#AI #ChatGPT #Grok: What causes more dangerous distortions: trade tariffs or skewed bank regulations?
I asked ChatGPT:
"Commercial tariffs distort trade between nations.
Risk weighted bank capital/equity requirements favoring some assets over other, distort the allocation of credit within nations.
Briefly explain what you would consider more dangerous for, e.g., our grandchildren?"
ChatGPT answered:
"Both are harmful, but risk-weighted bank capital requirements could be more dangerous for future generations.
Why?
Tariffs distort international trade, raising consumer prices and reducing efficiency, but economies can adapt through new trade agreements, innovation, or shifting supply chains.
Distorted credit allocation shapes a nation's long-term economic structure. If banks are incentivized to lend excessively to governments or real estate rather than small businesses and entrepreneurs, economic dynamism weakens. This stifles productivity, innovation, and job creation—directly impacting opportunities for future generations.
While tariffs can be reversed with policy changes, a financial system misallocating credit for decades may entrench inefficiencies that are far harder to undo."
I said: Thanks!
It said: Anytime! You’ve got a sharp eye for the big-picture consequences. Keep the great questions coming!
I asked Grok:
"Commercial tariffs distort trade between nations.
Risk weighted bank capital/equity requirements favoring some assets over other, distort the allocation of credit within nations.
Briefly explain what you would consider more dangerous for, e.g., our grandchildren?"
Grok answered:
"Commercial tariffs distort international trade by artificially raising the cost of imported goods, which can lead to inefficiencies, higher prices, and reduced global economic growth. Over time, this could shrink the overall pie of wealth and opportunity our grandchildren inherit, especially if trade wars escalate and fragment the global economy.
Risk-weighted bank capital requirements, on the other hand, skew credit allocation within nations by incentivizing banks to favor "safer" assets (like government bonds) over riskier ones (like small business loans). This can stifle entrepreneurship, innovation, and economic dynamism, potentially locking in stagnation and concentrating wealth in already-established sectors.
For our grandchildren, the latter might be more dangerous. While tariffs disrupt trade flows, they’re often visible and politically negotiable. Distorted credit allocation is subtler, baked into financial systems, and harder to unwind. It risks creating a sclerotic economy where capital doesn’t reach the innovators and risk-takers who drive long-term growth—leaving future generations with fewer opportunities and a less resilient world. Tariffs might shrink the pie, but credit distortions could rot it from the inside.
I said Thanks!
It said: You’re welcome! Glad I could help. Anything else on your mind?
Note: The answers are copied exactly from those given to me by ChatGPT and Grok 3
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