The United States is on the brink of an industrial transformation that could redefine its economic trajectory. Inward investment is surging, driven by a wave of new manufacturing plants, onshoring and reshoring initiatives, and a parallel boom in data centre and power generation construction. This is not incremental change; it is a structural shift that will demand vast amounts of labour, raw materials, and productive capacity. The question for investors and policymakers is whether this investment renaissance will reignite inflationary pressures which might lead to a newly reconstituted Federal Reserve signalling a willingness to run the economy “hot”.
The scale of manufacturing investment alone is extraordinary. Semiconductor fabrication plants, battery gigafactories, and advanced automotive plants are being announced at a pace unseen in decades. Industry estimates suggest that annual construction outlays for manufacturing could exceed an estimated $250 billion in both 2026 and 2027, as companies seek to localise and secure supply chains. These projects are not confined to the technology sector; they span electronics, pharmaceuticals, and heavy industry, creating a broad-based surge in demand for skilled labour and specialised materials. This manufacturing wave is additive to the already intense pressure from hyperscale data centre construction, which has become a defining feature of the digital economy. With AI and cloud computing hyperscalers expected to drive driving unprecedented demand for processing power, data centre investment is projected to account for half of the projected $1.2 trillion global data centre capital expenditure by 2029, while power generation projects will similarly scramble to keep pace with the energy requirements of this new infrastructure which are forecast to more than double over the next 10 years.
Source: DC Byte, Bloomberg NEF. Reported as of 15/04/2025. IT capacity is the amount of power a data centre needs for computing, network and storage
The implications for the labour market are huge. The construction sector already faces a shortfall of nearly half a million workers, and the competition for skilled trades, engineers, and project managers will only intensify as manufacturing and technology projects converge. Wage inflation is inevitable. In hotspots where multiple megaprojects collide, wage growth could easily outstrip national averages, creating ripple effects across the broader economy. Immigration constraints and demographic trends exacerbate the problem, and will leave employers with few options beyond aggressive pay increases and retention incentives. This is not a temporary squeeze; it is a structural challenge that will persist as long as the investment pipeline remains full.
Raw materials tell a similar story. Steel, aluminium, copper, and cement are all set to experience sustained demand shocks as the buildout progresses. Tariffs and supply chain fragmentation have already pushed input costs higher, and the synchronised surge in construction activity will amplify these pressures. Equipment lead times are lengthening, and logistical bottlenecks remain unresolved. The result is a cost base that is not just rising but likely to sharply accelerate, with regional disparities adding complexity for project planners and investors alike.
Source: Bloomberg, Bureau of Labour Statistics
Overlay this with monetary policy, and the picture becomes even more concerning . The Federal Reserve has signalled a more accommodative stance for some time, tolerating inflation above its long-term target in the interest of sustaining growth and employment. This willingness to let the economy run hot serves a dual purpose: lower rates support the industrial build-out and, as a by-product, higher inflation erodes the real value of the US government’s $38 trillion debt mountain. For policymakers, this is a calculated risk; for bond investors, it is a warning shot. A period of elevated inflation may be politically palatable and even strategically desirable, but it comes at the expense of real returns and introduces volatility into rate expectations. If the Fed cuts too aggressively while fiscal incentives continue to flow, the combination of easy money and surging real-economy demand could create a perfect storm for inflation in 2026 and 2027.
The broader macroeconomic consequences are clear. A synchronised boom in manufacturing, data centres, and power generation will strain every aspect of productive capacity. Labour markets will tighten further, wages will rise, and material costs will climb. These sector-specific pressures will bleed into headline inflation, challenging the narrative of a smooth return to price stability. For investors, the message is simple: the risk premium for inflation is back, and positioning for real assets, pricing power, and inflation-linked instruments will be critical. For policymakers, the challenge is to harness the benefits of reindustrialisation without igniting an inflationary spiral that undermines financial stability.
America’s great build-out will test the limits of labour supply, material availability, and monetary policy flexibility. If the Fed remains tolerant and the economy runs hot, the debt mountain may shrink in real terms—but so too will the purchasing power of every dollar in circulation. For bond investors this industrial renaissance may be good for growth, but it could also be the spark that reignites inflationary fire.
Victor Davis Hanson Proclaims “The End Of Climate Change”
Decades of ‘consensus‘ around so-called climate catastrophe are now running into new economic, technological, and geopolitical realities.
Mix in AI and its unprecedented demand for large-scale electricity generation, and we have a global climate conversation that demands to be reckoned with.
Victor Davis Hanson breaks down how the foundations of decades of “green orthodoxy” are shifting:
For decades, the narrative demanded radical economic shifts from fossil fuels to renewables like wind and solar, but recent skepticism is growing due to inconsistencies in temperature records and cyclical changes; Hanson notes, “I didn’t think in my lifetime that I would see an end to that dominance, even though there were inconsistencies.”
Artificial intelligence requires unprecedented electricity, far beyond what wind and solar can provide, necessitating 100 gigawatt plants annually equivalent to nuclear or fossil fuels; as Hanson cites Sam Altman, “we’re going to have to build 100 [one gigawatt plants] per year or the equivalent of clean coal or natural gas.”
