Readers here...

 ...are not suprised at the spike in Vol.

Still has some time before weak hands get forced out.

"Why take a chance?" - Cleaning House in the Middle Kingdom

There is a scene in the movie "Casino" that ushers in an incredibly violent motage that focuses on "cleaning house" (eliminating anyone who could testify or cooperate with law enforcement, aka "rats")

Life imitating art.  Who knows how many are compromised and Xi Jinping must be uttering "why take a chance" under his breath...

By Foster Wong and Josh Xiao
(Bloomberg) -- China removed nine military lawmakers from
its national parliament in the latest sign that President Xi
Jinping’s purge of key defense establishment personnel continues
to widen.
The country’s top legislative body revoked the membership
of Ground Force Commander Li Qiaoming and Information Support
Force Political Commissar Li Wei, along with seven other
military officials, during their two-day meeting this week,
state-run Xinhua News Agency reported on Thursday citing a
notice from the National People’s Congress Standing Committee.
The dismissals from the 14th National People’s Congress
include Ground Force’s Ding Laifu; Central Military Commission’s
Bian Ruifeng and Wang Donghai; Navy’s Shen Jinlong and Qin
Shengxiang; Air Force’s Yu Zhongfu; and Rocket Force’s Yang
Guang, according to the report, which didn’t provide reasons for
the removals.

Volatility (part N)

 More of the same and see previous posts for the timeline I expect.

Volatility...

 The Recapitulator believes the Ides of March will herald the return of volatilty, which is looking rather cheap in that context...

VIX get 19% increase today...

 ...on a holiday no less.  More pre-shocks.

Minnesota Fraud and Trust/Non-Trust societies

TLDR:  Justice moves arithmetically and retrospectively. fraud moves exponentially and contemporaneously. This is a problem for the United States.

The Recapitulator resides a town over from downtown Minneapolis, which is suffering from all sorts of issues at the moment but I will discuss "Justice" a bit here.

One of the challenges with Western Society importing immigrants is the issue of a low-trust vs. high- trust design for the prevailing Justice System.

The West is culturally a high-trust Justice System design. This is based on cultural values which assume "honesty" in the community as a whole and dishonesty as relative outliers. Because this is the assumption many safeguards and guardrails are built into the investigatorey and prosecutorial arms of the government. These act as checks against government power.

This system also relies upon rights, responsibilities, of citizens and controls upon authorities to limit power and enforcement. There is a presumption of innocence. Social enforcement of dishonesty is also purvasive. If one is known as "dishonest" in this space, one's opportunities are truncated and one risks being a pariah.

Conversely, low-trust justice systems assume transactions are arms length, fraud and deception are part of the game, and participants should dispense with long-term social punishments.

Minneapolis in particular serves as a particularly good laboratory for what happens when low-trust communities are imported into a high-trust Justice system designed on cultural norms based on honesty.
Justice moves arithmetically...and fraud (including political fraud and collusion) moves exponentially

Given the resource drain that investigations, prosecutions, and convictions demand, scaling up fraudulent operations acts as instant insulation from future enforcement. The process of gathering evidence, prosecuting, etc., etc. makes the US Justice system powerless to combat low-trust populations for the most part if efforts are coordinated and allowed to scale. A first-mover advantage.

For example, the largest RICO (Racketeer Influenced and Corrupt Organizations Act) case in US History, US vs. MS-13, the number of defendants topped a whopping 73 people. From indictment to sentencing took approximately 8 years.

The possible Defendants of the Fraud in Minnesota could number 2-3 orders of magnitude greater than this, putting immense pressure on a high-trust Justice System designed to limit Governmental power, which of course is not accidental.

All of this puts pressure on a Justice System based on high-trust cultural values. And therein lies problems, with future "solutions" that would be terrifying if they were not already in motion.

We are hurtling towards near-omniscience with AI driven surveillance systems. A possible sollution to the inherant scaleability problem above would be to eliminate some of the safeguards associated with a high-trust Justice system in the name of expedience.

The ramifications on culture are obvious. And its interesting to note the experiment of expecting instutions fo change cultures by moving populations from low-trust to high-trust locales has failed. And yet, the solution may harken a different, perhaps even more complicated and dark moment for "Justice".

I can hear the "solution" now...

"Have some issues with exponentially expanding fraud in light of an arithmetically limited Justice system? Sure we can build an app for that! But it will not involve the Courts...or Congress. All we have to do is remove the guardrails. We can always replace them if it does not work right?"

Boots on the ground Economic perspective in Venezuela...

 As a preface, all the VZ friends of The Recapitulaltor have applauded the US action.  Again, dear readers, its not like the Monroe Doctrine was not invoked before...by Democratic Presidents...

The Obama Doctrine

So this snippet is a microcosm.  On a more amusing note and as a person living in Minnesota, it does seem a strange confluence of things leading back to here (Walz, fraud, etc.  Cargill is headquartered here)

https://x.com/agrisacademy/status/2008280244105380254

Cargill was/is the leading producer of critical staple ingredients such as flour, pasta, vegetable oil, and rice in VZ. I am not saying I agree with grabbing the dictator, but I did have a front row seat to the damage a kleptocracy did to innocent people.

