Former SEC Chair Gary Gensler joins BBC News Chief Presenter Steve Lai to talk about reports that Truth Social has entered into agreements with Wall Street trading firms to sell faster access to the president’s posts.

Why might financial firms be willing to pay $100,000 per month for such early access? What does this mean about the fairness of markets?

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‘The AI Boom Will Pull Back, Warns Former SEC Chair Gary Gensler’, 13:18

Former SEC Chair Gary Gensler reviews why today’s AI investment boom will not continue indefinitely — expecting some form of slowdown or reversal within the next 18 to 30 months.

He discusses how it’s the AI related debt and vendor guarantees which could determine how disruptive that correction becomes. How much debt is there in the system? Who stands behind the many interconnected financial arrangements, vendor guarantees, and off balance-sheet special purpose vehicles? Who holds the debt or is relying on the guarantees?

Gensler also weighs in on the Anthropic IPO efforts, interest rates, Fed policy, financial stability, and the possibility that the U.S. has overbuilt AI infrastructure.

You can also listen to Gary & Simon discuss Fed policy in their most recent episode - Episode 35: What Will The Fed Do Next?

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How should the Fed navigate the Iran conflict continuing to keep energy and fertilizer prices elevated; the AI investment booming pushing up prices for chips, electricity, and construction; and high tariff rates? With bond yields pushing up borrowing costs while Europe grabbles with unrest over fiscal and debt imbalances, what might it mean for US inflation and employment growth.

With sticky inflation and the US economy still running strong, when might the Fed raise rates again? How could a retrenchment of the AI investment boom or a new European debt crisis impact the US and Fed policy?

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‘Next Financial Crisis?’ 30:23

In this episode of one of Britain’s top podcasts, The Fourcast, Gary Gensler speaks with Channel Four News lead presenter Krishnan Guru-Murthy about the economic challenges on the horizon from the AI investment boom.

Is the boom a bubble about to burst?

Listen in to hear why Gary believes a downturn in AI investment could be just 18 to 30 months away, potentially putting the financial markets and wider global economy at risk. Why is the AI boom unsustainable? What happens when the mounting debts funding AI data centers and model providers come due? Do we face a financial crisis?

You also can listen to Gary’s recent keynote address ‘The AI Trade’ to the Council for Institutional Investors annual meeting in Boston, highlighting the market and economic risks of the current AI capital expenditure boom.

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It is striking the extent to which the global economy has become driven by the artificial intelligence boom. We see this in investment data for the United States and elsewhere. We see it now in trade and capital flows between countries.

At the same time, the US-Iran conflict is keeping energy prices high putting pressure on inflation and living standards. The AI investment boom’s demand for chips and electricity also is adding to inflation pressures. We also see interest rates rising almost everywhere and still near-record US equity market valuations.

When people talk about the “affordability crisis” in the US, Europe, and elsewhere, much of this relates to the direct and indirect effects of the high price of oil, the AI boom, and rising interest rates.

At this point, most global indicators still point towards continuing short-term expansion of the AI sector and global economy. In Bangkok, new Federal Reserve Chair Kevin Walsh stressed that he sees AI as expanding the supply of goods and services – meaning that it will increase output without causing inflation.

There are definitely signs, though, of growing economic and financial fragility in the US and global economies’ current dependence on the AI boom. The history of general-purpose technology investment booms and related bull markets are that eventually we experience reversals – with only the timing, depth and reach being uncertain. For more you can watch Gary’s recent talk ‘The AI Trade’.

Could we be facing a potential repeat of the bust after the Internet investment boom of the late 1990s? Or from the housing boom of 2005–8? While all global economic upswings share happy similarities, each global economic downswing is unhappy in its own way.

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In his keynote talk to 500 investors at the Council for Institutional Investors annual meeting in Boston two weeks ago, Gary Gensler highlights the market and economic risks of the current AI capital expenditure boom.

After setting the context of today’s capital markets — high stock market valuations, rising bond yields, persistent inflation, unsustainable federal deficits, energy price shocks, and the US stepping back from decades of global leadership — Gary details why we’re likely to have a market retrenchment on the horizon.

The history of general-purpose technology investment booms and related bull markets are that we eventually experience reversals – with only the timing, depth and reach being uncertain.

