Global Carry Trade Chaos

0:09Emily 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.

0:20Felix Salmon: Hello, hello.

0:21Emily Peck: I'm here with Elizabeth Spiers of The Nation. You're writing something for them about the Melania doc.

0:27Elizabeth Spiers: Yes. Hello.

0:27Emily Peck: We are going global this week. We're going to talk about global foreign exchange markets, global interest rates, global carry trades, what this all means for markets and money. We're going to talk about Kevin Walsh, the new Fed chair. We're going to talk about whether Donald Trump has found the limits of what he's capable of doing. We're going to talk about CEOs talking about de-escalation. We have a whole Slate Plus segment about Elon Musk and his latest IPO shenanigans. It's a pretty full show this week, so stay tuned. It's all coming up on Slate Money.

1:17Emily Peck: All right, people. It doesn't happen every week here on Slate Money, but every so often we talk about the globally important interconnectedness of all things financial. And we're just going to have to get really big. And when it comes to financial markets, everyone thinks, well, there's bonds and there's stocks, which is true. But bonds are really just a special case of rates and rates are basically FX and currencies and rates are the real ground level underpinning of the entire global economy and trillions of dollars, literally trillions of dollars trades in the FX market every day. People are exchanging currencies for each other.

1:55Emily Peck: Those currencies are trading basically on the basis of what overnight interest rates are in those currencies, which are set by the central banks around the world. This is why central banks are so important. It all sounds incredibly boring, but it's all incredibly important. And what we are going through right now is massive things that haven't happened in 15 years, if not longer. Really big seismic changes in that entire global infrastructure. And we are going to get to America, I promise. And we are going to get to Kevin Walsh and the Fed and the stock market and whether it's really at record highs and all of these kind of things.

2:29Emily Peck: But the place I want to start, Emily, is Japanese government bonds. Because I feel like if we start with Japanese government bonds, which are a super interesting and super unprecedented kind of weird market, that will help us understand everything else that's going on in the world. So what is happening with JGBs?

2:50Felix Salmon: Buckle up. I have learned things, and I'm going to try to explain them to people who may be like me. And when they hear the carry trade, they're like, what? And then when they hear the carry trade's unwinding and it's disturbing the whole global economy, they're like, what, what? I have been trying, picking away all week, trying to make sure I understood this. I even woke up in the middle of the night and I was like, I understand the carry trade. And then in the morning, I was like, do I? So basically, Japan, for at least the last 15 years, its economy has been stagnating. It hasn't had any inflation.

3:28Felix Salmon: It's had deflation. And it's been able to borrow money or issue bonds at very low, low rates. And that has been good for the rest of the world and for investors because they go over to Japan. They borrow the yen because it's cheap. Then they go take the yen and then they use it to buy debt with higher yield overseas and around the world. And that has enabled Japan to keep going economically.

3:57Emily Peck: It hasn't really helped Japan that much, to be honest.

3:59Felix Salmon: Yeah, actually, the economy has been trash. And Japanese investors, because they don't get very good yield at home, they take their yen and they go and they invest it other places. and all their money, all the Japanese investment has been going overseas to the US. But now, something has changed in Japan.

4:21Emily Peck: Okay, so let's just stop right there and see if we can recapitulate because this is the really big mega mega force that has been driving capital markets around the world for decades. As you say, it's this thing called the yen carry trade. There are lots of other carry trades. There are lots of other funding currencies. Anytime you borrow in one currency and invest in another currency, that's a carry trade. But the big one, the mother of all carry trades has always been yen dollar. And the simplest form of the yen dollar carry trade, as you say, is just Japanese pension funds, insurers, housewives, anyone with yen takes one look at the bond market.

4:56Emily Peck: And by the way, Japan is a little bit like Germany in that they don't really invest in stocks there. Retail investors don't invest in the stock market. They just invest in bonds. and they look at the bond yields that are on offer and they're like 40-year bonds yielding 1 % or something. And they're like, I'm not going to invest my money at 1 % for 40 years. So they take their money, they convert it into dollars, they buy treasury bonds and they buy not just treasury bonds, but corporate debt and all manner of other European debt. And all of that money coming in from Japan, from Japanese investors, is great, like really cheap money that can fuel growth in the United States and Europe and around the world.

5:33Emily Peck: and then that is multiplied by hedge funds basically who go into japan and they don't have any money but they're hedge funds so they can borrow money so they go into japan and they borrow a whole bunch of money in yen pay one percent interest then they have coffers full of money that they then turn around and invest in treasury bonds or corporate bonds or whatever and so all of that money which is borrowed in japan used to winds up getting invested in america That helps U.S. growth, European growth, and all the rest of it. So that massive carry trade has been super important.

6:07Felix Salmon: Yeah, and I think Bloomberg said something like$5 trillion in Japanese capital is deployed around the world. So basically, cheap Japanese money has fueled investment around the world.

6:19Emily Peck: Yes.

6:19Felix Salmon: Okay.