Capture or Rescue?

 Not to be "too" cynical, but given the ovewhelming success and obvious intelligence "assistance" (read: omnipotence) during the capture and extraction of Maduro, one has to wonder if he reached out to US assets for a "rescue".

It's a low probability, but given the nature of this administration and its proclivity for decisive action and opportunism, one wonders.

Still, the entire exercise serves notice to the world that the margin of military superiority is even further than previously thought.  VZ had fairly modern defense systems that were rendered useless within an hour.  Zero casualties and zero war assets damaged on the US side for an operation that invaded a country with Billions of dollars in military equipment and plucked its sitting president away.  Incredible.

But the fog of war creates its own opportunities, and I am curious to see what else (if ever released) was happening.  If nothing else, Trump is very, very good at simultaneity and I have always been curious if this is planned or simply evolved organically from making decisive moves and reacting/adapting to the outcomes.  Given my belief in public choice theory, I "think" its the latter.

Venezuelan Testing Grounds and a warning to China.

The recent US action in the Caribbean serves many purposes.  The "1st Order" being a resurrection of the Monroe Doctrine mentioned in the blog before as an opportunistic tool for the incumbent POTUS to wage proxy wars against our enemies in this hemisphere.  The 2nd order effect is a warning and demonstration to China that they are outmatched in the Taiwan straights and will be for the next 30 years (at least - by which time China in its current manifestation will have fallen)

I have written about this before many times.

And now Mr. Trump has seen fit (in a moment of domestic weakness) to deploy it...not only as leverage on petroleum assets but as a demonstration of US capability extrapolated to other theaters.

The USS Gerald R. Ford is in the South Caribbean right now.  It is the greatest, most technologically advanced ship in the history of man.  It's nearest competitor is decades behind and 3 more Carriers in this class are expected to be delivered in the next five years...and its only pulling further ahead in its capabilities.  Rail Guns, Solid State lasers, hypoer advanced guidance systems, etc.  All are on the table for the Ford class once solidly developed.

The only issue it has is combat testing - it has not "officially" seen combat, which is generally left to the old battlehorse Nimitz Carriers.

The South Carribean sea (where, somewhere, the Gerald R. Ford currently patrols) is approximately 1.1 Million square kilometers.

The Taiwain Straight combat area (the location of likely naval conflict between China and the US) is approximately 1.2 million square kilometers.

So, boats the size of small sail boats can be located, targeted, and destroyed in an area of 1.1 million square kilometers.  There is no-where to hide. 

Larger boats would be even easier targets, such is the gap in US nautical and air superiority.

 It is "offically" unknown where the air strikes are coming from, but in terms of capability in a large theater, the CPC has been served notice.  There is simply no counter (blah blah Exocet Missile and blah blah Torpedo.  Neither would get a nautical mile close to the Ford before being disintegrated) to a Ford class Aircraft Carrier Group parked anywhere in the Carribean...or the World.

So batting practice for the Gerald R. Ford has begun, and I am sure some folks are eager to see it hit some home runs vs. Venezuela. 

So where are the other (Nimitz) Carrier groups?  Guam.  Near Taiwan.  Near the Taiwan Straight combat area.

The dots connect themselves.

 

Time elapses arithmetically...

 ... but AI generated "news" can expand geometrically (well, before the combinatorial explosion, anyway).   The increase of identity politics across the world is noticeable in this regard.  

Fake report of French ‘coup’ goes viral — and fools African leader

2025-12-18 18:33:19 GMT

(The Times)

President Macron has revealed that he was contacted last weekend by an African

president worried about a coup d’état in France after seeing fake news on

Facebook.

Macron accused Facebook of undermining democracy by refusing to delete the

fake television news report, made with the help of artificial intelligence by

a 17-year-old boy from Ouagadougou in Burkina Faso.

The video was viewed more than 16 million times before the author removed it

himself after an outcry in Paris.

The video, which featured a fictional journalist in Paris talking about a

“coup d’état led by a colonel whose identity has not been revealed”, was

highlighted by Macron in a question-and-answer session with readers of the

regional newspaper La Provence in Marseille on Tuesday.

 And, here we are.

This is an opening act.  I expect the headliner to begin in March '26.

No one has any idea how revenue will comport with current AI valuations.  I agree that it has great potential for just about "any" industry, but that transformative process will take much more time than some anticipate ("all customer jobs will be replaced by 2030, etc. etc.)
  

Ai giveth...

 ...and taketh away...

"Every time we list a job posting, we get 100 North Korean spies applying to
it," Infante said. "When you look at their resumes, they look amazing; they
use all the keywords for what we're looking for."

Fake job seekers are flooding U.S. companies that are hiring for remote positions, tech CEOs say – NBC New York

Trump, China, and Nobility vs. Bourgeous virtues...

