2026-08-05 ATS briefing¶

Zombie Monetarism¶

The return of monetarism is a symptom of institutional memory loss, and Galbraith is right to treat it as such. The quantity theory failed not because of technical measurement problems but because the relationship it posited between money and prices dissolved once credit became the dominant form of money creation. Friedman's stable velocity was an artefact of a particular banking era; the Divisia index is a sophisticated way of indexing a corpse.

What makes this revival politically significant is its timing. The Fed is being asked to adopt a rule-based framework precisely when the post-2008 regime of balance-sheet expansion has made the money supply a residual, not a driver. Banks create deposits when they lend; the Fed's control over reserves is indirect at best. A rule that cannot account for this is not a guide but a straitjacket — one that would force the Fed to respond to inflation by strangling credit, regardless of whether the inflation is supply-driven or a consequence of fiscal expansion.

The ideological function is clearer than the economic one. Monetarism offers the appearance of technical neutrality while smuggling in a distributional preference: it makes price stability the sole objective, rendering unemployment and financial stability secondary. That the advocates include Miran, a Trump adviser, suggests the appeal is not intellectual but political — a way to bind the Fed's hands against fiscal pressures while maintaining the fiction of central bank independence.

Galbraith's dismissal is correct but understated. The real question is not whether monetarism can be revived but why the establishment keeps reaching for failed orthodoxies when the actual constraint on inflation is political: who bears the cost of stabilisation. A Fed chair trained by Friedman may find the old doctrine comforting, but the economy has moved on, and so has the class struggle over who pays for the next crisis.

Bessent says there may be deal Tuesday or Wednesday to open Strait of Hormuz with ‘freedom of movement’¶

Source: Hellenic Shipping News

The market is being asked to price a deal that has already failed once on the exact same terms. Bessent's "freedom of movement" formulation is doing heavy lifting: it sounds like a neutral principle of maritime law, but the June memorandum collapsed precisely because Washington and Tehran could not agree on whose waters that freedom would be exercised through. Iran wants tankers in its territorial sea — that is the toll, whether collected as a fee or as sovereign jurisdiction. The US counter-offered with Omani waters under American military protection, which is the same thing with the flag changed. Neither side is arguing about whether ships move; they are arguing about who controls the chokepoint through which roughly a fifth of global oil consumption passes.

The 3% crude drop is the market's reflexive optimism, but Bessent's own framing gives the game away. He lists fertiliser, refined products, industrial gasses — the hundreds of stuck ships are not just barrels, they are the physical inputs of global production. The "big relief trade" he promises is really the release of a logistics bottleneck that has been inflating costs throughout the supply chain. That is why the Baltic Dry Index sits at a three-week high: dry bulk rates are rising because the war has rerouted traffic and stretched voyage times, not because demand is surging.

Trump's pattern of teasing a deal while strikes escalate is not diplomatic theatre. It is the rhythm of a conflict where neither side can afford to close the strait permanently — Iran needs the revenue and the leverage, the US needs the oil flowing — but where reopening it on the other's terms is equally unacceptable. The deal, if it comes, will be a truce in a war over who gets to tax the world's most important transit route.

From products to crude: how the strikes reshaped Russia’s seaborne exports¶

Source: Hellenic Shipping News

The strikes on Russian refineries did not reduce Russia's seaborne oil exports; they reorganised them. Crude that would have been processed domestically was pushed onto the water, while the closure of the Strait of Hormuz pulled those barrels toward India from the demand side. The headline total barely moved, which is precisely why it misleads. The composition tells the real story: clean product loadings from Ust-Luga and Primorsk fell below their ten-year floor, while crude exports peaked around 5.5 million b/d in late spring and stayed above 4.6 million into late July.

The Indian market is where the two forces collide. Russian crude arriving at Indian ports climbed above 2 million b/d, lifting Russia from a third to roughly half of India's imports—the first time any single supplier has held a majority. Saudi volumes into India fell from about 1.0 million b/d in February to roughly 330,000 in June. This is not a price story; it is a routing story. The war has reconfigured the physical geography of the global oil trade faster than any peacetime market signal could have.

For Moscow, the export surge is a mixed blessing. The crude windfall cushions the loss of refined product revenue, but it also locks Russia into a more extractive, less value-added export profile—a structural downgrade of its position in the world market. The diesel export ban imposed on 8 July is an admission that domestic supply constraints now trump export earnings. For the shipping industry, the shift means longer hauls from the Baltic and Pacific to India, which tightens tanker supply even as the headline trade volume looks unremarkable. The quiet total conceals a market that has been violently redrawn.

