The bursting of the investment bubble could shock the US and global economies

If the investment bubble around the AI ​​sector bursts, it will be the most predicted financial implosion in history, but few people think about its consequences. Even if it does not bring a deep recession, it will weaken the economic hegemony of the US – predicts the Economist.

The valuation of the artificial intelligence (AI) sector on stock exchanges has reached the stratosphere, so it is widely believed that some form of correction will occur. The International Monetary Fund has warned about this, and central banks are preparing for difficult times. For now, there is little concern that plummeting markets will trigger a widespread financial crisis. However, it would be a mistake to think that such a crash would only affect investors' pockets – says the British weekly.

The longer the investment boom lasts, the more opaque the methods of financing itso even if “financial Armageddon” does not occur, dramatic declines in stock markets could push the global economy into recession.

The source of the biggest problems would then be the decline in demand in the US; a crash would impoverish American farms by 8 percent, which could lead to a significant reduction in consumer spending. Combined with growing difficulties on the labor market, this would probably result in a decline in America's economic growth, the weekly notes.

The consequences of such changes would affect Europewhose economic growth is already erratic, and Chinacompounding problems created by President Donald Trump's tariff war.

A global recession would put the governments of indebted countries under pressure. This whole situation, combined with the weakening dollar and the risk that the Federal Reserve will become susceptible to political pressure as a result of Trump's policy, would undermine America's position as an economic hegemon – says the Economist.

Meanwhile, China, which is already trying to find a solution to the problem of overproduction, would even more try to place its export goods in Europe in the face of falling demand in the US.which – according to the weekly – would result in protectionist retaliation.

The Economist predicts that Wall Street will soon face a “doomsday”, especially since the speculation that a speculative bubble will burst usually appears just before the crash. (PAP)

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