For the first 200 years of US history, while we had a long history of borrowing to finance our way through crises (particularly wars), the goal was to pay down that debt once circumstances were more favorable (i.e., during peacetime). Over the last 25 years, though, this no longer has been the case. Since 2001, publicly held US government debt has increased steadily in both good economic times and during difficult times. It now weighs in at 100% of GDP — the highest since just after WWII, tripling from just 32% of GDP in 2001.

Much has happened during this time to shift fiscal policy and results — multiple tax cuts during the Bush and two Tump administrations, the 2008 financial crisis, COVID 19 pandemic, multiple US engagement in wars, and an aging population. For many of these years, particularly after the financial crisis, the US Federal Reserve also pursued monetary policies which kept Treasury borrowing costs close to zero.

While rating agencies have downgraded US debt, to date domestic and global investors have continued to readily buy the vast supply of newly issued Treasury debt. But how long will this last?

In the last four years as inflation returned, interest rates on government debt rose. Further, regardless of administration rhetoric, deficits have continued to run annually at about 6% of GDP.

What would it take to boost revenue or lower spending to balance the US fiscal picture? Though there are alternatives to raise taxes or cut spending, there has not been a ready political path forward to do so, particularly as 2/3rds of spending is mandatory spending, including for social security and Medicare. If we can boost economic growth significantly, perhaps our fiscal picture will take care of itself — but is that truly a realistic possibility?

Simon and James Kwak published a book on US fiscal questions: White House Burning (a reference to the war of 1812). For a more recent take, see also Fiscal Policy and Debt Sustainability by Antonio Fatas and Ugo Panizza, published in a CEPR volume last year (which Gary and Simon helped edit).

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Following up on our Episode Ten: Why Does the Rule of Law Matter?, we focus on how the Court’s recent decisions impact American institutions. Has the rule of law been strengthened or undermined? Is democratic participation likely to become more or less inclusive?

Many of the term’s decisions are likely to have profound economic consequences, including:

• Expanding Presidential power by allowing presidents to fire members of agency boards and commissions; while preserving, for now, some independence for monetary policy. For more see 'Presidential Supremacy Over Administrative Agencies' written by Gary and Lev Menand (CEPR Press) last December in anticipation of such a ruling.

• Ruling against an executive order that sought to end birthright citizenship, while allowing in other immigration related decisions: a) presidents to end individual’s temporary protected status, b) asylum seekers to be turned back at the border, and c) green card holders to be denied readmission to the U.S. without the need to show ‘clear & convincing’ evidence of crimes.

• Removing limits on coordinated political campaign finance and making it harder to claim Congressional maps violate the Voting Rights Act.

• Ruling against the President on the use of a fifty year old emergency law to impose tariffs (one of the key components to justify the tariffs initially imposed in 2025)

It’s often said that the Supreme Court is a never ending constitutional convention, albeit whose nine members have lifetime appointments. Does the composition and inclination of the US’s current rolling ‘Constitutional Convention’ suggest that we are in a period of weakening institutions — compared to what has previously prevailed? Or is today’s Supreme Court a reminder that US institutions remain robust, with effective limits on executive power in modern America? Listen to this week’s episode to hear Gary & Simon’s take on these important questions.

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The US may currently lead in large language models, chip design, and data center funding, but China has impressive computer science capabilities, leads in robotics, and its large language model (LLM) performance generally measures only months behind the US. China’s greater emphasis on ‘open-weight’ models also may be an effort to promote faster global adoption and diffusion of their models.

Europe, the UK, Japan, India, Mideast nations, and the rest of the world, though, aren’t sitting by idly. Each country seeks to establish some scope of AI sovereignty to exert control over their own economy and national security — as Gary and former US National Security Advisor Jake Sullivan discussed in ‘AI & The Future of Sovereignty’.

How much will countries without their own LLMs or data centers, though, have choices about what models to use? Might the rest of the world see a significant portion of AI’s economic benefit accrue to the US and China? If imbalances persist, what might be the geo-political consequences? Might the world find that the US or China use AI economic leverage to influence other countries’ geo-political decisions? As AI continues to change weaponry, how will it shift strategic balances?

As discussed in Episode 13: Can AI Behave Responsibly?, there also are differing policy approaches around the globe to AI. The European Union has adopted a relatively more restrictive approach to release and use of AI models. The US to date has been more permissive.

