Any hints on where AI related imports are going, given capital goods imports?
Figure 1: Change in imports of capital goods since 2026M01 (blue), change in imports of computer, computer accessories, semiconductors, mn.$. Source: BEA international trade release, advance economic indicators (June), and author’s calculations.
More Middle East war:
https://amwaj.media/en/media-monitor/attacks-on-saudi-arabia-from-iraq
Saudi Arabia and the U.S. have mounted a joint attack on Iraq in response to what Saudi Arabia claims was an attack from Iraq. I know the spin is that we’ve attacked terrorists, but that’s just what we say when we don’t want to admit what we’ve actually done. The Popular Mobilization Units we’ve bombed are part of the Iraqi military, paid by the government. We may want to claim that we haven’t attacked another sovereign country, but we have.
Popular Mobilization Units are aligned with Iran. That drives us and the Saudis crazy, but it’s the reality we face. Iraq’s military has strong ties to Iran, the result of Shrub’s war against Iraq. When we go to war with Iran, when Saudi Arabia goes to war with Yemen’s Houthis, we have to take Iraq into account. We didn’t, and now we’ve got another front in the conflict.
Odds are, Iraq’s government will try to let this slide; the Popular Mobilization Units very well may not, which seems like a problem for governance in Iraq. But what the heck? We’ve destabilized Iraq plenty of times before.
Going back to the “ISIS went off the rails” crises in Iraq and Syria. US and Iraqi army made no progress pushing ISIS out of Erbil and Kirkuk region. Quds and PMU did the deed, after which PMU was incorporated in the Iraqi military.
PMU is former Shi’a militia, which represents about 2/3 Iraqi sectarian mix. Demographic would ally Iran and Iraq. US would have PMU treated like Hizbollah, make Iraq like Lebanon. Too many Shi’a’s in Iraq.
US has lately wanted Iraq to disband units related to Shi’a, allegedly Iran. That will not fly.
Reports are some IRGC troops killed by U.S. and Saudi strikes.
I hav no idea whether this is credible:
https://militarywatchmagazine.com/article/ukrainian-saboteurs-targeted-iraqi-government-falseflag
Whether the story is true or not, it reflects on Ukraine’s recent dust-up with Iran – Iran’s close military relationship with Iraq would be Ukraine’s motive for implicating Iraq in violence.
Iran, Lebanon, Yemen, Iraq, Gaza, Jordan and the West Bank – violence is spreading. There are reports that Israel and Turkey are not happy with each other, either, and Israel’s incursion into Syria has been tolerated only because the new government is too weak to complain. Haven’t heard from Egypt lately.
Who caused this? Bibi. Will Israel’s election help end it? At this point, seems like maybe the plan is to make sure the next guys are stuck with Bibi’s wars.
The FOMC left rates unchanged, with three dissents in favor of a rate hike. Futures now price in a substantially lower chance of a 50 basis-point increase in the funds rate this year than was the case prior to the Fed’s rate announcement. Today’s escalation of the Mid-East war has driven oil prices up by 7%, so long-end yields are up despite reduced expectations for rate hikes. Stocks down, of course.
Sorry, one more…
https://www.nytimes.com/2026/07/29/world/middleeast/ships-drone-strike-egypt.html
Two vessels in Egypt’s Damien port caught fire while in the port’s gas terminal. Naturally, there’s worry that drones caused the fire, though that has not been determined.
If drones, who did it? Iran doesn’t have a beef with Egypt. Egypt was making a bundle on Suez Canal transit fees until recently. Insurers have decided that threats to Saudi shipping in the Red Sea amount to threats to all shipping, and Suez traffic is down. That hasn’t drawn a belligerent response from Egypt, as far as I know.
If Ukraine really is trying to fold the Iran war into its own for strategic reasons – consider the story that Ukraine attempted a false-flag operation in Iraq – then hitting gas shipments in Egypt might make sense.
Ethiopia? The on-again/off-again water issue is back on, but does Ethiopia want to stir the pot?
Hope this was a case of bad luck or bad maintenance. Two fires at ince in the gas terminal? Seems unlikely.
paulkrugman.substack.com/p/reality-is-a-communist-plot
Krugman’s latest starts off as a summary of the comments from Bruce Hall. Read on because he does come to his senses.
From the latest GDP report: most reporting is saying “…powering through the fallout of the Iran war.” To me – 1.5% GDP is below trend growth. AI is carrying an enormous amount of the expansion – Nonresidential investment was 8.4% and Industrial equipment investment was strongest since 2011. What happens when the Data Centers get built out?
What happens when Alphabet misses payment on its over indebted bet on OpenAI? Or lesser exposed but equally cash flow challenged Meta.
1.6% is trend growth. I could argue 1.1 if you go with population and no credit growth. But there probably is a “trend” in credit growth. This 1.6%. So, your a little wrong. GDP is a artifact of the industrial revolution.
1.6% may be trend growth if Stephen Miller gets to purge all the Hispanics.
Your definition of “trend” seems to be “potential”. OK, let’s allow you a bit of rope, but there are problems with your math, and your economics.
CBO puts potential real GDP growth at above 2% through Q3 of 2031. You, a guy with an opinion, had better have good reason to contradict the CBO. Let’s see…
Population is a crude measure for labor’s contribution. You want labor force growth. Sadly, the labor force has recently been shrinking due to immigration policy. CBO seems to think that decline in thr labor force is temporary. So do you, I guess.
You’ve tacitly asserted that credit growth drives GDP growth, one-for-one. That’s shaky even for nominal GDP, and we’re discussing real GDP growth. What you want is productivity growth. Recently, productivity growth has been running closer to 2%. If we accept your 1.1% population (sic) growth estimate trend growth would be 3%.
If one defines trend growth as recent average growth, rather than as potential real growth, as Menzie has every right to do – and you trying to correct him is just ego run off the rails – the recent (from 2023) average pace of growth is near 2.5%.
Here’s population and real GDP, indexed to 1947:
https://fred.stlouisfed.org/graph/?g=1XMHF
Obviously a terrible fit. GDP grows much faster than population.
Here’s population plus nonfinancial credit, along with real GDP:
https://fred.stlouisfed.org/graph/?g=1XMHT
Obviously a terrible fit, but in the other direction. GDP grows much more slowly than population plus credit.
Odd how you wrote with such assurance, but you’re so completely wrong. Maybe an econ class would help?