Argentina First?

0:12Emily Peck: Hello and welcome to Slate Money, your guide to the business and finance news of the week. I'm Felix Salmon of Bloomberg. I'm here with Emily Peck of Axios.

0:23Elizabeth Spiers: Hello, hello.

0:24Emily Peck: And with Elizabeth Spiers of New York Times.

0:27Elizabeth Spiers: Hello.

0:27Emily Peck: And we are going to talk about my favorite subject in the world, which is Argentina. We are going to talk about the government shutdown because we have to. We are going to talk about the biggest private equity deal of all time. We have a Slate Plus segment on a really big number. Is it about a big number?

0:48Felix Salmon: It's a big number.

0:49Emily Peck: Oh, that's right. We're talking about a really big number. We have a Slate Plus segment on a really big number. If you can guess what the number is, you get a prize. it's all coming up on slate money

1:06Emily Peck: so emily wait we're talking about something interesting we're gonna talk about something

1:10Felix Salmon: felix that i feel like as long as i've been doing this podcast with you you always low-key

1:15Emily Peck: want to talk about this as long as i have been doing this podcast like much longer than how Yeah, your whole career.

1:22Felix Salmon: Your whole career has been about this topic. And my whole experience with you is being like, I don't really want to talk about it. Don't care. Not interesting to me. Like, oh, are we going to talk about this? Like, oh, okay. But this week, everything changed for Emily.

1:38Elizabeth Spiers: Everything.

1:39Emily Peck: This week, everything changed. So, Elizabeth, what is the subject?

1:42Elizabeth Spiers: We are talking about Argentina.

1:44Emily Peck: And Emily, what changed this week to finally make Argentina, which is obviously my favorite subject in the history of the planet, what changed to make it interesting to Emily Peck?

1:56Felix Salmon: A secret text message that was broadcast to the world via a photograph of an iPhone text message from the agricultural secretary to the treasury secretary.

2:07Emily Peck: so this is glorious i love this so much like if you are a member of the cabinet and you're hanging out you're texting other members of the cabinet that's i guess what you do and then when the treasury secretary retrieves your text or reads your text he's looking at his phone and then there's a photographer behind him and the photographer can take a photograph of

2:27Felix Salmon: what's on the phone and well what did it say it said oh my god trump is so crazy did you see what just posted on it said um should i get the exact wording from the internet okay so basically i mean

2:40Emily Peck: the one thing which i know emily peck cares less about than argentina and finds even more boring than argentina is soybeans and yet somehow in this van overlap of argentina and soybeans Emily found something super delicious. And to be fair, the deliciousness of the soybeans is not like the deliciousness of tofu. It's not like blandly delicious. The deliciousness of the soybeans comes from the fact that we have major internal tensions within the Trump administration. And so, yeah, Emily, what does the text say?

3:17Felix Salmon: It's from Brooke Rollins, who's the Agriculture Secretary, to Scott Besson, who's Treasury Secretary. Just a heads up, I'm getting intel. Well, this is highly unfortunate. We bailed out Argentina yesterday, and in return, the Argentines, spelled a little bit incorrectly, are removing their export tariffs on grains, reducing their price, and sold a bunch of soybeans to China. At a time when we normally be selling to China, soy prices dropping further. This gives China more leverage on us.

3:49Emily Peck: I mean, the thing I didn't realize is that the Agriculture Secretary is actually a valley girl.

3:57Felix Salmon: This gives China leverage, you guys. Hey, you guys, we bailed out Argentina, but now they're just selling soybeans to the Chinese and the Chinese don't buy our soybeans.

4:06Emily Peck: So, yeah. So the big picture here is that historically China has been a massive buyer of U.S. soybeans, like$16 billion a year or something like that. and US soy farmers don't really have a plan B for where to sell their soybeans if China isn't going to buy it. In case you hadn't heard, we've been in a sort of trade war with China since the first Trump administration. And China was like, well, I can get soybeans from Brazil. I can get soybeans from Argentina. There's plenty of places I can get soybeans from. Why should we be buying soybeans from the country we're in a trade war with. And so this creates a kind of tension between the US and Argentina because when China goes to Argentina to buy soybeans, the American soy farmers are like, well, that's not fair.

4:58Emily Peck: We have always sold our soybeans to China. How come you Argentines now get to sell your soybeans to China? I mean, people, come on. This is a commodity and China will go to the place where the soybeans are cheapest, but yeah.

5:11Elizabeth Spiers: We should probably back up and just explain why the Trump administration has decided to do this. And there are two reasons. One is that...

5:18Emily Peck: Well, I think we should probably first back up and explain what the Trump administration has decided to do, because we haven't quite got there yet. Elizabeth, what has the Trump administration decided to do?

5:27Elizabeth Spiers: They're providing Argentina with a$20 billion bailout. Right after noting that if Zoran Mondani becomes mayor of New York, they would tell New York to drop dead if it needed a bailout. but new policy is America first, but maybe Argentina in front of that.

