A major unforced error in crypto is treating technical dashboards as financial dashboards. Nowhere is this as obvious as with TVL of lending protocols. TVL is NOT a substitute for accounting! Let’s look at TVL defined as “Value of all coins held in smart contracts of the protocol”, and how it would treat a bank with the following balance sheet: Deposits (a liability): $100m Loans (an asset): $80m Reserves (an asset): $20m Equity: $10m The TVL of this simplified balance sheet would show up as: $100m deposits - $80m loans + $10m equity = $30m TVL Does that feel accurate to you? It should not, because it structurally undercounts economic activity. In fact, TVL - a technical metric - is treating the bank’s largest asset (its loan book) as a liability and largest liability (its deposits) as an asset! The problem is one of using the wrong tool for the job. TVL counts how many tokens are in a smart contract or group of affiliated smart contracts. That’s it. In its most simple form, TVL is mostly just counting the reserve ratio of the bank (or lending protocol). TVL is not a substitute for actual accounting, and people need to understand this. A deposit on Aave/Morpho/SparkLend/Compound/Euler/Curvance is a liability to that protocol or pool. You could put $1 trillion in deposits onto one of those platforms and TVL would become $1 trillion. But that’s not an indication of economic activity! Now imagine $999.999 billion of that got lent out. TVL has crashed from $1 trillion to $1 million. Looks bad on a chart, right? But now we’re seeing economic activity! There is a reason why TVL is not used outside of crypto - it is a technical metric, not a financial one, and any overlap is coincidental and concentrated in very basic protocols like DEXes.

Everyone is so worried about misaligned AI, like scheming eunuch advisors who are more competent than you have never existed. It’s even called the principal-agent problem, for heaven’s sakes

Central bank nerds out there: So with yen again hanging around where the last intervention was, do we think they sell some Treasuries to finance that intervention? Will Fed come in with big swap lines or other help? Or is someone’s paper getting sold (and if so, US or clever ways to make the net sales fall on EU again)

This is junk data. First, 0.2% inflation would be 32% higher, because compounding is a thing. So the math is wrong. He used the arithmetic mean (average of the yearly rates, not the average rate of inflation, which was negative) Second, price levels were *lower* in 1940 than 1800 according to the usual source for this, the Minneapolis Fed’s spliced series. They use 1967 as the base year, and 1800 is 51 and 1940 is 42. You could legitimately make the argument that persistent inflation is relatively new. But there were plenty of 10%+ inflation years in that 1700-1940 period. People also forget that what’s most important is *unexpected* inflation. A stable 2% inflation that’s like clockwork beats flat-or-deflationary periods with +/- 10 or even 20% rates.

I love the optimistic interpretation, but labor productivity is a tricky thing. It tends to shoot up in recessions or other mass-layoff/hiring drought events. The reason is simple: the least productive workers are more likely to become unemployed - either within their firm or the firm itself being low productivity and dying off. Relevant today more than it has been probably in a generation, capital deepening can also give the impression of higher productivity. Giving the same worker better tools raises productivity per hour worked but not necessarily by unit of capital (total factor productivity supposedly captures the combined measure but is not very precise). So you get composition effects that strongly affect labor productivity by lopping off the left hand tail of employees and firms via extinction, or by piling capital (at the cost of lower capital productivity) in front of the same workers. This means labor productivity can exhibit countercyclical behavior. I think my own view is the rise shown below is a mix of lower-than-advertised growth of productivity (good news) and composition effects (bad news)

“…lending is meritorious and should be praised and approved.” Pope Leo X, 1515 at the Fifth Lateran Council

We do not teach how insurance works in the US school system, and I think that’s unfortunate. It also doesn’t help that the insurance most people think of first is health insurance, which in the US is more of a cost-sharing plan than insurance. So let’s quickly go over what insurance is and how it works financially. At its core, insurance is a bet against yourself. It’s a hedge. When you pay your car insurance premium, you are betting that you will get into an accident. When you pay your homeowners insurance premium, you are betting that your house will burn down or be flattened in a hurricane. When you pay life insurance premiums, you are betting that you will die young/soon. Of course, we all have strong incentives NOT to get into a car crash, let our house be damaged, or kick the bucket. This is what is called an insurable interest - it’s why you can’t take our insurance on someone else’s car and then slam the brakes right in front of them - to minimize moral hazard. If everything goes well - you drive safely, hurricanes skip your house, you live to life expectancy - then congratulations! You win. Although it may feel like those premiums were wasted, you paid them at the time because you didn’t know the future. So how does it work? The insurance company does some actuarial math to estimate if there are 10,000 people in a life insurance product, how many will die and what benefits will need to be paid out in an average year. While no one can predict when YOU die (except perhaps you, who have better info about yourself than any doctor or insurer), it’s possible to predict the PROBABILITY you will die in any given year. Not helpful individually, but across thousands of people this becomes useful to the insurer. The more people within an insured group, the more accurate. This is the Law of Large Numbers. Just like any given coin flip is unpredictable, you can be relatively certain that 100 flips will be around 50% heads, and 100k flips even closer to 50% heads. As the number of flips (or insured persons) grows, realized outcomes converge on the expected probability. If you’re clever, you will already notice that highly predictable outcomes are bad things to insure against. Why? Because the insurer will be better at predicting it than you, so will just charge you the cost + some profit. This is, counterintuitively, why a lot of preventative care is forced to be covered by law and bundled with other medical coverage. If the insurer knows you will - roughly very 12 months - go in for a yearly physical, and that physical usually costs, say, $100, then they will just build $100 into their expected loss and charge you for it via premiums. This is actually a bad deal for you, because insurance is pretty costly to administer both by nature and for important compliance reasons. So a near-certainty of $100 paid every January tends to require >$100 in spending. And insurers have to pay their employees and rent and other expenses so that gets added to the premium as well. For similar reasons, SMALL amounts are impractical for insurance. So what is insurance good for? LARGE, UNPREDICTABLE expenses. And in the ideal insurance model, the expenses are far in the future. That allows the insurer to invest the premiums during that time lag. This is underappreciated! Commonly, insurers in competitive markets take in LESS in premium payments than they pay out. The investment returns on the float over time is what allows a competitive insurance market to function so efficiently. Returning to the original poster, her husband is clearly on term life insurance. And the premiums are rising because the odds of his dying continue to rise (everyone converges on ☠️ eventually). At some point, the odds of dying over a year become >50% and he becomes basically uninsurable at any reasonable price. Whole life is a little different. It’s kind of like a pension where you pay in enough to underwrite your entire life and not just next year 1/2

Weird argument. The steelman answer is that sub-treasury yields are acceptable because sitting in USD is strictly better than Philippine peso, Turkish lira, Egyptian pound, etc. Why would you bash the relative strength of the USD when your own product is denominated in USD? That’s exactly why someone in Argentina or Venezuela or Nigeria are ok with holding raw USDT or below-risk-free yieldcoins. How bizarre.

S&P buying @OpenZeppelin prnewswire.com/news-releases…

Higher rates: good for stablecoins, bad for yieldcoins