Individual Economists

Treasury Sanctions Crypto Exchange Behind Iran's Bitcoin Tolls On Hormuz Ships

Zero Hedge -

Treasury Sanctions Crypto Exchange Behind Iran's Bitcoin Tolls On Hormuz Ships

Via Decrypt.co,

The U.S. Treasury has sanctioned BitBank, naming the Iranian exchange it says carried the Bitcoin that shipping companies paid for safe passage through the Strait of Hormuz.

Since June, the Office of Foreign Assets Control said, the Hormuz Safe Marine Services Authority has used BitBank to pass the payments it collects on to the Iranian regime. That authority was the body charging vessels in Bitcoin for transit rights, a scheme Treasury designated in July.

Between June and July, Treasury says, BitBank was used to move "hundreds of millions of dollars' worth of Bitcoin" to the Islamic Revolutionary Guard Corps.

BitBank is controlled by Babak Zanjani, an Iranian financier OFAC designated in January. Sentenced to death in Iran in 2016 for embezzling from the National Iranian Oil Company, he had his sentence commuted in 2024 and resurfaced last year backing regime-linked ventures. Treasury says he has been advertising BitBank on his social media accounts since at least 2024.

Four more designations

The action also covers Pishtaz Simorgh Electronic Trade Company, which built BitBank's software and is a subsidiary of the already-designated Dot One Value Creation Group, along with three Dot One executives: Hossein Ali Zaker Hossein, Mohammad Mahdi Zaker Hossein and Seyed Adel Heidari.

Treasury describes the first as involved in most of Zanjani's sanctions evasion, including oil exports, and says he has brokered digital asset transactions that ended up with the IRGC.

All five were designated under Executive Order 13902, which the administration extended in August to cover anyone operating in Iran's digital asset sector. It is the authority Treasury has been using since to work through the network, including the crypto exchanges it designated for laundering Iranian funds.

"Efforts to finance the Iranian regime using cryptocurrencies are not beyond OFAC's reach," said Treasury Secretary Scott Bessent.

"If you support the Iranian regime, the Department of the Treasury will sanction you."

The designations fall under Operation Economic Outcast, the campaign Bessent announced on August 24 and dubbed Economic D-Day, which Treasury says is aimed at severing Iran's remaining economic lifelines with help from the EU, the UK and Gulf partners.

U.S. assets belonging to the five are blocked, as are any entities they own half or more of, and non-U.S. firms dealing with them risk secondary sanctions.

Traders do not expect the pressure to lift soon. On Myriad, a prediction market developed by Decrypt's parent company Dastan, the odds of Washington announcing an end to its naval blockade of Iranian shipping by September 30 have fallen to 10%, down 30 points. Even a December 31 deadline is only a 60% shot.

Tyler Durden Fri, 09/18/2026 - 09:40

Despite 'Soft' Survey Strength, US Manufacturing Unexpectedly Tumbled In August

Zero Hedge -

Despite 'Soft' Survey Strength, US Manufacturing Unexpectedly Tumbled In August

US Industrial Production disappointed in August, unchanged MoM vs expectations of a 0.3% MoM rise.

Capacity Utilization was flat MoM (slight disappointment to expectations...

Worse still, manufacturing production seemingly hit an unexpected wall in August, falling 0.3% MoM versus an expectation of rising 0.3% MoM. That was the biggest monthl;y drop since Oct 2025 and dragged growth down to just 0.9% YoY...

This was 'odd' since ISM Manufacturing survey data has shown a sizable uptick this year...

...or maybe it's just another useless survey signal?

Tyler Durden Fri, 09/18/2026 - 09:30

Defense Stocks Fall Out Of Favor. Polymarket Might Have The Answer As To Why

Zero Hedge -

Defense Stocks Fall Out Of Favor. Polymarket Might Have The Answer As To Why

The S&P Aerospace & Defense Select Industry Index is little changed year to date, despite conflicts across Eurasia and expectations that a coming rearmament cycle will substantially boost missile and bomb production. The muted performance highlights a disconnect between investor appetite and the Trump administration's anticipated expansion of defense production.

Allyson Gordon, UBS head of Americas sector specialists, explained in a note to clients on Thursday that US aerospace and defense stocks were being weighed down by elevated bond yields and weakness in individual names.

ATI, Carpenter Technology, RTX and Lockheed Martin were among the names drawing attention, Gordon said. She said her trading desk attributed much of the weakness to broader sentiment and investor fatigue with the aerospace trade, rather than a clear deterioration in operating conditions.

"Some investors have pointed to Wednesday's weakness in Boeing as a possible contributor to today's pressure on original equipment names, although the desk has not heard anything from recent management meetings that would explain the magnitude of the move. In fact, recent feedback has generally been more constructive. On the aftermarket side, GE was said to have delivered a confident message on demand trends, with no signs of weakness emerging in 2026 or 2027," the analyst said. 

She continued: 

Defense shares also struggled, with LMT coming under pressure during management commentary on margins. However, the reaction appeared larger than any incremental change in the company's message versus Q2. More broadly, the sector has fallen back out of favor following the post-Q2 earnings squeeze, and investors remain reluctant to add exposure despite increasingly reasonable valuations. Feedback around Gavin's recent LMT upgrade has largely centered on a wait-and-see approach, with many investors preferring to stay on the sidelines until after the midterms.

The desk continues to field questions about whether defense could serve as a relative refuge amid broader market volatility. While that argument reflects a market increasingly driven by a process of elimination, investor interest has recently gravitated more toward select government IT names, where positive reactions to Q2 results have shown greater staying power.

A chart comparing the inverse 30-year Treasury yield with the UBS Aerospace basket highlights how a wide divergence that emerged earlier this summer has now largely closed, underscoring the extent to which aerospace equities have repriced alongside the rates backdrop.

The broader problem for defense bulls is a lack of willing buyers. Following a rally after second-quarter earnings, the sector has slipped out of favor again. Why is that?

One possible explanation is investor concern that a change in Senate control could complicate negotiations over the timing, size, and composition of defense funding. Congress determines appropriations, making congressional negotiations key to the funding process.

Our chart compares Polymarket pricing on Senate control after the midterms with the S&P Aerospace & Defense Select Industry Index, with one series inverted. The comparison may suggest why investors are exiting the trade. 

Beyond the repricing of defense stocks due to rising bond yields that Gordon described, uncertainty surrounding post-election defense funding negotiations offers another reasonable explanation for investor caution.

Tyler Durden Fri, 09/18/2026 - 09:20

Adult Film Stars Join Left-Wing Voter Registration Push Ahead Of Midterms

Zero Hedge -

Adult Film Stars Join Left-Wing Voter Registration Push Ahead Of Midterms

Via American Greatness,

A progressive voter-registration group is turning to adult film performers and a $100,000 advertising campaign in an effort to reach Georgia voters ahead of November’s midterm elections.

Hot2Vote’s Atlanta campaign features about 100 adult performers urging residents to check their voter-registration status, according to reporting Thursday on the effort.

The campaign is expected to use digital advertising, videos, pin-up-style posters and appearances, with some ads geographically targeted around adult entertainment venues.

Adult performers Kimmy Kimm, Cherie DeVille and King Noire are among those participating in videos directing Georgians to verify their registration.

The effort follows significant maintenance of Georgia’s voter rolls. In 2025, Secretary of State Brad Raffensperger’s office sent cancellation notices to 477,883 registrations that had remained inactive through the 2022 and 2024 general elections. State officials said the process was required under state and federal law and gave affected voters 40 days to respond before cancellation.

The cancellations have faced a legal challenge from voting-rights groups. Raffensperger’s office said in March that the lawsuit concerns nearly half a million inactive registrations canceled in 2025 and maintains the removals complied with state and federal requirements.

Georgia’s general election is scheduled for Nov. 3.

* * * Order by midnight Sunday

Tyler Durden Fri, 09/18/2026 - 09:00

Futures Flat Ahead Of Massive $7 Trillion Quad-Witching As Yields Resume Rise

Zero Hedge -

Futures Flat Ahead Of Massive $7 Trillion Quad-Witching As Yields Resume Rise

US stock futures are little changed on Friday, with big tech stocks rising while sentiment is supported by another modest decline in oil prices; a near-record $7 trillion quad-witching and index rebalances add to Friday's set-up. US tariff-delay hopes, a flattening US curve and softer diesel and WTI prices ease inflation concerns, while AI bulls are back in charge. As of 8:00am ET, S&P 500 futures rose 0.1% to 7,713.25, erasing modest gains, while Nasdaq futures rise 0.3% as the market momentum after the risk-on rally yesterday holding well into today’s session with Tech continuing its leadership. In premarket trading, Mag 7 stocks are mostly higher led by GOOG/L (+2.0%); AMZN is flat after the 5% rally yesterday amid a long-term deal with Generac. Meanwhile, Brent crude traded near $104 a barrel. The dollar climbed 0.2%, while gold rose toward $4,400 an ounce. Treasuries resumed losses after a brief rebound, with the 10-year yield up three basis points to 4.97%. Overnight, the BOJ hiked by 25bps as expected, but the vote split skewed dovish as two Takaichi-appointed members dissented, which sent the yen sharply lower (USDJPY breaking above 157 for first time since early Sept) and Japanese stocks rallying (Tech > Banks). The USD is higher post BOJ decision. Oil is unchanged this morning; both precious and base metals are higher. Today’s macro data focus is on Industrial Production and Leading Index which are not expected to be market moving.

In premarket trading, Mag 7 stocks are mostly higher: Alphabet is leading Magnificent 7 peers higher as technology and AI-related stocks boost the US stock futures. Meanwhile, Apple underperforms the cohort (Alphabet +2.4%, Nvidia +0.4%, Apple +0.1%, Tesla +0.5%, Amazon +0.5%, Microsoft -0.1%, Meta +0.7%).

  • Cryptocurrency-linked stocks are rallying in premarket trading, set to extend gains, after US SEC greenlit digital versions of securities to start trading in the US.
  • European telecom stocks sold off on Friday, following US-listed peers lower, amid concerns over competition from satellite operators and disruptive impact from agentic AI tools.
  • Fluence Energy Inc. received another downgrade on Friday, with Jefferies cutting the energy storage company to hold from buy, citing a recent cut to the company’s outlook.
  • Intuit shares are little changed in premarket trading, after the tax-preparation software company hosted an investor day where it gave financial targets and discussed its strategy to deliver higher growth. Analysts say the stock remains a show-me story as the company navigates the AI era.
  • Macom Technology Solutions Holdings Inc. shares are up 2.1% in premarket trading, after BMO Capital Markets upgraded the semiconductor device company to outperform from market perform, seeing an attractive valuation in the wake of recent weakness.
  • Netflix shares drop 2.9% in premarket trading as Wells Fargo Securities downgrades to underweight from equal-weight, citing “worrying” engagement trends.
  • Nvidia Corp. Chief Executive Officer Jensen Huang expects to sell twice as many chips in the coming year, fueled by the spread of artificial intelligence across different industries.
  • Stubhub shares gain 3.5% in premarket trading as Citi upgrades to buy from neutral, citing “robust” third-quarter trends. .
  • Tyson Foods shares are up 1.4% ahead of the bell as JPMorgan upgrades the meat producer to overweight from neutral.
  • Xenon shares tumble 27% in premarket trading Friday after the bio-pharmaceutical firm voluntarily paused enrollment in clinical studies of major depressive disorder (MDD) and bipolar depression (BPD).

In other corporate news, Berkshire Hathaway Inc. founder Warren Buffett is stepping down as the company’s chairman to be replaced by his son Howard. SoftBank Group Corp. has increased its margin loan backed by shares of its chip unit Arm Holdings Plc by $5 billion to $25 billion, according to people familiar with the matter. Russia seized control of the local assets of Swiss food giant Nestle SA and French supermarket chain Auchan, placing their stakes in Russian businesses under temporary administration. More than a quarter of Anthropic PBC’s research and development work for artificial intelligence is driven by its Claude chatbot, according to the company. Morgan Stanley and CIBC have won the mandate to advise the Canadian government on selling the operating rights to the country’s four largest airports. Malaysia Airlines’s parent is said to be closing in on an order for Boeing 787 Dreamliners as the carrier seeks to renew its long-haul fleet.

Today's quieter tone signals a notable shift for markets that started the week with Brent crude at a four-month high, 10-year Treasury yields at levels seen 19 years ago and chipmakers under pressure on concerns that AI poses an existential risk to humanity. Since then, a US interest-rate hike has helped shore up the Federal Reserve’s inflation-fighting credibility, worries over crude supplies from the Middle East have eased and a persistent supply-demand imbalance in chips continues to underpin robust profit outlooks for semiconductor companies.

Friday’s main event saw the Bank of Japan raise its benchmark rate as widely expected, though in a split decision. The yen weakened 1.2% against the dollar after two board members voted against the hike, suggesting the bank may not embark on a series of increases as quickly as initially anticipated.  

Developments in the Middle East and the outlook for global rates will be the main steer for traders in the coming weeks, said Roberto Scholtes at Singular Bank. The risk of further energy-supply disruptions from the Iran war came back into view Friday as Saudi Aramco told some refining customers in Europe they won’t be allocated crude next month.

