Key facts
- Kansas City Fed President Jeff Schmid highlighted the need to monitor the financial situation surrounding the buildout of the artificial intelligence sector.
- Schmid expressed concern that the scale of AI development could lead to systemic problems.
- He questioned whether the AI industry is evolving into a 'too big to fail' entity.
Kansas City Federal Reserve Bank President Jeff Schmid indicated that the financial implications of the expanding artificial intelligence sector require close monitoring. Speaking at a conference, Schmid suggested that the sheer scale of AI development necessitates a comparison to past experiences that have led to systemic financial issues.
He articulated concerns that the AI industry might be heading towards a 'too big to fail' status, a situation that warrants macro-level discussion and attention. Schmid's remarks align with ongoing research by Federal Reserve economists Paul E. Soto, Mason Thieu, and Jeffrey S. Allen, who are developing frameworks to track AI's economic impact using publicly available data. Their work categorizes indicators into capabilities and costs, firm investment and adoption, and productivity and labor, aiming to assess whether AI's economic effects are concentrated in investment-led growth or are beginning to manifest in broader productivity gains and labor market shifts.