Is Your Money Safe? The AI Bank Run Risk

Michael Zuber (0:01)

All right, are you ready for the latest and greatest AI destruction? If you guys don't know, AI was first going to take 50% of our jobs. Then AI was going to kill us all in three years or less. And now, thanks to the chief economist at Apollo, whose name is Torsten Slock. Somebody who I respect, actually, I think Torsten Slock does an amazing job as an economist. I think he does an amazing job of looking around the corner and seeing what is coming. But he just put out the latest and greatest headline that we're going to talk about, and that is that agentic AI, or AI agents, are going to cause a bank run. Now, some of you hear that and go, what are they talking about? So let me give you the thesis or the story behind why Torsten thinks that AI will cause a bank run. Well, it's actually rather logical. AI once left and focused on maximizing your dollars, will likely interact with your bank account. Now, I personally will never let AI touch my money, but who am I? Maybe I'm just a curmudgeon. Plenty of people are going to connect their bank accounts to AI. And then according to Torsten, what will happen is banks will suffer. If you don't know, banks today are paying a measly, call it 0.1 percent in checking. And according to Torsten Slock, what will happen is AI agents will sweep that money, any money in your account, into a money market account, now earning 3 to 5 percent. Now, that may not sound like a big difference, but when you interact with trillions of dollars, when you use fractional lending, you frankly count on idiots leaving big sums of capital in their checking account and even some of their savings account. And what Torsten Slock is saying is AI agents could cause a bank run by sweeping excess household cash into money market accounts, thus closing a large loophole or a large profit center for banks. Again, paying 0.1 is very different than paying 4 percent. So if AI agents do this in mass, you can guarantee banks' financial statements will look worse. Of course, they are paying 4 percent instead of 0.1. That is a 3.9 percent delta. But when you start doing that on millions and millions and perhaps billions of dollars, that is going to impact your profit and loss. Now, I did have a difficult time leaping to the idea of a bank run. I'm not sure how the masses efficiently using their money will cause a bank run.

A bank run is very much like Silicon Valley Bank. Remember Silicon Valley Bank when all of these tech executives thought their money was bad and then they moved their money somewhere else? That's a bank run. As I recall, Silicon Valley Bank lost like a quarter of a billion dollars, or no, a quarter of a trillion, I don't know, it was a big-ass number, in like 36 hours. That's a bank run. I don't know how moving low interest to high interest causes a bank run, but maybe there's some subtle calculations underneath. Maybe money market accounts are not counted in leverage ratios. I don't know. But yeah, it is funny to see that AI is going to cause all of this destruction. Again, we heard from AI executive that 50% of us will be unemployed. Couple months later, it's going to kill us all. Now, it's going to destroy our financial institutions. I mean, can we start getting some good headlines? Like, can AI cure cancer? Can AI cure baldness? I don't know. Can we find something good to say? It's just all negative all the time. It's kind of crazy. All right. What else is going on? Well, it is a big, big week for the markets. We actually have two numbers this week that will drastically impact October's Fed rate decision. In fact, it is my belief that by Friday morning, let's call it 6 a.m. Pacific, 9 a.m. Eastern, we will know with 99% certainty if an October rate increase is coming. All right, so what are the numbers? Well, first comes out Wednesday. It is PCE. It is obviously at least the current Fed's most important inflation metric. I do believe Kevin Warsh will change that in January, but hey, we still got a couple of months left with PCE core. And right now, the expectations are for PCE, aka inflation, to tick down on a year over year basis. Headline is supposed to go from 37 to 36 Core is supposed to go from 33 to 32

So, if those expectations are not met, you are going to have a very hard time convincing me that an October rate decision isn't locked in.