Slate Money Podcast: Brexit Day (February 1, 2020) – Detailed Summary

Episode Overview

On this special "Brexit Day" episode, Felix Salmon hosts from London alongside Anna Shymansky, Emily Peck, and guest Isabella Kaminska (Financial Times). The panel explores the immediate and long-term economic, financial, and societal implications of the UK officially leaving the European Union, the debate around ESG (Environmental, Social, and Governance) investing, and the looming transition away from LIBOR in global finance.

Main Discussion Points & Insights

1. Brexit Day: What Changes Now?

• Britain Leaves the EU (00:12–02:52)

  • Felix sets the scene: It's January 31, 2020, "an emotional day in the UK."
  • The UK now has no sway in EU decisions but must abide by EU rules during the transition. "Britain has no control over what those rules [are]." – Felix (02:14)
  • "We are in limbo" through at least the end of the year. – Isabella (02:20)

• The Path Ahead: Trade and Regulation (02:52–04:40)

  • Expectations of a "real" Brexit or "Brexit in name only" (Brino) are contingent on trade negotiations.
  • Anna and Felix question whether Boris Johnson can truly deliver a full break by year-end.

• Financial Services: The Passporting Issue (04:40–06:17)

  • London's status as a financial center depends on EU market access.
  • "If we pull out and start making our own rules... the EU will just not let us passport into their market." – Isabella (04:53)
  • The notion of "equivalence" is debated as a possible, but limited, workaround.

• Control vs. Dependence (06:17–09:11)

  • Anna raises the core tension: "It seems like that's impossible and it's going to end up being controlled by EU rules regardless." (06:17)
  • Brexiteers hope to re-orient trade to the Commonwealth, but others disagree this will offset losses with the EU. – Felix (08:52)

• Uncertainty and the UK Economy (09:11–10:55)

  • Economic damage from prolonged uncertainty estimated at £200 billion.
  • "Business hates uncertainty... but once they have the certainty, they can work around it." – Isabella (09:51)

• Beyond Trade: Immigration and Identity (10:55–15:33)

  • Cultural impact: Friends and families divided by Brexit allegiances.
  • Anna, Emily, and Isabella discuss parallels with US post-Trump polarization.
  • "Remain or leave defines who you are... people who had really good relations for 30 years, not friends anymore." – Isabella (15:02)

Notable Quote

"So in what sense is that taking back control?" – Felix (06:39)

2. Globalization in Retreat? (15:33–18:59)

• Consensus that Brexit and Trump symbolize a turn inward.
• Concerns that declining global trade and rising factionalism echo dangerous historical precedents.
• Isabella offers a counterpoint: Some Britons feel "globalization has shifted a lot of employment... and it's undermined the cohesion of our local communities... if we have to suffer a little bit economically to get the return of our communities, it might be a price that's worth paying." (16:56)

3. ESG Investing: Real Change or Feel-Good PR? (19:08–33:28)

• Defining ESG (19:08–20:09)

  • Stands for Environmental, Society, and Governance, now a major trend in asset management.

• Do ESG Funds Change the World? (20:09–23:03)

  • Emily: "In theory, it sounds great... in practice... is a failure." (20:09)
  • Anna: ESG is now integrated into business conversations, influencing company behavior, but concedes measurable impact is limited so far.

• Evidence and Impact (23:03–26:13)

  • Felix: Is there any proof ESG investing moves the needle environmentally? Anna: "We're in relatively early stages." (23:17)

• Divestment Dilemmas & Unintended Effects (23:43–26:13)

  • Isabella: "The problem with divestment, of course, is that someone still has to buy it." (24:04)
  • Divesting from profitable but dirty industries (tobacco, coal) may simply transfer ownership to less scrupulous actors.

• Real Change is Political, Not Financial (26:40–33:28)

  • Felix: "Real change when it comes to the environment has to be political change. It can never come from the financial sector." (27:43)
  • Emily: At best, ESG reflects shifting public sentiment, but may be counterproductive if it creates a false sense of progress.
  • Isabella warns about the democratic challenge: "To reach those [climate] targets, we can't do it in a democracy..." (30:39) referencing the Extinction Rebellion and Yellow Vests (Gilets Jaunes).
  • The real emissions challenge is not just in the West, but particularly in China and the developing world.

