A few speculations on the near future

I'm a bit hesitant to post this because it's mostly about the economy, a field in which I have no special expertise.  These are, however, points I've observed which I think will have more impact than most pundits expect.  Take them for whatever you think they're worth.

Inflation may not get as bad as most expect

The main driver of expectations of inflation right now is tariffs, which would raise prices of imported goods.  Since the US also imports a lot of raw materials used in domestic production, tariffs will also raise prices of US-made products by driving up the costs of their material inputs.

However, Trump has shown a pattern of backing down on tariffs at the last minute because the stock market and especially the bond market start panicking about the potential economic damage.  Usually he finds some pretext to claim that other countries have made concessions, but the point is, the threatened tariffs end up not materializing.  This pattern is now the expected norm, which is why the markets have not reacted to the latest tariff "deadline" of August 1 -- they are assuming he'll back down again and not impose them.  In fact, he's likely to put on more of a display of going through with it this time, partly because he's stung by the TACO epithet -- but if the markets start to think he'll really impose tariffs, they'll go haywire again until he does back down.  Remember, too, that many Treasury bonds are held by other countries -- Japan holds over a trillion dollars worth, while the UK and China hold over $700 billion each.  Even a mere threat to start dumping them would drive up interest on the US national debt, which gives those countries leverage.

Another factor now working against inflation is rising unemployment, which is going to keep getting worse for the foreseeable future.  News of layoffs is everywhere, from DOGE's random buggering up of the federal government to private companies retrenching for a range of reasons.  Given Trump's erratic and unpredictable handling of the economy, companies will be reluctant to invest in expansion, including hiring, when they don't know what the economic and policy environment will be like from one week to the next.  As fewer people have much income to spend, there will be downward pressure on prices as buyers desert higher-priced products for cheaper alternatives.

Finally, the decades of disastrous inflation of housing prices may finally be coming to an end.  All over the country, to a degree unprecedented in recent times, houses offered for sale are sitting unsold because the potential buyers can't or won't pay the prices demanded.  The now-normalized expectation that the price of a house must always go up over time has led sellers to price themselves out of the market.  They will eventually need to lower prices in order to sell.  Cheaper houses, and the effects of rising unemployment and less money to spend as noted above, will also exert downward pressure on rents -- apartments demanding inflated rents will sit unwanted on the market until the rent is lowered.  While rising unemployment is a human disaster, more affordable housing will be a benefit to most people.  And since housing is the biggest component of most people's spending, this will mean reduced de facto inflation as most of us experience it.

If Trump succeeds in replacing Jerome Powell with some toady who will slash interest rates on demand, inflation could take off in spite of all this, but these factors would still impose some restraint on it.

The stock market is going to crash

Yes, it is.  Not really soon or anything, but sometime in the next two or three years.

The reason is the "AI" bubble, which has reached truly staggering proportions.  We've seen events like this before -- the dot-com bubble, NFTs, and going all the way back to Dutch tulip bulbs -- but nothing resembling the "AI" bubble's sheer size and potential impact when it bursts.  Investment in "AI" has reached hundreds of billions of dollars.  And as I've documented in countless links in recent link round-ups, "AI" just doesn't work well enough to be useful for anything important, and it never will.  Its outputs are riddled with ludicrous errors, its "agents" cannot do most tasks routinely handled by even low-skill human workers, and companies which have tried to replace workers with "AI" have ended up spending far more money than they saved on fixing all the errors the "AI" makes, and frantically re-hiring workers.

Because their product doesn't work and has no actual uses of any value, "AI" companies are grossly unprofitable -- for most of them, revenues are meager relative to expenditures, and they stay afloat due to inflows of "investment" money from venture capitalists, or other gimmicks tangential at best to their core business.  But because of the insane hype surrounding "AI", they have sky-high stock prices, based on the expectation of profitability in the future.  (This post by Ed Zitron gives a comprehensive overview of the problem.)  Eventually it's going to dawn on investors that the hype is just hype and those stocks aren't really worth anything -- and they'll start dumping them.  The problem is that tech companies heavily involved in "AI" now make up a bigger proportion of the total market than the overhyped companies of previous bubbles, and the magnitude of the over-valuation is greater.  The bursting of this bubble will wipe out trillions in phantom wealth and drag the whole market down.

(The development of true artificial intelligence -- machines that can actually think -- would indeed revolutionize technology.  But that's probably at least a decade or two away, if it's even possible.  And the pitiful, crippled rubbish that we currently call "AI" doesn't represent even a step in that direction.  It has nothing to do with true artificial intelligence whatsoever.  That's why I always put "AI" in quotation marks -- because none of this stuff actually is AI or anything remotely like it.)

Even though government had almost nothing to do with the rise of "AI" hype, couldn't have stopped it, and can't do anything to prevent the stock market crash when the bubble bursts, nevertheless voters will doubtless blame whoever is president when it happens.  Depending on how widespread the suffering is, the next couple of elections after that could well be decided by this, not by anything the parties actually have control over.

Nobody knows what will happen in the 2026 and 2028 elections

I'm already seeing confident predictions of a Democratic sweep in 2026, based on recent special election results and the effects of the Republican "big beautiful bill".  Please.  This is exactly what happened in 2022-2024.  After the Dobbs ruling, Democrats far over-performed in almost every special election, and there was ample evidence that abortion restrictions were driving increased turnout among liberal voters.  Polls, too, looked promising.  All this led many, including me, to expect a Democratic landslide in 2024.  We all know what actually happened.  I've already given my assessments of why the Republicans won, based on culture, economic reality, and demographics.  (No, it was not because the majority are bigots and refused to elect a black woman as president.  Democrats across-the-board did worse than expected, not just Harris.  Obama was elected twice and Clinton won the popular vote in 2016.  Snotty, holier-than-thou voter-bashing is a bad habit and hurts Democrats.)  It's also clear that the trans issue played a role -- Harris hardly mentioned it, but Republicans went all-in on it, and it worked.  So far, Democrats have done absolutely nothing to fix any of these problems.

There are now fifteen months until the 2026 election.  All kinds of things could happen in that time.  A major turn in the Ukraine-Russia or Israel-jihadist conflicts, or a Chinese attack on Taiwan, could have a huge impact one way or another.  The worst effects of the Republican budget bill won't take effect until after the election, and we don't know how effective the Democratic messaging on that issue will be.  If the Democrats fail to explicitly repudiate trans ideology and the repulsive wave of aggressive sexual weirdness forcing itself on our culture, then the Republicans will talk about it 24/7, possibly turning the tide as they did last year.  We don't know how badly ICE's atrocities will erode the Republicans' gains among Hispanics.  If the full trove of information on Epstein's clients is released or leaked, dozens or hundreds of major figures from both parties could be forced out of politics in disgrace.  And if the "AI" stock market crash predicted above happens before November 2026, that will upend everything.

Or, of course, in fifteen months there could be some game-changing event which we can't foresee at all right now.  The point is, it's absurd to make predictions about an election that far away, and even more so to do so about 2028.

If anyone has a serious evidence-based argument to show that I'm wrong about any of this, I'd be genuinely interested to see it.  (But please, no "the elections will be canceled" stuff.  Flat-Earthism just wastes everyone's time.)  As I said, most of this is outside my area of expertise.  But it seems logical based on what I see going on.