This will be, I think, mostly a news roundup day, because I have things going on that will occupy my time. Let’s start with some interesting news that provides perspective on the AI craze, the reality of sanctions blowback, and signs of a new China policy under Trump 2.0. Put it together and it’s important—both long and short term.
Starting with AI, the first tweet already exposes the Western Ruling Class grift as well as the sanctions backfire phenomenon. It’s not that AI isn’t a thing, it’s that it was hyped beyond reality by the financial sector. Huh! Go figure!
All benchmarks now confirm it: Deepseek is truly is as good as OpenAI's o1 (which is top of the range) for 3% of the price. Boom.
And that's when you want to pay for the API. You can also use it Open Source for "free" (which you can't do with o1).
There's no overstating how profoundly this changes the whole game. And not only with regards to AI, it's also a massive indictment of the US's misguided attempt to stop China's technological development, without which Deepseek may not have been possible (as the saying goes, necessity is the mother of inventions).
Philip Pilkington @philippilk
I always thought the AI stuff was overhyped. But if you thought this stuff was the future a couple of postgrads in China just stole the future from a bubble economy in the West with apparently terrible capital allocation. 
1:57 PM · Jan 24, 2025
Maybe, hear me out here, AI was massively overhyped because NVIDIA is one the last remaining viable American hardware companies and Deepseek is just exposing the whole sector as a giant bubble full of capital misallocation and overinvestment.  x.com/natolambert/st…
The responses to this have been nuts. There are apparently a ton of AI hype-beasts on Twitter who have literally no idea what to do now that a few underfunded Chinese guys blew up their collective grift. Their response is now that DeepSeek is some sort of CCCP psyop.
This is what makes the DeepSeek thing so funny. A bunch of grifters have been selling AI secret sauce for years - spooky mystery juice that could never be fully explained. Now a bunch of young guys just wrote a good algo, published it, and the circus tent burned down.
But it economises on the chip use. The Western model was to go MAXCHIP. That was the scammy sales pitch. “You need a gorillion chips with INFINITEPOWER”. This whole thing is a grift from top to bottom. Classic bubble.
Nonzero probability that we’re sitting on another massive Dotcom-style bubble.
Uh oh… people are waking up to the fact the NVIDIA hype was a total scam that was based on the idea that AI models would never become more efficient.
Will be interesting to see if this guy and his buddies end up blowing up the NASDAQ bubble. NVIDIA is something like 14% of the NASDAQ market cap right now.
Up top, Arnaud Bertrand pointed to the failure of the sanctions model for keeping the US on top. PP quotes from an article that highlights this blowback:
How many examples do we need of export restrictions and sanctions on China driving innovation before policymakers in DC get it through their skulls? Really, it's getting embarassing at this stage. DeepSeek is only the latest leapfrog in part created by these restrictions.
However, there are signs that Trump 2.0 has a smarter policy in mind—or at least is paying attention to reality in all it’s complexity (economic, financial, military, geopolitical). There’s no reason to go overboard with optimism here. The Rubio - Wang Yi phone call and the respective readouts are subject to varying interpretations. There was no exact about face by the US, although the rhetoric appeared tone down. On the Chinese side the distrust is palpable—meaning, don’t expect China to abandon BRICS or Russia. Still, as with Trump and Russia, there seems to be a willingness to engage seriously and respectfully, which is a refreshing change from the Zhou screwups Blinken and Sullivan:
Chinese MFA's English readout on Wang Yi @marcorubio's phone call over China-U.S. ties. Wang:"I hope you will act accordingly(希望你好自为之) and play a constructive role for the future of the people of China and the U.S., as well as for the peace and stability of the world."
The phrase “act accordingly” is variously interpreted to mean something like, “make the right decisions” or maybe, in a more loaded interpretation, “be smart.” Other sources interpret this as a “warning.” Here’s a Chinese summary from the same tweeter:
What are key messages sent in Wang Yi#Rubio phone call? My analysis from a readout from Chinese MFA:
 #China-U.S. ties in a new era:
Wang: China, U.S. should find right way to get along in new era.
Rubio: The U.S. and China are two great nations. The U.S.-China relations are the most important bilateral relationship of the 21st century and will shape the future of the world.
 Xi-Trump phone call reached a series of consensus: Xi comprehensively expounded China's policy to the U.S.,#Trump said U.S.-China cooperation can solve many problems in the world.
 On China's strategic intention:
Wang: China has no intention to overtake or replace any country, but must safeguard its legitimate rights to development.
