Plutonomy--the AI Edition--and the Coming Crisis

Yeva Nersisyan and L. Randall Wray

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper examines the rise of the plutonomy--an economy dominated by the new plutocrats--and compares it with the Gilded Age of the 1920s. We show how John Kenneth Galbraith’s analysis in his classic, The Great Crash, offers insights into our current predicament. The financing used by the investment trusts that pumped up the stock market then looks eerily similar to the circular finance used by today's tech firms that dominate the equity market today. The assets held by those trusts were the stocks and debts of other trusts--just as our tech firms owe and own each other today. That ensures that when liquidation of positions begins, a Fisher-type debt deflation dynamic will take hold. Furthermore, just as the economy of the late 1920s relied on the spending of the rich, today's record level of inequality means that the economy must rely excessively on the investment spending of the Magnificent Seven and consumption spending of the millionaires, billionaires, and trillionaires minted by the boom of their share prices. Galbraith explained how FDR’s New Deal reconstructed the economy so that its growth relied on mass consumption supported by greater income equality, by reigning-in finance, and by creating a bigger role for government. We warn that government is ill-prepared to deal with the coming financial crisis and we offer alternatives to the strategy adopted to deal with the Global Financial Crisis.

Keywords: The Great Crash; Plutonomy; Artificial Intelligence; Magnificent Seven; financial crisis; Minsky; Money Manager Capitalism (search for similar items in EconPapers)
JEL-codes: B15 B25 B26 B52 E12 E32 E44 E62 (search for similar items in EconPapers)
Date: 2026-07
New Economics Papers: this item is included in nep-fdg and nep-his
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