Charles Sheeler, Water 1945

It is true, across the world, that investors are less keen to hold bonds. But there is no common pattern as to the driving forces.

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Ilya Repin, Arrest of a Propagandist, 1878

Giga-scale data centers

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Elmer Bischoff, Two Figures at the Seashore, 1957

The only really dynamic job-creator in the US economy is health care:

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Martin Johnson Heade 18 / 48Cattleya Orchid and Three Hummingbirds (1871)

The AI boom is driving a surge of imports.

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In each case the motive is understandable and the discussion is often fruitful, but more often than not the effect is comforting and to that degree also misleading.

• Fascism was a political force that was defeated.

• If we are in an interregnum then there is a new order to come.

• The nuclear arms race was managed and the “West won the Cold War”.

• If there are middle-income traps, then China’s growth must ultimately end and the “natural order” of world hierarchy will reassert itself.

To my mind each of these analogies follows a similar pattern. You start with uncertainty, reach for history and arrive at a narrative which, even if it is not fully spelled out, actually has a reassuring conclusion. The fact that the conclusion remains tacit contributes significantly to the consoling effect.

To put it the other way around, if any of this chosen repertoire of stories had truly nightmarish conclusions would we really be invoking them so light-handedly?

To avoid that vertiginous turn involves subtle shifts of focus. We speak of the threat of a new fascism not so much of the Holocaust or World War II. We speak of the Manhattan project, less of Hiroshima, Nagasaki (they barely appear in Nolan’s Oppenheimer) or even worse possibilities.

You might reply: what’s wrong with a consoling story as a rallying cry? What’s wrong with summoning allies to a battle that we might actually win? Fair enough. But there is also an evident risk: we not only underestimate the danger, but above all we underestimate the novelty, the historical novelty of the situation we are in.

What we underestimate is that we may not be in a re-run. This may not be the latest installment of a familiar franchise. We may be in a radically new script or, at the very least, in a new mash-up the likes of which we have simply never seen before.

You think you are in Alien v. Predator and then Hannibal Lecter walks in.

What film are we in now?

My latest argument along these lines was in the FT on Friday, where I argued that the current AI race is NOT, as widely suggested, a re-run of the Manhattan Project.

Why not? Because of the political economy …

What separates us both from the Manhattan Project and from Dr Strangelove is political economy. … The world we are in is not that of ascetic bombmakers wrestling with their souls. It is both darker and more mundane. Today’s world-threatening technologies are fuelled by trillionaire greed, junk bonds and jerry-rigged financial engineering.

As a colleague recently pointed out on twitter, if they had made the decision to wind down the Manhattan project, it would not have caused a massive stock market crash.

Think of my FT piece as the latest installment in a long-running series that starts with polycrisis and neoliberal order breakdown syndrome continues with

Violence and Hyper-agency.

Mar-a-Lago Stockholm syndrome.

The malign coincidence of MAGA and AI.

Trumpite futurism or taking seriously Musk’s space business.

Alien v. Predator

What film are we in now?

In filmic terms (as far as AI is concerned), think Dr Strangelove mashed up with Gordon “Greed-is-Good” Gekko and a dash of The Big Short. If this is the way the world ends, it will be not with a bang or a whimper, but in a whirl of tech jargon, Californian lifestyles and financial engineering.

I love putting out Chartbook. I am particularly pleased that it goes out for free to thousands of subscribers around the world. But, writing this newsletter takes a lot of work. If you are enjoying it and would like to support the project, sign up for one of the subscription options here. It is the equivalent of a fancy cup of coffee per month!

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William-Adolphe Bouguereau 16 / 430Portrait of Monsieur M. (1850)

Gridlock in the US Housing market is the theme of this week’s pod.

But, not all parts of the US housing market as equally frozen.

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Hiroshi Yoshida, Goshikibara, 1926

Keep coming back to this chart

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Peter Upward, Crimson Panel, 1959

A “vicious loop” of selling

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RALPH BALSON. 1890—1964. Oil and enamel, signed.

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Drawing, March 1973 Robert Klippel

The AI Build-Out Is Becoming the Biggest Economic Bet in U.S. History

Data-center spending is greater than that for the canals, railroads and grid combined—creating jobs and wealth but also boosting inflation

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Frank Norton, Path of the Kamikaze, 1945

Foreign money is flowing fast into US equities.

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H.G., War of the Worlds illustrations, 1906

It would seem that to plausible, any theory of higher interest rates in the US (or anywhere else) must account for this highly correlated movement.

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Jan Toorop 14 / 62 Broek in Waterland (1889)

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One is the staggering dynamism of US tech oligarchs and their increasingly loud and public presence in the political life. Here are the data from the Forbes billionaire list for the spring of 2026. This shows a remarkable degree of US dominance both in share and absolute values.