AI also presents significant labor market economic policy choices. We’ll consider in a future episode what might be the net effect on employment & wages — and which countries might do better or worse in this regard? Reflecting on China, what does their big push on robotics mean for all their people looking to find a good job?

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Gary Gensler discusses recent big tech fund raising activity including this week’s largest ever foreign US IPO — the $26.5 billion raised by Korean memory chip company SK Hynix. This followed on the heels of Google’s $85 billion share sale and SpaceX’s IPO at a $1.8 trillion valuation. What does this tell us about the current AI investment boom? Might it be a sign about market valuations?

Watch Bloomberg’s full interview here to find out more: Gensler: Big Deals a Sign of ‘High-Valuation Market’

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Currently, it’s advantage USA for large language models, though China also is doing very well. The US leads in computational power dedicated to AI due in large part to its advances in chip design, export controls, financial markets, and significant investment in data centers. The US model companies generally emphasize so-called ‘close weight’ models keeping proprietary the parameters to their algorithms. Chinese companies have led on ‘open-weight’ models which may advantage adoption diffusion.

China has demonstrated significant capabilities in AI computer science and has shown impressive advances in closing the AI performance gap with the US. With its size, political system, sensor-based economy, and social credit system, China also has greater access to personal data than any other country.

There are also many other important components of the AI technology stack and global competition beyond the LLM models themselves. Other niches — very profitable niches — are occupied by others — for instance for high bandwidth memory, lithography, and semiconductor fabrication labs.

Surely each country will wish to establish some scope of AI sovereignty, as well as adopting AI to fit their strategic needs, exerting control over their own economy and mitigating trade-offs between efficiency and AI supply chain resiliency. There also will be desires to develop applications that fit local conditions, particularly in countries very different (in income, culture, other features) from the US or China.

For further information listen to Gary’s fireside chat ‘AI & The Future of Sovereignty’ with former US National Security Advisor Jake Sullivan or read ‘AI Sovereignty Is About Options, Not Ownership’ by Ren Ito or ‘Is AI sovereignty possible?’ by a Brookings team earlier this year.

We also recommend the recently published Priority Technologies, edited by Elisabeth Reynolds.

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Gary Gensler and former U.S. National Security Advisor Jake Sullivan explore AI and the future of sovereignty during this fireside chat moderated by Google’s Kate Charlet at the recent International Association of Privacy Professionals Navigate 2026 Digital Policy Leadership Summit with the. talk below & here: IAPP Navigate 2026 keynote panel: Kate Charlet, Gary Gensler and Jake Sullivan.

Gary and Jake have worked together multiple times - on presidential campaigns and while serving in the U.S. Government. Jake Sullivan is now a Professor of the Practice at the Harvard Kennedy School where he teaches ‘The Policy and Geopolitics of Artificial Intelligence’. He also is a Senior Fellow at the Carsey School of Public Policy at the University of New Hampshire and co-hosts The Long Game podcast.

For more, tune in for Gary & Simon’s upcoming: Episode 19: Who is Winning the AI Geo Competition (July 6) & Episode 20: What are the consequences of the AI race? (July 13)

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We discuss three pivotal figures in American technological history while interweaving what the Constitution’s ‘We the People’ has meant to the nation over these 250 years.

Eli Whitney, Henry Ford, and Vannevar Bush represented important technological visions that shaped products, processes, and societal changes over long periods of time. For Whitney, this was through the cotton gin and his efforts to develop a system of interchangeable parts. For Ford, the impact was through creating moving production lines, bringing electricity to those lines, and imagining that the Model T could become affordable for much of the middle class. For Bush, it was through the simple idea that a nation investing in science helps build capacity in many ways essential both to national emergencies and to long term growth.

The American democratic experiment, though, also has been marked by many inequities and internal struggles. At our founding, power, opportunity, and economic rewards clearly did not live up to the Declaration of Independence’s ideals ‘that all men are created equal’ (nor for women). Through many ups and downs over the years, the US has made much progress — on who belongs, how we govern, and who gets to participate in economic, political, and civic life.

Each of Whitney, Ford, and Bush’s legacies — like our nation — are not without their darker sides. Whitney’s inventions had a serious negative impact on enslaved people and Ford was well known for his antisemitism. Bush helped open the door to meritocracy, but also may have contributed to an overly elite-oriented system.

