2026-08-14 ATS briefing¶

The Next Global Economic Crisis Could Be Made in China¶

The piece frames China's export machine as a problem of political backlash and arithmetic: a $1.2 trillion surplus growing at three times the rate of global goods trade must eventually run out of customers. The author, a former US trade representative, is right about the arithmetic but wrong about where the contradiction bites hardest. He treats the breaking point as a foreign-policy challenge — how to get Beijing to rebalance before protectionism forces the issue. Yet the material he presents shows the crisis is already internal.

The numbers do the work here. Thirty per cent of Chinese industrial firms operate at a loss, rising to 34 per cent in the state-prioritised sectors. Local governments prop up unprofitable factories to preserve employment and tax revenue; state banks roll over debt for insolvent borrowers. This is not a strategy that can be rebalanced by policy fiat, because the entire fiscal and financial system is organised around keeping the machine running. The "involution" the article cites — firms investing more to produce more at negative margins — is not a cultural quirk but the logical endpoint of a growth model in which credit allocation, not profit, determines investment. The state-directed financial system has decoupled production from the discipline of return on capital, and the result is overcapacity that cannot be wound down without triggering the very unemployment and fiscal collapse the propping-up is designed to prevent.

Froman's proposed solution — gradual rebalancing toward consumption — assumes the Chinese state can choose to stop. But the state's own legitimacy rests on industrial employment and export revenue. The anti-involution campaign and rural consumption push are gestures against a structural imperative. When the machine stalls, the shock will not be a trade dispute; it will be a deflationary wave through global manufacturing, with China's trading partners in Asia and Africa absorbing the collapse of demand. The US may have the institutional capacity to stabilise the system, as Froman claims, but that capacity is itself strained by the same overaccumulation dynamics in its own financial sector. The real question is not whether Beijing rebalances, but whether the global system can absorb the simultaneous unwinding of Chinese overcapacity and Western fictitious capital.

The AI Growth Paradox¶

Source: Foreign Affairs

The magic of the AI boom is supposed to be that it pays for itself. Rogoff’s piece is a cold shower for that fantasy, and the timing is precise: US federal debt is about to hit $40 trillion, with $2 trillion added each year. The argument that AI-driven growth will generate tax revenues sufficient to service this mountain rests on a chain of assumptions, each weaker than the last. Even if the productivity gains materialise, the government must resist spending the anticipated bonanza before it arrives — and the political incentive structure makes that near-impossible. Tax cuts and spending hikes will get out in front of the boom, as they always do.

The deeper point is about the cost of money. The 2010s orthodoxy of secular stagnation — that demographics and weak productivity would keep interest rates at zero forever — has already been falsified. The ten-year inflation-indexed Treasury yield averaged around zero from 2012 to 2021; it now stands above 2.4 percent. Interest payments on the federal debt exceed defence spending. Rogoff’s historical corrective is that low rates are the anomaly, not the norm, and debt ratios cannot adjust as quickly as market sentiment. The US can still place its debt, but only at a higher price, and investors are watching for signals that Washington will not tackle the problem seriously.

What Rogoff leaves implicit is that the AI boom itself is a driver of higher rates. If capital is genuinely being absorbed by AI infrastructure and equity valuations, the competition for funds intensifies. The state, meanwhile, is structurally incapable of restraint. The collision is not between growth and debt — it is between a ruling class that wants the productivity gains without the fiscal discipline, and a financial system that will eventually demand payment. For those watching from the left, the relevant question is not whether the crash comes, but whether the response to it will once again be austerity dressed as necessity, or something else entirely.

The Long Shadow of the Iran Shock¶

Source: Foreign Affairs

The five months since Tehran shut Hormuz have produced a strange comfort: Brent averaged just over $100, barely double its pre-war level, and the global economy avoided the recessionary spiral that followed past energy shocks. The authors are right to call this complacency misguided, but their own account points to something more structurally significant than a lucky confluence of spare capacity and full inventories. The crisis has revealed a new geography of energy power in which the pain of disruption is distributed with striking unevenness — and the United States and China have emerged as the principal beneficiaries.

The mechanism is worth spelling out. China absorbed the shock not by bidding against other importers but by drawing down its strategic reserves and curtailing its own consumption, effectively functioning as a global buffer. Washington, meanwhile, enjoyed the insulation of domestic production while its allies in Asia and Europe endured rationing, fiscal strain, and the slow bleed of depleting natural gas inventories ahead of winter. The modest headline price concealed a transfer of real costs onto the most exposed importers — precisely the countries least able to absorb them. This is not the 1970s, when a unified oil shock hit all advanced economies simultaneously. The system has fragmented into a hierarchy of energy security, and the hierarchy maps onto the emerging inter-imperialist order.

