Welcome to this week’s edition of Geopolitics & the Day After. Each week, we curate and synthesize key developments from global politics, economics, and financial markets, drawing from a wide range of trusted sources. Our goal is to provide you with a clear, concise, and insightful overview of the forces transforming the world today and shaping tomorrow. Below is an overview of what we cover this week:
Geopolitics traces how the erosion of a single dominant rule-enforcer is exposing the limits of any order built on procedures alone, from Britain’s leadership change to a fracturing global commons where chokepoints once managed quietly are now openly contested.
Geoeconomics examines how trillions in undisclosed tech debt, record stock valuations rivaling 1929 and 1999, and a multi-decade bond bull’s reversal are converging into a fragile financial order propped up by AI expectations that remain unproven and increasingly expensive to sustain.
Global Junctions shows how China’s grip on critical minerals licensing, open-source Chinese AI models rattling U.S. markets, and reported Russo-Chinese satellite-disabling research are converging on the same physical and institutional chokepoints the global economy still depends on and cannot yet replace.
Global Trajectories outlines how a historic wealth transfer skewed toward the already wealthy, an unexplained acceleration in Earth’s energy imbalance, and the looming erosion of labor-based tax revenue are each compounding slow-moving structural shifts that current institutions and models are not built to absorb.
Geopolitical Concerns
‘The Return of the Great Powers’ and ‘The Coming Storm’: Old Divisions Renewed
Robert D. Kaplan, WSJ
Benn Steil, Project Syndicate
How Andy Burnham, ‘King of the North,’ Conquered U.K. Politics
Michael D. Shear, The New York Times
The Slow Death of the Global Commons
Robert A. Manning, Foreign Policy
The post-Cold War assumption of a self-sustaining liberal order has given way to naked great-power competition. One historian at Cambridge University defines great-power status in terms of geography, population, nuclear arsenals, economic size, and resilience under strain, rather than a country’s cultural or diplomatic reach abroad. East Asia has replaced early-20th-century Europe as the likeliest site of a future great-power war centered on Taiwan, a comparison drawn explicitly to Alsace, Bosnia, and Belgium before 1914. Roughly half a percent of the world’s population has experienced great-power war today, leaving little collective memory of what such a conflict actually costs. Separately, Kurt Gödel’s incompleteness theorem and Kenneth Arrow’s impossibility theorem offer a useful frame for why a political order built entirely on rules can never fully regulate itself, since any system elaborate enough to interpret its own rules eventually meets a question those rules cannot answer. Four episodes illustrate the pattern domestically: the post-9/11 expansion of surveillance and detention authority, the 2008 bank bailouts, COVID-era emergency mandates, and the January 6 attack followed by mass pardons of participants. Each left a larger share of the public doubting that liberal-democratic procedures could manage a crisis both effectively and impartially. The same dynamic now plays out internationally. The rise of China as a near-peer competitor has ended the historically exceptional concentration of American power that once let Washington operate simultaneously within and beyond the rules it established after 1945. The contrast is visible between the 1991 Gulf War, conducted strictly under a UN mandate that did not authorize regime change, and the far less constrained war of 2003. What was once managed discreetly in the background of the postwar order has moved into the foreground, and once seen, cannot be unseen.
Andy Burnham’s ascent to become Britain’s 59th prime minister traces to a 2020 rebuke of a Conservative government that had imposed lockdown restrictions on Greater Manchester while refusing an $87 million request to protect low-income workers. That moment earned him the nickname “King of the North” and set his path from Manchester mayor to Labour leader. His rise accelerated after Keir Starmer’s popularity collapsed amid a scandal over his appointment of a Jeffrey Epstein associate as ambassador, and after a special election returned Burnham to Parliament for the first time in nearly a decade. Burnham now inherits high government debt, slow economic growth, and aging infrastructure, with no clearly stated plan for the trade-offs ahead. Elsewhere, Iran’s attempted monetization of the Strait of Hormuz is testing the same principle of open access to the global commons. A US-Iran memorandum commits only to a 60-day window of free passage before Iran and Oman “define the future administration” of the strait, leaving its longer-term status deliberately vague. This ambiguity has already prompted Indonesia to float tolls on the Strait of Malacca, through which 22 percent of world shipping passes, and it sits alongside intensifying US-China-Russia competition over Arctic sea routes and lunar bases under a 1967 treaty with no binding rules on commercial use. Vaccine nationalism during COVID and the US withdrawal from the World Health Organization and the Paris climate accords point to the same retreat from the cooperative frameworks, built after 1945, that once governed resources no single power could claim alone.
