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The Bad PlaceCounterPunch.org | Bursting the AI Bubble: the Fed Could End the “Who Could’ve Known” Defense by Dean Baker
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Dean Baker argues that, like the 1990s tech bubble and the 2000s housing bubble, the emerging AI bubble will cause massive financial and economic damage, yet the responsible investment managers rarely face consequences because they hide behind the “who could have known?” defense—pointing to peers who made similarly reckless bets. He suggests that the Federal Reserve, with its sizable staff of economists, could help deflate the bubble by publicly assessing whether current stock market valuations are consistent with realistic GDP‑growth and profit projections; such an official judgment would force fund managers to justify their price targets rather than shrug them off as inevitable market folly. While this approach could curb speculative excesses, Baker doubts the new Fed chair will pursue it, fearing political considerations will outweigh the need for market discipline.
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