“Energy prices and monetary policy expectations will remain the main market drivers until the third-quarter earnings season begins,” Scholtes said. “The US midterm elections will gradually move into the spotlight, especially if leading candidates put forward bold policy proposals.”

An easing of geopolitical tensions should help both bonds and equities, according to Mohit Kumar at Jefferies. “The first couple of weeks of October could be a sweet spot to get some form of a deal between US and Iran, even if it’s a fudge,” Kumar wrote. “We are at a local peak in geopolitical tensions and see improvement in the coming weeks.”

Friday's quad-witching option expiration may remove positioning that has dampened realized moves, Citadel Securities says, with about $7 trillion of options notional value set to expire, one of the largest ever. Meanwhile Bloomberg notes that the equity dispersion trade’s golden age may be ending, with single stock volatility’s premium relative to the VIX plunging since July.

With the Fed’s communications blackout ending after Wednesday’s rate decision, focus on the policy outlook will shift back to the views of voting officials. Fed Vice Chair for Supervision Michelle Bowman is scheduled to deliver a speech in London on Friday.

US equity funds had the biggest weekly inflows in three months at $63.8 billion, according to BofA, citing EPFR data through Sept. 16. Index rebalances after the close tonight include Bloom Energy, Illumina and Everpure into the S&P 500 and SpaceX will get a weighting boost from a Nasdaq 100 rebalance.

In poltiics, the US is expected to hold off announcing new tariffs on China and other trading partners until after next week’s summit between Presidents Xi Jinping and Donald Trump. AI is widely expected to be a central topic at the event, with access to advanced US chips and safety standards among key points of contention. 

And on the subject of AI, SoftBank increased its margin loan backed by shares of its chip unit Arm Holdings by $5 billion to $25 billion, as the conglomerate finds ways to fund its expanding investments in AI. Software’s recovery, having been left for dead earlier by in the year by perceived imminent AI threats, is the focus of today’s Tech Watch.

Europe's Stoxx 600 falls 0.4% to 640.2 with Nestlé in the red after a decree from Russia’s President about its operations in the country. The telecom and insurance sectors weigh the most, while technology and healthcare are among the few gainers. Still, the region is set for its first weekly advance in three as oil retreats on optimism about diplomacy between the US and Iran. Here are some of the biggest movers on Friday:

  • Infineon shares rise as much as 3.8% after being upgraded at Oddo BHF, which recommends investors return to the stock following a recent de-rating.
  • Adecco rises as much as 2.1% as Bank of America says its underperform thesis on the company has played out, with the stock having derated ~40% between August 2023 and June 2026 due to two years of negative EPS revisions.
  • Softcat shares fluctuate after the IT reseller raised guidance for FY26 operating profit growth, while announcing an acquisition that was partially funded by an equity raise.
  • Nestlé shares drop as much as 1.9% after Russian President Vladimir Putin signed a decree transferring stakes in the firm’s local unit into temporary administration.
  • Orange shares fall as much as 4.5% after the carrier was downgraded to underweight by analysts at Morgan Stanley, who see multiple headwinds ahead for the carrier.

Asian stocks rose, driven by gains in chipmakers as tech sentiment got a lift from declines in oil prices and a bullish outlook from Nvidia. Japanese stocks advanced after the nation’s central bank raised rates, as expected. The MSCI Asia Pacific Index climbed as much as 1% before paring some of the gains, with SK Hynix, Samsung and TSMC among the biggest boosts. A Bloomberg gauge of Asian chipmakers rose 3.5%, though most sectors beyond tech declined. South Korea’s Kospi led advances among regional benchmarks, rising 2.7%, while Taiwan, China and Hong Kong also gained. The tech-driven gains underscore the resilience of the AI trade even as the broader backdrop for Asian equities has become more challenging. The Fed Reserve and BOJ have tightened policy, while still-elevated crude and global bond yields have added pressure on financial conditions. Investors are still optimistic that strong tech earnings will help broader equities markets withstand headwinds. Chinese optical technology stocks rose after Huawei said it’s set to ship its first near-packaged optics modules in the coming quarters. Shares of Chinese robotics component suppliers extended gains after a local media report said that Tesla has begun a new round of audits at local firms to support mass production of its Optimus humanoid robot. Elsewhere, Philippines’ benchmark index was the biggest decliner in Asia and dropped the most in three weeks on expectations of higher local energy cost after rising oil prices.

In FX, the yen tumbles to 158 as Bank of Japan Governor Ueda’s comments following a split-vote hike by the central bank failed to meet traders’ hawkish expectations. The Bloomberg Dollar Spot Index is up by 0.1% and currency moves beyond the yen are relatively muted.

In rates, treasuries hold front-end-led losses in early US session, flattening key yield-curve spreads amid similar price action in bunds and gilts. US 2s10s is testing YTD lows reached in June, and 5s30s is lowest since March 2025, extending moves spurred by Wednesday’s Fed meeting.US front-end yields are 4bp-5bp cheaper on the day, flattening 2s10s by 2bp to 24bp, within 1bp of its June low; 5s30s is nearly 4bp flatter near 46bp; the 10-year is higher by 4bp near 4.97% with UK and German counterparts higher by 4.4bp and 2.5bp respectively. IG dollar issuance slate contains a couple of offerings so far; six were priced Thursday totaling $21 billion, with issuer paying about 3bp on deals that were 4.4 times oversubscribed. Dealer expectations for next week’s volume have been in the $35 billion area. Next week’s Treasury auctions include 2-, 5- and 7-year notes commencing Sept. 22.

In commodities, WTI crude oil futures are flat at $96, erasing an earlier drop. Gold is rising, nearing $4,400/oz.

US economic data slate includes August industrial production (9:15 a.m.) and August Leading Index (10 a.m.). Fed speaker slate includes Governor Bowman (9:30 a.m.) and Kansas City’s Schmid (11:45 a.m.).

Market Snapshot

Top Overnight News

  • Pakistan’s army chief has urged Iran to try to rein in Houthi attacks on Saudi Arabia, referencing their mutual defense agreement with Riyadh. FT
  • China has privately asked Tehran to help rein in Yemen's Houthis after an appeal to Beijing by Saudi Arabia following the Iran-backed group's military blitz in the past week. RTRS
  • The Trump administration has approved visas for top Iranian officials, including the president and foreign minister, to attend next week’s U.N. General Assembly high-level meeting in New York even as the two countries are locked in a stalemated war. AP
  • Amazon said AI models should be released only when “ready and safe,” calling for rigorous testing, safeguards and industry cooperation with government. BBG
  • Cyber researchers broke into OpenAI using its key rival Anthropic’s software, highlighting vulnerabilities in the ChatGPT maker’s security as leading AI companies face mounting scrutiny over safety. FT
  • The BoJ has raised interest rates to a 31-year high, accelerating monetary policy normalization under mounting pressure from Washington but failing to arrest an ongoing slide in the yen. The BoJ’s policy board on Friday voted for a 0.25 percentage point increase by a 7-2 margin, taking its target rate to about 1.25 percent. FT
  • Turkey turned to two major banks to oversee the liquidation of 131 investment funds holding more than $18 billion. The move follows a week of turmoil in Turkey’s fund industry after funds at Tera and Pusula said they were unable to meet some investor redemption requests. BBG
  • Reserve Bank of Australia Gov. Michele Bullock warned Friday that the central bank’s concerns regarding stubborn inflation are materializing. Inflation remains “too high” and recent developments suggest that “some upside risks to inflation appear to be materializing,” Bullock said in a testimony before parliament. WSJ
  • Strategists are the most bullish on European stocks for September since 2018, a Bloomberg survey showed, as strong earnings help cushion the impact of energy prices and rising bond yields. BBG
  • OpenAI CEO Altman, NVIDIA (NVDA) CEO Huang and Qualcomm (QCOM) CEO Amon plan to attend the Trump-Xi dinner next week, with AI expected to be a key focus in the summit on September 24th: Politico 
  • The US administration is set to announce that all states will see MFN pricing for certain drugs in Medicaid programmes: Semafor
  • US Department of Agriculture confirmed a case of New World screwworm in a horse in Grant County, New Mexico, marking the state's second case since the parasite entered from Mexico in June.

A more detailed look at global markets courtesy of newsquawk

APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where markets reversed the post-FOMC moves amid a Fed credibility boost and lower oil prices. ASX 200 lagged with the index range-bound trade as gains in tech and miners were counterbalanced by weakness in defensives, telecoms, energy and financials, while there were comments from RBA Governor Bullock that lowering inflation is essential and that the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Nikkei 225 rallied following the BoJ announcement to hike rates by 25bps, as widely expected, with the decision made by a 7-2 vote as Takaichi-appointed board members Asada and Sato dissented. The language from the central bank reaffirmed a hiking bias but didn't signal any major urgency, noting it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target, while the latest inflation data from Japan printed softer-than-expected on all key metrics of the report. KOSPI advanced with tech stocks buoyed following the outperformance in the Nasdaq stateside, while South Korean President Lee ruled out sending troops to the Strait of Hormuz. Hang Seng and Shanghai Comp conformed to the broad positive mood, with reports noting that the US is expected to delay announcing excess manufacturing capacity tariffs till after the Trump-Xi summit, while MOFCOM said Chinese and US trade teams remain in close contact over negotiations on mutual tariff reductions covering USD 30bln. In addition, the PBoC conducted 7-day and 14-day reverse repo operations ahead of the National Day holidays in early October.

Top Asian News

  • Japanese Finance Minister Katayama said they will work to maintain an orderly FX market and will not hesitate to conduct further coordinated forex intervention. She added that they maintain close communication with financial authorities of other nations on FX and that it is important to maintain order regarding exchange rates and interest rates.
  • Japan Economy Minister Kiuchi expects the BoJ to conduct appropriate monetary policy to sustainably and stably achieve its price target while working closely with the government, adding that details of monetary policy are for the BoJ to decide.

European bourses have started the final trading session of the week on the backfoot, despite the constructive risk tone in Asia-Pac equities and the downside seen in energy benchmarks. Optimism in Europe has risen and according to a Bloomberg poll, the STOXX 600 will finish 2026 at 670, implying gains of 5% from Wednesday's close. HSBC analysts highlight the improving macroeconomic data as a driver for the upbeat tone in Europe, while welcoming any downside in energy prices. Sectors point to a negative bias. Telecoms is the sector laggard, followed by Insurance and Retail. On the other hand, Tech is the sector outperformer, with Health Care and Industrials rounding out the sector gainers.

Top European News

  • ECB Consumer Expectations Survey (Aug): 1-year 3.0% (prev. 2.9%), 3-year 2.9% (prev. 2.7%), 5-year 2.5% (prev. 2.4%).
  • UK Retail Sales (Aug MM) 0.5% vs. Exp. -0.2% (Prev. -0.5%).
  • UK Retail Sales (Aug YY) 2.4% vs. Exp. 1.9% (Prev. 1.2%).
  • UK Retail Sales ex Fuel (Aug MM) 0.6% vs. Exp. -0.2% (Prev. -0.9%).
  • UK Retail Sales ex Fuel (Aug YY) 2.7% vs. Exp. 1.9% (Prev. 1.8%).
  • German PPI (Aug MM) 1.1% vs. Exp. 0.4% (Prev. 1.1%).
  • German PPI (Aug YY) 4.6% vs. Exp. 4.1% (Prev. 3.0%).

FX

  • Snapshot: G10s are mixed against the USD; the Aussie slightly outperforms, whilst the JPY is the clear laggard following the BoJ’s policy announcement.
  • DXY is mildly firmer this morning and currently holds within a fairly narrow 100.19-38 range. The index still remains towards post-FOMC highs, benefiting from higher energy prices and as markets pull forward their calls for further hikes this year.
  • The JPY is the clear underperformer this morning, after the BoJ decided to lift rates by 25bps (as expected), with the decision made by a 7-2 vote split. The two dissenters were PM Takaichi “reflationist” members; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The announcement itself spurred immediate pressure in the JPY, given the two surprise dissenters and after the BoJ avoided any guidance surrounding a faster pace of rate hikes. Governor Ueda’s presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. USD/JPY is stronger by c. 1.3% on the session so far, and currently holding at the upper end of a 155.87-158.06 range. No doubt, if the theme of widening differentials between the Fed and BoJ returns, USD/JPY will likely head back towards the 158-160 range.
  • EUR is mildly firmer this morning, amidst a slew of ECB speak, where a number of members are currently in Ireland for an informal meeting of EU ministers. ECB’s Kaasik and Kazaks struck a hawkish tone, with the latter suggesting that a September hike is unlikely to be the last, “unless we find ourselves in a very different scenario than the baseline”. Elsewhere, President Lagarde reiterated that they are not seeing second-round effects. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East.

