Two-track economy

Inflation has monopolized much of the conversation in the global post-pandemic recovery, but there’s another talking point: debt. And it’s been good for some and bad for many others. For the first time in nearly a generation investors are flocking back to fixed-income assets as US Treasuries revert back to their traditional role in the economy. Of course, the reset has not been without pain, a result of inflation and interest-rate hikes meant to tamp it down. But still, with the Federal Reserve and central banks in the UK and Europe finally signaling rate cuts ahead, appetite for longer dated US bonds has shot up. And bankers who underwrite debt may see payouts swell as much as 25% as deals pick up this year. For bond traders and equity underwriters, incentives may rise 20%.

Of course we all know about the louder parts of debt—from ballooning national deficits to commercial real estate. But, there’s a newer kind, or “phantom debt,” that lurks behind buzzy “buy now, pay later” platforms that exploded in popularity during the pandemic. The problem is that the companies behind these programs have resisted calls for greater disclosure. That’s masking a complete picture of the financial health of American households, which is crucial for everyone from global central banks to US regional lenders and multinational businesses. Then there’s Gen Z, which has higher debt levels and delinquency rates for a number of credit products—from credit cards to mortgages and student loans—than Millennials did at the same age a decade ago. The Gen Z frustration is real, writes Jonathan Levin for Bloomberg Opinion. “If you have a job, a house and some stocks, you’re probably doing just fine. But America’s two-track economy is leaving many behind, particularly young adults.”

The US-Israeli relationship is under deep stress: President Joe Biden paused the shipment of some 3,500 bombs to Israel, saying that US weaponry cannot be used in any invasion of the southern city of Rafah. “It’s just wrong,” said Biden, whose administration has repeated its opposition to the Rafah operation in part because of a likely high civilian death toll. Prime Minister Benjamin Netanyahu countered by saying Israel would fight alone. He maintains that the Rafah attack is crucial to winning the war and sent troops to the overpacked city’s periphery and took control of the border crossing into Egypt. Then late on Friday, the US said in a highly anticipated report that Israel may have violated international law in its war against Hamas. (Here’s how a Rafah operation threatens the pipeline of aid in Gaza.) Meantime, negotiations for a ceasefire between Hamas and Israel appear stalled. “Neither has been serious about negotiating a cease-fire, because neither is willing to give up its war aims,” Marc Champion writes in Bloomberg Opinion. “This is the murderous logic of the extremists who currently dominate the leadership on both sides.”

Republican Mike Johnson easily held onto his job as US House Speaker, but only with the help of Democrats. It was a “much needed, no-holds barred rejection” of Marjorie Taylor Greene, the far-right Georgia Republican who opposed his support of aid to Ukraine, writes Patricia Lopez in Bloomberg Opinion. But Johnson will still need Greene’s help to pass GOP-only legislation. As for America’s top Republican, despite all of its particular sexual detail, porn star Stormy Daniels’ testimony is unlikely to sink Donald Trump. Moreover, it’s unclear how much she helped the prosecution in his trial in New York.

Chinese leader Xi Jinping used his first tour through Europe in five years to urge French President Emmanuel Macron to help Beijing fend off a “new Cold War” with the European Union. He also sought to bolster ties and try to convince Europeans that Beijing offers them an economic opportunity—despite warnings from Washington. Still, the trip was peppered with concerns about China’s friendship with the Kremlin amid Russia’s war on Ukraine and growing complaints from Western countries that China is producing too much cheap stuff in its factories, stamping out competition and jobs. China disagrees. This week, it released a detailed rebuttal of claims about “overcapacity,” arguing that Chinese electric cars and solar panels are cheap because their producers are efficient, not because they’re subsidized.

The Biden administration is poised to unveil a sweeping decision on China tariffs as soon as next week, one that’s expected to target key strategic sectors with new levies while avoiding across-the-board hikes. At Tesla, Elon Musk claimed he wants to expand the Supercharger network, investing $500 million this year. The problem though is he made the proclamation just days after firing virtually everyone who works there. The mass termination by Musk, part of his much broader culling of Tesla workers, came as a shock both to customers and other carmakers that were starting to use its plugs.

Sports personality Stephen A. Smith says he’s always been ambitious, but nothing fueled a burning drive to succeed like being fired from ESPN. On the latest episode of The Deal with Alex Rodriquez and Jason Kelly, Smith said the experience forced him to focus on “mastering the business that I was in—and ultimately positioning myself where I would be able to define my worth.”

Alphabet CEO Sundar Pichai says artificial intelligence has been a key focus of the Google parent company since 2016, back when ChatGPT-maker OpenAI was in its infancy. Somehow though, Google missed the big chatbot moment and has been playing catchup ever since. But Pichai, who sat down for an exclusive interview with The Circuit with Emily Chang, doesn’t seem worried. “I view this AI as we are in the earliest possible stages,” he said, noting that Google wasn’t the first company to do search or email either. In other words, Pichai is playing the long game, and says Google has plenty of time to win.

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