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    ‘I Had to Go Back’: Over 55, and Not Retired After All

    After leaving the labor force in unusual numbers early in the pandemic, Americans approaching retirement age are back on the job at previous levels.When Kim Williams and millions of other older Americans lost their jobs early in the coronavirus pandemic, economists wondered how many would ever work again — and how that loss would weigh on the economy for years to come.Ms. Williams, now 62, wondered, too, especially when she struggled for months to find work. But in January, she started a new job at an AAA office near her home in Waterbury, Conn.“I’m too young to retire, so I had to go back,” she said.Whether by choice or financial necessity, millions of older Americans have made the same move in recent months. Nearly 64 percent of adults between the ages of 55 and 64 were working in April, essentially the same rate as in February 2020. That’s a more complete recovery than among most younger age groups.

    The rapid rebound has surprised many economists, who thought that fear of the virus — which is far deadlier for older people — would contribute to a wave of early retirements, especially because many people’s savings had been fattened by years of market gains. But there is increasing evidence that the early-retirement narrative was overblown.“The bottom line is that older workers have gone back to work,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. For many people, retiring early was never an option. Ms. Williams spent more than 25 years in manufacturing, working for a Hershey’s plant making Almond Joy and Mounds bars. The job paid reasonably well, and offered a retirement plan and other benefits. But in 2007, Hershey’s closed the factory, moving production partly to Mexico.The State of Jobs in the United StatesThe U.S. economy has regained more than 90 percent of the 22 million jobs lost at the height of pandemic in the spring of 2020.April Jobs Report: U.S. employers added 428,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the fourth month of 2022.Trends: New government data showed record numbers of job openings and “quits” — a measurement of the amount of workers voluntarily leaving jobs — in March.Job Market and Stocks: This year’s decline in stock prices follows a historical pattern: Hot labor markets and stocks often don’t mix well.Unionization Efforts: Since the Great Recession, the college-educated have taken more frontline jobs at companies like Starbucks and Amazon. Now, they’re helping to unionize them.Ms. Williams, then in her 40s, went back to school, earning an associate degree in hospitality and eventually finding a job as a supervisor at a local hotel. But the position paid significantly less than her factory job, and she drew down her retirement savings to cover medical expenses and other bills. When she was laid off again in June 2020, just a few weeks after her 60th birthday, Ms. Williams had little in savings.Ms. Williams tried to change careers again, this time going back to school to train as a medical secretary. But she has been unable to find work in her new field. In January, with her savings gone, she took a job at AAA for $16.50 an hour, $2 an hour less than she earned at the factory in 2007, before accounting for inflation. She says she will have to work at least until she can start drawing her full Social Security benefits at age 67.“If I could’ve left at 62, I would’ve left at 62, but I can’t,” she said. “Not all of us made that money where I could move down to Florida and get a $400,000 house.”The fastest inflation in decades has added to the pressure on people of all ages to return to work. More recently, so has the turmoil in financial markets, which has taken a bite out of retirement savings.But even some people who could retire are choosing to return to work as the pandemic ebbs.When the Long Island fitness studio where she worked as a spinning instructor shut down early in the pandemic, Jackie Anscher lost both a job and a part of her identity. In an interview with The New York Times that summer, she described what seemed at the time like an abrupt end to her career as “a forced retirement.”But after spending the beginning of the pandemic reorganizing her life and re-evaluating her priorities, Ms. Anscher, 60, has begun teaching spin classes again as a substitute instructor at a local gym, and she is looking for a more regular gig. Her husband is already retired — “he’s been waiting for me to go fishing,” she said — and the couple could afford for her to stop working. But she isn’t ready to hang up her cycling shoes.“I liked what I had. I loved who I was in front of the room,” she said. “It’s about my mental health. For me, it’s about preserving me.”Older workers weren’t any more likely than younger workers to leave the labor force early in the pandemic. But economists had reason to think they might be slower to return. Unemployed workers in their 50s and 60s typically have a harder time finding jobs than their younger counterparts, because of ageism and other factors. And unlike after the 2008-9 recession, when depressed housing prices and high debt levels left many people with little choice but to keep working, in this crisis prices of both homes and financial assets kept rising, providing a financial cushion to some people nearing retirement age.The share of Americans reporting that they were retired did rise sharply in the spring of 2020. But retirement is not an irreversible decision. And research from the Federal Reserve Bank of Kansas City has found that at the pandemic’s onset, there was a steep drop in the number of people leaving retirement to return to work, attributable at least partly to fear of the virus and a lack of job opportunities, swelling the ranks of the retired.As the economy has reopened and the public health situation has improved, these “unretirements” have rebounded and have recently returned roughly to their prepandemic rate, according to an analysis of government data by Nick Bunker of the Indeed Hiring Lab.

