The Breakdown

Today on the Brief:

• US Gov’t forces China’s Houston consulate to close
• US previously-owned housing market grows 20.7% May to June
• Insider stock selling reaches record levels

Our main discussion: DeFi 101

Today’s episode of The Breakdown is a primer for anyone who has lost track of the terminology surrounding decentralized finance. In it, NLW goes over:

• DeFi’s background and origins
• Market making in a traditional context
• Automated market making 
• How liquidity mining incentives economic participation 
• How decentralized exchanges differ from centralized exchanges 
• What “yield farming” actually means
• Why we shouldn’t be concerned about the Yield Farming bubble

Today on the Brief:

• EU leaders agree on $2 billion stimulus package
• LinkedIn job cuts show weakness in the professional sector
• Has DeFi jumped the shark?

Our main discussion: The Fed’s changing inflation strategy

University of Oregon professor and Bloomberg columnist Tim Duy recently penned a piece called “The Fed Is Setting the Stage for a Major Policy Change” arguing that we’re likely to see more inflation, promoted by the Fed. 

In this episode, NLW breaks down:

• Why the Fed is turning away from its traditional inflation forecasting method 
• Why the Fed is likely to let real inflation hit 2% before doing anything
• Why some are calling the move “simply asinine” 
• Why some think the Fed is full of hot air and has no power to actually create inflation
• Why the Fed is trapped by its definition of inflation

Audio clip featuring Alhambra Investments head of research Jeffrey Snider in an interview with Emil Kalinowski.

Today on the Brief:

• Mastercard, Standard Chartered and PayPal all deepen their engagement with crypto
• Japan inches closer to a central bank digital currency
• The real estate “doom trade” opens up

Our main discussion: GPT-3

Generative pertained transformer-3 – or GPT-3 as it’s better known – absolutely took over the internet this weekend. 

It’s a new AI language model that can do some truly incredible things, from writing poetry to composing business memos to generating functioning code from natural language descriptions.

In this episode of the Breakdown, NLW provides a 101-level overview of GPT-3, including:

• What an AI language model is
• Why AI for language is more difficult than image-based AI
• The background of OpenAI, the Elon Musk-backed project behind GPT-3
• Some examples of what GPT-3 can do
• Why reasoning and narrative still elude the technology

Reference posts:

GPT-3 Examples, a Twitter Thread

Jonathan Johnson on AI Language Models

Rob Teows: GPT-3 Is Amazing – And Overhyped

On this week’s Long Reads Sunday, we look at two essays about stablecoins previously published on CoinDesk. 

The first is called “USD Stablecoins Are Surging, but Zero Interest Rates Complicate Business Model” by Hasu and was one of the first pieces to recognize that demand was coming not just from the crypto space but from emerging markets facing crisis time currency pressures. 

The second is “Hyper-Stablecoinization: From Eurodollars to Crypto-Dollars” from Pascal Hügli. The piece argues that stablecoins are likely to play an increasingly important role in the global economy. In effect, they are a better version of the critical eurodollar system.

On this edition of the Weekly Recap, NLW explores:

• No-volatility bitcoin and DeFi’s big quarter
• An uptick in central bank currency action
• PayPal crypto confirmation
• A China-U.S. rhetoric flare up
• Social media as democracy’s fault line
• In Fed World, is the narrative trade the only trade?

Today on the Brief:

• The latest information in the Twitter hack
• Thailand starts using its central bank digital currency
• Treasury Secretary Mnuchin calls on Congress for more funds 

Our main conversation is with Jon Turek, author of “Cheap Convexity.” 

In this conversation, he and NLW discuss:

• Why the dollar has gotten stronger thanks to a savings glut from Asia
• How a too-strong dollar hurts other markets more than the U.S.
• Why globalization died in 2011 and we just didn’t realize it 
• How the Fed fixed the global dollar plumbing 
• Why there are still questions of actual dollar shortages 
• The detente in U.S.-China financial relations 

Find our guest online

Website: Cheap Convexity 

Twitter: @jturek18

Today on the Brief:

• Adjustment to bank profits in anticipation of growing debt delinquency 
• The lowest decrease in jobless claims since March 
• A boost in retail spending 

Today’s main discussion: The Great Twitter Hack, feat. Dr. Tom Robinson, chief scientist and co-founder of Elliptic 

Wednesday, at around 2:15 p.m. EDT, prominent Crypto Twitter accounts started sharing a similar message about a bitcoin giveaway. A couple of hours later, Elon Musk and Bill Gates were saying they were feeling generous and wanting to give bitcoin away. A couple more hours and every verified blue check mark account on Twitter was taken down. 

It was an attack with massive implications, if not much monetary gain. 

On this episode NLW breaks down:

• What happened
• Which accounts were impacted
• How much BTC was transferred 
• The narrative battle of “bitcoin scam” vs. “Twitter hack”
• Why it might have been a state-sponsored attack
• Why the real intention might have been to discredit Twitter 
• Why the (supposed) revelations about Twitter’s administrative tools could end up in a congressional inquiry 

Expert commentary provided by Dr. Tom Robinson. Find our guest online:

• Elliptic website: Elliptic.co 

No geopolitical relationship will shape the world over the coming decade as much as that of the U.S. and China. 

A day after President Trump signed the Hong Kong Autonomy Act enabling sanctions on those that threaten the autonomy of China (and the companies that do business with them) and the UK worked to ban Huawei 5G infrastructure, this episode of the Breakdown looks at the key faultlines and issues that have that relationship in a dangerous downward spiral: 

• Virus blame recriminations 
• Trade war tensions 
• The Hong Kong Security Law 
• Huawei 5G and critical digital infrastructure
• TikTok 
• India border skirmish
• South China Sea Military Exercises
• The politics of labeling this a “new cold war” 

Today on the Brief:

• A followup on Tesla, corporate earnings and PayPal’s crypto ambitions
• New COVID-19 shutdowns in California 
• Small businesses on the brink 

Our main conversation:

Bloomberg has reported recently bankrupt companies including J.C. Penney and Hertz had provided executives with more than $131,000,000 in bonuses. 

On this episode of The Breakdown, NLW examines:

• The logic behind these bonuses
• Why that logic is stupid 
• How this sort of reward for personal failure in the wake of 2008 led to the rise of populism on the right and left 
• Why we should allow companies to fail 
• Why people’s sense that the system is a crony system isn’t wrong

Today on the Brief:

• Wall Street quarterly earnings season opens
• Investor flock to higher-yielding Chinese government bonds
• Bitcoin whales go down but other types of HODLers go up

Our main conversation: What the hell is going on with $TSLA?

Elon Musk is now richer than Warren Buffett. A year ago, Tesla wasn’t as valuable as Ford or GM. Now it’s more than 25% of the value of the auto market as a whole. 

In this episode, NLW looks at a set of possible explanations:

• Elon as a Golden God/the cult of personality
• Tesla as an innovative tech company
• Better-than-expected vehicle delivery
• The mother of all short squeezes
• Robinhood effect
• Mr. FEDerico
• Narrative Market Machine

In the end, NLW argues that in a world where 1) the new retail base is willing to engage in narrative and meme warfare and 2) where the Federal Reserve distorts prices, the narrative market machine becomes more of a driver of prices than ever before.