Finance

In “Permutation City”, a novel by Greg Egan, the character Peer, having achieved immortality within a virtual reality over which he has total control, finds himself terribly bored. So he engineers himself to have new passions. One moment he is pushing the boundaries of higher mathematics; the next he is writing operas. “He’d even been interested in the Elysians [the afterlife], once. No longer. He preferred to think about table legs.” Peer’s fickleness relates to a deeper point. When technology has solved humanity’s deepest problems, what is left to do?That is one question considered in a new book by Nick Bostrom, a philosopher at the University of Oxford, whose last book argued that humanity faced a one-in-six chance of being wiped out in the next 100 years, perhaps owing to the development of dangerous forms of artificial intelligence (AI). In Mr Bostrom’s latest publication, “Deep Utopia”, he considers a rather different outcome. What happens if AI goes extraordinarily well? Under one scenario presented in the book, the technology progresses to the point at which it can do all economically valuable work at near-zero cost. Under a yet more radical scenario, even tasks that you might think would be reserved for humans, such as parenting, can be done better by AI. This may sound more dystopian than utopian, but Mr Bostrom argues otherwise.Start with the first scenario, which Mr Bostrom labels a “post-scarcity” Utopia. In such a world, the need for work would be reduced. Almost a century ago John Maynard Keynes wrote an essay entitled “Economic Possibilities for Our Grandchildren”, which predicted that 100 years into the future his wealthy descendants would need to work for only 15 hours a week. This has not quite come to pass, but working time has fallen greatly. In the rich world average weekly working hours have dropped from more than 60 in the late 19th century to fewer than 40 today. The typical American spends a third of their waking hours on leisure activities and sports. In the future, they may wish to spend their time on things beyond humanity’s current conception. As Mr Bostrom writes, when aided by powerful tech, “the space of possible-for-us experiences extends far beyond those that are accessible to us with our present unoptimised brains.”Yet Mr Bostrom’s label of a “post-scarcity” Utopia might be slightly misleading: the economic explosion caused by superintelligence would still be limited by physical resources, most notably land. Although space exploration may hugely increase the building space available, it will not make it infinite. There are also intermediate worlds where humans develop powerful new forms of intelligence, but do not become space-faring. In such worlds, wealth may be fantastic, but lots of it could be absorbed by housing—much as is the case in rich countries today.“Positional goods”, which boost the status of their owners, are also still likely to exist and are, by their nature, scarce. Even if AIs surpass humans in art, intellect, music and sport, humans will probably continue to derive value from surpassing their fellow humans; for example, by having tickets to the hottest events. In 1977 Fred Hirsch, an economist, argued in “The Social Limits to Growth” that, as wealth increases, a greater fraction of human desire consists of positional goods. Time spent competing goes up, the price of such goods increases and so their share of GDP rises. This pattern may continue in an AI Utopia.Mr Bostrom notes some types of competition are a failure of co-ordination: if everyone agrees to stop competing, they would have time for other, better things, which could further boost growth. Yet some types of competition, such as sport, have intrinsic value, and are worth preserving. (Humans may also have nothing better to do.) Interest in chess has grown since IBM’s Deep Blue first defeated Garry Kasparov, then world champion, in 1997. An entire industry has emerged around e-sports, where computers can comfortably defeat humans; their revenues are expected to grow at a 20% annual rate over the next decade, reaching nearly $11bn by 2032. Several groups in society today give us a sense of how future humans might spend their time. Aristocrats and bohemians enjoy the arts. Monastics live within themselves. Athletes spend their lives on sport. The retired dabble in all these pursuits.Everyone’s early retirementWon’t tasks such as parenting remain the refuge of humans? Mr Bostrom is not so sure. He argues that beyond the post-scarcity world lies a “post-instrumental” one, in which AIs would become superhuman at child care, too. Keynes himself wrote that “there is no country and no people, I think, who can look forward to the age of leisure and of abundance without a dread. For we have been trained too long to strive and not to enjoy…To judge from the behaviour and the achievements of the wealthy classes today in any quarter of the world, the outlook is very depressing!” The Bible puts it more succinctly: “idle hands are the devil’s workshop.”These dynamics suggest a “paradox of progress”. Although most humans want a better world, if tech becomes too advanced, they may lose purpose. Mr Bostrom argues that most people would still enjoy activities that have intrinsic value, such as eating tasty food. Utopians, believing life had become too easy, might decide to challenge themselves, perhaps by colonising a new planet to try to re-engineer civilisation from scratch. At some point, however, even such adventures might cease to feel worthwhile. It is an open question how long humans would be happy hopping between passions, as Peer does in “Permutation City”. Economists have long believed that humans have “unlimited wants and desires”, suggesting there are endless variations on things people would like to consume. With the arrival of an AI Utopia, this would be put to the test. Quite a lot would ride on the result. ■ More