5:44Emily Peck: So yeah, basically, this is where I get to nerd out a little bit. There is a relatively long history at this point, which spans roughly the length of my career, and I am an old man at this point, so this is now a long history, of American politicians using something called the Exchange Stabilization Fund to bail out Latin American countries. It started in the mid-90s during something called the tequila crisis in Mexico, where a bunch of US banks had lent a bunch of money to, especially Citibank, had lent a bunch of money to the Mexican government. And the Mexican government was kind of going bust and was unable to pay back those loans.

6:28Emily Peck: and this was going to be very bad for Citibank and various other US banks and threatened some kind of a banking crisis in America. And so what Bob Rubin did, who was the Treasury Secretary at the time, was he discovered this slush fund, basically, called the Exchange Stabilization Fund that no one really remembered even existed. And he took all of the money in it and he took$12 billion and lent it to Mexico so that Mexico could then turn around and use it to repay the American banks. The American banks didn't go bust. The Mexican economy struggled through. Mexico, of course, will always repay the U.S.

7:06because they're the number one most important creditor.

7:10Emily Peck: So the U.S. got repaid, made a profit on the whole loan. Everyone walks away smiling. And that was, in shorthand, the bailout of Mexico, although really it was a bailout of American banks. Now, fast forward to 2025, Argentina is in trouble. And Argentina is in trouble less to do with loans and more to do with its currency, which is plunging, which is the one thing having a malaise the president doesn't want because his whole platform when he got elected was, I want a stable currency. And ideally, I don't want a currency at all. I just want dollars. But next best thing is I want a peso that is very closely linked to the dollar.

7:51Emily Peck: And that's not happening. And everyone is worried that his program is going to go horribly sideways as these big elections coming up next month or this month, I should say, since we're now in October. And so he has a big problem, which is that everyone is selling pesos. That naturally decreases the value of the peso. So the only buyer of pesos is the Argentine Central Bank. The Argentine Central Bank needs dollars to buy the pesos that everyone is selling. The Argentine Central Bank doesn't have dollars. And so in steps Scott Besant to say, oh, you don't have dollars? Don't worry. We have 20 billion of them.

8:26So why don't you use ours to buy the pesos that everyone is selling?

8:32Emily Peck: This is a straight bailout of Argentina. It's not like a backdoor bailout to Citibank. Citibank doesn't really care what happens to the Argentine peso. said.

8:40Elizabeth Spiers: It's also maybe a bailout of Scott Besson's BFF, Rob Centron, who runs Discovery Capital and made huge bets on Argentina and needs the bailout probably as badly as Malay does.

8:53Felix Salmon: So I know I started out with my sarcastic reading of Brooke Rollins' text. And Elizabeth mentioned like the terrible optics here and the hypocrisy. We're America first, but also Argentina. But there really are two things happening sort of simultaneously, which is like maybe the U.S. government is kind of doing its normal thing of bailing out a Latin American country. And maybe that's fine.

9:17Elizabeth Spiers: I don't think that is our normal thing, though.

9:20Emily Peck: It's not super normal.

9:21Elizabeth Spiers: Mexico is a very different situation. You know, we're much more economically entwined with them. We share a 2 ,000 mile border. This is solely about Malay and wanting to support him. And also Argentina has the most prolific history of defaults of any country that the IMF has backstopped.

9:41Emily Peck: I think it just pips out Ecuador, but it's close.

9:44Felix Salmon: And it's, I think, the most indebted to the IMF of all the countries or something?

9:48Emily Peck: Yeah, no, it has an IMF program over IMF program, largely at the behest of the United States. You know, it wouldn't be so indebted to the IMF if it wasn't for the Trump administration, basically twisting the arm of the IMF and saying, yeah, we should do this big IMF program. But yeah, this is way more political, like to say this screamingly obvious than something like the Mexican bailout. Mexico bailout was economic. And this is kind of the flip side of those 50 % tariffs on Brazil because Bolsonaro got convicted of plotting a coup. And so Trump was like, I like Bolsonaro. You are mean to Bolsonaro.

10:30Emily Peck: Therefore, I will punish your country. in this case it is i like mille he is basically the only trumpy on the only trump friendly leader in the hemisphere mille is in trouble therefore i will throw you know a few billion dollars in his direction because that is because in trump's you know kind of manichean worldview you have friends you have enemies and you support your friends and you punish your enemies

10:53Felix Salmon: playground politics mille has done a lot of just in my cursory readings a lot of trumpy things he taking the chainsaw, firing federal or firing government employees, stopping public infrastructure projects, slashing subsidies for energy and transportation, fighting with labor unions, like doing all this stuff that I guess the Trump administration also likes to do in the name of austerity, in the name of stabilizing inflation, which is fair to say, like, at least the guy has a goal, which is like, I don't know what the Trump administration's real goal is in doing those same things. I guess the woke war or something is the goal.

11:34Felix Salmon: But in Malay's case, he has stabilized inflation in the country or something, right?

11:39Emily Peck: No, no, that's not all something. That is it. Argentina has this decades-long struggle with inflation. Inflation was incredibly high when Malay gets elected. And the reason it was high was fiscal. It was genuinely fiscal. I remember during the last election when everyone was debating about whether inflation in America was a function of, you know, Biden spending too much money in fiscal policy. And the Republicans would say, yes, it was. And Democrats would say, no, it wasn't. And like in Argentina, there's no doubt. It's very, very simple that Argentina was running these massive budget deficits and it basically needed to print money to fund them.

