Weekend reading links

1. Potato glut hits Europe, and in particular Belgium.

Europe faces a surplus of five million metric tons of the type of potato used for fries. For months, the price of a metric ton of potatoes on the spot market in Belgium, the world’s biggest exporter of frozen fries, has languished at precisely zero. It was nearly 600 euros ($690) three years ago.

2. The Murugappa Group (through Axiro Semiconductors and CG Semi), the Tata Group (through Tata Electronics), and Crystal Matrix are leading India's semiconductor chip design and manufacturing push. 

3. Very good assessment of a decade of the IBC law.

The idea was to enable timely exit of non-viable firms, preserve viable businesses, restore credit discipline, and unclog credit channels... Till March 2026, 1,419 companies had emerged from insolvency with approved resolution plans, with the proportion of companies achieving such outcomes improving steadily... Creditors have realised ₹4.32 trillion through resolution plans. The oft-cited haircut of around two-thirds, measured against admitted claims, can be misleading because claims are frequently inflated while asset values are deeply eroded by the time firms enter insolvency. A more meaningful benchmark is liquidation value: Resolution plans have, on average, yielded 167 per cent of the liquidation value. Importantly, firms resolved under the IBC demonstrated operational revival post-resolution. Within five years, sales and capital expenditure nearly doubled, asset utilisation improved sharply, and the aggregate market capitalisation of resolved firms rose from about ₹2.8 trillion to ₹9 trillion... 

In all, 3,003 companies have entered liquidation under the IBC, but most had little realistic prospect of revival. Their assets averaged barely 5 per cent of admitted claims, and four-fifths were already sick or defunct before entering insolvency. The IBC merely provided an orderly exit for firms that had failed long before the process began. Yet, the incidence of liquidations in India is comparable to that in the United States and significantly lower than in the United Kingdom and Australia... Resolution plans rescued 78 per cent of distressed assets, while liquidations accounted for 22 per cent. When all pathways to revival are considered — resolution plans, withdrawals, settlements, appeals, and rescues during liquidation — the number of revived companies substantially exceeds those liquidated.

4. John Burn-Murdoch points to evidence that remote working and NOT AI is responsible for the ongoing declines in entry-level hirings. 

Peter John Lambert and Yannick Schindler have a fascinating counter-proposal: the take-off of remote work. Early-career workers require more supervision than experienced hires, and build important skills, knowledge and social capital by observing and working alongside senior colleagues. Working from home adds friction to these processes, making entry-level workers more costly to bring on board in terms of time and resources and slowing their prospects for promotion. As such, the rise of remote work has worsened the trade-off for hiring entry-level workers, while leaving the calculus for senior hires unchanged. The evidence fits the theory. Lambert and Schindler analysed hundreds of millions of new hires and job postings and found that although both occupational exposure to AI and remote working rates line up with the outsized pullback in junior hiring, the link with AI evaporates once you account for whether a role is remote. In other words, it only looks like AI is behind the hiring crunch for junior software developers because coding jobs are also disproportionately done remotely. Jobs less exposed to AI but amenable to remote work (eg lawyers) have also seen weak junior hiring; roles with high AI exposure but an emphasis on in-person work (eg receptionists) have held up better.

5. Is Steve Jobs leaving the greatest corporate legacy ever?

Apple now rakes in sales of over $1bn a day. Its services business alone, driven by the App Store and Apple Pay, generates more revenue than Netflix, Spotify and Adobe combined, with a margin of around 75 per cent. Under Cook, the company has returned around $1tn to shareholders through dividends and buybacks… Nearly two decades since the product launched, Apple shipped well over 200mn iPhones in 2025 and the device still accounts for about half of Apple’s $400bn of annual sales, with high product margins underpinned by the highly efficient, Asia-based supply chain also created by Cook. Apple’s astonishing profitability is sustained by an annual cadence of new iPhones, each iteration featuring largely incremental improvements on the one before. Research and development spending as a proportion of revenue went from 8 per cent at its height in 2001 to a 2 per cent low in 2012 as the iPhone boom began, meaning that for a while Apple was spending proportionally far less than its Big Tech peers.

6. Good primer on why oil prices have remained less elevated than expected - decline in Chinese oil imports (almost 4 m bpd) and rise in US exports (almost 4.5 mbpd).

7. The US economy is increasingly resembling a one-trick pony of AI.

The US corporate profit share has climbed to a record 13.8 per cent of GDP, while net income margins across the broad US equity market have recovered to about 9.7 per cent, close to earlier highs. At the same time, market leadership has become unusually concentrated: a handful of AI‑linked stocks now account for roughly 40 per cent of the S&P 500’s market capitalisation, according to Bank of America data. Headline profitability is being flattered by a small slice of the economy earning extraordinary returns from the scramble to build AI capacity...

Spending strength is increasingly coming from upper-income households where wealth and income are more tied to equities than wages. The stock market has, in effect, become part of the growth model: rising AI profits lift share prices; higher share prices support the spending power of wealthier households; and that spending helps keep demand alive. Lower-income households, by contrast, are more exposed to squeezed real incomes and softer labour-market momentum... Large technology groups have produced surging revenues and margins with only limited growth in headcount... So long as investors believe AI will earn very high long-term returns, the loop can remain self-sustaining: capital expenditure stays firm, equities stay buoyant and affluent consumers keep spending.

