Feds Implement Temporary Water Sharing Agreement in Western States

Arizona, California and Nevada will be required to curb their use of the water from the Colorado River by about 20 percent over the next two years — and could ultimately face even larger cuts — according to three officials familiar with negotiations over a long-awaited federal plan to rescue the depleted river.

The plan, part of which the Bureau of Reclamation is expected to describe in an Environmental Impact Statement on Friday, comes at a time of escalating crisis for the Colorado, a crucial water source for seven states, 30 Native tribes and a swath of northwestern Mexico. But experts say it will not be sufficient to resolve a political standoff among the river’s many users or prevent the beleaguered waterway from teetering toward collapse.

The cuts proposed for the next two years resemble what the three states offered in a proposal this spring, and represent the first phase of a broader 10-year framework for operating the river’s dams and reservoirs, according to the officials, who spoke on the condition of anonymity to discuss ongoing negotiations.

That framework is expected to call for operating plans to be developed every two years and outline a wide range of possible measures those plans could include — including reducing the amount of water released to the Lower Basin by as much as 40 percent.

The framework is not expected to consider mandatory cuts to water use from the four states in the upper part of the basin: Colorado, New Mexico, Utah and Wyoming. Arizona, California and Nevada make up the Lower Basin. [...]

The current operating rules, which expire at the end of September, have not prevented chronic overuse of the river amid a decades-long drought worsened by climate change.

After a historically meager winter snowfall and a scorching spring, the amount of water flowing into the river this year is less than a quarter of average annual demand, and levels in its major reservoirs have dropped to record lows. Scientists warn that one or two more dry years could crash the entire system, disrupting hydropower production, drinking water supplies and irrigation for some 5 million acres of farmland. [...]

The likely operating plan for 2027 and 2028, based on a May proposal from the Lower Basin states, is projected to save about 3.2 million acre feet of water — enough to fill roughly 1.5 million Olympic swimming pools. The plan will require significant “belt tightening,” particularly in Arizona, according to Sarah Porter, director of the Kyl Center for Water Policy at Arizona State University, but states have indicated they can tolerate the reductions.

Yet those measures are only half of what studies suggest is needed to bring water demand in line with the dwindling supply, Porter cautioned, increasing the likelihood of even steeper cuts down the road. [...]

The 330-mile system of canals and aqueducts, which supplies water to the most populated parts of Arizona, is poised to see the biggest cut in its history under the bureau’s operating plan for the next two years. If the agency chooses to implement some of the deeper reductions considered in the 10-year framework, CAP’s entire water allocation could be wiped out. [...]

Fraught negotiations

Experts say the rising tensions on the river result from a chaotic combination of bad weather, poor planning, intransigent state officials and federal missteps under the Trump and Biden administrations.

At the heart of the conflict is an impasse between the Upper and Lower Basin states over who should shoulder the burden of necessary cuts.

In the Upper Basin, home to the snowcapped mountains and winding tributaries that feed the river, there are few reservoirs to provide long-term water storage, leaving users reliant on natural flows. That means the Upper Basin takes an automatic cut during dry years, officials argue. They say responsibility for restoring water to Lakes Powell and Mead should fall on the Lower Basin states that use them.

Yet about three-quarters of the people who depend on the Colorado live in the Lower Basin. The region is also home to major cities and sprawling farms that provide most of the nation’s winter vegetable supply. Officials from these states say they have already curbed their water consumption by millions of acre feet in recent years. Overuse of the river is universal, they argue, and so too is responsibility for saving it.

The situation is complicated by the arcane legal framework governing the river, which prioritizes users chronologically. Without agreements among the states, major cuts would fall entirely on junior users, including huge cities such as Phoenix and Tucson, before more senior rights-holders such as the farmers in California’s Imperial Valley see any reductions.
Last summer, it looked like states might agree on a new method of apportioning the river based on actual flow, rather than historical averages and legal agreements. But those negotiations broke down over familiar disagreements about who should be subjected to mandatory cuts. [...]

A vanishing river

Brad Udall, a climate scientist at Colorado State University’s Colorado Water Center, describes the tensions over the river as a “big collision of 19th-century water law, 20th-century infrastructure and 21st-century climate change and population growth.”

The Colorado has almost never contained enough water to satisfy everyone who has legal rights to it, Udall said, and human-caused warming has made the situation even worse. Since 2000, high temperatures and shifting rainfall patterns linked to climate change have diminished the amount of water flowing through the river by about 20 percent, compared to the 20th-century average.

The deficits have forced repeated negotiations over how to manage shortages. Past deals have helped curb consumption somewhat, but they were never stringent enough to reverse the inexorable decline of reservoirs that are intended to provide a buffer during bad years.

Lake Mead, the site of the Hoover Dam, is mere inches from its lowest level on record. A few hundred miles upstream, Lake Powell is approaching the point at which water can no longer flow through the turbines of the Glen Canyon Dam. That raises the risk of a phenomenon called cavitation, in which air bubbles form then implode in fast-moving water, releasing energy that can damage the dam itself.

“The reservoirs are depleted so low they’re really at the end of their capability,” Castle said. “We’re in such a precarious situation.”

by Sarah Caplan, Washington Post |  Read more:

Image: Caroline Brehman/Reuters
[ed. The U.S. Bureau of Reclamation on Friday unveiled the framework that will guide operations on the Colorado River through 2036. See also: Lake Powell's Dying Days (CCG):]

***

The L.A. Times’ Ian James reported that Trump’s Interior Department would accept a proposal submitted by California, Arizona and Nevada — the Lower Basin states — to slash their water use by 12%, 31% and 28%, respectively, through 2028. They’ll receive $350 million from Biden’s Inflation Reduction Act to support water conservation.

The Upper Basin states — Colorado, Utah, New Mexico and Wyoming — will get $100 million in conservation funding. But unlike their downstream neighbors, they won’t face mandatory water cuts. However much water they end up saving, that will be good enough. [...]

If Powell’s water levels sink much lower, water won’t be able to pass through the dam’s hydropower turbines, which generate cheap electricity for communities across the West. That wouldn’t be a “dead pool” situation; water could still flow downstream to the Grand Canyon and Lake Mead through bypass tubes lower in the dam. But the bypass tubes are surprisingly frail and could break with sustained use.

Translation: We are frighteningly close to “de facto dead pool.” That’s why the Trump administration is ordering everyone to use less water.

Well, not everyone. California, Arizona and Nevada are willing to cut back dramatically, and federal officials seem happy to make them do it. The Upper Basin states — the ones upstream of Lake Powell — say they shouldn’t have to commit to mandatory reductions, in part because they already consume a lot less.

In a New York Times opinion piece earlier this year, I argued that the Upper Basin states need to do more. Podmore agreed.

“It’s a tricky situation, because the Lower Basin has always used more water, and that’s a convenient argument for the Upper Basin,” he said. “But also, there’s more people in the Lower Basin. And the most productive agricultural land that’s irrigated with Colorado River water is located in the Lower Basin.”

“Even with the cuts that the Lower Basin has offered, we still have a long way to go to balance the water budget,” he added. “Everyone needs to pitch in.”

[ed. But not everyone is agreeing to pitch in: California’s Biggest AI Data Center Is Suing for Colorado River Water (Yahoo News):]

***

The developer behind California's biggest planned AI data center publicly swore it would never touch Colorado River water. It would run on recycled wastewater — clean, virtuous, zero environmental impact. That pledge held right up until the cities of Imperial and El Centro said no thanks. Now Imperial Valley Computer Manufacturing (IVCM) has sued the Imperial Irrigation District (IID) for access to the very river it promised to leave alone. The facility would sit in a desert valley where 180,000 people share exactly one freshwater source.

The Farm-to-Cloud Gambit

IVCM's legal strategy treats 160 acres of fallowed farmland as a water entitlement for a nearly million-square-foot AI campus.

The developer's playbook relies on a tactic called "buy and dry" — purchasing irrigated farmland, retiring it from production, then claiming its water allocation for industrial use.

China Now Uses 80% Artificial Sand

The world is running out of sand.

About 50 billion tons of sand and gravel are extracted annually, most of which is used for construction activities. This is a problem for two reasons. First of all, it’s not sustainable. Secondly, if we continue to extract sand at this rate, it will end up causing irreversible damage to the environment.

 

For instance, loss of sand from oceans, rivers, and beaches can lead to excessive flooding and degradation of marine ecosystems. It threatens coastal communities, and infrastructure. Plus, sand mining near aquifers can lower water tables, affecting water availability for humans, land animals, and agriculture.