6:21Emily Peck: And this is all based on the stylized fact, which is a fact or has been a fact for as long as I've been a financial journalist, which is longer than I care to admit. The interest rates in Japan are very near zero. They're like somewhere between zero and 1%. They always have been. They always will be. You can just kind of trust in that. And yet I wake up this morning. I get out of bed. I stretch. I stumble over to the coffee machine. And what does it tell me? The coffee machine that says, Felix. long-dated Japanese government bonds are yielding 4%. And I'm like, what? Have I had my coffee yet? And I drink my coffee and my coffee machine is, yeah, yes, I am not lying.

6:58Emily Peck: JGBs are yielding 4%. It is absolutely wild. This is completely unprecedented. And what that means is that Mrs. Watanabe, the bond investor, she doesn't need to do all manner of demand around investing in foreign currencies and taking currency risk and all the rest of it, because she can get 4 % on her JGBs now. And this carry trade has just gone away.

7:19Elizabeth Spiers: I have two questions.

7:21Emily Peck: Yeah.

7:21Elizabeth Spiers: Number one, where do you get a talking coffee machine? Yeah, I was thinking about that too.

7:26Emily Peck: Okay, maybe that was like artistic license. Number two, because of this,

7:32Elizabeth Spiers: are we secretly propping up the yen? Who's we? The U.S. government.

7:37Emily Peck: The U.S. government has nothing to do with this. The U.S. government has really got nothing to do with this because this is just a function of low interest rates in Japan and higher interest rates in the U.S., which has been the case for decades.

7:49Elizabeth Spiers: Yes, but in the prep, we did read a piece speculating that the government was trying to prop up the yen because of what you're describing this morning is not great for the U.S.

7:59Emily Peck: No, it is great. Okay, so the unwind of the carry trade is not great for the U.S., but there is no evidence that the United States government is propping up the yen or interfering in the yen dollar, anything. And if it did, it wouldn't work because these are huge seismic forces and treasury intervening. Like if it did, it could cause a little blip here or there, but it's not going to have any major effect. The thing that I started, these are like really massive, enormous forces that govern the world. These forces are bigger than governments. Every so often governments try to intervene in currency markets.

8:37Emily Peck: The one that everyone is worried about right now worth looking at is the European Central Bank, because the European Central Bank is worried about the euro-dollar exchange rate, and they're worried that the euro is too strong against the dollar. That's making European companies uncompetitive, and they want the euro to be a little bit weaker than it is. And when the euro reaches like 120 to the dollar, that's when the ECB starts thinking about, well, maybe we should start intervening and try and keep the euro a little bit weaker, prevent it from strengthening. So it's not like central banks never intervene.

9:08Emily Peck: But where the markets want FX rates to be, that's where they end up. And in the grand scheme of things, the number one overarching thing that you always need to remember about exchange rates is they reflect interest rates. So the way to have a strong currency is to have a higher overnight interest rate. The way to have a weak currency is to have a lower overnight interest rate because investors, you know, your hedge funds and all of them, they would much rather earn 5 % overnight on their money than earn 1 % overnight on their money. So they keep their money in the currencies where they're earning 5 % and they sell the currencies where they would be earning 1%.

9:45Felix Salmon: But that's only true so far as the currency is considered stable. Like you wouldn't invest in a currency with a high yield if it was put out by an unstable regime. Right.

9:56Emily Peck: So then you get into the Turkey situation, right? We can have like 100 % interest rates, but you still don't buy Turkish lira because you're convinced that the Turkish lira is just going to implode.

10:05Elizabeth Spiers: So the

10:06Emily Peck: problem with all of these trades, with every single carry trade, and every time you're investing in any foreign currency, is you worry about what is going to happen to the exchange rate. And you can make money till the cows come home on the carry, but then if the exchange rate moves against you, you can lose it all overnight. And that is what everyone is worried about right now, is like massive unwinds of the Japanese carry trade are going to cause the yen to spike. And if that happens, then all of the extra interest that the Japanese investors are getting in dollars is not going to make up for the fact that the dollar has weakened so much against the yen that then they're going to lose money.

10:42Emily Peck: And we should just stick with Japan for like one more beat, because there is like a reason why all of this is happening in Japan. And the Japanese government has been trying for decades to reignite inflation because inflation has been too low and to reignite economic growth. And they've kind of amazingly succeeded. And now what is happening is that after decades of artificially low interest rates, which they have been having in order to try and reignite economic growth, now inflation is a thing again in Japan. And so they're raising interest rates to help keep inflation in check. Also, after decades and decades of really expansionary fiscal policy, where they've been spending and spending at government level to try and boost the economy.

11:26Emily Peck: That finally seems to be maybe working. And so the economy is growing. The stock market is doing really well. So all of that brings interest rates back to what everyone else on the planet would consider normal. 4 % on a 40-year bond is not high by any other standards other than Japanese standards. And so Japan is moving back to what looks like a normal, healthy economy with normal interest rates and normal inflation. That's what it wanted. but the adjustment is seismic.

