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The World
Treasury Secretary Janet Yellen said the U.S. government could become unable to pay all of its bills on time as soon as June 1 if Congress doesn’t first raise the debt limit. President Biden invited the top Republicans and Democrats on Capitol Hill to meet next week to discuss raising the country’s roughly $31.4 trillion borrowing limit, the White House said soon after Ms. Yellen’s warning. The new estimate sets a shorter timeline than forecasters had previously expected. The Congressional Budget Office updated its own projection after having previously forecast that the U.S. could default as soon as July. Lower-than-expected tax receipts this year create a “significantly greater risk that the Treasury will run out of funds in early June” than CBO had expected, the agency’s director said. (Wall Street Journal)
At least 100,000 Russian fighters have been killed or wounded in Ukraine in the past five months, the White House said, the latest measure of the vast human toll of President Vladimir V. Putin’s invasion. John Kirby, a spokesman for the National Security Council, said the figure included 20,000 Russian fighters who had been killed in action. About half of those were mercenaries for the Wagner group. (New York Times)
China revises conscription law, eyeing Taiwan conflict. China on Monday enacted revisions to its military service law that will allow retired military personnel to be reenlisted to secure experienced soldiers. The law also focuses on recruiting tech-savvy science and engineering students to prepare for warfare in new domains such as space and cyber, as the country tries to build its military strength to prepare for possible all-out war in the Taiwan Strait. The State Council and the Central Military Commission, the Chinese military's top decision-making body, approved the revised regulations on conscription, based on the Military Service Law. "We will build a military draft system that can respond, from peacetime to emergencies, swiftly and seamlessly," Tan Kefei, a spokesman at the Chinese defense ministry, said. (Nikkei Asia)
The US was flooded with cheap, deadly fentanyl churned out by sons of ‘El Chapo,’ charges reveal. With Sinaloa cartel boss Joaquín “El Chapo” Guzmán serving a life sentence, his sons steered the family business into fentanyl, establishing a network of labs churning out massive quantities of the cheap, deadly drug that they smuggled into the U.S., prosecutors revealed in a recent indictment. Synthetic opioids — mostly fentanyl — now kill more Americans every year than died in the Vietnam, Iraq and Afghanistan wars combined, feeding an argument among some politicians that the cartels should be branded terrorist organizations and prompting once-unthinkable calls for U.S. military intervention across the border. (Associated Press)
Since mid-March, the world’s oceans have been hotter than at anytime since at least 1982, raising concerns among some climate experts about accelerated warming. Hotter oceans are hugely consequential for land areas, since they can contribute to more frequent and severe extreme weather and climate events, from deluges to heat waves. In addition, the temperature spike could be a sign that warming is speeding up in ways that climate models failed to anticipate. (Axios)
Supreme Court move could spell doom for power of federal regulators: A legal doctrine long despised by conservatives for giving federal regulators wide-ranging power is making yet another march to the gallows at the Supreme Court. The high court announced that it is taking up a case squarely aimed at killing off the nearly-four-decade-old precedent that has come to be known as Chevron deference: the principle that courts should defer to reasonable agency interpretations of ambiguous provisions in congressional statutes and judges should refrain from crafting their own reading of the laws. The Supreme Court’s move is another signal that the court’s conservatives have not tired in their efforts to weaken the administrative state.
New York airports report record first quarter traffic: The number of travelers passing through airports in the New York City area hit record levels for the first quarter of the year, as traffic surpassed pre-pandemic levels. A total of 32mn passengers passed through John F Kennedy, Newark Liberty International and LaGuardia airports, according to the Port Authority. That surpassed the previous record high for the first three months of the year and was nearly 1mn more passengers than in the same period in 2019. (Financial Times)
New York poised to ban gas in new buildings. New York will require new buildings to be zero-emissions starting in 2026 and make a state authority a major player in developing renewables as part of this year’s budget, Gov. Kathy Hochul announced late Thursday. The state’s budget will ban fossil fuel combustion in most new buildings under seven stories starting in 2026, with larger buildings covered in 2029. That means no propane heating and no gas furnaces or stoves in most new construction. (Politico)
AI Push Drives Up Capex for Meta, Alphabet and Microsoft: Big tech companies such as Meta Platforms, Alphabet and Microsoft have become more careful about spending over the past few months, with each laying off thousands of people. But all three are ramping up spending on servers and other technical infrastructure to gain the capacity to build and sell more artificial intelligence tools. The spending reflects the gold rush mentality that has taken hold in tech as companies race to find ways of incorporating generative AI tools—which create humanlike writing, complex images and videos, and computer code—into their products and services. But such AI software is built on large-language models that require heavy amounts of computing power using expensive specialized chips. (The Information)
Economy
Investors warn of First Republic aftershocks at gloomy Milken gathering: Top investors attending the annual Milken conference have warned against complacency following the rescue of First Republic, arguing the third seizure of a bank by US regulators since March threatens to constrain credit and worsen an economic slowdown. Several prominent investors used the opening day of the conference to predict aftershocks following the recent turmoil. They argued banks would be forced to comply with tougher rules that could crimp their ability to lend just as the US economy is starting to feel the full force of the Federal Reserve’s aggressive interest rate rises. (Financial Times)
What JPMorgan’s purchase of First Republic means for the economy. (Politico)
Why America will soon see a wave of bank mergers. (The Economist)
