The civilisational decline we’ve long entered has unleashed a generalised institutional frisson at the prospect of war—a titillation that captures the fragility, confusion, and sheer desperation of the historical moment. “War” now signifies something elementary: the reduction of life itself to a transaction. However, this is no longer the neoliberal prostitution of war as “the price tag of democracy”—the late-1990s and early-2000s Anglo-American fantasy of exporting democracy by cruise missile, from the Balkans to Afghanistan and Iraq. That justification has lost its economic and ideological efficacy. What is deployed, rather, is the spectre of war as something akin to what Jacques Lacan called the “fundamental fantasy”—the imaginary place where I see myself suffering; the ultimate phantasmatic screen providing unconscious attachment, thus protecting the subject from the void.
And Europe is once again the epicentre of such spectral mobilisation. “War-readiness,” as the technocratic elites cynically call it, functions as a fantasy frame populated by images of pain and even annihilation. Psychically, it is meant to function as the deepest defensive barrier against the emptiness of the modern subject at a moment when the belief that the capitalist constellation is socially productive is breaking apart. Paraphrasing the famous Freudian text that inspired Lacan, we could say that “Europe is Being Beaten” (Freud’s 1919 paper was titled “A Child is Being Beaten”); such painful image is supposed to generate a lasting identification with Europe itself. It is a fantasy that not only frightens Europeans, but it also binds them to the very logic that is stripping them of security, income, and collective power. This is what psychoanalysis calls cathexis: the psychic investment that attaches us even to what harms us.
If we zoom out and look carefully, we will see that the hauntology of war, which now provides the EU with its last form of legitimacy, is metastasising across three fronts simultaneously. First, in the data centres, where artificial intelligence is trained. Second, in the bond markets, where governments and corporations borrow vast sums to sustain their exhausted reproductive engine. And third, of course, in the skies over Ukraine and Iran—and in Gaza, where Palestinians are killed daily notwithstanding the ceasefire. If you connect those fronts, you will see not a war between nations in the traditional sense, but the slow disintegration of the global capitalist order itself.
In Robert Kurz’s prescient terms, we are witnessing a “world civil war”: global capitalism, always a fetish construction, decomposes as it reaches its structural limits. In this end-time scenario, the main scoreboard, I argue, is not the battlefield but the bond market.
Front One: The AI War
Capitalism is driven by bold technological revolutions which, over the last 50 years, have turned—“Terminator-style”—against capitalist societies that enabled them, by forcing onto these societies the dire consequences of a labour-shedding, debt-financed decline. This sums up the fatal shortsightedness of the capitalist juggernaut: a lumbering machine charging forward with “dollar signs in its eyes” (as in the classic mid-twentieth-century cartoons of Disney and Warner Bros). The compulsion of profit-making renders us blind to human empathy as well as its destructive consequences and social costs.
Now, the United States has spent the last three years building an artificial intelligence industry on the assumption that such intelligence would remain as scarce as the kind populating the brains of those who blindly follow it as a new religion—as well as expensive and proprietary. Hence, the conviction that whoever controlled the best AI models would control the future. But it takes little wisdom to realise that such assumption is now collapsing—at least as an industrial strategy. Why?
Because China has taken a different approach. Instead of building the biggest, most expensive models behind closed doors, Chinese companies have been releasing powerful open-source models: free for anyone to use, modify, and build upon. I mean models such as Kimi K3, Qwen, GLM, and DeepSeek, which now perform at roughly 90 to 95% of the capability of the best American models at a fraction of the price.
The figures make the point decisively. By late September 2026, Chinese models were processing 76.12 trillion tokens per week—up from 4.37 trillion in late April. That is a seventeen-fold increase in five months. The top four American providers combined processed just 14.2 trillion. In other words, the usage has flipped. The rest of the world is now using Chinese AI more than five times as much as American AI, and the gap is widening. So why does this matter?