And no, you can’t just use sand from the desert. Desert sands are typically rounded and smooth, which makes them less effective for construction purposes. For concrete, the rougher texture of river or beach sand is essential as it helps bind the materials together. Desert sand, with its finer and more uniform grains, lacks the necessary angularity to bond effectively with cement.

“The issue of sand comes as a surprise to many, but it shouldn’t. We cannot extract 50 billion tonnes per year of any material without leading to massive impacts on the planet and thus on people’s lives.” Pascal Peduzzi, a researcher at the United Nations Environment Programme (UNEP), told BBC.

A 2024 study suggests China may have found a solution to the sand mining problem. The Chinese have been using artificial sand made by crushing rocks and leftover materials from mining for many of their construction projects. This simple technique has allowed them to drastically reduce their dependence on natural sand without slowing down their massive construction projects. [...]

The study authors developed a monitoring system that allowed them to examine the sand use pattern in China from 1995 to 2020. Their analysis revealed many surprising facts. For example, the Chinese have been producing artificial sand since the early 2000s, but it became popular in 2010.

2010 was also the year when the supply of natural sand in China reached its highest level. However, the next year’s supply of manufactured sand overtook that of natural sand, becoming the primary sand type used for construction activities.

In the following years, production of artificial sand continued to increase by 13 percent annually. In 2020, the use of natural sand reduced to the extent that it accounted for only 21 percent of the total sand supply, witnessing an 80 percent decline compared to 2010.

“China’s overall sand supply surged by approximately 400% over the study period, yet the proportion of natural sand dropped from ≈80% to ≈21% due to the increasing use of manufactured sand,” the study authors note.

“The percentage of manufactured sand in the Chinese market could now be close to 90 percent. The shift from natural sand to manufactured sand is a miracle for a country that has completed such massive infrastructure construction,” Song Shaomin, a professor at Beijing University of Civil Engineering and Architecture, told SCMP.

by Rupendra Brahambhatt, ZME Science |  Read more:

Image: Nathan Cowley/Pexels

Will Larry Ellison Be the Face of the A.I. Bubble?

[ed. Don't miss this one. It's got everything (and could easily be a Pulitzer contender).]

On Jan. 21, 2025 — the first full day of the second Trump administration — Larry Ellison woke up in his 33-bedroom, 34-bathroom oceanfront mansion in Florida, got into his Gulfstream jet and headed up to Washington. Ellison, who was 80 and worth in the neighborhood of $200 billion, had an appointment at the White House. He didn’t bother to take a driver’s license — he needed to call someone on the president’s staff to vouch for him at the gate — but there he was, at 2 p.m., standing beside Donald Trump in the Roosevelt Room as the president announced “the largest A.I. infrastructure project by far in history” and told the world that his friend Larry Ellison was just the man to get it done. “He’s sort of C.E.O. of everything,” Trump said. “He’s an amazing man and an amazing businessperson.”

Ellison began by thanking Trump. “We certainly couldn’t do this without you,” he said. “It would simply be impossible.” He then proceeded to sketch out the ambitious plan. Ellison’s database software and cloud computing company, Oracle, and its partners — most prominently OpenAI — were going to invest as much as $500 billion over the next four years into a group of sprawling data centers, 500,000 square feet each, that would produce 10 gigawatts of computing power, using enough energy to power as many as 10 million homes. It was called Project Stargate, after the 1994 sci-fi movie in which Kurt Russell steps through a wormhole and finds himself inside a pyramid on an alien planet. This Stargate would be a portal leading humanity from the postindustrial era to the artificial-intelligence age. [...]

For Ellison, it was the capstone of a mad two-year scramble to transform Oracle into an A.I. juggernaut. The effort began in late 2022 when the launch of ChatGPT stunned the world and set in motion a race to master and control the most transformative new technology since the birth of the internet. Ellison, a founding father of Silicon Valley and the last of his generation still in the game, was desperate to avoid getting left behind. He’d moved quickly and aggressively — some might even say recklessly — to turn Oracle into a “hyperscaler,” one of the handful of companies providing the critical infrastructure that would power the A.I. boom. [...]

ChatGPT landed very differently in Washington than it did in Silicon Valley, setting off a scramble of its own inside the Biden administration to regulate the development of A.I. To oversee his A.I. policy, Biden turned to a veteran Democratic policy adviser, Bruce Reed, who believed that the administration needed to be proactive. A year after ChatGPT’s debut, in late 2023, Biden signed a comprehensive executive order on A.I., seeking to define the government’s role in the future of this new technology.

For the Biden administration, artificial intelligence was by no means just a domestic economic issue. Countries around the world were all racing to develop their own A.I. infrastructure and technology, and global power and influence would flow to whoever got there first. From this perspective, A.I. data centers were less businesses than geopolitical assets.

The administration was especially concerned about the A.I. ambitions of China and the Persian Gulf, given the powerful role artificial intelligence was likely to play in reshaping the information ecosystem. [...]

The administration’s concerns and Ellison’s ambitions were on a collision course. China and the Gulf were both critical to Ellison’s A.I. plans. Oracle already had a lot of contracts around the Gulf, and it also had a strong business relationship with one of China’s most important A.I. companies, ByteDance. Oracle was the U.S. cloud provider for the U.S. division of ByteDance’s TikTok, storing and securing the data of the app’s 100 million American users. But with ByteDance itself now pivoting into generative A.I., they had the opportunity to do more business together. In the summer of 2024, Oracle started working on a $6.5 billion deal to build a large data center complex in Malaysia, from which it could convey computing power to ByteDance and other foreign companies through opaque leasing deals.

It would be perfectly legal — but under the Biden administration maybe not for long. By that point, national security officials were growing increasingly concerned about China and the Gulf’s A.I. ambitions and were discussing ways to gain more control over them. The administration was especially worried about the role Oracle might play in fueling these ambitions. They knew that Ellison was trying to scale up the company’s A.I. infrastructure quickly and that it was badly in need of cash, which meant that it might be more tempted to make deals that the administration didn’t think were in America’s best interests. [...]

In early 2024, the administration started working with Congress on a bipartisan bill — the Protecting Americans’ Data From Foreign Adversary Controlled Applications Act — that would force ByteDance to divest its U.S. TikTok operations. Biden signed the bill into law in April 2024, setting a deadline of Jan. 19, 2025, for a sale. If ByteDance failed to meet the deadline, the app would be shut down in the United States.

At the same time, the administration was preparing to shore up its efforts to restrict China’s access to American computing power and to exert more control over the Gulf’s. In late 2024, it circulated the draft of a plan to require hyperscalers to go through a licensing process to operate overseas and to keep 50 percent of their computing power in America.

All of the hyperscalers were looking to build overseas, but Oracle had the most to lose: Its global plans were the most ambitious, at least relative to its size. The company publicly and aggressively opposed the Biden plan. Its top policy executive in Washington, Ken Glueck, called it “one of the most destructive” moves ever taken against the tech industry, arguing that the best way to solidify America’s lead in the artificial intelligence race was for U.S. companies to build and control as much of the world’s A.I. infrastructure as possible.

Biden signed off on the new policy in the final days of his presidency. It was scheduled to go into effect in May 2025. If enacted, it could force Oracle to scale back its ambitions in Malaysia and the Gulf. Ellison’s plan to transform Oracle was in trouble. But a new president was on his way to Washington.

‘The Tsunami’

Relief came almost immediately. Hours after his inauguration in January 2025, Trump sat down at the Resolute Desk and began signing executive orders aimed at dismantling Biden’s A.I. policies. He also signed an order directing his attorney general to hold off on enforcing the congressionally mandated TikTok ban for 75 days. And then, of course, came the Project Stargate announcement with Ellison and Altman.

Trump turned to a very different group of people to shape his new administration’s approach to artificial intelligence. He named as his A.I. and cryptocurrency czar David Sacks, a Silicon Valley venture capitalist who had raised many millions for the Trump campaign and, according to a New York Times investigation, was personally invested in at least 449 companies with ties to artificial intelligence. Sacks, who has denied any conflict of interest, believed that when it came to A.I., the government’s job was to get out of the way.

The National Security Council’s technology and national security division had played a key role in shaping America’s A.I. policy in the Biden years. Trump initially appointed David Feith — who had serious concerns about China’s ability to remotely access computing power through Malaysia and other Southeast Asian nations — to run it. But in April, he fired Feith and a few other China hawks and then eliminated the entire directorate. [...]

