As far as the size of the bailout: for comparison, Moodys put the size of the fiscal stimulus in response to the Great Recession at 7% of GDP. For comparison, the current GDP is $32.56 trillion, so assuming a comparable response to the AI Depression, that’s about $2.27 trillion.

Now where this gets interesting (in the way a bizarre accident is interesting) is that deficit spending is already at ~5.7% of GDP; it was sitting at 1.1% right before the Great Recession. Add in that bailout, we’d be looking somewhere in the neighborhood of deficit spending being 12-13% of GDP, which in the last century has only been hit during WWII and the COVID shock. Note I’m not playing deficit hawk here; the deficit would be an indication of the economic collapse, not a cause.

However, I think it could be worse this time around. The Great Recession had a lot of knock-on effects due to the way the debt was secured, but there were sectors that had pathways to growth (ironically, tech). This time around, everything that isn’t AI has been anemic, we really are in an all eggs in one basket scenario. The collapse of that GDP juicer means GDP falls extensively which makes the deficit spending as a percentage of GDP even greater. On top of that, the rise of BRICS and some internationally clearings done with yuan has brought up the specter of the end of the dollar as the international reserve currency. If the AI collapse plus the fallout from the Iran War accelerates that, that’s going to make the bonds needed for that deficit spending way more fraught as the US won’t have that monopoly over international trade anymore.

TL;DR buckle up.