollars:

A finance worker at a multinational firm was tricked into paying out $25 million to fraudsters using deepfake technology to pose as the company’s chief financial officer in a video conference call, according to Hong Kong police.

The elaborate scam saw the worker duped into attending a video call with what he thought were several other members of staff, but all of whom w

Open AI has tech to clone someone’s voice in instants. They haven’t released it and aren’t going to, but that will only slow the revolution.

I suspect this will mean a return to in-person meetings for any important decisions. Outside of corporations and businesses, this will include you having to physically go to your bank to move or withdraw significant amounts of money.

In court cases it may lead to a return to pre-photography evidentiary standards: do you have a witness and/or physical evidence plus a chain of custody? A picture or a video will mean nothing.

With respect to decision-making an attempt will be made to get around this by using codes and passwords, but that won’t work very well. As the modern world has proved, any password or code that’s on a computer system is not secure.

All of this means, ironically, a partial regression: electronic comms won’t be trustworthy and so will be used less.

Welcome the to the past in the future.

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