Whether due to an AI investment plateau or decline – or geo-political or other exogenous shock – market valuations, debt levels, financial stability, and the economy will be tested.

As Warren Buffett famously put it: “When the Tide Goes Out, We’ll See Who’s Been Swimming With Their Trunks Off”

Watch the full talk at ‘The AI Trade’.

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Former CFTC and SEC Chair Gary Gensler joins BBC News Chief Presenter Steve Lai to talk about why 39 US States asked the Supreme Court to hear a case against Kalshi. What’s the dispute is all about? Why might Kalshi not wish to be regulated by the States?

Gary filed his own Supreme Court Amicus Brief as well giving a firsthand account – from his time as CFTC Chairman - that Congress, in response to the 2008 financial crisis, did not make the CFTC the nation’s sports betting regulator.

You also can listen to Gary & Simon discuss Prediction Markets in ‘Episode Five: Prediction Markets’

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Why do these meetings matter? What’s the history and current relevance of these international institutions? Why (and over what topics) do the world’s leading central bankers, finance ministers, and economic policy actors come together to talk? What are the US, Europe, China, and the Global South (among others) looking to achieve this time around?

The International Monetary Fund (“the Fund” to insiders) and the International Bank for Reconstruction and Development (“The World Bank” or just “the Bank”) were created following the 1944 Bretton Woods conference, to establish a post-war international economic order. The British government argued for a return to the pre-war global trading system, structured around European empires with an important role for the British pound. Not surprisingly, the U.S. preferred a new dollar-based system — within which the Fund helped to manage fixed exchange rates, the Bank lent to assist rebuild war-torn Europe, and the General Agreement on Tariffs and Trade (GATT) created a framework that would encourage lower trade barriers.

This system proved successful for decades, at least within its own terms of reference. Since their founding, though, much has changed in the world along almost every dimension. Today, major currencies float freely (most of the time) and the IMF’s focus is lending to countries in economic trouble. The World Bank’s focus is on assisting lower income countries. The GATT became the World Trade Organization… which now finds itself at the center of a big push of protectionism (higher trade barriers), led by the U.S.

The Fund-Bank Meetings continue to play a meaningful role in global economic dialogue, including through personal relationships — this is why so many finance ministers, central bank governors, and deep-pocketed investors are currently in Bangkok. Where will this dialogue head, in a world where the U.S. has become more introspective, China is a major manufacturing/trading power, Europe seems stuck in neutral, and so many people in developing countries remain mired in poverty?

Will there be any relevant action on continued energy price shocks, global sovereign debt levels, inflation, or AI’s economic effects? Will the US succeed in narrowing the World Bank's consideration of climate change when lending?

With bond yields rising worldwide and growing questions about the AI investment boom’s eventual reckoning, thoughts turn to what a global downturn could look like. What should the world do now to mitigate such risks? What could be the role of the IMF in helping countries deal with future financial crises or — ideally — providing timely advice that could prevent such meltdowns?

Add to all of this a geo-political question, lurking just off-stage. Is it sustainable for the US to still have such outsized influence over World Bank and IMF decisions? Might other nations make progress on efforts to revise IMF quotas and voting - possibly diminishing US and European influence over IMF decisions? Who might be in a position to suggest alternative arrangements, and what would those look like?

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Gary Gensler joins EconoFact Chat’s Executive Editor Micheal Klein to discuss ‘Online Prediction Markets: Benefits, Costs, and Regulation’.

Do online prediction markets like Kalshi and Polymarket provide a service beyond the entertainment of gambling? Why have these markets caught the public’s attention?

Is the Commodity Futures Trading Commission, the federal agency Gary once chaired, well-positioned to regulate these markets to guard against insider trading and market manipulation?

Did Congress even give the CFTC authority to oversee sports betting, contracts which make up the vast majority of prediction market revenues? Gary’s recent Supreme Court Amicus Brief gives a firsthand account – that Congress - in Response to the 2008 Financial Crisis — did not make the CFTC the nation’s sports betting regulator.

Listen in to Gary and Michael discuss the challenges of protecting those trading on these markets as well as the integrity of the underlying events — whether they be sports, political elections, or geo-political events.

