As a young adult, I couldn’t wait to get out on my own. I was raised by my grandmother, Big Mama, and some of her house rules drove me bonkers — no shoes under the bed, don’t turn the television knob to the left, only to the right (this was before remote controls), chain the front door at 11 p.m. One time I had to call a neighbor to get my grandmother to open the door.

So I get it. Home is not always where your heart is. But in an economy where rents are ridiculously high, one of the smartest financial moves you could make — if possible — is to live at home, or with relatives.

If you can cut the biggest expense in your budget — housing — it can help you weather a recession.

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At the moment, mankind as a whole is confronted with many tough challenges, including environmental pollution, extreme weather events, energy crisis, the shock to our physical, social and economic wellbeing caused by the COVID-19 pandemic, and food shortages and raging inflation exacerbated by the regional confrontation. As an eminent economist of international distinction, Prof. Sachs has conducted ground-breaking research in many areas, such as debt crises, hyperinflations, transition from central planning to market economies, and eradication of extreme poverty. Moreover, when addressing complex issues related to global sustainable development, he combined the fields of global economics, public health, equity and sustainability to pioneer a multidisciplinary approach to solving these problems, transforming sustainable development into an integrated field of study and practice. His outstanding scholarship, advice to world leaders, educational innovation, and efforts in the global advocacy and realization of sustainable development have proven him to be a true leader of great vision, of profound influence, and imbued with deep humanistic concern.

With regard to the innovative transdisciplinary approach Prof. Sachs pioneered, an example can be found in his engagement with the Millennium Project, which he chaired on behalf of UN Secretary-General Kofi Annan from 2002 to 2006. He was tasked with developing a concrete action plan to attain the eight Millennium Development Goals (MDGs)[i], and he demonstrated how it can be done by using best practices in science, technology, and public policy. Moreover, Prof. Sachs was also in charge of the UN Millennium Village Project (MVP), which was implemented from 2006-2015 after the UN General Assembly adopted the key recommendations of the Millennium Project at a special session in September 2005. The MVP aimed to help rural Africa and was carried out in ten countries including Senegal, Nigeria, and Ethiopia. During these ten years, a range of notable successes were achieved, from raising agricultural production to reducing child stunting, and cutting child mortality rates. Lives of more than half a million people were changed as a consequence. Its key concepts of integrating rural development to achieve the MDGs are now being adopted by many other countries to help support national anti-poverty programs.   

With regard to promoting the UN SDGs[ii], Prof. Sachs began his engagement from their very inception when the idea was first broached at the “Rio+20” conference in June 2012 and offered his help based on this experience of implementing MDGs. The SDGs are the blueprint for creating a more sustainable future for all. They address many global challenges we face, including poverty, inequality, climate change, and environmental degradation. To overcome these problems, 17 goals, such as “no poverty,” “good health and well-being,” “reduced inequalities,” “climate action,” and “life below water” have been set. They are subdivided into 169 targets and 232 indicators to measure and track the global progress toward these goals. Prof. Sachs’ fruitful pursuit of the MDGs, and his tireless work in front of and behind the scenes at Rio+20 made an important contribution in persuading nations to forge a consensus on adopting the 17 SDGs as the successor to the MDGs.

To promote the SDGs, also in 2012, Prof. Sachs led a global consortium of universities and think tanks under the auspices of then UN Secretary-General Ban Ki-moon to establish the Sustainable Development Solutions Network (SDSN), which functions as the largest global knowledge-based think tank to help countries achieve the SDGs. The SDSN has produced many highly influential reports, conducted academic studies, offered online courses, and held hundreds of SDG-related meetings around the world each year. The SDSN now has over 1600 member institutions in 47 networks across 137 countries.   

With regard to combating anthropogenic climate change, Prof. Sachs saw the crucial importance of a long-term policy framework for climate control. He headed a global study on “deep decarbonization” which resulted in the highly influential “Pathways to Deep Decarbonization” report. The report lays out concrete and viable plans regarding issues like energy transition, industrial transformation, technological innovation, and governance mechanisms to enable 15 major carbon emitters to achieve deep decarbonization. Presented to Ban Ki-moon in September 2014, the report demonstrates how, during the decades leading to 2050, these 15 countries can find their own pathways to decarbonization that are compatible with their economic growth targets and technically feasible. Subsequently, many countries have taken on board this idea and designed their deep decarbonization pathways.           

Prof. Sachs’ participation in the promotion of the Paris Agreement has been equally vital. He has long helped to formulate core policy concepts for global climate control as a scholar and an academic leader. During the intensive phase of negotiating the Agreement, he worked behind the scenes with France, the US, and many other governments to support the design and adoption of the Paris Agreement. The SDGs and the Paris Agreement on Climate Change have been hailed as the two essential pillars for the world to achieve sustainable development, and Prof. Sachs has played a unique role in both.