12:18Emily Peck: And then all of that money caused inflation. It was as simple as that. And so Millais said, we are going to stop running the budget deficits and do various other things to get inflation under control. And so he needed, as part of his program, to massively cut government spending. He fired a bunch of government employees. He removed a bunch of the social safety net. And he did a bunch of very painful things in the country that the populace was not super happy about, but kind of understood was necessary in order to bring inflation under control and people really hate inflation so he was reasonably popular at the beginning that popularity is now waning for sort of political reasons there was a small election that he did very badly in that people got very worried about that he's going to do much worse in the big election and so suddenly like the political support for his program is in jeopardy and very explicitly what scott besant is saying is that if we support him right now with this swap line, with this bailout, that will help him push through the October 26th election, win that, get a renewed mandate, and then get his whole program back on track.

13:36Emily Peck: This seems fanciful to me. And honestly, the financial markets aren't really buying it. You know, the main move in the financial market seems to be, oh, Scott Besson wants to give us$20 billion for our pesos. Great. We'll take that trade every day and twice on Sundays.

13:52Elizabeth Spiers: Yeah. I mean, the thing here is that Millay is not some technocrat who's just a genius about inflation. He is ideologically a pretty hard libertarian. So a lot of the stuff that he's doing, regardless of inflation, you know, he would have fired a lot of government officials. He would have slashed these programs anyway. And there's always going to be backlash for that. So even if you stabilize the currency or people have some confidence that it's going to be stable, you still don't correct these problems that are affecting people on the ground in Argentina right now. If you're a libertarian, then you want the government to stay out of your business.

14:26Felix Salmon: You want free markets. How does that jibe with a bailout from the US and the IMF?

14:31Elizabeth Spiers: This is the perennial problem of hard libertarianism, though. There's not a successful model.

14:37Emily Peck: No, but I can answer that question, Emily, which is that Millay ran on a platform of abolishing the peso altogether and just replacing it with the US dollar. They had this thing called the currency board and Elizabeth, bless you, had Steve Hankey on and he's the currency board man. And he was like, currency boards are great. They always work. That's just the main solution to every problem. And you can tell me, Elizabeth, whether you buy his argument on that. But yeah, they had a currency board which works until it didn't and then when it all fell apart then everything went very bad but what mille wanted to do is go one step further than the currency board which is not just back up every peso with one dollar sort of you know make the peso into a kind of stable coin but just abolish the peso altogether and just use dollars which is basically what's happened in Ecuador.

15:28Emily Peck: And that would be fine if it had enough dollars, if the government had enough dollars to be able to do that. But it doesn't. So they have to use pesos because they just don't have the requisite number of dollars. And they really want people to consider the dollar and the peso to be sort of interchangeable. But at the same time, Malay has realized that he also needs the peso to be depreciating a little bit for various economic reasons. And so, yeah, it becomes hard and having the support of the country that prints dollars is a really great way of being able to get his program back on track libertarianism is all well and good but if your whole program is we want to become governed by the federal reserve basically rather than our own central bank then you do need it is helpful when the americans care about you one of the problems of course with dollarization is precisely that, you know, your monetary policy is set by someone who doesn't care about you.

16:29Emily Peck: It's kind of nice when those people do care about you.

16:32Felix Salmon: And then I guess the one thing we haven't mentioned yet is that as we're speaking on Friday, there are rumblings that a bailout is on the way for America's soybean farmers who are losing business to Argentina right now. Something like$50 billion or something for the soybean farmers.

16:49Emily Peck: Try doing that in the middle of a government shutdown. Right.

16:52Felix Salmon: No one really working at the USDA right now, I don't think. Not many people. And if they are, they're not getting paid any money. So it will be difficult to give out the$50 billion. But one presumes that one day the government will reopen and the farmers will get their bailout, as is what happened in the first Trump administration. Although I believe it wasn't as severe, the ability of the farmers to sell their stuff, but they have never recovered all their market share back from the first round of tariffs.

17:19Emily Peck: And it's really hard to replace a reliable year in and year out cash flow of like, I'm selling a billion dollars of soybeans to China every year with a check from the government. Like a check from the government is nice and good. And you can go and invest it in an S &P 500 index fund, or you can invest it in World Liberty Financial Crypto, or you can do whatever you like with it. But what you can't do is use it to get your soybean exports back. You know, it doesn't really solve the problem.

17:51Felix Salmon: It's quite bad economic policy. You do not need to be an economist to understand that this is a disaster. Like you've put tariffs on stuff. You've started a trade war with China, who is paying the farmers of the country lots and lots of money. And so now you have to take the money that you're getting from the tariffs that you're forcing importers to pay on Chinese goods and then give it back to the farmers who can't make any money selling their own stuff. because everyone's mad at us.

18:20Emily Peck: I mean, I do think that if we grow less soy, that would be good. I mean, I don't need like half of the acreage of America to be given over to growing a monocultural, boring crop that's only really used for feeding cows.