Because the entire American AI boom that drives the markets and effectively supports the debt-drenched Western economy—the data centres, the chips, the power plants, the hundreds of billions in borrowing—depends on being able to charge premium prices for AI. If near-equivalent intelligence is available for almost nothing, that pricing power evaporates.
As I argued in my previous piece, the American AI industry is addicted to credit and caught in a loop of circular deals. While companies like Microsoft, Google, Amazon, and Oracle have committed to roughly $2.3 trillion in future work, about half of that is owed by OpenAI and Anthropic—two loss-making companies. The hyperscalers are effectively lending money to unprofitable customers while borrowing heavily themselves to fund the buildout. This, in a nutshell, is the AI bubble, and China’s open-source strategy is the pin that could pop it.
As one venture capitalist put it laconically, forcing companies to pay $26 to $56 per million tokens for intelligence that the rest of the world gets for $0.50 to $1 is “economically unsustainable.” So, China is not trying to win the AI race in the traditional sense. In the best Sun Tzu tradition (“The supreme art of war is to subdue the enemy without fighting”), it is trying to make AI unprofitable for American incumbents—and it is working.
The stakes here extend beyond geopolitical rivalry. For all its authoritarian and state-capitalist character, China’s open-source offensive reveals something the Western AI complex desperately needs to conceal: AI need not be scarce, proprietary, or rented. It can circulate as a general capacity rather than function as an enclosed asset.
The bigger question: can this competition eventually detach AI from the logic of capital? Technology is not inherently liberating, but abundance can at least undermine the rentier form that capital has imposed upon it.
Front Two: The Bond Market War
While the AI war unfolds, something equally important is happening in the bond market. As even the mainstream media now deign to report, bond yields are surging like a tsunami wave across the Western world:
US 10-year Treasury: 5.36%, highest since 2002
US 30-year Treasury: 5.73%, highest since 2002
UK 30-year gilts: above 6%, highest since 1998
French 10-year bonds: near 5%, with the spread over German bonds at a euro-era record
To understand the relevance of this, imagine a friend—call him Alex—who earns £50,000 a year but has £500,000 in credit card debt. Alex has been managing by paying the minimum and occasionally taking out new cards to pay off old ones. Now the bank raises Alex’s interest rate from 5% to 10%, so his minimum payments double. Alex must now stop spending on everything else, and the economy around him suffers.
Then the bank realises that if it keeps charging 10%, Alex will default. So it lowers the rate back to 5%; not because Alex is creditworthy, but because the bank is scared. Other lenders see this and stop lending altogether. This is what is happening with governments and bond markets. Alex is our governments, and the banks are the bond investors, who are starting to panic.
At the IMF’s October 2026 Annual Meetings, Kristalina Georgieva (IMF Managing Director) identified persistent inflation, higher rates, AI-related investment demand, and weak fiscal fundamentals as forces pushing yields to multi-decade highs. Yet she also warned against “monetary cowboys, running to the rescue of the fiscal agents”—a warning that tells you how intense the pressure to do precisely that has already become. Inflationary QE, in other words, is written in the script. The only remaining question is when—and under what level of financial duress—central banks will be forced to read that script aloud.
Here is the crucial insight: the bond market is doing the central banks’ job for them. By pushing yields up, it is autonomously tightening financial conditions, without central banks having to raise rates significantly. Since mid-September the bond market has already tightened by nearly 200 basis points across eight major economies. This is making mortgages, business loans, and government borrowing more expensive, thereby unleashing conditions of austerity. The first symptoms of such austerity are already visible. In Europe, across France, Italy, Belgium and beyond, ongoing youth-led protests over the cost of living, housing, and the collapse of public services are turning the bond market’s abstract violence into a matter of collective anger, frustration, and revolt.
This is desperation time, and the systemic trap is now impossible to ignore. Central banks cannot raise rates further because the global debt burden is colossal. But they cannot aggressively cut rates either, because the threat of runaway inflation remains acute. And if long-term yields keep climbing, central banks will eventually be forced into the very move they promised to avoid: printing money to buy bonds and suppress yields.
