The title says it all: Boulder wants your money.
Oh wait&hellip; You don&rsquo;t live in Boulder, or even Colorado? Too bad. Fork it over.
At least, that was the argument last week in the U.S. Supreme Court, in a case called Suncor Energy v. Boulder County. If Boulder prevails, consumers everywhere will pay big-time. And if you&rsquo;re worried about so-called &ldquo;climate change,&rdquo; this case won&rsquo;t change even one raindrop or gust of wind in the weather. Because the idea is to take your money!
<h2 class="subhead nbp">A &ldquo;Local&rdquo; Lawsuit with YOU as Unnamed Defendant</h2>
In 2018, Boulder sued Suncor Energy Inc. (SU) and ExxonMobil (XOM) for damages related to future costs from heat, drought, wildfire and flooding. That is, Boulder sued for fanciful things that have not yet occurred. There was no oil spill, refinery fire, or any other definable, direct injury to people or property.
In essence, the lawsuit claims damages because Big Evil Oil Companies produce hydrocarbons, which are alleged to cause&hellip; Climate Change!
So, Boulder named the two oil companies as defendants in a state court case and now wants them to write huge checks. But what it really means is that Boulder wants YOU to pay because any monetary damages will flow through the companies to what they charge at the pump for gasoline, diesel, jet fuel and a myriad of other hydrocarbon products.
&ldquo;But wait,&rdquo; one might say. &ldquo;Even if the so-called &lsquo;climate&rsquo; is changing, isn&rsquo;t that a global issue?&rdquo;
Well, yes&hellip; It&rsquo;s not as if Colorado has its own air, let alone Boulder. And it&rsquo;s not as if any given molecule of carbon dioxide comes with a blockchain ID on it. Nobody can trace the source of atmospheric CO2 directly back to Suncor, Exxon, or any of a near incalculable number of global producers of oil, gas, coal, wood, other biomass, or even <a href="https://dailyreckoning.com/fire-to-fortune-a-year-of-living-volcanically/">natural sources of CO2 like volcanoes</a>.
Meanwhile, why Boulder? Who appointed Boulder as King of the World, let alone Czar of the Climate? Why can Boulder sue two oil companies in state court over CO2? And really, what about me? What about you? Where&rsquo;s my lawsuit? And where the hell is MY money?
Okay, just kidding&hellip; sort of. But you see where this goes, right? If Boulder shakes down Suncor and Exxon, then the costs get spread across those companies&rsquo; operations. Maybe they go out of business (which I doubt, although that is one key goal of the Green-Left); or&hellip; maybe we all pay more at the pump and furnace, while Boulder cashes the checks.
And perhaps you&rsquo;ve never set foot in Colorado (full disclosure: I&rsquo;ve been to Colorado). But that doesn&rsquo;t matter. If you buy or use fuel, electricity, food, plastic packaging, medicine, airline tickets, anything delivered by truck, and much else &ndash; pretty much everything in the entire economy &ndash; then Boulder&rsquo;s local lawsuit picks your pocket. You are simply the unnamed defendant here.
<h2 class="subhead nbp">From Activism to Lawfare</h2>
Several years ago, my colleague Jim Rickards coined the phrase &ldquo;Green New Scam&rdquo; as a shorthand method to describe much of what passes for environmental policy in certain sections of American and global politics. Indeed, what we have here, with Boulder, is a local climate scam acting via pure, unadulterated lawfare; that is, Boulder is using litigation to obtain what activists and their political lapdogs have not secured through federal law.
Boulder seeks what it calls a &ldquo;fair share&rdquo; of &ldquo;adaptation costs,&rdquo; which are undefined in any meaningful legal sense. At root, it&rsquo;s an exercise in speculation; a shakedown aimed at deep-pocketed companies that are &ndash; in some quarters &ndash; politically unpopular. So, they sue Big Oil in state court; versus seek a remedy against entire nations like China and India, which burn immense amounts of coal and oil; let alone sue billions of people around the world who use hydrocarbons every day.
In one sense, Boulder&rsquo;s lawsuit is a classic courthouse pressure campaign. Sue somebody and demand Big Buck$ under broad, arm-waving legal theories. Create legal bills and litigation exposure. All along, the process is the punishment, while setting up leverage for a payoff-settlement.
And one lawsuit may be leverage, but if Boulder blazes the trail here we can expect dozens more such suits. It&rsquo;s the beginning of a vast system of rent-seeking against the energy industry. In fact, per briefs filed in the Suncor case, over 60 local governments have brought similar lawsuits across the U.S., and thus this particular case is not a mere one-off.
If Boulder&rsquo;s lawsuit moves ahead, a barrel of oil, refined fuel, or other downstream feedstock will be priced not just based on internal costs such as finding, development, lifting, transport, refining and movement to point of use. Instead, that barrel will carry a massive markup for bottomless, endless litigation and claims under a constellation of different state laws.
<h2 class="subhead nbp">Litigating the Global Atmosphere in a County Courthouse</h2>
Boulder&rsquo;s lawsuit against Suncor and Exxon alleges nuisance, trespass, unjust enrichment, conspiracy and other state-law claims. Boulder says the companies produced and promoted fossil fuels while misleading the public about climate risks, leaving taxpayers with those ill-defined &ldquo;adaptation costs.&rdquo; The companies deny liability and argue that federal law forecloses claims rooted in global emissions.
Procedurally, Suncor and Exxon petitioned to do what&rsquo;s called &ldquo;remove&rdquo; the state case to federal court. And after a convoluted pathway of litigation, the case wound up still in the hands of Colorado courts, so the defendant oil companies petitioned the Supreme Court to hear arguments and make a determination on what&rsquo;s called &ldquo;venue.&rdquo; And that&rsquo;s where things stand now, with arguments last week.
Of interest, Justice Alito recused himself, presumably because he might own stock in SU or XOM (he didn&rsquo;t say). Thus, the outcome of the case will be determined by eight justices, versus nine, and there&rsquo;s a distinct possibility that Court politics will deliver a 4 &ndash; 4 vote; which means that the case stays in Colorado courts.
Again, CO2 in Colorado is chemically identical to that from China, India, Russia, Europe, ships at sea, aircraft in the sky, and factories, farms and billions of vehicles everywhere. There&rsquo;s no true accounting for what&rsquo;s in the earth&rsquo;s atmosphere. But welcome to American jurisprudence, where a small jurisdiction like Boulder can claim damages for planetary conditions related to the world&rsquo;s massive, globalized economy.
<h2 class="subhead nbp">What, Exactly, Is Defective?</h2>
During oral arguments last week, Boulder&rsquo;s lawyer compared the case to ordinary product liability. Really? Then what&rsquo;s the defect? That is, tort law creates a claim where, say, a defective brake fails to stop a car, or contaminated food makes you sick. Traditional product liability links back to an identifiable flaw, product and injury.
But hydrocarbons from Suncor, Exxon or anybody else do exactly what buyers expect. Gasoline powers engines; diesel moves freight; jet fuel lifts aircraft; natural gas heats buildings and feeds chemical plants; petroleum becomes asphalt, plastics, lubricants, fertilizer inputs, medical supplies and thousands of useful materials.
Liability-wise, Boulder&rsquo;s alleged &ldquo;defect&rdquo; is not some malfunction of refined products. Indeed, Suncor and Exxon can rightfully brag that their products work as intended and are successfully used every day at continental and intercontinental scale, with CO2 as a well-known product of combustion.
The long and short is that Boulder has no claim for ordinary product liability. Boulder is just bellyaching about the long-term, cumulative consequences of modern civilization&rsquo;s entire energy system. And that&rsquo;s hardly an issue for a state court anywhere. Aside from the money. Which will be paid by YOU, did I mention?
<h2 class="subhead nbp">Colorado&rsquo;s Courts Are Knocking at Your Front Door</h2>
And let&rsquo;s make this easy: follow the money! Because a legal victory for Boulder will create open-ended liability against energy companies everywhere, tied to weather, infrastructure and this ill-defined &ldquo;future adaptation&rdquo; thing. No oil company manager, business executive, lender or insurer could know which city would sue them next, let alone what conduct triggers liability, or even how many times the same emissions might be counted.
At the very least, Boulder&rsquo;s legal theory means that fewer energy projects be developed by U.S. companies, although America&rsquo;s energy demand will still remain, which is a recipe for higher prices. We&rsquo;ll all pay more for motor fuel, heat, electric power; and on and on and on&hellip;
And how much is enough? Ha! From long, personal experience I know that environmental activists live in their own world. To the extent they consider energy costs (especially costs paid by others), it&rsquo;s an abstraction. At the end of the day, Boulder&rsquo;s lawsuit is local lawfare that transforms into a national-scale, deeply regressive, so-called &ldquo;net-zero&rdquo; energy surcharge.
Meanwhile, Boulder&rsquo;s lawsuit will not remove a single molecule of CO2 from the atmosphere. Specifically, the world runs on hydrocarbons: about 83% of total global energy output comes via hydrocarbons (look it up). And the world will run on hydrocarbons long into the future.
If Suncor and Exxon sell fewer barrels, China, India, and the entire rest-of-the-world will still fire up their furnaces and engines. And if American companies exit the energy biz, somebody else will develop the oil and gas, and sell it to willing users.
Of course, that &ldquo;somebody else&rdquo; will be an overseas producer, far away from the nettlesome legal reach of Boulder, Colorado. And those foreign actors will laugh and scoff at the utter stupidity of not just Boulder and its crackpot lawyers, but at ridiculous American courts, and gullible voters who allow this kind of legal lunacy to handicap America&rsquo;s entire energy and economic system.
<h2 class="subhead nbp">Bottom Line</h2>
If Boulder prevails, activists will celebrate their victory over Big Oil. But the practical victory will belong to trial lawyers, foreign producers and every municipality that copies the complaint.
The losses, of course, will hit everywhere: costlier capital, fewer domestic energy projects, tighter supply, weaker industrial capacity, lower returns, more expensive food, power, transport and goods. None of this will respect Boulder&rsquo;s boundary line, and all of it will trespass on your wallet, bank account and investment array.
The so-called &ldquo;defect&rdquo; in this case is not in the gasoline, diesel, jet fuel or other hydrocarbon products. Every day, all around the world, these molecules deliver their promised energy and feedstock. No, the real defect is in a demented legal system that might transform worldwide energy use into a local cause of action, and then assume that the invoice stops with a corporate defendant.
Ideally, the Supreme Court will toss out Boulder&rsquo;s case and issue a strong opinion that clamps down on future copycats.
But if not? Well, the first check might come from Suncor or Exxon, but all along the money will come out of your pocket. So, and as noted above, fork it over.
That&rsquo;s all for now. Thank you for subscribing and reading.

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Hard-hitting economic news and market commentary. Each issue features biting market coverage, expert commentary, and in-depth analysis… along with a warm dose of humor and some skepticism.

Daily Reckoning

Morning Reckoning

Boulder, Colorado Wants Your Money

It&rsquo;s Columbus Day, a federal holiday: no mail, no banking, courthouses and most government offices are closed, as well as bond markets. But stock markets were open for trading.
And Columbus Day brings out the usual arguments. One side honors the mariner whose 1492 voyage pioneered sustained contact between two hemispheres. The other side condemns him due to what happened later: conquest, enslavement, disease, and dispossession.
Of course, history is what it is. And pro-Columbus or not, his efforts are worth recalling because reflection is neither indictment, acquittal or canonization. Whatever you think, no one can deny that Columbus&rsquo;s first voyage marked a unique moment in time that opened a vast new door in human history.
And to all you Vikings out there: Yes, Norsemen reached North America pre-Columbus, around 1000 A.D. and established a short-lived settlement at L&rsquo;Anse aux Meadows in Newfoundland. But their adventure left a near-negligible archaeological footprint. They were here and gone, with no durable corridor of migration, commerce, or exchange. Which makes Columbus&rsquo;s distinction even more important.
So no, Columbus was not the first European across the Atlantic. But he developed a workable method to cross that mighty sea, and I mean both ways! That&rsquo;s what was important. He sailed southwest from Spain to the Canary Islands, then west to the Caribbean; and returned to Europe via the southern rim of the Gulf Stream. He invented the transatlantic round trip.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/11GvZrRyyM1zytbn4dbU77/6d8b36982b3f916146d4b6393dd7abf3/dr-img1-10-12-26.jpg" alt="image 1" width="540px" />
Route of Columbus&rsquo;s first voyage: Canaries to Caribbean.
Columbus&rsquo;s 1492 mission charted a route based on favorable trade winds and oceanic currents. It was repeatable by others, and this is what transformed his voyage into a hinge of world history, which is also where Columbus&rsquo;s critics get things wrong.
That is, Columbus was an explorer who redrew Europe&rsquo;s maps. But he didn&rsquo;t write the script for subsequent events. His voyages set vast forces in motion, and many things happened that were disruptive if not brutal. But beware thinking in terms of post hoc ergo propter hoc; because it does not follow that Columbus personally created or intended the next 500 years of what ensued.
Plus, keep in mind that the world that evolved from Columbus&rsquo;s voyages &ndash; migration, exchange, conflict, discovery, and adaptation &ndash; is the only world we have. So, on Columbus&rsquo;s Day the question is not whether he was a modern man with modern values. (Hint: no, he was not.) It&rsquo;s why his voyage changed history.
<h2 class="centered subhead" style="text-align: center;">Morison&rsquo;s Test: Columbus the Sailor</h2>
At root, the triumph of Columbus begins with seamanship, geography, and the Canary Islands, where an audacious idea became a successful, repeatable Atlantic passage.
In the late 1930s, Harvard historian (and sailor) Samuel Eliot Morison retraced Columbus&rsquo;s routes under sail while researching what became his Pulitzer Prize-winning 1943 book, Admiral of the Ocean Sea. Morison wanted to test the story of Columbus&rsquo;s voyage against the realities of wind, current, rig, speed, landfall, and navigation. And the result was a portrait of Columbus as an ambitious and fallible man, and also a first-rate mariner.
Columbus&rsquo;s three ships &ndash; the Santa Mar&iacute;a, Pinta, and Ni&ntilde;a &ndash; left Spain on August 3, 1492, and reached the Canary Islands six days later. There, his crew made repairs, took on water and provisions, spoke with other sailors who had ventured into the open Atlantic Ocean, and waited for the winds. Then on September 6, Columbus sailed west.
<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/4ve0LjVyu11koCOetTlBPo/e867b08f1abe652f804ad03ef470429d/dr-img2-10-12-26.jpg" alt="image 2" width="540px" />
"Les Grand Voyages" by Theodore De Bry. Credit Paulus Swaen &amp; Co., Mapmakers.
In Morison&rsquo;s telling, Columbus was a man of human scale, doing his best with what was available. Columbus compared conflicting reports, read the weather, understood his ships, kept his anxious crews focused, mapped a dead-reckoning track, and decided when to press on.
Columbus&rsquo;s error about reaching Asia, versus &ldquo;merely&rdquo; the Western Hemisphere, doesn&rsquo;t erase his nautical or leadership qualities. He didn&rsquo;t just drift with the sea. He led a fragile expedition across a vast and unknown ocean, and by doing so helped swing open a door between worlds that would never again be closed.
<h2 class="centered subhead" style="text-align: center;">How Basalt Islands Became Atlantic Infrastructure</h2>
While we ponder Columbus&rsquo;s voyage, keep in mind the Canary Islands; a tourist destination today, but not mere beaches and scenery back then. In fact, those protruding rocks offshore of Africa were the launch point that made Columbus&rsquo;s westward crossing both possible and repeatable. Couple the islands with ocean currents, and here&rsquo;s the geographic and logistical secret to Columbus&rsquo;s success.
The Canary Islands are volcanic mounds piled upon relatively old oceanic crust within the African Plate, and far from any active plate boundary. They&rsquo;re the result of a deep-earth, long-lived hotspot in the mantle. For about 20 million years, fractures and stresses in the African plate have fed repeated eruptions, mostly basalt.
<img src="https://images.ctfassets.net/vha3zb1lo47k/RvGb6U02QgSoRmJPTb2GU/83778adc91f2042abeafe46e95f2b4e3/dr-img3-10-12-26.jpg" alt="image 3" width="540px" />
Canary Islands, offshore Africa. Credit University of Minnesota.
The Canaries make for an unusual geologic setting; they don&rsquo;t present the smooth eruptive and age progression of, say, the Hawaii island chain. Instead, with the Canaries, the slowly moving African Plate allowed old magma pathways to pause, revive, and overlap, producing older eastern islands and generally younger western ones without a conveyor-belt sequence.
Eruption after eruption raised durable basalt above the deep Atlantic seafloor, resulting in tall peaks visible from far offshore. And this high ground has long shaped cloud patterns and local winds, while lee shores offer shelter from exposed coastlines. Add in other aspects of eroded volcanic terrain and you have communities, farms, fresh water, labor, anchorages and places to repair ships.
In short, ancient geology created the platform. Human settlement made it useful. And location completed Columbus&rsquo;s advantage. His small, square-rigged vessels could sail southwest from Spain, replenish in the Canaries, then turn west with the trade winds.
Then, the return track required a different course; north into what we now call the Gulf Stream, and east toward Europe. And certainly, the shortest line on a map was not the fastest route at sea. Had Coumbus sailed straight west from Spain, he&rsquo;d never have accomplished anything and we&rsquo;d never have heard of the guy.
Instead, Columbus&rsquo;s achievement was to combine basalt, latitude, wind, currents, and island logistics to remarkable effect. His choice of geography became what we now call infrastructure, and his use of wind and waves supplied the energy.
Critically, Columbus created a repeatable crossing pattern for others. And repeatability was decisive because it transformed raw exploration into a durable, low(er)-risk form of passage. And thus, people, goods, ideas, faiths, ambitions, and conflicts reshaped the world.
<h2 class="centered subhead" style="text-align: center;">Post-Columbus, an &ldquo;Atlantic&rdquo; World</h2>
Later voyages confirmed Columbus&rsquo;s pattern. In 1493, a much larger Spanish fleet &ndash; 17 ships &ndash; staged through the Canaries, carrying settlers, animals, seed, tools, and institutions westward. Then again and again, through one expedition after another, the Canary Islands served as workshop, storehouse, lookout, and point of departure westward.
Post-Columbus, other navigators followed the same wind-and-island geometry. Voyages became routes; routes became settlements and commercial circuits; those circuits moved plants, animals, soldiers, settlers, technologies, beliefs, capital and enslaved people among Europe, Africa, and the Americas.
All along, the Canaries were a geographic and logistical hinge, and Canarian sailors and settlers became part of communities across the Caribbean and well into the mainland Americas. In this sense alone, Columbus Day remains relevant because this vast, mixed, creative, violent, and irreversible Atlantic world did not simply appear; it emerged through a unique oceanic channel that Columbus opened.
Again, keep in mind that historical consequence is not the same as personal authorship. Columbus was a skilled sailor who opened a route to the New World (well, new to Europe). Governments, merchants, soldiers, colonists, clergy, and countless later generations chose what else to move through that door, and they themselves determined what to do on the other side.
<h2 class="centered subhead" style="text-align: center;">The World After Columbus&mdash;and the World Ahead</h2>
To sum up, Columbus did not create the modern world, and he alone is no explanation &ndash; let alone a scapegoat &ndash; for its flaws or evils. To disdain him as the root cause of slavery, disease, war, or empire is lazy thinking that gets us back to that line about post hoc ergo propter hoc: it confuses sequence with causation. Indeed, the worst one can say of Columbus is that his efforts created the first true template for sustained transatlantic contact.
<img src="https://images.ctfassets.net/vha3zb1lo47k/5rKJCdQWImylsyMNUuk737/2d440f2f7582d783a38aed7f87ec1028/dr-img4-10-12-26.jpg" alt="image 4" width="540px" />
Christopher Columbus statue. Credit City of Barcelona, Spain.
The world after Columbus is the world our ancestors made and which we inherited. And like it or not, there&rsquo;s no reversing history with all its encounters, discoveries, explorations, migrations, exchanges and even crimes. We can only understand how they came together, judge them honestly, and decide what to do with the inheritance.
In this sense, Columbus Day offers a recurring civic occasion to think: to remember the mariner without denying what followed, and to study his mission without pretending that its consequences were simple.
And no&hellip; remembering Columbus is not to declare him flawless or to excuse anything that followed. It&rsquo;s more to recognize that history can turn on vision, skill, courage, error, and consequence all at once.
As with the Atlantic Ocean in 1492, our own future will not deliver perfect people or absolute certainty. Really, &ldquo;AI&rdquo; anyone? Where is that going?
But it&rsquo;s fair to say that the future belongs to those with enough vision to see beyond the known horizon, enough skill to navigate, and enough responsibility to answer for the world they help set in motion.
That&rsquo;s all for now. Thank you for subscribing and reading.

