Reporting of the RAF Fairford arrests blows the idea of a ‘free press’ out of the water

Reporting of the RAF Fairford arrests blows the idea of a ‘free press’ out of the water

When the establishment media deals with issues in which the West’s war industries are most heavily invested, it happily jettisons even the semblance of critical distance from the state

Johnathan Cook Sept. 30 2026

It’s easy to forget that the western media – the so-called “free press” – likes to distinguish itself from media in authoritarian regimes on the basis that, unlike them, it asks critical questions of the powerful, reports facts objectively, and formulates its analyses dispassionately. 

They do propaganda, we do news – or so the western media argues. 

The feverish coverage since five men were arrested in the early hours of Sunday morning close to RAF Fairford in the UK is blowing that claim all too obviously out of the water.

Here are the known facts so far. 

Three white vans, bearing the logo of a genuine fuel transit company, were spotted by a local farmer on the road outside her property as she returned from a party. Police arrived promptly and arrested the men, who were all British nationals in their twenties. 

On Tuesday, it emerged that one of the arrested men actually called the police earlier – seemingly the reason police were on the scene so quickly.

Although the men were initially arrested on explosives charges, no “viable” explosives were found. Although they were arrested on terrorism charges, which allow for 14 days of detention, they were released on bail under normal criminal laws in less than two days. 

Jonathan Cook 2d UK police can hold terrorism suspects for 14 days without charge. Had police any grounds to believe the men arrested outside RAF Fairford had even the slightest terrorism connection, they would not have been released. They'd still be behind bars. But watch the BBC's Daniel Sandford, like every other establishment journalist, desperately try to sustain this as an Iran terrorism story. This isn't reporting. It's… 353 39 130

It has also emerged that the men had several empty “barrels” in their vans, plus one that contained what police described disturbingly as an “accelerant”. 

Actually, that was simply a reference to petrol. The stuff that goes into vehicles to make them accelerate.

Jonathan Cook 14h I'm sure the BBC's Daniel Sandford is scornful of social media users for speculating that the men arrested close to a farm near RAF Fairford were there to steal fuel. Sandford, meanwhile, is still busy helping the security services spin this as an Iran terrorism story – by speculating that an "accelerant" found in the men's vans – that is, petrol – could have been vital to a planned "attack or sabotage". 43 5 13

British prime minister Andy Burnham held a rare national emergency Cobra meeting over the incident. 

Meanwhile, the Trump administration got involved because RAF Fairford, despite its name, is in reality a US air base from which American planes are waging an illegal war of aggression against Iran, with the UK’s blessing. 

US Secretary of state Marco Rubio has said the incident “clearly involves the hands of a foreign actor”. When asked whether Iran was that actor, Trump replied: “It might be.” He added: “I know the answer... I can be very specific, but I'd rather not say.”

According to a report in the New York Times, “American and British intelligence services worked with Israel and Western countries to discover the threats against US bases, including ones in Germany.” [my emphasis]

Despite these sparse facts, the British media have uniformly rushed to a single conclusion: that this was almost certainly part of an Iranian terror plot to target the US airbase and its planes. The only room for debate allowed is whether the five men were witting or unwitting actors in that plot. 

As the Guardian reported in its Wednesday edition, referring to this as a “complex investigation”: “An Iranian link to the bizarre events in the Gloucestershire countryside over the weekend is seen as increasingly likely.”

As a preface, let us note the following: that British and US officials have every interest in trying to hype this incident as an Iranian “terror plot”, whatever the actual evidence suggests. 

Why? Because the US is waging an illegal war on Iran, and the UK is allowing it to do so from British soil. Under the rules of war, Iran has every right to attack RAF Fairford. 

If the British state and billionaire-owned media were actually serving as a truly “free press”, they would be offering the context that RAF Fairford is a legitimate military target and that any attack on it by Iran would not constitute terrorism. 

Of course, none have done so. 

Instead, they have loyally regurgitated the British and US security services spin of a “terror plot” – based on no tangible evidence at all – that paints Britain and the US as the victims of sinister and unwarranted Iranian aggression.

But context aside, an objective, sceptical media – a “free press” – would be reserving judgment on what had happened. It would be asking difficult questions. It would be offering plausible counter-narratives. 

Again, none of this is happening. In the British media, there has been a lemming-like rush towards accepting uncritically the very conclusions that best serve British and US state interests. 