Figures like Sweden’s King Gustaf XVI and Bill Gates have publicly questioned the crisis, while Trump’s energy policies end subsidies for failed green projects like California’s high-speed rail; Hanson highlights Gates’ recent pivot, “he no longer believes that there is an impending climate change crisis.”
Elite hypocrisy is everywhere as Hanson notes “the people who have been the avatars of climate change, never suffer the consequences of their own ideology.“
“Barack Obama said the planet would be inundated pretty soon, if we didn’t address global climate change. Why would he buy a seaside estate at Martha’s Vineyard or one on the beach of Hawaii if he really did believe that the oceans would rise and flood his multimillion-dollar investment?
“The inconsistency of the global warming narrative, the self-interest in the people who promote it, and the logic that they have not presented, empirically, any evidence that would convince us that we have to radically transform our economies,” leaves Hanson questioning whether AI’s demand shift has permanently crushed the ideology of so-called ‘climate change.’
Eighty percent of Milan’s predatory crimes are committed by foreigners, Police Commissioner Bruno Megale told a parliamentary inquiry on Wednesday, outlining what he described as the city’s most pressing public-order challenge.
Speaking before the commission on suburban issues, Megale said 830 arrests for predatory crimes, such as robbery, were made in the first nine months of 2025, with one in five involving minors. He described residents having “a widespread sense of insecurity,” but suggested that overall crime was down and arrests had increased so far this year.
Megale was speaking ahead of Milan’s hosting of the Winter Olympics, which begins in February.
“We’re heading towards the Olympics, an event that will draw international attention. All eyes will be on Milan, especially in the days leading up to the inaugurations, and so we’re paying very close attention, with careful monitoring and planning,” he told the inquiry, as cited by Milano Today.
The police commissioner announced that the northern Italian city will receive more than 2,000 additional law enforcement officers to reinforce security, particularly around key venues and public spaces.
Megale noted a concerning rise in youths committing offenses, including the “maranza” phenomenon, which involves youth gangs who embark on anti-social behavior that may not meet the threshold of criminality but still affects day-to-day lives.
“We’re somewhat concerned about the glorification of their activities through social media,” he added.
The remarks come as Milan once again ranked last in Italy for safety and justice, according to Il Sole 24 Ore’s latest national quality-of-life report. The city records nearly 7,000 crimes per 100,000 inhabitants — the highest rate in the country — and ranks 104th out of 107 for perceived insecurity, with over a third of families feeling unsafe in their own neighbourhoods. It is also second-to-worst for property damage.
Liberal mayor Beppe Sala has previously explained Milan’s poor performance in such surveys by suggesting that “citizens report crime more” often in the city compared to elsewhere, and therefore the statistics make the city look worse than it is.
Last November, Italian Interior Minister Matteo Piantedosi announced the deployment of 600 additional police officers to Milan, citing concerns over integration challenges and rising crime rates, particularly in areas with significant immigrant populations.
NEW: 🇮🇹‼️ A huge 65% of all crimes in Milan are committed by foreign nationals, despite representing 20% of the population, damning new stats from Italy’s Interior Minister @PiantedosiM have revealed.
He noted that 65 percent of all crimes in the city are committed by foreign nationals, despite representing 20 percent of all residents, and suggested that “integration challenges must be addressed to reduce marginalization and its consequences.”
Sala, himself, said at the time, “I won’t claim Milan is a safe city, but it is making an effort to address challenges faced by all international cities.”
The city confirmed last week that it would not be holding its traditional New Year’s Eve celebration in Piazza Duomo this year, citing Olympics preparation and a lack of space as the reasons.
Critics, however, suggested that the city could not afford any bad press in the lead-up to the Games, following several years of high-profile sexual assaults during New Year’s celebrations.
Macron Wants To Go Full “Ministry Of Truth” With Draconian Censorship Grab
French President Emmanuel Macron is facing fierce pushback from conservative voices within France over his renewed drive to grant the state sweeping new censorship powers, Barron’s reports.
On Friday, Macron once again raised the alarm about so-called “disinformation” spreading on social media, insisting that parliament grant authorities the ability to immediately block content deemed “false information.” As if the existing arsenal of censorship tools weren’t enough, the left-wing president now wants to establish a “professional certification” system that would effectively create an official, state-approved class of media outlets—separating those that toe the government’s ethical line from those that refuse to do so.
France’s right-wing press has reacted with outrage, with Vincent Bolloré’s Journal du Dimanche denouncing Macron’s “totalitarian drift” on free speech and warning of “the temptation of a ministry of truth.”
Bolloré-owned CNews and Europe 1 were equally scathing, with popular presenter Pascal Praud accusing the president of acting out of personal resentment, declaring the initiative comes from a “president unhappy with his treatment by the media and who wants to impose a single narrative.”
National Rally leader Jordan Bardella also delivered a blistering rebuke, saying in a statement, “Tampering with freedom of expression is an authoritarian temptation, which corresponds to the solitude of a man… who has lost power and seeks to maintain it by controlling information.”
