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M8: Welcome to the omni shambles edition of Slate Money or a guide to the business and finance news of the week.
M6: I’m Felix Salmon of Acciona. I am a Brit. Britain is what is known as only shambling off a cliff. Right now we are going to talk all about that. We are going to talk about Amazon and its huge marauding massive contract delivery that invites employees who are running people over on the streets and causing death and destruction in their wake. We are going to talk about the Fernandez Fernandez ticket. Do you get to find out all about the Fernandez Fernandez ticket from the one and only and the Minsky ski who’s right here in the studio. And also from Emily Peck of The Huffington Post. We are even going to talk about Wal-Mart in Slate Plus. So stay tuned for all of that coming up on Slate Money. So let’s start with Brexit because I have been getting so many questions like just non news people axioms come up to me and I feel like you need to explain Brexit to me. I’ve been getting like literally more media requests than ever.
M2: I think in my entire life. So can you please come on American media and explain what’s going on.
F2: I mean Brexit. Can you explain what’s going on with Brexit because it’s become incomprehensible to most people. I think even to people who live there.
M5: The general rule of thumb is no one understands what is going on up to and including Boris Johnson. So if you don’t understand what’s going on. Don’t feel bad about this. Don’t feel stupid. No one really understands what’s going on. It makes basically no sense.
F3: Can you kind of like Bitcoin can you explain the past week to us because we heard about price and we heard about prorogue in this way. Yeah. Can you just like recap the latest. Yeah I think I think recap is easier than explain.
M5: Explain this basically impossible but recap I can I can make it a stab at the first thing you have to understand about Britain is as a parliamentary system and this is one of the occasions where the fact that it has a parliamentary system makes an enormous difference rather than a presidential system with separation of powers. So Parliament the legislature runs the country and the way it normally works is that you get a coalition or a single party who has a majority in parliament that party with a majority in Parliament elects the prime minister the prime minister is just the first minister there are lots of ministers the Prime Minister is one of them and the Prime Minister has power only insofar as he in this case controls his party and can and can persuade his party to vote for the stuff that he wants to do. And it’s a very sort of collegial thing and then income’s Boris Johnson who is treating this whole thing as like I am Prime Minister I’ve wanted to be prime minister since I was three years old and all I’ve ever wanted is to be prime minister and I am now in charge and you’re like But you’re you have to actually run the party and you have to get the party behind you. But he seems to have forgotten that bit because he’s quite good at getting Tory party members to vote for him as party leader. He is much worse. And what we have it’s important to recognize here in Britain is two party leaders who are basically hated by their own MP.
F4: That’s Jeremy Corbyn.
M5: And by chance correct. And then like the leader of the government and the leader of the opposition both parties have a system where it’s not just the employees who elect the Prime Minister it’s the entire party membership. And as a result of that system the entire party membership goes for the sort of crazy populist the MP is a more sensible. But they can’t really do anything about it so they’re stuck with this party leader who they don’t like.
F4: Which brings us to what happened this week.
M1: So what happened this week is that Boris Johnson barges into Parliament with his majority of 1 which is tiny and if you remember Theresa May. She was always facing enormous difficulties. She had a slender list of majorities and she found it really difficult to do anything because she only had this tiny majority and she always had to try and cajoled the party to come along behind it. Boris Johnson takes the exact opposite tack which is I’m just going to barge ahead and do whatever I think is right and you know you’re going to vote for me.
M2: And that went about as well as you would expect. In fact it resulted in a couple of dozen Tory MPs voting against him.
M5: He has not yet won a single vote in parliament. It’s kind of amazing like the prime minister almost never loses a vote in parliament. What we’ve seen is like four or five votes in a row where Boris Johnson has lost. He starts by losing a big important vote which basically just says you know you know how the prime minister is in charge of making the decisions and setting the laws and setting the agenda and that kind of stuff. Well we don’t trust you. We’re just going to do it ourselves. Parliament is going to be able to introduce bills and laws rather than just the government rather than just Boris Johnson and Boris was like this is ridiculous. This is tantamount to a vote of no confidence. If you vote against me I will throw you out of the Conservative Party and they voted against him. And we’re talking about you know Nick Soames who’s like Winston Churchill’s grandson. We’re talking about a bunch of former cabinet ministers we’re talking about Philip Hammond who is the chancellor of the exchequer the treasury secretary until very recently. We’re talking about you know super important and powerful grandees of the Tory party like Ken Clarke they all just get thrown out of the Tory party because they voted against this crazy you know PM and then all of the other votes follow in succession. There’s this vote to bar or no deal or Brexit and they all vote to bar no deal or Brexit. And then as Johnson tries to call a snap election before that bill can be signed into law and everyone’s like how we see what you’re doing that.
F4: No wait I heard a lot of people say that but I don’t.
M1: So the bill has been passed in the House of Commons. It is now being passed in the House of Lords it will get in. It will get signed into law.
F2: You know at the beginning of next week and this this bill says no no deal. Brexit.
M1: Exactly. But what Boris Johnson tried to do is call an election before that bill could be signed.
F4: Everyone in the country would vote for everything again.