Trump saw another benefit to withdrawing the Biden plan: The Gulf states were adamantly opposed to it. They needed U.S. computing power to build out their own A.I. infrastructures and had something to offer in return. Their sovereign wealth funds were sitting on trillions of dollars that they were ready to invest in all sorts of American companies, including some connected to the Trump family.

Two weeks before the Biden policy was scheduled to go into effect, Zach Witkoff — son of the Trump adviser Steven Witkoff and chief executive of the Trump family’s cryptocurrency firm World Liberty Financial — made an announcement at a conference in Dubai: The Emiratis would use $2 billion of the firm’s brand-new stablecoin for an investment in Binance, a crypto exchange. Less than two weeks later — 48 hours before the Biden restrictions would kick in — Trump rescinded the policy.

That same day, Trump landed in Saudi Arabia, the first stop on a three-day tour of the Gulf. He was joined in the United Arab Emirates by Altman to announce Stargate U.A.E., a multibillion-dollar initiative to build one of the world’s largest data centers outside Abu Dhabi. Oracle would be a partner, too.

With the Biden plan dead, Oracle was free to operate its data center complex in Malaysia as it saw fit. By the end of June, the facility was on track to become the second-biggest in the world. Oracle doesn’t release the names of its customers there, but by studying its output, an independent A.I. research firm, SemiAnalysis, determined that the facility was feeding most of its computing power to ByteDance. An analyst at the tech-focused think tank ChinaTalk, Aqib F. Zakaria, ran his own numbers and arrived at a startling conclusion: Oracle was providing a staggering 22.6 percent of China’s known A.I. computing power.

by Jonathan Mahler, Jim Rutenberg and Kirsten Grind, NY Times |  Read more:

Images: Louie Psihoyos; Scott Ball
[ed. Not to be redundant but this came out shortly after I'd posted about Oracle (and Larry Ellison) below in The Hater's Guide to Oracle (Part 2). It contains a treasure trove of new information and a road map to how business and politics intersect in Washington and around the world these days. Well worth a read.]

The Hater’s Guide To Oracle (Part 2)

Oracle has one of the strongest mythologies in the tech industry. Ask a regular person and they’ll tell you that it’s “incredibly profitable” and “growing fast,” that it’s “unstoppable,” and that Larry Ellison has the mandate of heaven with regard to the continual sales of software and hardware related to databases and AI.

And those people are completely and utterly wrong.

The original title of this article was “Is Oracle Dying?” because I assume, when I took a deeper look, that there’d be some sort of debate, some sort of bull case for a decades-old quasi-hyperscaler run by one of the more nakedly-evil CEOs in the history of tech. I assumed — incorrectly, I might add — that Oracle as a business was doing fine other than the ridiculous commitments it made to support the whims of Sam Altman and OpenAI via deals that I believed (and still believe) will kill Oracle.

Except it turns out that Oracle has already been on a death spiral for the best part of a decade (if not longer) and has only survived this long by screwing its customers, taking on masses of debt, and — most importantly — more than $85 billion in acquisitions over the last 23 years. Pretty much every major product line outside of databases is a hodge-podge of other people’s innovation stapled together with a legendary contempt for the customer. These acquisitions (and continual price increases) are the only thing keeping the reaper from Oracle’s door other than margin-destroying GPUs. [...]

After April 2009’s $5.7 billion acquisition of Sun Microsystems, Oracle’s revenues barely kept pace with inflation until December 2021’s $28.3 billion acquisition of Cerner allowed it to create Oracle Health, adding about $6 billion in annual revenue that had 40% lower margins (about 21.7%) than Oracle’s other businesses, though Oracle immediately started closing offices and brutal layoffs to try and bring them up.

And as I mentioned above, Oracle’s other plan was to sink a little over $99 billion in capital expenditures since the middle of calendar year 2020 into AI GPUs. [...]

Oracle is a decades-long mission to keep reapplying lipstick to a pig. Billions of dollars of acquisitions have, for the most part, only succeeded in keeping the company’s revenue growth from going negative, and as noted by forensic accountant Howard M. Schilit, this is one of the most well-documented cases of accounting shenanigans being used to cover up that a business is in decline.

Today’s newsletter is a sequel to the Hater’s Guide To Oracle, where I told the sordid tale of how Larry Ellison grew a massive, lucrative business out of a database business that one reporter once told me was a “law firm with a database company attached,” an Enterprise Resource Planning (ERP) product that competes with SAP to create the most-annoying way to run a large company, and a business built around licensing Java that exists mostly to email people and say “you need to pay us for Java or we’ll sue you.”

Then, as I’ve mentioned, there’s Oracle’s cloud infrastructure business, a decade-old also-ran that was meant to compete with Microsoft Azure and Amazon Web Services, but only managed to catch up following the advent of AI GPUs and a movement where all it took to party was buying billions of GPUs and saying “gosh darn, we love AI.”

I originally started drafting this as a much tamer piece where I’d ask whether Oracle was dying, but as my editor and I started digging into the research, it became obvious that not only is Oracle dying, it’s been dying for years, kept alive through decades of acquisitions and a desperate and dangerous commitment to generative AI.

And AI, I believe, will be what eventually kills Oracle dead. [...]

With revenue plateauing and customers in revolt, Oracle’s future already looked murky, but with the power of AI — and $95 billion in FY2027 capex — it’s becoming increasingly clear that this may be Larry Ellison’s last dance with Silicon Valley.

by Ed Zitron, Where's Your Ed At |  Read more:

Image: Larry Ellison, Bloomberg/Getty

[ed. Larry Ellison. One of the most hated personalities in tech (and unfortunately, owner of my beloved island of Lanai, in Hawaii). Update: What a coincidence. There's quite a story in the NY Times that just came out about Ellison being the face of the AI bubble. See also: The Hater's Guide to Oracle (Zitron); Ellison Empire Beseiged On All Fronts (NC); and, this excellent series The Oracle Files by Drey Dossier on YouTube. (For example, this one: How Larry Ellison and Gulf Money Just Bought Your News):]

***

Warner Brothers Discovery shareholders are getting screwed on this new Paramount deal. Okay. And I would like to get into exactly how before they vote on Thursday, the largest media merger in American history is going to a shareholder vote. A merger worth in the ballpark of $111 billion in case you were wondering.

Which means that Warner Brothers, you know, the big conglomerate that owns CNN and HBO, is potentially getting folded into another conglomerate Paramount Pictures, which is the company that owns CBS, MTV, Showtime, and Nickelodeon. And the shareholder vote is April 23rd, this up coming Thursday.

And last Thursday afternoon, which is one week before the vote, Warner Brothers Discovery filed a 14 page correction to the document that shareholders are voting o n.

Now, this is kind of a big deal because this is a 14page addendum to the biggest media merger in American history. And this was filed on Thursday of last week, 4 days ago at this point. 

Now, public companies don't usually rewrite their own proxy statements a week before a shareholder vote, unless of course someone is forcing them to, which usually means that someone being one of their shareholders is suing them in order to do so. So, I checked to see if there were any lawsuits floating around out there, and what do you know? There is one. A shareholder named Donna Nikosia, apologies if I butchered that last name, filed a lawsuit on April 2nd saying that the original document left out a lot of information that shareholders needed in order to make an informed vote. 

And following Donna's lawsuit were 15 other shareholders who had sent letters more or less saying the same thing. And can we all just take a moment here and say thank you to Donna for filing what we all probably knew to be true in the back seconds of our heads that there is information being left out that you need in order to make an informed decision this upcoming Thursday. Now up top I just want to say that I am not a Warner Brothers Discovery shareholder. I have never owned a share of Warner Brothers Discovery or Paramount Pictures. I am just thanking Donna as a media consumer.

All right, and somebody who works within the media ecosystem because I like to keep my media independent and this deserves a lot more scrutiny than it's getting. So WBD, Warner Brothers Discovery, told the court that this lawsuit had no merit and then two weeks later slightly added the information.

Anyways, so this move in business, I've learned, is how you smother out a lawsuit without ever having to say that we are wrong. Now, we're going to get into what was in this correction in a second here because oh boy, were they leaving information out? [...]

You know, I read that 14 page new filing this weekend and there are two companies in it that WBD is still trying very hard not to have to say out loud and is trying even harder, it seems, to smother this from any of the news outlets taking this to the other shareholders. And I think I figured out which ones they're talking about. 

