Artificial intelligence is rapidly becoming one of the most capital-intensive industries in history. Consider: Semiconductor fabrication plants cost tens of billions of dollars. Massive data centers consume extraordinary amounts of electricity, sending power bills soaring. Specialized engineering talent commands premium wages. (Although the median salary for an AI professional is $160K annually, the top 1 percent of AI researchers receive compensation packages exceeding $1 million). Global supply chains must coordinate rare materials, precision manufacturing, and complex infrastructure.

Yet discussions about artificial intelligence almost never address the most important economic variable shaping its development: money.

From an Austrian perspective, the future of artificial intelligence ties directly to the monetary system that finances it. Whether AI produces sustainable prosperity or another boom-bust cycle depends less on algorithms than on interest rates.

As we’ve seen throughout history, interest rates in a fractional-reserve banking system trend ever lower when a new technology gets underway. This generates the illusion of prosperity called a boom, followed inevitably by a bust.

As a reminder of what is meant by a “bust,” keep in mind the figure $16.2 trillion—“The total net worth American households lost between 2007 and 2009 of the Great Recession.”

Artificial intelligence is best understood economically as a higher-order capital good—a tool that enhances the productivity of human performance. Like machinery during the Industrial Revolution or computers in the late twentieth century, AI operates within a time-structured production process involving multiple stages before consumer goods emerge. Here’s how ChatGPT works as a........

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