I enjoyed reading these financial predictions that I haven’t seen in so much detail previously, particularly the part about massive default of fixed rate debt which I think makes a lot of sense. What I think is missing is this future world is the impact of massive deflation.
In a world where “a Claude agent can do the work of a $180,000 product manager for $200/month”, most white collar workers are moving into blue collar work, those with even a handful of years of savings will be sitting extremely comfortably in a deflationary spiral if they don’t have massive fixed rate debt. In such a situation if the Fed is still targeting 2% inflation, the government could start printing and spending massively (perhaps handouts to stop the mass-default of most fixed rate debt) with minimal increase in the CPI. Perhaps this would be terrible at any other time, but in this case everyone would be wildly rich regardless of bad economic policy (and AI companies would still be even more wildly rich). AI companies could of course hold non-dollars, but they’ll still face capital gains taxes denominated in dollars.
In a world where the richest have everything they can desire and those with a modest amount of savings are getting richer faster than they can spend the money, I doubt such a world will be anything but good (assuming alignment was solved). Nominally maybe in that world it would look scary, but in real terms everything would look great. At the very least this has made me realize I need to evaluate the security of my investments that I am using quite a lot of cheap fixed rate debt to obtain currently.
They are explicitly predicting that if there is massive AI productivity growth, there is no guarantee that the government will take the opportunity to print and spend to generate enough inflation to prevent the breakdown of basically all loans to extreme deflation. Somebody who found a way to exit into something safe from extreme deflation was fine, but everyone who misidentified it is soaked.
it might be that the only safe asset is datacenter shares, or something, and everybody who is not in that has whatever they are holding deflated to nothing.
The deal they predict looks like
We play musical chairs with all the claims on future production
There is way more future production to claim.
Even with a fairness guarantee, that can still be scary.
everyone would be wildly rich regardless of bad economic policy
In a world where the richest have everything they can desire and those with a modest amount of savings are getting richer faster than they can spend the money, I doubt such a world will be anything but good
What about the people without savings? It seems like the world in this scenario simply rewards those who are already ahead and punishes those who aren’t.
Plus, there’s less and less you can do to gain economic mobility and to get ahead of others, simply because everyone is getting better advice from their AI agents and “playing the game more optimally”, so to speak, and almost everyone has access to the same AI capabilities to help them with their work.
To me, this scenario seems like a good description of to path that would lead to the kind of extremely unequal future that some people have long warned about with AI development. By no means a good future to the majority of Americans, and even worse for regular people in the rest of the world, as at least in America (as a rich country) you can probably live on welfare.
I enjoyed reading these financial predictions that I haven’t seen in so much detail previously, particularly the part about massive default of fixed rate debt which I think makes a lot of sense. What I think is missing is this future world is the impact of massive deflation.
In a world where “a Claude agent can do the work of a $180,000 product manager for $200/month”, most white collar workers are moving into blue collar work, those with even a handful of years of savings will be sitting extremely comfortably in a deflationary spiral if they don’t have massive fixed rate debt. In such a situation if the Fed is still targeting 2% inflation, the government could start printing and spending massively (perhaps handouts to stop the mass-default of most fixed rate debt) with minimal increase in the CPI. Perhaps this would be terrible at any other time, but in this case everyone would be wildly rich regardless of bad economic policy (and AI companies would still be even more wildly rich). AI companies could of course hold non-dollars, but they’ll still face capital gains taxes denominated in dollars.
In a world where the richest have everything they can desire and those with a modest amount of savings are getting richer faster than they can spend the money, I doubt such a world will be anything but good (assuming alignment was solved). Nominally maybe in that world it would look scary, but in real terms everything would look great. At the very least this has made me realize I need to evaluate the security of my investments that I am using quite a lot of cheap fixed rate debt to obtain currently.
They are explicitly predicting that if there is massive AI productivity growth, there is no guarantee that the government will take the opportunity to print and spend to generate enough inflation to prevent the breakdown of basically all loans to extreme deflation. Somebody who found a way to exit into something safe from extreme deflation was fine, but everyone who misidentified it is soaked.
it might be that the only safe asset is datacenter shares, or something, and everybody who is not in that has whatever they are holding deflated to nothing.
The deal they predict looks like
We play musical chairs with all the claims on future production
There is way more future production to claim.
Even with a fairness guarantee, that can still be scary.
What about the people without savings? It seems like the world in this scenario simply rewards those who are already ahead and punishes those who aren’t.
Plus, there’s less and less you can do to gain economic mobility and to get ahead of others, simply because everyone is getting better advice from their AI agents and “playing the game more optimally”, so to speak, and almost everyone has access to the same AI capabilities to help them with their work.
To me, this scenario seems like a good description of to path that would lead to the kind of extremely unequal future that some people have long warned about with AI development. By no means a good future to the majority of Americans, and even worse for regular people in the rest of the world, as at least in America (as a rich country) you can probably live on welfare.