20% of the world's oil still must pass through the quite narrow Straits of Hormuz. Which Iran can supposedly interdict for an indeterminate period of time with anti-ship missiles and other weaponry should Trump decide to launch his new Epstein-Iran War. To distract us from the Trump-Epstein Files, which the Administration is still eagerly covering up.
Would depriving the world of 20% of its oil supply for days or weeks or months trigger a global recession or depression? Desperate Donny seems eager to find out.
Perhaps he’s trying to help his friend Putin’s oil companies? Also wouldn’t American oil companies if extracting in America benefit,not to mention your new colony Venezuela.
That's a good point. If Iran closes the Straits of Hormuz, Donny could push to get Russian oil un-sanctioned. For easier sale and distribution. As a way of preventing--or at least softening--a global recession. Putin would love it.
But bringing Venezuela's oil capacity back up would be a much longer term project. Requiring a hefty cash infusion, that Big Oil could spring for if an Iran war pushed prices way up.
If the planned Trump-Epstein war drives oil prices over $150/barrel, they'd flip on a dime, because they could make some good money. Right now the price is about $70/; compare that to the $150/ during the Bush-Cheney Surge, when the world just *thought* the US would DOW Iran.
Most of Russia's oil shipments leave from St. Petersburg and travel through the Baltic sea to reach their destinations. I've read that various nations have taken it upon themselves to stop tankers leaving St. Pete. As a result, Russia can't ship oil, even if the sanctions were to be lifted.
Major caveat on RFU News*: Its articles are definitely biased toward good news for Ukraine and/or bad news for Russia, but it's a quick&dirty source. The takeaway is that the EU is starting to "enforce" Russian sanctions indirectly by going after enough illegal vessels of the shadow fleet to cause further significant pain to Russia's oil income.
(Note that this is on top of the very expensive "kinetic sanctions" that Ukraine's long-distance drones and Flamingo missiles are applying to Russia's oil infrastructure, from rigs to pipelines to refineries to ports.)
*What I like about RFU News it that it doesn't have breathless news delivery with underlying excitement music, but just a simple verbal report with a map.
Who really wants that Venezuelan heavy sludge? Noone really apart for a few ancient inefficient sulphur carbon polluting refineries in Texas. More climate disaster to add to the orange idiot's destruction of the planet.
Aye, and drilling companies have to believe that price will remain high in order to go to the expense of restarting "shut-in" wells, or drilling new ones.
Then those US oil companies have to consider whether Trump will get his Middle Eastern oil buddies to flood the market again at the expense of American producers.
[NB: The immediate price of oil may be linked to the Iran war-drums.]
It would benefit *all* producers. Except those that must export through Straits of Hormuz. But if Iran's 10%; and non-Iranian Persian Gulf (10%) were taken off the market, it would give Big Oil a massive boner--while plunging the world into recession.
Trump and his supporters don't want higher oil prices. They want low gas prices through 2026 to help the Republicans. That might be why he's holding off the attack.
85% of the oil that goes through the Hormuz has Asia as destination according to a graphic I saw the other day. Saudi has already said that in case of a US attack on Iran they will set oil production on max capacity and ship via the Red Sea.
"Desperate Donny" or more likely one of his cabal. probably "thinks" that closing the Straits of Hormuz would push up demand for American oil and therefore the "pot of money" available for grift.
Yes, I lived in Texas at the time, and we used to say about the 55 mile an hour speed limit caused by that, driving across Texas at 55 was not a vacation it was a career!
Hahaha! I have been across a lot of Texas but never the full east/west or north/south all at once. But if there ever was a reason for full-self-driving cars, it would be driving from Texarkana to Midland, which, sadly, I have experienced.
Trump said he would have Iran demonstrators' backs if the regime started executing protesters. That's one reason the demonstrations got so large, then Trump went full TACO on them. Thousands were murdered.
I'm certainly not advocating military action, just what the President of the U.S. says has consequences. Trump has a terrible habit of shooting his mouth off before thinking about the fallout.
Like Bush I and the Marsh Arabs in Iraq; the Kurds, too. Big powers are great at egging on revolts but no where to be seen when the uprisings are ruthlessly suppressed.
Right now China is pretty much setting the world oil price floor and ceiling as they are the biggest variable buyer of oil. When the price is low enough, China buys cheap oil to help fill its expanding gargantuan* Strategic Petroleum Reserve, and as the price goes up, it cuts back on purchases.
_____________
*China is targeting having its SPR hold enough oil to cover →90 days' worth of imports← as protection against having its supply cut off. Meanwhile, it is lowering its domestic demand for oil as fuel (though it's an important product feedstock) by converting its heavy equipment fleets from diesel to electric, and having its refineries produce less diesel.
We put up solar + a Tesla Powerwall battery last March; and bought a Nissan EV. We now pay zero in gas or electricity. Feels good. China is not just strategically smart on this, but economically smart. Donny has already dismantled much of the Biden IRA and CHIPS acts, heading us in the opposite direction.
I've had EVs since 2014, but solar is not an option unless I want to cut down all of the 50+ ft trees surrounding my single-story house, so I rely on Austin Energy for power.
Solar is the cheapest energy option, so he will slow the adoption but he can’t stop it. The market will choose the cheapest option all else being equal so, expect more solar installations, just not as much as you would have without the orange one.
If war with Iran forced the MAGA regime to adopt renewable energy sources, then it might be world-changing. Unfortunately I think war with Iran is planned to deplete US materiel so that there's none for Ukraine or for the defense of Europe.
No worries about Ukraine depleting our stocks. Our KGB-controlled President killed the entire Ukraine aid package--military and civilian--the moment he was sworn in last January. Only the EU and a few others are still standing with Russia.