JPMorgan Chase Jamie Dimon chose AI as the first topic in his update of issues facing the biggest U.S. bank by assets.
In his annual letter to shareholders released Monday, Dimon said he was convinced that artificial intelligence will have a profound impact on society.
He also touched on inflation, geopolitics, social media and the bank’s First Republic deal.

Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on Dec. 6, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images

Jamie Dimon, the veteran CEO and chairman of JPMorgan Chase, said he was convinced that artificial intelligence will have a profound impact on society.
In his annual letter to shareholders released Monday, Dimon chose AI as the first topic in his update of issues facing the biggest U.S. bank by assets — ahead of geopolitical risks, recent acquisitions and regulatory matters.

“While we do not know the full effect or the precise rate at which AI will change our business — or how it will affect society at large — we are completely convinced the consequences will be extraordinary,” Dimon said.
The impact will be “possibly as transformational as some of the major technological inventions of the past several hundred years: Think the printing press, the steam engine, electricity, computing and the Internet.”
Dimon’s letter, read widely in the business world because of his status as one of the most successful leaders in finance, hit a wide variety of topics. The CEO said that he had ongoing concerns about inflationary pressures and reiterated his warning that the world may be entering the riskiest era in geopolitics since World War II.
But his focus on AI, first mentioned in Dimon’s annual letter in 2017, stood out. The technology, which has gained in prominence since ChatGPT became a viral sensation in late 2022, can generate human-sounding responses to queries. Enthusiasm for AI has fueled the meteoric rise in chipmaker Nvidia and helped propel tech names to new heights.  
JPMorgan now has more than 2,000 AI and machine learning employees and data scientists working on 400 applications including fraud detection, marketing and risk controls, Dimon said. The bank is also exploring the use of generative AI in software engineering, customer service and ways to boost employee productivity, he said.

The technology could ultimately touch all of the bank’s roughly 310,000 employees, assisting some workers while replacing others, and forcing the company to retrain workers for new roles.
“Over time, we anticipate that our use of AI has the potential to augment virtually every job, as well as impact our workforce composition,” Dimon said. “It may reduce certain job categories or roles, but it may create others as well.”
Here are excerpts from Dimon’s letter:

Inflationary pressures:

“Many key economic indicators today continue to be good and possibly improving, including inflation. But when looking ahead to tomorrow, conditions that will affect the future should be considered… All of the following factors appear to be inflationary: ongoing fiscal spending, remilitarization of the world, restructuring of global trade, capital needs of the new green economy, and possibly higher energy costs in the future (even though there currently is an oversupply of gas and plentiful spare capacity in oil) due to a lack of needed investment in the energy infrastructure.”

On the economy’s soft landing:

“Equity values, by most measures, are at the high end of the valuation range, and credit spreads are extremely tight. These markets seem to be pricing in at a 70% to 80% chance of a soft landing — modest growth along with declining inflation and interest rates. I believe the odds are a lot lower than that.”

On interest rates & commercial real estate:

“If long-end rates go up over 6% and this increase is accompanied by a recession, there will be plenty of stress — not just in the banking system but with leveraged companies and others. Remember, a simple 2 percentage point increase in rates essentially reduced the value of most financial assets by 20%, and certain real estate assets, specifically office real estate, may be worth even less due to the effects of recession and higher vacancies. Also remember that credit spreads tend to widen, sometimes dramatically, in a recession.”

