Look if we are going to raid pensions and 401Ks to prop up the valuation targets of Anthropic and OpenAI longer, then the bubble can stretch further and further, but eventually datacenters have to get built and powered. It's the power generation part that no one talks about. We simply don't have enough power in the United States to scale at the rate that Anthropic and OpenAI need to prop up their absurd valuations. AI is real, but these valuations are not.
TL;DR: Ed is directionally correct, but it's anyone's guess as to the exact timing.
In the meantime I'm not going to complain about subsidized credits from the big labs. :-)
So US manufacturing would go up and up by that logic. Not to mention the US can simultaneously restrict the money supply via increased taxes at same time. The US also could just stop issuing bonds entirely and simply create the currency directly rather than the Rube Goldberg that is the bond market
I'll tell you what is going to happen, b/c it is happening as we speak. The U.S. Government is soft-defaulting on the debt by devaluing the currency. (The debasement rate is somewhere in the 7%-8% range)
There will never be a real default, but it is likely that the USD will lose reserve currency status. The U.S. Government has $114+ Trillion in total debt. (Something like $325,000 per person in the US) We are never paying that off. The only way we can do anything about it is to grow the economy and devalue the debt via inflation.
To all the other currencies that are currently used as reserve currencies, other than the US dollar. There has never been a single reserve currency in the world.
It doesn't matter who/what gets it next, what's important is that we're about to take a 60-80% haircut on our standard of living. It's what happened to the British when the lost it with the Pound Sterling, and now it's our turn.
Most people don't remember what hard money is, and why it's important.[1]
* The value of the U.S. dollar against other currencies dropped about 11% in the first half of this year, the biggest decline in more than 50 years, ending a 15-year bull cycle.
* Morgan Stanley Research estimates the U.S. currency could lose another 10% by the end of 2026.
* Despite a recovery of 3.2% in July, the delayed impact of tariffs on growth and unemployment – besides policy uncertainties – are likely to keep negative pressure on the dollar.
* Foreign investors have been adding hedges to their exposure to U.S. assets, which will likely further weaken the dollar.
World reserve currency was solved by Keynes and Joan Robinson in the 1940s.
What you do is have a currency no country controls that acts purely for exchanging one national currency for another. Give it to the united nations or something.
If you take a national currency and make it a world reserve currency then the nation that does do has problems with balance of trade, deficits, and mathematically screws themselves over. This is because you currency becomes overvalued compared to those of over countries, meaning your domestic manufacturing has problems competing, among other things.
We already made the mistake of one national currency becoming the world currency post WW2. I hope its not a mistake the world chooses to repeat.
This is what cryptocurrencies do, but remove the need for an intermediary and codify the rules in software, so it is much harder (near impossible?) for politicians to manipulate the money supply.
It will likely be a cryptocurrency or perhaps a basket of cryptocurrencies. You essentially want a way to store wealth directly on the Internet as it is the fastest and easiest way to reassign ownership of money or collateral. The nice benefit too, then is the U.S. (and no other country as well) is subject to the Triffin Dilemma.
Which was never really a problem before cryptocurrencies. Nor does it any way address the core issue we have with physical currency, taking out loans now, against future wealth generation, which is happening in the crypto space too.
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