THE BOTTOM LINE
AI mania can’t survive higher interest rates
The price of money is the pin that deflates market bubbles
WHEN bond yields surged in recent months, analysts just shrugged, saying the artificial intelligence boom would thrive regardless. This is classic bubble logic. The price of money always matters, and there is good reason to believe that is true now more than ever.
Global debt is at record levels, much of it accumulating on government books. This is good news short term (governments are typically the last fortress to fall) but bad news in the end (governments will be in no position to deliver stimulus or bailouts).
The pool of available capital is more limited than it was in the booms of the late 1990s and 2000s, because this time companies must compete with governments for money.