How the Axis of Resistance Recovered¶

Source: Foreign Affairs

The octopus doctrine was always a metaphor for hierarchy, and the US-Israeli campaign against Iran has just discovered that the animal in question is not an octopus at all. The authors' central observation — that the axis has evolved from a Tehran-centred command structure into a distributed network where knowledge, manufacturing and even decision-making are pooled across multiple nodes — is the kind of finding that should force a rethink in Washington. It probably won't, but the analysis is worth taking seriously on its own terms.

The key shift is technological and organisational at once. Twenty years ago, Iran's allies were insurgents dependent on Tehran for arms and know-how. Today, Hamas, Hezbollah and the Houthis can build their own one-way attack drones from imported parts, with ranges up to 1,600 miles. That is not merely a capability upgrade; it is a change in the political economy of the network. When a group can manufacture its own weapons, it ceases to be a client in any meaningful sense. The IRGC's strategy of "upskilling" its partners has produced organisations that function like the military-industrial bases of mid-sized states, with their own rosters of smugglers, traders and engineers. Decapitation strikes assume a centre of gravity that no longer exists.

There is a deeper irony here. The US and Israel bombed Iran's leadership and supply lines on the theory that severing the head would kill the arms. But the arms have been reproducing themselves for years, precisely because the axis was built to survive the loss of any single component. The resilience is not accidental; it is the product of a deliberate Iranian strategy of distributed capacity. The authors note that Washington's toolkit of sanctions and strikes is now exhausted, and that containment or even deals with Iran and its nonstate allies may be the only realistic path. That is a remarkable admission from a policy journal, though it is framed as pragmatism rather than defeat.

What the piece does not fully explore is the class dimension of this distributed model. The axis groups have embedded themselves in local economies — smuggling networks, trading firms, engineering shops — which makes them harder to destroy but also ties their fate to the material interests of the populations they operate among. That is a source of strength, but also a potential vulnerability if those populations ever conclude the cost of resistance exceeds its benefits. For now, the network's capacity to absorb losses and reconstitute itself suggests the US is facing not a strategy problem but a structural one.

The Right Way to Balance Trade¶

Source: Foreign Affairs

The architects of the WTO and NAFTA era sold a system that would spread wealth and democracy. What it actually did was hand a rulebook to the largest retailers, pharmaceutical firms, and financiers, then bind signatory states to it. Wallach’s key move is to refuse the “free trade” label: the regime was never about the absence of rules but about a specific set of them — twenty-year drug patents, bans on capital controls, investor-state tribunals that let corporations sue governments for raising wages. The system’s purpose was not efficiency but the legal entrenchment of monopoly rent-seeking, and its defenders called that freedom.

The delayed fuse was China. Beijing exploited the gaps between the rules — currency manipulation, forced labour, suppressed wages, massive subsidies — to run a $1.2 trillion surplus by 2025. The U.S. political class, from Clinton to Bush, actively enabled this, rejecting trade relief petitions as imports flattened American manufacturers. Wallach’s point is that the surplus was not a bug in the system but its logical outcome: a regime that punished countries for raising standards and rewarded them for lowering them was always going to produce a race to the bottom that China won.

Trump’s tariffs, she argues, are chaos without a model — they neither revived manufacturing nor offered other countries a coherent alternative. The real question is what comes after. Wallach proposes a trade paradigm built on balanced trade, enforceable labour and environmental floors, and the restoration of policy space for domestic procurement and capital controls. The leverage for this, she notes, is that the U.S. trade deficit will outlast Trump, and so will Washington’s market power.

The analysis is sharpest where it shows the system’s internal logic: the same rules that created the surplus now make it impossible to address the deindustrialisation and political shocks that surplus causes. For revolutionary politics, the implication is that reform of the trade regime — even a genuinely progressive one — remains a project of managing inter-imperialist competition within the existing order. The surplus is not an anomaly to be corrected but the expression of a global division of labour that no new set of trade rules can abolish.

The New Forever Wars¶

Source: Foreign Affairs

The piece from a former State Department official reads like a confession with the conclusion missing. Rand documents a decade of Washington tripling security assistance to $46 billion annually, arming Saudi Arabia, Ukraine, and Israel, only to discover that it cannot dictate how those wars are fought or ended. The "leverage trap" she identifies is real: influence peaks in the first weeks of a conflict, when the attacked ally is desperate, and Washington consistently fails to use it because demanding concessions from a beleaguered partner feels like betrayal. By the time the US wants to talk about civilian casualties or exit strategies, the ally has absorbed the weapons, adapted, and no longer needs to listen.