    The return of older workers has been concentrated among those in their late 50s and early 60s, people who were still several years or more away from retirement when the pandemic began. The employment rate among those 65 and older fell more sharply and has been much slower to recover. That suggests that the pandemic might have led some people who were already closer to retirement to accelerate those plans, and that the greater health risks they faced may have made them less likely to return to work while the virus continues to circulate. Still, the return of early retirees to the labor force is a reminder that rising wages and abundant job opportunities can draw in workers who might otherwise remain on the sidelines, Mr. Bunker said. The labor force shrank during the last recession, too, and some economists were quick to declare that workers were gone for good. But many people eventually came back during the strong job market that preceded the pandemic: It provided opportunities to people with disabilities and criminal records, to people with little formal education and to people who had taken time away from work to raise children or to care for ailing parents.That pattern may be repeating itself, but on a much more compressed timeline.“Don’t underestimate labor supply,” Mr. Bunker said. “Don’t count out the possibility that people want and need work. It has happened much more quickly than what we saw after the global financial crisis, but the broad principle is the same.”When Tad Greener lost his job managing utilities for a Utah university in late 2019, he wasn’t worried at first about finding a new one — the unemployment rate, after all, was near a 50-year low. But Mr. Greener had hardly begun his search when the pandemic hit and the bottom fell out of the economy. Suddenly, he was 60 years old, unemployed and facing the worst labor market in nearly a century.Mr. Greener eased up on his job search during the first phase of the pandemic, in part because of some health issues unrelated to the coronavirus. By spring of 2021, he was ready to work again, but he had little luck applying for jobs. He thinks many prospective employers were turned off by the combination of his age and his time out of the work force.“It’s a daunting task to be 62 years old, to be unemployed for over a year and to try and find work,” Mr. Greener said. “There were times where I didn’t think I was ever going to be able to go back to work.”As the economy reopened, however, many businesses struggled to hire enough workers to meet the surge in demand. That prompted employers to consider candidates they might otherwise have dismissed, or to look for ways to attract people who could work but weren’t looking.In Mr. Greener’s case, he learned about a new “returnship” program from the State of Utah that was meant to help people who had been out of the labor force get back to work. Last fall, he was accepted into the program, landing a part-time job in the state Office of Energy Development, which quickly turned into a permanent, full-time job. Now that he is back at work, Mr. Greener says he plans to stay until he is 67, or perhaps longer if he stays healthy.“Every day I hear about how there aren’t enough workers available,” Mr. Greener said. “There are a lot of older workers that are being written off, or at least finding it much more difficult to get back into the workplace, who have a lot of years and things to offer.” More

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    Russia’s Economic Outlook Grows ‘Especially Gloomy’ as Prices Soar

