B (2:47)

Okay, so Neil, the Fed everyone expected it would cut by 25 basis points. It did cut by 25 basis points. It was almost unanimous except for one new Trump appointee who said he wanted it to cut by 50 basis points. Everything seems to have gone more or less smoothly. So why was everyone so focused on this. And why did it seem like such a big deal?

A (3:09)

So you can't separate what the interest rate policy is from the broader political and kind of economic environment we're in, which is we have this weird moment where President Trump is trying to use every tool he can find to make the Fed in his own image and appoint people and install people who are going to give him the kinds of policies he wants. And so this was kind of an early round in seeing how that effort is going to play out. And that's what we saw with the dissent that you mentioned from Stephen Myron, who's the new governor, saying, like, I.

B (3:35)

Want 50 rather than 25. You can sort of, eh, you know, what's 25 basis points among friends? The more interesting thing for Myron is that he was allowed to provide a document and Myron's dot was kind of wild. Am I right?

A (3:52)

Yeah. So it would shock you, if you're not in this world, how much Fed watchers care about these dots who gather at these policy meetings. They submit quarterly their guess of what is the appropriate level of the interest rate policy at the end of this year, end of next year, end of the end of 27. And they don't put names on the dots. So you don't know exactly which person said, I think the rate should be this. But in this case, we can kind of guess because the consensus view is they're going to cut two or three more times this year. And so the consensus view is that interest rates should get down to about 3.6%. But there was one dot, one new dot, that was down at 2.875%, so 2.9%. And so it doesn't take a rocket scientist to judge that the guy who was confirmed on Monday night and started the meeting Tuesday morning that the new guy was the one with this outlier dot, Stephen Myron again. And so. So he seems to want a radically lower interest rate than the rest of the Federal Reserve Policy Committee.

D (4:44)

So, Neil, why did they cut rates by 0.25 percentage points? Is the economy bad? Should we be worried?

A (4:51)

So I think that the overwhelming driver is that the labor market is showing serious cracks right now. Last two reports have shown very weak job growth over the summer. You see some other kind of peripheral evidence that the job market's softening, wage growth is on the low side, unemployment rate still low. It's only ticked up a little bit. But it's kind of like, if you follow baseball, the peripheral indicators of how a pitcher is doing, all the kind of Subtler indicators of the underlying health of the job market are not looking great. And so the Fed wants to try and get ahead of that by cutting interest rates.

C (5:18)

So there's been some speculation that Trump might go ahead and announce who he wants to succeed Jay Powell, and that person would become a de facto kind of shadow Fed chair. Myron has already booked CNBC appearance this morning. We tape on Fridays to talk about his thoughts about where the rate should be long term. Is that going to have a similar effect, especially if he's diverging significantly from the rest of the Board of Governors?

A (5:45)

I think so. Even, you know, we don't know if Myron gets a serious look to be the next chairman. But we, we do know that his mindset and his philosophy is what the President wants, which is somebody who's going to be kind of in line with what the White House wants, which is much lower interest rates. It's hard to overstate how unusual this is. I've been covering Federal Reserve for 20 years, and normally when somebody's a new governor or a new bank president, they just lay low for the first few months. They learn the building, they learn the kind of norms and everything and don't give any big speeches. Myron confirmed Monday night in the meeting Tuesday morning, dissented at his first meeting. He has two TV appearances scheduled on Friday. He has a speech scheduled at the Economic Club of New York on Monday. To do three public appearances within a few days of being confirmed is not the way this organization usually works. But look, that's what Trump wants. Trump wants somebody who's going to shake it up.

B (6:30)

Myron is coming in hot, which is absolutely Trumpy. And we have seen this in a million different other agencies and from Trump appointees across the board. He has not generally been included on the shortlist of people that Trump is reportedly looking at. One person who is included on the shortlist is Waller, who was also a voting member of the FOMC and who voted for 25 and seems to be sort of coming in cold here.

A (7:00)

Yeah, look, if you believe in an independent central bank and that these officials should, should not have the President telling them what to do day to day. There was some good news out of this meeting, which is that both Waller and Michelle Bowman, who another governor who was appointed by Trump and elevated to being in charge of regulation earlier this year, they both stuck with the program and stuck with 25 basis points. So that's a sign that they are willing to, even though they're both considered candidates to be the next chair, neither of them kind of gave the President what he wants in this meeting the way Myron did. And so, you know, that's a sign that maybe they aren't. If there is, let's say neither of them gets the big job, but somebody like Myron does come in and try and radically cut rates. It's a sign they're not ready to go along with that.

D (7:39)

The other big wild card right now is obviously Lisa Cook. And this week, the Trump administration appealed the latest court ruling keeping her on the Fed board all the way to the Supreme Court. That seems like that could really shift things. If the court rules in favor of the administration. Lisa Cook does get fired for doing this mortgage fraud thing, which apparently everyone from Scott Besant to everyone in Bill Pulte's family has also done.

C (8:04)

I was going to be clear, it's not mortgage fraud.