M1: BLOCK Yeah exactly. Exactly. Okay then Parliament quite sensibly said No wait let’s make sure we don’t have a no deal first and then we’ll try.
F2: Because I didn’t like the danger would be a new parliament gets elected and they wouldn’t they would be fine with no deal back.
M1: Well the danger would be that Boris Johnson would call in the election for after October the 30 first and then Britain would crash out with no deal on October 30 first and there’s nothing anyone could do about it.
F1: And maybe we can just like you can just recap exactly like where we stand right now in terms of no deal Brexit new elections like what are we facing right now.
M6: So the deadline is October the thirty first.
M9: That’s what the European Union has given the UK to come up with a deal.
M1: Boris Johnson has said that he’s going to leave on October 1st come hell or high water with or without a deal. No one will not know in parliament but definitely only a minority of Parliament thinks this is a good idea. Only a minority of the country thinks this is a good idea. No one thinks that crashing out without a deal is a good idea. Philip Hammond the Brexit here former Treasury secretary went up stood up in parliament said listen I saw all of the confidential documents saying like what’s going to happen if we have no deal.
M2: And it’s terrifying and we really can’t do it. And I’m going to vote against it even if it means me getting kicked out of my own party.
M5: So he wants Brexit so that’s how bad no deal is. That happens on October 30 first if nothing happens I think. But now there’s this law which says if the EU offers an extension to January the thirty first then the government from October 30 first to January. It’s like a three month extension. Then Britain has to accept that extension. Have they offered such a thing.
F1: They have said that they almost certainly will if it doesn’t seem to be the thing where it just seems to be extensions and then just kind of how the EU operates. But what what do you think the likelihood is that we will have new elections almost certain. And what is the outcome of those. Because couldn’t that you have no elections and end up with the exact same outcome.
M2: Yes I mean the outcome of the new elections is is super up in the air. Boris Johnson of course because he’s delusional and possibly correct. You never know in Britain thinks that he can get a majority. Remember that Theresa May was sure that she could get a majority when she Golden an election as well and that didn’t work out very well for her. She saw her majority massively reduced the general idea is that no one in Britain wants to vote for Jeremy Corbyn. So who else are they going to vote for. But increasingly there’s only one issue in British politics and that is Brexit.
M5: And so there is going to be a Brexit vote which is going to be split between the Brexit party which is Nigel Farage and the Tory party and possibly some Labour MP as well because two thirds of Labour MP has come from constituencies who voted to leave. So Labour is not really a remain party. And then on the other side you have the remain party which is the Liberal Democrats. It’s possible they could do quite well certainly let the Scottish nationalists.
M2: They are all very pro remain the Welsh nationalists will remain. So there’s a bunch of remain those who will get elected. Whether there’ll be a majority is unclear. You can you can say basically to a first approximation Scotland Wales and London all going to vote Remain.
F1: So it seems like at a certain point you know things were bad. But there were still like when Theresa May was in. Things were bad. She kept coming up with these plans I kept being voted down but at least she was negotiating trying. And then it seems like we’re moving to this place where it’s like no deal Brexit or Jeremy Corbyn seemed to be our only option. Do you think that’s true.
M5: I hope there’s some other option. I really do. I don’t think there’s any chance that Jeremy Corbyn is going to be replaced as leader of the Labour Party. So if it’s not the Tories then yeah probably Jeremy Corbyn will be the new prime minister. But Jeremy Corbyn has kind of been backed into a corner and has wound up promising kind of reluctantly that he won’t leave without another referendum.
M2: He’s going to try and negotiate a deal and then once he negotiates a deal he will put it to the country and say this is the deal that we’ve negotiated. You want to accept this deal. You want to remain. And so that’s the hope for the Remain is is that I guess you elect the Labour Party or some kind of a coalition between Labor and the Liberal Democrats and other Romanians and they cobble together some kind of a deal with the EU and then they put that to the country and they say well this is the best we can do. Or do you want to remain and then the country probably votes remain in a second referendum. You know just because there’s a bunch of young people who weren’t allowed to vote the first time round two are now you know three years later able to vote and a bunch of old people who died and you know the young people want to remain in the old people want to leave. And also people realise increasingly now just how bad Brexit is going to be. You know the 350 million pounds a week for the NHS that if we won was promised as a dividend this everyone knows that was a lie a lot a lot of like the Russian meddling on Facebook and that kind of stuff people know about now. So it’s possible that if you got a second referendum it’s not only possible it’s likely that if you get a second referendum it winds up voting to remain and you can remain very easily the government can remain incredibly easily just by repealing article 50 and you can do that unilaterally. The problem is that because all of the Brexit he has basically no the second referendum is tantamount to remaining they are they are doing everything in their power to avoid a second referendum.
F4: Is there anything to Boris Johnson’s I guess argument that he has to be really hard line about October 30 first in order to have kind of real negotiating position with the EU or is that just lies and garbage.
F3: Because that that makes sense. Yeah.
M4: How was it as far as you can to get the best concessions that would possibly make sense were for the fact that he was doing any negotiating which he isn’t.
F6: If he was if he was small but important.
M4: If he was in Europe like saying Here’s my proposal. Could you please sign on to my proposal or else I. Kill us all with no deal then that would be an insane negotiating tactic. But at least it would be a negotiating tactic. He doesn’t have a proposal.
