Younger economists don't recall the year 2000. Banks here and other nations' central banks were panicking! The closing years of the Clinton Administration was running massive SURPLUSES because a GOP Congress never let Clinton pass any programs for 8 years, Clinton was staying our of wars, and his economy set records for economic expansion, filling the Treasury coffers. So much so that the U.S. was on track to pay off all the National Debt. But Treasury bonds, notes, and bills were the world's primary source of no default risk, highly liquid financial securities needed to balance risky portfolios and provide quick conversion to cash as emergencies arose. George W. Bush was elected, invented "I hit the trifecta" rationale for burying U.S. economy back into debt: a 2nd unfunded Reagan-type tax cut for the rich, two unfunded Mideast invasions and decade occupations of huge nations not responsible for 9-11, and the dot.com Recession.
Not only is the most politically attractive solution changing bank capital and leverage requirements long before Treasury absorption becomes a binding constraint (vs. any type of fiscal austerity), it shifts the locus of blame from Capitol Hill to the banks, pension funds, insurance companies, money market funds, foreign central banks, and so on.
From a Public Choice Theory perspective, this is a win-win scenario.
But wait, there's more, says the huckster. Once the politicians realize that changing the regulations increases Treasury demand at no visible cost (vs. fiscal austerity) it becomes a one-way ratchet. Bet on it.
The administration is going on in on AI producing productivity increases to service the debt and pay down the principal. Well that, and of course inflation. I feel confident that it should work out like that more or less, but you never know what Black Swan could come along or a new combination of unpredictable variables to throw a spanner in the works. Sure it's gonna be fun watching though....
I'm neither economist nor financier. I don't see how adding $2 trillion of debt a year, with interest payments of $1 trillion a year, can be covered just by AI productivity enhancements and run of the mill 2% (or 4% now) inflation. It's either nastier inflation or nastiest default, unless by some miracle the 2032 SSA crash wakes up the politicians.
It's far from certain, but Capex from AI into energy and efficiency may compound into revenue to cover it. Opportunity drives innovation, and this is the biggest opportunity in modern history. And there's an awful lot of money waiting on the sidelines to jump in. That being said I am always an optimist. And it's pretty damn tough to default when you're the world preserve currency with nobody even in second place.
The historical record of innovations is very clear: it require 10 to 30 year gestation period for every major innovation to show a clear profit, with many hiccups along the way as rivals versions battle for supremacy (with lots of mergers, bankruptcies), writing off each technologically-obsolete version, adapting it to each industry's needs (slowing "diffusion" rate to a crawl) and restructuring each industry affected, designing all the new durable complements, massive retraining and redistribution of labor and job descriptions, and worker, community, and cultural acceptance.
Historical tax revenues have been 19% of GDP. That implies AI productivity would have to raise $10 trillion of income to generate $2 trillion more tax revenue. I do not believe anything can.
I agree that that any one thing can accomplish it, but I would just say I have an open mind that the possibility of a combination of technological advances in computing power and efficiency, energy capacity and efficiency could coincide with recursive self improving AI to compound. The amounts of money being invested buy companies large and small everyone in between is staggeringly unprecedented. I'm 54 years old and I've never been more excited to see what the future holds. My kids who are both at college and very talented, along with their peers, are going to have a really wild ride and some incredible opportunities to see and accomplish things that us oldies are going to have trouble comprehending.
Younger economists don't recall the year 2000. Banks here and other nations' central banks were panicking! The closing years of the Clinton Administration was running massive SURPLUSES because a GOP Congress never let Clinton pass any programs for 8 years, Clinton was staying our of wars, and his economy set records for economic expansion, filling the Treasury coffers. So much so that the U.S. was on track to pay off all the National Debt. But Treasury bonds, notes, and bills were the world's primary source of no default risk, highly liquid financial securities needed to balance risky portfolios and provide quick conversion to cash as emergencies arose. George W. Bush was elected, invented "I hit the trifecta" rationale for burying U.S. economy back into debt: a 2nd unfunded Reagan-type tax cut for the rich, two unfunded Mideast invasions and decade occupations of huge nations not responsible for 9-11, and the dot.com Recession.
Forget about the Safe-Debt Laffer Curve.
Not only is the most politically attractive solution changing bank capital and leverage requirements long before Treasury absorption becomes a binding constraint (vs. any type of fiscal austerity), it shifts the locus of blame from Capitol Hill to the banks, pension funds, insurance companies, money market funds, foreign central banks, and so on.
From a Public Choice Theory perspective, this is a win-win scenario.
But wait, there's more, says the huckster. Once the politicians realize that changing the regulations increases Treasury demand at no visible cost (vs. fiscal austerity) it becomes a one-way ratchet. Bet on it.
The administration is going on in on AI producing productivity increases to service the debt and pay down the principal. Well that, and of course inflation. I feel confident that it should work out like that more or less, but you never know what Black Swan could come along or a new combination of unpredictable variables to throw a spanner in the works. Sure it's gonna be fun watching though....
I'm neither economist nor financier. I don't see how adding $2 trillion of debt a year, with interest payments of $1 trillion a year, can be covered just by AI productivity enhancements and run of the mill 2% (or 4% now) inflation. It's either nastier inflation or nastiest default, unless by some miracle the 2032 SSA crash wakes up the politicians.
It's far from certain, but Capex from AI into energy and efficiency may compound into revenue to cover it. Opportunity drives innovation, and this is the biggest opportunity in modern history. And there's an awful lot of money waiting on the sidelines to jump in. That being said I am always an optimist. And it's pretty damn tough to default when you're the world preserve currency with nobody even in second place.
The historical record of innovations is very clear: it require 10 to 30 year gestation period for every major innovation to show a clear profit, with many hiccups along the way as rivals versions battle for supremacy (with lots of mergers, bankruptcies), writing off each technologically-obsolete version, adapting it to each industry's needs (slowing "diffusion" rate to a crawl) and restructuring each industry affected, designing all the new durable complements, massive retraining and redistribution of labor and job descriptions, and worker, community, and cultural acceptance.
Historical tax revenues have been 19% of GDP. That implies AI productivity would have to raise $10 trillion of income to generate $2 trillion more tax revenue. I do not believe anything can.
I agree that that any one thing can accomplish it, but I would just say I have an open mind that the possibility of a combination of technological advances in computing power and efficiency, energy capacity and efficiency could coincide with recursive self improving AI to compound. The amounts of money being invested buy companies large and small everyone in between is staggeringly unprecedented. I'm 54 years old and I've never been more excited to see what the future holds. My kids who are both at college and very talented, along with their peers, are going to have a really wild ride and some incredible opportunities to see and accomplish things that us oldies are going to have trouble comprehending.