UK's Central Bank Warns of Growing Risk That AI Bubble Could Burst (theguardian.com)
- Reference: 0179725836
- News link: https://news.slashdot.org/story/25/10/09/1012240/uks-central-bank-warns-of-growing-risk-that-ai-bubble-could-burst
- Source link: https://www.theguardian.com/business/2025/oct/08/bank-of-england-warns-of-growing-risk-that-ai-bubble-could-burst
> Policymakers said there were also threats of a "sharp repricing of US dollar assets" if the Federal Reserve lost credibility in the eyes of global investors. It comes as Donald Trump's continues to attack the US central bank and threaten its independence.
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> Continued hype and optimism about the potential for AI technology has led to a rise in valuations in recent months, with companies such as OpenAI now worth $500 billion, compared with $157 billion last October. Another firm, Anthropic, has almost trebled its valuation, going from $60 billion in March to $170 billion last month.
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> However, the Bank of England's financial policy committee (FPC) warned on Wednesday: "The risk of a sharp market correction has increased. "On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence. This ... leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic." It said investors had not fully accounted for these potential risks, warning that "a sudden correction could occur" should any of them crystallise, resulting in finance drying up for households and businesses. The FPC added: "As an open economy with a global financial centre, the risk of spillovers to the UK financial system from such global shocks is material."
[1] https://www.theguardian.com/business/2025/oct/08/bank-of-england-warns-of-growing-risk-that-ai-bubble-could-burst
Economists please break it down (Score:3)
Okay, it will burst. But how did it inflate? so where does "money" come from and where did it go?
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There's a breakdown [1]here [bsky.app]
[1] https://bsky.app/profile/did:plc:z6rujpf4u56jfie7aqic2nfg/post/3m2nampv6rs2w?ref_src=embed
The money came from you (Score:2, Troll)
The top 1% have had approximately 50 trillion with a t dollars moved into their pockets in the last 40 years. They can basically splash money everywhere and anywhere at the slightest whim because they've taken so much from you. It is the single largest wealth transfer in human history.
As for how it inflated modern ai, AKA machine learning and llms, has the potential to replace trillions of dollars of human labor every year. Whoever controls that becomes a God among men.
The elites are thinking about
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For those thinking this is some hyperbole one of the current Republicans and techbros like Thiel's thought leaders (and JD Vance has said as such multiple times) is Curtis Yarvin who is an anti-democratic monarchist: [1]Yarvin argues for American monarchy at closed-door debate [yaledailynews.com].
[1] https://yaledailynews.com/blog/2025/10/08/yarvin-argues-for-american-monarchy-at-closed-door-debate/
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Well, no, it isn't Republicans or the Right that is responsible for the plans rsilvergun described (though I'm not sure he knows it). Those are from the World Economic Forum - a group of very wealthy leftists who want to tear down the system that let them become wealthy in the first place. Presumably, lest they be displaced by up-and-commers.
I'm not familiar with Yarvin, but from the hearsay you linked, it sounds like it was an interesting debate. One we often have, in part as a practice exercise and
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We really going with the "WEF is anti-capitalist" line now? Are we gonna say WEF is communist? Also I've been to WEF you know who is also in Davos? All the tech companies and their leaders. For sure their current Larry Fink of BlackRock is a "leftist". I'm not even here to defend WEF but to be opposed to them because they are "leftists" is cracked I'm sorry.
> Also, like the sort of debate where two parties pick opposing sides of a topic and argue it regardless of their own opinion.
No, Yarvin and his [1]Claremont Institute [wikipedia.org] buddies (Like John Eastman of the Eastman memo fame) are true believers in this stuff and yes I would put the
[1] https://en.wikipedia.org/wiki/Claremont_Institute
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Presumably they mean the largest in 40 years, not the largest in 2250 years.
It's no surprise really that the end of the gold standard would allow the rich to print lots of money and give it to themselves. Once they have the power to print money, why wouldn't they?
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Are you talking about the nonsense that comes out of those "World Economic Forum" meetings? It sounds like you are, because they're the ones talking about owning nothing and fundamentally altering the economic system.
That's a very left-wing group. They're people who reaped the benefits of Capitalism to become wealthy (though I think the leader inherited his) and now want to tear it down. It is hard to see their plans as anything but nefarious, as they do come across as what you describe. Which would
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I'm not an economist, but the fundamental issue is that we take the last price that something sold (like a stock) as the actual real price of all the stock of that company.
So if you were holding 100 shares of Nvidia stock which you bought in January 2024 for $50 each, you would think you had $5000 of stock at that time. Recently people have been trying to buy Nvidia stock and have pushed up the price to nearly $200. You look at that and think, "Wow! I have $20,000 now!". And as a small investor, sure, y
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Very nice explanation; Thank You.
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The stock price times number of shares isn't the value of the company, it's the valuation (or the market capitalization).
For once "valuation" isn't just some business dude adding syllables because it sounds smarter. That $200 you pay for the stock values the company at $200 * a bazillion shares. That's not the value of the company, it's what *you're* valuing it at, by paying that price for the stock. You are buying one bazillionth of the company for $200.
It's easy to calculate so it gets used as "Xcorp is w
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To the average investor with their 401k or mutual funds or whatever, the only number the investment firm gives them is last share price times number of shares, so they absolutely take the latest purchaser's valuation as the actual value of all the shares they own.
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Why don't you go to the next board meeting of a typical publicly traded company, offer to buy them out by giving them its liquidation value in cash, and see what happens.