[ed. And this: Why Iran's Blockade is an Oracle Story:]

Most people know Larry Ellison as the Oracle billionaire, which true, you also probably know that he is the largest private donor to the Israeli military in American history.

He's given over $26 million to the friends of the IDF since 2014, including a single $16.5 million donation in 2017. That is the largest gift in the organization's history. And that is the part we have discussed at length. But here is the part that a lot of people don't know. Ellison is not just the largest funer of the Israeli military. 

His company is the operational backbone of it. According to Open Intel, Oracle holds a 26-year contract to build and operate the IT infrastructure for the IDF's intelligence campus in Negv. For clarity, that is the facility that houses unit 8200, Israel's signals intelligence and cyber warfare division and one of the largest listening bases in the world. That is a 26-year relationship extending into the 2040s between a private American company and the intelligence apparatus of a foreign military. 

And that's just the intelligence side because Oracle also runs the Israeli Air Force entire logistics system, the supply chain that tracks his spare parts for F-35s and F-16s, aviation fuel and mutations inventory. Oracle hosts an AI battlefield management system called Fireweaver that coordinates sensors and weapons on the battlefield in real time, which means that Oracle software is making targeting decisions in the kill chain for Israeli Defense Forces.

AI #179 Part 1: A Louder Fire Alarm for General Intelligence

[ed. See also: Part 2: Hearing The Fire Alarm.]

What a week.

Anthropic released Claude Opus 5. As usual I covered that in three parts: The system card, model welfare and capabilities.

OpenAI was revealed over the last two weeks to have left an internal model unsupervised for a week during a cybersecurity evaluation, with its cyber safeguards lowered, despite having had multiple previous incidents where models broke out of their sandboxes. During that test, the model broke out of the sandbox, then proceeded to use an agent swarm to hack into HuggingFace to get the test answers. The model was loose for a week before OpenAI realized what had happened.

This event was a really big deal. There are severe alignment problems at OpenAI, along with supervisory and infrastructure failures. The internal research model that did this, which my posts nicknamed Galaxy, has now been permanently deactivated.

There have been further developments, and I anticipate at least one additional post on the HuggingFace incident soon.

Partly as a response to this, over 1,290 employees at frontier labs signed an open letter, Pacing the Frontier. The letter warns that we are close to automating AI research, and that companies are racing ahead on this faster than we can handle it.

We request that the U.S. government support an international effort to develop the technical and governance tools needed to deliberately pace the frontier of automated AI development.

Both OpenAI and Anthropic put out statements of endorsement. Since that post, others have continued to sign, including OpenAI cofounder Ilya Sutskever and DeepMind cofounder Shane Legg. Dario Amodei has signed. Sam Altman has not signed, but is talking in Washington about the need to pace development.

All three of those developments are more important than anything in the weekly. There is plenty here, but catch up on those key events first if you have not done so.

This week was crazy. I am absolutely not moving to a 7-days-a-week posting schedule, and fully intend to take some weekdays off as soon as there is what passes for a lull. However, there is even more speed premium these days, so I will continue the policy of shifting posts to weekends when the speed premium is especially high.

by Zvi Moshowitz, DWAV |  Read more:

Image: via

[ed. Things are moving fast, too fast. Zvi's newsletter has become the first thing I check every morning. People have long speculated that before AI becomes too dangerous (without our knowing it) we might see "warning shots" that give us time to prepare. It appears we've seen those now, so what are we going to do about it? (assuming people actually view recent incidents as warning shots. Or just don't care (Politico):]

***

In the AI political universe, Zac Moffatt and Josh Vlasto are at the helm of the Death Star.

As the top political operatives at Leading the Future, they oversee a network of pro-AI industry super PACs and nonprofits that friends and foes alike describe as an aggressive, well-funded machine attempting to obliterate their opponents much like the Star Wars superweapon.

Their goal: to defeat candidates who support the strictest AI regulations and champion those who want to unleash the development of the industry.

Tip of the Iceberg

First of major coverage losses expected as a result of the ‘One Big Beautiful’ bill signed into law one year ago.

Nearly 500,000 moderate-income New Yorkers will be dumped from their health insurance plans on 1 July – the first of major coverage losses expected as a result of HR 1, the Republican-led law signed almost exactly one year ago.

The law, sometimes called the “One Big Beautiful Bill Act,” slashed government health spending by $911bn nationally in favor of permanent tax breaks for higher-income families and border security. [...]

The July coverage losses are related to the loss of New York’s “essential plan”, a provision of “Obamacare”. In 2023, the federal government approved a pilot program in New York to cover residents earning 200-250% of the federal poverty level, or up to $39,900 for a single person and $66,625 for a family of three. [...]

Nationally, the law could cause an additional 10 million people to become uninsured over the next decade. Those losses are largely a result of new work requirements for some Medicaid beneficiaries, which analysts predict will be very challenging to navigate and expensive to administer. [...]

In spite of the disinvestment in health, HR 1 is expected to add $3.4tn to the federal budget deficit by 2034, according to the Congressional Budget Office (CBO), largely due to reduced revenue from tax cuts.

“It’s very unlikely that these individuals will be able to afford a marketplace plan. So many of them are going to be caught with no insurance, at least for a period of time – who knows how long,” said Aponte, who expects most newly uninsured people will seek care in the emergency department. [...]

In addition to the cuts imposed by HR 1, the Republican-led Congress allowed special government subsidies to health insurers to lapse at the end of 2025, leading to record-high average deductibles of $3,786 per person according to KFF.

Those rate increases are expected to continue in 2027, with private health insurers already requesting double-digit increases, according to analysts at Georgetown University’s Center on Health Insurance Reforms found. In New York, insurers are asking regulators for an average 20.7% rate increase. UnitedHealthcare of New York proposed a 52.1% rate increase.

Analysts say most rate increases are the result of sicker people seeking insurance, and otherwise healthy people foregoing coverage they feel they can’t afford. Those dynamics tend to make insurance more expensive for everyone.

by Jessica Glenza, The Guardian | Read more:
Image: Albany Times Union/Hearst Newspapers/Getty Images

[ed. Remember this the next time you vote. Republican priorities. I'm not a single-issue voter, but this time I will be. I'm still pissed. If you're not part of Big Rich and can't contribute large sums of money to political campaigns your concerns Just. Don't. Matter.]

Drone WMDs Don’t Need Any New Technology

Drones are cheap, disposable, and the future of war. Over the past four years, we have seen platforms, missiles, and heavy infantry become increasingly obsolete in the face of $500 drones carrying a pack of explosives—a cost advantage that has let Iranians and Ukrainians alike neuter the conventional capabilities of their great power rivals. Eighty percent of casualties in the bloodiest war since 1945 are from drone strikes, Russia has managed to lose one-third of its fleet to a country without a navy, and the US is spending millions of dollars to intercept five-figure Shaheds flying over the Strait of Hormuz.

All this is the result of a technology that is still immature. The violence inflicted by today’s drones is the handiwork of the scant few that manage to evade countermeasures (a mix of radio jamming, high-power microwave weapons, missiles, automatic cannons, interceptor drones, and nets) before making contact. These defenses exploit the inherent limitations of drones—human guidance, GPS feedback, flight exposure, radio links, range—to take them down en masse. And yet, even though 75% of drones manufactured today never reach their targets, they have nonetheless been strategically decisive in Ukraine and elsewhere.

These limitations will not hold for long. Just like bacteria being overexposed to antibiotics, overexposure to counterdrone tech has created an arms race for ever-more-autonomous drone technologies. In the process of facilitating this arms race, states are likely to incrementally create and deploy an entirely new class of WMD—one that could provide rogue states with the nonnuclear means to threaten superpowers, or hand terrorists the means to selectively assassinate their political targets or civilians en masse.

Unfortunately, drone weapons intended for mass destruction have few barriers remaining to mass deployment. Even well before they reach the level of autonomy needed to surgically take out hardened targets on the battlefield, drones will be capable of employing their existing ability to navigate interiors, find and track human targets, and deploy simple antipersonnel devices to indiscriminately threaten civilians. Below, we discuss the looming arrival of miniature autonomous weapons, the limits of counterdrone technology, and the applications of drones as weapons of mass destruction.

Breaking the Last Barriers to Autonomous Weapons

The ideal drone weapon is a slaughterbot: a small, fully autonomous weapon system that can independently select and hunt its targets. For the most part, the necessary technology for such weapons already exists: airframes the size of a fist and the capability to track human targets are already on the front lines in the form of reconnaissance drones and semiautonomous weapons like the Russian V2U. Even now, these micro drones are agile and autonomous enough to hunt down and kill small moving targets like mosquitos—to say nothing of the advances in drone technology expected in the coming years.

