What I read this week...

What I Read This Week: a summary of the content that I consumed this week…

On December 11th, The White House issued a new Executive Order declaring that the United States must adopt a single national AI regulatory standard rather than a mosaic of state-level rules. The EO does not define the federal standard but directs agencies to resist state laws viewed as burdensome, using the following tools:

The goal is to prevent divergent state requirements that might hamper the AI landscape before Congress acts. The framework that the administration pursues will ensure that children are protected, censorship is prevented, copyrights are respected, and communities are safeguarded.

AI has become a national-scale economic and geopolitical priority, and fragmented compliance regimes impose costs that fall disproportionately on high-growth sectors. 50 distinct regulatory frameworks would slow investment, inhibit model deployment, and weaken U.S. competitiveness relative to China and the EU. This new EO intends to lower friction for capital formation and accelerate adoption across industries.

Elon has confirmed the speculation around SpaceX pursuing an initial public offering in 2026, targeting an implied valuation around $1.5 trillion. This could allow the company to raise in excess of $30 billion, which would make it the largest IPO in history, right above the Saudi Aramco’s 2019 offering of $29.4 billion.

Elon has historically avoided going public with SpaceX due to the market’s short sighted timelines on the grander mission, but once he realized Starlink satellites could be architected into a distributed network of data centers, the writing was on the wall.

“That is the moment an IPO suddenly came into play after being unlikely for so long. If you have followed Elon’s tactics, you know that once he commits to something, he leans fully into it. Much of the AI race comes down to amassing and deploying assets that work quicker than your competition. A large war chest resulting from an IPO will greatly help his cause and disadvantage all others.” - Abhishek Tripathi, Former Director at SpaceX

Elon sees this as the fastest way to scale in the next 4 years due to the access of abundant solar energy and once you are in space, you have the ability to connect via high-bandwidth lasers into the Starlink constellation. Bestie Gavin Baker also gives a first principles breakdown on where the main advantages come from.

The Fed has continued their reduction of rates by 25 bps as expected. Their justification was due to job gains slowing this year while the unemployment rate edged up through September. This is while inflation is also increasing.

Released on December 10, the Federal Reserve’s latest policy directive authorizes increases in the System Open Market Account (SOMA) through ongoing purchases of Treasury bills and potentially longer-dated Treasuries (up to 3 years). The stated goal is to “maintain an ample level of reserves,” a technical phrase that signals a halt to quantitative tightening (QT) and the beginning of gradual balance-sheet expansion. The Fed will start “reserve management purchases”, beginning at $40 billion per month in T-bills.

This move is the latest example of fiscal dominance: the idea that the Fed’s authority over monetary policy becomes subordinate to the government’s financing needs when deficits are structurally large. We’ve seen the pattern over the last six years with the Fed’s pivot from QT to QE during the 2019 repo crisis, its intervention to restore Treasury market liquidity in 2020, and the 2023 bank backstops when banks sat on mark-to-market losses in Treasuries. In each case, the Fed provided liquidity despite wanting tighter conditions. This new directive fits the same mold, expanding holdings of bills even with inflation above target, because the system cannot tolerate reserve scarcity while federal borrowing remains elevated.

The broader implication is that the Fed’s balance sheet will likely end at a higher level as it resumes a gradual upward trend, consistent with its own SOMA projections. Elevated deficits, a growing stock of Treasury supply, and the banking system’s need for ample reserves collectively constrain the Fed’s ability to shrink liquidity. Whether this policy is labeled QE, reserve management, or something else matters less than the underlying mechanism: the central bank is returning as a structural buyer of Treasuries, allowing the government to spend into the system without drawing from the system.