So what’s next for the USA? How will AI, this era’s transformative technology, affect society and inequalities? There are grounds for optimism that we could find ourselves on a more inclusive path, but history also suggests there are reasons for concern.

For a closer look at Eli Whitney and Henry Ford, warts and all, turn to Simon’s 2023 book with Daron Acemoglu, Power and Progress: Our Thousand Year Struggle Over Technology and Prosperity. For more on Vannevar Bush, see Simon’s 2019 book, Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, with Jonathan Gruber.

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Gary Gensler Talks AI Hype, IPO Outlook | Bloomberg Talks 13:20

Or watch AI is Most Transformative Technology of our Time, Bloomberg’s short video version. 7:30

Former SEC Chair Gary Gensler says AI models and hyperscalers need to generate meaningful revenue and productivity gains to meet current market expectations. Gary also highlights that as pre-IPO investors consider selling their shares in high-priced Mega IPOs such as SpaceX, it could create downward pressure on the capital markets as well.

You can also listen to Gary & Simon discuss Mega IPOs in Episode 17: What do Mega IPOs Mean for Markets?

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These companies have already raised large amounts of capital through private offerings and are now turning to public markets. If their recent private market valuations and the experience of SpaceX are any guide, their public market capitalizations (value of shares outstanding) will be among the largest in the world.

In part, this ability to issue capital reflects well on the functioning of US capital markets. The US share of global equity outstanding (over 50%) is well in excess of our share of global GDP (less than 25%).

But is there something else going on? History tells us that enthusiastic investment cycles and financial markets’ FOMO for general purpose tech generally leads to over-investment followed by market and economic reckonings.

US market and economic growth have been highly dependent on the outsized funding of AI infrastructure investment. Might this be what we’re currently experiencing in the US? Are the Mega IPOs a potential ‘tell’ of what comes next?

For investors (in public and private markets) to be rewarded, the large AI hyper-scalers and model companies will need to successfully find revenues to justify their significant current capital expenditures. To do so, AI needs to lead to sufficient US productivity boost to overcome creative disruption of many sectors’ and valuations.

Amidst the boom of AI investments, have US equity market prices become stretched? Is there excessive exuberance about potential revenues and profits in the AI sector? Is the AI investment boom being financed by an appropriate mix of equity and debt? What could go wrong?

There is a lot to read on this fast-changing topic. Here are few items worth digging into more deeply, depending on your particular interests:

Bloomberg’s Shuli Ren on “Why SpaceX, Samsung, Hynix are Becoming Meme Stocks”, all currently trillion dollar market cap companies.

‘SpaceX and OpenAI Are Ending Wall Street’s Era of Stock Scarcity’, Bloomberg, June 14, 2026

‘Is the US Stock Market Too Big?’, Jim O’Neil, Project Syndicate, June 10, 2026

‘Some Indexes Accelerate Entry for Massive IPOs’, Charles Schwab, June 10, 2026

A piece from Adviser Perspectives on the increasing use of margin debt by investors.

For a deeper look at WorldCom, the Internet era’s largest financing and subsequent bankruptcy, read a 2002 Wall Street Journal interview: ‘Gensler Says Telecom Stocks Still Have Tough Times Ahead’. It’s actually about Gary’s identical twin brother, Robert Gensler, then a star telecom portfolio manager at T. Rowe Price.

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Washington has woken up to the importance of AI — and especially to the “AI race” against China. While artificial intelligence is a potentially transformative general-purpose technology, it’s hardly the only technology, though, that matters. Power in the 21^st century also depends on drones, biotechnology and quantum computing – and on manufacturing as much as invention.

Read Simon Johnson’s and Elisabeth Reynolds’ Weekend Essay ‘How the US Could ‘Win AI’ But Lose the Tech Race’ at Bloomberg or download it below:

'How The Us Could 'win AI' But Lose The Tech Race', Johnson & Reynolds, Bloomberg Weekend Essay, 6.18.26

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The original space race was between the US and the Soviet Union; and for a long time (1960s-1980s) the Soviet Union launched the most rockets. By the early 2000s, the US and Europe ran at roughly the same pace in terms of the number of launches and payload (satellites) put into orbit. Now the US is far ahead of everyone, but China is coming up fast.

The sustained American success is not only the result of cumulative investments by NASA, but a concerted effort to have the private sector take the lead in the launch business. Also the European Union appears to have (arguably) underinvested in this activity. The US now has a lot more satellites than everyone else combined.

