Money, Power and War: Tuesday, May 12, 2026
Inflation is erasing what workers fought years to gain. A British government is unravelling in real time. A drone deal quietly signed between Washington and Kyiv may redefine modern warfare. GameStop tried to buy eBay. And a rocket company that hasn't gone public yet is already being valued at over a trillion dollars. Tuesday came loaded.
Prices at the Pump Are Wiping Out Wage Gains for the First Time in Three Years
The Bureau of Labor Statistics confirmed Tuesday what millions of Americans have been feeling for months: inflation has now risen faster than wages, erasing real purchasing power gains for the first time since 2023. Overall inflation climbed 0.6% from March to April, the largest monthly jump in over a year, with nearly half of the increase driven by energy costs alone. Gasoline surged 5.4% in April, pushing the national average to $4.50 per gallon, the highest since July 2022, according to AAA. Grocery prices rose 0.7%, their biggest monthly jump in nearly four years. Airfares are up 20% year-on-year, driven in part by a 60% surge in jet fuel costs since the Iran conflict began in February. The Federal Reserve, which held rates at 3.50%-3.75% at its last meeting, is under growing pressure: some analysts now say a hike could be necessary if energy-driven price pressures persist through summer. President Trump announced plans to suspend the federal gas tax as a relief measure, while Congress is considering a 90-day pause on the levy. Kevin Warsh, Trump's pick to replace Jerome Powell as Fed chair, is expected to be confirmed shortly, and his approach to the energy inflation question will be among the most consequential monetary policy decisions in years.
UK Cabinet Crisis Deepens as Three Ministers Resign to Force Starmer's Departure
Britain's political crisis accelerated sharply on Tuesday as three senior Labour ministers submitted their resignations in a coordinated attempt to force Prime Minister Keir Starmer from office. The move came days after Labour's catastrophic performance in England's local elections, where the party lost more than 450 council seats to Nigel Farage's Reform UK. Starmer has now lost the confidence of roughly a fifth of his own parliamentary party, with Labour MPs openly calling for his resignation in television interviews and on the floor of the House of Commons. The ministerial resignations, described by insiders as a deliberate and organised effort rather than individual acts of conscience, mark a significant escalation from the internal pressure that has been building since election night. Starmer has so far refused to step down, arguing that changing leadership in the middle of a fiscal crisis would make things worse, not better. But the arithmetic is shifting rapidly against him.
The economic backdrop makes the political crisis harder to contain. UK long-term borrowing costs hit their highest level in 28 years on Tuesday, with yields on 30-year gilts rising to levels not seen since 1998, and sterling fell 0.4% against the dollar. Traders cited political uncertainty, fiscal slippage, and rising inflation as the key drivers. The combination of a government in open revolt, a collapsing bond market, and a prime minister whose authority has been publicly repudiated by his own party places Britain in a position that analysts are beginning to compare to the Truss moment of 2022, when a short-lived prime minister's economic programme triggered a gilt market crisis within days of taking office.
US and Ukraine Are Preparing a Major Drone Deal That Could Redefine Modern Warfare
The governments of the United States and Ukraine have drafted a memorandum of understanding for a landmark bilateral defence agreement, CBS News reported Tuesday, citing three sources familiar with the matter. The document, developed by the US State Department and Ukraine's former ambassador to Washington, outlines a framework for joint drone production and the export of Ukrainian military technology to the United States. The deal has been in gestation since August 2025, when Ukrainian officials first pitched cooperation to the White House following the success of Operation Spiderweb, a daring Ukrainian drone attack that saw explosive drones smuggled into Russia on trucks and remotely guided to destroy dozens of Russian warplanes on their tarmacs, a strike that earned private praise from President Trump. The numbers behind the deal explain its strategic logic: Ukraine plans to produce more than 3 million low-cost first-person-view military drones in 2026 alone, compared to just 300,000 manufactured by the United States across the entirety of 2025. Ukrainian firms have also developed electronic warfare systems capable of guiding drones without GPS, enabling them to operate in heavily jammed environments, a capability the US military currently lacks at scale.
The deal faces internal resistance. Ukrainian officials told CBS News they sensed a lack of support from senior figures within the Department of Defense and the White House, particularly since the Iran war began and attention shifted to the Gulf. Ukraine's defence production capacity is projected at $55 billion for 2026, but Kyiv currently has funding for only $15 billion worth of weapons, creating a gap that external financing could help close. Zelenskyy confirmed that Ukraine has already signed defence agreements with Saudi Arabia, Qatar and the UAE, and said further positive news was coming. If formalised, the US-Ukraine memorandum would represent the most significant defence technology transfer between the two countries since the full-scale Russian invasion began in 2022.
