The World Is Falling Apart

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

S2: Hell, no. Welcome to The World is falling apart. It is kind of late.

S3: Money or guide to the business and finance news of a week, which seems to have lasted for a few decades at least this has been one hell of a week. I am Felix Salmon of axios.

S4: I’m here in Brooklyn with Anna SHYMANSKY of Breakingviews. Hello. I am also on the line with Emily Peck of HuffPost. Hello. From a undisclosed location somewhere in West Chester. But most excitingly, I am also here with Ben Hubbard in Beirut, Lebanon. Hi, Ben. Hello, you, Ben. The New York Times bureau chief in Beirut. Yes.

S5: And you have written a book.

S6: It is called m.b.a.s The Rise to Power of Mohammed bin Salman.

S3: And I can definitely recommend this book. It is a fantastic book. This man is the most important and interesting head of state in the world kind of definition, the top five. But he’s come out of nowhere to seize just astonishing amounts of power. We are going to go back to either 150 years ago or maybe six days ago when oil prices went crazy. We are going to talk about the corona virus and its effects on the global economy. We’re going to talk about what on earth is it like to have to work from home for possibly months on end? We’re going to talk about all manner of stuff coming up on Slate Money.

S4: So there’s absolutely no way that we are going to be able to cover everything that has gone on even in the last five minutes, let alone the last week, because it has been a week of complete crazy.

S7: But we should at least cover some of the huge big headlines. Anna, where where to even start?

S8: That’s a very good question. I mean, I think so. This has been quite a week. We’ve seen significant volatility and we’ve seen significant drops. You know, we’ve now had multiple times in which the S&P has fallen so far that circuit breakers were actually released. Other had to be a pause in trading.

S9: So that’s that’s 7 percent in the space of like what normally in the first five minutes of trading because something has happened overnight, like Donald Trump went on the Italian freak, the entire planet else.

S8: Exactly. So we’re seeing these massive sell offs. And then I think on Thursday, you also had the Fed come in and say that they were going to be injecting 1.5 trillion so that you have additional liquidity in the short term funding.

S9: So that. Yes. So that’s a bunch of liquid. The Fed is doing monetary policy. We’re almost certainly going to get a massive rate cut on Wednesday when they meet. They’re doing clever things in the repo market to try and keep liquidity going. The Treasury market was showing signs of seizing up. Also, like just to sort of zoom back a bit, we had Trump announcing basically that no one who isn’t an American is allowed to enter America if they’ve set foot in continental Europe at any point in the past 14 days, which is his way of basically. Painting the virus as a foreign invader and making this like a us vs. them thing, and then that went down about as well as you would expect it to do.

S10: I think that the big picture here and it’s something that I started thinking about when you sent your newsletter, Felix, but basically to fight this virus and this pandemic, you have to have an economic slowdown. You have to kind of do a recession to get the coronavirus contained, because basically you have to do all this social distancing. Everyone has to stay home under self-quarantine. People shouldn’t be out at big events. You see all these events getting canceled, all these gatherings getting canceled. Businesses aren’t seeing any business that all has to happen and that all necessarily is tanking the economy.

S9: I think I like to think I like to think of it as like chemotherapy for the economy in a way. Like you have to kind of kill various bits of the economy, including, you know, a large chunk of the travel sector, a large chunk of the service sector in order to try and get a grip on the spread of the virus.

S8: Well, I mean, I think you’re right. Yeah. I mean, I think the big issue here, which is often the issue in panics, is uncertainty. And in this case in particular is very uncertain because we we really haven’t had a type of crisis where people have just stopped going out like that is actually something new. And people in the market don’t actually know what is going to happen now.

S9: And just to be clear about this, the market is a symptom. It doesn’t matter. We shouldn’t be worrying about the market. We should be worrying about the spread of the virus. That’s the number one thing to worry about.

S10: Of course, we have this like we have this purposeful kind of economic slowdown. And what’s needed now is for leaders and governments to step in and simultaneously fight this public health crisis and mitigate the effects of the slowdown. The problem is most of the leaders around the world, especially in our country, do not seem up for that when it stands.

S9: In contrast, it’s not like we haven’t seen this. I think, you know, the Chinese did a very bad job at the beginning and then turned around and started doing a very great job. The Koreans did a very good job. The Italians are taking this super seriously. And, you know, it remains to be seen just how effective they’re going to be in that they’re having a very hard time of it right now. But they seem, at least right now, to be doing more or less the right thing, the messaging even. I mean, I hate to admit this because I can’t stand the guy.

S4: But even the messaging from Boris Johnson on Thursday was like he was like, this is going to be tough and you all need to stay at home and this kind of thing. It’s not like it’s impossible for politicians to do this.

S11: But there are certain politicians, including the president of Brazil, who was calling that virus a hoax and now may or may not have come down with it himself. And certainly the president of the United States, who who don’t seem to be constitutionally capable of really reacting in that kind of a way. And I’m actually super interested to have been here, because when you look in your neck of the woods, it’s sort of the Arab world how how a politician is reacting that, oh, there’s this kind of a mix of confusion and statements.

