But investors now are being forced to consider which poison will cause the least harm.
asserted
poison → force → harm
With civil unrest running rampant across the developed world, just as global investors are desperately seeking exits from the great artificial intelligence boom, a double dose of debt worries has suddenly infected the world of finance.
asserted
dose → run → finance
One is a problem decades in the making, as governments spent their way out of various crises with nary a care about the cost.
asserted
governments → spend → cost
The other has arisen in a frighteningly short space of time, driven by a manic investment boom using trillions of dollars of borrowed cash to fund a technology with debatable benefits for society.
asserted
other → arise → society
In the past eight weeks, the competing demands from those dual piles of debt have coalesced into a dramatic repricing on borrowing costs.
asserted
demands → compete → costs
But they now find themselves debating whether a sovereign debt crisis would be worse than an undoing of a technology boom that has driven stock markets since before the pandemic.
asserted
that → find → pandemic
The one thing over which there is no dispute is that, if there is a meltdown, interest rates will provide the trigger.
asserted
rates → be → trigger
The US Federal Reserve meets tonight and tomorrow, and while there is little chance of an official US rate hike this time around, markets are convinced that December will likely see an increase.
asserted
December → meet → increase
The US government has seen the cost of its long-term borrowings soar in recent months as bond markets, concerned about the mounting cost of its war in Iran coupled with massive tax cuts, have pushed debt costs higher.
asserted
markets → see → costs
America's debt is now equivalent to 126 per cent of its economic output, the highest it has been in the post-war era, with no plan to reverse the trend.
asserted
it → reverse → trend
The annual interest cost on that $US40 trillion ($56 trillion) debt has topped $US1trillion, creating a snowballing budget deficit.
asserted
cost → top → deficit
The great AI unravelling
They've been falling like bowling pins in recent weeks.
asserted
They → unravel → weeks
It began with the Firmus float flop, an audacious $44 billion grab for cash that may have gotten across the line just a few months earlier.
uncertain
that → begin → line
Last week, NextDC — a long-established Australian data centre builder with a strong track record — saw its share price plunge 42 per cent after Melbourne residents successfully delayed a monster computer shed in the suburbs.
asserted
residents → establish → suburbs
There was a similar incident in Sydney recently when Goodman Group canned a data centre in the northern suburbs.
asserted
Group → be → suburbs
It's a story resonating across the developed world.
asserted
It → resonate → world
CoreWeave, a US neocloud like Firmus that rents out its chips and computing power to AI firms, has seen its stock drop 36 per cent in the past month on concern over its mounting debts.
asserted
stock → rent → debts
The Nasdaq exchange, which is dominated by global technology firms, has just endured its worst fortnight since April as developed nations collectively turn their backs on the build-out of AI architecture.
asserted
nations → dominate → architecture
A recent Gallup poll in the US found 71 per cent of Americans opposed data centres.
asserted
cent → find → centres
Of those questioned, only 53 per cent opposed nuclear power plants.
asserted
cent → question → plants
A continuation of those delays will dramatically slow the expected distribution of AI technology to businesses and firms.
asserted
continuation → slow → businesses
That, in turn, could undermine revenue for AI firms and destabilise those that have taken on huge debts to fund their investment.
Those concerns have escalated dramatically in the past two months.
uncertain
concerns → undermine → months
ASIC takes a deep dive
asserted
ASIC → take → dive
Unlike the global financial crisis, where debt problems emerged out of left field, monetary authorities and market regulators are warning and preparing for the worst this time around.
asserted
authorities → emerge → worst
In Australia, the Australian Securities and Investments Commission (ASIC) is taking a helicopter view of national financial markets to ensure they are operating for the interests of all.
asserted
they → take → all
From the deeply troubled Australian Securities Exchange (ASX) to private credit markets, fixed income, commodities and foreign exchange, it is holding round table talks to improve their operation and eliminate friction points.
asserted
it → fix → points
ASIC commissioner Simone Constant says the watchdog has two key themes running across all markets: resilience and transparency.
asserted
watchdog → say → markets
"Resilience gives you strength, transparency gives you trust," she says.
asserted
she → give → trust
And the corporate watchdog is aware of the growing risk facing Australian investors and institutions.
asserted
watchdog → grow → investors
"Global markets are becoming more integrated and are open more hours than ever.
"
asserted
markets → become → ?
Capital flows are going offshore as much as onshore because of the dominance of tech stocks.
asserted
flows → go → stocks
During the 2008 financial crisis, a complete absence of transparency from ratings agencies, auditors and little-known corners of debt markets trading instruments that were mostly unregulated created panic across the financial system.
asserted
that → know → system
No-one knew who owed what or which bank held a toxic pile of worthless IOUs.
asserted
bank → know → IOUs
As trust evaporated, the system ground to a halt.
asserted
system → evaporate → halt
ASIC's overview won't stop a market crash.
asserted
overview → stop → crash
But it will limit the potential for regulators to be blindsided.
asserted
regulators → limit → potential
"We're seeing movements in spreads and volatility that we haven't seen for a long time," Constant notes.
asserted
Constant → see → time
The view from the helicopter may improve market efficiencies, she adds, the benefits of which will flow through to Australian investors, including those exposed through their superannuation funds.
uncertain
benefits → improve → funds
"We don't want to be a regulator that fears the risk of the challenges ahead.
"
asserted
that → want → challenges
It's about adapting to it with that trust and with that strength, that resilience and transparency give."
asserted
resilience → adapt → strength
…and 17 more, not listed.
The Aporia
