While “AI” gets the headlines for being a bubble, and rightly so, as we pointed out in this post, it is just one component in the bubbliest economy in US history.
Bubbles, generally, are fundamentally unsustainable overvaluations of assets, like tulips or flippable mid-century ranch homes in suburban developments now enveloped in urban sprawl, or of companies whose market cap is wildly optimistic given their actual profitablility, like Enron or WorldCom. The “bubble popping” is the loss of the value gap between illusion and reality.
Price plummets, and all the value in that gap vanishes. Since that value is functionally money as part of the supply, the downstream effect of that loss of value creates domino affects that eventually hit the real economy of goods and services whose broad, aggregate consumption is the actual driver of our entire financial system.
In 2007-2008, two bubbles collapsed simultaneously – real estate itself, and a new type of securities based on mortgages. So one fed into another. At one point, the value in these mortgage backed securities (and other collateralized debt obligations, also securities based on bundled debt) was estimated as high as $10.5 trillion. Almost half the entire GDP of the US at the time.
When those bubbles collapsed, all that value disappeared almost overnight. Now, there was still at least some buffer, in that the assets that anchored that value still existed. The largest hits were that banks were over leveraged into these debt securities, meaning their ability to make the loans necessary for basic operation of day-to-day finance and commerce collapsed, and the real estate market bottomed, leaving homeowners with mortgages based on inflated values in the first place found themselves underwater – their homes were worth less than the mortgage itself.
I encourage everyone to read about the 2008 crash, and how close we came to complete global collapse. We’re talking “currency isn’t a thing, we’re going back to cowrie shells and bartering” global collapse. Extinction level event. And I’ll point out that Republicans in the US still fought for tax cuts for the wealthy while they got bailed out directly, instead of the far more effective and called for direct stimulus to make up that loss of value in the money supply.
When we call Republicans and global Conservatives psychotic, this is a large part of why. They are pathologically incapable of admitting responsibility and doing the right thing. They will always delusionally cling to their ideological and economic dogma, even when it’s the thing that caused the problem in the first place.
“Have you tried MORE fire??” – Conservative fire department
So here’s the real horror story about the current economy – it’s all imaginary. There are no assets to offset the loss of value when it all comes down. There are no guard rails, there are no institutions, watchdogs, or chaperones to any of it. This is by design – can’t break any laws if there aren’t any laws. These narcissistic dipshits are so convinced of their superior intellect and flawless moral fiber that any intervention is just bumbling fools getting in the way of their divine innovations that serve, well, pedophiles and oligarchs, and that’s it.
No “AI” products are even remotely profitable outside of vaporware being sold to the government through Trumps “Cronies and Family” program. Since “AI” is software, there’s no real assets linked that could offset the loss of value when this wishcasting nonsense collapses. Crypto is even worse – not only are there no assets linked to cryptocurrency to offset the value collapse, it is a huge bag of siphoned real money that will just vanish entirely when the bottom falls out.
Tech has run on investor cash for decades, with companies like Amazon, Uber, Palantir, etc raising huge amounts of operating capital yet posting huge losses, even as their market cap and stock prices soar. These play on being profitable for individuals who can ride the stock rocket, or who sell their vaporware companies to Google or Meta for billions, all without making a single actual dollar, and often while paying zero taxes. All of their value is based on investor expectations of future earnings, literal pipe dreams not supported by any real data.
It’s an open secret that a huge part of the “AI” mirage is a closed loop of companies swapping the same trillion dollars back and forth, with no real need for any real broad consumer participation.
What income they do post comes from selling shitty, labor killing bots to everyone from scammers to porn companies to customer service and auto-reply services, to app makers trying to build replacements for basic shit handled far better by actual humans. It’s intentional enshittification to save money by reducing labor, all for more shareholder value and CEO profits.
We can see this, when tech companies collapse, that there are no real assets there, either, as it’s all IP that has, in the collapse, proven to be unprofitable. So, another asset-less bubble. This has played out in the “make vaporware, promise the moon, pay yourself millions out of investor cash, and either sell out to an apex predator or jump ship before the bankruptcy” loop. Then list “successful start-up guy who had nothing to do with the collapse, I swear” on the ole resume, and do it again.
