It's been about a month since we discussed Silicon Valley Bank (SVB). But the impact is still lingering. I know friends whose money is still tied up, and we've continued to see increased coverage of banks' perceived failures.
Currently, there are $7 trillion sitting uninsured in American banks. VisualCapitalist put together a list of the 30 biggest banks by uninsured deposits.
Many of the banks on this list are systemically important to the banking system ... which means the government would be more incentivized to prevent their collapse.
It's important to make clear that these banks differ from SVB in several ways. To start, their userbase is much more diverse ... but even more importantly, their loans and held-to-maturity securities are much lower as a percentage of total deposits. Those types of loans took up the vast majority of SVB's deposits, while they make up less than 50% of the systemically important banks on this list. But, according to VisualCapitalist, 11 banks on this list have ratios over 90%, just like SVB, which brings them to a much higher risk level.
Regulators stepped up in the wake of the SVB collapse, and the Fed also launched the Bank Term Funding Program (BTFP), as we discussed in the last article on this subject. But, it remains to be seen what will happen in the future.
Does the Fed have another option besides saving the banks and backing deposits? If not, market participants will start to rely on the Fed to come to the rescue, making even riskier decisions than they already were.
It feels like the Fed is stuck between a rock and a hard place, but hopefully, we will start to see some movement in the right direction.
In March, OpenAI unveiled GPT-4, and people were rightfully impressed. Now, fears are even greater about the potential consequences of more powerful AI.
The letter raises a couple of questions.
Should we let machines flood our information channels with propaganda and untruth? Should we automate away all the jobs, including the fulfilling ones? Should we develop nonhuman minds that might eventually outnumber, outsmart, obsolete and replace us? Should we risk loss of control of our civilization? - Pause Giant AI Experients: An Open Letter
The crux of their message is that we shouldn't be blindly creating smarter and more robust AI until we are confident that they can be managed and controlled to maintain a positive impact.
During the pause the letter calls for, the suggestion is for AI labs and experts to jointly develop and implement safety protocols that would be audited by an independent agency. At the same time, the letter calls for developers to work with policymakers to increase governance and regulatory authorities.
My personal thoughts? Trying to stop (or even pause) the development of something as important as AI is naive and impractical. From the Industrial Revolution to the Information Age, humanity has always embraced new technologies, despite initial resistance and concerns. The AI Age is no different, and attempting to stop its progress would be akin to trying to stop the tide. On top of that, AI development is a global phenomenon, with researchers, institutions, and companies from around the world making significant contributions. Attempting to halt or slow down AI development in one country would merely cede the technological advantage to other nations. In a world of intense competition and rapid innovation, falling behind in AI capabilities could have severe economic and strategic consequences.
It is bigger than a piece of software or a set of technological capabilities. It represents a fundamental shift in what's possible.
The playing field changed. We are not going back.
The game changed. That means what it takes to win or lose changed as well.
Yes, AI ethics is an important endeavor and should be worked on as diligently as the creation of new AI. But there is no pause button for exponential technologies like this.
Change is coming. Growth is coming. Acceleration is coming. Trying to reject it is an exercise in futility.
We will both rise to the occasion and fall to the level of our readiness and preparedness.
Actions have consequences, but so does inaction. In part, we can't stop because bad actors certainly won't stop to give us time to combat them or catch up.
When there is some incredible new "thing" there will always be some people who try to avoid it ... and some who try to leverage it (for good and bad purpose).
There will always be promise and peril.
What you focus on and what you do remains a choice.
Whether AI creates abundance or doomsday for you will be defined largely by how you perceive and act on the promise and peril you perceive. Artificial intelligence holds the potential to address some of the world's most pressing challenges, such as climate change, disease, and poverty. By leveraging AI's capabilities, we can develop innovative solutions and accelerate progress in these areas.
It's two sides of the same coin. A 6-month hiatus won't stop what's coming. In this case, we need to pave the road as we traverse it.
Last week, I shared a couple of videos that attempted to predict the future. As a result, someone sent me a video of Arthur C Clarke's predictions that I thought was worth sharing.
Arthur C. Clarke had a profound impact on the way we imagine the future. Known for his remarkable predictions, Clarke's ideas may have seemed farfetched at times, yet his thoughts on the future and the art of making predictions were grounded in reason.
If a prophet from the 1960s were to describe today's technological advancements in exaggerated terms, their predictions would sound equally ridiculous. The only certainty about the future is that it will be fantastical beyond belief, a sentiment Clarke understood well.
You can be a great futurist even if many of your predictions are off in execution, but correct in direction. For example, Clarke predicted that the advancements in communication would potentially make cities nonexistent. While cities still exist - in much the same way as in the 1960s - people can now work, live, and make a massive difference in their companies from anywhere on the planet, even from a van traveling around the country. Global communication is so easy that it's taken for granted.
As a science fiction author, some of what he wrote about might seem ridiculous today. For example, super-monkey servants creating trade unions. Much of what he wrote about was what could happen (and to provide a way for people to think about the consequences of their actions and inactions). As we discussed last week, humans often recognize big changes on the horizon ... but they rarely correctly anticipate the consequences.
In summary, even though some of Clarke's predictions were farfetched, they were rooted in a deep understanding of human potential and the transformative power of technology. His ability to envision a fantastical future was not only a testament to his imagination, but also served as an inspiration for generations of scientists, engineers, and dreamers. By embracing the unknown and acknowledging the inherent uncertainty of the future, we can continue to push the boundaries of what is possible and strive for a world that is truly beyond belief.
You won't always be 100% correct, but you'll be much closer than if you reject what's coming.
Top U.S. Banks by Uninsured Deposits ...
It's been about a month since we discussed Silicon Valley Bank (SVB). But the impact is still lingering. I know friends whose money is still tied up, and we've continued to see increased coverage of banks' perceived failures.
Currently, there are $7 trillion sitting uninsured in American banks. VisualCapitalist put together a list of the 30 biggest banks by uninsured deposits.
via visualcapitalist
Many of the banks on this list are systemically important to the banking system ... which means the government would be more incentivized to prevent their collapse.
It's important to make clear that these banks differ from SVB in several ways. To start, their userbase is much more diverse ... but even more importantly, their loans and held-to-maturity securities are much lower as a percentage of total deposits. Those types of loans took up the vast majority of SVB's deposits, while they make up less than 50% of the systemically important banks on this list. But, according to VisualCapitalist, 11 banks on this list have ratios over 90%, just like SVB, which brings them to a much higher risk level.
Regulators stepped up in the wake of the SVB collapse, and the Fed also launched the Bank Term Funding Program (BTFP), as we discussed in the last article on this subject. But, it remains to be seen what will happen in the future.
Does the Fed have another option besides saving the banks and backing deposits? If not, market participants will start to rely on the Fed to come to the rescue, making even riskier decisions than they already were.
It feels like the Fed is stuck between a rock and a hard place, but hopefully, we will start to see some movement in the right direction.
Posted at 07:15 PM in Business, Current Affairs, Market Commentary, Trading | Permalink | Comments (0)
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