B (3:40)

That's Jeremy Corbyn and Boris Johnson.

A (3:43)

Correct. And they're like the leader of the government and the leader of the Opposition. Both parties have a system where it's not just the MPs 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 MPs are more sensible, but they can't really do anything about it, so they're stuck with this party leader who they don't like.

B (4:06)

Okay, which brings us to what happened this week.

A (4:09)

So what happened this week is that Boris Johnson barges into Parliament with his majority of one, which is tiny. And like, if you remember Theresa May, she was always facing enormous difficulties because she had this slenderest 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 cajole the party to come along behind her. 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. And that went about as well as you would expect. In fact, it was resulted in a couple of dozen Tory MPs voting against him. 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 gonna 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 are 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 was the Chancellor of Dick Jacket, the Treasury Secretary until very recently. We're talking about, you know, super important and powerful grandees of the Tory Party like Ken Clark. 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 a no deal Brexit, and they all vote to bar a no deal Brexit. And then. And Boris Johnson tries to call a snap election before that bill can be signed into law. And everyone's like, ha, ha, we see what you're doing there.

B (6:14)

No, wait, I heard a lot of people say that. What? I don't.

A (6:20)

So the bill has been passed in the House of Commons. It is now being passed in the House of Lords. It will get signed into law, you know, at the beginning of next week.

B (6:28)

And this bill says, no, no deal Brexit.

A (6:32)

Exactly. But what Boris Johnson tried to do is call an election before that bill could be signed.

B (6:37)

Everyone in the country would vote for everything again.

A (6:42)

Exactly. And Parliament quite sensibly said, no, wait, let's make sure we don't have a no deal first and then we'll try and have an election.

B (6:50)

The danger would be a new Parliament gets elected and they wouldn't. They would be fine with a no deal Brexit.

A (6:55)

Well, the danger would be that Boris Johnson would call an election for after October 31, and then Britain would crash out with no deal on October 31st, and there's nothing anyone could do about it.

C (7:05)

And maybe we can just. If you can just recap exactly, like where we stand, stand right now in terms of no deal Brexit new elections. Like, what are we facing right now?

A (7:14)

So the deadline is October 31st. That's what the European Union has given the UK to come up with a deal. 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 in well, no one 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 Brexiteer former Treasury Secretary, went up, stood up in Parliament and said, listen, I saw all of the confidential documents saying, like, what's going to happen if we have no deal? 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. And he wants Brexit. So that's how bad no deal is. That happens on October 31st if nothing happens. But now there's this law which says if the EU offers an extension to January 31, then the government from October 31 to January 31, like a three month extension, then Britain has to accept that extension.

B (8:22)

Have they offered such a thing?

A (8:23)

They have said that they almost certainly will. If, you know, doesn't this seem to.

C (8:27)

Be the thing where it just seems to be extensions and it's kind of how the EU operates. But what, what do you think the likelihood is that we will have new elections?

A (8:37)

Almost certain.

C (8:38)

And what do you think the outcome of those will be? Because couldn't you have new elections and end up with the exact same outcome?

A (8:42)

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 called an election as well, and that it 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's Brexit. 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 MPs as well, because 2/3 of Labour MPs come from constituencies who voted to leave. So, like, 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, like the Scottish Nationalists, they are all very pro Remain. The Welsh Nationalists are all pro Remain. So there's a bunch of Remainers who will get elected. Whether there'll be a majority is unclear. You can say, basically, to a first approximation, Scotland, Wales and London all going to vote Remain.

C (9:59)

So it seemed 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 that 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 seem to be our only options. Do you think that's true?