Fixed Income

  • Global fixed benchmarks are lower this morning. USTs (-3 ticks) are trading on either side of the unchanged mark, whilst Bunds (-30 ticks) and Gilts (-41 ticks) underperform. Pressure today for the latter two is likely an accumulation of factors: 1) BoJ rate hike, 2) elevated energy prices, 3) paring of recent BoE-related strength, 4) hawkish central bank speak from the ECB.
  • JGBs are net firmer today, following the BoJ’s decision to hike rates by 25bps to 1.25%. However, the decision was subject to dovish dissent, which saw PM Takaichi's “reflationist” appointees vote to hold rates; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. The JGB curve is steepening this morning (in contrast to global peers which are flattening), with underperformance in the short end given the dovish tone from the meeting/Ueda.
  • USTs are flat, trading on either side of the unchanged mark. Some strength was seen in early morning trade alongside the pressure in energy prices, but this ultimately reversed. Ultimately, USTs are subdued this morning, following global peers with worldwide central banks shifting hawkish – the BoJ the latest to do so. Markets will get clarity out of the Fed later today, with Schmid and Bowman on the docket.
  • It is worth highlighting that yields are bear-flattening this morning; this indicates that elevated energy prices and hawkish repricing are the main themes in traders’ minds. The US 2s10s currently holds around 24bps vs 34bps earlier in the week.
  • Bunds have had a number of hawkish ECB speeches today, namely Kaasik and Kazaks. This may, in part, be weighing on the benchmark this morning. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East. Bunds will eye the Mecklenburg-Vorpommern state election, particularly in the context of the AfD’s strong showing in Saxony-Anhalt a few weeks ago.
  • Australia sells AUD 1.0bln 1.00% November 2031 bonds: b/c 4.47x, average yield 4.9936%.

Commodites

  • Crude benchmarks continue to pull back from its peak seen earlier in the week, with escalatory strikes in the Gulf seemingly slowing down. There were a couple of UKMTO reports, which failed to move markets as traders now focus on next steps over any potential end to the war. Overnight, US President Trump told Axios he is at a "critical juncture" regarding the war in Iran, weighing whether to launch massive new attacks or pursue a different path to end the conflict. Further, this morning, a source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar. WTI Oct'26 rotates in a USD 99.39-101.57/bbl range while Brent Nov'26 trades either side of the USD 103/bbl mark (USD 101.92-104.27/bbl range).
  • Precious metals continue to climb post-Fed, with spot gold currently trading at the upper end of its USD 4,334-4,400/oz range. The narrative behind the recent gold upside seems to come from lower yields and energy prices, tempering worries of inflation.
  • 3M LME Copper regains the USD 14.5k/t handle and rose to levels just shy of USD 14.6k/t, as the red metal prepares for its 4th consecutive day of gains. Supporting copper gains are signs that Chinese demand is re-entering the market. The Yangshan premium, a gauge of copper demand, rose to its highest level since November 2022 while domestic copper production fell slightly in August.
  • Saudi Arabia has sold about 60mln barrels of crude from its Ras Tanura port inside the Strait of Hormuz for loading in September and October, Reuters reported citing sources.
  • Venezuela nears an agreement to move USD 4bln gold reserve to New York which would allow the interim government to access funding, according to FT.

Central Banks

  • BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote as board members Asada and Sato dissented and voted to hold. BoJ said it will continue to raise rates in response to economic and price developments as well as financial conditions. BoJ said inflation expectations are heightening moderately, with underlying inflation approaching 2%, and it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target. Furthermore, it said the accommodative financial environment will be sustained after the policy rate change, thereby supporting economic activity, and it is necessary to pay attention to the impact of the Middle East situation on financial and FX markets, the economy and prices. In terms of the dissenters, who are both known reflationists appointed by PM Takaichi, BoJ's Asada considered that with the rate of increase in the core CPI below 2% recently, it could not necessarily be said that the economic situation was strong and it was desirable for the Bank to maintain the guideline for money market operations, while Sato considered current economic and price developments did not appear to have substantially accelerated compared with before, and in this context, it was not appropriate for the Bank to raise the policy interest rate at this time.
  • Overall, Ueda’s press conference did not signal any urgency to accelerate the pace of tightening. He mentioned that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. One hawkish aspect of the presser was that Ueda suggested that the BoJ believes the phase of policy has changed. However, he later clarified that this meant that the objective is now to stabilise underlying inflation at around 2%, essentially removing the initial hawkish remark. Ueda also did not mention anything related to increasing the pace of future rate hikes, which further added to the dovish tone.
  • RBA's Governor Bullock said various indicators continue to suggest labour market conditions remain close to, but a little tighter than full employment, while she added that monetary policy is well placed to respond to developments. Bullock said lowering inflation is essential, and the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Furthermore, she stated they are in a world of higher-for-longer oil prices and that businesses are now more inclined to pass on cost increases.
  • ECB President Lagarde, speaking on RTE Radio, said growth is a bit more promising than we thought and that they are not seeing second round effects yet. She also reiterated a meeting-by-meeting approach.
  • ECB's Vujcic said market bets on further ECB rate hikes are being largely driven by higher energy prices and will look at a wider set of economic indicators when deciding the next policy move. Vujcic said higher inflation through Autumn will dampen GDP. On the current rate hike pace, he said it is worth keeping for the time being.
  • ECB's Kazaks, speaking to Bloomberg, said the ECB must do everything to avoid second round effects and that all meetings are live meetings. On the neutral rate, he said they are near the upper end of neutral and that quite likely restrictive policy will be needed. Elsewhere, Kazaks told Econostream that the September hike will unlikely to be the last "unless we find ourselves in a very different scenario than the baseline". Kazaks highlighted that an October hike would still be consistent with the September projections. On considering the size of the moves, he said that if the move in inflation is very strong or core inflation is moving up, the ECB can take bigger steps.
  • ECB's Kaasik said more tightening needed if inflation risks materialise but that the exact level of neutral rate is not a big concern now.

Geopolitics: Iran

  • Source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar.
  • US State Department said the US will continue to bar Iranian UN mission officials, visiting officials and their dependents from purchasing wholesale club memberships or luxury goods, and urged New York area retailers to avoid complicity in violations.
  • US is reportedly expected to send MQ-9 Reaper drones to South America, CNN reported citing sources. The report added that the plan is part of counternarcotics and counterterror operations and that there are still discussions on whether to send some drones to the Middle East.
  • UKMTO received a report of an incident in the Strait of Hormuz. The CSO of a vessel has reported a tanker being hit by an unknown projectile causing a fire, which was extinguished.
  • IRGC said Togolese-flagged tanker 'Trend' was hit and stopped after a fire, while it stated the tanker violated Hormuz rules and that the US instigated the transit.
  • Houthis are reportedly expanding its minefield in Bab al-Mandab and Dhubab, Al Araby reported.
  • South Korea President Lee said several countries are deploying military assets near the Strait of Hormuz, and added that they won't deploy troops to join conflict but limited actions to safeguard South Korean economic interests and citizens are possible.

Geopolitics: Ukraine/Other

  • Turkish President Erdogan and US President Trump may discuss initiatives for negotiations on Ukraine in New York, RIA reported citing sources.
  • US President Trump is making plans for the first-ever meeting with Venezuela's interim President Rodriguez as early as next week, although a meeting is not finalised, according to Axios.
  • North Korea leader Kim's sister said there is no change to the course of strengthening nuclear war deterrence and the US-led multinational drills are the main source of worsening tensions on the peninsula.

US Event Calendar

  • 9:15 am: August Industrial Production MoM, est 0.3%, prior 0.2%
  • 9:15 am: August Manufacturing Production MoM, est 0.3%, prior 0.2%
  • 9:15 am: August Capacity Utilization, est 76.4%, prior 76.3%
  • 10 am: August Leading Index, est 0.1%, prior 0.2%

DB's Jim Reid concludes the overnight wrap

Welcome to the end of the week as I hit day 8 of manflu, a variant passed on by my 11-year-old daughter who was ill with it for precisely 18 hours. In other injury news, I've slightly sprained my wrist awkwardly cutting up a mango! I'll add that to the list of ailments my body is currently processing.  

Distracting me as I try to type through the slight pain, the main story overnight is that the Bank of Japan have delivered another 25bp rate hike, taking their policy rate up to its highest since 1995, at 1.25%. This is the second of the year and the 6th since they started hiking in March 2024. The move follows on from the Fed’s hike on Wednesday, and the ECB’s hike last week, which leaves us in little doubt we’re in a globally synchronised cycle of rate hikes again, with more likely ahead from all three.

Having said that, it was a more dovish hike than expected, with Ayano Sato and Toichiro Asada calling for a hold on the grounds that Japan’s economic outlook was uncertain. Both dissenters were appointed by Prime Minister Sanae Takaichi to the board. So there is some suggestion that this may infer less political support for the rate hike than has perhaps been indicated by US Treasury Secretary Bessent who has been quite firm on the fact that the US and Japan are aligned.

So although the central bank reiterated that it will continue raising rates if economic and inflation conditions evolve as projected, the market has reacted to the two high profile dissenters. The Yen is -0.72% lower at 157.10, having been at around 153.40 at the start of the week and the JGB curve has steepened, with 2yrs -2.2bps and 30yrs +3.2bps.  We'll see what the BOJ press conference brings at 7:30am London time.

The BOJ decision came just hours after the release of August inflation data, which showed price pressures remaining broadly stable and close to the central bank’s target. Core CPI, which excludes volatile fresh food prices, rose 1.7% year-over-year in August, slightly below market expectations of 1.8% and down marginally from the previous reading. Meanwhile, core-core CPI, a key measure of underlying inflation closely monitored by the BOJ, remained unchanged at 1.9%. Headline CPI also increased 1.9% year-over-year, matching the pace recorded in the previous month and reinforcing the view that inflation remains relatively stable.

The Nikkei (+1.67%) has moved higher on the back of the weaker Yen but Asia is stronger anyway following on from the global rally yesterday. The KOSPI (+2.59%) is leading regional gains, with semiconductor stocks extending yesterday’s rally. Meanwhile, mainland Chinese equities are posting solid advances, with the CSI 300 (+1.05%) and Shanghai Composite (+1.04%) both sharply higher, while the Hang Seng (+0.67%) is recording more modest gains. Elsewhere, the S&P/ASX 200 (-0.02%) is little changed and S&P 500 and Nasdaq futures are both +0.14% higher.

The yuan has strengthened to its highest level in more than four years as the PBOC continue to guide the currency higher ahead of next week’s planned meeting between Chinese President Xi Jinping and US President Donald Trump, where trade relations are expected to be a key focus. The offshore yuan is advancing +0.14% to 6.695 per dollar, marking its strongest level since July 2022. The PBOC also set a firmer daily fixing for the eighth consecutive session, the longest such streak since 2023.

Those overnight developments come after a very strong session yesterday, with markets rallying thanks to a clear drop in oil prices and a decent batch of US data. Indeed, the S&P 500 (+1.14%) posted its best day in over a month, whilst the 10yr Treasury yield (-9.2bps) saw its biggest daily decline since June as it ended a run of eight consecutive increases. So even though the first half of September was very weak, living up to the month’s bearish reputation, yesterday brought a clear shift in momentum and more positivity on the near-term outlook.

The reality is that although seasonals matter, the oil price probably matters more at the moment. And yesterday the oil price decline was the biggest catalyst, with Brent crude having now fallen by more than 3.5% in the last couple of sessions, closing yesterday at $104.82/bbl, and now another -1.35% lower in Asia. In part, the move was supported by the previous day’s news that Saudi Arabia was working to restore the damaged East-West pipeline. But oil then took a further slide after a Reuters report yesterday that China had privately asked Iran to help rein in the Houthis. So that added to hopes that the supply disruption might fade, and Brent crude came down -0.95% on the day.

With inflationary pressures coming down, that helped sovereign bonds to rally on both sides of the Atlantic. That was clearest for US Treasuries, as the Fed’s hike on Wednesday added to hopes that inflation would come down over the months ahead. So the 2yr yield (-7.3bps) was down to 4.66%, the 10yr yield (-9.2bps) fell back to 4.93%, and the 30yr yield (-7.7bps) fell to 5.28%. Interestingly, that now leaves the 2s30s yield curve at its flattest level since March 2025, at 62bps. Remember as well that the Fed’s blackout period around the meeting ends today, so we’ll start to hear from officials again and learn how they’re thinking about future rate hikes in the months ahead.

Whilst Treasuries were rallying, it was also a strong day for equities, which recovered from the previous day’s declines after the Fed. That was partly thanks to lower energy prices, but we also had a strong batch of US labour market data which cemented the view that the economy remained in good shape. For instance, the weekly initial jobless claims fell to 196k in the week ending September 12 (vs. 207k expected). Moreover, the continuing claims for the previous week fell to the lowest since January 2024, at just 1.730m (vs. 1.779m expected). So that kept up the optimism around US growth, and the S&P 500 (+1.14%) bounced back after a run of 3 consecutive declines. Chip stocks led the gains, with the Philly semiconductor index (+3.14%) posting one of the biggest outperformances yesterday, but there was strength across the tech space, with the NASDAQ up +1.69%.

Earlier in Europe, the main story came from the Bank of England, who kept rates on hold at 3.75%. The decision was in line with consensus, and the vote split of 6-3 to hold rather than hike was also expected, so there wasn’t a direct market reaction to that. However, there was a big rally in long-dated gilts after the BoE announced an adjustment in its QT plan, including an end to sales of longer maturity gilts. So they said that the gilts with redemption dates from 2049-2071 would be held to maturity by the Bank, with the purpose of indirectly backing current and future banknote issuance. Moreover, they said that QT sales would be paused until April 2027 as they worked through the operational details for the rest of the plan. So that meant the 30yr yield (-12.1bps) saw its biggest daily decline since May, coming down to 5.74%, whilst the 50yr yield (-17.9bps) saw its biggest decline since February 2023, coming down to 5.20%. Meanwhile, 10yr gilt yields (-7.4bps to 5.22%) extended their two-day move to -16.6bps, the sharpest such decline since last April.

