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Welcome to our Friday mailbag edition!

Every week, we receive great questions from readers. And every Friday, I answer as many as I can.

This week, weve got questions about two topics I touched on here the Federal Reserve and artificial intelligence (AI)

Arent advances in chip technology critical in the advancement of AI? I think the hardware side of the equation is of equal importance to the software side.

Dan H.

Hi Dan, thanks so much for your question.

Yes! Advancements in chip technology, or AI hardware, are just as crucial as software.

For those who dont know, hardware refers to the physical parts of a computer system. That includes the central processing unit (CPU), memory, and storage devices. Chip technology covers the design and manufacturing of all these parts.

AI hardware is like the brain of an AI system. AI needs to process vast amounts of data quickly and efficiently, and it needs a place to do that.

Thats why the hardware provides a place to store and process that data just like your brain stores memories and facts and it makes decisions.

Software is the link between the user and the hardware. Its made up of programs (or code) and algorithms (computations or directions for analyzing data).

Softwares job is to interpret data and then spit out decisions or results based on that.

Without hardware and software working together, AI cant happen.

Your question brings to mind a summer paid internship between my junior and senior college semesters. I worked at IBM in Briarcliff Manor for its International Finance, Planning, and Administration School (IFPA) program that operated between 1988-1992.

There, IBM provided specialized classes for its technical staff on the future of telecommunications and the emerging digital revolution across the hardware and software arenas.

My job was to remove old graphics cards the size of an index card and replace them with upgraded ones. Those upgraded cards could hold more data (or memory, in computer terms).

I had to test each old and new one to ensure no data was lost in the process.

It was tedious! But it taught me the importance of hardware.

Things dont just happen in a computer. Computer code needs a place to interact with data.

Back then, it was on a memory card. Today, its on a much smaller chip some are even smaller than a thumbnail.

AI comes down to data.

The more data there is, the more accurate it is, and the faster it can be collated and processed by a chip the swifter and more reliable the result.

And thats where hardware and software come together.

A better chip can store more data and software instructions than other chips.

And better software can process that data more quickly using more logical assumptions.

A better chip combined with better software creates a more accurate AI system.

The short version is that AI software cant function without hardware. Hardware is useless without software.

And its possible for anyone reading this to use that knowledge in the markets.

One way to take advantage of ongoing hardware and software AI developments is to buy the Global X Artificial Intelligence & Technology ETF (AIQ).

It holds a basket of 84 stocks including Amazon (AMZN), Nvidia (NVDA), and Meta Platforms (META).

From what I have read, the Federal Reserve is actually a private bank, with the stock held by the families of the six financiers who were there at the creation and helped create it.

The statute creating the Fed forbids the release of this information, as I understand it. Could you please confirm these items?

James A.

Hi, James, thanks for writing in. Theres so much mystery surrounding the Fed. And theres a lot of confusing information out there.

As you may know, since I left my career on Wall Street, Ive written several books exposing the cozy relationships between the Fed, Washington, and Wall Street.

So heres the scoop

According to the Federal Reserve Act of 1913, each of the 12 regional reserve banks of the Federal Reserve system is owned by its member banks.

What that means is that the banks in each region are shareholders of their own part of the Federal Reserve system.

When the Fed first started, these banks put up the capital to get and keep their respective regional reserve bank operating. In return, they received stock in their Fed.

In that way, they are shareholders of the Fed. And the Fed is organized like a private corporation.

But the Federal Reserve Board of Governors is appointed by the president and approved by Congress. So in that way, theres a political tie to the government.

Theres nothing in the Federal Reserve Act that prohibits the Fed from disclosing the names of their shareholder banks, how many shares each owns, or how much their shares are worth.

But theres also nothing requiring that disclosure.

When I was researching my book, All the Presidents Bankers, the last report I found on that was issued in 1941. It was created by the St. Louis Federal Reserve. But it isnt available online anywhere.

By the way, I shared an excerpt from All the Presidents Bankers about the creation of the Federal Reserve.

It shows how wealthy Wall Street bankers pushed the White House to create Americas central bank, the Fed.

If you missed it, and for readers who have just joined us recently, here it is again.

And thats all for this weeks mailbag. Thanks to everyone who wrote in!

If I didnt get to your question this week, look out for my response in a future Friday mailbag edition.

I do my best to respond to as many of your questions and comments as I can. Just remember, I cant give personal investment advice.

And if there are any other topics youd like me to write about, Id love to hear from you. You can write me at [emailprotected].

In the meantime, happy investing and have a fantastic weekend!

Regards,

Nomi Prins Editor, Inside Wall Street with Nomi Prins

Original post:
Weekly Mailbag: The Nuts and Bolts of Artificial Intelligence - Rogue Economics