With regard to offering suggestions to leaders of different countries, as one of the world’s leading experts on economic development, global macroeconomics, and the fight against poverty, Prof. Sachs has advised many heads of states and governments on complex economic challenges, including ending high inflations (Bolivia, Peru, Poland), negotiating debt relief (Bolivia, Brazil, Poland, and others), adopting market economic reforms (Poland, Russia), introducing new national currencies (Estonia, Slovenia), promoting regional development (China), and scaling up health systems (Ethiopia, Ghana, India, and many others). He has been awarded by several countries their highest honors for his board-based support of their economic reforms.

About Jeffrey Sachs

Born in Detroit, Michigan in 1954, Jeffrey Sachs got his BA, MA and PhD degrees in economics from Harvard University. He joined the Harvard faculty in 1980s. In less than four years’ time became a Professor of Economics with tenure at Harvard. He served as Director of the Center for Sustainable Development in the Earth Institute of Columbia University and Special Advisor to three UN Secretaries-General. He is a recipient of numerous awards and honors, including the Knight of the National Order of the Legion of Honor (by decree of the president of the French Republic), the Sustainable Development Leadership Award from India’s TERI (The Energy and Resources Institute), and Japan’s Blue Planet Award. He has also received 38 honorary degrees from universities all over the world. The papers and books he has published number in the hundreds, including three New York Times bestsellers: The End of Poverty, Common Wealth: Economics for a Crowded Planet, and The Price of Civilization: Reawakening American Virtue and Prosperity     

About the Tang Prize

Since the advent of globalization, mankind has been able to enjoy the convenience brought forth by the advancement of human civilization and science. Yet a multitude of challenges, such as climate change, the emergence of new infectious diseases, wealth gap, and moral degradation, have surfaced along the way. Against this backdrop, Dr. Samuel Yin established the Tang Prize in December 2012. It consists of four award categories, namely Sustainable Development, Biopharmaceutical Science, Sinology, and Rule of Law. Every other year, four independent and professional selection committees, comprising many internationally renowned experts, scholars, and Nobel winners, choose as Tang Prize laureates people who have influenced and made substantive contributions to the world, regardless of ethnicity, nationality or gender. A cash prize of NT$50 million (approx. US$1.7 million) is allocated to each category, with NT$10 million (approx. US$ 0.35 million) of it being a research grant intended to encourage professionals in every field to examine mankind’s most urgent needs in the 21st century, and become leading forces in the development of human society through their outstanding research outcomes and active civic engagement.

SOURCE The Tang Prize Foundation

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Klarna Bank is considering raising fresh funds at a significantly lower valuation than it achieved a year ago, according to people familiar with the situation, a sign of the punishing environment for tech companies.

The Swedish payments firm is in talks with investors about a deal that could value the company at around $15bn, the people said, less than it was seeking just last month. The Wall Street Journal reported Klarna was in talks to raise up to $1bn at a low $30bn-range valuation. One of the people said the current talks could yield at least $500m. There is no guarantee a deal will take place.

A $15bn valuation would be a substantial comedown for Klarna, which became Europe’s most valuable financial-technology startup last June when SoftBank’s Vision Fund 2 led an investment that valued the company at $45.6bn. Other investors include Sequoia Capital, Silver Lake and Dragoneer Investment.

Klarna specialises in buy-now-pay-later services, a popular type of cash advance that competes with credit cards. The services are offered to customers at the point of purchase, mostly online, and lets them pay for goods and services in installments without paying interest. Klarna makes money by charging a fee to merchants who offer Klarna’s services.

The latest leg down in Klarna’s expected valuation shows how the rout in tech shares has spread into the world of startups and pre-IPO companies. A decade of low-interest rates allowed unprofitable companies to flourish, but they have suddenly fallen out of favour. Investors are now prizing profits over growth amid fears of a potential recession and reined-in consumer spending.

Klarna’s net loss quadrupled in the first quarter to 2.57 billion Swedish krona, equivalent to about $250m, from a year earlier. Klarna said last month it would lay off 10% of its workforce owing to what it called a volatile economic environment and the need to cut costs.

Klarna chief executive Sebastian Siemiatkowski founded the company with two friends in 2005. In 2019, investors valued Klarna at close to $3.5bn, according to data from PitchBook. The pandemic helped its valuation soar after several fundraising rounds as consumers and businesses shifted commerce online during lockdowns. Klarna’s March 2021 fundraising valued it at $31bn, while its June fundraising the same year made it more valuable than most large European banks.

Klarna processed $80bn worth of transactions in 2021, up 42% from the previous year.

The company spoke with investors earlier this year about a valuation of more than $50bn, but some of them balked owing to choppy markets, The Wall Street Journal reported earlier, citing a person familiar with the company.

Scepticism among public- and private-market investors is growing around Klarna and other buy-now-pay-later firms. The share price of Nasdaq-listed Affirm, a Klarna competitor, is down more than 80% this year, giving it a market value of around $5bn.

Klarna, Affirm and other buy-now-pay-later providers face increasing competition. Apple said this month it would launch a buy-now-pay-later offering in the US later this year. Barclays and PayPal have also launched their own services. The industry is also facing greater regulatory scrutiny. Last year, the UK government said it would start regulating buy-now-pay-later products to protect consumers.

