Slate Money: The Dinosaur Edition

Date: June 3, 2017
Host: Felix Salmon, with Anna Szymanski & Jordan Weissman

Overview

This episode of Slate Money, dubbed "The Dinosaur Edition," dives into a turbulent week in business and finance news marked by the U.S. pulling out of the Paris Climate Agreement. The hosts dissect both the immediate and longer-term implications for climate and international relations, discuss the rise in Americans’ credit scores and shifting debt trends, and unravel the controversial deal between Goldman Sachs and Venezuela's government involving distressed bonds. The tone is analytical, occasionally sardonic, and often irreverent, with the hosts challenging each other's takes and delving into the ethical, economic, and political nuances of the week's biggest stories.

1. The U.S. Withdrawal from the Paris Climate Agreement

Segment start: [00:33]

Key Discussion Points

• Announcement Context: The hosts express dismay at the Trump administration’s formal exit from the Paris deal, framing it as another pivotal, discouraging moment—akin to Brexit ([00:33]–[01:44]).
• Administration’s Justification: Felix cites an op-ed by H.R. McMaster and Gary Cohn, who described international affairs as a ruthless arena of competition, not global community:

  “The world is not a global community, but an arena where nations, NGOs, and businesses engage and compete for advantage... we embrace it.” ([02:20])

• Corporate Pushback: Anna highlights that most of corporate America, including surprising sectors like coal and Exxon, actually advocated for staying in Paris ([03:44]).
• Counterintuitive Take: Anna and Jordan discuss arguments embraced by some climate activists — that open withdrawal might do less harm than hollow participation ([03:49]):
  • If Trump had stayed in and brazenly ignored the targets or sought to weaken them, it would have eroded the agreement’s integrity globally, signaling to others that noncompliance was permissible.
  • Exiting, ironically, has perhaps galvanized other nations and actors to redouble their commitments ([11:00]).
• The Role of States and Cities:
  Felix:

  “...if California does things like have, you know, emission standards for automobiles, anyone who wants to sell their car in the US effectively needs to adopt those California standards.” ([08:07]) Anna, Jordan, and Felix reinforce the rising influence of subnational actors—mayors, governors, and CEOs—in maintaining climate action despite federal abdication.

• Impact on Clean Energy Investment:
  Felix:

  “The one piece of economic damage which is going to happen here is that...the investment in clean energy and renewable energy... has now basically been jettisoned.” ([11:56]) Although private sector and foreign investment might fill some gaps, federal withdrawal is a blow.

• China & Europe’s New Leadership:
  Anna:

  “...another silver lining here is that [China now] see[s] this as an opportunity to really assert themselves as global leaders.” ([12:49]) The hosts note President Xi’s speech at Davos as a symbolic rise of China’s international leadership.

• Reversibility:
  Felix:

  “...it was a weak withdrawal rather than a strong one... any future administration can very, very easily just snap back in again.” ([14:26])

• Corporate America’s Independence:
  Jordan:

  “...what we've seen is they're saying no, they're pushing back. And I think moving forward, that could potentially also be a good thing.” ([14:45])

Notable Quotes & Moments

• Felix, on Trump’s worldview:

  “There is no such thing as society as [Thatcher] would have, at least international society. It’s one country against the next...” ([02:54])

• Anna’s “silver lining” take:

  “By actually exiting, in a way, has galvanized a lot of other countries...he's made everyone else bind together a little bit stronger.” ([11:00])

• Jordan, reflecting on economics:

  “...it is no longer efficient to pump coal. And that's not going to change. If anything, that is just going to become more and more so.” ([11:31])

2. Rising Credit Scores and Shifting U.S. Debt

Segment start: [15:04]

Key Discussion Points

• Improved Creditworthiness:
  Nationwide, credit scores have reached a new record high (average of 700) — a statistical rebound from the recession ([16:07]).
  • Anna points out the "mechanical" nature of this improvement, as bankruptcies and defaults from the crisis have rolled off credit reports ([16:39]).
• Auto Loans as an Exception:
  Defaults and delinquency rates remain stubbornly high in auto loans, correlating with faltering car sales ([17:26]).
• U.S. Household Debt Hits New High:
  The New York Fed reports nominal household debt has finally surpassed pre-crisis levels, driven less by housing and more by student loans (which now form 10% of household debt, up from 5%) ([18:21]).
• Socially Useful vs. Useless Debt:
  Felix discusses Adair Turner’s view that mortgage debt is “socially useless,” while student debt is more socially constructive ([19:15]).
• Concerns over Student Loans:
  Though a third of new student loans go to graduate education (often a good investment), stubbornly high delinquency rates (11%) point to deeper problems, especially among for-profit college enrollees ([20:40]).
• Impact on Homeownership:
  Anna and Felix debate whether student loan debt impedes homeownership—concluding that defaulted loans, rather than the debt itself, are the main barrier ([23:23]).
• Declining Homeownership as a Positive?
  Felix:

  “I'm not saying that [declining homeownership is] bad…you have a much more flexible labor force and...probably too high and should probably come down.” ([24:07])

Notable Quotes & Moments

• On recovering credit:
  Anna:

  “You have these wounds and then you convalesce and then you come out in some ways looking better than ever. You have this fresh, clean credit report.” ([17:04])

• Felix’s take on the evolution of U.S. growth models:

  “Maybe finally we're beginning to see what a world could look like where growth isn't driven by debt and by lending and by credit...” ([25:13])

• On socially useless student debt:
  Anna:

  “There is socially useless student debt. Yes. ...for-profit schools in the first place, especially if they never graduated with a degree...” ([20:55])

3. Goldman Sachs, Venezuela, and the “Dinosaur” Brokerage

Segment start: [26:58]

Key Discussion Points

• The Scandal:
  Goldman Sachs purchased approximately $2.8 billion in face value Venezuelan bonds (for about $865m), indirectly infusing cash into the embattled Maduro regime and sparking uproar, especially since the transaction was mediated by an obscure broker, “Dinosaur” ([27:34]).
• Primary vs. Secondary Market Ethics:
  Felix draws the distinction between buying directly from a government (which receives the proceeds) and acquiring distressed bonds on the open market. Jordan and Anna debate whether there’s a significant moral difference, referencing Harvard’s Ricardo Hausman:

  “At the end of the day you're not engaging in good activity either way...it would be very hard to justify this.” ([29:28])

• Can Financial Markets “Boycott” Dictatorships?
  The hosts discuss the practicality of market-wide boycotts — noting that so long as high yields exist, some buyers will enter, and the bonds themselves don’t “disappear” ([31:39]).
• The Role of Dinosaur:
  The hosts find it odd that a tiny, obscure British brokerage acted as counterparty ('…a guy showed up in an alley with a trench coat, opened his jacket and there were some Venezuelan bonds in it.' — Anna, [34:05]).
• Risk & Recovery:
  On whether Goldman will be repaid, Jordan points out that buying at 31 cents on the dollar means the potential for profit even if only partial payments are made, given high coupon payments and possible future recovery ([37:49]).

Notable Quotes & Moments

• Anna:

  “Is it possible that [Dinosaur is] entirely set up solely for the purpose of laundering Venezuelan bonds?” ([34:05])

• Felix:

  “That alone makes the deal weird and unusual.” ([35:04])

• Felix on the special scrutiny Goldman receives:

  “There is this peculiar specialness to Goldman which works sometimes in its favor and sometimes against it.” ([36:12])

• Jordan on the trade’s viability:

  “This trade makes a lot of sense...you're paying 31 cents with the expectation that Venezuela is going to make it through 2017 and 2018...” ([37:49])

4. Numbers Round

Segment start: [39:04]

Highlights

• Felix: 849,751% — The return on a satirical “cat factor” trading algorithm purely based on buying stocks containing the letters “C,” “A,” “T” ([39:04])
• Jordan: 1,000 — Amazon’s stock price breached $1,000, highlighting not only tech industry power but changes in stock-splitting and retail vs. institutional trading ([41:04])
• Anna: 8.7% — Germany’s current account surplus as % of GDP, far surpassing China’s, raising concerns about Germany’s role in global trade imbalances ([42:32])

Notable Exchange

• Anna:

  “Germany may be the most problematic actor [in] global trade...they may have done a better job gaming the global trade system than any other nation at this point.” ([43:22])

• Felix:

  “Maybe what they're doing is they're showing the way to prosperity without massive consumer spending...spending less on ourselves is a good thing.” ([45:00])

Conclusion

This “Dinosaur Edition” presents a characteristically robust Slate Money exploration: from the global stage (Paris Agreement fallout, Chinese/European leadership), to American household finance, through the shadowy world of distressed emerging market debt. The show’s balance of skepticism, data, and sharp banter (with a few very memorable pull quotes) adds to the lively dissection of the week in economic news.

Timestamps at a Glance

• Paris Agreement: [00:33]–[15:04]
• Credit Scores and Debt: [15:04]–[26:58]
• Goldman Sachs & Venezuela: [26:58]–[39:04]
• Numbers Round: [39:04]–[46:49]

Notable Quotes

• “The world is not a global community, but an arena where nations, NGOs, and businesses engage and compete for advantage...” – Felix, quoting Cohn/McMaster ([02:20])
• “By actually exiting, in a way, [Trump] has galvanized a lot of other countries...” – Anna ([11:00])
• “You have this fresh clean credit report.” – Anna ([17:04])
• “Germany may be the most problematic actor [in] global trade.” – Anna ([43:22])
• “That alone makes the deal weird and unusual.” – Felix ([35:04])

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