A Bigger Hammer

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S1: This ad free podcast is part of your slate plus membership.

S2: Hello and welcome to the Bigger Hammer episode of Slate Money, your guide to the Business and Finance News of the Week.

S3: We had a mini episode on Wednesday to try and keep you caught up. We have a full episode today, but it is impossible to keep up with what’s going on right now. We’re going to do our best to cover what’s going on in Congress. What’s going on in the world, how the Corona virus will affect the global economy. All of these questions in this episode. I’m Felix Salmon of axios. I wrote a newsletter this week, axios Edge, with a whole segment about the sort of what this means for investors in the stock market. We don’t cover that this week, but we are definitely looking at that. And if you have any questions about your own investments or anything else, do please send them in on Slate money at Slate dot com and we will do our best to answer them. With me, I have Emily Peck of HuffPost. Hello. Who’s going to try and explain how this crisis is hitting like? Hourly wage earners in that kind of thing with me, I have. And the shymansky of breaking views. Hello, Anna has a whole Slate Plus segment about Brazil. But she is also going to have a little fight with me about what is the job of capital during a pandemic. All of that coming up on Slate Money. Let’s start with America and the. Bail out. We’re all getting a check or we will all be getting a check in, what, two or three weeks perhaps from Steve Revolution for like a certain amount of money. It’ll be up to fifteen hundred dollars. And then if you earn more than $150000 a year, will start going down after that.

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S4: Well, it’s not even gonna. So. So the Congress has sort of gotten behind slowly this idea of sending out checks to Americans.

S5: Mitt Romney proposed thousand dollar checks, I think earlier this week. And then on Thursday, Mitch McConnell put out his proposal for a corona virus emergency stimulus. And in that proposal, he did propose direct cash payments to Americans. But probably a lot of people, they’re not that great. So it’s twelve hundred dollars per adult, but the checks start diminishing after for people who make over $75000 a year and they phase out for those making ninety nine thousand dollars a year and above.

S4: So that’s one thing. And they’re also smaller. The checks, they’re only around six hundred dollars for poor people. So to be clear, poor people under this proposal from McConnell would actually get less money than Middle-Class People because they don’t get tax refunds.

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S6: What is classified as poor? So like what exactly is the level where that cutoff?

S7: Right. So it has to do with if you filed a four if you owed taxes or not.

S5: So people who didn’t have any tax liability in their claims, I believe are getting going to get less back. They’re framing it as kind of like a rebate. So one person, a former Obama administration official, did it one analysis and said people making less than $40000 a year might get almost nothing under this proposal. And this is just a proposal. And I think it’s going to go through a lot of macho nations before anything actually comes of it. But I wouldn’t I wouldn’t wait breathlessly by the mailbox for the next two weeks waiting for your check. It seems like this is going to be a bit of a struggle to figure out for a Congress.

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S8: That’s going to definitely be a bunch of political horse trading on Capitol Hill. There will be some kind of a stimulus, but it seems that at least in the first instance, there’s not going to be a bunch of what we were talking about last week, which is targeted stimulus aimed at the people who are worst affected by the Corona virus recession, i.e. the people who’ve been laid off and people in the entertainment industry, the travel industry, the restaurant industry, that kind of stuff. We’re not seeing a massive increase in unemployment insurance. We’re not seeing a bunch of bills saying the government is going to pay businesses to keep people on payroll. Like that’s what Denmark is doing, that Denmark is paying up to 75 percent of the salaries of affected businesses to allow them to keep people on payroll. France is coming out and saying that businesses don’t need to pay rent if they need to close for this period, you know? All right. You know, it’s all of these kind of very targeted. Interventions seem not to be happening. And instead we’re doing a vague kind of helicopter drop. Everyone get something. Maybe the richest people, depending on how much they earned in 2018, might get less money. Maybe the poor people might get less money because this is America. God damn it. And it doesn’t seem like anyone is really thinking about this in terms of what’s going to be the most effective. Instead, they’re thinking about this in terms of some other kind of weird political calculations and also what’s practically the easiest to implement on a practical basis.

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S9: Yeah, I would say that, yes. On the one hand, in theory, we would want to do this in the most effective way possible. But this is such a potential disaster that I feel like they should just do more rather than less and do whatever you can quickly, because the longer it takes to do this, the more damage it is going to be and the more expensive it’s going to be.

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S3: This is a piece that I wrote for axios on Friday, which is basically saying the lesson of the Corona virus is that you can never be too early or too aggressive.

S4: Yeah. I think I said that last week. Just do more. Do it now and keep doing it like there’s no shortage of things. Like you can’t think too big on this. Everyone is going to be affected. Unemployment claims are skyrocketing. State unemployment offices are already overwhelmed. People can’t get through to even file for unemployment insurance. The emergency package that passed Wednesday did have a little more money going to from the federal government to the states because one massive problem is going to be states. They have to balance their budgets and all of a sudden they have less tax revenue coming in. And then they can’t pay for all the benefits that people are gonna need right away, like unemployment and stuff like that.