The constant highlighting of a terrorism connection to the arrested men – for which there is no apparent evidence – is precisely the kind of coverage you would expect from state media in an authoritarian regime. This is about whipping up a public mood of fear, not about transparent fact-finding. 

Notably, unlike the British media, the New York Times report does allow for another possibility, even if it instantly ignores it and then joins the British media in treating what evidence there is as proof of an Iranian terror plot. 

The Times opens with a question: “The potential ambiguities – were the men Iranian operatives, petty gas thieves, or both? – added to the confusion surrounding the arrests that the authorities have yet to fully explain.”

“Petty gas thieves”! Men in vans with empty barrels close to a farm in the middle of the night. Is it possible they could simply be criminals? 

In fact, this conjecture has been all over social media since the first reports of the men being arrested surfaced. As new details have emerged, those suspicions have only grown. 

And yet Britain’s “free press” has uniformly ignored this counter-theory in favour of the US and British security services’ narrative. 

Doubtless, British journalists covering this incident would call the idea that this was simply a criminal group caught in the act unhelpful “speculation”. 

But how is their no-more-plausible, and possibly less plausible, theory that this was an Iranian terror plot not equally speculation – if in their case, speculation that happens to be extremely helpful to the British and US security establishments?

There are other theories we could posit too, given the known facts. Israel, which pushed for the original illegal and disastrous war on Iran, has been looking for a way to persuade the Trump administration to return to a full-scale bombing campaign. 

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An attack on RAF Fairford – or the appearance of one – would be an ideal way to pile on the pressure for renewed strikes on Iran. It’s not, after all, as if there are no examples of Israel carrying out false flags. 

If the “foreign actor” of Iran can recruit a gang of petty criminals to unwittingly spark a major security incident outside RAF Fairford, why can the “foreign actor” of Israel not do exactly the same? 

I don’t know what happened outside the airbase. I’m not claiming to. I am keeping an open, critical mind while what facts there are emerge. If only our “free press'“ were doing the same.

There may be those reading this who find the claim that the media in our “democratic” societies is not confrontational to, or at least distant from, the state hard to believe. Such an idea may be new to them. 

That should not be surprising. After all, how did each of us form our foundational view of the world – of who are the good guys, and who the bad – if not from spending a lifetime reading and watching media owned by billionaire-led corporations and the state? 

Since quitting the establishment media myself a quarter of a century ago (I worked for the Guardian), I have dedicated much of my time to identifying some of the most egregious examples of skewed journalism – reporting that consistently presents events in ways that serve not their audiences’ interests but those of the powerful: the corporations themselves; western security establishments; and Israel, the lynchpin of the West’s war industries. 

In such cases, the establishment media readily abandons even the pretence of neutral, fair or dispassionate reporting. It serves as little more than a propaganda factory. (You can read my detailed explanation of how the Propaganda Model works here.)

This has been all too visible in the coverage of Israel’s mass-slaughter in Gaza, a genocide that could not be named as such. 

It was visible in the coverage of Russia’s “unprovoked” invasion of Ukraine that had, in fact, been provoked by Nato for decades, as it expanded across Europe with a clear intention: either to corner Moscow militarily or drive it into a retaliatory attack on Ukraine that would provide an opportunity for the West to bleed Russia on a proxy battlefield.

It was visible in the sustained media campaign of antisemitism smearsagainst Jeremy Corbyn, that rarest, and most dangerous, of things: a leader of a major party who promoted socialist policies for the benefit of the public, not billionaires, and was a vehement critic of Israel long before it showed its genocidal hand. 

It was visible too in the media pile-on against Julian Assange, whose Wikileaks whistleblower platform exposed British and US war crimes while also threatening to destroy the media’s top-down model. Having ridiculed him for claiming asylum in the Ecuadorean embassy for fear Washington would seek to extradite him for exposing its crimes, the media then treated his seizure by British police and incarceration for years in a high-security London prison, while the US sought his extradition for exposing its crimes, as entirely unremarkable, as barely worth reporting. 

I could go on and on. There is consistent pattern when the establishment media deals with the most important issues, the very ones in which our national security states are most invested. Then the media jettisons even the semblance of critical distance from the state. 

RAF Fairford is just the latest example of how, in such critical moments, the media serves as nothing more than the security state’s loudspeaker. 

IRAN'S REVOLUTIONARY GUARDS CORPS (IRGC) JUST WROTE A LETTER TO THE AMERICAN PEOPLE.

