Why is Trump throwing money at the Argentine peso?

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1:59In Los Angeles, I'm Kyle Rizdahl. It is Wednesday, today, the 22nd of October. Good as always to have you along, everybody. You know, when we do stories about the foreign exchange markets, currency trading, in other words, it's often about the euro. Sometimes the Japanese yen or the British pound, much less frequently the Chinese yuan. Almost never the Argentine peso. Nevertheless, that is where we find ourselves today as the Trump administration tries to prop up President Javier Malay ahead of midterm elections down there this weekend. The White House, President Trump says, wants to buy more Argentinian beef, for one example.

2:37And the United States is putting as much as$40 billion on the line to prop up the peso, which has lost half of its value since the beginning of the year. Marketplace of Subrit Beneshore gets us going with the foreign exchange law of supply and demand. The Argentine peso is in trouble because people do not want it. The currency is woefully overvalued. Mark Sobel is U.S. chair of the official Monetary and Financial Institutions Forum. And the market has lost confidence that the value of the currency is sustainable or tenable. A bedraggled peso is a problem for Argentina's government, which is about to face an election.

3:20If the peso falls, there'll be an uptick in inflation in Argentina. Brad Setzer is a senior fellow at the Council on Foreign Relations. The price of imports will go up. The price of all things will go up. That's good if you're trying to win an election. So the way you prop up a currency is by going and buying a bunch of it. When you buy something or when you bid on something, the price tends to go up. And that is what the U.S. has been doing in a very unusual move, just buying pesos. The U.S. has had to spend a decent amount of money. Estimates are close to a half billion, maybe more. And it hasn't actually had that much of an impact on the currency.

3:59So the U.S. Treasury is throwing more dollars at the peso, up to 20 billion more, using something called a currency swap. Where you exchange one currency for another. Arturo Porzikansky is a research fellow at American University's Center for Latin American and Latino Studies. The basic idea is Argentina gets dollars that it can then use to buy pesos, propping up the value. The U.S. gets to hang on to a bunch of pesos, which it doesn't actually need. And at some point, Argentina pays back the dollars. And that is where the risks start to come in. There's repayment risk. We're not going to get repaid everything that we're owed.

4:38Steve Kamen is a senior fellow at the American Enterprise Institute. Argentina is a serial defaulter. It's defaulted many times. And it owes far more money now to other agencies, especially the IMF, than it can repay. And if Argentina's currency continues to fall, the U.S. is left with a bunch of pesos that aren't worth what it paid for them. In New York, I'm Sabri Beneshior for Marketplace. On Wall Street today, stocks were down, gold was down, dollar was pretty much steady, oil was up. We'll have the details when we do the numbers.

5:29If you look at the stock market right now, and then you look at the broad economy, you're probably thinking a couple of things. First among them, of course, should be that the stock market is not the economy. I believe we've gone over that. But also, you're probably thinking, what is happening? Even with all the uncertainty around tariffs and the government shutdown and a cooling labor market, the major indices are near record highs. Here's one big reason. I think it's a misnomer to say the S &P 500. I feel like there's the S &P 490 and the S &P 10. That's Scott Galloway, podcaster, also a professor of marketing at NYU, and a conversation with me on his podcast a couple of weeks ago.

6:11The S &P 10, that's what we're going to talk about for a couple of minutes here. The 10 biggest companies in this economy, NVIDIA, Apple, Microsoft, Amazon, on down the list, they account for a disproportionate percentage of the S &P's total return. NVIDIA alone is responsible for about a quarter of it. And the story there comes down to pretty much one thing. The trend that we see in an AI investment. Ronnie Sotka is a professor of finance at Boston College. There is a ton of money going into artificial intelligence. J.P. Morgan figures AI investment contributed as much as 1.1 percent to economic growth in the first half of the year, which is, and this is important, that's more than consumer spending contributed.

6:55Investing in the technology. That's one part. And companies that are going to support the technology, data centers, you know, material, or is it investing in the end users? For all of that, though, there are still a whole lot of unknowns. People are trying to always understand a little bit better the entire supply chain. I do think that people also are sounding some alarm bells about what AI can do and what it cannot do. Some alarm bells about whether just maybe the market is overinvested in AI. Even Sam Altman, the CEO of OpenAI, the company behind ChatGPT, said this summer, we're in a bubble.