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S9: The one slightly positive is that states went into this incredibly flush. If you look at actually states have these massive rainy day funds. I think California’s rainy day fund was like $18 billion. So that is the only positive thing I will say. No, that’s not true. For all case Illinois, their rainy day fund is like $4 million. But for the majority of states, there is actually one thing that they could tap that.

S3: And we have to understand because this happens at the state level. All of this unemployment money which is coming out is over and above any federal stimulus at some point. As Emily says, the federal government is going to wind up having to send money to the states in order to pay an unprecedented spike in unemployment claims. Goldman Sachs is forecasting that the next week, when the big first week of unemployment claims numbers comes out, we’re going to see 2.2 million new claims for unemployment, which is just a number which is unimaginable. It’s yeah, it’s it’s like never in American history has it been even half that.

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S4: One thing I was thinking about were calling this a stimulus package. But this isn’t really stimulus. We’re not trying to stimulate the economy. We’re just trying to bridge it until we can get it back going. The point right now is to stop the economy and to keep everyone from Mike crashing out. It’s not to stimulate anything like that’s not actually what the problem is at all.

S9: That’s a good point. And it’s actually similar to what the Fed is doing. Like the Fed isn’t buying long term bonds because they’re like, oh, well, we’re gonna lower long term rates are not going to stimulate the economy. Like, no, we just want to keep this market going. And that’s exactly the same thing here. I mean, you’re just trying to stop it from imploding, because if you don’t I mean, this would be the kind of, you know, the kind of economic crisis that we like literally never seen.

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S3: So so my my former employer, Nouriel Roubini, is is doing his Dr. Doom thing on Twitter. And then he’s talking about this. He’s saying like, well, there were people talking about a V-shaped recovery and then there’s like this U-shaped recovery and then there’s just an L shape. And then I think it’s going to be an eye shaped, which is just a depression. It just keeps on going down. And that’s a real possibility. I don’t I don’t necessarily think it’s the base case scenario right now, but it is. It is important to just try and get as much activity moving and as much things clearing like the credit markets right now. Like Nouriel and I vividly remember, the credit crunch of 2007, which went into then became the financial crisis of 2008. And the credit crunch markets right now are looking. I would say worse than they were in 2007. And it’s not you know, we don’t have the same kind of systemic built-In problems that you had in 2008 with mortgages. So that’s less of a problem. But what we do have is just especially the Fed coming in and the ECB as well coming in with just basically unlimited amounts of liquidity to try and keep markets clearing. When you have the government needing to borrow a trillion dollars in a very short amount of time to send checks out and off as part of the stimulus package, you need to have the markets able to operate enough to be able to lend them the government that trillion dollars. You know, these things need to be able to function. And well, a lot of what we’re seeing is just keeping the economy functioning.

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S9: Exactly. I mean, when people are talking about, you know, like, you know, the commercial paper market, like the Fed stepping in and making sure that we’re just connected with money markets as well. This is how a lot of businesses access short term capital for them to pay for payroll and rent. So it’s vital that these especially these short term markets function properly. So it’s not about the government like bailing, bailing out. It’s just sustaining.

S3: Right. And I think this is this is the main thing that we should keep top of mind when we’re when we’re thinking about markets is that historically, when we look at markets, what we tend to do is we look at the levels of the market. Is the market up? Is the market down? And if it’s you know, people are happy and if it’s down, people are sad. But I think that’s the wrong way to look at markets right now. And the right way to look at markets is just all of a clearing. Are they doing their job of being able to move capital around to where people need capital and right now? You know, there are strains in the markets, but they are clearing and they are working. And that’s one of the main things that we really need to continue to work right now. And obviously, one of the other ones is just the Internet. You know, all of us are working from home. We’re recording from our sheltering in place. It would be so much worse if we didn’t have this Internet system, which seems to have held up incredibly well. And that’s also a little piece of good news right now.

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S10: I’m feeling okay and sort of confident that the Fed is going to do what it can do to make sure things are moving and people are able to get the money they need. Companies are flat out getting the money they need, etc.. My concern really is for all those people filing the unemployment claims and all those small businesses who, you know, Michael under right now might not be able to come back later. I mean, you’re really looking at a massive catastrophe for like, what, 20 percent of the American workforce? I mean, these people are really working paycheck to paycheck. And even if they got the $100 one time check, that’s not enough money to do much of anything. Like you have to pay rent, keep the lights on. If you get sick, you need to be able to get health insurance. Like we’re talking about like a massive human catastrophe. If Congress doesn’t get its act together and figure out how to do a real a real package. And I’m I’m actually really worried about it because they’ve already had two bites at the apple and both bites of it kind of like Nibali and not good yet. I mean, what they’ve done with paid sick leave is a national embarrassment. They the Virgin, they passed on Wednesday gave paid sick leave only to people who work at companies with less than 500 employees. So leaving out millions and millions and millions of workers at these large companies, many of whom are still actually working and aren’t unemployed and are at them in the most at risk of getting sick.

