Part 9/11:
The Broader Economic Outlook and Unforeseen Risks
The convergence of high fiscal deficits, political instability, and geopolitical conflicts creates a perilous cocktail for inflation and economic stability. The recent surge in artificial intelligence (AI) investment, estimated at another trillion dollars of capital expenditure, further complicates the outlook by adding demand-side pressures that could stoke inflation.
If history is any guide, the bond market is poised to be the shock absorber or shock trigger — with many analysts predicting a significant correction later this year. The current environment resembles a "dynamite shed" where policymakers, politicians, and investors are playing with volatile ingredients, often without understanding the full potential for catastrophe.