How Jamie Dimon swooped on the remains of First Republic: In the end, after weeks of uncertainty and a final round of talks that dragged through the night, the fate of First Republic came down to JPMorgan Chase. Jamie Dimon’s Wall Street institution had been central to discussions about the distressed California lender since First Republic emerged as a weak spot in the banking sector this year. Ultimately it edged out bids from rival banks. JPMorgan secured a loss-sharing agreement with federal regulators to avoid any hit from the most problematic loans on First Republic’s books, a crucial sweetener for the buyer. (Financial Times)
The Air Has Come Out of the Dollar: Decadelong rally leaves U.S. currency as much as 15% overvalued, Goldman Sachs says. (Wall Street Journal)
Morgan Stanley Plans 3,000 More Job Cuts as Dealmaking Slumps. (Bloomberg)
The Federal Reserve is on track to raise its benchmark interest rate for the 10th time on Wednesday, the latest step in its yearlong effort to curb inflation with the fastest pace of hikes in four decades. Yet economists and Wall Street traders will be more interested in what the Fed and Chair Jerome Powell signal in a statement and at a news conference about a bigger question: What comes next? Economists say Powell will likely hint that the Fed is edging closer to a long-awaited pause in its rate increases. (Associated Press)
Citigroup’s Fraser Says Return-to-Office Trends Drive Property Fears. Pockets of commercial real estate, such as the area east of Third Avenue in Manhattan, are likely to come under stress as landlords continue to struggle to refill towers in the aftermath of Covid-19, Citigroup Inc. Chief Executive Officer Jane Fraser said. For her part, Fraser said she’s most worried about real estate with debt that’s been packaged into lower-rated commercial mortgage-backed securities. (Bloomberg)
Pandemic graduates struggle with teamwork, say Deloitte and PwC: Deloitte and PwC are giving extra coaching to their youngest UK staff after noticing recruits whose education was disrupted by lockdowns have weaker teamwork and communication skills than previous cohorts. Junior employees who spent part of their school or university years isolated from their peers have found it harder to adapt to the work environment, partners at the consulting firms told the Financial Times. The recruits have less confidence doing basic tasks such as making presentations and speaking up in meetings, they said. (Financial Times)
Deutsche Bank is planning a hiring spree and significant expansion of its investment bank advisory team, as the German lender positions itself for a dealmaking rebound and to take advantage of market dislocation after the collapse of rival Credit Suisse. Deutsche has already recruited 26 managing directors in the past two months — with several coming from its Swiss peer — and plans to continue adding more, investment bank boss Fabrizio Campelli said in an interview. (Financial Times)
China’s manufacturing activity contracted in April, official figures showed, as global demand for goods slowed and Communist party leaders warned that a post-Covid recovery in the world’s second-largest economy had yet to gain solid footing. (Financial Times)
Technology
Microsoft is launching a payments service within Microsoft Teams that allows small businesses using the program to charge customers for classes, appointments and other videoconferencing events, the company said on its website. GoDaddy, Stripe and PayPal helped Microsoft develop the payments feature. (The Information)
Chatbots beat MDs answering questions in an online forum: It wasn’t even close. In a study that asked three health professionals to evaluate responses to questions posed on a Reddit forum, a chatbot assistant was rated significantly higher than physicians on both quality and empathy, a study in JAMA Internal Medicine says. The research was inspired by how much more time clinicians are spending documenting care and responding not just to patient queries but also to insurers’ demands. Authors of a companion commentary yearn to leave the computer and get back to the bedside. Responses from physicians were much shorter than from the chatbots. One example: Asked whether you'd go blind from splashing bleach in your eye, a doctor said “Sounds like you will be fine. You should flush the eye ….” The chatbot said: “I’m sorry to hear that you got bleach splashed in your eye. It’s important to rinse the eye ….” The upshot: Maybe chatbots can help draft replies that doctors review. (STAT News, JAMA)
IBM to Pause Hiring for Jobs That AI Could Do: Roughly 7,800 IBM jobs could be replaced by AI, automation. (Bloomberg)
A.I. Is Getting Better at Mind-Reading. In a study published in the journal Nature Neuroscience, the researchers described an A.I. that could translate the private thoughts of human subjects by analyzing fMRI scans, which measure the flow of blood to different regions in the brain. Already, researchers have developed language-decoding methods to pick up the attempted speech of people who have lost the ability to speak, and to allow paralyzed people to write while just thinking of writing. But the new language decoder is one of the first to not rely on implants. In the study, it was able to turn a person’s imagined speech into actual speech and, when subjects were shown silent films, it could generate relatively accurate descriptions of what was happening onscreen. (New York Times)
‘The Godfather of A.I.’ Leaves Google and Warns of Danger Ahead. Geoffrey Hinton was an artificial intelligence pioneer. In 2012, Dr. Hinton and two of his graduate students at the University of Toronto created technology that became the intellectual foundation for the A.I. systems that the tech industry’s biggest companies believe is a key to their future. On Monday, however, he officially joined a growing chorus of critics who say those companies are racing toward danger with their aggressive campaign to create products based on generative artificial intelligence, the technology that powers popular chatbots like ChatGPT. (New York Times)
Geoffrey Hinton will be speaking live to MIT Technology Review in his first post-resignation interview at EmTech Digital on Wednesday. (MIT Technology Review Event Tickets)
Smart Links
Japan's Kishida to visit South Korea, likely in 1st half of May. (Nikkei Asia Review)
A simple paper test could offer early cancer diagnosis; it could also be designed to reveal whether a tumor has metastasized. (MIT News)
How Households Are Locked In by Rising Mortgage Rates. (Knowledge at Wharton)
G-7 ministers agree to 'five principles' for assessing AI risks. (Nikkei Asia Review)
Alibaba founder Jack Ma takes up teaching post in Tokyo. (Financial Times)