“AI is coming to displace us” is definitely in many articles and conversations I hear. Isn’t this a huge argument for a more and stronger social safety net - funded by the tech/AI industry/investment industry? Societies get disrupted by advancing technology. Do they have to cripple and destroy the workers lives irreparabley, though? That is a choice. The current tech bro-AI-advancement seems to be underpinned by actions that are very autocratic and enslaving -if not right-out dismissive of the worth of average human beings. The Bros are posturing as gods on Mt. Olympus. They are simply flawed humans -many sick in their souls- and they need to be reined in so the positive advances that tech can give us can flourish.
sort of like free trade, 30 or so years ago. Yes, globalization can increase overall wealth - but the distribution of the wealth matters. As it happened in most of the Western world, certainly in the US but not only, the increase in wealth went to the owners of globalized industries and about none to the workers displaced as factories closed. Thus ... discontent, general disapproval of globalization by working class people and academics, leading to political choices, leading to ... Trump, arguably.
So - distribution of benefits of AI (if and when...) is very important.
"“AI is coming to displace us” is definitely in many articles and conversations I hear. Isn’t this a huge argument for a more and stronger social safety net - funded by the tech/AI industry/investment industry?"
Of course, but not wanting that is precisely *why* AI is so big.
AI can't, in reality, replace most human jobs. But the reason you keep hearing this, and the reason Silicon Valley's oligarchs have gone all-in on AI, is that they desperately want to *believe* that it can displace us. Because then, they'd no longer have employees to care about even to the limited extent that they do today. We'd all be surplus people, and the world would just be them and their robot servants.
So, AI is going to displace workers because of greedy Oligarchs, right? And who’s going to buy all the stuff they make from productivity gains? Just wondering. A much poorer World, I bet.
That’s the question, of course the tech bros don’t really sell stuff, so they don’t think it will affect them as the see themselves sell to businesses. However business has to sell stuff to someone or no business.
OMG, I almost didn’t watch it due to my cringing at the image of the Bee Gees and me in middle school. Thanks for urging me to circle back. See, these are our future. And that’s a good thing.
I’m no expert, but as a consumer, this is what I dispute: “it will reduce prices and raise real income in sectors that aren’t displaced.” Companies no longer pass savings to consumers because they are not content with offering a good value at a fair price. (And I am leaving aside the problem of individualized pricing based on the calculated pain point of every consumer.) Reduced cost is retained as revenue.
Up like a rocket, down like a feather…but a feather might be too heavy in 2026. I think between the greed, self-centeredness, and monopolistic nature of the ultra wealthy, it is unrealistic to expect prices to come down without significant drop in demand. These are the very people PK has been talking (rightly) about holding too much wealth while gaining more, avoiding taxes, groveling to Trump to keep or make another buck, etc. They don’t do the moral or ethical thing. They don’t care about the future beyond how to add to their fortunes, regardless of consequences. And if (when?) everything does go to shit, they won’t give a second thought to regular folks as they ride off into the sunset on their super yacht to their private island. Like much of history, those at the top of the pyramid won’t care or want to do anything for everyone else. It only happens if they are forced to do it. Things ebb, somewhat improve, until the cycle eventually repeats itself.
crucially what I'm not seeing in that article, is what sectors will not be displaced? I mean plumbers will still have jobs, just fewer when all that real estate crashes.
In a consumer-driven economy what happens when you blow out the part that does 50% of the spending?
That 50% of consumer spending is a major source of income for those plumbers.
Per Google: "In 2023, white-collar workers made up approximately 57.8 percent of the total U.S. workforce."
What sectors will grow to accomodate these workers? How many of them will be talented programmers, say with a now urgent desire to 'get even', and readily available AI to help them hack their way to riches of the malware kind?
They blithely overlook that episodes of 30-40% unemployment does not a healthy society make. The Great Depression reached a maximum of 25%.
Their rosy predictions of 'removing the sources of friction' for the humans overlooks the friction those humans can cause because they've been discarded loke broken machines.
"Companies no longer pass savings to consumers because they are not content with offering a good value at a fair price."
----
Has that ever really been the case? Most companies charge "what the market will bear," modified by whatever calculation needed to maintain a positive reputation (PR) and to keep the customers coming back.
I have apprehensions about the way AI is being implemented in terms of its gross consumption of resources, potential misapplication, and over investment by the investor class crawling over each other like crabs in a bucket. If anything causes a recession, it will likely be when the crabs realize that they aren’t escaping the bucket.
Also current AI isn’t really very good at anything. In also of cases a smart high schooler would do a better job. For any specific skilled work AI does a poor job.
You are failing to update your economic priors for a scenario in which human labor is dramatically reduced. Previous technological revolutions shifted human labor to new domains, where they maintained a comparative advantage. There might not be many such areas with AI. I don’t get the impression your cool reaction to AI automating certain companies out of existence is actually doing any work to think deeply about the unique challenges of this moment.
Still, Ian, it is sobering that it may be proof that many investors act without thinking much. I do wonder how reliable rich people are when you consider that they are holding up the US economy pretty much single-handedly at this point. Economic inertia may be helping, but it is losing power. But really, it is all about releasing the Epstein files.
I work in corporate IT and AI is everywhere. That said, there’s still solid demand for people who know how to use it effectively. We were warned about huge layoffs due to covid, only to experience a noticeable shortage of skilled people during those years, in the non-virtual world. Because it’s politically incorrect for corporate ‘leaders’ to blame Trump for anything, I suspect that AI will emerge as the obvious explanation for reductions in force.
