A (2:56)

Keeping step up basis.

B (2:57)

And then fucking incredible. Okay, I'm going to stop right there and I'm going to. This is clearly going to be the Jordan nerds out about tax cuts episode Jordan, why don't you give like the 32nd base explanation? I'm trying to be 30,000ft here and you're saying step up basis.

A (3:16)

I just, I can't. I just, like, I can't. With this tax cut. There's just so many horrendous things about it. So basically, like the way they're getting rid of the estate tax, right? Like you die, you know, if, right now, if you die and your state is worth Less than $5 million, you don't get hit by estate tax. This is a tax for multimillionaires and.

C (3:35)

Also stupid multimillionaires who don't know one pays.

A (3:38)

Okay, so they are on top. So they're going to initially raise the exemption to $10 million. So, you know, really, really rich estates, only the richest of the rich are going to get hit by this. But then eventually they eliminate it entirely. Starting in 2024, however, they leave what's called step up in basis. We've talked about, you know, capital gains taxes on this show. You're, you know, what basically it means is that step up in basis says that you are not responsible for the capital gains that your, you know, great Aunt Mildred would have owed if she had sold off her stock before she left it to you. You know, if you sell that stock, you, your basis, you know, your starting price is what you inherited it at. And that works today because, you know, the inheritance tax takes off some of that or the estate tax siphons off some of those old profits. Now if you die and leave your stock to your heirs, no one's ever going to freaking pay taxes on all of your capital gains over time. It just gets passed on totally tax free until it appreciates further and you can just hold stock forever and accumulate wealth. And that's how we end up with a stupid 19th century style bell epoch aristocracy in this country. And that's just one little part of this tax thing. And that's not even the important part. The important thing is the giant corporate cuts. But this is, this is the state that this thing has left me in.

C (4:58)

Okay, so I think, I think Jordan is gesticulating.

A (5:02)

Wildly gesticulating.

B (5:03)

Jordan has to go lie down in the corner. We're going to, we're going to come back to Jordan when we start talking about opioids, which I feel like he needs some of right now.

A (5:11)

Xanax. Xanax. I don't need opioids.

C (5:14)

Well, they also made value.

A (5:15)

That's true.

B (5:16)

Anyway, so the. Yes. So the tax cut, which Jordan apparently Doesn't like is mostly for corporations. And if you take the rest of it, which isn't for corporations, a large chunk of it is the estate tax, which is, you know, very rich, dead people. And then what's left is a smallish tax cut for everyone else which is like normal, you know, human beings. And there are, I would say like probably three winners for every loser. I don't know, it's complicated. But a bunch of people will see their taxes going up. A bunch of people see their taxes going down.

A (5:59)

A lot of. So when you say a lot of people going up. Early analysis just came out from Ernie Dadeshi. He's a former treasury economist who now is at a consultant consulting economic consulting firm. He's really good on this stuff. And his calculations have it with about 22 million tax units, which is basically households, 22 million households who make less than $200,000 will get a tax hike under this plan. And like keep in mind total households in this country is like 120 million of all, you know, and that we're just talking.

B (6:29)

It's still a minority, It's a minority.

A (6:30)

But it's like a lot of. Yeah, I mean that's, you know, still a bunch of people are going to be on the losing end of this. And that was just in 2018. It actually gets wor for individuals as it goes along. There are all these little like charming little details of ways they raise your taxes further down the line with inflation adjustments and phasing things out that initially give you a break and then later on won't exist. Anyway, sorry, please give me the value.

B (6:54)

Okay, so Jordan apparently doesn't like this tax cut and but the people who like this tax cut are corporations because as we've basically worked out, the lion's share of this proposal is devoted to cutting the corporate tax rate from 35% to 20%. That comes with a few welcome loophole, not eliminations, but closings. Like they're starting to tax offshore funds. They are starting to reduce the tax deductibility of interest. Yay. But the big picture is this massive trillion dollar tax cut for corporations. And so Anna, like if I am in management at a corporation or if I'm a shareholder of a corporation, does that mean I should be happy about this? Unlike you know, contra Jordan?

