AI: False Savior of a Hollowed-Out Economy

August 27, 2025

What nobody seems to notice is all the incentives for deploying AI are perverse.

The real story of the US economy isn't about AI, it's about an economy that's run out of rope. AI is being hyped not just by promoters reaping billions of dollars in stock market gains, it's being hyped by the entire status quo because it's understood to be the last chance of saving an economy doomed by the consequences of decades of artifice.

The real story of the US economy is that decades of "financial innovations" finally caught up with us in 2008, when the subprime mortgage scam--a classic example of "financial innovations" being the cover story for greed and fraud running amok--pulled a block from the global financial Jenga Tower that nearly collapsed the entire rickety, rotten structure.

Our political leadership had a choice: clean house or save the scam. They chose to save the scam, and that required not just institutionalizing moral hazard (transferring the risks of fraud and leveraged speculation from the gamblers to the public / Federal Reserve) but pursuing policies--zero interest rate policy (ZIRP), quantitative easing, increasing the money supply, and so on--that had only one possible outcome:

An economy permanently dependent on inflating asset-bubbles that enriched the top 10% while the bottom 90% who depend on earned income fell behind.

The desired goal of permanent asset-bubbles is the "wealth effect," the cover story for transferring all the gains into the hands of the top 10%, who can then go on a spending spree which 'trickles down" to the bottom 90%, who are now a neofeudal class of workers serving the top 10% who account for 50% of all consumer spending and collect 90% of the unearned income and capital gains.

This arrangement is inherently unstable, as "financial innovations" suffer from diminishing returns. Eventually the debt-serfs can no longer borrow more or service the debt they already have, and every bubble being bigger than the previous bubble guarantees the next implosion will be larger and more devastating than the previous bubble-pop.

So what does a system that's run out of rope do? Seek a savior. The rope has frayed, and the rocks are far below. The impact is going to be life-changing, and not for the better.

The choice remains: clean house, end the bubble-dependent frauds and scams, or find a way to inflate yet another credit-asset bubble. Clean house and lose all our bubble-wealth? You're joking. The solution is to blow an even bigger bubble. Hey, it's worked great for 17 years.

Never mind that the precarity of the bottom 90% is accelerating as both the state and Corporate America have offloaded risks onto households and workers; they have OnlyFans, 24% interest credit cards, zero-day-expiration options and side hustles to get by. Never mind that for many Americans, basic services are on the same level as impoverished developing-world economies. What matters is maintaining the wealth of the few at the expense of the many, by any means available.

Enter the savior of our asset-bubble-dependent elites: AI. AI is going to change the world, we'll all be watched over by machines of loving grace, profits and capital gains will be in the trillions of dollars, yowza, because we'll fire half of you and give you enough Universal Basic Income (UBI) to scrape by, and some of you can join our security teams protecting us from the impoverished rabble.

There's just one teeny little problem: AI is a false savior. It doesn't work as advertised, it has multiple inherent limits that can't be overcome by scaling up processors, and the dystopian consequences of even this first wave are already uncontrollably destructive:

AI psychosis and addiction to AI chatbots is making users even lonelier and more isolated than they were before embracing AI, AI Slop is overwhelming legitimate content, AI agents are just good enough to degrade already pathetically deficient corporate services, LLM models are Swiss-cheese security risks, and 95% of all corporate AI projects founder.

What nobody seems to notice is all the incentives for deploying AI are perverse. Those seeking nickels from Big Tech platform engagement / views win big by flooding the web with AI slop, scammers and fraudsters now have much more powerful tools to deceive and defraud (deepfake videos and voiceovers), and rather than watch over us with loving grace, the AI systems are scraping their own inaccuracies and hallucinations and deceptively presenting this slop as accurate.

The status quo is counting on AI to be the savior of a hollowed-out economy, but it's a false savior. The frenzy has inflated another credit-asset bubble as planned, but another bubble that enriches the few isn't going to fix what's broken. Rather, unleashing AI tools in a system of perverse incentives is accelerating the decay and collapse of the entire system by replacing authentic value with illusions of value--what I call Ultra-Processed Life.

I hate to be the bearer of unwelcome news, but enriching the few at the expense of the many is the problem, not the solution. So the AI bubble mints more billionaires, well that's swell, but the process of inflating bubbles that enrich the few is what's destabilizing our economy and society.

This chart presents the consequences of 17 years of bubble-inflation "wealth effect": wealth for the few and "effects" for the many:



Asset bubbles have been good to the top .01%:



And it's been good for the top 10%, too: $107 trillion in net worth, and of course, "I earned every penny of it." The bottom 50% with $4 trillion--well, better launch your OnlyFans site, even though there are already millions of other desperate people hoping to scrape up a few bucks by selling themselves online.



Contrary to the hype, AI isn't the savior of the bubble economy--it's the hype-heavy straw that breaks it for good.

Before we bow down and worship a false savior, it's probably a good idea to learn about the limits of our AI savior and the self-serving hype, and the banquet of consequences being laid for true believers.

MIT report: 95% of generative AI pilots at companies are failing

LLMs + Coding Agents = Security Nightmare

AI Is a Mass-Delusion Event

The potential of generative AI for personalized persuasion at scale

What If A.I. Doesn't Get Much Better Than This?

The Real Demon Inside ChatGPT

ChatGPT May Be Eroding Critical Thinking Skills, According to a New MIT Study

AI Industry Nervous About Small Detail: They're Not Making Any Real Money

Which jobs can be replaced with AI? Jobs that have already be degraded to the point of uselessness.

I've written 17 essays on AI this year: here are four:

AI: Over-Promise + Under-Perform = Disillusionment and Blowback

Maybe AI Isn't Going to Replace You at Work After All

Good News! AI Can Do More BS Work

AI Is a Mirror in Which We See Our Own Reflection


Check out my new book Ultra-Processed Life and my updated Books and Films.

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