I think the economy is vulnerable to a Wile E. Coyote moment where these things all come together and its like walking off a ledge sometime in the middle or latter part of this year, Summers told Bostons NPR news station WBUR Wednesday, referencing the classic Looney Tunes character known for his not-so-successful attempts at catching the Road Runner. Im not predicting with confidence that that will happen, but I think the risks are significantly elevated.

The U.S. economy added 517,000 jobs in January, pushing the unemployment rate to a 53-year low of 3.4%. And year-over-year inflation, as measured by the consumer price index, dropped from its 9.1% June peak to 6.5% in December. 

Federal Reserve Chair Jerome Powell said last week that the latest data is indicative of disinflation in some key segments of the economy. But Summers, who over the past few years stood firmly against the Federal Reserves transitory argumentthat inflation was a temporary issue caused mainly by broken supply-chains amid COVID-related lockdownssaid that getting inflation all the way back to the Feds 2% target remains a challenge.

Its going to be a very difficult balancing act, he argued. I think the economy is going to slow and inflation is going to come downbut I still think the risks are very large that we either dont get inflation down durably or the economy tips into recession.

The economist also used one of his favorite analogies to describe his fears of entrenched inflation, comparing the Feds interest rate hikes to a form of antibiotics for the economy, where the full prescription must be taken for the effects to last.

Weve all had the experience of taking a course of drugs and giving up, stopping the drugs, before the course was exhausted, simply because we felt better. And then, whatever infection we had came back and it was harder to fight the second time, he said.

Summers admitted that the economy has been stronger than he forecasted, but argued that a recession is still likely coming within the next 18 months. That recession could begin with an outright crasha Wile E. Coyote moment of sortsdue to a few key factors, according to the economist. 

First, consumers are spending down the savings that they built up during the pandemic and using credit card debt to cope with the rising cost of living. Eventually, that could lead to a point where many Americans wallets are tapped out, and overall consumer spending falls. 

Second, Summers worries about rising geopolitical uncertainty amid tensions between the U.S. and China. And third, he said that businesses might decide to pause business development or expansion plans until there is more certainty regarding the future for the economy, and that could slow gross domestic product (GDP) growth.

But like other economistsincluding Mohamed El-Erian, president of Queens College at the University of CambridgeSummers warns that making predictions about the economy, and particularly the path of inflation, is more difficult than ever before. 

The economy right now is as hard to read as any time that I can remember in the 40 years Ive been following it, he said. On the one hand, the economy is very strong.the hard thing to judge is if inflation is on a strong enough downward trajectory to get to the 2% target. And if inflation comes down, will it stay down?

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But not everyone is convinced they are always a good idea, including a team of white hat hackers at a cybersecurity startup called Unciphered. The team has just published a video that shows them breaking into a device manufactured by OneKey, a Hong-Kong based firm that has raised $20 million in venture capital and that describes its product as an open source wallet trusted by millions.

Unciphered shared a preview version of the video with Fortune, explaining that the exploit involved using a man-in-the-middle attack to trick the OneKey device into thinking it was still in the factory. By doing this, Unciphered was able to get the device to relay the wallets seed phrasea random, unguessable string of 12 or more words that serves as a passwordto another part of the devices computer system, capturing it along the way.

Taking possession of a seed phrase means it is possible to gain access to the digital assets inside a wallet and steal them by sending them to a different address. Or more simply, its like making a copy of the key to someones safety deposit box that can be accessed anytime and anywhere.

Here are images showing the exploit, which Unciphered says takes less than a second to conduct once the OneKey device has been disassembled and the man-in-the-middle component attached:

Yishi Wang, the founder of OneKey, confirmed the existence of the exploit, and told Fortune the company has since provided an update to repair it.

We appreciate the assistance of Unciphered and other security white hats. The firmware vulnerability you mentioned above, which required physical access [and] specialized equipment, has now been fixed, he said by email.

According to Unciphered, OneKey paid the company $10,000 in the form of a bug bountya term that describes a reward system, offered by many tech and crypto companies, to encourage white hackers to report and share vulnerabilities in a responsible fashion.

How safe are hardware wallets, really?

While the existence of vulnerabilities are always cause for concern, the reality is that not all exploits pose a significant real world danger. As the OneKey founder noted in his reply to Fortune, the vulnerability discovered by Unciphered required a hacker to have physical access to the device and a high degree of technical proficiencya very different situation than a software exploit that can be sold or used by a low-level cyber-criminal.

Nonetheless, the danger is still real. According to Eric Michaud, the founder of Unciphered, the sort of person who possesses a hardware wallet typically owns a fair amount of digital assets, and is especially likely to be targeted by sophisticated criminals. He notes that crypto conferences provide a particularly target rich environment for thieves, including those who burgle hotel rooms.

In an interview, Michaud also observed that hardware wallets can provide a false sense of security, leading owners to fail to securely store their device on the false assumption hackers cant crack it. And while hardware makers provide software updates to harden a devices securityas OneKey did in response to Unciphereds discoverythere is also the problem of older wallets whose manufacturer is no longer in business, or held by owners who neglect to update them.