On a breakdown between banks and regulators:

“There is little real collaboration between practitioners — the banks — and regulators, who generally have not been practitioners in business…. Unfortunately, without collaboration and sufficient analysis, it is hard to be confident that regulation will accomplish desired outcomes without undesirable consequences. Instead of constantly improving the system, we may be making it worse.”

On rising geopolitical risks:

“Russia’s invasion of Ukraine and the subsequent abhorrent attack on Israel and ongoing violence in the Middle East should have punctured many assumptions about the direction of future safety and security, bringing us to this pivotal time in history. America and the free Western world can no longer maintain a false sense of security based on the illusion that dictatorships and oppressive nations won’t use their economic and military powers to advance their aims — particularly against what they perceive as weak, incompetent and disorganized Western democracies. In a troubled world, we are reminded that national security is and always will be paramount, even if its importance seems to recede in tranquil times.”

On social media:

“One common sense and modest step would be for social media companies to further empower platform users’ control over what they see and how it is presented, leveraging existing tools and features — like the alternative feed algorithm settings some offer today. I believe many users (not just parents) would appreciate a greater ability to more carefully curate their feeds; for example, prioritizing educational content for their children.”

An update on the First Republic deal:

“The acquisition of a major company entails a lot of complexity. People tend to focus on the financial and economic outcomes, which is a reasonable thing to do. And in the case of First Republic, the numbers look rather good. We recorded an accounting gain of $3 billion on the purchase, and we told the world we expected to add more than $500 million to earnings annually, which we now believe will be closer to $2 billion.”
JPMorgan acquired most of the assets of First Republic last year for more than $10 billion after regulators seized the firm amid the regional banking crisis. More

U.S. Treasury Secretary Janet Yellen said Monday that future discussions between the U.S. and China will focus on Beijing’s need to change its policy on industry and the economy.
She noted U.S. conversations with the Chinese would continue later this month at the International Monetary Fund and World Bank Group spring meetings in Washington, D.C.
Instead of global trade, Beijing’s oversupply concerns tend to focus on the deflationary aspects, detriments to banking sector health and local governments’ fiscal stress, said Yue Su, principal economist for China at The Economist Intelligence Unit.

U.S. Treasury Secretary Janet Yellen said Monday that future discussions between the U.S. and China will focus on Beijing’s need to shift its policy on industry and the economy, as she wrapped up the fourth and final full day of her trip to China on April 8. 2024.
Pedro Pardo | Afp | Getty Images

BEIJING — U.S. Treasury Secretary Janet Yellen said Monday that future discussions between the U.S. and China will focus on Beijing’s need to change its policy on industry and the economy.
“We intend to underscore the need for a shift in policy during these talks — building on the over two hours I spent on this topic with the Vice Premier last week,” she said in prepared remarks for a news conference Monday, as she wrapped up the fourth and final full day of her trip to China.

She arrived in Guangzhou on Thursday and is set to depart Beijing on Tuesday.
Yellen said her conversations with Chinese officials during the trip discussed plans Beijing had for its economy, but she did not elaborate. Yellen also declined to share what tools the U.S. might use to prevent China’s industrial policy from resulting in the loss of American jobs.
She noted U.S. conversations with the Chinese would continue later this month at the International Monetary Fund and World Bank Group spring meetings in Washington, D.C.

China’s industrial overcapacity — or excess production of goods that undercuts global competitors on price — has increasingly become a point of international concern. Other countries claim such production is often heavily subsidized.
However, instead of global trade, Beijing’s oversupply concerns tend to focus on the deflationary aspects, detriments to banking sector health and local governments’ fiscal stress, said Yue Su, principal economist for China at The Economist Intelligence Unit.

“We anticipate further anti-subsidy and anti-dumping investigations on Chinese manufacturing to take place throughout the remainder of the year, particularly as inflation becomes less of a concern for many developed economies,” Su said. “These investigations may extend to Chinese overseas factories, including those in ASEAN countries.”