A (10:18)

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 Labor 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. 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. Do you want to accept this deal or do you want to remain? And so that's the hope for the Remainers, is that, I guess you elect a Labour Party or some kind of a coalition between labor and the Liberal Democrats and other Remainers, 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 just because there's a bunch of young people who weren't allowed to vote the first time around who are now, three years later, able to vote, and a bunch of old people who died. The young people want to remain and the old people want to leave. And also people realize increasingly now just how bad Brexit is going to be. The £350 million a week for the NHS that everyone was promised as a dividend, everyone knows that was a lie. A lot of the Russian meddling on Facebook and that kind of stuff, people know about now. So it's possible that if you get a second referendum, it's not only possible, it's likely that if you get a second referendum and 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 Brexiteers basically know that a second referendum is tantamount to remaining, they are doing everything in their power to avoid a second referendum.

B (12:17)

Is there anything to Boris Johnson's, I guess, argument that he has to be really hardline about October 31st in order to have some kind of real negotiating position with the eu, or is that just lies and garbage? Because it kind of makes sense to me that, like, push it as far as you can to get the best.

A (12:36)

Concessions that would possibly make sense were it for the fact that he was doing any negotiating, which he isn't. If he was, if he was actually.

C (12:45)

Small but important detail, if he was.

A (12:47)

In Europe, like, saying, here's my proposal. Can you please sign on to my proposal? Or else I kill us all with a 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.

B (13:02)

Is this going to wind up like NAFTA and Trump, where he was like, nafta is the worst. I hate it so much. And then he makes a whole hoo ha about getting rid of NAFTA and then renegotiates a deal that, like, offers a few slight tweaks, you know, having to do with, like, dairy in Canada, and in the end, nothing changes kind of a thing. Is that what's going to happen?

A (13:23)

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 comes basically, there's only one sticking. There's one major sticking point over the 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, like, 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 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 Northern Ireland being under EU law until you can come up with some other idea. And Boris is saying, that's unacceptable. This is known as the backstop. He's saying, that's unacceptable. Europe went to Maine, now they're going to Boris 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.

B (14:53)

What an absolute failure of everything. Democracy, politics, diplomacy. It's such an embarrassment. It's such a. It's like a self own, like this is a news story that it's such a distraction from real things that are happening.

A (15:07)

It's such an embarrassment, but it is also deeply real. Yeah. UK productivity has plunged about 5% already. No one is investing in the UK right now. Probably no one will invest in the UK even if we remain like, 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 leavers and remainers 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 for you, David?

C (15:51)

I think broke the country.

B (15:52)

I'm just shaking my head. Makes us look good though, right? Right, guys?

A (15:58)

Emily. Internet platforms, we hear loads of things about Facebook and Google being evil, but is it now Amazon's turn to be evil?

B (16:08)

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 a contract workforce to do its deliveries as it's 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, if you remember the Christmas fiasco.

A (16:51)

I vaguely remember the Christmas fiasco.

B (16:53)

It was 2013. Bezos had just gone on 60 Minutes and they let him do this commercial for drone delivery, which is a thing that didn't exist. Yeah. And then right after that, I guess it worked, his little ploy, because everyone ordered a bunch of stuff on Amazon and UPS 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 UPS 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 came out.

A (17:31)

So this sounds. This sounds a lot like Uber, right?

B (17:34)

Yes. And they, they even had an app that they came up with so anyone could drive and deliver Amazon packages. The other day a guy drove up in like a brown sedan into our driveway and dropped off a package. And I was just like, what is that? And my husband was like, 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.

A (18:16)

They can look like a brown sedan.

B (18:18)

Exactly. And there have been at least 10 deaths. And 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 UPS 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.

A (18:40)

I love, by the way, can I just say, this is one of my favorite things, the left turn. It's the UPS delivery algo, which, you know, is designed to have basically zero or absolute bare minimum of left terms. It's so. I love whoever came up with that idea. And we should also mention it kind.

B (18:55)

Of breaks my brain because then I think about all the driving I do and how I would do it without if I couldn't make a left turn. Right. I don't quite get it, actually.

A (19:03)

Do you?

C (19:04)

We know exactly how the number of accidents and fatalities for Amazon, how that compares to UPS and FedEx.

B (19:14)

I thought that was the weakness of all of these pieces because they don't have a number for UPS and FedEx. All they can say is that the training is a lot worse and the pressure and the pay on the. The drivers have very Low pay and very, very high pressure to 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?