11:54Felix Salmon: So I guess then the question just is how seismic and what is the adjustment? Like bully for Japan, but like we're Americans, like what does it mean for us?

12:04Emily Peck: It's not super, I mean, there are problems with Japan, right? Because in all of those decades of borrowing, Japan now has government debt, which is over 200 % of GDP, right? It makes the US, people bellyaching about the US debt look like nothing.

12:18Felix Salmon: And they have this new leader, the woman with the nice purse we talked about a few weeks ago, Sanae Takeuchi. She is also talking about cutting taxes, though, even though their debt's so high.

12:28Emily Peck: Yeah, she's talking about further expansionary fiscal policy, and her political opponents also want expansionary fiscal policy. We're seeing that in Europe. We're seeing that in Japan, in the United States. Basically, every single politician in the world right now is being expansionary in terms of fiscal policy, which means needing to borrow a lot of money, especially in a country like Japan, which already has debt to GDP of 200%. That means a lot of demand from the government, from investors. So global investors are kind of happy right now because they have all of these different governments around the world saying, like, I want to borrow money from you.

13:02Emily Peck: And so they're all like competing with each other to see who can pay the highest interest rate, basically, because with a finite amount of money, the investors get to choose where they put their money. And so interest rates go up. That's good for investors over the long term. It's bad for bondholders because the bond, when interest rates go up, prices go down. So on a marked market basis, it doesn't look great in the bond market. But broadly speaking, it's good for investors. It's bad for taxpayers who have to pay a lot of interest on all of that government debt that is being issued. And this is a global phenomenon.

13:32Elizabeth Spiers: What are the downsides of the fact that it is a global phenomenon and that almost every single country is running huge deficits and using that to prop up growth? Or is there a downside?

13:43Emily Peck: On a macro level, that's a really good question. What happens when you have the entire world running massive deficits? I think what it really means is it becomes, over the medium term, a massive transfer of wealth from taxpayers with income, who pay income tax, to rentier bondholders with wealth, who sit there and clip coupons on their government bonds. It definitely kind of, or over the median term would exacerbate global inequality from the income to the wealth.

14:15Felix Salmon: So lawmakers in the US, obviously, but also in Europe and Japan, they don't want to raise taxes. They're running up higher debts. And yes, taxpayers are on the hook to pay these higher interest rates, but they're also not being asked to pay higher taxes, technically, which would lower the debt.

14:34Emily Peck: Yeah, exactly. Because if you've got all of this government spending that people want to boost growth, you can fund it in one of two ways. You can fund it via taxes or you can fund it via borrowing. Right now, I mean, obviously, every government does both. But there is a lot of borrowing and they could raise taxes. But ultimately, as a taxpayer, you pay for it one way or another, either way. You either pay directly in higher taxes or you pay indirectly in terms of higher debt interest payments down the road.

15:01Felix Salmon: I don't understand how that's me paying indirectly, actually. Is it because inflation is higher?

15:05Emily Peck: It's because you as a sort of citizen slash shareholder of USA are racking up this government debt. Like you have one 300 millionth of the national debt can be thought of as being like your little share of national debt. And so you have whatever it is,$150 ,000 of debt that you're paying ever higher amounts of interest on. And your taxes, when they do go to spending money, an ever higher proportion of that tax revenue goes on interest payments on the debt rather than going on spending money for services by the government.

15:43Felix Salmon: So we will see some kind of like fiscal cutbacks if interest rates stay high and our servicing costs go up?

15:50Emily Peck: Well, so far we haven't. And if you look at the experience of Japan, that hasn't happened in Japan. So like the fiscal constraint, the bond market fiscal constraint on governments has always existed in emerging markets. We saw it very briefly under Liz Truss in the UK when she tried to do some crazy fiscal thing and the bond market revolted and she wound up getting ejected after a month or however long she was in power for. So it does happen in rich Western countries, or it did happen once in relatively recent memory. But broadly speaking, we haven't reached the sort of bond vigilante part of the story yet.

16:30Emily Peck: People worry that we will, but we're not there yet. But we should talk a little bit about what happened on Friday, which is that Donald Trump came out and said, Kevin Walsh is going to be the new Fed chair. Obviously, the Fed nomination process is going to be quite fraught so long as Janine Pirro is suing Jay Powell. But assuming this does end up happening, and I don't think that there are any really significant objections to him from Congress, the markets loved it, basically. They're like, you are not a MAGA crazy person. You are not like Stephen Myron, who joined the Fed board a few months ago, and it's just like, you know, we should cut rates to zero.

17:12Emily Peck: He's been on the Fed board before. He seems relatively normal. Yeah, he's making requisite sort of trumpy noises to the degree that he needed to get nominated. But he seems vaguely sane. And the markets were like, oh, good. He's like broadly hawkish, which means he's going to keep interest rates higher than they would be if you had a MAGA crazy coming in. That means that if interest rates are higher, people are going to want dollars more because they get higher interest rates on their dollars. So that caused the dollar to strengthen against all of the currencies in the world and against quite spectacularly against silver, which plunged in price by 10 % in a matter of minutes, which is not something that normally happens to silver.