Back in 2012 there were only three Americans and two tech barons in the top ten.

The second, contrasting, development, is the abrupt regime shift in China with regard to oligarchic wealth. Whereas in the US tech wealth is running rampant, in China at the same moment, the party has asserted its leadership. In an earlier post I referred to this as walled-in wealth. These contrasting developments in personal fortunes underline dimensions of “decoupling” that are not well-captured by trade data or balance of payments statistics.

The long arc of China’s development is remarkable. It is not sufficiently appreciated that Xi’s period in office coincides almost exactly with the moment in which China’s mega fortunes, born out of real estate and tech industries, began to break into the global top 100.

The history of chinese wealth is recent. In 2003 there was probably no one in China worth one billion dollars. Over the following decade Chineses capital accumulation exploded.

But, for all this growth, China’s position in the global rankings was still modest when Xi took power. In 2012, it was an open question whether there was even one Chinese individual in the list of top 100 billionaires. Over the first phase of Xi’s time in office that changed. By 2015 there were seven Chinese businessmen in the top 100.

In 2021, the statistical peak of wealth exuberance in China, there were twenty mainland Chinese in the Forbes top 100 and four were now in the top 30.

By that point, the spring of 2021, the decisive turn had already been inaugurated. Amidst the bullish mood in Beijing in the early summer of 2020 after the CCP had won its “peoples war” against the first wave of COVID, the Chinese government took a series of key decision: the security law for Hong Kong was introduced, the real estate growth-boom was ended, common prosperity was declared a top priority and upstart tycoon Jack Ma was humbled. Those measures depend on the willingness to deploy discretionary policy and the power of the Party against individuals and their businesses. But they also depended on infrastructural power with regard to both data and money.

The partitioning of tech-fueled capitalist development by China goes back to the building of the firewall from 2006 and the increasingly difficult environment for Western operators that resulted, in 2010, in Google’s withdrawal in China. At the time, Eric Schmidt of Google opined that the West had history on its side.

“I personally believe that you cannot build a modern knowledge society with that kind of [censorship],” Google chairman Eric Schmidt told Foreign Policy in 2012.“In a long enough time period, do I think that this kind of regime approach will end? I think absolutely.”

Instead what happened was an explosion of Chinese tech entrepreneurship and the development over the following decade of a fully autonomous Chinese internet sphere behind the Great Firewall. Those tech fortunes were heavily represented in China’s billionaire list in 2021. Unlike in the US however, that same moment marked a turning point towards a reassertion of political control.

At the macroeconomic level, the presumption of the 2000s was that China’s “Bretton Woods 2.0”-currency and exchange controls were transitional measures that would ultimately give way to capital account liberalization. That did not happen. Far from it. In 2015, following the near-miss financial crisis, Beijing significantly tightened controls. Ten years on, it is showing every sign of further intensifying those regulations, taking steps to crack down on tax payment and limiting personal movement by controlling passports.

So long as the development of Chinese and US platform businesses was running along roughly parallel lines and oligarchs enjoyed a large measure of autonomy, these infrastructural walls could be ignored. Chinese wealth was rising to meet its Western peers.

It is that convergence that has now been broken, from both sides. On China’s side by the party’s assertion of control. In the US by the explosion in the valuation of the US platform businesses supercharged by the AI boom. The result of these twin developments is that the number of Chines in the top one hundred billionaires is now less than half what it was at the beginning of the 2020s.

Not only has the ascent of Chinese megawealth in relative terms been reversed, but the top US fortunes are now out of sight, well above the centi-billionaire level.

Both the absolute levels and the trends matter. Together they add up to the conclusion that the forward march of a Chimerica-elite mediated by financial partnerships and tech supply chains, has been halted and any further convergence seems unlikely.

The below graph shows the approximate representation of mainland and Hong Kong billonaires in the global top 100 since 2010.

With regard to political economy the contrast is now stark. In China, the Party has decisively asserted its leadership. AI’s development in China shows no sign of disrupting the new dispensation. In the US, by contrast, the malign coincidence of AI acceleration with Trump’s second term has resulted in a free for all, far more spectacular even than dot.com and financialization surges of the 1990s and the 2000s.

In terms of trade and macroeconomic financial flows, decoupling may, so far, be limited. But this should not obscure the fact that in the two leading economies of the world, we are seeing the emergence of radically different political economies of wealth. Call it oligarchic divergence.