8. The spectacular surge in Google's capex.

Five years ago, its capital expenditure on servers, network equipment and such was $25bn, which it funded out of operating cash flows of $92bn. In 2027, analysts expect $250bn of capital expenditure, versus cash flows of $260bn — a tighter fit. In its second quarter next year, Visible Alpha estimates suggest Google will spend more than it makes, for the first time in its listed history.

9. A good illustration of deficient national security discipline comes from how the US is allowing the exports of tungsten scrap to China even as it spends money abroad buying tungsten mines. 

Since early 2025, Chinese scrap traders have been seeking tungsten throughout the US, prompted by a shortage outside China caused by declining supply and intense demand from the aerospace, weapons and tools industries. The effort has set off a bidding war with American buyers and calls to ban sales of a critical national security resource to overseas buyers... Sellers said they were fielding calls from Chinese buyers looking for the material, while American buyers said they were being outbid by Chinese rivals willing to pay as much as five times the usual price... 

Tungsten scrap commonly comes from worn-out industrial tools such as drill bits and mining equipment. It can be crushed and chemically processed back into tungsten powder or carbide for use in new machinery and tools. The shortage has been triggered by Beijing imposing export restrictions on it and an array of other critical minerals in early 2025 and the country cutting mining quotas. China accounts for more than half of global mined and refined tungsten supply and about half of demand... 

Tungsten is broadly used in military applications, including in bullets and missiles. Traders said stocks were already low before the Iran war and that companies do not typically hold large stores of the metal. There was “no availability” outside China of the so-called “intermediate” products that manufacturers need — mined ore that has been processed... The price of tungsten has risen by more than 200 per cent since May 2025, while tungsten scrap has risen 350 per cent, according to Argus Media.

10. The AI wave is lifting all stocks, including those legacy IT firms like HP and Dell. 

11. India's non-tax revenue fact of week.

In the last three years, the share of RBI surplus in the government’s non-tax revenue has stayed between 42 and 52 per cent.

12. SpaceX IPO in a graphic.

13. Real Madrid at the top of European football club valuations.

14. The universe of PSUs in India has been rising.

15. Rama Bijapurkar's categorisation of India's consumption class.

The important thing is that 93% of households have annual consumption less than $5700.

16. Anthropic facts.

Last month, Anthropic crossed $47bn in run-rate revenue, a metric used by start-ups which estimates annual revenues based on short-term performance. This is a more than fivefold increase since the start of the year... Anthropic’s valuation has soared from $350bn to $900bn in 12 weeks. It is now one of the fastest-growing companies in history.

17. The biggest threat to the US superpower status now appears to be its surging public debt, which is now $36 trillion held by the public and federal agencies 

The exorbitant privilege has ensured the dollar's status as the world's pre-eminent reserve currency and the Treasury market's role as the world's safest haven asset, thereby allowing the US access to unlimited global capital at a low cost. While there are no competitors to the dollar on the horizon, the Treasury's safe haven status is facing competition. 

18. The most important difference between the dotcom bubble and the AI bubble.

19. Japan is losing people. 

Japan’s population peaked in 2008 at 128 million, and it is projected to fall to 87 million by 2070. The country is now roughly the same size it was in 1989... All but two of the country’s 47 prefectures reported population decreases in 2025, and the rate of decline is accelerating.

20. Finally, this says as much about the Indian stock markets as about the Korean and Taiwanese markets.

India’s stock market capitalisation was overtaken in the past week first by Taiwan and then by South Korea, as the value of Indian equities held by foreign investors slumped to a 10-year low of 7.3tn rupees ($76bn) on June 1. The value of Indian stocks was more than double that of Taiwanese stocks and roughly 3.5 times that of South Korean stocks 18 months ago, analysts at Bernstein said this week. “Fast forward just five months into 2026, and that lead has evaporated,” they added. 

Weekend reading links

1. German bread facts of the week.

Germany has what may be the most diverse bread culture in the world. The official bread registry overseen by Germany’s national bread institute (yes, really) lists more than 3,000 types. Specialities include pumpernickel, Dreikornbrot (three-grain bread) and Kürbiskernbrot (pumpkin-seed bread). There are specific regional iterations of rolls: Brötchen in the north, Semmeln in the south. In German the word “bread” is partially interchangeable with “meal”—a working lunch is Pausenbrot (break-time bread), dinner is Abendbrot (evening bread). Bavarians, who always do things differently, add Brotzeit (bread time).

2. The number of Indians studying abroad has tripled in five years to 1.8 million in 2025.

3. Visakhapatnam's data centre ambitions are staggering in scale.

Andhra Pradesh has promised Google, Meta, Reliance, Tata Consultancy Services, and half a dozen others a combined 5 GW of data-centre capacity in Vizag alone. That is more than three times everything India has built in 30 years, in a city that had near-zero data-centre infrastructure six months ago... (the government) has committed to 6 GW across Andhra Pradesh in five years, a cable network twice the size of Mumbai’s, and three undersea cable-landing stations—essentially building a digital future on the eastern coast... The state’s own electricity planning documents project Vizag’s peak district demand at 2.2 GW by 2029. Google alone has applied for 2.1 GW from the local distribution company... 