17:56Emily Peck: So what we are seeing here is a really good example of how just like people kind of expected it was going to be Kevin Walsh, right? Most of Kevin Walsh was priced in. And even though most of Kevin Walsh was priced in, when it finally became official, there were these huge moves because these tiny little differences in like, we are 80 % sure that it's going to be Kevin Walsh to like, we are 100 % sure that it's going to be Kevin Walsh. That little change in probabilities could cause significant movements in the FX market, because that's how much the global economy really cares about small differentials in overnight interest rates.

18:44Emily Peck: What do you think about Kevin Walsh, Emily?

18:47Felix Salmon: Well, I'm still learning about Kevin Walsh. He's one of several Kevins that were under consideration for the job. More Kevins than women. He is a George W. Bush guy. He was, I think, initially appointed to the Fed Board of Governors by George W. Bush, who is now considered very normal and, I guess, moderate. It's crazy to think about that. Come back, W.

19:06Emily Peck: All is forgiven. All is forgiven. It's all good.

19:08Felix Salmon: You were great. We love when you hit the golf ball that time or duck the shoe, just charming stuff. I know that he works with or is a protege of Stanley Druckenmiller, who's like a big money guy after he left the Fed.

19:24Emily Peck: After he left the Fed, he went to work for Stan Druckenmiller, who is a famous sort of contrarian. Well, not contrarian, but like slightly what you might say, structurally bearish hedge fund manager, but very successful.

19:35Felix Salmon: And I know that Besant also is like a Druckenmiller man. I saw it on Twitter. Don't ask me more questions about that. And I know that Kevin Warsh is married to a lauder heiress. And that made him more attractive to the president, possibly, because it's like they run the same circles kind of a thing.

19:55Emily Peck: He's a rich person.

19:56Felix Salmon: Rich guy. I don't know.

19:57Elizabeth Spiers: Rich guy. Trump likes billionaires.

19:58Felix Salmon: It's good to have a rich guy.

19:59Elizabeth Spiers: Is he tall, though? That's a big Trump criteria.

20:02Felix Salmon: Well, Trump said he was central casting, which I don't know. We know what central casting means, right? It's like the person fulfills the stereotype of what...

20:12Emily Peck: It means you have good hair.

20:13Felix Salmon: But like, yeah, for Trump, it means good hair and looks good on TV, I think.

20:17Emily Peck: But he does. He looks like a central bank governor.

20:20Felix Salmon: So did Powell, which is probably why he got the nomination in the first place from Trump. So, yeah.

20:25Elizabeth Spiers: The expectations are so low. So, and this isn't a knock on Warsh, but I think everybody's just so relieved that there wasn't a total maniac that he nominated because that has happened in so many Trump appointments.

20:37Emily Peck: I think Trump does seem to have been, what's the word? Moderated, maybe? Yeah, moderated a little bit. We've seen it a little bit in his kind of retreat in Minnesota. We're seeing it like he's not out there railing against the Fed right now. when they announced this lawsuit against Powell, the reaction from the White House was, wait, hang on a sec, no one told us this was going to happen. You know, you don't see Trump like vocally backing that lawsuit, which is sort of interesting. It doesn't seem like the White House and the Fed are particularly, like, obviously they are at war because there's this lawsuit, but it's more of a Jeanine Pirro rogue faction of the DOJ against the Fed than it is the White House against the Fed.

21:22Emily Peck: The Lisa Cook lawsuit seems to be sort of petering out a little bit. They had oral arguments in the Supreme Court where the Supreme Court basically was highly skeptical that Trump can fire Lisa Cook from the Fed. And again, like the markets breathe a big sigh of relief because if Trump can do that, then he could just start firing everyone and replacing them with lackeys. And Kevin Walsh has come out and said Fed independence is important. Scott Besson, the Treasury Secretary, has come out and said that the U.S. has a strong dollar policy. What this means, no one knows. But there are all of these sort of in the past week or so, we have seen a bunch of sort of tacking towards normality and away from the kind of just blow everything up.

22:07Elizabeth Spiers: Trump's biggest sensitivity is just the stock market and how it's performing. And I think the people around him have convinced him that chaos at the Fed is not good for markets.

22:16Emily Peck: Well, I don't know how they could have convinced him of that, given that the stock market is at record highs. I mean, we should also, since we are talking about big, important rates and currencies and stuff, we should mention that this is a large part of why the U.S. stock market is at record highs. It's because it's at record highs in dollar terms. And the dollar has weakened substantially, right? So if you are an investor from anywhere in the planet other than the United States, your U.S. stock holdings are not looking nearly as good as if you're an American. The Americans are all super happy.

22:50Emily Peck: They're like, oh, my God, S &P 7 ,000. But everyone else in the world is like, wait, hang on a sec. What does it benefit me for the S &P to hit 7 ,000 if the dollar has just plunged by 15 percent?

