It’s the opposite. The non-AI economy is in recession because the AI bubble is sucking the oxygen out of the rest of the market.
Which actually presents a possible upside to the bubble bursting: maybe the rest of the economy will actually recover.
Probably not. But maybe!
Do you see a specific part of the economy that has a clear growth potetial? Prior to AI there was green energy and EVs but Trump kneecapped that. Tech has been shedding people for a while and transformed into AI. I’m curious if I’m missing something obvious that wouild grow if given the capital.
BTW I think AI is not only sucking out the oxygen in terms of capital. It’s also depriving the rest of the economy of certainty and predictability (confidence). Employees are wondering whether AI would lay them off. Employers are wondering how many people they’d be able to lay off. Both classes are waiting on the ambiguity to be resolved by AI as that would have significant implications on their spending plans. Until then, I think they’re likely underspending due to that uncertainty. That’s of course without considering all the other uncertainty. 😅
Been saying for nearly 20-years that green energy initiatives are a no brainer for America, even if you don’t believe in global warming. New jobs, new tech to sell internally and externally, the US could have led the way and hiked our economy and world leader status.
it’s this the first bubble, where investment is done not due to speculation.
but because we all know we’re in a massive financial crisis but they continue to invest in order to pretend it isn’t there?
I think it’s still speculation. They’re speculating that the naysayers are wrong and that AI will allow firms to produce a lot more with less people.
it has been so obvious that it won’t.
so many major glitches, companies rehiring their programmes.
it is so obvious that we are in a massive crisis, but investment is still going so they can pretend it isn’t
I was thinking about this today. I think this is fundamentally different than the situation during the pandemic recession or the 2008 crash. In both of those cases there were parts of the US economy that were growing and the crash occurred elsewhere, not affecting them directly. Once the capital/labour problems were resolved, the growing parts of the economy kept growing, the stock market recovered reflecting the expected future profits from those growing parts. This time around the only thing that’s growing is the thing that’s under threat of destruction. Thus once it dies, there’s no obvious other bit of the economy to throw money at that could expand and grow productively. So I think given Trump and his sycophants predispositions, this one is gonna last significantly longer than the previous two before a growing part of the economy emerges and recovery is seen. I don’t think they’ll have the ideological predisposition to begin massive infrastructure projects with public employment, which is a known working solution. I think if the AI bubble pops they’re in for a bad time for a while, and anyone else who’s hitched to this wagon, like us (Canada), and it might look more like 1929 than 2008.
It’s almost as the good old real work where you produce goods and services has been forgotten. I mean since a long time, but it worked out okay because people still worked and ofset the bullshit jobs (office, lots in finances, rich parasites etc), maybe we’re at the cusp of something new?
Personally I think we’re about to get another reminder that Marx was right. But we’ll see.
People will try to push the old stuff that didn’t work like communism etc. I hope there will be something new, like take the best of the known systems sort of thing. One can dream eh ☺️
Oh I’m not even talking about him regarding communism. I’m referring to Marx’es most significant work - the analysis of the workings of the capitalist system. He (they) created that work (Das Kapital and related works) in the mid-1800s. I’m reading and it describes in striking accuracy what’s happening around us today, often with uncanny predictive ability.
So, any new fresh ideas 😁 ?
One other theory I’ve heard is that the oligarch class are searching for a radically disruptive tech in terms of economic impact (mass market home computers, internet, smartphones), but there is no guarantee that “AI” will be as disruptive or offer the same ROI values.
Oh yeah, they are def doing that. I think this theory answers the question of why they’re doing what they’re doing. Why they piled up money in various tire fires since the Great Recession, the latest one being AI. And if the ROI doesn’t show signs that there’s ungodly money to be made in AI, the money would move elsewhere, by selling off AI assets, thus crashing AI asset prices (NVIDIA stock, OpenAI valuations, etc.) Once that occurs, if it occurs, is where my hypothesis begins. I’m basically saying that there isn’t an obvious thing for them to throw money at, at similar rate they’re throwing it to AI. If there’s nowehere for them to throw money at as they take it out of AI. Nothing will grow until they find something new, since we know the rest of the economy isn’t growing.
BTW, perhaps less obviously, if AI actually shows it would return the huge ROI the market is expecting, I really don’t see how that ROI actually going to materialize. At first there will be high returns as firms displace workers with AI, partially (more work per worker, layoff some) or fully. But as more and more firms do this, I highly doubt the economy would be able to quickly find jobs of equivalent pay for all those laid off workers. That means rising unemployment and/or deskilling/downward mobility/lower pay. Which means lower aggregate demand. Which means at one point there won’t be enough demand to buy the output of the firms displacing workers with AI. At that point they won’t be able to get further returns on their AI investment. That would also likely produce an economic crisis and social unrest as it has in the past.
Agreed, much of the American-style faux-optimism is based on the ignorance of history.
Push the plebs too far and there is some risk that they will rebel. No LLM or smartphone is going to change that.
Totally not a bubble. Trust me, bro!
Everyone involved knows it’s a bubble. They’re just banking on not being left holding the bag when it pops. Remember, the survivors of the dotcom crash made out like bandits.
“It’s a good bubble.”
What they include and exclude when deciding recessions, inflation and other economic issues is really a black art. Investment in data centres and dodgy sw really affects the economy 🤭
The US likely has many years of recession to look forward to. There might even be a civil war. The country is utterly broken and the ones to blame are capitalists and useful idiots preaching and implementing their propaganda (neoliberalism and its even more degenerated derivates).
Jason Furman, Economist and former Deputy Director of the US National Economic Council, estimated in a New York Times podcast that 92 percent of the economic demand in the first two quarters of this year came from information processing equipment and software.
“Ultimately, what we’re really hoping for is that AI shows up on the supply side of the economy, actually helping us do more with less,” he said. Some of that is happening, he claimed, “but there hasn’t been anything particularly special about productivity growth to date.”
I am assuming that the 92% refers to “net new” economic demand, not total.
This is damning for AI hucksters and conmen. The worse thing is that since many of them are based in the US, not a single one will be prosecuted (how many financial fraud conmen were prosecuted under Obama?)