A (19:37)

And the dispatcher calls and various other things are true as well. Like UPS and FedEx drivers are 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.

C (19:54)

I agree with that. And I, 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 involve 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, 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.

A (20:18)

I really agree with this because, I mean, if the problem that Amazon is trying to solve is that UPS and FedEx can't cope with their volume of Christmas deliveries and if Amazon therefore decides that it wants to become a logistics company, that's fine and 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.

B (20:48)

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 contractors for Amazon. It's going up to 43% 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.

A (21:18)

Just, and that's not all that Amazon is contracting out because we should mention the Wall Street Journal article that came out as well, which is, you think of, you know, Amazon is a logistics company, but it's not really because it's contracting it all out to third parties. You think of Amazon as an online retailer, but it's not really. It's contracting it all out to third parties. And you have all of these thousands and thousands of, you know, fly by night merchants listing their 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, you know, DOT 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, they're a retailer, they're a logistics company. They should do these things themselves. And because they outsource it all, you just get much more death and danger. Yeah.

C (22:17)

And I. I mean, even though I'll Just one little caveat that 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 awful. But I.

A (22:31)

Well, the Wall street journal article found 4,650 items or something that was. Out of how many data? Well, I mean, you don't know how many. That's the point.

C (22:39)

Right, but that's what I mean, like in the same thing here too. Like, and again, I am 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.

B (22:58)

Yeah, I really did want to have the UPS or FedEx. The data on crashes from UPS and FedEx, it's got to be out there somewhere to compare. But I mean, the facts of how.

A (23:08)

Clearly have many more. You know, the UPS and FedEx trucks are huge. The more parcels you have per truck, then the fewer accidents you're gonna have per parcel.

B (23:22)

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 DUIs. They had. I mean, it's clear that the standards for who get deliver these packages to the subcontractors are worse.

A (23:46)

And more generally, I think what's clear is that you want these, like, economies of scale that you get with UPS 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. If Amazon is like, well, we can replace that with a distributed and nimble system of guys in brown sedans, then that creates some tiny little piece of consumer surplus because it, you know, makes it that much more likely you can get a same day delivery.

C (24:22)

But that is prime is a, is a huge part of Amazon's success. 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.

A (24:57)

Right.

B (24:58)

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 their, have to pay.

A (25:15)

The drivers and probably like maximum hours per day.

B (25:17)

Maximum 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 you, the relationship is clear. But with the Amazon delivery guys, you, you don't know they weren't able to track a lot of these accidents or it was hard to track them because it's not immediately that Amazon was even involved. You know, the company's 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 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 these drugs.

C (26:32)

The one thing I would say is fast package delivery.

A (26:35)

In terms of the counterfactuals, 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 UPS 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 had like driven to the store and picked it up and then driven back home.

B (27:03)

Interesting.

A (27:04)

You know, it's. 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 a real, you know, to nail it down.

C (27:32)

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, I mean, it's actually not true for most of the country.

A (27:42)

90% of commerce is not done right.

C (27:44)

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 a lot 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 in, 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.

A (28:17)

I think it's the opposite. 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 at like 50 miles an hour and becoming much more dangerous. And people wind up accepting an increased chance of like death and injury. As a trade off for the convenience of being able to drive around 50 miles an hour.

C (29:02)

Right. But if you look at statistics about accidents, just overall, like deaths by accident still have declined significantly since, you know, the 19th century. So, I mean, like, my point is that, yes, a certain type.

A (29:15)

There weren't any cars in the 19th century.

C (29:16)

No, no. But I'm saying, like, you could say one 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.

B (29:35)

We're deep in the weeds.

A (29:36)

We're deep in the weeds. But I think. I think. Coming, let's circle back to Amazon here.

B (29:40)

Someone has to regulate this stuff. And I think there's a state law now that Amazon, of course, is fighting in California, which would make companies like Uber responsible. 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 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 businesses are more than just profit engines and they have responsibilities. I think their first responsibility would be to the people that work for them and to make sure no one dies while doing it.