F2: Is this going to wind up like NAFTA and Trump where he was like NAFTA’s the worst. I hate it so much and then he makes a whole who had by getting rid of NAFTA and then renegotiate a deal that like offers a few slight tweaks you know having to deal with like dairy and Canada like and then again nothing changes kind of a thing is that gonna happen.
M5: Well it’s hard to see how Boris Johnson can do that because he famously resigned from Theresa May’s cabinet because she included this famous backstop as part of her deal and it all come.
M4: Basically there’s only one sticking there’s one major sticking point over a withdrawal agreement and the Brexit deal which is Ireland which is everyone knew from before the referendum that this was like the impossibility that you can’t have you know freedom of movement in Ireland and also have Britain leave the EU and you can’t square that circle and it’s absolutely imperative that the border remains invisible because that’s the basis of peace on the island of Ireland and everyone basically agrees that they really don’t want a hard border but everyone also agrees that you kind of need some kind of a border unless you have an agreement of some description which you know which allows free movement of goods and services across the border. So the EU is saying well listen we’ll just keep the current situation of you know Northern Ireland being under EU law until you can come up with some other idea.
M1: And Boris is saying that’s unacceptable. This is known as the backstop. He’s saying that’s unacceptable. Europe went to May and now they’re going to bite us and they’re saying the same thing which is. Well if that’s unacceptable what do you want to do and there’s no answer. That’s just this big like silence from Westminster. They’re not saying what they want because there is no solution to that problem.
F2: What an absolute failure of everything democracy politics diplomacy. It’s such an embarrassment it’s such a it’s like a cellphone like this is a news story that it’s such a distraction from real things that are happening in its head it’s an embarrassment.
M4: But it is also deeply real. Yeah. UK productivity has plunged by about 5 percent already. No one is investing in the UK right now. Probably no one will invest in the UK even if we remain like theirs. It’s there’s so much uncertainty. This issue has divided the country so much that no matter what happens the entire country is going to be split between leave us and remain us for decades to come. And that’s going to just infect the economy and the politics of Britain for the foreseeable future. And it was all as you say completely avoidable. The only reason we had this godforsaken referendum in the first place was because David Cameron wanted to keep his party together. Well how did that work you they broke the country.
F2: I’m just shaking my head. Makes us look at it.
M6: Emily Internet platforms we hear loads of things about Facebook and Google being evil. But is it now Amazon’s turn to be evil.
F2: I mean Amazon has always been a little evil and I think people always tried not to think about it too much because everybody loves Amazon so much. I mean I’m a prime member myself but it got a little harder to ignore the bad stuff this week because the New York Times and ProPublica published a story and Buzzfeed published a story last week the same story which is that Amazon is using contract workforce to do its deliveries as its promises to customers have gotten more amazing like you’ll get it tomorrow if you’re a Prime member. They’re promising you know next day delivery constantly and they had this debacle in 2013. It’s called The Christmas fiasco I don’t know if you remember the vaguely remember Christmas fiasco is 2013 Bezos had just gone on 60 Minutes and they let him do this commercial for drone delivery which is a thing that exists.
F5: And then right after that I guess it worked his little ploy because everyone ordered a bunch of stuff on Amazon and U.P.S. and FedEx couldn’t handle it and people didn’t get their Christmas gifts in time and that was the Christmas fiasco of 2013. So after that Amazon was like we can’t rely on U.P.S. and FedEx to deliver our stuff anymore. And they started building basically a contract workforce of little companies that their sole purpose is to deliver stuff for Amazon like little vans little cars the other day a guy sounds.
M1: This sounds a lot like uber right.
F5: Yes. And they even had an app that they they came up with so anyone could drive and deliver Amazon packages the other day a guy drove up in like a brown sedan an hour into our driveway and dropped off a package and I was just like what is that. My husband was like oh yeah guys in cars come all the time to deliver Amazon packages. So anyway these two articles come out and what they say is these drivers are getting into a lot of accidents and people are dying. I guess since June 2015 there have been 60 accidents that the Times and ProPublica have tracked and it doesn’t sound like a lot. But it’s hard to even know when these accidents happen because Amazon the vans that are doing these deliveries don’t necessarily have any official they can look like a brown sedan. Exactly. And there have been at least 10 deaths in the New York Times leads with a baby dying which is you know obviously really sad and BuzzFeed leads with an elderly woman dying. Apparently these drivers aren’t getting trained like a U.P.S. driver goes through a lot of training in person training learns tactics to drive has specific algorithms where they can’t even make left turns because they’re more dangerous blah blah blah.
M3: I love it by the way. Could I just say this is one of my favorite things the left turn is the U.P.S. delivery algo which you know is designed to have basically zero absolute bare minimum left times.
F2: So I love whoever came up with that idea and we should also mention kind of breaks my brain because then I think about all the driving I do and how what I would do it with that if I couldn’t make a left turn right.
F1: I don’t quite get it actually do we know exactly how the number of accidents and fatalities for Amazon how that compares to U.P.S. and FedEx I thought that was the weakness of all of these pieces because they don’t have a number right.