Gaming as an industry is twice the size of the film and music industries combined. Wrapped up in this is development of hardware, and as the next generation console wars bear down on us, chip costs, chip availability, and global trade instabilities are forcing the dominant players, Playstation and Xbox, to question whether a next generation is even feasible. This threatens this entire industry.
What does this look like in real terms? Take game developer Bungie, purchased for $3.6 billion by Sony, has hemorrhaged money since, leading to the abandonment of their classic Destiny franchise, thousands of layoffs over the last 4 years, and their remaining game, the live-service extraction shooter (already niche product) on life support, with barely 5000 concurrent players according to the data. But the companies’ execs waited long enough for their Sony shares to vest, and jumped ship, leaving a skeleton crew facing complete absorption into Sony.
Bungie CEO Pete Parsons rode his legendary car collection off into the sunset, the ink barely dry on the pile of layoff orders on his desk.
$3.6 billion price tag. Thousands of jobs lost. No currently profitable products. This is the tech bubble in a nutshell. And as development on “AI”, AAA games that risk instant failure ala Concord, and funny money that you can barely use in the real world.
Functionally, it’s all financial vaporware. As soon as investors lose confidence in any of these plates being spun by blindfolded, bike riding jugglers, these entire sectors will collapse, instantly. Investor behavior is not hard to predict in these cases – they flee like spooked horses. No one wants to be the one holding piles of worthless stock, crypto, or tech dreams.
Gaming, a huge driver of tech, is predicted to be worth an eye-watering $250B this year. “AI” is supposedly worth from $400-$600B, with a projected value of $4T by 2033. Crypto value sits around $2.3T. So we’re looking at over $3 trillion dollars in just these three industries, not to mention the manufacturing and accessory markets involved.
This is a full 10% of the US GDP. With no real assets backing up most of this value. For context, the hit to GDP over 2007-2009 was 4.2%.
The reality of this is that at the heart of these industries is a complex manipulation of value for value’s sake, a “line goes up” gamification of imaginary money that only benefits those with the capital to exploit it. When we say “Capitalism only rewards access to capital”, this is what we’re talking about. Capital has realized that is doesn’t need pesky buzzkills like “labor” or “consumers’ to force arbitrage profits, they just need a cult of true believers who keep all the money in a closed loop of self serving fantasy numbers that, as long as no one who matters blinks, stays afloat.
$2.6 trillion locked in a useless, fabricated currency market that exists solely for trading is insane. It has always been insane. The promise that “the blockchain” was going to take over the world of technology, providing immense benefit to mankind, has completely been abandoned. Now it just makes computer components disastrously expensive, expends massive amounts of energy, and has not led to a single secondary innovation. Crypto is so fucking stupid that our 80 year old President makes billions off of meme coins and a company expressly created to funnel bribes into a laughably unstable “stablecoin”.
“AI” is no different. Elon Musk refused to censor Grok as millions of CSAM images flooded through their servers. Non-consensual images and videos of exes and celebrities continue to fill libraries of online sites. “AI” apps for everything from terrible, circulatory customer service designed to get you to just give up and live with whatever shitty thing that company has done to you, or addictive chatbots designed to feed you your every vanity and need for validation, to enforcing Right Wing censorship in government, social media, education, etc, not to mention terrifying “self-driving” cars that cannot make moral or ethical decisions while they clog the roads full of real human life, none of it is any good.
Like the promise of the blockchain, it will reach it’s limit, and it will fail.
In two years or so, the next generations of “AI”, crypto, and gaming will all require large leaps forward in tech innovation, cost controls, and availability of both components and power. None of these things are going to occur, both due to the constraints of physics, and the intractability of a political cult that refuses to rein in their sundowning sociopath of a god-emperor. Political resistance to non-climate-change-speedrunning tech alone is going to doom all three of these industries, and limit their growth potential, even if the delusional cult members continue to agree that the emperor is not naked.
There are not enough chips, not enough hardware, and not enough power to sustain current levels of extraction from these industries, much less grow them. And this is what makes the Big Blink inevitable.
Unsustainable. 10% of US GDP.
Start stocking up on cowrie shells and canned goods. Or better yet, vote for robust regulation and contraction of these industries by people who don’t jerk off to daily video compilations of dead kids in Gaza.
Kelsoland.Institute 