Bruno Retailleau, head of the Republicans in the Senate, echoed the warning on X: “[N]o government has the right to filter the media or dictate the truth.”
Un “label de l’information” décidé sous l’impulsion du pouvoir ? C’est une dérive inquiétante.
Nul gouvernement n’a à trier les médias ni à dicter la vérité.
La France n’a pas besoin d’un ministère de la Vérité.
La liberté de la presse est un pilier : on ne l’entoure pas de…
In an unusual move, the Élysée account fired back on social media, posting clips of Praud and other conservative commentators under the sarcastic headline “attention false information.”
At Wednesday’s cabinet meeting, Macron insisted no limitation on free speech was planned and explicitly ruled out any state-issued media label, Barron’s said. “As the president of the republic noted at the start of the cabinet meeting, there is not going to be a state label, and even less a ‘ministry of truth,’” Macron’s spokesperson claimed.
The Central Asian Republics (CARs) fall within Russia’s “sphere of influence” for historical, economic, and security reasons.
The first stems from their shared history under the Russian Empire and USSR, the second from the Russian-led Eurasian Economic Union (EAEU) in which Kazakhstan and Kyrgyzstan participate, while the third relates to the Russian-led Collective Security Treaty Organization (CSTO) that includes them and Tajikistan. Russia’s influence, however, has waned in recent years.
Its understandable prioritization of the specialoperation created the opportunity for Turkiye to expand its influence through the “Organization of Turkic States” (OTS) in which Kazakhstan, Kyrgyzstan, and Uzbekistan participate with Turkmenistan as an observer. The OTS began as a socio-cultural integration group that now also promotes economic and even security cooperation, thus challenging the EAEU and CSTO. The US also made major trade inroads there earlier this month during the latest C5+1 Summit.
These developments were greatly facilitated by the US-mediated normalization of Armenian-Azerbaijani ties and the attendant “Trump Route for International Peace & Prosperity” (TRIPP) that was unveiled during their three leaders’ White House Summit in early August.
This will essentially lead to Turkiye injecting Western influence along Russia’s entire southern periphery, especially through the expected ramping up of military exports there, which threatens to pose serious latent challenges to Russia.
The latest move on this front was the CARs inviting Azerbaijan to join their annual Consultative Meeting of Heads of State and then rebranding as the “Community of Central Asia” (CCA), coincidentally right after their meeting with Trump. Regional integration is always positive, but in this case, it could also reduce Russia’s regional influence.
That’s because all six might deal with Russia as a group instead of individually. This could lead to tougher negotiating stances if they’re emboldened by Turkiye and the US.
Azerbaijan’s inclusion suggests that it’ll share its experiences managing this summer’s tensions with Russia and serve as its Turkish ally’s supervisor within the CCA to align it as closely as possible with the OTS (remembering that non-Turkic Tajikistan isn’t a member).
This likely role coupled with the timing of the CCA’s announcement right after the C5+1 and three months after TRIPP’s unveiling suggests that they want to rebalance ties with Russia and could rely on Azerbaijan’s guidance if this results in tensions.
Russia still plays an enormous economic role in the five CARs and ensures three of the CCA’s six members’ security through their membership in the CSTO. Putin also hosted the CARs leaders in early October during the Second Russia-Central Asia Summit where he committed to scaling up investments. Concrete limits therefore exist in terms of how far and fast the CCA could rebalance ties with Russia, so nothing dramatic is expected anytime soon, but some reduction of Russian influence might be inevitable.
That’s because the CCA could foster a stronger sense of regional identity, even ethnic in the pan-Turkic sense (Tajikistan being the exception), than the one that they share with Russia through their Imperial- and Soviet-era pasts with all that entails for future policymaking.
This aligns with Turkiye’s interests, which envisages becoming a Eurasian Great Power through its new influence in Central Asia via TRIPP and the OTS, and that in turn advances the US’ grand strategic goal of containing Russia.
Approximately 20,000 rounds of Bundeswehr ammunition were stolen from a civilian transport truck after the driver parked overnight in an unsecured industrial-area lot near Burg, outside Magdeburg, the German defense ministry confirmed on Monday.
The incident, first reported by the platform Meetingpoint Jerichower Land and developed by Der Spiegel, has prompted a joint investigation by the Bundeswehr and local police amid concerns the theft was not random but carried out by perpetrators who may have been monitoring the vehicle.
According to the ministry, the driver — employed by a civilian company contracted to move ammunition for the armed forces — opted to stop for the night and reportedly checked into a hotel, leaving the cargo unattended. When he arrived at a nearby barracks the following morning, soldiers immediately noticed signs of tampering and reviewed the manifests.
An initial assessment found that approximately 10,000 live 9mm pistol rounds, 9,900 blank rifle cartridges, and several smoke grenades were missing in what officials described as a serious security breach.
“A particular danger comes from 9mm cartridges: This is the most widely used caliber worldwide for pistols and submachine guns. It is live, lethal ammunition,” Meetingpoint wrote.
“We are taking the incident very seriously and are thoroughly investigating the matter. We are supporting the investigating authorities in all further steps,” a spokesperson for the Bundeswehr’s support division told the site.
