Axios

Crypto is facing a crisis moment — and its ecosystem is proving much less capable of reacting in a way that's predictable and fair than the dollar-based system generally does when firms implode.

Why it matters: There will always be institutions that take on too much risk or that end up insolvent. A well-functioning system will swing efficiently into action in such cases, while a chaotic system will spiral into ever-greater troubles.

When Queen Victoria's mother and husband died in quick succession, the result was a significant expansion of public education in England.

• That's the conclusion of what is easily my favorite economics paper of the year so far, from Marc Goñi of the University of Bergen in Norway.

Financial advisers' bullishness is reaching new and ever more unrealistic levels, even as the stock market pulls back from its recent excesses.

Why it matters: Advisers are already doing a bad job managing their clients' expectations. But it turns out their own instincts have also been skewed by the long bull market of the past decade.

Whether you’re firing up the grill, lighting up the sky with fireworks or taking a road trip during the July 4th weekend, inflation has likely been an uninvited guest.

The big picture: Prices for most July 4th cookout staples are up as much as 36% over last year, according to a recent survey from the American Farm Bureau Federation, Axios' Julia Shapero reports.

Google announced Friday it will start deleting user location history whenever someone visits an abortion clinic, domestic abuse shelters or other similar locations.

Driving the news: “If our systems identify that someone has visited one of these places, we will delete these entries from Location History soon after they visit,” Jen Fitzpatrick, a senior Google executive, wrote in a blog post.

Executives are calling out the bloat inside their companies, and challenging workers to evaluate themselves.

Why it matters: Workers have enjoyed almost two years of flexibility and having the upper hand. But they may find the tables are turning as the economy loses steam, and tech companies start handing out pink slips.

Driving the news: Leaked audio of a staff meeting yesterday inside Meta reveals the company has cut plans to hire engineers by at least 30% this year, while raising the bar for existing employees, according to Reuters.

• "Realistically, there are probably a bunch of people at the company who shouldn't be here," CEO Mark Zuckerberg was also heard saying, Reuters reports.
• “Part of my hope by raising expectations and having more aggressive goals, and just kind of turning up the heat a little bit, is that I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” he added. Axios has reached out to Meta for comment.
• His comments echo those of Tesla CEO Elon Musk, who has been saying, reportedly, that the company was becoming "overstaffed in many areas" and that people who didn't want to come into work shouldn't work there at all.

The big picture: Meta and Tesla are among at least a dozen tech companies trimming, or cutting back on growing, their workforces amid a slowdown in the economy.

What to watch: Outplacement firm Challenger, Gray & Christmas is getting ready to be busier.

• “Labor’s always a kind of slow [and] lagging indicator of what’s happening in the overall economy,” Andrew Challenger, senior vice president at the firm, previously told Axios.

Federal securities regulators and a federal grand jury in New York have subpoenaed former President Trump's social media company as part of their investigations into its pending deal to go public via a blank-check company called Digital World Acquisition Corp., according to a Friday disclosure.

The big picture: Certain current and former members of Trump Media & Technology Group were also subpoenaed, but no specific individual names were disclosed.

Independence Day weekend is expected to be the second busiest for travel since 2000, with flight delays, cancelations and staffing woes.

Why it matters: It's a sign that the summer of "revenge travel" is upon us, with Americans splurging on travel and enduring delays to make up for pandemic-related cancellations.

The world's 500 richest billionaires lost $1.4 trillion in the first half of 2022, the steepest six-month drop ever for the ultra rich, Bloomberg reports.

Why it matters: The losses come as the S&P 500 Index suffered its worst first half of the year since 1970, per Barron's.

Influencers on social media have become so integral to the process of selling merchandise that they’ve become appendages to the largest marketing organizations in the world.

Why it matters: Online creators, whether on YouTube, Instagram or TikTok, have not only been filling a role to pitch products, but also to plug gaps in creativity as advertising agencies have shrunk.

Troubled crypto lender BlockFi said Friday that it agreed to an option to be acquired by FTX for up to $240 million.

What to know: The acquisition figure would include performance incentives, and BlockFi didn't specify how much would be an upfront payment.

The FBI has offered a $100,000 reward in its search for Ruja Ignatova, the so-called "Cryptoqueen" who allegedly helped defraud investors out of $4 billion with a cryptocurrency scam.

Driving the news: Ignatova was added to the FBI's list of the 10 most-wanted fugitives this week. The FBI is asking for any information about the alleged fraudster, who disappeared in 2017.

On Thursday, the Axios Macro team spoke with Mary Daly, president of the Federal Reserve Bank of San Francisco, about a wide range of topics. Here are some lightly edited highlights from the interview.

On the interest rate path ahead and what might change her views on the need for rate increases:

• "My own views on policy… are that we need to get to something like the neutral rate of interest by the end of the year, which in my judgment would be to around the 3.1% range of a nominal Fed funds rate."
• "And so what would unwind the need to do that? Well, if there were some extraordinary, unexpected developments in the economy that pull inflation down rapidly, or [the] supply chain would repair or some other global shock that we had to deal with, but none of those things are happening" at the moment, she says.

On the latest inflation reading, showing a 6.3% rise in consumer prices over the past year:

• "The data on inflation are coming in more or less as expected. … My expectation was that we would be high for another several releases. And so this is just confirming that the data are coming in strong in a negative sense. They're coming in too high. And thus, we have to stay on our policy course if we're going to do our part to restore price stability."

On when the Fed might slow the pace of interest rate hikes:

• "I would say 75 [basis points] in July, and then you figure out what else needs to be done so that we can get to 3.1% by the end of the year. So that is likely to be some natural slowing of the pace of interest rate hikes in terms of the magnitude."
• "It's more about getting to where we need to be, and how much do we do that? It could be the case that we're very uncertain about how the economy will play out and we want to take 25 basis point increases at a time, but I don't feel that uncertainty is the pervasive thing happening today. I think that really is about next year."