C (7:52)

My guess is for in many industries probably yes. If you're say in real estate, probably not so much. But yeah, I mean I think that my guess is this will be one of those things that most, most companies are probably going to be Pretty happy about. Although I think people are probably going to be questioning whether what's actually going to be the. How this is actually going to play out.

B (8:16)

So. Okay, so, like, this is not a political podcast. And we, you know, I'm, I'm trying very hard not to get into sort of like horse racy, sort of like, you know, what are the odds that this will pass in its recent form kind of stuff. But, Jordan, just like, very big picture. Can we more or less assume that the Republicans will be able to pass something?

A (8:39)

Yes, something. I mean, like. So you mentioned real estate, right? I actually think that's going to be one of the central battles in this whole thing. One of the ways they're paying for this is that they are capping the mortgage interest deduction. You know, right now you can deduct interest on up to a million dollars of debt. They want to lower that cap to 500,000, which on its own is not such a bad policy. You just have to keep in mind what that money is going to pay for, which is big corporate cuts. And there are other things in this bill that would hit the housing market, potentially lower prices. And so already home builders have come out against it and realtors. And so that's one of the most powerful interest groups in the country and have been for years. And so you're setting up this battle between the Republican Party trying to behave this big corporate cut and the entirety of the housing industry and maybe homeowners, a lot of homeowners, I mean, not, you know, not every person who owns their house wants to see prices appreciate because property taxes.

B (9:33)

And not everybody who owns their house deducts their mortgage interest payments anyway.

A (9:37)

No, but they still care if they're, I think a lot of them, even if they don't deduct, they still care if housing prices in general fall. And you can argue about the extent. I mean, the bottom line is we don't really know the extent to which this would cause prices to fall. But we kind of directionally have a sense.

B (9:53)

Well, we directionally have a sense that housing prices have gone up enormously just in the past 12 months. And, you know, if they go back to where they were a year ago, I don't think that would be.

C (10:04)

Well, my guess is, honestly, this is gonna have very little impact.

A (10:08)

Well, unless you were one of the people who bought in the past 12 months and suddenly you're locked in. You know, I mean, this is.

B (10:12)

Nah, not really. I mean, like, house prices go up and down and like, you can say that it's because of tax codes.

C (10:17)

I guess I just always wonder how much people's behavior also is also impacted by some of these changes. Like in the 80s when they reduced, you could no longer deduct like credit card interest. It's not like people stopped using credit.

A (10:27)

Cards in the 80s after tax ref reduced a lot of the advantages for real estate. We ended up getting a real estate driven recession partly. Like so it's like. Yeah, but I, yeah, I mean, which is kind of amazing that like Donald Trump doesn't remember that because he gave a testimony in Congress about how that tax reform bill had like screwed up everything.

B (10:44)

Jordan Jordan, by the way, is a homeowner who itemizes.

A (10:47)

I literally, here's, literally I tweeted earlier that so I should probably full, full disclosure. As a upper middle class urban homeowner who has considered adoption before, at some points this bill does feel like a personal. They are getting rid of like the adoption tax credit among other. And the student loan interest deduction. You know. Anyway, the thing about. Okay, so I want, let's talk about the corporate tax cuts like what they are supposed to do. Right. Because this is like the center of this whole, this is the central claim Republicans have made, which is that if you cut corporate taxes that will lead to a surge in investment by companies. And that is supposed to, you know, increase workers wages.

C (11:24)

Yeah.

A (11:24)

And it's just, and there's like there are economic models. You can, you can make an economic model that shows this. And the idea is that you invest, you build a factory, that means there's more capital. That means there are higher skilled jobs and workers get paid more.

C (11:35)

Right.

A (11:35)

And there are, there are model, academic models that show this and there is even some empirical research that suggests again, directionally this is the case. But what the Trump administration has done and what their, you know, their chief economist, his chief economics adviser Kevin Hassett has done to say, we can guarantee you that in like eight years you'll have making $4,000 more a year or even $9,000 a year.