D (8:07)

Right. So, I mean, like, how are people thinking about that? If she does get fired, then Trump is going to have two, right? Two people there to do his bidding.

A (8:17)

So there's already the two Trump appointees, or three now Trump appointees on the board. Waller Bowman, and now Steve Myron. If Lisa Cook is successfully fired, that's a fourth slot. So that's four out of seven governors. And that suddenly opens up a lot of power to run the organization, you know, including potentially firing or not renewing the terms of the 12 presidents of reserve banks, controlling the budget, controlling the staff, stuff like that. And then there's the chairmanship. Powell's term as chair is up in May. Now, if he wants, Powell can stick around as a governor for another two years, I believe, and kind of occupy the seat and prevent the president from filling that seat. That would not be how it's worked historically. But that is an option Powell has, and he has pointedly not ruled that out, which is a sign he's not going to just hand the keys of this organization to anybody.

B (8:58)

My sort of, like, gut feeling here is that this whole thing is much more binary than people, I think, give it credit for that. Either the Fed loses, independence, becomes completely politicized, basically becomes much more like the Supreme Court, as you say. Like, if Trump succeeds in firing Cook, gets a majority of the governors, they then can basically veto and control which presidents get involved. And at that point, Trump basically controls the Fed. On the other hand, if the Supreme Court finds in favor of Cook, and if people like Mickey Bomer continue to act more like technocrats than as Trump lackeys, then, you know, we had tensions between the Fed and Trump all through his first term. There will be tensions all through his second term, but we will still have an independent Fed. Like, I feel like those are the only two options. Or do you think there's like a kind of. Am I wrong about that?

A (10:01)

Look, I think there's truth to what you say, but I don't think it's quite that binary. So you can imagine a world where Trump has Myron, Trump has somebody in the Cook slot and or the Powell slot, and then to have a majority, they have Bowman and Waller. So then Bowman and Waller are the kind of constraints on how much radical remaking of the organization happens. And so maybe they do want to fire a few of the Reserve bank presidents. I don't know. Maybe there is some change, but they would presumably, you know, I know, I know Waller pretty well. You know, you presumably want credible, serious people, even if there are some changes.

B (10:32)

And this is not a safe assumption when you're talking about Trump.

A (10:35)

Yeah, I mean, look, this is a source of democratic accountability for this organization. Like, presidents appoint governors and over time they often end up with the majority of the board. There's a reason the board is a majority, Biden appointees right now. So if you think there are flaws, there's groupthink, there are some ways in which the Fed has not performed well, which is the Trump administration's view. Then this is the method of accountability. The question is, do they replace any changes in the personnel with credible, serious economists who just view things a little differently than the old regime, or do they put in a bunch of partisan hacks? And that's what we don't know.

B (11:04)

And this is the really big overarching conversation which I don't want to spend too much time on, but it's definitely something we wanted to ask you, which is Federal Reserve independence is this shibboleth that all right, thinking people agree with on both sides of the aisle, but yet that is also just this sort of cornerstone of neoliberalism. And as neoliberalism dies, and as both the left and the right kind of move away from such things, is it weird to you that the left seems to have found itself trying to defend something that really isn't part of its agenda anymore?

A (11:44)

The Democratic Party has become the party of the wonks, the technocrats, the college educated elite, the professional managerial class, whatever you want to call it, that's kind of become the core part of the Democratic Party. And so in that sense, it's not surprising that central bank independence and the idea of these powerful technocrats is something that's become A at least center left, maybe not far left, but a center left coded idea at the same time. There's a long history of this, that this battle over who's going to be in charge of America's central bank goes back to the very beginning of the republic. That has been a long and tortured history. The Federal Reserve act itself creates this byzantine structure with these reserve banks and public private boards and all this weird stuff. You know, we talk about this as Trump versus the Fed. It's really Trump versus Congress in important ways. Congress set up this institution with 14 year staggered terms in this, again, very complex system as a series of compromises. And to the degree Trump is trying to take unilateral control of it, that's undermining what Congress set up 100 years ago when they passed the Federal Reserve Act.

B (12:39)

Ah, well, if it's Trump versus Congress, we know who's going to lose that one.

D (12:44)

I was reading a little bit and you know Adam Tooze, right?

B (12:46)

Friend of the pod, Friend of the.

D (12:48)

Pod, Adam Tooze, he was saying, you know, there's all this debate, is the Federal Reserve actually Democratic? And then he has this quote I was reading the Fed is not a neutral technocracy. Is that a word?

B (12:58)

Good word.

D (12:59)

Because its regional boards give business elites formal seats at the table while labor and consumers are marginal or absent. Independence isn't independence from politics, it's independence from electoral accountability. Would you go with that? I feel like you wouldn't because you were just talking about Congress and blah, blah, blah.

