Lecture Notes on Macroeconomics, Cryptocurrency, and AI

Introduction

Discussion with Raul on transformations in the global landscape, specifically around crypto, macroeconomics, and AI.
Emphasis on recent developments: crypto technologies, political realignments, macroeconomic changes (banking crises), and the emergence of generative AI.

Exponential Age: An era defined by rapid, accelerating technological growth impacting all facets of life and economy.
Everything Code: A conceptual framework explaining modern economic phenomena through fundamental macroeconomic, demographic, and policy factors.
- Driven by population growth, productivity growth, and debt growth.
- Lowering population growth and aging demographics have slowed GDP growth.
- Increase in debt growth and eventual failures led to reliance on quantitative easing (QE).

Baby Boom Generation: Increased inflation due to a massive influx into the labor force and consumer market, causing structural inflation and stagnant real wages.
Millennials: Larger cohort leading to further suppression of real wages and accelerated debt growth.

2008 Financial Crisis: Marked by excessive debt, resulting in a reliance on zero interest rates and QE.
Quantitative Easing (QE): The process of injecting money into the economy through central bank purchases of assets, seen as a modern economic necessity.
- QE leads to asset price inflation rather than consumer price inflation (debasement of currency).
- Significant impact on asset classes such as technology and cryptocurrency due to network effects and liquidity.

Interest Payment Crisis: Necessity for central banks to monetize interest payments to prevent economic collapse, indicating perpetual reliance on QE.
Predictability of Asset Prices: Possible through forward-looking models assessing central bank balance sheets and liquidity trends over macro cycles.
- Positive outlook for crypto and technology sectors based on these models.

Nexus of Network Adoption: Explained exponential growth in both technology and crypto sectors as fundamental and cyclical trends interplay.
Exponential Impact of AI: Comparable to the impact of major technological revolutions, leading to large-scale structural change in productivity and job markets.

Shift to Multipolar World: Global realignment driven by rising economic powers (e.g., China) and the need for energy independence.
US Dollar Dominance: Ongoing structural reliance on the dollar in global trade and debt markets, despite discussions of dedollarization.

AI and Robotics: Revolutionizing productivity and potentially replacing human labor, contributing to deflationary pressures.
Renewable Energy: Central to improving productivity by reducing energy costs, leveraging societal shifts toward green energy as a remedy for economic challenges.
Possible Employment Shifts: Contemplating Universal Basic Income (UBI) and Universal Basic Equity (UBE) through web3 and digital asset ownership to address displacement caused by automation.

Trust and Decentralization: Increasing appeal of trustless systems like Bitcoin and Ethereum in a world of eroding trust in traditional financial institutions and media.
- Crypto remains volatile but critical for long-term savings and hedging against currency debasements.
Institutional Involvement: Growing interest and participation from sovereign wealth funds and institutional investors, catalyzing a mature market structure.
Development Ecosystem: Anticipation of continued innovation and product launches across various applications, including DeFi, NFTs, and decentralized identity systems.

Metaverse and Immersive Technologies: Integration of AR, VR, and metaverse spaces driven by innovations such as Apple’s anticipated hardware launches.
Employment and Social Constructs: Adapting to augmented human capabilities, the evolution of work, and potential changes in societal roles and purposes.
Risks and Optimization: Addressing adversarial use of AI, safety protocols, and balancing rapid adoption with ethical considerations.
Economic Renaissance vs. Existential Risks: Balancing optimism for a technology-driven renaissance with precautions against long-term threats posed by advanced AI and quantum computing.

Macro: Expected bottoming of the economic cycle with slow recovery anticipated, enhanced by anticipated monetary stimulus.
Crypto: Positive outlook with anticipated major capital inflows and continued technological adoption driving market strength.
AI: Unforeseeable rapid developments expected, with profound implications for productivity and economic structures.

Exciting yet precarious times ahead with potential for transformative advancements across multiple sectors.
Continuous reassessment of technological impacts, policy responses, and societal adaptations required to navigate the exponential age effectively.