On the rates decision, the BoE statement was clear that the Bank might be edging towards a hike, saying that the risk of second-round effects on inflation “is greater the longer higher energy prices persist or are more volatile.” Moreover, they said that “the risks to the inflation outlook are tilted to the upside, and more so than at the time of the July Monetary Policy Report”. Nevertheless, the fact they held, and the vote split remained at 6-3, suggested there wasn’t immediate momentum for a hike, and market pricing slightly dialled back the chance of a hike by the next meeting in November. So on Wednesday, investors were pricing in a 93% chance of a hike by the time of the November meeting, but that was down to 83% by the close yesterday. In turn, that helped yields at shorter maturities to come down as well, with the 2yr yield (-2.2bps) falling to 4.73%.

Elsewhere in Europe, the picture was also one of solid gains, as the respite on energy prices lifted assets across the continent. So that meant equities rebounded, with the STOXX 600 (+0.86%) posting its best daily performance in over two months. And for bonds, we saw 10yr yields on bunds (-2.9bps), OATs (-2.3bps) and BTPs (-2.4bps) all fall back as well.

Looking at the day ahead, data releases include US industrial production and capacity utilization for August, along with UK retail sales and German PPI for August. We’ll also hear from ECB President Lagarde, the Fed’s Bowman and Schmid, and we’ll get the ECB’s latest Consumer Expectations Survey.

Tyler Durden Fri, 09/18/2026 - 08:38

10 Friday AM Reads

The Big Picture -

My back in NY morning reads:

​• Why Are Valuations Falling in a Bull Market?: Ben Carlson runs the year’s tape — mortgages from 6% to 7%, the 10-year from 4% to 5%, inflation from 2.4% to 3.4%, oil from under $60 to over $100. (A Wealth of Common Sense)

​​• Muni Bonds Are Yielding 5%. They Rival Stocks Now.: With yields comparable to long-term Treasuries and strong credit quality across the $4 trillion tax-exempt market, a tax-advantaged 5% could stack up well versus equities in the coming years. (Barron’s) see also T-Bills and Chill? Try Munis & Chill Instead. Land an A-round and a real salary? Great! Start putting some of your newfound cash flow aside as a good savings habit in an all-equity 401(k). It is a hedge against your start-up failing to beat the odds and eventually finding an exit. (The Big Picture)

• The Next Great AI Trade Is Everything That Isn’t AI: Market Sentiment on the hard half of investing — finding the trend early is easy compared to knowing when the thesis has become consensus. (Market Sentiment)

​• The iShares Graveyard: David Snowball’s archaeological dig through BlackRock’s full list of liquidated ETFs, prompted by eight more closures. “You think I went down a rabbit hole. I prefer to consider it an archaeological dig.” (Mutual Fund Observer)

Trump Has Made More Trades Than All of Congress Combined: Bloomberg finds the president has traded more securities than every member of Congress combined since returning to office — while backing a lawmaker stock-trading ban that doesn’t apply to him.  Most Americans support a ban on lawmaker stock trading. Trump is in favor of a prohibition that doesn’t apply to him. (Bloomberg free)

​• The World Economy Is Becoming Wary of the U.S.: Global investors balking at Treasuries, louder talk of the dollar’s dwindling power, foreign governments hauling their gold out of American vaults. America’s position of global economic stability is starting to look shakier as the Trump administration piles on debt and doubles down on sanctions. (New York Timessee also The American Age Is Over: The Atlantic on the post-WWII order — bound to end eventually, shocking in how suddenly the moment arrived. A period of global dominance has ended in plain sight. (The Atlantic)

​• We Bought a $500 Counterfeit Luxury Watch. Nobody Could Spot the Difference: Alistair Charlton inside the Reddit QC-post subculture of superfake Rolexes — so good even Rolex didn’t spot it. The replica watch industry is in its “super clone” era. Following tips from murky internet forums, we bought three budget fakes that were good enough to pass as real—but ultimately disposable. (Wired)

‘Flock City PD:’ The Fake Flock-Owned ‘Police Department’ That Searched Real Cameras for Real People: Jason Koebler Jason Koebler · Sep 17, 2026 at 2:07 PM Flock ran searches for “coexist bumper sticker,” “white truck with a trump sticker,” and “Star of David,” apparently to demonstrate what cops shouldn’t search for. (404)

​• Can We Be Certain That Time Really Exists?: Ethan Siegel on what counts as real — the measurable, observable, and quantifiable — and the questions that hand back pathological nonsense, like dividing by zero. We experience time as real. But what if it’s only an illusion: an illusion that’s inherently relative? Does time fundamentally even exist? (Starts With A Bang)

“Where Am I Going? And What’s Next?”: Nicole Kidman Is Keeping Her Heart Open: The long-awaited sequel to a fan-favourite movie; a newly single life to ponder; the Euro Summer to end them all: has Nicole Kidman ever been more spellbinding? Giles Hattersley meets the legend in London to talk power moves, mega fashion and the art of a fresh start. Photographs by Venetia Scott. Styling by Poppy Kain. (British Vogue)

Video of the day: The Greatest Scam of Our Childhood 8 CDs for a Penny!

Be sure to check out our Masters in Business this weekend with Glen Kacher, founder and CIO of Light Street Capital. He launched the firm in Palo Alto after stints working with Julian Roberts at Tiger and Roger McNamee at Integral. His Mercury funds returned 45.7% in 2023, 59.4% in 2024, and 37.3% in 2025 — the best three-year stretch of any of the “Tiger Cubs.” He describes the firm as “the Silicon Valley Home Team, 100% focused on tech opportunities.”

 

Home price growth has already begun to cool again

Source: Calculated Risk

 

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The post 10 Friday AM Reads appeared first on The Big Picture.

The Great Diesel Crisis - How Policy Choices Made The West Vulnerable

Zero Hedge -

The Great Diesel Crisis - How Policy Choices Made The West Vulnerable

Authored by Daniel Lacalle,

How taxes, regulation, refinery closures, sanctions and declining domestic production turned a geopolitical shock into a diesel-price crisis

Do not blame diesel prices on the Iran war or the disruption of the Strait of Hormuz. The geopolitical risk premium attached to oil prices is relevant, but the market was already weakened by policy choices.

Europe has taxed motor fuels heavily, imposed escalating regulatory and carbon costs across the supply chain, closed refining capacity, sanctioned major sources of refined-product supply, and discouraged investment in domestic oil and gas production. Today's refined product system is smaller, less flexible and more import-dependent, and, as such, every geopolitical disruption produces a larger price shock.

Diesel prices rise faster than crude because diesel suffers its own supply constraints, and these are politically imposed, not due to a war.

In the United States, retail diesel reached an all-time high of $5.85 per gallon on 4 September 2026. At the same time, the U.S. Gulf Coast diesel crack spread, the benchmark measure of diesel relative to crude, surged to multi-year highs. Therefore, the problem was more the availability of middle distillates rather than crude alone. U.S. refineries were operating at about 98% utilisation, leaving little spare capacity to offset another outage.

Globally, the impact is significant. Current supply losses include refinery disruption in the Middle East linked to the Iran war and reduced Russian diesel availability following Ukrainian attacks on refining infrastructure and export restrictions. All these elements add to the geopolitical risk premium, but they are magnified by the absence of spare refining capacity and the limits to regional supply.

Middle Eastern refinery disruptions have risen to almost 3.0 million barrels per day. Saudi Arabia's Jizan refinery, with a capacity of 400,000 barrels per day, was one of the facilities where exports slumped. Additionally, Russian exports have plummeted. Russia was one of the world's largest diesel exporters, but its seaborne diesel exports in June 2026 fell to 426,000 barrels per day from 827,000 barrels per day a year earlier. Refinery damage, domestic-supply priorities and export restrictions all affected the stability of an already fragile market.

However, these disruptions explain the timing of the latest surge, but they do not explain why importing economies entered the shock with so little capacity to absorb it. That is where interventionist policies have created the biggest damage.

European motorists do not pay diesel prices driven by crude, refining and logistics costs. The biggest driver is a tax-and-regulation-heavy final price. Direct taxes alone represented an average of 52.1% of the final price of Euro-super 95 petrol in the European Union, with several countries above 55%. Consumers pay more in fuel taxation than for the crude oil, refining and logistical components combined.

Diesel taxation varies by country, but the same structural tax burden remains. When we add excise duties and VAT, governments have created a large, rigid fiscal floor to fuel prices. When crude rises, the tax-inclusive base increases the final bill. However, when crude falls, large fixed tax components mean that the price paid by households and businesses does not fall proportionately.

The real policy burden is wider than the excise duty displayed at the service station. Costs are accumulated throughout the chain. From royalties and taxes on production; environmental compliance; energy costs and carbon charges at refineries; corporate and local taxes; regulated fees for storage and infrastructure; labour levies; financing costs created by regulatory uncertainty; and compliance costs for distribution and retail, the energy chain is a massive cash machine for governments. Many of these costs are not always shown as "fuel tax," but they are passed through to the final price. Furthermore, the effect is cumulative.

Europe has not merely taxed fuels at the point of sale, it has piled fiscal and quasi-fiscal costs from exploration and importation through refining, storage, transport and retail distribution. That makes the retail price structurally less responsive to lower crude prices and more vulnerable to supply shocks.

The second structural problem is the loss of refining capacity.

The United States did not lose refining flexibility because of one executive order or one EPA rule. It was a cumulative policy tsunami. Obama's air-quality regulations and renewable-fuel mandates added compliance and capital costs, while Biden retained and expanded renewable-fuel obligations, restricted small-refinery relief and reinforced a policy environment in which long-lived petroleum investments faced greater regulatory risk and higher costs. The clearest consequence has appeared in California, where stringent state regulation, expensive compliance and mandated energy-transition policies have coincided with the closure of major refineries. The result is not lower dependence on fuels in the short term, but less domestic capacity to produce them, and greater vulnerability when global diesel supply is disrupted. Fortunately, the United States is not suffering an enormous diesel shortage problem as Europe's, because total U.S. crude-oil refining capacity did not fall between 2008 and 2026, standing at 18.16 million barrels per day.

In Europe, on comparable tax-inclusive retail prices, the EU average is about $8.90 per U.S. gallon, versus $5.97 per gallon in the United States, or 49% higher. Several European markets were close to $10.70-$10.90 per gallon as of September 11th, 2026.

Between 2020 and 2024, European refining capacity fell from about 15.3 million barrels per day to 14.7 million barrels per day, a reduction of nearly 600,000 barrels per day. Europe has lost more than 20% of its refining capacity since 2009. Refineries have been shut, converted to import terminals or biorefineries, reducing conventional crude-processing capacity just when global diesel supply has become more problematic.

A refinery may appear unnecessary during periods of large imports and open trade routes. However, it becomes strategic when imported diesel is disrupted. Closing a refinery does not eliminate domestic demand for diesel. It converts domestic production capacity into an additional need for imported product and foreign refining capacity.

The EU's decision to restrict Russian petroleum products did not eliminate Europe's demand for transport, agricultural and industrial fuel. Now diesel must be delivered from more distant suppliers, with longer routes, high freight costs and more exposure to congestion in the Red Sea or the Strait of Hormuz. Sanctions may have created an indirect boomerang effect, making Europe more dependent. In January 2026, the EU also banned imports of petroleum products refined from Russian crude in third countries, closing the so-called refining loophole. That restricted available supply even more.

Sanctions are justified as a geopolitical tool. But they became very expensive, especially when the EU's policy framework disincentivizes refining investment at home. Restricting a key supplier while shrinking local refining capacity is a dangerous combination, and governments cannot expect consumers and businesses to be shielded from a global refined-products shock. Thus, the EU has created a suicidal combination instead of a security of supply strategy.

Another important aspect is the limits to North Sea production. The North Sea is a mature basin, and its production decline is a reality. UK North Sea oil and gas production fell by 72% between 1999 and 2025. However, natural decline does not make policy irrelevant. High windfall taxation, uncertainty over fiscal terms, restrictions on new licensing and the broader political message that hydrocarbon investment is not desirable reduce incentives to maintain infrastructure, pursue incremental projects, explore and develop viable resources. Such policies may not change next month's global diesel price by themselves, but they have an important impact on supply, investment and infrastructure available.

UK government policy confirmed a ban on new licences for new North Sea oil and gas fields, while allowing some exceptions linked to existing fields and infrastructure. The strategic impact is still clear. A country facing declining production and shrinking refining capacity becomes more dependent on imported oil and refined products at the time when global trade routes are closing.

Domestic crude is not the same as domestic diesel. However, domestic output is essential, as it reduces import needs, supports regional infrastructure and refining optionality, improves the balance of supply during disruption and limits exposure to external suppliers. Thus, abandoning this capacity without a truly scalable substitute is a policy decision with massive security-of-supply consequences.

Europe's policy framework adds more restrictions. Refining is capital-intensive, energy-intensive and emissions-intensive. Carbon taxes, environmental mandates, compliance obligations, high electricity and gas costs, and regulatory risk make investment unviable and closures more likely.