A (13:14)

Yeah, I think that is what it is. You know, it's independence from the day to day electoral concerns. We're aspiring to be a democratic country where you need to have ultimate accountability to Congress, to the President. That's why the system is what it is. Tooz is right historically, but lately what's part of the conservative critique of the Fed is that it's shifted left over time in its appointments. So these boards of directors, they involve more NGOs and labor union members than they used to. Their donation patterns actually shifted toward Democrats and liberal causes over the last 20 years. Political donations, if you look in 2000, donations were pretty even. Now they've tilted toward Democrats. So that is a concern and a criticism that Republicans have.

B (13:52)

Finally, I just want to ask about this wonderful new meme that has infected the White House, which I love, which is they've dug up ancient founding documents and discovered a third mandate, like the famous dual mandate of the Fed, where you want high employment and low inflation has now they've discovered there's a third mandate, which is low long term interest rates. And it really interests me that they are pushing this discovery because it strikes me, at least intuitively, that you have this tension between the inflation and the employment which has always been there. If you add in a third mandate for low long term interest rates, what that really means is low long term inflation expectations. And it basically gives inflation the upper hand out of those two. And it would kind of intuitively to me mean that the central bank should be more hawkish rather than more dovish. And obviously Trump is very dovish and always wants massive rate cuts. So can you square that circle for me?

A (15:03)

I think we've heard since the beginning of this administration they want lower mortgage rates, lower long term interest rates. And what they don't seem to believe is what you just said, which is that the way you achieve that is by anchoring inflation expectations. And if people, look, if bond investors think inflation will be low and their bonds won't be inflated away, they're more likely to accept a low rate. They want to do this through other means than those means. So that's why you hear them talk about all the revenue being raised by tariffs. Right. So that's helping the fiscal picture because all this money is coming in. That's why they, they talk about bank regulatory things to encourage banks to buy more treasury bonds. And I think that's what we might see. So what you're referring to is Stephen Myron in his confirmation hearing mentioned the full language of the statute, which is that Congress signed Fed stable prices, maximum employment and moderate long term interest rates. And just by mentioning that third clause, it got everybody's attention.

C (15:49)

Is this really coming from a place of kind of principled understanding of what should be happening here, or is this solely a function of maybe Occam's Razor, the fact that Trump is a commercial real estate guy and thinks that we should always be in a ZIRP environment?

A (16:03)

I think that's mainly it. The President wants cheap money, President wants low rates. It's his entire kind of philosophy. And then there's kind of intellectual retconning of how to make a more sophisticated, nuanced case for why that's a good thing economically.

D (16:16)

Can I ask one more question?

B (16:18)

We're never going to get onto these credit cards, Emily?

D (16:20)

Well, I just want to lay out sort of the stakes and why people would care, like more broadly, if the Fed loses its independence and, you know, starts cutting rates the way Trump wants. Are we going to become Turkey? Is it going to be okay? What could happen.

A (16:37)

Let's say they end up with a majority and they replace some of the Reserve bank presidents and they really do go full Trump and cut rates to 2, 2 and a half percent in an environment where the economy's still decent and there's not a recession or a real case for it. The risk is that, you know, we already have had four or five straight years of too high inflation. The risk is we have another five plus years if there's a risk that suddenly long term interest rates go up, consumer behavior changes, there's more cost of living adjustments, there's the kind of 1970s inflationary spiral that we saw. That's the risk if they really set an inappropriate interest rate policy for the economic environment we're in.

B (17:10)

And to Neil's point, I think if you do see that effect at the long end of the curve, if all interest rates, including mortgage rates, go up rather than down, which is, to Elizabeth's point, the exact opposite of what Trump wants, then that raises the risk of all manner of financial shenanigans and financial repression in an attempt to do what Neil said, which is to bring long term rates down by force if the markets won't bring them there voluntarily, as it were.

A (17:37)

And they think much more wide open and really creatively about these issues than I think the traditional central bank people do. So Myron wrote this paper last year where he's calling for basically strong arming other countries into buying more Treasury Treasuries and resetting the terms of their debt. I mean, that's stuff that normal economists don't talk about, but they have kind of a wide open playing field.

B (17:55)

I was just in a little seminar last week about what was termed one big beautiful default. If Trump wanted to just default on all foreign holders of treasury bonds anyway, we're not going to go into that.

D (18:06)

It's really like the nerds last stand here with the Federal Reserve. That's how I think of it. It's like they kick the experts.

B (18:12)

I think it is because the nerds have left scotus. The only place they're left is in the hallowed halls of the $5 billion Federal Reserve.

D (18:20)

I mean, they've all left the federal government. There's hundreds of thousands of people gone now, scientists, experts, whatnot. They're all just left at the Federal Reserve waiting on the Supreme Court's word there.

B (18:30)

In the immortal words of Michael Gove during the Brexit debate, I think we've had enough of experts, Emily.

D (18:38)

Well, that went well. So.