B (11:58)

Let's, let's put aside that kind of rhetoric about Kevin Hassett. CR yeah, it may or may. It will probably like intuitively it is true that if corporations make more money then some of that money will wind up going to their employees. Perhaps it probably won't be nearly as much money as the Trump administration likes to say. But what is undoubtedly true is that if you cut corporate taxes, then corporations will make more money. You know, and corporations are owned by capital rather than labor. So this is basically a gift to Capital.

C (12:30)

Yeah. And I think that going back, I think that, you know, if this were actually looks like this is going to pass, I do think that the markets would respond well to that. But do I think in the long run this is actually going to lead to any economic improvements? Like just. Absolutely not. There is just so little evidence to show that that is actually the case. And in fact, a wealth of empirical evidence to show that. Although there is just, I mean, if you look at what happened in Kansas, like, which I realize is an extreme example, and it's different. We'll talk about that later. Right.

B (12:59)

But so lovely listeners, what happened in Kansas, this is a very oblique way that Anna is referring to today's Slate plus segment, which is all about pass through income. And if you want to understand what happened in Kansas, then listen to the little Slate plus segment at the end of this show. So. Yeah. So slate.com moneyplus for all of those of you who aren't already slate plus subscribers and who really want to learn about pass through taxes, but putting Kansas to one side. Wait, what were you saying about Kansas?

C (13:34)

Just, just, I think that this, we all know that the idea that these tax cuts are going to pay for themselves, that they're going to pay for themselves and growth and ultimately like that will then also be good for corporations, I just think is nonsense.

B (13:47)

Right. And I don't think that, I feel like most tax cuts don't pay for themselves. It's almost impossible to find a tax cut which does pay for itself. So fine, we're going to have tax cuts. It won't pay for itself. That would be true of any tax cut, whether it was corporate or income tax or anything else.

C (14:05)

Right. But if you're doing a tax cut because you think there is going to be some significant benefit, okay, it doesn't entirely pay for itself, yet it leads to something else. But this, I'm still a little unsure exactly why we're doing this because I.

B (14:19)

Don'T think we're doing this because Republicans are the.

C (14:21)

Yeah, I mean, I get it. It's because Paul Ryan has been talking about this since he was like utero, like, but, but again, I think that this idea that wages are, have been low because corporations don't have sufficient profits makes.

A (14:36)

No, no, it doesn't. And, but I mean, and if you look at corporate profits as a percentage of the economy, they're historically high right now. I mean, they've been for a while, actually ever since the recession really. But there is a part of the conservative establishment and respectable economists who look at these models, these economic models that say if you lower corporate rates, you can expect this kind of a surge of investment. And it's actually for a long time that was almost orthodoxy to some extent. And the bottom line is once you drill down into them and you start looking at the assumptions that underpin all of that thinking, it starts to look a little bit absurd. Like one of the mainstays of these models is that the US Economy is a small open economy, which getting too much into the weeds essentially means our economy looks like Israel's. Like, that's like, that's kind of like the assumption that you're making that like your borrowing doesn't really affect the international markets anyway. Like, and it gets, it just gets kind of crazy. You're like, oh, okay, none of this actually makes that much sense. We can, it's just handing gobs of money to capital or saying come here, like, isn't actually necessarily going to, you know, do what Greg Mankiw thinks it will. And so there has been like a, there have been respectable Republicans making arguments for this kind of policy for, you know, decades now, and they're finally seeing it come to fruition. That's why we're doing it. Right.

B (15:58)

And yeah, this is, the Republican Party has always been very business friendly. This is what business wants. And now business looks like it's going to get what it wants. This is what happens when you have the Republicans control, you know, both the White House and both houses of Congress. You know, I have some hope that, you know, maybe the blue state Republicans might be able to derail some of this because of the state and local tax deduction, but I think it's slim. I think my base case is that they won't and that something very similar to this bill will actually wind up getting enacted.

A (16:33)

I also, I just want to for a moment try to like channel Kathy here a little bit, you know, which is why do you really worry about this? Is it, is it that's going to blow up the deficit? Not really. I mean like, long term, I am not a deficit hawk. This is not new. Good for it. I mean, do you, you know, this is not good for it, but that's not something to tear your hair out over. Do you worry about this because some middle income families are going to get tax hikes? Yes, you do worry about that. That's not a good thing. I personally will be unhappy, but we noticed. But like, that's obviously an issue, but fundamentally it's just concentrating more wealth and power at the tip top of the economic pyramid. And that's honestly part of the worries me is just you are further just you are just money is power and you are handing more money to the most powerful people in society. And we have seen what that looks like over the past decade. And this is just or two decades. And it's only going to exacerbate that and it's only going to warp us socially and politically further.

