Reminder: Econ Weekly publishes 48 issues per year. We will return with our next issue on Sept. 13.
Inside this Issue:
- A Fall Stall? Fears of a Hindered Recovery as Virus Variant Vexes
- Energy Use Reduced: Oil Ails Amid Covid Travails
- Supply Chain Curse Gets Worse: Covid Curbing Asian Output
- The Retail Whale: Walmart Still Firing on All Cylinders
- The Retail Fail: Kmart Somehow Still Alive
- Home Repo: And Foreign Repo too as Fed Fights Dollar Risk
- Cambridge Binge: Biotech Booming as Moderna Inspires
- Satellite Fight: More Competition in the Space Economy
- The Bill from Kabul: How Much Did the U.S. Spend in Afghanistan?
- Remembering a Fiscal Fiasco: The Savings and Loan Crisis of the 1980s
- And This Week’s Featured Place: Atlantic City, New Jersey, Unviable Visions of Vegas
Quote of the Week
“We like the assets we’ve got. I think some people view stores these days as boring. We don’t.”
-Walmart CEO Doug McMillon
Oil prices plunged last week. What does it mean?
It’s a sure sign that the world is becoming more pessimistic about the global economy’s recovery. Demand for oil and other commodities is softening as Covid stubbornly persists in tormenting humanity. In the U.S., hospitals are again filling up. Companies are reversing earlier plans for an autumn return to the office. Airlines are seeing their bookings start to soften. In East Asia, meanwhile, where vaccination efforts are slower and less effective, countries are finding their ultra-strict quarantines to be less effective against Covid’s new and more dangerous Delta variant. And that matters to the U.S. economy, whose supply chains include Asian factories and seaports that are now seeing virus-related disruptions.
America’s supply shock, indeed, is getting worse, perhaps making inflation more persistent. At the same time, demand—while still strong according to most U.S. companies—stands to soften some as fiscal and monetary support dissipates. The Fed, for its part, seems ready to stop its stimulative asset buying. Leaders could say more about that at a symposium this week, an event by the way just switched to virtual rather than in-person. Damn Covid just won’t go away.
Walmart is the most important company to reassure about demand strength. Other retailers generally agreed, offsetting some concerns raised by a Census report showing a decline in retail sales. Some of that decline, to be clear, was driven by drivers—fewer of them, in other words, buying autos. The auto issue of course, is specifically tied to a shortage of semiconductors not helped by Asia’s new struggles with Covid. Vietnam, for example, is a major production site for top semicon firms like Intel and Korea’s Samsung.
Back in the U.S., the new school year is now underway throughout much of the country. Labor economists hope more parents will be able to reenter the workforce, addressing what’s still an uncomfortably low rate of workforce participation. Nevada by the way, still has the nation’s highest unemployment rate, reflecting the troubles of Las Vegas and its tourist industry. Nebraska and Utah have the lowest rates. The next nationwide jobs report (for August) will come Sept. 3. But hopes are higher for subsequent reports that better capture school reopenings across the country. Then again, if Covid problems continue to worsen, the recent run of job market momentum could stall, not strengthen.
The housing market isn’t strengthening. But then again, how could it? It’s already on fire. But the flames are waning as homebuyers balk at high prices. On Capitol Hill, Democrats are maneuvering among themselves to pass a double infrastructure/care economy agenda. It’s a chief topic of coverage for The Hill, a political news provider that broadcast media giant Nextstar said it will buy for $130m—Nexstar is trying to build a news empire that’s less partisan than existing alternatives. Amazon, the Wall Street Journal reports, wants to open more brick-and-mortar retail stores. Tesla wants to build human-like robots and a world in which “physical work will be a choice.” Landlords are grappling with the difficulties of repeated rent forbearance (but not forgiveness). And Q2 earnings season is winding down, though not before a week featuring reports from Best Buy, Dell, Dollar General, Peloton and so on.