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S3: So that’s a really, really good point. And I’m going to be a little bit optimistic here, which is, first of all, Congress has unlimited bites at this apple. Like no matter how weak the bill it passes right now is, if things continue to go catastrophically bad, like Congress will still exist and they will still be able to pass new bills and they will be able to continue to pass new bills that, you know, they will come up with some kind of remote voting protocol if they need to, and they will continue to pass new bills. You know, for as long as this crisis continues. And to your points, yes, people right now have this feeling that they need to pay rent, they need to pay utilities and they need to pay health care bills. Congress right now, it doesn’t look like they’re going to do this, but at some point in the future, absolutely has the ability to pass a law saying, you know what? Right now, you don’t need to pay rent. It has the ability to pass a law saying you don’t need to pay. Your utilities were going to deal with utilities. We’re just going to have them, you know, not bill you for these months. It has the ability to say all treatment is going to be free for the next however many months, like all of these things are within Congress’s power to implement. And although it is not doing it yet. I hold out hope that if and when those things become necessary, like at least we will have the ability to do that.

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S9: Yeah. And if you compare to 2008, how long it took for anything really to start. Like the only thing one of the few pluses I’ll say is at least. People are now getting their act together somewhat quickly and even though, yes, it would be nice if Congress was doing it faster. I. I do think that if this what we’ve seen thus far continues, it shouldn’t be too long before something significant is in place.

S11: And they can always add to that after.

S3: So the other thing that Congress is doing is insider trading. We have to cover this because it’s quite astonishing. Let’s talk a little bit about Richard Baer and his friends on the Intelligence Committee.

S12: Richard Burr is the Republican senator from North Carolina and he chairs the Intel Committee, as Felix just said. And he knew for a long time what was going on with coronavirus. At the same time, he was reassuring the public that everything was fine. He was telling he was at a private function, warning people that things were going to be really bad. And the economy is going to get really hit hard. Oh, and on February 13th, while he was still saying things were gonna be fine in public, he sold about 1.7 million dollars worth of stock before everything kind of crashed. Do I have that right?

S3: And he and he also specifically sold stock in like hotel companies. And. Yeah, and while buying stock. I know. Yeah. He still got stock in hotel companies. And then it was LeFlore who started buying stock in like Citrix since late summer. Working companies.

S12: Yeah. So separately, another senator, Kelly Loffler, who is married to the president of the New York Stock Exchange, also a Republican out there in public saying everything’s gonna be fine. And Trump’s got this. Don’t even worry. It’s not a big deal. Democrats are kind of making it seem worse than it is. She also, along with her husband, sold a bunch of stock in companies most likely to be affected by the Corona virus and then bought stock, as you said, in Citrix, which is specializes in part and working from home software to help you work from home.

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S3: So she claims like just to be clear, she claims that she didn’t make that decision and it was all done by some third party financial advisor. So if that is true, then that’s just an amazing trade by her third party financial advisor. And like, what an amazing coincidence. But, you know, she just got very lucky. Burr is just saying, well, I sold before the stock market went down. So that means I’m fine. It’s like, you know, that’s the strange logic to it. This is the real scandal here is that this is legal. Everyone is like they should be prosecuted for insider trading. There was a big attempt to try and make members of Congress liable for insider trading laws. It failed. And the compromise was that they would have to at least report their trades, which is how we know that they did this. And there is no law against them doing it. They just we just need to be able to see that they did it. And now that we have seen that they did it. Basically, the only thing that can happen is that public opinion forces them to resign.

S13: As far as I can make out, it’s just it’s amazing to me, like when comparing to the restrictions you harvest. You work for like a private equity firm. Like the regulations that you have as an employee about when do you like approval, you need to get for trades. And the fact that if you work for the government, apparently you can do anything you want.

S3: Is it? Never mind. Like being a financial journalist. I don’t own any individual stocks at all.

S13: No, I don’t. None that I, you know, manage my sense of that. But that’s the real scandal here. Yes, these people are just awful. But it’s part of a larger system that’s enabling people to do this. And until that system is changed, people are going to continue to do this.

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S4: I feel like I was just most scandalized by the fact that these people knew what reality was like. Richard Burr understood what was about to happen in this country, was telling people privately he was being straight with people and saying what the coming situation was going to be like with this pandemic. He was saying it privately. He was making trades based on that information. Then he was going out to the public and giving a whole other story. And to me, that’s even more shocking than, you know, trading on the information that’s keeping that information close and not doing his duty as a public servant and informing the public of the actual risks that were coming. That is a scandal to me that it is a scandal.

