Gregory: faster technological progress could sharply raise interest rates and the price of risk

Discussing the effect of AI investment on interest rates, Farrell Gregory said that if technological progress continues at the pace he expects, rates will have to rise substantially. He linked this partly to the “neo-dollar” and partly to his view that the market’s required risk premium does not rise linearly with the risk-free rate.

As an illustration, Gregory suggested that if yields doubled, the rate demanded for risk could rise four- to fivefold. He also said that data-center construction alone could saturate the money supply. These figures and assessments are his hypotheses and forecasts, not established outcomes.