 As stated here before the following moves:

China counters with a "34% retaliatory tariff".  This is a bluff and too strong of a move.  They will be forced to the negotiating table within 3 months once the fallout from the US actions take hold.

Trump embodies a shift to "Nobility" virtues (courage, loyalty, hospitality, honor to a select few), etc.  These are much different than the Bourgeois virtues the world has come to expect from the US in the last 50 years.

I am ambivalent regarding the absolute value of the above virtues, and merely express that this is a sea-change for international relations, and will be interesting to see how these actions play out given the US recipe for dealing with competitors:

Cooperate, Assist, Tolerate...then suddenly...violently...Compete.

One of the overwhelming strengths of the US is its ability to adapt and change, both on socio-economic and political levels, and the SPEED which it does so.

One wonder how the CCP will attempt to mirror this given very little institutional/cultural memory on how to digest what is coming.

This "all" about China.  And this is also why Russian peace is important.  Japan to the East, Russia to the North, and Australia to the South.  

Meanwhile...an important signal amongst the noise...

 While every news outlet is making sense of "reciprocal tariffs" and the resultant ramifications, a credit rating service (yes, I have railed against them in the past so this is to be taken with the usual cautions) downgrades the Paper Dragon.  Note the "rising public debt" trajectory" language.

Managing the political and social fallout from the coming 3-5 quarters of chaos will be a tall order for the CCP.  

Yuan Falls Versus Dollar as Fitch Downgrades China’s Rating to A

2025-04-03 12:45:46 GMT

By Nour Al Ali

(Bloomberg) -- The Chinese yuan fell further against the US

dollar, underperforming all major peers, after Fitch downgraded

China’s rating to A from A+. The outlook is stable.

Fitch said the downgrade reflects their “expectations of a

continued weakening of China’s public finances and a rapidly

rising public debt trajectory.” Meanwhile, China pushed back and

said the downgrade does not fully reflect the country’s economic

recovery momentum, calling it “biased”.

Volatility...

 ...ahead here.   I expect November to remind us it never went away...

It's been some time...

...since I wrote here.

We have had unprecedented coordinated responses to pandemics, earthly disasters, war (and the concomitant risk of human extinction) in Europe, AI threatening every job in the world, etc.

So what is there to be optimistic about?

Plenty. 

The prospect of cheap unlimited (and "free" in a pollution sense) energy from Fusion alone is enough to pour your next cup of coffee and reflect upon the state of the world.

Much more to come as we enter into a new era, not one demarcated by time, but of accelerating human achievement.

One MILLION jobs...

...a nice round number.  This is analogous to me threatening a restaurant owner that I will not eat all the meals his current kitchen and his as yet unopened future restaurants can produce in perpetuity because we must discuss the meat/pasta ratio in his spahghetti.

Threatening imaginary numbers is not really the effective and professional response one would like to hear from the middle kingdom. 

"Alibaba’s founder and chairman Jack Ma says the Chinese mega e-commerce company no longer has plans to create 1 million jobs in the US, citing the ongoing trade conflict as the reason Alibaba is retracting its promise to Donald Trump. A new round of tariffs between the US and China will make mutual trade more difficult.

A new API.

To make a techy analogy: The current administration acts as a different API ("application programming interface") between the United States and China.  However, the outputs and reaction functions continue to play a similar tune:

So we see statements like this:

"China called on the United States to play its part in resolving trade frictions between the two countries, and said Beijing isn’t devaluing its currency to boost exports as tensions simmered ahead of President Xi Jinping’s first meeting with U.S. President Donald Trump."

In light of evidence like this:



(Graph depicts Yuan dropping against the dollar since May...a bit counter-intuitive given the tarriffs put in place.)

Now, Trade Deficits are like political positions themselves...they typically change state ("good" or "bad") depending on whatever political position one wants to make at a given time...more on that later.  Devaluation is a response based on purchasing power, and is much more systemic than Trade arguments in that it effects all goods and services.***

***Which is, of course, why Trade Deficits/Surpluses are not quite as meaningful anymore.  In the Days of Adam Smith or David Ricardo, goods and services may have been unique to a country or region.  In the modern era, a product designed in California, with parts manufactured in several Asian countries, yet assembled in Latin America makes the very notion of country balances a much less powerful indicator of economic position.

It has been some time...

...since I last posted.  What with world events being so vexing, why was this so?

The answers are coming, dear readers.

But for now, let us ruminate on the trivial observation that the past 60 years of market data was formed from a historical period of truly remarkable peace.  The theories and assumptions derived form this period are similarly pollyanish in assessments of future market behavior.

Kinetic war will not be the cause of the next conflagrations.  This is wonderful news for absolute living standards.

Relative living standards, "not so much" as the colloquialism goes...

Of course it is.

China is building a replica of the Titanic.

Can countries sink to the bottom of the sea?  This particular rendition of the Titanic will not even sail.  A massive construction project to build an enormous boat which will never drop anchor.

Patrons of the Restaurant China have had a nice dinner, but it is time to skip dessert and request the check.