Apparently, Monday mornings are the time for bank news. Over the weekend, Credit Suisse would have failed without Switzerland’s banking regulators pulling together a deal to ensure that didn’t happen. And there’s the required fear out there with such a story.
But I want to highlight this passage from Axios.
There’s no doubt that the still-unfolding banking panic has raised the odds of a recession. But when you scrutinize the details of what is happening, there is less reason to think this will become a sprawling mega-crisis.
It helps to start with an explanation of the root cause of the two crises. Back in 2008, all kinds of highly levered institutions owned complex securities, particularly backed by home mortgages, that turned out to be far less valuable than advertised.
The 2008 crisis was, in effect, a series of institutions either failing or being bailed out as those losses became apparent.
This time around, the root problem isn’t bad loans. Rather, the Fed’s rapid tightening has created paper losses for banks that made loans or bought long-term bonds when rates were much lower.
That’s prompted depositors to pull money out, causing forced selling that turns paper losses into real ones.
But couple that with another piece they published. This one notes that the tech industry surges from downtimes, noting the 17% rates when the IBM PC was released in 1981, the shift through the 90s coming out of recession to build the internet, or the late 2000s, with the iPhone’s arrival.
And the piece then notes the AI emergence happening right now.
A new Pew Research Center study showed that half of Americans are aware of the various uses of AI but could only identify three out of five examples of its use. The data indicated that those with higher education and income had an increased awareness of AI in their environment. When asked about the societal ramifications of AI–38 percent said they were “more concerned than excited,” and 46 percent felt a mix of both. (Source: PCMag)
Looking back, the downtimes in the economy have driven the creation of new IT services companies. And as this analysis also showed, the technological surges seem to align too. Is this a reason to be keener on AI? Not on its own… but the alignment is too convenient to ignore. I don’t want to be overly optimistic. I’m just observing the opportunity in the chaos.