According to Der Spiegel, early findings suggest the transport company violated Bundeswehr safety protocols. Contracts require that ammunition transports be staffed with two drivers, ensuring one is continuously observing the vehicle during any stop. In this case, investigators say the unplanned overnight stop was not authorized and security rules were not followed.
Bundeswehr sources believe the theft was unlikely to be opportunistic. Instead, they fear the cargo may have been targeted, with the offenders waiting for the moment the vehicle was left unattended.
The police investigation is ongoing, and the ministry has not yet commented on whether organized crime or extremist groups are suspected.
The driver has not been publicly identified, and neither Germany’s federal defense ministry nor investigators have disclosed whether disciplinary or contractual measures will follow against the transport company.
The Trump administration’s killings of scores of Venezuelans are justifiably provoking outrage. Secretary of War Pete Hegseth recently proclaimed, “We have only just begun to kill narco-terrorists.” Donald Trump and Hegseth are cashing a blank check for carnage that was written years earlier by President Barack Obama.
In his 2017 farewell address, Obama boasted, “We have taken out tens of thousands of terrorists.” Drone strikes increased tenfold under Obama, helping fuel anti-US backlashes in several nations.
As he campaigned for the presidency in 2007, then-Senator Barack Obama declared, “We will again set an example for the world that the law is not subject to the whims of stubborn rulers.” Many Americans who voted for Obama in 2008 expected a seachange in Washington. However, from his first weeks in office, Obama authorized widespread secret attacks against foreign suspects, some of which spurred headlines when drones slaughtered wedding parties or other innocents.
On February 3, 2010, Obama’s Director of National Intelligence Dennis Blair stunned Washington by announcing that the administration was also targeting Americans for killing. Blair revealed to a congressional committee the new standard for extrajudicial killings:
“Whether that American is involved in a group that is trying to attack us, whether that American has—is a threat to other Americans. We don’t target people for free speech. We target them for taking action that threatens Americans.”
But “involved” is a vague standard—as is “action that threatens Americans.” Blair stated that “if we think that direct action will involve killing an American, we get specific permission to do that.” Permission from who?
Obama’s first high-profile American target was Anwar Awlaki, a cleric born in New Mexico. After the 9/11 attacks, Awlaki was showcased as a model moderate Muslim. The New York Times noted that Awlaki “gave interviews to the national news media, preached at the Capitol in Washington and attended a breakfast with Pentagon officials.” He became more radical after he concluded that the Geoge W. Bush administration’s Global War on Terror was actually a war on Islam. After the FBI sought to squeeze him into becoming an informant against other Muslims, Awlaki fled the country. He arrived in Yemen and was arrested and reportedly tortured at the behest of the U.S. government. After he was released from prison eighteen months later, his attitude had worsened and his sermons became more bloodthirsty.
After the Obama administration announced plans to kill Awlaki, his father hired a lawyer to file a challenge in federal court. The ACLU joined the lawsuit, seeking to compel the government “to disclose the legal standard it uses to place U.S. citizens on government kill lists.” The Obama administration labeled the entire case a “State Secret.” This meant that the administration did not even have to explain why federal law no longer constrained its killings. The administration could have indicted Awlaki on numerous charges but it did not want to provide him any traction in federal court.
In September 2010, The New York Times reported that “there is widespread agreement among the administration’s legal team that it is lawful for President Obama to authorize the killing of someone like Mr. Awlaki.” It was comforting to know that top political appointees concurred that Obama could justifiably kill Americans. But that was the same “legal standard” the Bush team used to justify torture.
The Obama administration asserted a right to kill U.S. citizens without trial, without notice, and without any chance for the marked men to legally object. In November 2010, Justice Department attorney Douglas Letter announced in federal court that no judge had legal authority to be “looking over the shoulder” of Obama’s targeted killing. Letter declared that the program involves “the very core powers of the president as commander in chief.”
The following month, federal judge John Bates dismissed the ACLU’s lawsuit because “there are circumstances in which the Executive’s unilateral decision to kill a U.S. citizen overseas” is “judicially unreviewable.” Bates declared that targeted killing was a “political question” outside the court’s jurisdiction. His deference was stunning: no judge had ever presumed that killing Americans was simply another “political question.” The Obama administration’s position “would allow the executive unreviewable authority to target and kill any U.S. citizen it deems a suspect of terrorism anywhere,” according to Center for Constitutional Rights attorney Pardiss Kebriae.
On September 30, 2011, a U.S. drone attack killed Awlaki along with another American citizen, Samir Khan, who was editing an online Al Qaeda magazine. Obama bragged about the lethal operation at a military base later that day. A few days later, administration officials gave a New York Times reporter extracts a peek at the fifty-page secret Justice Department memo. The Times noted, “The secret document provided the justification for [killing Awlaki] despite an executive order banning assassinations, a federal law against murder, protections in the Bill of Rights and various strictures of the international laws of war, according to people familiar with the analysis.” The legal case for killing Awlaki was so airtight that it did not even need to be disclosed to the American public.