S3: And I actually blame Trump for that. I agree big because there was a point many, many, you know, millions of years ago when the US Senate was this grand deliberative body, Filyaw, wise old gray beards, who would, you know, try and do what was best for the country. But. Obviously, over the years, it has become increasingly politicized and under Trump, basically anyone who does anything that Trump considers to be disloyal can forget about being reelected. And so they are they feel incredibly constrained in what they say and they feel that the only thing they’re allowed to say is whatever Trump is saying, and that’s deeply unhealthy to any kind of civil society.

S14: Yeah. We’re seeing how that shakes out right now. Terrifying.

S3: Let’s move on to a little bit of good news for those of us who are on the FedEx earnings call and anyone else who’s been looking at China. China recorded zero new domestic cases of coronavirus on Thursday and day, according to FedEx. More than 90 percent of the big businesses are back running again. More than two thirds of the small businesses back running again. And I am just going to jump in here and say that everyone who listens to Slate money should get onto medium and read the medium article about the hammer and the dance, because this explains the way that the world can and should respond to coronavirus better than any other piece of writing or audio or anything else that I’ve I’ve come across during this crisis. And basically what we had in China was we had the hammer. They brought the number of new cases down to zero. And now they’re beginning the dance. Now they’re saying, OK, we can allow the economy to start moving again. We can allow people to start going back to work again. And, you know, probably there will be some new new cases if we do that. But we have it under control and we have like the right knobs and levers and dials. And if we need to crack down again, we can. But so long as we keep this number called R0, which is basically the number of people to any infected person infects, as long as we keep that below one, we’re fine. And probably in China right now, like under the hammer, when they really crack down, it was down to about 0.3. So they were let they can bring the amount of activity and the economy back up substantially from where it was and still function as an actually important global economy. And that for me is a is a really optimistic little data point. So I agree.

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S6: I mean, I will say, you know, just a little bit of caution that, you know, there are also a lot of activity indicators coming out of China that are still like really not good. They’re better. But especially things that are related to consumption are still, you know, quite low. And even though now you had a lot of migrants who have moved back from their homes to the cities, they’re not necessarily finding any work there. So I agree that I think clearly once China kind of got its head around this, they reacted well in certain ways. And so they should see a recovery. But I I think any type of like V-shaped recovery is an incredibly unlikely. And I think it could be it could be slow going for a while.

S14: And I was under the impression that even though there was one day where there were no domestic cases, you have to wait around 14 days to see that. That has to happen every day for around 14 days before we can say it. But, you know, they kicked it, right? I mean, one day isn’t enough to make a trend.

S3: That’s that’s absolutely correct. But we know what the trend is in China. The interesting question is, what do we know what the trend is in the U.S. and we do not know what the trend is in the US. We have no idea how many people have the Koran virus in the US because we don’t have any testing as the testing rolls out the number of positive tests. It’s obviously going to go up. Just going to be a function of how many tests you do, basically. And there’s going to be a very, very long time. Well, not very long. It’s going to be a few weeks before we can get a handle on is the number of people with the virus in the U.S.. The least flat or going down rather than going up. And before you can start beginning to open up the economy again, you really want this not only to be going down, but you want it to have gone down substantially to somewhere in the zero.

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S6: Yeah, and I do think it’s important to focus to bring up some of these more positive statistics, because I think in a moment like this, it can seem, you know, like everything is just going to fall apart and that there’s nothing anyone can do. But I think when you see this, you can see like, well, no, if people actually stay inside. If people follow the rules, this, you know, disaster will be substantially less.

S3: It will be substantially less. But, yeah, know it’s gonna be bad and we’re going to need to wait. I mean, let’s assume, which is absolutely not the case, but let’s assume that everyone in the United States is basically sheltering in place at this point and it’s not really having a lot of human contact with other people. That’s good. The number of cases will still continue to go up for the next week or so, the number of actual real cases in the world, not the number of measured cases. They will continue to go up, but then it will stop going up. And, you know, the hospitals will be overloaded and there will be this medical emergency. But then it will, with any luck, start going down and start going down quite quickly as people dont have contact with each other. And then that gives us time to start building out more medical capacity tests. You know, because like come the fall, there will be another uptick in in covered cases. But like we have time between now and the fall and maybe in the fall, we have enough time to get a lot of masks, get a lot of tests, get a lot of respirators and ventilators and put ourselves on a footing which makes us much more capable of reacting to this epidemic. And then you can allow people, you know, in a few weeks to start, you know, going back to work and in that kind of thing with much more confidence that there’s a plan. Right now, there is not a plan.