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Admiral of the Ocean Sea: Columbus and the Hinge of History

&ldquo;Money is gold, and nothing else,&rdquo; banker J.P. Morgan testified to Congress in 1912.
Morgan spoke in the aftermath of the Panic of 1907, when credit failed on an international scale and the U.S. economy went into a tailspin.
By 1912, politicians were debating how to prevent future financial panics. So, they summoned Morgan to discuss money and so-called &ldquo;trusts.&rdquo;

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3mPEPShOksY2qlvyo005FJ/3a78f7c8d8430fceda02e8ea5746c50a/mr-issue-10-06-26-img-2.jpg" width="300px" />

Portrait of J.P. Morgan by Fedor Encke. Credit: National Portrait Gallery, Smithsonian Institution
Morgan&rsquo;s distinction between gold and credit was elemental, if you&rsquo;ll excuse the pun. Gold represents value already mined and refined from the ground. As a physical asset, gold does not depend on another party&rsquo;s future performance. Credit, meanwhile, represents a claim on value yet to be delivered and, in many instances, future value yet to be created.
In other words, gold is real but credit is a promise, an important promise, of course, but only as sound as the borrower&rsquo;s capacity to honor the bargain. Indeed, noted Morgan during his 1912 testimony, &ldquo;The first thing (about extending credit) is character, before money or anything else. Money cannot buy it.&rdquo;
This last point about character dovetails with another famous line from Morgan, that &ldquo;It is always best to have no money in your account. Then you are forced to use your brain.&rdquo;
A promise is credible only when someone is both trustworthy and knows how to create and deliver the value required to redeem it. For example, a farmer receives credit because he knows how to raise crops.
Which gets back to Morgan&rsquo;s line about how &ldquo;money is gold.&rdquo; Plus, how downstream credit energizes production and pulls future value into the present. And what connects the two &mdash; gold and credit &mdash; is character and knowledge. Character makes the promise credible; knowledge, in the form of skill and productive capacity, makes it possible to fulfill.
As for knowledge, it&rsquo;s neither money nor a promise, but it gives substance to a promise. And for most of history, that kind of knowledge was scarce because it resided within the heads of trained, skilled and experienced people &mdash; butchers, bakers and candlestick makers, to borrow an old line.
And now, along comes writer Emad Mostaque. His 2025 book, The Last Economy: A Guide to the Age of Intelligent Economics, explores the possibility that the historical scarcity of knowledge is ending.
<h2 class="subhead nbp">When Knowledge Becomes Capital</h2>
Mostaque is very mathematical, and there&rsquo;s nothing wrong with math! But in many ways he reminds me of the so-called &ldquo;quants&rdquo; whose faith in mathematical modeling contributed to the financial excesses that culminated in the 2008 crisis.&nbsp;
Although Mostaque never mentions J.P. Morgan, intriguingly, Mostaque formulates some new ideas from where the crusty old New York banker left off.
Per Morgan, gold embodies value already present, while credit advances value on the strength of character and promises. Now, Mostaque explores how knowledge is rapidly becoming a critical connector that helps promises perform.
Until now, the capacity to perform has always been scarce because it was bound to knowledge, literally embodied in skilled and well-trained people. But artificial intelligence (AI) has changed the equation by turning growing portions of knowledge and judgment into endlessly reproducible software.
In other words, AI does not abolish value. It relocates it.
When massive data sets, analysis and decision-making can be copied at negligible marginal cost, human knowledge or skill alone commands less of a premium. Think of routine legal research, where software can now instantly perform work that once required many hours of human effort.
With AI, more and more value accrues to the capital that organizes intelligence, applies it to productive work and converts its output into goods, services and cash flow. This is the so-called &ldquo;intelligence inversion&rdquo; at the center of The Last Economy.
According to Mostaque, economic institutions as we know them were built to ration and reward scarce human skill and judgment. But now that competent cognition has become abundant and scalable, the fundamental basis of many professions and business models is changing.
Or stated in another way, the sound you hear is the shattering crash of many broken rice bowls. Businesses are already laying people off or never hiring in the first place, with AI often cited as the reason.
And with the midterm elections approaching, the politics of AI are moving to the foreground. Voters may hear plenty about AI and productivity, but the harder question is what happens to jobs and wages when businesses can accomplish more with fewer people.
Which leads to other questions: When intelligence ceases to be scarce, how can economies measure value? And who captures the gains?
<h2 class="subhead nbp">Seven Lies Behind the Intelligence Inversion</h2>
Mostaque argues that the world&rsquo;s current economic system was built to allocate scarce things, and the scarcest productive input has always been competent skill and human judgment. AI changes that by turning large elements of analysis and decision-making into code, where marginal costs trend downward.
Indeed, if you view the economy through a lens of allocating relative scarcity, it&rsquo;s easy to mistake AI abundance for collapse. That is, as AI gains traction, many jobs &mdash; definitely, many entry-level jobs &mdash; and billable hours will disappear, along with revenues across entire industries.
Mostaque organizes his indictment of the current system around seven &ldquo;fatal lies&rdquo;:
<ul>
<li>Scarcity is fundamental</li>
<li>Human labor has inherent economic value</li>
<li>Reward follows contribution</li>
<li>Growth means health</li>
<li>Markets naturally produce efficient outcomes</li>
<li>Technology creates more jobs than it destroys</li>
<li>And human intelligence will remain economically indispensable.</li>
</ul>
One can quibble about these points, but they offer a nice list of assumptions beneath today&rsquo;s labor markets, corporate governance and public policy.
And if &mdash; no, when! &mdash; useful AI cognition becomes abundant, wages and GDP can weaken even while real productive capability expands. The gains will flow first, and perhaps mostly, to owners of the capital that makes AI useful at scale.
<h2 class="subhead nbp">Where Marx Runs Out of Road</h2>
It&rsquo;s worth mentioning that Mostaque&rsquo;s ideas offer a sharp break with the Marxian labor theory of value, so dear to the hearts of many in modern academe and politics.
In familiar shorthand, Marx ties the value of a product to the socially necessary labor required to make it and frames profit chiefly as a claim on the surplus created by workers. It&rsquo;s a view rooted in his 19th-century industrial world of miners with pickaxes hammering coal from seams.
But looking ahead, AI models can absorb the results of past labor &mdash; research, code and engineering &mdash; and reproduce a useful task over and over, with little additional human labor per task.
Thus does AI offer value to end users, yet the labor involved in each additional unit approaches zero. Traditional metrics like price, usefulness and human input cease to move together in the old framework.
And no, the so-called &ldquo;surplus&rdquo; of productivity does not vanish, nor does invidious exploitation become impossible. But the scarcity factor has moved: It&rsquo;s no longer chiefly the raw hours of the person who performed the task; it&rsquo;s who controls the system that can perform the task repeatedly and at scale.
So, who controls that system? Well, sorry, Karl Marx, but it&rsquo;s the owners of capital: data centers, semiconductor supply and dependable energy sources. That is, those who own the cash registers between abundant digital knowledge and economically useful output.
In this sense, Mostaque&rsquo;s inversion does not automatically lead to a classless abundance. In fact, it may produce even more concentrated versions of current capitalism in which intelligence is cheap at the point of use, while the physical and financial infrastructure required to supply it grabs the biggest whack of rent.
<h2 class="subhead nbp">Gold Versus Credit Versus Knowledge</h2>
Which brings us back to J.P. Morgan and his distinction between gold and credit.
On Morgan&rsquo;s spectrum, AI knowledge is neither money nor credit, and there&rsquo;s no allowance for &ldquo;character.&rdquo; In this respect, AI&rsquo;s low marginal cost does not make it a final settlement asset. But AI is an entirely new tool of production that expands capacity to support credit, while concentrating gains among those who own the machinery and energy.
Of course, gold &mdash; as real &ldquo;money&rdquo; &mdash; remains outside this AI structure. Gold does not forecast future productivity, nor does the yellow metal depend on somebody else&rsquo;s character or promise to, say, keep the grid running.
Gold is money because it is already valuable, and nobody else&rsquo;s liability. And in Morgan&rsquo;s framework, credit consists of promises against future production and delivery, backed by character.
So, AI may reduce the overall cost of production, but it doesn&rsquo;t always turn a promise into fulfillment. Indeed, cheaper intelligence may encourage governments, corporations and households to issue still more credit against hoped-for productivity.
If those gains fail to arrive, or if they accrue too narrowly to support incomes and tax bases, the credit claims multiply while the means of redemption weaken. In that world, gold&rsquo;s role as an immutable asset outside the credit chain becomes even more important. Put simply, gold preserves wealth over time.
Meanwhile, GDP and price levels capture only part of an economy&rsquo;s productive health. As any observant American can tell you, a nation can boast booming asset values while its power grid, industrial base and skills pipelines all decay.
With AI use rising in the U.S. and abroad, routine cognitive work now faces deflation, while ownership of the physical bottlenecks commands a premium. Firms may be able to do more work with smaller teams, for example, even as smaller teams mean fewer people are hired and trained to become tomorrow&rsquo;s experts. And that will be its own big problem.
For now, all of this forecasts that countries with dependable power and manufacturing depth will gain leverage over nations that merely consume imported intelligence.
<h2 class="subhead nbp">The AI Economy Runs on Copper</h2>
Aside from owning gold, how does one play this new game? Begin with the fact that cheap intelligence is not free intelligence. That is, AI runs on electricity, around the clock, at industrial scale.
The International Energy Agency reports that global data-center electricity demand is on track to roughly double by 2030, with AI-focused facilities driving much of the increase.
And power generation alone is not enough. Electrons must reach the data center through a vast network of transmission infrastructure, much of it heavily dependent on copper. A single new transmission line, for example, requires physical metal, equipment and construction that cannot be replicated with a few keystrokes.
Plus, this entire system must be designed, permitted, financed, manufactured and installed by skilled people. Yes, with AI helping, but real people doing real jobs. (Hint: be THAT guy, with the real job!)
In this sense, Mostaque&rsquo;s new world of abundant intelligence still rests on a foundation of smart, skilled people and basic, physical stuff.
<h2 class="subhead nbp">Invest in Durable Value</h2>
The investment lesson is not simply &ldquo;buy AI.&rdquo; Indeed, many superb cash registers are sited upstream from the places where AI lands with a job-killing thud.
Consider copper. AI may move at software speed, but new copper mines don&rsquo;t. A new mine can take many years to permit, finance and build before producing a pound of red metal.
Meanwhile, beware! Valuation can outrun cash flow, regulators can delay projects and consumers may resist paying for infrastructure built around private data centers.
Along these lines, I have two names for you:
Freeport-McMoRan (FCX), a roughly $107 billion market-cap diversified copper producer in the U.S. and abroad, with significant gold and molybdenum operations.
And Enphase Energy (ENPH), a roughly $4.6 billion market-cap U.S.-based energy technology company that develops power-electronics systems and is now developing its IQ Solid-State Transformer platform for AI data centers.
These are not official recommendations, but I track them and expect solid performance over the long haul.
<h2 class="subhead nbp">Asking the Right Questions</h2>
Mostaque&rsquo;s book, The Last Economy, is edgy, quirky, nerdy and provocative. It asks some of the right questions such as: When AI becomes plentiful, who owns the scarce assets that convert knowledge into trusted action and durable returns?
Of course, J.P. Morgan supplied the basic monetary compass long ago. Gold is money. And credit is a promise, backed by character and skill.
Looking ahead, the fact is that whatever happens with AI, behind every dazzling promise of abundance-via-software lies a hard-rock, boots-in-the-dirt physical supply chain. Fuel, metals, copper wire, transformers, chips and skilled people must all deliver before the promises can be paid.
That&rsquo;s all for now. Thank you for subscribing and reading.

mr-issue-10-06-26-img-1

Gold, Credit, Character… and the AI Economy

Are you disappointed with President Trump and Republicans? Tired of all the political hot air, drama and emotion? The campaign solicitations? &ldquo;Gimme money, pleeease!&rdquo; Yeah, join the club. But&hellip;
Suck it up, Pilgrims. It&rsquo;s two weeks until Election Day and voting has begun. All across the country, many ballots are already banked, to await their fate on Election Night after the polls close. And as my colleague Jim Rickards has noted, this is a turnout election.
Definitely, many Democrats will vote &mdash; and vote hard! &mdash; because they despise Trump.
And many Republicans, Independents, and even some old-line Democrats may stay home because Trump&hellip; and Congress&hellip; and the Supreme Court&hellip; and You-Name-It&hellip; has disappointed them; they&rsquo;re angry about the Iran war, blowout spending, fuel and food prices, creeping inflation, immigration, foreign visas and more.
But staying home or casting a protest vote means nothing in politics. In fact, when you don&rsquo;t vote, you lose twice because your protest pique passes political power to the Hard Left, which will absolutely make America&rsquo;s problems worse.
Indeed, not-showing-up isn&rsquo;t really a theory of victory because the thrones of political power never remain vacant. At the end of day &ndash; of Election Day &ndash; someone always holds the keys to Capitol Hill, as well as governors&rsquo; mansions, city-county buildings and courthouses across the land. And it&rsquo;s just a question of &ldquo;who&rdquo; wields power.
<h2 class="subhead nbp">For Example, Look at Britain</h2>
In July 2024, British voters were (to borrow a phrase) p!ssed off. They rejected a fumbling, bumbling Conservative government. Millions stayed home or voted Labour. Mostly, they meant to punish the Tories, not endorse a radical regime of rule and ruin.
Instead, the stay-homes and protest-voters handed Keir Starmer an enormous parliamentary majority. So now, in Britain, the left pushes higher taxes, open borders, hostility toward Britain&rsquo;s culture and history, and sweeping economic controls. And if you don&rsquo;t like it and speak out too loudly, the police will pay you a visit. (Look it up.)

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Boatloads of migrants arrive on British Beaches. Credit BBC.
Currently, Britain showcases the danger of a protest election: voters reject one party, then the Hard Left gets in and declares a revolutionary mandate. That, and works overtime to spend, tax, regulate, close industries, import the Third World, and convert temporary popular anger into permanent left-wing policy.
Looking ahead two weeks, America can make the same mistake if Republicans, Independents and moderate Democrats sit this one out. The no-shows will surrender the House to a coalition increasingly guided by the Democratic Socialists of America (DSA); definitely not a bastion of old-fashioned, FDR-, JFK- or LBJ-style liberalism.
In fact, DSA is openly communist. Its manifestos call for abolishing the Senate, expanding government power via the House, packing the Supreme Court, nationalizing all health care, defunding law enforcement, socializing major industries, and&hellip; ugh (long story).
The DSA agenda runs so far left that Sen. John Fetterman (D-PA) [full disclosure: I knew him when he was Mayor of Braddock, PA; nice guy] has criticized Bernie Sanders (I-VT) for backing DSA candidates against sitting Democrats. Which is to say that DSA uses the Democrat donkey only to ride through the gates and into power. Vote them in, and they have no plans ever to leave.
<h2 class="subhead nbp">France: 45 Years Down the Road to Serfdom</h2>
So, Britain offers an immediate warning; but France supplies the long-term case-study. For roughly 45 years, left and hard-left governments expanded spending, taxes, regulation, subsidies and labor controls while promising nearly everything to everyone.
Each step sounded humane in a French sort of way. And every program rewarded politically important beneficiaries. The tax burden always targeted &ldquo;someone else.&rdquo; It sounded great until the bills arrived.
France now carries immense, unpayable debt, and chronic, massive deficits. Day-to-day, France is barely solvent. Business formation is negligible. Productive people and capital leave. Housing costs have soared. Industry struggles. Public services are breaking down despite record spending. And lately, rioters roam the streets while historic buildings go up in flames.

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Limoges, France: Oct. 17th, city hall burned by rioters. Credit AFP.
Did French voters consciously choose national decline? Not in so many words; but election cycle after election cycle, they chose politicians who promised more regulation, subsidies and taxes on somebody else. And that&rsquo;s exactly how the big state grows bigger. Meanwhile, failure rarely kills a government program; in fact, politicians often use failure to justify their next boondoggle.
Just now, the relevance of the U.K. and France to America is that both nations show how unhinged politics eventually wrecks the balance sheet. High taxes reduce returns. Regulation delays important projects. Energy scarcity raises costs. In short, bad policy breaks things.
<h2 class="subhead nbp">Zito&rsquo;s Lesson: Voting is Not Love</h2>
Recently, a great writer named <a href="https://salenazito.substack.com/p/the-house-is-restless-again-it-has?r=172bv&amp;utm_medium=ios&amp;triedRedirect=true">Salena Zito wrote about how</a> Gilded Age transformation enriched America while it also left millions of citizens on the outside looking in. Railroads, mills, factories, oilfields and electric power remade the country; but financial panics destroyed banks, businesses, jobs, farms and even entire industrial sectors.
In 1888, Republicans narrowly won control of Congress and treated victory as a massive mandate. They spent heavily and nearly bankrupted the country, which mattered quite a bit in the days before the Federal Reserve could just print so-called &ldquo;money&rdquo; to wallpaper the problems.
Voters didn&rsquo;t like what they saw, and punished Republicans in 1890 with significant losses on Election Day. Then in 1892, Democrats captured Congress and the White House, and went wild in their own ways. So, two years later in 1894, Democrats lost 125 House seats.
Which is to say that voters didn&rsquo;t fall in love with either party; they just kept evicting whoever failed. And that political pattern continues today. The House changed hands in 2006, 2010, 2018 and 2022. When Americans don&rsquo;t like what they see, they tend to vote against incumbents; but then they recoil when the winners mistake popular frustration for ideological consent to engage in mega-overreach.
Political scientist Morris Fiorina calls these arrangements &ldquo;unstable majorities.&rdquo; Or stated another way, Americans rarely grant mandates; they hire politicians on probation. But a stay-home protest this year carries high risk because the DSA is not your father&rsquo;s Democrat Party. And DSA won&rsquo;t govern on probation; it will regard a win as permission to proceed with their crypto-Bolshevik revolution.
<h2 class="subhead nbp">Your Portfolio Runs on Power</h2>
On the investing front, this election will shape America&rsquo;s next industrial buildout: mines, mills, factories, aerospace, shipbuilding, electronics, computers, networks and data processing, and much else.
All that buildout requires energy: oil, natural gas, refined fuels, uranium and electricity; plus materials such as copper, steel and innumerable critical metals.
Downstream from rigs, pipelines, mines, mills and refineries, we have artificial intelligence (AI) that intensifies demand. Data centers and AI require transformers, chips, cooling systems, switchgear and miles of wire. The future joins steel with software, copper with semiconductors, and algorithms with megawatts.
Looking ahead, America must build out everything; and if you impede energy and materials, the future of technology slows or stops.
Along these last lines, California shows how a resource-rich economy manufactures scarcity via bad policy. In essence, for many years the (formerly) Golden State has discouraged drilling, closed refineries, tightened regulation and repelled investment.
<a href="https://dailyreckoning.com/california-nightmare-a-looming-energy-disaster/">As I discussed last April</a>, fuel shortages and refining constraints drive California&rsquo;s ongoing energy crisis. And let&rsquo;s apply that mindset nationally, because a DSA-driven House would restrict leasing, slow pipelines, obstruct refineries, harass conventional power, block mines and subsidize favored substitutes.
Plus, and as we&rsquo;ve noted near-countless times in our <a href="https://dailyreckoning.com/the-world-has-oil-but-not-enough-refining/">articles here at paradigm Press</a>, the Green New Scam constrains dependable energy, funds unreliable projects and blames markets when prices rise.
<h2 class="subhead nbp">The Investment Danger</h2>
America can&rsquo;t tax, regulate and litigate its way to wealth creation and industrial leadership. A Democrat-DSA victory would bring higher energy costs, slower permits, heavier taxes and more politically directed capital. In short, DSA policy will hit you straight in the investment side of life.
That is, DSA and so-called &ldquo;Green&rdquo; policies raise costs for electricity, motor fuels, transport, manufacturing and data-processing. Anti-mining policies constrain copper, uranium and rare earths, the very materials behind the grid, reactors, defense systems and AI. Project delays strand capital and send development elsewhere. Subsidies steer money toward favored technologies instead of durable businesses and paying customers.
All along, <a href="https://rudeawakening.info/posts/chinas-touch-of-death">China will keep on mining, refining, manufacturing and building</a> its power systems, and I mean that in every sense of the phrase. Contrast China with how America&rsquo;s energy, pipelines, uranium, copper, nuclear, grid equipment, engineering and data centers form one system. Weaken one link and the whole chain suffers.
<h2 class="subhead nbp">Anger Is Not a Portfolio</h2>
So, yes&hellip; Here we are&hellip; Two weeks from Election Day. And Trump has disappointed many voters. Okay&hellip; Understood&hellip;
But voting isn&rsquo;t like getting married out of love. And stay-home protests won&rsquo;t fix what&rsquo;s wrong in Washington. Sitting this one out only empowers a DSA coalition that is prepared to choke the energy, materials and infrastructure of the U.S. economy; to harm what your investments require to function.
It&rsquo;s alright to be disappointed, and even cynical (ask me how I know). We all want &ldquo;better&rdquo; governance. But c&rsquo;mon, man&hellip; Show-the-hell-up. Don&rsquo;t protest so hard that you give the keys of power to the lefty-lunatics in the DSA.
That&rsquo;s all for now. Thank you for subscribing and reading.

