On Wednesday, November 5, Børge Brende, Chairman of the World Economic Forum (WEF), warned of three potential “bubbles” that may be forming in the global financial markets: cryptocurrencies, artificial intelligence (AI), and the debt market. This comes after a sharp decline in global tech stocks.
Brende, during a visit to the financial center of Sao Paulo in Brazil, stated, “We may see bubbles forming in the future. The first is the cryptocurrency bubble, the second is the AI bubble, and the third is the debt bubble.”
He added that the debt levels of governments around the world are at their highest levels since 1945.
Some analysts view the recent stock market declines with concern, but argue that there is no need for panic as major stock markets continue to hit new highs.
Brende noted that while artificial intelligence has the potential to significantly increase productivity, it also poses a threat to many white-collar jobs. Referring to recent layoff announcements from companies like Amazon and Nestle, he said, “The worst-case scenario is that cities with a large number of back-office service jobs and white-collar workers may experience a ‘Rust Belt’ phenomenon, where white-collar workers are easily replaced by artificial intelligence and higher productivity.”
However, he pointed out that history shows technological advancements ultimately drive productivity growth, and that the key to achieving long-term prosperity in society lies in improving productivity. “With higher productivity, businesses can afford to pay higher wages, and society as a whole will become wealthier.”
Brende’s warning serves as a reminder to investors not to overlook hidden risks such as high interest rates, inflation, and uncertainty in international trade amidst the widespread anticipation of artificial intelligence reshaping the global economy. As tech stocks continue to drive stock markets to new highs, the vulnerability of the financial markets is increasingly becoming a point of concern.