7:37I keep thinking of the Bugs Bunny cartoon where the guy goes off the cliff and he doesn't fall until he looks down. We're over the cliff, especially with AI valuation. Gary Marcus is a psychologist, emeritus professor thereof at NYU. He has been working on machine learning for decades, and he is a longtime skeptic of AI's economic promise. It's really fun being me right now. And, you know, people are like, instead of thinking I'm the Grinch of AI, which somebody once called me, now they're like, wow, you were really courageous standing your ground. And now we see what you meant. We got the Grinch.

8:10We got the Roadrunner. We got Wiley Coyote. We got everybody. Even if Gary Marcus is right and the AI bubble bursts, a lot of money has been made and spent. Construction workers hired to build all those data centers, concrete poured cloud infrastructure purchased. Now what we're seeing is big cloud companies, Google, Microsoft, Amazon, investing in businesses going downstream, and then OpenAI, you know, buying NVIDIA chips, and NVIDIA investing in OpenAI, and it seems to be a little bit circular. David Gary Witter is at the School of Information at the University of Texas, Austin. Microsoft, along with Google and Amazon, are cloud providers.

8:46So they're the ones selling the proverbial picks in the AI gold rush. If AI turns out to be a bubble that pops or deflates, they've still made bank in the process. It will be interesting to see what the fallout is, what the blast radius is. Who's going to lose money then and how much is it going to affect society if that happens? AI skeptic Gary Marcus one more time. I will not be surprised to see six months or a year from now if people start saying it's too big to fail and there's some kind of bailout. Like, that wouldn't surprise me at all. Too big to fail. Sound familiar? Anyone? Anyone? We are going to dig deeper into that part of this story another day.

9:48That Argentina bailout is a pretty good example of how the Trump presidency is operating globally. But the White House has thoughts about operating in corporate America, too. The administration, as you've heard, has taken a 10 % stake in Intel. It's taken equity stakes in rare earth and lithium companies. NVIDIA is giving the government part of the proceeds from certain chip sales to China. Now, the United States has a long history of government shaping the economy. Industrial policy is one name for that. Another name under this president might be state capitalism. Mariana Mazzucato is the founding director of the Institute for Innovation and Public Purpose at University College London.

10:27She's also written extensively on industrial policy. Thanks for joining us. Welcome to the program. Thank you so much. Great to be here. So what do you think? Are we in the United States sliding towards state capitalism? Are we in it, do you think? Well, you know, when I wrote my book, The Entrepreneurial State, back in 2013, I argued that the United States has always had an active industrial strategy, but has pretended and not to have one. So they kind of talk the Jefferson talk, but act Hamilton. And at the time when I said that, no one knew what I was talking about, but thank God for the Hamilton musical.

10:59I was going to say, Lin-Manuel Miranda took care of you on that one. Exactly. And so I think what's super interesting now is that Trump is actually dismantling any form of industrial strategy that the US has had. So for example, the CHIPS Act had conditionality linked to it that those semiconductor companies that were benefiting would have to be good companies. They'd have to improve working conditions. They would limit share buyback. So reinvesting profits in. And that's the kind of stuff Trump is taking away. He's really eliminating all the safeguards that would actually help people and plan it.

11:30It does seem there is an element also of capriciousness in the president's policies. He has said, you know, I walked into this meeting with Intel and I said, I think we should have 10 percent of your company. And they said, OK, that does not seem to me to be a reasoned industrial policy. Well, so I argue that governments should take equity stakes because what happened in Silicon Valley, for example, is that the government made huge investments. Everything in our iPhone that's smart and not stupid was actually state funded. So the Internet, GPS, touchscreen, Siri. But we ended up socializing risks and privatizing rewards.

12:05So one way to socialize both risks and rewards is indeed through equity stakes. So just think of Tesla. Tesla got the same amount of money as Solyndra. Everyone knows about Solyndra because it went bust. Let's remind people it was the solar cell company that got raided, which full disclosure, my brother worked at. And he said that was quite a day. But anyway, yeah, that's what was going on there. So Tesla received close to what Solyndra got as a guaranteed loan from the Department of Energy. They got$465 million. they succeeded. They actually paid back the loan in 2013 after receiving it in 2009.

12:41But in this case with Trump, he hasn't actually created anything, right? He's coming on on the back foot. He's in fact, with one hand, you know, increasing tariffs, with the other hand, I'd say decimating the only industrial strategy that was left, but then handpicking in a capricious way, as you rightly said, things like, oh, we're going to take stakes in a company. But that's completely unaligned with any strategy. Setting aside for a second the inner workings of Donald Trump's mind on the state of this economy, it is true, is it not? And would you agree that the free market, or free as much as it is market, can figure out how to allocate capital and get things done far more efficiently than a government can?