The frontier of AI capabilities leaves a place for many human supervisors today, but there is no guarantee it will tomorrow. Even a bearish reading of AI which assumes the technology will plateau before reaching general intelligence must deal with the problems of economic diffusion and retraining, as companies and individuals race to stay relevant. But I believe even that reading is naive; if AI is able to automate all white collar labor, then what role do humans serve in the economy? For anyone but the owners of capital it will be a minimal one. I also work in IT, as an engineering manager heavily exposed to AI automation, and I believe it is critical we begin to assess real economic policies to address future job loss.
Yes, I see tons of AI being used to automate testing and low-complexity claims, but I also think that this represents ‘low hanging fruit’ and that replacing actual human intelligence is much harder. Personally, I avoid using AI for writing because ‘AI responses’ are so recognizable and overly sycophantic. I use it for troubleshooting my ‘low code’ developer projects, and it does save time, but only if I understand the material well enough to implement the recommendations … or determine that my copilot is once again hallucinating.
Totally understand where you’re coming from. I would just note that (1) I am seeing many developers shift to writing 100% of code with AI, including myself (even if a lot of software production outside code is not yet automated), (2) capabilities are improving exponentially, so we ought to assess economic impact on the basis of likely future gains (prepare for a probable worst case scenario), and (3) writing is sometimes understood as a litmus test for AGI itself, i.e. if an AI could reproduce our thread here then we already have reached general intelligence. So it’s a very high bar to measure capabilities against
Excellent point about software production being much more than code. Integration is huge as well. I wonder about the rampant use of third party data among the big insurers, because it ultimately means that they’re all relying on the same data, on the same platform (AWS), with the same vulnerabilities.
Any lawyers signing and submitting these legal pleadings with "made up" case cites are lazy idiots.
But AI can and will be used for legal research / initial drafting of pleadings, which are then reviewed/checked/revised for accuracy by the responsible attorney. That preliminary "AI work" would have been done by lower level associates or paralegals.
I agree. The argument Paul made in his article that a partial displacement wouldn’t be catastrophic to the economy as a whole is not very convincing to me, because the worst case scenario is exactly that AI replaces almost ALL human intellectual labor (with robots maybe even physical labor). If that happens, no remaining sectors to boost the demand. Ultimately, this is a distribution problem. When the current labor-capital hybrid distribution system breaks down because human labor is no longer valuable, we need a new system that either guarantees enough income to everyone to support their demand, or redistribute capital among all people so everyone can benefit from the technological advancement. And the politicians and business leaders need to start thinking about the appropriate policies before it’s too late.
Yup, this is one of those rare points where I disagree with Mr. Krugman. As you write, previous disruptions has shifted labor force into jobs that machines still couldn't do. Not sure why we are not seeing the obvious problem that eventually machines will be capable of doing everything humans can and labor force will no longer have a place to move to.
I'm not saying we are at that place yet, because as capable as the AI is it can't do everything yet. But with the progress we are seeing it's not hard to imagine further improved AI, fully autonomous vehicles, robots matching human dexterity and etc. Where will the job market for humans shift to then?
I agree with you. I agree with almost all of Krugman’s analyses, and I’m aware that with every new technology there’s a “this time it’s different” line when it’s not actually different. But as stated in the Citrini article, this is the first time human intelligence itself is no longer the scarce resource. AI is so pervasive because it changes every market at the same time. I think he’s being dismissive rather than actually exploring how this might play out.
When pandemic supply chain issues got resolved, prices didn’t come back down because we’re no longer in a real market economy. I’m not clear on what “ other industries” are going to reduce prices in response to productivity gains from AI that will offset the job losses.
Now I don’t think things will happen exactly as Citrini outlines, it will likely be slower and bumpier. But in 3-5 years I don’t see everything just shifted around like in past new technology booms.
"Now I don’t think things will happen exactly as Citrini outlines, it will likely be slower and bumpier. But in 3-5 years I don’t see everything just shifted around like in past new technology booms."
That's the key, in my opinion. Paul has similar quote about recessions:
"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought."
That's my concern: it will be just like before putting us at ease, but when finally technology causes changes unlike we have seen before there will be little or no time to deal with consequences.
When human labor is dramatically reduced, human consumers of services are dramatically reduced. What direction does dramatically reduced human energy take in its wake?
The take home. Also, I think, he’s cautioning us, at-large, to not just point out the lies, but to remain steadfast that we do have data points, that if used in the proper context, can help guide us through this challenging time. When “2+2=5” is being bandied about, don’t just say that the administration released a report yesterday that said “2+2=5.” And it’s not enough to respond with “it’s a lie.” Find the facts and respond with the facts. And if the only facts are data points, use them in the proper context.
Get one of the top paid versions (not at all expensive for you); ask it to catalog all of Trump's lies or falsehoods since he ran for office in 2015. Categorize these by severity and the likelihood that he knew they were false, also categorize by issue area. Produce important charts. Then do the same for Biden and Obama, and compare the three Presidents. Include other details.
This project, done thoroughly and well, would take a large team of skilled humans months and cost millions. An AI could do it in a day, pretty much for free, generating an extensive report hundreds of pages long. And the results could be stunning and very important.
I think it might be able to do it. First, it will be looking at the fact checkers. It will be relying on humans saying it’s a lie, and these LLM‘s have gotten much better at discerning the credibility and expertise of the source, like the source saying it is a lie. Second, it can just compare Trump‘s facts and figures against the official facts and figures in in credible and expert databases. It can compare what he says against a wide range of credible and expert sources.
You may be really underestimating the capability of these LLM‘s and how much better they are even compared to just three or six months ago. I have been really impressed lately with these systems. And in any case, you would ask it to create an appendix of all the lies, with details on the lie, a link, why it is considered a lie or falsehood, why the lie or falsehood was categorized the way it was, and so on. You could then check a random sample of those lies or falsehoods to discern how good a job the AI did.