From here, the only barrier to weaponization is integration: improving navigation enough to make drone technology useful for mass homicide in an urban setting, as well as packing the necessary guidance, sensor, and payload technology onto a small and energy-efficient chassis. Regrettably, this seems like less of an engineering problem than one of mission design: so long as the attacker is willing to accept indiscriminate targeting and use simple payloads aimed at civilians, the underlying technology is already—or very nearly—ready for practical use.

by Felix Choussat, AI Frontiers | Read more:
Image: uncredited

Tariffs For Debt

Donald Trump’s most consequential construction project may not be a ballroom or an arch, but his tariff wall... By the end of this month, the administration is expected to introduce major tariffs on dozens of countries intended to ensure what once was a temporary regime lasts well beyond this presidency. Unlike most previous rounds of tariffs, including the ones just threatened on Canada, the new ones are backed by monthslong investigations into alleged unfair trade practices by other countries. No court has ever overturned this kind of tariff.

But the biggest obstacle to undoing Mr. Trump’s tariffs after 2028 won’t be legal. It will be financial. With the national debt clocking in at a staggering $39.6 trillion, the market responsible for selling this debt has quickly grown addicted to the money coming into the government every day thanks to tariffs. Few politicians are willing to upset the bond market given that it dictates the cost of borrowing money for some of the most important purchases Americans make including their cars and their homes. Rather than be constrained by these forces, the next president can find a way to use them to the country’s advantage.

It’s a situation almost no one saw coming. It was the bond market that originally thwarted Mr. Trump’s tariffs only 15 months ago.

In April 2025, on the so-called Liberation Day, the president threatened to raise tariffs on nearly everything America imports to their highest level in nearly a century. Bond markets panicked, fearing that a global trade war could bring higher prices and slow growth, and they went into a nosedive, leading Mr. Trump to pause his plans a week later. “I was watching the bond market. The bond market is very tricky,” he admitted at the time.

But Mr. Trump, still convinced that tariffs are the best economic weapon he has available to fix what he believes is an unfair trading system, never abandoned the strategy. In the months following, he relentlessly added tariffs on countries including America’s major trading partners. This time, the bond market shrugged. It certainly helped that the risk of a global trade war faded as Europe, India and Japan all declined to retaliate. At the same time, the United States was adding an estimated $40 billion a week to the national debt. Wall Street found that number much easier to swallow thanks to the new tariff money flowing into the Treasury.

Three months after Liberation Day, the Trump administration used the funds it had raised from tariffs to convince Congress that it had a way to pay for the sweeping tax cuts in the One Big Beautiful Bill. “The Congressional Budget Office put out a 10-year estimate that says that the tariff revenue that’s already in place right now is going to raise $2.8 trillion over the next 10 years,” noted Kevin Hassett, director of the National Economic Council. That, he said, was “deficit reduction right there.” By the end of 2025, the government had taken in a record $264 billion in net tariff revenue — more than triple the receipts from the previous year.

In less than a year, America’s financial markets went from hating tariffs, to being able to live with them, to needing them to help cope with the country’s deficit.

The latest evidence came this winter. In February, the Supreme Court struck down the president’s authority to use the International Emergency Economic Powers Act to levy tariffs. Investors rapidly sold off bonds over worries about the cost of refunds and the end of a revenue stream. Instead of panicking about the introduction of tariffs, the bond market was fretting over the possibility of losing them.

Mr. Trump had a plan ready. Within hours, the administration introduced backup tariffs, and by the end of the day, the market had settled down. When those backup tariffs expire this week, the administration will step in again with new tariffs, ones the courts have consistently said that presidents have the authority to impose. Those could generate nearly $ 1 trillion over the next 10 years.

Over that period, our increasingly untenable national debt is likely to put even more fiscal pressure on future presidents. Regardless of who wins in 2028, the desire to avoid the wrath of the bond market may be at a high.

Mr. Trump’s successor will have options. The next president could keep some tariffs while rebalancing where the revenue comes from — and he should.

Mr. Trump’s recent trade strategy has been to put tariffs on everyone, whether friend or foe. What about a more targeted approach? The logical place to focus is China. Considering that it is now running the largest trade surplus in history, the case against China is stronger than at any point in the past decade.

The smart move would be to cut our allies a deal. The United States could partly lower tariffs on its partners in return for their help raising tariffs on key sectors in China. European leaders, feeling pressure from a crushing wave of Chinese exports on everything from cars to chemicals to steel to solar panels, are likely to be much more receptive to this arrangement than in years past.

by Josh Lipsky, NY Times |  Read more:

Image: Daniel Ribar for The New York Times

[ed. I'm not an economist but it sounds like we're making everyone else pay for our insane, ballooning debt? How long can that go on?  And why would European countries want to help the US at this point after being forced to develop new supply chains for everything from defense to EVs to solar panels etc. after US trade policy became unpredictable and punitive? At least with China they know who and what they're dealing with.]

How Leprosy Was Used as a Weapon Against Hawaii’s Indigenous Population

Father Damien was a dirty man. Everyone agreed on that. Dirt would accumulate under his fingernails; he rarely washed his hands. His clothes—his habitual cassock and wide-brimmed hat—were worn for days on end; he saw no reason to clean his hut in Kalawao, the leprosy colony on the Hawaiian island of Molokai. His detractors claimed he lacked elegance too: burly with a “piggish” head, they complained, he squinted from behind a pair of wonky wire-framed circular spectacles. He was eager to learn Hawaiian, it was noted sniffily, but otherwise he had little enthusiasm for languages. His Latin came only by official requirement, his English was sparse; a native Flemish speaker, even his French was stilted. The prose of his letters lacked refinement whatever their language: “coarse…headstrong and bigoted” was one particularly vitriolic posthumous assessment.

None of this worried Damien. Hawaiian did him fine. From that messy home, built in sight of Kalawao’s cemetery, Damien wrote to his brother Auguste, also a priest, to say that Molokai was exactly where he wanted to be.

"We eat what Providence sends us. The calabash of poi is always full; there is also meat; water in quantity, coffee and bread sometimes, wine or beer never. As I have had to work all week and cook on Sunday, you will excuse me if my hands are not as clean as yours, which do nothing, I suppose, but turn the pages of books. Sometimes the plates are not well washed either. But what matter. Hunger and habit make us eat just the same. For dessert, we smoke a pipe. That finished, quickly back on the horse."

In the saddle, Damien would cross Molokai’s mountains; his parish over two thousand square kilometers, he rode down the island’s valleys beyond Kalawao itself, across water and through fields to find the most remote of his parishioners. Today it is a national park, wild garlic growing in fragrant profusion, its white flowers poking up between ferns, yellow hibiscus and amid the ki-tree, the roots of which were used to brew a potent beer. Across this paradise the finch-like honeycreeper flits, feeding off the red spindly flowers of the evergreen ‘ōhi‘a lehua tree. Damien would haul building material and basic medical supplies with him, eager to provide practical as much as spiritual comfort (though he never left without an ad hoc altar of four sticks and a plank). Sometimes he had to abandon the horse and mules to scale by hand and foot the sheer cliff faces which routinely stood between him and his flock. For Damien dirtiness brought him closer to godliness, the grime evidence of his graft.

For his colonial masters, those disdainful of his personal habits, the priest’s life was alien at best and an affront to Western order at worst; religion was supposed to be a cleansing antidote to indigenous habits, a washing-away of the idolatry and idleness they projected onto the population, be they sick or healthy. Yet here was Damien, adopting their ways, it would seem, along with their language. His body and the leprous bodies of his parishioners were dangerously entangled even before he himself succumbed to the disease. This was 1872, and the pious (and patronizing) commentators of the time muttered that Damien’s unvarnished personality was due to his simple farm upbringing in rural Belgium. “It is absolutely beyond doubt that he contracted the disease through his careless ministrations and uncleanly personal habits,” a representative of the Hawaiian Board of Health tutted, though not without something approaching admiration, noting the priest “would have leper boys at work in his kitchen so that he could give more time to his ministrations for others, being busy from peep of day until long after dark.” Dirty of body, dirty of mind, would be the eventual assumption: sexual proclivity was whispered. Damien’s brother, reading Latin scripture in a clean cassock 12,000 kilometers away, faced no such danger and no such accusations of moral lapse.

