Artificial Debt Ceilings

And genuine human incompetence...

(Source: Getty Images)

Bill Bonner, reckoning today from Youghal, Ireland...

The subject is AI. But the discussion takes place against a backdrop of financial crisis. Or, at least a faux financial crisis – the debt ceiling.

You probably know more about Artificial Intelligence than we do. But since it is supposed to change life on planet earth – for the better – we thought we should get acquainted with it. We don’t want to be surprised by a sudden increase in our well-being. It might be unsettling.

Here is the executive summary:

If you are counting on AI to make you rich…or save the US from decline…you will probably be disappointed. In particular, buying into the speculative frenzy surrounding AI is likely to be costly. Don’t buy NVIDIA. Sell it.

Chicken Little’s Prognostication

Returning to the financial crisis, illustrating the ‘faux’ part is The Economist: 

The nightmare scenario

What happens if America defaults on its debt?

An unimaginable eventuality becomes all too imaginable

The Council of Economic Advisers, an agency in the White House, estimates that in the first few months of a breach, the stock market would fall by 45%. Moody’s reckons it would fall by about 20%, and that unemployment would shoot up by five percentage points, which would mean somewhere in the region of 8m Americans losing their jobs. The government, constrained by the debt ceiling, would be unable to respond to the downturn with fiscal stimulus, making for a deeper recession.

‘All too imaginable!’ Oh my. The sky is really falling this time. 

It doesn’t take artificial intelligence to see that the debt ceiling crisis is a fraud. The government has plenty of money to pay for essential services – and to service the interest on its debt. As Ms. Yellen explained on TV on Sunday, it can “prioritize” its debts, paying those that are essential…and letting the others slide. No need for a ‘government shutdown’…no need for a ‘default.’ The ‘crisis’ is a swindle. Nothing more.

From former budget director (under Reagan), David Stockman, we get the figures.   Every month the feds receive about $450 billion in tax receipts. The net interest payments on the debt are just over $60 billion per month. Social Security is $128 billion. That leaves $262 billion available for whatever foolish thing the feds want to spend it on. In fact, it leaves plenty to run the entire government in the style to which it became accustomed in 2019, which was no mean and lean year.  

The debt ceiling fight is pure politics. The Democrats don’t want to make the hard choices that real budgets require. And the Republicans want to show that the Democrats are spendthrifts. Neither party really wants an actual limit on spending. 

A.I. Says…

But all the jabbering by the toady press suggests that terrible things will happen if the feds can’t get their act together and increase the national debt. This is where just a little intelligence – artificial or otherwise – might come in handy. We know of no business, family or government that ever got out of a debt trap by continuing to borrow money. Instead, the extra debt causes awful things to happen; it doesn’t prevent them.

Ultimately, all we have is time and resources. And ultimately, all the money spent by the feds must come from us. Allowing the Treasury to borrow more – with no national emergency – is just a way for them to get more of your money without raising taxes.  

So, let’s go to AI. Can we count on artificial intelligence to give it to us straight…without the blithering and blabbering of the mainstream media?

Do we need a debt ceiling, we asked?

ChatGPT:

The question of whether the United States needs a debt ceiling is a matter of ongoing debate among economists, policymakers, and experts. The debt ceiling is a statutory limit on the amount of debt that the U.S. government can issue to finance its operations and meet its obligations.

Advocates of the debt ceiling argue that it serves as a crucial mechanism to promote fiscal discipline and ensure that the government does not accumulate excessive levels of debt. They believe that the debt ceiling encourages policymakers to make responsible spending decisions and helps control the growth of government borrowing.

On the other hand, critics of the debt ceiling contend that it is an arbitrary and unnecessary constraint that can create economic and financial instability. They argue that the debt ceiling does not prevent the government from spending money it has already committed to, and reaching the limit can lead to potential default, disrupting financial markets and undermining the country's creditworthiness.

In practice, the debt ceiling has been raised numerous times in the past to avoid default and allow the government to continue borrowing. The ceiling is often viewed as a political tool that can be used by lawmakers to negotiate and shape fiscal policies.