I am grateful to Mutari Abubakari for these comments

The IRGC released a 26-page open letter addressed directly to the American public.

Not to the White House, Not to Congress, To the people.

 

The letter was presented at a press conference in Tehran by IRGC spokesman, Brigadier General Hossein Mohebbi. He said the goal was to create "familiarity with Iran's logic."

 

The letter bypasses the U.S. government and corporate media. It speaks directly to Americans, scholars, students and journalists.

 

The IRGC claims Iran won the war.

 

It says the U.S. and Israel failed to achieve their objectives. It says Iran retained operational control over the Strait of Hormuz. It says American warships fled to the Indian Ocean. It says not a single U.S. vessel can dock at the Fifth Fleet in Bahrain. It says U.S. bases in the Gulf "resemble ghost towns." It says Iran achieved this with one percent of the U.S. defense budget.

 

The letter addresses "Death to America."

 

It says the slogan is not directed at the American people. It is directed at U.S. policies of aggression, killing and exploitation. It argues that Iranians and Americans are both victims of the same elite. It calls the White House "the House of Oppression."

 

It traces 73 years of conflict.

 

The 1953 coup. The Shah's rule. The Iran-Iraq War. Sanctions. The downing of Iran Air Flight 655. The killing of Qasem Soleimani. It asks Americans to test that history against what their media has told them. It rejects the nuclear weapons accusation. It calls the claim that Iran is weeks away from a bomb "the great lie of the century." It says Washington has repeated that claim for 25 years while Iran has not produced a weapon. It calls on Americans to close the bases.

 

It says the U.S. has 800 military bases around the world. It asks why. It asks what the purpose is of spending $1.1 trillion on the military budget. It urges Americans to demand the closure of overseas bases, bring troops home, and end military assistance to Israel. It calls on Americans to change their leadership. It says Americans should use their votes to remove politicians it calls corrupt. It mocks leaders who think they can buy support with direct payments to voters. It ends with a religious appeal.

 

The letter invokes Jesus Christ and Imam Mahdi. It speaks of a shared vision of justice. It suggests Americans and Iranians could ultimately stand together. It closes with an offer: 

"We can live together in peaceful coexistence."

 

The IRGC is not talking to the White House. It is talking to the American voter. The letter is a political intervention. It is a call for Americans to question their government, reject its wars, and change its leadership. It is written in English and Persian. It is addressed to scholars, students and media workers. It is meant to be read by the people who shape opinion and cast votes.

 

The timing is deliberate.

 

The war has lasted seven months. Donald Trump's approval is at a record low. Diesel is above six dollars a gallon. The midterms are in November. The IRGC is telling Americans that their government is lying to them. It is telling them that their leaders are enriching themselves. It is telling them that the war is not about Iran. It is about Israel and the defense industry.

 

The letter is a weapon, Not a missile, It is a message to the American voter. 

Palestine: The Two State Solution is Dead.

I am in general agreement with this statement but I cannot see it as possible within the framework of capitalism.  Capitalism simply cannot accomplish this in Palestine, Northern Ireland , Kashmir or other areas of the world that are in crisis as a result of colonial and imperialist intervention.  Despite AFL-CIO president Liz Shuler’s appeal for a Democratic sweep in the US Mid-terms in order to “right the ship”, the ship is sinking, and cannot be righted by appeals to one wing or the other of the ruling class. 

 

Only the working class internationally can right the ship, can put an end to the rotting corpse of capitalism and the so-called free market and build a future for humanity. A global federation of democratic socialist states based on a global plan of production that produces for social needs in cooperation between nations can solve literally save the planet, or our existence on it anyway.  This is no utopian. To think that capitalism can solve a crisis of its own making is. R Mellor, FFWP Admin

 

Palestine: The Two State Solution is Dead.

Chris Williamson

Former UK Labor MP

The so-called two-state solution is dead. The only credible proposition to deliver peace and security in the Middle East is to dismantle Israel and replace it with one unitary, de-Zionised state from the Jordan River to the Mediterranean Sea.

 

It’s just over a year now since the former prime minister, Sir Keir Starmer, announced the British government’s formal recognition of the state of Palestine. But his announcement was littered with caveats, including the bold claim that, “Hamas will have no role in the future of Palestine.” But that is a matter for Palestinian people to determine, not some second-rate post-colonial politician. In other words, Starmer was indulging in performative politics to give the illusion of taking action, while in reality maintaining the status quo ante.