Google is building a 1 GW campus across three sites: Tarluvada, Adavivaram, and the Rambilli-Atchutapuram cluster. Meta and information-and-communications-technology company Sify are reportedly building a 500 MW facility at Paradesipalem, a village 25km from the city. Reliance and alternative asset manager Brookfield’s joint venture has signed a $11 billion MoU for another GW. TCS, Adaniconnex and real-estate developer Anant Raj round out the cluster. Even if the announced 5 GW materialises, Vizag would rank among the largest data-centre clusters in the world. Northern Virginia, the global leader, sits at 6.6 GW. Beijing, London, Tokyo, Singapore—all around 2 GW each. Mumbai, India’s current data-centre capital, has around 600 MW of operational capacity.

The emerging constraint to these ambitions is power supply.

Deloitte has warned that data centres in Andhra Pradesh alone could add 2–3 GW of peak electricity demand by 2030—up to 20% of the state’s entire current peak load—risking grid instability if transmission infrastructure doesn’t keep up... The Andhra government’s Data Centre Policy 4.0 (the “4.0” a chosen suffix for most of the current TDP government’s industrial policies) offers electricity duty waivers for five years and a Re 1 per unit discount on industrial electricity tariffs for 15 years... state has committed over Rs 22,000 crore in incentives to Google alone... Vizag’s data-centre sites are on the eastern coast, far from the state’s renewable-energy generation zones in the south and west. “You would need entirely new, dedicated high-voltage transmission infrastructure. Not an upgrade to existing lines, but new corridors built from scratch,” said a former APIIC official. “In India, this typically takes years to tender and build. And I don’t see them speeding up the process for these mega projects.”

And the solution is to outsource electricity generation or sourcing to the data centre developers themselves. 

In a first for the state, it has granted a private entity, Google, a distribution company licence, allowing it to bypass the standard grid entirely and procure power directly from generators. Reliance is going further still, building its own 6 GW solar project to supply its data-centre operations... when Google contracts directly with generators at premium rates, those generators have less power to sell to the state discom at regulated prices. The discom, which still has the same demand to meet, has to make up the shortfall by either paying more on the open market (which it then recovers through higher tariffs) or simply cutting supply to consumers who have no alternative. If enough large consumers exit the grid, the discom’s revenue base shrinks while its fixed costs stay the same. Eventually, the grid gets more expensive for everyone who remains on it... The data centres planned in Vizag will operate on a hybrid model—hyperscalers will anchor the demand, local operators will build and run the physical infrastructure. Google is the end user. Adaniconnex builds the campus and co-invests in the power infrastructure. Airtel builds the cable-landing station and fibre backhaul.

4. The rise and rise of Chinese cars.

The market share of foreign firms in China has almost halved in five years, to around 30% in 2025. Moreover, in 2023 China passed Japan to become the world’s largest exporter of cars. In 2025 over 8m of its vehicles went abroad, nearly a third more than the year before. In Europe over the past five years, Chinese brands have gone from almost nowhere to nearly 9% of all sales, estimates Schmidt Automotive Research, a consultancy. Incumbents are also under siege in markets from Mexico and Brazil to Indonesia and Malaysia.

5. China promulgates its version of US CFIUS.

In recent weeks the State Council, or China’s cabinet, has issued two menacing decrees. One threatens trade curbs in response to actions that undermine Chinese supply chains (potentially including shifting orders to foreign factories). The other vows countermeasures against firms that apply foreign sanctions against Chinese companies, which in effect criminalises compliance with American law.

6. If the US sanctions individuals, they will be denied access to the services offered by among others, Amazon, Alphabet, Meta, Microsoft, Visa, Mastercard, Paypal, Apple, Slack, WhatsApp, Zoom, YouTube, Uber, Instagram, UPS, Fedex, Booking.com, and Expedia. FT writes about the scenario of US extending sanctions to services. 

Weaponising services would mark a clear escalation from trade disputes over goods and have huge repercussions for both sides. For decades, Europe’s economic relationship with the US has been defined by deep integration: goods flowing westward across the Atlantic, services coming back the other way. The EU’s surplus for goods in 2023 was €156.6bn; the EU’s deficit for services that same year was €108.6bn. As geopolitical tensions rise, that interdependence is seen by many EU capitals as a weakness that needs to be fortified as fast as possible.

7. A New York Fed study finds that around 90% of the Trump tariffs have been borne by US consumers and companies. 

Further, the complexity of the tariff regimes and its multitude of carve-outs means that the effective rate is lower than the headline tariff.

8. Global economic imbalances are back. Two graphics capture them starkly. The first is how China and the US represent the two sides of the problem. 

Global public sector indebtedness is at historic highs. 

This is a good description of the way out, though it is unlikely to happen on its own. 

As a first-best response, the Centre for Economic Policy Research’s fourth Paris Report recommends fiscal consolidation in the US, boosting household consumption in China and an increase in productive investment — modelled on former Italian premier Mario Draghi’s report — in Europe. These measures would encourage more balanced patterns of global saving and investment.

9. A ten-fold increase in export restrictions since the pandemic.

According to Global Trade Alert, the number of distortive export restrictions and bans has increased dramatically since the pandemic. Before Covid, an average of 22 export restrictions were being introduced a year. Since 2020, that average has shot up to 228.

