Here’s an attention grabber — Why China Can Collapse the U.S. With One Decree. It’s by David Dayen at The American Prospect, so I’m inclined to take it seriously,
When Donald Trump reacted to China’s export restrictions on rare earth minerals—a group of 17 chemical elements used in almost all electronics—by threatening a new 100 percent tariff on Chinese goods, Wall Street investors who had yawned at most of his erratic announcements for six months finally took notice. It was the same stock-tanking pressure that led Trump to climb down from his Liberation Day tariffs; sure enough, by Sunday, the TACO (Trump always chickens out) vibes started kicking in.
“I have a great relationship with President Xi … he’s a great leader for their country, and I think we’ll get it set,” Trump told reporters on Air Force One on the way to Israel. “Don’t worry about China, it will all be fine!” he exclaimed on Truth Social. Next thing you know he’ll be apologizing in Mandarin like John Cena.
Here’s an explanation of the John Cena reference if you’re like me and didn’t get it.
Holding the president of the United States on a tight leash is certainly a lucrative asset. But investors should probably be more wary of the situation. America has made an unusually directional economic bet that is at this moment totally dependent on Chinese rare earth exports. The circumstances that brought us here long predate Trump and are rooted in decades-long failures to retain our technological know-how and channel it into industrial production. It’s never too late for a wake-up call, but the country is in a terribly vulnerable position where China can snap its fingers and snuff out the only thing propping up our economy.
Our economy is currently being propped up by what’s looking like an AI bubble. “Close to half of the gain in gross domestic product this year will come from data center construction, and around 80 percent of stock market gains are attributable to a handful of AI-heavy tech companies,” Dayan writes. And then he goes on to describe how we got here. This is the accumulation of a lot of business and government decisions going back many decades. But now that business karma is getting ripe we’ve got a perfect moron in charge of our economy to steer us through the crisis.
Paul Krugman has a post up about technology bubbles that’s partly hidden behind a paywall. But here’s another article that explains what Krugman wrote.
In his newsletter on Monday, Krugman said that Trump’s tariff announcements six months ago were “a massive betrayal of the world’s trust,” noting that previous tariff reductions were achieved “through many rounds of international negotiations, in which the U.S. and other nations solemnly agreed not to backtrack.”
Krugman said Trump now appears surprised that other countries are retaliating, referring to China’s new export controls on rare earths, which include several vital inputs for U.S. industry.
Reacting to the administration’s hypocrisy on the matter, Krugman said, “Gosh. Aggressive unilateral trade action is a ‘moral disgrace.’ Who knew?”
Krugman said that there is “one big difference” between the trade strategies of the two countries, and it is that, unlike the U.S., “the Chinese appear to know what they’re doing.”
China has us by the boy parts, thanks to Trump.
See also Robert Reich, Beware the Oligarchs’ Two Bubbles. The two bubbles in this case are AI and crypto. Regarding AI, Reich notes that the big players all seem to be way over-leveraged. They’re tottering on the edge, so to speak.
Frankly, I don’t care which giant corporations or ultra-wealthy investors strike it big and which lose their shirts.
I worry about the economy as a whole, about working families who could lose their jobs and savings. The losses when the AI bubble bursts could ricochet across America.
Trump has put David Sacks, co-founder of an AI company and, of course, a fierce Trump loyalist, in charge of AI and cryptocurrencies. So far, Sacks has killed any restrictions and regulations that might stand in the way of either.
The Trump regime has been opening the doors for trillions of dollars in pension funds to be invested in crypto, AI, venture capital, and private equity. Even 401(k) plans have joined the flood.
There are times when being poor seems almost an advantage. But collectively we are in a terribly precarious place right now. If you have investments you might want to check for vulnerabilities. A bit later, Reich continues,
The flood of money into these two opaque industries — AI and crypto — has propped up the U.S. stock market and, indirectly, the U.S. economy.
AI and crypto have created the illusion that all is well with the economy — even as Trump has taken a wrecking ball to it: raising tariffs everywhere, threatening China with a 100 percent tariff, sending federal troops into American cities, imprisoning or deporting thousands of immigrants, firing thousands of federal workers, and presiding over the closure of the U.S. government.
When the AI and crypto bubbles burst, we’ll likely see the damage Trump’s wrecking ball has done.
I fear millions of average Americans will feel the consequences — losing their savings and jobs.
