Podcast Summary: Slate Money – "Smoke Filled Rooms" (July 13, 2019)

Episode Overview

In this macroeconomics-heavy episode, host Felix Salmon (in Washington, D.C. for an Axios retreat) is joined by regulars Emily Peck (Huffington Post) and Anna Szymanski, with special guest Neil Irwin (The New York Times and author of How to Win in a Winner Take All World). The episode explores three major threads:

• The Jeffrey Epstein scandal and the broader impunity of powerful men
• The significance of Christine Lagarde becoming president of the European Central Bank (ECB)
• Central bank policy, deficits, and why economic orthodoxy keeps failing to predict reality

The tone is conversational, spirited, and strives for both clarity and depth, punctuated with moments of dry wit and thought-provoking insights.

Key Discussion Points & Insights

1. Jeffrey Epstein: Wealth, Crime, and Systemic Impunity

[02:18–10:36]

• Epstein’s Dubious Wealth

  • Neil Irwin questions Epstein’s claim to billionaire status, noting the absence of Wall Street connections or typical hedge fund infrastructure.

    "The fact that nobody on Wall Street has memories of doing business with this guy... This is not a hedge fund. Something weird is going on." (Neil Irwin, 02:18)

• Explaining Epstein’s Influence

  • Anna proposes the Les Wexner connection (Victoria's Secret/L Brands founder) as plausible for Epstein's money—possibly tax evasion or money laundering.
  • Emily recaps Epstein’s 2008 plea deal, negotiated by Alexander Acosta (who later became U.S. Labor Secretary)—highlighting sweetheart deals with law enforcement and lack of consequences for Epstein’s crimes against minors.

• Systemic Enabling of the Powerful

  • The hosts reflect on how extreme wealth and connections afford legal and social impunity for figures like Epstein, drawing comparisons to Harvey Weinstein, Bill Clinton, Donald Trump, and the broader #MeToo reckoning.
  • Emily:

  “We live in a society that values rich men over young, poor girls… His behavior is like to the extreme, but I don’t think it’s actually that unusual of behavior.” (Emily Peck, 08:53)

• Cultural Tolerance and Elite Blindness

  • Neil observes that Epstein's predatory behavior “was just kind of hiding in plain sight long before the 2008 charges.” (Neil Irwin, 06:59)
  • Discussion about the prevalence of questionable behavior at elite gatherings and the persistent global culture of enabling the wealthy.

2. Christine Lagarde and the Changing Face of Central Banking

[10:43–23:44]

• A Woman Succeeds Two Scandal-Plagued Men

  • Lagarde’s path to the ECB presidency is contextualized after the scandals of Dominique Strauss-Kahn (DSK) and Jeffrey Epstein, both of whom benefited for years from elite protection.

• The ECB as a Political Institution

  • Neil Irwin explains that picking a “politician” over an economist is a deliberate choice for the ECB’s top job:

    “The real tricky part is trying to get European governments to do the things they need to do… If Christine Lagarde is more savvy about navigating European politics than some economist off the street, she'll be a far better ECB president.” (Neil Irwin, 13:44)

• Authoritative Leadership Without Economics Chops?

  • Comparison to Jay Powell at the U.S. Fed and discussion of whether political skill now trumps academic economics in top central bank roles.
  • Anna highlights Lagarde’s communication skills and market credibility, suggesting these qualities are “almost more important than just simply being able to do the modeling.” (Anna Szymanski, 14:17)

• Can ECB Lead Through European Fragmentation?

  • Looming issues: a less fraught Eurozone than Draghi inherited, but Brexit and political fragmentation are unresolved.
  • Felix: “Is she the most powerful person in Europe?” (19:51) – Neil: “I think there’s a very strong case.” (19:58)

• European Leadership, Legitimacy, and “Smoke Filled Rooms”

  • The process of picking EU leadership via backroom deals is questioned as undemocratic but perhaps necessary for keeping the bloc together. Anna warns, however:

    “The political trends in Europe right now are not positive in terms of stability or greater integration.” (Anna Szymanski, 23:18)

3. Deficits, Broken Orthodoxy, and What Central Banks Should Do Next

[23:52–34:31]

• Macroeconomic Model Failures

  • Neil Irwin explains that rising deficits and ultra-low interest rates should, per received economic wisdom, have caused inflation and higher rates—but haven’t.
  • Classic macroeconomic relationships (“deficits crowd out investment”) haven’t held true.
  • Notable quote:

    “Key elements of macroeconomic orthodoxy…are just turning out not to be so. And I think it’s the deepest challenge to how we understand the way the economy works in my lifetime.” (Neil Irwin, 25:29)

• What Should Policymakers Do?