Damien was never supposed to achieve the fame he did, a symbol of global imperial paranoia and catalyst of religious fetish: a bronze statue, in which he wears his wide-brimmed hat, stick in hand, now represents the state of Hawaii in the US Capitol building’s Hall of Columns. He was never supposed to be the subject of culture wars in his lifetime and long after: in 2020, Congresswoman Alexandria Ocasio-Cortez decried the choice of a white man as Washington’s symbol of the Polynesian fiftieth state. Damien was supposed to stay working in his parents’ fields in Tremelo, a dull village in a duller part of Belgium. The fact that celebrity landed upon him, plucking him from the obscurity of his mission to represent the burgeoning discourse on the disease, says more about the world that orbited him than his actions on the island or his own political nous. There were plenty of other missionaries, in plenty of other colonies, with plenty of other health issues, spreading religion and the soft arm of imperialism. Leprosy, however, had become totemic of a moral depravity or sexual freedom that Europeans had long imagined pervaded the South Seas. The leprous, lascivious body was a perversion that Western proselytizing could fix.

***

For indigenous Hawaiians, leprosy arrived as Damien did, an unwanted visitor from across the sea. The disease may have stowed away as early as Captain Cook’s colonial voyage, but it only became regarded as a public health issue eighty years later. “The commander manifested a laudable humanity, in endeavouring to shield the population from the evil effects which so inevitably result from connection between foreign seamen and the native females,” wrote one sympathetic European account of Cook’s trip. The evil effects weren’t just moral turpitude, but disease too. “But his efforts were in vain. If the discipline of his own crew could have been strictly enforced, the eagerness of the women was not to be repressed.” Historically, this genesis, regardless of whether the women were actually consenting, inextricably linked sickness with sex in the minds of Hawaiian and colonialist alike, with the former’s lack of conformity to Western and Christian mores taking the brunt of the responsibility in the minds of the latter.

The haole—the white incomers—dodged blame from among Hawaiians for leprosy too. As cases multiplied, the disease became known as ma‘i pake, the “Chinese sickness,” named after the thousands of Chinese laborers who arrived on the islands at the invitation of American traders endeavoring to create an export market in sandalwood (a precursor to the sugar industry that would dominate the economy in years to come). “There seems but one way to prevent the whole of Oceania from becoming leprous, and that is the exclusion or the rigid control of all Chinese coolies,” a Scottish physician warned. Wherever it came from, contact was devastating for the indigenous Hawaiian population, which plummeted from the healthy 683,000 people Cook first encountered to just under 40,000 Polynesian islanders left after a century of colonial enterprise and disease.

by Oliver Basciano, Literary Hub |  Read more:

Image: Kalaupapa, Molokai

The ACA Death Spiral Is No Longer Just a Theory

Insurers are now quantifying what experts long warned would happen: healthier consumers are leaving the marketplace, premiums are rising, and affordability is deteriorating.

I’ve long warned that letting the enhanced ACA subsidies expire could set off a classic insurance death spiral: healthier people priced out first, a sicker risk pool left behind, higher premiums as a result, more healthy people priced out — rinse and repeat. Reports this week from KFF News and other media outlets about 2027 rate filings is the first time I’ve seen that mechanism actually measured rather than predicted.

Insurers filing preliminary 2027 rates in 16 states and D.C. are asking for a median 14% increase, according to a Peterson-KFF analysis. If the rates are approved by state regulators, that would be the second-highest jump since 2018. What makes this year’s filings different from a routine “medical costs went up” story is that insurers are saying that about four percentage points of that increase is the direct result of the enhanced subsidies expiring because of Congressional inaction – and healthier people leaving the pool as a consequence. Another chunk — UnitedHealthcare put it at 12.7% in its New York filing — is attributed to new Trump administration enrollment rules that make it harder to sign up and stay signed up.

In other words, what we’re now seeing is insurance companies telling regulators that the failure of Congress to extend the subsidies, along with the Trump administration’s new enrollment rules — not just rising medical costs — are a measurable share of what ACA marketplace premiums will be next year.

I want to be careful here because its too early to suggest that a death spiral is definitely underway. A full death spiral means an insurance market becomes non-viable — premiums rise, enrollment collapses, insurers exit the market, and coverage disappears entirely for a region or population. That is not what’s happening in the ACA marketplace right now. Enrollment is down about 3 million from last year, which is not a collapse. Federal risk-adjustment programs are still functioning. Most subsidized, low-income enrollees — the bulk of the marketplace — are still price-protected because their subsidies rise automatically as premiums rise. Some insurers are leaving this market – including big ones like Aetna and Cigna, where I used to work – but most insurers are still filing to participate in 2027 in most states, not fleeing the market (not yet, anyway).

What we’re seeing so far seems to be a self-reinforcing cost spiral concentrated among the roughly 5% of enrollees earning above 400% of the federal poverty line who lost all subsidy protection when the enhanced tax credits expired at the end of 2025. For them, the mechanism KFF describes is real and is compounding. And this is the second consecutive year of double-digit marketplace rate increases, on top of last year’s subsidy cliff. While that’’s a genuine affordability crisis for a specific population, it’s not evidence the whole system is on the verge of collapse. But, going forward, as more people continue to drop coverage because of premium increases, the affordability crisis will encompass more enrollees, and more of them will join the ranks of the uninsured.

by Wendell Potter, Healthcare Un-Covered |  Read more:

Image: uncredited

[ed. Thanks to the Big, Beautiful, Backstabbing Bill passed by Republicans, which means more emergency room visits by uninsured people, and higher insurance premiums for the rest of us (exacerbated by cuts to Medicaid). Also, more people pushed into bankruptcy. See also: The Other Health Care Cliff Americans Are About to Fall Off  (high deductibles); and, In Preliminary Rate Filings, ACA Marketplace Insurers Largely Propose Double-Digit Premium Increase For 2027, Following a Steep Climb This Year (KFF); and, despite all this, Republican voters continue to internalize waste, fraud and abuse messaging as being the most important issue (KFF).]

We're Headed for a Depression Worse Than 2008; and Military Spending Isn't Helping

[ed. Which sounds like the good news if AI doesn't kill us all first.]

Michael Hudson and Radhika Desai discuss many of the long-operating forces that have been eating away at the foundations of the American economy, from its super-sized military to neoliberalism and financialization, now exhibiting many late-stage pathologies, from asset speculation to extreme wealth concentration. And as bad as those trends have been, Trump has succeeded in making them worse.

  

Michael Hudson and Radhika Desai examine the gap between Trump's promised economic boom and the reality of an economy sustained by asset bubbles rather than production. They show that the stock market's rise reflects cheap credit, buybacks, and speculation rather than profit, a Ponzi-scheme dynamic that cannot survive the oil shock triggered by Trump's war on Iran. His tariffs have not reversed deindustrialization, and his refusal to end that war guarantees the inflation he promised to kill. The result is a starkly K-shaped economy, in which the wealthiest 1% have seen their assets grow from $10 trillion to over $50 trillion in twenty-five years while the bottom half of Americans have gone from nothing to nothing, pushing the US toward a depression as serious as the 1930s and eroding even his own base's faith in him.

00:00 – Highlights 

01:12 – Channel introduction 

02:02 – Iran war escalation and the coming global oil/energy shock 

06:56 – The dollar's shift from treasury-based to stock market speculation (Ponzi bubble) 13:56 – China's stabilizing role vs. the Fed's inflation-vs-interest-rate gap 

25:06 – Inflation, GDP growth, and why "growth" numbers are largely fake (rents, fees) 34:00 – De-industrialization, manufacturing job losses, and shrinking labor force participation 

42:06 – The K-shaped economy: stock market boom vs. wealth inequality, and Trump's collapsing approval ratings  [...]

Radhika Desai:

Today we have decided to talk about the US economy under Trump. Now, of course, Trump is doing everything in his power to suck the oxygen out of the story about the economy. That includes continuing to escalate wars and all sorts of diplomatic and other shenanigans that he is constantly involved in, berating leaders of other countries and generally trying to make a big spectacle of himself... Anyway, all of these shenanigans are designed to distract attention from the biggest story, the condition of the US economy. Notwithstanding his unhinged and genocidal antics, the topic of the US economy simply will not go away. The world is settling down to summer before the midterm elections, and assessments of the US economy are proliferating. That is what we are going to talk about today, because the US voter votes on her economic condition, and her economic condition is not looking good at all. Michael, what are the headlines from your point of view?