B (17:32)

Okay, so now that we've decided that the rich and powerful are going to become even more rich and even more powerful, let's talk about the poor and powerless who are being exploited, who are being exploited by the rich and powerful. The one of the richest and most powerful families in America is the Sackler family, who have a net worth of something in the region of $13 billion. And a very large proportion of their $13 billion has come from one drug, which is OxyContin. And they are making billions and billions of dollars off this drug, basically by looking the other way when millions of relatively poor Americans die from drug overdoses and they have blood on their hands. And this is the subject of fantastic New Yorker article by Patrick Rudden Keefe and various other articles. And it's not like this is the first time this has been written about, but it's probably the most exhaustive treatment of it and it's worth reading. But even if you haven't read it, Anna is here to talk about it a little bit. And what's the main sort of thing you learned from this?

C (18:57)

I mean, I would say two things. One, you know, it's not just that they're looking the other way. I mean, from even earlier on, when, you know, previous drugs that this family was connected with, like Valium, their whole business model is essentially based on finding a very addictive drug that they, they know is addictive and then trying to convince people it's not, and then just reaping tremendous profits from this. And now they're doing the same thing. And then on top of that, part of what they've been doing is getting a lot of specialists, experts, clinicians to convince doctors that it's okay to prescribe opiates. Because it's important to remember that part of the reason for a long time doctors were very averse to prescribing these drugs is because they're very highly addictive. And so this is where I actually think the article was really interesting and kind of tied together the philanthropy because look, we all know that often a lot of philanthropies are the result of, you know, pretty Lousy practices that created a lot of wealth. That's not a new thing. What I found really interesting here is that you could also. You could almost see the philanthropy as being very tied to the business itself. They endow many chairs at, you know, medical schools at this kind of thing, that they're using their philanthropy also in a way to a kind of get these type of experts who will then support the promotion of these drugs.

B (20:15)

And let's be clear about the real innovation that the Sacklers came up with and which made them multibillionaires was not so much a medical innovation after all. You know, opium has been around for millennia, but rather a marketing innovation. The Sacklers were way, way ahead of the curve in realizing that if you placed certain kinds of advertising in certain kinds of medical journals, you could basically treat the prescribing doctors of America as your sort of target audience and persuade them that, you know, what they thought was false, that, in fact, codeine is not addictive, and all of this kind of stuff, and it works. And the. They were then, they were very good as well at just, like, looking at doctors who prescribed lots and lots and lots and lots of these pills. And instead of reporting them to the authorities for doing something illegal, which, you know, people did do, and doctors have gone to jail for being. For overprescribing oxycontin, they've just considered them to be like these wonderful whales who should. Who they should sell more to.

A (21:26)

Literally call them.

C (21:27)

Yeah, yeah. And when you look at the relationship with doctors, I really think it's interesting because, again, most doctors, of course, you have, like, your. Your criminal doctors, but the vast majority of doctors want to help their patients. That's why they become doctors. And when you're dealing with patients who are in chronic pain, it's very hard. And so I think this is. Again, the company is taking advantage of this. And then I think it's really. Again, it reminds me of if you're looking at, you know, drug kingpins, who. It's the guy on the street who goes to jail. The drug kingpin does not. And to me, if you look at some of the practices of this family, I'm having a hard time distinguishing this.

B (21:59)

From, you know, and this is actually explicitly in the article, that what has happened in the past couple of years is that the people who became addicted to OxyContin have now, in very large numbers, switched from OxyContin to heroin. Because it's less expensive? Well, no, partly because it's less expensive and partly because the patent on OxyContin was running out, so they reformulated it to get another 13 years of patent. And the reformulated OxyContin couldn't be crushed up and snorted in the way that the old one could. And so now everyone is just turning to heroin instead. And it turns out that the methods of the heroin dealers, who are largely Mexican, are almost indistinguishable in many ways from the methods of Purdue Pharmaceuticals, which is the Sackler owned company which is making OxyContin.

