EA, FTX, and SBF

One of the side-stories in the FTX saga is the fawning portrait of Sam Bankman-Fried (SBF) that Sequoia Capital published less than 2 months before the collapse of his financial empire. The part that has already raised eyebrows comes toward the end: After my interview with SBF, I was convinced: I was talking to a future trillionaire. Whatever mojo he worked on the partners at Sequoia—who fell for him after one Zoom—had worked on me, too.

~2 minutes

Looting as the Endgame of the Entirely Predictable Crypto Collapse

I learned everything I needed to know to understand the crypto-crisis (and the great financial crisis) from the Savings and Loan crisis of the 1980s. For those too young to remember, I suppose it might be useful to resurface the paper that George Akerlof and I wrote three decades ago: Looting: The Economic Underworld of Bankruptcy for Profit.

~1 minutes

Inflation, Employment, and Wages in the Current Recovery

The shared behavior of inflation in the OECD countries suggests that they are all coping with a common price shock exacerbated by the the war in Ukraine. For decades, the big difference between the US and its peers is that the US has failed to maintain a high employment rate. The hidden success of US policy during the last two years is that wages for those most likely to leave work have been growing faster than wages for other workers. This trend may need to be sustained for a long time to get the employment rate back to where it was before the pandemic hit; even longer for employment in the US to catch up with its peers.

~3 minutes

Theories, Facts, and Lisa Cook

John Cochrane used a theory about Lisa Cook to dismiss her as a candidate for membership on Board of Governors of the Federal Reserve System. I know Lisa well enough to know that John's theory does not fit the facts. I respect them both as economists, but recognize how they differ. John is a theorist. Lisa is an empiricist. Of the two, I would rather have Lisa on the Board of Governors because she is more attentive to the facts. I may not be able to convince John that she is better suited to the job than he, but perhaps I can persuade him that she is better suited than I, a theorist like John.

~5 minutes

The Growth-Severity Confound

Someone who tweets under the handle @enn_nafnlaus cautioned that it is easy to make a mistake when comparing trajectories with different exponential growth rates.

In fact, this mistake can bias down the measure of severity that is raising hopes that an omicron infection will be less serious. The bias can be large, off by something closer to a factor of 10 than a factor of 2.

The underlying problem is that fast growth dramatically increases the ratio of any quantity that we measure today compared to its value only a few days ago.

~4 minutes