3 min read

Sleepwalking into upheaval

The ingredients for the 1970s are already in place; the big shifts in crypto; the world turns hawkish; and not even death can save you from the TSA.
Cartoon showing inflation eroding real wages.
The 2020s have a lot of of similarities to the 1970s. Source.

1—Sleepwalking into upheaval

Financial shocks, political clashes and civil unrest. That's what historian Niall Ferguson worries we have in store for us this decade now that the "ingredients of the 1970s are already in place":

"The monetary and fiscal policy mistakes of last year, which set this inflation off, are very alike to the 60s. And, as in 1973, you get a war," he continued, referring to the 1973 Arab-Israeli War — also known as the Yom Kippur War — between Israel and a coalition of Arab states led by Egypt and Syria.

"This war is lasting much longer than the 1973 war, so the energy shock it is causing is actually going to be more sustained," said Ferguson.

Ferguson went on to note today's lower productivity growth, higher debt levels and less favourable demographics all increase the likelihood that we need to at least "consider the possibility that the 2020s could actually be worse than the 1970s".

You can read the full summary of Ferguson's comments at the Ambrosetti Forum in Italy here (~3 minute read).

2—The big shifts in crypto

Blogged Noah Smith interviewed the creator of Ethereum, Vitalik Buterin, ahead of Ethereum's upcoming "Merge". According to Buterin, while proof-of-stake (what Ethereum is moving to) comes with its own security issues, proof-of-work blockchains (e.g. Bitcoin) will run into potentially worse problems when issuance eventually "decreases to near-zero":

"In the case of Bitcoin, I'm worried for two reasons. First, in the long term, Bitcoin security is going to come entirely from fees, and Bitcoin is just not succeeding at getting the level of fee revenue required to secure what could be a multi-trillion-dollar system. Bitcoin fees are about $300,000 per day and haven't really grown that much over the last five years. Ethereum is much more successful at this, because the Ethereum blockchain is much more designed to support usage and applications. Second, proof of work provides much less security per dollar spent on transaction fees than proof of stake, and Bitcoin migrating away from proof of work seems to be politically infeasible. What would a future look like when there's $5 trillion of Bitcoin, but it only takes $5 billion to attack the chain? Of course, if Bitcoin actually gets attacked, I do expect that the political will to switch to at least hybrid proof of stake will quickly appear, but I expect that to be a painful transition."

There's plenty more in the full interview, which you can read here (~20 minute read).

3—The world turns hawkish

Image showing a map of the world coloured by central bank cash rate moves.
The world's central bankers are getting serious about inflation.

4—Not even death can save you

Can you think of an organisation that pays poorly, has the lowest job satisfaction in government, routinely abuses its customers and doesn't accomplish any of its stated outcomes? Yes, it's the US Transportation Security Administration (TSA), an agency featured this week by The Verge:

"It remains institutionally obsessed with 'preventing another 9/11,' using that phrase like a reflex in press releases, Congressional hearings, and pretty much any attempt to justify its increasingly baroque policies. In the last 20 years, it has spent nearly $140 billion to 9/11-proof air travel.

But the reality is that TSA has played next to no role in the biggest counterterrorism stories of the past two decades. According to the think tank RAND, intelligence and security services manage to foil nearly two-thirds of terrorist plots in the planning stages.
The most generous independent estimates of the cost-effectiveness of the TSA's airport security screening put the cost per life saved at around $15 million. And that makes two big assumptions: first, that the agency is both 100 percent effective and 100 percent responsible for stopping all terror attacks; and second, that it stops an attack on the scale of 9/11 about once a decade. Less optimistic assessments place the number at $667 million per life saved."

Do read the full feature by Darryl Campbell, which is available here (25~ minute read).

5—Further reading...

👩‍🌾 Global food prices fell for a fifth month in a row in August "and is now lower than it was before Russia's invasion of Ukraine".

🌽 Why China has been obsessed with food security: "If China went to war with the U.S. over Taiwan or some other issue, millions of Chinese people would very quickly face a real risk of starvation, no matter the damage cutting off China from the global economy would also do to its enemies".

🖼️ An image created by a popular text-to-image AI generator named Midjourney won first prize at a state art competition.

👊 The outcome of Xi Jinping thought: "China's private firms have been underperforming relative to the state-run sector, according to latest data through July 2022 from the Chinese statistical authority, and the gap is widening."

🚆 From the FT ($): Why "Megaprojects often end up late and hideously over budget."