Key Points
As improvements in artificial intelligence (AI) continue apace, so do questions about how AI will influence economies, asset prices andthe question of the momentinterest rates in America: Is AI more likely to make them go up or down?.
Nevertheless, I have a bold prediction: Real or inflation-adjusted rates will go up, and for a considerable period of time..
Second, as a matter of theory, the productivity of capital is a major factor in shaping real interest rates..
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 ratesat 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 have a surprising effect on interest rates
27, Mar, 24As advancements in artificial intelligence (AI) accelerate, debates arise regarding its impact on economies and interest rates. Contrary to conventional wisdom, economist Tyler Cowen predicts that real interest rates will rise due to increased demand for capital expenditures (capex) driven by AI, leading to significant changes in economic dynamics.