MR-AISSUELERT-10-20-26-1

The Protest Vote That Wrecks Your Portfolio

There I was, high on the slopes of Mount Etna, more than 9,000 feet above the Mediterranean tide, with the hills and plains of Sicily spread out far below. And the volcano was venting.

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Your editor (minus obligatory hard hat) on Mt. Etna, Sicily. BWK photo.
Above the tree line, there&rsquo;s no soil; just lava, ash, shattered rock, and a few spots of lichen here and there. Wind, rain, frost, and gravity are all hard at work, but at this moment in geologic time they are losing the race. Mount Etna rises faster than weather and erosion can break the mountain apart and carry it away.

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/2NHsdoXNSD8dPAjG0bkKhj/85b446b73f72b9ee2228fad37dd235cd/mr-issue-09-29-26-img-3.jpg" width="540px" />

Distant hikers cross a barren volcanic landscape on Mt. Etna. BWK photo.
Near the summit, Etna&rsquo;s terrain is stripped to elemental colors: charcoal, rust, flashes of sulfur yellow, and vast swaths of fresh, pale-gray ash. Indeed, each step grinds through cinders and loose pebbles. While jagged debris and volcanic bombs litter the slopes; at one time, they were molten blobs and superheated blocks hurled far from the vents and then frozen in flight.

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Sixty pounds of basalt, tossed from the mouth of Mt. Etna. BWK photo.
Sorry to say, but we have no mineral deposits here; well, none of any particular value. There&rsquo;s no gold, silver, copper, etc. Just basalt and volcanic ash for, say, construction; and it&rsquo;s a long haul down a steep slope to take it anywhere. Still, if you know how to observe things, the geology lessons are priceless in terms of how to find mineral deposits.
<h2 class="subhead nbp">The Forge of Hephaestus</h2>
Ancient Phoenicians had a word, &ldquo;attuna.&rdquo; It translates as chimney, likely the root of Etna&rsquo;s name. And it&rsquo;s a fitting description of the smoking landmark they saw from afar, long ago.
Later, Greek explorers and settlers framed the massive mountain as the seat of Hephaestus, god of the forge. Certainly, it makes sense because Etna supplies perfect imagery: furnace-like heat rising from below, tremors that remind one of hammer blows, smoke and sparks at the vents, and black slag draped across the flanks.

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/OgEv5fbvlBqA3rQnX6yfP/5b4e1de5762d431cd024603287644bb0/mr-issue-09-29-26-img-5.jpg" width="540px" />

Recent lava flow from Mt. Etna. Credit Geological Survey of Italy/Italian Institute for Environmental Protection and Research
Even today, and for all the accumulated knowledge of geological science, walking amidst the ash beds of Etna, Hephaestus feels less like myth than an actual field observation. Which leads to a particular physical truth; namely, that Etna&rsquo;s summit is the topmost, smoky outlet of a complex system that channels energy and mass from deep in the Earth, upwards toward the surface.

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/7BCrNt4E6srQByAQcAgSTD/334014efc1c6cb0424928aaa9780727c/mr-issue-09-29-26-img-6.jpg" width="540px" />

Tectonic map of Sicily/Mt. Etna and Ionian Sea. Credit NATO.
Measured from sea level, Etna towers over Sicily at 3,403 meters (11,165 feet). But trace its structural foundations eastward, along a massive fault system and down toward the floor of the neighboring Ionian basin and Calypso Deep, at 5,267 meters (17,100 feet) below sea level. Do some math and the true scale of this tectonic edifice becomes larger still.
Another way to explain the geological story is that, from near the summit and then down-down-down to far beneath my boots, Etna is a series of stacked lava flows, feeder dikes, intrusions, faults, and magma pathways. It&rsquo;s the buried machinery of Hephaestus&rsquo;s forge that channels heat and mass from the depths. And in fact, what looks like a single mountain is really the exposed crest of a three-dimensional, northwest-southeast trending, energy-mass transport system rooted far down in the planet&rsquo;s mantle.
<h2 class="subhead nbp">A Geology Lesson Between Tectonic Plates</h2>
One of my jobs at Paradigm Press is to look at mining company plays and figure out their advertised mineral systems and ore deposits. Then, if it&rsquo;s the real deal, I assess exploration and development potential to turn interesting science into cash-flowing operations. Over the years, I&rsquo;ve traveled the world, from Alaska to South Africa, from Chile to Kyrgyzstan, to look at mineral and mining ideas. And I&rsquo;ve found some great ones, along with more than a few that never panned out.
With mineral deposits as in life more broadly, you must look before you can find. Nothing is ever handed to you. And when you look, it helps greatly to understand what you see. Which is why <a href="https://dailyreckoning.com/dont-waste-this-bull-market/">I routinely take opportunities to visit just plain &ldquo;geology&rdquo; jurisdictions</a>; to maintain basic field competencies and relearn &ndash; or learn anew &ndash; some aspect of science that can help me find the Next Big Thing.
And the opportunity to see an active Mount Etna up close is what took me recently to Sicily, a geology classroom set above the collision zone between the African and Eurasian Plates. Plus, it&rsquo;s worth mentioning, about a year ago I was in Iceland where the North American and Eurasian Plates diverge. Also, this past summer I was in the Canary Islands, part of Spain but offshore of Morocco, atop a fascinating volcanic feature of the African Plate.
Tourism aside, the geologic lessons of these volcanic features involve plate convergence or divergence, subduction, slab-edge processes, regional extension, crustal faults, thermodynamics and mantle flow interactions.
Together, they show how tectonic forces channel energy, create pathways, move mass from deep within the planet, and set up chemical conditions that form mineral deposits. And understanding this aspect of earth dynamics &ndash; if not just plain old volcanism &ndash; is how geologists learn to find the good stuff; namely, the valuable minerals (although some say that &ldquo;it&rsquo;s all good&rdquo;).
Along the way, I saw much of a type of rock called basalt, which to a geologist is a start but definitely not a diagnosis. That is, to understand what builds a volcano, and where and how mineralization may occur, it&rsquo;s necessary to reconstruct the geologic history, the &ldquo;deep time&rdquo; aspects, the tectonic engine, magma sources, and structures that guide mass through the crust.
<h2 class="subhead nbp">Follow the Energy, Then Follow the Mass</h2>
Mount Etna is currently active. It attracts tourists, which is good for Sicily&rsquo;s economy; but on occasion, its eruptive ash clouds close entire sectors of Mediterranean airspace to flight traffic, lest jet engines ingest the volcanic emissions and, basically, seize up mid-flight.
And to be sure, for obvious reasons of public safety, access to the actual explosive vents is restricted by Italian authorities.
Meanwhile, and beyond providing a stunning spectacle for tourism, Mount Etna &ndash; and any volcano, when you get around to it &ndash; is the surface expression of deep-earth energy and mass in motion. And mineral deposits are not isolated anomalies; they are products of a dynamic set of systems that move heat, rock, fluids, and dissolved elements from one place to another.
The earth&rsquo;s inner heat drives melting. Buoyant magma rises through fractures and crystallizes in intrusions. Gases and hot fluids separate from the melt and react with the surrounding rock. As temperature, pressure, chemistry, and permeability shift, metals may remain in an intrusion or accumulate in veins, breccias, replacement zones, and alteration halos.
Again, I&rsquo;ve seen this all over, from the gigantic platinum deposits of Rustenburg, South Africa to volcanic-massive sulfide (VMS) deposits in the Andes, or up in the &ldquo;golden triangle&rdquo; of British Columbia. I recall visiting a county-sized lead-zinc-silver deposit at the base of the Tien Shan mountains of Kyrgyzstan, and then there&rsquo;s the gold-silver arc of southern Idaho, created by North America sliding over a mantle hotspot which now sits directly beneath Yellowstone Park, in Wyoming.
Finding new ore deposits is why the study of active, youthful volcanoes matters to exploration efforts, even exploration in much older terrain. Sure, the volcanic thing may have occurred long ago; but that&rsquo;s the idea! Chemistry and physics played out and created ore deposits, and subsequent deformation and erosion removed the upper reaches of an ancient system, while deformation or metamorphism may have scattered the evidence.
Yet parts of the old geological plumbing can survive; namely, feeder dikes, intrusive centers, fault corridors, hydrothermal alteration, and mineralized structures. And it happens everywhere, on every continent; too many places to name.
Then come the practical questions: What supplied the heat? What carried the magma and fluids? Which structures focused their flow? Where did physical or chemical conditions change enough to deposit and preserve minerals?
To me, at least, basalt-oriented volcanic systems and islands make those relationships easier to read. The rift zones, calderas, lava fields, dike systems, geothermal areas, collapses, and age-progressive landscapes expose different parts of the same planetary machinery. It&rsquo;s quite a textbook if you read it.
<h2 class="subhead nbp">The Point of the Journey</h2>
I could take my &ldquo;basalt bucket list&rdquo; to thoroughly nerdy levels, but I&rsquo;ll spare you. The essential point is this: finding the right kinds of mineral and ore deposits begins with understanding the nearly infinite geological experiments our planet has run.
Mount Etna, Iceland, the Canary Islands&hellip; Read together, these landscapes turn black rock into a record of plate motion, energy flow, mantle melting, magma movement, fluid circulation, and chemical concentration. That record is more than an academic illustration of how the Earth works; it is a guide to where mineral wealth can form.
These volcanic systems teach geologists to reconstruct ancient movements of energy and mass. That, and to recognize where those forces concentrated mineral wealth, where time and tectonics concealed it, and where evidence to find it may still remain.
And that&rsquo;s the point of the journey to Mount Etna. When you learn to read the rocks, they can lead you to the next great discovery.
That&rsquo;s all for now. Thank you for subscribing and reading.

mr-issue-09-29-26-img-1

Fire to Fortune: A Year of Living Volcanically

&ldquo;The world runs on diesel,&rdquo; goes the saying.
And &ldquo;Houston, we have a problem,&rdquo; goes another saying.
So today, we&rsquo;ll discuss diesel (and its molecular cousin jet fuel). But first we&rsquo;ll talk about oil. And oh by the way, when was the last time you bought a barrel of crude oil? Probably never.
Let&rsquo;s dig in&hellip;
<h2 class="subhead nbp">What&rsquo;s In Your Tank?</h2>
You don&rsquo;t buy crude oil. You buy gasoline or diesel, right? And lubricants like motor oil. And items made of plastic (almost everything anymore) or other petrochemicals. Or when you fly, a big whack of the ticket price is jet fuel. Plus, much of the food in grocery stores was fertilized in the field or bug-sprayed with goop made from oil or natural gas derivatives. I could go on but you get the idea.
So, you use oil products; but no, you never buy crude oil. Your purchases are far downstream from the pumpjack out in the prairie. Still, people watch the price of crude oil because it&rsquo;s the headline number. But again, crude is only raw material.
This distinction matters because the world is not &ldquo;running out of oil,&rdquo; or some variation on that scary headline. The world is short of refinery capacity; turning crude oil into products that people actually buy.
Another way to say it is that the economic motive force of the Oil Biz is what happens after crude moves through a refinery and comes out as diesel, jet fuel, heating oil, lubricants, naphtha, petrochemical feedstocks, asphalt and hundreds of other necessary materials.
Refining is a business, of course. And refiners watch the price spread between crude and finished fuel because that&rsquo;s where the money is made or lost. Specifically, people watch what&rsquo;s called the &ldquo;crack spread,&rdquo; which the U.S. Energy Information Administration describes as the difference between the purchase price of crude oil and the selling price of finished products such as gasoline and distillate fuel.
Along these lines, one common refining metric is &ldquo;3-2-1,&rdquo; which is a way of explaining how three barrels of crude become two barrels of gasoline and one barrel of distillate. (Although any chemical engineer can tell you long stories about what really happens in those cracking towers.)
The 3-2-1 idea seems simple, but behind it is the uncomfortable fact that the energy-conversion system &ndash; aka refineries &ndash; has been thinning out for many years. For example, between 2009 and 2024, Europe closed roughly 30 refineries, with more capacity scheduled to disappear this year and next.
The U.S. has also closed refineries, with California in the lead; from over 40 refineries in the Golden State in the 1980s, to seven today (two of which are biodiesel that process French fry grease and similar). Indeed, <a href="https://dailyreckoning.com/california-nightmare-a-looming-energy-disaster/">as I&rsquo;ve discussed in the past, California is a fuel island</a>, tied to a limited set of local plants and distant replacement cargoes.
<h2 class="subhead nbp">Goldman Finds the Choke Point</h2>
That brings us to a &ldquo;choke point&rdquo; issue that Goldman Sachs flagged in a recent note: the world&rsquo;s biggest energy problem is not lack of crude in the ground or at wellheads, but refined products coming out of the world&rsquo;s refineries.
Goldman&rsquo;s conclusion was that diesel sat &ldquo;at the epicenter of the supply squeeze.&rdquo; And this past summer the reality of global energy markets has proved the theory. Consider how Russia has &ldquo;temporarily&rdquo; halted diesel exports after repeated refinery strikes and its own domestic fuel shortages; this is on top of previous Russian diesel and gasoil restrictions for export.
Absent Russian energy exports, European diesel prices rose roughly 40% during the past summer price squeeze, and now prices are sky-high just as harvest demand and the winter heating-oil season approach.
Plus, just in the past two weeks Saudi oil and refined fuel exports have been essentially shut off due to conflict with Houthis in neighboring Yemen; <a href="https://dailyreckoning.com/investing-on-a-new-energy-map/">I discussed this last week</a>. In fact, Saudi has told buyers in Europe to expect zero oil and fuel for the rest of September and into October; which means a dramatic shortage of refined products by November.
You see the point, yes? The energy problem is no longer as simple as &ldquo;we just need more crude oil.&rdquo; It has moved downstream to the refinery level. When refinery output falls in Russia, when Persian Gulf facilities or shipping lanes are disrupted, and when aging Western plants shut for good, the world does not merely lose barrels on paper. It loses diesel for trucks and tractors, jet fuel for aircraft, heating oil for winter, lubricants for engines and factories, and feedstocks for plastics, solvents, resins and chemicals.
This is why the story is bigger than one trade, meaning the price of a barrel of petroleum. It&rsquo;s a warning about global energy flows tightening at the refined-product level.
<h2 class="subhead nbp">Why This Is Bigger Than Diesel</h2>
At the beginning, I cited the old saying that the world runs on diesel. And right now, the shortage of diesel and jet fuel is the brightest distress flare in the sky when it comes to energy. Diesel powers freight, farms, construction, mining and backup generation. In much of central and northern Europe, as well as in New England here in the U.S., the same middle portion of the barrel also supplies heating oil.
Meanwhile, jet fuel and kerosene compete for many of the same molecules down at the refinery. Push airline demand higher, and refiners may favor aviation margins while leaving the diesel pool thin.
And don&rsquo;t forget lubricants, which depend on specialized base-oil units and cannot be replaced by simply pouring extra crude into a tank. Then come asphalt, waxes, sulfur, naphtha and the chemical intermediates behind packaging, synthetic fibers, fertilizer and industrial materials.
That is what insiders call the Diesel Floor. If the truck that hauled your groceries paid a fortune for fuel, the extra cost arrives on the shelf as supermarket sticker shock. If the aircraft carrying high-value freight pays more for jet fuel, the bill moves through logistics. If a mine, steel mill, railroad or machine shop cannot source the proper lubricant, equipment overheats or stops. Scarcity in these products is not cosmetic. It is a tax on motion.
<h2 class="subhead nbp">Russia and the Middle East Are the Same Problem</h2>
Now, we get to geography and the world&rsquo;s missing barrels. Think of conflict in Russia and the Middle East as two parts of the same problem. And don&rsquo;t be confused: much of the media wants to separate these two stories. That is, Middle East troubles are treated as a crude and shipping problem due to Houthis, a subset of U.S.-versus-Iran. And Russia is treated as a sanctions and war problem.
But for diesel and downstream materials, Russia and the Middle East are the same problem; namely, conflicts that result in lower flows of fuel to world markets. Russia&rsquo;s refinery damage and export restrictions squeeze one major stream of middle distillates. Gulf conflict squeezes another.
All this, while tanker traffic through Hormuz has remained dangerous and disrupted; and attacks on Saudi energy infrastructure have shown that bypasses like the East-West pipeline are not magic solutions. Add to the fact that numerous of Saudi&rsquo;s giant refineries have been repeatedly attacked.
India and the U.S. can still send barrels to thirsty markets. But first, you need tankers which are, just now, hard to find. Plus, shipping oil or products from a distant refinery raises fuel costs, plus extra for insurance, financing and transit risk. And the crude oil or refined product may also be the wrong specification for a particular local market. That is how a regional outage becomes a global price: the marginal buyer must reach farther, wait longer and pay more.
<h2 class="subhead nbp">Germany Shows What Tight Energy Flows Do</h2>
Germany shows what tight energy flows look like; in essence, scarcity can choke a major industrial economy. Across Deutschland, thousands of small, medium and large businesses are scaling back or closing due to energy costs and availability. Volkswagen, for example, is laying off over 100,000 workers.
Plus, Europe now enters winter months when its industries need gas and power, while its freight system, farms and many heating systems need middle distillates. If diesel is already expensive before furnaces come on, winter demand adds stress to the system; indeed, it reveals how little slack there was all along.
That pressure shows up everywhere: at the pump, in power prices, in chemical plants, in plastics, in fertilizer, in logistics and in the auto supply chain. And to be fair, energy is not the only source of German industrial stress (i.e., Chinese imports are causing problems); but energy is the cost floor under the entire system.
Now connect that back to Russia and the Middle East. If Middle East trouble lifts oil and refined prices, or LNG prices, or simply threatens tanker routes, Germany pays. If Russian refinery outages and export restrictions remove diesel from the global market, Germany pays. If global crude-derived feedstocks tighten, Germany&rsquo;s manufacturers pay before the average consumer even notices. This is how the shortage moves: from pipeline to tanker, from refinery to truck, from fuel invoice to factory gate.
<h2 class="subhead nbp">Why the Fed Cannot Print Diesel</h2>
And this is not to beat-up on Germany; but that nation&rsquo;s industrial policies and so-called &ldquo;green&rdquo; politics has a dire message for everyone else: when fuel, gas, feedstocks and freight all rise together, inflation stops being a monetary abstraction and becomes a physical bottleneck.
Central banks can print money, but they can&rsquo;t print diesel fuel. Brussels can coordinate stock releases, subsidize bills and ask consumers to conserve. European Commission President Ursula von der Leyen put the fallback plainly in April: &ldquo;The least expensive energy is of course the energy we do not use. We should reduce demand.&rdquo;
Well, okay; but try telling a farmer to harvest without fuel, an airline to fly without jet fuel, or a machine shop or factory to run without lubricant for the rotating equipment. And yes, food is cheaper when you don&rsquo;t eat it. And didn&rsquo;t Marie Antoinette say something about, &ldquo;If the peasants have no bread, then let them eat cake&rdquo;? (Hint: didn&rsquo;t work out too well for her.)
So, here&rsquo;s the takeaway: we like oil companies that operate away from the Middle East, as well as refiners; and toss in service companies and offshore drillers. <a href="https://dailyreckoning.com/investing-on-a-new-energy-map/">I mentioned some last week</a>:
ExxonMobil (XOM). Chevron (CVX). Petrobras (PBR). Schlumberger (SLB). Halliburton (HAL). Cenovus Energy (CVE). Syncrude/Suncor (SU). Transocean (RIG). Oceaneering International (OII). Valero Refining (VLO).
The trade may be crowded, and some stocks may pull back if demand weakens. But the larger argument does not depend on one quarterly earnings cycle. The point is that global energy flows have tightened in products people actually use, which leads us all to an era of higher energy prices and higher downstream costs.
<h2 class="subhead nbp">Wrap Up</h2>
The headline price of crude still matters. But in this market, the deeper question is whether the world can turn crude into products required where and when they are needed. That&rsquo;s a refinery question, a shipping question and increasingly a national-security question.
So, watch crack spreads, refinery outages and middle-distillate inventories alongside crude. Watch jet-fuel margins, base-oil availability and heating-oil stocks. Those gauges tell you whether the world has enough useful petroleum, not merely enough raw crude.
The investable lesson is that a barrel underground is potential; but a functioning refinery turns it into mobility, heat, food, freight and industrial output.
After decades of refinery closures, underinvestment and now these recent physical attacks, the oil-to-product conversion step has become the scarcest asset. And yes, the world may even have sufficient oil, but what it lacks is cracking towers down at the refinery.
That&rsquo;s all for now. Thank you for subscribing and reading.