S12: And I mean, it’s pretty it’s pretty terrifying around here. I mean, the Arab world’s a broad place with a lot of diversity. But I mean, the biggest concern for me is that you have a number of you know, when you look at what this region has been through since 2011, whether it was sort of the aftermath of the Arab Spring, civil war in Syria, the rise of ISIS, destruction of ISIS, we’re in a war in Yemen. We have so many states that are just basically either failed or barely getting by. And my big fear is that if Carona really gets into one of these places, there’s going to be almost no system that can restrain it. So if you have Carona take off in parts of Syria where the government is basically absent, or parts of Iraq that were destroyed and you know, the fight to get rid of ISIS or Yemen, which has been largely destroyed by Saudi Arabia and its allies, at least parts of the country, you know, these are not countries that have large medical sectors that are standing that are going to be able to act quickly on, you know, to do something about a new phenomenon like this.

S9: And you have to assume that, like the standard of immunosuppression in your typical refugee camp is not that great. And that like, you know, all you need is one person and things can get very bad very quickly.

S12: Yeah, and you have obviously, you know, thanks to the Syrian civil war, you have huge refugee populations in Lebanon and Jordan in southern Turkey. And, you know, there’s the medical care, there is always poor. So then if you get a virus that goes in. I mean, these are people that are crammed in tents that are lining up to get water, to get food in some places. And so these these things are gonna spread incredibly easily.

S10: Do we know yet how many cases are in the Middle East right now? Is there any reliable testing or reporting there?

S12: Yeah. I mean, of the various countries have put out, you know, have put out numbers, the Saudis have reported some cases, the Egyptians and the Lebanese, you know. Yeah. Iran, definitely. There’s you know, there’s always some concern that these countries either don’t really know how many cases they have because the reporting is so bad or that they could just be lying about it. You know, they could be playing it down because it’s bad for their image or it makes the leaders look bad. And, you know, so I don’t think we have a, you know, a perfect view of of where it is in the region. But, you know, it’s a major concern.

S10: I’m curious, Felix, and I know what you think. I was talking to Jason Furman this morning and he said he thinks the downturn from coronavirus could be worse than the financial crisis. What do you guys think about that?

S8: I disagree with that. To be perfectly honest, I obviously could be 100 percent wrong. But once I think there is some type of reasonable policy reaction in the United States from that kind of probably some coordination between the Trump administration, Congress and the Fed, and that people have a sense of, OK, we have we know in general about how long this might last. Looking at what happened in China, in South Korea, I think you’ll see the markets come down because well, I mean, again, like let’s let’s say these two.

S4: When he says downturn, presumably you’re saying economic, but that’s what I mean. But no. So so let’s try announces caution without talking about the markets.

S8: OK. OK. Right. So if you’re if you’re thinking about businesses and because what can really causes a significant economic downturn is obviously if you start to have lots of layoffs and then people also aren’t spending, and then that’s a bad cycle. Now, if people think this is probably going to be a limited period of time, we’re going to have this significant drop in demand. You probably aren’t going to have a lot of companies lay people off because very expensive to rehire them if they think this is going to be short term. What’s much more likely is that you have a lot of companies that will simply take a hit in profits. You’re going to have not to go back to markets, but you will have like a bad earnings period. Right.

S11: So so what’s the what’s that period of time like if I’m, say, Disney theme parks and I need to shut down my theme parks for X amount like what is X such that it actually makes sense for me to lay off the workers and then rehire them rather than just keep on paying them while they close. How long how long is is short term enough for me to be able to say, well, I’ll probably just keep on paying them?

S8: I think it obviously depends on the industry. It depends on, you know, the company itself. But I think if people think this is going to be a one or two quarter event, you’re not going to lay a lot of people off. If you think, wow, this could last for the next year, you know, then people think we really have no idea. We can’t get a handle on this. Then, yes, you could see a really significant economic downturn.

S11: But yeah, and that’s where I think right now the the one like tiny glint of hope is that we did see in both China and Korea a pretty rapid decrease in new cases once they got a handle on it. Now, I am not a tool optimistic that we’re going to see that kind of rapid decrease in either be in Italy or the US or Spain, but at least we can see that it’s possible and that even if it doesn’t decrease as rapidly as that and doesn’t go down in like a week or two. The idea that it can go down in sort of three or four months and like do it within the next couple of quarters and we could have a really bad recession which only lasts too quick. And then and then you get a bounce back is still possible.

S8: Yeah. And honestly, I mean, I was looking at S&P reports this week saying, like, even if you had something that was close to, you know, the 1918 flu, you still probably wouldn’t see a severely significant recession in the United States. So I think the comparisons with the with 2008, I think are a little overdone.

S11: The other thing to note is that there are a whole bunch of sectors which at one point would have been much more hit than they are now in a world of massively decreased mobility, including podcasting. You know, we can we can podcast remotely now because technology is amazing and a bunch of other people, the ability to work remotely. Now, assuming the Internet keeps on working, which I think everyone assumes it will, is. You know, there’s a huge number of people who cannot take advantage of that. But equally, this an almost unprecedented number of people who can.

S8: Yes, I think that that’s very true. And. Another thing that is really important is the United States went in to this crisis in a really good economic position, and that matters because it means that a lot of companies, a lot of people have a lot more kind of buffers, you say, than they would have in 2008 when a lot of what people thought were their buffers were kind of phantom.

S13: I don’t know.

