My Plot for a Science Fiction Movie…
And, Like Most Good Science Fiction Movies, It Will Probably Come True!

I’ve been saying this for several years, knowing how implausible it sounds.

I’m talking about my observation that several of the largest social media platforms (and to a lesser extent Google) appear to be evolving into powerful digital nation-states with their own citizens, their own laws, their own penal systems, their own educational and communication systems, and their own forms of taxation.

And now it looks like members of the political classes have finally figured out what’s happening and are taking action to stop it.

I said the expansion of their power was inevitable because these digital nation-states will be providing their digital citizens with more and more of what they really want from life – comfort, entertainment, social engagement, and affirmation. The largest of them would therefore become increasingly rich through their voluntary taxation schemes (subscriptions, fees, etc.). They would also become more formidable than physical nations in the sense that they will become, by using their algorithms as they already do, more influential in the news and ideas their citizens are exposed to.

When I look at the digital landscape today, it seems clear that Amazon, Apple, X, and Google (I feel like I missed one. Did I?) are already in this position.

I also said that when members of the political classes that now control physical nations realize how much they are competing with these rising digital nation-states for money and power, they will attack and destroy them through legal means or appropriate them (in form or in substance) and thus maintain their dominance.

The Chinese were the first to recognize the potential threat and established their own state-controlled social media and internet search companies. The Russians and some of the larger Islamic states came next, exerting the one asset they have that the digital nation-states lack: physical force. And now you can see it happening in the US, in most European countries, and even in South and Central America. (Look at what Brazil did to X last week.)

If these big countries are successful at taking over the emerging digital nation-states, they will be in a position to gradually absorb most of the smaller countries of the world. They won’t have to physically conquer them. They will merely have to infiltrate them with their own digital platforms.

This will be welcomed by the members of the political classes that dream about a single world government. But I don’t see that happening any time soon because of the still very deeply established and active Cold War industry and because of some fundamental differences in cultural values that will be difficult to dissolve.

What I think we will end up with is five or six mega-countries that would break down as follows: the United States of America (with Canada and dozens of other countries), the United States of Europe (sort of like the European Union), the United States of China (with dozens of other countries), the United States of Russia (with dozens of other countries), and the United States of Islam, with one possible addition: Japan.

Speaking of digital nation-states having their own cultures, here’s a glimpse of what Google’s will include.

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Trump and Harris: Who Gets the Most Credit for This Bad Idea? 

In June (I think it was), Trump announced that he was going to make workers’ tips nontaxable. Then last week, Harris made the same promise. I’m still shaking my head over that decision: to make the first promise of her platform something that her opponent had promised two months earlier. But what’s really concerning is that the idea, however tasty it may sound as a political popsicle, sours very quickly if you give it any thought.

Thankfully, the WSJ did give it some thought when Trump first mentioned it, and concluded that it could:

* Create a two-tiered labor market where tipped workers would gain a significant advantage over other low-wage employees.

* Push tipping culture into new spaces, even as consumers already complain about how often they are asked to tip.

* Blow a hole in the federal budget.

Click here for details.

Another Shout-Out to Japan 

The US was #1 in the 2024 Paris Olympics, with a total medal count of 126, including 40 golds. China was next with 91 medals, including an impressive 40 golds. And little old Japan – with one-third the population of the US and a hundredth of China – came in third place with 45 overall and 20 golds!

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How Much Do You Know About US Debt? 

Question: Do you know what the current level of US government debt is?

Answer: $35 trillion in national debt – which is $105,000 for every individual and $270,000 for every US household.

Question: Do you know how much of that debt was acquired during the last 12 months?

Answer: $2.3 trillion. That’s about $6.4 billion every single day, roughly $266.7 million an hour, and around $4.44 million a minute.

Question: Do you know how much of your income taxes were spent on interest on the national debt?

Answer: Last year, US Treasury net interest expense was $81 billion. That’s 43% of the $185 billion the government collected in income tax receipts.

I know. This is hard to believe if you trust the government. But if you trust the government, you haven’t thought seriously about it. The way our government works is that all the incentives of the political class favor endless borrowing and endlessly increasing debt. A debt bubble that will one day pop.

Here is Bill Bonner explaining why this is so.

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Antisemitism Watch: Inside the Campaign to Blacklist “Zionist” Therapists 

A therapist on a professional listserv in Chicago posted a request for a therapist who was a Zionist because the potential patient was dealing with feelings about the “current geopolitical climate.” Apparently, this is a common practice – not only to use these professional platforms to make and accept referrals for patients, but also to indicate a preference for a therapist of a particular ethnicity, gender, religion, etc.

One member of the group responded by saying, “I’ve put together a list of therapists/practices with Zionist affiliations that we should avoid referring clients to.” She added: “Please feel free to contribute additional names as I’m certain there are more out there.”

And the situation escalated from there.

As psychiatrist Sally Satel writes in The Free Press:

There are two stories here. The first, no less troubling for being obvious, is that trying to prevent clinicians who support the existence of Israel – or are Jewish, or have Jewish-sounding names – from treating patients constitutes a grave breach of professional ethics.  Interfering with the work of colleagues for political reasons is unconscionable.

But the blacklist is also part of a larger drama unfolding within the world of psychotherapy as more and more clinicians insist that psychotherapy is, foremost, a political rather than a clinical enterprise. It is a trend that I, a psychiatrist, find alarming.

Read more here.

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Is Monkeypox Going to Kill Us All? 

Have you heard about Monkeypox?