    LONDON — After sanctions hobbled production at its assembly plant in Kaliningrad, the Russian automaker Avtotor announced a lottery for free 10-acre plots of land — and the chance to buy seed potatoes — so employees could grow their own food in the westernmost fringe of the Russian empire during “the difficult economic situation.”In Moscow, shoppers complained that a kilogram of bananas had shot up to 100 rubles from 60, while in Irkutsk, an industrial city in Siberia, the price of tampons at a store doubled to $7.Banks have shortened receipts in response to a paper shortage. Clothing manufacturers said they were running out of buttons.“The economic prospects for Russia are especially gloomy,” the Bank of Finland said in an analysis this month. “By initiating a brutal war against Ukraine, Russia has chosen to become much poorer and less influential in economic terms.”Even the Central Bank of Russia has predicted a staggering inflation rate between 18 and 23 percent this year, and a falloff in total output of as much as 10 percent.It is not easy to figure out the impact of the war and sanctions on the Russian economy at a time when even using the words “war” and “invasion” are illegal. President Vladimir V. Putin has insisted that the economy is weathering the measures imposed by the United States, Europe and others.Financial maneuvers taken by Moscow helped blunt the economic damage initially. At the start of the conflict, the central bank doubled interest rates to 19 percent to stabilize the currency, and recently was able to lower rates to 14 percent. The ruble is trading at its highest level in more than two years.Empty shelves in a supermarket in Moscow in March. Food prices have shot up, especially for items like imported fruit.Vlad Karkov/SOPA Images/LightRocket, via Getty ImagesAnd even though Russia has had to sell oil at a discount, dizzying increases in global prices are causing tax revenues from oil to surge past $180 billion this year despite production cuts, according to Rystad Energy. Natural gas deliveries will add another $80 billion to Moscow’s treasury.In any case, Mr. Putin has shown few signs that pressure from abroad will push him to scale back military strikes against Ukraine.Still, Avtotor’s vegetable patch lottery and what it says about the vulnerabilities facing the Russian people, along with shortages and price increases, are signs of the economic distress that is gripping some Russian businesses and workers since the war started nearly three months ago.Analysts say that the rift with many of the world’s largest trading partners and technological powerhouses will inflict deep and lasting damage on the Russian economy.“The really hard times for the Russian economy are still in front of us,” said Laura Solanko, a senior adviser at the Bank of Finland Institute for Emerging Economies.The stock of supplies and spare parts that are keeping businesses humming will run out in a few months, Ms. Solanko said. At the same time, a lack of sophisticated technology and investment from abroad will hamper Russia’s productive capacity going forward.The Lukoil refinery in Volgograd. Russia has had to sell oil at a discount, but its tax revenues have risen along with prices.ReutersThe Russian Central Bank has already acknowledged that consumer demand and lending are on a downhill slide, and that “businesses are experiencing considerable difficulties in production and logistics.”Ivan Khokhlov, who co-founded 12Storeez, a clothing brand that evolved from a showroom in his apartment in Yekaterinburg to a major company with 1,000 employees and 46 stores, is contending with the problem firsthand.“With every new wave of sanctions, it becomes harder to produce our product on time,” Mr. Khokhlov said. The company’s bank account in Europe was still blocked because of sanctions shortly after the invasion, while logistical disruptions had forced him to raise prices.“We face delays, disruptions and price increases,” he said. “As logistics with Europe gets destroyed, we rely more on China, which has its own difficulties too.”Hundreds of foreign firms have already curtailed their business in or withdrawn altogether from Russia, according to an accounting kept by the Yale School of Management. And the exodus of companies continued this week with McDonald’s. The company said that after three decades, it planned to sell its business, which includes 850 restaurants and franchises and employs 62,000 people in Russia.“I passed the very first McDonald’s that opened in Russia in the ’90s,” Artem Komolyatov, a 31-year-old tech worker in Moscow, said recently. “Now it’s completely empty. Lonely. The sign still hangs. But inside it’s all blocked off. It’s completely dead.”Nearby two police officers in bulletproof vests and automatic rifles stood guard, he said, ready to head off any protesters.In Leningradsky railway station, at one of the few franchises that remained open on Monday, customers lined up for more than an hour for a last taste of McDonald’s hamburgers and fries.The French automaker Renault also announced a deal with the Russian government to leave the country on Monday, although it includes an option to repurchase its stake within six years. And the Finnish paper company, Stora Enso, said it was divesting itself of three corrugated packaging plants in Russia.A closed McDonald’s in Podolsk, outside Moscow, on Monday. The company said this week it was putting its Russian business up for sale.Maxim Shipenkov/EPA, via ShutterstockMore profound damage to the structure of the Russian economy is likely to mount in the coming years even in the moneymaking energy sector.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Households are now spending an estimated $5,000 a year on gasoline

    U.S. households are spending the equivalent of $5,000 a year on gasoline, according to Yardeni Research.
    That is up from about $2,800 a year ago, and $3,800 as recently as March.
    Yardeni said consumers’ inflation-adjusted incomes are barely growing, but they have accumulated a lot of savings, and they are charging more on credit cards.

    A woman rides an electric bike past a gas station as current gasoline prices continues to climb close to record setting territory in Encinitas, California, May 9, 2022.
    Mike Blake | Reuters

    U.S. households are now spending the equivalent of $5,000 a year on gasoline, up from $2,800 a year ago, according to Yardeni Research.
    In March, the annual rate of gasoline spending was at $3,800, Yardeni noted. During the week of May 16, the national retail price for gasoline reached a record $4.59 per gallon, the firm noted.