A call to boost domestic demand

When asked about potential solutions, Yellen pointed to how China could boost domestic demand relative to supply by adding support for retirement or children’s education.
High costs of living, including housing and health care, have encouraged many Chinese to save rather than spend.
Yellen acknowledged that efforts to reduce industrial overcapacity or increase domestic demand would not be resolved quickly.
“This is a matter that we have discussed over more than a decade in China,” she told reporters.
Consumer demand in China didn’t rebound from the pandemic as quickly as many analysts had expected. In contrast to governments in the U.S. and Hong Kong, Beijing did not issue stimulus checks, but instead focused on cutting business taxes and fees.

National security talks

China has also sought to bolster its technological capabilities in the face of growing U.S. restrictions on how Chinese companies can access that tech.
Both Washington and Beijing have increasingly cited national security as the reason for new measures.
Yellen on Monday said both sides exchanged information on the use of economic tools in national security, and should continue to do so. “We are committed to no surprises,” she said.
During her trip, Yellen met with top Chinese officials including Premier Li Qiang in Beijing and Vice Premier He Lifeng in Guangzhou.

“Over the past year, we have put our bilateral relationship on more stable footing,” Yellen said in prepared remarks for her meeting with Li on Sunday.
“This has not meant ignoring our differences or avoiding tough conversations,” she said. “It has meant understanding that we can only make progress if we directly and openly communicate with one another.”
In a readout from China, Li said Beijing hoped the U.S. would abide by market economy norms and avoid politicizing trade issues. He said the development of China’s new energy industry will make important contributions to global carbon neutrality efforts.
The U.S. and China agreed to “intensive exchanges on balanced growth in the domestic and global economies,” according to a Treasury readout after Yellen’s meetings with Vice Premier He.
The two countries also agreed to “start Joint Treasury-PBOC Cooperation and Exchange on Anti-Money Laundering to expand cooperation against illicit finance and financial crime,” the readout said.
The Chinese side did not explicitly mention such agreements, but said both sides planned to maintain communication. Beijing also “expressed serious concerns” about U.S. trade restrictions.
The Chinese readout described the talks as “constructive,” and noted conversations about “balanced economic growth,” “financial stability” and “anti-money laundering.” That’s according to a CNBC translation.
The U.S. Treasury secretary also met Minister of Finance Lan Fo’an, the mayors of Beijing and Guangzhou, representatives of U.S. businesses, and professors and students at Peking University during the visit.

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Ripple CEO Brad Garlinghouse said he expects the entire value of the crypto market to double this year, citing the arrival of the first U.S. spot bitcoin exchange-traded fund and upcoming so-called bitcoin “halving.”
“The overall market cap of the crypto industry … is easily predicted to to double by the end of this year … [as it’s] impacted by all of these macro factors,” Garlinghouse said.
One of the other factors Garlinghouse sees pushing the crypto market to new highs is the possibility of positive regulatory momentum in the United States.

Brad Garlinghouse, CEO of Ripple, speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, U.S., May 4, 2022. 
Mike Blake | Reuters

The CEO of blockchain startup Ripple sees the combined market capitalization of the cryptocurrency market topping $5 trillion this year.
Ripple’s Brad Garlinghouse told CNBC that he expects the entire value of the crypto market to double, citing macro factors including the arrival of the first U.S. spot bitcoin exchange-traded fund (ETFs), as well as the upcoming so-called bitcoin “halving.”

“I’ve been around this industry for a long time, and I’ve seen these trends come and go,” Garlinghouse told CNBC. “I’m very optimistic. I think the macro trends, the big picture things like the ETFs, they’re driving for the first time real institutional money.”
“You’re seeing that drives demand, and at the same time demand is increasing, supply is decreasing,” Garlinghouse said. “That doesn’t take an economics major to tell you what happens when supply contracts and demand expands.”