B (18:55)

Sleep money is sponsored this week by Monarch Money. Can you name all your financial accounts? Even if you can, can you tell me how much you have in them? I'm just going to come out and say that you can't. And the fact is that if you don't know, that can leave money on the table. And if you're looking to feel organized and confident in your finances, it's probably worth checking out. Monarch Money Monarch Money is an all in one personal finance tool which brings your entire financial life together in one clean interface on your laptop or your phone. And right now, since you're a Slate Money listener, Monarch is going to give you 50% off your first year. Monarch just keeps tabs on everywhere you have money, including the places that you would otherwise forget about. It looks at not only how much is in your accounts, but how much is going out of your accounts. It'll tell you when you're spending more than you normally do on something. It will alert you when you have opportunities to increase your savings rate or broadly review your financial health. And it will even help you do something like Discover a forgotten 401k from a past job. Help you roll it over into somewhere where it's not going to get forgotten. Understand how much of your cash is sitting idle. It's a really effortless way of keeping tabs on the things that are important because you can just rely on push alerts basically, rather than having to work everything out yourself. So if you've put off organizing your finances, let Monarch do the heavy lifting. You can link all your accounts in minutes and get clear data visuals, smart categorization of your spending and real control over your money. Don't let financial opportunities slip through the cracks. Use code slate@monimalmoney.com in your browser for half off your first year. That's 50% off your first year@monimalmoney.com with code slate Slate Money is sponsored this week by Saks. Saks Fifth Avenue makes it easy to shop for your personal style this season. Fall is here and there are so many new fall arrivals that you're going to want to wear again and again. There's a great new relaxed Prada blazer. There are Gucci loafers you can take from work to the weekend. It is incredibly Easy to visit Saks.com and find new arrivals from your favorite designers. I kind of love the shirts from Commes des Garcons. I can't always afford them, but it is definitely always there on my Inspo board. And once in a blue moon I might even buy one. Saks makes shopping feel customized to you. They have in store stylists. They have Saks.com showing you only what you like to shop. They will even let you know when arrivals from your favorite designers are in or when something you love is back in stock. So find inspiration for your personal style every day at Saks Fifth Avenue. But I do want to move on to the credit cards. There has been this explosion in the number of people flashing ultra high end credit cards, by which I mean the Chase Sapphire Reserve and the Amex Platinum. And there seems to be no end to the demand for these status symbols to the point at which all of the lounges that these credit cards get you into have become almost uninhabitably crowded. And there's a very kind of Groucho Marx, sort of no one goes there anymore, it's too crowded thing going on. Was that Yogi Berra, I can't remember the way they are dealing with this is the classic market response, which is if you have too many people crowding into somewhere, you just raise the price. And so now it's what, $800 for the Amex Platinum, 795, oh, $900 for the Amex Platinum and $800 for the Sapphire Reserve. So Neil, as the expert on these cards, are they just trying to push out the normies and make them more elite?

A (23:03)

Yeah, I mean, the Groucho Marx thing is exactly right. I think what happens is people really overvalue some of these benefits they throw in. And the credit card companies have realized that and they're trying to charge for them. And so you mentioned the lounges. If you're spending a lot of time in airport lounges, you get to the airport too early is my view. And, you know, I think the lounges are really overrated, but people seem to love them. And people will line up to get into the Amex lounge when there's a perfectly good restaurant next door where you can sit at the bar and have a drink. I think people overvalue the lounges, but they do. And so of course they're going to charge for it. I think they seem to be trying to layer on all these little bells and whistles that if, you know, if you buy the right thing, if you get a thing from Resi, if you get an Uber, then you get the value of the benefit, but if you forget about it or don't use it quite right, you don't get the value of that benefit. I think they've introduced all this complexity and they're doing it because they can and People seem to like a nice heavy metal card enough to put up with a lot of nonsense.

B (23:50)

The complexity is absolutely wild. There was this one article I was reading, some woman who would like keep her computer plastered with little sticky notes saying, have you spent your money this quarter on like when they say you need to spend this, you get to save this much money a year on X, a lot of it. You have to spend one quarter of that every quarter and then they'll refund it. It's incredibly difficult. Bloomberg had this wonderful interactive saying, like, you know, is it worth it? And just reading the questions was exhausting. You know, it was like, do you book hotels which are members of the edit on Chase more than twice a year and spend. They said, who knows whether the hotel I'm booking is a member of the edit on Chase. You need to use so much of your brain to care about saving this money that like, that's just such a non elite, non high income activity to do.

C (24:42)

What's, what's crazy to me. I'm not a amex card holder. I didn't realize that the higher end cards, they only just made an app where you can track all of that, which is what was driving people crazy. How did they not have an app in the first place? That's.

B (24:55)

Well, they don't want people to track it. That's the whole point. Because the way they make their money is by promising you lots of savings and then you never know how to access those savings and you never actually access the savings. And so they don't need to reimburse Lululemon or whatever for the leggings that you bought.

D (25:11)

My favorite part of the Bloomberg thing was where it was like, how much do you spend at Lululemon per quarter?

A (25:17)

What?

B (25:18)

Yeah, Lululemon does not strike me as somewhere that people shop on a quarterly basis per quarter.