 

Some have claimed that the removal of Starmer and his replacement with Andy Burnham marks a sea change in the UK’s policy toward Palestine and the Zionist colony. They point to Ed Miliband’s declaration of sanctions against illegal Zionist settlements in the territory occupied since 1967. But the reality is very different. The sanctions represent the bare minimum and will do nothing to deter Israel’s ongoing crimes against humanity. Just last week, Declassified UK revealed that the government has not cancelled any arms export licences to Israel, and the Ministry of Defence maintains contracts worth hundreds of millions of pounds with Israeli arms firms. Furthermore, just like his predecessor, Burnham still refuses to describe the slaughter of tens of thousands of Palestinians as a genocide. 

 

The truth is there is no two-state solution. The 1993 and 1995 Oslo Accords were supposed to pave the way, but Israel reneged on the agreement signed by Yasser Arafat, Israeli Prime Minister Yitzhak Rabin, and US President Bill Clinton. The only credible and long-term resolution to this 78-year long injustice is one singular state where all citizens have equal rights. Furthermore, all the Palestinians and their descendants who have been ejected from their homes since the Nakba in 1948 must have the absolute right of return, and be awarded reparations for the injustice they suffered.

 

Palestine became part of the British Mandate, which was a system established by the League of Nations to administer territories formerly controlled by the Ottoman Empire, after WW1. But that didn’t give Britain the right to give away a land that didn’t belong to it, to a people who had no legitimate claim to it, at the expense of the people who lived in it. If truth be told, 31 years after the original Balfour Declaration, which promised Palestine to Zionist Jews, the Attlee Labour government surrendered to a lengthy campaign of terrorism by Zionist extremists.

 

The indigenous Palestinian population was twice the size of the Jewish population, but they were given a significantly smaller slice of their own country. Even that wasn’t acceptable to the Zionists. They seized more territory in 1948, then made a further land grab in 1967 and have been illegally occupying the West Bank, East Jerusalem and the Golan Heights ever since. Last year it voted by a majority of 71 to 13 to formally annexe the West Bank. In 2018 the Knesset passed the Nation-State Law that relegated non-Jewish inhabitants to second class citizens; and Israel’s Central Elections Committee has just barred Arab parties from standing in the general election. 

 

Although Britain is mainly culpable for the catastrophe experienced by the Palestinian people, the international community also bears some responsibility because it has shamefully turned a blind eye to Israel’s crimes. They sat on their hands while Israel constructed a 9-metre-high separation wall and atomised the West Bank with 700,000 Zionist settlers to destroy the prospect of a two-state solution coming to fruition. Moreover, the UN Security Council has done nothing to enforce any of its resolutions critical of Israel.

 

Consequently, the only credible solution is to create one unitary democratic sovereign state, where all citizens enjoy equal voting rights, freedom of movement, access to land and resources, and protection under the same laws. Jews and Palestinians alike could maintain their cultural and religious identities within a shared civil framework. Hebrew and Arabic could be co-official languages, and both historical narratives could coexist in public discourse and education. This proposition draws inspiration from other historical precedents where outright racist regimes transitioned to democracies, such as the end of apartheid in South Africa. It was Nelson Mandela himself who said, “we know too well that our freedom is incomplete without the freedom of the Palestinians.”

 

But there is a crucially important caveat. It would be entirely wrong to expect Palestinians to live alongside the very people who have been oppressing them since the Zionist colony was created. Israelis with dual nationality would almost certainly leave, but those who remained would need to be de-Zionised because Jewish Israelis have been radicalised. 

 

A poll published last year by the Israeli newspaper, Haaretz, found that 82% of Israeli Jews support the expulsion of the Palestinians from Gaza to other countries. And 56% support the forced expulsion of Arab citizens of Israel to other countries, too. It is clear that a dangerous derangement has gripped the Jewish Israeli population, which will have to be exorcised to secure a long-term harmonious future for a unitary state. There are clear parallels with Nazi Germany and Austria which were subjected to a denazification process after WW2 to prevent the resurgence of Nazi ideology.

 

Anyone who says that securing a unitary Palestinian state from the Jordan River to the Mediterranean Sea is an unattainable pipedream, should remember the words of Nelson Mandela, who said: “It always seems impossible until it's done.”