18:37Felix Salmon: Yeah, I mean, I guess if the object of the tariffs is to make us more of like a self-sufficient, standalone economy, then we would have to convert the soybean farms to other stuff because we can't afford to buy stuff from other countries anymore.

18:51Emily Peck: So in any case, the big picture here is that this is just a really badly constructed bailout. And I think this is the main thing I wanted to say on this subject is that when the U.S. bails out countries, and I have covered more U.S. bailouts than I've had hot dinners. There was Mexico, there was Korea, there's been multiple in Argentina and Brazil and Ecuador. You name it, the entire Asian crisis. Bailouts follow a certain rules, which is that you get the international community behind you, you do it via the IMF. You put a whole bunch of conditionality on the country that you're helping so that you don't just throw money at them.

19:34Emily Peck: They have to do something in return. They have to have a program that is likely to work. It has to be on track. and you don't just take the entire exchange stabilization fund, attach no strings to it, throw it at the most profligate country in the world and say, yeah, we trust you because you have seven dogs who are all cloned from the same dog called Conan.

19:58Elizabeth Spiers: This is in keeping, though, with every economic policy they roll out, which is they'll roll something out, they'll see a negative consequence, and then they'll roll part of it back. There's always this sort of failure to think one or two steps ahead of what could possibly happen if they actually enact these things.

20:16Emily Peck: Yeah. And one of the interesting things about this particular bailout is it's being structured as a swap line. And if you remember in 2008, I think maybe 2009, but probably 2008, there was a big G7 conference in London and all of the central banks announced big like cross currency swaps, which really helped make the financial crisis less bad than it would otherwise have been. And the best way to do swap lines, if you want to do a swap line, is to do it via the central bank. And what's interesting about this is that they're basically, instead of saying the Fed is going to do a swap line with BCRA, the Argentine central bank, which wouldn't really cost anything, it would just be a swap line, and there wouldn't be a dollar check involved.

20:59Emily Peck: The swap line is coming straight from Treasury and the ESF, which is actual cash. And the reason they're doing it that way, which is obviously a suboptimal way of doing it, is because the Fed would never do this. And so because it's so political and because it makes no economic sense.

21:15Felix Salmon: Can you explain what a swap line is?

21:17Emily Peck: Basically, a swap line is we will give you dollars and in return you give us pesos.

21:22Felix Salmon: And who sets the exchange rate?

21:24Emily Peck: At whatever the current exchange rate is and whatever the current interest rates are. And then you pay interest on your dollars and we'll pay interest on the pesos. And basically, in a world where everything is stable, the net cost on both sides should be zero. In a world where the peso devalues sharply, then we wind up possibly losing money. But the point is that we don't really want any pesos. There's nothing we can really do with the pesos. All we can ultimately do with the pesos is sell them back to Argentina at some exchange rate. you know and so it's effectively just you know alone but it's structured as a swap and again

22:05Felix Salmon: there's no like in the 1990s we bailed out mexico because like elizabeth was saying they're our neighbor we share a border with them like it's important that they are economically stable and also we really wanted to bail out citibank and we wanted to bail out citibank um so there were reasons for that. The reasons for bailing out Argentina are just basically political. And by political, it just means that Donald Trump likes Javier Malay.

22:33Emily Peck: Exactly.

22:42Emily Peck: But yeah, we should actually talk about this shutdown, because say what you like about the federal government basically not working anymore. Markets seem to like it. New all-time highs on the stonks.

22:56Felix Salmon: Stonks don't care about the shutdown. And never have.

22:59Emily Peck: 20 % in a year. It's wild.

23:02Elizabeth Spiers: How much of this, though, is the market just sort of saying, we've seen this before and it didn't really affect anything and we don't expect it to last very long?

23:10Emily Peck: I don't think it's that. I think the market actually likes it. I think markets like gridlock and they love shutdown. They love the idea that the federal government isn't going to sort of interfere and stuff. I think like the potential downside is like if the federal government really, really stops for like months, then that could affect the broader economy. But economically speaking, the only economy that's really being affected here is Washington, D.C. and maybe a couple of other places with a lot of federal employers. The economy as a whole can crack on without federal employees being paid, you know, at least for a number of weeks.

23:46Emily Peck: and the markets are like, great, we don't actually need to worry about whatever damn stupid thing the federal government is going to do tomorrow because there is no federal government to do anything.

23:54Elizabeth Spiers: That's true. That's true. I feel like there are a lot of businesses that are intertwined with federal agencies in the sense that they need things from them. One example right now is just that, you know, we're not getting the jobs report on time from the BLS. People are concerned about that.

24:08Emily Peck: Oh, 100%. I was about to sort of mention that if the markets care about anything right now in terms of the shutdown, It's like, we want our jobs report on Friday morning. Oh, no, there's no jobs report on Friday morning. Literally, that seems to be worry number one. You're right. There are lots of companies that make lots of money from selling things to the federal government, Palantir being the obvious example. But somehow I don't see this government shutdown really having any particularly large effects on the sort of net present value of Palantir's future Defense Department cash flows.

24:41Elizabeth Spiers: No, but you need like a regulatory approval for things. And if that gets delayed by months, you know, that's a cost.

24:47Emily Peck: It's a cost, but it's like a one-off cost. And the stock market is relatively good at looking past one-off costs.