A (30:29)

And their customers. Because these people getting run over by cars are Amazon customers.

C (30:33)

Right.

B (30:33)

And I feel like there's something bigger.

C (30:35)

And they are customer obsessed. Yeah.

B (30:38)

Like there's.

A (30:38)

Yeah. Killing your customers, it's just like, not a great way of keeping them.

B (30:41)

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, consumers are also laborers. They're also workers. They have other needs besides, like, really cheap paper towels delivered tomorrow.

A (31:02)

Anna Shymansky, Felix Salmon, you informed myself and Emily Peck not so long ago that we were gonna have a segment on Argentina. This is your segment on Argentina. What would you like to say about Argentina?

C (31:16)

So Argentina is obviously an ongoing story, but we legitimately had some big news over the past few. So there. 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 VP 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 heightened. 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 the 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.

A (32:33)

So basically what Anna is saying is that Argentina defaulted on its debts kind of.

C (32:38)

I mean like it was, it was a technical default.

A (32:40)

But in any case, it, even though there was a technical default and it now looks basically certain that there is going to be a default default, they are going to default on their bonds.

C (32:51)

Almost certainly going to be some type of restructuring.

B (32:53)

And that would be like the ninth time in its history as a country.

A (32:56)

That Argentina, Argentina is the classic serial defaulter. Every time it issues a bunch of debt, it defaults on that debt, it restructures the debt, it issues a bunch more debt, it defaults on that debt, it restructures. It's a rinse and repeat in 2017. We have talked about this on this show before they issued a hundred 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 it like crashed. It's now, last time I looked, it was trading at like 37 cents on the dollar, something like that. But like.

C (33:34)

And so yeah, yeah, so we had this happen and then we had the announcement of the imposition of a certain number of controls, which is also a big deal because that was one of Macri's 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. So many dollars were leaving the country.

A (33:54)

To 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 saying, you can't move your money out, which is particularly dollars. Now created the. The wonderful phenomenon of soy farmers refusing to sell their soybeans because they. If you sell your soybean, soybeans, you get pesos, and the pesos are just going to wind up getting devalued. And you can't convert the pesos into dollars and move the dollars out of the country because that's now illegal. So instead they just sit on their soybeans and they use them as. As kind of. That's. That's their 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.

C (34:40)

Yeah.

B (34:40)

And so wasn't this guy Macri, wasn't he supposed to be the answer?

C (34:44)

He was supposed to be like, so, yeah.

B (34:46)

Fiscally conservative and not a wild socialist.

A (34:49)

And the IMF loved him, right?

C (34:51)

To a certain extent, yeah.

A (34:53)

So he's like BFF with Christine Lagarde.

C (34:55)

So when Macri came in, he had his, like, 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 the kind of years and years of being under, like the Pronus regime caused, that they would never get reelected. There'd be so much pain that they'd never get reelected. So their plan was, we're going to 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 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 debt. So they're really. They were banking on the fact that they were going to be able to reduce inflation, that they were going to be able to spur economic growth. Those things didn't happen.

B (36:09)

And didn't investors really Buy into the macros kind of promise. I was reading yesterday that some fund called Autonomy Capital lost a billion dollars in Argentina 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 became. He came into power.

C (36:28)

And that is certainly true. 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 indebted because they also wanted to increase reserves. They were often doing things kind of at cross purposes, which is part of the problem.

A (36:52)

So just to talk about the politics a little bit, it now looks like Fernandez. Fernandez is going to be the new regime, which is basically the old regime. We're going back to Christina effectively running.

C (37:08)

The country, and because she's vp, he can pardon her.

A (37:14)

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 and they lied about all their economic statistics and it was a bad thing. And they lost a bunch of court cases in New York. And 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 like, Alan Garcia in Peru, who, like, you know, was a dreadful leftist prime minister the first time around, and it's actually quite a good prime minister the second time around.

B (37:47)

So it's.

