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Politics

U.S. warns firms concerning the dangers of doing enterprise in Hong Kong as China clamps down on rights

U.S. warns companies about the risks of doing business in Hong Kong as China clamps down on rights

The national flags of the USA and China fly in front of a building.

The Eng Koon | AFP via Getty Images

WASHINGTON – The Biden government on Friday warned companies with offices in Hong Kong of far-reaching financial and regulatory risks as China continues to restrict political and economic freedoms in the area.

The nine-page Hong Kong Business Advisory – jointly published by the Departments of State, Finance, Trade and Homeland Security – warns that US firms in Hong Kong are exposed to a number of risks posed by China’s national security law.

The report states that “companies are exposed to risks in connection with electronic surveillance without an arrest warrant and the disclosure of data to authorities as well as“ restricted access to information ”.

“Beijing has damaged Hong Kong’s reputation for accountable, transparent governance and respect for individual freedoms and has broken its promise to keep Hong Kong’s high levels of autonomy unchanged for 50 years,” Foreign Minister Antony Blinken wrote in a statement.

“In light of Beijing’s decisions last year that stifled the democratic aspirations of the Hong Kong people, we are taking action. Today we are sending a clear message that the United States is resolutely on the side of the Hong Kong people, ”added the country’s top diplomat.

The Biden government also imposed US sanctions on seven Chinese officials for violating Hong Kong’s autonomy.

The Chinese embassy in Washington did not immediately respond to a request for comment.

Earlier this week, the Biden government issued a warning to companies with investment ties to China’s Xinjiang Province, citing growing evidence of genocide and other human rights abuses in the country’s northwestern region.

Washington has openly criticized Beijing’s comprehensive national security law, passed in June 2020, aimed at restricting Hong Kong’s autonomy and banning critical literature about the Chinese Communist Party.

The then Foreign Secretary Mike Pompeo described the measure as an “Orwellian move” and an attack “on the rights and freedoms of the people of Hong Kong”.

Former President Donald Trump soon signed a law imposing sanctions on China in response to its interference with Hong Kong’s autonomy. He also signed an executive order ending the preferential treatment that Hong Kong has long enjoyed.

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“Hong Kong is now being treated like mainland China,” Trump said during a July 2020 speech from the White House rose garden.

“No special privileges, no special economic treatment and no export of sensitive technologies,” said Trump. “Also, as you know, we are imposing massive tariffs and have imposed very high tariffs on China.”

China’s State Department fired back, saying Beijing would impose retaliatory sanctions on US people and businesses.

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World News

As China forges international commerce ties, U.S. dangers falling behind

As China forges global trade ties, U.S. risks falling behind

Chinese Premier Li Keqiang attends the signing ceremony of the Regional Comprehensive Economic Partnership (RCEP) agreement following the fourth RCEP summit held on November 15, 2020 via video link. Chinese Trade Minister Zhong Shan signed the agreement on behalf of China.

Xinhua News Agency | Xinhua News Agency | Getty Images

The biggest hole in the Biden government’s otherwise encouraging efforts to better compete with China – a loophole that could undermine all other parts – is the lack of an international trade strategy.

As President Xi Jinping’s China accelerates its efforts to negotiate multilateral and bilateral trade and investment agreements around the world, both Republicans and Democrats in the US have become allergic to such agreements.

“The Chinese firmly believe in the importance of the correlation of forces, and they believe the correlation is in their favor right now,” said Stephen Hadley, former national security adviser to President George W. Bush. If the US does not change this Chinese belief, it will not regain the leverage needed to deal with Beijing.

“The most important missing element in changing this Chinese rationale is a trade strategy,” says Hadley, which could gather global allies, create American jobs and growth, and counter the escalating Chinese efforts to organize the world economy around them.

Former US Secretary of State Madeleine Albright once called the US the “indispensable country” of the world, but Xi now positions China as the “indispensable economy” of the world.