Does this confer a lasting advantage either on the US as a nation or on particular companies, such as SpaceX? The answer depends presumably on how other countries (and companies) respond – as well as whether Low Earth Orbit and Radio Spectrum Allocation can accommodate a lot more satellites. (Watch out for the Kessler Syndrome!)

How much of a broader innovation edge results from leading the way into space? There were great hopes for this in the 1960s — but then there were questions whether the evidence that the “space program helps economic development” was compelling. (Simon and Jonathan Gruber discuss this experience in Jump-Starting America.)

With SpaceX becoming so dominant in launch and low earth orbit communications, has the US political economy changed and even created the modern equivalent of an East India Company (as argued by Alessio Terzi and Stefano Marcuzzi)? Will this undermine the US process of creative destruction (as emphasized as a problem for Europe by Philippe Aghion, winner of the 2025 Nobel Prize in Economics).

Some additional reading:

This useful paper on the history of commerce in space: “Evolution of the Space Economy: Government Space to Commercial Space and New Space,” by Walter Peeters. Or read this Federal Aviation Administration 2023 short excerpt ‘Origins of the Commercial Space Industry’.

A comprehensive Report on the Space Economy, by the European Space Agency, covers 2023 and 2024.

A concise analysis of the current SpaceX situation and valuation, “Is Elon Musk’s SpaceX Really Worth $1.75 trillion?” by John Cassidy of the New Yorker.

Other resources we found useful include: Orbital Radar, and Jonathan’s Space Report (lots of raw data!)

And here is a link to Arthur C. Clarke’s 1945 proposal for Geostationary Satellite Communications. As for Howard Hughes, read this short bio ‘The Life and Legacy of Howard Hughes: Aviator, Filmmaker, and Billionaire’ or tune in to watch Leonardo DiCaprio’s portray Hughes in Martin Scorsese’s ‘The Aviator’.

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Watch here: ‘Gensler Flags Risks in SpaceX Debut’ 8:48

Gary says SpaceX’s record setting IPO is part of a new era of Mega-IPOs raising questions of valuations, governance, and the future of AI. He also highlights the Financial Stability Risks in Artificial Intelligence as well as the legal fights over prediction markets.

Join Gary & Simon on June 15 for their upcoming Episode 16: The Business of Space.

Later, in Episode 17 they’ll explore what the new era of AI Mega IPOs – SpaceX, followed possibly by Anthropic & OpenAI – means to the markets, AI development, the US, and you.

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CNBC ‘Squawk Box’ Interview on Regulating Sports Betting 10:14

Read Bloomberg’s ‘Gary Gensler Says Kalshi Is Flat Wrong: Sports Bets Aren’t Swaps’

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.

The case boils down to the question of what, if anything, Congress did in 2010’s Dodd-Frank financial reform with regard to sports betting. Kalshi contends that Congress made the CFTC a nationwide sports betting regulator and denied states their traditional police power to regulate gaming, including sports betting.

The answer—from someone who was there—is that Congress did nothing of the sort.

Also John Lothian’s posted ‘Gary Gensler has now Weighed in Directly on Prediction Market Debate’ with this fun AI generated image:

Gensler Amicus 6th Circuit 6

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

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Cuba has played an outsize role in American politics over the past 65 years, including: the Bay of Pigs (April 1961), the Cuban missile crisis (October 1962), the 1996 Helms-Burton Act, Elián González (1999), the partial thaw under President Obama, and that thaw being undone by the first Trump Administration.

What should we make of the current confrontation, including the message sent in Spanish by Secretary of State Marco Rubio on May 20, 2026 regarding “a new relationship between the U.S. and Cuba?'“

Will the US invade Cuba? Might the Cuban economy soon be crushed by the tightening trade embargo, including the severe limits on imported oil? Or could there be an amicable pathway towards economic reform and liberalization?

From the American perspective, is this more about a long legacy of messaging (Remember the Maine!) or the Donroe doctrine or electoral politics in Florida (and Republican primaries)? Is there any geopolitical rationale for wanting to overthrow the Cuban regime? If the US does exercise effective control over Cuban politics, and evicts military-backed GAESA from its leading role, will Washington provide generous aid or other means for Cuba to get back on its feet?

