Washington’s Inferno: From Shutdown Stench to Global Ripples
Causes of Economic Instability – The Looming AI Bubble and Lessons from Adam Smith's Wealth of Nations
As the government shutdown stretches into its second week on this fateful October 12, 2025, Michael Cohen’s impassioned live session and Substack post expose the raw ego fueling Washington’s dysfunction, where both parties point fingers while Americans suffer. Complementing this, Aaron Parnas’s urgent news roundup captures the escalating fallout—from slashed federal protections to wild presidential claims and international tensions. This isn’t mere gridlock; it’s a systemic collapse we’re enabling through apathy.
Domestic
The Blame Game Intensifies: Cohen emphasizes both Trump and Democrats are “right and dead wrong,” with polls showing 41% blaming Republicans, 30% Democrats, and 23% both—proving ego overrides governance, holding Americans hostage to a system favoring slogans over solutions.
Real Lives at Stake: Service members risk losing homes, families struggle for basics like diapers, and workers like TSA agents go unpaid; Cohen calls for ending normalized shutdowns as “reality TV” and voting out the “arsonists” fueling the chaos.
Numbness to Dysfunction: Americans have grown desensitized to breakdowns, Cohen warns, mistaking destruction for strength while ignoring casualties like federal workers, veterans, and struggling families—urging self-reflection on our role in enabling performative politics.
Trump’s Distraction Tactics: Efforts to deploy National Guard in Chicago (court-blocked) and Nobel rage exemplify retaliation over compromise; Parnas notes inflated $17 trillion investment claims (reality: dubious $8.8 trillion) amid 39% approval ratings.
Gutting Protections for the Vulnerable: Education Department fires nearly all special education staff, crippling disability oversight under IDEA; CDC reinstates over half of 1,300 fired employees after “coding error,” but 600 remain out, hitting public health programs.
Conspiracy Theories Run Rampant: Trump deems Watergate an “illegal hoax” and claims “Biden FBI” planted 274 agents on January 6 (despite being president then); Vance eyes Insurrection Act for domestic military, defends CDC firings by blaming Democrats, dodges Homan’s alleged $50,000 FBI-recorded bribe, and contradicts admin on using tariffs (illegal without Congress) for troop pay.
South Carolina Mass Shooting Tragedy: Four killed, 20+ injured at Willie’s Bar and Grill; large crowd fled as deputies arrived, with victims in critical condition and no suspects named yet.
Student Loan Portfolio Sale Considered: Admin eyes selling $1.6 trillion federal loans to private investors, risking borrower protections and debt cancellation while advancing Education Department shrinkage.
Smithsonian Shuttered by Shutdown: 19 museums and National Zoo close after reserves deplete; animal care continues, but exhibits and cams go dark amid gridlock.
Meta AI Adviser Spreads Disinfo: Right-wing activist Robby Starbuck, appointed via lawsuit, pushes false info on shootings, vaccines, and transgender issues, criticized for legitimizing extremism on Meta platforms.
Judicial and Ethical Crises: Pressure on Justices Thomas and Alito to retire lets Trump stack SCOTUS with Heritage Foundation picks, locking in ideology for decades; Epstein ties resurface via 2011 email showing Prince Andrew’s ongoing contact.
Calls to Action Fall Flat: Protesting, ACLU volunteering, and viral posts help, but Cohen stresses midterms to flip Congress, hold figures like Tom Homan accountable, and break GOP monopoly for real oversight.
International
China Vows Tariff Retaliation: China vowed to “stand firm” against President Trump’s threat of 100% tariffs, warning it would take retaliatory measures if the U.S. proceeds and urging Washington to resolve trade disputes through dialogue rather than escalation amid tensions over rare earth exports and new U.S. restrictions.
U.S. Aids Ukraine Strikes on Russia: The Financial Times reports that the Trump administration has been covertly assisting Ukraine in launching long-range drone strikes on Russian energy facilities since midsummer, sharing U.S. intelligence to help Kyiv target oil refineries and cripple Russia’s fuel production—part of a coordinated strategy to pressure Vladimir Putin’s economy and push Moscow toward negotiations, marking a sharp escalation in Washington’s involvement in the war.
