What the AI Race and the Euro Have in Common

Weirdly enough, the race for AI supremacy reminds me of the development of the euro zone.

George Soros gave this incredible speech in June 2012, 

https://www.georgesoros.com/2012/06/02/remarks_at_the_festival_of_economics_trento_italy/

right in the heart of the European debt crisis where he talked about how the whole project had always been something of a “bubble” but not in the traditional financial markets aspect.

It’s a long speech, but these are the paragraphs that stick in my head:

“I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a ‘fantastic object’ – unreal but immensely attractive. 

The EU was the embodiment of an open society – an association of nations founded on the principles of democracy, human rights, and rule of law in which no nation or nationality would have a dominant position.

The process of integration was spearheaded by a small group of far sighted statesmen who practiced what Karl Popper called piecemeal social engineering. 

They recognized that perfection is unattainable; so they set limited objectives and firm timelines and then mobilized the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. 

The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed into the European Union, step by step.”

The belief was that any time a flaw was exposed, leaders would come together and find the fix.

Soros goes on to identify the moment where he believes the “bubble” burst:

“Germany used to be in the forefront of the effort. When the Soviet empire started to disintegrate, Germany’s leaders realized that reunification was possible only in the context of a more united Europe and they were willing to make considerable sacrifices to achieve it. 

When it came to bargaining they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement. 

At that time, German statesmen used to assert that Germany has no independent foreign policy, only a European one.

The process culminated with the Maastricht Treaty and the introduction of the euro. 

It was followed by a period of stagnation which, after the crash of 2008, turned into a process of disintegration. 

The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. 

It took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect.”

The first country they identified was Greece (and then eventually Italy, Cyprus and so forth).

The crisis ended when Mario Draghi found a way to let the ECB backstop every country’s balance sheet with his famous “whatever it takes” announcement, but effectively this was the moment where the forward momentum towards that “fantastic object” of free integration came to an end.

Today we’re talking about another fantastic object, and that’s AGI

There’s always this expectation that the forward momentum of investment (such as better models, better chips, more energy) will ultimately take care of the problems that are manifest, for anyone to see.

From the stock market’s view, it’s fine that the technology is flawed so long as everyone still believes in the end goal, and is willing to spend whatever it takes to get to that end goal.

Joe Weisenthal and Tracy Alloway Bloomberg 27 februari 2025 

https://www.bloomberg.com/news/newsletters/2025-02-27/what-the-ai-race-and-the-euro-have-in-common

Dagens EU, konstaterar Annika Ström Melin, kan inte förstås utan hänvisning till Monnets personlighet

https://englundmacro.blogspot.com/2023/12/dagens-eu-konstaterar-annika-strom.html

 It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."

 "I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created."

Romano Prodi, EU Commission President

https://englundmacro.blogspot.com/2011/12/prodi-it-is-politically-impossible-to.html

Tillbaka till Rolfs länktips 28 Februari 2025

https://englundmacro.blogspot.com/2025/02/rolfs-lanktips-28-februari-2025.html