Squiz Today – Wednesday, 3 May

THE SQUIZ
The US Treasury Secretary Janet Yellen has warned the government could begin defaulting on its debt (that is, failing to make the repayments it owes) by 1 June if their federal debt ceiling isn’t raised. It would be a historic first and it follows Yellen’s warning earlier this year that “failure to meet the government’s obligations would cause irreparable harm to the US economy, the livelihoods of all Americans, and global financial stability.” It means the US could stop paying welfare benefits, military and public servant salaries, tax refunds, retirement pensions – basically anything that involves the government paying out money. And to add to the stress, economists have predicted that a default would shake international markets to their core, potentially plunging the world into a deep recession that could set America back for generations. 

UMM YOU’RE GONNA HAVE TO EXPLAIN THIS TO ME… 
The US has a huge national debt – more than US$31.45 trillion to be exact… It’s accumulated the debt since the American Civil War by selling what’s called ‘marketable securities’ such as Treasury bonds and notes. And then came COVID… Between 2020-22, spending increased by about 50% in the US due to tax cuts and stimulus programs which were accompanied by decreased tax revenue caused by widespread unemployment. A lot of governments were in the same boat, including Oz… But the issue for America is there’s a legal limit on how much debt the government can get into. In the past, Republicans and Democrats have agreed to raise that limit – it’s happened 78 times since 1960. But this year, hard-right Republican lawmakers are refusing to do it as a way to force US President Joe Biden to cut government spending. Since the impasse started, the Treasury has been using temporary accounting measures to keep paying, but Yellen says that’s about to end.

SO WHAT WOULD IT MEAN IF AMERICA DEFAULTS?
All and sundry say it would be a cluster disaster for the US and the world. And the fix for it isn’t economic – it’s political. Last week the Republicans in the House of Reps passed a bill that raises the debt ceiling at the same time as drastically cutting government spending. It would need to be passed by the Democratic-controlled Senate and signed by President Biden – and that ain’t gonna happen… For Biden’s part, he’s determined not to let Republicans play chicken with the US economy and wants them to raise the debt ceiling, no strings attached. Biden and chief provocateur/Republican House Speaker Kevin McCarthy will meet on 9 May, and market watchers are hoping they reach a deal before it turns into a boom-crash opera. As one analyst said: “There’s going to be a lot of drama, for sure.”

Up they go again…

Continuing with the finance theme… Aussie borrowers will be hit with another rate rise after the Reserve Bank board yesterday decided to lift the official cash rate to 3.85%. It came as a shock to some economists following recent signs that inflation has started to ease in Oz. Bank Governor Philip Lowe said inflation’s passed its peak, “but at 7% is still too high” given the target rate is 2-3%. Lowe says the cost of services and labour is still going up, and unemployment remains low. That equals more spending/demand in the economy, which circles back to more price rises. And it might not be over – Lowe’s flagged that “further tightening of monetary policy may be required” (aka rate rises) to tackle inflation down the track. Treasurer Jim Chalmers said yesterday’s update was tough for Aussies who are already under the pump but was “a reminder of the difficult economic conditions” shaping next week’s Federal Budget.

Qantas gets a fresh pair of wings

In the latest corporate shakeup announced in recent days, Qantas’ chief financial officer Vanessa Hudson will replace outgoing boss Alan Joyce in the top job in November. After 15 years at the helm, Joyce yesterday said it was a “logical time” to step aside after shepherding the company to the other side of the tough pandemic years. In February, the carrier announced it had returned to profit for the first time in 3 years but flagged signs of turbulence ahead. Joyce said rising interest rates and high inflation could continue to put a brake on consumer spending on travel, as well as push up borrowing costs for the company. And complaints have soared as Qantas’ staffing issues cause flight cancellations and delays, with Hudson pledging to focus on customer experience in the top job. After working in several executive roles at Qantas since 1994, Hudson will become the first woman to lead the nation’s flagship airline. 