By 2018, 90 countries in the world were trading twice as much with China as they did with the United States. By 2019, China surpassed the US as the world’s largest recipient of FDI. The underlying message now is that China’s market is so large, its liquidity so deep and its recovery from Covid-19 so dramatic (up 18% in the first quarter) that no sane country can resist its acceptance.

“In times of economic globalization, openness and inclusion are an unstoppable historical trend,” President Xi told the Boao Asia Forum this week. Without mentioning Washington by name, he said that “attempts to” build walls “or” decouple “are contrary to economic law and market principles. They would harm the interests of others without being of any use to yourself.”

It is far too easy to poke holes in Xi’s statement: China is still rich in market protection measures and government interventions at home and abroad are on the rise. Intellectual property theft and cybercrime continue.

But without a modern, future-oriented trade strategy, the US is entering this global crisis with one arm behind its back.

“The US and China are in a strategic competition that will determine the shape of world politics this century,” former US Treasury Secretary Hank Paulson Jr. wrote in the Wall Street Journal. “But when it comes to trade, a critical dimension of this competition, America is stepping down.”

This undermines the early successes of the emerging Biden approach to China.

First, Biden has benefited from a bipartisan consensus, rare in Congress these days, on the urgency to face the Chinese challenge.

Second, Biden has started gathering friends and allies in Asia and Europe who share his concerns about China.

In March, Biden called the first meeting of the heads of state and government of the “Quad”, in which the US, India, Australia and Japan participated, in order to balance China in the region. To address China’s far-reaching vaccine diplomacy, countries agreed to distribute 1 billion doses of vaccines by 2022.

Last week, Biden welcomed Japanese Prime Minister Yoshihide Suga as the first head of government to visit Washington. Their joint statement made no mention of China, but did promise that “free and democratic nations that work together” could act to withstand “challenges to the free and open rules-based international order”. You also spoke of ensuring cross-strait peace. This is the first mention of Taiwan by a Japanese prime minister in a joint statement with a US president since 1969.

And for the first time, on March 22, the EU imposed economic sanctions on China for human rights abuses in the Xinjiang Autonomous Region, which acted alongside the US, Canada and the UK.

Third, the Biden government’s $ 1.9 trillion Covid-19 stimulus plan and its upcoming $ 2.3 trillion infrastructure-related investment will keep the US competitive through investment in human capital, physical infrastructure and advanced Improve technology.

The problem is that the same bipartisan consensus in Congress on the Chinese challenge comes with a bipartisan allergy to the kind of multilateral and bilateral trade and investment deals that are required to address Beijing’s dynamic.

Last November, China was one of 15 Asia-Pacific countries, accounting for 30% of global GDP, to sign the Regional Comprehensive Economic Partnership (RCEP). It was China’s first free trade agreement with its US allies Japan and South Korea, which formed the largest trade bloc in history.

China has also expressed an interest in joining the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP). This was the trade deal that eleven countries signed after the Trump administration pulled out of the effort as one of its first acts of government.

Should the RCEP agreement enter into force, which is expected to be before January 2022, and should China be able to join the CPTPP, the international trade agreement in Asia would have largely ended and China would have won.

At the same time, China is making progress on other fronts.

In January, it signed the EU-China Comprehensive Investment Agreement (CAI), much to the dismay of incoming Biden administration officials. (The conclusion of this agreement has stalled in the European Parliament due to new Chinese sanctions against the EU.)

Whatever happens in Brussels, most European countries are eager to sign trade and investment deals with China, which became the EU’s largest trading partner for the first time last year.

The real problem lies in Washington’s lack of alternatives – fueled by the misrepresentation by both parties that globalization has worked against American interests and jobs.

When the Republican Party transformed into the Trump Party, it abandoned the kind of free trade policy that President Ronald Reagan saw as “one of the keys to our nation’s great prosperity.”

