The Good Fight Andrés Velasco on Oil Shocks and Financial Crises
Apr 11, 2026
Andrés Velasco, Dean of LSE’s School of Public Policy and former Chilean finance minister, discusses oil shocks, financial fragility, and the London Consensus. He weighs the risk that the Middle East war could echo the 1970s, flags AI-driven valuations and private credit as potential triggers, and outlines warning signs to watch in markets.
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Productivity Gains From AI Will Take Time
- Major technology revolutions raise productivity but their gains arrive slowly as firms learn to use the tech.
- Velasco compares AI to electrification and PCs, noting productivity lifts often take a decade to show up in macro data.
Globalization Is Changing Not Ending
- Globalization is not ending but is morphing into trade among politically similar countries and regional blocs.
- Velasco cites persistent global trade growth and rising trade within non-US/China pairs despite political tensions.
Dollar Anchor Is Weakening But No Clear Replacement
- The international system needs an anchor country; US rules and dollar credibility have been eroded but alternatives are limited.
- Velasco notes the dollar weakened after tariff moves, and Europe could develop the euro if political will creates liquid pan-European bond markets.