13:25No. There's no history of that. All right. So, I mean, whether you look at the history of pharmaceuticals, the history of nanotech, you know, biotech, clean tech, energy, the state has always played the leading role. Yeah, but the question, the question was the question, excuse me, I'm sorry. The question wasn't who played the leading role. The question is who did it better? Who did it more efficiently? Right. Because you want return on your investment. Well, it depends what you mean by efficiency. So first of all, all these sectors have different phases in their life cycle, right? So if we're talking about, you know, the automobile industry today, that's very different from talking about artificial intelligence today.

14:07So in the later phase, the more mature phase of an industry, you could argue that there's really no reason for government to be too involved. The real question is, in terms of efficiency, does the government ultimately have the capacity, the skills, the people, right, that can indeed, independent of that kind of life cycle, make the right decisions. My biggest worry is that we've actually reduced that capacity and the doge kind of rhetoric is reducing it even more. You know, it's very interesting, actually, this conversation, because you are clearly in favor of some measure of government involvement in the economy directly when necessary.

14:45And yet you are concerned about what is happening in the United States. Yeah. Well, I'm a U.S. citizen, so I'm very concerned with what's happening in the United States. I appreciate that point, but also academically, just professionally, right? Oh, absolutely. I mean, well, first of all, there's a history of the United States, which, again, has always had the rhetoric about the free market. Right. But actually has had a much more visible hand, you know, in terms of the invisible or the visible hand than than Europe. You know, 40 billion a year is what the National Institutes of Health have been spending every year recently on health innovation, not regulation, literally the investments that get us kind of blockbuster drugs.

15:22Under Reagan, for example, the NIH, the National Institutes of Health, increased their funding. So this is the first president that actually is going after particular organizations like ARPA-E, NIH, and so on. And, of course, China is very happy, by the way. You know, any any competitor to the U.S. must be extremely happy because this is really going to hurt U.S. competitiveness. I hate to end on a hypothetical, but I'm going to end on a hypothetical. And it goes like this. Let's assume that the path the American economy is on right now under Donald Trump and has has been the case for for a while now continues.

15:59Where do you see the short term future of the United States economy? me? Well, unfortunately, potentially irrelevance. In other words, if you look at what's happening in China right now, the leadership they're playing at the G20, the COP conferences, the alliances that they're making, the real risk is that the US is just becoming extremely siloed. It's talking about making America great again, but we know that's not the case if we're going to look at the future of inflation with the tariffs, but also jobs, which will not happen if we don't have a proper industrial strategy. So at home, I see problems, but also internationally, the international stage, that's the risk, global irrelevance.

16:44Mariana Mazzucato at University College London. She runs the Institute for Innovation and Public Purpose there. Thanks for your time. I really appreciate it. Thank you very much.

17:08Coming up. It was just a cash flow issue. Well, that can't be good. First, though, let's do the numbers. Dow Industrial is down 334 points today, 7 tenths percent closed at 46 ,590. The Nasdaq down 213 points, about 0.9%, 22 ,740. The S &P 500 subtracted 35 points, 0.5%, 66.99. Netflix down 10 % today after reporting earnings that fell short of expectations. Still, the streamer reported its best quarter so far in advertising sales and is expected to double revenue this year compared to last. Reporting after the bell today, Tesla indicated a 12 % growth in revenue. That's after two down quarters.

17:51The end of the third quarter, in which, of course, EV sales were strong, coincided with the expiration of federal tax credits for electric and hybrid vehicles. Henry Epps, been all over that story for us. Bond prices up, yield on the 10-year T-note down 3.9 or 5 percent. You're listening to Marketplace.

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18:57This is Marketplace. I'm Kai Rizdahl. Here with a story about a distinction with a very thin but critical difference. The online sports betting giant DraftKings is getting into prediction markets. It's bought RailBird, a platform that offers events contracts, perhaps better understood as prediction markets, where you put money on whether or not you think a particular event is going to happen. That difference, thin though it may be, is an important one. Because unlike traditional gambling, which is regulated state by state and heavily at that, prediction markets are under federal commodities rules, meaning they can do business even in states where gambling is illegal.

19:35Think California and Texas. Marketplace's Megan McCarty Carino explains what's going on. Until fairly recently, prediction market platforms like CalShe and Polymarket were mostly known as places you'd go to bet on politics or cultural questions, like who'll win the presidential election? Will Taylor Swift get engaged? And then this year, those prediction market companies moved into the sports betting area. Analyst Chad Bynum at Macquarie Capital says Calci and Polymarket have seen explosive growth since then. It sent traditional sportsbook stocks on a losing streak in recent months. Shares in DraftKings and FanDuel parent company Flutter have fallen by more than 15 percent.