There is some macroeconomic information on Cuba available through the World Bank, but we would strongly caution against taking this at face value. Cuba withdrew from the International Monetary Fund in 1964; consequently, without IMF quality control, these data likely are inaccurate and perhaps misleading. Cuba is in deep economic and humanitarian crisis.

Here are a couple of classic articles for your consideration:

‘Cuba Refrozen’, by David Rieff, Foreign Affairs, July 1, 1996.

‘Farewell, Fidel’, by Michael J. Bustamante, Foreign Affairs, November 27, 2016.

And for summary assessments:

‘What’s Next for Cuba?’ A Project Syndicate roundtable, March 26, 2026.

‘Cuba on the Brink’, by Michael J. Bustamante, Foreign Affairs, Jan 1, 2026.

Along with some other recent articles representing a range of views:

‘Pentagon puts building blocks in place for Cuba invasion’, Paul McCleary, Politico, April 27, 2026.

‘Cuba’s Only Choice: A Deal with Washington is the Island’s Best Hope’ by Michael J. Bustamante and Ricardo Herrero, Foreign Affairs, May 29, 2026.

‘Attacking Cuba would be a huge mistake’, The Economist, April 27, 2026.

‘Ada Ferrer on Cuba: What Threat Can a Declining Cuba Be?’ Weekend Interview, Bloomberg, April 29, 2026

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Gary Gensler discusses Artificial Intelligence and the current Mega-IPO boom as SpaceX, Anthropic, and OpenAI all seek to go public. With U.S. AI infrastructure capital expenditures tripling in just two years to an estimated to be $750 billion this year — these firms will need to find sustainable revenue models to warrant these AI investments and their own targeted valuations.

Watch Bloomberg’s full interview here: ‘Fmr. SEC Chair: Giants Like SpaceX Need to Find Revenue Model’

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Over the past decade, there has been increasing debate over whether and how the US can or should use industrial policy – meaning policies that benefit particular sectors (or even specific firms). Over the past 250 years, the US has often said “we don’t do industrial policy”, but – arguably – the US has used industrial policy in every decade of its history. The question now is: what version will maintain political support? Everyone wants to strengthen national security and economic resiliency, but how much efficiency or fiscal resources is the US willing to sacrifice? How much are we willing to pay to promote sectors that we regard as strategically important?

On the history of American thinking underlying industrial policy, take a look at Ganesh Sitaraman’s essay, from September 2020 including this from Ganesh:

“The reality is that industrial policy is not limited to active planning or strategy … Tax breaks for specific industries, sectoral deregulation, tariff reductions, and global standards-setting can all have precisely the same effects.”

Alexander Hamilton’s contributed to the debate is his famous 1791 “Report on the Subject of Manufactures.” James Madison’s case for national infrastructure can be found in his ask to Congress for “internal improvements” in 1815. For Benjamin Franklin’s personal contributions to science, see this Franklin Institute material.

A more modern perspective on economic development-through-investment-in-science is best represented by Vannevar Bush’s Science: The Endless Frontier, published in 1945. In 2019, Simon and Jonathan Gruber published Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream, recommending a big expansion of science – commercializing more ideas, building the ensuing businesses as much as possible in the US, and creating more good jobs for Americans. The experience with Sputnik is discussed in their Chapter 2.

For a look at industrial policy around the globe take a look at this recent World Bank report ‘Overview, Industrial Policy for Development’. In the podcast, we refer to a recent publication from MIT: Priority Technologies: Ensuring US Security and Shared Prosperity, edited by Elisabeth Reynolds. This includes material on critical minerals, semiconductors, drones, biomanufacturing, and advanced manufacturing. (Simon wrote the foreword.)

To understand the views of two of President Biden’s then most influential advisors on industrial policies read Brian Deese’s ‘Executing a Modern American Industrial Strategy’ and Jake Sullivan’s ‘Renewing American Economic Leadership’. To keep up on industrial policy discussions, as Gary mentions in the podcast, subscribe to the substack of Mike Schmidt, Todd Fisher, and Sara Meyers, ‘Factory Settings’.

Does China have an industrial policy? Most people would say: definitely, yes. If this assessment is correct, can the US afford not to have a matching policy, at least to some extent?

“The Malaise Speech” was President Jimmy Carter’s address to the nation on Energy and National Goals, broadcast July 15, 1979. As Gary mentions, this led to the rise and fall of the U.S. Synthetic Fuels Corporation. Energy policy, though, has remained important in shaping opportunities – for example, see this recent report on the development of the shale oil and gas sector.