See also Jared Bernstein and Ryan Cummings in the New York Times, Warning: Our Stock Market Is Looking Like a Bubble. (Gift article.) While they throw in disclaimers about how maybe AI is not a bubble, they go on to say it has all the hallmarks of one.
I just hope the bubbles burst sooner rather than later. At least it could destroy most of what is left of Trump’s support.
All this technology data-center building is also putting huge demands on our water and power resources that I doubt we can afford. Reich says that crypto is basically a Ponzi scheme, and I am inclined to believe him. AI may very well have useful business and other applications, but large parts of it currently are just being used to generate slop turning up on social media. At the very least it’s going to have to be tightly regulated at some point.
On another note, last night Letitia James spoke at a rally for Zohran Mamdani. In any match between James and Trump, I’d put money on James.
Update:
Trump says he’s being called “the greatest president of them all. Does that include Washington and Lincoln? Yes it does.”
— Aaron Rupar (@atrupar.com) October 14, 2025 at 2:26 PM
Of course.
Just my opinion, but there's a lot of money at the top. More than at any time in the last century, or more. Individuals, families, and corporate monsters have more money than they know what to do with. Inflation is here, which means they lose money by leaving cash in the bank. IMO, the stock market is overvalued (in part) because it's going up faster than inflation. Investors may know it's overvalued and think they can cash out if/when the crash starts.
Crypto is designed to be a bubble. Or someone tell me about any crypto that's been around longer than a decade with no crash. (I define crash as an oscillation of over 70% of the previous value in 90 days.) Crypto guys are in jail for engineering the crash (sometimes). You start the company, issue the crypto, create a phony rush of sales, sucker buyers on the prospect of multiplying in value, decide when peak is, sell out for maximum gains, and let it crash. Rinse and repeat.
AI strikes me as phoney. I went to Wendys and a machine took my order. I asked at the window, WTF, and the girl told me it's an AI ordering system. But it was too stupid to explain that Wendy's was out of chili. So a system that can't do what a HS dropout can do is gonna revolutionize the world. Impressed I am not.
Musk keeps promising self-driving cars. It works, sometimes. It crashes, sometimes. May the force be with you in a Tesla. Or on the same road as a Tesla. Impressed, I'm not. I think self-driving cars can work with roads engineered for self-driving cars. I do not think the 'judgement' is there in a car to deal with dynamic situations. Yet.
Economic crash in Trump's term? I would say there's a 90% chance. It was the opportunity that gave FDR the support to rein in the banks, regulate Wall Street, reform taxes…. So I hope it's bad enough for a progressive president to have the clout to implement real change.
"But it was too stupid to explain that Wendy's was out of chili"
Maybe it was offering highly intelligent advice, just say no to the chili!
A lot of things are labelled "AI" which really aren't. And there are a lot of poorly designed systems which may have an AI component, but it can't hide the fact that they're poorly designed.
No one ever thought to add the "are we out of chili?" feature to the Wendy's system, OR a manager made the decision to not include it (features cost $ to build). They had other priorities.
I use AI all the time to find and summarize what used to take me hours of research. It's an expected part of any software project, to prototype certain features you're not sure how to pull off. AI is a massive timesaver in this regard, abetted by the fact that dozens of others have faced the same or similar issues you're now facing, and have written about it on the web. AI finds these results and puts them together in a coherent fashion.
AI – properly designed – is going to revolutionize every field of endeavor. Being able to quickly sift through trillions of data points and come to a reasonably accurate conclusion will change everything. This is also why AI is likely to become more accurate, not less, since noise or disinformation are going to get drowned out by the larger dataset of honest research.
I eagerly await real-time fact checking of the nonsense coming from right wing media – this is coming, because the political benefits from this are immense, and the technology is just about here to make it possible. I have often thought about rolling up my sleeves and joining the effort to create this, but it's much too big of a project for this aging engineer, and I'm certain there are well-funded teams of younger people working on it.
Self-driving cars are in their infancy. There is too much money to be made to not perfect them, particularly in the long-distance trucking industry. The money is in insurance savings (far fewer accidents) and being able to use automatons instead of human drivers, who need to rest and draw a salary. Truck driving is one of the last bastions of blue-collar work, and the social changes that are coming will be immense.
Think about how human switchboard operators were a part of the early rollout of telephones, and how all of that was displaced by direct distance dialing. AI is just another example of this.
I'm not particularly a cheerleader of AI, it's just that it's coming whether I like it or not, and it will change everything. The challenge will be to position yourself on the controlling end of this tool instead of being a victim of change that's coming anyway.