20:18The view has been that prediction markets could take market share. So it was only a matter of time until the sports betting operators got in on the prediction market action, says analyst Clark Lampin with BTIG. It's sort of the confirmation of what people have expected for a while. DraftKings' acquisition of RailBird follows a FanDuel partnership with financial services company CME earlier this year. Both companies have said they plan to offer contracts on prediction markets, but they haven't decided whether those will include sports. Translation, they're still feeling out what's legal, says Lampin.

20:57Because you worry that in some states that a regulatory body might look at you in a sort of negative light. DraftKings and FanDuel put in a lot of effort and expense to get licensed for legal sports betting in the roughly half of states that allow it. And some have explicitly warned them not to offer sports on prediction markets and have told Kalshi to cease and desist. We have a tension here between that state regulation of gambling and that federal regulation of financial markets. And it hasn't been resolved, says John Holden, a business law professor at Indiana University. He says there are multiple ongoing lawsuits over whether this practice counts as gambling, but no federal ruling yet.

21:43It's a wild, wild time. He says these companies might offer sports prediction markets only in states that don't have regulated gambling, but there are also legal challenges there too. I'm Megan McCarty Carino for Marketplace.

22:12It's been a little bit more than a year since Hurricane Helene tore through western North Carolina. And 13 months on, they're still cleaning up. As with any natural disaster, that cleanup can be big business. And local officials have to navigate tough and sometimes expensive choices when it comes to debris removal. Katie Myers from Blue Ridge Public Radio in Grist has more on how cleaning up Helene's mess has become a mess of its own. Margie Huggins lives on 16 rolling acres of farmland in Transylvania County, North Carolina. The Little River winds its way up to her property line, and she likes to take a golf cart downhill from her house to sit in the shade and visit.

22:53We've got not quite a half a mile of Little River frontage, which is just a beautiful river that stays clear. Huggins grew up here and now takes care of this land as an adult. A year ago last month, Helene caused the river to flood about 12 feet up the riverbanks on her property. The water didn't reach her house, but it changed the river's flow and covered the riverbank in mud. In March, she noticed federal contractors starting work. And they brought in their big heavy equipment and started coming up Little River to remove debris from Helene. The contractors used the river as a road, driving the heavy machines downriver.

23:34Huggins says that destroyed habitat and crushed freshwater mussels. Huggins doesn't know exactly which company did the work by her property, but there were many federal contractors and subcontractors working on cleanup at that time, including one company called Ashbrit. President of Disaster Response Brian Thomason says his workers comply with environmental regulations and guidance. We apply the best management practices to the best of our ability to make the situation better and not create more harm than good. Here's the thing. The way that the contractors are paid for disaster cleanup can cause problems.

24:16Federal contractors were often paid by the amount of dead trees and debris they took away. The more that was removed, the more money they could potentially make off of it. Hans Lohmeyer is a conservation biologist with Conserving Carolinas. He noticed that federal debris contractors removed healthy vegetation from riverbanks, which helps prevent flooding. That provides an essential role not only for allowing for the banks to stay stable, but also providing shade for the water, which then reduces water temperatures overall. That cool water supports beloved local critters like hellbender salamanders and brook trout.

24:59Now, local communities do have options when it comes to disaster cleanup. Neighboring Henderson County, North Carolina, didn't use federal contractors. Emergency Response and Recovery Director Natalia Santana Pollard says that when the county contracts work directly, it does get reimbursed from FEMA. It just takes a long time. It was just a cash flow issue. Henderson County is still waiting on a FEMA reimbursement for$32 million. The county eventually started working through the state to get that work done. Santana Pollard says the state contractors seem to listen to local concerns. Before a piece of equipment lands in the water, everybody knows where they're allowed to go, what they're allowed to touch, what they're not allowed to touch.

25:46The major state contractors are paid by both distance traveled along a waterway for cleanup and sometimes wait instead of just by wait. Conservationists have been working with the county to protect wildlife. They set up a flag and they were like, don't move this branch because there's a mollusk environment there or there's salamanders in this river or whatever the case might be. But there's a delicate balance between removing debris quickly and doing it right that counties are still trying to navigate, Santana Pollard says. I would argue it's the most psychologically impacting part of a hurricane or a disaster that strikes an area.