    “No wonder that the Consumer Sentiment Index is so depressed. The wonder is that retail sales have been so surprisingly strong during April and May,” Yardeni said in a note.
    Yardeni said consumers’ inflation-adjusted incomes are barely growing, but they have accumulated a lot of savings, and they are charging more on credit cards.
    But Yardeni said don’t bet against the U.S. consumer. “When we are happy, we spend money. When we are depressed, we spend even more money!,” it said.
    Retail sales data for April, released on Tuesday was surprisingly strong. On a year-over-year basis, retail sales rose 8.2% in April.
    Gasoline sales actually declined in April from March, as prices temporarily fell before ramping up to record levels in May. Spending on gasoline in April surged almost 37% from a year ago, according to Commerce Department data.

    The price of gasoline was $3.04 per gallon a year ago, according to AAA. This week, the average price rose above $4 a gallon in all 50 states, according to AAA data.
    The national average Wednesday was $4.57 per gallon, according to the AAA website.

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    CEO outlook dims sharply, with more than half expecting a recession ahead, survey shows

    A Conference Board measure of CEO sentiment showed that 57% expect the economy to sustain a “very short, mild recession.”
    Just 14% of CEOs reported that business conditions had improved in Q2, down from 34% in the first quarter. Similarly, 61% said conditions were worse.

    Corporate executives are taking a dim view of their prospects, with a majority now expecting a recession ahead, according to a closely watched business survey released Wednesday.
    The Conference Board measure of CEO sentiment showed that 57% of respondents expect inflation to come down “over the next few years” but the economy to sustain a “very short, mild recession.”

    Those results reflect an overall pessimistic tone from the quarterly gauge, as the board’s Measure of CEO Confidence fell to 42, a steep drop from the first quarter’s 57 and the lowest since the early days of the Covid pandemic. Anything below 50 represents a negative outlook as the number measures the level of respondents expecting expansion over those seeing contraction.
    That reading “is consistent with slowing for sure,” Roger Ferguson, vice chairman of the Business Council and a trustee of The Conference Board, told CNBC’s “Squawk Box” in an interview following the report’s release.
    “All of this is telling us that the combination of inflation that is much too high to quote [Federal Reserve Chairman] Jay Powell, wages that are increasing but not keeping up with inflation, and then the inability to pass all this along is creating a very challenging dynamic,” said Ferguson, a former Fed vice chair.
    The recession expectation reading wasn’t the only bad news out of the report.
    Just 14% of CEOs reported that business conditions had improved in Q2, down from 34% in the first quarter. Similarly, 61% said conditions were worse, compared to 35% in the prior reading. Only 19% see improvement ahead, down from 50%, while 60% expect things to worsen, up from 23%.

    One piece of good news was that 63% expect to hire in the next quarter, down only slightly from 66% in Q1. However, some 80% said they were having problems getting qualified workers, down just slightly, while 91% see wages rising by more than 3% over the next year, up from 85% in the first three months of the year.
    Also, just 38% expect to increase capital spending, a sharp decline from 48% previously. Some 20% see stagflation conditions of low growth and high inflation.
    Powell said in an interview Tuesday with the Wall Street Journal that he remains determined to tamp down inflation, insisting that he will need to see conditions change “in a clear and convincing way” before the Fed stops raising rates and tightening monetary policy.
    Ferguson said the survey “suggests that this set of circumstances is not likely to get better anytime soon and consequently pressures on the middle and bottom line for businesses, pressure on the household sector, pressure at the CEO level, and, quite frankly, pressures on the Federal Reserve.”

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    Weekly mortgage demand from homebuyers tumbles 12%, as higher interest rates take their toll

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.49% from 5.53%
    Mortgage applications to purchase a home fell 12% week to week and were 15% lower compared with the same week one year ago.
    Applications to refinance a home loan continued their landslide, falling another 10% week to week.

    A sign of a home for sale is pictured in Alhambra, California on May 4, 2022.
    Frederic J. Brown | AFP | Getty Images

    Mortgage rates actually fell slightly last week, but the damage has already been done to housing affordability. Both refinance and purchase loan demand dropped, pulling total mortgage application volume down 11% for the week, according to the Mortgage Bankers Association’s seasonally adjusted index.
    Mortgage applications to purchase a home declined 12% week to week and were 15% lower compared with the same week one year ago. That was the first weekly drop in homebuyer demand since the third week in April. Mortgage rates have risen over 2 full percentage points since the start of the year, and home prices are up more than 20% from a year ago.