Weekend reading links

1. On the origins of infrastructure financing in the UK.

In the summer of 1858, Britain’s parliamentarians soaked the curtains in the Palace of Westminster with lime chloride in an attempt to counter the “Great Stink” emanating from the river Thames. It failed. The prime minister demanded the Metropolitan Board of Works construct a sewerage system, legislating to allow the board to raise £3mn. This was to be repaid by a three-penny levy on all London households for 40 years. By 1900, the municipal bond market in England was about 50 per cent of the market for UK government debt. Today it is just 4.7 per cent. Back then, most infrastructure projects were not only financed by the private sector but also backed by hypothecated cash flows from money raised locally. For example, the debt for the 1892 Elan Valley Aqueduct to pipe water into Birmingham was funded by an increase in water rates on businesses and households there. So the residents of, say, Manchester were not funding infrastructure elsewhere.

2. India is marching ahead on adoption of electrotech.  

3. Germany is the poster child for central bank independence.

4. Spurred by surging data centre loads, electricity demand is rising sharply in the US.

Data centre power demand will surge from 34.7 gigawatts in 2024 to 106GW by 2035, according to BloombergNEF, a research group, equivalent to more than 80mn homes. Overall US electricity demand is forecast to jump by a quarter by 2030 and by 78 per cent by 2050, compared with 2023, according to consulting firm ICF... Between January and November, the latest month for which data is available, the cost of electricity for residential customers in the US increased by 11.5 per cent.

5. Most Indian state boards focus on memory and conceptual understanding, as opposed to analysis and application. 

6. At 16%, US after tax corporate profit margins are at historic highs.

7. Nick Bloom, Paul Mizen, Gregory Thwaites et al have an estimate of the costs of Brexit (HT: Adam Tooze)

These estimates suggest that by 2025, Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time. We estimate that investment was reduced by between 12% and 18%, employment by 3% to 4% and productivity by 3% to 4%. These large negative impacts reflect a combination of elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process.

8. Some data on students and migrants from Asia in the US. Even as enrolment of Chinese students has declined, that of Indian students has taken off since 2014. While Chinese students were mainly for the UG programs, Indian students have been mostly for PG studies. (HT: Adam Tooze)

Indian students dominate the workforce of computer science workers. 

Similarly, Indians dominate physicians and Filipinos dominate nursing. 

9. India has one of the lowest free floats in its equity markets.

10. Japan's public debt at 237% of GDP is way off the charts, and considerably constrains Sanae Takaichi's room to manoeuvre. 

11. Tej Parikh writes that UK's biggest economic challenge is its political instability.

The UK doesn’t have a productivity puzzle. The causes of Britain’s weak underlying growth are well known and discussed ad nauseam. Why policymakers aren’t delivering is the bigger conundrum. Instability undermines business investment, hiring and planning decisions, and absorbs the political bandwidth that could be used to address lacklustre growth... Uncertainty and slow growth weaken the appeal of UK assets too. Pound sterling and British stocks have underperformed relative to peers over the past decade. Long-term UK government borrowing costs have remained elevated compared with other G7 nations, having come under frequent selling pressure thanks to fiscal mishaps... For all the turbulence, Britain remains attractive. London remains the leading European destination for foreign direct investment. The country’s strengths in finance, university research, tech and life sciences are draws. Cheap assets add to the allure.

12. Fascinating account of China's largest hotel chain, H World, with 12,700 hotels, adding 1700 hotels in 2025, aiming for 20,000 hotels by 2030, and took in 8.3 m guests during last year's Lunar New Year holiday. As a reference, Marriot has 10,000 hotels worldwide. 

H World was launched in 2005 by Ji Qi, co-founder of online travel booking site Ctrip, after he took inspiration from the multi-brand French group Accor... Its Hanting Inn brand, a fixture of the streets of major Chinese cities, often charges well below Rmb300 ($43) a night, while mid-range Ji Hotels typically cost slightly more. H World has several other brands, while internationally it also operates German brand Steigenberger. Its franchise model mirrors an approach that other Chinese businesses have used to expand in consumer sectors from bubble tea to fast food. For the “vast majority” of its franchised hotels, H World retains a degree of control, sending in hotel managers on its own payroll under what it calls a “manachise” approach. In the US, “typically the franchisees decide almost everything . . . we think in China this would not work,” said He. “A lot of people would not abide by your rules.”

13. VC funding for India's tech startups has fallen 73% since 2021, which also coincided with the rise of Byjus.

14. Fascinating account of the Jeffrey Epstein world. 

15. Shruti Rajagopalan has a good essay on India's AI ambitions, and more. This on regulation.

The EU went first and went heavy, a binding cross-sector AI Act with tiered risk categories, compliance obligations, and a governance apparatus that could employ a small city. China took the authoritarian-efficiency route. Regulate fast, regulate specifically, and make sure the state retains control over what models can say and do. The US, characteristically, has been light touch at the federal level, leaving governance to a patchwork of executive orders, state laws, and vibes. India, with these guidelines, has landed somewhere interesting, closer to the US in its instinct to avoid a standalone AI law, but far more deliberate in articulating why it is choosing not to regulate horizontally yet. The framework’s core bet is that India’s existing legal infrastructure (the IT Act, the Digital Personal Data Protection Act, sectoral regulators like the RBI and SEBI) can handle most AI risks if enforced properly and updated where needed...