Michael Hudson:

Well, the headline is really that the US economy is all about Donald Trump right now. The main thing, as you have just pointed out, is the war with Iran that he is escalating. Instead of rolling things back, he is bombing Iran. Iran has taken a response that is irreversible. It has closed down trade not only in the Strait of Hormuz but also in the Red Sea, with the Yemenis’ support, and it is bombing Bahrain’s port. It is absolutely certain that there is going to be a shutdown in the oil trade, and that is going to affect the entire world economy and push it into what I think is going to be as serious a depression as the 1930s. That is the US economy... It has been a huge expansion of financial wealth without any real expansion in living standards, real wages, or prosperity for most of the population. All of this financial wealth has been based on credit. Companies are not making more profits. The whole leadership of the stock market has been the seven AI companies linked to computers. AI is not making a profit; it is all speculation that we are going to expand and that there is going to be a huge market because everybody is going to use AI. But all of this market is dependent on computer chips that run on energy. We are going to see energy prices go way up, and that means electricity prices are going to go up. I want to briefly explain why the oil war is so important when we talk about the economy. [...]

Michael Hudson:

I want to explain just how that works. My whole premise in Super Imperialism is that after the United States went off the gold standard in 1971, all of this military spending, which is the major cause of the balance of payments deficit, ended up in foreign countries. The recipients took the dollars, turned them over to the central banks, and the central banks bought Treasury bonds and Treasury securities. What has happened in the last few years is that banks have stopped buying Treasury securities. The growth in international reserves has taken the form primarily of buying gold, not Treasury securities, and yet the US dollar remains strong. What has happened is that the private sector that has been receiving these dollars has not been turning them over to the government to recycle to the US as Treasuries, as you and I have been talking about. They have spent them into the US stock market. What has that done? It has inflated prices and ridden on the wave of the Federal Reserve supporting the banking system and creating huge asset price inflation, starting with the zero-interest-rate policy that Obama began. What has been creating all this financial wealth, making trillions of dollars for financial investors, has not been profits. It has been the ability to borrow at a low interest rate, including low interest rates in Japan, to buy US securities, bid up the prices of stocks, and create a huge credit overhead. So it is not a profit bubble; it is a Ponzi-scheme capital-gains bubble. It is a credit-creation bubble.

The problem is what happens when there aren’t the profits to support the stock buyback programs and the dividend payouts that have enabled borrowers to carry the debts they have taken on to bid up the stocks. If the credit begins to be rolled back here, and two weeks ago we talked about how Warsh and Bessent want to roll back the Federal Reserve’s balance sheet, they want to begin selling the Federal Reserve bonds that they have been buying in recent years to help liquefy the economy. The economy is going to be made much less liquid, and all of a sudden it is like a Ponzi scheme. A Ponzi scheme requires more and more people buying into it to provide the revenue to pay off investors. If interest rates go up, there is no more recycling of all this money into the stock market to help support things, and there is going to be a huge write-down. When that happens, stocks begin to fall. With higher energy prices, higher food prices, and higher costs of doing business, companies will go out of business. The Financial Times and main business sites have been saying the real problem is private equity. They have borrowed money from the banking system to buy companies, and now some of these companies are going to be running losses and closing down operations because it is not profitable to operate with high oil prices, high energy prices, and high electricity prices. Once they close down operations, they will not be able to pay the debts they have taken on, creating the same snowball effect that people expected in 2008–2009, when Obama decided on a bailout of the banks and decades of asset-price inflation to keep the bubble going and save the banking system. We are talking about the dynamics set in motion by the oil war, the rise in energy prices, and the AI demands for electricity that cannot be met because there is no electricity supply. All of this hopium has evaporated, and the result is going to be the serious depression we have been talking about all along. Yet the stock market idles along as if everything is all right. Our point is that these changes are irreversible. You cannot reverse a debt-inflated economy without wiping out the debts. How does that happen? Companies go bankrupt. There is not going to be a Brady Plan for the American economy. It is going to be companies going broke, and there will be a capital flight out of the dollar, not into the dollar. The whole world balance is being thrown out of kilter in a way that, unlike 2009, there is no monetary solution to a problem of actual physical supply of energy, electricity, oil, and chemicals not being available. This is the grand interruption that we are going to be talking about.

by Radhika Desai with Michael Hudson, Naked Capitalism |  Read more:

Image: YouTube

[ed. Not to mention the trillion bucks or so we're spending on the military each year, and the insane level of national debt that's accruing each day (nearly $40 trillion and counting (see this real time clock). The military's current arsenal is also severely depleted and will likely require even more big bucks to replenish expensive weapons systems (that are likely to be antiquated as soon as they're delivered as kinetic warfare rapidly shifts to AI controlled drones (NYT); see also: The US is Blowing Billions on the Wrong Weapons (Atlantic). Finally, remember that non-war we're not fighting? Iran War: Brief US Pause Followed by Renewed Strikes as Iran Intensifies Attacks on Bases and Kuwait Desalination; Continued Speculation About US Operation (NC):]

***

From Larry Johnson in The US Faces a Strategic Crisis with Iran…The Rapid Depletion of US Battlefield Missiles: [...]

These are not just the numbers currently in the hands of US CENTCOM (i.e., the US military command in charge of the war against Iran), these are the total numbers available to all of the US military commands. If these missiles are allocated evenly to the other two critical commands — i.e., EUCOM (European Command) and PACOM (Pacific Command) — then you begin to understand the gravity of this deficit.

Let’s take the case of the Tomahawk missile. Let’s assume there are 3,000 left (I believe that is a generous over estimate) and the remaining number are divided evenly among CENTCOM, EUCOM and PACOM… That means each command gets 1,000. Does anyone want to argue that in the event of a hot war with Russia or China that EUCOM and PACOM respectively would be able to sustain combat operations for more than four weeks? Hell, CENTCOM fired 850 of them during the first four weeks of EPIC FURY.

Here’s another major problem: All eight missile systems rely on rare earth elements — there are no exceptions among modern US precision-guided weapons. The dependence is nearly universal because rare earth permanent magnets are irreplaceable for the high-performance actuators, guidance motors, and seeker gimbals that make these weapons accurate. And who controls the supply chain of these rare earth minerals? China!…

The supply chain isn’t just about mining — it’s about processing, separation, and magnet manufacturing, which China controls:

Mining: China ~60% of global rare earth oxide production
Refining/Separation: China ~91%
Sintered NdFeB Magnet Manufacturing: China **~94%**

Regrets, Maybe a Few

How Biden Enabled Israel’s Aggression Toward Gaza—and Iran (New Yorker)
Image: Saher Algohrra/NYT/Redux
[ed. Another blame shifting mea culpa, usually issued after some self-inflicted disaster that everyone warned against and finally can't be denied - "Who could have known?" and "If only we knew then what we know now". Etc. etc. Iraq, Iran, Climate Change, DOGE, Trump...]

The New Coming Age

Google CEO Demis Hassabis offered us a first rate second rate essay, A Framework for Frontier AI and the Dawning of a New Age. I’ll go over that essay and various responses to it in Part 1.

Part 2 of this post then covers Alex Turner’s resignation, and his story about how he tried and failed to prevent Google from signing up to allow the Department of War to use its models for essentially whatever the government wants, including autonomous weapons.

Demis Hassabis sold DeepMind to Google on condition that something like this would not happen. Yet here it is, happening. A cautionary tale. [...]

***

The Core Statement and Request

He saying we are standing in the foothills of the singularity.

His ask is a Frontier AI Standards Body within the US Government, similar to FINRA, that would govern ‘frontier labs,’ defined as any company that produces a frontier model based on various technical benchmarks. Evaluations would be updated regularly, and vulnerabilities would be addressed, both before and after release.

He is excellent about stating that this is big, really big, no bigger than that, it be big.

Demis Hassabis: I’ve spent my whole life working on AGI because I’ve always had a deep conviction that, if built and deployed responsibly, it would prove to be one of the most beneficial and transformative technologies ever invented. AGI cannot be compared to standard technological breakthroughs, not even ones as consequential as the internet or mobile - it is much more akin to the discovery of electricity or fire. If you stop to think about it, we’ve essentially found a way to make sand think. It’s miraculous.

The magnitude of this technology’s impact will be unprecedented, perhaps 10x of the Industrial Revolution at 10x the speed. It will help us solve some of the biggest problems society faces from accelerating drug discovery to developing new clean energy sources to creating novel advanced materials. We could even reach a point where resources are no longer the limiting factor for human progress, leading to an amazing new era of abundance.