  • Irwin argues for “new economics” that fits observed reality, and for using persistent low rates as an opportunity to address underinvestment.
  • Northern Europe (especially Germany) is held up as a region stifling aggregate demand due to misplaced deficit fears—when cheap borrowing represents an opportunity, not a threat.

• Inequality as an Explanatory Driver

  • Emily asks if rising inequality helps explain weak inflation and low demand. Anna and Neil agree loose monetary policy has contributed to wealth concentration, and that high savings by the rich may be suppressing demand and inflation.
  • Neil:

    “The shortage of aggregate demand might be a reflection of how much wealth inequality has developed.” (Neil Irwin, 28:39)

• Why Wages Aren’t Rising

  • Emily observes that unemployment is low, but wage growth is muted—implying something’s “broken.”
  • Neil suggests:

    "The longer we have a hot job market… the more that will break down… [employers will have] to compete to get workers. And that means paying more, better benefits, more flexibility, all those good things." (Neil Irwin, 31:11)

• Time for a Policy Shift?

  • Anna and Felix argue for letting the labor market run hot—keeping rates low and not snuffing out gains for marginalized communities who have only recently begun to benefit from the recovery.

• Need for New Indicators

  • Emily raises the idea that old indicators (unemployment, inflation) may be missing the signal—Irwin champions the employment-to-population ratio as a better measure of progress, but notes men’s labor force participation especially remains depressed.

Notable Quotes & Memorable Moments

• On Epstein and Power:
  “We live in a society that values rich men over young, poor girls. So… these men could get away with this in plain sight because… it’s not unusual.”
  — Emily Peck ([08:53])

• On Macro Orthodoxy Failing:
  “Key elements of macroeconomic orthodoxy… are just turning out not to be so. And I think it’s the deepest challenge to how we understand the way the economy works in my lifetime.”
  — Neil Irwin ([25:29])

• On Central Banking as Political Work:
  “The real tricky part is trying to get European governments to do the things they need to do… If Christine Lagarde is more savvy about navigating European politics than some economist off the street, she’ll be a far better ECB president.”
  — Neil Irwin ([13:44])

• On Wage Growth and Inflation:
  “[Jay Powell] used a line I think might be on his tombstone: You can’t say something’s hot if you don’t see evidence of any heat.”
  — Neil Irwin ([31:11])

• Lighter Moment—Ed Sheeran’s Success:
  “[Ed Sheeran] is a win for goofy looking white guys everywhere.”
  — Neil Irwin ([35:37])

Timestamps for Major Segments

• [00:10] – Show introductions, Neil Irwin’s new book
• [02:18] – Opening discussion on Jeffrey Epstein’s finances and impunity
• [03:56] – Recap/litany of law enforcement’s leniency toward Epstein
• [06:49] – Powerful connections, the culture of elite impunity
• [10:43] – Transition to Christine Lagarde and high-level finance/politics
• [12:52] – What Lagarde’s appointment means for the ECB and Europe
• [13:44] – Neil Irwin on political vs. economic leadership at central banks
• [19:32] – Is Lagarde now the most powerful woman in the world?
• [20:41] – Brexit’s impact on the EU and ECB
• [22:37] – Europe’s “smoke filled rooms” politics and risks of fragmentation
• [23:52] – Explaining why economists and models keep getting things wrong
• [25:29] – Neil Irwin on the unraveling of macroeconomic orthodoxy
• [28:39] – Discussion of inequality, demand, and policy implications
• [29:52] – Why isn’t inflation rising with low unemployment?
• [31:11] – Neil Irwin on the future of wage growth and inflation
• [33:44] – Rethinking macroeconomic indicators for today’s labor force
• [34:37] – Numbers round (Ed Sheeran tour, France’s “GAFA tax,” U.S. deficit, Manhattan curb cut scam)

Numbers Round Highlights

• Ed Sheeran’s ‘Divide Tour’: $750 million—highest-grossing concert tour ever ([34:37])
• France’s “Big Tech” Tax: 3% of French revenues from large digital firms ([36:08])
• U.S. Federal Deficit: $747.1 billion, already 23% higher than previous year ([37:20])
• NYC Fake Garage ‘Curb Cut’ Scandal: House number 777, ingenious (and entitled) effort to claim a public parking spot ([38:05])

Closing Thoughts

This episode thoughtfully links news of personal impunity and scandal (Epstein) to systemic failures of accountability—whether among the economic elite or central policy institutions. It makes the case that our economic models, much like our systems for policing the rich, may be woefully out of date for twenty-first-century realities. The cheerful banter leavens the heavy topics, with frequent returns to the necessity of rethinking who holds power, and how—whether in a smoke-filled room or a central bank boardroom.

Recommended for listeners interested in: Economic policy, central banking, inequality, European politics, the real-world disconnect between macro theory and observed data, and the pervasive patterns of privilege among the rich and powerful.