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.49% from 5.53%, with points increasing to 0.74 from 0.73 (including the origination fee) for loans with a 20% down payment.
    Inflation isn’t helping consumers feel particularly flush either.
    “General uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search,” said Joel Kan, an MBA economist.
    Applications to refinance a home loan continued their landslide, falling another 10% week to week. Refinance demand was 76% lower than the same week one year ago. Two years of record-low interest rates during the Covid pandemic incited a refinance boom which has now gone bust. There is simply a very small pool of borrowers who can now benefit from a refinance.
    While dropping very slightly from the week before, the adjustable-rate mortgage share of total applications remained high at 10.5%. It was around 3% at the start of this year. ARMs offer lower interest rates and can be fixed rate for up to 10 years.

    Mortgage rates moved higher again Tuesday, after strong retail sales data and comments from Federal Reserve Chairman Jerome Powell, who said the Fed would not hesitate to continue boosting interest rates until inflation came down.
    The weekly drop in homebuyer mortgage demand concurs with another report out Tuesday from the nation’s homebuilders. They reported a considerable drop in both buyer traffic and current sales conditions, according to the National Association of Home Builders. Builder sentiment dropped to the lowest level in nearly two years.

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    Economic Headwinds Mount as Leaders Weigh Costs of Confronting Russia

    BRUSSELS — The world economy is heading into a potentially grim period as rising costs, shortages of food and other commodities and Russia’s continuing invasion of Ukraine threaten to slow economic growth and bring about a painful global slump.Two years after the coronavirus pandemic emerged and left much of the globe in a state of paralysis, policymakers are grappling with ongoing challenges, including clogged supply chains, lockdowns in China and the prospect of an energy crisis as nations wean themselves off Russian oil and gas. Those colliding forces have some economists starting to worry about a global recession as different corners of the world find their economies battered by events.Finding ways to avoid a global slowdown while continuing to exert pressure on Russia for its war in Ukraine will be the primary focus of finance ministers from the Group of 7 nations who are convening in Bonn, Germany, this week.The economic challenges that governments around the globe are facing could begin to chip away at the united front that Western nations have maintained in confronting Russia’s aggression, including sweeping sanctions aimed at crippling its economy and efforts to reduce reliance on Russian energy.Policymakers are balancing delicate trade-offs as they consider how to isolate Russia, support Ukraine and keep their own economies afloat at a moment when prices are rising rapidly and growth is slowing.Central banks around the world are beginning to raise interest rates to help tame rapid inflation, moves that will temper economic growth by raising borrowing costs and could lead to higher unemployment.Global growth is expected to slow to 3.6 percent this year, the International Monetary Fund projected in April, down from the 4.4 percent it forecast before both Russia’s invasion of Ukraine and China’s zero-Covid lockdowns.On Monday, the European Commission released its own revised economic forecast, showing a slowdown in growth to 2.7 percent this year from the 4 percent estimated in its winter report. At the same time, inflation is hitting record levels and is expected to average 6.8 percent for the year. Some Eastern European countries are in for much steeper increases, with Poland, Estonia, the Czech Republic, Bulgaria and Lithuania all facing inflation rates in excess of 11 percent.Last week, Christine Lagarde, president of the European Central Bank, signaled a possible increase in interest rates in July, the first such move in more than a decade. In a speech in Slovenia, Ms. Lagarde compared Europe to a man “who from fate receives blow on blow.”Eswar Prasad, the former head of the International Monetary Fund’s China division, summed up the challenges facing the G7 nations, saying that its “policymakers are caught in the bind that any tightening of screws on Russia by limiting energy purchases worsens inflation and hurts growth in their economies.”“Such sanctions, for all the moral justification underpinning them, are exacting an increasingly heavy economic toll that in turn could have domestic political consequences for G7 leaders,” he added.Still, the United States is expected to press its allies to continue isolating Russia and to deliver more economic aid to Ukraine despite their own economic troubles. Officials are also expected to discuss the merits of imposing tariffs on Russian energy exports ahead of a proposed European oil embargo that the United States fears could send prices skyrocketing by limiting supplies. Policymakers will also discuss whether to press countries such as India to roll back export restrictions on crucial food products that are worsening already high prices.Against this backdrop is the growing urgency to help sustain Ukraine’s economy, which the International Monetary Fund has said needs an estimated $5 billion a month in aid to keep government operations running. The U.S. Congress is close to passing a $40 billion aid package for Ukraine that will cover some of these costs, but Treasury Secretary Janet L. Yellen has called on her European counterparts to provide more financial help.Finance ministers are expected to consider other measures for providing Ukraine with relief. There is increasing interest in the idea of seizing some of the approximately $300 billion in Russian central bank reserves that the United States and its allies have immobilized and using that money to help fund Ukraine’s reconstruction. Treasury Department officials are considering the idea, but they have trepidations about the legality of such a move and the possibility that it would raise doubts about the United States as a safe place to store assets.Ahead of the G7 meeting this week, American officials saw the economic challenges facing Europe firsthand. During a stop to meet with top officials in Warsaw on Monday, Ms. Yellen acknowledged the toll that the conflict in Ukraine is having on the economy of Poland, where officials have raised interest rates sharply to combat inflation. Poland has absorbed more than three million Ukrainian refugees and has faced a cutoff in gas exports from Russia.“They have to deal with a tighter monetary policy just as countries around the world and the United States are,” Ms. Yellen told reporters. “At a time when Poland is committed to large expenditures to shore up its security, it is a difficult balancing act.”A downturn may be unavoidable in some countries, and economists are weighing multiple factors as they gauge the likelihood of a recession, including a severe slowdown in China related to continuing Covid lockdowns.The European Commission, in its economic report, said the E.U. “is first in line among advanced economies to take a hit,” because of its proximity to Ukraine and its dependence on Russian energy. At the same time, it has absorbed more than five million refugees in less than three months.Deutsche Bank analysts said this week that they thought a recession in Europe was unlikely. By contrast, Carl B. Weinberg, chief economist at High Frequency Economics, warned in a note on Monday that with consumer demand and output falling, “Germany’s economy is headed for recession.” Analysts at Capital Economics predicted that Germany, Italy and Britain are likely to face recessions, meaning there is a “reasonable chance” that the broader eurozone will also face one, defined as two consecutive quarters of falling output.Vicky Redwood, senior economic adviser at Capital Economics, warned that more aggressive interest rate increases by central banks could lead to a global contraction.“If inflation expectations and inflation prove more stubborn than we expect, and interest rates need to rise further as a result, then a recession most probably will be on the cards,” Ms. Redwood wrote in a note to clients this week.A bakery in Al Hasakah, Syria. The interruption of wheat exports from Ukraine and Russia is causing food prices to spiral and increasing global hunger, particularly in Africa and the Middle East.Diego Ibarra Sanchez for The New York TimesThe major culprit is energy prices. In Germany, which has been most dependent on Russian fuel among the major economies in Europe, the squeeze is being acutely felt by its industrial-heavy business sector as well as consumers.Russian gas shipments “underpin the competitiveness of our industry,” Martin Brudermüller, the chief executive of the chemical giant BASF, said at the company’s annual general meeting last month.While calling to decrease its dependence, Mr. Brudermüller nevertheless warned that “if the natural gas supply from Russia were to suddenly stop, it would cause irreversible economic damage” and possibly force a stop in production.Russia-Ukraine War: Key DevelopmentsCard 1 of 4In Mariupol. More