24:54Felix Salmon: So are we saying that the shutdown doesn't matter? 750 ,000 federal workers who aren't working and getting paid, of course it matters.

25:03Emily Peck: But yeah, I'm saying it doesn't matter to like an index fund holder. But does it matter to actual human beings? I mean, some people care about human beings and for those.

25:14Felix Salmon: I mean, that's the failure of the whole line of using the markets as some kind of thermometer on anything. I'm so over it. It's just not helpful. Even after Liberation Day, when everyone was like, see, tariffs are bad because look what happened to the stock market. It wasn't a good way of analyzing tariffs. You know what I mean? Because now the stock market is great, but tell it to the soybean farmers, right? I mean, it's just, it's not useful, I think, to look at the stock market to analyze anything but the stock market.

25:46Emily Peck: So your opinion, Emily, just to be clear about this, is the shutdown is bad and not good.

25:53Felix Salmon: My opinion is that the shutdown is bad for, my reasons are many. First, just for these federal workers who have already, like, they've been through it this year. I think we can all agree. That's not my opinion. That is fact. They've been, you know, threatened. They've been fired. They've been rehired. They've seen their funding cut. They're going through weird hoops. They're getting these political messages that are probably illegal and violations of the Hatch Act. Who can say they're not getting paid? They'll probably get back pay. But Russ Vogt is now threatening to permanently fire more of them.

26:27Felix Salmon: So then I don't know what happens. Courts are going to be disrupted. Companies filing to go public could see delays. I don't really care about that as much. The BLS isn't, as you said, releasing the jobs report, might not release CPI. If it goes longer than a week or two, then the WIC program will run out of money.

26:46Emily Peck: What's the WIC program? Is that something about running around shooting people in the head?

26:50Felix Salmon: No, love those movies. No, it's Women, Infants, and Children. It's a program that, you know, is food and I believe like formula and things for women and babies. We'll run out of money. SNAP will run out of money, I think, in a couple of weeks. It's not good. The BLS not releasing data is also not good. And the way things are going with data and the government right now, it makes me worried. Anytime you shut off something and turn it back on, I mean, we know from being computer users that that can be excellent to do. But sometimes it's not.

27:23Emily Peck: My favorite example of that was the State Department, where it was kind of shut off under Trump 1. and then, you know, Tony, what's his face, tried to turn it back on during Biden. But like it was very, Blinken, there you go. There you go. Thank you for reminding me. You know, I'm not the world's biggest fan of Tony Blinken, but I will say that he had a really hard job because turning the entire State Department back on when someone else has already turned it off is non-trivial.

27:51Felix Salmon: The Trump administration has already been sort of like closing the switch or like turning the knob to shut down the government's sort of bigger picture. like ending USAID, shuttering CFPB, firing almost everyone at DOE.

28:06Emily Peck: And now to mention CPB as well as CFPB, Corporation for Public Broadcasting.

28:12Felix Salmon: Yes, exactly. And so now this is just pushing those goals further. Like this is a good thing for those goals. And, you know, so I worry about it a little bit more.

28:22Elizabeth Spiers: Well, you know, also, again, they don't really think about the longer term ramifications of any of this. And so the small government kind of extremists, the VOTs in the administration, I think they're sort of looking at a longer shutdown as an opportunity to do more of that, to fire people and destroy these agencies. And it's just really hard to spin them back up after you've created that much destruction because these are agencies that took a long time to even optimize what they're doing. And they've been understaffed under the Trump administration. but then all of the resulting damage will invariably get blamed on Democrats.

28:58Elizabeth Spiers: So the plan is kind of what they've been doing, but this just gives them more cover to do more layoffs and make the government even smaller.

29:07Felix Salmon: Yes.

29:08Elizabeth Spiers: And then blame the incompetence on other people.

29:10Felix Salmon: I don't know about the blame part.

29:11Elizabeth Spiers: But they're already doing that. They're blaming the shutdown on Democrats.

29:14Felix Salmon: Right. Like, look what you made me do kind of a thing. You made me fire all these people. I mean, who's going to believe that?

29:19Elizabeth Spiers: Yeah, they literally changed the email signatures of several federal employees without their consent or anything that, you know, I'm not here because the Democrats did this. Right, right. Right.

29:31Emily Peck: I don't think that out of office replies are going to change public opinion. But I do think that politicians in general are not held in high esteem right now on either side of the aisle and that this government shutdown is only going to exacerbate that. So this is definitely a sign that politics in America is not working.

29:53Elizabeth Spiers: Yeah. Understatement.

29:56Emily Peck: And I think politics is like pointing fingers and blaming the other side. You know, if one side is pointing fingers at the Republicans and saying, it's your fault that the government shut down, the Republicans are pointing fingers at the Democrats and saying, it's your fault the government's shut down. That's just what politics is. And there's very little sort of useful information in trying to unpack the finger pointing and trying to adjudicate who's right and who's wrong. This particular round of finger pointing is in any case going to get forgotten come the next election. But as you say, the repercussions and the ramifications of the shutdown are going to last a long time.

30:32Emily Peck: And they're probably almost certainly going to be negative for, you know, the efficient functioning of the government and civil society.