While President Barack Obama was negotiating the Trans-Pacific Partnership during his presidency, presidential candidate Hillary Clinton rejected the deal in 2016 after calling it the “gold standard” only three years earlier.

“Both Democrats and Republicans are now advocating ‘a trade policy for the middle class,'” writes Adam Posen of the Peterson Institute in a convincing foreign policy that exposes this approach. “In practice, this appears to mean tariffs and ‘Buy American’ programs aimed at saving jobs from unfair foreign competition.”

Instead, he writes: “Washington should conclude deals that increase competition in the United States and raise tax, labor and environmental standards. It is the self-deceptive withdrawal from the international economy that has failed American workers for the past 20 years , not globalization itself. “

While the Biden government has put its trade agenda on hold, China marches forward – closing deals and setting the standards that will shape the future.

Frederick Kempe is a best-selling author, award-winning journalist, and President and CEO of the Atlantic Council, one of America’s most influential think tanks on global affairs. He worked for the Wall Street Journal for more than 25 years as foreign correspondent, assistant editor-in-chief and senior editor for the European edition of the newspaper. His latest book – “Berlin 1961: Kennedy, Khrushchev, and the Most Dangerous Place in the World” – was a New York Times bestseller and has been published in more than a dozen languages. Follow him on Twitter @FredKempe and subscribe here to Inflection Points, his view every Saturday of the top stories and trends of the past week.

More information from CNBC staff can be found here @ CNBCopinion on twitter.

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Business

Biden’s Guess on a Local weather Transition Carries Massive Dangers

Biden’s Bet on a Climate Transition Carries Big Risks

Richard Rhodes, the energy historian whose recent book Energy: A Human History describes the technologies and innovations that have changed energy over centuries, said an Italian physicist, Cesare Marchetti, discovered a hard truth in the 1970s after he had examined thousands of energy transitions. It takes about 50 years for a new energy source, be it coal or oil, natural gas or renewable energy, to dominate only 10 percent of the world market. Then it takes another half century to reach 50 percent.

This, Rhodes said, was true despite wars, economic conditions, and government intervention.

White House officials say the country can brave history in a number of ways to meet Mr Biden’s goals, including reducing emissions from farms and city buildings. However, two sectors play a major role: electricity, in which the president needs far more renewable energy, including advanced batteries to store electricity generated by solar panels and wind turbines; and transportation, where reliance almost entirely on gasoline must be shifted to electricity.

Mr Biden has proposed a carrot-heavy approach that includes spending on research and development, efficiency improvements in households and schools, and the power grid to better support renewable energies. As part of his infrastructure plans, he would like Congress to require utilities to switch to lower-emission power sources.

Mr Biden’s emissions target is based on the fact that electricity companies will significantly reduce their emissions by 2030 and zero them by 2035.

“Our analysis says we could get there by 2050,” said Nick Akins, general manager of American Electric Power, an Ohio-based utility company, but not by 2035.

“If we go too fast, we can jeopardize the reliability of the grid,” he added, citing recent power outages in Texas

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Business

C.D.C. Panel Retains Pause on Use of J&J Vaccine, Weighing Dangers

C.D.C. Panel Keeps Pause on Use of J&J Vaccine, Weighing Risks

“At the moment we believe these events are extremely rare, but we are also not sure we have heard of all possible cases as this syndrome may not be easily identified as being associated with the vaccine,” said Dr. Rochelle P. Walensky, the CDC director said at a White House press conference about the pandemic on Wednesday.

During the panel discussion, experts noted that the “risk window” for the disease was still open among vaccine recipients and that new cases could arise as nearly 3.8 million people had received the shot in the past two weeks. In the six women, the strong coagulation developed within about two weeks after the shot.

Other experts advocated the dissemination of health information about how to diagnose and treat the condition so that it could spread awareness among doctors, emergency rooms, and those who had received the vaccine. An important point to note is that the blood-thinning heparin, a common treatment for blood clots, can be harmful to these patients and should not be used.

