| | | | | | | Presented By Crexi | | | | Axios Markets | | By Emily Peck and Matt Phillips · May 12, 2022 | | 👋 Hey, you guys. Today, Matt takes a look at what happened to UST and its sibling coin (is that a term?) Luna. Need a preview? Take a look at this short video clip. Anyways, let's get to it! Today's newsletter, edited by Kate Marino, is 1,205 words, 5 minutes. | | | | | | 1 big thing: Broken stablecoin |  | | | Illustration: Shoshana Gordon/Axios | | | | A stablecoin called TerraUSD (UST) — and the cryptocurrency that backed it, Luna — seem to have entered a doom loop in recent days, vaporizing billions in illusory wealth and demonstrating the potential pitfalls of poorly thought-through crypto hijinks, Matt writes. Why it matters: The spectacular blowup will bolster the push for regulation of stablecoins, the creations that serve as the actual money used in the crypto and DeFi economies. Driving the news: UST continues to struggle, falling another 25% on Wednesday, to $0.68, shortly after 4 pm ET. Luna fell a remarkable 95%, to around $1.25. How it works: Stablecoins are a type of cryptocurrency designed to avoid the wild swings seen in traditional cryptos. They're meant to maintain a value of $1. - Most stablecoins you've heard about in the news are dollar-backed, meaning each token is backed by traditional money.
- In contrast, UST is an algorithmic stablecoin, meaning it derives its value — in part — from computer programs that automatically adjust supply of the coins in response to rises and falls in demand.
Yes, but: For UST it was clearly not that simple. - It's true that UST was designed so that the amount of the coin that could be created or destroyed — "minted" and "burnt," in crypto-speak — changed in response to prices.
- But UST was essentially backed by another cryptocurrency, something called Luna.
It gets even more complicated. When UST value fell below $1, traders could "burn" one UST and be paid to do so with $1 worth of Luna. - The traders then pocket the small difference between the sub-$1 price of UST and of $1 worth of Luna, in a seemingly low-risk kind of trade known as an arbitrage.
- In the aggregate, all of this arbitrage trading would shrink the supply of UST — which would help raise the price back to $1.
Our thought bubble: I guess this could work if Luna was really worth something. - But what if people decide that they don't think UST is worth anything and they also don't think Luna is worth anything? What if the whole thing is made up and worthless?
- That's kind of what we're seeing now. The whole thing collapses.
What to watch: In and of itself, the collapse of UST and Luna don't seem like they should be large enough to pose a major problem to the broader markets and financial system. - But the question is whether this stablecoin run — as the bank runs of yore — will generate a bunch of others, as people rush to convert their stablecoins to actual dollars.
- The entire stablecoin market is roughly $160 billion in market capitalization, according to Fitch Ratings. And that's certainly big enough to cause concern in the broader markets.
Go deeper. |     | | | | | | 2. Catch up quick | | 🛒 Instacart confidentially files for IPO. (Bloomberg) 🔎 The SEC is reportedly investigating Elon Musk's timing on Twitter disclosure. (WSJ) 🛢 In a reversal, IEA says world can handle lack of Russian oil. (Reuters) | | | | | | | | 3. Airfare inflation is the new used car inflation |  Data: Bureau of Labor Statistics; Chart: Axios Visuals The latest inflation data included a number that was shocking, though not exactly surprising to anyone who has booked their summer travel lately: Airfares rose 18.6% in April, the most on record for a single month, which accounted for about a quarter of the overall surge in core inflation last month, Axios' Neil Irwin writes. Why it matters: A challenge with interpreting inflation data is determining what to "look through" as a mere one-time adjustment and when to show more alarm. The experience of the last year shows the risks of being too willing to brush off high inflation just because one or two categories are disproportionately responsible. - It would be a mistake to brush off the elevated April inflation just because so much of it was due to one sector facing unique issues, as many commentators did this time a year ago when used car prices spiked.
State of play: The causes of surging airfare are straightforward. Jet fuel prices have been rising, leading airlines to raise their prices. There are pilot and other staffing shortages, constraining the operators' ability to add more routes. - Moreover, financially flush consumers are ready to spend whatever it takes to book their vacations and business travel.
- Limited supply plus strong demand = booming prices.
The problem with the current inflationary moment is not that some prices are rising for idiosyncratic reasons. It's that inflation has become s0 broad-based that the markets with idiosyncratic issues — like April airfares, or used car prices last spring — drag inflation up from already-high levels. - And over time, you would expect these weird shocks to be symmetrical, with deflationary surprises that offset inflationary surprises. But the nature of our current economy is that the surprises all are cutting in the same direction.
Keep reading. | | | | | | | | A message from Crexi | | This data hub helps you make better CRE decisions | | |  | | | | Intelligence, a robust data hub developed by CRE leader Crexi, is a comprehensive database subscription with unlimited access to over 13 million nationwide sales comps, map overlays and a data center. Learn more. | | | | | | 4. Economically devastating for women |  | | | Illustration: Aïda Amer/Axios | | | | Legalizing abortion was one of the most meaningful economic policies of the past 50 years for women — research shows it advanced their educational attainment and career achievements, as well as reduced poverty rates for women and families, Emily writes. Why it matters: If Roe v. Wade goes away, some of that progress will likely be reversed, which could slow economic growth more broadly. The research: Abortion access allows young women to delay becoming mothers, making it more likely that they will attend and finish college and start careers, a host of studies have found. - "Whether and under what circumstances to become a mother is the single most economically important decision most women will make in their lifetimes," says Caitlin Knowles Myers, an economist at Middlebury College, widely recognized as a leading scholar on this issue.
She summarized the scholarship on the economic consequences of abortion access in an amicus brief filed by 154 economists to the Supreme Court last year, citing studies that found: - Legalization increased women's labor force participation, particularly Black women.
- Young Black women who used abortion to delay motherhood for just one year realized a 10% increase in wages later in their careers.
- The benefits to children (a majority of women who obtain abortions have children) are vast: a reduction in poverty and death rates, as well as the use of welfare benefits.
The other side: Opponents argue that abortion is morally wrong and that no benefits outweigh those costs. The bottom line: Janet Yellen, the U.S. Treasury Secretary and a labor economist who knows all this research, summed it up earlier this week. - Eliminating a woman's right to seek an abortion, she said, would have "very damaging effects on the economy and would set women back decades."
Go deeper. | | | | |  | | | | If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. | | | | | | | | 5. There's still a shortage of child care workers |  Data: BLS; Chart: Axios Visuals Speaking of the economics of parenthood, the number of child care workers is still down by 11% compared to pre-pandemic levels, Emily writes. - The median wage for a child care worker is $13.22 an hour, according to BLS data — a couple of dollars more than in 2019, but still not competitive with other industries paying more in this ultra-tight labor market.
That means some parents are having a hard time finding child care, which keeps them (typically mothers) either out of the workforce or working less than they'd like. The bottom line: Lack of access to quality child care is a problem that predates the pandemic, though — and could become a growing concern in a future without Roe. | | | | | | | | A message from Crexi | | Get the CRE data you need | | |  | | | | Crexi is transforming CRE by improving access to key data for real estate professionals. Here's how: With Intelligence, property buyers and sellers can quickly access 13M+ nationwide sales comps and market data to make decisions with confidence. Learn more about Intelligence. | | |  | It's called Smart Brevity®. Over 200 orgs use it — in a tool called Axios HQ — to drive productivity with clearer workplace communications. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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