Ukrainian Teen’s Anti-Drone Innovation: An 18-year-old from Kyiv invented a 3D-printed anti-drone net round for grenade launchers and shotguns to neutralize Russian Geran-2 (Shahed) drones; this stands in stark contrast to Russia’s mass production of Geran-2 drones at the Alabuga facility.
Prince Andrew’s Epstein Email Exposed: A newly revealed 2011 email shows Prince Andrew telling Jeffrey Epstein “we are in this together” and urging him to “keep in close touch,” contradicting the Duke’s public claim that he ended contact with Epstein in 2010 after the financier’s conviction, further deepening scrutiny of Andrew’s relationship with the disgraced sex offender.
Trump’s Middle East Diplomatic Push: President Trump will travel to the Middle East to meet with Israeli Prime Minister Netanyahu, address the Knesset, and co-chair a Gaza peace summit in Egypt with President el-Sisi, joined by more than 20 world leaders.
Gaza Ceasefire Enables Aid Surge: The ceasefire has allowed massive humanitarian operations, with aid trucks entering Gaza and hospitals preparing for released detainees, though destruction remains overwhelming—over 67,000 killed, 170,000 injured, and most schools destroyed.
Europe Echoes Trump’s Antifa Label: Following Donald Trump’s move to label antifa a “major terrorist organization,” far-right leaders across Europe—including in the Netherlands, Hungary, and 20 countries represented by 79 MEPs—have pushed similar designations, prompting experts to warn that such efforts politicize counterterrorism, threaten dissent, and echo Trump’s broader culture-war strategy spreading through Europe’s nationalist movements.
Economy
The doom sirens are blaring: As we touched on last week, there is a growing chorus of pretty reputable voices that AI hype is well and truly becoming an AI bubble of epic proportions. Of course, sceptics have always called 50 out of the last 10 crashes but this time it feels like there’s mounting evidence.
As FT reported: With the great headline ‘America is essentially one big bet on AI’, it noted 80% of stock growth in the past year being driven by AI spend and a shocking 40% of GDP growth down to the same.
More corporate debt tied to AI than banks: Bloomberg reports $1.2 Trillion USD in corporate debt is now tied to AI, making it a larger sector than banks.
Bank of England sounds the alarm: The BoE’s Financial Policy Committee just flagged soaring AI-sector valuations as a key risk. If investor sentiment shifts or progress stalls, they say we could see a “sharp market correction.”, which seems like it is polite British for ‘Very Bad Crash’.
MIT survey gets fresh scrutiny: With this ambient doubt about, the recent MIT study which reviewed hundreds of generative AI initiatives and found 95% delivered zero meaningful financial returns is starting to do the rounds again.
“Circular” deals: Some of the biggest names in AI are entering intertwined mega deals worth hundreds of billions — Nvidia investing in OpenAI while OpenAI commits to buying Nvidia’s chips, and so on. Money being passed back and forth this way is a worrying indicator that a bubble might be peaking. Matt Levine had a great hilarious summary of the recent AMD/OpenAI deal.
Cohen’s rallying cry rings true: this is a crisis of character, not just policy. Real change means redesigning the system—as Adam Smith might envision—starting with:
Embedding moral accountability by requiring decision-makers like executives and politicians to undergo narrative audits and case studies that force them to reflect on the real human impacts of their choices, fostering an “impartial spectator” mindset to curb detached self-interest.
Incentivizing empathy through measures like rotating professionals into community-facing roles, building proximity to those affected and reigniting Smith’s concept of sympathy to bridge the gap between boardrooms and everyday lives.
Tying rewards to ethics by redesigning compensation structures so that bonuses and incentives are linked not just to profits but to lived ethical standards and long-term societal benefits, ensuring prudence over greed.
Sharing risks fairly by adopting models that end the habit of privatizing gains while socializing losses, such as clawback provisions and shared stakeholder investments, to promote vigilant accountability across institutions. Arm yourself with facts, vote wisely, and demand better; subscribe for more insights to help douse the fire.