Officials also noted that because the blood clots were so severe, people with the disease needed treatment as soon as possible. Some patients needed invasive procedures to remove large blood clots from the blood vessels in their brain.

Several panel members reiterated that two other vaccines – from Moderna and Pfizer-BioNTech – are available, neither of which are associated with the clotting problem. Continuing the hiatus would not stop most people in the US from getting vaccinated.

Speaking at the press conference, Jeffrey D. Zients, the White House pandemic coordinator, said the hiatus would not disrupt the momentum of the country’s vaccination campaign in general.

“In the short term, we expect some impact on the daily average as Johnson & Johnson locations and dates move to Moderna and Pfizer vaccines,” he said. “We have more than enough Pfizer and Moderna vaccines to continue or even accelerate the current rate of vaccination.”

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Health

EMA says advantages of J&J Covid vaccine outweigh dangers

EMA says benefits of J&J Covid vaccine outweigh risks

Crystal Jones, 52, head of the Athens City Department of Health, loads syringes of the vaccine on the first day of Johnson and Johnson’s vaccine.

SOPA pictures | LightRocket | Getty Images

LONDON – The European Medicines Agency said Wednesday that the benefits of Johnson & Johnson’s Covid-19 vaccine outweigh the risk of side effects following reports of extremely rare blood clotting.

It comes shortly after the US Food and Drug Administration asked states to temporarily suspend J & J’s use of the vaccine “out of caution” after six cases of bleeding disorder were detected with more than 6.8 million doses of the shot were.

All six cases in the United States occurred in women between the ages of 18 and 48, with symptoms developing six to 13 days after receiving the shot. The FDA said one woman died from complications from blood clotting and another was in critical condition.

The European Medicines Agency has currently investigated all reported cases and will decide whether regulatory action is required.

“The EMA is currently accelerating this assessment and is currently expecting to issue a recommendation next week,” the European Medicines Agency said in a statement.

“During the ongoing review, the EMA continues to believe that the vaccine’s benefits in preventing COVID-19 outweigh the risks of side effects.”

South Africa has stopped the launch of the shot while J&J has announced it is “proactively delaying” delivery of its vaccine to Europe, which began last week.

The vaccine was approved in the EU on March 11, but widespread use of the shot has not yet started.

“Right now, these adverse events seem extremely rare,” the FDA said on Tuesday in a joint statement with the Centers for Disease Control and Prevention. “The safety of COVID-19 vaccines is a top priority for the federal government and we take all reports of health problems following COVID-19 vaccination very seriously.”

Last week, the European Medicines Agency said it had identified a possible link between the coronavirus vaccine developed by AstraZeneca and Oxford University and rare blood clotting problems. AstraZeneca has not received approval for use in the United States

Oxford-AstraZeneca and J&J vaccines work in a similar way, and both use an adenovirus, a common type of virus that typically causes mild cold symptoms.

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Business

Fed Chief Says U.S. Financial system Is at an ‘Inflection Level’ as Dangers Stay

Fed Chief Says U.S. Economy Is at an ‘Inflection Point’ as Risks Remain

WASHINGTON – The economy is at a “turning point” and on the verge of faster growth, Federal Reserve Chairman Jerome H. Powell said in an interview that aired Sunday night. But he warned that the crisis was not over yet.

In the interview with “60 Minutes” on CBS, Powell said the American economy “brightened significantly” as more people were vaccinated and businesses reopened. But he warned that “there are really risks out there,” especially coronavirus flare-ups, if Americans return to normal life too quickly.

“The main risk to our economy right now is that the disease will spread faster,” he said. “And that’s worrying. It will be wise if people can continue to distance themselves socially and wear masks. “

The Fed has kept interest rates close to zero since March 2020 and buys around $ 120 billion worth of government bonds every month. This policy is designed to boost spending by keeping borrowing cheap. Fed officials knew they would continue to support the economy until it gets closer to its goals of maximum employment and stable inflation – and that while the situation is improving, it is not there.