23:00Felix Salmon: I agree with you guys that when it comes to the Federal Reserve, that's been a bit of a quasi red line for the president. I mean, he still tried to fire Lisa Cook and he still has sued Jerome Powell. But like the Supreme Court has actually like woken up around that and I think send fairly clear messages that they're not going to tolerate that. And Republican congressmen also have sort of like pushback. This is like the Federal Reserve is the one area where he gets some pushback, I think, from Republicans and the Supreme Court. And even on Friday before we talk, like Senator Tom Tillis, who is retiring, but he's a Republican senator in North Carolina was saying, I'm not going to vote for Warsh because this Powell thing is happening.

23:40Felix Salmon: So I would suspect it's possible you see that case get dropped to get Warsh over the line. That's a theory I just came up with today.

23:47Elizabeth Spiers: I think Republicans do view the Fed as a load-bearing piece of economic stability, even when they complain about it. Yeah.

23:54Felix Salmon: Everyone cares about the money, not the money. Don't touch the money. Touch the poor people. That's fine. But I will say for all that and all the rationality that seems to prevail in that arena, Thursday night, the president did sue the Treasury Department and the IRS. Like, things are still not, even in the money arena, things are, like, a bit weird.

24:13Emily Peck: Okay, but that was in his personal capacity, right?

24:16Felix Salmon: Okay, yeah, no, sure, it's different. But, like, in any other moment, any other era, if the president, in his personal capacity, sued the IRS and the Treasury Department, like, we would be doing our whole podcast about it.

24:29Emily Peck: But$10 billion. It is a classic piece of Trump crazy. And like, what, is Treasury going to just settle with him? Like, you know, Scott Besson is like, oh, yeah. Hi, boss. Who am I to say that you're wrong? I'm a big Trump supporter. I think we should just settle for$5 billion. You know?

24:46Elizabeth Spiers: There's nobody in Congress or founding fathers, like any piece of government that would have anticipated that we'd have a highly litigious president in office who would just constantly be suing people. But suing his own executive branch. His own government that he runs.

25:00Felix Salmon: He runs the government and he's suing it. It's crazy pants.

25:05Emily Peck: To Emily's point, we are living in a world of crazy.

25:08Felix Salmon: I didn't say that. I didn't say crazy. I just said that's very abnormal.

25:12Emily Peck: I'm going to come out and say it's crazy. Do you not think it's crazy?

25:16Felix Salmon: I am a journalist. I don't want to say. I feel like...

25:19Emily Peck: Emily is an objective Axios journalist, but Elizabeth will say that it's crazy.

25:23Felix Salmon: I'm an objective clinical Axios journalist, and I'm not going to use the word crazy to describe anything. Also, I feel like mental health people, they don't like that word either. So I'm just going to say it's like real unusual. It's not conventional. And any suggestion that like Trump is being moderated.

25:40Elizabeth Spiers: Is unhinged a mental health word?

25:42Felix Salmon: I don't think it is. I think it's a word about doors.

25:46Emily Peck: The doors have come off their hinges.

26:00Emily Peck: but actually i think we should stay on this there was part of me we've been going back and forth about like where should we talk about the sort of corporate communications around this and i think we should actually do this here because it is all part of the same conversation the consensus around fed independence and normality that we're seeing with kevin wash being sort of reassuringly nominated to be fed chair with the supreme court showing a little bit of backbone with tom tillis being like the voice of reason and all of this kind of stuff is being mirrored by corporate america when trump was inaugurated what you saw was all these billionaires sitting behind him in washington they're all donating millions of dollars to his inauguration committees they're all sucking up to him in public you have mark zuckerberg talking about masculine energy and all of this kind of stuff and you have tim cook presenting him with a gold plated or a solid gold something and everyone is doing the sucking up to trump thing which seems to have broadly worked for them on a corporate level and you can see why they do it it's because it works and now this week we are beginning to see that broad corporate consensus with trump almost leading the way with trump like firing bovino and sending in tom homan to calm things down and stuff That broad corporate consensus is like has now moved to say, yeah, guys, we should not have like quasi civil war in Minnesota with the state and the feds facing off against each other and U.S.

27:35Emily Peck: government thugs murdering people in the street. Like that's bad. Let's not do that, people. And that to me is interesting because it does kind of indicate that there is some kind of self-correcting mechanism somewhere in this society still.

27:51Elizabeth Spiers: Well, I think it's not that their moral compasses have become sharpened overnight. I think it's that it is bad for business to have the entire state of Minnesota in this kind of state of chaos. And a lot of these CEOs are doing business there.

28:04Emily Peck: I don't think the state of Minnesota is that important economically.

28:08Elizabeth Spiers: No, I think it's not just what's happening in Minnesota. It's the idea that ICE can come in to, you know, if you have a company like your Home Depot, if they can just walk into your stores and raid people, that's a problem. But also, it reminds me of a conversation I had in 2017 with a tech CEO where he said, you know, immigration is sort of part of the discourse now. He said, but none of the CEOs give a fuck about it, but we sort of have to talk about it and develop a stance because our employees are affected by it and they care about it.