Two weeks after killing Awlaki, Obama authorized a drone attack that killed his son and six other people as they sat at an outdoor café in Yemen. Anonymous administration officials quickly assured the media that Abdulrahman Awlaki was a 21-year-old Al Qaeda fighter and thus fair game. Four days later, The Washington Post published a birth certificate proving that Awlaki’s son was only 16-years old and had been born in Denver. Nor did the boy have any connection with Al Qaeda or any other terrorist group. Robert Gibbs, Obama’s former White House press secretary and a top advisor for Obama’s reelection campaign, later shrugged that the 16-year-old should have had “a far more responsible father.”
Regardless of that boy’s killing, the media often portrayed Obama and his drones as infallible. A Washington Post poll a few months later revealed that 83% of Americans approved of Obama’s drone killing policy. It made almost no difference whether the suspected terrorists were American citizens; 79% of respondents approved of preemptively killing their fellow countrymen, no judicial niceties required. The Post noted that “77 percent of liberal Democrats endorse the use of drones, meaning that Obama is unlikely to suffer any political consequences as a result of his policy in this election year.” The poll results were largely an echo of official propaganda. Most folks “knew” only what the government wanted them to hear regarding drones. Thanks to pervasive secrecy, top government officials could kill who they chose and say what they pleased. The fact that the federal government had failed to substantiate more than 90% of its terrorist accusations since 9/11 was irrelevant since the president was omniscient.
On March 6, 2012, Attorney General Eric Holder, in a speech on targeted killings to a college audience, declared, “Due process and judicial process are not one and the same, particularly when it comes to national security. The Constitution guarantees due process, it does not guarantee judicial process.” TV comedian Stephen Colbert mocked Holder, quipping “Trial by jury, trial by fire, rock, paper scissors, who cares? Due process just means that there is a process that you do.” One purpose of due process is to allow evidence to be critically examined. But there was no opportunity to debunk statements from anonymous White House officials. For the Obama administration, “due process” meant little more than reciting certain phrases in secret memos prior to executions.
Holder declared that the drone attacks “are not [assassinations], and the use of that loaded term is misplaced; assassinations are unlawful killings. Here, for the reasons I have given, the U.S. government’s use of lethal force in self-defense.” Any termination secretly approved by the president or his top advisers was automatically a “lawful killing.” Holder reassured Americans that Congress was overseeing the targeted killing program. But no one on Capitol Hill demanded a hearing or investigation after U.S. drones killed American citizens in Yemen. The prevailing attitude was exemplified by House Homeland Security Committee Chairman Peter King (R-NY):
“Drones aren’t evil, people are evil. We are a force of good and we are using those drones to carry out the policy of righteousness and goodness.”
Obama told White House aides that it “turns out I’m really good at killing people. Didn’t know that was gonna be a strong suit of mine.” In April 2012, The New York Times was granted access for a laudatory inside look at “Terror Tuesday” meetings in the White House:
“Every week or so, more than 100 members of the government’s sprawling national security apparatus gather, by secure video teleconference, to pore over terrorist suspects’ biographies and recommend to the president who should be the next to die.”
It was a PowerPoint death parade. The Times stressed that Obama personally selected who to kill next:
“The control he exercises also appears to reflect Mr. Obama’s striking self-confidence: he believes, according to several people who have worked closely with him, that his own judgment should be brought to bear on strikes.”
Commenting on the Times’ revelations, author Tom Engelhardt observed, “We are surely at a new stage in the history of the imperial presidency when a president (or his election team) assembles his aides, advisors and associates to foster a story that’s meant to broadcast the group’s collective pride in the new position of assassin-in-chief.”
This is how Obama’s Press Secretary Robert Gibbs responded to questioning on the murder of the 16 year old US citizen Abdulrahman al-Awlaki in a drone strike ordered by Obama: “I ‘d suggest that you should have had a far more responsible father”. pic.twitter.com/Hp408VX08P
On May 23, 2013, Obama, in a speech on his targeted killing program at the National Defense University in Washington, told his fellow Americans that “we know a price must be paid for freedom”—such as permitting the president untrammeled authority to kill threats to freedom. The president declared that “before any strike is taken, there must be near-certainty that no civilians will be killed or injured—the highest standard we can set.”
Since almost all the data on victims was confidential, it was tricky to prove otherwise. But NBC News acquired classified documents revealing that the CIA was often clueless about who it was killing. NBC noted, “Even while admitting that the identities of many killed by drones were not known, the CIA documents asserted that all those dead were enemy combatants. The logic is twisted: If we kill you, then you were an enemy combatant.” Killings are also exonerated by counting “all military-age males in a strike zone as combatants…unless there is explicit intelligence posthumously proving them innocent.” And U.S. bureaucrats have no incentive to track down evidence exposing their fatal errors. The New York Times revealed that U.S. “counterterrorism officials insist…people in an area of known terrorist activity…are probably up to no good.” The “probably up to no good” standard absolved almost any drone killing within thousands of square miles in Pakistan, Yemen, and Somalia. Daniel Hale, a former Air Force intelligence analyst, leaked information revealing that nearly 90% of people who were killed in drone strikes were not the intended targets. Joe Biden’s Justice Department responded by coercing Hale into pleading guilty to “retention and transmission of national security information,” and he was sent to prison in 2021.