F5: Yes and FedEx. All they can say is that the training is a lot worse and the pressure and the pay on the drivers have very low pay and very very high pressure too.
M3: Like they’re told don’t come back with a package and they’re Amazon calls the dispatchers of these companies that they’re supposedly not affiliated with and is like did you get it done did you get it done and the dispatcher call and various other things that you as well like U.P.S. and FedEx drivers salaried employees with benefits they don’t have this same incentive to work like you know 20 hours a day because they’re getting paid like per parcel or per hour and that kind of thing.
M4: I agree with that and I do think that this this story and in combination with a number of stories does suggest that as we kind of shift towards having parts of our economy involved kind of more of the gig economy we are going to need new regulations because you can’t have it where companies can have third parties that they essentially thought the third parties can kind of do whatever and then the company can be like Well those weren’t our people like you need some type of liability that I really agree with this because I mean if the problem the Amazon is trying to solve is that U.P.S. and FedEx can’t cope with the volume of Christmas deliveries and if Amazon therefore decides that it wants to become a logistics company that’s fine and lam Amazon should become a logistics company. What isn’t fine is Amazon deciding to then outsource all of that logistics to independent contractors because that’s not how logistics companies work.
F2: I mean and the results are pretty devastating. Also we should say FedEx and Amazon severed their relationship this year and there are some projections in the Times piece that said right now about a quarter of deliveries are through contractor for Amazon it’s going up to 43 percent over the next four years. This is like a very it’s going to be a big and bigger and bigger problem. And I think it signifies you know bigger problems just with the workforce right now which is you know we’ve talked about it companies contracting out their labor force and that labor force getting treated just turn. That’s
M4: not all the Amazon is contracting out because we should mention the Wall Street Journal article that came out as well which is you think of know Amazon is a logistics company but it’s not really because it’s contracting all out to third parties. You think of Amazon as an online retailer but it’s not really it’s contracting and it will out to third parties and you have all of these thousands and thousands of you know fly by night merchants listing this stuff on Amazon. It’s all fulfilled by Prime whatever the hell that means. What it doesn’t mean is that Amazon stands up that these products are genuine and safe and you get like deeply flawed and unsafe products being sold on Amazon and listed as duty approved safety approved and everything. And it’s that they’re becoming this kind of like oh we’re just a platform and they’re not you know the retailer. There were logistics companies they should do these things themselves because they outsource it all. You just get much more definite danger.
F1: I mean even though I’ll just one little caveat that I I do think one should be a little skeptical about some of these articles just because I don’t think they include a lot of data. They include really horrible stories that obviously are are awful.
M3: But I what Wall Street Journal article found four thousand six hundred and fifty items or something that was I don’t know how many data. Well I mean you don’t know how many.
F1: That’s the point right but that’s what I mean like in the same thing here too. And again I’m not trying to say that this doesn’t mean this is a very very big problem. I’m just saying that I do think it’s important to know where we actually stand how big the problem is and then how you can actually fix it. And I wish that these articles had included a bit more information to actually put it in perspective.
F5: Yeah I really did want to have the U.P.S. or fed the data on crashes from U.P.S. and FedEx. It’s got to be out there somewhere to compare. But I mean look at that thing.
M6: So how really have many more you know the U.P.S. and FedEx trucks are huge. The more parcels you have per truck then the fewer accidents you’re going to have per parcel.
F5: Right. And the regulations on the big trucks are. I mean the drivers are subject to drug testing and you know are screened better I mean some of the drivers in the BuzzFeed story specifically you know had criminal records they had DUI as they have.
M9: I mean it was clear that the standards for who gets to deliver these packages to this the subcontractors are worse and more generally I think what’s clear is that you won’t be easily economies of scale that you get with U.P.S. and FedEx and they’re like you know they have these big systems in place to deliver packages and maybe those packages don’t get delivered overnight but they end up getting delivered.
M6: If Amazon is like well we can replace that with a distributed and nimble system of guys in ground sedans then that creates some tiny little pieces consumer surplus because it makes it that much more likely you can get a same day delivery that is prime is a is a huge part of Amazon’s success.
F1: So I actually would push back a little bit on that. I do think that it can make sense for Amazon to not simply rely on the UPS and FedEx and to have a more nimble workforce. However Felix what you said before I think is correct if they’re going to do that though they need to have some liability for what happens there they can’t just simply outsource that and they’re some of the descriptions of some of these third party companies were pretty awful and the kind of things that frankly Amazon as a company should not want to be connecting itself with.
F5: Right. I mean if they’re going to lay out what you know how many packages drivers have to deliver per day and how fast they have to do it they should also be setting higher standards for pay. You know they should be doing a minimum wage for these that these contractors have to pay. They’re have to pay the drivers probably like maximum hours per day in them hours they should they should really take ownership in a way Amazon is even worse than Uber because at least with Uber you know you’re getting in an uber right. So at the end of the day they’re independent contractors. But the relationship is clear but with the Amazon delivery guys you you don’t know.
