Uncharted waters

What now? Procedurally, the first former US president to face indictment is set to fly with his Secret Service detail to New York City early next week, be placed under arrest, fingerprinted and photographed. Donald Trump and the whole world will then finally learn the exact charges he faces. After that, everything (except perhaps a long, litigious road to trial) remains uncertain. Trump has previously predicted “death and destruction” should he be indicted, but so far most of the scattered demonstrators who have shown up at the Manhattan courthouse were cheering his bad news. It is, however, very much early days. And this is just the first and least serious of what could potentially be four criminal proceedings against Trump, stretching to Washington and Georgia, should he be charged in connection with his handling of top secret files, efforts to block Joe Biden from the White House, and the Jan. 6, 2021 attack on the US Capitol.

The precedent for violence set on that fateful day is why New York officials have assigned police to set up camp around Manhattan’s Foley Square, where most of its courts are located. Indeed, Trump’s New York prosecution could breathe new life into his campaign for the 2024 Republican presidential nomination, and his contention that he has long been the victim of a Democratic-run “deep state.” Other GOP politicians, including his main rival, have rallied to his defense and called the grand jury indictment politically motivated, an allegation rejected by Manhattan District Attorney Alvin Bragg.

Nevertheless, while this is a first for the US, former leaders of other democracies have been prosecuted, including in Italy, Brazil, and currently Israel—where Benjamin Netanyhu has been accused of trying to sidestep his prosecution by restricting the power of the judiciary. In a democracy, though, no one is supposed to be above the law, Timothy O’Brien writes in Bloomberg Opinion. Trump’s indictment and the reaction to it, O’Brien concludes, says as much about America at this fraught moment as it does about Trump.

Is the next financial calamity hiding in plain sight? The amount squirreled away in money-market mutual funds has surged to more than $5 trillion, with investors parking cash they’ve moved from banks. That risks becoming a problem for the US economy if money funds continue to prove more attractive than deposits, putting more downward pressure on bank reserves. Then, there’s a range of experts from regulators to bankers who say the next bout of volatility could come from a huge pile of hidden leverage that’s emerged across private markets. These concerns come as a key gauge of US inflation cooled and consumer spending stabilized, suggesting yet again that the Federal Reserve might be able to slow its fight against inflation.

On the surface, it seemed unlikely Charles Schwab would be swept up in the banking crisis. The brokerage giant isn’t overexposed to crypto or startups and it says it has enough liquidity. But another look at its balance sheet shows it is facing pressure from bond losses and rising cash yields. Meantime, the Fed’s top bank regulator said more could have been done to keep tabs on Silicon Valley Bank before it collapsed. Unlike previous blow-ups, where banks suffered from deteriorating loan quality, SVB suffered an interest-rate shock to its stash of US Treasuries.

Taiwan President Tsai Ing-wen visited the US this week, a trip China called “another provocation” to which it “will definitely take measures to respond.” But China Premier Li Qiang sought to calm fears of any looming war over Taiwan, telling business leaders in Asia that China is “an anchor for world peace and development” and “will remain so in the future.” It’s a difficult balancing act for US President Joe Biden’s team, which is determined to maintain support for Taiwan as a beacon of democracy and, more practically, as the source for the vast majority of the world’s most advanced microchips.

The artificial intelligence sector is staffing up, and an engineering degree isn’t required. Jobs for “prompt engineers,” people who spend their day coaxing the AI to produce better results, can pay $350,000. Critics of the technology, including Elon Musk, have signed an open letter calling for a six-month pause on training AI systems more powerful than GPT-4, which underpins ChatGPT. The call comes after the launch of a series of AI projects in the last several months that convincingly perform human tasks such as writing emails and creating art. While the petition says the pause will allow the development of shared safety protocols, it “ignores the risk already unleashed,” writes Parmy Olson in Bloomberg Opinion.

The exodus from Manhattan has reversed itself, the most recent US Census Bureau data show, making it the only of New York City’s five boroughs to stop a population decline that worsened during the first years of the pandemic. The newcomers were mostly babies and international arrivals. Departed New Yorkers, undeterred by high mortgage rates, make up the largest share of homebuyers in these three Florida cities. The coronavirus has also created more women entrepreneurs: for the third year in a row, women created about half of new businesses in the US, according to a survey by Gusto.

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Easy monetary policy under former Japan central bank Governor Haruhiko Kuroda unleashed a $3.4 trillion firehose of cash on the investment world. Now the stage is set for a possible policy reversal under his successor, Kazuo Ueda. The stakes are enormous: Japanese investors are the biggest foreign holders of Treasuries and own everything from Brazilian debt to European power stations—and the flow reversal is already under way.

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