Correct. The proposed project would be "Garbage In, Garbage Out", because it would treat a "Biden Lies" post from Johnny MAGA on X as equivalent input to Daniel Dale's meticulously cataloging every Trump lie.
AI is the modern equivalent of Orson Welles, it can easily produce a realistic story with audio and video that could cause a world wide panic. DoorDash failing is the least of our worries
Professor Krugman: like with the war of the worlds, the linked piece clearly states that it is a scenario -- a thought piece -- not a prediction. which makes me think that most investors are barely literate numbskulls. as it stands, i think this could be developed into an interesting scifi novel.
Stock market trading is mostly carried out by computers and algorithms. A"I" could really create a mess there. Especially as it seems capable of falsehood.
Rarely do I disagree so completely with Dr. Krugman. Perhaps the problem is that he hasn't yet tried to work with AI or perhaps he has only played with the free versions. I bought a subscription to Claude so that I could evaluate AI with all the features and power that the free versions don't offer. It codes complIcated software quickly and incredibly well. It builds spreadsheets and draws graphs from esoteric data that it finds on its own. It isn't perfect but then neither was any employeenI ever had. AI agents communicating with each other will remove layers of friction in B to B transactions.
Think about the disruption caused by off-shoring, about the political consequences still reverberating through our society. AI has the potential to be orders of magnitude more disruptive because it cut across so many fields. Software. Law. Accounting. Clerical work. Research. It isn't that AI will replace all workers in these fields, it won't. But it will replace many. Very many. And what will all those displaced workers do to earn money? Well Sam Altman's shoes don't shine themselves.
Yes, law. The cases you point out are cautionary because the lawyers involved didn't review the work - as any competent attorney would do before releasing the work of a paralegal or junior attorney under his name. As I noted in my original comment AI won't replace all lawyers - or engineers, accountants, or any other profession. But they will thin the herds significantly.
Despite being an avid follower of your column, I remain deeply puzzled by the steady rise of the stock markets - DJIA, Nasdaq, etc etc. These indices are supposed to predict the future of US based (or at least US financed) companies. Yet I see future doom and gloom with worldwide reaction to Trump’s aggressions (too numerous to recount) and formation of extra-US alliances, China becoming the worldwide leader in wind and solar power generation, rejection of scientific research with functional dismemberment of NIH and research universities, rejection of evidence-based medicine and climatology, defunding of K1-12 public education in favor of “faith-based” learning … the examples go on and on. Yet the DJIA keeps rising and rising. How different is this from Orson Wells’ Martian invasion. Less fun, less dramatic but fundamentally the same mass delusion. Please, please … somebody tell me the difference.
"But if AI delivers big productivity gains, it will reduce prices and raise real income in sectors that aren’t displaced, causing other Americans to spend more."
I question the probability of the assumption based lived experience during what I call The Great Offshoring when production of good moved to China. One example: We needed to buy a new pair of LaCrosse pack boots for Ice fishing. When we got to the LaCrosse store, the boots were the same price as they had been the previous year, but were "made in China". Consumers did not see lower prices; companies saw bigger profits. The gains we have seen in productivity over the decades have boosted corporate profits while wages remained stagnant. If past predicts future, gains in productivity from AI will go straight to the companies and stockholders, as it has over the past couple of decades.
20% of the world's oil still must pass through the quite narrow Straits of Hormuz. Which Iran can supposedly interdict for an indeterminate period of time with anti-ship missiles and other weaponry should Trump decide to launch his new Epstein-Iran War. To distract us from the Trump-Epstein Files, which the Administration is still eagerly covering up.
Would depriving the world of 20% of its oil supply for days or weeks or months trigger a global recession or depression? Desperate Donny seems eager to find out.
Perhaps he’s trying to help his friend Putin’s oil companies? Also wouldn’t American oil companies if extracting in America benefit,not to mention your new colony Venezuela.
That's a good point. If Iran closes the Straits of Hormuz, Donny could push to get Russian oil un-sanctioned. For easier sale and distribution. As a way of preventing--or at least softening--a global recession. Putin would love it.
But bringing Venezuela's oil capacity back up would be a much longer term project. Requiring a hefty cash infusion, that Big Oil could spring for if an Iran war pushed prices way up.
Exxon Mobil already said they are not interested in investing in Venezuela. That infrastructure is 50 years old.
If the planned Trump-Epstein war drives oil prices over $150/barrel, they'd flip on a dime, because they could make some good money. Right now the price is about $70/; compare that to the $150/ during the Bush-Cheney Surge, when the world just *thought* the US would DOW Iran.
Most of Russia's oil shipments leave from St. Petersburg and travel through the Baltic sea to reach their destinations. I've read that various nations have taken it upon themselves to stop tankers leaving St. Pete. As a result, Russia can't ship oil, even if the sanctions were to be lifted.
Very good news, if true. Is there a trustworthy source, or two, for this?
https://www.youtube.com/watch?v=DYuzHSRJ6is
https://www.youtube.com/watch?v=ZcA7sXZicj0
https://www.youtube.com/watch?v=gd4uOT91n7U
That second video, though long, is watchable (at 1.25x speed) and informative, if a bit repetitive and music-hyped.
Major caveat on RFU News*: Its articles are definitely biased toward good news for Ukraine and/or bad news for Russia, but it's a quick&dirty source. The takeaway is that the EU is starting to "enforce" Russian sanctions indirectly by going after enough illegal vessels of the shadow fleet to cause further significant pain to Russia's oil income.
(Note that this is on top of the very expensive "kinetic sanctions" that Ukraine's long-distance drones and Flamingo missiles are applying to Russia's oil infrastructure, from rigs to pipelines to refineries to ports.)
https://www.youtube.com/watch?v=0eHxLea78MQ
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*What I like about RFU News it that it doesn't have breathless news delivery with underlying excitement music, but just a simple verbal report with a map.