Sovereign immunity entitles presidents to kill with impunity. Or at least that is what presidents have presumed for most of the past century. If the Trump administration can establish a prerogative to preemptively kill anyone suspected of transporting illicit narcotics, millions of Americans could be in the federal cross-hairs. But the Trump administration is already having trouble preserving total secrecy thanks to controversies over who ordered alleged war crimes. Will Trump’s anti-drug carnage end up torpedoing his beloved Secretary of War Hegseth and his own credibility with Congress, the judiciary, and hundreds of millions of Americans who do not view White House statements as divine revelations handed down from Mt. Sinai?
Japan’s Sanae Takaichi Seeks To Ease Deepening Row With China, Reaffirms Taiwan Status Quo
Japanese Prime Minister Sanae Takaichi finally appears to be backing down amid recent escalating punitive measures imposed on Tokyo by China in the areas of trade, diplomacy, and tourism. Beijing has been dialing up the pressure for weeks, after the new prime minister nearly a month ago told Japanese parliament an attack on Taiwan by the People’s Liberation Army could pose a “survival-threatening situation” for which Tokyo would be justified in intervening militarily.
Feeling immense pressure and blowback from the provocative prior comments, Takaichi on Wednesday while again addressing parliament reverted back to providing clarity that Japan’s official position on the self-ruled island remains unchanged. “The Japanese government’s basic position regarding Taiwan remains as stated in the 1972 Japan-China Joint Communique, and there has been no change to this position,” Takaichi said.
The historic 1972 communique spells out that “the government of the People’s Republic of China reiterates that Taiwan is an inalienable part of the territory of the People’s Republic of China” before affirming that the Japanese government “fully understands and respects this stand.”
The communique further states that Japan “firmly maintains its stand under Article 8 of the Potsdam Declaration.” China also often cites the Cairo Declaration of November 1943 as having the legal status of a binding treaty. The Cairo Declaration requires that Japan return any territory seized from China during war. The two documents formed the basis of the 20th century post-war WW2 era normalization of ties between the two historic enemies and rivals.
Since last month, China’s Foreign Ministry has been insisting on a full retraction and apology from PM Takaichi over her ‘defend Taiwan’ remarks – which drew a sharp rebuke from ministry spokesperson Mao Ning. “Stop crossing the line and playing with fire, retract the wrongful remarks and deeds and honor its commitments to China with real action,” Ning said at the time.
On Monday ministry spokesperson Lin Jian repeated the demand, urging Japan to “learn the lessons of history, do soul searching, take seriously what it has heard from the Chinese side, simply retract the erroneous remarks as it should and take practical steps to honor its political commitments to China.” Takaichi’s fresh remarks recognizing the status quo on Taiwan, which was spurred by questions from lawmakers, could soften the crisis – yet Beijing is likely to still keep up the pressure given her words stopped short of a formal retraction and apology.
“President Xi is trying to stir up trouble wherever he can and intimidate countries like Japan,” Senator John Cornyn (R-TX) told ZeroHedge on Wednesday, calling Japan an important US ally. He described that he views the US stance of Strategic Ambiguity on Taiwan as “not necessarily a bad thing” because “we want President Xi to think not just once or not just twice but many times before he pulls the trigger which unfortunately I think is preparing to do.”
Sen. Josh Hawley (R-MO) also responded on the question of allowing China to believe that it owns Taiwan. “We shouldn’t do that,” he told us. “Taiwan has a right to be independent, they are a free and independent nation, they should remain that way. Whether we given them security guarantees if a different question.”
“We should tell them ‘you don’t have any right to conquer them’. It plays into China’s hands to treat the Taiwanese as if they’re owned by China,” Hawley emphasized, declaring further that “we ought to be clear about it.“
China of course remains Japan’s biggest trading partner, and has already taken harsh retaliatory measures including the curbing of Japanese seafood imports, the cancellation of films and concerts – as well as cultural exchange programs, as well as the drastic move of urging Chinese citizens to avoid all travel to Japan.
In addition to Japan’s vital seafood industry being impacted, the restaurant scene is also feeling the fallout:
Diners once had to book weeks in advance to secure a table at Toya, a popular Japanese restaurant in Beijing.
But business has taken a sharp turn, with more than 60 reservations cancelled since mid-November, said owner Kazuyuki Tanioka, who has served omakase menus in the Chinese capital for over a decade.
And the film industry, per the same report:
The spat has also led to the postponement of Japanese film releases in China, the abrupt cancellation of concerts by Japanese musicians and the suspension of official exchanges.
A frequent traveller to Japan, Yan Jun, faced a dilemma when China advised its citizens to avoid visiting Japan. Chinese airlines proceeded to cut hundreds of Japan-bound flights this month.
China’s PLA Navy and Coast Guard have also increased their presence near Taiwan and in and near disputed islands and waters. The latest incident involving Japanese and Chinese vessels happened near a group of geopolitically sensitive islands in the East China Sea on Tuesday, as we documented previously.
