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The economy still needs its bitter inflation medicine

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Thu, Mar 16, 2023 08:29 PM

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Plus: Will AI raise your kids? Follow Us This is Bloomberg Opinion Today, a hyperproductive hellscap

Plus: Will AI raise your kids? [Bloomberg]( Follow Us [Get the newsletter]( This is Bloomberg Opinion Today, a hyperproductive hellscape of Bloomberg Opinion’s opinions. [Sign up here](. Today’s Agenda - The Fed [must hike](. - The AI [must transform](. - The UK [must learn](. - The zones [must prosper](. The Fed’s Bitter Pill Sometimes when you are sick, a doctor will prescribe you medicine. And sometimes the prescription bottle will include a little disclaimer. Maybe you’ve seen it before: “Keep using this medicine for the full treatment time, even if you feel better after the first few doses. Your infection may not clear up if you stop using the medicine too soon.” The instructions are simple. Take the full dose. And yet [some of us never learn]( this lesson. Halfway through the dose, we feel miraculously cured. The ailment is gone! And with it, the urge to take the medicine. Then, when the illness comes roaring back, we act shocked, appalled, horrified. But it’s our fault for not following the doctor’s orders. This is basically what’s happening with the economy. Rate hikes are what the doctor has ordered to fight inflation — the doctor being the Federal Reserve. When Silicon Valley Bank collapsed, some saw it as a sign the Fed’s tightening campaign was finally starting to work. “If we were this close to a system-wide financial meltdown, then the Fed should stop raising rates,” the argument goes. Not so fast, argues Bloomberg’s editorial board: “A pause now might only delay, [not avoid, the need for higher rates]( — and could necessitate even bigger subsequent increases.” The editors point to the latest CPI report as proof: Core inflation is still rising at an annual rate of 5.6%, which means the Fed still has a long way to go to achieve its mission. John Authers agrees: “There’s nothing in this report to suggest that [inflation is defeated already](, or to justify leaving rates unchanged.” This is no time to stop taking medicine: We’re now one year into the Fed’s rate-hike campaign, Jonathan Levin notes, but the mounting crises at SVB, Signature Bank and now Credit Suisse (which Paul Davies and Matt Levine break down [here]( and [here](, respectively) are causing headaches (fedaches??) for Fed chair Jerome Powell. Jonathan writes the central bank chief essentially has [two choices](, neither of which are appealing: - Entrenched inflation - An ever-more-likely recession Unlike some prescriptions, the Fed’s rate-hike medicine has no clear timeframe. It’s obvious we still need more doses, but a new, unintended side-effect — recession — might be getting in the way. It’s “a lose-lose scenario of policymakers’ own making,” Jonathan writes. Read [the whole thing](. Bonus Bank Reading: - After Credit Suisse, [can we trust our money-market funds]( to stay afloat? — Alexis Leondis - Nothing grabs investors’ attention like an [old-fashioned bank run](. Beware of scaremongers. — Nir Kaissar - Credit Suisse needs to find a way to calm down the crazy, rich, [anxious Asians](. — Shuli Ren There’s an AI for That Ten billion years ago in 2009, Apple started [using the phrase]( “There’s an app for that.” Everyone from [My Little Pony]( to [the state of Florida]( made parodies. [YouTube: iPhone 3g Commercial "There's An App ...]( After 10+ years, the bit is getting stale. So let’s start a new one: There’s an AI for everything. Let’s count the ways: - An AI for [groceries](! - An AI for [mental health](! - An AI for [bugs](! - An AI for [space](! Oh, what’s that? You want an encore? Twist my arm: - An AI for [cancer](! - An AI for [Super Bowls](! - An AI for [CEOs](! - An AI for [jailbreakers](! The list probably goes on ad infinitum. Now that we’re seeing the marked improvement of [OpenAI’s ChatGPT-4](, Tyler Cowen suggests bots wo;; transform everyone’s lives, but [perhaps no one will be more impacted than our children](. “In the future, every middle-class kid will grow up with a personalized AI assistant — so long as the parents are OK with that,” he writes. Gone are the days of imaginary friends — little ones will now have a built-in companion they can talk to as often as they want. Tyler pictures a future in which people will use AI services for everything, from tutoring and therapy to “vocalizations of what the family pet might be thinking.” Can you imagine, growing up being able to talk to your DOG?!? In my days, all I had was my [Tamagotchi]( and a [Poo-Chi](. This would be a major upgrade. Now, if you’ve only used the first iteration of ChatGPT, this may sound unrealistic. But Parmy Olson writes the progress the large language model has already achieved is remarkable: “The old ChatGPT could only read text. The new ChatGPT can look at a photo of the contents of your fridge and suggest a dinner recipe. The old ChatGPT scored in the 10th percentile on the bar exam. The new one was in the 90th.” That level of intelligence will inevitably “raise the bar on the humans’ performance,” she argues, adding our workplaces may soon turn into “[hyperproductive hellscapes](.” If you’re not sure what to think about all this, don’t worry. I’m sure there’s an AI for that, too. Telltale Jeremy Hunt Charts The UK is battling a [vibecession]( like no other: Half a million workers are on strike, and yet the economic picture is actually pretty sunny. “Inflation, which reached 11.1% in October, is now anticipated to be 2.9% at the end of the year,” Therese Raphael writes. That might be so, but [no amount of platitudes from Jeremy Hunt can reverse]( these Brexit battle wounds: Could [12 new investment zones]( be good for what ails the UK economy? Sure. But “anyone who thinks this is likely to ‘supercharge’ economic growth, in the words of the UK’s finance minister, is likely to be disappointed,” Matthew Brooker writes. Zones like these are good policy, but 12 of them probably won’t make a tangible dent in the grand scheme of things: Further Reading Of course cutting the price of insulin has to be [good for Big Pharma’s bottom line](. — Lisa Jarvis A concerning number of Japan’s national assets are tied up in government bonds. [Can Kuroda avoid repeating SVB’s mistakes](? — Daniel Moss Putin’s [Russia was humiliated](. Now the Kremlin will hold a grudge forever. — Andreas Kluth California is going to need [more than reparations]( if it wants to fully reckon with slavery. — Francis Wilkinson [Two UK department store chains]( are under serious financial strain. — Andrea Felsted Tennessee’s discriminatory [ban on drag performances]( is a direct violation of the First Amendment. — Noah Feldman The ECB might be walking head-first into [a nightmare banking storm](. — Marcus Ashworth ICYMI TikTok [braces]( for the worst. First Republic got a [$30 billion rescue](. What it’s like to travel on “[Trump Force One](.” The [top US cities]( where $100,000 goes the furthest. Kickers Rival towns fight over [a frozen dead guy](. Caesar salad and chicken soup [martinis](. Some people really [hate water](. Fitness influencers are eating [dog food](. Notes:  Please send frozen dead guys and feedback to Jessica Karl at jkarl9@bloomberg.net. [Sign up here]( and follow us on [Instagram](, [TikTok](, [Twitter]( and [Facebook](. Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022

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