We also mention Mariana Mazzucato’s famous Ted Talk, and Graham Allison’s even more famous idea the “Thucydides Trap”.

For the case against what they define as industrial policy, the Cato Institute has been consistent over the decades, including: in 2021, Questioning Industrial Policy; and at least as far back as 1984, with The Case Against “Industrial Policy”. Relevant also is Anne Krueger’s famous warning about the rise of a “rent-seeking society.”

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Gary Gensler discusses with Jessica Dean that it was never the intention of Congress in 2010 when passing post Great Financial Crisis Dodd-Frank reforms to cover sports betting or give the Commodity Futures Trading Commission, which he then chaired, authority as the national gaming authority. Gary shares that the then Senate Majority Leader, Harry Reid of Nevada, ‘would have thrown us out of his office if we had asked for such authority.’

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

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Former CFTC Chair Gary Gensler discusses the President’s call for the Commodity Futures Trading Commission to have exclusive authority over prediction markets’ sports contracts.

CNBC ‘Squawk on the Street’ full interview with former CFTC Chair Gensler 11:26

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When we started researching and teaching about AI in the late 2010s, there were policy debates about AI ethics or what later came to be called “responsible AI.” In those years, as machine learning was increasingly used in decisions about who gets opportunities in our economy — e.g., consumer loans, entry to college, employment, healthcare, or insurance — responsible AI was mostly about the accuracy, bias, and explainability of the algorithms. Given AI’s insatiable use of data there also were concerns about data privacy and surveillance.

As AI capabilities have increased since the release of ChatGPT in late 2022, public expectations — and unease — have expanded, leading to broader definitions of what “responsible” AI might mean moving forward. There is now growing concern about deepfakes and intimate imagery, as well as about AI’s impact on mental health, on children, and education more broadly. The impact on jobs also looms large.

The public also is increasingly concerned about the business models of AI companies, including the boom in data center investment, effects on electricity prices, and the potential for AI agents to run amok. While numerous U.S. states have enacted AI related laws, many in the AI industry have resisted the imposition of meaningful federal legal safeguards, but public opinion may now be shifting. Further, companies using the preview of Anthropic Claude Mythos coding model have uncovered thousands of bugs in their own software — highlighting the real risks of threat actors using AI to disrupt critical parts of our economy.

What is the right public policy response? How is it best to both promote the public good and innovation? Are there ways to steer AI development in a better direction? What exactly would that involve? And how does the technology race with China play into these considerations?

Gary has written and spoken extensively about a wide range of analytical, business, and public policy issues in the context of AI. Here are some of his most relevant items (listed in reverse chronological order by medium):

Podcasts

‘On AI in Finance’, EconoFact podcast with Micheal Klein, May 3, 2026

‘Episode Seven: Artificial Intelligence’, Power and Consequences podcast with Simon, April 14, 2026 (i.e., part of our podcast series, within which we expect to have many discussions of AI).

‘Trump, Trade, and AI Growth’, VoxTalks Economics podcast, January 2026

Writings

‘Artificial Intelligence Development and Policy Landscape’, December 2025, published as part of our co-edited CEPR volume, The Economic Consequences of the Second Trump Administration.

‘AI, Finance, Movies, and the Law’, Yale Law School Remarks, February 13, 2024

‘Isaac Newton to AI’, National Press Club Remarks, July 17, 2023

‘Deep Learning and Financial Stability’, with Lily Bailey, November 2020, which might seem like a long time ago but still has quite a bit of relevance.

Short Videos (3 -4 minutes each), when Gary was Chair of the Securities and Exchange Commission: part of Office Hours with Gary Gensler. Released February-October 2024.

AI, Investors, Issuers, & the Markets

Systemic Risk in Artificial Intelligence

Fraud and Deception in Artificial Intelligence

Conflicts of Interest in Artificial Intelligence

AI Washing

Simon also has written about AI, for example in Power and Progress: Our 1,000 Year Struggle Over Technology and Prosperity, with Daron Acemoglu, which attempts to put this latest technological transformation in broad historical context (actually more than 1000 years!). The mini-comic version of this book, which emphasizes the issues through the lens of what AI may bring, is available for free via the MIT Stone Center for Inequality and Shaping the Future of Work.

And here is a link to Geoffrey Hinton’s Nobel banquet speech from December 2024 discussed in this podcast. It is chilling. Everyone should read it.

