Economics in the News – June 12-19, 2022
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
- The price of Bitcoin surged during the COVID-19 pandemic, driven by a fear of missing out on the next big thing, higher savings from stimulus checks and pandemic boredom. Bitcoin – the most popular cryptocurrency – fell below the $20,000 for the first time since December 2020, losing more than half of its value earlier this year.
The selloff is being fueled by the uncertainty in the financial markets, rising interest rates, 40-year high inflation and the war in Ukraine. The dramatic rise in Bitcoin and other cryptocurrencies attracted young investors and more investment from businesses. Investors’ confidence declined in cryptocurrencies this spring, opting to move money into more traditionally safe assets. Some crypto companies, such as Crypto.com, Coinbase, and BlockFi, have had to cut jobs due to shrinking revenue and fewer active users. [The New York Times]
- Last Wednesday, the Federal Reserve raised interest rates by three-quarters of a percentage point. It marked the largest interest rate increase since 1994, but the Fed was far from the only Central Bank to raise interest rates. At least 45 countries have raised interest rates so far in 2022. The Bank of England raised its benchmark rate to 1.25 percent, the highest since 2009. Other countries such as Switzerland, Brazil, and Saudi Arabia, have also raised interest rates.
Economists expect the Fed to continue raising rates this year. Higher rates make borrowing money more expensive, reducing consumer demand and slowing business expansions. While demand in the United States has remained strong, consumers are showing signs of pulling back. [The New York Times]
- Once-dominant internet browser Internet Explorer has been discontinued. Microsoft announced plans last year to discontinue Internet Explorer, pushing users to Microsoft Edge. Internet Explorer is the latest ’90s nostalgic tech gadget to be discontinued, joining the likes of the Blackberry, Palm Pilot and dial-up modems.
Internet Explorer once had over 90 percent of the market share for web browsing in the 2000s, but users moved on to other browsers due to complaints over Internet Explorer being slow, prone to crashing and susceptible to hacks.Today, Google Chrome dominates the web browsing market at 65 percent, Apple’s Safari has 19 percent of market share. Microsoft Edge has four percent, just ahead of Firefox. [Associated Press]
- A new report by United States safety regulators, shows that automakers have reported nearly 400 crashes over a 10-month span with partially automated driver-assist systems. The report shows that 273 Tesla’s using Autopilot “Full Self Driving” Traffic Aware Cruise Control were among the 400 crashes between July 2021 to May 15, 2022. Tesla has an estimated 830,000 cars in the system. Honda, with more than six million cars in the system, had the second most with 90, followed by Subaru with 10.
In 108 of the crashes involving fully autonomous vehicles, no injuries were reported. Tesla’s numbers appear elevated compared to their competitors due to the use of a different reporting software. The electric automaker uses telematics to monitor its vehicles and get real-time crash reports, while other automakers don’t have such capability. Advocates for self-driver systems maintain that the systems have the ability to save lives, but acknowledge performance standards and improvements need to be made. [Associated Press]
- Record home prices combined with rising interest rates have priced many Americans out of the housing market. The monthly payment to buy a median-priced home in the United States has become twice as expensive in the last two years. That uncertainty makes builders less confident that they’ll be able to sell a home, even if they build it.
A shortage of nearly four million homes in the United States can be traced back to the 2008 housing bubble burst. Many builders went out of business and construction slowed, creating a lack of supply that has pushed prices higher in recent years. During the pandemic, low mortgage rates helped drive up prices further, while construction costs have increased due to supply chain issues. [NPR]