A (22:56)

So I want to try to actually take the big picture view here, which I know after just going into the minutiae of tax reform, maybe not what's expected for me, but there are a few things that this article kind of brought to mind for me. One is that the story of OxyContin is not isolated in American history. Right. And this is kind of what they get at partly Purdue did this with Valium, right? They got doctors to prescribe.

C (23:23)

Sackler family did.

A (23:24)

Or yeah, sorry, yeah, the Sackler family got them to doctors to prescribe Valium, even though it wasn't necessarily a good idea. Tranquilizers and got people hooked on them. And in the 70s and 80s, there was a panic about tranquilizers, not totally dissimilar from what's happening today. And if you go further back in American history, you know, amphetamines were essentially legal for a very long time, and lots and lots of people were tweaking out all over the country because they were a legal drug. And this is. This pattern is that we've always cracked down on very hard, on illegal drugs that poor people use from marijuana starting in the 20s, when that was the drug we associated with Mexican immigrants while always having some sort of, you know, legalized narcotic out there. And like, there's always been ways for companies to peddle it through whatever regulatory process exists or doesn't exist. And so this is just a continuation of that story in my mind. The second thing is you're saying that the Sacklers sort of recognized or were innovators in marketing, and they realized that doctors wanted fundamentally to help their patients deal with pain. I think what they also just noticed, another way to put it, is they notice a lot of rot in the medical profession and that there are lazy doctors out there who are willing to take a. Who are willing to take a pharmaceutical rep's word for it when they hand them just, you know, a paper saying this drug is okay, which, oh, by the way, it may or may not say in the, you know, note at the bottom that this was funded by Purdue Pharmaceuticals, you know, this and that's, you know, and they were able, as a result of that, they were able to create this marketing machine where they would fund research and pay doctors to be speakers on their behalf. And then that research would infiltrate. It kind of would flow into the medical community and these speakers would appear at conferences and then more doctors would be, you know, who weren't willing to go and you know, kind of think twice or double check these claims, you know, would start prescribing and it just became normalized.

B (25:17)

Well, one of the problems is that no one ever likes to print negative theses. If you subscribe to Nature or Science or, you know, any kind of medical journal, what you're not going to see is expensive, elaborate, double blind, peer reviewed studies on OxyContin and other opioids and whether or not they're addictive. Because, you know, the what. Because those studies have been done and they have been published by Purdue and no one wants to replicate. There's this replication crisis in all of science right now. And if we had had a little bit more in terms of attempts to replicate the findings that Purdue found and if those attempts to replicate had all obviously failed because it now seems that they were just more or less made up, maybe we wouldn't be here right now.

C (26:18)

And I'm. Yeah. And again, I'm going to push back a little bit on the doctor claim and full disclosure. Like, my father's a doctor. Many people on my dad's, my mother teaches doctors. I'm more saying that just because like, like I know when you do talk to a lot of doctors and they have dealt with patients with chronic pain, like, I really do think that that has been an issue. And I do think when this drug came out and all of a sudden then you had all these people saying, we have this new wonder drug, you can give it to your patients, they're going to feel so much better. It's not addictive. I really do think that that was more the doctors or the Purdue Pharmaceuticals taking advantage of, taking advantage of these doctors trying to do the right thing. I'm not saying that there aren't bad doctors.

B (26:59)

Of course there are bad doctors, of course. Like, but there was this thing, I remember it wasn't that long ago, sort of 15 years ago, something like that, where everyone started talking about the pain epidemic and suddenly pain became like the hot topic in medicine and everyone's, it became top of mind in the way that it never had been before. And now with hindsight it looks really obvious that all of these stories about the pain epidemic were in some way or another of part of this big Purdue marketing campaign.

C (27:34)

And to a certain extent, yeah, I mean, it does seem very similar to, if you look at what happened around the, like, stress epidemic when they were first marketing Valium. I mean, yes, I do definitely think that there is this assumption that, you know, this is what people are struggling with. And so then you have doctors responding.