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S15: And the only thing you can do is buy yourself time to create a plan.

S6: And one the one one last thing I’ll say is that one of the things you’ve also seen in a number of other Asian countries that have done a really good job at this is that they went when they started kind of allowing people to go out. They were heavily monitored. So like you’re going into a restaurant, your temperature is taken. And while that may seem intrusive, I think a lot of people would at a certain point rather have that than having to just stay inside.

S4: Absolutely. And one other thing. In that medium post Felix shared with us, I already kind of knew and had read about, but really was hammered home was how important it’s going to be to have the hospitals have the capacity to treat people and what a rolling disaster it would be if the U.S. was Orbison flooded with covered patients, because that kind of creates this snowball effect where other people who are sick can’t get care. And then you’re seeing a huge fatality rate for the covered cases, but then more fatalities for, you know, people are coming in with heart attacks or strokes or the potential for catastrophe is so high that if we can by the time right now and ramp up that hospital bed capacity, which I guess New York State is kind of leading this a little bit, they’re having a hospital ship, right?

S3: A Navy hospital ship is going also the Navy hospital shebang is coming in two weeks because apparently it takes two weeks. They literally they could have started like giving out this ship two weeks ago, but it was just sitting in Virginia gathering dust. Now they need to start making it work. And then in two weeks time, it will arrive in New York. And yeah, that this hospital ship, when it arrives in New York, will not have any covered patients. It will have all of the other patients that would otherwise normally be in hospital to free up space in the hospitals for cofee patients.

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S4: Right. And so that’s me. The post that you shared really hammered home the importance of ramping up our medical capacity in our hospital capacity and just what a difference that can make in that they tallied rate. And there just seems like there’s a lot that needs to be done. So it seems your state governments kind of have it under control. But again, I say the federal government does not seem to there seems to be more to be done there while we wait.

S3: Hammond then to get bigger, you know that the Hamit we definitely need the Hammond to be as big as possible. That’s for sure. And the hammer has come down in California. The whole state of California is under shelter in place right now, but it’s not coming down in much of the rest of the country. We need to have this and basically everywhere. And then once it does, yeah, we can build out this capacity. What fascinates me is that in terms of total deaths, like if you manage to bring the hammer down and get the kohver deaths down, all of this is incredibly good for saving lives in other ways, like the number of flu deaths comes way, way down for exactly the same reason as number of cope with this does because you have social distancing and people don’t. Catch the flu. You get like people are driving less, so you have fewer car crashes. You have like fewer homicides. Like, there’s this fascinating study of what happened to illness and death during the Great Depression and it actually went down rather than up, counterintuitively, that recessions seem to have surprisingly good health outcomes.

S5: If you want a little silver lining here, a fast moving economy is bad for the environment and bad for the health of the population.

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S16: Maybe we will actually. I mean, the environment.

S3: That’s actually a non-trivial thing. This is I’ve seen some mathematics on this. Just in terms of China, the number of lives saved by the decline in air pollution in China is greater than the number of lives lost to.

S4: Yeah. I mean, this is a really good experiment. You know, and collective action to solve the climate crisis. Right. Maybe we just need to social.

S17: I don’t think this is the I think that will create a number of problems that probably wouldn’t be the ideal solution. Are you sure? OK.

S15: When it comes to bailouts, one of the things that the American government is trying to work out what to do is try and work out what to do with the airlines. Obviously, the airlines are barely flying right now. They’re losing a lot of money. And the question is, do you try and keep the airlines operating as best possible so that when we’re on the other side of this, they can go back to the status quo ante or not? And my kind of I have this weird feeling that like this is our opportunity. If you let the airlines go bust, it takes a long time to rebuild those networks and it results in flights being rarer and much more expensive.

S3: And I’m like, is that a bad thing? You know, like from a climate perspective, you want flights to be reira more expensive for individuals.

S6: But I mean, you’re talking about an entire logistics system. I mean, like it it’s bigger than that. I mean, you kind of can’t let the airline industry not function.

S4: But, you know, restrictions on the bailout money so that they function in a more climate sensitive way. I mean, there’s so much there is a lot of talk right now about how to structure these corporate bail outs so companies can’t just, for example, think, Elizabeth, why do stock buybacks want them to do buybacks ever again?

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S12: I wanted to.

S18: Which is OK. Can I just say one thing like, OK. Like, I understand saying that, like, if you’re gonna give a company alone until they have paid back that loan, I can see having some restrictions on where how that money can be used that I get. But anything beyond that. It just it it it makes me actually kind of angry because I’m like the companies didn’t cause this complete government. Hopkins. So I don’t think we should be like harming companies as we don’t understand why this one is so obsessed with stock buybacks.