Chinese state media is also meanwhile highlighting that Takaichi faces backlash from within Japan as well. “Several Japanese lawmakers and prominent scholars gathered Tuesday evening at the Members’ Office Building of the House of Councillors to urge Prime Minister Sanae Takaichi to retract her recent erroneous remarks on Taiwan,” Xinhua writes Wednesday.
“The meeting was held under the theme of demanding Takaichi withdraw her remarks linking a ‘survival-threatening situation’ for Japan to the Taiwan question and return to the starting point of the normalization of Japan-China relations,” the report notes. If Takaichi does in the end back down, offering the requested retraction and apology, it will be seen in the region as a huge diplomatic ‘win’ for China after flexing considerable economic might.
China’s Real Estate Collapse Sends Local Debt To Record $18.9 Trillion
Almost 20 years ago, when the Lehman/AIG collapse and the ensuing global financial crisis sent the world into a brief but acute depression, it was China’s massive debt-fueled growth dynamo that kick started the world economy and lifted the globe out of what would have been a lost decade – if not worse. The one trade off to this historic kickstart: China ended up doubling its total debt, which then continued growing at an exponential rate until the covid collapse sent China’s property sector – the biggest asset of its massive middle class – into a tailspin, and sparked a historic economic crisis. Only this time, because its total debt was already at 350% of GDP, Beijing no longer could wave a magic debt wand, inject a few trillions in credit, and make it all go away. Instead, the housing market has been in steady decline for the past 5 years and if anything, the decline has accelerated now that China’s Vanke – the last remaining state-backed property giant – is on the verge of collapse.
Unfortunately for China, which has done an admirable job of shoving all its economic woes under the rug while pretending it is growing at a immutable 5% year in and out, it’s about to get worse.
As Japan’s Nikkei reports, China’s local government debt continues to balloon as the prolonged, 5-year-long and counting, real estate slump has led to slumping income from property sales, pushing local government bond issuance for the year to a record high.
The total owed by local governments and the local government financing vehicles (LGFV) that fund their projects now sits at an estimated 134 trillion yuan ($18.9 trillion), which suggests that total public debt to GDP is far above 200%… and rising (by comparison in the US it is 100%… and rising). Add another 200% in private sector debt, and you can see why China debt problem is even bigger than that of Japan. It’s also what, according to Rabobank’s Michael Every, underlines China’s structural necessity to maintain capital controls and a vast, neo-mercantilist trade surplus (i.e., China will continue dumping goods and exporting deflation as the alternative means game over).
And while China’s record low interest rates may cover up and put the problem off temporarily, it will also draw out deflation further, further depressing growth, leading to even more debt, and so on as the deflationary debt vortex expands.
“We’ve set aside 500 billion yuan for local governments,” said China’s Finance Ministry said in an October notice, explaining that it had approved additional debt expansion.
The funds are to be used to reduce local government debt and unpaid bills, as well as for investment projects.
“Right now, local governments are focusing on issuing bonds, placing them quickly and realizing their benefits as soon as possible,” said Li Dawei, who leads the ministry’s new debt management department.
Issuance of local government bonds this year totaled over 10 trillion yuan as of the end of last month. This exceeds the total for all of last year – 9.7 trillion yuan – and has already set a record for the largest amount in a single year. The outstanding balance of local government bonds has reached 54 trillion yuan.
Multiple factors are behind the increase. The biggest one is the drop in local government revenues resulting from the neverending real estate market slump. The value of property sold by local governments in January-October totaled just under 2.5 trillion yuan. In 2021, that value was over 8.7 trillion yuan for the full year.
“Over 10% of properties to be sold received no bids because there were no buyers,” said You Zipei, an analyst at Zhongtai International Securities. You says the market is adjusting further, and expects the total value of property sales for 2025 to be about 3 trillion yuan, a more than 5 trillion yuan decline from the peak.
Another reason local governments are issuing more bonds is hidden debt. Hidden debt refers to money raised through means such as corporate bonds issued by local government financing vehicles, or investment companies owned by local governments.
There is no precise data on the balances of these LGFV debts. The total of all debt with interest issued by roughly 4,000 LGFVs sat at 87 trillion yuan at the end of last year, according to Chinese data provider DZH. Adding this to the 47 trillion yuan in local government bonds brings the total to 134 trillion yuan, or just under $19 trillion.
The International Monetary Fund estimated LGFV debt in China at 65 trillion yuan in 2024. While there are a range of estimates, the general view is that local governments in China have between 60 trillion yuan and 80 trillion yuan in off balance-sheet debt.
A company can survive even with large debts as long as it is making money, but LGFVs have low profitability, with nearly 10% seeing losses. Only 3% of LGFVs have a return on equity over 4%.
Sure enough, while total net profit for LGFVs for the year ended December 2024 was around 550 billion yuan, they received double that, or more than 1 trillion yuan, in subsidies. In other words, without constant funding from Beijing, China’s regional economies would implode.
This means that nearly 50% of those LGFVs were in the red when subsidies are excluded. Considering the projects they fund are low profitability infrastructure projects, these entities will face a long road to paying down their debts.