Group Linked to Trump Sons Seeks Extra $400 Million for Tungsten Mine in Kazakhstan
A mining group in which Donald Trump Jr. and Eric Trump hold a stake through a shell company has asked the US government for an additional $400 million in financing for the development of what is described as the world's largest undeveloped tungsten deposit, located in Kazakhstan's Karaganda mining district. The group, now operating as Kaz Resources following a merger between Cove Kaz Capital and Skyline Builders, has already secured commitments of up to $1.6 billion from the US Export-Import Bank and the Development Finance Corporation. The new request would bring total US government support for the project to approximately $2 billion. Tungsten is a critical mineral used in aerospace and defence manufacturing, and the United States currently has no active domestic tungsten mines, making it heavily dependent on Chinese imports. The Trump sons' involvement was first reported by the Financial Times. A representative for Donald Trump Jr. said he is a passive investor with no operational involvement and no role in engaging with the federal government on behalf of the project. Senator Elizabeth Warren has described the arrangement as corruption in plain sight.
Scottish Mortgage Defends $1.25 Trillion SpaceX Valuation Ahead of Historic IPO
Scottish Mortgage Investment Trust, the flagship fund of Edinburgh-based Baillie Gifford and one of SpaceX's most prominent institutional shareholders, pushed back on Tuesday against the $1.75 trillion valuation circulating in press reports ahead of SpaceX's anticipated IPO. The trust, which holds a stake in SpaceX worth approximately £3 billion, said its carrying value for the company is based on verifiable secondary market transactions rather than press speculation, arriving at a figure of $1.25 trillion. The discrepancy reflects genuine uncertainty: the full S-1 prospectus, expected in May or June, will be the first time SpaceX's audited financials, precise use of proceeds, and offering terms are made publicly available. Scottish Mortgage also noted it does not yet know what post-listing restrictions will apply to its stake or how long any lock-up period will last. At $1.25 trillion, SpaceX is already among the most valuable companies in the world. At $1.75 trillion, as Bloomberg has reported, it would surpass Saudi Aramco's 2019 record and rank as the largest IPO in financial history. The fund called SpaceX a provider of infrastructure for the global economy, holding firm on its position even as analysts debated whether any valuation number currently in circulation can be considered reliable without audited accounts.
eBay Rejects GameStop's $56 Billion Takeover Bid as 'Neither Credible nor Attractive’
EBay's board formally rejected a $56 billion unsolicited takeover proposal from GameStop CEO Ryan Cohen on Tuesday, describing it in a letter to Cohen as neither credible nor attractive. Cohen had submitted the non-binding acquisition offer on May 3, proposing to buy eBay at $125 per share in a deal structured as half cash and half GameStop common stock. The problem, as eBay's board chairman Paul Pressler made explicit, is that GameStop, valued at roughly $12 billion, was attempting to acquire a company nearly four times its own market capitalisation. Pressler's letter cited uncertainty over how the deal would be financed, the operational risks of the combination, and what it described as concerns around GameStop's governance and executive incentives. Analysts had been sceptical from the moment the proposal emerged: the arithmetic of a $12 billion company acquiring a $56 billion one primarily in its own stock is, as one investor put it, a bold ask. Cohen framed the bid as a move to create a rival to Amazon by combining GameStop's retail footprint with eBay's marketplace infrastructure. EBay's board, apparently, was not persuaded.
UK Borrowing Costs Hit 28-Year High as Sterling Falls on Political Turmoil
Britain's financial markets sent an unambiguous signal on Tuesday: they do not trust the current government to hold together. Yields on 30-year UK gilts climbed to their highest level since 1998, driven by a confluence of political instability, fiscal uncertainty, and the broader inflationary environment. Sterling fell 0.4% against the dollar, extending a broader decline that has gathered pace since the local election results confirmed the scale of Labour's political crisis. Economists drew uncomfortable comparisons to September 2022, when Liz Truss's mini-budget triggered a gilt market collapse and forced emergency Bank of England intervention within days. The current situation has not reached that level of severity, but the direction of travel is concerning: a government whose authority is being visibly eroded, a borrowing cost environment that constrains fiscal flexibility, and an inflationary backdrop that limits the Bank of England's room to cut rates. If Starmer falls and Labour enters a leadership contest, markets will be watching closely for any signal that fiscal discipline might be relaxed or any spending commitments made to win internal party votes.