Read on for a trip to Atlantic City, a gambling mecca that never quite managed to replicate the success of Las Vegas. Like other subjects of Econ Weekly place profiles, Atlantic City has specific challenges that aren’t often captured in discussions about the broader national economy. Speaking of which, the national economy—as Bloomberg’s Allison Schrager points out in a must-read article—has a future that will likely look more like The Villages in Florida than superstar cities like New York or San Francisco. The Orlando-area retirement community remains the fastest-growing place in America, with an “economy that’s older, less dynamic and more reliant on government benefits.”
Another can’t miss article—by Kevin Williams of the New York Times—tells the story of Kmart’s demise, which coincided with Walmart’s rise. More on that below. And lots of other interesting stuff as well!
- Walmart: There’s a bit of data discrepancy in the retail world. A Census report for July told of a 1% decline in retail and food sales from the prior month. A drop in auto sales had something to do with that, but so did a drop in categories like clothing and groceries, both important to Walmart. Nevertheless, America’s largest retailer—and its largest company—had nothing but positive things to say. Walmart unveiled strong Q2 profits and sales growth, headlining a busy week of reporting for Big Box retail. Target too, said sales were strong. Same for the discounter Ross, which did mention heightened levels of uncertainty with Covid’s current resurgence but also that a “significant number of retail closures and bankruptcies in recent years further enhances our ability to gain additional market share in the future.” Home Depot said underlying demand was strong, with people still eagerly remodeling their homes. Supply chain headaches resulting in low inventories, however, persist. But back to Walmart. It sounded less concerned about supply chains, and about inflation more generally. Its earnings call with investors was mostly sunshine and smiles, featuring talk of strong demand for most product categories, ongoing momentum in ecommerce, extremely rapid growth in online advertising revenue, positive trends in key overseas markets (like China, India and Mexico), record membership levels at Sam’s Club and buoyant back-to-school shopping. Walmart intends to monetize assets in new ways, including the online sales and fulfillment services it offers other retailers, many of them independent small businesses. Once wary of its disadvantages in the online space relative to Amazon, Walmart cares less these days about where customers buy their stuff, and how they get it to their homes. Come to a store. Pickup curbside. Home delivery. Whatever. Of course, home delivery entails new costs, and Walmart is focusing much of its capital investment on improving distribution efficiency, which was a big part of what made it so dominant in the first place. It seems little worried about an end to federal stimulus checks. It remains bullish on financial and health care products. And it’s surely watching closely the online-native Amazon plans to build more brick-and-mortar stores, according to a Wall Street Journal report last week.
- Kmart: Their names are similar. But their histories couldn’t be any more different. As Walmart took the economy by storm in the 1990s and 2000s, Kmart was one of its many victims. The company remains alive, following multiple brushes with death. But as a New York Times profile recounts, it’s still in contraction mode, closing stores and firing workers. Kmart opened its first store in Michigan in 1962, the same year that Walmart opened its first store in Arkansas. Why did one become the largest retailer in America and the other a perennially wounded basket case? Walmart’s distribution prowess, its cost management and its economies of scale all played a part. But the Times article cites Yingru Li, a professor of geography at the University of Central Florida, who says “The differences in performance between Walmart and Kmart can largely be explained by location.” She found it was not pricing, customer service or mismanagement that was the most significant factor for the success or failure of each retailer.” Indeed, it was where they placed their stores. Kmart neglected to follow customers as they moved farther into the suburbs. Walmart, by contrast, built stores “next to interstate interchanges in the nation’s rapidly growing areas beyond suburbs known as exurbs.” Kmart’s decline left a large footprint in deteriorating areas closer to urban centers. Kmart, the article notes, last opened a new store in 2002; since then, it has all been closings. “When it merged with Sears in 2005, Kmart had 2,085 locations. With the abrupt closing of the Astor Place Kmart in Manhattan last month, the number of open Kmart stores is down to 17.” Interestingly, the storefronts it leaves behind are finding new uses as churches, truck washes, self-storage facilities, flea markets, pharmaceutical labs, car dealerships, driving schools, cannabis stores and even funeral homes. They’re also of interest to distributors as online commerce grows. Said economics professor John Strong of William & Mary: “A lot of these inner-city locations are really good for last-mile delivery for online products.”