S10: I feel like, yes, more people can do business online. You can buy stuff now a lot online. You can do your work a lot online. If if there’s three months where people aren’t going outside to stores or events or restaurants. A lot of businesses will fail and like they won’t come back. And this will sort of push industries that were like, yeah, last time it was homeowners that didn’t have you know, they didn’t have the cushion that they thought they had. But now it’s like these industries that were already kind of fragile and sort of falling apart will be pushed faster to do so. And also, I feel like three or four months where commerce and consumption is is like kind of ground to a halt in the United States is is pretty serious. And I don’t I mean, who can say if it’ll be like 0 8 and you guys are probably right that it wouldn’t be as severe, but right now it feels like it could be. And then when you hear about how China and South Korea have contained the virus versus what’s being done here, I mean, like there was an episode of The Daily this week where they described what China did, which is basically like people didn’t quarantine at home once. They thought they might be sick or were diagnosed with the virus. They were, you know, brought in to hospitals where they’re quarantined there because that they were finding that the disease spread when you quarantine with family. And I just can’t imagine the U.S. ever getting it together to do that. Like, I just don’t see that there’s coordination here.

S4: It’s not it’s definitely a massive potential downside here. And like just when you say that a bunch of businesses will close because they can’t afford three months of losses, I feel like we like that is just one of those huge unknowns. Right. My my my kind of I have this gut feeling that like if you wind up in an Italy type situation where basically all these storefronts and shops and retail closes down except for groceries and pharmacies, then it’s going to be interesting to see what happens to it at the landlord level. Right. I mean, the idea is that a bunch of these businesses just won’t be able to pay rent for those months. But does it make sense for the landlords to even demand rent for those months? Because if they evict those tenants, it’s not like there’s gonna be a huge line of other people coming in and wanting to start renting that storefront later. Right. I think you could easily see a bunch of rent forgiveness at the landlord level just because they would prefer to see those businesses stay than trying to deal with like a whole bunch of empty storefronts. It’s you know, it’s very, very hard to game these things out. And all we know for sure is that the error bars on any forecasts right now are just absolutely enormous. And I mean, I will agree with you that there are probably bigger on the downside than they are on the upside.

S14: Should we talk about yet happen with oil? Because, yes, I feel like, yes, please.

S4: But no, I mean, but this is this is the other thing that there has been an absolutely enormous world shaking shock. I did a quick back of the envelope calculation for my newsletter this week that 20 trillion dollars of value has been wiped off the value of the world’s oil reserves.

S15: And basically overnight, because Vladimir Putin and MBBS, the crown prince of Saudi Arabia, basically couldn’t.

S4: Agree with each other and that that the natural sort of repercussions of that just so enormous that it’s kind of crazy that we’re not all talking about that. Of course, like the thing we are all talking about is even bigger, but we have the man who can explain this all to us, which I’m super happy about. So let’s stop, Ben with a very simple question, like what the hell happened in Switzerland? What went wrong?

S6: Well, I think let me first give a little bit of context. I mean, you know, MBBS came to power in 2015 and the low oil price was a huge problem for him. I mean, this was a guy who came to power or came out of the shadows to sort of begin his rise at age 29. He has huge plans. He wants to revolutionize the kingdom, diversify the sources of income, do all these great things, and he needs money.

S4: When you say he was struggling with the low oil price in twenty fifteen, that low oil prices like 60 or 70. Right.

S6: Right. Yeah. And now we’re, you know, at half of that. So one of the things that he does to kind of deal with this is he. He comes to you know, he comes to basically an agreement with Russia where Russia becomes kind of an unofficial member of OPEC, where they decide on, you know, they decide on production levels to try to keep the price up. And this works well for a number of years. And m.b.a.s sort of has this kind of bromance with Vladimir Putin, you know, famously after the killing of Jamal Khashoggi, the Saudi Saudi writer who was murdered in Istanbul in 2018. They run into each other at the G20. They have this high five, that sort of video of this hi5 that goes viral. And, you know, it appeared to be this very close relationship. And then we get into, you know, starting last month, they they get again into talks about what they’re gonna do on production cuts to try to keep the price up. And the Russians balk. They resist. They say, no, we’re not quite sure about this. And BSF keeps pushing. The Saudis keep pushing. Now we need to do this to keep the price up. Finally, the Russians say no. And m.b.a.s just basically pushes back and says, OK, fine, you don’t want production cuts. We’re going to up production and we’re going to crash the price, which is exactly what happened.

S8: I’m curious your thoughts on how the U.S. fits in here, because it seems that U.S. shale producers play a really big role in terms of what Russia is thinking and then also the relationship between the Saudis and the U.S. really affects what and the U.S. is doing.

S6: I mean, this has been a major sort of long term threat to Saudi Arabia. I mean, Saudi Arabia since 1945. You know, we had President Roosevelt went to see you went to see King Abdulaziz m.b.a.s, his grandfather, in 1945 when the US during World War 2 sort of realized, wow, this oil stuff, we’re going to need a lot of it. And where we’re going to get it, we’re gonna get it from this sort of strange, you know, kingdom on the other side of the world. And so this was sort of the birth of the Saudi American relationship. And the Saudis, you know, they’ve always known that even though their culture is different and their society is different and a lot of things that they do sort of rankle the United States. They’ve always known that the you know, the US needs their oil and they’re going to work on getting it. The rise of shale sort of question that because all of a sudden the U.S. is producing a lot more oil than it used to. It’s much less dependent on Saudi oil. And, you know, this this was sort of one of these long term issues that was going to gradually erode the importance of Saudi Arabia for the United States. So this you know, for the Saudis, this could be you know, this could help them in a way if they can really knock the wind out of shale production, the United States and, you know, bring themselves back onto the market as players that you have to deal with and that you can’t get around. That’s that’s good for them in the long run.

