Robin Wigglesworth links bond market history to current AI debt risks

Robin Wigglesworth, author of "A Fabulous Debt: The Epic Story of How Bonds Built the Modern World," argues that the global bond market is currently facing significant risks due to rising debt levels and historical parallels. The book, published on Sept. 29, positions the $160 trillion global bond market as the foundational infrastructure of the modern economy, comparing it to household plumbing that is easily overlooked until it fails.

Wigglesworth highlights that long-term government bond yields in the U.S. and other G7 countries have climbed to levels last seen in 2007, just before the financial crisis. This rise raises concerns about increasing borrowing costs for nations already managing heavy debt loads. Simultaneously, the artificial intelligence boom has expanded into the corporate bond market, sparking fears of a debt-fueled bubble.

In an interview with Axios, Wigglesworth explained why bonds often receive less attention than stocks. He noted that the stock market is perceived as more glamorous due to its volatility, while bonds are designed to be boring when functioning correctly. "There have been a lot of meme stocks over the years. There's never been a meme bond," Wigglesworth said.

The author warned that while stock market bubbles are common and often self-correcting, debt-fueled manias tend to result in more severe economic consequences. He cited the housing boom of the 2000s and the 19th-century railway mania as examples where debt-driven speculation led to significant financial crises. Wigglesworth observed that the current tech sector has shifted from a standard stock market mania to one fueled by debt and off-balance-sheet liabilities, a development he finds worrying.

"If there is a big crash, and we look for symptoms, this would be one of the first things you'd point to," Wigglesworth stated regarding tech bonds. He emphasized that while these companies remain profitable, the structural change in how they are financed presents a distinct risk.

The U.S. Treasury market remains the central concern for Wigglesworth, who described it as the most liquid and critical bond market in existence. He characterized the Treasury market as representing the cost of money for Americans and the rest of the world. Although he stated he is less worried about U.S. debt than many others, he acknowledged an increase in his personal level of concern.

"I've gone from maybe like 1% worry to like 3% worry," Wigglesworth said, noting that these figures are arbitrary. He added that even a small probability of a U.S. default in any form is "super scary." Wigglesworth predicted that global anxiety over U.S. debt levels will persist for decades, as it has for the past 20 years.