AI Mania May Fuel the Next Global Economic Meltdown: Analyst

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In Engelsberg Ideas, veteran investor David Roche warns that a dangerous cocktail of artificial intelligence exuberance, unregulated private credit, and ballooning government debt is inflating massive economic bubbles that could soon burst — reshaping global power dynamics and testing the limits of Trump-era economic policy.

By TRH Business Desk

Mumbai, October 31, 2025 — In a sweeping essay for Engelsberg Ideas, renowned investor and strategist David Roche sounds the alarm on what he calls a “fatal combination” of AI-driven market exuberance, reckless private credit expansion, and surging sovereign debt, arguing that these forces are jointly inflating economic bubbles whose collapse could spark a global financial and geopolitical crisis.

Roche cautions that while President Donald Trump cannot be blamed for creating the bubbles, he “will certainly be debited with the fallout” if they burst during his administration. Trump’s policies, he notes, have produced “an extraordinary short-term equilibrium” — boosting markets through fiscal stimulus and monetised alliances — but at the cost of long-term strategic stability and the erosion of institutional quality in the United States.

The essay dissects the anatomy of modern bubbles: irrational exuberance, easy credit, and overvalued assets, warning that the bursting of such bubbles could either be a manageable “capital market correction” or an “economic catastrophe” depending on their scale and integration into the productive economy.

Roche identifies non-bank private credit as a key vulnerability, noting it has grown to 3.8 times GDP in Europe and 3.1 times GDP in the US, largely escaping regulatory oversight. Fintech firms, hedge funds, and insurance companies have taken on risky lending once confined to banks — a process exacerbated by regulatory reforms that unintentionally pushed credit creation into the shadows.

Meanwhile, sovereign debt has re-entered crisis territory. Debt-to-GDP ratios in advanced economies are expected to hit 95% this year, rising to 123% by 2030, with the US projected to reach 143% — levels far above those that triggered Europe’s debt crisis in the 2020s.

“The undoing of a bubble is based on price discovery — and that is rarely gradual,” Roche warns, adding: “The collapse of the bubble is unlikely to be gradual either.”

While the world edges closer to another inflection point, Roche offers diagnosis and warning: the next crisis may not only upend markets but also redraw the global geopolitical map.

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