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2026-02-18 20:09:42
[The AI Productivity Myth Faces Historical Judgment: The Greenspan Rate Hike of the 1990s] ⑴ After a nearly 30-basis-point plunge over nine trading days, US Treasury yields rebounded slightly on Wednesday. The market had priced in almost three rate cuts by 2026, an extreme expectation partly stemming from a new narrative: artificial intelligence will be a "disruptor" of the labor market, while simultaneously ushering in a wave of prosperity. ⑵ In her speech on Tuesday, San Francisco Fed President Daly reiterated the technological productivity miracle of the Greenspan era. She suggested that just as the information technology revolution of the 1990s allowed the Fed to remain patient and usher in prosperity, the current AI revolution may also be worth waiting for. However, historical records offer a different answer. ⑶ Harvard professor and former chairman of Obama's Council of Economic Advisers, Furman, wrote in the Financial Times that while Greenspan did recognize accelerating productivity earlier than most, the legend here is distorted. Just one month after his speech, the Fed raised interest rates by 25 basis points, and inflation began to rise steadily. Furman warned that productivity gains were pushing up the neutral interest rate, and central banks must maintain higher nominal interest rates to prevent inflation. (4) Turning our attention to the present, Furman argues that there is a key difference between the current situation and the 1990s: US productivity growth over the past year was only 1.9%, far below the 3.9% growth before Greenspan's speech in 1999. More dangerously, excessively high expectations for AI have driven up demand and asset prices, while inflation remains close to 3%. If the optimistic scenario materializes, the real lesson Warsh learned from the 1990s shouldn't be that the Fed should remain on hold, but rather that it may need to raise interest rates again. Tactically, it is recommended to establish short positions around the 10-year yield of 4.09% and the 2-year yield of 3.41%.