C (25:23)

You don't know about my line item budget for Lululemon every month. It's like right next to my cable bill.

D (25:28)

Rent, cable, electricity, yoga pants.

C (25:31)

Yeah, yeah.

A (25:32)

Look, if you're lucky enough and affluent enough to be part of this mass affluent, as they say, so you spend enough money on your credit cards to be able to even begin justifying any of these things. That's great, that's nice. But the whole point of having that much money is to not have to sit around scrutinizing every dollar you spend to make sure it's at the right place to get the right value of the benefit. To me, it's, it's not a great trade.

D (25:51)

It's this is a TikTok thing though. One of the pieces we read in the prep was, you know, there were all these links to TikTok videos. There was one of a bunch of Gen Zs out to dinner and they played credit card roulette. They all put in their platinum cards and they all made a satisfying clinking sound that people really like on TikTok. Like an ASMR of credit card noise on the table. And then they said to the waiter, like, you pick which card pays the bill. And the bill was like $4,000. And you know, and then there's like another bill where literally the guy is just plunking down platinum cards versus gold. And it's like, this just sounds better. I mean, it's just marketing for these companies and for these cards. Like the cachet.

B (26:30)

The whole card is metal and it's free.

D (26:34)

It doesn't get the same play on TikTok. I don't think, Felix, that's a problem, right? That's a problem.

B (26:39)

Is it a problem? They've managed to do a good job of extracting money from, I think we've all agreed, like people who. Yeah, they've reinvented the coupon book, which was always a very kind of low income thing, but they've made it a high income thing. But, you know, 1% of U.S. gDP is spent on Delta Amex cards every year or every month for that matter. It's gdp. Like for all that. It seems to make no sense. These things are obscenely popular.

D (27:08)

It's a brilliant marketing by the credit card companies. So they're not only. They're making money on the fees that they're really raking in because people like Neil said don't manage to take advantage of every single deal. They don't spend all their Lululemon bucks or whatever every quarter. So they make money on that. Apparently swipe fees are higher for the higher status cards.

B (27:28)

Well, I mean, so we have talked about swipe fees a lot on this show, but it's absolutely true. The more expensive the card, the higher the swipe fee as a rule. Although there are exceptions. And weirdly, the Apple card is another one of those exceptions. It has very high swipe fees and it's free.

D (27:45)

There's something going on there behind the scenes with you and Apple. We won't talk about it. We don't want to get into it. So there's the fees. The swipe fees are higher. One wrong move and you. The aprs kick in. And then you get people the brand loyalty. I mean, this is incredible marketing. I think for something that's not a real product that you don't need in any way, like you don't need this.

B (28:05)

It really is. Yeah. No one needs one of these. Like, literally no one needs one of these.

A (28:10)

Right.

D (28:10)

It's nonsense.

B (28:11)

But I think it's also a sign of how much richer the rich are getting. That $900 a year is kind of like, okay, I feel like they're not going to lose a bunch of customers by raising it by 200 bucks a year.

D (28:23)

No, it's more status for those people.

B (28:24)

They could probably raise it to 2000 bucks a year and still keep half their customers.

A (28:28)

It's a version of what we see in so many spheres of people just scraping the upper middle class line of, you know, upper middle class people who feel like they can't get their kid into a good college anymore, people who their kid plays soccer and they have to do the travel league to get into the more el year of soccer. Everybody's kind of scraping to, to get quite into that next year and there's not enough room for everybody. And, and we see that with airport lounges and credit cards and everything else.

B (28:50)

In American society, it's all positional goods. If you want to get rich in America, just start selling positional goods.

A (29:07)

Foreign.

B (29:11)

Is sponsored this week by upwork. Scaling your business requires the right expertise at the right time. And with upwork, you can find specialized freelancers in marketing, development and design who are ready to take your business to the next level. Companies at every stage turn to upwork to get things done and find more flexibility in the way they staff key projects and initiatives. The global marketplace at upwork is filled with top talent in it, web, dev, AI, design, admin, support, marketing, whatever you need. Posting a job on upwork is easy. There is no cost. To join, you can register, browse freelancer profiles, get help drafting a job, post, even book a consultation. And from there you can connect with freelancers and you can hire them with ease. Upwork makes the entire process simpler and more affordable with industry low fees. So post a job today and hire tomorrow. With Upwork, visit Upwork.com right now and post your job for free. That is Upwork.com to post your job for free and connect with top talent ready to help your business grow. That's upwork.com upwork.com slate money is sponsored this week by Quince. The cooler temperatures are rolling in and as always, you can turn to quints for fall staples that are going to last. Cashmere, of course, but also denim and boots. Whatever you order is going to be high quality, that holds up and the prices are unbeatable. I am still, I have to admit, refusing to give up on the summer. It is still warm here in New York City and I am wearing head to toe linen. It's just wonderful. And the thing about linen is if you want it to last, it can be very expensive. Unless it's at Quince. Eventually though, I'm going to move into fall. And Quince has the kind of fall staples that you will wear non stop super soft 100% Mongolian cashmere sweaters starting at 60 bucks. They're denim, is durable and fits right. And their real leather jackets bring that clean, classic edge without an elevated price tag. What makes Quint different, they partner directly with ethical factories and they skip the middlemen. So you get top tier fabrics and craftsmanship at half the price of similar brands. So keep it classic and cool this fall with long lasting staples from quince. Go to quince.commoney for free shipping on your order and and 365 day returns. That's Q-U-I-N-C-E.com money to get free shipping and 365 day returns. Quint.com money but if you want to be comfortable in America, like not super rich, not like never need to worry about money, but like really comfortable in America, the best way to do that has historically been to win the Publisher's clearinghouse sweepstakes. It's $5,000 a week for life. I feel like this is the perfect amount of money. You know, it's not a billion dollar lottery jackpot. It's not like you're going to be living on a private island with your yacht. But it's you realistically just never need to worry about money again. And it's kind of the lowest amount of money that is you never need to worry about money again. And they've calibrated it perfectly. And loads of individuals across America have given up their jobs and been like, I don't need to work again. I'm getting $5,000 a week from Publishers Clearinghouse. I'm set for life. And then Emily, oh, so awful.