More broadly, Michaud says Uncipheredwhich is staffed by longtime security researchers, some of whom have held national security clearancesis also concerned about a much broader range of hardware wallets than OneKey.

According to Michaud, multiple hardware wallet manufacturers recycle the same code base to make their products, meaning that a vulnerability discovered in one wallet is often found in other ones. The upshot is that those who rely on hardware wallets to guard their crypto need to remain vigilant.

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However, the data guiding the nations efforts to help kids catch up does not generally include the students who experienced the most dramatic learning disruptions.

Nationwide testing results released in the fall of 2022 revealed that the reading and math performance on standardized tests of students who were in fourth and eighth grades in the U.S. in the 2021-2022 school year declined by historic amounts.

This dramatic evidence of learning loss has mobilized federal, state and local education leaders. The federal government has allocated $122 billion to support state and local efforts to help students catch up in the classroom.

Public school districts are using these resources to fund tutoring and extended learning time. And researchers are assessing the effects of these investments on standardized test scores.

However, these efforts do little to identify or target support to the children whose learning environments were most disrupted by the pandemic. This is especially so for the youngest students, who arent yet old enough for most standardized testing.

Enrollment decline and the streetlight effect

During the pandemic, public school enrollment in grades K through 12 fell by 1.2 million students. These declines were concentrated among kindergarten students and in schools that offered only remote instruction.

Similarly dramatic enrollment losses among even younger learners erased a decade of progress in boosting preschool education enrollment.

These declines indicate that the pandemic caused students to miss instructional time or undertake disruptive school switches, often in their developmentally critical early years.

However, school officials list early-childhood programs among the least popular use of available federal funds and provide no indication of targeted academic-recovery efforts for younger or truant students.

This is an example of what scholars call the streetlight effect, in which people focus their attention on easily visible evidence such as the test scores available for older, currently enrolled students rather than other relevant data that are more obscured and harder to identify.

And long lags in national data reporting mean little is yet known about the learning environments of the disproportionately young children whose families avoided public schools during the pandemic. Currently, official federal statistics do not even provide basic data on private school or home-school enrollment beyond 2019.

Where the kids went

My research, done collaboratively with The Associated Press and data journalists at Stanford Universitys Big Local News, addresses this issue.

For our analysis, we gathered state-level data on public, private and home-school enrollment for the school years from 2019-20 through 2021-22. We also used U.S. Census Bureau estimates to identify the school-age population in each state over this time period. These combined data provide insights into where the students who avoided public schools went and what it means for the nations academic-recovery efforts.

Complete data arent available in every state, but we have good data on more than half of the school-age population in the U.S. at the onset of the pandemic. These states also experienced public school enrollment declines that are representative of the national trend.

Some students, particularly the youngest, clearly turned to private schools during the pandemic. In the 34 jurisdictions with available data, private school enrollment grew by over 140,000 students between the 2019-20 and 2021-22 school years. However, this increase only explains a modest amount roughly 14% of the corresponding decline in public school enrollment.

A more surprising finding is the robust growth of home-schooling during this period. An early Census Bureau survey reported that home-schooling increased soon after the pandemic began. Our data show this initial increase endured into the 2021-22 school year when most public schools returned to in-person instruction.

In the 22 jurisdictions with data, home-school enrollment increased by over 184,000 students between the 2019-20 and 2021-22 school years a 30% increase. For every additional student enrolled in private school over this period, nearly two entered home-schooling. This sustained growth in home-schooling explains 26% of the corresponding losses in public school enrollment.

Roughly a quarter of the public school enrollment loss simply reflects the pandemic decline in the number of school-age children in the U.S. However, people moving to new homes during the pandemic means this demographic impact varied considerably by state. In states like California and New York, which saw their overall populations fall dramatically, the percentage declines in public school enrollment were at least six times those in states like Texas and Florida, where populations grew.

New questions for academic recovery

These findings raise several new questions about what help American students will need to get their education back on track. For instance, researchers know little about the learning opportunities available to children who switched to home-schooling, or the effects of this choice on families.

Our data is also unable to locate more than one-third of the students who left public schools. That could mean that some children are not going to school at all or that even more families started home-schooling but did so without notifying their state.

A third possibility is that the pandemic led more families to have their kids skip kindergarten. Our data indirectly supports this conjecture. The unexplained declines in public school enrollment are concentrated in states that do not require kindergarten attendance, like California and Colorado.

What we do know is the pandemics learning disruptions occurred disproportionately among the nations youngest learners.

Our work to understand and respond to this situation is just beginning. One possible response is to refocus some federal funding on the broad use of early screening tools to reliably identify and address learning setbacks years before students are old enough to take the current battery of standardized tests, which often begins in the third grade. Policymakers can also do more to locate students who are missing and to understand the educational needs of those outside the light of conventional data systems.

Thomas Dee is Barnett Family Professor, Stanford University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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