Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How Much Wealth an AI Stock Market Crash Could Destroy

economist.com

Post reply on HN
Print view View original

51–60 of 110 posts

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#51

Post by Hasz »

KumaBear wrote: post #23

Why does it matter? Government learned during covid they can spend there way out of a crash.

...and in 2008. sadly, it might actually work:

https://bipartisanpolicy.org/article/the-deficit-in-a-downtu...

https://www.frbsf.org/research-and-insights/publications/eco...

The hard part is reigning that spending in during non-crash years (see the uproar over removing the temporary COVID subsidies) in a way that is not political suicide. At the Federal level, there is zero incentive to not run a deficit.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#52

Post by [deleted] »

willvarfar wrote: post #28
vanschelven wrote: post #15

I've never felt right about the framing of "destroying wealth" when stock prices go to some new number. If anything, the word "reflecting" seems more applicable?

Does it materially impact people's pensions? Globally, pension funds hold approximately $5–7 trillion directly in the top US tech stocks (the "Magnificent Seven" and adjacent AI infrastructure). Also in the last couple of years many pension funds have moved money into Private Equity and Private Credit to chase higher returns and they're the backstop for all the off-books AI datacenter buildout debt?

[deleted]

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#53

Post by biophysboy »

vanschelven wrote: post #15

I've never felt right about the framing of "destroying wealth" when stock prices go to some new number. If anything, the word "reflecting" seems more applicable?

At the same time, retail investing has grown a lot in the last 10 years. A lot of people treat their portfolios as a line-only-goes-up bank account because that has been mostly true for a while.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#54

Post by [deleted] »

z0r wrote: post #49
paulddraper wrote: post #27

Earlier quoted context omitted.

Yeah. You don't own more or less of anything. Five sticks of gum, a car, 10 shares of $MSFT, a Mewtwo Ultra Rare. You have exactly same assets as before. The businesses of which you are a fractional owner have the same fundamentals. But other people won't trade other assets for yours at the same rate.

Don't the invested dollars poured into infrastructure that won't yield gains represent a loss of value? Especially if the same investment could have been put to work somewhere more fruitful.

[deleted]

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#55

Post by kiba »

toomuchtodo wrote: post #3
skx001 wrote: post #2

https://archive.md/EzGW2 - A drop in nominal values on the same scale as the dotcom bust would wipe out $16T, or 8% of American household wealth. Foreign investors would lose $7T.

The wealthiest 10% of Americans own 93% of stocks even with market participation at a record high - https://finance.yahoo.com/news/wealthiest-10-americans-own-9... - January 10th, 2024 > The richest Americans own the vast majority of the US stock market, according to Fed data. The top 10% of Americans held 93% of all stocks, the highest level ever recorded. Meanwhile, the bottom 50% of Americans held just 1% of all s…

Land prices are subject to speculative bubbles as well. The only way to get rid of speculation in the real estate market is to drive the price of land down to zero by taxing it.

You also need a lot of money to purchase land, so this effectively allows banks to make a lot of money on overly inflated price of land.

Land by itself doesn't generate wealth, only improvements on top of it does. Only problem is that we tax improvement along with the land, leading to the perverse incentive that building anything increases your tax burden. We call them property tax.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#56

Post by blitzar »

brentm wrote: post #42
blitzar wrote: post #6

It would be like SVB all over again. Small governemnt, anti bailout, pull yourselves up by your bootstraps tech CEOs on TV crying and begging for someone to cover their losses.

I don't think that is likely this time. Injecting capital to cover losses doesn't bring back the forward looking valuations so stock prices would remain down anyway. Gov isn't going to fund losses for like Microsoft.

Airline CEOs, Auto CEOs, Bank CEOs have all done it in the not distant past. Eventually, you have to fly the private jet to Washington and sit at a comittee and beg.

Tech CEOs are not as special as they think they are, one day they too will be there begging, like a dog.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#57

Post by 79a6ed87 »

KumaBear wrote: post #23

Why does it matter? Government learned during covid they can spend there way out of a crash.

But since then the other countries learned that the US government could weaponize their USD holdings if they don't align. Central banks started accumulating gold to counter this.

Also, debt market is not the same as it was 5 years ago, Japan now has inflation (and they hold the biggest bag of US debt).

To add to this, USD lost 10% of its value this 2025 according to the DXY index. To be fair, it pretty much went to what it was worth before 2022, but the Fed has to be careful anyway.

Many things happened since 2020. It's almost 2026.

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#58

Post by bell-cot »

vanschelven wrote: post #15

I've never felt right about the framing of "destroying wealth" when stock prices go to some new number. If anything, the word "reflecting" seems more applicable?

Every right-thinking plutocrat knows to use catastrophized language for any serious drop in his paper wealth. Otherwise, how would he argue for a fat government bail-out?

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#59

Post by scottlamb »

lateforwork wrote: post #21

Counter argument: https://www.nytimes.com/2025/12/09/business/wall-street-valu... Excerpts: In the 1990s and early 2000s, many of the companies leading the stock rally were not making much money, if any. This led to very high P/E ratios for some companies because share prices kept going higher, even when earnings were lagging well behind. While Nvidia’s stock price has risen roughly 1,000 percent over the past three…

Nvidia is selling shovels, widely believed to be a better business than panning for gold. So...

* You can't generalize from Nvidia to companies spending all the money on hardware, electricity, and labor without making a profit.

* It's also worth asking if Nvidia will keep having those earnings if all the AI companies crash. Unsure about this. At least there's a bunch of pent-up demand from people wanting GPUs for other reasons.

* Also, there's the $100B they invested in OpenAI...

Re: How Much Wealth an AI Stock Market Crash Could Destroy

#60

Post by toomuchtodo »

kiba wrote: post #55
toomuchtodo wrote: post #3

Earlier quoted context omitted.

The wealthiest 10% of Americans own 93% of stocks even with market participation at a record high - https://finance.yahoo.com/news/wealthiest-10-americans-own-9... - January 10th, 2024 > The richest Americans own the vast majority of the US stock market, according to Fed data. The top 10% of Americans held 93% of all stocks, the highest level ever recorded. Meanwhile, the bottom 50% of Americans held just 1% of all s…

Land prices are subject to speculative bubbles as well. The only way to get rid of speculation in the real estate market is to drive the price of land down to zero by taxing it. You also need a lot of money to purchase land, so this effectively allows banks to make a lot of money on overly inflated price of land. Land by itself doesn't generate wealth, only improvements on top of it does. Only problem is that we tax…

We're getting into the weeds, but the goal is usually to own your home free and clear by the time you retire, reducing your income needs from retirement to death by not having a non discretionary housing payment. The wealth in most homes cannot be tapped until sold, death, or stripping the equity (HELOC or reverse mortgage) and hoping you die with zero.

You can sort of think of a house as an I bond you can live in [1], and the return is the equity gains (historically). You need lots of money to buy land because demand outstrips supply, there is a shortage of ~4M housing units in the US, and the pipeline for building new housing was permanently impaired after the 2008 global financial crisis. We will never build as fast as we used to as we go into structural demographic labor shortages in the US; the value of existing real estate is ancient embodied construction productivity and material costs, similar to how oil is ancient sunlight.

[1] The Rate of Return on Everything, 1870–2015 - https://www.frbsf.org/wp-content/uploads/wp2017-25.pdf | https://doi.org/10.24148/wp2017-25

Post reply on HN