Musk’s plan to deal with debt with AI might have some benefit: ALEX BRUMMER

There is a long and curious practice in US elections of ‘walking around money’. These are legal funds distributed to party officials to assist in getting the vote out.

Most famously it was used by John F Kennedy’s West Virginia primary campaign in 1960 when the candidate’s wealthy father Joe arranged for suitcases of cash to be delivered to voters in one of the poorest states.

Campaigning in Pennsylvania for his November 5 election choice Donald Trump, multi-billionaire Elon Musk has come up with a bizarre twist on an old practice.

The Tesla, Space X and X tycoon waved a cheque for $1million before an audience of 1,500 Trump supporters and randomly handed it out to a lucky attendee.

Musk is campaigning for the Republican candidate on a manifesto of cutting government spending. 

It is a theme we hear little about in the run-up to Labour’s first Budget next week where all the advance leaks have focused on tax rises.

Musk is drawing lessons from his experience at the X social media site – formerly Twitter – which he bought for $44billion in 2024. 

Since taking the helm, Musk has savaged the number of employees, axing 80 per cent of the workforce, displacing people with artificial intelligence (AI). 

He tells his Pennsylvania audience that if Trump is elected, he would support a new ‘Department of Efficiency’. It seems unlikely that Musk himself could be in charge given the many conflicts of interest.

Musk is on to something. The International Monetary Fund, holding its annual meeting here in Washington this week, has identified the world’s $100 trillion debt pile as a concern. 

It cites the US and Britain as countries that need to take early action to restore stability to the public finances.

In past US election campaigns, the scale of government spending and debt often has been a big feature. In the current run up to voting, only Musk is making hay from the issue. 

Data from the US Congressional Budget Office (CBO), an American-style Office for Budget Responsibility, suggests that US national debt, which stood at an average of 48.3 per cent of national wealth in the half century to 2023, will rise to 122.4 per cent of output by 2034.

Both presidential candidates have outlined plans which can only add to America’s borrowing binge. 

It calculates that Trump and Democratic candidate Kamala Harris’s policies would add $7.5 trillion and $3.5 trillion respectively to debt over the next decade.

This is largely because of a refusal to trim Social Security (welfare and pension payments) and state-supported medical programmes.

Musk thinks he can do better using AI and efficiency.

Unlike the candidates, including Trump himself, he at least has a plan.

Russian roulette

America’s debt splurge is among the reasons for the renaissance of gold, which in latest trading, hit a record breaking $2,740 an ounce. It also has been driving down the price of US ten-year bonds, currently yielding a hefty 4.1 per cent.

Markets also are concerned by deepening geo-political risks. This will also be a focus in Washington at the IMF-World Bank sessions. 

The BRICS – Brazil, Russia, India, China and South Africa – meeting in Kazan in Russia have a very different agenda. 

This powerful grouping, once seen as the great hope for future global growth, increasingly is alienated from Western democracies.

Most object to unwavering US support for Israel in its conflict with Iran proxies and the US and Europe’s financing of Ukraine’s defence against Russian aggression.

Today, Britain is releasing £2.26billion of interest returns from frozen Russian assets to support Ukraine as part of a wider $50billion European programme. 

The Russian-sponsored summit, attended by China’s president Xi Jinping and India’s Narendra Modi, is looking at ways to curtail the reserve currency role of the dollar.

Anyone interested in roubles?

Slow coach

Bank of England governor Andrew Bailey is certain to face questions at the IMF this week on why the Bank is so slow in bringing down the UK bank rate, currently marooned at 5 per cent.

Perhaps the Bank should pay attention to analysis by Goldman Sachs which projects bank rate will plummet to 2.75 per cent by this time next year. Time to get on with it.