Bank of England issues same chilling warning as man who predicted Covid and 2008 financial crash
The head of the Bank of England thinks AI will lead to global economic downturn - and so does Robert Peston.
Andrew Bailey warned in a letter to G20 finance ministers in North Carolina, US, that the aftermath of the US-Iran war is causing huge 'volatility'.
As chairman of the Financial Stability Board, he wrote that ‘markets remain vulnerable to a potentially disorderly correction that could spread across borders, particularly given fragilities in sovereign debt market’.
“The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, in particular the increasing cross-investment between artificial intelligence (AI) companies and hyper scalers, in a way that could amplify a future market correction.
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“I remain concerned therefore that a large shock or combination of shocks could concurrently trigger multiple vulnerabilities.”
Mr Bailey’s warning comes as Chancellor John Healey announced a £100 million fund aimed at backing British AI start-ups.
Making sure more of the benefits of AI are felt in every UK postcode
The fund is part of the government’s efforts to grow the country’s so-called 'Sovereign AI' capacity, homegrown AI technology aimed at ensuring the UK is not dependent on services and infrastructure developed abroad.
Mr Healey said: “Britain is home to some of the most innovative AI companies in the world, and this Government is backing them to start, scale and succeed here in the UK.
“This first-of-its-kind competition will help make sure more of the benefits of AI are felt in every UK postcode.
“As G20 countries seek to make the most of AI opportunities, I’m determined Britain has a lead role in harnessing this technology to drive more jobs, better public services, and growth that’s UK-wide.”
Peston, meanwhile, is 'genuinely anxious' that a major market crash could take place in the near future.
The political editor of ITV News, who previously raised the alarm about the banking collapse in 2008, thinks AI will not deliver the returns that people have been promised.
'How are people going to live?'
Peston told the Radio Times: "I am genuinely anxious that we’re going to get a serious financial crash, globally, in the next year or two, because there is the most astonishing amount of money going into building the data centres and power plants for AI, and as we saw when SpaceX floated on the stock exchange, a late-1920s degree of breathless excitement on the markets.
"And I worry that the profits aren’t going to be delivered on a scale to justify all this, so businesses will go bust, investors will take fright and we will have a significant market shock."
He added: "There may not be conventional productive employment to replace those lost jobs, so how are people going to live?
"And if vast numbers lose their jobs, nobody pays income tax, so the government can’t pay for public services, and society collapses."
In 2008, Peston reported on and broke exclusive scoops regarding the unfolding of the crisis, along with the collapse of Northern Rock and Lehman Brothers.
Topics: Money, UK News, AI, Technology
Anish Vij