Notable Quotes

"It has to be government led. But... these are not politically popular policies and in a democracy it's very unlikely they're going to get voted in." – Isabella (30:39)

"If people think that tiny little tinkering at the margin is a step in the right direction or helpful, that's actually bad, like inoculates you against the massive changes that the world needs to make on pain of catastrophe." – Felix (29:14)

4. LIBOR’s Last Days: Financial System Overhaul (34:06–45:38)

• What is LIBOR? Why Get Rid of It? (34:48–36:30)

  • LIBOR: A floating interest rate used in an estimated $400 trillion of global contracts.
  • Scandal: Banks manipulated LIBOR for profit.
  • "It had obviously been gamed and abused... and we can all agree that LIBOR is out-of-date and anachronistic." – Felix (34:48)

• Transition Challenges (36:30–38:07)

  • Massive contractual complexity: Bonds, loans, derivatives all reference LIBOR.
  • Alternates like SOFR (US) and SONIA (UK) are risk-free, not credit-risk based.

• Who Cares? Impact on Non-Bankers (42:00–45:03)

  • Felix: For “normals,” the impact is indirect and likely negligible: "I don't think that LIBOR manipulation actually made any difference to normals. I think on some level it really was a victimless crime." (42:19)
  • The legal, technical, and industry transition will take years (Anna estimates up to a decade).

Notable Quote

"It's a huge amount of effort to make up for something where there was almost no harm done." – Felix (43:21)

5. Numbers Round (47:07–51:51)

Key Segments & Quotes with Timestamps:

• Marfa, Texas tourism and income paradox – Felix (47:07–47:38)
• "[The annual per capita income is] $19,000. And that shows you just how limited tourism is as a force of economic development." – Felix (47:38)
• Super Bowl avocado consumption and the economics of Mexican agriculture – Anna (47:43)
• The environmental cost of e-commerce: "Just think of all those Chinese goods made with coal-fired plants, shipped in..." – Isabella (49:09)
• The negative value of recycled paper due to oversupply and China's import bans – Isabella (49:33–50:22)

Memorable Moments & Quotes [w/Timestamps]

• On Brexit & Control: (06:39)
  • Felix: "So in what sense is that taking back control?"
• On Division: (15:02)
  • Isabella: "Remain or leave defines who you are... people who had really good relations for 30 years, not friends anymore."
• On ESG Cynicism: (27:43)
  • Felix: "Real change when it comes to the environment has to be political change. It can never come from the financial sector."
• On LIBOR Transition: (34:48)
  • Felix: "It had obviously been gamed and abused... and we can all agree that LIBOR is out-of-date and anachronistic."
• On Recycling Economics: (49:33)
  • Isabella: "I'm going to give you minus five, minus five. So it's minus five pounds per ton at the moment in the UK, that's the price for recycled paper."

Important Segment Timestamps

• 00:12 — Brexit Day opening, who's on the panel
• 02:20 — Britain's status: in limbo, impact on rules and trade
• 04:40 — Financial services and passporting to Europe
• 06:17 — The "take back control" conundrum
• 09:11 — UK economic uncertainty, investment impact
• 14:12 — Cultural impacts, division in the UK
• 19:08 — ESG definition, beginnings of investment debate
• 23:43 — Problems with ESG divestment, unintended consequences
• 26:40 — Real change is political, not financial
• 34:06 — LIBOR, the coming change, and confusion
• 36:30 — Contractual complexity, risk differential of new rates
• 41:51 — Estimated decade-long transition to a post-LIBOR world
• 47:07 — Numbers round, Marfa, avocados, Amazon Prime, recycled paper

Key Takeaways

• Brexit marks a momentous but murky shift for the UK: questions abound around sovereignty, economics, financial services, and national identity.
• The ESG movement is booming, but panelists are sharply divided over whether it produces actual good or is just corporate window dressing. Everyone agrees true environmental change requires government policy, not just market mechanisms.
• The financial world faces enormous challenges in replacing LIBOR, with major consequences mostly for industry professionals, not everyday consumers.
• Across all topics, there’s a common thread of uncertainty, complexity, and profound transition in both the UK and the global economic system.

This episode blends deep policy analysis, industry insight, and candid skepticism — with sharp, sometimes contrarian, wit from the hosts.