Richard Clarida, managing director at PIMCO and former Federal Reserve vice chair, comforted investors on Tuesday by confirming that artificial intelligence is on track to become a major economic driver by actively reducing the amount of money paid to human beings.
NEW YORK — Richard Clarida, managing director at PIMCO and former Federal Reserve vice chair, comforted investors on Tuesday by confirming that artificial intelligence is on track to become a major economic driver by actively reducing the amount of money paid to human beings.
Speaking on Bloomberg’s "The Close," the global economic adviser told hosts Romaine Bostick and Katie Greifeld that the technology’s most exciting near-term application is acting as a powerful "disinflationary force," a financial industry term used to describe the macroeconomic benefits of a shrinking payroll. Clarida noted that the billions currently being poured into large language models will soon pay dividends through widespread wage compression.
For a while there, we were genuinely worried that a tight labor market might force companies to continue paying workers competitive salaries, which is obviously a headwind for bond yields.
While Clarida acknowledged the significant financing risks associated with the massive data centers required to train new AI systems, he assured the Bloomberg audience that the upfront capital expenditure is more than justified if it permanently breaks the bargaining power of the American middle class.
The former central banker added that while the resulting wage compression might eventually make it difficult for consumers to purchase the goods and services produced by the broader economy, that is primarily a problem for the equities desk.