According to The Smart Ape, the mass displacement of white-collar workers could trigger a cascading economic collapse comparable in scale to the 2008 crisis, writes forklog.com.
Office workers are the backbone of the credit system
In the blogger’s view, banks make loans not to people but to “income trajectories.” A lawyer with a $200,000 salary, a consultant with $180,000, an engineer with $160,000 – these are top-tier borrowers for banks. If AI replaces their jobs, an entire class on which the credit system relies will disappear.
The author describes a chain of consequences: job loss – spending down savings – selling stocks to pay off mortgages. If millions of formerly highly paid professionals start doing this at the same time, the stock market will sag, and in 6-12 months there will be massive mortgage defaults.
The housing market is more vulnerable than in 2008
The Smart Ape points to a key difference from the 2008 crisis: then the blow came to the periphery of the credit system – subprime borrowers. Now the most reliable categories will be hit.
“U.S. mortgage debt rose to $12.5 trillion versus $10.5 trillion in 2008 – only 20% nominally, even though home prices have nearly tripled in that time. Home equity is concentrated among boomers, while younger homeowners remain heavily leveraged.
Additional pressure is created by the lock-in effect: millions of Americans took out mortgages at 3% during the pandemic and are not ready to sell homes at current rates around 7%. This reduces the liquidity of the market. If forced sales begin, prices could fall faster than fundamentally justified levels,” according to The Smart Ape.
The Fed’s dilemma and the failure of redistribution
The author believes that there is no good way out for the Fed. Two scenarios are possible:
– Turn on the printing press again and bail out the banks, as during the 2008 crisis. However, the effects of the recent spike in inflation are still being felt: food, rent and fuel prices remain high, and global central banks are increasingly betting on gold instead of the dollar.
– Stay out of it and let banks handle defaults on their own. But this threatens to repeat the events of September 2008, when the financial system began to rapidly lose stability.
The blogger emphasizes that since the 1980s, productivity growth has not translated into higher wages – capital has taken the benefit. AI, he says, triggers the same dynamic “without brakes.” Value will be concentrated in a few companies – NVIDIA, Microsoft, Google, Anthropic, OpenAI – and a thin layer of engineers around them.
Why DBB won’t save the day
The most popular answer – unconditional basic income (UBI) – the author calls unrealistic. A modest $1,000 a month for American adults would cost the budget $3-4 trillion annually – about two-thirds of all tax revenues. The program would have to be funded by taxes on the very companies that have “the best lobbyists and the most aggressive offshore schemes.”
The real policy program, according to The Smart Ape, will be reduced to unemployment insurance and retraining programs for occupations that will also be gone.
K-final
The outcome, according to the author, will be a K-shaped economy. At the top – owners of capital and AI-engineers, at the bottom – former “white-collar” workers who join the ranks of manual labor and gig-economy workers. There is no middle class in the former sense.
“Suleiman could be wrong about 18 months. Even if he misses by five years, the direction is set. The people who come out ahead are those who create the AI that replaces the rest of us. Learn the tools, get close to the people who are building them, figure out how it works. Waiting won’t save you,” concludes The Smart Ape.
