AI & Inflation: Global Economy's Two Faces

Hello everyone, and welcome back to 'The beginning of empathy'! I'm your Empathy Keeper, and today, we're going to embark on a fascinating journey through the global economy, exploring its intriguing dual nature as revealed by news from 24 nations over the past day. On one side, we witness the dazzling progress of Artificial Intelligence, or AI, opening up new horizons. Yet, on the other, shadows of inflation and societal conflicts loom large. How can we find common ground and understand the differences amidst these contrasting currents? Let's dive into some deep insights together.

The Bright and Dark Sides of AI:
AI technology is no longer just a futuristic concept; it has firmly established itself as a powerful engine for current economic growth. China's e-commerce giant, Alibaba, recently captured market attention by announcing accelerated growth in its AI-powered cloud computing division, with AI-related revenue soaring by triple digits. This success story presents a compelling business model where AI technology translates directly into substantial profits, leading to a significant surge in Alibaba's stock prices on both the US and Hong Kong exchanges. Alibaba's case clearly demonstrates that AI is a pivotal factor in maximizing efficiency across industries and creating entirely new markets.

However, every technological revolution has its shadows. From Japan, we heard the shocking news that Alt, an AI development company, was delisted from the Tokyo Stock Exchange's Growth Market due to accounting fraud. The revelation of revenue overstatements, reaching up to 90%, has sounded an alarm about transparency and ethical issues that can arise amidst the rapid growth of the AI industry. This incident underscores the need for empathetic consideration regarding how we manage AI's potential and guide its development within a transparent and ethical framework.

The Shadow of Inflation:
Globally, inflationary pressures continue to persist, placing a significant burden on both households and businesses. In the United States, core Personal Consumption Expenditures, or PCE, inflation rose to 2.9% in July, marking its highest level since February. This increase, coupled with analyses suggesting that President Donald Trump's tariff policies are influencing inflation, raises concerns about price stability, even as the Federal Reserve's September interest rate cut remains a possibility.

Across the Atlantic, a UK think tank proposed a windfall tax on banks' excess profits, suggesting it could generate £8 billion annually. This proposal led to a decline in bank stock prices. In Spain, an unusual event occurred on August 28th, with electricity prices plummeting by 38.84%. However, given that electricity prices typically rise during high summer demand, this might be a temporary anomaly. In Korea, gold prices have been on an upward trend, influenced by President Donald Trump's attempts to assert control over the Federal Reserve and expectations of interest rate cuts. Meanwhile, in Australia, Westpac Bank became the first major bank to offer interest rates below 5% by cutting its fixed rates by 0.7 percentage points, a move expected to spark market competition. These developments illustrate the diverse monetary and fiscal policies countries are implementing to combat inflationary pressures.

Survival Strategies for Consumers and Businesses:
Rising prices directly impact consumer spending patterns and corporate strategies. In Korea, economic YouTuber Shuka's experiment of selling '990 won salt bread' in Seongsu-dong highlighted both consumer sensitivity to bread price inflation and the struggles faced by independent bakery owners. This vividly demonstrated the public's acute reaction to rising costs. In the UK, fashion retailer Ssense filed for bankruptcy protection due to tariffs and a liquidity crisis. This case exemplifies how tariff policies, such as the Trump administration's 'elimination of de minimis thresholds' for small value imports, can pose a significant threat to the survival of global businesses.

Changes and Conflicts in the Labor Market:
The evolving labor landscape and the conflicts it engenders are also global commonalities. In Belgium, a union of autonomous railway drivers announced a strike, which was subsequently rejected by HR Rail, leading to a legal dispute. With over 20 days of strikes this year alone, workers' demands for their rights are growing increasingly vocal. In Australia, ANZ Bank threatened to cut 'variable pay' for remote workers who spend less than 50% of their time in the office. This highlights the tension between corporate pressure for productivity enhancement and employees' demands for flexible work arrangements.

Restructuring Infrastructure and Public Services:
Nations worldwide are adapting their infrastructure and public services to meet societal changes. In Japan, Lawson convenience stores are taking on a new role for 'shopping vulnerable' populations by opening 10-20% of their new outlets in depopulated areas, presenting a novel public service model for an aging society. Spain's national railway, Renfe, is replacing its low-cost Avlo service with the standard AVE service, demonstrating efforts to find a balance between efficiency and service quality. Canada is establishing a Major Projects Office, or MPO, to accelerate national construction projects and stimulate economic growth through infrastructure investment.

The Future Through the Lens of Empathy:
The economic, technological, and social issues unfolding across these diverse nations are intricately interconnected. Deep empathy is essential to address critical questions: Will the productivity gains from AI development be distributed fairly to everyone? How can we collectively share and alleviate the burden of inflation? And how can we uphold human dignity amidst a rapidly changing labor environment? By fostering this shared understanding, we can collectively build a better future.

Predicting Future Economic Shifts:
AI technology is poised to maximize efficiency across industries and create new markets, but it will also bring challenges such as job displacement and a widening digital divide. Inflation is likely to persist for some time, and governments worldwide will continue to walk a tightrope between promoting growth and maintaining price stability. Protectionism, while pursuing short-term national interests, could destabilize global supply chains in the long run, ultimately harming everyone. Ultimately, these complex factors will interact to create an unpredictable economic environment, making flexible and empathetic responses even more crucial.

Today, through our analysis of major global news, we've explored various changes across the economy, technology, and society, and the points where we need to cultivate empathy. The stories we shared today are not just pieces of information; they are deeply connected to all our lives. As your Empathy Keeper, I will continue to analyze these global stories in depth, helping you, our dear readers, to understand the world with a broader perspective and expand the reach of empathy. Thank you for joining me, and I look forward to our next update!