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Former CFTC and SEC Chair Gary Gensler joins ‘Closing Bell Overtime’ to talk about his Supreme Court Amicus Brief related to sports betting regulation. Saying the Administration’s and Kalshi’s position is ‘frankly absurd’ that in response to the 2008 Financial Crisis, Congress made the CFTC the nation’s sports betting regulator.

Not once in the 54 times Gary testified to Congress in the years after the financial crisis did anyone mention sports betting.

It’s a matter of common sense, he says, that then Senate Majority Leader, Harry Reid of Nevada — who’s first job in politics was as Chairman of the Nevada Gaming Commision — “would have thrown me out of his office if I had said, ‘could you just transfer your Nevada gaming Commission authority over to this small federal agency I’m honored to Chair?’”

‘Trump Admin’s and Kalshi’s position on gambling regulation is ‘frankly absurd’: fmr. SEC Chair’ 4:24

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Gary’s Supreme Court Amicus Brief gives a firsthand account – from someone who was in the room as CFTC Chairman, that Congress - in Response to the 2008 Financial Crisis — did not make the CFTC the nation’s sports betting regulator.

In ‘Gensler to Supreme Court: “I Was There,” and Dodd-Frank Didn’t Make the CFTC a Sports Book’, John Lothian gives a review of Gary’s brief and the legal issues pitting New Jersey and 38 other states on one side vs. Kalshi and the CFTC on the other. (graphic above is from John Lothian news)

The case boils down to the question of what Congress did in 2010’s Dodd-Frank financial reform with regard to sports betting. The Third Circuit majority found that Congress included sports-betting contracts within the statutory definition of swaps and, as a result, displaced states’ traditional police power to regulate gaming, including sports betting. The Ninth and Sixth Circuits have come out the other way, as have many district courts.

Gary asks the Supreme Court to hear New Jersey’s appeal – and overturn -- the Third Circuit’s opinion which ruled in favor of Kalshi.

As Politico reported yesterday. ‘“Congress does not make fundamental changes in the balance of state and federal power in isolated snippets of text,” Gensler writes in his brief, ... “If Dodd-Frank had preempted the states and tribes on sports betting, it would have been one of the biggest stories about Dodd-Frank at the time. But nobody ever mentioned it.”’

CoinDesk reported on Gary’s amicus along with Senator Chris Dodd’s brief and the NFL’s, all which pushed back on the Third Circuits’ and Kalsi’s views.

You can also listen to Gary & Simon discuss Prediction Markets in ‘Episode Five: Prediction Markets’

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Europe did well in previous waves of industrialization and tech development, but lost its edge during the digital 1990s and has fallen further behind the IT frontier in the past two decades. The entire region is seized with concerns about its future in the age of AI, particularly as most new information technology is being developed in the United States and in China. Add to these challenges, real risks from Chinese manufacturing, Europe’s energy dependencies, the ongoing Ukraine and Iran conflicts, and continuing trade disputes with the US.

Europe is also witnessing a rise of of nationalist, euro-sceptic, anti-immigration political parties. The Alternative for Germany, AfD, has made significant gains with German Chancellor Friedrich Merz’s popularity at an all-time low. What will the next elections in Germany and France, Europe’s two largest economies, mean for Europe? What will they mean for the US?

So how much trouble is Europe in really? Much has been written on the question, including the widely discussed 2024 Draghi report on EU competitiveness and more recently the IMF’s report Reforming Europe Under Pressure.

There are big questions about entrepreneurship, continuing cross border trade restraints (particularly in services), and the level of regulation in Europe. If it is harder to start a business in Europe than in the US, why not just move? Many excellent European computer scientists, for example, seem happy working in the United States (including on AI).

As the Draghi report and others have highlighted, might the problems be due to Europe’s fragmented capital markets and heavier reliance on bank funding? Or might it be that the move to the Euro — without concurrently moving to fiscal integration, uniform banking policies, and true free trade — has shackled Europe with slower growth?

There also are some fascinating debates underway, including between Paul Krugman and Luis Garicano (writing with others). Both sides raise good points: Krugman that Western Europe is still well-off and close to the United States in terms of average standard of living; Garicano that the latest wave of world-sweeping technology is not led by Europe.

