Tesla CEO Elon Musk warned of an explosion in U.S. public debt, saying that a financial collapse of the United States will be inevitable if artificial intelligence and robotics do not transform the economy and ease the burden of indebtedness.
In a long interview with podcaster Dwarkesh Patel, which was also attended by Stripe co-founder and president John Collison, Musk was asked why he had advocated aggressive cuts to government spending while leading the Department of Government Efficiency (DOGE), if he already believes that technology will strongly boost GDP growth and make debt repayment easier. Musk replied that he is primarily concerned about waste and fraud, although numerous reports have shown that among the mass layoffs were also key people whom the government later had to rehire.
“Without artificial intelligence and robotics, we are basically completely done, because public debt is piling up at an incredible rate,” Musk added.
He said that interest alone on U.S. debt of 38.5 billion dollars amounts to about one billion dollars annually, which already exceeds the budget of the U.S. military.
Reflecting on his work at DOGE, Musk said that he wanted to slow down what he described as the unsustainable fiscal trajectory of the United States and buy time until artificial intelligence and robotics spur economic growth.
“That is the only thing that can solve the public debt problem. We will 1,000 percent go bankrupt as a country and collapse as a nation without artificial intelligence and robots. Nothing else will solve the public debt problem. We just need enough time to build AI and robots so that we don’t go bankrupt before that,” Musk concluded, reports Index.hr.
He warned, however, that a sudden increase in the production of goods and services, driven by these technologies, would likely lead to strong deflation.
“That seems likely because you simply won’t be able to increase the money supply as fast as the quantity of goods and services produced grows,” Musk added.
Deflation would, in real terms, further increase the debt burden, while inflation would initially ease the situation, but a subsequent rise in bond yields would once again lead to a sharp increase in interest costs.
The United States nevertheless has certain built-in advantages because the dollar still serves as the world’s reserve currency, which allows the Treasury to borrow at lower interest rates than would otherwise be possible.
The ability of the U.S. to issue debt in its own currency, as well as the capacity of the U.S. central bank to purchase bonds, further reduces the risk of complete bankruptcy.
Despite this, the Committee for a Responsible Federal Budget warned last month that the United States is on a trajectory that could trigger as many as six different types of fiscal crises.
Although, as they state, it is impossible to predict when a collapse might occur, “some form of crisis is almost inevitable” if the direction of fiscal policy does not change, the committee said.
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Source: Nova.rs; Foto: AP / Allison Robbert