Mr Powell reiterated that approach on Sunday, saying that the central bank would “consider a rate hike when the labor market recovery is essentially complete and we return to maximum employment and inflation returns to our 2 percent target and on the right track is to move over 2 percent for some time. “

But he said it would “be a while before we get to this place”.

On inflation, Mr. Powell reiterated that the Fed wanted “sustainable” price increases before adjusting monetary policy.

“Inflation was below 2 percent,” he said. “We want it to be only moderately over 2 percent. This is what we are looking for. ”

“And when we get that,” he added, “we’ll raise interest rates.”

Some celebrity viewers have warned that the economy may overheat as the federal government pumps out trillions of dollars in stimulus and other spending, and re-opens the economy so consumers can spend more.

So far there has been no sustained rise in inflation.

Figures show that the economy is recovering, albeit slowly. Employers hired more than 900,000 workers last month, but the country is still lacking millions of jobs compared to February 2020, and state unemployment claims only increased last week.

Mr Powell stressed Sunday that while some workers were doing fine, others had not yet returned to where they were before the Covid-19 lockdown. This phenomenon will affect when the Fed reduces or removes policy support.

“What you are seeing is that some parts of the economy are doing very well, having recovered fully and in some cases even more than fully recovered,” Powell said. “And some parts haven’t recovered very much. So you see real differences between different parts of the economy. This is unusual for an economy like ours. “

Mr Powell also pointed to data showing that the hardest hit is those who are least able to bear it: lower-income service workers who are heavily colored and female have been hit hard by job losses.

While he expects these workers to get back to work faster when the economy recovers, the Fed needs to “stay with these people and support them as they try to get back to where they were in life, which worked,” he said adding, “You were in Jobs just a year ago.”

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Business

Funding Agency’s Collapse Put Unseen Dangers on Full Show

Investment Firm’s Collapse Put Unseen Risks on Full Display

After the implosion of a little-known investment firm that last week weighed billions in losses on banks around the world, a big question is being asked all over Wall Street: How did they let this happen?

The answer could be because Archegos Capital Management, with the full support of at least half a dozen banks, placed bets on stocks without actually owning them.

Archegos used esoteric financial instruments called swaps, which get their name from the way they exchange one stream of income for another. In this case, Wall Street banks bought certain stocks Archegos wanted to bet on and Archegos paid the banks a fee. Then the banks paid Archegos the stock returns.

These swaps increased the fund’s purchasing power, but also created a two-pronged problem. Archegos has been able to build a lot more leverage on the stock prices of a few companies, including ViacomCBS and Discovery, than it could afford on its own. And since there are few regulations governing this type of business, there have been no disclosure requirements.

When those bets got sour last week after the stocks of some of the companies in question fell, it sparked a miniature crisis: the banks that made Archegos amass such large holdings angrily sold the stocks to protect their own balance sheets and the tide of cheap ones Shares pushed share prices even further down. And Archegos himself imploded.

The blind-side hit shuddered the financial system, stuck banks at losses that some analysts say could hit $ 10 billion. And for a time Wall Street feared that problems might cascade.

“The disclosure system doesn’t cover any of this,” said Dennis Kelleher, executive director of Better Markets, a monitoring group on Wall Street. “These derivatives are designed for synthetic exposures that de facto hide ownership.”

If banks add up their losses and shareholders are wise about the impact on their portfolios, the tactics used by Archegos will attract the attention of regulators and renew calls for further regulation of swaps and similar financial products called derivatives.

The Securities and Exchange Commission said it was monitoring the situation, and Senator Elizabeth Warren, Democrat of Massachusetts, said the Archegos collapse was “all set for a dangerous situation.”

“We need transparency and strong scrutiny to ensure that the next explosion in hedge funds does not affect the economy,” she said in a statement sent via email.