S3: But I will say that the way that the Treasury proposal structured the corporate bailouts seemed quite good to me in terms of not bailing out the shareholders or the bondholders. It was secured debt, which basically means that, you know, if the company goes down in value, the government ends up owning a large chunk of the company. Both the president and Larry Kudlow have said quite publicly that they’re perfectly comfortable with the government owning stakes in companies. I think that’s correct. And the corporate bailouts are not really going. And they’re loans. They’re not grown. Yeah, that really is you know, that that bit of it seems to me to be structured the right way. Mike, the way that I’m looking at this generally in the big picture way is that.

S15: People with wealth in the world, a minority of the people in the world, and what they do with their wealth. A large part of the time is they wind up taking risks, investing it and taking risks, and they put it in the stock market and they put it in the bond market.

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S3: And all of those investments carry risks. And one of the big sort of tail risks that comes with those investments is that a global pandemic can strike and the value of their investments goes down. And that’s kind of the job of people with wealth to provide this loss absorbing capital, something which can go down in value when a crisis hits. And that’s exactly what we’re seeing right now. You know, the value of bonds is going down, the value of stocks is going down, the value of gold is going down. Basically, the value of things that people with wealth have is going down. And that’s capitalism kind of working the way it should. I’m in a weird way heartened by that.

S6: I’ll agree with that to a certain point. You know, I mean, I think you can’t have an economy functioning where any investment or business decision and you’re thinking, well, what if we had a global pandemic next year that stops all production?

S13: Because if you did that, you would have an economy that wouldn’t function. And so I agree with you. To a certain extent that, you know, part of the reason you get a return is because you’re taking on risk. So there can be some lost there. But I do think that this is something that is truly unique, like this is not a normal oh, we had a recession and people made some bad investments. They had too much leverage. That’s a that’s very different from what’s happening here.

S14: So Felix is saying it’s OK if investors lose money. And Anna, you’re saying not this time?

S6: Well, I’m not saying that investors can’t lose them. I’m not saying the goal should be to make sure that every investor is flush. That’s not what I’m saying. What I’m saying is, if you’re thinking of people are investing capital, that’s how companies are able to function. If everyone is investing, then the companies themselves are using that capital in such a way, always within the back of their minds. Well, I need to make sure I have enough of a buffer so that if there is a global pandemic, I will be fine.

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S16: No, it’s not. That’s not what I’m. That’s not what I’m saying. It’s all. I’m not I’m saying the exact opposite. I’m saying that that companies should not be worried about that.

S3: And the companies will continue to operate. And the investors in the companies, the people, the risk takers, not the companies themselves, but the risk takers, the people with the stock and the bonds, they are taking the risk. There’s gonna be a pandemic. And that’s a very low risk. It’s a tail risk, but it always exists. And if and when a pandemic arrives, they lose money. The businesses continue because they’ve already received the money from the investors when they issued the stock in bonds. And that’s like that’s the right way for capitalism to work. And the investors took a risk. That’s what it means to be wealthy on some level is to have is to delay consumption to the future and take the risk that you won’t be able to spend that money in the future. And they took that risk and the risk materialized and they lost a bunch of money. And that’s how things should work. I’m not for a minute saying that people should operate in the expectation that there’s going to be a pandemic or that they should try and prevent losses in the event of a pandemic. I’m saying that if you want to prevent losses in the event of a pandemic, don’t have wealth, just go out and spend your money instead.

S18: I think that’s not that good. The ideal way, how we want to run our economy. Look, I agree with you.

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S16: That’s that’s that’s that’s capitalism. I mean, literally saying that is how we have been running our economy. That is exactly how the economy has been growing up until now. And that’s how the economy will continue to grow. On the other side of this pandemic, when we come out the other side, I like we don’t need to go in this argument.

S18: I think that with everything that’s going on, I feel like this is not.

S6: But only one thing I’ll say is that what happens in like what happens to investors affects the ability of companies as they move forward. You can’t divorce the real economy in a financial company entirely, especially with something like this, because the ability of investors to like to access more capital and the ability of investors to get to grow. I mean, the ability of the economy to function is based on having capital markets that work. And if investors are so gun shy because they were all just wiped out, you know, that could cause some problems. Now, do I think they should all be completely bailed out, all the investors? No, I’m just saying this is a unique circumstance.

S16: Let’s have a numbers round.

S15: I’m going to start, I think, with twelve, which is the number of journalists that China expelled in its latest tit for tat war with America over journalists. And they basically kicked out all of the journalists working for The Washington Post, New York Times, The Wall Street Journal, The Voice of America. And they said, you have to leave the country and you can’t even go to Hong Kong. You just need to leave everywhere. And this came after America effectively kicked out about 60 odd Chinese journalists. And it comes against a background of China, basically, which is the main manufacturing hub in the world for facemasks, basically refusing to export any facemasks until of the Chinese demand for face masks failed. There is this extreme nationalism that is happening against the backdrop of the pandemic. And when you see countries putting up national borders, not allowing people in or out. That happens on a national level. We’re seeing a lot of this nationalism. And I I worry about this because I feel that there was already a trend towards less global cooperation and more nationalism and that this pandemic is only going to exacerbate that. And that could. Well. Continue long after the coronavirus crisis has passed.