30:41Felix Salmon: Yeah, for stability and for civil society. And if you wanted to have a federal government that hires the best and brightest, this year has not been an advertisement to attract the best and brightest to the federal government. I think about it a lot, like, because you speak to these workers and they're like, I wanted to work for the federal government because, you know, it's a stable job and, you know, no one ever gets fired. It's like, it's not particularly like being rich, but it's like a stable, middle class, like solid kind of work and like working in the private sector. So volatile, blah, blah, blah.

31:14Felix Salmon: And now it's just like anyone who thought that has been completely wiped away by the past several months.

31:18Emily Peck: So just tactically speaking, Emily, like given all of the damage that this is going to cause to civil society and yada yada, is there any offsetting potential upside here that the Democrats might be able to achieve from forcing this shutdown that might offset all of the negatives?

31:41Felix Salmon: I mean, I'm not the political expert here. That's Elizabeth. I don't really get it. Like the reason they for ostensibly and I'm veering into political territory, so I'm sure Elizabeth can correct whatever I say this. But the Democrats are saying they're doing this because they want to restore Obamacare subsidies, which seems good. But it almost seems like politically a good thing to do would be just let the Obamacare subsidies lapse. And then all these voters in rural areas and in red states that are going to see their premiums double, let them complain about it. And then it gets fixed that way.

32:18Like you can't.

32:19Elizabeth Spiers: But that's the thing is that that also hurts Democratic constituencies. And I think right now the biggest frustration that Democratic voters have with the party is that they don't seem to want to fight. You know, there's a lot of strongly worded letters and speeches that say high minded things about why this is all wrong, but they want to see a real opposition party. And so this is better than nothing. And also the Republicans were trying to put all sorts of things into the budget that had little to do with economics and really more to do about the sort of persecution of women and minorities that they've been conducting since the beginning of the Trump term.

32:58Elizabeth Spiers: And I think at some point, you know, Democrats have to sort of ask themselves, like, how far are we willing to let them go before we become obstructionist, which was always a Republican strategy? And I think we're just at a point where Democratic approval among Democratic voters is so low that if they don't push back, they will pay for it in the midterms. And so I think this is the first time we've seen them use some of the similar obstructionist tactics that Republicans have used historically. So I think it would be much worse for them if they had rolled over on it.

33:29Emily Peck: Let me just try and see if I've understood you correctly. In terms of the question that I was asking Emily, what is the compensating upside to make up for all of the downside? What you're saying is the upside is this will help create some modicum of enthusiasm for the Democrats, and the Democrats will therefore be able to do better in the elections. And then when the elections come, we will be able to make changes.

34:00Elizabeth Spiers: Yeah.

34:13Emily Peck: We should move on, though. What's the last final glorious subject that we have this week?

34:19Felix Salmon: I'll say Jared. I'll say Madden.

34:23Emily Peck: Elizabeth's favorite person is back in the news. Jared Kushner is spending$55 billion to buy a video game company. Jared Kushner is a very rich man, but he does not have$55 billion of personal wealth. You know who has$55 billion? Saudi Arabia. They have$55 billion. dollars and so what Jared is doing is he's basically hopping on a plane going to Saudi Arabia picking up a bag getting 55 billion dollars bringing it back to America dropping it in the laps of the board of electronic arts and saying here I want to buy your video game company and the board goes that's a lot of money sure yes and then deal is done and electronic arts becomes Saudi, effectively.

35:16Emily Peck: The first question which I have is, I mean, number one, the first thing I want to say is this is obviously a really good way to, you know, in the current Trump administration to make sure that the Trump administration doesn't block the deal. If it's all done by a Jared, then it's very unlikely that the Trumpers will say that's a bad idea. But the first question I have. Is there anyone who particularly is inclined to make the argument that electronic arts is some major part of America's patrimony and should not be controlled by the Saudis?

35:51Felix Salmon: I haven't seen it. I haven't seen anyone actually say that. All the criticism sort of more amorphous, like Saudi Arabia is bad and we shouldn't let a US company be by them. But no one thinks that CFIUS will be worried about it. We're more worried about steel companies getting bought by Japan, our closest ally or whatever.

36:15Emily Peck: But to be fair, if I was at CFIUS, I wouldn't be worried about it either.

36:19Elizabeth Spiers: If I were an executive at EA, though, I wouldn't be super enthused about being in bed with a guy who notoriously dismembered a critic he didn't like. But then I would feel the same way if I were Jared Kushner. I don't understand that relationship.

36:33Emily Peck: you just don't criticize the saudis just ask any of the comics who are over there right now and it's fine i do think there is an argument for this being good for ea i'm not saying it will be good for ea but i'm saying it could be good for just because money right now is good for ea or yes specifically yes basically the video games run on very long time cycles it takes many many years to develop a video game. And then if it is a hit video game, that video game can cash flow and make lots of money for many, many years after its release. And one of the things you need if you're running a video game company is the long term vision and patience to just kind of say, like, we are going to build something great, and then it's going to pay off.