A (27:50)

Yeah, it just, it's so frustrating too, because this is the kind of stuff that, that just totally undermines any faith in the medical establishment, which we now. Which has, which has collateral consequences. We see that in people now no longer vaccinating their kids because they don't try. If you talk to people like this online, they'll say, well, you know, why should I trust the fda? They're the people who gave us like, oxycontin. And lo and behold, that's not a bad. I mean, it's hard to respond to that when it turns out the guy who approved oxycontin at the FDA left his job not long after, went through the revolving door and took a job at Purdue. I mean, you are looking at obvious. I mean, that's as close to obvious corruption as you can get. I mean, you don't know if there was a quid pro quo there or not. I'm not libeling anyone, but that certainly looks. And so it's just this eats at. This has, you know, it's created a public health emergency in multiple ways. It's not just the opium epidemic or the opioid epidemic. It's a crisis of public faith. I think it's contributed to.

C (28:54)

Yeah, agreed.

B (28:55)

Ok, so we have a new Fed.

C (28:58)

Chair who's kind of like the old.

A (29:01)

Fed chair, Jerome Jay. Jay.

B (29:03)

Jay Powell. I mean, so okay, on the one, this is a fascinating story to me.

A (29:11)

Because the accidental Fed chair.

B (29:13)

Yeah, number one, he kind of got appointed by accident. And there's a great little Twitter thread about this. But like, the fact that he even got nominated to the Fed at all was kind of random. And now he's the chairman and no one can seem to find any particular reason to object to him. Qua Vega. He seems to be rather sort of dull and unobjectionable and will probably just continue doing more or less the same things that Janet Yellen was doing. The big objection here is that if you're going to keep on doing the same things that Janet Yellen was doing, then the whole point about central bank independence is you re. Nominate Janet Yellen. There's this incredibly strong norm that if you don't have a major objection to the central bank Fed chair, then you re nominate that person because the central bank is Fed chair is not a political appointee.

A (30:09)

Yeah. And this really seems to have been like a Steve Mnuchin job. Like it was apparently. According to Bloomberg, Trump was really close to renominating Yellen. And it's not hard to figure out why. He's looking at the stock market and it's like, holy shit, it's going great. I can brag about this on Twitter every day. Whenever something's going wrong, just talk about the stock market. I might as well don't mess with a good thing. And then Mnuchin is like, you should put your own stamp on the Fed, quote, unquote. And I think. And so that's. And somehow he convinced Trump that he didn't need to bring Yellen back and that he should have somebody else. And Powell became his favorite. And this is Steve Mnuchin was apparently pushing hard for him. And the, the only reason I like, the only reason I can think of, aside from the fact that Powell is a Republican nominally, is that so was Ben Benanke. Yeah. Yeah. I mean, the only reason I can think of is that Powell is less. Is a little bit more in favor of deregulation than a little bit, a little bit more. Like he thinks that you could kind of rethink the Volcker rule. There are some aspects of Dodd Frank, he's criticized, but even that is not, I think, a great reason, because yes, the Fed chair sits on what's called the Financial Stability Oversight Council. And they play an important role in the reg. In regulatory decisions. They do things like identify non bank institutions like AIG for instance, big insurers that could threaten the financial system. So they play it. That plays an important regulatory role. You get a vote there. But there is a different vice chair on the Fed that handles regulation. And they nominated their guy. His name's Randy Quarles. And so it's not even clear that you really need, you know, Jay to be there to deregulate the banking sector.

B (31:46)

Here's something that Randy Quals and Jay Powell have in common, in contrast to almost everyone else on current and past Fed boards, is they're both unbelievably rich.

C (31:58)

Yeah. I mean, this is actually like, apparently Donald Trump only likes hiring white investment bankers.

B (32:04)

It's not even, it's just any. If you're really, really rich, if you're, you know, Wilbur Ross or something, he Just, he just trusts you more. And Janet Yellen is not poor. She's married to a Nobel prize winning economist. She has over $10 million.

C (32:18)

She just net 55 million.

