Economics in the News – May 29 – June 4, 2023
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o The United States averted an unprecedented default on its federal debt, as President Joe Biden signed legislation that lifted the nation’s debt ceiling. The leadup ended a monthslong buildup that caused uneasiness in the financial markets and anxiety for retirees and social security services to come up with contingencies. Treasury secretary Janet Yellen warned that the nation would start to run low on cash to make its payment obligations on Monday, June 5 which would have shaken the US and global economies.
The final agreement, which came after intense negotiations between Biden and House Speaker Kevin McCarthy, was passed by the House on Wednesday and the Senate on Thursday. It suspends the debt limit until 2025, which comes after the next presidential election. [Associated Press]
o Gas prices could be on the rise, as Americans prepare to hit the road for their summer vacations. Saudi Arabia plans to reduce how much oil it exports, cutting one million barrels per day starting in July. A cut is expected to increase oil prices in the short term, but the long-term implications depend on Saudi Arabia’s flexibility with the voluntary maneuver.
Saudi Arabia made the decision to cut supply because oil prices have sagged in recent months and two previous cuts to supply by major producing countries in the OPEC+ alliance failed to push oil prices higher. Oil-producing countries such as Saudi Arabia need the money to fund their budgets but must take into account the impact of higher prices on oil-consuming countries. Prices too high can fuel inflation that cause central banks to raise interest rates that slow economic growth. [Associated Press]
o Many users are finding ChatGPT helpful in a wide range of circumstances – from help with research for schoolwork, to assisting with content creation, or to get ready for a job interview. When it was used to help prepare a court filing, it did not go well. A man recently sued the airline Avianca when a serving cart bumped into his knee. An attorney’s legal research had been completed using the artificial intelligence software, but the airline’s attorneys or the judge could not find the evidence in the decisions or quotations cited.
Artificial intelligence has depicted a role to computers replacing human labor. Knowledge workers are fearful that it could one day replace them. ChatGPT generates its realistic responses by making guesses about which fragments of texts should follow other sequences, based on a statistical model with billions of examples of text pulled from the internet. [The New York Times]
o Tickets to see superstar music artist Taylor Swift on her Eras Tour have been hard to come by for diehard fans of the artist. Pent-up demand stemming from the COVID-19 pandemic for experiences combined with Swift’s decision to showcase her all-encompassing, wide-ranging genres of music throughout her illustrious career sent prices soaring.
Last summer when the tour was announced, millions flooded Ticketmaster hoping to score tickets. So many flooded the site that Ticketmaster’s system was overwhelmed by the demand and were unable to buy tickets. Tickets sold at a face value of $50 have been re-sold on secondary ticket exchanges such as StubHub or SeatGeek for $1,500 or more. Some desperate fans are even tailgating in parking lots of football stadiums hoping to score a last-minute ticket for the biggest concert of the summer at a reasonable cost. [Bloomberg]
o NVIDIA is the world’s most valuable chip maker and became the seventh company to eclipse the $1 trillion mark in worth based on market capitalization. The company is perhaps the most surprising among the companies to reach the trillion-dollar worth, joining the likes of Apple, Amazon, Microsoft, Tesla or Meta. The origin of the company began 30 years ago and was created by three engineers – including CEO Jensen Huang -- at Denny’s.
Its chips can be found throughout the economy, including video games and 3-D graphics. The advanced graphics chips are required for artificial intelligence, including ChatGPT, are made almost exclusively by NVIDIA. As a result, and the surging popularity in artificial intelligence, NVIDIA has seen its market cap triple in 2023 topped with a gain of $184 billion in a span of a week. [The Wall Street Journal]