The Fed Chairman thinks expensive electricity and data centers justify higher prices at the pump. AI will fix inflation later. Trust the process.
Warsh inherited an economy where energy costs are climbing and tech companies are lighting billions on fire to teach computers how to write mediocre emails. His solution: wait it out. Inflation today buys deflation tomorrow, assuming the robots work. If they don't, you still paid six bucks for eggs while Microsoft built another server farm in Iowa.
The devotees love this. They've convinced themselves that short-term price pain is investment in a future where AI makes everything cheaper. Never mind that the AI capex binge is the thing driving energy prices up right now. Causality takes a back seat when you're this committed to the narrative.
Retail traders are already pricing in the deflationary utopia. They bought Nvidia at the top and tech stocks on margin because someone on Twitter said AI would solve supply chains. Now they're holding bags while the Fed waits for ChatGPT to optimize shipping routes. The bags are heavy. The routes remain unoptimized.
Warsh is in a tough spot only if you believe central bankers care about looking stupid. They don't. They'll sit through Congressional hearings, nod at charts, and explain that transitory meant something different this time. The price of gas doesn't matter when you have a driver.
The real joke is that AI suppressing inflation requires AI to actually work at scale. It has to reduce costs faster than the infrastructure to build it raises them. So far, the infrastructure is winning. Energy companies are thrilled. Tech CEOs are thrilled. Your Visa statement is not thrilled.
Warsh will be fine either way. If AI saves the economy, he's a visionary. If it doesn't, he's retired before the bill comes due. Retail eats the spread on both outcomes.
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