 

Michael Roberts and Ted Reese: Is China Capitalist?

Richard Mellor

I have argued that I do not think China is capitalist nor is it socialist. My half hearted effort at an explanation as to what it is is that it's neither but "on the road" to capitalism and likely unable to turn back. I do think that there will likely be huge clashes at some point between the Chinese working class and the bureaucracy , and between the private sector and the bureaucracy.

Truth be told though, as the two speakers suggest, we cannot tell exactly how it will end. The discussion does offer valid arguments as to why it's not capitalist.

It's a great short introduction to the subject that workers like myself will find very interesting.

Northern Ireland: No Orange Order Parade Down Garvaghy Road

Mike Craig

Northern Ireland

9-27-26

 

I was born an atheist in Northern Ireland in the middle of the 20th Century, and my ancestors were Protestants who came here centuries ago from Scotland. I am neither Unionist or Nationalist. I am a socialist. So what is my take on the current situation on the Garvaghy Road

 

Too many socialists look at this place and simply say 'Unionism bad, nationalism good', without applying a class perspective. The fact is that the working class here is being divided and exploited by the politicians in both camps. All political parties here (except People Before Profit and possibly the Greens) serve the interests of capitalism. They need division in order to do this. None of them believe in unity of the working class as that would not be in the interests of the system they represent. Practically anyone could go into an election here waving a flag, whether a tricolour or a union jack, and get elected. 

 

The Orange Order, who want to march down the mainly nationalist Garvaghy Road may be supported by many working class Protestants but it's not a working class organisation. It represents an upper class Protestant ascendancy .and has origins as a breakaway from the Peep O' Day Boys, which was a brutal anti-Catholic terrorist organisation in the 18th Century. 

 

Irish Nationalism is not a vehicle for working class freedom either. It is and has always been in the interests of a middle-class, pro capitalist section of the population. Ireland was controlled by Catholic aristocracies until the invasion of The Dutch Prince William of Orange in the 17th Century. It was never united except under British rule. 

 

Having a society ruled by an aristocracy, whether British or Irish, is not something a working class person should be fighting for, it is the antithesis of their interests. Nationalists are focussed on British colonialism and imperialism, and claim that these took away their freedom and their right to self-determination. The reality is that the working class will never determine their own destiny under the capitalist system, so supporting the class which oppresses you through the capitalist mode of production is not going make you 'free', no matter which flag they fly.

 

This tribal division has led to the ghettoisation of both sides, which is why we have a mainly nationalist area in the vicinity of the Garvaghy Road. 

 

There is no question that Catholics were discriminated against in Northern Ireland since partition at the hands of a local Government controlled by members of the Orange order, and to rub salt into the wounds the Orange order paraded their triumphalism by marching through mainly Catholic/Nationalist areas several times a year for decades.

 

This stopped in 1998 when the Parades Commission was set up to determine who could march where without intimidating the local residents. Unfortunately the Parades Commission, after 28 years of keeping the peace, became complacent and lax and stopped taking its responsibility seriously allowing an opening for the Orange order, backed by sinister right-wing elements, to renew their intimidation.

 

Things have changed in 28 years. The Orange order no longer controls Northern Ireland, there is no longer any discrimination in jobs and housing (The misery of poorly paid jobs and the housing shortage is suffered by both sides now). There is a nationalist party in government here and the population is almost equally divided by religion and national identity. 

 

Looking at this, anyone might think that 30 Orangemen walking past the cable of a nationalist house isn't much of a threat, but there's much more at stake here. 

 

The Orange Order is completely unapologetic about its role in the discrimination and oppression carried out against the Catholic population here, and in fact would like to return to such a regime. 

 

The Order is egged on by extreme right-wing elements who share the political views of Farage's Reform in GB. This is why the Orange Order parade should not be allowed down the Garvaghy Road!  

Michael Roberts AI: the biggest economic bet in US history

AI: the biggest economic bet in US history

by Michael Roberts

The US economy continues to expand faster than other G7 economies, but the driver is the humungous investment in AI models, data centres and all the AI-related chips and technology. 

The US composite PMI (economic activity measure) rose to 58.4 fom 56 in August, the strongest expansion in private-sector activity since July 2021 and marking a fourth consecutive month of accelerating growth. The gains were driven by the service sector (including information services) with the steepest rise in output for over five years, while manufacturing also accelerated. New orders grew at the fastest pace since April 2022, while manufacturing hiring was the strongest since February 2021.