D (32:52)

And then after 60 years, Publishers Clearinghouse filed for bankruptcy. And now the company that acquired them out of bankruptcy is saying they're not going to continue to pay. Winners of the sweepstakes who won before April of this year, One guy, John Wiley, who talked to the press, talked to cnn, talked to the New York Times, who's been getting his $5,000 a week, and it comes in a lump at the beginning of the year, apparently $260,000 all at once. And he didn't get his check in January. He's been living off these checks for 12 years, and now it's just over. And I. I really can't believe it. It's just so awful to me, because this guy hasn't worked in 12 years. Like, he, you know, he's not very employable. He's not employable. He's 61 years old. Like, what is he going to do? AI is here now. He's screwed.

C (33:40)

I think we need to sort of back up on the basis that we might have some Gen Z listeners who don't even know what we're talking about.

D (33:46)

Oh, yes, good point.

B (33:47)

All right, Elizabeth, what or who is the Publisher's Clearinghouse?

C (33:50)

Publisher's Clearinghouse, when I was growing up, existed to disappoint small children because you would get a big envelope that would come to your house and it would say, you may have already won a million dollars. And you would take it to your parents excitedly and say, mom, dad, we might have already won. And this would happen probably once a month, and then you never win. But the business model was that they used it to sell magazine subscriptions, which sort of explains part of the reason why they're going into bankruptcy. And that was a core piece of revenue. So you would get these packages. The inducement that you might have won would cause you to open them, and then you would think, oh, yes, I do need 10 magazines all at once. And so that model just doesn't work anymore. But they were mostly known because they had a prize patrol that would come to your house with a camera crew and a bunch of balloons and an oversized check and knock on your door and say, you are the new Publisher's Clearinghouse winner. And people would see this and get excited. That's the background for this.

A (34:46)

So let me introduce a term to this, which is what this poor guy is learning about is something called counterparty risk, which was a key part of the 2008 financial crisis, which is a type of risk we take that whoever you're doing business with can't give you what they owe you. It applies in lots of different areas. So in the financial crisis, the situation was, you know, why did the government bail out aig, the big insurance company? Because they were afraid that if AIG went bankrupt, all its counterparties, which involves every insurance customer, every, you know, all kinds of customers all over the world, would no longer trust that they would be, you know, have the value of their insurance, and that was a big risk.

B (35:17)

So, Neil, what you're saying is that the $5,000 enough. Clearly wasn't quite big enough for these winners to be able to afford a financial advisor who could point them in the direction of credit default swaps on Publishers Clearinghouse that would have hedged that counterparty risk.

A (35:35)

That would have been an amazing trade.

C (35:37)

Well, apparently they used to buy prepaid annuities. Why did they stop doing that?

B (35:42)

To ask the question is to answer it.

D (35:45)

But maybe it's not the perfect amount of money, Felix, to get back to your original proposition, because clearly this guy and the other winners that they spoke to who are now don't have enough money or, you know, their income's cut off. They haven't prepared for this scenario. So my question is, if you win some kind of sweepstakes or lottery that's like a monthly payment or an annual payment, what are the steps you need to take to protect yourself from the counterparty risk?

B (36:08)

Assuming that you don't have access to credit default swaps on Publishers Clearing Nails.

D (36:12)

Assuming so.

B (36:13)

I mean, there is a market in these things, right? Like, I think that 12 years ago, it would have been possible for. For your man to find some kind of a financial institution that would buy those future cash flows off him for $2 million or something, and then he could put the $2 million in an index fund, and then he'd just be a normal rich person. But there's something nice about just getting that check every year.

A (36:39)

I mean, I gotta say, if I ever win the Powerball, one of the hard questions I'm gonna be asking my financial advisor I hire is in deciding between the lump sum and the cash flow. All right, what is the counterparty risk? There's.