mr-issue-09-22-26-img-1

The World Has Oil, but Not Enough Refining

There&rsquo;s an old Wall Street line: &ldquo;Buy the rumor, sell the news.&rdquo;
Well, from the Red Sea, then across Saudi Arabia and into the Persian Gulf, rumors just redrew the map.

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The world&rsquo;s new energy map. Credit Matt Bracken.
This is the new energy and geographic reality, and it won&rsquo;t soon return to anything like the old reality, if ever (and probably never). So, prepare and invest accordingly. Let&rsquo;s dig in&hellip;
<h2 class="subhead nbp">Own Non-Middle East Energy!</h2>
No beating around the bush today. Here&rsquo;s the takeaway: own energy and oil service plays that operate far from the Middle East! If you already own investments like that, good for you. If not, you need to get moving.
Here at Paradigm Press, my editorial colleagues and I have banged this energy and service drum for many months; even years, depending on how far back you want to go:
ExxonMobil (XOM). Chevron (CVX). Petrobras (PBR). Schlumberger (SLB). Halliburton (HAL). Cenovus Energy (CVE). Syncrude/Suncor (SU). Transocean (RIG). Oceaneering International (OII). Valero Refining (VLO).
All these and more&hellip; We told you so.
And if you&rsquo;re a new subscriber? Well, you weren&rsquo;t around but here you are now. And many of our ideas still have legs for the marathon ahead.
The Middle East is ground zero for worldwide energy problems. Since the outbreak of conflict with Iran last February, global energy flows are disrupted. Oil prices have bounced around but are generally rising. And now, after what happened last week with Saudi Arabia and Yemen, they&rsquo;re really rising, which we&rsquo;ll address below.
The investment opportunity is that, for many years, markets mispriced risk in a historically volatile region. Meanwhile, it&rsquo;s not as if people didn&rsquo;t know the risks. Anyone could have visited a decent library and looked up some history about the Arabian region. But then, there&rsquo;s what&rsquo;s called &ldquo;recency bias.&rdquo; Many people thought that things seemed to be under control.
But obviously, things are not under control.
<h2 class="subhead nbp">Energy is a System of Systems</h2>
From the pumpjack in the field to the fuel pump down the street, the story of oil is not &ldquo;just&rdquo; geology, and I say that as an old petroleum geologist.
Oil is a system of systems: land and mineral rights; exploration and mapping; capex allocations; roads, rigs and drill bits; pumps and pipelines; refineries, terminals and tankers; harbors and ports; insurance and finance; chokepoints and military power&hellip; or lack of it.
Now, we&rsquo;re watching in real time how a seemingly &ldquo;local&rdquo; conflict can trigger a global energy and economic earthquake. In Arabia, it&rsquo;s Saudis versus Houthis; and most people hear that and say, &ldquo;Huh?&rdquo;
Because who has time to learn about arcane tribal issues that go back over a century, to the dying days of the Ottoman Empire, let alone research back even more centuries into the dusty mists of ancient times? Who cares, right?
Well, right now we all care. And the short version is that a well-organized militia in Yemen &ndash; called &ldquo;Houthis&rdquo; &ndash; just mauled Saudi military forces and gained control over a strategic stretch of Red Sea coastline. During the back and forth, a key pipeline in Saudi Arabia was wrecked; apparently, the pump stations are destroyed. So now, Saudi is days away from essentially no oil exports, a loss to global supply in the range of 8 million barrels per day.
We have a situation where tankers must reroute; insurers must reprice; refiners everywhere are scrambling; and oil, refined products, fertilizer, other petrochemicals, LNG, container goods, food, and much more must now sail on very different routes and schedules.

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&nbsp;California gas station this past weekend. Credit anonymous Paradigm subscriber. 
In due course, your cost of living will increase, while your quality of life will decline. Oh, and here (above) is California diesel fuel at $9.99 per gallon. Note how it maxes out the electronic price screen. No doubt, Shell will find a way to fix that problem.
<h2 class="subhead nbp">Two Gates Under Pressure</h2>
Go back to that map, above. On the eastern side of Arabia sits the Strait of Hormuz, the narrow exit for Saudi, Kuwaiti, Iraqi, Emirati, Qatari and Iranian energy exports, and much else. It&rsquo;s been in the news bigtime since the Iran conflict kicked off.
On the southwest corner is Bab al-Mandeb (BAM), the &ldquo;Gate of Tears,&rdquo; where the Red Sea opens into the Gulf of Aden and Indian Ocean. Plus, BAM is the gateway to Suez, up north, which leads to Mediterranean ports and Europe. It too has been in the news over the past few years, and now drives much of the energy story.
Basically, if somebody closes or restricts Hormuz or BAM, the world changes fast. If both Hormuz and BAM have problems, then we all have big problems.
That is, with Hormuz under restrictions from Iran, oil producers in the Persian Gulf struggle to move energy out. And now that BAM is under threat, the Red Sea-Suez route becomes unreliable.
Plus, with Saudi Arabia&rsquo;s East-West pipeline shut down, the kingdom&rsquo;s land bridge from eastern oil fields to Yanbu on the Red Sea ceases to be a reliable source of oil to global markets; and in fact, becomes just another target.
And consider that the Houthi militia need not defeat Saudi Arabia in any sort of major battlefield sense, like some sort of reverse version of Desert Storm of 1991. They only have to make Saudi oil logistics unreliable.
In other words, Houthi militia &ndash; literally, &ldquo;guys in sandals with AK-47s&rdquo; &ndash; don&rsquo;t require a blue-water navy or modern air force to disrupt global shipping. They just need to control a stretch of Red Sea shoreline, which is the situation now. They can station observers with binoculars (or use Chinese satellite feed), set up drones and low-end missiles, utilize mines or boarding teams, and generally present enough credible firepower to make shipowners and insurers think twice.
The larger context is that global trade &ndash; definitely, the energy trade &ndash; runs on sailing schedules, credit and confidence. When ships must stop and await an escort, or divert around Africa, the costs appear everywhere: higher fuel burn, inventory shortages or backlogs, delayed delivery times, higher freight rates, war-risk insurance premiums, and higher prices all down the line.
Of course, oil gets the headlines. But the same shipping lanes that host oil tankers also serve vessels that haul refined products, LNG, fertilizers like urea and ammonia, methanol, sulfur, aluminum, industrial chemicals, auto parts, electronics, textiles and ordinary household goods. You name it. Because you&rsquo;ll pay more for it.
<h2 class="subhead nbp">Saudi Weakness, Houthi Leverage</h2>
Since the 1970s, Saudi Arabia has spent massive fortunes on aircraft, missiles, air defenses, advisers and command centers. On paper, it looks formidable. But in combat &ndash; certainly last week in Yemen &ndash; Saudi military power was abysmal.
One problem is that much of Saudi&rsquo;s ground force is comprised of foreign mercenaries; they are happy to get paid but not much of a war machine. In fact, last week against the Houthis, Saudi troops were defeated in a debacle.
Plus, Houthis have advantages where it matters. They&rsquo;re fighting on their home field, in their own mountains and coastal approaches. They excel at improvised logistics and can supplement their capabilities with drones and various Iranian and Chinese missiles. At root, they&rsquo;ve transformed low cost equipment into strong operational leverage. And again, the Houthis need not conquer Saudi Arabia; just make Saudi oil export routes unreliable.
The quick history is that the Saudi-Yemen border is not a clean line; and it never was, not even in the days of the Ottoman Empire. When the Ottomans collapsed in the 1920s, Saudi claimed vast areas of Houthi land. And the result is a long-disputed, ill-defined &ldquo;tribal&rdquo; zone along a range of rugged mountains. Another way to say it is that the Saudi-Houthi conflict is based on historic grievances, religious differences and a long-festering, anti-Saudi anger. So, don&rsquo;t be misled into thinking it&rsquo;s all a big, so-called &ldquo;Iranian proxy war.&rdquo;
In another universe, perhaps Saudi-Houthi is local conflict with little blast radius. But in this world, with global dependence on Saudi oil exports, we feel worldwide shockwaves. Looking ahead, the picture is ugly for Saudi oil exports. Hormuz is restricted; BAM is under Houthi control; and the Saudi East-West pipeline is shut in, with pump stations blasted to ruins.

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/3NJqZMXNvmrINr2DfXl4tv/f8234da712124df8b9450fc34e7114dd/mr-issue-09-15-26-img-4.jpg" width="540px" />

Saudi East-West Pipeline pumping station. Credit MizarVision.
Hence, markets are repricing oil and much else, likely for the long haul.
<h2 class="subhead nbp">Washington Stays Out</h2>
It&rsquo;s worth noting that, per news accounts, Saudi Crown Prince Mohammed bin Salman asked President Trump for U.S. military help against the Houthis, and Trump declined to intervene, at least for now.
Clearly, Trump doesn&rsquo;t want U.S. forces to become the fire brigade for this fight between Saudi and the Houthis. The U.S. has immense combat power available in the Middle East; but right now, the U.S. military has more problems than available assets. So, Trump and his generals must be selective. The policymaking process is clear: Why should the U.S. get involved? And what does the U.S. get out of the mess?
<h2 class="subhead nbp">The Investment Lesson</h2>
To restate things: the Middle East risk premium just exploded, literally. Hormuz is restricted, BAM is threatened, Saudi&rsquo;s bypass pipeline is shut down, and even the Suez Canal can be closed by relatively simple military strikes. So, oil is repricing to a much higher level.
This doesn&rsquo;t mean that Middle East oil disappears. But it does mean that all oil everywhere &ndash; even here in North America! &ndash; now carries a price premium based on the Middle East risk. Call it the revenge of geography.
Looking ahead, the necessary evolution for energy users is redundancy and security. Generally, this favors non-Middle East producers, definitely in the Western Hemisphere. Plus, service companies, offshore drillers, and LNG that comes out of secure infrastructure.
Other strong plays will be uranium in stable jurisdictions, critical minerals, grid fuel, storage, pipelines, and related energy services that operate in jurisdictions where the route to market is not controlled by a militia with a century-long grudge.
Sad to say, but in U.S. culture the term &ldquo;energy security&rdquo; is more of a political slogan than a foundational strategic imperative. Or else, why has the U.S. misallocated so many resources to dumb ideas that range from the &ldquo;Green New Deal&rdquo; to draining the Strategic Petroleum Reserve whenever gas prices bump up a few dimes.
Energy security is geographic, such that it defies the tyranny of distance. It requires strategic focus and discipline at national scale. It&rsquo;s steel in the ground, equipment, skilled labor, defensive power, and the ability to punish bad guys when the map turns ugly.
Looking ahead, the best investment angle is in companies that produce and move energy without having to ask permission from some tribe in the mountains, or wait for Washington to save a Saudi regime that just displayed to the world its martial incompetence.
That&rsquo;s all for now. Thank you for subscribing and reading.

mr-issue-09-15-26-img-1

Investing on a New Energy Map

Last week the Supreme Court issued an arcane, procedural order that looks narrow but holds the potential to explode in the future like a buried bomb beneath the national roadbed.

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Typical headline on &ldquo;Ballroom&rdquo; issue. Credit Associated Press.
I&rsquo;m talking about President Trump&rsquo;s so-called &ldquo;Ballroom,&rdquo; or more accurately the ballroom-and-buried-bunker complex that the Orange Man is building adjacent to the White House.
Or as the Associated Press (AP) framed the matter:
WASHINGTON (AP) &mdash; A divided Supreme Court&nbsp;on Monday (August 31; BWK) allowed the White House to continue construction on a $400 million ballroom project as lawsuits play out, a win for President Donald Trump as&nbsp;he flexes unprecedented executive power and remakes the capital in his image.
Most imagery of the new structure shows a spacious building with prominent pillars, glass, and the usual gilded glitz of a Trump-brand hotel.