Do not regulate the technology itself, govern its applications through the regulators who already understand those domains. Build incident databases so you learn from failures instead of pretending to prevent them through preemptive compliance theater. Use “techno-legal” mechanisms (standards, system-architecture-level controls, provenance tools) so that compliance scales without armies of auditors. Create sandboxes so regulators can see what actually goes wrong before writing rules. The explicit preference for “innovation over restraint,” listed as a core principle, rejecting the EU’s precautionary posture. Both committees looked at Brussels and decided that regulating AI the way you regulate pharmaceuticals, before you know what the side effects actually are, is a bad trade for a country where AI adoption is still nascent and unevenly distributed... The liability framework it recommended is graded. The regulated entity remains liable to consumers for any losses, but first-time failures where the entity followed prescribed safeguards and reported promptly would not automatically trigger full supervisory penalties. A rigid liability regime that punishes every probabilistic error will cause institutions to constrain AI capabilities to the point of uselessness.

16. Shyam Saran writes about Marco Rubio's speech at the Munich Security Conference, describing it as an "unabashed white, racist manifesto". 

His remarks celebrated the history of conquest, exploitation, barbarity, and even ethnic cleansing, which has marked the history of Western imperialism and colonial empire-building across Asia, Africa, and Latin America. He wants this to be a source of pride and inspiration, not something to “atone for purported sins of past generations”. What is perplexing is that the history of the world after the Second World War, which is often described as an American era, is instead seen as a period of Western decline: 

“But in 1945, for the first time since the age of Columbus, it [i.e. the West] was contracting. The great western empires had entered into terminal decline accelerated by godless communist revolutions and by anti-colonial uprisings that would transform the world and drape the hammer and sickle across vast swaths of the map in the years to come.” Anti-colonial uprisings, which would include our own against British colonialism, are not celebrated as struggles for freedom and human dignity but as evidence of the abdication of the Western will to rule. Strange that this should come from a representative of a country that is celebrating 250 years of its own successful war of independence against British colonialism.

17. AI is leading to changes in software industry business models, resulting in less predictability and more uncertainty.

Software companies have, for decades, sold their wares on a “per seat” basis, where an employee gets unlimited use of a package of tools. Think of the traditional Microsoft 365 licence... In a world of AI “agents” carrying out duties autonomously, that model makes less sense. The unit of account will no longer be users but tasks completed, queries undertaken, and data “tokens” used. Sticky, predictable, year-round software-as-a-service revenue — the kind of thing that private equity firms love because it makes companies easier to load up with debt — may become an endangered species. Some are already embracing the post-seat era. Snowflake, a data management software maker, charges based on consumption, as does Databricks, an unlisted hotshot valued at $134bn, according to Crunchbase. ServiceNow is one of many working on hybrid models, where monthly fees meet pay-as-you-use add-ons... consumption-based pricing... Software companies’ predictability was an asset that contributed to high valuations.

18. Europe telecom industry facts of the day

Europe has more than 44 mobile operators that each have more than 500,000 subscribers compared with eight in the US and just four in China, according to industry group Connect Europe’s State of Digital Communications 2026 report.

19. China high-speed railway facts.

China’s railways have in recent days been ferrying about 20mn passengers a day, with half a billion train trips expected over the 40-day lunar new year period... Nearly three-quarters of passengers will travel at speeds of greater than 200kph, streaking across the country in the white and silver high-speed trains that have become a defining symbol of China’s industrial might. In December, China reached 50,000km of high-speed rail, enough track to circle the globe, compared with 8,500km in the whole of the EU as of 2023. Just over two decades after it was launched, the network now links 97 per cent of cities with populations of more than half a million... China opened its first high-speed passenger line in 2003 between Qinhuangdao and Shenyang in the north-east, with speeds of 200kph. The World Bank estimated in 2019 that China spent about $17mn to $21mn per kilometre on high-speed rail... Another 20,000km of track is planned by 2035... 

China has benefited from a combination of relatively cheap land, enormous scale, standardised designs and a permissive regulatory environment, experts say. The country’s rail project is now overseen by China State Railway Group, a huge state-owned enterprise that operates the network and helps fund new line development. The group plans to invest Rmb520bn ($75bn) this year... The group’s total liabilities have mounted to Rmb6.4tn. China State Railway reported a modest profit of Rmb11.7bn in the first three quarters of 2025, following several years of losses during the Covid-19 pandemic. Analysts said profits from the freight network helped offset losses from passenger high-speed rail. Local governments typically share the burden of building and operating the tracks. But many are struggling with their own shaky finances following the pandemic and the collapse of the property market.

20. Finally, the US Supreme Court has struck down the tariffs imposed by Donald Trump under the International Economic Emergency Powers Act. Also this. 

Weekend reading links

1. Dame Sarah Mullally, 63, becomes the 106th Archbishop of Canterbury, the first woman to serve as the senior-most bishop of the 85 million-strong Anglican Communion since the role's creation for Augustine of Canterbury in 597 AD!

2. Kevin Warsh as Fed Chairman may pursue significant changes to the way the Fed sets monetary policy.

The Fed’s vast bond-buying programmes, which Warsh initially supported as a Fed governor during the financial crisis, are at the centre of the Trump administration’s allegations that the central bank is acting far beyond its remit to keep prices in check and maximise employment. The... quantitative easing, expanded the Fed’s balance sheet from less than $900bn in 2008 to a peak of almost $9tn. The balance sheet now stands at $6.6tn, following a three-year reversal of QE — dubbed “quantitative tightening” — that the rate-setting Federal Open Market Committee has recently paused amid signs banks were falling short of reserves. Warsh has said he would like to shrink it much further... Warsh in April said successive QE programmes meant politicians found it “considerably easier appropriating money knowing that the government’s financing costs would be subsidised by the central bank”... 