Geoeconomics
Five US tech giants’ hidden debts soar to $1.65tn on opaque AI funding
Kohei Yamada, Nikkei Asia
The next crash: why this time might not be different
Martin Wolf, Financial Times
Hoisington, US Bond Bull for Decades, Turns Decidedly Bearish
Elizabeth Stanton and Greg Ritchie, Bloomberg
A Believer’s Guide to Buying Gold Now
Merryn Somerset Webb, Bloomberg
Off-balance-sheet debt at Alphabet, Microsoft, Amazon, Meta, and Oracle has grown eightfold in roughly four years to $1.65 trillion. That figure now exceeds the $1.35 trillion the same five companies report as debt on their balance sheets. The gap exists because long-term GPU and server purchase agreements that have not yet been delivered, along with data center leases that are not yet operational, are disclosed only in footnotes rather than recorded as liabilities under current accounting rules. Meta’s hidden debt alone stands at $420 billion, nearly triple its recorded figure, and includes a joint venture with Blue Owl Capital for a Louisiana data center whose total cost Meta now expects to exceed $50 billion, with a contract guaranteeing investor losses if the facility’s lease is ever terminated. Oracle’s hidden debt has grown more than thirtyfold in four years to $273.3 billion on the back of its Stargate project with OpenAI, and the Bank for International Settlements has labeled this reliance on institutional investors “shadow borrowing,” warning that a stall in data center construction or a drop in utilization could turn much of this debt real very quickly. The cyclically adjusted price-earnings ratio for US stocks reached 41.4 in July, a level exceeded only in September 1929 and December 1999. Only those two prior peaks have come close, and both were followed by major market corrections. The “excess Cape yield,” a measure that has historically predicted the following decade’s stock returns, sits at 1.4 percent against a long-run average of 4.7 percent. That gap implies prospective real returns of roughly 2.4 percent absent a genuine transformation in productivity or the distribution of income between labor and capital. Roughly 40 percent of the S&P 500’s market capitalization now depends on the continuation of the AI boom, according to Bank of America data, a dependency compounded by public debt in advanced economies that has returned to levels last seen at the end of World War II and by US fiscal deficits above 7 percent of GDP.
Hoisington Investment Management, bullish on US Treasuries for more than three decades, has reversed course. Its latest quarterly report cites a fiscal backdrop it says will push both inflation and long-term yields upward, with inflation’s long-run equilibrium migrating toward 3.5 to 4.5 percent and a meaningful risk of episodes above 5 percent. The fund has cut the effective duration of its holdings from 20.88 years to under one year since September, and its assets under management have shrunk to less than $2 billion from roughly $5 billion in 2020 after five years of annualized losses of 8.7 percent. The pivot began in the first quarter, when a US attack on Iran sent oil prices and inflation expectations higher, and the 30-year Treasury yield has since approached 5.2 percent, its highest level since 2007. Rising yields are compounding a parallel flight toward gold, which has outperformed US stocks since 2000 and risen nearly 122 percent over the past five years. Central banks bought a record 1,200 metric tons of gold in 2025 and another 250 tons in the first quarter of 2026 as they diversify away from the dollar. This is part of a broader “debasement trade” against public debt levels above 120 percent of GDP in the US and above 100 percent in the UK, France, Italy, and Canada, levels that financial advisers increasingly treat as justification for gold allocations of 5 to 15 percent of a portfolio, a level of institutional acceptance that would have been unthinkable when “gold bug” was still used as an insult.
Global Junctions
China and the new era of critical minerals diplomacy
Camilla Hodgson, Financial Times
The Ancient Texts That Teach You to Be Human
Elias Wachtel, The Atlantic
The dangers of investor fatalism
Gillian Tett, Financial Times
What to Know About the Chinese AI Models Rattling U.S. Stocks
Raffaele Huang, WSJ
Three decades of Chinese investment and subsidy, aided by Western deindustrialization, have left China producing the vast majority of the world’s yttrium, gallium, and germanium. Beijing now runs a licensing system that determines which overseas companies receive minimum-viable but unpredictable shipments, based on lengthy applications proving civilian end use. One semiconductor industry supplier describes yttrium as “the killer chokepoint” with “no date where we will have any fully de-risked supply chain.” Defense contractors report they can no longer source tungsten from China at all, a shortage made worse by the fact that the US currently has no active tungsten mines of its own. Washington has announced roughly $40 billion in minerals funding since 2022 and taken equity stakes in domestic miners, while Brussels has committed about €6 billion to strategic projects of its own. Still, six non-Chinese companies alone have outlined gallium production plans that could bring online nearly half of annual global demand, a buildout experts warn could crash prices without coordination, the same way China’s own recommencement of exports could just as easily undercut it. On a different front, a debate over what AI actually displaces has revived a century-old argument about the purpose of education. The skills now rendered obsolete are increasingly the “practical” ones once considered secure, including entry-level coding, upending the old assumption that vocational training was the safe choice against automation. The argument echoes a debate from the late nineteenth century, when critics dismissed classical education as similarly impractical, only for its defenders to argue that its value lay in shaping character rather than employability. The case for studying subjects with no obvious market application rests on that older distinction between learning that helps a person do something and learning that helps a person become someone, a distinction that survives even as AI gets better at parsing text.