Recognition…Emile Wamsteker / Bloomberg News

Archegos was actually a family office set up by Bill Hwang, who previously ran a hedge fund that was involved in an insider trading case under his leadership. However, some Wall Street analysts calculated leverage – essentially trading borrowed money to increase their purchasing power – that was potentially eight times their own capital.

In this case, the leverage was shown in the form of swap contracts. In return for a fee, the bank undertakes to pay the investor what the investor would have received through the actual possession of a share over a certain period of time. When the price of a stock rises, the bank pays the investor. If it falls, the investor pays the bank.

In business today

Updated

March 31, 2021, 6:27 p.m. ET

Archegos focused its bets on the share prices of a relatively small number of companies. These included ViacomCBS, the parent company of the country’s most watched network; the media company Discovery; and a handful of Chinese technology companies. The banks that bought swaps alone held millions of shares in ViacomCBS.

Typically, large institutional investors are required by the SEC to publicly disclose their holdings at the end of each quarter. This means that investors, lenders, and regulators know when a single company has a large stake in a company.

However, the SEC disclosure rules typically do not apply to swaps, so Archegos did not have to report its large holdings. And none of the banks – at least seven known to have had ties with Archegos – saw the full picture of the risk the fund was taking, analysts say.

The use of equity-related derivatives has increased significantly in recent years. The number of equity derivatives outstanding – including swaps and a related instrument known as a forward – for US-listed stocks more than doubled from $ 50 billion at the end of 2015 to more than $ 110 billion in the first half of 2020, according to current news Data available, according to the Bank for International Settlements, an international consortium of central banks.

The use of swaps and other types of leverage can exceed profits when investments pay off. But when such bets go wrong, it can quickly wipe an investor out.

That happened last week. Several stocks that Mr. Hwang’s company had bet on began to fall, and banks demanded that he put up additional money or other assets. Known as “margin,” this is a cushion of cash that is designed to ensure that the bank does not lose money if stocks fall. When he was unable to do so, the banks tossed millions of stocks they had bought.

The impact on stock prices has been profound, with ViacomCBS down 51 percent and Discovery down 46 percent last week. The shareholders of these companies saw the value of their holdings decline. Those two stocks alone were wiped out with shareholder value of more than $ 45 billion. And banks lost money on stocks that had fallen in value. Kian Abouhossein, an analyst with JP Morgan, estimated that banks lost $ 5 billion to $ 10 billion in their dealings with Mr. Hwang.

Credit Suisse may have lost $ 3 to 4 billion, Abouhossein estimated. Japanese bank Nomura Securities has stated that it is exposed to losses of up to $ 2 billion. Morgan Stanley and Goldman Sachs have announced that they expect minimal losses – meaning it won’t seriously affect their financial results – but for such large companies that could still mean millions of dollars. Mitsubishi UFJ Securities Holdings Company, a unit of the Japanese financial conglomerate, reported a potential loss of around $ 270 million.

Analysts say the damage has been relatively minor, and while the losses have been large for some players, they are not large enough to pose a threat to the wider financial system.

But the episode will most likely revive a push to expand derivatives regulation that has been linked to many significant financial blows. During the 2008 crisis, insurance giant AIG nearly collapsed under the weight of the unregulated swap contracts it entered into.

The cascade of problems that began with Archegos was just the latest example of the ability of derivatives to increase invisible risk.

“During the 2008 financial crisis, one of the biggest problems was that many banks didn’t know who owed what to whom,” said Tyler Gellasch, a former SEC attorney who heads the Healthy Markets Association, a group advocating market reform. “And it seems this happened again.”

Matthew Goldstein contributed to the coverage.

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Business

Shares are buying and selling on reopening optimism, however dangers stay

Stocks are trading on reopening optimism, but risks remain

The stock market is betting on reopening optimism, which will cause technology stocks to fall and cyclical stocks to rise in Tuesday’s session, CNBC’s Jim Cramer said.