Google sez that in 2026 40% leaves from St. Pete; 20% from Novorossiysk (Black Sea).
Who really wants that Venezuelan heavy sludge? Noone really apart for a few ancient inefficient sulphur carbon polluting refineries in Texas. More climate disaster to add to the orange idiot's destruction of the planet.
Ethipopia will stop the Straits from being closed.
????
Review a world map.
do some research on drones and where the bases are
You're confusing the Red Sea with the Persian Gulf. Ethiopia is 1,200 km from Iran.
Fracking is unprofitable when oil is less than $60/barrel. A war would benefit US producers.
I didn't check the price of oil today, but last week it was just above $70 a barrel.
Aye, and drilling companies have to believe that price will remain high in order to go to the expense of restarting "shut-in" wells, or drilling new ones.
Then those US oil companies have to consider whether Trump will get his Middle Eastern oil buddies to flood the market again at the expense of American producers.
[NB: The immediate price of oil may be linked to the Iran war-drums.]
I read that new oil production takes 5 to 10 years. The number one thing that want is stability and good governance.
It would benefit *all* producers. Except those that must export through Straits of Hormuz. But if Iran's 10%; and non-Iranian Persian Gulf (10%) were taken off the market, it would give Big Oil a massive boner--while plunging the world into recession.
Trump and his supporters don't want higher oil prices. They want low gas prices through 2026 to help the Republicans. That might be why he's holding off the attack.
85% of the oil that goes through the Hormuz has Asia as destination according to a graphic I saw the other day. Saudi has already said that in case of a US attack on Iran they will set oil production on max capacity and ship via the Red Sea.
"Desperate Donny" or more likely one of his cabal. probably "thinks" that closing the Straits of Hormuz would push up demand for American oil and therefore the "pot of money" available for grift.
Answer: If you are old enough, you remember gas lines in the 1970's oil embargo.
🙋
Yes, I lived in Texas at the time, and we used to say about the 55 mile an hour speed limit caused by that, driving across Texas at 55 was not a vacation it was a career!
Hahaha! I have been across a lot of Texas but never the full east/west or north/south all at once. But if there ever was a reason for full-self-driving cars, it would be driving from Texarkana to Midland, which, sadly, I have experienced.
Trump said he would have Iran demonstrators' backs if the regime started executing protesters. That's one reason the demonstrations got so large, then Trump went full TACO on them. Thousands were murdered.
I'm certainly not advocating military action, just what the President of the U.S. says has consequences. Trump has a terrible habit of shooting his mouth off before thinking about the fallout.
Like Bush I and the Marsh Arabs in Iraq; the Kurds, too. Big powers are great at egging on revolts but no where to be seen when the uprisings are ruthlessly suppressed.
donny is on the verge of wagging his big dog
Right now China is pretty much setting the world oil price floor and ceiling as they are the biggest variable buyer of oil. When the price is low enough, China buys cheap oil to help fill its expanding gargantuan* Strategic Petroleum Reserve, and as the price goes up, it cuts back on purchases.
_____________
*China is targeting having its SPR hold enough oil to cover →90 days' worth of imports← as protection against having its supply cut off. Meanwhile, it is lowering its domestic demand for oil as fuel (though it's an important product feedstock) by converting its heavy equipment fleets from diesel to electric, and having its refineries produce less diesel.
We put up solar + a Tesla Powerwall battery last March; and bought a Nissan EV. We now pay zero in gas or electricity. Feels good. China is not just strategically smart on this, but economically smart. Donny has already dismantled much of the Biden IRA and CHIPS acts, heading us in the opposite direction.
I've had EVs since 2014, but solar is not an option unless I want to cut down all of the 50+ ft trees surrounding my single-story house, so I rely on Austin Energy for power.
Solar is the cheapest energy option, so he will slow the adoption but he can’t stop it. The market will choose the cheapest option all else being equal so, expect more solar installations, just not as much as you would have without the orange one.
If war with Iran forced the MAGA regime to adopt renewable energy sources, then it might be world-changing. Unfortunately I think war with Iran is planned to deplete US materiel so that there's none for Ukraine or for the defense of Europe.
No worries about Ukraine depleting our stocks. Our KGB-controlled President killed the entire Ukraine aid package--military and civilian--the moment he was sworn in last January. Only the EU and a few others are still standing with Russia.
Good question. Is there a likelihood of Putin actually encouraging Trump to do so?
Putins oil and gas wealth would suddenly become a lot more important
If he can find a buyer. China can’t absorb all of it.
They love to mine the straits, too.
“AI is coming to displace us” is definitely in many articles and conversations I hear. Isn’t this a huge argument for a more and stronger social safety net - funded by the tech/AI industry/investment industry? Societies get disrupted by advancing technology. Do they have to cripple and destroy the workers lives irreparabley, though? That is a choice. The current tech bro-AI-advancement seems to be underpinned by actions that are very autocratic and enslaving -if not right-out dismissive of the worth of average human beings. The Bros are posturing as gods on Mt. Olympus. They are simply flawed humans -many sick in their souls- and they need to be reined in so the positive advances that tech can give us can flourish.
sort of like free trade, 30 or so years ago. Yes, globalization can increase overall wealth - but the distribution of the wealth matters. As it happened in most of the Western world, certainly in the US but not only, the increase in wealth went to the owners of globalized industries and about none to the workers displaced as factories closed. Thus ... discontent, general disapproval of globalization by working class people and academics, leading to political choices, leading to ... Trump, arguably.
So - distribution of benefits of AI (if and when...) is very important.
What they mean is “billionaires are coming to displace us”. AI is just a (faulty) mechanism for how they are going to try.
