Still Jason Shepherd

Wow! How does *that* work?

[Izabella Kaminska @izakaminska]

Great observation from Tracy below. But I’ve annotated the chart as I think a lot of people still don’t understand that it was Deepseek that triggered this acute phase of hyper scaling.

By going open weight Deepseek commoditised AI ensuring the “there can be only one” race had no choice but to turn to capex spend instead.

It’s been a simple “who has the ways and means to moat up most expansively?” ever since. If you’re confused by the economics, it’s because the economics aren’t supposed to make sense. The irrationality of the infrastructure spend is the logic. We’re in the world of Highlander.

That means you win by forcing everyone else to go bankrupt. Potentially even yourself (safe in the knowledge that if you do Uncle Sam still inherits the legacy infrastructure.)

In that sense it’s no different from the USSR diverting the nation’s entire consumer budget into vast steel plants that no one else could ever afford to match on cost.

But if loss leading your way to AI domination through control of compute was the plan, last month’s Kimi moonshot disrupted everything. It’s like beating Russian steel with the invention of a Star Trek replicator.

That’s why I’d be surprised if the pace of debt issuance continues on at the projected pace. If anything, Leopold’s blow up implies a pivot towards greater capital efficiency is incoming.

Alternatively this is when “the project” begins in earnest.

Either way, I’d bet on more secrecy and even more centralisation.

The only question now is whether the USG takes control or not. Judging by Anthropic’s previous spat over Pentagon access, this is the point where the statecraft is gonna get complicated.

👇

[Edward Stringer @edwardstrngr65]

Reposting this, and in a state of being genuinely staggered that @Cassi_on_X , a UK company regulary beating @xai and @GoogleDeepMind in the international technical rankings, has only 103 followers😳!

[nxthompson @nxthompson]

This is an amazing quote from Lindsey Graham about when he realized how politics works. https://t.co/sh04ahQOFq

[Adam Tooze @adam_tooze]

The AI boom, China's walled-in-wealth and the financial barriers that separate the two. - World Economy July 2026.
Latest Chartbook newsletter just dropped. Continuing & widening the exchange with @SanderTordoir & @Brad_Setser @michaelxpettis
https://t.co/7T8DnWJhbk

[Anthony Finkelstein @profserious]

Why do sensible interventions so often fail? Why do small changes sometimes have enormous consequences? Why do organisations keep recreating the same problems? Systems dynamics and control offers some answers. https://t.co/bUiU3xzkWJ

[Still Jason Shepherd @Doctorpugwash]

@rorysutherland And the tulip bubble wasn't, to boot.

[Still Jason Shepherd @Doctorpugwash]

The UK will do its usual hand wringing, then recommit to the false choices of austerity and get progressively worse at everything. Until we change our peculiar national relationship with capital and finance, we're going to be sitting out this next round of history.

[Still Jason Shepherd @Doctorpugwash]

I think the key 'tell' here is that USG were happy to let AI develop in ways that would disrupt arts, sciences, job markets, etc. All of that drives accelerated development, reinforced by low interest rates a global glut of capital.

[Still Jason Shepherd @Doctorpugwash]

Mankind at its worst. One chance, to push back on the approach - we all lean in to tackle the challenge of Mythos-level national security capabilities - or we're stuck on the AI arms race path so many of us have feared.

[Mark Sedwill @marksedwill]

Britain can't sustain a “balanced force” We need integrated forces to protect the North Atlantic and High North against Russian aggression and hold their Arctic bases at risk. Those forces can also deploy to wherever the next Hormuz crisis erupts. It's the only credible strategy in a world where American security guarantees are no longer unconditional.

[Michael Pettis @michaelxpettis]

Very sorry to hear about Robert Skidelsky's death. Shortly after I finished reading the final volume of his brilliant three-volume biography of Keynes, perhaps 15 years ago, I met him at a conference in Brazil. We became friends after that and met several times, mostly in London (where he once took me to lunch at the House of Lords) but also whenever he was in Beijing.
https://t.co/75zj9h8gsk

[Still Jason Shepherd @Doctorpugwash]

@Jordan_W_Taylor Punkin chuckin teams across Delmarva....

'Challenge accepted'

[Alessio Patalano @alessionaval]

Putin is testing the UK. Soon he might be proven wrong in doing so, and having worked really hard to get us the right practice to know how to do so.

[Still Jason Shepherd @Doctorpugwash]

@Frances_Coppola ...I've got a cunning plan...

[Michael Pettis @michaelxpettis]

Jacques de Larosière writes that "anyone who believes that Europe is close to a Hamiltonian moment has fallen victim to self-delusion. In fact, despite diverse external pressures for the Europeans to become a more powerful strategic force in the world, we are still very far from the goal that some are trying to promote."

He's probably right. Hamilton didn't fight for the central-government assumption of war-related state and local debts out of a sense of fairness, or even in order to benefit himself (he was one of the only people in history who was poorer in the years after he was Treasury Secretary than before).

He understood that shifting the bulk of state and local debts to the central government debt would be meaningless unless the central government was also able to control overall taxation in the new states. Having to service debt requires the ability to raise revenue.

He also understood that if the wealth of the most powerful individuals and institutions in the country depended on the credit of the central government, one way or another they would ensure that the central government controlled the purse strings.

In Europe, as has often been noted, the most powerful individuals and institutions depend more on the strength of the various national governments than on the EU government, and for that reason, it is the former, and not the latter, that matter. A true "Hamiltonian moment" is not so much about who issues the debt as it is about the mechanism that can cause the most powerful individuals and institutions in Europe to want to enhance the credit of the EU rather than its members. Until that happens, I suspect real power is unlikely ever to reside with the EU.

[Alexander Evans @aiaevans]

LSE Launches Huth Initiative for a New Political Economy | LSE news | philanthropy - LSE https://t.co/XAKKTFwixr

[William D. James @w_d_james]

For reasons unknown, my first book, British Grand Strategy in the Age of American Hegemony, is on sale for £28.99 on Amazon UK - a 62% reduction in price! It would be rude not to at that discount! H/T to @jonathanboff https://t.co/gSawTXQKA4