Crypto News: US and Saudis go from fist bump to knife in the back

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OPEC+ oil cuts.
ChatGPT's threat to Google.
Comparing SVB to history.

Exactly 261 days ago, US President Joe Biden did a fist-bump with Saudi Arabia's crown prince, Mohammed bin Salman. Oh, how times have changed.

A crude joke. Photographer: Royal Court of Saudi Arabia / Handout/Anadolu Agency via Getty Images

In a surprise weekend announcement, OPEC+ said it's culling more than 1 million barrels a day from the market in the name of maintaining "stability" … which the White House has called "ill-advised." This kind of feels like a textbook thing for an oil cartel to do — sew mass chaos while attempting to pocket boatloads of cash — but on the back of a bros' fist-bump, it stings, nonetheless.

The OPEC+ cuts are the cherry on top of Russia's decision to axe 500,000 daily barrels, which Julian Lee says is a brazen attempt by President Vladimir Putin to "punish the nations arrayed against Moscow by pushing up oil prices." While Putin wants to exact revenge, OPEC+ has its eyes on supply and demand, which were projected to do a little switcharoo around June of this year:

Reading between the lines, David Fickling says the oil cartel might have a hunch that "some of the promised second-half demand is unlikely to materialize." But even if that's not the case, and OPEC+ is merely greedy for more oil revenue (as Javier Blas has written), there's still something sketchy afoot. Under normal circumstances, OPEC+ countries would be reinvesting oil cash into projects that would yield more oil. For Saudi Arabia — OPEC+'s most prominent player — that's not happening. The Saudis are diversifying their portfolio with "a flurry of investments in everything except new crude output," David writes. OPEC+ knows its core business has an expiration date, and it's going to do everything it can to keep the good times rolling until the tank runs out of gas.

As for the US, the cuts arrive at a rather precarious time for Jerome Powell's Federal Reserve, which has spent the last year knee-deep in a battle against inflation that even a recession might not be able to tame, Allison Schrager writes. Stronger oil prices will complicate the inflation narrative even further, Liam Denning argues: "Average gasoline prices are 16% below where they were a year ago. But they have risen 9% so far this year and, all else equal, OPEC+ has at the very least weakened a helpful disinflationary force."

Is it just me, or is shopping in-store nowadays an incredible guilt trip? I make eye contact with a salesperson, three hangers in my hands, and I'm all but helpless. They're starting a dressing room for me! They're selecting a shirt in two different colorways! They're telling me I look great in this skirt! Is it psychology? Am I just weak and socially awkward? Do I really need this bucket hat, or is it just because the cashier told me she rang up four of them earlier this afternoon?? I'll never know.

But online, things are different. I can control my own destiny. My shopping cart can rot for days, no problem. But what if salespeople existed there, too? This quote from Parmy Olson paints quite the picture:

"American users of ChatGPT will soon be able to go to the tool's main page and select the plugin for Klarna Bank AB, a payments facilitator for thousands of brands like Nike Inc. and Gucci. Once they select Klarna, they could ask ChatGPT to make product recommendations for a gift for their sister. Thanks to the powerful language model underpinning ChatGPT, known as GPT-4, they can give the kind of detail they'd share with a human retail employee, laying out at length how their sister loves movies and kayaking and is in their 30s, for instance. ChatGPT can then make the recommendation."

While the gift-giving advice is certainly an upgrade from Googling "cool fathers day gifts 2023," do we really want to open up this kind of Pandora's box? Klarna allows people to treat a Prada handbag as if it was a 30-year mortgage — a phenomenon Alexis Leondis gets into here. Instagram and TikTok algorithms are already scary-good at selling us stuff we don't need. Adding ChatGPT — a technology that Parmy says "millions of businesses can quickly exploit" — into the mix seems rather dangerous.

In that light, regulation seems all but inevitable. Noah Feldman says there are a few distinct possibilities. On one end,AI companies might be treated "like arms and weapons producers: heavily regulated, staffed by security-cleared scientists, and closely linked to the national security state." On the other end, "there's the lightest-touch mode of regulation: lawsuits," he writes. Determining which approach is most appropriate will take time, which Tyler Cowen argues is an essential ingredient for AI development. Although the prospect of a scary-good online salesperson is slightly terrifying, Tyler says a pause in AI will only hurt us in the long run.

Paul J. Davies and Elaine He took a look at the past 22 years of bank failures and found that a large majority of depositors were saved after their bank went under. But the size of Silicon Valley Bank's rescue was only comparable to Washington Mutual, which fell in 2008:

During the pandemic, SVB was swimming in VC money. But instead of keeping cash, like Bank of America and JPMorgan, the bank plowed it into government bonds and other securities. As rates rose, that money started to vanish, which spurred the bank run.