Ultimately, whether the U.S. needs a debt ceiling is a complex question without a definitive answer. It involves weighing the potential benefits of fiscal discipline against the risks of economic disruption. Different policymakers and economists may have varying opinions on the matter, and the decision on whether to maintain or eliminate the debt ceiling ultimately lies with Congress and the political process.

Not wrong. Not bad. Blah-blah. Suitable for a 9^th grade civics class. But something is missing…

Government Misinformation

The internet promised to bring humanity to a new, higher level. We’d all have all the info, all the time. That was in the late ‘90s. But more information did not really make us better off. It turned out that information is only useful if it is pertinent to your situation…and connected, closely, to things you understand and can verify. Those YouTube videos that show you how to install a new bathroom sink, for example, can be extremely useful, but only if you’re replacing your bathroom sink. Otherwise, information is a distraction…and keeps you from replacing the sink.

And ‘information’ is easily distorted and contrived. Remember when the media was telling us that Presidential candidate Donald Trump engaged in mutual urination with a Russian prostitute? The story, though backed by mainstream celebrities, was apparently, completely untrue. Or remember being told – by 51 CIA ‘experts – that the Hunter Biden laptop brouhaha was “Russian misinformation?” Also, untrue. And who can forget when Donald Trump’s band of misfits invaded the Capitol building? For hours and hours, we saw the hapless mob milling around – with neither a plan nor a clue – and we were told they were bent on ‘a democracy-ending coup d’etat.’ Completely absurd. 

And remember how the Covid virus was a threat to us all? We followed ‘the science’ and locked down much of the entire US economy. If only we had had AI back then! It might have told us – it wasn’t true.

‘Information’ on the internet was remarkably promiscuous. Loose. Untethered to reality. It merely amplified and certified the kind of loose talk you might hear from barroom big mouths.

But at least it was ‘free.’ Or so we thought, until the ‘gatekeepers’ at Facebook, Google and Twitter began colluding with the feds to shut the gates to keep out ideas and opinions the feds didn’t like.  

More A.I. Blah-Blah

And now, we have AI. It offers to clean up the mess on the worldwide web. It will sort, verify and organize the chatter you find in the press, in academia, in research reports and other stores of knowledge. Got a question? Just ask ChatGPT, Bard or some other AI-enhanced know-it-all.

When will the AI investment bubble blow up, we wanted to know? ChatGPT replies:

As an AI language model, I don't have access to real-time financial data or the ability to predict future events with certainty. The rise and fall of investment bubbles are influenced by various factors, including market conditions, investor sentiment, technological advancements, and regulatory changes. While AI has experienced significant growth and investment in recent years, it is challenging to determine precisely when or if an investment bubble will occur.

It's worth noting that AI continues to be an area of intense research and development, with numerous applications across industries. As with any investment, it's essential for individuals and organizations to conduct thorough research, consider the risks involved, and make informed decisions based on their specific circumstances.

If you have concerns or are considering investing in AI-related ventures, it's advisable to consult with financial professionals who can provide personalized advice based on your individual needs and goals.

Well, that’s helpful! More blah-blah.

As you can see, AI is smart…it can use big words. But it is smart in the way a lot of people appear to be smart – by repeating what other people say. The artificial part is easy to see. Where’s the real intelligence?  

Stay tuned...

Regards,

Bill Bonner

Joel’s Note: According to the deluge of fear-mongering stories you’re about to be inundated with from now through Friday, the US Treasury is down to its last $57 billion dollars. 

One estimate we saw reckons that, if spending continues at the current rate, the balance will be negative $18 billion by Friday. Hmm...

Ten billion here... a couple of trillion there... gosh golly it’s hard for us non-artificial intelligences to wrap our merely mammalian brains around such large numbers. So here it is, broken down in terms we can cerebrally digest...

Having $57 billion in the kitty while owing $31 trillion is like the average punter at the casino having ten $100 chips left on the table... while being in hock to the house for $545,000. 

Oh, wait. That does sound like a terrible position. What to do, then? Extend the poor sap’s line of credit? Or call gamblers anonymous?