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Proposed interior of new Ballroom. Credit White House.
But wait, there&rsquo;s more! Because, per court filings, apparently the above-ground edifice will cap a deeply buried military complex of nuclear-hardened spaces, communications capacity, medical facilities, and more of the super-secret stuff that supports what people in Washington call &ldquo;continuity-of-government.&rdquo;
Marble above. Bunker below. Versailles sur Cheyenne Mountain, one might say.
<h2 class="subhead nbp">Does Standing on the Sidewalk Convey &ldquo;Standing&rdquo;?</h2>
No doubt, you&rsquo;ve heard the story. Last year Trump ordered that the 1940s-era East Wing be demolished. He then presented drawings for a &ldquo;Ballroom.&rdquo; And of course, the usual suspects squealed like stuck hogs.
Naturally &ndash; cuz it&rsquo;s Trump! &ndash; a so-called &ldquo;historic preservation&rdquo; group sued and argued that the Chief Executive could not reconstruct the White House grounds absent bureaucratic review, if not congressional authority. Then, naturally, a D.C. district judge and two D.C appellate judges took the claim seriously and ordered work halted as the concrete was setting.
Trump&rsquo;s lawyers appealed and, in a 5&ndash;4 decision, the Supreme Court allowed construction to continue while litigation proceeds. The unsigned majority order stated that the court was not deciding whether Trump&rsquo;s reconstruction project is lawful. Indeed, the outcome rests entirely upon whether the plaintiff has what&rsquo;s called &ldquo;standing&rdquo; to bring suit in the first place.
Standing sounds like a term from the legal weeds but is, in essence, the key to the door of the courthouse. That is, if I&rsquo;m standing on the sidewalk and your tree falls on my head, arguably I have standing to sue you because I was injured. But if I&rsquo;m standing on the sidewalk and I don&rsquo;t like the paint color on your house, I&rsquo;m not really &ldquo;injured&rdquo; enough to have standing to sue, right?
Basically, if you show standing, you can sue; if you lack standing, you can&rsquo;t file. And in this case, per the Supreme Court, absent standing by the preservation group, Trump and his construction crews can continue to erect steel and stone.
Which returns us to that vote, 5&ndash;4. Four justices, including Chief Justice Roberts (full disclosure: a classmate of mine at Harvard), apparently believe that the plaintiff has enough stake &ndash; aka standing &ndash; in the White House project to keep the case alive. Plus, Roberts and the court&rsquo;s three liberal justices opined that the construction was &ldquo;likely unlawful.&rdquo;
But five justices thought otherwise. Which means that only one vote separates &ldquo;likely unlawful&rdquo; construction from the ancient legal concept of &ldquo;pour more concrete.&rdquo;
Is this crazy, or what? We&rsquo;re not talking about patching potholes in Pittsburgh. This is the White House, easily among the most recognizable buildings in the world. And the lawsuit is about presidential power to build and rebuild without bureaucratic and legislative signoff.
Five justices said the plaintiff cannot sue the president. But four justices said that a guy walking his dog outside the fenceline can seek judicial remedies and slam the brakes on further construction.
At which point, this whole thing is NOT about marble, fancy pillars and gold gilt, let alone the bomb shelter. It&rsquo;s about the rules of political combat in our Republic. That is, who may sue whom? Over what? And when is a claimed &ldquo;injury&rdquo; sufficient to open the big bronze doors of the courthouse?
Meanwhile, in terms of Supreme Court jurisprudence, when does the so-called &ldquo;highest court in the land&rdquo; determine that a dispute is too radioactive? And then bury the Geiger counter beneath the doctrine of standing?
<h2 class="subhead nbp">The Trapdoor of Standing</h2>
If this issue seems familiar, recall December 2020 when the State of Texas filed what&rsquo;s called an &ldquo;original jurisdiction&rdquo; action in the Supreme Court against Pennsylvania, Georgia, Michigan and Wisconsin over election procedures from that year. Sixteen other states joined the case.
Under the Constitution&rsquo;s original jurisdiction language, the Supreme Court is the forum for disputes between states. And Texas&rsquo;s filing was no jailhouse missive scrawled on some yellow legal pad. In fact, Texas had a long list of claims, and soon the docket was packed with related, supplemental filings, including many well-crafted &ldquo;amici&rdquo; briefs from serious players. And of course, the defendant states filed answers.
Whatever one might think of the Texas allegations, at an institutional level the question was national and Constitutional, regarding a presidential election and original jurisdiction.
But the Supreme Court dismissed Texas and the other states &ndash; one third of the states of the Union &ndash; with two sentences. Namely, that Texas lacked standing because it had not shown a &ldquo;judicially cognizable interest&rdquo; in how other states conduct elections. And all other motions were moot.
To their credit, in 2020 Justices Alito and Thomas argued that the Supreme Court lacked discretion to refuse an original jurisdiction case. But still, the Court summarily ended the matter based on one magic word: standing, aka the trapdoor of the courthouse. By dismissing the case, the Supreme Court avoided addressing Texas&rsquo;s arguments, while coming off as merely controlling the keys to the front door.
So, here we have two cases about standing. One dismissed an original jurisdiction action, a legal pathway clearly written into the Constitution; the other was a close call &ndash; one vote! &ndash; about a case filed by some guy who walked his dog in front of the White House and claimed &ldquo;aesthetic&rdquo; injury.
Which is it? Is there no more original jurisdiction? Or does a guy in the street almost &ndash; by four votes out of nine &ndash; have standing to stop a White House military bunker with a Ballroom on top? Or are both cases simply occasions when the Supreme Court avoided inconvenient matters?
At root, the idea of standing prevents courts from becoming debating clubs. And it&rsquo;s probably prudent to avoid ugly politics. Yet at some point we don&rsquo;t have neutral law anymore, either.
<h2 class="subhead nbp">The Price of Legal Fog</h2>
The Ballroom litigation is not just an argument about Donald Trump, the East Wing or the emotions of 2020. Because federal courts are part of the operating system of the Republic.
If standing is too tight, genuine injuries go unheard. If standing is too loose, anyone with an attitude can jam the gears. Either way, confusion is costly: projects and progress halts; political actors preen and posture; lawfare body shops seek plaintiffs; and capital fails to move because legal uncertainty is a tax, but no one knows the exact rate.
This is how a modern empire declines and falls; not through one grand Constitutional crash, but via thousands of acts of ambiguity. Do you have standing or not? After a while no one knows where the lines are, so everybody sues if only to preserve leverage.
The irony is that the Supreme Court claims to stay out of politics. Yet clearly, the Constitution assigns certain disputes by design. Meanwhile, federal governance is a priori political. And obviously, the presidency is political and every justice on the Court reached the bench through a political process. So, when the Court sanctimoniously pretends to be apolitical, it doesn&rsquo;t purify a quarrel; it just relocates the knife fight to a darker alley.
And no, the Court can&rsquo;t decide every national p!ssing fight. It&rsquo;s not a council of elders. But when it defaults to &ldquo;lack of standing&rdquo; to avoid hard questions, it owes the country some bright lines. Otherwise, standing is not a constitutional doctrine. It&rsquo;s more like a judicial mood gauge.
<h2 class="subhead nbp">From Permits to Political Risk</h2>
Carry this idea beyond the courthouse. Pipelines and mining roads cross federal lands. Ports and rivers must be dredged. Defense sites and shipyards may need to expand. And in countless other ways, many ambiguities arise that are not distinctly addressed in law and regulation, such that someone somewhere claims injury. And the question of who can sue becomes almost as important as who is right.
When legal thresholds are obscure, project sponsors lack certainty. Permitting is provisional, final agency action is in &ldquo;quotation marks,&rdquo; litigation looms, and capital formation slows because investors can&rsquo;t model whether a permit ends the process or merely determines who files the appeal. Infrastructure and economic development transition from asset creation to hostage negotiation. In their own bizarre way, court dockets become part of the overall capital portfolio.
The fog of legal uncertainty favors the side that willingly litigates. It rewards delays and allows public officials to recast policy disputes as jurisdictional puzzles. It turns every development project into a law-school exam.
In this sense, the 2020 &ldquo;lack of standing&rdquo; dismissal against Texas still stings. Set aside the personalities and election outcomes. If Texas and 16 other states believed that sister states altered voting rules to distort the legitimacy of our federal compact, where else can this kind of dispute go? We&rsquo;ve already tried Fort Sumter.
Perhaps Texas deserved to lose on the merits; but we&rsquo;ll never know because the 2020 dismissal was based on catch-all &ldquo;lack of standing&rdquo; procedure. So, instead of clarifying law, the Supreme Court bred further suspicion.
Likewise, if Congress must authorize Trump&rsquo;s Big Beautiful Ballroom, then say so. If executive control of the White House grounds prevails, say that. But draw some boundaries because restraint without explanation is not wisdom. Evading hard calls comes with costs.
<h2 class="subhead nbp">The Holy Roman Warning</h2>
Perhaps our nine justices simply don&rsquo;t want to arbitrate a fractured Republic. Or in a manner of speaking, nobody wants to referee the Holy Roman Empire, and this point is more than a joke.
The Holy Roman Empire was a loose mosaic of kingdoms, duchies, bishoprics, counties and imperial cities. Its emperor was elected. Authority was layered, with many overlaps. The emperor possessed majesty but limited powers. Local rulers guarded sovereignty like family silver. And this concoction of a political entity endured for centuries, which is no small achievement. But it also produced jurisdictional complexity, from the days of Charlemagne to governance under Napoleon.
The lesson is not that federal systems are doomed. Indeed, ambiguity can help preserve order by allowing every faction to tell itself a tolerable story. But confusion compounds, and over time every quarrel becomes a legal fight that drags out and locks up the gears of society.
With a dismissal based on &ldquo;lack of standing,&rdquo; the Supreme Court justices may think they&rsquo;ve avoided ugly politics. But actually, they create an imperial, jurisdictional maze within which every elector, governor, politician, agency and lawfare mill reads a different map. Last week, the Court saved itself a bitter decision on the merits; but now hands the country a future of procedural wars.
<h2 class="subhead nbp">Law, or Oracles?</h2>
Done right, the doctrine of standing disciplines litigation. It prevents generalized grievances from becoming federal cases and prevents judges from issuing advisory opinions. Courts remain a forum for real disputes brought by parties with real stakes.
But unpredictable &ldquo;standing&rdquo; doctrine &ndash; whether dismissing Texas or a 5-4 decision about Trump&rsquo;s Ballroom &ndash; does the reverse. Now, we&rsquo;ll see more lawsuits because nobody knows the boundaries. The Court has politicized procedure because its denials look selective. Meanwhile, the Court invites forum shopping, bizarre claims and emergency applications.
When the courthouse is open only according to the heat map of a dispute, the Court reveals its institutional discomfort with the power of the Constitution. And sorry, but America can&rsquo;t run on judicial avoidance.
Indeed, over 250 years &ndash; okay, since 1789 &ndash; the Republic has survived bad rulings, even foolish ones. But what it cannot survive is an elite legal culture that turns access to court into some sort of petition to the oracles. You ask whether you may sue; the oracle studies goat entrails, sniffs the political winds and replies: &ldquo;Yes, but only maybe; and not exactly now, but possibly next time.&rdquo;
That&rsquo;s not law; it&rsquo;s judicial ambiguity. It weaponizes procedure and leaves citizens and states wondering whether the Constitution has become another museum piece: admired and revered, protected by thick glass at the National Archives, and increasingly irrelevant.
With the Ballroom decision, the justices may think they acted in restraint. But I suspect that history will frame it as a warning sign of deep, structural problems that precede the so-called &ldquo;decline and fall,&rdquo; if not disaster.
And on that note, I rest my case.
That&rsquo;s all for now&hellip; Thank you for subscribing and reading.

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Trump’s ‘Ballroom’ and a Legal Bunker-Buster

It&rsquo;s September 1st and we&rsquo;re ten days out from 9/11 + 25 years. Next week, on Friday, September 11th, we&rsquo;ll say something suitable for the occasion.
But in the runup, I&rsquo;ve been pondering the meaning &ndash; and power &ndash; of historical milestones, especially now that we&rsquo;ve reached a quarter-century post-event, aka the &ldquo;silver anniversary.&rdquo; Let&rsquo;s dig in&hellip;
<h2 class="subhead nbp">Reflection and Recollection</h2>
The tradition of silver at 25 years began in the 1500s, in German mining towns. It&rsquo;s an idea with staying power, considering that people still follow the custom after 500 years; eg., a wedding anniversary. As for silver, it&rsquo;s ceremonial and polished, if not elegant. And it suggests reflection and continuity.
Then again, how &ldquo;polished&rdquo; is a calamitous event with national and international impact? What happens on year 25 when a date recalls a path of painful history?
At five years, a terrible event may still be playing out, complete with raw scars if not open wounds. By the tenth anniversary, remembrance likely includes rituals, and approved versions of public vocabulary. By year 20, public ceremonies angle towards a historical view, although it&rsquo;s not quite yet a museum display.
Now, skip ahead to a 50th anniversary, by which time memory has transformed into heritage. That is, most adult eyewitnesses are gone, or at best elderly and fading, and thus is ceremony often wrapped in an evolved sense of national nostalgia.
Which brings us back to the 25th anniversary, moored in the middle of this river of time. The initial shock has passed. Early monuments are up. Public language is distant enough to speak in terms of doctrine yet also close enough to events that living witnesses can still object.
Still, it&rsquo;s fair to say that by the silver moment, at 25 years, much memory has crystallized into something like an approved curriculum and ceremony, all intended to become the &ldquo;official&rdquo; explanation.
<h2 class="subhead nbp">The Battle to Harness Legitimacy</h2>
In other words, at five and ten, recollection is controlled by recent shock and pain. At twenty, history writers and policy wonks are reorganizing evidence and framing future narratives. Then by year 50, the state and culture own the story.
But midway, at the 25th annual mark? Memory remains contested. Witnesses, institutions and political actors all compete for positional authority. Participants demand fidelity to what they saw, heard and lost. While younger people who inherited the consequences ask what the event means to them; that is, why it still matters and where does its legacy take them as they blaze their own trail through life.

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Remembering 9/11. Credit New York Times.
At year 25, the story still begins by honoring the loss; but it can end by narrowing the past. That is, grief has transformed into doctrine which then becomes a shield against questions; definitely, it&rsquo;s a problem with &ldquo;official&rdquo; history. And inevitably, governments, political actors, media, academics, museums and other groups &ndash; think of veterans &ndash; begin to close ranks around the version of history that future citizens will be encouraged to remember.
Another angle is that, by year 25, state actors and other powerful interests have converted the catastrophe into what passes for moral permission to do&hellip; well, to do whatever they want. Old pain and scars become the basis for current policy, while politicians and policymakers willingly mask their own failures with patriotic language, if not treat inquiry as disloyalty.
In this sense, a 25th anniversary is a center of gravity within the long-term contest over who gets to define the past for the benefit of the present and future. So, as noted above, we&rsquo;ll look at 9/11 on 9/11. But for today, let&rsquo;s revisit two other 25-year markers from long-ago in 1966, both of which are revealing.
First, on December 7, 1966, America recalled Japan&rsquo;s surprise attack on Pearl Harbor in 1941. Also in 1966, the Soviet Union recalled the German invasion of June 21, 1941, aka &ldquo;Operation Barbarossa&rdquo; which led to what Russians call the &ldquo;Great Patriotic War.&rdquo;
Both Barbarossa and Pearl Harbor began with surprise attacks. Both led to immediate and vast warfare, immense death and destruction, and creation of a very different, postwar European and Pacific worlds. Yet by their respective 25thanniversaries, the two events played different roles in different cultures.
In the U.S., Pearl Harbor+25 began with memorial and grief for the direct loss, but then followed an upbeat arc: from defeat to mobilization, then victory, occupation, global reach, superpower status, and even alliance with the former foe.
In the USSR, the quarter-century remembrance also mourned the dead and celebrated victory. Plus, it harnessed past suffering to reinforce the ongoing legitimacy of Communist state power, along with permanent anti-capitalist/imperialist vigilance.
Again, as we approach 9/11+25, the question is not just how a nation remembers its past, but who controls the framing and narrative; of what questions remain permissible, and whether the dead are honored by truth in full, or by a polished story that leaves too much out.
<h2 class="subhead nbp">Pearl Harbor+25: Grief Recast as Victory</h2>
On December 7, 1966, America marked Pearl Harbor+25 while already moving towards another Asian war, this one in Vietnam. Many veterans of the fight against Japan were in the prime of life. Certainly, many were political actors if not movers and shakers in public life, business, media and academe; and of course, the U.S. was full of old vets who swapped tales down at the VFW halls.
In this sense, the 25th Pearl Harbor anniversary was not just history, but a state-level reminder of the need for America to be vigilant: watch for enemies, watch the sky, watch the Pacific, expect surprise, and never assume that vast oceans protect America. The lessons of December 7th carried great force.

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USS Arizona Memorial, Pearl Harbor. Credit U.S. Navy.
In this sense, Pearl Harbor+25 differed from our own, upcoming 9/11+25 because, by 1966, the U.S. could look back on wartime victory of great scale and scope. Between 1941 - 45, American energy, industry and arms defeated and occupied Japan and converted that nation into a Cold War ally. Thus did memory and memorial begin in fire and death, but the arcs ended in triumph and overwhelming American power and influence.
Along these lines, the sunken battleship ex-USS Arizona (BB-39) and the USS Arizona Memorial mattered much to the 25th anniversary in 1966. By then, an elegant white structure spanned the ruined ship without touching it, while the names of entombed Sailors and Marines were carved into white marble within the structure. The harbor&rsquo;s flat water and soft breezes remain part of the evidence; the memorial admits the disaster without turning loss into abstraction.

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List of names, lost on December 7, 1941. Credit U.S. Navy.
Artistically, the memorial carries the Pacific war&rsquo;s whole message: surprise attack, mobilization, energy, industry, logistics, overcoming the tyranny of geography, fighting, bombing, blood, surrender and the postwar American order. Yet at root, the overall physical Arizona memorial displays the human cost as exact and visible, with names fixed in stone where no future politician can erase them.
<h2 class="subhead nbp">In the Soviet Union, Memory Became State Armor</h2>
In the Soviet Union of 1966, the 25-year reckoning worked differently. Emphasis fell less on the final victory of 1945 than on the treacherous surprise of Germany&rsquo;s June 1941 invasion, the opening of the Great Patriotic War.

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Germany&rsquo;s Operation Barbarossa. Credit Imperial War Museum.
By 1966, that memory had become an emotional and political foundation for Soviet legitimacy. Moscow had already made the May 9th &ldquo;Victory Day&rdquo; remembrance into a public holiday, and the story of total, continental-scale war became more than solemn remembrance; it was hard proof that the Communist Party had saved both the post-1917 Soviet state as well as the ancient and venerable Russian civilization.
The Soviet sacrifice was immense: about 27 million dead, of whom 10 million were military and 17 million civilians. Plus, innumerable cities and regions were occupied, burned, wrecked and starved. Indeed, Soviet losses surpass anything like easy comprehension to an outsider, and even today in 2026 families across the former-USSR still live with painful memories.

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Soviet monuments at Stalingrad. Credit Kremlin.ru.
At the same time, the Soviet silver anniversary also showed how total state power can dominate memory. Official history emphasized unyielding resistance, heroic suffering and inevitable triumph, while masking Stalin&rsquo;s pre-war purges, misjudgments and terror. The state-level story elevated military endurance but suppressed political culpability. It honored veterans yet subordinated them to the power of the Communist Party. The famous phrase &ldquo;No one and nothing is forgotten&rdquo; sounded absolute, but many questions remained dangerous to ask.
In the Cold War context, the 1966 message was contemporary as much as historical. For example, West Germany&rsquo;s place in NATO was cast as revanchism in postwar dress, while the U.S. war in Vietnam became ipso facto proof of imperial aggression.
All in all, in 1966, Soviet postwar power &ndash; its comprehensive, national-scale militarism and Communist international agitprop &ndash; was presented not only as the force that defeated H!tler and the N@z!s, but also as the shield of global peace; and hence, went the argument, none of Moscow&rsquo;s policies of the era deserved scrutiny.
<h2 class="subhead nbp">The Lesson of 25 Years</h2>
There&rsquo;s more to say; whole libraries exist on these subjects. But as we approach America&rsquo;s 9/11+25, the lesson is clear: a silver anniversary can sharpen national understanding, but also harden a narrative into official doctrine, if not national myth.
Handled honestly, a 25th year, silver remembrance can widen inquiry while witnesses remain to correct the record. But handled politically, remembrance risks morphing into liturgy that narrows inquiry because the entireties of an event &ndash; its overall moments in time &ndash; are now masked by well-choreographed ceremony and approved vocabulary. As in&hellip; yes, we honor the dead; but at the same time bury the inconvenient questions.
Even today, certain Big Questions from 1941 have never quite disappeared: Did President Franklin Roosevelt know enough to warn his Pearl Harbor commanders that Japan would strike, yet fail to raise the alarm? Did Joseph Stalin know enough to see Barbarossa coming, yet fail to prevent the catastrophe? In both cases, the issue is not cheap accusation; it&rsquo;s accountability.
A serious anniversary of a serious event &ndash; and certainly, its silver moment &ndash; must be a &ldquo;house with many mansions,&rdquo; to borrow an old term (John 14:2-6). Recollection must make room for heroism, courage, fear, grief, sacrifice, policy success; but also, for policy failure, mistakes and unintended consequences.
A day of remembrance is a teachable moment, or otherwise it becomes mere theater. Worse, it becomes whitewash for people and institutions that deserve true scrutiny. And whether the subject is Pearl Harbor, Barbarossa or our own upcoming 9/11, the warning stands: memory monopolized by the state uses just enough truth to build a grand fa&ccedil;ade. It salutes the dead, waves the flag, and asks the rest of us to stop asking questions.
But don&rsquo;t stop asking questions. And that&rsquo;s all for today.
Thank you for subscribing and reading.

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9/11 + 25: When History Turns Silver

On July 31, I wrote about Canada, and how Donald Trump seems to be channeling his inner Benjamin Franklin. And I received more negative responses to that article than anything I&rsquo;ve written over the past two decades.
Most critics were from Canada, a place where I&rsquo;ve traveled and done business for over 40 years. So, perhaps I&rsquo;ve missed something in my explorations in Canada; or perhaps some Canadians lack a sense national self-awareness.
&ldquo;Trump-Trump-Trump,&rdquo; you say?
Well, okay&hellip; if you insist: &ldquo;Trudeau-Trudeau-Trudeau!&rdquo; And &ldquo;Carney-Carney-Carney!&rdquo;
Seriously, Canada. Look inward. What have you done to your country? And now, over this past weekend U.S.-Canada trade talks cratered, and we have a new tariff war. Let&rsquo;s dig in.
<h2 class="subhead nbp">Can Canada Defy the Map?</h2>
A few weeks ago, I recalled how, in the 1760s-80s, Franklin was involved with Canada, or what was then called &ldquo;British North America.&rdquo; The point was that Franklin viewed North America as a strategic whole: rivers, ports, farms, mines, workshops, shipyards, roads, canals, defenses and markets, all tied together by geography and necessity.