"“AI is coming to displace us” is definitely in many articles and conversations I hear. Isn’t this a huge argument for a more and stronger social safety net - funded by the tech/AI industry/investment industry?"
Of course, but not wanting that is precisely *why* AI is so big.
AI can't, in reality, replace most human jobs. But the reason you keep hearing this, and the reason Silicon Valley's oligarchs have gone all-in on AI, is that they desperately want to *believe* that it can displace us. Because then, they'd no longer have employees to care about even to the limited extent that they do today. We'd all be surplus people, and the world would just be them and their robot servants.
So, AI is going to displace workers because of greedy Oligarchs, right? And who’s going to buy all the stuff they make from productivity gains? Just wondering. A much poorer World, I bet.
That’s the question, of course the tech bros don’t really sell stuff, so they don’t think it will affect them as the see themselves sell to businesses. However business has to sell stuff to someone or no business.
Good thing I know how to garden.
they are all sociopaths for sure
Those Olympian gods were a bunch of unpredictable nuts too.
Without DoorDash, the deliveries of Uber Eats and other niceties could suffer.
That in turn could infringe on snack availability for NFL watching, a bulwark of our increasingly frail economy.
Be afraid, be very afraid!
The bros are surely mad and rather than bothering with all the displaced poor why not just dispose of them? Certainly stop their medicaid!
Atlas Shrugged indeed.
https://jimstewartson.substack.com/p/white-box-pandemic-how-giant-people
Also in the Door dash example this helps the actual delivery drivers as they make more money.
What an amazing CODA, totally makes my day!
OMG, I almost didn’t watch it due to my cringing at the image of the Bee Gees and me in middle school. Thanks for urging me to circle back. See, these are our future. And that’s a good thing.
It's very interesting.
I’m still trying to figure out who are the Martians and who are the investors? ? ?
I’m no expert, but as a consumer, this is what I dispute: “it will reduce prices and raise real income in sectors that aren’t displaced.” Companies no longer pass savings to consumers because they are not content with offering a good value at a fair price. (And I am leaving aside the problem of individualized pricing based on the calculated pain point of every consumer.) Reduced cost is retained as revenue.
Up like a rocket, down like a feather…but a feather might be too heavy in 2026. I think between the greed, self-centeredness, and monopolistic nature of the ultra wealthy, it is unrealistic to expect prices to come down without significant drop in demand. These are the very people PK has been talking (rightly) about holding too much wealth while gaining more, avoiding taxes, groveling to Trump to keep or make another buck, etc. They don’t do the moral or ethical thing. They don’t care about the future beyond how to add to their fortunes, regardless of consequences. And if (when?) everything does go to shit, they won’t give a second thought to regular folks as they ride off into the sunset on their super yacht to their private island. Like much of history, those at the top of the pyramid won’t care or want to do anything for everyone else. It only happens if they are forced to do it. Things ebb, somewhat improve, until the cycle eventually repeats itself.
“it will reduce prices and raise real income in sectors that aren’t displaced.”
Sadly, this reads like science fiction today.
crucially what I'm not seeing in that article, is what sectors will not be displaced? I mean plumbers will still have jobs, just fewer when all that real estate crashes.
In a consumer-driven economy what happens when you blow out the part that does 50% of the spending?
That 50% of consumer spending is a major source of income for those plumbers.
Per Google: "In 2023, white-collar workers made up approximately 57.8 percent of the total U.S. workforce."
What sectors will grow to accomodate these workers? How many of them will be talented programmers, say with a now urgent desire to 'get even', and readily available AI to help them hack their way to riches of the malware kind?
They blithely overlook that episodes of 30-40% unemployment does not a healthy society make. The Great Depression reached a maximum of 25%.
Their rosy predictions of 'removing the sources of friction' for the humans overlooks the friction those humans can cause because they've been discarded loke broken machines.
White collar jobs are programming jobs.
"Reduced cost is retained as revenue."
Or c-suite bonuses.
When ironically the C-Suite is probably the easiest to replace with even the AI of today.
Absolutely!
"Companies no longer pass savings to consumers because they are not content with offering a good value at a fair price."
----
Has that ever really been the case? Most companies charge "what the market will bear," modified by whatever calculation needed to maintain a positive reputation (PR) and to keep the customers coming back.
I have apprehensions about the way AI is being implemented in terms of its gross consumption of resources, potential misapplication, and over investment by the investor class crawling over each other like crabs in a bucket. If anything causes a recession, it will likely be when the crabs realize that they aren’t escaping the bucket.
It uses vast amounts of energy, for one thing.
Also current AI isn’t really very good at anything. In also of cases a smart high schooler would do a better job. For any specific skilled work AI does a poor job.
You are failing to update your economic priors for a scenario in which human labor is dramatically reduced. Previous technological revolutions shifted human labor to new domains, where they maintained a comparative advantage. There might not be many such areas with AI. I don’t get the impression your cool reaction to AI automating certain companies out of existence is actually doing any work to think deeply about the unique challenges of this moment.
Still, Ian, it is sobering that it may be proof that many investors act without thinking much. I do wonder how reliable rich people are when you consider that they are holding up the US economy pretty much single-handedly at this point. Economic inertia may be helping, but it is losing power. But really, it is all about releasing the Epstein files.
I work in corporate IT and AI is everywhere. That said, there’s still solid demand for people who know how to use it effectively. We were warned about huge layoffs due to covid, only to experience a noticeable shortage of skilled people during those years, in the non-virtual world. Because it’s politically incorrect for corporate ‘leaders’ to blame Trump for anything, I suspect that AI will emerge as the obvious explanation for reductions in force.
