“the most obvious financial implication of AI will be mass debt default, bankruptcies, bank failures and chaos in the international financial sector….Global debt (private and public) recently hit a record high of $353 trillion, with $29 trillion added last year alone. Two-thirds of this rise in global debt was incurred by rich countries’ governments trying to soften the blow of losing competitiveness. Borrowing to cover lost income can only last so long. Something will give. The most probable trajectory is that the AI bubble bursts, which may already be happening, triggered by the crash in Korea in recent weeks. This is followed by wealth destruction in the US as the Americans have bet the Wall Street house on Silicon Valley. Thereafter, the productivity rise associated with AI ensures that deflation sets in, unemployment rises as AI replaces the service jobs of the clerical middle (consultants, lawyers and administrators), leading to falling tax revenue and mass debt defaults.”
It’s one of the ironies of the AI race, that Big Tech’s leaders seem mainly in it for the money, yet their creation (AI) will ultimately destroy much of the long-term wealth that they covet. Irish economist David McWilliams does a good job of explaining what is ahead.
He explores this from an angle that rarely gets explored … deflation. As AI deflates both prices and wages, it will make debt steadily more unpayable. That is everything from government debt, to corporate debt, to individual mortgages and personal debt.
If prices fall across the board, how will we repay all the debt we have accumulated?
You crash the currency so it’s not worth anything. Of course you move your fortunes to another currency before you pull the trigger. Crypto has been named for this.