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Until the moment you use some product or service, its value is somewhat speculative - it's is how many goods/services you expect to get from it at some point in the future. That's true of dollars, stocks, investment real estate, a stockpile of baked beans and bullets, whatever.
So let's say you buy a beanie baby for $5. Suddenly there's a craze and somebody somewhere pays $100 for the same type of beanie baby you have. Congratulations, your wealth just went up by $95. You start thinking about retiring ea
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"so where does "money" come from and where did it go?"
I get the feeling that you conceive of money as a static pile of cash that gets shared out and moved around. That's not how money works at all. You may want to read up on how the money supply works. TLDR version: Money is being constantly created and destroyed as banks lend and fiscal assets change in value.
A few things (Score:4, Informative)
A few things come to mind:
If it quacks like a duck, walks like a duck, swims like a duck, it is a duck, even if everyone tells you its not a duck.
Pay no attention to the man behind the curtain.
The definition of insanity is doing the same thing over and over but expecting a different result.
Gambling odds are always in favor of the house, not the gambler. Eventually the piper will need to be paid.
The AI gold rush reminds me of the late 1990s where everyone and their dog could start a company that did nothing of value and yet walk away with hundreds of millions selling the "success is just around the corner, if only we could find someone to throw more money on the fire" to the next sucker, until the music stops and someone ends up holding a bag full of nothing but air.
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Ducks don't "swim"!
Re: A few things (Score:2)
According to AI, ducks are very good swimmers.
I predict. (Score:2)
Based on nothing more than my own intuition (and a high-school-level understanding of economics), I predict that the AI bubble will pop in 2026. Possibly as late as Q4.
When it pops, it will not be utter collapse, because there is enough real value here that there will still be an AI product and market. But there will be a significant market correction, as the current levels of excessive optimism will ratchet down to something more realistic.
So there will be some hardship, but it won't be the next Great De
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There'll be a lot of GPUs to sell, but the big question is whether there'll be any service to sell for which they can charge more than it costs. Between the hardware investment, the cost of running the data centres and the cost of power for the GPUs required to run the LLM it's not clear to me that they can offer a service that people will pay for if they charge the full cost of operating it.
The big short (Score:3)
I wonder if any big investment firms are shorting AI stocks? Maybe the Bank of England should put their money where their mouth is and do it. But their history with shorts isnâ(TM)t goodâ¦.i.e George Soros 1992.
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Why is it that when people discuss "evil billionaires", the guy who made his money by gleefully crashing national economies is rarely mentioned, but people who build wildly successful businesses are? And why in God's name do we accept his political influence when it pushes policy in unsustainable directions and imperil the economies of every nation he touches? Have we learned nothing from what he has said he does?
Stock market Bubbles Bursting (Score:3)
Here is a secret about Stock Market Bubbles.
Everyone knows they are a bubble.
The issue is that you do not know how big the bubble is going to get. They become HUGE sometimes. Look at Tesla. in December of 2024 everyone could see this high flying stock was going up super fast. But they did not know this was the top. So they kept it. If you sold some in February you likely came out ahead, even though it was half the year end price in March.
Often you make more money by putting some money in the bubble and taking 10% out once a month, rather than avoiding it entirely.
Many believe that the trick is to never have too much of your money in the bubble, rather than avoiding it entirely. They try to ride the bubble up and get out early enough to make money.
If they pay attention and are skilled at it, they can make a lot of money.
If they are on vacation the wrong week, they lose a ton.
The Guardian is such a lie factory. (Score:1, Troll)
"It comes as Donald Trump's continues to attack the US central bank and threaten its independence."
Really? Trying to remove a board member accused of mortgage fraud is "threatening its independence"? Nuh-uh. Oh, and he's leaning on them to lower interest rates, as have most Presidents.
We should not waste bandwidth on that propaganda rag. They officially discarded truth in favor of opinion and put banners on their website to brag about it.
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" Trying to remove a board member accused of mortgage fraud ", and who accused her of mortgage fraud? Why, el Bunko and his "justice" department. It's another made up court suit like all of his other attempts. Jesus, learn to have some discernment before you spout bullshit.
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Is she not accused of mortgage fraud? If it was Biden's administration accusing a Trump appointed member, would you have called for her to at least take a leave to avoid the appearance of impropriety? Because I'm pretty sure the press would be screaming for her head if the sides were reversed.
Personally, I don't think people should be fired over allegations. I think they should be suspended pending the outcome of an investigation. But I don't think that what happened here can be reasonably called "thr
Burst! Burst! Burst! (Score:2)
An AI failure would certainly help the world right now.
Such beauty (Score:2)
Wait, are you telling me that the Emperor's newest outfit isn't the most beautiful in all the land? I was told only the ill-cultured and unintelligent nabobs would fail to be dazzled!
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From the summary it sounds like it's not the bubble bursting that they are worried about, it's that Trump might massively devalue the US Dollar by taking control of the US Central Bank. Once it loses its independence and is subject to the whims of a man whose companies have been bankrupt many, many times, it will become another joke currency and not the world reserve it once was.
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There's no doubt that AI is developing into a useful tool -- for people who understand its limitations and how long it is going to take to work the bugs out. But people have a long track record of getting burned by not understanding the gap between promise and delivery and, in retrospect, missing the point.
I think we should take a lesson from the history of the dot com boom and following bust. A lot of people got burned by their foolish enthusiasm, but in the end the promise was delivered, and then some.