S4: And the one thing that I really get from your book is the m.b.a.s. He’s just he he kind of thinks of himself as is sort of Alexander the great type figure. He’s a maximalist. He just does the biggest and strongest and most aggressive and craziest things like at any given point. He kind of takes I love this. You describe the Saudi Air Force as being decorative until he came along and then he’s suddenly just started bombing Yemen or he, you know, arrests his his uncle, NBN and or anyone else. So he put his own mother under house arrest if he decides to build a half a trillion dollar city on them in the middle of the desert, the army. He’s just all he wants to do is very, very big, grand, bold. You like he’s he’s a little bit like Trump in that way. Give him a range of choices in all Holloways. Take the most extreme one. Is that is that fair to say?

S6: Oh, yeah. He’s there’s not much evidence that he’s into half measures. I mean, this is you know, I mean, we probably all know 20 year olds. And I think even myself, if I look back to my 20s, I probably spent a certain amount of time thinking that I was an undiscovered genius and sort of not understanding why the world hadn’t realized how smart I was. The difference is that this guy, his father, is a king, which means that he can basically get close to unlimited power. And he happens to be the crown prince of Saudi Arabia, which means he has an almost unlimited budget. And so, you know, you sort of take those dreams or those ambitions, that sort of a very ambitious twenty nine year old or someone in their early thirties would have a new turbocharge them. And so we’ve just seen again and again, this guy just does not hesitate to take the most dramatic sort of action possible launches these. Massive initiatives that, you know, send everybody sort of scrambling and trying to figure out, is this even possible, how possible is it, how unrealistic it is, and we’ve just seen this again and again. And, you know, that’s sort of surprising thing about this whole oil shock now is that, you know, the killing of DeMatha Shoji at the end of 2018 was such a major blow to the Saudi credibility. And it came it came on the heels of a number of other things. I mean, after, you know, we’d had the Yemen war that had been going on and that had been increasingly angering parts of the U.S. government that, you know, we had sold all these weapons to the Saudis, basically thinking they were never going to use them. And then they go get involved in this huge quagmire. You had this bizarre episode of the kidnapping of Saad Hariri, the president of Lebanon, to try to get him to resign as prime minister to change the politics here. You had the lockup at the Ritz-Carlton where he threw a few hundred princes and businessmen in a luxury hotel and tried to take their money away. I mean, just craziness after craziness. And then you have the murder of Jamal hachioji. And for a lot of people that I mean, it was such a major blow to Saudis credibility into his standing that, you know, you really thought you could get away with this. And he pushed through. He basically said, I’m not going to compromise and we’re going to put some people on trial. And Trump stood up for him. And there was really a sense that 20/20 was going to be kind of a quiet year for Saudi Arabia. I mean, they just took the presidency of the G20. MBBS is incredibly proud to have this thing. I mean, for him, Saudi Arabia deserves to be up there with the big boys. He wants it to be a major player in the world. He wants it. He wants to stand on the same same stage as Donald Trump and Emmanuel McKown and Angela Merkel. And he believes he should be in the same league. And so here comes 2020. You know, they’re going to host the G20 later this year in Riadh about, you know, for the first time in history. And then, you know, when they just, you know, sort of comes out with another one of these kind of crazy gambits that sends the world economy into a spiral.

S10: I wonder, Ben, how much could he have pulled off?

S16: Had Donald Trump not been had there been a different president in the White House? Could they get the sense from your book that, you know, I mean, I don’t get the sense you stay in your book. There’s like this bond between Trump, especially Trump’s son in law, Jared tensioner and M.D.s, and an affinity between the two families because they’re sort of similar in their way. This little princeling and kushnir and the little princeling, you know, and m.b.a.s. And if a different administration was in the White House, would he have like mess with oil prices like this? And maybe, maybe not. Maybe a different administration could have like put a stop to this?

S17: Well, it’s a bit counterfactual. I mean, it’s hard to imagine sort of what a Hillary Clinton administration would have done and how they would have related to m.b.a.s. And so I you know, I don’t want to speculate too much. What’s clear is that Trump, from the early days of the end of the administration, basically decided this is a guy that I really like. And I actually think it was kind of one of them. I think it’s one of the most successful things that m.b.a.s did. He you know, when when when Donald Trump won the election, there was no reason to believe that he was going to be a good friend to the Saudis. I mean, this was a guy who had a long and public record of saying nasty things about Muslims, saying some nasty things about Saudi Arabia, including in some of his debates with Hillary Clinton. And so but the Saudis did a very smart thing. They sent a delegation to the East Coast. They met with a number of Trump’s business associates. They met with Jared Kushner. They met with some of, you know, some of his political associates just to try to figure out who are these people that are going to be moving into the White House. And the message they came back with was these guys are dealmakers. They’re not politicians. They’re interested in the bottom line. They don’t really know anything about the Middle East. They don’t really know anything about Saudi Arabia. What they do know about in the Middle East is Israel. And then they very much crafted their approach to this administration based on what they found. And it ended up being wildly successful. And that has paid dividends to M.B.A since Trump came into the White House, that, you know, a number of things that he’s done. Trump has been there to back him and he’s been there to protect him. And you’ve had over the last last number of years anger rising against Saudi Arabian, rising against them, B.S. from various parts of the US government. I mean, he got rid of Mohammed bin Nayef, who was one of the best friends of the CIA. You know, they’ve been working with this guy for years to fight al-Qaeda. And all of a sudden MBBS pushes him out of the way as crown prince and puts them under house arrest. And so, you know, there’s one very important branch of the U.S. government that’s ticked off at m.b.a.s. You know, you have the Yemen war. You know, you have it’s been bipartisan in Congress. There’s been multiple efforts to try to stop the arms sales to Saudi Arabia that haven’t quite worked yet. But it’s an issue that keeps coming up. And you have lots of anger on both sides of the aisle that this war continues to go on using American arms. And Trump just is more than happy to keep selling the weapons. Jamal Khashoggi, you know, pretty much pissed off everybody across the entire government. But Donald Trump basically, you know, you know, he had this famous statement that he put out and he said, you know, maybe he didn’t, maybe he didn’t. We don’t really know. And it doesn’t matter anyway because he’s so important to us that we’re gonna protect this relationship.