37:25Emily Peck: And it has been hard to do that in public markets that are, you know, this is one of the cases, and I don't think there are many, but it is one of the few cases where the criticism of stock market short-termism, I think, could be warranted. And we saw this when Microsoft just bought Activision Blizzard, and now it's just part of a massive big corporation that isn't pushing it for quarterly results. EA is the other big one, is now being taken private by the Saudis and by Jared Kushner. And that basically being private allows long-term investment by shareholders who don't get antsy at the first sign of a downturn in quarterly EBITDA.

38:10Felix Salmon: You're not alone in making that kind of argument. The White House, I think, last week was pushing for, what, no more quarterly reports from companies? They want to move to—

38:20Emily Peck: Yeah, Donald Trump is saying that maybe we can move from every three months to every six months. and people like Warren Buffett don't necessarily disagree with him on that one. I guess.

38:32Felix Salmon: I mean, is it that big of a deal to report your finances quarterly? We have AI now. Like, what is the big deal, actually?

38:38Emily Peck: It is a surprisingly large amount of work in, like, the CFO's office to put together a 10Q and to do all of the reporting necessary as a public every month.

38:51Felix Salmon: The bigger thing is orienting your whole business around that quarterly deadline, as opposed to, like you're saying, long-term thinking and strategizing.

38:59Elizabeth Spiers: But do you think that Trump's position on this is really about, you know, how can we make the reporting process less costly and more efficient than just a stepping stone into reducing accountability overall and eventually saying, do we need reporting? Do we need this kind of oversight?

39:15Emily Peck: You do need some kind of reporting because shareholders are going to demand it right in the public markets you know people will pay a premium for companies where they have good transparent visibility into what the finances are and if it's just a black box saying trust us then you're not going to get the you know current market cap of the u.s stock market out of that like you might get one or two companies who can do it you will not get thousands isn't open ai though that no as i say that you can get one or two but there's also a reason why open ai isn't a public company when a company goes public that is generally considered to the point to be the point at which it stops that's like the show me point in its evolution it stops saying like trust me i know what i'm doing i'm going to make lots of money in the future and it starts saying hey i'm a viable company here here's my financials see for yourself and then buy my stock based on my public financials rather than on some kind of like you know i look good in a hoodie and you think that i'm going to be able to make money so it's not you can't go public when you're losing money but historically that's been like a lot of bankers have been like wait until you start being profitable

40:31Felix Salmon: before you go public and that kind of thing so why do you then go private what's the and then the

40:37Emily Peck: reason to go private is well i mean one of the reasons to go private right now is the debt has never been cheaper the spreads of corporate debt over treasuries have never been lower ever in the history of capitalism and so when jared kushner is buying electronic arts for 55 billion he's not actually putting up 55 billion he's borrowing 20 billion of that from like jp morgan and the cost of that borrowing 20 billion has never been lower so like it's really easy because before private equity was private equity. It had a different name. It was called LBOs, leveraged buyouts. The general stylized fact about public and private markets is that private equity-owned companies are much more levered than public companies.

41:27Emily Peck: And EA does not have$20 billion of debt right now. It will have$20 billion of debt when it goes private. And right now is a really good time to raise$20 billion of debt because it's really cheap.

41:39Felix Salmon: Why is it really cheap? I thought interest rates were high now.

41:42Emily Peck: Well, interest rates are coming down and spreads are really low. In fact, like weirdly, and this is kind of blowing my mind, fun fact, Microsoft debt, for some weird technical reason I don't entirely understand, is actually trading through U.S. Treasuries. There's a negative spread for Microsoft debt over Treasuries. It means the yield on Microsoft bonds is lower than the yield on equivalent duration Treasury bonds.

42:09Felix Salmon: Why? Oh, you said you don't know.

42:11Emily Peck: I mean, yeah, it's complicated and I haven't received a good explanation, but that gives you an example. Like that shouldn't really happen. And yet it is happening.

42:19Felix Salmon: So corporate debt is like more safe a bet than treasuries?

42:24Emily Peck: That's what the market is saying. Yeah.

42:26Felix Salmon: That seems really strange. Okay.

42:28Emily Peck: It is strange. You are right to be puzzled by that. You are right to find that very strange. Textbooks would say that should never happen.

42:34Felix Salmon: But Microsoft bonds and Microsoft debt is a different thing than EA debt, right? Right. Like Microsoft's one of the most valuable, profitable.

42:43Emily Peck: Correct. And the EA is not going to be able to borrow at a negative spread over treasuries. It is going to have to pay a spread over treasuries. But compared to the amount that it would have had to pay a year or two ago, it's come down dramatically.

42:58Felix Salmon: Huh. Well, we should talk about that another time because I don't feel like we really cracked that.

43:03Emily Peck: Yeah. Let's get a credit nerd on and we can talk about credit spreads.

43:18Elizabeth Spiers: numbers round elizabeth what's your number my number is 33 000 and that's a dollars and that's the average cost of a wedding in the u.s right now but that's mean not median right yeah so she said

43:29Emily Peck: average yeah i mean but yeah like the median has to be lower than that by a large margin i don't

43:35Elizabeth Spiers: If you consider high-end celebrity weddings, Jeff Bezos alone pulls the media.

43:40Emily Peck: Exactly. You have$1 billion wedding in Vegas, and that brings the mean up a lot.