F2: They weren’t able to track a lot of these accidents or it was hard to track them because it’s not immediately clear that Amazon was even involved you know the companies called impacts or something and it was driving a rental van. Like it’s hard to even Amazon takes is taking no responsibility at the same time putting a lot of demands that are causing a lot of problems. And at the same time they’re trying to sort of say oh didn’t Amazon just announce a 15 dollar an hour minimum wage for its low paid workers but that this sort of puts a lie to that minimum wage that they’re going around touting because they have this even lower paid subcontracted out workforce. Right. That’s that’s bringing down what really Amazon is paying people and it’s sort of part of the reason why we see rising inequality overall in the labor market right now because giant companies like Amazon are sort of perpetuating this high low workforce. And it’s as these articles show it’s not just dangerous for the labor force it’s dangerous for just people on the streets that are getting killed by the one.
F3: The one thing I would say package delivery in terms of the counterfactuals.
M4: The one thing which is completely impossible to calculate is not the question of how many deaths and injuries would have been caused if they’d used U.P.S. and FedEx instead but rather the question of how many deaths and injuries would have been caused if Amazon had not sold those items at all and instead individual people like yourself who’d like driven to the store and picked it up and then driven back home. Interesting. You know it’s. Yeah. There’s a really interesting question of whether the rise of e-commerce is doing good things or bad things to traffic. Overall I think it’s doing bad things. I think the net effect of all of this everyone ordering things online and all of those things having to be delivered to your door is more traffic and more deaths and more vehicle miles traveled. But it’s hard to get real you know to nail it down.
F1: Yeah. And we are still kind of in this transitional period because even though it seems when you live in certain communities like oh everybody buys everything online and it’s actually not true for most of the like 90 percent of commerce is not right. Exactly. But it is obviously the part that’s rapidly growing and it is only going to get more and more and I think like it’s when you look at every period in you know kind of industrial history you have new industries. There aren’t rules there aren’t regulations. Usually there’s kind of people die and then it’s unfortunate. I’m not I’m not saying like that’s great I’m just saying that that’s what happens. That’s true. And then you have rules set and you have new standards things change because people now are used to some you know they’re used to there being these types of trucks on the road or whatever. But my point is I think I think it’s the opposite.
M4: I think if you look at look at the introduction of the automobile and when the automobile gets introduced it has to share the street with people walking down the street with horses with bicycles with all manner of other forms of transportation. And it’s basically going at the same speed as everyone else and then eventually it becomes so big and so powerful that people start carving out these roadways for the exclusive use of automobiles which can then start zooming along like 50 miles an hour and becoming much more dangerous and people wind up accepting an increased chance of like death and injury in all you know as a trade off for the convenience of being able to drive around 50 miles now.
F1: Right. But if you look at statistics about accidents just overall like deaths by accidents those had declined significantly since you know the 19th century. So I mean like my my point is that yes a certain type there weren’t any cars in the 19th century. No no but I’m saying like you could say when car. But my point is the car was introduced during that period of precipitous decline. Now I’m sure that when the car was first introduced and during a period there probably was an increase but overall as these different technologies have been introduced there’s been a significant decline we’re deep in the weeds deep in the weeds but I think I think coming back to Amazon someone has to regulate this stuff and I think there there’s a state law now that Amazon of course is fighting in California which would make companies like Uber responsible.
F5: I think it’s called someone can write in and correct me if they want joint employer law where it’s like even though you’re using a contract workforce you you to have to take some liability and responsibility for it. And I think during the Obama administration there were some moves in that direction with McDonald’s and franchises. And I think we need some kind of federal regulation so that companies just can’t contract away their responsibilities especially now that the Business Roundtable has said that businesses are more than just you know profit engines and they have responsibilities I think their first responsibility would be to the people that worked for them and to make sure no one dies while doing it and their customers because these people getting run over by cars.
M5: Amazon customer.
F3: Right. And I feel like there is something bigger and they are customer obsessed. Yeah like killing your customers it’s just like not a great way of keeping them.
F2: But like Amazon and these other companies they’re so obsessed with getting low prices and convenience for consumers and it’s all about it’s not about human beings it’s about the consumer. People forget that consumers are also laborers. They’re also workers. They also they have other needs besides like REALLY cheap paper towels delivered tomorrow Szymanski Felix Salmon.
M3: You informed myself an Emily Peck not so long ago that we were going to have a segment on Argentina. This is your segment on Argentina and what would you like to say about Argentina.
F1: So Argentina is obviously an ongoing story but we legitimately had some big news over the past few weeks. So there are a few weeks ago there were these primary elections and the results of the primary elections were very unexpected because the polling in Argentina was very bad. And so the ticket that’s the Fernandez Fernandez ticket which includes as V.P. Cristina Fernandez de Kirchner came in way ahead of Mauricio Macri the current president. So as a result of this the peso massively declined in value their bonds sold off a lot of equities in the companies sold off. So you had a bit of economic chaos following essentially a significant period of economic chaos just this is how I. Think things have not been good for a while in Argentina that’s part of the reason this primary vote happened but things have now gotten worse and now we’re at an acute state and consequently because of that you had two things happen One last week. You had a government announce that they were going to be reprofiling debt in a reprofiling you’re extending the maturities. So you’re still going to pay you’re just going to pay later. But if the issuer doesn’t compensate the creditor in some way then that is another form of a haircut. It’s an NPV haircut.