Tweet of the Week
- Housing: The National Association of Homebuilders (NAHB), together with the bank Wells Fargo, publishes a monthly sentiment index that’s showing a more pessimistic outlook among builders. The August reading, in fact, dropped to its lowest level since last July. Why? High construction costs and supply shortages, it seems, are lifting single-family home prices to the point where buyers are now balking. The index, however, is still in positive territory, meaning builders view market conditions as good. The big pandemic-era story of the housing market, of course, has been one of extremely strong demand and extremely tight supply. That’s caused prices to rise sharply, creating what now appears to be a slowdown in demand. But to repeat what most housing analysts insist: This is not the late 2000s all over again. The runup in housing prices does not, in other words, reflect a giant bubble waiting to pop. The last bubble was caused by widespread recklessness in mortgage lending. There’s nothing of the sort today.
- Housing: Here’s a telling quote from Home Depot’s CFO last week: “We are at a point now where the housing stock of the United States is over 20% more valuable than it was two years ago. And so, as we look forward, not only have we seen that home price appreciation, but the homeowner balance sheet is incredibly healthy. The state of mortgage finance is incredibly healthy.”
- Biotech: The Economist looks at trends in the booming U.S. biotech industry, now in the spotlight following the breakthrough success of mRNA vaccines. Investment money is pouring in, new companies are sprouting up and new laboratories are opening in places like Cambridge, Massachusetts, the “closest that the biotech business currently has to a Silicon Valley.” Cambridge is home to both Harvard and MIT. Why the boom now? Because “everyone is vying to be the next Moderna,” The Economist writes. The Cambridge firm, which lost money for a decade before its vaccine breakthrough, now has a market capitalization approaching $160b, up from $5bn when it went public in 2018. Also driving interest among investors are recent advances in cell and gene therapies. Some investors are “philanthropic capitalists” looking to earn money from scientific endeavors that help humanity. Others simply see financial rewards in backing smaller companies pursuing novel technologies, rather than place their money with pharmaceutical giants (who often partner with the startups, as Pfizer did with Germany’s BioNTech). There’s also the hope of emulating Moderna’s expansion from merely developing products to also manufacturing them. Investing in biotech is risky though. The article says only one in six firms in the Nasdaq biotech index made money last year. The remaining five-sixths lost a combined $33bn. Moderna itself turned a profit last quarter for the first time in a decade. There’s political risk too—Washington wants drugs to be cheap.
- News Media: If you haven’t heard, the job market for journalists isn’t great. In the decade to 2018, there’s been a 47% reduction in employment, according to Harvard professor Martha Minow, speaking at a recent Brookings Institution event entitled “Saving the News.” Things only got worse during the pandemic, when news media organizations laid off or furloughed another 30,000 people. Minow points to the dangers associated with losing local newspapers across the country. Since the early days of the Republic, they’ve served as a watchdog on local government officials. In fact, Minow points out, the press is the only private industry mentioned in the U.S. Constitution. Without a vibrant local press, disinformation is spreading and less scrupulous “news” outlets are thriving. Minow thinks governments have a role to play in supporting the industry, given the vital national interest. They could start, she says, with tighter scrutiny of social media, the platform and spreader for much disinformation.
- Hotels: The Wall Street Journal describes a new trend among some hotels: They’re experimenting with airline-like “a la carte” pricing. Pay extra for using the pool or gym? For late check-out? For daily housekeeping? The Journal talks with one independent hotel owner, MCR, which is reacting to the pandemic’s immense financial toll on the industry. Recall that airlines themselves began charging for extras in reaction to an earlier crisis: The spike in fuel costs during the mid-2000s. Hotels are typically more brand sensitive however—people often choose an airline because it’s flying to where they’re going, not because they enjoy its peanuts. Hotels, furthermore, face competition from companies like Airbnb. And independent hotel owners, even if bullish on the a la carte pricing idea, often have branding partnerships with big chains like Marriott which don’t seem so keen. So it’s not a certain thing that this new pricing trend will stick. But the pressure to increase revenues is intense, more so amid labor shortages, rising costs for sanitizing rooms and new signs of demand weakness tied to Covid’s Delta variant.
