Category: economics

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Weapons and trade

The 21st century demonstrates again the direct power of weapons and the indirect power of trade. In 2026-10 we experience the use of both as a force in international politics. Big as well as smaller powers push for the weaponization of trade as part of the overall arsenal of weapons. Rare earths, microchips, oil again, all serve to coerce nations into more lenient behavior. Welcome to the era of behavioral strategies in international politics. The revival of game theories and multiple applications in those markets or policy domains seems inevitable. Only the rational part of the behavioral strategies has changed to include higher stakes into the loss function of loosing a (repeated) game. States gamble not only in specific policy domains, but they raise the stakes even to their own survival. Populations of such states become hostage to the ruling elite and have hardly any exit possibilities from disaster. As nutrition and public infrastructures have become targets and weaponized as well. Modern warfare has entered an even more harmful phase on the global level. (blog entry inspired by Victor d. Cha, China’s weaponization of trade, 2026). 

power display of DragonBall characters 2026-11
power display of DragonBall characters 2026-11
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swop Credit default swops

Credit default swops (CDS) are popular again in the financial markets. Taking insurance against the risk of AI-giants, unused data centers or chipmakers defaulting on their massive debts has been on top of the agenda in the Financial Times on 2026-10-21. The last time a similar run on CDS happened was related to the bank, then much bigger financial crisis about 20 years ago. Remember those days “Too big to fail” and the huge bill put on governments and tax payers subsequently. The drop on Wall street on Thursday 29th and Friday 30-10-2026 send shivers through the financial markets. There seems to be the opinion that we have witnessed the peak of the AI-hype towards the end of October 2026. In the New York Times (2026-10) there was already an article which advocated that if the AI technology is not viable as a private enterprise, it should be nationalized to guard against abuses and make sure the military applications could continue to be exploited at full potential as other superpowers might equally do so.
We all heard or read the warnings about the riskiness of such investments even when hedged through CDSs, it is about time to return to investments that do not primarily build on other people’s intellectual property. 

credit-default-swops-swoped-2026-11

credit-default-swops-swoped-2026-11
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Splendid Isolation Iceland

In international politics the term “splendid isolation” refers to the British diplomacy of the 19th century to keep Great Britain out of the power struggles across Europe and as a separate force. Maybe the Brexit in the 21st century can be figured in terms of  a return to the ideal of a splendid isolation, despite the close economic links and joint democratic heritage since the 2WW.
Iceland had a referendum on opening EU-accession talks which it dismissed by 53% against to 47% in favor. As with the Brexit vote, countries rarely vote similar in all regions. Therefore, it is no surprise that an even larger majority of the population of Reykjavik voted in favor, but the 2/3 of the population living in rural areas, many related to the fishing industries, rejected the prospects of EU-integration. As a member of the EEA Iceland is already part of the more economic aspects of the EU, but a strong isolationist and independent diplomatic stance dominated. Sometimes it takes a generational change before the prospects for younger generations are taken into account in politics.

splendid-isolation-in-Paris-2026-10
splendid-isolation-in-Paris-2026-10
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Delors White Paper revisited

The former President of the European Commission Jacques Delors had prepared a white paper (1993) to guide economic reforms for the next few years from 1994 onwards. The report covered macroeconomic recommendations to spur growth, to improve competitiveness and create employment opportunities. The report achieved a balance between the 3 fields with an additional emphasis on sustainability. Based on the simulations of several macroeconomic models it became clear, that “… easing of the burden of statutory charges, which would be introduced as part of active employment policies, would have to be offset by tax measures so as not to swell budget deficits.” (p.157). A special emphasis was on job creation across all ages. Countries submitted comments and implementation plans which were published as an Annex also in multiple languages.
Recent discussions on the so-called 28th regime or a single simplified European Incorporation (EU-Inc) try to cut red tape in access to the European Single Market by creating a single company valid across the whole EU. However, it became quite clear that a separate and additional jurisdiction just for this EU-Inc would create additional administrative burdens of parallel courts and jurisdictions. Additionally, such an EU-Inc would open up ample possibilities of fraudulent evasion of taxes and social security contributions for businesses just created for this purpose from across the world. Sweden just had a hard time and succeeded in 2026 to dismantle a fraudulent network of Russian businesses set up in Sweden alone. Paris just picked a battle against fast fashion Chinese business SHEIN. Policing the EU-Inc across Europe would need thousands of additional persons and might disenchant many Europeans about the potentials of the European Single Market. (Image: Jacques Delors Centre Discussion of 28th Regime in Paris 2026-10-14)

Jacques Delors Centre Discussion of 28th Regime in Paris 2026-10-14
Jacques Delors Centre Discussion of 28th Regime in Paris 2026-10-14
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Peak AI

Many scholars, economists and politicians have predicted peak oil production before and were wrong in the estimate of the timing of the turning point. At the occasion of the Frankfurt book fair #fbm26, the sector’s coming to grips with the use of AI is all over the place. AI is the elephant in the room which threatens jobs and complete business models, but also creates new opportunities. On the Global Stage on 2026-10-7 the panel on innovation and experimentation in publishing discussed the issues based on first experiences. When I asked Chat-GPT for an opinion on, whether one of the presenters gave a realistic assessment of the potential of AI in publishing, it came up with a rather  sobering statement (see below). “Yes — the overall approach is realistic, but the slide makes it sound easier and more universal than it actually is.” A great opportunity for AI consulting to the sector subject to rapid change (again). Maybe the AI knows from my track record of prompts that I am a social scientist and favor critical thinking. Pleasing me, it ends by a suggestion that indirectly AI is less universal than is currently the dominant opinion. We might see a reckoning of AI that it (hopes) for its own sake, to be less universal than what the hype suggests. Peak AI could guarantee sufficient margins to survive comfortably, just like other not-so-social or not-so-sustainable sectors and technologies. 

