In episodes like the railroad boom and the dot-com bubble, creditors and shareholders were wiped out, because investment in a genuinely transformative technology outpaced any plausible near-term return. With the US financial system and asset markets having become a one-way bet on AI, such an outcome today could be catastrophic.
BERKELEY—US Federal Reserve Chair Kevin Warsh recently announced a new task force that will “survey the pace, the reach, [and] the economic impact of new general-purpose technologies, including AI, and explore the implications for the Fed” as it pursues its “employment and inflation mandates.” Notably absent from Warsh’s statement was any mention of the impact of AI on financial stability, the Fed’s de facto third mandate.