The bond market is a war front, not a trading desk. It is the transmission mechanism through which the system’s explosive contradictions crash directly into the daily lives of millions. When the bond market fights, it doesn’t fight with tanks and artillery; it fights with your mortgage rate, your pension fund, and your local school and hospital’s budget. In short, with your livelihood. And right now, the bond market is winning.
Front Three: The Real War
On 14 October 2026, drones struck two tankers off Romania’s coast, one inside Romanian territorial waters. A NATO source told Reuters the drones were Russian; Romania’s president confirmed the attacks but declined formally to blame Moscow; Bulgaria’s president said there was “no solid evidence” of Russian origin. No matter. The war rhetoric from Brussels and London has been escalating for months. Kaja Kallas keeps repeating that Russia may test Europe’s readiness “within three to five years.” Mark Rutte declares: “We are Russia’s next target.” Ursula von der Leyen proclaims: “If Europe wants to avoid war, Europe must get ready for war.” The EU is constructing a “Military Schengen” to move troops faster, on the premise that peacetime rules will not deter Putin. In Britain, the armed forces are reviving the Cold War-era War Book: the plan for national mobilisation, rationing, evacuation, and emergency government.
This is the language of a continent preparing for war—the marriage of good will and conscription that accompanies every descent into barbarism. It operates precisely as Lacan’s fundamental fantasy: an imaginary screen, filled with images of pain, erected against the void opened by the collapse of capitalist legitimacy. After Covid, Europeans must again be trained to fear (and, unconsciously, enjoy fearing) the threat posed by an overpowering Enemy. This late-capitalist memento mori allows the technocracy to fill the complete absence of any political ideas—and the disintegration of the capitalist substance—with the emergency fantasy of national or collective survival.
Yet when pressed, the same officials concede what their rhetoric conceals. Rutte: “We see no imminent threat against NATO territory.” An EU official: European intelligence services have seen no signs that Russia plans to attack NATO members. And Putin repeats what he has said for years: “We have no plans for any military action against Europe. There is no reason for it.”
The pattern is unmistakable: institutions that warn incessantly of Russian aggression admit, when asked directly, that they see no evidence of an imminent attack. War-readiness therefore serves three purposes: it justifies vast defence spending as fiscal space collapses; it disciplines populations into accepting austerity, sacrifice and possible conscription; and it creates the political conditions for the QE that the bond market is already making inevitable.
Consider Britain. It is spending £298 billion over four years to “rebuild warfighting readiness,” while its army has shrunk to around 73,000 troops—the lowest since the Napoleonic era. Its attack submarines are reportedly entirely unavailable for operations; its combat aircraft number around 140, a fraction of Cold War strength. Is Britain preparing for war? More likely, it is preparing for the appearance of preparing for war. The point is not military capacity but ideological mobilisation: a population trained to accept that young people may have to “go out and die” ( Jacob Rees-Moggdixit) for a country whose ruling class has spent decades dismantling the conditions worth fighting for.
Then there is Iran. The unprovoked US war has entered its seventh month, with Israel on maximum alert and Washington and Jerusalem discussing strikes on Iranian military and nuclear facilities. Around this conflict, suspicion is systematically converted into implication: an incident near RAF Fairford produces arrests, evacuations and Iranian-involvement claims, though no explosives are found; a hijacking aboard a Flydubai flight is immediately reframed as another 9/11, though no proven Iranian link emerges. Again, this is how the collective psyche is trained: no proof, just implication.
Needless to say, the deeper stakes are financial. Iran’s reported willingness to accept yuan for oil transiting the Strait of Hormuz—and reportedly to offer Europe a euro-denominated transit deal—threatens the petrodollar arrangement that has underwritten American financial dominance since 1974. If oil ceases to demand dollars, dollar demand falls, US borrowing costs rise, and a debt machine already strained by $40.3 trillion in gross national debt and $1.36 trillion in annual interest payments becomes truly unsustainable.
