Here are some things I think I am thinking about:

1) The Return of ZIRP (zero interest rate policy).

The Fed released an interesting study this week saying there was about a 9% chance of the Fed cutting interest rates to 0% again.

That’s an interesting one to me because I would say that there’s about a 100% chance the Fed will get back to 0% at some point. This is probably the biggest and boldest macro view I maintain. I have no idea over what time horizon that will occur, but my basic thinking is that AI is going to crush services inflation. Then robots using AI will crush goods inflation. Then the government will respond with a ZIRP at some point because any recession that coincides with such an environment will very likely coincide with very high unemployment and very low inflation.

Said differently, I think we’re on the precipice of an era of unprecedented abundance. There is a flood of supply coming into the global economy because AI is going to make everything so accessible. And when robots start mass producing physical things using that technology we’ll see a collapse in goods inflation as physical things become increasingly abundant. We’ve already seen a microcosm of this play out over the last 30 years as technology has created an abundance of many things. But this is about to go into hyperdrive at some point in the next 5, 10 or 20 years. Again, I don’t know the exact time horizon because I don’t think the robotic technology is there yet, but if I had to pick year 20 or year 0 I’d say we’re closer to this happening now than any 20 year prediction assumes.

In short, I think the Fed’s 9% probability is way too low. ZIRP will come back during my lifetime. It’s just a matter of when.

2) AI Will Make Govt Will Get MUCH Bigger.

Someone wrote me a critical email last week because I was critical of Zohran Mamdani and Democratic Socialists. Look, I am not really that critical of government intervention in the economy and I wouldn’t place Democratic Socialists anywhere near actual Socialists. They’re just not the same things. At the same time, I am, as my first book stated, a “Pragmatic” Capitalist and I consider that to be someone who acknowledges that Capitalism is great, but also that Capitalism needs a certain level of oversight and government intervention. Having sensible rules, a government safety net and some level of countercyclical policy makes a lot of sense in my opinion. It is just practical Capitalism. And in many ways helps Capitalism from eating itself. Where I disagree with a lot of Democratic Socialists is about their hatred of Capitalism. My view is that their movement would make a lot more sense if it was something more aligned with Democratic Capitalism. In other words, you can be a Capitalist and also understand that Capitalism allows you to have a much bigger government than you otherwise would (because Capitalism is so good at creating the very resources that allow the government to spend so much). Capitalism doesn’t need to be at odds with many of the ideals that a Democratic Socialist might hold.

Anyhow, I’ll get off my political soapbox because I think the Democratic Socialists will be happy to hear that I believe point #1 means the government is going to get much bigger than it already is. Well, I should be clear. If I worked in a department like a building department at a government I would be very terrified about my employment because AI can automate away tens of thousands of jobs like that. But therein lies the paradox of AI and employment. If AI is going to be able to replace a lot of those jobs then that means more and more people are likely to need government assistance. So, AI is a bit of a Capitalism paradox in that it is likely to create an abundance of stuff, which will create a shortage of jobs required to consume that stuff, which will result in an increase in the demand for government assistance.

Again, I don’t know the time horizon of any of this. And I could be wildly too optimistic about what I think AI is capable of, but if I am right then we’re on the precipice of the golden age of Capitalism, which will, ironically, make Democratic Socialists much more influential.

3) How Big Will the Government Get?

Speaking of much bigger government – I joined Michael Batnick for a segment of What Are Your Thoughts? We talked about many of the issues I’ve debunked over the years. I think you’ll enjoy the segment as we jump into many concerns on people’s minds these days including the risk of exploding government debt, rising interest payments, the collapse of the Dollar and the Dollar’s recent relative forex decline.

And please remember, all hate mail at this website goes to Jerome Powell at jpow@federalreserve.gov – I am nothing more than an apolitical and totally unbiased market analyst. Thanks for reading and remember not to let your politics (or my political rants) get in the way of pragmatic and disciplined investing.