- Dollar: Joseph Wang, author of the Fed Guy blog, writes about the impact of the Fed’s new “FIMA” repo facility for foreign central banks. As background, one of the Fed’s chief responsibilities is ensuring that the U.S. financial system always has access to dollars in an emergency. It’s the lender of last resort, in other words. But the rest of the world needs dollars too—they’re necessary to conduct international business. And if foreigners can’t get their hands on enough dollars during an emergency, the resulting panic could bid up Treasury prices and thus affect domesticS. interest rates. As Wang writes: “Offshore banks lack stable sources of dollar funding and are prone to bid up dollar funding rates in a crisis. This means that the Fed cannot control short-term dollar rates without also having a footprint in the offshore dollar world.” Since the 2008-09 financial crisis, the Fed has dealt with this issue using foreign exchange swap lines with foreign central banks. But China, whose banks have something like $1 trillion in U.S. dollar liabilities, according to the Bank of International Settlements, isn’t eligible to use the Fed swap lines. The new FIMA Repo Facility by contrast allows any foreign central bank that owns Treasuries (China owns more than any other foreign country except Japan) to obtain dollars from the Fed without having to sell the Treasuries outright. Indeed, Wang sees the policy directed at the needs of just China, since it’s the only country that has large dollar needs and large Treasury holdings but no FX Swap access. Other nations can still rely on the swap lines. Why would the Fed want to help China? That’s not the intention. The idea is to avoid a situation where China would quickly have to dump its Treasuries in a dash for dollars. This, again, would potentially affect domestic U.S. interest rates. The new repo facility helps, in other words, ensure a well-functioning Treasury market, which showed signs of malfunctioning both in late 2019 and again when the pandemic hit in early 2020. Wang writes: “Not just foreign central banks but domestic banks, pension funds and investment managers all hold Treasuries on the assumption that they can be readily converted to cash.” If they can’t, the whole world has big problems.
- Inequality: As data clearly indicate, wealth has grown more and more concentrated in the U.S. But what to do about it? As governments tackle the challenge, they might consider a thesis developed by Harvard professor Michael Sandel. America is a meritocracy he says, which is generally a good thing. But meritocracy has a dark side: It rationalizes unjustified inequality. Those who struggle, meritocratic champions conclude, must deserve their fate. The fact is, more and more well-paying jobs require a college degree. And most Americans (almost two-thirds) don’t have one.
- Money Laundering: The organization Global Financial Integrity (GFI) published a report entitled: “Why U.S. Real Estate is a Kleptocrat’s Dream.” During the past five years, it estimates, criminals have laundered more than $2.3b through U.S. real estate. It blames “gatekeepers” like attorneys, real estate agents, investment advisors and employees of financial institutions for facilitating such activity by high net-worth individuals, whether through willful blindness or direct complicity. GFI says the U.S. remains the only G7 country that does not require real estate professionals to comply with anti-money laundering (AML) laws and regulations. The report also highlights the troubling use of anonymous shell companies and complex corporate structures to mask the true ownership of asset purchases and investments. The recently passed Corporate Transparency Act calls for creation of a robust beneficial ownership registry. But it needs to be actively updated and enforced, GFI says.
- Tax Cuts and Jobs Act of 2017: In another report about billionaires behaving badly, ProPublica uncovers the role of 82 ultra-wealthy American households that collectively saved—in just one year—more than $1b from the 2017 tax cut. The gains were achieved through deft lobbying of both Republican and Democratic officials. It shows, in ProPublica’s telling, “how the billionaire class is able to shape the [tax] code to its advantage.”
- Bad Auditing: And one more report of undesirable behavior, this from a Wall Street Journal investigation. It calls attention to substandard financial auditing work performed by smaller private companies. After the accounting scandals of the early 2000s (remember Enron and WorldCom?), new rules ensured that all audits of public companies are now overseen by a government-appointed regulator. But smaller firms auditing other entities still police themselves. The Journal found that some 200,000 employee-benefit plans, with $449b in total assets, are audited by firms that do fewer than 25 such audits a year.