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Former SEC Chair Gary Gensler highlights looming hurdles for AI companies and risks they present for the markets and US economy. Citing the AI capital expenditure boom, concerns about AI safety, and robust competition from Chinese models, he cautions about a possible market adjustment on the horizon. With real concerns about AI risks of misalignment with humans, the AI model companies and hyperscalers still need to generate meaningful revenue gains to meet current market expectations.

Listen at Gary Gensler Talks AI Competition with China | Bloomberg Talks 13:24

Or watch There’s Existential Risk Of AI Agents ‘Not Aligning’ with Their Humans 12:50

To hear more on Gary & Simon’s views on AI data center boom and AI safety listen to their latest podcasts: Episode 30: What Are All the Data Centers Getting Us? and Episode 31: Should We Slow AI Development? Can We?

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In a wide ranging discussion about AI risks, the economy, and markets, former SEC Chair & current MIT Professor Gary Gensler joins Bloomberg Open Interest to break down how the AI boom could trigger economic and market stress. Hear why Gary says, “It’s not a matter of if, it’s a matter of when we see a retrenchment”.

Listen as well for the discussion on Anthropic’s stark S‑1 warnings about AI safety and how AI agents may effects savers and shift bank deposits. Gary also discusses how energy prices, rising bond yields, the continuing Iran war, along with an "AI bubble" retrenchment may expose hidden risks in private equity and credit.

Watch Bloomberg’s full interview here to find out more: Gary Gensler Warns on How AI Could Trigger Bank Stress, 10:10

To hear more on Gary & Simon’s views on AI data center boom and AI safety you can also listen to their latest two podcasts: Episode 30: What Are All the Data Centers Getting Us? and Episode 31: Should We Slow AI Development? Can We?

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The promise of AI is real - making it easier for humans to handle many tasks from the mundane (scheduling appointments) to the complex (writing computer code). The risks are also real - that either threat actors using AI, or AI ‘agents’ on their own, act maliciously. Additionally, as with previous waves of automation, millions of people may lose good jobs and their roles in society.

Given the number of recent cases in which AI agents acted in ways that were not what their human minders intended, there have been increasing calls to slow the pace of AI development. Breaking into other people’s computer systems is bad enough, but what if AI agents (or their human bosses) ‘decide’ to go further and cause physical harm to humans?

With top people in the AI industry now calling for a slower, more careful path forward, the question is what can actually be done to ensure for safety? Would pre-release safety checks, guardrails, incident reporting, and ‘kill’ switches truly work to lower risks? What would stop users from detaching guardrails from open weight models? What is even likely when the US and Chinese governments both seem committed to “faster and more” AI to maintain or gain national security and competitive advantage?

What should the tech industry do? How can other countries best protect themselves? Who will be held responsible if (when?) AI agents cause damage around the world?

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Listen to both sides of the prediction markets legal debate as Freakonomics Stephen Dubner interviews Gary Gensler as well as Kalshi senior executives, Co-Founder & CEO Tarek Mansour and Head of Research Nicole Kagen.

Gary filed an Amicus in Kalshi vs. Schuler in the U.S. 6th Circuit Court of Appeals regarding the case between Kalshi, Ohio, and Tennessee over the application of state gaming laws.

Listen to the full Freakonomics podcast here: ‘When is a Bet Not a Bet’ 50:32

You can also listen to Gary & Simon discuss Prediction Markets in ‘Episode Five: Prediction Markets’

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The growing investment in data centers is eye-popping. Amazon, Microsoft, Google and other US hyperscalers’ capital expenditures has grown nearly five-fold over the last three years to about $750 billion (projected) in 2026. Analyst consensus estimates are for this to grow in 2027 to as much as $1 trillion. With 2700 data centers already in operation (Data Center Map), the US currently is building 400 and planning another 1500.

Are expectations for revenues from the use of AI (and the prices that can be charged) overblown? How will China’s open-weight AI models affect the competition for future revenues? Though the US spends nearly seven times more for data centers annually than China, the US model performance lead over China is only measured in months.

Economic history contains many past building booms with compelling underlying rationales alongside excessive exuberance — think about what happened with canals, railroads, electricity generation, and the early Internet.