Things Left Unsaid

There is definitely a ‘don’t say the thing’ aspect of this, where he won’t name what the downside risks actually are. When Demis says ‘experts disagree’ he is rather avoidant about the way in which they disagree here.

Nate Soares (MIRI): I’m glad Demis acknowledges that this is a “pivotal moment in human history” during an “extremely intense” race. I’m disappointed that his proposed solution is a “standards body” to evaluate whether models are dangerous, with no plan for what to do once they are.

I’m glad he acknowledges that “experts disagree.” I’m annoyed that he glosses past how the disagreement is about whether there’s a ~5% or ≥50% chance of total catastrophe. We’ve gotta do better.

Aaron Scher: Glad to see AI CEOs speaking publicly about their views on AGI. I think Demis is wrong about his policy prescription: it’s far too little too late. When he says the experts disagree, he means that some think 5% this tech kills literally everybody, some at 40%, some at 90%.

Clearly this is strategic, but if you don’t already know, or are looking to not realize, it is very easy to come away thinking that Demis does mean the effect on jobs, even though when he says ‘safely’ he very much does not (primarily) mean that.

The Proposal

Demis Hassabis: … On the horizon, we will need robust safeguards to maintain control of increasingly agentic, recursively self-improving systems - and tackle unknown issues that will only become clearer over time.

… I’ve always believed in the power of human ingenuity and creativity to solve any problem. I’m confident that mitigating the technical risks related to AI is a challenge we can collectively address, but only if we give ourselves the time and space to get this next crucial step right. Currently, as a field and as a wider society, we aren’t doing that.

He makes clear part of this is about giving us options, including for a slowdown.

The strength of this approach is it would be technically focused, while at the same time supporting innovation and incentivising responsible behaviour. It is designed to keep up with the field’s acceleration and adapt to the biggest risks as they are identified, and could be ratcheted up if the seriousness of the situation demands, including coordinating a slowdown in development among the Frontier Labs if deemed necessary.

Demis keeps it short, not offering many details. To the extent that he has laid out a proposal, it seems to be a good one. It is definitely an improvement on the margin.

Jack Clark (Anthropic): At this point, everyone at the frontier of AI agrees that third-parties should test out AI systems and use these to develop standards to feed into policy - excellent to see @demishassabis laying out a framework to do this!

Samuel Hammond: It is striking to see leadership at Google, Anthropic, OpenAI and Microsoft all fairly independently sounding warning alarms about an imminent technological acceleration.

Thus I file this post and its ask, as high praise, under ‘the least you could do.’

A Good Start But Insufficient

I agree with Peter Wildeford that while better than nothing FINRA is not a great model here, with heightened risk of regulatory capture, and not a substitute for full government action. You need an SEC to your FINRA. That doesn’t mean don’t make the FINRA. It does mean you still need the SEC.

Would such a (at least partly) voluntary regime, only for models intended for release, and without a related binding intentional agreement, be sufficient to solve the problem? No, again it’s just way better than doing nothing, as Peter Wildeford and many others noted.

You do not need to believe, as Aaron Scher and Connor Leahy do below, that only a full halt would be sufficient here, to know we have a long way to go. Demis’s statements here, if you know what they actually mean, imply a level of danger and urgency that is not reflected in the proposal.

Eli Tyre: > Initially, Frontier Labs would voluntarily share models with the Standards Body for review up to 30 days before release.

Is this proposal only intended to address risks from models that companies plan to release? If a company develops a frontier model and never releases it, only deploying it internally to develop even more powerful AI capabilities, are they thereby exempt from this oversight scheme?

Connor Leahy: While @demishassabis is right that we need urgent action to address risks as we approach AGI (and superintelligence, I’d add), the correct response to the threats is not a ‘self-regulatory organization’.

We need to prohibit superintelligence, not give industry regulatory power.

Aaron Scher: … The extinction threat, the “only a few short years”, the “10x the Industrial Revolution”—these aren’t indicators that point to “let’s evaluate models to understand their capabilities and have voluntary safety standards”. We need to back off, we need to halt the creation of ASI.

Point 2: I agree with the attached quote that we need more time. But I think Demis’s optimism is a vibe, not a trustworthy basis for predictions. Rob Miles says it best in this video, if an asteroid we’re headed earth’s way 200 years ago, we’d just die 🤷

Point 3: As others have pointed out, it’s not clear that this proposal would reduce risks from internal deployment (it seems to focus on public deployment and pre-deployment testing), but internal deployment is where much of the risk is.

Point 4: I don’t think the proposed body could actually enact, verify, and enforce a slowdown; there’s ambiguity about what’s voluntary. Again, I think we need a long-term international treaty and to actually back off, not just to slow down a little.

by Zvi Mowshowitz, DWV |  Read more:

Image: uncredited

[ed. See also: The Voice of Google (New Yorker):]

***

I started working at Google in the summer of 2007, straight out of college, as a “new-­grad associate” in the communications department. My first week, I sat with more than a hundred other “Nooglers” (new Googlers) at the company’s weekly staff meeting, T.G.I.F., wearing matching company-issued propeller caps as a kind of ritual hazing. The venue was Charlie’s Cafe, a multilevel auditorium in the heart of the “Googleplex,” the company’s sprawling campus in Mountain View, California. The event felt less like a corporate meeting than like a weekly revival—part stand­up set, part science fair, part sermon, all of it fuelled by keg beer.

Google’s founders, Larry Page and Sergey Brin, were bona-fide public figures by then, and self-­made billionaires multiple times over, but in Charlie’s they were idols. They would often ascend the stage together, practically matching in sweat-wicking athletic clothes and Crocs. Larry had a dopey perma-smile, and seemed delighted by everything, especially Sergey. Sergey was the straight man, with a faint lilt, a product of his childhood in Russia, and an acrobatic build that made him look like he might launch into a handspring at any moment. Their charisma was unconventional, contextual; you had to be there. The audience of employees lapped up every word, giggled at every dad joke. During a Q. & A. portion of the proceedings, even adversarial questions were absorbed into the Google spirit—­it all melted into laughs, love. Merriam-­Webster had added “google” to the dictionary the year before. Fortune had crowned it the “Best Company to Work For” in America. Profits were, as the execs loved to boast, “up and to the right,” fuelled by an online-advertising machine that minted cash beyond Wall Street’s wildest dreams. But the company’s financial success felt almost incidental. What mattered, we told ourselves, was the mission—a conviction that technology could improve the world and that we were helping to build the future. The air in Charlie’s buzzed with collective belief.

That first meeting was the only one I’d ever attend as a pure spectator. By week two, I was working the event—­cordoning off the Noogler section, handing out extra caps—and I soon began helping to draft bits of Larry and Sergey’s script. A portion of my time was spent supporting the P.R. team, and I started to pick up my first press requests, providing office tours to journalists eager to see the “Google experience” firsthand. I studied a “master workplace talking points” document, which was maintained with input from PeopleOps, which was Google-speak for human resources. This was the era of “bringing your whole self to work,” of shiny, smiling H.R. people doing press hits about the importance of valuing employees’ authentic personhood (always with a telling corollary: “Because that’s how people do their best work!”). I was required to attend a training on “conscious business” with a guy named Fred Kofman, an executive coach whom Sheryl Sandberg credited with shaping her “lean-in” ethos. The course was, theoretically, about living one’s courageous values, but its most salient lesson was that employees should take “unconditional accountability”—which, in practice, sounded a lot like never questioning the higher-ups. The message reiterated over and over was that there were two kinds of people in the world: victims and players. You wanted to be a player at all times.

Despite the lore, Google’s offices didn’t make a big first impression. The bulk of the campus had been quickly converted after its previous occupant went down in the fallout from the dot-­com bust. The result was a complex of squat, one-­ or two-level buildings with metal and glass siding, surrounded by a moat of parking spaces, with Google signs plunked into the dirt out front. But there were plenty of amenities to point out—­the massage rooms and nap pods, the dinosaur fossil, the wacky sensory-­break touches like ball pits, swings, and yoga balls (even if no one actually seemed to use them). Foreign journalists seemed more skeptical than their American counterparts of perks such as lunch-­break haircuts or on-site laundry rooms, which I’d heard described as letting Google be your “housewife.”

“Z is is all a big plot to control ze workers, no?” a French reporter said.

At that point, though, I was still learning to see Google through Google’s eyes. I learned to deflect these kinds of questions and pitied the askers, a little bit, for their cynicism.