On whether it might make sense to speed up the pace of shrinking the Fed's balance sheet in light of continued high inflation:

• "When we decided on [the pace of balance sheet reduction], one of the things that I really was focused on is, you want to pick a pace that you think is durable across a range of outcomes."
• "So the economy goes slower than you think, but the adjustments on interest rates go far quickly and the economy slows down more quickly. So it's slower. Will this pace still work? The other one is what if we have to do more, will the pace still work?"
• "So I feel this pace is a really good pace because it gives us that durability across a range of potential developments in the economy."
• "The funds rate is like our speed boat adjustment tool, and [the] balance sheet is like a tanker ship. So you want your tanker ship to be on a good course that's really robust to a variety of developments, and you want to make any fine-tuning of your rate path with your more nimble instrument, and that would be the funds rate and forward guidance," Daly argues.

On the widespread financial troubles among venture capital-backed tech firms and the crypto industry, and whether it might have broader economic significance:

• "What I'm hearing from my contacts — who are either in venture funds, or they're in companies funded by venture capitalists, or they have a crypto presence — is that this was a pretty rapid ride up to some levels that look like a little bit frothy to me, frankly, and not probably long-term sustainable. So corrections in those marketplaces are not surprising."
• "In terms of the real economy effects, I was doing a CEO roundtable in LA last week. And they all came to the same conclusion, which is they lost a lot of younger people to the idea that you could work a little bit in trading crypto, and so they quit their jobs. And now they're getting calls back saying, 'Well, probably the working thing is a good gig, and I want to invest in the diversified portfolio.'"
• "So the real economy seems to have two sides to it: There are layoffs, there's definitely layoffs, but these individuals are quickly able to find other jobs."
• "And some of the softer labor supply in the 25 to 35 group is now firming up a bit. People are coming back in in ways that I'm anecdotally hearing. Now we'll have to watch to see if it scales to actually seeing it in the aggregate data. But right now, I'm hearing it. And that's a positive sign for many of the firms here."

On the housing market:

• "Households are in very good shape from a budgetary perspective, and that means that the systemic risk from housing slowing is just not there."
• "The slowing I'm seeing so far is a positive development for the housing market. There are so many people who are priced out because of the unbridled price appreciation. Slowing that down a little bit and giving builders and others a little room to breathe, I think will allow some opportunities to create a more sustainable plan in the housing market, which we clearly need."

Decentralized finance (DeFi) may seem weird, but it's not going to implode like other crypto lenders have, at least not according to Robert Leshner, the CEO of Compound Labs and founder of one of DeFi's blue chip protocols, Compound Finance.

Why it matters: Outsiders reading the odd story about cryptocurrency might think any company doing finance with bitcoin nearby is "DeFi," but it's not. It's only DeFi if it functions autonomously, out in the open.

Crypto's cataclysmic first half ended on Thursday with a disputed CNBC report that crypto lender BlockFi could be sold to FTX for a base price of just $25 million.

Why it matters: BlockFi has raised around $1.2 billion in venture funding, from investors like Dan Loeb, Tiger Global and Bain Capital Ventures. There are lots of different ways to calculate VC returns but, in this case, all methodologies lead to sadness.

Affinity Partners, the private equity firm formed last year by former President Trump’s son-in-law Jared Kushner, has agreed to invest in Mosaic, an Oakland, Calif.-based fintech company that provides loans for residential solar installations, Axios has learned from multiple sources.

Why it matters: This would be the first major deal for Affinity, which has raised more than $3 billion for its debut fund.

A key indicator of the financial health of Americans has declined steadily for the last 14 months, in yet another ominous sign from the economy that Democrats will face tough midterm elections.

Driving the news: Real per capita disposable income — the money consumers can spend after accounting for taxes and inflation — is dropping sharply, according to government data released Thursday.

Congratulations, you just lived through the stock market's worst first half since the Nixon administration.

Driving the news: The S&P 500 dropped 20.6% in the first half of 2022, as the Fed launched a tough rate-hiking campaign to counter inflation.

Since 2021, Hispanic and Black Americans experienced slightly higher rates of inflation compared to white or Asian Americans, finds new research from the New York Fed.

Why it matters: The headline inflation number in the Consumer Price Index — which is at a super high 8.6% right now — is an average, and doesn't reveal much about how different households experience rising prices. There are real differences across income groups, or between rural and urban dwellers, for example.

Parents and caregivers in Florida and Maryland are getting a tax break on diapers, starting Friday.

Why it matters: With inflation at a record 40-year high, the average cost of diapers nationwide has gone up by nearly 22% since 2018, according to NielsenIQ, a data firm that tracks consumer prices, Boston public radio station WBUR reports.

Thousands of U.S. Uber drivers and riders reported being sexually assaulted over a two-year period, according to a safety report the ride-hailing company released on Thursday — its second ever, covering 2019-20.

Between the lines: The 3,824 reported sexual assaults is actually a decline of 38% from the previous report, which covered 2017 and 2018. However, the number of deaths due to physical assaults and crashes both increased.

The U.S. Treasury Department said Thursday it's notified the Delaware-based Heritage Trust that it's blocking more than $1 billion in assets linked to the sanctioned Russian oligarch Suleiman Kerimov.

Why it matters: The U.S. and other governments are intensifying efforts to financially squeeze oligarchs with ties to Russian President Vladimir Putin due to the invasion of Ukraine.

The hardest thing for most aspiring leaders and managers to master is giving clear, direct and sometimes very hard feedback to others.

Why it matters: Candor, done right, is a time-saving, culture-strengthening, clarifying gift.