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British North America in 1776. Credit: Muir-Way.com.
I suspect that Trump understands this as well. And despite hyperbolic criticism from Canadian readers, my July 31 thesis still stands. That is, the U.S. and Canada are two continent-scale neighbors, deeply intertwined by supply chains and common defense, but now arguing as if geography was just an opinion.
And I&rsquo;m sorry to break the news, guys &amp; gals, but Canada can&rsquo;t win a trade war with the U.S.
Sure, Canada can impose counter-tariffs. It can ban U.S. liquor and boo the U.S. anthem at hockey games. But Canada can&rsquo;t replace the world&rsquo;s largest economy &ndash; located right next door! &ndash; with distant dreams of Europe or China. And here&rsquo;s where Canada&rsquo;s political class has a huge problem.
Begin with Prime Minister Mark Carney, a globalist in every respect; except that he keeps his money mostly in U.S. investments (look it up!). Then add how much of official Canada, as well as Canada&rsquo;s mainstream media and academic factions, collectively view their nation as a European country, cruelly condemned by fate to occupy North American real estate. Meanwhile, vast numbers of Canadians want Scandinavian social policy, Brussels-nanny-state regulation, Davos-approved climate virtue, along with wide open American market access, and then &mdash; somehow &mdash; massive trade with China on Canadian terms.
Yeah, right&hellip; Dream much? On China alone, Canadian trade goals are absurd. That is, China doesn&rsquo;t view Canada as a partner in value-added manufacturing or high tech. China can produce all the steel, aluminum and auto parts it needs, and at far lower internal cost than anything Canada can offer for sale.
Meanwhile, Beijing eyeballs are focused on Canada&rsquo;s vast, post-glacial landscape of water, energy, minerals, farmland and timber, and a modest-sized (by Chinese numbers) market for Chinese goods.
In purely strategic terms when it comes to China, Canadian trade aspirations risk turning the place into just another of the Middle Kingdom&rsquo;s worldwide resource appendages: dig, pump, cut and ship; then import back the higher-margin finished products from Asia.
<h2 class="subhead nbp">The Benjamin Franklin Frame</h2>
It brings us back to Ben Franklin, who would have recognized the problem. He was not a &ldquo;free trader&rdquo; in the modern, graduate-seminar sense. He built institutions: libraries, fire companies, postal routes, schools, militias and civic machinery. He understood that prosperity requires production, infrastructure, credit, skills, security, law and the strong habits of serious people.
In the 1760s - 70s, before there was a United States, Franklin saw North America as strategic geography. Then during the Revolution, and later while negotiating the Treaty of Paris, he argued in terms of waterways, boundaries, trade routes and particularly the St. Lawrence. And in 1783 the Articles of Confederation even offered a standing invitation for British North America to join the new American union, but the people up north declined and history unfolded accordingly. Fair enough; Canada is Canada for a reason.
But the fact that, today, Canada is a separate country does not divorce the place from North American reality. The U.S. and Canada share a continent, an oceanic and aerospace defense problem, plus rail corridors, power grids, pipelines, lakes, ports and Arctic approaches. No tariff schedule can repeal the map.
All of this is why Franklin and Trump belong in the same conversation. Tariffs are not just a revenue grab or a fit of pique by the Orange Man. They&rsquo;re part of a 250-year-old American argument over how trade should serve national development.
In Ottawa&rsquo;s telling of the tragic trade tale, the U.S. moved the goalposts at the last minute; something about refusing to print French language on the packaging of American goods. Huh? Umm&hellip; no, I don&rsquo;t think so, mate.
In Washington&rsquo;s telling, Canada has long and openly permitted Chinese goods to enter, and then trans-shipped them down into the U.S. with a &ldquo;Made in Canada&rdquo; label. In other words. Canada has distorted trade while expecting privileged access to American markets.
<h2 class="subhead nbp">An &ldquo;American System,&rdquo; Whether Canada Likes It or Not</h2>
After Ben Franklin came Alexander Hamilton in the 1790s, who gave the young U.S. republic a program: national credit, sound money, manufacturing, infrastructure and a legal order friendly to productive enterprise. Later, Henry Clay put a name to it: the &ldquo;American System.&rdquo; This meant tariffs, internal improvements, banks, canals, roads, railroads, mines, mills and farms. And these weren&rsquo;t just isolated policies; they were a method to turn a continent into a powerful nation.
Now, Canada wants not merely to remain independent &mdash; which is understandable &mdash; but to abjure a school of economic logic that would make North America much stronger. Indeed, one wonders: what&rsquo;s so wrong with Canadian development, infrastructure, value-added industry, energy abundance, reliable defense, and deep integration with the only market that can absorb that country&rsquo;s output at scale?
Instead, modern Canada encourages internal policies that, for example, block pipelines, delay mines, litigate ports, tax capital, subsidize favored sectors, protect sacred political cows. Then, people wonder why investment per worker and productivity lag. Where&rsquo;s the economic growth?
It&rsquo;s not enough that Canada controls energy resources, minerals, farmland, water, etc. A strong country must build systems that convert resources into durable wealth. And this is the &ldquo;resource country&rdquo; question that Canadian elites hate to discuss.
Indeed, Canada&rsquo;s elite tend to view resource development as an insult, if not a sin. Quite unlike their Chinese friends, Canada&rsquo;s ruling apparatchiks apparently lack an appreciation for how energy and resources translate into wealth creation and national power, certainly when developed through the downstream levels, to where people can have good-paying jobs.
<h2 class="subhead nbp">Industrial Policy Before the Term Existed</h2>
Over 40 years, I&rsquo;ve seen how Canada&rsquo;s political class tends to be reflexive and defensive, certainly vis a vis America. But really, any serious U.S.-Canada bargain would not reduce Canada to an American gas station or rock quarry; in fact, expect the opposite. Canada can create a trade regime in which it becomes indispensable to a North American system: Canadian energy and minerals; Canadian engineering; Canadian infrastructure from the U.S. border up into the Arctic. The future should be hemispheric.
In other words, let Canada be Canada! But be a Canada built on energy and resource development, along with high tech and modern industry; not Canada as an American colony (and not the 51st state). Also, definitely, not Canada as China&rsquo;s mine mouth, nor a far-off Euro-wannabe with fewer people and no old castles.
Meanwhile, the U.S. has its own work. Tariffs can shape economic development, but alone they don&rsquo;t issue construction permits, build mines and factories, train workers, or launch ships and merchant marine capacity. Industrial policy must be more than a White House press release about tariff rates.
The bottom line for Canada is that access to American markets comes with conditions. If Canada wants favored treatment, then Canada must help build a secure North American production base and not use U.S. access to shoehorn Chinese supply chains across the border, while indulging in European regulatory fantasies.
<h2 class="subhead nbp">China Is Not Canada&rsquo;s Escape Hatch</h2>
Let&rsquo;s revisit the China card, because the fact is that China buys what China needs, on terms useful to China. And China wants Canadian resources and access, not lectures about values and definitely not a partnership in advanced manufacturing.
Beijing already dominates most of the world&rsquo;s critical, value-added supply chains, which includes just about everything Canada produces. So, why would China invite Canada to move up the ladder when it can buy raw inputs, add value at home, and sell finished goods back to the world? In other words, the &ldquo;China option&rdquo; is a mirage (unless it&rsquo;s a sellout).
Meanwhile, in commerce, geography is destiny and the U.S. is right next door. The roads, rails, pipelines, power grids, legal practices and business relationships already exist. And don&rsquo;t forget the defense umbrella, under which Canada is well-defended at strategic levels by the U.S.
In fact, if Canada were not located beside the United States, Ottawa would have to spend staggering sums to protect its coastlines, airspace, Arctic approaches and infrastructure. And deep down, Canada&rsquo;s defense problem is inseparable from America&rsquo;s.
Obviously, Canada must look after Canada. But this requires a strategy that marries resources and goals. Bashing America may feel good, along with booing the U.S. at hockey games; okay, get it out of your system, kids.
But when the sugar high wears off, it&rsquo;s time to get productive: develop energy resources, build mines and mills, open ports, shorten permitting processes. Indeed, reverse the trend in which de jure regulation is de facto veto. Lower internal trade barriers, reward investment, rebuild fiscal discipline, and stop confusing bumper-sticker slogans with national development strategy.
At higher levels of policy, Canada is hamstrung by a widespread sense of globalism, especially the so-called &ldquo;Davos view&rdquo; of the world. Indeed, too many Canadians frame their nation as some sort of administrative platforms within an agenda of global governance, where energy is a moral problem and industry is a net-zero carbon-accounting nuisance. This kind of worldview is toxic to a country whose natural geologic-geographic strengths are energy, resources, engineering, agriculture, transportation and hard infrastructure.
To be prosperous, Canada must make things: mine stuff, grow crops, produce and refine energy, etc. Oh, and read the map! Canada is in North America. This is not hard.
<h2 class="subhead nbp">What a Deal Should Look Like</h2>
What should Washington and Ottawa do after this week&rsquo;s failed talks? First, stop pretending that this sordid tariff drama is an end state.
Tariffs are leverage, but the end state ought to be a continental compact built around industry: secure U.S. access to Canadian oil, gas, uranium, potash and critical minerals; Canadian access to the U.S. market for genuinely North American goods. Plus, tighter enforcement against third-country transshipment (i.e., slapping &ldquo;Made in Canada&rdquo; stickers on overseas goods!), along with joint investment in processing, transport, power and defense production.
Second, fix the loopholes. If Chinese steel, electronics or components can just enter Canada, do a paperwork makeover, and then roll into the United States under preferential treatment, it&rsquo;s not &ldquo;free trade;&rdquo; it&rsquo;s money-laundering. Industrial strategy without border discipline is a euphemism for organized crime.
Third, Canada should choose value-added development. Don&rsquo;t just sell raw materials cheap and buy back finished goods dear. Instead, climb the value chain inside North America.
Fourth, the U.S. must treat Canada as a strategic partner, not a convenient target to bash at political rallies. After all, Canadian workers from the mines of Yukon to the mills of Hamilton and Quebec City are not America&rsquo;s enemy; most are exactly the people a renewed North American industrial system needs.
America&rsquo;s argument with Canada is against a long-evolved, protectionist and self-dealing system that has blocked its own development, while demanding access to American markets for favored sectors.
<h2 class="subhead nbp">Tariffs Are Now the Message</h2>
So, now we have new tariffs in effect, a regrettable point that should be sobering to both sides. Washington has reminded Ottawa that access to the U.S. market is valuable. And Canada demonstrates how nationalism-theater works in the modern media age. But neither point addresses the larger question.
That is, can North America move ahead as an economically integrated, industrial continent? Or is the Canadian border line just a no-man&rsquo;s-land where mutual grievances confront each other?
Franklin would have understood the answer: develop energy, increase output, build infrastructure, and create wealth at home in North America, with friends, on terms that don&rsquo;t leave the continent dependent on long-term adversaries.
Understandably, Canada doesn&rsquo;t want to be seen as running up a white flag; but neither does barstool rhetoric and political swagger solve any problems. Canada can develop or decline. It can make a deal, enforce rules, build infrastructure, and join an &ldquo;American System&rdquo; that is evolving one way or the other. Or not&hellip;
Meanwhile, Canada&rsquo;s alternative is a mishmash; be a boutique-Euro-wannabe, pursue China-trade fantasies, maintain open-immigration policies that swamp the country&rsquo;s welfare state, and see where it goes. Again&hellip; good luck, guys.
Which brings us back to Ben Franklin, whose efforts failed to bring British North America into the new U.S. republic. But still, over the past 250 years the big, continental map has not changed, and Franklin&rsquo;s ideas still pertain. One way or another, geography rules, and the question is whether today&rsquo;s leaders understand that, and can build upon reality.
That&rsquo;s all for now. Thank you for subscribing and reading.

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Dear Canada, Please Read the Map

Today, let&rsquo;s discuss aircraft carriers; namely, recent news accounts about poor food and living conditions aboard the long-deployed USS Abraham Lincoln (CVN-72), as well as President Trump&rsquo;s recent order about future vessels using steam catapults versus something called an electromagnetic launch system (EMALS).

<img class="aligncenter" src="https://images.ctfassets.net/vha3zb1lo47k/1jTBKEPyu2nuzRunhYaLf0/87c86938a923eacaf141b6f2b8d44d91/mr-issue-08-18-26-img-2.jpg" width="540px" />

USS Abraham Lincoln (CVN-72) Credit U.S. Navy.
These are not just &ldquo;Oh-yeah-military-stuff&rdquo; stories. Indeed, these stories open the door to several Very Big Pictureissues: war, peace, operational tasking, military procurement, supply chains and industrial base (or lack thereof). And it&rsquo;s all far beyond gossipy, political hit-job soundbites. So, let&rsquo;s dig in&hellip;
<h2 class="subhead nbp">Napoleon and Me &ndash; Same Ocean, Different Remote Islands</h2>
First, I&rsquo;ve been traveling. In fact, I just spent two weeks on an arid volcanic island out in the Atlantic Ocean. It&rsquo;s kind of like what happened to Napoleon, except I didn&rsquo;t invade Russia or lose the Battle of Waterloo.
Indeed, I traveled to the far-off island of my own free will, to study geology; to observe and examine basalts, ash deposits, pyroclastics, aka &ldquo;oceanic plate shield volcanoes.&rdquo; My goal was to learn about mantle hotspots and energy/mass transfer from deep inside the earth to the upper crust.
To me, this kind of continuing education effort is &ldquo;scientific&rdquo; geology that helps me improve on the industrial side. That is, if you understand how energy and mass flow around in the earth&rsquo;s crust, it helps to decipher why and how certain minerals form in certain ore deposits. And of course, that helps to find more gold, silver, copper, etc.
On the island, I had cell phone coverage and Internet, but I was kind of busy. Along the way I saw some headlines about how U.S. sailors are allegedly getting bad food and live in stark conditions aboard a deployed aircraft carrier, USS Lincoln.
And yes, this Navy news caught my eye&hellip; cuz I&rsquo;m an old Navy guy with a few aircraft carrier deployments in the logbook (see below). But I was preoccupied with my own geology work and besides, I&rsquo;m far from the facts of the story. The Lincoln is in the North Arabian Sea, and I was a continent and more away, out in the far Atlantic. Plus, I don&rsquo;t receive Navy message traffic and absolutely can&rsquo;t say what&rsquo;s in the food storage lockers of Lincoln, or any other Navy warship or logistics vessel in that theater.
But over the past weekend I flew home, and the vagaries of airline travel put me in Switzerland for a day, where I had a chance to catch up on the &ldquo;news.&rdquo;
And in my humble assessment, there&rsquo;s something quite wrong with what the public is being told. So, let&rsquo;s put it all into more perspective&hellip;
<h2 class="subhead nbp">I Know a Few Things</h2>
Begin with the fact that I &ndash; like hundreds of thousands of other current and former Navy people! &ndash; know a few things about aircraft carriers and long deployments to distant places. In 1985 I pulled a seven-month haul on the long-gone ex-USS Constellation (CV-64), across the Pacific and Indian Oceans and up into the North Arabian Sea. And we sailed all the way back, I&rsquo;m pleased to say.
In 1990-91, I worked in what&rsquo;s called &ldquo;combat logistics,&rdquo; and supported wartime carrier operations in the Mediterranean and Red Seas during Desert Shield and Desert Storm. That is, my job was to move stuff from Point A ashore to Point B, a gray hulled vessel making a wake out in the middle of some vast body of water. There&rsquo;s nothing easy about it.
In the 90s, I sailed the Atlantic aboard ex-USS Enterprise (CVN-65) and later crossed the blue Pacific out of Japan, aboard ex-USS Independence (CV-62). And I have the flight jacket to prove it.

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Your editor&rsquo;s flight jacket. BWK photo.
Then in the early 2000s, working in the Med region, I did more of that combat logistics stuff in the early days of the wars in Afghanistan and Iraq. Long stories; not here.
So, I&rsquo;ve sailed on a few aircraft carriers to a few places, and I know a few things. Now, any questions? Okay, you&hellip; in the front row.
<ul>
<li>Are long deployments mentally tough and stressful? Yes, absolutely, totally. And like it or not, however down-in-the-dumps you might feel at times, you&rsquo;re surrounded by 5,000 other people. Do you want some privacy? No way&hellip; But do you want some friends? Well, they&rsquo;re not too far away either.</li>
<li>Do sailors try to commit su!c!de by jumping off ships? Actually, yes, sad to say... It&rsquo;s been happening since the days of sailing ships. Modern-Navy-wise, every couple of deployments there&rsquo;s a story about some guy who jumps over the side. Take 5,000 people, age 18 to about 40 or so; put them under high stress for six months or more, somebody cracks and you get an &ldquo;Oscar&rdquo; &ndash; slang for &ldquo;man overboard.&rdquo;</li>
<li>What about the news accounts of a guy who jumped off Lincoln, bobbed in the water for an hour, and was rescued? Well&hellip; it seems to be true and hey, miracles happen. That is, again per news accounts, somebody jumped; and at night I hear, which makes it very hard to find him. And in the middle of fighting a war, ships and helicopters diverted, located the individual and pulled him out. He&rsquo;s now receiving psychiatric counseling.</li>
<li>Frankly, this dude is lucky he didn&rsquo;t get eaten by sea snakes and jellyfish. That was a huge fear when I flew in the North Arabian Sea arena. The intel officers briefed us that there were sea snakes and jellyfish in the water, and that&rsquo;s all I needed to hear. The last thing I ever wanted was to get wet and become jellyfish food. Meanwhile, oceans are big and people are small; so, when you go into the briny sea your only true hope is that somebody misses you and sends help. Which is EXACTLY what happened here. In other words, we have a system for finding lost souls and in this case it worked as advertised.</li>
</ul>
More questions? Yeah, you in the second row:
<ul>
<li>Do ships run out of fresh produce and milk? Absolutely&hellip; after about a week at sea! After that, it&rsquo;s whatever can be canned, frozen, powdered, freeze-dried, boil-a-bag, preserved in plastic bins, etc. It&rsquo;s been that way for a long time.</li>
<li>Can all this preserved food become bland and boring? Yes, definitely. Just hope that you have some creative minds at work in the ship&rsquo;s galley.</li>
<li>Does the Navy resupply food to ships at sea? Of course! Since&hellip; like&hellip; the Civil War. And today, there&rsquo;s food along with jet fuel, spare parts for airplanes and other ship functions, ammunition and related items like fuses and guidance kits, mail and packages, and much else. It&rsquo;s a very complex operation.</li>
<li>Do Navy ships keep food preparation spaces and mess decks clean? Yes, because nothing degrades combat effectiveness like hundreds of people getting food poisoning. So, cleanliness of food prep is a maniacal fixation on Navy ships.</li>
<li>What about news accounts of crummy food, or not enough food? Well, I&rsquo;m not there onboard USS Lincoln, but it doesn&rsquo;t shock me that there might have been (or still are?) problems; I&rsquo;ve experienced similar issues in my own past. But I&rsquo;m inclined to think that if Lincoln had food prep issues, it&rsquo;s been on occasion, due to vagaries of high-tempo operations in a war zone where resupply at sea is not at all easy. Because systemically, the Navy does have entire programs to move food and mail to ships at sea.</li>
<li>So&hellip; What&rsquo;s the problem with Lincoln? Why the headlines about crummy food and terrible conditions? Well, we&rsquo;re here, not there on the ship; and we don&rsquo;t know the facts, and news media sometimes twist a small amount of truth into a big lie. We&rsquo;ll find out eventually, when more &ldquo;real&rdquo; news comes out. But for now, don&rsquo;t discount raw politics and the creation of negative, emotion-triggering narratives in the current American cultural climate. Which leads to another discussion&hellip;</li>
</ul>
<h2 class="subhead nbp">U.S. Has Very Deep Problems</h2>
Okay, enough day-to-day news. Let&rsquo;s define a deeper problem: thirty-five years of high level, strategic failure in Washington, D.C. Yes, shocking. I know&hellip;
First, why are aircraft carriers &ndash; and do NOT forget the other ships in the battle group! &ndash; on these long-long-long deployments? Eight months, nine months, ten months&hellip; Because the Navy, and of course Congress and a long string of U.S. presidents, did not build enough ships, that&rsquo;s why.
Long ago, the Navy had 18 large-deck aircraft carriers; then 16, 14, 12, and now &ldquo;11&rdquo; although it&rsquo;s really 10 because USS Nimitz (CVN-68) is soon destined for decommissioning.
Long ago, the Navy had enough carriers to cover operational assignments in a way that allowed for six- and seven-month deployments. Now? Too many commitments, which is why we see these 8-, 9-, 10-month hauls.
Plus, add the task of fighting a war against Iran, with a high operational tempo. And include the important military fact that Iran shoots back at the carrier and its associated ships. My war-planning days are behind me, but fighting Iran ought to require six or more carriers (and air wings), which obviously will not happen.
Meanwhile, how long does it take to build an aircraft carrier? Well, try 18 years. Yes, 18 years. No typo.

