Adam Smith published The Theory of Moral Sentiments in 1759, laying the ethical groundwork for his more famous economic treatise, The Wealth of Nations, which followed in 1776.
Long before Silicon Valley figured out how to generate fake Drake songs with GPU clusters, Smith warned us: prosperity without virtue is a house of cards.
He wrote, “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” And yet, he also believed that self-interest — when tethered to a moral conscience — could benefit the whole: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
But here’s the catch: capital must be employed productively to do any good. In Wealth of Nations, Smith argued the best use of capital was “to put into motion a greater quantity of productive labour, and to augment the value of the annual produce of the land and labour of the society.”
Now step back and ask: is that what’s happening with the trillion-dollar AI binge on Wall Street?
Is hiring fleets of engineers to fine-tune models that help hedge funds predict sentiment on Reddit really “productive labor”? Or is it just the latest flavor of rent-seeking by tech overlords insulated from the consequences of their own hype?
Because while the Mag 7 shovel capital into AI infrastructure as if humanity depends on it, you might notice the grocery bill is still going up, the bridges are still crumbling, and your local ER still has a six-hour wait.
Smith would look at today’s AI bubble — and the misallocation of capital it represents — and conclude what he warned back in 1759: “Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience.”
And yet, here we are — building machines to think for us, while forgetting how to think like moral beings ourselves. Morality requires you to be “the human in the loop” when it comes to AI.
Okay, enough of that.
Let’s move on to today’s news bites…
Market Pause, PPI Data
The rally in U.S. stocks took a breather this morning after the PPI numbers were released.
As we pointed out in this morning’s Ripple Effect, resurgent inflation numbers could shape how aggressively the Fed cuts interest rates – if at all, for the time being – feeding the “most terrifying bull market in history,” as Grey Swan’s Mark Jeftovic calls it.
Traders are still leaning heavily toward a September rate cut even after today’s surprisingly high PPI read — over 90% odds by current pricing — with some, including BlackRock’s Rick Rieder and Treasury Secretary Scott Bessent, openly calling for a 50-basis-point move.
Bitcoin briefly topped $124,000 for a new all-time high before pulling back, helping mint two new crypto billionaires as Bullish exchange hit a $1.1 billion IPO.
Bessent’s “Big List” for Jackson Hole
Ahead of the Fed’s annual gathering of central bankers next week in Jackson Hole, Wyoming, Treasury Secretary Scott Bessent revealed there are “10 or 11” candidates under consideration to succeed Jerome Powell when his term as Fed chair ends next May — with two more names to be “revealed” soon.
The shortlist reportedly includes David Zervos of Jefferies, BlackRock’s Rick Rieder, and former Fed Governor Larry Lindsey. Bessent also signaled that Stephen Miran, Trump’s nominee for the current Fed board vacancy, is unlikely to stay beyond January, when a new 14-year term opens.
Please note: The short-list for control of the Fed plays a central role in Trump’s $7 Trillion Shock. We’re hosting a special session of Grey Swan Live! tomorrow, Friday August 15, at 11 a.m… conveniently 54 years to the day since the great Nixon shock that removed the dollar from the gold standard. See more details below.
The Inflation Problem Behind the Curtain
Bessent also warned that U.S. yields aren’t moving in a vacuum — they’re being “dragged along” by surging long-term rates in Japan and Germany.
Japan’s inflation problem, he said, has the Bank of Japan “behind the curve” and likely to hike. That pressure, plus Germany’s 30-year yields hitting a 14-year high, is pulling U.S. 30-year rates upward.
The implication: Powell’s successor will take over a Fed with more global crosswinds than domestic control.
Tariff Ripples and Trade Chess
The Port of Los Angeles just reported its busiest month in its 117-year history as shippers rushed to get goods in before tariffs bite harder. Trump’s floated idea of taking a cut from U.S. chip sales to China has corporate America nervously wondering what else might be “metered” by Washington.
Bessent told Europe it’s “put up or shut up time” on sanctions against buyers of Russian energy, even as Trump warned Putin of “very severe consequences” without a ceasefire. Russia’s economy is sputtering — deficits at a 30-year high, oil revenues slumping, inflation and rates both punishing.
China, AI, and Energy Reality
China’s long-term prep for economic decoupling means U.S. tariffs now hit just ~3% of its GDP, down from 7% two decades ago.
China is using that buffer to sprint ahead in AI — with 29 nuclear reactors under construction to power the data center boom. The US? Zero.
Social Security Turns 90
Today marks the 90th anniversary of the Social Security Act, but the party’s short on cake.
The Peterson G. Peterson Foundation, which was notably launched in 2009 by purchasing our documentary I.O.U.S.A, has been warning about the demographic challenge of funding social security since its inception.
Without reform, the OASI Trust Fund will run dry in 2033 — triggering a 23% automatic cut to benefits. Congress has had decades to fix it.
Instead, we’re running up a $37 trillion national debt — growing at a pace that’s now $1 trillion every 5 months — faster than at any point in history.
The Peterson Foundation also regularly points out that without some reform of the two-party system and their respective demands on the U.S. tax base to fund “entitlement” programs, the U.S. government will forever be behind the eight ball on debt service payments.
Jobs, Youth, and the New Sober(ish) America
Here’s a sobering stat to help us close out the Dive: The unemployment rate for young men with college degrees is now slightly higher than for those without.
Male-heavy sectors like business and tech are freezing hiring, while AI eats into entry-level roles.
Women in healthcare, hospitality, and education are finding more work — but at lower pay.
Alas, a fewer number of them are prone to binge drinking. Only 54% of Americans now drink alcohol, the lowest in 90 years of Gallup data.
Health concerns top the list, with 53% now saying even moderate drinking is unhealthy.
Nicotine, backed as much by vaping as a declining smoking population, is holding steady as America’s preferred vice — tobacco stocks are up, beer stocks are down.
~ Addison
P.S.: Tomorrow — Friday, August 15 — Grey Swan Live! goes live at 11 a.m. ET, not our usual Thursday slot.
Paid members will get a free trading pick. We’ll be taking a sneak peek at our latest research into Trump’s $7 Trillion Dollar Shock.
If you’re not yet a member but want to join the Sneak Peek session, we’ve arranged a one-time VIP pass you can register for here.
(Clicking the registration link above will instantly register you for urgent reminders and details leading up to the event on Friday, August 15th at 1pm ET. You may unsubscribe anytime.)
Your thoughts? Please send them here: addison@greyswanfraternity.com