28:38Emily Peck: Well, they suddenly care about the H-1Bs and they started this big pressure group called Forward.US and they really tried to push for more immigration and more high skilled immigration. and that all fell apart. Now they just shut up about it, or up until a week ago, they broadly shut up about it because they lost that war. But they care. They really do want more immigration quite badly. And they are hiring aggressively overseas and not in America because that's where the talent is now.

29:08Elizabeth Spiers: Yeah, but this was when they didn't think that the H-1B's program was going to be threatened beginning of the first term. So I agree with you. Now they do give a fuck about it, But a lot of the reaction you're seeing is coming from the workers first. There's backlash against Tim Cook right now because the few hours after Alex Preddy was shot, he was at the White House for a screening of Melania. And Apple employees were very angry about that. So he had to sort of post an internal message saying that, you know, I don't approve of what's happening, even though I've been hobnobbing with the president.

29:38Elizabeth Spiers: And so I think that's the sort of pressure is coming from labor in a big way, in a way that I don't think it was earlier in the administration. And I think the companies feel like they have to respond.

29:49Emily Peck: This is Emily's beat, right? Because you tell me, Emily, have you seen workers be relatively quiet over the past year and then suddenly noisier and that that has caused the CEOs to be like, oh, now my workers care, I need to say something? Or have the workers always been relatively noisy and now there's some other reason why the CEOs are speaking out?

30:13Felix Salmon: I mean, earlier this week, there was this open letter from 450 tech workers, some of whom were retired from some of the big tech companies, signing a letter demanding that their CEOs, tech CEOs, like go to the White House, demand ICE leave cities, cancel their contracts with ICE. And that seemed to get some traction that I haven't seen. I haven't seen a letter like that in the second Trump administration. letters like that were like a dime a dozen in the first Trump administration. And even before that, like the tech labor was so much more vocal and active back when interest rates were low and they were high demand workforce, but now they're not.

30:48Felix Salmon: And I think this week that dam broke with this letter and there was just a lot more talk. And I do think Elizabeth is right. The labor pressure was like one vector pushing on the CEOs to say something and not that they said anything particularly like strong.

31:04Emily Peck: The term of art seems to be de-escalation. Everyone is calling for de-escalation.

31:08Felix Salmon: Yeah. Milk toast kind of a response, but for this era, very notable and very different from anything else. And I think, I mean, partly it's like it's labor pressure and then it's just something happens that's, and it's very clear what it is and you can't deny it. And I think that's what happened with George Floyd in 2020. And that's what happened with Alex Preddy a little over a week ago, you watch the video and you're like, holy shit, like, how is this happening in my country? And I think that also a little bit really did play a role here. Like as cynical as we always are, I think it has to have played a role.

31:42Emily Peck: My point of view here is that the thing that changed was seeing like Minnesotans coming out in like minus 20 degree weather in their thousands to demonstrate and be very vocal in support of their immigrant friends and neighbors. And what this showed very visibly and very vocally and at very high volume was that truly middle America is horrified by what ICE is doing in these towns and that public opinion is not ambiguous on this. And that gave CEOs the ability to say, well, yeah, if I say that we need to deescalate, if I say that what is going on in these towns is terrible, there is almost no one on either side of the political spectrum who's going to disagree with me.

32:37Emily Peck: When you see Sam Altman and Tim Cook and the Home Depot guy and all the rest of it coming out and saying like, let's this word de-escalate one of the reasons i think they can do that is because that is not going to get ben shapiro upset that is not going to get the right like they're not going to face backlash from the rights on that partly because it's kind of what trump is saying too even trump is signaling that things have gone too far so like you can speak out insofar as you're still more or less aligned with trump and he's not going to disagree with you yeah i think for the tech

33:11Elizabeth Spiers: CEOs too. Part of it is their workers are aware, and this came up in one of the open letters, that when the tech CEOs want to march to the White House and demand something, they can do it. They convinced Trump to call off an ice surge in San Francisco. And all the workers remember that. And so they're sort of like, well, when you guys want to stop this, you can. And I think it's easier for these CEOs to put out a public statement that makes it sound like they're on the same side as the workers. But how many of them are actually marching to the White House and demanding anything? None of them, as far as I can tell.

33:41Emily Peck: I think, though, Cook did talk to Trump about it. I don't think he's lying when he said he talked to Trump about it.

33:46Elizabeth Spiers: What does that mean?

33:47Felix Salmon: It's really democracy in action, what Felix just described. That's it. That's why we have the First Amendment, to protest. So you can make a big stink so that lawmakers have to pay attention to you.

33:57Emily Peck: And also, I'm just going to come out and say the blindingly obvious here, which is that Trump is not an ideologue. You know, Stephen Miller is an ideologue, but Trump is not an ideologue. Look, Trump has this preternatural ability to sort of understand the temperature of his base. And I think he knows that his base has reacted really badly to this, partly because of just like the killing people thing and partly because also they've totally fucked up on the Second Amendment thing. So he lost like the NRA. And when you lose the NRA, like that's not good if you're a Republican.