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Pre-Commissioning Unit John F. Kennedy departs Newport News for acceptance trials. Credit: HII.
In fact, just last week the USS John F. Kennedy (CVN-79) left Newport News Shipbuilding, a division of Huntington Ingalls Industries (HII). The ship is undergoing what are called &ldquo;acceptance sea trials,&rdquo; the final major evaluation phase before the vessel is handed over the Navy for commissioning, currently projected for March 2027.
From authorization to commissioning, this new JFK vessel took 18 years to build and bring to the fleet. Or ask the question another way: are there any fast fixes to add more aircraft carriers? Umm&hellip; nope. Things like this don&rsquo;t get built fast. It&rsquo;s called an &ldquo;industrial base&rdquo; issue
Meanwhile, why can&rsquo;t the Navy bring enough supplies to its deployed ships? Because for 35 years the Navy &ndash; and Congress and a string of presidents &ndash; have failed to buy and build enough &ldquo;combat logistics&rdquo; vessels; the ships that haul fuel, ordnance and other supplies, certainly food.
Right now, in the North Arabian Sea arena, the Navy has just four combat logistics vessels to shuttle food and other cargo from ports in East Africa, Diego Garcia and South Asia, into the theater to replenish Lincoln and numerous other smaller vessels. Plus, a couple of &ldquo;oilers&rdquo; that haul jet fuel and other odds and ends. Overall, it&rsquo;s not enough so the immediate workaround is to hire third party vessels, but now we confront restrictions on how suitable non-military ships are for military logistics (another long story).
I could continue, but&hellip; The story is &ldquo;not enough&rdquo; industrial base, supply chains, shipyards, skilled tradespeople, ships and sailors; plus, too many tasks for the Navy, and not enough steel and people to cover the long waterfront. It&rsquo;s not that Navy people &ndash; from deckplate sailors to bigshot admirals &ndash; don&rsquo;t know what to do out on the water. They just can&rsquo;t cover all the missions with the available resources, and the system is stretched thin.
Right now, President Trump and his senior people are the political targets (and what else is new?). But the root of the problem goes back many decades, to a country and governing class that became strategically lazy, if not kind of stupid about reality.
Policymakers blew off kinetic issues like having &ldquo;enough&rdquo; ships and people to do the jobs. Presidents and Congresses failed to fund procurement. Institutional Navy didn&rsquo;t fight for its long-term interests. And people write books about these things.
<h2 class="subhead nbp">The EMALS Issue</h2>
One last item. Last week, President Trump signed a memo that instructed the Navy to investigate going back to steam catapults on carriers, versus continuing with EMALS. Among other journalistic malpractice, no less than the Wall Street Journal presented it as a cavalier dictate about &ldquo;ripping out&rdquo; entire sections of ships to replace EMALS with steam.
No, no, no&hellip; WSJ is completely wrong. Trump signed an order that gives the Navy 60 days to explain the virtues of EMALS over steam, now after several years of operation. This might impact construction of one carrier (CVN-81, future Doris Miller), which is in the very preliminary stages of construction, with a few keel-pieces in place and not much else.
If Navy does go back to steam, it will require long-lead buys of numerous systems and machinery, but HII certainly knows how to build these things after all the Nimitz-class vessels it has constructed.
Again, the EMALS controversy is just the news media and political hacks looking for click-bait stories. Don&rsquo;t be fooled.
And that&rsquo;s all for now. Thank you for subscribing and reading.

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What’s Going on With Our Navy?

You may have already seen some of what I&rsquo;m about to share in The Daily Reckoning. But given what we&rsquo;re focused on here and the sheer amount of money now moving into this corner of the defense industry&hellip; I think it deserves a second look.
The drone itself is only part of what&rsquo;s happening here. Building a military around unmanned systems requires an enormous industrial ecosystem underneath it like chips, sensors, batteries, rare-earth magnets, software, machine tools and, most importantly, the factories capable of producing these systems at scale.
That&rsquo;s the side of this story Byron has been looking at.
So with that, I&rsquo;ll pass it over to Byron to show you just how much the battlefield is changing and what this massive buildout could mean for investors&hellip;
We&rsquo;re out of time. The future is now.
I&rsquo;m talking about drones, which are no longer an exotic military sideshow, tucked away in research labs while the so-called &ldquo;real warriors&rdquo; plan the next campaign. Like phalanxes of marching soldiers, or guys riding horses into battle, that era is over. Drones are now the latest &ndash; and likely decisive &ndash; military thing.
The Army, Navy, Marine Corps, Air Force, Space Force, Coast Guard, law enforcement and even firefighters are in the drone business. If it can fly, float, roll, crawl, loiter, listen, jam, scout, strike or blow itself up at the right place and time, it belongs in the new, unmanned order of battle.
Think of drones the way old-timers once thought of radios, radar, GPS, precision navigation or night vision. First, they look like clever add-ons, bolted to the airframe, deck plates, or a rack in the back of a truck. Then they become force multipliers. Over time, they become doctrine. Finally, they become table stakes.
<h2 class="subhead nbp">Air Power Gets Less-Manned</h2>
Begin with air power. The Air Force has been &ldquo;droning&rdquo; for years, whether it used that word or not. Cruise missiles, decoys, loitering munitions, anti-radiation weapons and electronic attack packages have blurred the old line between aircraft, missiles and science fiction sky-robots.
A loitering munition can search, wait, attack or return if there is nothing worth killing. MALD, the Miniature Air-Launched Decoy, spoofs air defenses. HARM, the high-speed anti-radiation missile, hunts radar systems. Together, these tools show where air combat has gone: aircraft, missiles and semi-autonomous or autonomous systems now occupy the same battlespace.

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MALD missiles. Credit Raytheon/RTX.
In other words, the drone is no longer a science and engineering experiment. It has become a business model for modern war, and a rebuke to past planning processes, acquisition timelines and chronic risk aversion, all designed for a slower world that is long past.
<h2 class="subhead nbp">The Pilot Becomes a Mission Commander</h2>
Here&rsquo;s the next step: collaborative combat aircraft, or CCA. These are unmanned aircraft that function via artificial intelligence (AI), built to fly alongside manned fighters, bombers, surveillance birds and tankers. They carry sensors, scout ahead, jam radars, haul missiles, absorb enemy fire or hit targets where commanders do not want to risk a living, breathing pilot. But the key part of a CCA is not the airframe; it&rsquo;s the autonomy stack that lets the machine sense, decide, maneuver and cooperate inside a larger combat network.
For years, a small community of defense visionaries argued that war would become faster, cheaper, more distributed and driven by autonomous systems and AI. They were called too commercial, too theoretical, too Silicon Valley-ish. Turns out, though, those guys were right.
Now the Air Force has moved CCA from PowerPoint Dreamland to contracts, flight test and production. The air service is not just buying drones. It&rsquo;s moving toward a procurement model in which hardware and mission software can be competed and upgraded on separate timelines. A future F-35, F-47 or B-21 will not fight alone. It will fight inside a moving code-cloud of sensors, shooters, jammers and electromagnetic tricks.

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Drone is my copilot and wingman. Future notional CCA. Credit US Air Force.
And the central question is not whether a pilot is comfortable with an autonomous wingman. Broadly, that decision has been made and now the issue is how the overall package works in wartime, especially when ideas cycle through in days and weeks (and as we&rsquo;ll discuss below, this is one of many lessons from Ukraine).
Trust in new technology is not an immediate and warm feeling; it must be earned. So, before anyone trusts an AI-driven CCA, the software, communications and cyber defenses must survive deception, electronic attack, GPS denial, spoofed data, degraded links and every other dirty trick a thinking enemy will throw at them.
The old Pentagon way of buying and building new weapons was to fund new ideas on the margin while protecting legacy programs of record. But that luxury is gone, which is why CCA is not just an aviation story. It&rsquo;s a validation story, a software-assurance story and a network-resilience story.
Manned or unmanned, every aircraft is now a node in a large kill chain. If the network is hacked, delayed, spoofed or denied, the airplane&rsquo;s performance becomes almost secondary.
<h2 class="subhead nbp">The Navy Builds Mother Ships</h2>
Characteristically, the Navy took longer to get there, but it is getting there. In the mid-2010s, Northrop Grumman&rsquo;s X-47B proved that an unmanned aircraft could launch from and land on an aircraft carrier; no small trick, considering that carrier aviation is one of the most demanding operating environments on earth (as I know from first-hand Navy experience).

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Navy X-47B autonomous drone in 2015. Credit U.S. Navy.
The actual, experimentalX-47B aircraft (image above) went into storage; but over time, the idea behind the program morphed into Boeing&rsquo;s MQ-25 Stingray, an unmanned carrier-based refueling aircraft.
And okay, aerial refueling may sound boring, but it&rsquo;s not (again, ask me how I know). Because tanking is range, range is reach and reach is combat power. Meanwhile, MQ-25 lays the command-and-control foundation for a future carrier air wing full of unmanned systems.
Follow that drone-style logic into non-carrier shipbuilding. New vessels are being built with dedicated space to store, fuel, prepare, arm, launch and recover unmanned systems &mdash; not just aerial drones, but surface and underwater drones too. In other words, a modern warship is no longer your granddad&rsquo;s gray hull, stuffed full of guns, missiles and sailors. It has become a mother ship for both controlled and autonomous drones.

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USS Somerset (LPD-25) can carry aerial, surface, subsurface drones. Credit U.S. Navy.
Whether launched by air, surface ship or submarine, drones can scout or attack. Underwater drones can map, listen, lay sensors, hunt mines, shadow submarines or perform missions too dangerous or dull for real people. That creates opportunities not just for traditional shipyards, but also for suppliers that can build unmanned vessels cheaply, quickly and at scale.
<h2 class="subhead nbp">Ukraine Shows the Future</h2>
This is where Ukraine enters the story as a brutal laboratory and testing-range for drones. Small FPV (first person view) drones, long-range strike drones, loitering munitions and improvised systems have changed the character of the battlefield.
Drones watch trenches, spot artillery, attack armor, cut logistic lines, strike air bases and force both sides to move, hide, jam the other guy, and adapt fast. In fact, the life cycle of a drone&rsquo;s usefulness is not years or months. It can be weeks, days, even hours or minutes because the enemy watches, learns, jams, copies and counters.
One critical lesson from Ukraine is that drones are not just warfighting tools. They are product development under fire.
<h2 class="subhead nbp">Production Wins Drone Wars</h2>
For investors, the market angle is that drones are not just weapons. They are complex, moving AI learning systems. They require software updates, signal processing, anti-jamming tricks, antennas, batteries, motors, optics, tactics, operators and constant verification.
A drone unit is part air arm, part artillery observer, part radio shack, part machine shop, part software lab and part test range. The side that manufactures faster, ships quicker, assembles more efficiently, tests more realistically, updates software faster and repairs better gains the warfighting edge.
<h2 class="subhead nbp">The Factory Is the Front</h2>
Now we get to the hard part. You don&rsquo;t win a drone war with a boutique defense-industrial base. You win it with production, and not by the dozens, hundreds or thousands, but by the hundreds of thousands, if not millions.
For this vast scope of buildout you need carbon fiber, fiberglass, aluminum, titanium, specialty steels, small engines, propellers, batteries, rare-earth magnets, chips, cameras, antennas, LIDAR, software, test ranges, machine tools and skilled workers. And you need mines, mills, refineries and factories... especially factories.
This is why the new defense companies are talking like mass production industrialists. For example, Anduril&rsquo;s Barracuda family is built around software-defined, mass-producible autonomous air vehicles. The selling point is not just range or payload. It&rsquo;s fewer tools, fewer parts, faster assembly and a supply chain designed for scale; to &ldquo;make it rain missiles,&rdquo; so to speak.

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Mass drop of Anduril &ldquo;Barracuda&rdquo; drones. Credit Alex Hollings/You Tube.
In a high-end war, the current arsenal of &ldquo;exquisite&rdquo; weapons will be consumed faster than Congress can hold hearings about why the armed forces are out of them. Gold-plated systems designed like hand-sewn, bespoke Saville Row suits may be impressive. But that&rsquo;s not how to win a modern war against a capable foe.
<h2 class="subhead nbp">Follow the Supply Chain</h2>
All of this does not mean the old defense primes will go away. Far from it. Lockheed Martin, Raytheon/RTX, Northrop Grumman, General Dynamics, Boeing, Huntington Ingalls, L3Harris and others in that arena still have customer relationships, classified program access, integration muscle, product lines, assembly and est facilities, workforce depth, access to capital, and of course entre to Congress.
But the drone boom is opening cracks in the castle wall. Legacy primes have checkbooks and technical benches that can scale. But startups can move faster. The likely winners will combine Silicon Valley speed with Detroit-style production, along with Pentagon-grade technical authority and combat reliability. In other words, the procurement establishment can no longer afford to treat the new crowd as a kiddie-table sideshow.
Watch shipbuilders too. The Navy&rsquo;s future is not just buying more big gray hulls. The sea service is building out a mixed fleet of crewed ships, unmanned surface vessels, underwater drones, autonomous mine hunters, maritime sensors and launch-and-recover platforms. That points toward demand for steel, engines, electrical systems, autonomy packages, rugged communications, modular payload bays, shipyard capacity and repair yards.
Along these lines, one company that is both legacy but also quite nimble is Huntington Ingalls (HII). It&rsquo;s worth a longer writeup all on its own, but not here. The takeaway is that HII builds nuclear submarines, aircraft carriers, and large numbers of surface ships, while is also has an aggressive program of drones called Romulus and Remus; the former being surface drones and the latter for underwater. The company is definitely working to secure long-term Navy business.
(Note: HII is not an official recommendation and we won&rsquo;t track it here in Strategic Intelligence. But it&rsquo;s a solid company for long term investors.)
On the other side of the planet, China understands all this about drones and the industrial base. Indeed, China has spent decades building the upstream and downstream muscle behind modern war: ore deposits, mines, mills, refineries, critical minerals, rare-earth magnets, batteries, electronics, components and final assembly. China&rsquo;s shipyards alone are nothing less than astonishing.
Back here in the U.S., we&rsquo;re just at the point of broad realization that every drone needs a supply chain before anyone can even think about finding a target. Carbon fiber, chips, magnets, batteries and sensors do not emerge from policy papers. They come from industrial systems that have yet to be built out in America.
All of this also puts rare earths and battery metals on the front page of defense investing. Neodymium, praseodymium, dysprosium and terbium are magnet words. Magnet words are motor words. Motor words are drone words. Add lithium, graphite, nickel, cobalt, copper, aluminum and tungsten, and suddenly the drone story is also a mining story, a refining story, a battery story and an industrial metals story.
And no, we&rsquo;re not tossing out the old platforms. Submarines are still war-winning weapons. Just as aircraft are critical weapons. Plus missiles, tanks, ships, satellites and radars. But ore in the ground is a weapon too. Refineries are weapons. Machine tools are weapons. Battery plants are weapons. Software libraries are weapons. Assembly lines are weapons.
Here&rsquo;s the takeaway: in the new age of drone warfare, the factory is not behind the front. The factory is the front.
<h2 class="subhead nbp">The Investment Lesson</h2>
Here&rsquo;s the investment lesson: Drones change tactics because they put eyes, ears and explosives everywhere. They change operations because commanders can coordinate fires, movement and logistics with persistent surveillance and rapid feedback. And they change strategy because nations must plan for production depth, electronic resilience, data dominance and supply-chain sovereignty.
Follow the money and you&rsquo;ll find it flowing toward autonomy, software, sensors, counter-drone systems, batteries, rare earths, machine tools, cyber resilience and the old-fashioned industrial base that still wins wars.
Modern war is industrial war, now fought at software speed. Stockpiles matter, but stockpiles run down. Production keeps armed forces in the fight, and logistics keeps production relevant.
So, while we&rsquo;ve been discussing drones, don&rsquo;t confuse the shiny moving thing with the whole story. The real story of a drone is the stack beneath it: motor, magnet, battery, chip, sensor, code, secure network, factory, mine and ore in the ground.
This is where the next great defense trade begins: not with an aircraft on a runway or a ship cutting a wake, but with the magnets, batteries, tools and factories that make drone war possible.
That&rsquo;s all for now. Thank you for subscribing and reading.