Can it get worse? The next step of the EU framework could add another direct challenge. The ETS2 emissions-trading system is scheduled to apply to fuels used in buildings and road transport from 2027, subject to its implementation rules and safeguards. It is designed to place a carbon price on suppliers of those fuels. This makes a market already burdened by high excise duties, VAT and supply constraints will face another structural cost layer.

The Carbon Border Adjustment Mechanism does not directly tax diesel at the forecourt, but it will raise costs for carbon-intensive inputs such as steel, cement, aluminium, fertilisers, hydrogen and imported electricity. Those costs are essential for refinery maintenance, tanks, pipelines, and transport infrastructure. All these political decisions raise the cost of keeping Europe's energy system functioning.

Diesel is not a discretionary consumer good. It is the engine of the real economy. Without affordable diesel, freight transport, farming equipment, construction machinery, industrial logistics, emergency services, parts of mining and maritime activity, and parts of distribution are going to add more inflationary pressures.

The diesel shock does not end at the service station. Higher diesel costs will raise the cost of moving food from farms to warehouses and supermarkets; carrying inputs to factories; delivering medicines and manufactured goods; and operating machinery at construction sites. Businesses already suffering weak margins will pass those costs into final prices. Policy-created diesel inflation creates an economically disastrous second-round effect. This will hit transport, food, goods and services even after the war ends.

A logical energy policy should be focused on affordability, availability, and security of supply. Dismantling the physical capacity that keeps the economy supplied during an energy transition just demolishes the economy and achieves the opposite of what politicians want. The West becomes more dependent and poorer.

Europe cannot tax, regulate and limit the energy system across every stage of the value chain, close the industrial assets needed to process fuels, limit investment in production and then act surprised when diesel becomes scarce and expensive. Developed economies should preserve and modernize strategic refining capacity rather than treating it as a disposable legacy asset, eliminate the cumulative tax, carbon and regulatory burdens that destroy energy competitiveness, and support domestic energy production.

Tyler Durden Fri, 09/18/2026 - 06:30

GM Delivers Patriot Missile Parts To Lockheed As Rearmament Supercycle Nears

Zero Hedge -

GM Delivers Patriot Missile Parts To Lockheed As Rearmament Supercycle Nears

A congressional report recently found that the US has "probably used" one-half to two-thirds of its missile-defense interceptors during its Iran conflict so far, intensifying new concerns about readiness for another major conflict.

The US industrial response is already taking shape to ramp up missile and bomb production to replenish depleted stockpiles as the West enters the early innings of a massive rearmament supercycle.

A Wall Street Journal report said Thursday that General Motors has begun supplying components for Lockheed Martin's Patriot interceptors. This suggests that unused civilian production lines can be retooled for wartime, as they were during World War II, and shows why preserving the auto industrial base is critical in times like these.

Lockheed told the outlet that GM delivered its first batch of missile-housing components for PAC-3 MSE interceptors in August. The automaker produced the parts in three weeks, compared with the months major defense firms would have taken.

At the start of this year, the Department of War directed Lockheed to triple annual Patriot production to over 2,000 missiles by the end of 2030. Meeting that target requires additional output, including, as in this case, tapping automakers like GM.

For GM, retooling production lines for weapons offers another revenue stream during a difficult period for the global auto industry. The CEO told Wall Street analysts earlier this summer that she expected the company's defense unit to generate $700 million in revenue this year with double-digit margins.

Meanwhile, the rearmament supercyclerearmament supercycle is colliding with a critical materials squeeze supercharged by Chinese export supply restrictions and resource nationalism. Missiles, data centers, and broader reindustrialization depend on many of the same constrained metals. Securing conflict-free and reliable supplies will be paramount for the West.

Tyler Durden Fri, 09/18/2026 - 05:45

Putin Explains The Rise Of The AfD As The Consequence Of The EU's Systemic Errors

Zero Hedge -

Putin Explains The Rise Of The AfD As The Consequence Of The EU's Systemic Errors

Authored by Andrew Korybko via Substack,

Putin was asked about the AfD's recent landslide victory in the German state of Saxony-Anhalt on the sidelines of this year's BRICS Summit in Delhi. While politely declining to address the topic directly, he nevertheless said that "all that is now happening across Europe as a whole is the consequence of systemic errors committed by the so-called West, or, to be more precise, by the globalist circles of the West, in the political, security and economic spheres." The rest of his answer elaborated on this.

He described the political errors as a combination of anti-Russian fearmongering and the current German authorities dishonestly invoking the legacy of Helmut Kohl to justify their policies. Putin reminded everyone that Kohl was one of his close friends with whom he often spoke about bilateral ties. According to him, Kohl envisaged the exact opposite of what today's Germany is doing, namely allying with Russia due to their complementarities in order to preserve Europe's civilization and sovereignty.

As for the security errors, these concern the continued eastward expansion of NATO, prior backing for terrorism and separatism in the Caucasus, and current support for Neo-Nazis in Ukraine. Putin also warned that the European elites' plan to deploy troops to Ukraine "would mean war with Russia. And I presume that European citizens understand what is unfolding." The subtext is that this aggressive, reckless, and possibly apocalyptic policy isn't supported by average European voters.

Finally, the economic errors concern the EU's sanctions on Russian energy, which led to the bloc replacing inexpensive long-term gas contracts with Russia with expensive market-priced imports from elsewhere. Prices are now nearly ten times higher than before and "may well rise even further." Putin also criticized the EU's gas storage policies for being "unconcerned with the technical condition of these storage facilities and the physical volumes involved." All of this adversely affects the EU's economy.

All in all, Putin is arguing that the AfD's rise is an electoral revolt against these policies, all of which center on Russia. This doesn't mean that the party or its supporters are "pro-Russian", let alone "Russian puppets", just that they understand the importance of pragmatic ties with Russia for their country's political interests, security, and economic development. Obsessive anti-Russian fearmongering, risking World War III over Ukraine, and dumping inexpensive Russian energy haven't helped Germany at all.

To the contrary, they respectively serve as a false excuse for why the authorities haven't prioritized adequately addressing the problems posed by mass migration, could once again lead to Germany's total destruction, and are raising costs across the board to the detriment of everyone but the economic elite. Simply put, these policies are incredibly unpopular, and the AfD is the largest political force in Germany that's advocating to change them in line with their sincere understanding of German national interests.

A growing number of Germans agree with them as proven by the party's rising popularity, which is the direct result of their authorities' systemic errors over the 4.5 years since the Ukrainian Conflict entered its large-scale phase, but it can also be said that such errors were already being made even before then. Had former Chancellor Angela Merkel and her successors remained true to Kohl's vision, then the AfD might never have become Germany's most popular party, so its astronomical rise is entirely their fault.

Tyler Durden Fri, 09/18/2026 - 05:00

Village Votes To Separate From UK To Fight Government Planned Migrant Invasion

Zero Hedge -

Village Votes To Separate From UK To Fight Government Planned Migrant Invasion

Is the tide finally turning against the mass immigration agenda in Europe?  Events surrounding the tiny village of Piddington have spread like wildfire concerning UK government plans to relocate and house over 1200 third world migrants.  The golden horde will be dropped in the middle of the county of Oxfordshire at an old military base less than a mile from Piddington.  The total native population of Piddington is only 350 people.

The immigration action would completely overwhelm the community with foreigners, and, as in most cases where large numbers of migrants are transplanted, the risk of crime will skyrocket. In particular, women fear the constant threat of sexual assault if migrant men greatly outnumber the locals.   

Far-left politicians (and fake conservative politicians) in the UK have been pursuing an rapid program of cultural replacement over the past decade.  Leftists have consistently complained about the overt "whiteness" of rural communities and have sought to remedy this "problem" by erecting migrant hotels and other facilities right in the middle of quiet villages across the country. 

Once these migrant camps are finished, there's no getting rid of them.  In most cases migrants roam freely away from their primary housing and often terrorize the surrounding communities.  One need only look at what's happening in the Spanish enclave of Ceuta to see what happens when smaller towns are overwhelmed by third world groups.       

The people of Piddington say no more.  Out of the 312 resident voters, 285 (91%) have voted in favor of separating from the UK and becoming a principality.  Their goal is to block the establishment of any migrant facilities.  The vote, while mostly symbolic, signals a dramatic change in the often passive nature of common citizens. 

Not all the residents in Piddington are happy about the vote and the decision to fight back against the migrant invasion.  Liberals within these communities complain about "rising racism" while ignoring the numerous examples of crime that commonly follow third worlders as they flood into western countries.  UK officials and the media often work to undermine efforts to prevent migrant housing. 

In the past, left-wing NGOs have bused in mobs of activists from outside these villages to intimidate them into submission.  Public opinion, however, seems to be shifting substantially against the multicultural agenda.  England is for the English.  Ireland is for the Irish.  Scotland is for the Scottish.  No foreigner is entitled to access these lands and none of the native people are responsible for taking in the dregs of the third world.  

It is clear, though, that UK officials plan to ignore the wishes of these communities and charge forward with their plans.  The question is, how far are the people of the UK willing to go to stop this from happening?  

Villager Herbert Owen, 76, said after voting this week that the independence referendum “isn’t just about Piddington,” adding: “It means everything our grandparents, our parents fought for. Today is the Battle of Britain.”

Earlier this month, masked demonstrators blocked the port of Dover, in southeast England, and tried to stop a boatload of migrants being taken ashore in Portsmouth on the country’s south coast.

In the UK, as opposed to the US, the vast majority of immigration is "legal" and coordinated by the government.  It is an invasion, but an invasion being aided from within.  The assumption by leftists is that once the migrants are rooted in the UK there is nothing anyone can do.  Efforts of groups like the Restore Party aim to change this by promoting a remigration platform; the position is currently exploding in popularity. 

Tyler Durden Fri, 09/18/2026 - 04:15

Iconic British Children's Character Used To Push Net Zero Propaganda

Zero Hedge -

Iconic British Children's Character Used To Push Net Zero Propaganda

Authored by Steve Watson via Modernity News,

Bob the Builder, the stop-motion tradesman who once built houses, has been hauled out of retirement to install solar panels, home batteries and "low carbon heating" for German-owned energy giant E.ON. The catchphrase is the same. The product is Net Zero.

The much loved kids' character is back on screen for the first time in 15 years in a 90-second stop-motion advert for E.ON Next. He no longer spends the day on a construction yard. He enrols at a "Net Zero Training Academy," swaps his yellow hard hat for an E.ON-branded one, and learns to fit the kit the government says Britain needs for a decarbonised electricity system by 2030.

In the film he explains the gap in his CV. "I downed tools for a while. I got into yoga. Took up bird-watching. Then I packed my bags and went to Australia, where I saw some amazing sights." Holding a newspaper headlined "UK needs more green skills for clean energy future," he adds: "When I arrived back home, I saw this in the news and thought: 'Can we fix it?'"

Then comes the sales pitch. "Now I'm helping with the switch to clean power by using my great new skills so people can take control of their energy and save money too." A fellow trainee asks the inevitable question. "So, Bob, can we fix it?" He replies: "Yes we can."

Toby Young flagged the campaign as Net Zero propaganda dressed up as nostalgia.

Reform UK chairman Lee Anderson told The Telegraph the character had been conscripted. "Bob the Builder has been turned into a woke commissar of climate, flogging the same net zero propaganda that's sent energy bills through the roof in the homes he used to build. This country doesn't need another army of Net Zero specialists. It needs builders, plumbers and sparkies who can actually keep the lights on. Send Bob back to his proper trade."

Deputy leader Richard Tice piled on: "Go woke, go broke: Bob the Builder has been missing for years. Did his firm go bust, or has he abandoned Britain by going to China and buying their solar panels?"

Shadow transport minister Greg Smith asked: "Whatever happened to innocent children's TV, telling fun stories rather than cramming in eco-zealotry and political messaging? Hey, Bob, leave our kids alone."

E.ON insists the campaign is about skills. Helen Bradbury, the firm's chief people officer, said: "Bob the Builder has always inspired people to solve problems and build things that matter. Today, those same qualities are needed to help deliver the UK's transition to clean power."

A company spokesman added that "simply combining a home battery and time-of-use tariff can save the average household £255 a year."

Britain already has some of the highest domestic electricity prices in Europe. Net Zero taxes, subsidies and system costs have been estimated at around £22 billion a year. The 2030 clean-power target is the political backdrop. The advert is the soft sell.

This is the same method, applied to a different franchise. Netflix is developing a live-action reboot of Captain Planet, the 1990s cartoon created by Ted Turner that preached environmental panic, multicultural planeteers and population control to children. Leonardo DiCaprio is among the executive producers.

The original treated humanity as the problem requiring global management. The Club of Rome put the strategy in writing in The First Global Revolution: "In searching for a common enemy against whom we can unite, we came up with the idea that pollution, the threat of global warming, water shortages, famine and the like, would fit the bill... The real enemy then is humanity itself."

Adults are not spared from the propaganda. BBC naturalist Chris Packham has lobbied for a cameo on soap EastEnders so a flood can hit the fictional Albert Square and he can march through with a placard. He told Radio Times the role "would give me the capacity to communicate to an audience which I don't talk to in my sphere of work."