- Atlantic City, New Jersey: There are cities whose best days lie ahead. There are cities whose best days are long past. Atlantic City, sadly, is fighting an uphill struggle to avoid the latter category. Today, all one needs is a single word to capture the essence of its economy: Casinos. But unlike Las Vegas, where casino growth coincided with a population and economic boom, Atlantic City remains a city mired in deep poverty, with a metro-area population that shrank 4% during the 2010s. The city itself had a poverty rate of 37% in 2019, compared to just 9% for all of New Jersey, one of America’s wealthiest states. Median annual income was just $29,000, compared to $83,000 statewide (and $63,000 nationwide). There’s some resemblance to other northeast cities, from Philadelphia to Baltimore to New Jersey’s own Newark and Trenton, all of which likewise experienced a major post-World War II outflow of people, especially middle-class whites (population peaked in the 1930 Census). But today, these other cities all have many highly prosperous suburbs nearby. Atlantic City does not. Most of New Jersey’s wealth resides farther north. What Atlantic City does have are beaches, an allure recognized as early as the 1850s. It seemed an ideal location, developers at the time concluded, for the monied classes of New York and Philadelphia to spend the summer. The advent of rail transportation made this possible. And sure enough, Atlantic City became one of the nation’s first major tourist destinations. Its famous boardwalk opened in 1870. During the prohibition era of the 1920s, it became a magnet for organized crime. The Great Depression came next, battering economies everywhere. Then came world war in the 1940s. But Atlantic City never experienced the post-war economic boom enjoyed elsewhere. By the 1950s, most affluent Americans had their own cars to drive, giving them more vacation choices. As air travel developed—and especially cheap air travel in the 1980s—Florida and the Caribbean became the go-to spot for beaches. Airlines also gave gambling-minded northeasterners easy and affordable access to Las Vegas. In reaction, New Jersey—in 1976—legalized casino gambling in Atlantic City. Two years later, Resorts International opened the city’s first. To a degree, the plan worked. The 1980s saw a frenzy of new investment, most famously by a New York real estate developer named Donald Trump (you may have heard of him). Atlantic City would gain national notoriety for its Miss America pageants and championship boxing matches—in 1988, Mike Tyson became the undisputed heavyweight champion of the world, beating Michael Spinks at Atlantic City’s convention center. But the city itself would get a painful punch: The recession of the early 1990s. It would bankrupt Trump’s casino empire and discourage new investment. Still, the number of visitors grew in the 1990s, if only a modest 4%, reaching 33m by 2000, according to the University of Nevada Las Vegas (nearly all visitors come by car or tour bus). But then came another punch: A wave of new casino competition throughout the northeast, some operated by Native American tribes. In the Philadelphia metro area alone, three new casinos opened between 2007 and 2010. As a result, from 2006 through 2016, the number of casinos in Atlantic City declined from 12 to just seven. In 2017, annual visits totaled just 24m, the lowest figure since 1982, according to Stockton University. The peak was 2005, when about 35m came. In 2014, meanwhile, gross gambling revenue was down 53% percent compared with the all-time peak of $5.2b in 2006. The decline, which convinced Apple to close its store in the city, didn’t dissuade two new casinos from opening in 2018, creating about 8,000 new jobs. Bad timing though: The 2020 pandemic hit Atlantic City’s economy harder than almost anywhere in the nation. The area ranked number three nationwide for employment loss, leaving a third of the metro area’s labor force jobless (the figure was more like 50% for the city itself). As casinos reopened this year, jobs have returned, but metro area unemployment remains elevated at 11%. Leisure and hospitality, by the way, account for 30% of the region’s unemployment, with others mostly employed in government, education, health or transportation. Atlantic City does have a Federal Aviation Administration facility that employs nearly 4,000 people, making it the region’s largest non-casino employer. (Caesars is the largest among the casinos). AtlantiCare, Shore Medical Center and Stockton University are other notable jobs providers. In addition, some 10,000 people own second homes in Atlantic City, boosting the economy during the summer tourist season. Spirit Airlines offers Atlantic City flights to Florida, Atlanta and Myrtle Beach. Is it too pessimistic to say that Atlantic City’s best days are behind it? The two new casinos offer hope. So does New Jersey’s recent legalization of online gambling and sports betting, giving Atlantic City’s casinos new sources of revenue. Had there been no casino legalization in the 1970s, the area would surely have attracted less investment. Yet for locals, the high poverty rate—along with other data like average home values and broadband access—reveals a story that looks much different from Las Vegas. Atlantic City remains—behind Vegas—the second largest commercial casino market nationwide. But the two are worlds apart in terms of population growth, economic diversification and global prestige. It does have great saltwater taffy though.