AI on AI - it is not so universal 2026-10
AI on AI – it is not so universal 2026-10
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Legal illegal business

The world of business has to be quite well defined in order to make the borders between legal and illegal practices clear, transparent and enforceable. You name the business or trade and then check the rules governing it. For pharmaceutical products we have rather strict regulations, but smuggling across borders can be a challenge to national customs if online commerce can easily circumvent national controls. Trading on ebay in small amounts is not defined as a tax registered trade, if it is below certain amounts. However, this might be difficult to control and legal rules are at times tough to enforce. The construction sector has been closely scrutinized for illegal practices and sketchy applications of regulations with regard to health and safety of employees. Regulations can be a pain, but they have contributed to safe lives in many instances. (Image: construction of “Scheune” (barn) in Berlin 2026-9, future center of Kulturforum). 

Kulturforum construction 2026-9

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Leadership art or craft

In an English translation of a book on leadership we read: “Leadership is an art of creating a world that others would love to be part of.” (Pinnow, 2011 p. vii and ch 3). “Kunst” in German translates as “art”, but also in the sense of craft (Kunsthandwerk). We have seen “art” leadership which consisted in change management more like window dressing or just showing off a nicer logo for an organization. The crafted leadership has a whole toolbox at its disposal from which to choose according to necessities. Gardening maybe considered similar to leadership and management. You may create a piece of art that others would love to be part of, but you need craftsmanship, water management skills to nurture nature. 

Gardening skills and water management 2026 Berlin

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Rural urban interrelationship

Cities are no isolated microcosms. They rely on being delivered a huge range of products. Cities have been markets, hubs or platforms for exchange with their surroundings, neighboring communities as well as distant ones. Historically, quite many cities have built walls to limit access and strictly regulated access. In the 21st century with low levels of fertility, the demographic pressure to leave the countryside for jobs is less pressing, but many regions face the shrinkage of the countryside’s population. The interrelationship between the urban centers and the rural surroundings has to be studied and addressed due to the far-reaching consequences for both. Transportation into cities needs public infrastructure which can handle the necessary flows and exchanges of people and products. For too many decades we have focused on an either/or cleavage of an apparent dichotomy of urban versus rural. It is about time to correct this bias and take the rural-urban interdependence more systematically into account. 

uri urban rural interrelationship in food and drink

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VCs shun SA

Venture Capitalists have an eye on long-term safety of investments. Political upheavals, unrest or instability can deter investments as much as risks to the safety of the workforce. The abbreviation “SA” in Germany has at least 2 meanings. (1) Historically, it refers to the “Sturmabteilung”, which was important in the rise of the Fascist movement and Nazi-terror in the 1920s, 1930s. Foreign investors were right to shun away from investments during the rise of the Fascists in Germany as a total loss of the investment was to be expected. (2) In 2026-8 the abbreviation “SA” in Germany stands also for “Saxony-Anhalt”, one of the Federal States of Eastern Germany, formerly the GDR between 1949-1990.
The “Wallstreet Journal”, which is read by many international investors showed on its title page of WSJ 2026-9-7 a report by Bertrand Benoit on the disastrous election in Saxony-Anhalt giving the extreme right-wing party AfD close to an absolute majority of votes. The abandoned investment by Intel into a chip-production near the capital of SA, Magdeburg, has been in retrospect a rather wise investment decision. The internationality of the employees, who build and operate such plants, might have contributed to them feeling rather unsafe in a hostile environment towards foreign workers.

intel processor logo

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Climate Anxiety

The events of several wildfires and a too hot summer in 2026 have raised the level of anxiety related to climate change for many people. From the field of economics we know that the fear of an economic recession can be as bad for the economy as a statistical economic downturn. The anxiety about climate related bad events can trigger or worsen symptoms of depression. The research by Zacher and Kühner (2026) shows that psychological evidence supports this hypothesis. The 1 year follow-up clarified, that the opposite direction of causality is not supported by the data analysis. A pre-existing depression is not worsening due to climate change. The consequence of these results is that the total number of persons with depression is likely to increase with an additional source of depression, for example after experiencing a wildfire. Oceans are warming and the number of injuries on beaches due to poisoning from algae or medusaes (jellyfish) become more frequent as well. Lots of sources for increasing climate related anxieties. In the economic costs of global warming and climate change we frame this as second round effects of climate change.

young curious boy touching jellyfish on beach