Here the real war meets the other fronts. War drives energy prices and inflation upward; inflation keeps rates high; high rates intensify the AI debt burden; the resulting credit distress forces central banks toward QE. In a world of $100-plus oil and war-driven inflation, however, QE further destroys monetary credibility. The Iran conflict is thus not merely a geopolitical catastrophe. It is the mechanism through which the AI bubble and the bond-market crisis become a real war; and through which the system acquires its justification for the monetary rescue it cannot survive without.
The Script
QE, followed by further mass impoverishment, mass revolt, and control measures, is written into the script, because within the Western capitalist horizon there is no alternative. The three-front war makes this clearer. The West is fighting on all three fronts with the same weapon: debt-financed spending. China’s advantage is that it fights with open-source abundance, destroying the pricing power on which American AI capital depends.
Within this confrontation, the bond market is the mechanism that turns the AI war into a financial crisis. When the cost to insure CoreWeave’s debt against default surges past 1,000 basis points, this is not merely one company’s distress. It is the market pricing the collapse of the AI capex model. (For context, CoreWeave is an AI cloud provider that went from obscurity to a giant, and multi-billion-dollar borrower, in barely three years.)
Real-war escalation is the wildcard behind the QE. If the conflict with Iran intensifies, or if Ukraine expands toward NATO territory, the fiscal cost becomes instantaneous and enormous. War drives energy prices and inflation upward; inflation keeps rates high; high rates worsen the AI debt burden; the resulting credit event forces central banks to monetise. This could be the logic of the next “whatever it takes” moment. It would arrive not as salvation but as the admission that the system can be kept upright only by printing its way past its own contradictions.
QE, of course, will not resolve the crisis. It will not restore profitability, repair the AI capex model, or make sovereign debt sustainable. Its function is narrower and more cynical: to prevent immediate default, protect asset values, and buy time for the distribution of losses downwards. This is the sequence to keep in mind: insolvency is converted into inflation; inflation into a new regime of social discipline; and social discipline into the political conditions for further control.
The same convergence is visible in the language now surrounding AI itself. On the back of recent panic about autonomous “rogue swarms,” US and Chinese experts are discussing AI governance in the idiom once reserved for nuclear weapons: red lines, mandatory human control, hotlines for incidents caused by autonomous systems. The feared scenario is instructive. An American system detects suspicious activity in a Chinese military network, classifies it as an attack, and responds. Chinese systems detect the response and respond automatically. Within minutes, two defensive systems have produced the appearance of mutual aggression, and the war begins through automated misrecognition.
This is why the AI war and the real war come together. The infrastructure being built to manage algorithmic risk within a civilisation in slow-motion collapse is also the infrastructure of a digital panopticon (the administrative apparatus of the QE regime; the means by which the losses distributed downwards are made to stick). The CLARITY Act’s stablecoin regime, with its KYC requirements and Treasury powers to freeze transactions without court order, is legalised as “consumer protection.” Central banks experiment with programmable money that can be restricted, expired, or made conditional. Under economic duress, tools designed for “illicit finance” become tools of population management: a digital prison whose bars remain invisible until they close.
Will they call it QE, yield-curve control, “liquidity support,” or a new emergency facility? It does not matter, because the script is written and the only variable is how much real war must occur before it is read aloud.
But a script is not a destiny. If war-readiness functions as a fundamental fantasy, then the task, as Lacan would put it, is to traverse the fantasy. This means refusing any sacrificial identification with nation, flag, or the “defence of Europe,” and instead looking directly at the void which the war rhetoric is designed to cover. When the conscription letter arrives or the emergency decree is issued, traversing the fantasy means saying: “The country that asks us to die is the same country that has stripped us of housing, healthcare, and a future.” It means organising a structural refusal, a movement of uncompromising desertion: we will not be the human collateral for a bond market rescue. The system needs our consent, our sacrifice, and our psychic investment. To withdraw that investment is the one variable they cannot price in.