S4: So can I zoom back a little bit here? Because, again, it feels like a million years ago, but on. Day there was a huge plunge in all of the stock markets and oil markets, and in the other market you mentioned, except for the Treasury bond market and. And this was entirely a function of this, the breakdown of talks and the debt and the decision by m.b.a.s to increase production.

S7: And so that was the the verdict of the markets was like this sharp decline in the oil price is a bad thing. Economically, I guess.

S4: Is that true? Is is low oil prices something that on economic level we should think is is bad?

S6: Well, bad. Bad for whom?

S9: I mean, I guess bad and I guess bad for us Americans isn’t a bad thing industry.

S8: Yeah. I mean, I think this is where it’s interesting because, you know, it used to be that you would almost always think, oh, well, low oil prices will almost serve as a stimulus because people will not be spending as much on oil. They can spend more on other things. However, now that the U.S. is like one of the biggest producers, it calculus changes a little bit. And I think then there’s concern because it’s not just the, you know, the shale producers. It’s who holds their loans, because these guys are they have a lot of leverage. And the concern is, okay, they start defaulting. And then so I think that is where there’s just a little bit more anxiety in the markets, really.

S10: Plus, we can’t even take advantage of all the cheap gas because we’re all stuck at home.

S18: Well, yeah, and actually that’s that’s actually not a bad point because this is the other thing. Normally I’d point yeah.

S8: It’s a very good form of normally as I’ve said, you might think, okay, oil’s low then that’ll get people to use more of it. They’ll drive more, they’ll do whatever. But when you have low oil at the same time that people almost can’t take advantage of it. And at the same time as demand is declining and that also suggests that the price is just going to continue to drop.

S11: I mean, there is a pretty clear causality between the coronavirus, like basically causing the collapse of the talks in Switzerland that it with the Corona virus causes this global demand shock. You know, it causes people to want less oil, to need less oil. And so that forces. Saudi and Russia to the negotiating table to say, how are we going to react to this virus related demand shock? Are we going to cut supply? And then obviously, as we now know, the answer was, was no, we’re going to increase supply. But if it wasn’t for that demand, probably that conversation would never have happened.

S8: It’s hard to say. It’s hard to say because obviously you have had the Saudis kind of trying to prop the price up and partly was because they were gonna be taking Aramco public. Right. But whereas Russia, you’ve had a little they haven’t wanted to cut back on production as much. Partly also because they’re pissed at the US because we’re sanctioning Rosneft related to Venezuela. So I think they’re also more apt to be like we they they don’t want the price to say higher because then that will help the U.S. shale producers.

S10: Another question I had is how is this going to affect efforts to reduce the world’s dependence on oil? Because we really don’t need oil to be cheap because then there’s less incentive away from it.

S9: It’s bad for the planet. I mean, like coronaviruses, this this very temporary, we hope. You know, demand shock, which is going to be good for the planet. People, you know, flying around less and emitting fewer carbon emissions in the short term. But in the medium term to long term, like number one, there’s going to be this bounce back and probably like an overcompensation in terms of people doing a bunch of admitting that they didn’t get to do back during the era of the virus.

S11: And then also just given the expectations, the extremely low oil prices for as far as the eye can see, that just makes alternative energy sources much less competitive. And it makes it harder for people to decide to buy an electric car because suddenly guest driven cars seem much more attractive in comparison.

S8: It’s true, although I would also say you will probably have a lot of economies that are right now, you know, crude producers start to think even more about the need to diversify. This obviously goes back to Saudi Arabia, this idea that people can see moving forward. This is going to be this is going to be the price is gonna be very low at the same time. Global warming is going to cause, you know, demand to decline even further. There’s also the possibility that people started to diversify away.

S4: OK. I think we should talk about something which I suspect nearly all of us or most of many of us are going to be doing for the next few months, which is working from home. I know you have opinions about this, Emily. I have so many opinions. You have so many opinions. This is a bit like my oil question. Is a low oil price good or bad? Is working from home a good thing or is it a bad thing?

S14: Yes. All right, Ben. Is it a good thing or a bad thing?

S6: I think it’s a good thing in moderation.

S10: Mm hmm. I think that’s right. I have a list of cons and pros because I’ve I’ve been I’ve been really sitting alone in this room in my house, you know, for the past week working from home. And I’ve been through some things. Mentally, I would say. So, I mean, the pros is that I have no commute. Usually my commute is very long. So for a lot of workers, that’s more time where they could be more productive. I think in a lot of ways, working from home is certainly more productive.