34:28Elizabeth Spiers: Yeah, there was Greg Abbott, the governor of Texas, pushed back. And you can just almost see the scene playing out in their minds, which is that ICE sort of goes into a big Texas city where almost everybody does concealed carry and they shoot a bunch of white guys. Some of them are going to be Republicans. So they want ICE generally to at least recognize that having a gun does not make someone inherently a criminal, which Trump said something to that effect early in this news cycle. And then he sort of walked it back because that backlash was so swift.

34:59Felix Salmon: This is all not to say, to be clear, like Trump is talking de-escalation and this Bovino fellow was demoted. It doesn't mean that the White House has stopped its crackdown on immigration.

35:10Emily Peck: But I do think that the temperature change. I do think that the Stephen Miller targets for the number of deportations have always been massively unrealistic. He was pushing very hard on Kristi Noem and ICE to just deport more and more people and be more and more aggressive because he is the ideologue. and now he's run up i think what emily is saying like he's run up against democracy in very in various different ways and forms and does the official administration deportation agenda remain in place yes but have we now realized like where the line is like you cannot cross this line because then the entire country will go against you yeah i think maybe we have but the line i mean it's so

35:59Felix Salmon: the line is just like, don't shoot a white guy in the street. You know what I mean?

36:05Elizabeth Spiers: Yeah. There has been some internal backlash against Miller in the last week. And I haven't seen that so far. I mean, he's been sort of surprisingly not as visible to people. Like whenever I talk to MAGA people, they sort of dimly know who he is.

36:20Emily Peck: There was this very interesting Axios story where quote unquote friends of Christy Noem basically said, don't blame me. I just did what Steve told me to do. And basically just trying to blame her boss, Stephen Miller, who's not her boss, to be clear. He's just like some shadowy Rasputin type figure floating in the shadows of the White House. But everyone kind of understands that he has more power than she does.

36:46Elizabeth Spiers: Is there a poly market bet on who gets thrown under the bus next? Or first?

36:50Emily Peck: I mean, this is the other thing we should say. We're a year into the Trump administration. This one. This time, eight years ago, in the first Trump administration, it was just pure fucking chaos in the White House. And I can't count how many cabinet secretaries had been fired and turnover and scaramuchis and all the rest of it. And we have not seen that this time around. Like, we haven't seen a single cabinet change, right, as far as I can remember?

37:16Felix Salmon: Yeah, we had a story, one of my colleagues wrote it, just about Trump not really firing anyone in this second administration. He picked people that were really loyal to him. And in the worst case scenario, when he needs to push them out, he just puts them in different jobs.

37:31Emily Peck: The only person who really got pushed out was Elon, and he was not really...

37:34Felix Salmon: But he's like back in the fold now.

37:36Emily Peck: And no one was pretending that he was there permanently anyway. Even to the point at which, like, to get back to the Fed, Trump said, like, yeah, I really thought that Kevin Hassett would be great as a Fed chair, but I didn't want to move him to the Fed because I really like him here in the White House talking to me doing his economic counseling. So Trump is, for the first time that I can ever remember, showing loyalty to his own cabinet and his own appointees, which he never showed that in the first term.

38:05Elizabeth Spiers: I don't think that's loyalty, though. I think the appointees this time around, they've kind of people who...

38:09Emily Peck: Well, he's not firing them, which is what he normally does.

38:11Elizabeth Spiers: That's true, yes. But I think the people who decided that they were going to work with Trump this time around, that sort of cleared out all of the moderates who were like, well, maybe I can go work at the White House and temper what he wants to do. Now, everybody who went in for the second term knew what they were getting into, and they were just completely on board with it.

38:30Felix Salmon: I think this makes Trump more like a corporate executive, because there is this tendency, once you get high enough on the corporate ladder, you don't straight up get fired a lot of times. You get kicked into a side role until you gracefully bow out kind of a thing. Chairman.

38:47Emily Peck: It's always a good one.

38:48Felix Salmon: Chairman. Yeah. Chairman emeritus. Yeah, and you see it all the time. It happens all the time. It's like this gentle push.

38:55Elizabeth Spiers: Maybe we could all convince Trump he can be the chairman emeritus of the U.S. and then he doesn't have to do any work, but he'll still get paid. I feel like this would be an attractive offer for him.

39:06Emily Peck: Yeah, but he would want like a billion dollar salary.

39:09Elizabeth Spiers: Can we pay him in crypto?

39:24Emily Peck: We should have a numbers round. Emily, do you have a number?

39:28Felix Salmon: Yes. You know, I was going to do the Melania movie for my number, but I'm not doing it.

39:32Emily Peck: Don't do it. Don't be obvious, Emily. Also, that was my number. All right, well, let's start with Elizabeth, since you've given it away. Elizabeth, what's your number?

