The AI Bubble Bursting Would Actually Be Incredible for the Economy, Economist Says

The American economy is completely shouting. Late rent and fusion payments are escalating in loans, and the highest 10 percent of the wave holders amounted to nearly half of all consumer spending. In early September, the work statistics office reported that the nation added more than 900,000 jobs less than it was previously believed from March 2024 to 2025.

However, since things may feel things for common popularity, financial markets have never seemed better-technology-dominated NASDAQ continues to reach record levels, and the country’s gross domestic product has grown more than 50 percent since 2020.

Hunting here is that this growth is largely due to a small handful of technology companies and the dreams of its investor full of the economic revolution that Amnesty International is working, which has never seen the world from.

Of course, this prompted many analysts to refer to the “artificial intelligence spending bubble”, an unprecedented misuse of resources that drive the economy, with potential severe consequences awaiting when the bubble is “fixed organic pollutants”.

However, there may be a bright side: one of the macroeconomic researchers, Dean Baker, says to the Economy and policy Research Center, that the explosion bubble may be just what we need to restore matters on the right track.

In a summary of this situation, Baker agrees with the school of thought that we say we are in the Amnesty International spending bubble, and that there are some bad consequences – stagnation, most likely – we are waiting for us when music stops.

Although economic contraction may be, though, Baker says it will open the door because of a potential recovery makes life better for workers.

He explains that the economy can be considered a bathtub with open drain and tanks, one of which bears the name “wealthy” and the other “ordinary workers”.

“The goal is to maintain the bathtub full but indifferent. This would comply with the labor market in the full work and the economy that works as it,” Baker writes.

“If the water flows into the sink very slowly, we have unemployment and excessive ability.” “If the water flows into the sink very quickly, then the bathtub overflows and gets water all over the ground. This will be the story of inflation.”

At the present time, the “wealthy” faucet – the artificial intelligence bubble – is flowing into the complete explosion, while the other barely flows. When the bubble explodes and investors begin to withdraw their money from the technology companies that sell the artificial intelligence revolution, this tap will also slow down in dotting, leading to the dropping level of the water in the pelvis.

Although this is “bad news for everyone”, says Baker, “the lower water level in the pelvis means that we have the option to convert the flow from the ordinary workers’ tap up, without causing the pelvic flow. “

And the good news, he says, is “we know how to turn the flow up.”

The simplest way to do this is to direct instructions to the federal reserve to reduce interest rates – which was very hesitant in looking at the possibility of increased inflation, but he finally did this week.

Another strategy to increase the flow of the “normal factor” after the recession is to increase government spending on social programs such as health care, education and children’s care, giving workers a room for breathing and spending their wages. We hope to avoid the worst consequences of recession and stimulate the economy.

In short, Baker assumes that “the collapse of the artificial intelligence bubble will create the room that the economy needs for policies that will make the lives of tens of millions of people much better. That is why we must all be a fan of collapse and do not worry that we are harassed against the local team.”

Whether the current political climate in the United States makes Baker solutions to be applied completely another issue – but it seems that one thing is certain: the armament faucet will dry sooner or later.

More about the artificial intelligence bubble: There is an amazing financial problem in artificial intelligence data centers