The frontier of AI capabilities leaves a place for many human supervisors today, but there is no guarantee it will tomorrow. Even a bearish reading of AI which assumes the technology will plateau before reaching general intelligence must deal with the problems of economic diffusion and retraining, as companies and individuals race to stay relevant. But I believe even that reading is naive; if AI is able to automate all white collar labor, then what role do humans serve in the economy? For anyone but the owners of capital it will be a minimal one. I also work in IT, as an engineering manager heavily exposed to AI automation, and I believe it is critical we begin to assess real economic policies to address future job loss.
Yes, I see tons of AI being used to automate testing and low-complexity claims, but I also think that this represents ‘low hanging fruit’ and that replacing actual human intelligence is much harder. Personally, I avoid using AI for writing because ‘AI responses’ are so recognizable and overly sycophantic. I use it for troubleshooting my ‘low code’ developer projects, and it does save time, but only if I understand the material well enough to implement the recommendations … or determine that my copilot is once again hallucinating.
Totally understand where you’re coming from. I would just note that (1) I am seeing many developers shift to writing 100% of code with AI, including myself (even if a lot of software production outside code is not yet automated), (2) capabilities are improving exponentially, so we ought to assess economic impact on the basis of likely future gains (prepare for a probable worst case scenario), and (3) writing is sometimes understood as a litmus test for AGI itself, i.e. if an AI could reproduce our thread here then we already have reached general intelligence. So it’s a very high bar to measure capabilities against
Excellent point about software production being much more than code. Integration is huge as well. I wonder about the rampant use of third party data among the big insurers, because it ultimately means that they’re all relying on the same data, on the same platform (AWS), with the same vulnerabilities.
One of my new hobbies is reading about lawyers who have used ChatGPT to write their legal briefs get excoriated and sanctioned by the courts, AI seems to like to skip the annoying work of finding case precedent that supports your argument, and just going straight to making stuff up out of whole cloth, or mis-citing actual law. https://www.reuters.com/legal/government/us-appeals-court-orders-lawyer-pay-2500-over-ai-hallucinations-brief-2026-02-18/
Any lawyers signing and submitting these legal pleadings with "made up" case cites are lazy idiots.
But AI can and will be used for legal research / initial drafting of pleadings, which are then reviewed/checked/revised for accuracy by the responsible attorney. That preliminary "AI work" would have been done by lower level associates or paralegals.
I agree. The argument Paul made in his article that a partial displacement wouldn’t be catastrophic to the economy as a whole is not very convincing to me, because the worst case scenario is exactly that AI replaces almost ALL human intellectual labor (with robots maybe even physical labor). If that happens, no remaining sectors to boost the demand. Ultimately, this is a distribution problem. When the current labor-capital hybrid distribution system breaks down because human labor is no longer valuable, we need a new system that either guarantees enough income to everyone to support their demand, or redistribute capital among all people so everyone can benefit from the technological advancement. And the politicians and business leaders need to start thinking about the appropriate policies before it’s too late.
Interesting. The double entendre of “Never Trump.”
Yup, this is one of those rare points where I disagree with Mr. Krugman. As you write, previous disruptions has shifted labor force into jobs that machines still couldn't do. Not sure why we are not seeing the obvious problem that eventually machines will be capable of doing everything humans can and labor force will no longer have a place to move to.
I'm not saying we are at that place yet, because as capable as the AI is it can't do everything yet. But with the progress we are seeing it's not hard to imagine further improved AI, fully autonomous vehicles, robots matching human dexterity and etc. Where will the job market for humans shift to then?
I agree with you. I agree with almost all of Krugman’s analyses, and I’m aware that with every new technology there’s a “this time it’s different” line when it’s not actually different. But as stated in the Citrini article, this is the first time human intelligence itself is no longer the scarce resource. AI is so pervasive because it changes every market at the same time. I think he’s being dismissive rather than actually exploring how this might play out.
When pandemic supply chain issues got resolved, prices didn’t come back down because we’re no longer in a real market economy. I’m not clear on what “ other industries” are going to reduce prices in response to productivity gains from AI that will offset the job losses.
Now I don’t think things will happen exactly as Citrini outlines, it will likely be slower and bumpier. But in 3-5 years I don’t see everything just shifted around like in past new technology booms.
"Now I don’t think things will happen exactly as Citrini outlines, it will likely be slower and bumpier. But in 3-5 years I don’t see everything just shifted around like in past new technology booms."
That's the key, in my opinion. Paul has similar quote about recessions:
"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought."
That's my concern: it will be just like before putting us at ease, but when finally technology causes changes unlike we have seen before there will be little or no time to deal with consequences.
I’m still seeing a lot of discussion about about how effective AI actually is. Opinions are all over the map.
When human labor is dramatically reduced, human consumers of services are dramatically reduced. What direction does dramatically reduced human energy take in its wake?
In chaotic times, even fiction can shake the market.
The take home. Also, I think, he’s cautioning us, at-large, to not just point out the lies, but to remain steadfast that we do have data points, that if used in the proper context, can help guide us through this challenging time. When “2+2=5” is being bandied about, don’t just say that the administration released a report yesterday that said “2+2=5.” And it’s not enough to respond with “it’s a lie.” Find the facts and respond with the facts. And if the only facts are data points, use them in the proper context.
Paul,
Here is a good AI project to try:
Get one of the top paid versions (not at all expensive for you); ask it to catalog all of Trump's lies or falsehoods since he ran for office in 2015. Categorize these by severity and the likelihood that he knew they were false, also categorize by issue area. Produce important charts. Then do the same for Biden and Obama, and compare the three Presidents. Include other details.
This project, done thoroughly and well, would take a large team of skilled humans months and cost millions. An AI could do it in a day, pretty much for free, generating an extensive report hundreds of pages long. And the results could be stunning and very important.
