The range of topics under discussion at the World Economic Forum in Davos this week has been — and will continue to be — diverse.
Climate change. Trade accords. Big Tech, too, of course, and digital taxes.
More recently: Sovereign debt and high-tech initiatives, including artificial intelligence (AI).
In an interview with CNBC on the second day of the World Economic Forum, JPMorgan Chase CEO Jamie Dimon warned that sovereign debt presents a risk, saying it is among the “only” areas where financial bubbles have taken shape.
By way of example, the total of U.S. public debt outstanding has topped $23 trillion, and, per CNBC, debt held by the public stands at $17 trillion.
“Right now people think central banks around the world can do whatever they want. They can’t,” Dimon said. “They’re intelligent, looking at all the facts trying to figure out what to do. But [inflation] would be the big negative surprise.” Negative interest rates may signal that investors are overpricing sovereign debt, even while low interest rates remain in place around the globe. Rising interest rates would make servicing that debt more expensive.
“I think it’s very hard for central banks to forever make up for bad policy elsewhere. And that puts them in a trap,” Dimon said. “Do you know anyone who’s actually bought a negative interest rate bond?”
Separately, IBM CEO Ginni Rometty told CNBC from Davos that artificial intelligence should be subject to “precision regulation … you want to have innovation flourish and you’ve got to balance that with security.” And drilling down a bit into that regulation, she said there should regulation governing how the technology is used (as opposed to regulating the technology itself). As an example and with a nod toward facial recognition, “When you go through an airport to get through safely, to find a criminal, those are good uses of facial recognition,” she said. “To violate your civil liberties, it’s not.”
… And Digital Taxes
With a nod to digital taxes and trade disputes, the U.S. has suspended tariffs that would have been levied on French imports amid disagreements over digital taxes France imposed on Big Tech firms.
At Davos on Wednesday (Jan. 22), French Finance Minister Bruno Le Maire said there had been a postponement to the end of the year on payment of the taxes.
“There’s still some work to be done,” the minister said at the conference. At present both nations have agreed to work on a framework that would touch on taxation — namely whether companies can decide whether to reallocate a percentage of profits (the U.S. position) or whether such taxation should be compulsory, CNBC reported. An agreement among OECD countries would spur France to end its national digital tax.
“We still need to have a clear understanding of what will be the working basis at the OECD. And we want this basis to be solid, credible and fair. An optional basis would not be credible,” Le Maire said at the conference. Various other countries, such as Spain, Italy and the U.K., have been considering or embracing digital taxes. Said Le Maire of those efforts, “We share the same assessment,” adding that “it is not worth entering a trade war and not worth having many national taxations.”