The AI Investment Boom

I can't wait for the AI bubble to be over so HN can talk about something else

I think it will burst when the Fed realizes inflation is not done and start raising again in 6 months. They can only feed the bubble for so long before the common people have had enough of rising prices.

The Fed raising rates will increase inflation at this point (and further increase fiscal deficits), nothing stops that train.

Arguably if the investment here works out we’ll see deflation through extreme technical advancements.

No, raising rate would bring the economy to a slower pace and reduce private sector consumer demand. Private sector investment can continue to increase but at some point that too will hit a brick wall. The public sector spending depends on which type of big ego people get to make decisions. Given the extreme excesses so far it can go either way. The now extinct fiscal conservatives might just make a return finally but don’t hold your breath.

Raising rates works in the beginning with high fiscal deficit driven inflation by slowing demand and bank lending.

But raising interest rates and keeping them high in an environment where runaway government deficits and high government debts are causing inflation runs the risk of exacerbating inflation.

You have high interest rates on a large amount of government debt which continues to push _more_ money into the economy.

The Fed doesn’t have any real options at this point but to lower rates.