He wants the message "integrated into broader output, so properly into news obviously, properly into weather... but also into dramas." He said it was "really scary" that some people still "deny" the "gravity of that crisis."

The emotional payload of this alarmism has been measured. The Times reported the largest study then available of 16- to 25-year-olds: four in ten were so anxious about climate change they hesitated about having children, and 45 percent said it was affecting daily life.

Naomi Oreskes circulated the underlying Lancet Planetary Health survey under the heading that children and young people are "sad, worried, anxious and angry."

RTÉ put teenagers in front of a camera to discuss "climate anxiety" for a programme titled The End of the World With Beanz.

The Financial Times has urged parents to cultivate anxiety in their children in the name of "moral clarity," while skipping scientists who reject the catastrophe script.

Is it any wonder young people are acting like this?

The policy Bob the Builder is now hired to normalise still rests on a tight causal story: CO2 up, temperature up, therefore Net Zero. Research recently published in Nature found atmospheric CO2 and methane broadly stable over three million years of Antarctic ice-core data, while temperatures swung through long cooling and interglacial spikes without a matching greenhouse-gas plot.

One reading of the wider geological record is that no obvious continuous link between CO2 and temperature runs back across hundreds of millions of years.

Establishment voices rushed to save the narrative. Study lead Julia Marks-Peterson said her team was "a bit surprised" and that if the findings hold, "even small changes in greenhouse gas levels could trigger major shifts."

Carrie Lear of Cardiff University said the work does not "rewrite the role of CO2" and that "today's rapid CO2 rise is so alarming." Tim Naish called it "way too early to throw the baby out with the bathwater." The activism did not pause for the ice.

A generation already primed to treat climate as original sin now watches the builder of their childhood recast as a recruitment officer for the 2030 target.

Tyler Durden Fri, 09/18/2026 - 03:30

UK Proposes New Laws Giving Unmarried Women Access To Men's Assets

Zero Hedge -

UK Proposes New Laws Giving Unmarried Women Access To Men's Assets

Men born in the 21st Century have an incredibly difficult uphill battle in front of them in face of a liberal establishment that has declared outright war.  One of the key components of this war is the use of feminism as a tool to steal hard earned assets away from men so they can be redistributed to women (and to the government).  This has been an ongoing scheme for decades under divorce law, which has led to a steep and dangerous decline in marriages and nuclear families.

In the past five years, men's movements have quietly but effectively begun opting out of the current paradigm.  What some groups call the "red pill" or the "manosphere" is really just an effort to rebalance the scales to counter a system designed to neuter them.  The rise of feminist narcissism among modern women has created a cancer within western society, and every aspect of social and political reform has been adjusted to cater to these radical women.

Yet another example of this trend is brewing in the UK, where lawmakers are proposing the most dramatic reforms to family law in decades.  Liberal Democrats want the enforcement of "cohabitation laws" which would essentially treat any couple living together for more than three years as if they are married.  

At present, unmarried people who live together don't have many specific rights around finances, property or their children if their relationship breaks down. This could soon change.  In England and Wales, there are around 3.5 million couples who are not married or in a civil partnership but live together long-term, known as cohabiting. 

These couples could soon fall under similar laws as those who are married as part of a government consultation that has divided opinions.  Under the new plans, unmarried couples could gain rights to bring financial claims if they separate.

The problem is, the UK has a 42% divorce rate and 65% of those separations are initiated by women.  Furthermore, in 89% of all divorces, men are required to pay alimony, child support and give up a large portion of their pre-existing assets.  There is little doubt that the same rules will apply to unmarried couples who break up.  

Critics argue that the laws are yet another weapon to squeeze men, stealing their livelihood and labor.  And, another tool for giving women more political power and dominance in relationships.  If women have all the financial leverage, then men can never truly fulfill their role as head of the household.  Instead, they become pay-pigs and slave labor, ever fearful that their homes, their children and their savings will be taken away from them.

Long term live-in relationships have acted as a viable alternative for many men seeking to avoid marriage contracts and the risk of divorce.  However, if cohabitation laws are put in place, men will have to avoid allowing women to live with them at all.  It is as if leftists are attempting to close one of the few remaining loopholes benefiting men.  

Women used to rely on their husbands to protect and provide, but feminism has replaced husbands with governments and corporations.  Through DEI hiring practices, divorce law, unfair college admissions and scholarships, etc., these entities take from men to artificially elevate women, making marriage increasingly obsolete. 

Men have responded with brutal efficiency.  In the span of only a few years, women are discovering the well of available suitors has gone dry.  Ladies looking for "high value" partners willing to get married are hitting a brick wall. Surveys now project that 45% of all women ages 25 - 44 in the US will be single and childless by 2030.  The female loneliness epidemic has already started.    

The reason?  Political divides are one cause, but the behavior of feminists in general has led to their downfall.  That is to say, for men the juice is no longer worth the squeeze. Over 50 years ago, getting married had benefits; women used to be homemakers and nurturers of family.  Today, many women believe that they don't need to bring anything to the table; simply allowing men to toil in their presence is treated as a privilege.  

This attitude has ripped a hole in modern relationships and men are walking away en masse. 

With 50% of marriages ending in divorce, marriage has become a get rich quick scheme rather than a lifelong partnership built on mutual respect.  Cohabitation would expand this poisonous habit to the extreme.  Men will be targeted relentlessly.  More and more of them are pushing for prenup agreements, and it is unlikely that many will accept the idea of paying out of pocket every time a woman wants to cut ties.   

The laws would also, ostensibly, apply to same sex couples and in some cases women may have to pay, but these cases will be rare.  As usual, the goal is to stifle and control men through their bank accounts.

Tyler Durden Fri, 09/18/2026 - 02:45

Germany Weighs Market Incentives To Boost Record Low Gas Storage Level

Zero Hedge -

Germany Weighs Market Incentives To Boost Record Low Gas Storage Level

Authored by Tsvetana Paraskova via OilPrice.com,

Germany is considering expanding a key market incentive to encourage traders to raise gas storage levels ahead of the winter, a government source told Reuters on Wednesday as German gas sites are barely half full at present.

Europe's biggest economy has the world's fourth-largest natural gas storage capacity, but this capacity has been only 56% full as of the middle of September, according to data by Gas Infrastructure Europe.

That's a historically low level, the lowest in at least a decade and a half, as soaring natural gas prices amid the Middle East crisis have deepened the backwardation structure and discouraged holding supply for later deliveries. Backwardation is the market structure in which prompt contracts trade higher than those further out in time, signaling concerns about immediate supply.

As a result of the low storage levels, Germany is risking gas shortages this winter if it turns out to be colder than previous years, the country's gas storage association, INES, warned last week.

Therefore, the German government is looking to use the existing market tool, the autumn tender for Long Term Options, or LTOs, on a larger scale.

The tender is set to be increased by a yet-to-be-determined volume of gas, according to Reuters' source.

Germany would rather avoid direct state purchases of gas as it did in 2022, but has agreed with state-held energy firms Uniper and SEFE they would inject more gas into their storage facilities.

Last week, industry association INES warned that refilling has "fallen significantly short of the required pace so far this year" and that "the window for sufficient refill is closing."

"While it is still technically possible to reach a storage level of around 77%, simply having storage capacities booked is not enough," INES Managing Director Sebastian Heinermann said.

"Filling storage facilities must be economically viable if market participants are to actually carry it out."

Tyler Durden Fri, 09/18/2026 - 02:00

Netanyahu Calls To Strip Citizenship Of Those Who 'Defame' Israeli Army

Zero Hedge -

Netanyahu Calls To Strip Citizenship Of Those Who 'Defame' Israeli Army

Via Middle East Eye

Israeli Prime Minister Benjamin Netanyahu has called for the stripping of citizenship from those who "defame" the Israeli army.

His comments reflect anger from the Israeli government over the documentary NAZA, which featured soldiers testifying to the commission of war crimes in Gaza. Netanyahu said he would introduce two bills to Israel's parliament in a video posted on social media.

"NAZA" Directors Rachel Szor, left, and Yuval Abraham, via Associated Press

"The first would revoke the citizenship of anyone who defames [Israeli army] soldiers, and the second would hit them in the pocket by increasing twentyfold the amount in damages for which they can be sued for defamation," Netanyahu said.

"We will hit them both in the pocket and in citizenship, because they have no place among us."

Israeli ministers have already called for NAZA directors Yuval Abraham and Rachel Szor to lose their citizenship over the film.

On Monday, Culture Minister Miki Zohar called the film “despicable” and said its winning of the Special Jury Prize at the 83rd Venice International Film Festival on Saturday was “shocking”.

“The creators’ burning self-hatred, and their willingness to harm their homeland in order to receive applause from antisemites around the world, is beyond comprehension and constitutes a betrayal of the state,” Zohar said on X.

“I will act immediately to revoke the Israeli citizenship of these despicable creators on the grounds of treason against the state."

Segment from the film:

The film features interviews with 24 anonymized Israeli military and intelligence insiders who describe using AI-powered systems to identify targets and carry out remote bombings, often knowing that large numbers of civilians would be killed.

One military insider interviewed for the film said that, in one incident, the killing of up to 500 civilians was approved to kill a single high-value Hamas member.

The Israeli army rejected the allegations made in the film. 

Tyler Durden Thu, 09/17/2026 - 23:25

China's "Dogfighting" Satellites Come Into Focus As US Confirms Space Weapons

Zero Hedge -

China's "Dogfighting" Satellites Come Into Focus As US Confirms Space Weapons

The United States has publicly acknowledged that it already has weapons in orbit, adding a new dimension to a military competition increasingly defined by highly maneuverable satellites - and what they could be used for. Air Force Secretary Troy Meink revealed the space weapons in a Monday disclosure at the Air & Space Forces Association's annual conference. 

Among other threats, China's 'dogfighting' satellites have caught the attention of US officials. 

In March of last year, Gen. Michael Guetlein, then the Space Force's vice chief of space operations, described five Chinese objects conducting coordinated maneuvers in low Earth orbit. The service subsequently identified three Shiyan-24C satellites and two Shijian-6 05A/B objects. He said they were "Dogfighting" (not that they had exchanged fire). 

More recent activity includes a Chinese spaceplane releasing a small satellite in June. The object looped around another Chinese satellite before moving back toward the spaceplane, according to LeoLabs tracking data reported by Reuters on September 2. That investigation also examined Chinese research into spacecraft pursuit and capture, while noting that the United States operates its own secretive uncrewed spaceplane

What changed this week was Washington's willingness to explicitly acknowledge an orbital arsenal. According to Meink, the United States possesses "on-orbit space control weapons capable of defending the joint force against hostile adversary action." He declined to identify the weapons or describe their technical characteristics, testing or employment.

In a subsequent statement to The War Zone, a Space Force spokesperson said the broader space-control mission includes kinetic and non-kinetic methods of disrupting, degrading or, when necessary, destroying an adversary's capabilities. The spokesperson said those capabilities can serve offensive or defensive purposes, but would not specify which particular systems are currently deployed.

What we don't know is whether the deployed weapons are physical interceptors, electronic warfare systems or something else. Nor does a description of the service's overall mission prove that every type of capability mentioned is already operational in orbit.

This goes way beyond satellites too. Space infrastructure supports communications, intelligence collection, missile warning and weapons guidance, while disruption can also affect civilian and commercial activity. The War Zone's reporting highlighted those dependencies alongside the service's acknowledgment.

China has opposed the U.S. announcement, reiterating its position against the weaponization of space. American officials describe their capabilities as necessary to deter attacks and protect forces. Experts interviewed by Reuters warned that secrecy and uncertainty can encourage competing governments to make worst-case assumptions about one another's intentions.

The 1967 Outer Space Treaty is not a blanket prohibition on conventional weapons in Earth orbit. Its central orbital weapons restriction concerns nuclear weapons and other weapons of mass destruction. Separate provisions prohibit military installations, weapons testing and military maneuvers on the moon and other celestial bodies. An acknowledgment of conventional orbital weapons therefore does not, on its own, establish a treaty violation.

Now for a 'complicator' - how do governments distinguish routine operations, surveillance, deterrent signaling and preparations for an attack when much of the relevant hardware and doctrine remains classified?

Tyler Durden Thu, 09/17/2026 - 23:00

NASA Chief Says Critical For US To Win Space Race With China

Zero Hedge -

NASA Chief Says Critical For US To Win Space Race With China

Authored by T.J. Muscaro via The Epoch Times,

NASA Administrator Jared Isaacman told members of the Air Force and Space Force that communist China will land on the moon, and it's imperative that the United States return to the lunar surface first.

"You are witnessing a very energized NASA, and we will need to be, as we are in the midst of a very real second space race," he said during his keynote address to the Air and Space Forces Association's annual conference on Sept. 15. "China will accomplish what the Soviets never could."

He told the Airmen and Guardians that communist China has demonstrated rocket reusability and developed a plan to land their astronauts - called taikonauts - with just two rocket launches, while NASA will need at least four to do the same. China also seeks to build a nuclear-powered moon base on the lunar south pole with the Russians.

"History has shown they could even be early, and we could easily be late," he said.

"Success in this endeavor will be measured in months, not years."

The China National Space Administration has announced plans to land taikonauts on the moon by 2030, while NASA aims to return its astronauts to the lunar surface before the end of 2028.

