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Doable in principle, but such measures would necessarily cut into the potential capabilities of such a system.

So basically a trade off, and IMO very worth it.

The problem is we are not doing it, and more basic, people generally do not get why it is important. Maybe its the framing, like when EY goes "superintelligence that firmly believes 222+222=555 without this leading to other consequences that would make it incoherent".

I get exactly what he means, but I suspect that a lot of people are not able to decompress and unroll that into something they "grook" on a fundamental level.

Something like "superintelligence without knowledge about itself and never reason about itself, without this leading to other consequences that would make it incoherent" would cut out a ton of lethality, and combine that with giving such a thing zero agency in the world, you might actually have something that could do "things we want, but don't know how to do" without it ending us on the first critical try.

avoiding harmful outputs entails training AI systems never to produce information that might lead to dangerous consequences


I don't see how that is possible, in the context of a system that can "do things we want, but do not know how to do".

The reality of technology/tools/solutions seems to be that anything useful is also dual use.

So when it comes down to it, we have to deal with the fact that such as system certainly will have the latent capability to do very bad things.

Which means we have to somehow ensure that such as system does not go down such a road either instrumentally or terminally.

As far as I can tell, intelligence[1] fundamentally is incapable of such a thing, which leaves us roughly with this:

  1. Pure intelligence, onus is on us to specify terminal goals correctly.
  2. Pure intelligence and cage/rules/guardrails[2] etc.
  3. Pure intelligence with a mind explicitly in charge of directing the intelligence.

On the first try of "do thing we want, but do not know how to do":

1) kills us every time 

2) kills us almost every time

3) might not kills us every time

And that's as far as my thinking currently goes.

I am stuck on if 3 could get us anywhere sensible (my mind screams “maybe”………”ohh boy that looks brittle”).

  1. ^

    I don't have a firm definition of the term, but I approximately think of intelligence as the function that lets a system take some goal/task and find a solution.

    Explicitly in humans, well me, that looks like using the knowledge I have, building model(s), evaluating possible solution trajectories within the model(s), gaining insight, seeking more knowledge. And iterating over all that until I either have a solution or give up.

  2. ^

    The usual: Keep it in a box, modify evaluation to exclude bad things and so on. And that suffers the problem of we can't robustly specify what is "bad" and even if we could, Rice's Theorem heavily implies checking is impossible.

That's not how it works.

The 10B are new money, unless they came from someone not the FED (notes are not money).

Where did the 10B in cash come from?

10B was given to the bank, and in exchange the bank encumbered 10B in treasuries and promised to give 10B back when they mature.

So where did the 10B come from? The treasuries are still there.

Before: 10B in treasuries

After: 10B in treasuries and 10B in cash (and 10B in the form of a promissory note).

So again, where did that 10B in cash come from?

crediting a bank with 10B in treasuries with 10B liquid cash now


I have no idea what you think happens here, but that is literally 10B in new money.

They can't lower interest rates, they are trying to bring inflation down.

You can't just keep spawning money, eventually that just leads to inflation. We have been spawning money like crazy the last 14-15 years, and this is the price.

Sure they can declare infinite money in a account and then go nuts, but that just leads to inflation.

Anyway, go read my prediction, which is essentially what you propose  to some degree, and the entire cost will be pawned of onto everyday people (lots and lots of inflation).

Yes and no, they don't matter until you need liquidity. Which as you correctly point out is what happened to SVB.

Banks do not have a lot of cash on hand (virtual or real), in fact they optimized for as little as possible.

Banks also do not exist in a vacuum, they are part of the real economy, and in fact without that they would be pointless.

Banks generally use every trick in the book to lever up as much as possible, far far beyond what a cursory reading would lead you to believe. The basic trick is to take on risk and then offset that risk, that way you don't have to provision any capital for the risk (lots of ways to do that). 

Here come the problems:

The way risk is offset is not independent from the risk, they are correlated in such a way, that when systemic things start to happen, the risk offset becomes worthless and the risk taken becomes real.