B (36:49)

It's not a hard question, Neil. This is absolutely fascinating to me. I think it's been 16 years since anyone chose the income. Everyone always chooses the lump sum. Like, it's not even close. And partly that's because people appreciate that they have mortality risk, right? If you choose, you know, so much a year for 30 years and then you die after 10 years, it's like, well, fat lot of good those other 20 years worth of income is doing me. So they want all of the money now, but it's also just because the way it's structured is, like the most conservative possible investment. It's all in treasury bonds. And every single financial advisor will be like, well, we can do better than that. So that's what they do.

D (37:33)

So Always take the lump sum.

B (37:35)

There are very weird. If you're young and healthy and risk averse and believe that income tax is more likely to go down rather than up, then it's like there's a few kind of very weird corners solutions where like it might be possible to come up with a way why someone would prefer the income. But it's rare.

A (37:56)

Just add one more thing which is, you know, we're all taking on these kinds of risks more often in our day to day life than you might realize. You know, if, if you have a gift certificate to a store, you are ultimately an unsecured creditor of that company. You might not think of yourself as a creditor, but that's exactly what you are. And if that store goes bankrupt, your gift certificate is either worthless or you're somewhere down in the stack of claimants to get your money back. So it matters a lot when it's a quarter million dollar year annuity for life. You know, that's a life changing kind of situation. But we're routinely exposed to companies we do business with, whether you know it or not.

D (38:25)

Also, Publishers Clearinghouse is going to go on. And I thought, first I thought who would ever trust them again? Then I realized it's a free sweepstakes. There's no downs. Like it's fine. It's not like aig, right? We don't have to choose to spend any money or take out insurance from Publishers Clearinghouse Sweepstakes. We can still put our name in the hat and perhaps someone will show up at the door with a big check.

B (39:03)

Slate. Money is sponsored by Live it up, which is your opportunity to build healthy habits. This is something that does not have to be complicated. So one really simple habit you can get into is Live It Up Super Greens. It's an all natural blend of over 20 superfoods formulated with organic vegetables, probiotics, digestive enzymes. It's derived by nutrients nutritionists. It's third party tested for purity and it's designed to be easy on your stomach. I have a little tin of it on my desk. I take a little scoop. It comes with a scoop. I put it into a container. I zhuzh up the container with a little zhuzha frother thingy that they give me after adding some almond milk and it's boom. Simple as that. Easy habit. You don't need to mix it in almond milk. You can use water or, or milk or whatever you like. And this becomes a super healthy habit that you will look forward to. Live it up is offering you 15% off your first order, including subscriptions with code MONEY. Plus shipping's always free. So head to letsliveitup.com money and use code MONEY for 15% off your first super greens order. These statements have not been evaluated by the fda. This. This product is not intended to diagnose, treat, cure, or prevent any disease. We should have a numbers round. Elizabeth, do you have a number?

C (40:27)

I do. My number is 100. And that's dollars, and that's how much you have to pay for a ticket to an event called the Ultimate Fighting Bots UFB in San Francisco. And it's basically a robot fight club. This is part of a series of AI focused events. You know, just peak Silicon Valley. But the robots all have names and Personas and histories that come along with those. So it's kind of like professional UFC stuff.

B (40:55)

I feel like I watched this on the back of an airplane seat, like, 10 years ago. Like, it's like, in a big circle, and the little machines have, like, hammers, and they hit each other, and, like.

C (41:06)

Everyone designs them a little bit more complicated than that. Like, the events are really sort of decorated like a cage fight, and they're bigger robots, and they. There's one called Pewter Steel, after Pewter Thiel, and it wears a puffer and a necklace that says CEO on it.

B (41:21)

Are they, like, humanoid?

C (41:23)

Yeah.

B (41:24)

Okay.

C (41:24)

They also have a sort of, like, ring lady, which is a robot vacuum with an upside down mannequin leg and fishnets, and people throw money at it.

B (41:33)

I mean, I'm in favor of this. It sounds good to me.

D (41:36)

I like it.

B (41:36)

I'm thinking of BattleBots. I want to know what the difference is between this and BattleBots.

C (41:41)

Yes. Which is not nearly as exciting as this is. This event has, like, you know, neon lighting and techno music blaring.

B (41:50)

So I went to the tennis. I went to the US Open for the first time.

D (41:54)

I went to the tennis. Can that be something? Is that a title? Go on. I'm sorry.

B (41:59)

And it was totally, you know, neon flashing lights. There was a lot of, like, loud music and flashing lights, and, you know, it felt like a basketball game or something like that.

A (42:10)

This is why serious tennis fans don't love the US Open.

B (42:14)

I'll make sure to only go to Wimbledon from here on in.

D (42:16)

Did you get that drink the honey Deuce?

B (42:18)

I did. I got a honey deuce. It wasn't very sweet. It was nice. I liked it. Oh, all right, Emily, what's your number?