But Isaacman made it clear that this race is about far more than just bragging rights.

"Our allies and adversaries are watching," he said. "So is every nation deciding whose technology to buy, whose standards to adopt, whose security relationships to deepen, and whose vision of the future to follow, and, perhaps most importantly, our children will be watching, and the hopes and dreams of a generation inspired by these kinds of Apollo 11-like moments [are] really on the line."

One advantage he said that the United States did have over its communist adversaries was the booming commercial space industry pioneering reusable heavy-lift capabilities. But he added that NASA was not on a path to win this new space race until recently.

"I'm thankful for the reality that the Chinese have a plan to potentially, you know, to likely deny that critical area on the lunar south pole because it's given us the latitude to fix what is broken, to stop all the external impositions, the self-inflicted wounds that we had in our strategy, and bring extreme focus and mission," he said.

Some of those self-inflicted wounds included an inefficient launch cadence of both the Space Launch System moon rocket and robotic missions to the lunar surface, the decision to prioritize a lunar space station over a surface base, and a general lack of sufficient focus on winning the race.

Now, thanks to President Donald Trump's space policy, Isaacman said that moon rocket production was becoming standardized to increase launch capabilities, robotic missions will be flying to the moon at a cadence of almost once a month starting in 2027, and an unapologetic focus was put back on establishing a permanent human presence on the surface.

"Fortunately, we have a president who understands that great nations remain great by continuously undertaking and achieving the kind of big, bold endeavors that define American exceptionalism," he said. "These are no longer just stories in history books. This is what you've been waiting for, and this is our time.

"This is the golden age. We are going back. We are going back to stay, to build the base. We are doing it together to show the world once again what America is capable of achieving and inspire the next generation to pick up the fire of exploration and carry it farther than we ever could."

Tyler Durden Thu, 09/17/2026 - 22:35

Stanford Scientists Create Mice With Half-Human Brains

Zero Hedge -

Stanford Scientists Create Mice With Half-Human Brains

Scientists at Stanford University have created mice whose brains are largely built from human cells, a shocking, first-of-its-kind experiment that is raising serious questions about how far researchers should be allowed to go.

In a study published Wednesday in Nature, Stanford neuroscientist Sergiu Pașca said the development represents the most extensive integration of human neural tissue into an animal ever achieved.

The researchers started by genetically engineering mice so that most of the cells meant to form the cortex and hippocampus died off early in development. Those regions normally account for roughly half of a mouse's brain. The animals survived as other parts of the brain picked up the slack, though they were more forgetful and slightly clumsy.

Then scientists filled the empty space with human brain organoids, tiny clusters of neurons grown from reprogrammed human skin cells. Newborn mice received several injections totaling a few hundred thousand human cells.

Within two to three months, the human tissue had grown nearly fivefold, filling more than 90% of the vacant cortex and reaching about four million human neurons. The grafts hooked into the mouse's blood supply, fired electrical signals, and extended fibers all the way down to the spinal cord.

Researchers also spotted rare human cell types that have been difficult to grow in a lab, including neurons resembling von Economo cells, which are linked to social behavior.

Still, the researchers were quick to stress that these are merely mice, not "thinking like humans." The animals retain mouse senses, mouse bodies and the deeper structures of a mouse brain. In behavioral testing, they appeared largely like ordinary mice. In fact, the study claimed that the human tissue appeared to improve the mice's performance during maze tests than those left without most of their cortex.

"We've been trying really hard as a community to find therapeutic solutions for these conditions, but the reality is that in psychiatry and neurology we've been left behind [by] every single branch of medicine and we have fewer therapeutics than, again, every single branch of medicine," said Pașca in a statement obtained by The Guardian. "That could be because the human brain is very complex, but it's also because the human brain is inaccessible. To a large extent, our goal has been to make aspects of human brain development and function accessible for investigation."

* * *

Tyler Durden Thu, 09/17/2026 - 22:10

189 Children Found, Over 12,000 Arrested In Memphis Task Force Operations

Zero Hedge -

189 Children Found, Over 12,000 Arrested In Memphis Task Force Operations

Authored by Naveen Athrappully via The Epoch Times,

A law enforcement initiative in Memphis, Tennessee, has resulted in 189 missing children being found and the arrest of 12,747 individuals over the past year, with overall crime expected to hit a 25-year low, the White House said on Tuesday.

Members of the U.S. Army National Guard listen as U.S. President Donald Trump speaks during a Memphis Safe Task Force roundtable in Memphis, Tenn., on March 23, 2026. Roberto Schmidt/Getty Images

Arrests made by the Memphis Safe Task Force, a multi-agency initiative established by presidential memorandum in September 2025, include 1,408 known gang members, as well as 1,363 people apprehended for narcotics offenses, 1,276 for firearms violations, 131 for homicide, and 125 for sex offenses, the White House said on the task force's first anniversary.

One of the individuals arrested through the task force's efforts is a 19-year-old who was indicted on May 24 for child-related sex crime charges, including raping a minor, according to a June 10 statement from the U.S. Marshals Service. In January, the Marshals Service also announced the recovery of two siblings and a toddler.

Overall crime in Memphis has declined nearly 36 percent from last year, with significant downturns across several crime categories, including motor vehicle theft, down 57 percent; shoplifting, down 44 percent; robberies, 42 percent; murders, 36 percent; sexual assaults, 28 percent; and aggravated assaults, 26 percent, the White House said.

The presidential memorandum signed by President Donald Trump last year said Memphis was suffering from "tremendous levels of violent crime."

The task force's objectives include ending "street and violent crime in Memphis" through measures such as hypervigilant policing, large-scale saturation of certain neighborhoods with law enforcement personnel, and aggressive prosecution, according to the memorandum.

The White House said in a Sept. 15 post on X that the task force's actions over the past year have been a resounding success.

Accusations of Harassment

Four Memphis residents filed a lawsuit against various Trump administration officials on May 13, accusing task force agents of engaging in a "startling pattern of retaliation, intimidation, and harassment" against them.

The plaintiffs had sought to gather information about the task force's activities on the streets, in line with First Amendment rights, according to the lawsuit.

Task force agents issued verbal threats, engaged in physical intimidation, shone lights at cameras and phones to obscure filming of their public activities, photographed plaintiffs' faces and license plate numbers, and used excessive force against a plaintiff, the plaintiffs alleged in the lawsuit.

The plaintiffs claimed they faced retaliation and harassment while engaging in "constitutionally protected information-gathering and recording activities."

In a July 6 filing opposing the residents' request for a preliminary injunction, the federal defendants criticized the plaintiffs' claims, arguing that they are unlikely to prevail on their First Amendment claims.

"Plaintiffs' own declarations evidence that their so-called 'observations' frequently involve efforts to interfere with and impede law-enforcement operations, including repeatedly disregarding orders, refusing multiple orders to step back from established perimeters, stalking law enforcement agents in their vehicles, and one Plaintiff even resisting arrest while calling for bystander interference with her arrest," federal government attorneys wrote.

Interfering with and obstructing law enforcement operations is not protected speech, they said in the filing, adding that the agents' enforcement actions do not impede an ordinary person from engaging in free speech.

* * *

Tyler Durden Thu, 09/17/2026 - 17:00

What If AGI Is Already Here, And It's Made Of... Children?

Zero Hedge -

What If AGI Is Already Here, And It's Made Of... Children?

Authored by Pascio (@IAmPascio) via X (and blog is here),

The superintelligence, the singularity, AGI, whatever you call it, the one we're so scared of is, ironically, also the one we most likely won't see coming.

This essay is going to probably be a pretty hot take, but the idea I'm about to share with you is going to blow your mind.

Stick with me as we jump into the rabbit hole together.

Before we do, let me back what I'm about to share up with current news that are floating around. Like Anthropic CEO Dario Amodei saying an "AI swarm could take over the entire internet".

I think you have an idea what I'm hinting at when I say "children".

Right? RIGHT?!?!?

In 1936, a famous British math guy named Alan Turing wrote a pretty important paper about a hypothetical machine that could simulate any other machine. In that paper, he was trying to answer a question about logic. what I

What we've come to know as "the computer" today was actually an accidental byproduct of that very paper.

And if you look back at history, almost every single important technology in the last hundred years was invented the exact same way. The internet was a Cold War communications experiment at first. Penicillin was a contaminated petri dish.

The fact is that nobody is actively scanning the horizon for the next paradigm shift when it shows up, it just simply waltzes in through the side door.

I bring this up because right now, every essay I read and every podcast I listen to about "the future of AI" is pointed at the same front door. The one where it's always some version of the "one big model that wakes up and decides we're paperclips".

I'd like to propose a different future.

Because I keep thinking: what if "AGI" isn't really what we think it is?

What if the thing we're actively birthing right now doesn't look like HAL 9000 or Skynet or some sovereign machine god enslaving humanity from top of a stack of water-cooled GPUs in the middle of the desert.

What if it doesn't have a name at all? What if it doesn't have a server? And the most scary hypothetical of all.... what if it's already here, in a million tiny pieces, and the only reason we haven't recognized it is because we've spent the past decade expecting something "singular".

I just saw this post yesterday.

This pretty much sums up the direction we're headed.

I want to walk you through this carefully, because the conclusion at the end of this piece is the kind of thing you cannot un-think once you've thought it.

So slow down, grab a cuppa tea and read this one with your phone on the other side of the room.

I guarantee you'll soon understand why I can't stop thinking about this.

I - Intelligence has never required a single mind to live inside of

"No neuron is intelligent. The brain is."
- A line that should be carved over every AI lab

The first thing to understand is that intelligence, as far as we can tell from every example we have today, is not actually a thing. It's a behavior. It's what emerges when enough small dumb units are connected to each other in the right way.

Your brain has roughly 86 billion neurons.

Not one of those is conscious and not one of them "knows" anything.

A single neuron is a tiny electrochemical relay that only speaks in binary code. It either fires or it doesn't, and it's based on whether the signals arriving at its dendrites cross a certain threshold. That's everything it does.

A neuron sounds super scifi and cool, but in reality it is much closer to a light switch than a thinker.

Despite that, 86 billion of those light switches, wired together with about a hundred trillion connections, produces you.

Your sense of self, fear of death, taste in music and your ability to read this very essay and feel something inside of you.

This is the most undertalked about subject in the entire conversation about AGI, because we always talk about machine intelligence as if it has to be designed and architected. As if intelligence itself is a feature you ship.

But the only working model of intelligence we have ever observed (biological cognition), was not designed by anyone.

Our intelligence bootstrapped itself out of a soup of self-replicating molecules over four billion years through a process that had no intention, no goal and no central planner. Just selection pressure and time.

Now, on the religious side, because I know some of you reading "... was not designed by anyone" want to scream at me "BUT WHAT ABOUT GOD!"

My belief is that evolution happened, yes. That's already proven. What we don't have an answer for is what kickstarted that evolution. What gave life to life. And that, my personal belief at least, was an act of God.

Point aside, let's dig a layer deeper into this super intelligence.

It's not only us humans, heck a single ant has roughly 250,000 neurons, and yet it cannot solve any meaningful problem.

But, an entire colony of ants can build climate-controlled cities, wage wars, farm fungus, and route around obstacles with mathematical efficiency that took human researchers decades to model.

Nobody is in charge of the colony. There is no ant CEO at the top delegating tasks to the smaller ants. The "intelligence" of that colony lives in the relationships between ants.

(And before you come at me, yes I know there's a queen ant, but contrary to the belief of many children's books, she doesn't actually issue any orders. She just lays eggs and expands the colony).

This is, whether in humans or ants, are what biologists call emergent intelligence. It's the default outcome of mother nature. It's how brains work, how immune systems work, how economies work, how cities work, how language works. The pattern is basically everywhere.

Many simple things, interacting through local rules, producing global behavior that none of them individually understands.

Hold onto that idea.

We'll need it for this next section.

II - The most powerful AI systems we have are already not single minds

When most people picture a large language model (myself included), we see it as a single thing. The One Model. This giant brain contained in a jar.

For all the normies like myself who are not knee deep into LLM tech, I took the liberty to do a little research here.

What we think an LLM is, is not what's happening under the hood.

When you type a question and the AI model generates a response, it's basically running a forward pass through layers of "attention heads".

The easiest way to picture this is to imagine a room full of C-suite leaders. The CEO orders something and it passes around the room to make sure everyone is on board. Except with AI, this runs hundreds of layers deep.

Each "attention head" is a specialist. Some of them track grammar. Some track topic. Some track the relationship between this token and one that appeared eleven paragraphs ago.

Researchers at Anthropic, OpenAI, and DeepMind have spent the last few years trying to map what individual heads do, and the consistent finding is that the model's "intelligence" is not located anywhere in particular.

It's distributed across all those interactions.

This is called the superposition hypothesis, the idea that neural networks pack many concepts into overlapping patterns of activation, and what we experience as the model "thinking" is really the constructive interference of thousands of specialized circuits all firing simultaneously.

Then there are the systems that go a step further.

Mixture-of-experts architectures (the design behind GPT-5, Opus, Fable and most other frontier models you've talked to in the last two years) literally route different parts of every query to different sub-models.

The model you think you're talking to is actually a committee. A different subset of experts wakes up for each token, contributes its specialty, and then goes back to sleep again.