From the Latest Census:
Fastest and Slowest Growing States, Resident Population, 2010-2020
- Afghanistan: With the world’s attention turned to Afghanistan, one question to ask is: Where does the Taliban get its money? Vanda Felbab-Brown of the Brookings Institution tells NPR Marketplace that kidnapping for ransom and trading opium, heroin and methamphetamine have all been important revenue sources. More importantly though, the group collected money through taxes on border trade, fuel, goods and even infrastructure projects like cell phone towers. Even before the events of recent weeks, remember, the Taliban controlled large parts of rural territory. The government that just collapsed, meanwhile, relied a lot on foreign aid money that’s no longer coming in. The IMF would normally step in as a last resort provider of funds, but the U.S. and others likely won’t allow that. China could decide to provide some funding. But all signs point to extreme economic difficulties, made worse by a drought affecting farmers, many of which simply grow food for subsistence. According to OEC, Afghanistan’s top exports in 2019 were gold and grapes. Top imports include wheat, cell phones, oil and cigarettes, all of which require foreign currency. But where will that foreign currency come from, aside from selling things like gold and grapes?
- Afghanistan: How much did the U.S. spend trying to rebuild Afghanistan? The total, during the 20 years it was there, amounted to $145b, according to a new report by the Special Inspector General for Afghanistan Reconstruction. That’s roughly the GDP of Arkansas. But that leaves out military spending, which was another $837b. The report also notes that all war-related costs for U.S. efforts in Afghanistan, Iraq, and Pakistan over the last two decades are estimated to be $6.4 trillion. Brown University’s Cost of War project pins the cost of Afghan activities alone at $2.26 trillion. The size of the entire U.S. economy, remember, is about $23 trillion.
- Savings and Loan Crisis: The 1980s are remembered for many things, including many welcome economic developments: Inflation eased, interest rates moderated, oil prices dropped and GDP grew. There was, however, a large financial crisis that began in the early 1980s and didn’t get resolved—expensively resolved—until the 1990s. Savings and Loan institutions (S&Ls) were, according to an FDIC history, state- or federally chartered deposit-taking institutions whose loans mainly took the form of residential mortgages. Some were mutual institutions owned by their depositors, while others had publicly traded shares. Their origins date to the Depression-era 1930s, when Washington looked to promote mortgage lending. But they suffered a solvency crisis in the early 1980s, after Fed chair Paul Volcker famously increased interest rates sharply to defeat inflation. Suddenly, as a Dallas Fed history recounts, the S&Ls had to pay higher rates to attract deposits (which is how banks are traditionally funded). But their mortgage loans were locked in at low 30-year rates. When rates later eased as Volcker’s touch medicine worked, the S&L situation improved somewhat. But many were already insolvent. And instead of winding these troubled S&Ls down, Congress deregulated them, hoping they’d grow out of their problems. They didn’t. What they did was take excessive risks in a gamble to regain viability. Many eventually collapsed, with 1988 the peak year for failures, and Texas the epicenter of the problem (Texas, remember, was a rare area of the U.S. that was hurt not helped by the decade’s falling oil prices). By 1989, Congress decided to address the problem more directly, abolishing the S&L’s main regulator and replacing it with an Office of Thrift Supervision. S&L deposits were thereafter covered by the FDIC’s guarantee. And a Resolution Trust Corporation (RTC) was established and funded to resolve the remaining troubled S&Ls. The RTC would close 747 of them, holding assets exceeding $400b. An FDIC analysis estimated that the final cost of resolving failed S&Ls was just over $160b, including $132b from federal taxpayers. “It must be concluded that the savings and loan crisis reflected a massive public policy failure… and much of this cost could have been avoided if the government had had the political will to recognize its obligation to depositors in the early 1980s, rather than viewing the situation as an industry bailout.” The report goes on: “Believing that the marketplace would provide its own discipline, the government used rapid deregulation and forbearance instead of taking steps to protect depositors.”