B (32:19)

But Jay Powell has like 100 million. Randy Qualls probably has more than that. There's something about the sort of centi millionaires like Steve Mnuchin who love to appoint each other, prop each other up.

A (32:36)

I have a question for you guys. Jay Powell, until five years ago, according to people, the Fed really knew nothing about monetary or monetary policy or macroeconomics. He's had to learn on the job and he's tried hard apparently.

B (32:50)

And he's not an economist and that's kind of interesting. He's the first non economist to be Fed chair in a long time.

A (32:56)

Yeah, since Paul, Paul Volcker actually had.

B (32:58)

Some training but he, Paul Volcker was an economist. He didn't have a PhD but he was an economist.

A (33:04)

My question is, is there a potential benefit, you see to the fact that this guy was in private equity, was in investment banking, he did have a stint at the treasury, that he does probably understand financial markets really well and actually was involved at the Fed. His job has been to monitor the really boring shit like payment systems and things like that that are kind of nuts and bolts of the system. So the fact that he does have that background, do you guys see any actual potential benefit there?

B (33:31)

Yes. And we saw this in 2008 and Ben Bernanke spent the entire crisis dealing with cross border capital flows, swap lines with other central banks, liquidity concerns, all of this stuff which was nothing to do with short term interest rates and was everything to do with the nuts and bolts of how money moves around the world. And if you understand that and you have a career which has been in then. Yeah, I mean this is the same reason why people wanted Larry Summers to be Fed chair instead of Janet Yellen. Because like you have that sort of, you're a little bit better placed in event of a crisis.

A (34:15)

There's also, there are two parts of dealing with a crisis if you're a Fed chair, right, there's the part you're talking about, Felix, which is the kind of the mechanics role, right, like how do we fix shit. But then there's also the interest rate decisions and you know, at some point during the financial crisis became clear, just, just drop them as far fucking down as we can, you know, get to zero. And if we can't do, if we can't go below zero, let's start buying bonds left and right, you know. But there's, you know, in the lead up to the crisis, the Fed screwed up its decision making on whether to hike or whether to cut in early 2008. And even right after Lehman, they really were still kind of worrying some right before Lehman and some people. LAUGHTER Were still worrying about inflation more than they really should have. They were getting kind of blinded by the rise in energy prices. And Janet Yellen, to her credit, was one of the people saying, I think there's a credit crisis coming. We should probably cut and try to head that off or we could be in for a nasty recession. And that was one of the, you know, it's so there. I guess that's my thing is like Jerome Powell has so far in his monetary policy career gotten by such that. It is such that it is. Has gotten by. By imitating Janet Yellen. So what happens when he's the guy in charge? Will he be able, you know, will he still just take her advice? Will she still be there?

B (35:31)

No, she won't be there, but she could stick around.

A (35:34)

I hope she'll stick around.

B (35:35)

She's not going to stick around.

A (35:35)

I really want her to stick around. Janet, if you're listening, stick around, please. Janet.

B (35:39)

She's not going to stick around. But what is going to happen is a continuation of a big change in Fed leadership where you can basically see this change happening from on the one hand, you had the Volcker Greenspan years where you had the maestro in charge and the Fed chair was this incredibly powerful, an important person, and then Greenspan leaves, is replaced by Ben Bernanke, who's extremely collegial, who used to be like the head of an economics department. And there's nothing more like herding cats than running an economics department. And he just brought everyone around the table and said, hey, guys, let's make a collective decision here. And Janet Yellen has continued that tradition and it's pretty obvious that Jay Powell will continue that, that tradition and that the Board of Governors of the Federal Reserve really is a board of Governors of the Federal Reserve. And yes, it has a chairman, but the chairman is not really in charge of interest rates. It's the board and will continue to be a collective decision.