43:45Elizabeth Spiers: Yes, but when I was reading the story, there were two other facts that are not really tied to a number, but that I found interesting. One was that October is now the most popular month for weddings because it's less expensive and sweaty, apparently. The other thing is that the Knot had a report on wedding trends for the year, and they ranked the kind of vibes that people are going for. And the number one vibe is, quote, old money aesthetic, whatever that means. What does it mean?

44:12Emily Peck: What does it mean? Does it mean like wood paneling and oil paintings?

44:15Elizabeth Spiers: I guess. It's weird because in their top 10 list, number one is old money aesthetic. Number five is quiet luxury. So I wonder if old money aesthetic is just like you look vaguely waspy in some over the top way. Number four is cottagecore.

44:31Emily Peck: i'm down with the october thing by the way i will reveal something personal here which is that not only did i get married in october but i got married in october 2005 which means it's my 20th wedding anniversary michelle i love you very much and we are having a 20th wedding happiness thing going on right now and yeah if you are thinking about getting married in october and especially Columbus Day weekend, it's apparently the driest weekend of the year. Although it wasn't for me. It was pissing it down with the rain the day I got married. But do it.

45:05Felix Salmon: Metaphorically, I'm sure it wasn't dry either, given your penchant for wine. There wasn't a dry eye in the house.

45:11Emily Peck: Oh, no, but it's true. We did manage to drink all of the champagne before Michelle even walked down the aisle. Emily, what's your number?

45:20Felix Salmon: I'm a little afraid I've done a number like this before, but I'm just going for it. my number is 34, as in 34%. That is the share of US adults who always or often use subtitles when watching TV shows or movies, because that's what we do now. We watch streaming shows and movies, and we read them. We don't listen. For the young, those under 44, it's 40 % are using subtitles because they say they want to get all the words. They watch in noisy environments with the sound down. They watch while doing other things. Subtitles used to just be for foreign language films, but now subtitles are for everyone all the time.

45:59Felix Salmon: And my last point I wanted to make about this was the other day, I think one of my numbers recently was that people don't read anymore. I think I'm taking it back. People are reading all the damn time. They're reading their movies. They're reading their TV. They're reading their text messages. If their cabinet secretary is like, we're reading all the time. It's huge. It's big.

46:19Emily Peck: I went this week to see an opera. I went to see the amazing Adventures of Cavalier and Clay at the Metropolitan Opera. And there's a lot of projections going on. Bartlett Sher has a very sophisticated, large, expensive production where words and images are being projected onto screens and onto the backdrop, basically throughout the entire opera. And there's a lot of reading. like both reading words and like reading animated images and trying to understand what's going on there at the same time as you are also reading the you know met titles on the back of the seat in front of you because even though it's sung in english you know you need to read the met titles to understand exactly what they're saying and yeah like the whole opera was basically an exercise in reading as well as just experiencing the singing and the orchestration and the theatricality it was a high cognitive load and i do think that yeah this is a change and it is a sign of literacy like cultural literacy requires actual literacy literacy i watch movies with subtitles on now

47:28Elizabeth Spiers: sometimes because the sound design on streaming is so annoying that too where there's there's you know like some background noise will be at 180 decibels and then you can't hear what they're

47:37Emily Peck: saying i mean christopher nolan is notorious for this no one can ever understand what anyone says

47:42Felix Salmon: or see anything in the movies because they're very dark as well so it's it's hard to both it's just people mumbling in the dark for some reason they make a billion dollars

47:51Emily Peck: and we're like what art this is art people um my number is 5.5 million and this is an interesting one because this is this is a kind of a narrative violation 5.5 million is the number of international passengers who came through port authority airports in august and that is an all-time high there were more international passengers at jfk and newark and i guess like three of them at for whatever tiny number of international flights there are at LaGuardia, there are more international passengers now than ever. And we've been reading and hearing so much about the plunge in international tourism and how the Canadians aren't traveling to America anymore, and the Germans aren't traveling to America anymore, and the Japanese aren't traveling to America anymore.

48:46Somehow, all of

48:48Emily Peck: that notwithstanding, international travel seems to be as strong as ever, at least in New York.

48:53Felix Salmon: I think the Canadians, that's a real downturn.

48:55Emily Peck: oh these are all real i mean i'm not saying that all of these are false i'm just saying like it's a weird how how can they both be true is it maybe because there are flights that aren't running

49:06Elizabeth Spiers: anymore and so you have to run flights through hub cities like new york maybe connecting flights

49:11Emily Peck: or it could just be that like americans are traveling internationally a lot more and they're making up for the foreigners not coming but yeah i don't know if you know can you please write in and tell us. Our email address is slatemoneyatslate.com and we would appreciate it. If you're a Slate Plus subscriber, then we very much appreciate that and you're going to get a whole segment on

49:32Felix Salmon: the new number.

49:33Emily Peck: The new

49:34Felix Salmon: big number that everyone is talking about.

49:37Emily Peck: We appreciate you. We appreciate Merritt Jacob and Jessamyn Marley who produced this show. And thank you for listening and we'll be back next week with more Slate Money.

49:54Thank you.