The first U.S. spot bitcoin ETFs were approved on Jan. 10 by the U.S. Securities and Exchange Commission. They trade on U.S. stock exchanges and allow institutions and retail investors to gain exposure to bitcoin without directly owning the underlying asset.
The bitcoin halving is a technical event that takes place roughly every four years in bitcoin’s history. It halves the total mining reward to bitcoin miners, which are volunteers on the bitcoin network that use high-powered computers to verify transactions and mint new tokens.
The last such event took place in 2020, and the next one is slated to happen later this month.

“The overall market cap of the crypto industry … is easily predicted to to double by the end of this year … [as it’s] impacted by all of these macro factors,” Garlinghouse said.
The total crypto market capitalization was roughly $2.6 trillion as of April 4. If the market were to double, that would imply a new total crypto market cap of $5.2 trillion.
Bitcoin has risen more than 140% in the last 12 months.
It hit a record high above $73,000 on March 13, according to CoinGecko data. It has since fallen well below the $70,000 level, however.

The world’s digital currency has been the main token driving gains for the broader market.
Bitcoin accounts for about 49% of the entire crypto market, with a market capitalization of $1.3 trillion as of April 1.

Positive signs on U.S. crypto regulation

One of the other factors that Garlinghouse sees pushing the crypto market to new highs is the possibility of positive regulatory momentum in the United States.
This year being an election year, crypto hopefuls are optimistic that the next administration will be more accommodating to the crypto industry with its policy focus.
The SEC under Chair Gary Gensler has been aggressive in its enforcement on crypto companies, including Ripple itself.
The SEC targeted Ripple with a securities lawsuit alleging it illegally sold XRP, a cryptocurrency Ripple is closely associated with, in unregistered securities deals. Ripple denies the claims and is fighting the suit.

Read more about tech and crypto from CNBC Pro

“One of the things actually I’ll say on the macro tailwinds for the industry: I think we will get more clarity in the United States,” Garlinghouse said.
“The U.S. is still the largest economy in the world, and it’s unfortunately been one of the more hostile crypto markets. And I think that’s going to start to change, also.”
Garlinghouse isnt the only crypto bull predicting outsized gains for the crypto market this year.
Marshall Beard, chief operating officer of U.S. crypto exchange Gemini, recently told CNBC at a crypto conference in London that he expects the bitcoin price to rise to $150,000 later this year.
“Everything went up so fast already this year, there’s just a lot of activity, a lot of adoption, new regulation, ETFs, the halving, miners needing to get out,” Beard told CNBC.
“You’re going to see violent moves up and down until that new all-time high, which I think will be $150,000,” Beard added. “It probably happens this year. I think it moves so fast … and I think that momentum, the supply shock, it moves crazy quickly.”
WATCH: Bitcoin serves different purposes for different people, says Anthony Pompliano More

A new ETF is trying to capture profits in the municipal funds space.
BondBloxx’s Joanna Gallegos is behind the IR+M Tax-Aware Short Duration ETF (TAXX) — which launched less than a month ago. 

“When you think about municipal bond portfolios, you really want people to think beyond them and look for the relative value of after-tax income,” the firm’s co-founder and COO told CNBC’s “ETF Edge” on Monday. 
Gallegos sees actively managed municipal bond exchange-traded funds as an income-generating opportunity in a high rate environment. She expects healthy returns even if the Federal Reserve starts to cut interest rates this year.
According to the BondBloxx website, almost 62% of TAXX’s holdings are in municipal bonds. Its five largest muni holdings by state as of Thursday were Illinois, Pennsylvania, New Jersey, New York and Alabama.
The ETF also includes exposure to corporate and securitized bonds. The firm states the fund’s mixed-bond approach presents a “wider opportunity” to increase after-tax total returns. FactSet describes the fund as “tax efficient” — balancing strong after-tax income opportunities with capital preserved through both municipal and taxable short-duration fixed income securities. 
“Right now, the portfolio’s tax-equivalent yield is close to 6%. It’s about 5.88 as you look at it,” Gallegos said. “It’s just the year to be thinking about taxes.” 