S19: On the other hand, working from home is also seems to be less productive for me and probably for a lot of other people who work in somewhat creative industries where you want to be talking to colleagues and like have those moments of serendipity where you sort of like come to an agreement or like come up with an idea or fix a problem. Like some things can be fixed in a minute. Person to person that take like for ever if you’re just, you know, meeting up on slack or something. So that would be downside. Like, it’s harder to, like, maintain. I think Kevin Ruess in his piece and there are many pieces on the Internet where you can read all about where you reman. There’s a lack of like there’s no like team cohesion. You know, you need to be able to function as teams and that’s that becomes harder if you’re not in person also. And this cannot be overstated.

S13: I think it’s pretty lonely.

S10: I miss my colleagues and like talking to people and stuff.

S13: I mean, this is an important thing. Just even bigger than your productivity. Like you need to talk to people, right?

S8: Anna, I think you’re completely right. Yeah, I I really hate working from home for the most part. I had one year where I was basically freelancing and I mostly had to work from home. And I just absolutely hated it. And as I said, I actually I don’t go into my office on Fridays, but I go to a co-working space because I will not work from home, because as you said, it’s just. Yeah, we I do think that the loneliness factors into the low productivity. And it just it’s not ideal. And, you know, granted, I do want to be fair that especially if people have kids and especially if they have young kids, I do think that working from home can obviously be a really good thing and people should have the opportunity to do it.

S4: No, I mean, this is the other bad trying, trying to like work and be productive and actually like get into a flow state and do intelligent things with like a bunch of toddlers running around screaming is non trivial.

S18: No. But of course, like if you’re working from home, you’re gonna have somebody watching the child. I’m not saying it would work.

S4: I mean it’s not an of course because. And just because someone is watching the child doesn’t mean they’re not a distraction.

S10: Yeah, it’s definitely not. And of course, during this crisis, like everyone’s freaking out right now because normally your kid would be at school, but all the schools are closing. So they’ll be home from school. And maybe you don’t want to you know, maybe you don’t put them in daycare because of fears of the virus or because the daycare is closed. And, you know, the person who comes to watch your kid maybe is sick. Like there’s no guarantee that there are people to watch the children. So that’s definitely a con.

S20: I’d say it was somewhat counterintuitive. I mean, I can be quite introverted and I actually love working from home when I can. But I think it can also be bad for your health in ways that you don’t imagine. I mean, I sort of you know, I got a very short book leave. I only had three months off work to finish doing this book, which meant that I spent a lot of time working on it while I was at while I was also working as a full time correspondent, The New York Times, which one day I spent a huge amount of time at my keyboard and my arm sort of hurting because I was just typing so much.

S6: And so, you know that the problem is that with all of this so sort of working from home market, you know, we’re, you know, remote work and whatever. It basically pushes you back to your keyboard. I mean, I got to the point where I literally would think how how how do I take time away from being on my keyboard today? Because the book is about the keyboard. You know, when I was no longer getting visas to Saudi Arabia, I was at the keyboard communicating with people on WhatsApp and other various encrypted messaging apps.

S21: I also cover Syria where I hadn’t been able to get visas, so I spent a lot of time messaging with people there, you know, and then all of a sudden, instead of going to talk to colleagues on messaging with them and then, you know, then my bosses say, well, everybody needs to be on slack, which is yet more typing. And then by the end of the day, you’re typing 12 hours a day, which, you know, can do all sorts of terrible things to your hands and arms.

S10: And you haven’t spoken word out.

S21: So you can, you know, you want to walk. So, you know, you would need to talk to your boss. You walk over a new job for five minutes and, you know, take care what you need to take care of.

S4: There are other health issues, too. My colleague Dan Primack, who basically works from home, mentioned today on Twitter that the first rule of working from home is don’t have too much food in the house because you just whine that, you know, that’s what you do, is you need to get up and walk around in the place. You walked in with this phrase and you eat too much food. Meanwhile, like the first rule of like a pandemic, you stock up on food and these like go straight against each other.

S14: It’s very true. We just can’t win.

S4: I do think that one of the main rules of thumb about working from home is like the richer and more privileged. You are the easier and better it is like if if you have like a separate office where you can close the door and it has a nice big window and you have a nice view out the window and you have a pleasant computer in your life. And you can set things up in a very customized way and you have it maybe a standing desk and all of this kind of stuff. It’s like it’s awesome. It’s probably a better setup than you have at the office. In many ways. Whereas, you know, if you are stuck into an apartment with a whole bunch of different family members and roommates and everyone’s running around and, you know, fighting and just being like human and behaving the way that most families behave and sort of typically family dysfunction, the ways it can just be incredibly distracting and hard. And, you know, the norm, just basic things like the number of square feet per person start becoming a huge, much more important than they ever were before.

S10: I agree with you. Definitely feel like my other thought was that. I think we spoke a while ago about restaurants kind of starting to shut down and more people were doing like seemless and stuff. And I feel like there’s something going on in the U.S.. Bear with me. Where people are just becoming more isolated, like holding up with their laptops and watching Netflix instead of going to the movies, ordering from seemless instead of going to restaurants, working from home instead of going to the office. And I feel like what’s happening now is like an intensification of that trend. And I feel like it’s making people more lonely and maybe it’s bad. That’s my theory. There’s like this is pushing an epidemic of loneliness that I’ve been like quietly under the surface in the country for a long time.

S4: All right. We’ve solved all of the problems with working from home. It means that we’re going to get fatter and we’re going to get lonely and sad and a lot more productive.

