LOW VISIBILITY ON ECONOMY, HIGH VISIBILITY ON DEBT: TIME TO REVISIT HIRSCHMAN’S ‘HIDING HAND’?
The world entered 2024 wary of the array of political risks due to a swathe of elections that covered around half of the world’s population, which were coming on top of longer-term concerns about the conflicts in the Ukraine and the Middle East, geopolitical tensions between NATO and the SCO (Shanghai Cooperation Organization), Climate Change and the Energy Transition.
WHILE THE FINANCIAL WORLD HAS EMBRACED THE PROMISE OF AI, THERE ARE MANY IN THE BROADER POPULACE THAT FEAR FOR THE FUTURE OF THEIR JOBS AND LIVELIHOODS, AND THERE ARE EMERGING QUESTIONS ABOUT THE COST OF DEVELOPING AI...
As 2024 draws to a close, the election related risks have been overcome, but the broader political risks have amplified, above all the impasses engendered by the EU and French elections, and the collapse of the coalition government in Germany, which brings forward the federal election to Q1 ahead of the scheduled date in October. Initial reaction to the US election result at the time of writing has been furious, though precisely what actually emerges via way of trade tariffs and overall US fiscal policy is written in the stars, given that the precise details of what is legislated will depend to some extent on the outcome of the House Congressional vote.
While the financial world has embraced the promise of AI, there are many in the broader populace that fear for the future of their jobs and livelihoods, and there are emerging questions about the cost of developing AI, and thereafter the cost of running it both in financial and power output capacity and consumption terms. But rather more poignantly there is increasing concern about global debt levels. This is not just from the aspect of not being sustainable, but also the fact that the political classes, wherever they are positioned on the political spectrum appear to have little or no appetite to deal with what many of them see as a long-term problem, on which they are not willing to expend their political capital, as they see little benefit to their chances of re-election, or personal aggrandisement. There is the added concern that while interest rates are falling in the developed world, they are not going to fall to pre-pandemic levels thus adding to the growing debt pile, while central banks continue to shrink their balance sheets. Germany is a notable exception to this, with its dogmatic and obsessive adherence to the ‘Schuldenbremse’ (debt brake). Eminently the US ‘Debt Ceiling’ is not dissimilar to the latter, but this is less of a ‘debt brake’ than a cause celebre for politicians to gerrymander concessions to fund their pet causes, rather than ever addressing the core underlying issues, and at the same time only adding to the debt burden.
24 | ADMISI - The Ghost In The Machine | Q4 Edition 2024
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