Warsh’s claims that the response to the pandemic “was the biggest monetary policy error in 45 years”... Along with shrinking the balance sheet, Warsh would like to change the Treasury-Fed Accord, a 1951 agreement seen as the foundation for the US central bank’s freedom to set interest rates free from political pressure. Warsh has said he wants a “recommitment” to the accord that would entail a smaller, less powerful central bank, with some control of its balance sheet handed to the Treasury... Trump’s nominee will push the Fed’s staff to gather more “real-time information” to rely less heavily on official government data that comes on a longer lag... He could also deploy economists to find out whether his view is right that an AI-led productivity boom can boost US workers’ pay without stoking inflation — a move that could potentially pave the way for more interest rate cuts.

This is Warsh's WSJ op-ed of March 2023, where he called for an "economic regime change", including stopping the practice of providing forward guidance and stopping the provision of forecasts of the path of interest rates. The expectation now is that Fed may dispense with its widely followed dot plot showing the interest-rate projections of each participant of the FOMC, and end the tradition of press conferences by Fed chair following every FOMC meeting. 

3. Soumaya Keynes points to new research that links commerce and markets to the shaping of cultural norms.

One 2010 study ran money-sharing experiments across a diverse mix of communities, including smaller ones where people foraged or hunted for food. In those less marketised societies, norms around fairness towards strangers seemed weaker... A new study by Max Posch of the University of Exeter and Itzchak Tzachi Raz of Hebrew University takes a different approach, exploring the US economic transformation between 1850 and 1920. Thanks in part to a vast expansion of railroads, internal commerce became much easier. Mail-order catalogues served remote communities with items including shoelaces, suitcases and booze. The researchers compared places and people gaining more and less market access. Unsurprisingly, they found that in the places that enjoyed juicier connections, work shifted to involve co-operation with more distant partners...

Compiling many metrics, they found that on at least three dimensions, new markets did seem to affect culture. First, commercial opportunities made people more outward-looking. In places that became more connected, Americans became more likely to marry someone outside their local community and parents more likely to pick out nationally common names for their children. Second, access to markets raised tolerance levels, as measured by higher religious diversity and greater variation in family size, as well as mothers’ ages at their first birth. (The logic being that more dispersion should reflect more of a “you do you” attitude.) Third, greater market access came with higher trust towards others, as extracted from language in local newspapers. This measure wasn’t perfect, but reassuringly matched trends in more recent survey data, and fell during wars... Instead, they emphasised a story of rapid cultural adaptation among people who were most engaged with impersonal, anonymous exchanges. The changes in naming practices, for example, were concentrated among migrants working in industries that were more exposed to trade with other parts of the country. For those working in construction and entertainment, the market access had no effect.

4. Paul Blustein questions claims about the dollar's dethronement. 

Participants in this market are international banks, securities firms, multinational corporations, insurance companies and pension funds — the biggest private actors in the financial system. Their globe-girdling operations require the movement of immense amounts of money across borders on a constant basis. They use the market to hedge themselves against currency fluctuations by trading a pair of currencies (say, the dollar and Japanese yen) twice, first at the current exchange rate and then swapping back later at an agreed rate. Japanese life insurance companies, for example, invest their portfolios heavily in US Treasuries and other dollar securities. Because they have obligations in yen to their policyholders, they need to protect themselves against movements in the yen-dollar rate and they use swaps to do so. These sorts of transactions occur at such a huge scale that, according to data from the Bank for International Settlements, the amount of outstanding swaps currently stands above $100tn. Some 90 per cent involve the dollar, reflecting the myriad ways it is used. Unwinding all of this activity and subbing in another currency would be staggeringly costly and difficult.

The $12.6 trillion European holdings of US Treasuries confer less leverage to the Europeans than they appear.  

Europe’s US government debt holdings don’t translate into usable leverage, because most of them can’t be politically co-ordinated and selling would be self-defeating. The reason is simple. “Europe” may hold a lot of US assets, but that doesn’t mean Europe can control them or deploy them as a co-ordinated political tool. Much of Europe’s exposure actually sits in private portfolios — pension funds, insurers, banks, and asset managers — not in a single public balance sheet that can be mobilised strategically.

But while a deliberate and coordinated weaponisation is difficult, "a slow, decentralised buyers' strike, as investors gradually stop adding to US assets" is a distinct possibility.

5. Singapore's acclaimed public housing model.

More than three-quarters of its citizen and permanent resident population live in 1.1mn government-built flats, bought at subsidised rates... Rising property costs, notably in the resale market, have sparked concern over affordability, while the lottery system for allocating flats, which favours traditional nuclear families, is being tested by changing social norms. Over the longer term, property values are also being eaten away by the 99-year leases on which they are sold. “The main thing that worries me is that . . . as the lease clock ticks down and as the stock ages, housing equity drops to zero,” Gee added...