Back in June, I commented that AI was just ‘one big trade for the US economy’.  But now in September that appears to be an understatement. The AI build-out is on track to become the biggest economic bet in US history, dwarfing the investments made to fund other huge US infrastructure projects in the past, such as the railroads in the 19thcentury, the highway system in 20th century and the internet in the 21st century.

Analysts estimate that capital spending at five of the so-called hyperscalers—Alphabet, Amazon.com, Meta Platforms, Microsoft and Oracle—will be $4.2 trillion in the four years ending in 2029, according to FactSet. Data-centre spending is greater than that for the canals, railroads and grid combined, projected to total $10.3 trillion from 2025 to 2032, according to new estimates by the Brookings Institution. That is a staggering average 3.6% of GDP a year. Never before has the US economy been so dependent on the build-out of a single industry.

Up to July, $37 billion has been spent on private data-centres with most still not operating.

In contrast, US private construction spending on everything else—houses, apartment buildings, shopping centers and so on—was about $46 billion below year-earlier levels in the first seven months of this year. 

AI investment has created 750,000 new jobs since 2023, according to LinkedIn estimates. And those jobs pay well: the median annual salary for AI-related job listings on LinkedIn is around $180,000, compared with $80,000 for all jobs.

Above all, the AI investment has led to huge gains in stock-market wealth. As of Q2 2026, US stock and mutual fund holdings came to $63 trillion, according to the Federal Reserve—nearly double the amount at the end of 2022. Most of this increase in financial wealth has gone to the already rich, as working people own little stocks or bonds. 

Foreign investors are piling into US assets.  They now hold a record $39 trillion in US equities and bonds, up since 2022.. This is keeping the US dollar relatively strong and driving up stock prices.  The wars in Ukraine and Iran encourage foreigners to shift their assets to the US to take advantage of the boom.

At the same time, demand for equipment that goes into data centres like memory chips is driving up costs for tech products. Import prices on computers, peripherals (such as hard drives) and semiconductors were 20% higher in August than a year earlier. These high import prices are in turn putting upward pressure on the costs of consumer goods, such as iPhones and gaming consoles, and contributing to general inflation.  

But here is the problem. The gap between hyperscaler spending and cash flow is widening fast.  Capital expenditures at Amazon, Meta, Microsoft, and Alphabet are projected to exceed $1 trillion in 2027 for the first time. At the same time, combined ‘free cash flow’ (ie money from profits in existing businesses) is projected to fall below $100 billion. A year ago, free cash flow was around $200 billion, while capex was $300 billion. Now, AI spending is accelerating at the same time as the cash available to fund it is disappearing.

The bigger this gap becomes, the more the hyperscalers need to rely on debt and equity markets to finance their AI spend.

The issue is that if AI spending fails to generate sufficient returns (profits), the stock market could take sharp turn downward as investors bail out.  US stock market prices are massively overvalued relative to existing earnings. The trend ratio of stock market prices to earnings per share (called the CAPE ratio) is above the level just before the 2008 financial crash and nearly at the level just before the dot.com bust of 2000.

Will profits come through? Research by Fathom Consulting shows that for the multitrillion-dollar AI boom to turn a profit, it would need the AI-related sales of the tech companies involved to rise by $600-800bn within the next two years. But the consulting firm Panmure Liberum calculated that current CAPEX and revenue forecasts through 2030 imply a negative internal rate of return on invested capital for Alphabet, Meta, Microsoft, and Oracle.

So either the hyperscalers significantly reduce their capital spending on AI to levels that generate a reasonable profit on capital already invested or by some miracle they deliver massive profitablity from a huge future increase in demand for AI products.  If they cut spending, that would signal to investors that AI is not delivering and they would sell off accordingly.  A crash would ensue.  So they must keep spending more and more.

At the same time, what companies can charge for AI computing costs (tokens) is falling fast. The LLM Token Expenditure Index, which tracks the market price companies pay for AI model output, has fallen to just $0.97, its lowest level since the index was created late last year and more than 50% below its summer peak. Token prices are collapsing as cheaper models, open-source Chinese competitors and falling training (inference) costs make AI usage increasingly cheap. That is eroding revenue growth for the AI labs, making it more difficult to meet the bills for AI infrastructure spend.