While key averages were all down at close of trading, Cramer said the action was defined by a decline in consistent operators and an increase in sporadic boom-and-bust stocks.

“It’s all about optimism, people. Investors vote with their feet,” said the host of “Mad Money”. “They’re leaving those secular growth stories, the stocks of companies that do well regardless of whether the economy is hot or cold. Instead, they find their way into stocks of companies that only make big bucks when business is booming.” “

The comments come after the overall market pulled back on Monday’s gains that followed a tough sell-off last week. The Dow Jones Industrial Average fell 144 points Tuesday to 31,391.52, down 0.46%. The S&P 500 retreated 0.81% to 3,870.29. The tech-heavy Nasdaq Composite fell 1.7% to 13,358.79.

The S&P sector indices, with the exception of materials, also traded lower during the session. The market was toughest in tech and consumer staples, with both indices dropping more than 1% along with the Nasdaq.

Cramer said the market activity reflects investors betting on the chances that citizens will soon be able to drop their Covid-19 protective masks and that states will soon be dropping coronavirus restrictions thanks to the country’s advances in vaccines The economy can return to normal. Still, a tug-of-war remains between those who are optimistic and those who are cautious, he added.

The governors of Texas and Mississippi on Tuesday announced plans to lift mandates to wear masks and all restrictions on doing business in their states.

“You bet we’ll soon be able to rip our masks off and get back to normal, and that’s the core of this market right now,” Cramer said. “Right now, it’s the people who believe our long national nightmares are over. They are the ones who win.”

However, he warned that the moment in the market is still prone to risk. Cramer said the country could reopen too quickly and that variants of the virus, such as the strain first spotted in South Africa, could lead to further spikes if the country drops its guard.

While President Joe Biden expects to sign a $ 1.9 trillion stimulus package that will be on its way through Congress later this month, any hiccups in Senate enforcement could hit the market impact.

“There’s still a lot that could go wrong,” said Cramer.

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Categories
Business

The Biden Economic system Dangers a Rushing Ticket

The Biden Economy Risks a Speeding Ticket

Fortunately, there is already a lot of impetus. The most recent coronavirus relief act, signed in late December, came to around $ 900 billion. Its effects have not yet been shown in the GDP data.

Added to this is the pent-up demand from the pandemic. When people started avoiding restaurants, travel and non-essential purchases last spring, the personal savings rate rose and has only partially returned to normal since then. Much of this additional savings is in cash that people can spend when it is safe to do so.

All of this means that fiscal policymakers may already have pressed the accelerator hard enough to bring the economy to its speed limit by the end of the year, when widespread vaccination is likely to have sparked much of that pent-up demand. Another $ 1.9 trillion, as President Biden has suggested, could push the economy way over the limit.

Of course, some new federal spending on public health and people in need may be needed. But spending on disaster relief also increases the demand for goods and services.

Beyond this necessary expenditure, there is no strong case for more fiscal incentives in general. The $ 1,400 checks for most Americans in the Biden proposal go to many people who don’t need them. This item alone costs $ 422 billion.

Proponents of greater fiscal stimulus suggest that estimates of potential GDP are very imprecise. In addition, it is said that when the economy exceeded potential in late 2019, there was hardly any hint of inflation. So why worry now?

You’re right about the inaccuracy, but some signs of inflation started appearing in 2019. For the year that ended in the first quarter of 2020, the labor cost index for wages and salaries in the private sector rose 3.2 percent, the fastest rate in more than a decade. Had the pandemic not interrupted this acceleration, companies would eventually have passed rising labor costs on to consumers as higher prices.

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Health

Skype co-founder Jaan Tallinn on three most regarding existential dangers

Skype co-founder Jaan Tallinn on 3 most concerning existential risks

Skype co-founder Jaan Tallinn

Center for the Investigation of Existential Risk

LONDON – Skype co-founder Jaan Tallinn has figured out what he believes are the top three threats to human existence this century.