When Singapore introduced national service after gaining independence in 1965, home ownership was also encouraged as an incentive for conscripts to fight for their country. Today, more than 90 per cent of Singaporeans live in an owner-occupied home — among the highest rates in the world. Properties are allocated to would-be buyers via a lottery system to applicants who are typically required to be married, engaged or older than 35. Prices are eased through a raft of government subsidies based on personal circumstances. Singaporeans can also dip into their mandated savings and pension plans and obtain mortgages and loans from the HDB directly. But critics have said that the lottery system is unfair to singles and non-traditional families, for whom it is harder to get a flat. Singapore’s marriage rate has been steadily falling in recent decades, dropping from 57 per 1,000 unmarried males in 1994 to 42 in 2024. The HDB system has also been used by Singapore’s government to promote multicultural integration by setting limits on the proportion of different ethnic groups in the same estate. However, this policy has caused problems for some in the resale market by restricting potential buyers... Construction ground to a halt during the Covid-19 pandemic... Wait times to move into a property rose from three years to as many as six. As a result, more buyers turned to the resale market, where HDB owners can sell properties after five years of occupancy. This led to a sharp rise in resale prices, especially in more desirable estates.

6. FT has a long read on Latin America's rightward turn.

“Crime and violence is clearly the top concern of Latin Americans today,” says Jean-Christophe Salles, Latin America chief executive at pollster Ipsos. “It is the biggest concern in almost every country.” Some 55 per cent of Latin Americans name crime and violence as their prime worry, according to Ipsos data, against just 34 per cent worldwide. In Chile, the figure rises to 62 per cent. Fear of crime propelled arch-conservative José Antonio Kast to a landslide presidential election victory last month in Chile over a Communist opponent, Jeannette Jara. His broader rightwing message had failed in two previous elections, but this time he won by focusing on pledges to erect border fortifications, deport illegal migrants and reduce crime...

El Salvador’s President Nayib Bukele is the inspiration for many rightwing challengers across the region. His extraordinary success in transforming El Salvador from one of Latin America’s most murderous countries to one of its safest — albeit through mass incarceration and authoritarian rule — is firing up anti-establishment conservatives across the region just as it enters a major election cycle... Bukele’s newly built giant prison, the Centre for Confinement of Terrorists (Cecot), which has capacity to hold about 40,000 inmates, many detained indefinitely... Even Costa Rica, a country so peaceful that it decreed the abolition of its army in 1948, has been shaken by record levels of drug-related murders. Ahead of elections on February 1, its outgoing president, Rodrigo Chaves, appeared with Bukele to lay a foundation stone for Costa Rica’s own version of Cecot, a $35mn maximum security jail project with capacity for 5,100 prisoners... In Peru, which is set to go to the polls in April, leading presidential contender and former mayor of Lima Rafael López Aliaga is promising to fight what he calls “urban terrorism” with life sentences for serious crimes... In Mexico and Uruguay, leftwing incumbents are cracking down on violent crime to curry favour with voters.

7. The rising share of debt raising by hyperscalers (companies like Alphabet, Amazon, Meta, Microsoft, and Oracle) to finance their AI infrastructure rollouts.

8. What does the India-EU FTA mean for Europe?

9. Ed Luce has this description of the breadth of the Jeffrey Epstein network.

This includes the sitting US president and a previous one, big Wall Street figures, a network of Ivy League luminaries, Silicon Valley entrepreneurs, foreign government officials, Democrats, Republicans, a Maga influencer, a far left scholar, British and Norwegian royals, wives and girlfriends of powerful men, government lawyers, heads of law firms, movie directors and endless celebrities. Epstein’s network is an MRI of the establishment. The idea that anyone did not know about Epstein’s conviction as a sex abuser is absurd. Some people spurned his social approaches. Having been invited in 2010 to an Epstein dinner with Woody Allen and then Prince Andrew in New York, the magazine editor, Tina Brown, replied: “What the fuck is this . . .? The paedophile’s ball?” Brown’s reaction should have been everyone’s. So should that of Melinda Gates, the now ex-wife of Bill Gates, who stepped into Epstein’s home once and immediately regretted it. Alas, their reaction was all too rare.

10. Fascinating account of the egregiously one-sided US-Japan trade deal.

Proposed projects are screened for “strategic and legal considerations” by a committee of US and Japanese members, according to a joint MOU and a document prepared by Japanese officials. Projects are then sent to an investment committee headed by US commerce secretary Howard Lutnick, who chooses which proposals to send to the US president for approval. Donald Trump has the final say on which projects are “deemed to advance economic and national security interests”. Japan and its state-backed bank can delay or refuse to proceed but face potential penalties, including higher tariffs. Funds for approved projects — from JBIC or with guarantees from Japan’s insurance corporation — then flow into an SPV alongside “the provision of land, water, power, energy, offtake agreements, regulatory support, etc” from the US. Free cash generated by projects will be split equally until the Japanese loans are paid back, according to officials. After that, the US will receive 90 per cent. Officials believe Japanese companies outside the project can also make agreements with it separately, with terms negotiated that are different from the US-Japan split of cash flow... The way the agreement with the US is structured also means that if Japan delays or refuses to fund a project recommended by Trump, it could be liable for “catch-up” payments or an increase in tariff rates.