The AI labs (OpenAi and Anthropic) continue to claim they will soon make big profits and so the hyperscalers will eventually get their share of the booty. But much of these claims are based on dubious profit estimates. AI-related investment gains increasingly flatter earnings, with so-called “other income” (contracts with other AI firms) rising to 54% of pretax income.

Indeed, the AI companies are keeping their heads above water only through what is called  ‘circular financing’ where one firm lends funds to another and the latter then claims it has made a profit. Sona Asset Management have mapped the AI universe and catalogued the interconnections between major players. Everybody is depending on everybody else to deliver.

Sona also found that AI firms’ revenue is almost completely tied to the capex decisions of one or two other AI players. This is a systemic bust in the making.

A key question is whether AI is actually going to deliver a step-change in US labour productivity that could boost economic progress for a generation. The AI lab, Anthropic, wants to issue shares worth $100bn to the public in November (thus valuing the company at $2trn!).  To build up its case, it published a report in which it claimed that if AI really takes off, US GDP could rise by 32% by 2030(!), that’s annual growth in GDP of up to 15% (against current US growth at 2.5% at best).

This is wild nonsense that assumes that AI works in boosting productivity growth as every company in the US adopts AI agents and tools to run their businesses, while sacking millions of workers who are no longer needed.

Historically, automation has historically proceeded at roughly 2% of tasks per year for two centuries, without ever pushing growth much above 2%. Past so-called ‘general-purpose technologies’  took decades to diffuse even after the technology itself worked. For example, electrification took around 40 years to show up in factory productivity. Similarly, Comin and Mestieri’s study of technology adoption across countries documents average adoption lags of around 45 years, and still 7-18 years for more recent technologies.

AI adoption appears to be much faster than that of the PC or the internet, but adoption is only the first step: measured productivity typically first falls while firms make the necessary complementary investments, the “productivity J-curve” of Brynjolfsson, Rock and Syverson. Even the most bullish insiders are noticing this, for example Sam Altman who recently conceded: “I think I was wrong about a few things, but one of them, in terms of the speed, one of them is the economy just has so much inertia. […] we’ve all been too ambitious on timelines […] Society and the economy will adapt more slowly.”

And remember most work is physical. An AI capability explosion is first and foremost an explosion in cognitive capabilities. But only around a third of the economy consists of work that can be done on a computer (Epoch AI’s remote-work piece). The rest of GDP is produced in mines, on construction sites, in kitchens, hospitals and care homes. Automating two thirds of all tasks by 2035 therefore requires robots that do a large share of physical work. These robots would need to be designed, manufactured, installed and maintained by the billions within a decade. While progress is certainly happening, robotics development is slower than software development and robots that can do a wide range of physical tasks at close to the cost of a worker are still not on the horizon.

So far there is scant evidence of economy-wide productivity gains; in fact, total factor productivity (a measure of productivity from new technologies) is falling below trend.

It’s true that AI adoption by companies is picking up, at least among service companies. In just two years, AI usage has risen from 25% to 61% among service firms and from 16% to 51% among manufacturers.  But only 17% of employees in services and 7% in manufacturing are actually using AI regularly in their work.

As the Federal Bank of New York admitted: “The next stage will be much more important as, for the moment, AI mainly helps people write, summarize, code or analyze faster. Tomorrow, agents and specialized tools could handle entire workflows. At that moment, the impact on productivity and employment could really move to another level. Usage is exploding while corporate spending remains relatively limited but the price of intelligence keeps falling. Very bullish for AI diffusion and productivity and much less obviously bullish for the monetization of every player in the ecosystem.” In other words, productivity growth may eventually rise but at the expense of profitability as AI prices for usage fall: a classic contradiction for capitalism.

And there remain faultlines in the very nature of AI Large Language Models. Two years ago Oxford and Cambridge Researchers proved that every LLM trained only on AI-generated content develops an irreversible disorder. Each new model learns only from what the one before it wrote. By generation nine, the new model had forgotten what it was talking about. Ask it about medieval church towers and it answers with a list of jackrabbits. They called it ‘model collapse’. Every time someone posts machine output, the next model gets a little more average. 

The warning signs of the coming crash keep multiplying. An upward trend in interest rates amid falling bond prices could be the crisis-triggering factor. Or it could be a failed IPO (Anthropic, OpenAI), or surging competition from so-called ‘open weight’ LLM models from China and elsewhere driving down profits. The biggest bet in US economic history is a very risky one.