D (42:23)

Oh, my number is 2,000. That is the number of invitees to last year's Boston Marathon, who made it by running qualifying marathons that are at least 2,000ft downhill. There's a lot of controversy because to qualify for the Boston Marathon, you have to, you know, meet a certain time limit on another marathon.

B (42:44)

So wait, everyone who does the Boston Marathon has already run a marathon?

D (42:48)

Yeah, you have to qualify. You need a qualifying time. And they're different for various age groups and for men and women. But heretofore, people could run these specific marathons that advertise themselves as being, like, negative feet marathons. Like, you wind up running 2,000ft downhill, and that makes your running time, like, five, 10 minutes faster, which is important if you want to qualify. So a lot of people run these downhill races and they qualify for Boston, but all the other marathoners who don't run the special downhill marathon races are, like, that's really unfair. So this year, the Boston Marathon, like, changed the rules a little bit. If you, you know, run a marathon to qualify and it has a drop of like, 1500ft or more, you. They give you, like, a little penalty, stuff like that. So this is very controversial.

B (43:36)

It's like in golf, where you have, like, a handicap, they'll add another three minutes onto your time.

D (43:40)

Exactly. But then people point out, like, running downhill is painful and can really hurt your legs. So it's not so simple.

B (43:47)

My number is, you know, back in the day when everyone would be shocked at, like, the number of hours a day that Americans spend watching telly, My number is 165.5. And that is the average time that US men between the ages of 18 and 24 spend each day on YouTube. That's like getting on for three hours a day on average.

D (44:14)

That seems bad.

B (44:15)

And you know that a lot of US men aged between 18 and 24 spend zero minutes a day on YouTube. So, like, that means there's a whole bunch of them spending, like, six or seven hours a day on YouTube. What?

C (44:27)

It's wild how much of it is, like, podcasts that people just have on in the background.

B (44:31)

Yeah, I'm sure it's all very intellectually worthy material. Elizabeth.

C (44:36)

I wasn't suggesting that.

D (44:38)

What about women? Do you know the number for women?

B (44:40)

Yes, it's over an hour less.

C (44:43)

Whoa.

B (44:44)

The women are presumably on other networks, by which I mean Instagram. Neil, what's your number?

A (44:51)

I have two numbers to close this up. Where we started with the Federal Reserve, 2.875. That is the interest rate that Stephen Myron, the new governor, thinks ought to be the interest rate by the end of this year, we assume. And the other number is three, which is the number of public appearances Myron is doing in his first week on the job, which is something Stephen Myron.

B (45:10)

Man, he's blowing up the Federal Reserve conventions. How dare, dare he. Neil Owen, thanks so much for being on. It's been so great having you. We love you on the show. Thanks also to Jasmine Molly and Shayna Roth and Merritt Jacob for producing this. And thank you all wonderful listeners for emailing us on slatemoneyleep.com we couldn't do it without you. Thanks especially to the Slate plus crew who gets to listen to Listen to me and Elizabeth arguing about the boo boos this week. I have some extra news for you too, which is that if you want to listen to me and Elizabeth talking about the booboos, which you should, because you need to know about the booboos and why they encapsulate 2025 in the way they do, you can get an Apple exclusive two week long extended free trial of Slate plus if you just press Try three at the top of the Slate Slate Money show page in Apple Podcasts. You get it for free for two weeks and you get to listen to all of the Slate plus content across all of the different podcasts, not to mention all of the other Slate plus content on the web. If you're not an Apple listener, that's okay. You can visit slate.com moneyplus to get access wherever you listen. The Lebooboo episode is available for your immediate consumption right now and we will be back next week with more Slate Money.

D (46:45)

Slate Money is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Listen to Washington Wise, an original podcast for investors from Charles Schwab to hear the stories making news in Washington right now. Host Mike Townsend, Charles Schwab's Managing Director for Legislative and Regulatory affairs, takes a nonpartisan look at the stories that matter most to investors, including policy initiatives for retirement, savings, taxes and trade, inflation concerns, the Federal Reserve, and how regulatory developments can affect companies, sectors and even the entire market. Mike and his guests offer their perspective on how policy changes could affect what you do with your portfolio. Download the latest episode and follow@schwab.com WashingtonWyse or wherever you listen.

B (47:40)

Slate Money is sponsored this week by Saks Saks Fifth Avenue makes it easy to shop for your personal style this season. Fall is here, and there are so many new fall arrivals that you're going to want to wear again and again. There's a great new relaxed Prada blazer. There are Gucci loafers you can take from work to the weekend. It is incredibly Easy to visit Saks.com and find new arrivals from your favorite designers. I kind of love the shirts from Commes des Garcons. I can't always afford them, but it is definitely always there on my Inspo board. And once in a blue moon, I might even buy one. Saks makes shopping feel customized to you. They have in store stylists. They have Saks. Com showing you only what you like to shop. They will even let you know when arrivals from your favorite designers are in or when something you love is back in stock. So find inspiration for your personal style every day at Saks Fifth Avenue.