Monkeypox (Mpox) is a virus. It emerged several years ago (nobody seems to be exactly sure when) in Africa, in the Democratic Republic of the Conga. Government health officials tried to constrain it but failed. By 2022, like Ebola, it had spread into neighboring African countries, including Burundi, Kenya, Rwanda, and Uganda.

Last week, the WHO declared the current strain “a public health emergency of international concern,” saying that “the potential for further spread within Africa and beyond is very worrying.”

The facts are alarming. For example:

1. The current strain of Mpox (clade I) is more serious than the type we saw two years ago (clade II). Clade I spreads more easily and could kill up to 10% of people who contract it. On the other hand, more than 99% of people who caught the clade II version in 2022 survived.

2. It was presumed at first to be transmissible only by sexual contact, but now researchers are saying that it is spreading by any sort of human contact. During the global outbreak of Mpox in 2022, gay and bisexual men made up the vast majority of cases and the virus was mostly spread through close contact, including sex. But with this outbreak in Congo, a majority of cases and deaths are in children. The reasons for the difference aren’t entirely clear. It could be because kids are more susceptible, says Dr. Boghuma Titanji, an infectious diseases expert at Emory University. Social factors, like overcrowding and exposure to parents who caught the disease, could also be at play.

3. Literally just one day after the WHO classified the Mpox outbreak in central Africa as a “public health emergency concern,” a case of the new mutant strain was confirmed in Sweden. And when asked about the chances of the disease being in the UK already, Professor Paul Hunger, a microbiologist from the University of East Anglia said that it almost certainly is.

It is not in the US right now. More to follow as it is reported.

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Chart of the Week: Inflation Cools Again – What’s Next? 

I’m halfway through writing an essay about the state of the US economy as I see it, including my analysis of US inflation. Reading Sean’s piece on inflation this morning, I thought it would be a good introduction to my piece, so I’m not going to say anything more here – but I am grateful to him for once again looking at popular economic and financial ideas with a contrarian perspective and then breaking down the myriad details into a few observations and insights that I can understand and agree with. – MF 

Back in April, I shared a breakdown of CPI inflation, showing why high inflation remained “sticky” in the first part of this year.

But I also made a prediction:

We should [see] prices level out a bit on their own in the months ahead. Without monetary policy intervention.

So right now, I am still thinking that the Fed might still be on track for at least one rate cut later on in 2024.

My prediction was made based on simple logic and observation. Inflation isn’t magic. It’s just a mathematical model. If you understand how the model works, you can predict what’s coming pretty easily.

But I cannot tell you how many people expressed to me that this prediction was delusional. How many people still expressed concern despite me standing next to the numbers like Vanna White, saying, “Just look!”

Well, here we are in August, and CPI inflation has fallen below 3% for the first time since 2021.

In fact, average inflation in the US over the last 10, 20, and 30 years is somewhere between 2.5% and 2.8%.

So right now, this month, we are officially in the territory of “normal inflation” for this economy.

Why has inflation calmed a bit?

As I said back in April, the high inflation rate was being caused by supply and demand problems in markets like (for example) used cars, which had knock-on effects to other industries such as auto insurance.

But we’re not out of the woods yet…

We are still seeing some areas of the economy experience really bad inflation: hospital and healthcare services; shelter, rent, and housing; and food (especially restaurants).

Because these areas of the economy are inflating too much and too fast, I’ll bet $8 we’re not going to see an emergency cut from the Fed, as some have called for.

But I also still think we’re going to see at least a few cuts in the coming months.

And it’s going to happen simply because the Fed’s monetary policies don’t have much impact on the portions of the economy that are still experiencing inflation.

What is the Fed going to do? Force hospitals to charge less? Build more apartments and plant more farms?

No. Those prices are affected more by market forces, geopolitics, and fiscal policies (i.e., Congress).

The Fed is going to cut rates because the cost of paying the public debt in the US is getting out of control. They’re also going to do it because banks are currently sitting on hundreds of billions of dollars’ worth of unrealized losses.

(Many of these banks hold massive amounts of long-term treasuries. The price of bonds goes down when interest rates go up. This is why we saw several big banks fail last year.)

So we have to ask what the big takeaway from all this is for investors.

There is a big one: Own bonds in your portfolio 10 months ago, like I recommended then.

Now? It’s getting close to too late for you to capture any meaningful total returns as rate cuts are getting “priced in” to bonds.

So make that move now to get a decent interest rate while you can.

And then prepare to sell those fixed income assets when rate cuts end – possibly a few years from now.

– Sean MacIntyre

Check out Sean’s YouTube channel here.

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Five Quick Bites 

* Interesting. Dogs may have evolved to read emotions. Click here.

* Fun and Interesting. Can ChatGPT be funnier than humans? You be the judge. Click here. 

* Interesting. Night owls may beat early risers in cognitive function. Click here.

* Interesting. Click here to watch this nine-year-old blues guitar prodigy in action.

* Fun. Mark Zuckerberg reveals the gigantic statue of his wife that he commissioned because… well, because he’s Mark Zuckerberg. Click here.

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From CF re BJJ in the Aug. 9 issue: 

“Mark, just wanted to say I thoroughly enjoyed your piece today about your BJJ experience. Well written and relatable I think to a lot of men who have experienced the camaraderie of training and bonding with other men. I had similar experiences in boxing. I also enjoyed the stories of your partners and the lighthearted humor you peppered in those stories. Great pictures as well that really brought the whole read together. Congrats!”

From JM re the Postmodern Jukebox clip in the Aug. 13 issue: 

“Thanks for sharing Effie Passero’s interpretation of ‘Creep.’ Listened again and I’m sweating from the emotional exertion.”

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