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    How a Trash-Talking Crypto Bro Caused a $40 Billion Crash

    Do Kwon, a South Korean entrepreneur, hyped the Luna and TerraUSD cryptocurrencies. Their failures have devastated some traders, though not the investment firms that cashed out early.Do Kwon, a trash-talking entrepreneur from South Korea, called the cryptocurrency he created in 2018 “my greatest invention.” In countless tweets and interviews, he trumpeted the world-changing potential of the currency, Luna, rallying a band of investors and supporters he proudly referred to as “Lunatics.”Mr. Kwon’s company, Terraform Labs, raised more than $200 million from investment firms such as Lightspeed Venture Partners and Galaxy Digital to fund crypto projects built with the currency, even as critics questioned its technological underpinnings. Luna’s total value ballooned to more than $40 billion, creating a frenzy of excitement that swept up day traders and start-up founders, as well as wealthy investors.Mr. Kwon dismissed concerns with a taunt: “I don’t debate the poor.”But last week, Luna and another currency that Mr. Kwon developed, TerraUSD, suffered a spectacular collapse. Their meltdowns had a domino effect on the rest of the cryptocurrency market, tanking the price of Bitcoin and accelerating the loss of $300 billion in value across the crypto economy. This week, the price of Luna remained close to zero, while TerraUSD continued to slide.The downfall of Luna and TerraUSD offers a case study in crypto hype and who is left holding the bag when it all comes crashing down. Mr. Kwon’s rise was enabled by respected financiers who were willing to back highly speculative financial products. Some of those investors sold their Luna and TerraUSD coins early, reaping substantial profits, while retail traders now grapple with devastating losses.Pantera Capital, a hedge fund that invested in Mr. Kwon’s efforts, made a profit of about 100 times its initial investment, after selling roughly 80 percent of its holdings of Luna over the last year, said Paul Veradittakit, an investor at the firm.Pantera turned $1.7 million into around $170 million. The recent crash was “unfortunate,” Mr. Veradittakit said. “A lot of retail investors have lost money. I’m sure a lot of institutional investors have, too.”Mr. Kwon did not respond to messages. Most of his other investors declined to comment.Kathleen Breitman, a founder of the crypto platform Tezos, said the rise and fall of Luna and TerraUSD were driven by the irresponsible behavior of the institutions backing Mr. Kwon. “You’ve seen a bunch of people trying to trade in their reputations to make quick bucks,” she said. Now, she said, “they’re trying to console people who are seeing their life savings slip out from underneath them. There’s no defense for that.”Mr. Kwon, a 30-year-old graduate of Stanford University, founded Terraform Labs in 2018 after stints as a software engineer at Microsoft and Apple. (He had a partner, Daniel Shin, who later left the company.) His company claimed it was creating a “modern financial system” in which users could conduct complicated transactions without relying on banks or other middlemen.Mr. Shin and Mr. Kwon began marketing the Luna currency in 2018. In 2020, Terraform started offering TerraUSD, which is known as a stablecoin, a type of cryptocurrency designed to serve as a reliable means of exchange. Stablecoins are typically pegged to a stable asset like the U.S. dollar and are not supposed to fluctuate in value like other cryptocurrencies. Traders often use stablecoins to buy and sell other riskier assets.But TerraUSD was risky even by the standards of experimental crypto technology. Unlike the popular stablecoin Tether, it was not backed by cash, treasuries or other traditional assets. Instead, it derived its supposed stability from algorithms that linked its value to Luna. Mr. Kwon used the two related coins as the basis for more elaborate borrowing and lending projects in the murky world of decentralized finance, or DeFi.Read More on the World of CryptocurrenciesA Perfect Storm: A steep sell-off that gained momentum this week is illustrating the risks of cryptocurrencies. Crypto Emperor: Sam Bankman-Fried, a studiously disheveled billionaire, is hoping to put