Nope, can't even keep itself from lying, much less catalogue others' lies. https://www.reuters.com/legal/government/us-appeals-court-orders-lawyer-pay-2500-over-ai-hallucinations-brief-2026-02-18/
I think it might be able to do it. First, it will be looking at the fact checkers. It will be relying on humans saying it’s a lie, and these LLM‘s have gotten much better at discerning the credibility and expertise of the source, like the source saying it is a lie. Second, it can just compare Trump‘s facts and figures against the official facts and figures in in credible and expert databases. It can compare what he says against a wide range of credible and expert sources.
You may be really underestimating the capability of these LLM‘s and how much better they are even compared to just three or six months ago. I have been really impressed lately with these systems. And in any case, you would ask it to create an appendix of all the lies, with details on the lie, a link, why it is considered a lie or falsehood, why the lie or falsehood was categorized the way it was, and so on. You could then check a random sample of those lies or falsehoods to discern how good a job the AI did.
Correct. The proposed project would be "Garbage In, Garbage Out", because it would treat a "Biden Lies" post from Johnny MAGA on X as equivalent input to Daniel Dale's meticulously cataloging every Trump lie.
AI is the modern equivalent of Orson Welles, it can easily produce a realistic story with audio and video that could cause a world wide panic. DoorDash failing is the least of our worries
If AI works we'll have tens of millions of well-compensated workers un/underemployed. If it doesn't work we'll have huge debt problems.
There's also skyrocketing electricity costs and problems with ground water to consider.
Hegseth also seems to be pushing for automated killing machines.
The future ain't what it used to be.
And it never was.
Concerns about an attack on Iran? No worries. Jared Kushner to the rescue.
Better Kushner than Miller.
Professor Krugman: like with the war of the worlds, the linked piece clearly states that it is a scenario -- a thought piece -- not a prediction. which makes me think that most investors are barely literate numbskulls. as it stands, i think this could be developed into an interesting scifi novel.
This sort of scenario appears in quite few science-fiction novels. None of which could truly be called "utopian".
Stock market trading is conducted by looking at made up charts. It becomes a self fulfilling prophecy.
Stock market trading is mostly carried out by computers and algorithms. A"I" could really create a mess there. Especially as it seems capable of falsehood.
Or have the attention span of fruit flies.
Rarely do I disagree so completely with Dr. Krugman. Perhaps the problem is that he hasn't yet tried to work with AI or perhaps he has only played with the free versions. I bought a subscription to Claude so that I could evaluate AI with all the features and power that the free versions don't offer. It codes complIcated software quickly and incredibly well. It builds spreadsheets and draws graphs from esoteric data that it finds on its own. It isn't perfect but then neither was any employeenI ever had. AI agents communicating with each other will remove layers of friction in B to B transactions.
Think about the disruption caused by off-shoring, about the political consequences still reverberating through our society. AI has the potential to be orders of magnitude more disruptive because it cut across so many fields. Software. Law. Accounting. Clerical work. Research. It isn't that AI will replace all workers in these fields, it won't. But it will replace many. Very many. And what will all those displaced workers do to earn money? Well Sam Altman's shoes don't shine themselves.
Law? https://www.reuters.com/legal/government/us-appeals-court-orders-lawyer-pay-2500-over-ai-hallucinations-brief-2026-02-18/https://calmatters.org/economy/technology/2025/09/chatgpt-lawyer-fine-ai-regulation/https://www.theguardian.com/us-news/2025/may/31/utah-lawyer-chatgpt-ai-court-briefhttps://www.reuters.com/legal/new-york-lawyers-sanctioned-using-fake-chatgpt-cases-legal-brief-2023-06-22/
Yes, law. The cases you point out are cautionary because the lawyers involved didn't review the work - as any competent attorney would do before releasing the work of a paralegal or junior attorney under his name. As I noted in my original comment AI won't replace all lawyers - or engineers, accountants, or any other profession. But they will thin the herds significantly.
Wow...you MIGHT want to look up the etymology of the phrase 'thinning the herd' there.
Hint: the 'herd' doesn't get to 'go live on a farm upstate'
Economically that remains true.
Despite being an avid follower of your column, I remain deeply puzzled by the steady rise of the stock markets - DJIA, Nasdaq, etc etc. These indices are supposed to predict the future of US based (or at least US financed) companies. Yet I see future doom and gloom with worldwide reaction to Trump’s aggressions (too numerous to recount) and formation of extra-US alliances, China becoming the worldwide leader in wind and solar power generation, rejection of scientific research with functional dismemberment of NIH and research universities, rejection of evidence-based medicine and climatology, defunding of K1-12 public education in favor of “faith-based” learning … the examples go on and on. Yet the DJIA keeps rising and rising. How different is this from Orson Wells’ Martian invasion. Less fun, less dramatic but fundamentally the same mass delusion. Please, please … somebody tell me the difference.
The good outcome from attacking Iran is the impact on Ukraine. They will certainly stop sending Shaheds drones to Russia.
"But if AI delivers big productivity gains, it will reduce prices and raise real income in sectors that aren’t displaced, causing other Americans to spend more."
I question the probability of the assumption based lived experience during what I call The Great Offshoring when production of good moved to China. One example: We needed to buy a new pair of LaCrosse pack boots for Ice fishing. When we got to the LaCrosse store, the boots were the same price as they had been the previous year, but were "made in China". Consumers did not see lower prices; companies saw bigger profits. The gains we have seen in productivity over the decades have boosted corporate profits while wages remained stagnant. If past predicts future, gains in productivity from AI will go straight to the companies and stockholders, as it has over the past couple of decades.
I did some lower priced goods after offshoring, although the quality wasn’t as good.