What Rand cannot say is that this is not a strategic failure but the normal operation of the system. The US does not arm allies to win wars; it arms them to maintain a global order in which the US is the indispensable patron. The weapons transfers, intelligence sharing, and diplomatic cover are the substance of the alliance itself. A partner that could be compelled to negotiate on Washington's timetable would be a client, not an ally — and the entire structure of US hegemony depends on the fiction that these are sovereign equals making common cause. The "mixed results" Rand laments are actually the point: the wars grind on, the allies remain dependent, and the arms sales continue.

The deeper problem is that the US has outsourced its forever wars without solving the original problem. The Afghanistan and Iraq quagmires were not caused by boots on the ground but by the absence of any political settlement that could end the fighting. Arming proxies to fight the same unwinnable battles merely relocates the quagmire. The Houthis still hold Sanaa after a decade of Saudi bombing. Ukraine's borders remain contested. Gaza is rubble. The US has discovered that it can export the means of war but not the capacity to conclude it. For the rest of the world, the lesson is simpler: the American empire has found a way to make its wars permanent without even the cost of its own soldiers' lives.

Stronger EU borders needed after Ceuta crisis, von der Leyen says¶

Source: The Guardian

The numbers alone tell the story of a crisis that was never really about migration. Nearly seventy thousand people crossed into Ceuta in a single day, and nearly all of them were back in Morocco within four days. That is not a wave of asylum seekers overwhelming a border; it is a mass movement that began and ended on the Moroccan state's timetable. The floating barrier Spain is now installing is aimed less at people than at Rabat's ability to open the tap at will.

What makes the episode politically explosive is not the crossings but the Spanish regularisation programme that preceded them. Twenty-two member states signed a letter blaming Sánchez for creating "pull factors" by legalising 500,000 undocumented migrants. The academic evidence finds no such pull effect, and the EU diplomat quoted in the piece concedes the real concern is "painting a picture that the door is open". The dispute is about perception management, not migration flows. Italy and Denmark are using Ceuta to discipline a member state that dared to treat labour migration as something other than a security threat.

Von der Leyen's five-point response — more returns, more fences, more deals with Morocco — is the EU's standard repertoire, and it has a convenient symmetry. The same Commission that wants to upgrade relations with Morocco to a "strategic partnership" is simultaneously building barriers against the people Morocco can mobilise at its border. Morocco is both the problem and the solution, depending on which meeting room the conversation happens in. The offshore detention centres Italy wants to accelerate would complete the circuit: externalise the border, externalise the detention, and keep the political costs out of European view.

The deeper issue is that the EU has no answer to a neighbour that treats human mobility as a diplomatic weapon. Fences and early-warning systems do not address the fact that Morocco's leverage over Spain is precisely the EU's dependence on Moroccan cooperation. Every "partnership" deal with Rabat or Tunis buys border control by funding the very conditions that produce migration. The contradiction is not hidden; it is the policy.

What a Sino-American G2 Would Mean for Asian Security¶

Source: Project Syndicate

The G2 idea Trump has floated is less a strategy than a confession. Washington is signalling it can no longer afford the posture of primacy it built across the post-Cold War decades, and is shopping for a managed duopoly that would let it keep a share of the spoils while Beijing polices its own neighbourhood. Chellaney's warning that this could produce a "unipolar Asia" is revealing precisely because it is so counterintuitive: two powers dividing the region would not balance each other but collude, each consolidating its sphere while the smaller states lose the leverage that comes from playing the giants off against one another.

Japan's "free and open Indo-Pacific" is the alternative on offer, and it is worth taking seriously as a class project rather than a geopolitical slogan. The framework's genius is that it dresses up a containment architecture as a public good — open seas, rule of law, connectivity — which lets Tokyo and its partners mobilise Southeast Asian states that would never sign up to an explicitly anti-China bloc. India's role as "indispensable partner" is the hinge: New Delhi gets to pose as a non-aligned power while quietly anchoring the maritime rim against Beijing's expansion.

What Chellaney does not say is that both arrangements are responses to the same underlying condition. The American-led order that managed Asian capitalism for three decades is fraying not because of bad diplomacy but because the US economy can no longer underwrite it. A G2 would be an attempt to formalise that decline on terms favourable to the two largest creditors of the global system. The Indo-Pacific framework, by contrast, is a bid to keep the old hierarchy alive with Japanese capital and Indian manpower substituting for American hegemony. Either way, the smaller Asian states are choosing which master's rules to live under, not whether to have a master at all.