Weekly Rundown - August 1, 2022

Happy August!

I’m on vacation. “Holiday” as they say in proper English.

No audio today. Also, no updates this week. We all need our breaks, sometimes.

Please read the July issue if you have a chance (tap immediately below).

Also make sure you caught my update from July 28, 2022.

Scroll down for some content you may enjoy.

A reminder that on-chain governance, like real-world governance, has a lot of complexities and ethical considerations in design and execution.

In crypto as in life, you get unscrupulous people, big-money manipulators, and “tyranny of the majority.”

I don’t think anybody’s yet figured out how to avoid these problems. With time, effort, and iteration, maybe somebody will figure that out. We certainly have a lot of good people trying.

After shrinking for two quarters, the US economy is in a technical recession, though the government says it’s not. Lots of people have jobs, so obviously the economy is strong and this is a transition to steady, sustainable growth.

All part of the plan:

I don’t really spend much time thinking about the definition of “recession,” but we should probably all have one definition everybody can agree on, even if it’s a definition that doesn’t make sense.

“Two quarters of negative GDP” is arbitrary and not a very useful way to conceptualize the circumstances we’re in, but if we go with that, at least we can have an honest discussion and spend our time and effort figuring things out instead of debating semantics and trying to score political and rhetorical points.

Something for ETH merge fans.

When you tinker with the biggest, most-used, best-known smart contract platform, you’d better be careful about the potential consequences.

Galois Capital has a good thread highlighting some risks and potential outcomes.

Not sure it’s alpha but it’s free and certainly something to think about.

Are you sitting on cash? Or short on it?

You have good company. With little urgency for risk assets, tighter budgets, and pessimism about the fate of your economy, you have tough choices to make.

Ecoinometrics posted an interesting perspective in an article for paid subscribers.

If you aren’t a paid subscriber, you can read the article for free. Tap the link in this box, then select “Keep reading with a 7-day free trial.” The option should appear in a red box after you tap the link.

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One last note to anybody sitting on cash:

Consider putting that cash into short-term government bonds and money market accounts. At least you’ll get some money for your money.

If you’re concerned about emergency expenses, you can combine that approach with debt, for example:

1. Open a line of credit or a new credit card. Don’t use it.

2. Buy a one-month treasury bond or whatever’s comparable in your country, in whatever amount feels comfortable for you. Thanks to rising interest rates, that bond will reward you with a yield (possibly, for the first time in years).

3. Go about your life.

4. When your bond matures, roll it over into a new one-month bond. Do this each month. If rates keep going up, your yield will go up, too. You’ll make more money as rates go up, and less money as rates go down.

5. If you need cash, borrow from your line of credit up to the value of your bond. Don’t borrow any more than that. You may want to borrow less, just in case things don’t work out the way you expect.

6. When your bond matures, cash it out instead of rolling it over. Use the proceeds to pay off your debt. You’ll have 30-59 days to do this without paying interest.

7. Pocket whatever money is left (minus taxes, if applicable).

This is more effort and risk than staying in cash, but it gives you more flexibility and some income without locking you into any long-term commitments.

Yes, if your government runs out of money, your bond is worthless—but if that happens, your cash is probably worthless, too.

Let’s hope that doesn’t happen.

Relax and enjoy the ride!