S9: So that’s that’s the true the true legacy of the Corona virus is gonna be a fat, sad and lonely country.

S1: Wasn’t just before the crowd of let’s just make it worse.

S4: Why don’t we have a numbers round? Ben, did you bring a number with you?

S17: I did, yeah. And it’s relevant to the week’s news. Two dollars and eighty cents.

S5: That is the cost to Saudi Aramco.

S20: To get a barrel of oil out of the ground. Wow. Two dollars and eighty cents. Right. That’s like what kind of lotto could you get for that?

S21: Now, you compare that to Exxon Mobil cost about $16 and Ross enough, about $20.

S22: So it’s it’s a very you know, it’s a reminder that regardless of how we talk about sort of renewable energies, you know, end of oil, these sorts of things, that as long as oil is a thing in the world, Saudi is gonna be a player in it.

S21: And they in a win win, sort of the last barrel of oil is pulled from the earth. It could very well be Saudi Arabia that does it because it really costs them almost nothing.

S8: Their fiscal break, even price is actually significantly higher, though, because they need oil to balance their budget. So that actually, as is does play a big role. It’s actually significantly higher than the fiscal break, even price for Russia.

S4: I don’t know what that means, like the overhead for Aramco in terms of putting in oil above a barrel of oil out of the ground in terms of like what you need in terms of oil derricks and that kind of thing is low. But the overhead in terms of being able to keep all of those crown prince is in AU Prince is rather in well-paid jobs and Bentleys is much higher.

S20: Right. And I think right now the break, even price for the current Saudi economy, for this current Saudi budget, I believe is around $80. And so we’re definitely well, well below that at this point.

S10: My question is, is oil cheaper than pure?

S4: Right now, if only there were untapped pure oil reserves, although there are you know, I mean, I have to say, Andrew Cuomo managed to find a whole bunch of untapped pure oil reserves. And you know where he found them in the prisons. The governor of New York is using prison labor to make hand sanitizer, which honestly, I don’t disapprove of.

S10: Felix, what? They’re not being paid very well. Also, I don’t think they’re allowed to use hand sanitizer in prison. So it just seems kind of gross, right?

S4: I mean, that’s to say we should definitely allow hand sanitizer into prisons. We don’t want prisons to be definitely allow him a germs based, his disease or any other place for a bunch of people are cooped up in close contact, should have lots of hot running water and soap and hand sanitizer. That’s a no brainer. My number is 2 billion, which I’m going to throw in here just to sort of close the loop on the conversation that we had with Anna last week about Twitter, an innovation that the fight with between Twitter and Elliott Associates got settled. And the fight that I was having with Anna was like, you know, can Twitter just keep on going as it is? And was like, no, it needs to innovate, it needs to grow. And she was taking into it like trying to explain what the what the hedge fund types would come coming and saying the fight got settled with an agreement by Twitter to grow and innovate, you know, with an agreement by Twitter to spend two billion dollars on the stock buyback, because that is apparently how you get growth and innovation these days.

S23: That’s a fair point. That is very typical activist behavior, which is like, I know what you can do a stock buyback.

S14: I know what’s going on, but that’s how it ends.

S4: So, yeah, that’s that’s how it ends. Jack Dorsey remains the CEO. He doesn’t go to Africa and he agrees to do a $2 billion stock buyback. Brilliant.

S8: Well, my number is 15 percent, which as of the last time I looked on Thursday. So this is probably changed almost certainly by the time you’re hearing this was how much Brazil’s equity index, the Bovespa, had declined. I just wanna say, like that’s in one day. In one day. Yeah, that’s not up from the highs. No, no, no, no. This year it’s down like 35 percent. It is. They have the worst performing equity index in dollar terms. They have the worst performing currency. Their terms of trade are rapidly deteriorating. Like of all of the relatively major countries that are being hit by this. Brazil is being hit maybe the worst.

S4: Is it good or bad that the president probably has credit?

S23: Well, no, but this is a thing.

S18: They’re also if you think we’re being run by a crazy person and we are, they are also really being run by a complete crazy person. He’s sent a comedian to one of his press conferences last week in his place just to, like, mess with the reporters. He like he’s nuts. And that I imagine people don’t have a tremendous amount of faith in his ability to get through this crisis.

S16: Emily, my number is 14. That is the number of days of emergency sick pay that are being proposed by Democrats in the House and the Senate and a big bill they’re trying to get through to do something to help with the. Economic fallout of the Corona virus. And in one of the bills, I’m really excited because they also tried to sneak in like a permanent paid sick leave bill. And listeners will know that I am obsessed with paid leave in the United States. And the one kind of upside to me from this whole crisis is people are really paying attention to this issue right now. And there’s kind of a possibility that we’ll either get at least this emergency provision so that workers, hourly workers who don’t have paid leave and low income workers who don’t get it can actually stay home when they’re sick and still get some money and maybe even have it as a permanent part of U.S. policy.

S4: OK. Yay! Yes. Sick leave. Let’s hope that the you know, House Republicans don’t veto it.

S10: Well, I mean, the House Republicans, they’ll probably veto it, but they don’t matter because they don’t have a majority. It’s those Janki senators.

S4: If the is the janky Janki, is it let’s hope that Susan Collins comes through on it. On which note. Let’s wrap this one up for another week. Thank you so much, Ben Hubbard, for coming on this show all the way from Beirut, Lebanon. I think you’re the most remote, remote guest that we’ve had. Thank you. Just me and Molly for producing.

