3 ms·

At $1.2T, More High-Grade Debt Now Tied to AI Than Banks

• moose_man 11mo ago
  From October 7th before the more than 200 billion debt issued this month
• nabla9 11mo ago
  Shit. Debt and over-leverage are the things that make the AI-hype problem for everyone. As long as AI investments are funded from revenue and wealth seeking profits, the bust makes a dent but takes very little from those who stayed away. With debt, you can create systemic risk. Normal investment risk (risk of a stocks going down) is idiosyncratic, specific to that asset and can often be diversified away. Systemic risk is non-diversifiable because it is an external risk that drags down all interconnected parts, causing economic crises or financial contagion. Massive debt (over-leverage) could create a systemic risk where the collapse of a few key firms forces banks to tighten credit, causing a wider recession that impacts all sectors. Systemic risk threatens the stability of the system itself, normal risk only threatens investors.