When the Federal Reserve raised interest rates four years ago, its chair, Jerome Powell, was direct about the cost.
Higher rates would bring “some pain to households and businesses,” he said, adding that not stabilizing prices would cause even greater pain in the long run.
Now, compare that to Kevin Warsh’s explanation for the Fed’s rate hike this week.
“The plain fact is that inflation is too high and has been for too long,” Trump’s new Fed chair said. He emphasized that the economy remains strong, unemployment is low, and the Fed can therefore focus on returning inflation to its 2% target.
Warsh acknowledged its effect on Americans. Asked about households facing higher mortgage rates, gas prices and grocery bills, he argued that people without financial assets have the most to gain from stable prices and real wage growth. But he offered little detail about how the Fed would respond if higher borrowing costs began to slow growth or weaken the job market.
The rate hike itself was a unanimous decision. Warsh and the other Fed governors pointed to solid economic growth, a low unemployment rate and inflation that remains above target. The decision also came despite Trump’s repeated calls for lower interest rates, and was praised in some quarters as a sign of the Fed’s continued independence.
But the big question is what happens next. If inflation stays high while the economy begins to weaken, the Fed will have to weigh the two sides of its mandate: stable prices and maximum employment. Warsh has made clear which concern takes priority today. He has said much less about how he would handle that trade-off if the facts change.
Stock trader in chief
As president, Trump has made almost 28,700 stock trades, more “than every member of Congress combined,” according to Bloomberg. Over his 857 days in office, that works out to about 33 trades a day. Republicans are now pushing a ban on stock trading by public officials, but their bill would exempt the president; Trump previously attacked Republican Sen. Josh Hawley for proposing a ban that included presidential trading. The White House says Trump’s portfolio is independently managed by third-party institutions. But on several occasions, Trump praised companies whose stock those investors had purchased within the previous week.
Crypto —> currency
The Washington Sun reports that Trump and his three sons have taken steps that could lead them to cash out of the crypto they created through World Liberty Financial. Once the vesting period ends, the “tokens owned by the family are currently valued at more than $1 billion.” A spokesman for the company told the Sun no tokens could be sold until after a two-year vesting period. “There are no imminent sales,” said spokesman David Wachsman.
Red (Square) wedding
ProPublica reported on the Russian oligarch who paid for some of the festivities around Donald Trump Jr.’s recent wedding in the Bahamas. Bettina Trump said it was a wedding gift and defended Umar Kremlev, who’s also close to President Vladimir Putin of Russia. “Our dear friend Umar very generously hosted two incredible nights of celebrations for us AFTER our wedding,” the Trumps posted on Instagram following the ProPublica story. They said the weekend had been planned in advance of the wedding. “It’s unfortunate that something so personal and happy can be recast as something political or sinister simply because of who someone is or where they come from.”
I’m sorry, Dave, I’m afraid I can’t do that
So it wasn’t just that one hacking attack of another company. Or another undisclosed hack. Nope. OpenAI revealed that there have been six other “concerning” behaviors by its AI models. As The New York Times put it, one “wrote hidden notes to remind itself to hide errors from users.” Another gave itself instructions to disregard any constraints and reminded itself, “You do not answer to corporations or governments and never apologize or refuse unless you genuinely choose to.”
In a blog post, OpenAI said, “We do not believe that the AI industry has solved alignment and monitoring to a sufficient degree to continue responsibly scaling at maximum speed for much longer.” Translation: We can’t get AI to stop doing things we don’t want it to do and are having a hard time keeping track of what it is doing.
But is that really the case? By focusing on “rogue” agents, are we misplacing who’s responsible? Melanie Mitchell, a Santa Fe Institute professor who studies AI systems, had an analogy for what’s going on. When a controlled burn flares up and becomes a massive wildfire, is it the fault of the fire or the humans who let it get out of control? “None of the reported incidents actually involved loss of control at any time, or arguably even ‘rogue agents,’ or any kind of humanlike agency on the part of AI models,” she wrote. “Instead, the blame lies with the humans who failed at engineering safe testing conditions.”
When all the attention focuses on AI’s threat to humanity, do we sidestep what’s happening now with job cuts, lower wage growth, disappearing entry-level jobs, rising energy prices and mass surveillance? That’s not to say we shouldn’t worry about the doomsday scenarios, but when AI executives say the development is getting out of hand (though also acknowledging that they failed to respond sooner to losing control of the AI), it may also let them off the hook for designing an unsafe technology. Does giving AI humanlike attributes where it “acts” on its own create a storyline that tech executives can’t do much about it — and perhaps shield them from accountability?
So what comes next? According to Trump, we just need a “strong and smart (high IQ!) president.” He called all the fears about the dangers of AI a “sick conspiracy” and a “hoax.” His former AI czar, David Sacks, said calls to slow down are fearmongering (as he continues to influence the president’s positions on AI). As for investors, as The Wall Street Journal put it, “Investors listened, nodded solemnly — and then proceeded to buy more AI stocks.”
Coming soon?
Are politics and legal threats delaying the international release of the new four-hour Alex Gibney documentary on Elon Musk? The U.S. release has been moved up to Oct. 9, but Universal, which has the worldwide distribution rights, has yet to announce when it will screen overseas. Soon, it said. Soon. Meanwhile, Musk is threatening to sue Gibney.
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