SocGen’s Albert Edwards knows a thing or five about macroeconomic apocalypses, having predicted all of them, plus a few.
On some level, it’s odd there’s a plural form of the word “apocalypse.” If “apocalypse” means the extinction of everyone and everything, there can’t really be a second apocalypse, just like I can’t die twice.
Anyway, Edwards is famous for two things: 1) Developing and propagating a predictive macro-market framework he dubbed “The Ice Age,” which proved more or less correct, and 2) perpetually claiming that a financial meltdown’s right around the corner.
Suffice to say Albert relishes a “good” doomsday scenario — one time, while vacationing in Jamaica, he escaped an earthquake and narrowly dodged a tsunami like John Cusack driving the limo in the exceedingly cheesy disaster flick 2012 — so it’s no surprise he latched onto Citrini Research’s AI dystopia paper.
Unlike the authors of that paper, Edwards doesn’t think the AI jobs apocalypse is a 2028 event. Rather, he thinks it’s a “right now!” thing.
“Having propelled the S&P sharply higher since the November 2022 launch of ChatGPT, the AI investment story has begun to disintegrate,” Albert declared in a Wednesday note. “Macroeconomic doomsday scenarios foretelling what might happen by (a distant) 2028 are gaining attention, but we might not have to wait until then.”
As a quick reminder to readers who may not be as familiar with Edwards as you need to be if you’re going to safely read his notes, he’s a bit like Donald Trump in that you should take him seriously but not literally. When Albert says doomsday’s here, he means it, sort of, but he doesn’t want you to take the whole bottle of Ambien.
Another thing to note about Albert is that like me, and like the Eastern European “friend” I mentioned on Tuesday while documenting Citrini’s dystopia thesis, he’s prone to suspecting that other people’s macro ideas might’ve emanated from something he said or wrote. (There are no coincidences. I’m a fan of Albert’s because of the Eastern European, and Edwards is a long-time fan of that same Eastern European who in turn is a fan of Albert’s. In some ways, we’re all the same person — like Harrison Ford, Nick Faldo and a young Dennis Quaid.)
“I’ve been out of circulation for a couple of weeks due to a much-needed operation on my Achilles tendon, but the last time I wrote, I made, in a very short space, the same arguments as Citrini,” Edwards said, claiming for himself the same narrative authorship that I claimed for myself on Tuesday, and that our mutual friend surely claimed for himself on Monday.
Albert called it “blindingly obvious” that AI is “already causing serious damage to aggregate job prospects, especially those of recent university graduates.” The figure below is the same chart (basically) that I highlighted here last week. US payrolls have stopped growing even as the world’s largest economy continues to expand.
Bloomberg calls that the “jobless boom.” The Citrini piece suggested it’ll eventually come to be known as “Ghost GDP.”
“I can honestly say that if I was 18 now, there is no way I would go to university only to leave with huge debts and poor job prospects,” Edwards said Wednesday.
I agree wholeheartedly, with the important caveat that the core curriculum at four-year colleges and universities is indispensable when it comes to creating educated citizens. That’s why it’s called a “general education program.”
From a purely economic perspective, Albert’s right. You’re better off being a plumber these days than getting a liberal arts degree. But you really do need that four-year education if you don’t want to be a dumbass. I wish there were a nicer way to say that, but there isn’t. (Maybe it’s different in Albert’s England, but in America, the non-college educated are generally unbearable.)
Unfortunately, AI risks undercutting four-year programs by making it easier for students to cheat and further undermining the already grim post-pandemic prospects for white collar hiring. And, as the Citrini report noted, “the US economy is a white-collar services economy” where white-collar workers comprise half of employment and account for around two-thirds of discretionary consumer spending.
The figure above, from Edwards, shows you the divergence between overall spending and incomes excluding government largesse. The implication’s clear: Incomes aren’t rising with spending.
“Continued consumer spending growth of close to 3% is entirely unsupported by real personal disposable income growth [which] has been flat for the last six months or so, with or without transfer payments included,” Albert went on, adding that spending has “only been sustained through a collapse in the saving ratio to 3.6%.”
That level on the saving rate, Edwards said, is “eye-wateringly low,” where that means that with the exception of the March-October of 2022 period — when the Fed was squeezing rates higher and consumers were burning through COVID stimulus amid rampant inflation — we haven’t seen it “since the euphoria of the 2006 housing bubble.”
So, if it’s a future state where jobs disappear and spending’s supported only by the asset-rich and the last remnants of dwindling savings you fear, just know that it’s already here. According to Edwards, anyway.