As of Friday, TAXX is down 0.2% since its March 14 launch date.
Disclaimer

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US Federal Reserve Governor Michelle Bowman attends a “Fed Listens” event at the Federal Reserve headquarters in Washington, DC, on October 4, 2019. 
Eric Baradat | AFP | Getty Images

Federal Reserve Governor Michelle Bowman said Friday that it’s possible interest rates may have to move higher to control inflation, rather than the cuts her fellow officials have indicated are likely and that the market is expecting.
Noting a number of potential upside risks to inflation, Bowman said policymakers need to be careful not to ease policy too quickly.

“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” she said in prepared remarks for a speech to a group of Fed watchers in New York. “Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run.”
As a member of the Board of Governors, Bowman is a permanent voting member of the rate-setting Federal Open Market Committee. Since taking office in late 2018, her public speeches have put her on the more hawkish side of the FOMC, meaning she favors a more aggressive posture toward containing inflation.
Bowman said her most likely outcome remains that “it will eventually become appropriate to lower” rates, though she noted that “we are still not yet at the point” of cutting as “I continue to see a number of upside risks to inflation.”
The speech, to the Shadow Open Market Committee, comes with markets on edge about the near-term future of Fed policy. Statements this week from multiple officials, including Chair Jerome Powell, have indicated a cautious approach to cutting rates. Atlanta Fed President Raphael Bostic, an FOMC voter, told CNBC he likely sees just one reduction this year, and Minneapolis Fed President Neel Kashkari indicated no cuts could happen if inflation does not decelerate further.
Futures traders are pricing in three cuts this year, though it has become a close call between June and July for when they start. FOMC members in March also penciled in three cuts this year, though one unidentified official in the “dot plot” indicated no decreases until 2026 and there was considerable dispersion otherwise about how aggressively the central bank would move.

“Given the risks and uncertainties regarding my economic outlook, I will continue to watch the data closely as I assess the appropriate path of monetary policy, and I will remain cautious in my approach to considering future changes in the stance of policy,” Bowman said.
Weighing inflation risks, she said that supply-side improvements that helped bring numbers down this year may not have the same impact going forward. Moreover, she cited geopolitical risks and fiscal stimulus as other upside hazards, along with stubbornly higher housing prices and labor market tightness.
“Inflation readings over the past two months suggest progress may be uneven or slower going forward, especially for core services,” Bowman said.
Fed officials will get their next look at inflation data Wednesday, when the Labor Department releases the March consumer price index report.

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Trump has proposed a baseline 10% tariff on all U.S. imports and a levy of 60% or higher on imported Chinese products.
Speaking to CNBC’s Steve Sedgwick on the sidelines of the Ambrosetti Forum on Friday, Koo said protectionism was a “horrible thing,” but that Trump’s approach “does have some economic logic.”

Former U.S. President Donald Trump speaks after attending a wake for New York City Police Department (NYPD) officer Jonathan Diller, who was shot and killed while making a routine traffic stop on March 25 in the Far Rockaway section of Queens, in Massapequa Park, New York, U.S., March 28, 2024. 
Shannon Stapleton | Reuters

Decades of trade deficits and a strong dollar created too many “losers” in the U.S. economy who turned to Donald Trump’s protectionist policies, according to Richard Koo, chief economist at the Nomura Research Institute — and those conditions remain.
Trump’s “America First” economic policies led his administration to institute a slew of trade tariffs on China, Mexico, the European Union and others, including slapping 25% duties on imported steel and aluminum.

As the Republican nominee for the 2024 presidential election, Trump has proposed a baseline 10% tariff on all U.S. imports and a minimum levy of 60% on imported Chinese products.
These policies have drawn widespread criticism from economists, who argue that tariffs are counterproductive, as they make imported goods more expensive for the average American.
Speaking to CNBC’s Steve Sedgwick on the sidelines of the Ambrosetti Forum on Friday, Koo said protectionism was a “horrible thing,” but that Trump’s approach “does have some economic logic.”
“When we studied economics and free trade, in particular, we were taught…that free trade always creates both winners and losers in the same economy, but the gain that winners get is always greater than the loss of the losers, so the society as a whole always gains. So that’s why the free trade is good,” he noted.
Koo nevertheless argued that this rests on the assumption that trade flows are balanced or in surplus, while the U.S. has been running huge deficits for the last forty years, which have expanded the number of “losers.”

