Transcription
We are due for one of our downturns. What can then happen and what is happening is that we're noticing that something is bubbling which [music] simply doubles the likelihood that we will have a crash and that it may be a doozy. And given how much money has been poured into AI, that it is the overwhelmingly dominant technological change of our period now, comparable to what the internet was in the 1990s and so on. Well, then that's more evidence and the irresponsible way [music] that stock market prices for a very small number of [music] companies that are involved in AI at this point producing it. Yeah. Everything is there for the bubble mania to be what we're looking at. And so I'm not surprised in any way that we're seeing growing nervousness.
And there's one more thing that's a little different from the ones before. We have seen in recent years that a very fall small number of companies they're actually called the magnificent seven in the stock market. You know companies like Apple and Amazon and a tiny number have been lifting the overall averages because the broader stock market has not been in good shape for quite a while. And that serves the argument I've tried to make in recent years that what we are witnessing is a historic decline of the American empire and of the American capitalist system. And that's reflected in the mediocre performance of the stock market the minute you remove the bubblers who are around the latest technology. If you put all that together, then the corrections that almost every leading business figure is predicting is absolutely likely to happen. And a correction would be a 15 to 20% drop in the value of stocks in the stock market with focus on the magnificent seven cuz they're the ones that are most likely to crash. And if that happens, then the great question will always be the same. always has been the same for the last century. Will any of these every four to seven years economy downturns, stock market downturns, will it leech into the broader economy and take the whole thing down with it?
The first time this happened that really shook world capitalism was 1929. The stock market crashed October of that year, 1929. And it took 11 years to recover. and it only recovered because we went into war and put everybody back to work. The private capitalist system was unable to do it even with the assistance of the New Deal. So, we know how a stock market downturn can lead us into real bad economic time. And that was at the beginning of what we call the American century. We are now at the end of the American century. And that makes people [music] who are historically aware realize that each of the downturns of a market now with or without a bubble could once again go back into the broader economy because we don't have the longerterm historical upswing that was there even though we didn't know it in 1929. We do know that we're not zooming. zooming is what China and the bricks are doing, not what we are doing. And that means we have to be much more worried. And of course, with a government like Mr. Trump's, which is always cheerleading, there is no space to face that risk and to think about what might have to be done to deal with it. Lowering interest rates one or two points is way too little and way too late.
If we're in that situation, [music] we were in an expansion mode in the 1929s. I want to remind people, World War I had wrecked all of the other capitalist countries. They had been engaged in the worst war the world has ever seen. Europe, Japan, China, Russia decimated, not the United States, which suffered much, much less comparably to them. So, we were now emerging. Secondly, the global empires, the great British, French, German, Dutch, and other empires were all in a declining phase. The United States wasn't burdened with an empire. It had Latin America, Monroe Doctrine, our playground, but we weren't responsible for what went on in these countries. They were nominally independent. A very different situation. We were growing. We were coming into what came to be known as the American century. We are not anything like that now. Every day we learn about a new way that the people's republic of China is outmaneuvering us competitively this way, that way, this product, that product. It's a completely different situation. And therefore, we don't have the buoyancy. We don't have the support from below of a historical trend. Mr. Penai doesn't say a word about that. It's as if the larger context were equivalent. So we can rely on the same outcome to the bubble this time that we had the last time. Suppose I told you that only the buoyancy of the United States in the world economy got us through the bubble last time. Then I would have to conclude that lacking that buoyancy now being in fact in a downward phase in the longer sweep of economic development, we are in real danger that a bubble burst will do all of the scary things we know [music] it can do.
I could say look the bubble that burst in 1929 did lead us into one of the greatest depressions that world capitalism has had. 29 to 1941. Do we really want to work our way through the way they did? That's not a good idea. Or are we looking at a war in Venezuela to do for us what the World War II did in getting us out? Are we really want to go there? He ignores all of that. He looks at it only as a question of an investment that we can survive. Let me take another tack because it is even more important. Let's suppose he's right. Let's suppose that the investments, yeah, there'll be some excesses, but they'll work their way out and we will see all of industry affected by AI in the way that we are seeing. Well, in my judgment, for the working class, this is a disaster. This is not a successful emergence from a bad situation. No, this is a bad situation becoming much worse. And I'll tell you why. If AI is to succeed, it has to be profitable. That's why they're pouring that much money into it. Basically, it means that the employer will be able to purchase AI [music] and to install it in the factory or the office or the store where he's an employer. And why is that attractive? Well, let's take a simple example. Let's assume the AI makes workers doubly productive. instead of processing 200 pieces of paper at your desk, you can process 400 pieces or something like that. Then the capitalist says, "Oh, great. I'll buy this AI equipment and I'll tell half my workers, don't come back Monday. You're fired because with AI, the remaining half can do exactly what we were doing before." But now comes the exciting difference. With the same revenue I've ever got before, I have half the workers to pay. The other half of the wages and salaries for those 50% of my workers I keep. Whoa. I am happy. My profit has gone up. Wait a minute. All of that is true. The capitalist has profited. Pinchai's dream has been realized. The payoff of investing in AI has happened because every little producer and medium level producer factory office store has [music] bought the AI and installed it. But half of our labor force has been fired. Nobody is responsible in our capitalism for that. Well, [music] is there some guarantee that these people will be institutionally taken care of? Absolutely not. I mean we live in a society which is busily taking SNAP support food stamps away from millions of people. Not a good situation to dump large numbers of unemployed people as you install. So this lovely story you can see Sundar Pincha he lives in the world of investments and profits [music] and none of that is his concern. You know what you get when you talk to people like that? You're talking to a cheerleader whose job is hooked up with saying what is necessary so people will buy what he's investing in. In Wall Street, it's called talking your book. It is a phrase used when you have someone on a TV show who all that he or she is doing is promoting whatever they're invested in under the guise of commentary or advice. That's why it's never good to listen to those people because whether they're smart or not or whether they're insightful or not really is beside the point because that's not what they're there for to be smart. They're there to promote. And that's what you got here. You got promotion. And the irony is that's not what this bubble needs. It needs people to say slow down. Wait, what about the context? Last point. It would not be the first time in history that a gunghole cheerleading march into the future produces a catastrophe because you didn't understand the constraints, the limits, and the secondary effects of what you were doing. And it comes back and bites you right in the rear end in a way that hurts.