M3: So basically what Ana is saying is that Argentina defaulted on its debts kind of I mean like you said it was a one sided with Ultra.
M4: In any case it even though there was a technical default and and it now looks basically certain that there is going to be a default default they are going. There’s a fault on that.
F5: Almost certainly going to be some type of restructuring and that would be like the ninth time in its history as a country that that Argentina.
M4: Argentina is the classic serial default. Every time it issues a bunch of debt default on that that it restructures that issues a bunch more debt defaults on that that it restructures. Rinse and repeat in 2017. We have talked about this on this show before they issued a 100 year bond. And when that happened everyone knew that there was literally zero chance that Argentina would manage to go 100 years without defaulting on its debt. People didn’t realize it would take two years before they like crashed. No. Last time I looked to a video like 37 cents on the dollar or something like that. But like and so yeah yeah.
F1: So we had this happen and then we had the announcement of the imposition of a certain number of capital controls which is also a big deal because that was one of Moncrieff big things when he came in which was that he was going to eliminate all of the capital controls and they had to do this because you had just the reserves were tanking.
M4: So elsewhere in the country put it in English everyone wanted to move their money out of Argentina and that was destroying the economy. So they put up these walls and you can’t move your money out which is narrowly dollars and now created the the wonderful phenomenon of soy farmers refusing to sell the soybeans because they if you sell your soul you soybeans you get pesos in the pesos is just going to wind up getting devalued and you can’t convert the pesos into dollars move the dollars out of the country because that’s now illegal.
M5: So instead they just sit on their soybeans and they use them as is kind of that’s that’s the sort of quasi liquid asset. And if they need some cash they can sell some soybeans and get some cash. But the soybeans hold their value better than the currency does.
F4: And so listen this guy mockery. Wasn’t he supposed to be the answer he was supposed to be like. So yeah but when most fiscally conservative Well it’s not a wild socialist.
F6: I loved it. It’s to a certain extent yes. So it’s like being fed with Christine Lagarde.
F1: So when mockery came in he had his cabinet of CEOs he came in as a technocrat but he came in with the idea that he was going to engage in gradualism in gradual reform because the idea was if they really tried to undo all of the mess. That’s the kind of years and years of being under the current protest regime caused that they would never get real active that there’d be so much pain that they’d never get reelected so their plan was we’re gonna do some reform slowly things are going to improve. People are going to see that there are improvements we’re going to gain more political capital then we can institute kind of harsher reforms. Now that didn’t work. Basically they kind of banked on the fact that they could kind of procrastinate on some of the fiscal reforms and they actually ended up making their fiscal deficit worse because even though they did some things to increase revenue they also like increased tax cuts so that it ended up putting themselves in a worse position. And then they ended up basically financing their deficit with money from outside Argentina. So then they kind of were building up their debts so they’re really they were banking on the fact that they were gonna be able to reduce inflation that they were gonna be able to spur economic growth.
F4: Those things didn’t happen and didn’t investors really buy into them. Makris kind of promise I was reading yesterday that some fund called Autonomy capital lost a billion dollars in Argentina a lot yesterday or last week or something I don’t know. Everyone kept saying and everything I read that investors poured their money into Argentina after he he came into power and that is certainly true.
F1: It’s mostly it’s interesting because the a lot of the money actually basically came in because the government was becoming more indebted. It wasn’t as much actually going into the private sector. It was much more going into the public sector and partly because also the government was becoming a debtor because they also wanted to increase reserves. They were often doing things kind of at cross purposes which is part of the problem.
M4: So just to talk about the politics a little bit it now looks like Fernando Fernandez is going to be the new regime which is basically the old regime. We’re going back to Cristina effectively running the country because she’s V.P. He can pardon her.
M6: So last time she was president Argentina had like a decade of being in default and was basically cut off from the rest of the planet and had terrible inflation.
M4: And in light of all the economic statistics it was it was a bad thing and they lost a bunch of court cases in New York. Is that what everyone expects to happen this time around as well or is this going to be like my favorite sort of Prodigal Son story of Alan Garcia in Peru who like you know was a dreadful leftist prime minister the first time around. It’s
M5: actually quite a good prime minister the second time around. So it was president I should say no prime minister. CRIMMINS I can remember in Peru.
F1: So right now I think there is a you’re seeing a lot of basically like panic selling right. So you’re getting so many things selling off as though people anticipate having things be as bad as they were under the previous years that Kirchner administration whoever. I mean if you talk to a lot of people I think there is also the belief that it’s unlikely that they would engage in the exact same policy they engaged in before. However what I would argue is that it may not matter because the economy is such a mess that it is going to take really draconian reforms to get out of that. They’re not going to do that. Certainly.
M4: I mean you had let’s just be clear as well that the Argentine economy to a first approximation there’s an economy of selling beef and soya to China.
F1: And if China is slowing down well and this is actually significant because part of the reason the cursor is that at one point had a little bit of wiggle room was because of the fact of when China was growing so rapidly this was a lot it for a lot of yen. And so while I’m sure this will be a story that we’re going to talk about multiple times. But I just wanted to bring it out because it this is legitimately a big deal right now in the emerging markets and it’s.