- The Space Economy: In 2019, some 2,000 satellites were orbiting planet earth. Now, the number is more like 6,000. The Hustle describes the growth of the satellite industry, fueled by three developments: 1) rocket launches got cheaper, 2) satellites got smaller and 3) data analysis software became more advanced. For decades, the article notes, launching satellites into space was the work of governments and multi-billion-dollar firms like Boeing, Lockheed Martin and AT&T. Today, however, many smaller private players are playing a role. The most famous is Elon Musk’s SpaceX, whose Falcon 9 (in 2012) became the first reusable rocket capable of delivering an object into orbit. Reusables have since lowered the average industry-wide cost of launch from $200m to $60m. The first earth observation satellite, by the way, Landsat 1, was launched by NASA in 1972; it weighed 1,800kg and was roughly the size of a garbage truck. “Today’s so-called ‘smallsats’ weigh as little as 12kg and are about the size of a shoebox.” Satellites have many applications, The Hustle explains, from helping to predict the weather to tracking delivery drivers to beaming live sports to our televisions. But the list of uses is growing as imagery improves, providing—among other things—valuable data to investors and businesses. Space X, meanwhile, is now developing a satellite-based internet service called Starlink. Are there downsides to the surge in satellites? One is the environmental impact of crowding the skies with space junk as satellites age. Another is the issue of privacy, with so many increasingly powerful satellite cameras watching us.
- The Cryptoeconomy: New York Times columnist Ezra Klein has no doubts that crypto is more than just a passing fad. Silicon Valley, he writes, sees it as “the digital infrastructure atop which the next internet will be built.” Klein spoke with Fred Ehrsam, co-founder of both Coinbase and Paradigm, who says the first phase of crypto involved digitally native currencies like Bitcoin, leading to a market that’s worth $2 trillion today, up from nothing in 2008. These currencies are frequently bought, sold and traded. They’re occasionally used to buy stuff. And they’re used to pay developers and software engineers who help improve and maintain the networks. But then came a phase two, according to Ehrsam: building digitally native financial services that compete with those offered by banks, accomplished through online contracts that anyone can write, and which are enforced by software code, not a third-party institution or a court. This is what the crypto world calls decentralized finance, or “DeFi.” Klein writes: “According to some estimates, there are about $100b worth of assets being held in DeFi applications right now, up from almost nothing just four years ago.” But crypto continues to evolve. Ehrsam and others envision a third phase, in which crypto underpins a better internet, dubbed Web 3.0. It’s one where online identity, ownership and authenticity can be verified, allowing creators to earn money from their work, rather than see their work sent around for free and monetized by middlemen like Facebook and Google. Creators are using non-fungible tokens (NFTs) that fans and followers can buy. What’s next? The cryptoeconomy is evolving in uncertain ways. But it’s certainly growing. And it’s also attracting a lot of money and talent. It’s attracting more attention from politicians and regulators too, another sign that it’s here to stay.
- Cryptoeconomy: No person is more associated with the cryptoeconomy than Bitcoin founder and blockchain inventor Satoshi Nakamoto. But nobody knows who he or she is. Or even if he or she is a real person, or perhaps multiple people? For a less mysterious personification of crypto hero, consider Vitalik Buterin, founder of the Ethereum blockchain while still a teenager. He remains actively involved with the non-profit network, which serves as a platform upon which other crypto applications can be developed. Ethereum is currently transitioning to a new method of verifying transactions that doesn’t involve so much energy consumption. That aside, what does Buterin think of Jack Dorsey’s plan to build Bitcoin-based financial services? It likely won’t work, he tells Bloomberg Studio, given Bitcoin’s limited functionality. He’s also skeptical of Mark Zuckerberg’s plan to win the metaverse. He thinks the metaverse will come to be sure; after all people are already living more and more of their lives in a virtual world, a trend accelerated by the pandemic. Where will Ethereum be five years or ten years from now? Buterin answers: “Hopefully running the metaverse.”