"AI – properly designed – is going to revolutionize every field of endeavor"
I'm not so sure about that. One thing it may do is stifle human learning and creativity in many fields. I worked as an electrical engineer for 33 years, I learned alot from on the job trial and error, I learned a whole lot from mistakes that I had made, it made me a better engineer. If people are just going to do what AI tells them to do well that's the end of that, no mistakes, no revelations, no progress the end of learning?
That's a real concern. I've read comments by young people wondering about going into engineering, and all the heavy duty studying it takes to master such a difficult field, and for what? If AI is going to do the heavy lifting.
The hope is that it will free humans from tedious work and enable more creative work. Those who can master AI in this fashion are going to be the winners in the coming age.
You are right. A massive explosion is exactly what we are seeing. It is not helpful but we are talking about a pResident that literally sh!ts his pants on the world stage.
And the media tells us that all is coming up roses!
So, the bubble will burst, but in the mean time, and in the past bubble years, the Crypto scammers will buy real assets with their winnings and the AI overlords will build and have built a personal-corporate-government surveillance tool that will make the Stasi look like amateur cave men. The bubble will burst and the public will have to soak up the massive monetary losses and long-term societal damage.
The one weird thing about crypto is it that it will probably kill the dollar-system and lead to massive poverty. The top of the top ten things that is bad and not so good about AI surveillance is that it is stupid, ham handed and naturally right-wing, not because of the designers, but because it is stupid, uncreative design of the models and their training data.
Fascism is only the first step in our collapse.
Big Yes to all; my only quibble is that things are far worse than Maha describes.
The Stock Market is waaay over-inflated; the longer it keeps going up, the more dangerous the crash. The AI Bubble is very real – and is likely to trigger the crash – but there are other fundamental problems with the US economy (concentration of wealth/income, etc).
Crypto is and has always been a Ponzi scheme – the best one ever.
When – not if – the Dollar loses its status as the default global currency, we will see serious inflation. Essentially, our lifestyle has been propped up for decades by printing money to buy things from other countries. It worked because everybody knew that everybody else would accept $ in exchange for real goods. Now, everybody knows that won't be true forever; but everybody also knows that the collapse of the $ will be a mess for everybody. Sensible countries are trying to create a global exchange system to replace the dollar, but it's not easy, and the transition is going to be scary.
Of course, Trump's idiotic approach to Tariffs has accelerated the end of Dollar Hegemony. (Smart, slow, targeted Tariff increases might have helped resuscitate US manufacturing, maybe).
And Yes, China is now strong enough (economically, militarily, etc) to openly defy Trump & the USA. Luckily, China's leaders are rather cautious – truly 'conservative' in the technical sense. They believe – IMO, correctly – that China's rise to world power is inevitable, so they can afford to be patient about it. They are working hard to avoid a Thucydides Trap (war between rising Power and fading Hegemon), because that would make things worse for everybody. So far, they've succeeded, but managing the decline of the USA won't be easy.
Ian Welsh has written extensively on how China has surpassed the USA:
China Is Going To Leave The US What America Left Britain: Nothing – Ian Welsh
The West Cannot Win A Trade War Against China – Ian Welsh
One of the tells that crypto is a ponzi scheme is the way that Trump and Melania have gone into it, like Trump University, Trump Steaks and so on. It's the same idea as these older cons, but completely virtual. There's no need to peddle a physical product anymore, just a "share" in what amounts to some bits in a computer network, inflated by the belief of millions that it has value.
I was thinking about my tenure at GE (1980s – early 90s), and the spectacular downfall of that company. Jack Welch realized it's much easier to sell financial products than to actually create a factory to produce and sell something physical. By the year 2000, fully half of GE's revenues were coming from GE Capital, their finance arm. At that time GE was the most valued company on the Dow Jones index.
Welch retired in 2001, financial bubbles subsequently popped, and almighty GE was brought to its knees, selling off its profitable industrial divisions to dig its way out of the financial mess Jack helped create.
Mary Kuykendall wrote a good book about GE
https://www.goodreads.com/book/show/26454599-rebuilding-the-ge-house-jack-blew-down
"GE was brought to its knees"
I worked as an engineer for what used to be called Westinghouse, GE's big competitor we would get an occasional hire from GE but there where way more engineers going from Westinghouse to GE. GE paid better and they didn't work near as many hours, we used to call them Generous Electric!