M4: But hasn’t Argentina always been like this exceptional country in in which people make big bets on one way or the other. It’s not really considered to be symptomatic of anything else. I mean the one thing which I’m not seeing is this famous thing that we saw 20 years ago which is contagion. No one is saying Argentina’s really bad so So Uruguay right.
F1: I mean to a certain extent you are correct that part and partly this has to do with the underlying causes of the crisis when they are a little bit more kind of unique to the country than of course the potential for contagion is less. However there have been selloffs in a lot of different kind of currencies and economies and part of that has to do with like if if you’re holding assets that are from Argentina and they’re significantly declining in value and you need liquidity you’re not going to sell those if you don’t have to. You instead are going to sell other assets you can get a good price on. Right. This is a mediation mechanism I’m just saying like is it going to bring happening. I think well it was it’s not happening. Of course the way you’re seeing in the 90s that’s also because countries have a lot more reserves. We’re in a very different place than we were back then however this does indicate that it causes Argentina is not the only country that’s in a delicate position. And one last thing I say because I do think this is kind of interesting is that part of the reason that they really started to have problems. Two summers ago was because of actually fed policy that when the Fed was actually beginning to tighten that really put pressure on a lot of economies because those that have a lot of USD denominated debt and also want a lot of trade as in dollars. So this was something that was actually brought up at the Jackson Hole meetings is the idea that the dollar is just becoming or is so dominant that it’s making the ability of countries to really control their own monetary policy. It’s actually kind of taking that was was that Mark Carney.
M4: Yeah. So yeah. So when we mark Carney is Canadian we can take that with a pinch of salt or we can just all move to Libra.
F6: What could possibly go. What other suggestion I think yeah.
M4: On which note we will hopefully not talk about Argentina for at least another week or two is October 27 I believe are the actual elections.
F6: Let’s let’s have a numbers round. Emily what’s your number.
F4: My number is twenty seven thousand dollars so the Bureau of Labor Statistics put out these numbers this week and they listed the top 30 occupations that are expected to have the most job growth over the next few years and 6 in 6 out of the ten occupations expected to have the most job growth median wages was a little over twenty seven thousand dollars six out of ten. So it’s just another indication of sort of what I was talking about before which is you know the growing inequality in labor force in the by four by four occasion of the labor force to the some people get paid a lot of money and most people get paid very little money.
F6: So speaking of people who want to get paid a lot of money but less money than they thought they were going to get. My number is 20 billion so that’s a lot of money. It is a lot of money but less than 47 million. Oh I know what this is. We work. Yes. So now it looks like we work is targeting a valuation for their IPO of 20 billion dollars which is it’s a bit less than previously when Softbank last bite in at a 47 billion dollar valuation although we’re not entirely clear whether that was actually a 47 billion yes. OK I’ll give you that. But point is the trend is still holds that it’s look like investors are starting to get a wary of some of these companies that are promising a lot and losing a tremendous amount of money and have no path to buy.
M4: My favorite number about we work is 13 and a half years which is the amount of time that this IPO analyst Brett Wallace wait to trust on such things reckons that it takes four. We work to recoup its costs of bringing in a tenant that has has the typical lease for 15 years and it takes 30 and a half years just to cover its you know customer acquisition costs and then it has a year and a half before its own lease is up in order to sort of make all of its profit.
M1: What could possibly go wrong. 20 billion is still too high and they’ve never made any money. I mean there’s a strong case to be made that zero is too high. Well we were.
M9: My number is 80 percent which is the Plame age employment to population ratio. We had the jobs report out on Friday. And for the first time in many many years 80 percent of the prime working age Americans was 20 40 55 25 to 54 something of that 80 percent of them working.
M4: So we like for all that there’s a lot of talk about recession and that kind of stuff. It looks like you know the jobs may not be good but there are jobs and people have jobs and that’s much better than not having jobs.
F2: And the reason the jobs aren’t good and the people aren’t getting paid is because of companies like Amazon who don’t take ownership over their employees. Right. Right.
M4: Okay. I think that’s it for us this week unless you’re a Slate Plus member in which case we will talk about Wal-Mart and guns.
M8: Otherwise many thanks for listening. Do keep the e-mails coming on sleep money and sleep. Dot com. Many thanks to just mean Molly for producing and we will talk to you next week on sleep. Money.
M4: Let’s talk about we let’s not talk about we want to talk about Wal-Mart. I’m getting my WS confused.
F2: OK. Yeah let’s talk about Wal-Mart.
M1: Wal-Mart has said that there are some kind of bullets that they’re not going to sell anymore.
F2: Yes. So Wal-Mart this week Doug McMillan. He’s the CEO. Yeah. Well let’s back up a little bit. So 22 people died in a Wal-Mart in El Paso a couple of weeks ago because there was a mass shooting there. Clearly something should be done about this. Right. So Wal-Mart sort of got dragged into the gun debate it had already been there a little bit then because they are the biggest seller of guns in the world I think. I don’t know. They sell a lot. I couldn’t find that data online that all I know is they sell. Yeah. They don’t sell semiautomatic rifles anymore. They stopped doing that they only sell handguns in Alaska.
