Greenspan's 1990s playbook offers a warning for the US-China AI race: don't let backward-looking data stifle investment
Summary
Senior Fellow Karl Smith argues that Alan Greenspan's approach to monetary policy during the productivity boom of the 1990s offers a critical lesson for the current AI race against China. The core insight is that macroeconomic data is inherently backward-looking and can mislead policymakers during periods of rapid technological transformation. Smith contends that winning the AI race requires massive U.S. corporate borrowing (trillions of dollars) to finance data centers, power generation, autonomous vehicle factories, and satellite infrastructure. The Federal Reserve must avoid stifling this productivity revolution by raising rates based on outdated economic indicators. If U.S. institutions misread the current productivity shift, they risk slower AI investment and a weakened long-term competitive position against China.
Source
bskyGreenspan's 1990s playbook offers a warning for the US-China AI race: don't let backward-looking data stifle investmentcsis.orgKey quotes
· 5 pulledWinning the AI race against China is going to take a gargantuan amount of patience.
It will require U.S. corporations to borrow trillions of dollars to finance the massive physical capital investment required to outpace China.
Deft monetary policy plays a crucial role in U.S. economic security.
In particular, the Federal Reserve should avoid stifling the productivity revolution.
If U.S. institutions misread a new productivity shift, they risk higher rates, slower AI investment, and a weaker long-term tech position.
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