A (37:48)

Or President, I should say. No, prime minister. Was it prime minister? I can never remember in Peru.

C (37:52)

So right now, I think there is a. You're seeing a lot of basically, like, panicked 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 of the Kushner administration. However, I mean, if you talk to a lot of people, I think they're. There is also the belief that it's unlikely that they would engage in the exact same policies 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. I mean, you had.

A (38:39)

And let's just be clear as well, that the Argentine economy, to a first approximation, is an economy of selling beef and soy to China. And if China is slowing down, well.

C (38:51)

And this is actually significant because part of the reason the Kirchners at a 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 for a lot of em. And so I'm sure this will be a story that we're going to talk about multiple times but I just wanted to bring it up because it's, this is legitimately a big deal right now in the emerging markets and it's.

A (39:15)

But hasn't Argentina always been like this exceptional country in the EM which people make big bets on one way or the other but 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.

C (39:33)

Yeah.

A (39:33)

No one is saying Argentina's really bad so sell Uruguay.

C (39:37)

Right. I mean to a certain extent you are correct that. But 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 then of course the potential for contagion is less. However, there have been sell offs in a lot of different EM 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.

A (40:10)

Right. This is an invitation mechanism. I'm just saying like is it going to bring, is it happening?

C (40:16)

I think. Well it's not happening of course the way you would have seen 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 because this Argentina is not the only country that's in a delicate position. And one last thing I'll 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 EM economies because those that have a lot of USD denominated debt and also when a lot of trade is 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 away.

A (41:21)

Was that Mark Carney? Yes. Yeah. So. Yeah. So, well, anyway, Mark Carney's Canadian. We can't. We can take that with a pinch of salt or we can just all move to Libra. What could possibly go. That was kind of his other suggestion, I think. Yeah. On which note, we will hopefully not talk about Argentina for at least another week or two.

C (41:41)

October 27, I believe, are the actual elections.

A (41:45)

Let's have a numbers round. Emily, what's your number?

B (41:47)

My number is $27,000. 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 in six out of the 10 occupations expected to have the most job growth, median wages was a little over $27,000. 6 out of 10. So it's just another indication of sort of what I was talking about before, which is the growing inequality in labor force and the bifurcation of the labor force to the. Some people get paid a lot of money, and most people get paid very little money.

C (42:25)

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.

B (42:33)

So that's a lot of money.

C (42:34)

It is a lot of money, but less than 47 billion.

B (42:36)

Ooh, I know what this is.

C (42:38)

We Work. Yes. So now it looks like We Work is targeting a valuation for their IPO of $20 billion, which is. It's a bit less than previously when SoftBank last bought in at a $47 billion valuation, although we're not entirely clear.

A (42:53)

Whether that was actually a $47 billion valuation.

C (42:56)

Yes, okay, I'll give you that. But point is, the trend still holds that it does 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 profitability.

A (43:11)

My favorite number about WeWork is 13 and a half years, which is the amount of time that this IPO analyst, Rhett Wallace, who I do trust on such things, reckons that it takes for WeWork to recoup its costs of bringing in a tenant. It has a typical lease of 15 years, and it takes 13 and a half years just to cover its customer acquisition cost. And then it has a year and a half before its own leases up in order to sort of make all of its profit. What could possibly go wrong?

B (43:40)

20 billion still too high.

A (43:42)

They've never made any Money. I mean, there's a strong case to be made that zero is too high for. My number is 80%, which is the prime age employment to population ratio. We had the jobs report out on Friday and for the first time in many, many years, 80% of the, you know, prime working age Americans, what is that, 24 to 55? 25 to 54, something like that. 80% of them are working. 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.

B (44:29)

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.

C (44:37)

Right, Right.

A (44:38)

Okay. I think that's it for us this week, unless you're a Slate plus member, in which case we will talk about Walmart and guns. Otherwise, many thanks for listening. Do keep the emails coming on sleepmoneyleep.com Many thanks to Jessamine Molly for producing and we will talk to you next week on Sleep Money.