“By 2016, the number of people who consider themselves losers of free trade, were large enough to elect Trump president, and so we have to really go back and say to ourselves: what did we do wrong to allow this many people in United States to view themselves as losers of free trade?” he said.
For Koo, the key problem was the exchange rate, as the strength of the U.S. dollar incentivized foreign imports and hurt U.S. companies exporting around the world.
“We kind of let the exchange rate be decided by so-called market forces, speculators, my clients, Wall Street types, but the foreign exchange rate has to be set in a way that the number of losers does not grow to a point where the free trade itself is lost,” Koo said.
He pointed to a similar pivotal moment in 1985, when President Ronald Reagan faced the same issue of a strong dollar and rising protectionism. At the time, Reagan responded by facilitating the Plaza Accord with France, West Germany, Japan and the United Kingdom to depreciate the U.S. dollar against the respective currencies of these countries through intervention in the foreign exchange market.

“That’s the kind of thing we should have been more conscious of doing. Instead of allowing [the] dollar to go wherever the market takes [it], and then these people who are not as fortunate as we are in the financial markets, end up suffering and end up voting for Mr. Trump,” Koo added.
He argued that economists need to move beyond the idea that the trade deficit is simply down to “too much investment” and “too few savings” in the U.S., as this means deficit can only be reduced by remaining in recession until domestic demand weakens so much that U.S. companies can export more goods, which would not be possible in a democracy.
Koo again pointed to past dealings with Japan, suggesting that if the argument held that overseas companies are just filling in where U.S. companies cannot satisfy domestic demand, then the American companies fighting Japanese firms in the 1970s and 70s should have recorded huge profits due to excess demand.
“But that did not actually happen. It’s the opposite that happened. So many of them went bankrupt, so many losers of free trade were left in the streets, because it was not savings and investment issue, it was the exchange rate issue,” he said.
“The dollar should have been much weaker, and Reagan understood that that’s why he took that action.”
President Joe Biden’s administration has also broken from Washington’s decades-long spotlight on free trade deals and has retained any of the measures enacted under the Trump administration.
However, rather than focus on imposing new tariffs, Biden has instead bet big on industrial policies such as the CHIPS and Science Act and the Inflation Reduction Act to bring manufacturers back to the United States, particularly in rapidly-growing sectors such as semiconductors and electric vehicles. More

Since November, Nio has partnered with at least four Chinese automakers — Changan, Geely, Chery and JAC — for developing battery swap standards and expanding the network in China.
Nio has installed more than 2,300 battery swap stations but said less than a fifth currently are breaking even.
The company’s investment in battery swap stations is about two years ahead of market demand, CEO William Li said at an event last month here Nio announced a partnership with battery giant CATL.

Pictured here is a Nio battery swapping station in Haikou, Hainan province, China, on May 9, 2023.
Bloomberg | Bloomberg | Getty Images

BEIJING — Chinese electric car company Nio has been expanding its battery swap partnerships in a bid to gain an edge on the infrastructure side of the EV ecosystem.
Since November, Nio has partnered with at least four Chinese automakers — Changan, Geely, Chery and JAC — for developing battery swap standards and expanding the network in China. Nio also announced agreements earlier this year to work with two local battery companies on battery swap services.

All these efforts are aimed at alleviating consumers’ anxiety about driving range. While having a large network of battery charging stations helps address those concerns, battery swapping is a faster method as it takes only a few minutes.
“Swapping right now is mainly driven by Nio. Of course, Nio found out this is an ecosystem,” CLSA’s deputy head of research Ding Luo said in an interview. “If only one player is trying to build up the whole ecosystem, it’s impossible for [them]. That’s why they’re thinking whether they can invite some partners.”
Battery swapping still isn’t mainstream because the car batteries need to be standardized, he added.
While a charging station resembles a typical gas station, battery-swap technology is housed in a shed-like structure. It uses machines to automatically exchange depleted batteries for pre-charged ones in compatible cars.
Nio said in mid-March that it completed 40 million battery swaps compared with nearly 37 million charges at its public stations — Nio consumers can also access third-party charging stations, or install one at home.