a new face on the still-chaotic world of digital assets.Crypto Critic: The actor Ben McKenzie, best known for “The O.C.,” has become an outspoken skeptic of digital currencies. Who’s listening?Fund-raising Efforts: Activists and nonprofits are considering digital currencies as a way to raise funds for causes like abortion rights. Can it work?From the beginning, crypto experts were skeptical that an algorithm would keep Mr. Kwon’s twin cryptocurrencies stable. In 2018, a white paper outlining the stablecoin proposal reached the desk of Cyrus Younessi, an analyst for the crypto investment firm Scalar Capital. Mr. Younessi sent a note to his boss, explaining that the project could enter a “death spiral” in which a crash in Luna’s price would bring the stablecoin down with it.“I was like, ‘This is crazy,’” he said in an interview. “This obviously doesn’t work.”As Luna caught on, the naysayers grew louder. Charles Cascarilla, a founder of Paxos, a blockchain company that offers a competing stablecoin, cast doubt on Luna’s underlying technology in an interview last year. (Mr. Kwon responded by taunting him on Twitter: “Wtf is Paxos.”) Kevin Zhou, a hedge fund manager, repeatedly predicted that the two currencies would crash.But venture investment came pouring in anyway to fund projects built on Luna’s underlying technology, like services for people to exchange cryptocurrencies or borrow and lend TerraUSD. Investors including Arrington Capital and Coinbase Ventures shoveled in more than $200 million between 2018 and 2021, according to PitchBook, which tracks funding.In April, Luna’s price rose to a peak of $116 from less than $1 in early 2021, minting a generation of crypto millionaires. A community of retail traders formed around the coin, hailing Mr. Kwon as a cult hero. Mike Novogratz, chief executive of Galaxy Digital, which invested in Terraform Labs, announced his support by getting a Luna-themed tattoo.Mr. Kwon, who operates out of South Korea and Singapore, gloated on social media. In April, he announced that he had named his newborn daughter Luna, tweeting, “My dearest creation named after my greatest invention.”“It’s the cult of personality — the bombastic, arrogant, Do Kwon attitude — that sucks people in,” said Brad Nickel, who hosts the cryptocurrency podcast “Mission: DeFi.”Earlier this year, a nonprofit that Mr. Kwon also runs sold $1 billion of Luna to investors, using the proceeds to buy a stockpile of Bitcoin — a reserve designed to keep the price of TerraUSD stable if the markets ever dipped.Around the same time, some of the venture capital firms that had backed Mr. Kwon started to have concerns. Hack VC, a venture firm focused on crypto, sold its Luna tokens in December, partly because “we felt the market was due for a broader pullback,” said Ed Roman, a managing director at the firm.Martin Baumann, a founder of the Hong Kong-based venture firm CMCC Global, said his company sold its holdings in March, at about $100 per coin. “We had gotten increasing concerns,” he said in an email, “both from tech side as well as regulatory side.” (CMCC and Hack VC declined to comment on their profits.)Even Mr. Kwon alluded to the possibility of a crypto collapse, publicly joking that some crypto ventures might ultimately go under. He said he found it “entertaining” to watch companies crumble.Last week, falling crypto prices and challenging economic trends combined to create a panic in the markets. The price of Luna fell to nearly zero. As critics had predicted, the price of TerraUSD crashed in tandem, dropping from its $1 peg to as low as 11 cents this week. In a matter of days, the crypto ecosystem Mr. Kwon had built was essentially worthless.“I am heartbroken about the pain my invention has brought on all of you,” he tweeted last week.Some of Mr. Kwon’s major investors have lost money. Changpeng Zhao, chief executive of the crypto exchange Binance, which invested in Terraform Labs, said his firm had bought $3 million of Luna, which grew to a peak value of $1.6 billion. But Binance never sold its tokens. Its Luna holdings are currently worth less than $3,000.That loss is still only a drop in the bucket for a company as large as Binance, whose U.S. arm is valued at $4.5 billion.Expand Your Cryptocurrency VocabularyCard 1 of 9A glossary. More