M1: So they’re the mass when they sell guns in other states but in Alaska they only sell hunger.
F2: No they only sell handguns in Alaska.
F3: Do they not sell any guns in any other state.
F2: They sell rifles for hunting. I think the. Raffle thing with my hands. It’s just. Let me just get this out. OK. DOUG MCMILLON this week announced that Wal-Mart would stop selling ammunition for semiautomatics and other stuff. It would stop selling handguns in Alaska. And it also politely asked customers to please not open carry guns into its stores in states where it’s legal to open carry guns. And the reason Doug McMillon did this is because 22 people were gunned down in a Wal-Mart in El Paso. And after that there were like Open Carry guys. It’s always guys coming into some Wal-Mart stores and just like scaring the bejesus out of customers and the people who work there by walking around with guns openly right after there had been a mass shooting.
M5: So one thing I’m a little bit unclear about in Texas and I’m not sure if either of you guys can can help me out on this. When you are in Texas there’s a lot of time for you walk up to a store or a restaurant or something there’s a sign on the door basically saying you can’t be open carrying guns in here it looks to me as though individual businesses do have the right to say open carry ends at my front door.
M2: And then within my store you’re not allowed to do that.
F4: I mean it’s it’s very unclear from everything I’ve read how much power that these companies actually in these businesses actually have enforcement power because what are they going to do. And like Wal-Mart says it will be putting out more training and guidance for its employees for how to deal with it. If someone who is openly carrying comes into a store because. Yeah. What does this poor Wal-Mart cashier going to do. There’s some guy there it’s always a guy you know with a holster and a gun like it doesn’t seem like this is going to solve America’s gun problem.
F6: You can’t have this being done like company by company.
F2: Right. Right. So. So and then the news was after Wal-Mart said this it’s a pretty big deal because Wal-Mart’s always been a little hesitant to kind of come out and be at all political when it comes to guns and in the past like a deeply red state company they’re based in Arkansas.
F5: You know in the past when they’ve done things like they stopped selling semi-automatic weapons a few years ago and I remember they were insistent this is a business decision. I remember calling them and they were like this isn’t about mass shootings it’s a business decision.
F2: I mean it happened right after a mass shooting but literally in the United States everything happens right after a mass shooting.
M4: I mean so why what’s the business rationale for not selling something that customers want.
F4: So Josh Barro actually had a good column on this and he was like a lot of people were saying well Wal-Mart can do this now because it wants to be an e-commerce company. It’s pivoting to e-commerce. And you know that that means liberals. And so they can do this because liberals will like this and the red staters might get upset but the Liberals are cool and it’s good to be on the right side of that. In terms of where the company is going but Barrow was just like look at 22 people died in a Wal-Mart and were shot. And that’s scary. And then in another state and I think Mississippi another person came in and shot someone in a Wal-Mart not too long ago. In the recent past and you know customers are scared and so are the people that work there. And at a very base level Wal-Mart had to be like Don’t be scared. Please don’t stop shopping at Wal-Mart. And so maybe this decision and this announcement wasn’t as political as as it’s being made out to be maybe it was more like a smart business decision because you don’t you want business to continue at your stores.
M4: And my ex’s colleague Deon rebellion had the results of a pretty big poll where it looks like there’s a bunch of Americans who are angry at Wal-Mart for making this decision. But the number of Americans who applaud Wal-Mart for making this decision and say they’re more likely to shop at Wal-Mart as a result is much bigger.
M7: Right. Which isn’t surprising because more Americans support sensible gun control than don’t. That’s has been the case for a very long time.
F4: I mean no one wants to go into a store and see people carrying guns in the store. I just I couldn’t believe that it would really be an unpopular decision to come out and say don’t do that. And several other companies have followed Wal-Mart’s lead this week I think CBS Walgreens Wegmans Kroger all said please please don’t bring guns into our store Public Library.
F2: It’s just like the the bare minimum of what they can do and part of me is annoyed that these companies are getting like pats on the back for it. But on the other hand it’s not they can’t find any.
M7: I mean I agree with you all the wrong there that doing more than killing right. Exactly. Yeah it’s issue of course this isn’t something that should be done by individual companies but unfortunately it’s probably going to take a little while before our government is going to do anything. Hopefully as the NRA is kind of financially imploding me that will actually help so we will be able to get sensible gun control through.
F4: Wait there was one really interesting thing. Do you guys listen to the daily. Yes. OK. So Andrew Ross Sorkin was on the Daily yesterday talking about all this. And he I guess a few years ago came up with the idea of like talking to Citigroup and other financial services companies and being like why don’t you guys stop. You know you guys have power once you stop letting transactions through. One has to do with guns and I think Citigroup came out and said we won’t let the you putting some restrictions on buying guns essentially. And then apparently according to him the S.E.C. then pushed back on the financial industry and said please don’t get involved with with guns we don’t want you to do that. And kind of like stalled momentum for companies there.
M4: So way the FCC was like anti anti-gun.
F4: Yeah listen. So the thinking maybe is Wal-Mart is even more powerful than a Citigroup and could have actual like it by its saying like please do something regarding gun control like maybe something would happen. But I’m sort of dubious.