Global Economy Faces Systemic Risks From Debt and AI Bubble

The global economy faces multiple systemic risks in the coming year, primarily driven by unsustainable public finances in the United States and France alongside an AI-driven stock market bubble. The Congressional Budget Office reported that the United States will run budget deficits exceeding 6 percent of GDP under current policies. This fiscal instability has led Asian and European central banks to reduce Treasury holdings due to the perceived weaponization of financial policy, increasing reliance on leveraged hedge funds.

In Europe, France risks a sovereign debt crisis as its debt-to-GDP ratio nears 120 percent. This financial pressure coincides with social unrest and upcoming presidential elections. Meanwhile, the Government Pension Fund of Norway announced plans to sell $80 billion of US Treasury bonds, further signaling a decline in foreign appetite for US debt.

Simultaneously, an AI stock market bubble, characterized by a Warren Buffet indicator of 280 percent, faces potential collapse. This risk is compounded by rising long-term interest rates and the possibility that the United States Congress will implement new regulations on AI companies and slow the construction of data centers. The Federal Reserve System remains tasked with managing the fallout should these economic bubbles burst.