AI expert issues a warning

Dr Geoffrey Hinton – the man considered the ‘godfather’ of artificial intelligence – has stepped down from Google so he can speak freely about the risks he believes it poses. Hinton is credited with creating the self-teaching technology that forms the basis of current-day AI systems like ChatGPT and Bard. After working at Google for more than a decade, Dr Hinton said a part of him now regrets his life’s work. What’s keeping him up at night is his concern that the technology is progressing so fast that AI systems could soon be more intelligent than humans and that they could do more harm than good, especially if they end up in the hands of “bad actors”. And while stressing he wasn’t criticising Google, who he said had been “very responsible”, he’s concerned about the ramifications of the tech race to develop AI. Just in time for a new AI development in mind-reading… 

It’s pens down for TV writers

You might notice some interruptions to your regularly scheduled TV viewing in the next couple of weeks… That’s because thousands of screenwriters are on strike in Hollywood from today, fighting for greater worker pay/conditions in the wake of the huge disruption created by the streaming services. The Writers Guild of America (WGA), which represents 20,000 US members, is behind the first strike since 2007-2008, when writers downed tools for 100 days at a cost of US$2 billion to California’s economy. Discussions between the union and the major studios have been going on for 6 weeks, but it’s come to naught. “The companies’ behaviour has created a gig economy inside a union workforce, and their immovable stance in this negotiation has betrayed a commitment to further devaluing the profession of writing,” the WGA said. So if you’re a fan of Saturday Night Live or The Bold and the Beautiful, you might want to get across this good breakdown of what the strike means for you…

Raising a lager to Karl…

Another year, another Met Gala done and dusted… But not before an on-brand NYC ambassador got its creepy-crawly moment. And it wasn’t the only animal to show up – paying tribute to the ‘Karl Lagerfeld: A Line of Beauty’ theme, actor Jared Leto and the (appropriately-named) US rapper Doja Cat dressed up as the German designer’s beloved cat. But for those who prefer a bit more of a traditional fashion moment, there were plenty to choose from… Stars who dressed in Lagerfeld’s vintage couture stood out, including Gisele Bundchen, Naomi Campbell, and our Nicole (who rewore the Lagerfeld-designed gown she donned for a Chanel No 5 commercial in 2004). Tennis legends served up looks – and baby news – while basketballer Brittney Griner also celebrated being back on US soil after her detention in Russia. In summary: there was a bit going on… 

Italian artist Maurizio Cattelan’s infamous duct tape banana has been eaten again – this time by a South Korean art student who claimed he was “hungry” after skipping breakfast. Nothing like a US$120,000 artwork to tide you over…

The Japanese city of Kakogawa has removed its public piano due to too many rule-breaking incidents. It turned out people don’t want to hear a wannabe aficionado play Chopsticks for hours on end… 

A German zoo is home to a polar bear cub for the first time in 21 years, and the fluffy little baby is a 10/10 on the cuteness scale. Polar bear cubs are born blind, deaf, and weighing less than a kilo, so the cub has been sticking close to its mum…

12.30pm (AEDT) – Danielle Wood, CEO of the Grattan Institute, Su-Lin Ong, Managing Director of RBC Capital Markets and Cherelle Murphy, EY Oceania Chief Economist, make their Pre-Budget address to the National Press Club – Canberra

ABS Data Release – Retail Trade, March; Selected Living Cost Indexes, March

Wild Koala Day

World Asthma Day

World Press Freedom Day

Ed Sheeran documentary The Sum Of It All drops on Disney+

Anniversary of:
• New Zealand being proclaimed a colony independent of New South Wales (1841)
• Margaret Mitchell winning the Pulitzer Prize for Gone With the Wind (1937)
• Japan’s post-war constitution going into effect, granting universal suffrage, stripping Emperor Hirohito of all but symbolic power and outlawing Japan’s right to make war (1947)
• the first spam email, sent by a Digital Equipment Corporation marketing representative to every ARPANET address on the US west coast (1978)
• the disappearance of Madeline McCann (2007)