Write to Julie Steinberg at julie.steinberg@wsj.com, Ben Dummett at ben.dummett@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

This article was published by The Wall Street Journal, part of Dow Jones

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Driven largely by soaring gas prices, inflation reached levels not seen in decades over the last year, according to new Consumer Price Index data. Prices at the pump helped accelerate inflation to 8.6% for the 12 months ending in May, CNN reports—and there seems to be no end in sight. 

Such price disruptions are sure to have impacts on consumer behavior. Market-watchers have suggested that an “inflationary psychology” is starting to set in, which describes a situation wherein consumers expect future prices to be higher than they are at present, creating less short-term resistance to spending.

With some consumers willing to spend more to get ahead of inflation, firms are equally willing to raise wages, leading to fears of a “wage-price spiral,” or what’s referred to as inflation’s self-fulfilling prophecy.  

Inflationary psychology may just be one ingredient propelling a wage-price spiral, says Rory Smead, associate professor of philosophy at Northeastern, who researches the evolution of social behavior. But the situation is manifold, and it’s hard to predict how consumers will respond to the economy-wide price surge. 

“Like anything in the economy—you’re dealing with a really complex system,” Smead says. “Sometimes economists fixate on one or two aspects of the situation that we can understand; but what might cause inflation in one context might cause deflation in another based on what else might be going on in the background.”

Rory Smead, associate professor of philosophy, poses for a portrait. Photo by Ruby Wallau/Northeastern University

Smead says one factor that observers might gloss over as it relates to present economic conditions is just how educated and in-touch with economic news consumers are today compared to decades prior. Social media and the 24/7 news cycle have helped drive information such that consumers develop “generalized inflationary expectations” that in turn influence how they behave, says Bruce Clark, associate professor of marketing at D’Amore-McKim School of Business. 

“The first question we might ask is: Do they [consumers] even notice?” Bruce says, “Do they notice that prices have changed, and if so, is it from personal experience, or other people telling them?”

A person’s financial situation bears greatly on how they respond, he says. 

“If you’re fairly well off, inflation might be annoying but it doesn’t bother you that much,” he says. “You may order a less-expensive meal, spend more out of savings, for example. It may only hang over you on bigger purchases, like when you go to buy a house.”

Bruce Clark, associate professor of marketing at Northeastern University. Northeastern University Photo

Clark says that research shows that consumers by and large notice price fluctuations on items they’ve purchased recently, and that they purchase frequently. You’re more likely to notice a change in the price of coffee, for example, versus the toothpaste that you buy every six months, he says.

And then there is the price of gas—the most visible marker of inflation—which historically plays an “outsized role in how consumers see prices in the economy,” so much so that even many people who do not drive or purchase gasoline are aware of it, Clark says. 

The so-called “forward-buying” that characterizes the wage-price spiral is seen mostly in items that can be stockpiled, such as certain kinds of food items. But just how much do consumers accelerate their purchasing during inflationary periods? 

“One of the arguments against this is that the other we see in an inflationary environment is that certain people may become more uncertain,” Clark says. 

Concerns that the U.S. economy may be headed into a recession may also factor into consumers’ thinking about the future. Some consumers may respond by curbing spending over worries that they could lose their job, or their hours reduced, Clark says. 

But one thing is certain: Once the cycle of inflationary psychology begins, it’s hard for economic policymakers to stop it. 

“Even figuring out how to correct or design policy around these disruptions can be really, maddeningly complicated,” Smead says.

For media inquiries, please contact media@northeastern.edu.

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Most millennial millionaires feel optimistic about the U.S. economy, with nearly three-quarters expecting improvements by the end of 2022, according to the latest CNBC Millionaire Survey.

Inflation concerns are a theme throughout the survey, with 37% of millionaires saying it’s the biggest risk to the economy over the next 12 months, the findings show.   

“This is the first time that the millionaires in the survey said that inflation is their No. 1 threat — both to the stock market, the economy and their personal net worth,” said Robert Frank, CNBC’s wealth editor, unveiling the findings at the Financial Advisor Summit.  

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However, the millennial millionaires surveyed had a rosier economic outlook than their older counterparts.  

A majority say they think inflation is going to last six months to one year, compared to older generations who expect higher costs to linger for one to two years or longer, the survey finds.

And more than half are “very confident” in the Federal Reserve’s ability to manage inflation. 

“The millennial millionaires have become not just different kinds of investors, but an entirely different species of investor,” said Frank.

Millennial millionaires are ‘active in the market’

While nearly 70% of millionaires have a financial advisor, the percentage rises to almost 90% for millennials, the survey shows.

In response to inflation, younger millionaires are more likely to buy stocks and fixed-income assets, and are less likely to have higher amounts of cash.   

“They’re active in the market, they’re buying more stock at twice the rate of baby boomers,” Frank said. “And that again reflects that optimism.”

Of course, millennials have a longer investing timeline, which may fit a more aggressive approach, he said.

Still, while most millionaires surveyed haven’t reduced spending amid rising inflation, millennials were more likely to have shifted their habits. Almost half, 48%, delayed the purchase of a new car, 44% put off buying a home and 62% are giving less to charity.

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