Banks also suffer real losses that cant be hidden, and eventually those will start to mount, so far the real economy is ok, but eventually recession will hit (central bank are hell bent on fighting inflation, so rates will continue to go up).

That will put a strain on liquidity. Banks can handle that, they can always get cash for their assets in the form of a loan (repro, 3 party repro, discount window etc).

However the book value on a lot of their assets is way higher than market value, so that means pledging more book value than they get back in cash (a lot). 

The assets they hold (bonds) return LESS than what the cost of funding is, that is already a reality and will only get worse (so negative cash flow).

This spiral will continue, and all the while the real economy, the one that provides a lot of liquidity to the banks is going to slow down more and more, so velocity of money slows down, that is also a big drain on liquidity.

Eventually something will blowup, and with how everything is connected, that can very well lead to a banking system Kessler syndrome moment.

So yeah sure you can ignore the issues of solvency, that is until lack of liquidity smacks you over the head and tells you that you are bankrupt.

At the end of 2022 all US banks had ~2.3T Tier 1+2 capital.[1]

And at year end (2022) they had unrealized losses of $620B[2]

Is it fixable? Sure, but that won't happen, doing that would be taking the toys away from bankers, and bankers love their toys (accounting gimmicks that let them lever up to incredible heights).

If Credit Suisse blowups it will end badly, so I don't think that will happen, that's just a show to impress on all central bankers and regulators (and politicians), that this is serious and that they need to do something.

So more hiking from the FED and ECB, until ECB hits 4.5% (4.0-4.75 is my range). The problem will start here, we have the most levered banks in the world and the structure of the EU/ECB lets some countries in the EU over extend their sovereign debt.

At that point things will start to happen. Some countries will start having a lot of trouble getting founding (the usual suspects at first), also the real economy will be in recession and tax receipts will start to suffer. Banks will have liquidity problems (recession in the real economy), putting even more pressure on sovereign bond prices (higher real rates).

And then I think it will be the usual, more papering over, free money to banks, even more leeway in accounting and lower rates.

Inflation will remain high, and when it eventually goes back down we are looking at 50%-100% total since Jan 2022 (so 25% to 50% drop in purchasing power).

That's pretty much my prediction from back in August 2022 (conveniently I did not write it down, I just talked to people).

But now I did, and boy do I hope that I am wrong.

  1. ^

  2. ^

Sorry life happened.

Anyway, there is an argument behind me saying "frozen and undecided".

Stepping in on the 10th was planned, the regulators had for sure been involved for some time, days or weeks. 

This event was not a sudden thing, the things that lead to SVB failing had been in motion for some time, SVB and the regulators knew something likely had to be done.

SVB where being squeezed from two sides:

Rising interest rates leads to mounting looses on bond holdings.

A large part of their customers where money burning furnaces, and the fuel (money) that used to come from investors was drying up.

Which means well before the 10th, everyone knew something had to be done, and the thing that had to be done was that SVB need a wet signature on an agreement to provide more capital to the bank. And the deadline was for sure end of business day the 10th.

They didn't get one, and the plan proceeded to the next step, and obviously the regulators already worked all this out in the meantime, including all the possible scenarios for what would happen to depositors.

So that fact it took 2 days to decide, yeah that was indecision.


SVB died because they where technically insolvent, and had it not been for mark to model they would have been de jure insolvent (and a long time ago).

They could keep it going because they where liquid, but they where careening towards liquidity.

Obviously banks can loan money to keep the liquid, but that pretty much always involved putting up collateral.

But in the current environment, that is somewhat problematic:

Lets say you want to borrow $100M. But the collateral (assets) are trading at lets say 80, so you need $125M book value, but it gets worse, the usual haircut in such a situation is ~20%, so now you have to put up $156M in book value (give or take, this could be less or more, depending on the assets, and how the repro partner does risk assessment).

Eventually you go from being technically insolvent to de jure insolvent, unless of course you can stay liquid - and SVB could not, mostly due to the customer base.

And the big problem is, pretty much all banks are in that hole right now, they are all technically insolvent. Which means, should a systemic liquidity crisis arise...nasty and quick.

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