The title of my Tuesday evening mailer was “Apocalypse soon?” Albert’s answer is “No. Apocalypse now!”
(RIP Robert Duvall.)
I’ll know you’re serious when you exchange your wardrobe for Patagonia and join a nighttime fight club.
Until then, I’ll continue doing what I’ve done with Avgo for the past decade- buy the dips. 🙂
Or trades in the Mercedes for a Range Rover!
Oh God, I’d never do that. The Mercedes is stressful enough in terms of being finicky. A Range Rover would be even worse in that regard. I’m seriously considering trading down to an Acura TLX Type-S for the reliability. I’m doing a lot more driving these days, and that AMG I have isn’t supposed to be an everyday driver.
What the jobs narrative ignores is the potential and some say real world ability of AI to reduce market friction. I used it the other day when trying to determine landlord quality when looking at 25 listings. I typed in ‘Does ____ company enjoy a good reputation in _______ apartment rental marketplace?’ The results were surprising. I think I ended up with a responsible manager. Time will tell, but at least I avoided some who were labeled slumlords.
I have seen other examples where market friction is reduced. I recently installed a free database in my linux computer using an ai engine to troubleshoot some installation problems. IT was bumpy but got the job done without spending a dime.
I am also cognizant of how it might replace jobs. However nothing I have used it for yet has replaced any human function. I note that the people I talk with are using it in a less advanced way than me. Therefore they are not there yet either. There are quite a number more advanced but a security consultant told me that AI in the hands of a hacker makes her job more labor intensive. So go figure.
I mean, at the end of the day it’s really hard to beat the Japanese manufacturers for reliability.
Just don’t succumb to the temptation to get an NSX. That beast’s a widow-maker.
I just found out they’re discontinuing the TLX altogether. No more mid-sized Acura sedan. Crazy.
That’s wild. Not quite “Ford doesn’t make cars anymore apart from the Mustang, and the Mustang EV is an SUV” wild, but still.
So… I was going to say Inifiniti. The G35 was on my short list back in the day. Thought I should google it first. Model names changing all the time and whatnot. Turns out Infiniti no longer sells sedans at all (which didn’t stop GPT 5mini from hallucinating a price for a new Q50 at me).
If you have 3 minutes to kill though, definitely head to Infiniti’s website and check out the concept cars page (it’s under the ‘Vehicles’ drop down). Apparently that’s the only place you can find a sedan these days.
The groundwork is definitely here for an economic apocalypse. On the other side are numerous forces that will try to delay it, particularly during an election year, so call it a slow rolling apocalypse. It seems certain now that AI will eat numerous traditional forms of employment while not creating an equal number of quality alternatives. If I’m reading H correctly here, I’m in agreement that an even bigger and more fundamental problem is and will continue to be a nation of “dumbasses” without a liberal arts degree. Who needs to be able to think critically when a machine can do it for you.
I’ve never been a fan of investing in gold because I couldn’t understand why, now I own my fair share as a component of the apocalypse trade.
I think if we learned anything from the GFC, it’s that the market will be the last thing to react to a severe economic downturn. Trump’s new Fed chair slashing rates to near nothing will only prolong the market’s resilience, even if the news is wall to wall coverage of people in bread lines.
My prediction is that Trump forces the credit card issuers to drop credit card interest rates this summer. Just in time for the midterms.
Since we’re respecting the recently deceased, Rest In Power to Oliver Grant as well… Too young.
You can still be a dumbass with a four-year degree … just sayin
Oh, absolutely. I’d never deny this. In fact, I’m continually amazed at how dumb I am despite being over-educated.
Zadie Smith talks about this all the time — how much there is to know, and how every, single time you delve into something you discover how little you actually know about the world.
A person only develops wisdom when it becomes obvious how little knowledge said person has.
Fear always finds a receptive audience, which is why I don’t find the Edwards missives helpful. You’ve done a great job covering the Citrini apocalyptic scenario, which is clearly the work of a shortseller. Any thorough analysis would consider multiple possible future scenarios, not just the doomerist view.
You mention the Brits. They did vote for Brexit prior to the US voting for Trump (twice). Not sure that makes the less educated among them unbearable – but if they are into their drinking, you are probably not going to get a lot of thinking.
” . . . like Harrison Ford, Nick Faldo, and a young Dennis Quaid.”
Which one of you is (most like) the salty English golfer that takes forever to get around the course?