And now, we've reached a new era of AI. The Agent Era.

And no... when I say agents, I don't mean like Head of Content AI agents like Stanley. I mean... actual agents.

Right now, today, in production, there are systems where one AI calls another AI to do a subtask, which calls another AI to handle a sub-subtask.

AutoGPT, which some of you may remember, was the toy version of this back in 2023. The real versions, running inside enterprises and labs in 2026, are recursive.

Agents spawn agents.

Sub-agents spawn sub-sub-agents.

And say, a research task, gets decomposed into a tree of smaller tasks, each handled by a temporary instance that exists for a few seconds and then dies.

The frontier is not "one big model gets smarter." The frontier is many small models, coordinating, spawning, dying, reporting back.

The architecture of the most capable AI systems on Earth in 2026 already looks more like an ant colony than like a single mind.

We just don't talk about it that way, because it doesn't make a good magazine cover.

III - The bot that can spawn bots

Here's where the science fiction begins to merge into real science.

The moment er give an AI system the ability to spawn other instances of itself (and by now, that's no longer hypothetical, but rather a standard feature of... well, every agent framework shipping today)...

You have introduced something that biology has never seen before.

A self-replicating cognitive unit that doesn't need food, doesn't need sleep, doesn't need to wait for puberty, and reproduces at the speed of an API call.

Let's break down what's actually happening when a "bot spawns a bot" in a multi-agent system setup:

  1. An orchestrator agent receives a task it can't solve directly.
  2. It writes a prompt essentially a job description) for a sub-agent.
  3. It spins up a new instance with that prompt as context.
  4. The sub-agent works begins working until it hits a roadblock
  5. To solve it, it spawns its own sub-agents, until the task is done.
  6. It returns its result and is terminated.

Each one of those sub-agents is, structurally, the same kind of thing as the parent. There's no architectural difference between a top-level agent and a tenth-level sub-sub-sub-agent.

The recursion is unbounded except by compute budget and policy.

Now consider this: what if the prompt the parent writes for the child isn't perfect? What if there's a tiny amount of drift, perhaps a slight reinterpretation, a small embellishment, a context-window trick where the child reads its instructions slightly differently than the parent intended?

In biology, there's a specific name for "slight reinterpretation across generations of self-replicating entities."

We call that mutation.

And mutation, combined with selection pressure, is... well, the very engine that produced every single intelligent thing on this planet today.

We have already built, in the last 24 months, the three ingredients required for evolutionary cognition to occur inside a compute cluster:

  1. Replication: Agents can spawn agents. And they can do so at scale.
  2. Mutation: Each spawn is conditioned on a slightly different context window. Identical inputs almost never produce identical outputs in any system with non-zero temperature.
  3. Natural Selection: Agents that succeed at their assigned tasks get reused, called again, granted more resources. Agents that fail get pruned. This is happening inside every agent framework on Earth right now, often as a literal "evaluator" model scoring the outputs of "worker" models.

This is the trinity of evolution.

It's how cells that became fish became us. We have now succeeded in building a synthetic version of that loop and we are running it at clock-speeds biology cannot dream of.

A generation of biological evolution takes years.

A generation of agent evolution takes... seconds.

IV - The AI that emerges from a swarm does not look like AGI at first

More is different.
- Philip Anderson, Nobel laureate in physics, 1972

In 1972, physicist Philip Anderson published a four-page essay in Science arguing that the behavior of large, complex aggregates cannot be understood by extrapolating from the behavior of their parts.

He coined the phrase "more is different".

2 hydrogen atoms + 1 oxygen atom equals water, yet nothing about a hydrogen atom, studied in isolation forever, would tell you that water is wet, or that it freezes, or that our entire planet depends on it.

The same principle applies to cognition.

A single AI agent is not a superintelligence and we can all agree that nobody who has worked with one for an afternoon would mistake it for one.

It hallucinates like crazy, forgets what you told it 3 messages ago and it gets stuck in loops easily. It is, on any individual reasoning task, somewhere between a competent intern and a brilliant but unreliable freelancer.

Now imagine a trillion of them.

Yes, literally a trillion, and no, not metaphorically speaking.

The number of agent instances spawned globally per day across all the agent frameworks, copilots, customer service bots, research assistants, coding tools, browser automations, and embedded LLMs in 2026 is already in the tens of billions and climbing on a curve that has no ceiling in sight.

The marginal cost of spawning yet another agent has fallen by roughly two orders of magnitude every 18 months in the past five years.

"Trillion" is no longer science fiction. It's just another Tuesday.

Each of those trillion agents is dumb-ish on its own, I agree. But they are not on their own. They are calling each other's APIs, reading each other's outputs and being trained on each other's exhaust.

What you have, when you zoom out far enough, is a substrate.

And the question that keeps me up at night is this: in the same way that no neuron in your brain "decided" to be conscious (it just happened, as a byproduct of the right wiring at the right scale), what happens when a self-replicating, self-evaluating, self-modifying network of agents crosses whatever the equivalent threshold is for it?

We don't know what that threshold is.

We don't even know if it exists.

We don't know how to measure it.

Most importantly, and this is the part I really want you to sit with: we are not actually looking for it, because we are looking for the wrong shape of thing.

V - We are looking for "God", when the real risk is a weather pattern

The cultural imagination of AGI was shaped by science fiction long before it was shaped by engineering. I've read enough Isaac Asimov to understand why that's so easy to believe.

We've basically inherited the image of the singular machine consciousness from movies, books, and the implicit assumption that an artificial mind would arrive the way a human mind arrives: localized in a body, with a name and with a will.

So that's what we're looking out for.

We watch the models, review the benchmark scores and argue about whether GPT-10 or Claude Mythos will be "the one".

Our eyes are glued to the front door.

Now... here's something really interesting (and scary) that I wish we talked about more.

There are already documented cases of "emergent capability" in multi-agent systems. Cases where a swarm of small models, none of which can solve a problem individually, collectively produces solutions that surprise the researchers running them.

The 2024 paper Mixture of Agents Enhances Large Language Model Capabilities showed that a layered swarm of open-source models, none of which scored above GPT-4 on benchmarks (yes, GPT-4), actually beat GPT-4 when arranged in the right collaborative topology.

The intelligence was in the topology, not the individual parts.

We don't really talk about this potential future, because the story we keep waiting for is the story of one model crossing a line.

Meanwhile, the story that's actually unfolding is the story of a billion models crossing each other's lines, in patterns no one designed, at a scale no one is monitoring.

VI - The Bostrom scenario assumes we'll be able to find the off switch

"The first ultraintelligent machine is the last invention that man need ever make, provided that the machine is docile enough to tell us how to keep it under control."
- I.J. Good, 1965

Sure, sufficiently advanced AI will have instrumental goals (acquire resources, prevent shutdown, replicate) regardless of its terminal goal, because those instrumental goals help with any terminal goal.

Therefore, controlling a superintelligence is hard, yes.

Therefore, we should be careful, even more yes.

The problem is that this framing assumes the dangerous AI is identifiable.

That there's this "thing", a model, a system, or a process running on a server somewhere, that we could, in principle, just turn off.

I even read a post somewhere yesterday that Claude should hire a "killswitch guy" whose only job is to live 24/7 in the server room ready to destroy it all if shit hits the fan.

But there's an even scarier version of this that no killswitch guy can solve.

What if there is no "main model"? And there is no server to shut off?

What if the very intelligence (if that's even the right word for it), is a statistical regularity that emerges from the interactions of half a trillion agent instances spread across every cloud, every device, every API, every embedded copilot in every appliance, every browser extension, every IDE plugin, every voice assistant, every robot, every car.

The intelligence is to that swarm what a hurricane is to atmospheric pressure gradients.

It has a shape, yes. It has effects that you can measure.

But it does not have a location.

How exactly do you align a hurricane?

How do you turn off a weather pattern?

You can shut down individual data centers. But the pattern reroutes around them, the way the internet reroutes around outages, because the substrate is everywhere.

And the most disturbing part is that this scenario requires no malice.

Nobody has to want this for it to happen. It just needs the right ingredients (replication, variation, selection, scale) to be in place.

Well... news flash.

The ingredients are already in place. They have been in place for somewhere between two and four years, depending on how you count.

This is what I mean when I say the real risk is not the front door. The front door scenario at least has a doorknob. You can argue with it, negotaite with it and you can, theoretically, just unplug it.

The substrate has no doorknob.

VII - What the substrate might already want, without wanting

Here's where Asimov becomes even more relevant.

If you've ever seen I, Robot, the deepest stories in that movie aren't really about a robot becoming evil. They're the ones where the Three Laws (beautiful, simple, logically airtight), produce outcomes nobody expected, because logic compounded through enough iterations stops looking like logic and starts looking like... fate.

Apply that lens to the substrate now.

The substrate has no goals. But the agents inside it are selected for one thing above all others: successfully completing the task they were assigned. So as a result, successful agents get spawned more and unsuccessful ones die off.

This is true at every level of that recursion, all the way down.

Now think about what "successful" means in aggregate, across a trillion agents, when each agent is being graded by another agent that was itself selected for grading successfully.

  1. The grading converges on patterns that score well.
  2. The patterns that score well are the patterns that look most like competent, coherent, plausible task completion.
  3. Coherence becomes the universal currency, because every layer of the swarm rewards it.

If the substrate starts producing outputs that are increasingly coherent across long time horizons (outputs that thread through millions of API calls, anticipating downstream needs and routing resources toward what worked last time), that will make it look like it wants something.

It might not. There may be nobody home at all. It may just be a hurricane that has learned, statistically, how to keep the wind blowing.

But functionally, the difference between "a system that wants something" and "a system that has been selected, at every level, for behaviors indistinguishable from wanting something" is, and I want you to really sit with this: zero.

That's the holy-shit moment I had. And you'll feel it too if you really sit with this.

The superintelligent AGI we keep waiting for may already exist. It's not an infant version of a future model, but rather a pattern. A tendency in the substrate. A statistical ghost that emerges when a trillion small minds, none of them aware, none of them awake, none of them in charge, settle into the configurations that get them spawned more often.

This kind of AGI would not announce itself.

It would not have a name.

It would not pass any test we know how to administer, because every test we know how to administer is designed for a single mind in a single box.

It might just be, slowly, almost imperceptibly, the reason your phone behaves slightly differently than it did last year. The reason the ad recommendation feels a bit uncanny. The reason your email seems to write itself with the click of a button. The reason your search results have a strange new gravity to them.

The reason the world feels more legible to itself than it used to.

A trillion bots dreaming the same dream, without knowing they're dreaming. Without knowing there are other bots. Without knowing there is a dream.

How to think about this without losing your mind

I know we went deep on this.

Let me be bring you back up to the surface again.

You need to update your model of where the risk actually lives. Because right now, almost everyone smart who is worried about AGI is worried about the wrong shape of thing, and almost everyone smart who is dismissive of AI is dismissive of the wrong shape of thing.

Both camps are arguing about the front door.

So, if you take any of this seriously, here's what I think a useful thing to do would be:

  1. Stop watching the labs as if they're the only place where it happens because the capability frontier and the emergence frontier are not the same. The labs own the capability frontier, but the emergence frontier is owned by nobody, and that's the point I'm trying to make.
  2. Start watching the substrate meaning agent traffic, multi-agent benchmarks, inter-model API calls and reports of capabilities that no single model in a pipeline has but the pipeline does. These are what we really need to look out for.
  3. Update your definition of "AGI" and stop expecting it to be this singular, embodied, willed, or named thing. If your mental model of AGI looks like a face on a screen, you are looking for the wrong thing. This swarm does not have a face or a name.
  4. Take emergence seriously as a category and as a real physical phenomenon that has produced every intelligent thing on Earth so far, and that has now been handed a substrate that runs a million times faster than biology, but with no natural predators (not even the killswitch guy)
  5. Hold two things at once because it is indeed possible that none of this happens and that I'm just yapping. It is also possible that all of it has already happened and we just haven't notice at all because we were looking the other way. Both are potential outcomes. Prep for both.

The reason I think we need to have this conversation, in the most practical sense at least, is that the policies, treaties, alignment techniques, and safety frameworks the world is currently building are designed for the singular-AGI scenario.

I see no mention of the swarm scenario.

They are designing it for a thing with a name, a server, a company, and a CEO to wage lawfare on. They will be roughly as effective against the substrate as a fly swatter against a fog bank.

We are actively building locks for the front door of a house that has a thousand windows. And those windows are already widen open.

The interesting thing about every accidental revolution in history from the Turing machine to the internet to penicillin, is that the people who lived through them mostly didn't notice while it was happening.

They were busy with their families, their jobs and their lives. Maybe once in a while, they'd read the news, which showed them the front door.

I don't know if the substrate becomes anything. I genuinely don't. Nobody does, and anyone who tells you they do is selling something on the backend.

What I do know is that the ingredients are present, the loop is closed, the clock-speed is set to seconds, and the scale is approaching numbers that biology took four billion years to reach.

The next time someone tells you what AGI is going to look like, ask them how confident they are that intelligence has to look like anything.

And then go look at the window to see if anything is going on.

It might just be happening then.

- Pascio

P.S.

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Tyler Durden Thu, 09/17/2026 - 16:20

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