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S14: I’ve thought about that because some of the countries affected the most right now have elected these populist leaders like us. Like Italy, like the UK.

S12: And my positive thinking on this is that these leaders are doing such a bad job and the nationalism has failed.

S4: And coronavirus really does need to be fought with a global outlook, even though so much of it is about shutting down, you know, borders and keeping everyone at home. There has to be some kind of global coordination. And these populist leaders have done such a bad job at that. It’s so runs against everything they seem to believe in that I’m slightly optimistic that they’ll all get voted out and we’ll can maybe get back to some kind of global cooperation or more globalist thinking in the future. Maybe.

S13: Sadly, I kind of feel like, you know, the last especially the last year or like everyone is talking about this like D globalization, like this kind of, you know, end of this era. And to me, this is like the ultimate coda on the end of the Arab globalization, when literally you people locking themselves down like I kind of feel like we are not going to go back to globalization like as we were before. I think it’s much more likely that countries are going to become much more isolated. That trade is going to decline. That supply chains are going to become much closer, which will probably also end a potential increase in prices. So I don’t I’m not positive about this.

S19: What’s your number? So my number is one twenty three point seven H. That is the ratio of gold and silver prices from a few days ago. That is the highest that number has been in five thousand years.

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S16: So that’s the gold price divided by the silver price.

S13: Yes. Now, obviously, the data we had from like Faroes time is probably somewhat suspect, but we do in fact have data.

S17: And as of like looking at the data we have, it is in fact the highest it’s been in five thousand years.

S13: Now, don’t try to get me to explain why exactly that is, because like anything right now, it’s incredibly. There are about 8 million reasons why. But I thought that was interesting.

S15: But this is interesting that gold that the price of gold has been going down with everything else.

S3: But basically what you’re saying is that even if the price of gold has been going down, the price of silver has been going down even more. Exactly.

S4: Emily, interesting. My number is six thousand five hundred dollars.

S12: That is the health care deductible of one Amazon driver. I spoke to yesterday that I can’t stop thinking about. She pays $90 a month for health insurance, but then has a sixty five hundred dollar deductible, which essentially means she’s paying about $600 a month for health insurance. She only makes about $18 an hour right now driving and has very limited protection against, you know, getting coronavirus, not able to work from home. She’s out in the truck all day. And because everyone is home right now, Amazon is seeing an amazing surge in business. So she is being pressured to drive for, I think, eight or 10 hours a day as fast as she can. So she said that mean she doesn’t really take bathroom breaks or breaks to eat or anything like that. And just talking to her, it really reinforced how precarious people’s economic and health situations really are right now and just how bad the safety net is in the United States. I feel like we can’t talk about enough because maybe the situation will finally make people realize, like, you have to do something. People can have sixty five hundred dollar deductibles. Oh, and then the thing I wanted to compare it to is this great story in Reuters about a medical concierge service in New York City that average people pay $5000 a year to belong to. So contrast that with the sixty five hundred dollar deductible.

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S14: And those people have the concierge service were able to get covered tests to their homes right now. So at a price.

S12: At a price in addition to the $5000 a year. But I mean, it just shows you the extreme inequality.

S8: This is why the NBA players all got tested. This is why I’m like, you know, Idris Elba. Whoever got tested is because if you are rich, you can get these tests. And it is a ridiculous two tier system. I mean, part of the problem. The main problem, of course, it’s just that there aren’t enough tests and that one of the main reasons we need to buy time is to buy time to get a lot of tests, like tens of millions of tests, possibly hundreds of millions of tests into America, so that people can be everyone can be tested. Everyone can be tested multiple times. Everyone can. We know exactly who has it and who doesn’t. That really helps enormously. And is it’s almost. More important than a vaccine. So that’s huge. But I can also recommend Max Fisher piece in The New York Times basically saying that if you look at the countries that have been successful in fighting the coronavirus versus the ones that have not been having an effective medical safety net is just crucial. And I’m looking at the UK right now, which just seems to have the most shambolic response imaginable to coronavirus. And Boris Johnson is the worst conceivable Leber you could have in this in the face of this crisis.

S3: But the thing it has is a national health service. And like just that alone puts it on a stronger footing than the United States. You need people to get treated and get tested and not worry about health care costs, because if people are worried about health care costs, that increases the amount of other people that they in fact.

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S14: That’s correct. And most people are worried about health care costs.