What might these earlier booms foretell about our economic future? No building boom lasts forever. When the slowdown comes, what will be the consequences? A major part of the answer will lie in the amount, complexity, and precise holdings of debt related to data centers and their suppliers. Adding to these risks, there’s a great deal of opacity around these arrangements. Could we be heading for a serious case of economy-wide and financial markets indigestion?

There also are many micro concerns about data centers, focused on the implications for local communities. What are the effects on electricity prices, water use, the environment, and noise? Data centers are being built faster than electricity capacity can be added. The cloud providers, AI model labs, and the White House seem to have consistently underestimated local opposition. While some jobs are created, not many remain once data centers are completed — and there are broader concerns about what AI will do to existing human jobs of all kinds. Political pushback is likely to intensify.

Please join us again next week when we’ll take on the other big question of the moment: Should we (or can we) slow the development of AI?

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Gary Gensler joins Squawk Box to discuss AI safety concerns, calls for a slowdown in AI development, the need for for more responsible AI regulation, impact on AI IPOs, and the state of AI competition with China.

Watch Gary share his thinking on the likely retrenchment in the current huge AI capital expenditure build and related stock market ‘AI Trade’ — ‘it’s just a question of when and how steep.’

Gary Gensler on AI safety: Don’t want government putting a thumb on the scale from capital markets POV 8:19

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What’s striking about the Japanese experience is not that they had a boom, bubble - and then a bust - in investments and asset prices. All too many countries have experienced such economic cycles. Japanese growth was based on real innovation by companies that appeared to be well run and that built dominant global market share. The Japanese stock market crash of 1989-90 was followed by not one or two but by ‘three lost decades’ of stagnation in total GDP. This is a remarkable and daunting story with more than its share of policy mistakes along the way.

What are the lessons and for whom? Does what happened in Japan offer warnings to the US of the dangers of a massive tech boom? Or the potential consequences of not dealing head on with economic distress if it becomes widespread? So-called Zombie firms and banks became a big part of the 1990s Japanese financial landscape.

Might Japan offer a cautionary tale for China this decade and next? Japan’s economic boom - like China’s in the past three decades - was based on export-oriented manufacturing and a tech/led economy. The Japanese authorities felt compelled to revalue (ie., appreciate) their exchange rate in the mid-1980s, coincident with when they loosened credit too much - driving up real estate prices and contributing to a big over-expansion of plant and equipment.

Today, low growth expectations and projected rapid aging of the Japanese population may also be a forerunner of what’s to come in many industrial economies - at least anywhere that significantly limits net immigration. Japan’s experience suggests that if a country wants to become or remain one of the world’s leading economies, it needs to sustain productivity growth - and it also needs to: have enough working age population (relative to the number of retirees); make sure young people receive the education they need; and promote vibrant competitive markets, including with continued entry by new entrepreneurs.

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Overall, the U.S. economy is close to “full employment” and inflation has been consistently above the Fed’s 2% target. We’re experiencing multiple upward pressures on prices — including the Iran war energy price shock (see Episode 27: When Will the Iran War End?), the AI capital expenditure boom, decline in net immigration, and US tariff policies.

Ordinarily, in such a situation you would expect the Fed to “lean against the wind” by raising interest rates, possibly as early as the Federal Open Market Committee’s (FOMC’s) mid-September meeting announcement (Wednesday, September 16th). At their last meeting there was a split at the FOMC, with three members willing to vote for higher rates.

During our podcast, we review Fed Chair Kevin Warsh’s important speech at Jackson Hole, on the economy and conduct of monetary policy. For many years prior to rejoining the Fed, Chair Warsh argued for tighter monetary policy. But what will the FOMC led by Warsh do now — given that the President has repeatedly called for the Fed to lower interest rates?

If not in September, would the Fed raise rates at its next meeting in late October and risk being seen as influencing the mid-term elections then just one week away? Otherwise, does it wait for its last meeting of the year in December?

Inflation and the Federal Reserve are much on the markets (and our) minds these days. For a discussion on what the bond market may be saying about inflation you can also listen to Episode 26: What Is The Bond Market Saying? For our earlier episodes on the Fed you may also wish to listen to Episode 12: Big Challenges Facing The New Fed Chair and Episode Two: The Federal Reserve and Monetary Policy. Those substack posts also include recommendations for further reading.

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