 Over #Taiwan question:
 Wang: Taiwan has been an integral part of China's territory since ancient times, and China will never allow Taiwan to be separated from the motherland. Wang asked the U.S. to handle it with caution.
Rubio: U.S. does not support "Taiwan independence" and hopes the Taiwan question can be resolved by peaceful means which are acceptable to both sides of the Taiwan Strait.
From this reading, Rubio appears to be attempting a bit of a reset on Taiwan, back to at least Trump 1.0 or maybe further. This Bloomberg article makes the conversation sound a bit more prickly—or, perhaps, cautious. Not a love fest, and China’s diplomatic expression of criticism of past US behavior is clear enough. But overall positive:
Rubio emphasized to Wang that the new US administration would pursue a relationship with China that “advances U.S. interests and puts the American people first,” State Department spokeswoman Tammy Bruce said in a statement on Friday.
“The secretary also stressed the United States’ commitment to our allies in the region and serious concern over China’s coercive actions against Taiwan and in the South China Sea,” she said.
Wang told Rubio that the two sides should implement the “important consensus” reached between the Chinese leader Xi Jinping and President Donald Trump, according to a Chinese government statement. Wang reiterated that Beijing would never allow Taiwan to be separated from the mainland, and warned the US to handle related matters carefully.
“A major country should act like one. It should shoulder its due international responsibilities, safeguard world peace, and help countries achieve common development,” Wang said, according to the statement. “I hope you will conduct yourself properly and play a constructive role in the future of the Chinese and American people, as well as in world peace and stability.”
PP goes a bit further, and there are signs that Trump 2.0 is looking to reach out to break the previous deadlock in relations:
Trump's top defense official for Southeast Asia on unilateral aid cuts to the Philippines: "The US might begin a cooperation spiral with China by proposing to remove US military forces or weapons systems from the Philippines in exchange for the CCG executing fewer patrols..."
Trump legit has the opportunity to carve up the world rationally into spheres of influence, work with rivals on a pragmatic basis, and maybe save American from its otherwise grim “failed empire” fate. 
4:17 AM · Jan 25, 2025
Well, that would be an interesting trick to pull off. Would require an Anglo-Zionist mindset transplant. Still, Trump appears to be working according to a plan to gradually back the US out of the global cop role. Next stop, Middle East?
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Anglo-Zionists live in the short term. That's another way of saying that America is a means to an end, not a good in itself to be nurtured.
David P. Goldman @davidpgoldman
**Sanctions can backfire.** The seizure of $300 billion of Russia's FX reserves after the 2022 invasion of Ukraine scared some big central banks out of the Treasury market.
**According to my model, the Treasury is paying an extra 0.8% to borrow on the bond market. With a $36 trillion national debt, that's nearly $300 billion more per year.**
While the US Treasury’s borrowing requirement has risen sharply, foreign central bank holdings of US Treasuries have declined. This stands in sharp contrast to the 2007-2012 period (including the World Financial Crisis), when the Treasury stepped in to support the banking system with a (then) unprecedented bailout of $800 billion. Foreign central banks, notably including China, stepped in to support the Treasury, doubling their holdings of US government debt to $4 trillion from $2 trillion in 2007. During the COVID crisis of 2020, by contrast, foreign central banks (notably including China) reduced their holdings of Treasuries.
Anglo-Zionists live in the short term. That's another way of saying that America is a means to an end, not a good in itself to be nurtured.
David P. Goldman @davidpgoldman
**Sanctions can backfire.** The seizure of $300 billion of Russia's FX reserves after the 2022 invasion of Ukraine scared some big central banks out of the Treasury market.
**According to my model, the Treasury is paying an extra 0.8% to borrow on the bond market. With a $36 trillion national debt, that's nearly $300 billion more per year.**
The Biden Administration was the dumbest in American history. https://asiatimes.com/2025/01/how-the-us-sanctioned-itself-in-ukraine/…
2:09 PM · Jan 25, 2025
While the US Treasury’s borrowing requirement has risen sharply, foreign central bank holdings of US Treasuries have declined. This stands in sharp contrast to the 2007-2012 period (including the World Financial Crisis), when the Treasury stepped in to support the banking system with a (then) unprecedented bailout of $800 billion. Foreign central banks, notably including China, stepped in to support the Treasury, doubling their holdings of US government debt to $4 trillion from $2 trillion in 2007. During the COVID crisis of 2020, by contrast, foreign central banks (notably including China) reduced their holdings of Treasuries.
Imagine the unimaginable. The fog that is decades of biased education, indoctrination, and propaganda is lifting.