In spite of their massive debts, LGFVs can continue to operate by banking on implicit guarantees from the government and low interest rates resulting from prolonged deflation. Meanwhile, the debt hole is only getting bigger: Xi Jinping’s government last fall approved the issuance of an additional 10 trillion yuan in local government bonds to transfer LGFV debt to local governments. The government has a strong desire to avoid a financial crisis brought on by LGFVs, or anyone else for that matter as economic collapse in the middle of a trade war with Trump would be catastrophic for Xi’s reputation.
The average yield on corporate bonds issued by LGFVs under the city of Beijing this year is 2.1%, down 1.4 percentage points from 2021. The drop is comparable to that seen for national government bonds. The finances of local governments are being supported by monetary easing on the part of the People’s Bank of China in an effort to prop up the sluggish economy.
While deflation does help kick the debt problem down the road, it also makes the issue ultimately harder – if not impossible absent a devastating crisis – to solve.
The Domar condition is one indicator for determining fiscal stability. The basic idea is that fiscal sustainability is unlikely to be compromised as long as the nominal rate of economic growth exceeds the nominal interest rate.
“With China’s nominal growth rate headed downward to the 3% range, and its nominal interest rate is just under 2%, the gap is closing,” said Yusuke Miura at think tank NLI Research Institute. And unless the PBOC pulls a Japan and unleashes Negative Rates thanks to massive QE, the countdown to China’s next mega crisis is on.
The majority of China’s government bonds are denominated in yuan. With the country’s large current account surplus, local government bonds are not likely to run out of buyers in the near future. Yet China’s government is well aware that its fiscal situation is getting worse. It has started refraining from making big outlays and there is a growing possibility that deflation due to slack demand will drag on.
New Chilling Theory Reveals ‘Blackmail’ Threat Posed By Afghan Refugees
Last week, Secretary of Homeland Security Kristi Noem revealed that Rahmanullah Lakanwal, the man accused of shooting two National Guard troops in Washington, DC, last week, killing one and leaving the other severely wounded, was likely radicalized in the United States after being allowed in this country under the Biden Administration’s Operation Allies Welcome. But new information revealed the chilling possibility that Taliban blackmail may have driven Lakanwal to gun down National Guard troops, which raises troubling questions about threats no security screening can detect.
Lakanwal, 29, stands accused of first-degree murder after allegedly shooting Army Spc. Sarah Beckstrom, 20, and Staff Sgt. Andrew Wolfe, 24, in an ambush-style attack the day before Thanksgiving blocks from the White House. Beckstrom died from her injuries the following day, while Wolfe remains in critical condition. Federal intelligence agencies are now investigating whether a Taliban “hit squad” threatened to murder Lakanwal’s family in Afghanistan if he refused to carry out the assault, which would explain why a man with no criminal record or history of extremism would drive from Washington state, armed only with a .357-caliber revolver, to engage heavily armed military personnel.
Lakanwal’s background makes the alleged attack even more perplexing. He was a GPS tracking specialist with the Afghan Scorpion Forces and worked closely with the CIA in Afghanistan. He supported U.S. forces during Joe Biden’s botched withdrawal in August 2021 and managed to board one of the last flights out, escaping potential retaliation for his cooperation.
“One line of inquiry they are seriously pursuing, according to sources with knowledge of the investigation, is that Lakanwal was made an offer he could not refuse. Either he accepted the mission, or his family in Afghanistan would be beaten, murdered, and possibly beheaded,” reports The Daily Beast. “Lakanwal was a member of the Afghan Scorpion Forces working closely with the CIA as a GPS tracking specialist. He helped the U.S. military escape from Kabul in the shambolic retreat from Afghanistan in August 2021. Between August 14 and 30, more than 123,000 people were airlifted from Kabul Airport. The Afghan fighter joined one of the last flights because he served the United States and due to the danger he would be in if he were left behind.”
It is believed that about 700 members of the Scorpion Forces are still detained in Afghanistan due to their collaboration with the U.S. and its allies, and the Taliban hasn’t forgotten those who helped the West. A military unit called Yarmouk 60 has spent the past five years tracking down and killing Afghans who collaborated with Western forces. In a horrifying example of this retaliation, an Afghan special forces fighter who escaped to Germany saw his family targeted by Yarmouk 60 earlier this year. According to a source, the Taliban “killed his wife and father and four of his children, including two little girls who were beheaded.”
An intelligence source told The Daily Beast that “It is by no means our only line of inquiry,” but added that “most of them have families back home, and if the Taliban cannot get to them, they are making it very clear that they will go after their families.” Sources with knowledge of the investigation suggest Lakanwal may have been given a stark choice: accept the mission or watch his family in Afghanistan be “beaten, murdered, and possibly beheaded.”
The blackmail scenario, if confirmed, represents a national security nightmare that goes far beyond typical vetting failures. It means that Afghan refugees who risked everything to help America defeat terrorist elements could be weaponized through threats against their families still trapped under Taliban rule. Recent reports indicate that more than 5,000 Afghans admitted under the Biden administration have been flagged as national security risks. If the Taliban can activate refugees through family-based coercion, even those with no terrorist ties become potential threats—a vulnerability nearly impossible to prevent through standard security protocols.