“I think our outlook is very simple,” Shen Fei, senior vice president of Nio’s power division, said in Chinese translated by CNBC. “The first thing is to serve Nio’s users, and then provide a good battery charging and swapping experience, make charging more convenient than refueling, and at the same time help the company sell more cars.”
The company claims that with battery swap, drivers can get a fresh charge in three minutes, if they opt in for a paid battery service plan.
Shen said more car models will be added to Nio’s battery swap network, while adding that swapping can allow drivers to keep abreast with improvements in battery technology. He did not specify which automakers will likely be added to its network.
Power services and other products account for just about 10% of Nio’s total revenue. The company said that category of “other sales” for 2023 grew by 69% to 6.36 billion yuan ($895.9 million). Nio does not break out swap station revenue.

Battery swap’s checkered past

Battery swapping has been tried by the industry with mixed success, especially in the U.S.
Tesla and a startup called Better Space tried out swapping more than 10 years ago, but the venture soon closed.
In 2021, another startup, Ample, opened its battery swap stations in the San Francisco area — aimed at Uber drivers using the Nissan Leaf car.
While it’s not clear how much headway Ample has made in the U.S., the company has since expanded its partnerships overseas. Last month the company announced it would serve corporate car fleets in Kyoto, Japan, while it teamed up with Stellantis to roll out battery swaps this year in Madrid, Spain.
“For swapping to work it can’t be niche,” Tu Le, head of consultancy Sino Auto Insights, said. “Battery inventory investment is massive, so it needs to be amortized over lots of swapping.”
But he was cautious on whether Nio could sell enough of its own premium-priced cars to make the economics work. “For now I still think the combination of swapping and charging makes for a pretty attractive feature set, but swapping alone likely doesn’t help them sell that many more cars.”
“I think the nudge the Chinese government gave to encourage others to join forces with Nio on swapping could create the necessary pool of vehicles to make swapping viable,” he added.

The business of charging

Nio is the first major electric car company to roll out battery swap stations in addition to charging stations, alongside its own vehicles in mainland China and Europe.
The company has installed more than 2,300 battery swap stations, and plans to install 1,000 more this year.
Nio’s investment in battery swap stations is about two years ahead of market demand, CEO William Li said last month, adding that less than a fifth of battery swap stations that Nio operates are processing 60 orders a day, likely the minimum orders needed for a station to break even.
Nio’s battery charging stations, on the other hand, reached profitability last year, according to the company. It plans to build 20,000 more this year.
Passenger car battery swap stations can cost around $500,000 to build, while a relatively basic charging station with two ports costs around $200,000 to $300,000, according to Shay Natarajan, a North America-based partner at Mobility Impact Partners, a private equity fund that invests in transportation.
CLSA’s Luo said businesses also prefer to invest in normal charging stations than swap stations because they make a higher return. But if businesses want to install faster-charging stations, he said they might face power grid challenges.
CLSA’s analysis found that the power required for five superchargers in one location would be more than what 300 families would normally consume.
Tesla is also collaborating with automakers in battery charging, with its over 50,000 superchargers worldwide that claim to restore about two-thirds of a battery’s charge in 15 minutes.
In February, Ford reached a deal that allows its electric cars to use Tesla’s superchargers in North America. General Motors announced a similar agreement last year.

Sustainability considerations

The rapid development of electric cars, ostensibly aimed at reducing carbon emissions, also raises questions about battery waste.
Nio pointed out that recent growth of new energy vehicles, which include hybrids, means nearly 20 million batteries will be reaching the end of their eight-year warranty period between 2025 and 2032.
Last month, the company announced a partnership with battery giant Contemporary Amperex Technology to develop batteries with a longer lifespan, particularly for those used in swap stations.
Nio claimed that by using battery swap and big data, it can retain 80% of a battery’s capacity after 12 years of use. Nio also said last month that CATL will develop batteries with longer lives for the company.
— CNBC’s Lora Kolodny and Michael Wayland contributed to this report. More