Key Points
As improvements in artificial intelligence continue apace, so do questions about how AI will influence economies, asset prices and the question of the moment interest rates: Is AI more likely to make them go up or down?..
Nevertheless, I have a bold prediction: Real inflation-adjusted rates will go up, and for a considerable period of time...
If capital productivity rises significantly due to AI, real interest rates ought to rise as well...
If enough of these trends come together in a short enough period of time, then real interest rates can be expected to rise..
Still, it makes sense to be prepared for a reversal of the long-run trend of falling real interest rates at least for several decades, until AI-driven progress creates more wealth to replenish stocks of savings, lowering real rates once again...
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AI could drive up the neutral rate of interest in an economy
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