Reports from Der Spiegel, Insider, and Le Monde describe a Russo-Chinese working group that has met five times. Its goal is developing a staged strategy for disabling American satellite systems, including SpaceX’s Starlink, which Ukraine’s former defense minister has called the blood of the country’s entire communication infrastructure. US banks continue issuing bullish recommendations on SpaceX stock even as one venture firm active in military tech describes orbits as “battlefields” nations naively hope will remain governed by treaty. This divergence reflects investor fatigue after a decade of overlapping shocks, from the 2008 financial crisis through the pandemic, the full-scale invasion of Ukraine, and the Iran war, that has normalized tail risk rather than eliminated it. A comparable gap between hype and scrutiny is playing out in AI models themselves. Moonshot AI’s Kimi K3 is a 2.8-trillion-parameter open-source model that ranks third for intelligence behind Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6 Sol. Its release triggered a selloff that pushed a major semiconductor stock index down 10 percent in a week, echoing the pattern set by DeepSeek’s release in January 2025. Moonshot has said it plans to make the model fully open-source later this month, a move that could accelerate adoption among cost-conscious developers worldwide. After the DeepSeek shock, US AI firms responded with hundreds of billions of dollars in new investment announcements that ultimately reassured markets the underlying demand was real.
Global Trajectories
Boomer Wealth Transfer Set to Favor America’s Richest Families
Saijel Kishan, Bloomberg
The rate at which Earth is absorbing energy is alarming scientists
The Economist
The AI Doomsday Scenario Nobody Talks About
David Ramli, Bloomberg
The Coming Clash Between China and Europe
Thorsten Benner, Foreign Affairs
Of the projected $93 trillion in Baby Boomer wealth set to change hands in the coming decades, nearly three-quarters will go to households already in the top 10 percent by net worth. After liabilities, retirement spending, charitable giving, taxes, and fees are subtracted, less than 40 percent of the total, or about $36 trillion, will ultimately reach younger generations, working out to roughly $515,000 per inheriting household. Gen Z and Millennial recipients are expected to spend roughly $8 trillion of that inheritance on transportation, housing, travel, and retail. High-income households are less likely than less affluent ones to spend their share immediately, meaning most of the transfer will flow into savings, investments, and property rather than circulating through the broader economy. Away from financial markets, an imbalance is emerging in Earth’s energy budget. Data from NASA’s CERES satellite program and the Argo network of ocean floats both confirm that the gap between the sunlight the planet absorbs and the infrared energy it sheds back into space has more than doubled since 2000. This growth is dominated by a falling albedo that current climate models cannot fully reproduce, even when their overall imbalance figures come close. That mismatch has led researchers to rule out, with high confidence, any model relying on a climate sensitivity below 2.94 degrees Celsius.
An IMF war-game convened in December to model AI’s fiscal effects concluded that the more immediate risk is not a rogue system but a hollowing out of the income tax base. Sixty-six percent of US federal revenue in 2024 came from individual and payroll taxes tied directly to labor that AI increasingly threatens to displace. Anthropic’s own research names computer programming among the most exposed occupations, despite its median wage running nearly double the national average. Proposed remedies, including consumption taxes, wealth taxes, and levies on AI compute itself, each face the same obstacle: replacing US income tax revenue with a consumption tax alone would require a rate near 33 percent, a level no government has approached even as France failed to pass a far more modest 2 percent levy on fortunes above €100 million. For Europe, a comparable structural reckoning is unfolding in trade policy, where a coming “China shock 2.0” is expected to hit advanced sectors including automotive, machinery, chemicals, and pharmaceuticals rather than the lower-value industries devastated in the US in the early 2000s. China’s share of global manufacturing has risen from 6 percent to roughly 30 percent since 2000 while the EU’s has fallen from 30 percent to 17 percent, and Germany alone is losing 10,000 industrial jobs a month. This has prompted France to propose a general tariff near 30 percent on Chinese goods and Germany’s chancellor to signal openness to comparable measures for the first time.