The authors note that the cushions are now threadbare: inventories depleted, refining capacity stretched, diesel and jet fuel priced far above what crude benchmarks suggest. The second phase of the crisis, should it come, will hit a market stripped of the buffers that made the first phase survivable. But the deeper point is that the resilience of the last five months was itself a form of power — the power to make others absorb the costs of disruption. The question for the coming winter is not whether Europe can replenish its storage, but whether the political order that emerged from this first phase can survive a second one in which the buffers are gone.

The Real Competitiveness Test¶

Source: Project Syndicate

The McKinsey authors have hit on something genuinely useful by accident. Their claim that investment flows are "the ultimate test" of competitiveness is less a methodological breakthrough than a confession: after three decades of benchmarking, the World Bank's hundreds of indicators have failed to capture what matters. When capital moves, it votes with hard currency. The Baltic Dry Index tells you what goods cost to ship; this tells you where the future is being built.

The numbers behind their argument are stark. China has absorbed the lion's share of global productive investment for years, and the gap is not closing. But the authors' prescription — make it "cheaper and easier to build, operate, and innovate" in Europe and the US — mistakes the symptom for the disease. Capital is not fleeing the West because permits take too long, though they do. It is fleeing because the rate of profit is higher where the state actively orchestrates accumulation. Chinese industrial policy does not just lower costs; it guarantees demand, subsidises inputs, and socialises risk. No amount of regulatory streamlining in Berlin or Washington can compete with a state that treats the entire economy as a single investment vehicle.

The deeper problem is that the authors cannot see their own framework's implication. If investment is the test, then the West has already failed it, and the question is not how to win back factories but what happens when the world's most dynamic productive forces are concentrated under a rival state's command. The competitiveness discourse is itself a form of inter-imperialist anxiety dressed as management consultancy. The real test is not whether Europe can cut red tape, but whether the capitalist class in the West can still find a way to profit from a system whose centre of gravity has shifted decisively eastward.

Salvage work begins on tanker leaking oil off Oman, risk firm says¶

Source: Al Jazeera

The Caroline Bezengi has been leaking since June, yet the salvage operation only began this week, after satellite imagery showed the slick had expanded from 45 to roughly 1,300 square kilometres in a fortnight. The timeline is the story. An unidentified explosion, a crew report, then two months of drift while the vessel flew flags of Cameroon, Palau and Liberia — states with no capacity or incentive to act as a flag state in any meaningful sense.

The war exclusion invoked by the International Oil Pollution Compensation Funds is the crux. If the explosion is deemed an act of war, the compensation regime voids itself, and the tanker becomes what one expert calls an orphaned wreck: no responsive owner, no verifiable insurer, no functioning flag state. The shadow fleet was designed precisely for this. Sanctions pushed Russian oil into vessels whose ownership is opaque and whose insurance is dubious, externalising the risk of a catastrophic spill onto whichever coastline happens to be downwind. The Gulf of Oman is now absorbing a cost that Western sanctions policy helped manufacture but for which no one will pay.

The response gap is also a class gap. Omani authorities are being blamed for a slow reaction, but the expert quoted makes the structural point: no mid-sized maritime administration is resourced for a wreck with no accountable owner. The polluter pays principle assumes a polluter can be identified. When the entire architecture of the trade is built to obscure that identity, the principle collapses into a bureaucratic footnote.

Greenpeace's call for international mobilisation is reasonable but politically naive. The "international community" that would fund such a response is the same bloc whose sanctions created the shadow fleet. The spill is not an accident within an otherwise functioning system; it is the system's normal operation at its endpoint.

What is the Texas ratio?¶

Source: FRED Blog

The Texas ratio is a bank-stress thermometer that emerged from the 1980s Texas banking collapse, where oil-price shocks and real-estate speculation gutted the state's lenders. It divides nonperforming loans by the capital cushion available to absorb them — tangible equity plus loan-loss reserves. Above 100%, a bank's bad assets exceed its buffer; the implication is insolvency risk. The FRED Blog's aggregated figure for all FDIC-insured US commercial banks currently sits at 5.82%, near the all-time low of 4.59% recorded in mid-2022.

