All right, so the Bank of International Settlements, which is known as the Central Bank for the Central Banks, just warned that the AI bubble is risking a global financial crash, warn central bankers.
Reversal of 'excessive' tech investments could have serious economic consequences, report finds.
They say that the financial vulnerabilities as amplifiers.
Should inflation rise significantly or AI-led investment turn to a bust, the macroeconomic consequences could be amplified by existing financial vulnerabilities. A tightening of policy rates needed to contain inflation could precipitate a sharp pullback in asset prices after a prolonged period of exuberant risk-taking, triggering disruptive macro-financial feedback loops. A reversal of AI optimism could likewise have major financial consequences, given AI's faster rising leverage and growing footprint in credit. Vulnerabilities extend to their supplier ecosystems, including engineering, procurement and construction (EPC) contractors whose balance sheets are comparatively weak, leaving them exposed to any capex pullback by hyperscalers.
A major equity market correction could have larger macroeconomic consequences today than in the past. Household equity exposures have grown over the past five decades, both relative to total wealth (12.5%) and income (3.5%). A large contraction in common equity could have more profound wealth effects and sharper consumption pullback than in the past. And with US stocks accounting for an outsized share of global equity markets – about 64% of the MSCI Global Index – the wealth impact from a US-led repricing could propagate globally.
Because of the amount of debt that's tied into this bubble, as well as how much of GDP is dependent on it. It affects a lot more than just a few tech companies.
This is the Central Bank that advises all the other central banks.
They shoot very straight and they try to stay balanced in their narrative. They're not trying to call a bubble or anything like that. They're just pointing out the facts for the rest of the central banks.
And essentially what they break down here is AI bubble fueled by debt with massive credit risk and it's artificially inflated through circular financing.
So pretty much everything I've been saying for the past few months. Nice to finally have some institution saying the same thing as well.
We have a major credit problem with record high debt. And we have inflation crisis, which is likely to pop the credit bubble.
And just as I've been saying for a while, they explain that the Hormuz disruption is long-lasting, even if we have a deal right now, which obviously, as we all know, is a temporary situation.
They state that even if the strait's open now, this oil crisis is likely to deepen into 2027. But more importantly, the damage that's been done to the energy infrastructure, the factories, the LNGs, the transport, the fuel for data centers, the fertilizer and food disruption crisis has also been building since Ukraine and then like exacerbated by tariffs.
So none of these are like new issues, okay? They're just sparked, triggered by Hormuz and now we're past the trigger point.
And that's why I can confidently come out and say that there's going to be a collapse.
Don't let the government distract you or lull you into complacency or make you think that it's not going to be that bad.
Don't be one of those.
Because now we have the confirmation from the Central Bank of Central Banks.
And in doing so, they're not only making the economic situation worse, they're lulling people into complacency and making people think that it's not going to be that bad.
They're manipulating things heavily to drag out the inevitable. And the reason for that is they want the votes for midterms.
You get that, they're literally making the situation worse just for some votes.
And in doing so, they're not only making the economic situation worse, they're lulling people into complacency and making people think that it's not going to be that bad.
I can confidently come out and say that there's going to be a collapse.
The central bank of central banks warns AI frenzy could trigger stock-market slump and jeopardize economy
Provided by Dow Jones · Jun 29, 2023 at 5:13 AM