S24: Thank you for like all of the extra work and activity that is required to put a remote podcast together. And thank you, listeners for keeping the e-mails coming on. Slick money. Dot com. We will talk to you next week on Slate Money.

S4: All right. So it’s a bad light. Let’s let’s just put this into context because it’s amazing. m.b.a.s is a grandson of this sort of grand patriarch of Saudi Arabia. This guy, King Abdulaziz, how many other grandsons are there? Not even counting the grand daughters.

S22: So this was actually my my second choice for the numbers round and then oil that the oil number was a little bit more relevant to the news.

S21: So. So King Abdulaziz, who founded Saudi Arabia in 1932 and died in the 1950s during his lifetime, he married 18 women. He had 36 sons and 27 daughters.

S5: So we’ll let that sink in for a second. OK. You wanna hear that again?

S4: I mean, one son’s twenty seven dollars and then said that I can do the math there. That means what? Sixty three kids altogether.

S21: Right. And so then. So then you think about that kind of productivity and not certainly not all of those children had that many children.

S17: But let’s say each one of them had five, 10. You know, this is where the Saudi royal family that we talk about now comes from. This is how it began. Now, you know, there are you can talk to different experts who will argue that there are at the least there are thousands of members of the Saudi royal family. People sort of debate about, you know, there’s some other sort of father out branches and whether you count them or not, but definitely thousands and thousands of people inside of this family.

S8: I’m really curious about something. How exactly do they figure out how much each person gets? Like, is there a formula, just like who they like the most?

S17: Well, there’s there’s it’s sort of one of the best kept secrets in the kingdom. One of the best kept secrets is how does the money get from Aramco to the royal family? You know, and it’s sort of how is it distributed and then how are the stipends to distribute to basically everybody who’s a royal, a prince or a princess gets some kind of a stipend from the government. And so the only real information that we have of this is a number of years old. I mean, I can actually flip to it in the book.

S5: It came we came from WikiLeaks, right? Yeah. Yeah.

S25: There was a here and. Let’s see. Hold on one sec. And this is really the only detail that we have about the stipends. And this is from. Hold on one second. STENSTROM Since the seven paid seven in the book early on, you don’t even have to read the whole thing. You can only read about seven. In 1996, an American diplomat visited the office that distributed the stipends and found a stream of servants picking up their master’s allowances, which vary based on their status. So the sons and daughters of King Abdulaziz, the ones that I just talked about. So this is the thirty six sons and twenty seven daughters received up to two hundred and seventy thousand dollars. His grandchildren. So their children would get up to twenty seven thousand dollars. And his great grandchildren? Thirteen thousand dollars. The most distant relatives would get eight hundred bucks.

S4: That’s per month. And that’s. That’s per month.

S25: That’s monthly. Yeah, that’s just a monthly stipend because you’re a prince or a princess. Now, on top of that, there are other perks. So you’ve also got you know, you if you get married, you can get a bonus. You can go build a palace for your family. A lot of you can get bonuses for having children. Which is why they also tend to have large families at this point in 1996. I mean, this information is quite old. The diplomat estimated that the stipends cost the Saudi state more than two billion dollars per year. But that was merely a guess. And so, you know, since then, the family has continued to have, you know, more and more children has gotten even larger.

S4: My favorite bit about the the family being so large, it has no idea what was going on. Is the story of the bidding of on the Leonardo painting, where various different arms of the family and and it’s like sycophants. Also, the m.b.a.s would read like this Leonardo painting. And so they all effectively wound up bidding against each other. For the same buyer.

S22: Which is why I don’t know what to do. I think that way constantly apocryphal. I don’t. I don’t know if we know that should be true. I don’t know who the other bidders were.

S12: I don’t think we have and we’ll never know for sure who else was bidding on that. One of the stories was that it was m.b.a.s is representative bidding against a representative of the emir of Qatar. You know, because there was this, you know, the Saudis and the Emiratis and some other countries got together and put a boycott on Qatar and that there was basically it was basically a bidding war between these two monarchs or the representatives and monarchs.

S22: My story is I’ve never we’ve never known who the other bidders were.

S4: No, but this story, which I which I much prefer and of course, we don’t know for sure, is that there are two different bits of the Saudi royal family or sycophants thereof who basically both they both think that the other bidder is the Qataris and they’re just bidding against each other. And if that’s true, it’s glorious. I do hope that’s true, though.

S16: The other thing that I enjoyed from your book, Ben, was that members of the Saudi royal family, I’ll just go to the bank and borrow large sums of money and then just not pay it back because they can.

S17: And this was historically I mean, this is you know, the country is called Saudi Arabia. I mean, this is an entire country that’s named after the royal family. And so, you know, they they tend to believe the place belongs to them. And and historically, this is why it was so difficult to decide what was corruption, what was not. I mean, if it if it’s your country and you own it, then who cares if you skim some money off of a state contract or if you borrow some money from the bank and don’t pay it back. And and for a long time, there was just so much money sloshing around because of the oil wealth that it didn’t really matter that much. I mean, there could be so much fat in the economy and there could be so much waste. And it wouldn’t really make that big of a difference because there was so much to go around. And this this is what really changed with m.b.a.s. I mean, basically, that system was running out of gas. There was just there had become too many people. There were too many princes and princesses and there were too many citizens. And they just didn’t have the money to sort of do that anymore. And so it’s one of the things that has motivated MBBS to try to reform and how the place works.