I grew up in a GE town, and everyone called it by that name also. It offered the best pay in town, but you really had to work. The union guys, not so much.
Going OT: you can tell when the GOP has been given their talking points. They don't even pretend to mix up the words or improvise. The last few days the coordinated message has been that No Kings II is an American-hating group of violent terrorists. At first, I was amused that the administration was trying to discredit a protest in advance.
My concern is that Miller is working with real domestic terrorist groups to make the event, which is nationwide in hundreds of locations, violent in some of them. Why? Trump wants to clamp down on free speech, freedom of assembly, and pubic opposition to fascism. So far, progressives have not responded to flagrant violations of human rights in the US, even against US citizens with violence. They are responding in growing numbers, often with satire and ridicule. My hat is off to Portland, and Chicago a close second. Y'all rock!
IMO, the 2025 playbook calls for provoking violent incidents to provide an excuse for martial law. Eight hundred generals and admirals were not called to Virginia to hear about getting fat soldiers out of combat roles. Again, IMO, the endgame expects that Trump will lose popular support badly and the military will support a coup in violation of the US Constitution. There's a very real risk that the military will NOT murder US civilians unless they can be convinced that these civilians are actually a threat to the Constitution. (Orwell must be rolling in his grave.)
There's a problem that even the dim bulbs in the Proud Boys may have figured out. If they attack non-violent Americans exercising their First Amendment rights, they can be arrested and charged under STATE law. SO it's Oregon, California, New York, and Illinois who will run trials that will produce convictions that Trump can not overturn. DC is a different story.
Am I concerned? Yes. Will I be there in Tampa with a sign with Trump's pic and a caption that says, “Support Your Local Pedophile" Hell, yes. It will be in my hand. I wish somebody had their finger on the pulse of the wackos. The feds so not. State agencies might. Perhaps I am wrong, and the vilification of "No Kings" is not a preamble to violence against free speech. If I could make one suggestion, it would be to keep your phone-cams running. The invention of a portable camera for virtually everyone has robbed tyrants of control of the narrative – when contradicted by evidence.
Violence against protesters in the 60s fueled the civil rights movement. Have Americans lost their nerve in the last 70 years. I'm betting not.
One of the people I follow advised: if it starts to get violent – from agents provacateurs – head in the other direction. Don't add fuel to the fire they're trying to ignite. Even better, get a frog costume, a boom box, and start dancing and making merry. Deliberate de-escalation.
That sucking sound you hear is AI draining electricity at a rate that will force power companies to frantically find new sources and enlarge the grid. How will they pay for such an enormous undertaking?
The usual… hiking rates on a daily basis? brownouts and rolling blackouts?
You know… the Schwartzenneger method used in california a few decades ago. (ask your parents and grandparents).
All for losers to squint at and fall in love with what they think is real.
I'm beginning to think the mothership can't get here soon enough.
Even worse: the AI bubble is now a satanic alliance between the three worst economic sectors – Silicon Valley, Wall Street, and Big Oil/Gas/Coal. Wall Street drools at Silicon Valley's promise to eliminate millions of white-collar jobs while providing an excuse to build more CO2-spewing power plants.
If the thunder don't get you then the lightning will…
"“Don’t worry about China, it will all be fine!”"
Diaper don is in way over his head with Xi!
Just a thought: If you find yourself in a bar that allows Nazis in, you are in a Nazi bar.
Pascal Lottaz at Neutrality Studies looks at the export controls/sanctions from quite a different angle. at Shocking U.S. Defeat: China's Rare Earth Checkmate Is NOT What Media Pretends.
I do not think he would disagree with Krugman et al. but he is not an economist/financial analyst and looks at other things. Also he actually reads the Chinese Gov’t policy documents that discuss the stated reasons for this policy, something I suspect a majority of Western pundits do not usually do.
If I understand correctly, his thesis is that China wants to severely affect the USA’s ability to act in a militarily aggressive manner for the next few years.
If you cannot build a Tesla without rare earth metals nor can you build a Patriot missile battery or an F-35. He points out that US military stockpiles (and presumably of the rest of NATO) are severely depleted and without Chinese imports are not going to be restocked in the next 5 years or more even making the somewhat risky assumption that the USA has the industrial capacity.
Why does he say this? Probably pecause the Chinese Gov”t policy documents explicitly link the export controls to civilian/military dual-use considerations.
Two things can be true at the same time.