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    Powell says the Fed will not hesitate to keep raising rates until inflation comes down

    Fed Chair Jerome Powell said he will back interest rate increases until prices start falling back toward a healthy level.
    “If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” the central bank leader told the Wall Street Journal

    Jerome Powell, chairman of the U.S. Federal Reserve, arrives for a Senate Banking Committee hearing in Washington, D.C., on Thursday, July 15, 2021.
    Al Drago | Bloomberg | Getty Images

    Federal Reserve Chair Jerome Powell emphasized his resolve to get inflation down, saying Tuesday he will back interest rate increases until prices start falling back toward a healthy level.
    “If that involves moving past broadly understood levels of neutral we won’t hesitate to do that,” the central bank leader told The Wall Street Journal in a livestreamed interview. “We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down.

    “We’ll go to that point. There won’t be any hesitation about that,” he added.
    Earlier this month, the Fed raised benchmark borrowing rates by half a percentage point, the second increase of 2022 as inflation runs around a 40-year high.

    Powell said following that increase that similar 50 basis point moves were likely to come at ensuing meetings so long as economic conditions remained similar to where they are now.
    On Tuesday, he repeated his commitment to getting inflation closer to the Fed’s 2% target, and cautioned that it might not be easy and could come at the expense of a 3.6% unemployment rate that is just above the lowest level since the late 1960s.
    “You’d still have a strong labor market if unemployment were to move up a few ticks,” he said. “I would say there are a number of plausible paths to have a soft as I said softish landing. Our job isn’t to handicap the odds, it’s to try to achieve that.”

    The U.S. economy saw growth contract at a 1.4% pace in the first quarter of 2022, due largely to ongoing supply side constraints, spread of the omicron Covid variant and the war in Ukraine.

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    However, tighter monetary policy has added to concerns about a steeper downturn and has sparked an aggressive sell-off on Wall Street. In addition to the 75 basis points in interest rate hikes, the Fed also has halted its monthly bond-buying program, which is also known as quantitative easing, and will begin shedding some of the $9 trillion in assets it has acquired starting next month.
    Powell said he still hopes the Fed can achieve its inflation goals without tanking the economy.
    “You’d still have a strong labor market if unemployment were to move up a few ticks. I would say there are a number of plausible paths to have a soft as I said softish landing. Our job isn’t to handicap the odds, it’s to try to achieve that,” he said.
    He added that “there could be some pain involved to restoring price stability” but said the labor market should remain strong, with low unemployment and higher wages.

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