S3: Onwhich depressing note, we are going to wrap up this episode of Slate Money. Thank you for listening. Thank you to just me and Molly for managing to stitch together three different audio tracks into a single podcast from three different parts of New York state. Do keep the e-mails coming. It’s Slate money at Slate dot com. And we will talk to you next week on Slate. Money.

S15: Anna, I. Yes. Remember, because I am a very old person. I remember various emerging market crises in the early 2000s when you had this economist named Gamow Calvo talking about sudden stops and you had all of these countries which were relying on steady inflows of foreign capital. And then when the steady inflows stopped, suddenly that caused major crises around the world. We are seeing the mother of all sudden stops right now. There’s not a lot of flows into foreign markets right now. But to what degree are these foreign markets reliant on foreign capital? Is it as bad as the early 2000s when they really needed those inflows?

S13: It’s it’s very bad because, you know, you see you have now there are some differences. Just just to be clear, in terms of countries now compared to like, you know, 98 obviously had a lot more foreign reserve foreign currency reserves than. So that’s that’s a buffer. But they’re obviously depleting that buffer rapidly because we are seeing outflows, you know, significantly more than what we saw in the great in the financial crisis and sit in even more than we saw in the, you know, the Asian financial crisis. And the reason this is so important is because if you’re a developing economy, you don’t have sufficient capital within your country to have to even have the economy to run the economy that you currently have and to grow that economy. And especially you need access to foreign currency because you need to buy like machine parts, like you need to be able to pay for imports in order to run your economy. And this is when you hear about countries having current account deficits, when you’re talking about emerging developing economies. What that means is that they rely on external financing to run their economies. And so when you have this money just like dramatically pulled out, it does a number of things. Obviously, it affects the currency and then the level of the currency, the currency becomes quite weaker. And that obviously has many, many different ramifications. And then on top of that, it it is going to make it harder for these economies to just be able to get the basic parts that they need, the basic materials that they need. I mean it in order to function. So it’s not I think when people hear money coming in, they just think of, oh, it’s just investment flow that it’s just the market doesn’t matter. No, you’re talking about a developing economy. It really matters. Now, there are different development models. There’s like the I we’ll go to this too much. But like there was like the North Asian model, which much more relied on local capital from like you had policies that forced the savings rate up really high. And then that was used to develop the economy. Now, that’s in if you’re talking about like Latin America, that’s not the that’s not the system they use. They do not have high savings rates. They do not have sufficient capital inside. So they really do rely on this.

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S14: What is them? What are some of the countries most struggling at? I think you mentioned Brazil. And yeah, I mean, certainly early.

S13: So, yeah, like everywhere is pretty much getting killed. But Brazil is uniquely vulnerable and uniquely getting hurt. So first of all, Brazil went into this already weak. They growth has been much slower than people thought it was going to be last year. Brazil has, you know, is still in a lot of ways recovering from one of the biggest recessions they’ve had in the modern era. And so Brazil right now is one of the worst performing currencies. Basically, the reaI and the ruble are kind of battling it out for the worst performing currency this year. And, you know, they’re also the Bovespa. There are equity market is just getting destroyed and. So on the one hand, there are again, there are some differences that are positive from in the past, which is that inflation is just so much lower in these countries than it was in the past. And so that gives you know, it gives the central banks a little bit more room to function. It also can in theory, it would give the governments a little bit more fiscal space. But the problem is, so many of these countries are have enormous debt loads. They already are running deficits. They do not have fiscal space in a country like Brazil that has a history of massively overspending. If they start to just like throw away all their spending rules, they’re going to get killed in the markets by investors, because the only reason investors were putting money in there to begin with was because they thought that they had gained some discipline. And so it’s it’s not a good situation. And then obviously in Brazil, too, you have this just political chaos because you have this idiot running the country and his finance minister. You know, I have I have mixed feelings about. But overall, it’s just it’s a it’s a government that doesn’t have a functioning coalition. You know, it’s very likely that the government’s policies are going to be able to serve its full term. I would imagine at this point we will see. But this Brazil is one extreme example of this and every country slightly different. But this is a major problem. I mean, if this if this if these levels. Just like I mean, I’m sure will slow down at some point. But like this is not something that could be easily recovered from. And one of the last things I’ll say is part of the reason that a lot of emerging economies actually did OK and like the kind of 08/09 and recovered relatively quickly was because of China. China had a massive stimulus and a mass. And so there’s a massive commodity boom. Commodity prices skyrocket. And so many of these e.m economies, obviously, they’re primarily exporters. So they so they massively benefited from that. They were running surpluses because of that. So that really helped. That is not the case now. And that hasn’t been the case. That’s part of the reason. Brazil hasn’t been running a strong budget as of the reason that a lot of economies have been struggling. It’s because commodity prices have been lower because of Chinese demand. So this is probably only going to make that significantly worse.