I love putting out Chartbook. I am particularly pleased that it goes out for free to thousands of subscribers around the world. But, writing this newsletter takes a lot of work. If you are enjoying it and would like to support the project, sign up for one of the subscription options here. It is the equivalent of a fancy cup of coffee per month!

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Artemisia Gentileschi 31 / 45 Self-portrait as the Allegory of Painting (1638-1639)

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Georges Rochegrosse, Danseuse, 1894

Bessent is all about the bills

BofA’s estimate would take the stock of outstanding bills to roughly $8tn, or 24.3 per cent of marketable Treasury debt, by next September. Goldman has the figure reaching 24.3 per cent next year and 24.9…

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Kubin, The Past (forgotten-swallowed), 1901

The rise of the neoliberal gentry

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John Glover 15 / 38 My Harvest Home (1835)

The fiscal costs of immigration depend critically on the structure of the fiscal system (John Burn-Murdoch)

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I’ve lost track of how many times I have faced questions framed in this way. It is an invitation to “fin-fiction”, to imagining the shifts in the global financial order that must, “surely”, result from “America’s decline” etc.

Of course we should be thinking about the future and America’s decline. But what is misleading about this framing, is the assumption that the dollar’s main role right now, is as a “reserve currency”. That depends, as the name suggests, on policy-makers in major economies around the world accumulating reserves. That was certainly true in the early 2000s. And given the size of global imbalances, net claims continue to change hands internationally. But a lot has happened in the world of global finance over the last generation. And compared to the early 2000s, one of the most dramatic shifts is that official reserve accumulation has decelerated sharply. This shift, which happened in the mid 2010s, is brought out beautifully in graphs by Karl Schamotta, whose work I want to highlight in this post along with that by old Chartbook-friend Brad Setser.

This great chart from Schamotta highlights the danger of talking in 2026 about global reserve currencies as though we were still in the 2000s. In fact the period from the early 2000s to the mid 2010s actually was, both compared to the decades before and the decade since, extremely unusual. Being a “reserve currency”, in the sense of being the currency and issuer of assets in which official reserve managers around the world openly stash their trillions, is not a historical structure that can be taken for granted. It is not how the dollar generally functioned after 1945. It is not how sterling functioned in the beforetimes. And there is no particular reason to expect the 2000s model to apply to some other currency in the near future. Being a reserve currency in the 2000s sense appear to have been a historically unique configuration conditioned by defensive responses to hyperglobalization on the part of EMs, Asian exporters, petrostates and China.

As Brad Setser pointed out in a comment on Schamotta’s graph, there is a tight correlation in time with the surge in US Treasury issuance - the asset in which much of the unprecedented reserve accumulation was invested. Since round about 2015 a new configuration has emerged in which Treasury issuance continues, even as reserve accumulation levels off.

What then to call the dollar in this new configuration of global flows? In earlier posts on the metamorphoses of the dollar, and in the pages of the FT, I suggested the notion of the “profit dollar”. Schamotta suggests calling it a “portfolio” or “funding” currency.

The key thing, as Brad Setser shows in another excellent graph, is that net purchases of US assets by foreigners have since the early 2020s shifted decisively towards funding corporate America not the US Government.

So to go back to where we started: the question of which currency will succeed the dollar as the “world’s reserve currency” is misleading because it supposes that the configuration of the 2000s is normal. Whereas, in fact, it was exceptional. Today, the dollar already no longer functions as “the reserve” currency in the way that it did in the period 2000-2015. Today, surplus countries like China go out of their way to obscure their accumulation of claims and to divert them into all sorts of “non-official” channels. To be accumulating reserves as in the 2000s would be an embarrassment. The function that the dollar performs for the world economy today is principally that it serves as the medium for complex financial engineering on a global scale, and furthermore as the gateway to what continue to be the largest and most lucrative financial markets in the world. Whereas China, in the 2000s was a key player in the market for Treasuries and Agencies as safe assets, today, China is, thanks to its capital account controls and balance of payments management, eccentric to the profit-driven flows that dominate foreign accumulation of dollar claims. In this sense too, the dollar system has changed. Compared to the 2000s, it has become more multipolar and “multi-logic”. In this diversity of roles - as Cembalest of JP Morgan, and many others, insist - there is little prospect of any rival, let alone the yuan, replacing the dollar any time soon.

I love putting out Chartbook. I am particularly pleased that it goes out for free to thousands of subscribers around the world. But, writing this newsletter takes a lot of work. If you are enjoying it and would like to support the project, sign up for one of the subscription options here. It is the equivalent of a fancy cup of coffee per month!

Subscribe now

Aristide Briand by Noel Derville

Joining the dots between big AI

If you have a sub, sttop and read this piece by Toby Nangle on the circularity of AI investment and capex spending

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