That near-record low is the interesting number, and it deserves more scrutiny than the blog gives it. The ratio measures the stock of recognised bad loans against capital, not the flow of new distress. In a credit cycle where interest rates have been elevated and commercial real estate has been under visible pressure, a ratio this low suggests either genuinely healthy balance sheets or a lag effect — problem loans take time to be classified as nonaccrual, and banks have strong incentives to extend and pretend rather than recognise losses. The 2022 trough coincided with the tail end of pandemic-era liquidity and stimulus; the current figure, while still low, has crept upward since.

There is also a structural quirk worth noting. The ratio is aggregated across all banks, which smooths away the distribution. A handful of regional banks with concentrated commercial real estate exposure could be sitting at ratios far above the system-wide 5.82%, while the megabanks — whose capital positions dominate the aggregate — pull the average down. The metric that predicted the Texas crisis was designed for individual institutions, not the whole system. Using it as a systemic indicator flattens the very variation that matters.

For the current conjuncture, the ratio is a reminder that official measures of banking health are backward-looking and aggregate away the points of fragility. The system can look calm at the mean while individual institutions teeter. That gap between the average and the outlier is where crises actually begin.

DRC's fast-growing Ebola outbreak spreads to sixth province¶

Source: The Guardian

The numbers deserve a moment of pause. At the same point in the 2014-16 west Africa catastrophe, 755 cases had been recorded. This outbreak has already logged over 4,500, with a death toll approaching three times faster. The WHO director general's admission that this will likely surpass the deadliest Ebola outbreak in history is not hyperbole; it is arithmetic.

Yet the material conditions driving the spread are almost entirely political-economic. Health workers at the Nizi treatment centre in Ituri province went on strike this week over three months of unpaid wages, temporarily shuttering the facility. Global development aid cuts have hollowed out the response. Rebel groups control territory along the north-eastern border where the outbreak is concentrated. Communities traumatised by decades of violence are distrustful of authorities, and misinformation flourishes in that vacuum. The virus is not merely spreading; it is spreading through the cracks of a state and an international order that have both withdrawn.

The WHO's own language betrays the dynamic. "We are chasing the virus; the virus is ahead of us," said the regional director. Meanwhile his colleague projects a "turnaround in three months" if the response is implemented "at the same time across the five transmission zones" — a conditional that presupposes the very coordination, funding and community trust that are absent. The contradiction is concrete: an epidemiological response that requires precisely the resources and legitimacy that austerity and conflict have destroyed.

The Bundibugyo strain's genetic divergence from previous outbreaks suggests a fresh zoonotic jump, and researchers worry about mutation. But the deeper mutation is social. When health workers must choose between feeding their families and containing a haemorrhagic fever, the outbreak is no longer a natural disaster. It is a symptom of a system that treats labour as disposable and populations as expendable. The true scope remains unknown — officially declared in May, sequencing shows it began in February. The gap between those dates is the gap between what is happening and what is being managed.

Zambia elections haunted by ghost of incumbent president's arch-rival¶

Source: The Guardian

The feud between Hichilema and the late Edgar Lungu has outlived its object. Lungu died in June 2025, yet his body remains the central prop of the opposition campaign — Mundubile and Zulu have promised to repatriate it for a dignified burial, and the government fought in South African courts to prevent the family from burying him on their own terms. That the state would litigate over a corpse suggests the political stakes are not about the dead man but about what his living memory represents: the only figure who ever beat Hichilema at the ballot box, and the symbol of a rival faction that refuses to be absorbed.

The campaign rhetoric cuts both ways. Hichilema’s team defends its record by invoking Lungu’s repression — the arrests, the closed media, the switched-off internet — and insists the opposition now campaigns freely. Yet Transparency International monitors record police disrupting opposition rallies with suspicious frequency, and activists describe being detained for peaceful protest during the 2024 blackouts. The incumbent’s insecurity is doing the work his opponents cannot. Vandome’s observation is precise: Hichilema’s lived experience of how elections can be stolen has made him risk-averse in ways that dent his own legitimacy.

The economic picture is where the real tension sits. Inflation has fallen from 24.6% to 6.5%, debt default is behind him, and copper has drawn international investment. But average income rose from $1,127 to $1,318 between 2021 and 2025 while prices nearly doubled. The macro numbers are real; the lived experience is not. Voters ask why they cannot afford three meals a day when the economy is supposedly stabilising. That gap between aggregate recovery and household reality is the terrain on which this election will actually be decided — not the ghost of Lungu, however loudly the opposition invokes it.