mr-issue-08-13-26-img-1

Your Grandfather’s Military Is Dead

OpenAI hates you. Yes&hellip; That OpenAI&hellip; One of the tight-swimsuit glamour-girls of artificial intelligence, a company that sells the future in large language models, while enjoying access to Washington and even the White House. Plus, it now bears an odious aura of a Justice Department settlement for shutting American workers out of jobs.
Bottom Line: OpenAI&hellip; Hates... Your... Guts.
And in this note, I&rsquo;ll explain why...
<h2 class="subhead nbp">Whoopsie! No Qualified Americans&hellip;</h2>
According to the U.S. Department of Justice (DOJ), OpenAI and subsidiary Statsig recently agreed to a $3.2 million settlement over allegations that they discriminated against U.S. workers during the Permanent Labor Certification process, or PERM.
Don&rsquo;t dwell on the lowball number; for Silicon Valley, $3.2 million is pocket change. But as a public marker, the settlement speaks volumes: one of America&rsquo;s most celebrated AI companies was accused of favoring low-cost, imported visa labor over American applicants.
The facts are disgusting, to the point of loathsome. According to DOJ, OpenAI did not advertise a series of PERM jobs on its external careers site. Instead, it sought U.S. workers via late-night, AM-radio ads that required paper applications by snail mail, while ordinary company hiring used modern electronic channels.
And whaddaya know? No Americans showed up. Then the foreign-worker pipeline moved along.
So, are you an American in tech? Did you go to school, &ldquo;learn to code,&rdquo; play by the rules and apply online like a normal person? Too. Bad. So. Sad. No. Job. For. You.
OpenAI denied wrongdoing (of course!). Still, it agreed to pay $1.2 million in civil penalties, a pittance, but also a de minimis level set by statute so we can&rsquo;t exactly blame the DOJ lawyers. Plus, the company will create a $2 million back-pay fund, revise policies, train staff, accept electronic applications and submit to monitoring. More pocket change, really.
Still, though; this gives us a glimpse behind the curtain of widespread visa abuse and rank, pernicious discrimination against U.S. workers in their own country.
<h2 class="subhead nbp">Tip of the Visa-Scam Iceberg</h2>
The facts of this settlement matter because PERM was never meant to be a paperwork tunnel to move visa workers into permanent U.S. jobs. It was supposed to promote good-faith efforts to recruit ready, willing and able U.S. workers.
But when the process becomes a corrupt Kabuki Theater of late-night notices, paper-only applications and hidden job postings, we&rsquo;re not looking at a shortage of skills. It is a rigged, wired, anti-American system.
And clearly, OpenAI is not some bootstrap tech wannabe working out of mom&rsquo;s garage. It rides a mainline track straight into Washington, D.C. It launched OpenAI for Government. It works with U.S. National Labs, the Pentagon, NASA, NIH, the Treasury Department and the General Services Administration; all up to and including highly classified workloads.
And yet&hellip; While OpenAI covets the American state, American data, American contract$, American legitimacy and American regulatory accommodation, it overtly discriminates against American workers.
And it&rsquo;s not me saying it, but the U.S. Department of Justice.
<h2 class="subhead nbp">America&rsquo;s New Moral Equation</h2>
Every nation has a labor policy. Rome had slaves. The history book kingdoms of Medieval Europe had serfs and peasants. Imperial Britain had colonies.
Today, America has consultants, contractors, body shop operators, and HR departments whose role, far too often, is to make expensive American workers disappear and replace them with cheap, imported labor.
Never mind that Americans paid for the roads, schools, courts, government grants, power grids and defense budgets that built the platform on which these companies stand. The trick is to privatize the gain and socialize the losses.
Indeed, this recent OpenAI settlement illuminates a key moral point. That happily &ndash; and with ill-concealed greed &ndash; companies want the benefits of operating in America. They court the government, pitch national-security relevance&hellip; yet they treat American workers as one more cog in the wheel, just interchangeable line items in global labor inventory.
The answer ought to be straight out of Politics 101: if the federal government opens lucrative doors, companies must honestly work to recruit U.S. citizens before importing substitutes, if not visa-scabs.
And no, this is not an anti-immigration issue. It&rsquo;s workforce policy, industrial policy, national security and culture. A nation that will not employ its own engineers, technicians, programmers, machinists and builders is liquidating its future.
<h2 class="subhead nbp">The Myth of the &ldquo;Talent Shortage&rdquo;</h2>
<a href="https://dailyreckoning.com/the-sirens-song-of-cheap-labor/">As I&rsquo;ve discussed before</a>, for over 40 years, Americans were told that companies must import labor because the domestic pool is inadequate. The framing changes; it&rsquo;s a &ldquo;skills gap,&rdquo; or &ldquo;STEM shortage,&rdquo; or we need &ldquo;global talent,&rdquo; and obviously we all want &ldquo;the best and brightest.&rdquo; But the result is the same.
Employers claim scarcity, government loosens the pipeline, and American workers discover that the &ldquo;shortage&rdquo; somehow leaves them with stagnant wages, layoffs, age discrimination, and young graduates who can&rsquo;t get their first job except as a bartender or barista.
In essence, a rotten system incentivizes many firms to game the system and use imported labor as a substitute for hiring and training Americans or retaining experienced employees. But at this stage, when companies say they can&rsquo;t find talent while refusing to hire young Americans or retain seasoned ones, the public isn&rsquo;t fooled because &ndash; obviously! &ndash; the shortage is manufactured; it&rsquo;s fake.
And this OpenAI outrage is just one example. Consider another company, Cognizant. It&rsquo;s a major H-1B user and has faced repeated litigation alleging that its workforce practices disadvantage U.S. workers and favor visa-heavy staffing pipelines from India.
In fact, in March 2026, a New York jury awarded former Cognizant executive Jean-Claude Franchitti $8.4 million after finding unlawful retaliation tied to his complaints about discrimination and H-1B hiring practices. While other Cognizant cases have raised similar issues over staffing, promotion and termination patterns. And to be sure, legal details differ by company and case, but the theme is hard to miss: a visa-heavy, Indian-favored labor model has become a mechanism to sideline Americans.
<h2 class="subhead nbp">Hollowing Out the Middle</h2>
By now, the visa gimmick is clear when you do the pattern recognition. Companies lay off higher-cost Americans and replace them with imported body shop staff based on (often) fake credentials from shady diploma mills. They lean on H-1Bs, outsourcing firms and recruiters. To add insult to injury, they next complain that no qualified Americans are available.
In a saner world, healthy companies depend on a solid middle: experienced employees who know the systems, midcareer people who can train the young, and junior employees who learn by doing. But break that chain and the company looks leaner but has become brittle.
On paper, payrolls fall and margins improve. In reality the business is often just performing an asset strip: it&rsquo;s burning down the knowledge, judgment, safety habits, customer memory and the informal apprenticeships that keep complex systems alive.
In other words, a business school and management gimmick has become a widespread economic disease. Displaced Americans earn less, spend less and pay less tax. Communities lose good jobs. Families lose ladders upward. National competence weakens because practical knowledge no longer passes cleanly from one generation to the next.
<h2 class="subhead nbp">Imported Labor, Bad Business and Local Consequences</h2>
The pattern is not limited to OpenAI or Cognizant. Microsoft is another example, with heavy criticism for layoffs while sponsoring thousands of H-1B approvals. Or consider household names like American Express, FedEx, IBM, HomeDepot and other large employers that have appeared in recent reporting over layoffs, outsourcing, visa sponsorship and replacement economics.
Each case has its own facts. But once American workers see layoffs paired with cheaper labor channels, they understand the game.
In communities built around technology, especially, lost jobs change everything: housing, schools, small businesses, tax collections and civic life. In the 1970s, we had the Rust Belt when major industries closed across the heart of the nation. Now, a so-called &ldquo;tech&rdquo; company might stick around as a corporate campus, but its economic value is lowered via cheap wages, if not outsourced labor or jobs routed through &ldquo;temp-worker&rdquo; channels. One way or another, less of the value-add falls and takes root in jurisdictions where the social costs remain.
And again, don&rsquo;t view it as hostility toward foreigners. It&rsquo;s more like pointing out that the obvious duty of a sovereign nation is to protect the economic health and prospects of its own citizens, and certainly its lawful workers. A country that refuses to draw that distinction teaches its people that citizenship has no practical meaning. We&rsquo;re just one big, wide, free trade zone with no national purpose or meaning. And good luck with that!
Or look at it this way: at some point, Americans must ask what it means for a corporate entity to be an American company. A U.S. headquarters is not enough. Access to American stock and capital markets, courts, infrastructure, consumers, universities, defense contracts and subsidies should come with reciprocal obligations.
An American company should recruit Americans in good faith, train them where skills are scarce and retain them where institutional knowledge matters. It should not manipulate hiring processes to hide jobs from qualified U.S. applicants (like OpenAI and its AM radio ads; seriously?) or take public benefits while treating the U.S. workforce as disposable.
America&rsquo;s vitality and strength must not be measured by how easily employers can replace citizens with foreign, low-wage workers. It should be measured by whether citizens can build careers and families in the economy their country sustains.
<h2 class="subhead nbp">The Policy Response</h2>
The OpenAI settlement points toward policy responses. How about just freezing all visas? Don&rsquo;t laugh it off.
One way or another, penalties must be large enough to change behavior. PERM recruitment should be transparent, digital and auditable. Visa vendors and labor brokers should be audited. Companies claiming shortages should show what they did to recruit, train and retain Americans first.
And definitely, Congress must revisit statutory damages and penalties. If the fine is smaller than the bonus generated by labor savings, the law becomes a dumb, little, nickel &amp; dime toll booth along the economic superhighway. It&rsquo;s like with U.S. automakers 50 years ago, and their &ldquo;exploding gas tanks&rdquo; (look it up); overtly, large firms simply priced gross, criminal misconduct into the business model.
Universities and other schools should face the same truth. It&rsquo;s dishonest to tell young Americans to take several years and pay big bucks and study engineering, computer science or advanced manufacturing while employers design pathways around them. &ldquo;Study STEM&rdquo; becomes a cruel, expensive joke when the first rung of the ladder is removed.
<h2 class="subhead nbp">Last Point: Culture Follows Work</h2>
Here&rsquo;s the takeaway: work is not just a paycheck. It teaches discipline, responsibility, teamwork and confidence. It gives young people a place in their own country, if not the world, Plus, older workers have a reason and opportunity to pass along what they know. Remove the foundation of productive, remunerative effort, and the culture weakens.
America is playing with fire, here, with this &ldquo;EZ-Visa&rdquo; worker replacement regime. It tells Americans that the country wants their taxes, infrastructure, consumer spending, military protection and political consent&hellip; but not them as people.
And not to put too fine a point on things, it tells citizens that the politicians and corporate bubbas disdain them (if not hate them). And no republic can sustain that for long.
The OpenAI settlement is small in dollars but huge in meaning, while Cognizant is another burning road flare on the fuel load of social resentment. Add Microsoft, AmEx, FedEx, IBM, Home Depot and others to the news flow; it reminds us that layoffs followed by cheaper labor channels are not efficiency, only a greedy, chiseling business gimmick with national consequences.
The U.S. cannot bench its own citizens, outsource its memory, import an unacculturated and not-very-middle class, and then expect to remain strong. If America wants American industry, innovation and security, it must demand fair access to jobs:
<ul>
<li>Hire Americans.</li>
<li>Train Americans.</li>
<li>Retain Americans.</li>
<li>Promote Americans.</li>
</ul>
And when companies take the benefits of the American system while blocking Americans from the workplace, the policies, laws and courthouses must make the price high enough that the flinty, greedy, penny-pinching boardroom suits learn a stiff lesson about what citizenship is worth.
That&rsquo;s all for now. Thank you for subscribing and reading.

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OpenAI Hates You

Long ago, during my days at Gulf Oil, twice a month (usually on Friday) my then-boss would take the geology team to lunch at K-Bob&rsquo;s Steakhouse in Monahans, Texas, deep in the heart of the Permian Basin.
There, we would eat ribeye, talk shop and learn what good geologists ought to know. (Historical Note: this quaint custom is how senior people used to teach important things to junior people.)
&ldquo;You know why I hired you, Byron?&rdquo; asked the main man.
&ldquo;I guess you figured I might know some geology,&rdquo; I replied.
&ldquo;No,&rdquo; he said. &ldquo;I can hire all the geologists I want with a phone call. But I liked how your resume said you know how to weld. So, if something breaks out on a rig, you can help fix it.&rdquo;
It&rsquo;s funny how life works. I had a geology degree from Harvard and studied petroleum engineering at Purdue. But I owed my oil company job to an old ironworker in Pittsburgh who taught me how to weld one summer when I worked in a heavy machine shop.
I mention this because, right now, America is reindustrializing, yet I keep seeing stories about how difficult it is for employers to find skilled labor: welders, electricians, pipefitters, electronic technicians and much else. Let&rsquo;s dig into this&hellip;
<h2 class="subhead nbp">A Fake &ldquo;Skills Shortage&rdquo; Became Business Gospel</h2>
America didn&rsquo;t lose its industrial edge because Americans forgot how to work. Americans are good at work, and they get stuff done. Grand Coulee Dam kind of speaks for itself, right? Still, the country has a workforce problem, and it came from a within; from a long campaign by business, academic and political elites to replace national skills and workers with short-term labor arbitrage.
The pitch was simple. Americans cost too much. And American schools don&rsquo;t produce enough talent. Plus, American workers are picky and rooted. So, goes the brief, the country must import labor, offshore jobs, use global vendors, and pursue the chimera of endless &ldquo;flexibility,&rdquo; all sold as &ldquo;efficiency.&rdquo; In practice, this line of argument has transformed into a buzz saw that has cut many current Americans out of the career ladders their parents and grandparents built.
The Siren&rsquo;s Song began to play in the 1980s, when inflation was high, U.S. wage rates were rising, and businesses felt sticker shock. So, corporate America had two choices: hire and train more U.S. citizens and pay them; or persuade Washington that a &ldquo;skills shortage&rdquo; required low-cost imported workers. By 1990, Congress had created the modern H-1B visa program, grafted onto a broad visa structure that gave companies a formal pipeline for &ldquo;specialty occupation&rdquo; labor.
Then came the 1990s dot-com boom, and the volume went up: &ldquo;More visas! More imported labor!&rdquo; And perhaps, in narrow cases, the shortage claims were even slightly true. Sheep-shearing comes to mind. The U.S. simply does not produce enough sheep-shearers.
But much of the call for foreign labor was just a disguised excuse to cut wage levels across broad swaths of industry. That is, the alleged &ldquo;skills shortage&rdquo; often meant that Americans weren&rsquo;t willing to work at the lowball salary levels employers wanted to pay.
When you think about it, the &ldquo;lack of skilled workers&rdquo; argument was absurd. After all, the U.S. &ldquo;won World War II,&rdquo; as the saying goes; and &ldquo;put men on the moon,&rdquo; as the other saying goes. Yet suddenly, in a nation of something like 300 million, business leaders insisted that they couldn&rsquo;t find people ready, willing and able to work. So, went the argument, America had to open its doors to foreign labor via work visas.
<h2 class="subhead nbp">The Myth of &ldquo;Global&rdquo; Talent</h2>
Let&rsquo;s back up even further. Because American history is filled with stories of skilled immigrants who arrived, built, invented and contributed. For example, in the late 1700s, E.I duPont came to the U.S. from France, set up a factory and made gunpowder for the Army. Or consider how Albert Einstein helped the U.S. develop the science that led to the atom bomb. These kinds of success stories are legion.
And indeed, any nation that expects to do well in science and engineering should work to attract rare talent. But &ldquo;rare talent&rdquo; is not the goal for much of the current visa system. Too often, H-1B and related programs are just legalistic paperwork for body shops, staffing firms and HR departments that seek cheap, pliable, low-risk labor.
In the olden days, America&rsquo;s hiring systems tended to offer employment via a certain level of sociological scrutiny. In many fields, students pursued rigorous academic programs, internships, co-ops, technical interviews, peer review and probationary periods. Generally, hiring managers knew that candidates had been tested by professors, supervisors, colleagues and even customers.
But today, in way too many corners of tech and other sectors, that formerly trustworthy chain of verification has been replaced by shoddy or fake paperwork, sleazy vendor relationships and ethnic-oriented offshore recruiting networks. All while credentialing has become a crap-shoot because of counterfeit degrees and fabricated claims of experience.
The current U.S. visa system is biased toward low costs and high volume, and thus the process has evolved to select for&hellip; low cost and high volume.
Imported labor also gave the U.S. education establishment its own bucket of whitewash. If primary and secondary schools graduated weak students, employers could say, &ldquo;We can&rsquo;t find what we need, so we must import talent.&rdquo; And if universities admitted unprepared high school grads and diluted standards to keep enrollment flowing, they could say, &ldquo;We must recruit internationally.&rdquo; Failure at home became tolerable because the system could paper over the deficit with people trained elsewhere.
<h2 class="subhead nbp">Fake Vetting and a Crisis of Competence</h2>
This is not an argument against every visa worker or foreign student. But it helps highlight how the U.S. now has a structural labor and demographic problem. That is, if employers (and university faculties) can bypass the hard work of cultivating home-grown American talent, relieve their wage pressures and route hiring through intermediaries, the incentive is obvious: go cheap.
And the social and cultural damage doesn&rsquo;t stop with one displaced worker. For example, in entire fields of science and engineering, bad incentives compound other problems. Product quality suffers. Medical systems become harder to trust. Cybersecurity risk rises. Intellectual property gets pirated. Safety margins shrink. Institutional knowledge thins. The public experiences buggy software, shoddy products, endless service loops and compromised systems.
Then there&rsquo;s outsourcing, which has done to supply chains what visa abuse did to domestic labor markets. It turned national capability into a hollow shell, a Potemkin Global Village. That is, factories closed here at home, and toolmakers and machine builders vanished. Apprenticeship ladders broke. Entire towns and even regions were told to retrain: &ldquo;Learn to code!&rdquo;
In the 1990s NAFTA (North American Free Trade Agreement) literally and figuratively paved entire highways to Mexican factory sites. Then in 2001 China entered the WTO (World Trade Organization), again another event that opened America&rsquo;s doors wide to an outflow of industry and talent.
Over time, corporate America discovered that back-office functions, software teams, call centers, assembly lines and compliance could be chopped up, priced by the hour, and set up at some 24/7 boiler shop on the other side of the planet.
All along, the &ldquo;global&rdquo; culture-freaks and corporate media sold this labor bloodletting as some sort of beneficial modernization. But really, it was the old Rust Belt deindustrialization model in a newer paint job. From boots and blue jeans to motorcycles and trucks, and even to the working man&rsquo;s most iconic hand tools, America kept its brand names but lost industrial muscle.
Sure, many corporate headquarters remained domestic because C-Suite people tend to enjoy their U.S. social circles and the kids&rsquo; private schools. But for all the U.S. glass tower jobs that remained in, say, legal and investor relations, much of American business exported its production know-how.
Then to mask reality, many corporations highlighted slogans about their clever business model, like Apple with its odious, disgusting line, &ldquo;Designed in California, Made in China.&rdquo; Yeah, right; while over the past three decades, Apple or its subsidiaries trained over 25 million Chinese workers on how to do electronic assembly. (It&rsquo;s true; look it up!)
Meanwhile, U.S. shop floors hollowed out. Labs and engineering benches disappeared. Critical capabilities migrated to foreign jurisdictions, where others now do the innovation and eventual maturation. It&rsquo;s a sad, tragic tale because no country can outsource the hard parts and still expect to command the future.
<h2 class="subhead nbp">The National Security Bill Comes Due</h2>
Now, between support for Ukraine and the ongoing war with Iran, comes the national-security bill for outsourcing labor and capabilities. It&rsquo;s blindingly apparent at the near-empty bunkers of more than a few Naval Weapon Stations and Army Storage Depots. And while the Pentagon scrambles to restock depleted inventories of munitions &ndash; let alone to build new ships and airplanes &ndash; the contractor base replies that many (literal) elements of the supply chains are somewhere down the path of thin to non-existent.
Oh, you want new missiles? Radars? Ammunition? Spares and repairs for ships, submarines, aircraft? Whoops&hellip; Sorry; we don&rsquo;t have enough antimony, bismuth, cobalt, gallium, germanium, graphite, rare earths, tellurium, titanium, tungsten, zircon. And the issue is no longer theoretical because China controls the product pipelines and they just closed the valves.
The U.S. has painted itself into a corner of opaque and iffy foreign supply chains, where strategic dependence is neither true capability nor resilience. And that same logic applies to software and technical labor. When critical code, architecture, cybersecurity and maintenance are dispersed through offshore contractors and weakly vetted labor channels, America loses control over its own nervous system.
And no, you need not assume that every outsider is hostile. You only need to understand that dispersed control, weak vetting and dependency on foreign labor create exploitable openings.
<h2 class="subhead nbp">The SpaceX Exception: High Standards Still Work</h2>
On the positive side, SpaceX demonstrates how flimsy the cheap-labor story has always been. Because here&rsquo;s a highly successful technology company that simply cannot hire &ldquo;foreign&rdquo; due to national security regulations.
That is, rockets are a national security thing. Launchers, propulsion systems, flight software and guidance hardware, and of course satellites all live inside tight export controls like ITAR (International Traffic in Arms Regulations) and other restrictions. And this is before we get to classified military programs, facility clearances and FBI-level personnel vetting.
No aerospace or defense firm can simply outsource sensitive work across cheap global labor pools. Defense work operates under a different rubric. There&rsquo;s nothing casual or borderless about access to controlled data, classified information and sensitive facilities. Indeed, for defense systems, labor is not just a cost center. Labor is a security perimeter. And yet, somehow without all those allegedly critical visa-workers, SpaceX is world class.
As with SpaceX, so are many defense primes, shipyards, missile shops, semiconductor fabs, nuclear labs and specialized machinery firms that must &ndash; by law &ndash; hire U.S. citizens. They don&rsquo;t win by finding the lowest hourly rate on the planet. They win by building American teams that can handle difficult work, protect secrets, iterate fast and keep responsibility inside a controlled chain of command.
Or in other words, excellence does not require cheap labor and visa loopholes. Sometimes, excellence just involves bringing the work inside and closing the g0dd@m doors.
<h2 class="subhead nbp">Disposable Workers, Discarded Citizens</h2>
There&rsquo;s a certain moral architecture to every labor system. And yes&hellip; perhaps America&rsquo;s old labor bargain was imperfect, although in its own way it was understandable: work hard, build skills, earn enough to support a family, buy a house, join the community and pass something on.
Now, though, the new model of cheap foreign labor breaks that bargain. Native-born Americans are told they are too expensive, too demanding, too rooted, too unwilling to relocate, too likely to ask questions and too likely to push back when management cuts corners.
Meanwhile, the new visa-work model harms nearly everyone, excepting people who collect rent on the spread. As for American citizens? Clearly, young people have lost the entry-level rungs of the ladder. Mid-career workers have lost bargaining power, and then their jobs. Communities have lost stable taxpayers, and by extension volunteers and future civic leaders.
Ironically, even visa workers are often trapped inside a squirrel cage of dependency, afraid to seek change or speak plainly because their legal status is tied to a particular employer. And the winner is the firm that converts that insecurity into higher margins.
<h2 class="subhead nbp">The Public Has Awakened</h2>
Now the public is catching on. Visa games, layoffs, wage cuts, outsourcing, political donations and procurement failures are no longer hidden in the shadows; they&rsquo;re visible in real time.
Young workers see the pattern. A company lays off Americans, then petitions for more imported labor. STEM graduates can&rsquo;t find work, while trillion-dollar firms with massive overseas operations complain about labor shortages. And the alleged American &ldquo;talent gap&rdquo; becomes a glaringly ethnic wage gap in workplaces where English is the second language.
The immediate fixes are straightforward. Restrict foreign talent to skillsets that truly are rare. Verify all credentials. Ban replacement schemes. Audit wage gaps and stop allowing outsourcing firms to drink everyone else&rsquo;s milkshake. Restore apprenticeships, entry-level pipelines and support serious technical education. Revise tax and regulatory codes to favor a rebuild of critical manufacturing. Map defense supply chains down to the mine and mineral. Punish fraud until fraud quits paying. Defend national sovereignty in the workplace.
Across its 250-year history, America&rsquo;s edge was never just that the country had money. No, the leg up, so to speak was a culture that valued skill, trust, discipline, and the ability to turn ideas into real things that add value: metals, tools, machines, ships, chips, oil wells, autos, aircraft, rockets and code. Now, though, cheap imported labor has corroded all of that, while outsourcing has hollowed it out.
The takeaway here is that long-term visa abuse has inflicted immense damage on the country, and the bill is now coming due. Looking ahead, America cannot afford another generation of rigged national decline. Because there&rsquo;s nothing &ldquo;cheap&rdquo; about cheap labor.
That&rsquo;s all for now. Thank you for subscribing and reading.

mr-issue-08-04-26-img-1

The Siren’s Song of Cheap Labor

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Articles by Byron King