A (36:48)

I think you're pre. I think that's probably correct. And it also makes me a little bit nervous because Trump still has more people he can nominate. And so on the one hand, he has nominated a relative dove in Jerome Powell to head the Fed and that that's good, but he has lots of people around him who want to nominate hawks and there's definitely a push right now to nominate John Taylor, who we've mentioned a couple times on the show, to be like vice chair or something. And so part of me worries is worried that, let's say Janet Yellen does leave. Like she just says, screw it, I'm going back to California. Finally. I'm going to chill in Berkeley. You know, you could have Trump just like taking his eye off the ball, listening to Mike Pence, just nominating other, other governors who are more hawkish on interest rates. And suddenly you'll have Powell, who is clearly who, again, not a PhD economist, sort of at the mercy of his staff, maybe potentially influenceable by the people around him, surrounded by people who want to raise interest rates.

C (37:46)

And I do actually think this is important because we are like, look, we are do a recession. Everybody knows this. And Janet Yellen is someone who always in some sense prioritized, you know, trying to keep unemployment low, to which sometimes I think angered a lot of Republicans. And there is a little bit of a concern. Again, if you have someone who's kind of a, not a non entity, but not the strongest personality leading and you start to get more of those other figures. If we do move into a downturn, what the response could be?

B (38:15)

Numbers round. Yes. Okay, I'm going to start this one because it's a clean segue from the last segment about monetary policy and unemployment. My number is 5.5 and 5.7% is the unemployment rate for Americans with less than a high school education. Americans who haven't even managed to graduate from high school. Their unemployment rate at 5.7% is the lowest it has ever been. It's like the numbers go back to 1992 and it gives you an indication of just how tight the labor market is and how successful Janet Yellen has been at bringing unemployment down.

C (39:04)

Agreed. So my number is 1.2 billion because it's November 2017 and we all know what that means. Pitta Visa had to make their bond payments.

B (39:17)

They're making one more payment.

C (39:19)

No, they just did. So they actually had two big bond payments. One was late because they said they didn't know who to like, like which bank to pay.

B (39:26)

Venezuela has finally, it looks like it's the end of the road and they're finally defaulting. I mean, you thought that Argentina was a slow train crash. This one is like the world's slowest, the slowest train crash of all time. About three years after everyone thought they would default, they're finally getting, they just keep going.

C (39:45)

And granted, they have not defaulted yet. Maduro did come out and make this weird statement about he's creating a commission that's going to look into restructuring and it's headed by his vice president who people think it's involved in drum track, I think. So this is, this is going to be a super successful commission. But yes, I just thought it was interesting that they did actually make their payments. I think these are the last payments.

A (40:05)

My number is $7290. That's how much one bitcoin is worth right now. The price of bitcoin is just like surged since the CME Group, the Chicago Mercantile Exchange, you might know it as announced that they would be allowing people to trade bitcoin futures.

B (40:27)

Well, they're saying that maybe they hope that they might be able to do that by the end of the year. And they're the second futures exchange to say that they hope that they might be able to do that by the end of the year. We will see whether this buzzes the cftc.

A (40:41)

But if that happens, bitcoin's a real thing, right? At that point, it's time for all the doubters to admit we were wrong. I mean if there are bitcoin futures on cme, it must be real, it.

C (40:55)

Must be a great ide.

A (40:57)

They wouldn't have been doing like tulip futures back in the day, would they? Anyway, anyway, this is the story goes on.

B (41:03)

So if you have bitcoins, well done, you're rich. And I think that's it for us this week. Thank you for listening to Slate Money. Do listen to Mum and Dad Are Fighting, which comes out on Thursdays with Gabe Roth and Rebecca Lavoy and Carvel Wallace and talks about parenting and that's, you know, and they'll answer your questions. So if you're a parent, go listen to that, ask some questions, get your questions answered. Also send us your questions. This is an important thing. We are going to have a big Q and A edition of Slate Money at the end of the year and we want to rack up a long list of questions which we can answer for you. So anything you want answered, send it in to slatemoneylate.com and although you can ask us your questions by emailing slatemoneylate.com it would be even better this being an audio show if you did that by voicemail. So call us on 347-960-6314. That number will be in the show notes, but give us a ring on that and ask us your questions and we will answer them. 3, 4, 796-06-6314. Also come along on November 15th to the bell House in Brooklyn for the Food edition live with Francis Lamb and James Truman and the three of us. It's going to be delicious. Many thanks to Dan Schrader and we will talk to you next week. Week on Sleep Money.

A (43:01)

I put you on an a.