11. Elon Musk may have pulled off the biggest bluff of the century by merging SpaceX with xAI to create the most valuable private company at a combined valuation of $1.25 trillion. xAI, which had revenues in the low hundreds last year and is burning through $1 billion a month, was bought by SpaceX at an eye-popping valuation of $250 billion. Musk says that the move was needed to launch data centres into space, build factories on the moon and colonise Mars. Musk controls both the private companies, whose combined valuation has increased by over $1 trillion in 18 months. To pay for the deal, SpaceX will issue $250 bn in new shares, thereby diluting the existing shareholders.

This from the comments section sums up the deal

You set your own price for a company you own, sell it to another you own and, miraculously you can then leverage the hell out of it.

12. Thailand has become the sick man of Asia

South-east Asia’s second-largest economy has been stuck at about 2 per cent growth for the past five years, with its pivotal drivers of consumption, manufacturing and tourism all in decline... Making matters worse are prolonged political instability and frequent changes in leadership. The royalist-military establishment has been locked in a stand-off with reformist parties that have won the past two elections but have been blocked from power. Thailand has had three prime ministers in as many years... Signs of economic malaise are increasing. Banks worried about defaults are lending less, the property market is in its worst slump in three decades and headline inflation turned negative last year, signalling weak demand. Thailand’s stock market has been the worst performer in Asia over the past 12 months, declining 10 per cent in 2025 in local currency terms. The government has projected 2 per cent growth this year, but the IMF has forecast just 1.6 per cent, the slowest among major south-east Asian economies...

Manufacturing has been on the decline for years, weighed down by weak domestic demand, an influx of cheaper Chinese goods and intense competition from newer manufacturing hubs such as Vietnam. That has also taken a toll on Thailand’s once mighty auto sector. The country was a regional hub for car manufacturing but Nissan, Honda, Suzuki and others have shut down factories or scaled back production in recent years... Household debt-to-GDP is close to 90 per cent, among the highest levels in Asia, as wages have remained stagnant. And Thailand’s population has been shrinking for four years, with the birth rate hitting a 75-year low in 2025... Tourism, another economic engine, is sputtering and this has had a knock-on effect on retail, agriculture and hotel construction... Thailand recorded 32.9mn foreign visitors in 2025, a 7 per cent fall from the previous year and still below the pre-pandemic peak of 40mn tourists in 2019.

13. US federal debt is at pre-war highs.

14. With the purge of General Zhang Youxia and Gen Liu Zhenli, Xi Jinping has removed all the six members of the Central Military Commission (apart from himself), 35 out the 43 generals in leadership positions of the PLA.

15. Indian cities need much more buses.

While the Ministry of Housing and Urban Affairs recommends 40-60 buses per 100,000 people, India’s cities together have only about 47,650 buses, nearly 61 per cent of which are concentrated in just nine mega cities.

16. Primer on Project Vault, the $12 bn US program to procure and develop a reserve of critical minerals for civilian and other purposes through a public-private partnership involving the US federal government and US companies. 

Project Vault is a public-private partnership that will buy and store critical minerals and rare earth elements. These include gallium and cobalt, which are essential for modern technology and defence equipment. It will combine $1.67 billion in private seed funding with another $10 billion from the US government’s Export-Import Bank... Companies will make an initial commitment to buy materials later at a fixed inventory price. They will also pay some upfront fees. Based on these commitments, companies can give Project Vault a list of the materials they need. The project will then purchase and store those materials. Manufacturers will pay a carrying cost that covers loan interest and storage expenses.

16. Mihir Sharma has an excellent op-ed that raises the questions about the emerging international order arising from the US National Security Strategy released in December and the more recent National Defence Strategy. Both are anchored around an America First approach that narrowly defines its interests in terms of drug trade, energy security, immigration, etc. 

The rest of the world matters only as a market or as a source of certain raw materials that are not specifically available in the US. This is not a status-quoist view of the world, nor is it radical or aggressive. It is essentially defensive. US interests are defined far more narrowly than earlier, and are more localised. But they will be as aggressively and unilaterally defended as ever, perhaps more.

I'll blog on this in due course.

17. Some staggering numbers in the Big Tech capex plans announced this week, along with their quarterly earnings which have spooked the markets. 

Big Tech stocks sold off heavily after unveiling plans to spend $660bn this year on AI, as investors fret that the “breathtaking” capital expenditures are outpacing the earnings potential of the new technology. Amazon, Google and Microsoft are set to lose a combined $900bn in market value since filing their quarterly earnings over the past week... Along with social media giant Meta, their proposed outlay on data centres and specialised chips needed to train and run advanced AI models would mark a 60 per cent rise from the $410bn they spent in 2025 and a 165 per cent increase from $245bn in 2024... Even a 14 per cent boost to their combined annual revenue to $1.6tn was not enough to overcome the pessimism.

18. Big infrastructure deal in the UK, as Canadian pension fund majors CPPIB and Omers announced sale of their 34% and 33% stakes in Associated British Ports (ABP) in a deal estimated to value the UK's biggest port operator, owning 21 ports in the UK, at more than £10bn. ABP was taken private in 2006 by a group of investors including Goldman Sachs' infrastructure arm and Omers, for £2.8bn. Ownership has chaged over the years, with CPPIB taking stake in 2015, along with others like Singapore's GIC and Kuwait Investment Authority's Wren House Infrastructure. CPPIB manages C$777.5bn ($568bn) of assets and Omers manages C$141bn of assets.