Note: In this episode we don’t focus on the key issue of how AI will impact jobs. We covered this in part of episode seven of Power and Consequences (linked above), and plan to pick this topic up in a further episode (or more than one!) soon.

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When he steps into his new role, Mr. Warsh and the Federal Reserve will face a high dose of significant economic uncertainties: the Iran War supply shock; the Artificial Intelligence infrastructure investment demand shock; and continuing uncertainties related to tariffs, declining net migration, and the precise extent of fiscal stimulus from last year’s tax bill. Regarding AI, Mr. Warsh recently wrote that it may lower prices (or slow inflation) and could create the space for interest rate cuts. Former senior officials Jared Bernstein and Janet Yellen (both Democrats) caution that AI currently is driving an investment boom, tending (all other things being equal) to create inflationary pressure. The difficulties surrounding the reopening of the Strait of Hormuz also means that energy prices are likely to stay higher for longer.

Adding to these substantive economic debates, Mr. Warsh faces the challenge of maintaining Federal Reserve independence. Mr. Warsh may reasonably be considered to have been somewhat of a hawk historically, i.e., someone who puts relatively more weight on controlling inflation. But how will he square these views with the position, stated many times, by President Trump that interest rates – short-term and longer-term – should be significantly lower, and that the Fed Chair should make this happen?

Mr. Warsh also has expressed his share of criticisms of Fed policy in recent years. Though he supported extraordinary measures by the Federal Reserve in the immediate aftermath of the 2008 Financial Crisis, by 2010 then Governor Warsh was of the opinion that “expanding the Fed’s balance sheet is not a free option.” He supported strong action by the Fed in support of the economy when COVID arrived, but subsequently argued against the expansion of quantitative easing and spoke out in favor of tighter Fed policy in 2021-22.

The long-standing views of incoming Chairman Warsh on the Fed are clearly articulated in an April 2025 speech to the G30, available through the Hoover Institution. This includes the position that, "The Fed has acted more as a general-purpose agency of government than a narrow central bank."

Mr. Warsh is strongly not in favor of the current size of the Fed’s balance sheet and what this implies for the operation of monetary policy. As we discuss in the podcast, trimming the size of the Fed’s balance sheet, while it bears consideration, is likely to put upward pressure on long-term interest rates, the key benchmark for mortgages.

Shrinking the Fed’s balance sheet may also face resistance from other Fed Governors. For one such view, see this speech last week by Fed Governor Michael Barr. If this is not enough Fed speeches for you, try this speech by Chairman Jay Powell and this speech by Governor Christopher J. Waller!

We covered the basics of central banking in Episode Two: The Federal Reserve and Monetary Policy which includes an accompanying newsletter with links to reading that can help you dig deeper into particular issues.

In 2010, Simon and James Kwak published 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, arguing that deregulation played a key role in encouraging risk-taking and overleveraged bets placed by big banks in the run-up to the 2008 crisis. The subsequent Dodd-Frank financial reforms made the financial system safer on multiple dimensions. More recently, however, the Federal Reserve has proposed updated rules that might allow banks to carry more debt relative to loss-absorbing equity buffers. For more on this, see Simon’s testimony to the House Financial Services Committee in December 2025. (Simon is co-chair of the CFA Institute Systemic Risk Council, a group of former officials and financial market participants that focuses a great deal on the direction of regulation for big banks in the U.S.)

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We are happy to share additional content here on central banking, as suggested by Eileen Tipoe and her colleagues at Core Econ (Curriculum in Open-access Resources in Economics) a UK non-profit distributing educational/textbook materials for free. (Simon is on the board.)

· CORE Insight ‘Too big to fail’ explores the global financial crisis and subsequent reforms aimed to address the problems that arise when banks become too big to be allowed to fail.

· CORE Insight ‘Financing American government’ Sections 4-7 explain how the Federal Reserve conducts monetary policy; Sections 1-3 focus on the Treasury and government borrowing.

· The Economy 2.0, Unit 5.9: ‘Monetary policy and inflation targeting’ discusses central bank independence and why it is crucial for inflation targeting.

· The Economy 2.0, Unit 8: ‘Economic dynamics: Financial and environmental crises’ Sections 8.4-8.8 discuss the US housing price bubble; Sections 8.9-8.10 discuss financial system instability and the role of central banks.