While the climate emergency and coronavirus pandemic are viewed as issues that urgently require global solutions, Tallinn told CNBC that artificial intelligence, synthetic biology and so-called unknown unknowns each pose an existential risk through 2100.

Synthetic biology is the design and construction of new biological parts, devices and systems, while unknown unknowns, according to Tallinn, are “things we may not be able to think about right now”.

The Estonian computer programmer, who helped set up the Kazaa file-sharing platform in the 1990s and the Skype video call service in the 00s, has become increasingly concerned about AI in recent years.

“Climate change will not be an existential risk unless there is an out of control scenario,” he told CNBC over Skype.

Of course, the United Nations has recognized the climate crisis as the “defining issue of our time” and recognized its impact as global and unprecedented. The international group has also warned that there is alarming evidence that “critical turning points leading to irreversible changes in key ecosystems and the planetary climate system may have already been reached or passed”.

Of the three threats Tallinn is most concerned about, AI is at the center and it spends millions of dollars making sure the technology is developed safely. This includes investing early in AI labs like DeepMind (partly so he can keep an eye on their activities) and funding AI security research at universities like Oxford and Cambridge.

Referring to a book by Oxford Professor Toby Ord, Tallinn said there was a one-in-six chance people will not survive this century. Why? One of the biggest potential threats in the short term is AI, according to the book, while the likelihood that climate change will cause human extinction is less than 1%.

Predicting the future of AI

When it comes to AI, nobody knows how smart machines get, and it’s basically impossible to guess how advanced AI will be in the next 10, 20 or 100 years.

Trying to predict the future of AI is made even more difficult by the fact that AI systems are starting to create other AI systems without human input.

“There is a very important parameter in predicting AI and the future,” Tallinn said. “How much and how exactly will AI development give feedback on AI development? We know that AI is currently being used to search for AI architectures.”

If AI turns out to be not good at building other AI, we needn’t be unduly concerned as there will be time to dissipate and use AI skill gains, Tallinn said. (Should this line be in quotes? I think we should rephrase if this is not a literal quote.) However, if AI is able to create other AIs it is “very justified to be concerned … about what happens next, “he said.

Tallinn explained how there are two main scenarios that AI security researchers are looking at.

The first is a laboratory accident in which a research team leaves an AI system in the evening to train on some computer servers and “the world is no longer there in the morning”. The second is where the research team produces a prototechnology which is then adopted and applied to different areas “where it has an unfortunate effect”.

Tallinn said it is focusing more on the former as fewer people think about this scenario.

When asked if he’s more or less concerned about the idea of ​​superintelligence (the hypothetical point where machines reach and then quickly surpass human-level intelligence) than three years ago, Tallinn says his point of view is “muddier” or less has become more “nuanced”. “”

“If you say that it will happen tomorrow or that it won’t happen in the next 50 years, I would say that both of them are cocky,” he said.

Open and closed laboratories

The world’s largest tech companies are investing billions of dollars in advancing the state of AI. While some of their research is openly published, many are not, and this has raised alarm bells in some corners.

“The question of transparency is not at all obvious,” says Tallinn, claiming that it is not necessarily a good idea to reveal the details of a very powerful technology.

Tallinn says some companies take AI security seriously than others. For example, DeepMind is in regular contact with AI security researchers at places like the Future of Humanity Institute in Oxford. It also employs dozens of people who focus on AI security.

At the other end of the scale, business centers like Google Brain and Facebook AI Research are less connected to the AI ​​security community, according to Tallinn. We must seek comment from both of them.

If the AI ​​becomes an “arms race,” it will be better if there are fewer participants in the game, according to Tallinn, who recently heard the audiobook for “Making the Atomic Bomb” where we were (typo? Goods?) Great concern about how many research groups worked on science. “I think it’s a similar situation,” he said.

“If it turns out that AI isn’t going to be very disruptive in the near future, it would certainly be useful for companies to actually try to solve some of the problems in a more distributed manner,” he said.