39:41Elizabeth Spiers: My number is$3 million, and that is the expected box office revenue for the Melania documentary between today and Sunday. I have to go see this documentary later today because I'm writing about it for the nation. And this is out of the$40 million that Amazon invested, plus$35 million in marketing, which is the highest marketing budget, as far as anyone can tell, of any documentary ever. Although I loosely call it a documentary because I don't think it really fits.

40:11Emily Peck: Is it not a documentary?

40:12Felix Salmon: She said it wasn't a documentary. So Sean McCree went to the premiere at the Kennedy Center. which is currently suing to keep its name the Kennedy Center. And apparently the first lady walked on stage and said, some have called this a documentary. It is not. And she said, it is a creative experience that offers perspectives, insights, and moments.

40:35Elizabeth Spiers: Moments. He's also an executive producer of it. And so I called a friend of mine who is a documentary filmmaker and has won a bunch of big awards. And he was like, every time I hear somebody call it a documentary, I just want to die.

40:47Felix Salmon: But why? There are all these documentaries now, not just Melania, but like the Beckhams produce their own documentary. It's not uncommon anymore. And people like take it seriously.

40:57Emily Peck: I have no problem with this being called a documentary at all.

41:01Elizabeth Spiers: Well, documentary implies a kind of remove where the subject is not dictating what is happening.

41:07Emily Peck: Yeah.

41:07Elizabeth Spiers: And if the subjects are executive producers, that's highly unusual. It's basically like just a big commercial for Melania, which I think serious documentary filmmakers are like, that's not really what we do. Emily, what's your number?

41:20Felix Salmon: 26. As in iOS 26, as in Apple's new operating system.

41:25Emily Peck: Oh, the liquid glass.

41:26Felix Salmon: Liquid glass. So one of the updates of the system is your phone will screen your calls for you. So if someone calls from an unknown number, the phone will say like, who is this? And they have to say, and then you decide. Oh my God.

41:39Emily Peck: That's so cool.

41:40Felix Salmon: So you guys think it's cool.

41:41Emily Peck: Is this the one good thing about liquid glass that people are actually like, this is good actually?

41:46Felix Salmon: Well, the journal had a story that said some famous people don't like it because they want their calls to go through. And now they're getting like Apple blocked or whatever by this new iOS. So some of them don't like it, but I think most people like it.

42:00Elizabeth Spiers: I think they'll live. They'll be fine.

42:02Felix Salmon: Yeah, they're going to be okay.

42:02Elizabeth Spiers: Have you encountered this in the wild?

42:04Felix Salmon: Yeah. First, my phone does it, which I don't like because I want people to be able to call me even though it means I get 40 spam calls a day. And so I don't like that. And going the other way, I don't like getting my calls screened either. So for me, I don't love it.

42:17Emily Peck: So how does it work? Because I haven't encountered this. If someone calls you or you call someone, what happens?

42:23Felix Salmon: You get like a robot telling you, what did they say? They say something like, Emily, can't take your call or who is this? You have to say who you are, basically. And then you get a text of the person's name. And I think you can hear it too. This is how it works.

42:38Elizabeth Spiers: I've had a call screener for like two years now because I've had the same phone number for a million years. so every PR person in existence has it. And also every time I write a column that right-wingers don't like, somebody finds my phone number and then I just get bombarded. But I was using this app, and I think it's called Roboblock, where you can choose the message that people get whenever they call in. And some of them are like, the voicemail pretends to be like a fictional company or whatever. Depending on how obnoxious you want to be to the incoming callers, you can change the message.

43:10Felix Salmon: Oh, that's fun. Oh, yeah.

43:12Emily Peck: And I should have my number two, which is 70, which is the amount of tons of gold that Tether has purchased over the past year, which is$24 billion of gold. And the CEO tells Bloomberg that they are continuing to buy gold at a rate of one to two tons per week.

43:34Felix Salmon: Is that why gold keeps going up and up and up?

43:36Emily Peck: One of the reasons, I think only Poland is buying more gold than Tether right now.

43:42Felix Salmon: Crypto is keeping gold's prices high?

43:45Emily Peck: Yeah.

43:45Felix Salmon: That's funny.

43:45Emily Peck: Yeah.

43:46Felix Salmon: It's not what you think.

43:46Emily Peck: It's a strange world that we're in because the whole point about Tether is it's a stable coin, right? Which means that it's all backed one-to-one with dollars. And gold is not dollars, to be blindingly obvious about it. But I guess they just have so much extra wealth now over and above the number of dollars that they need to back their Tethers that they can go ahead and buy gold at$5 ,200 an ounce. On which note, I think that is it for us this week. If you are a Slate Plus member, number one, thank you. We love you. You're great. Number two, we do have a whole other Slate Plus segment on Elon shenanigans.

44:24Emily Peck: But otherwise, thanks for listening. Thanks for emailing us on slatemoneyatslate.com. Thanks to Micah Phillips and Shana Roth. And many thanks also to not only Jasmine Molly, but also Justin D. Wright of Seaplane Armada for producing this here show. And we will be back next week with more Slate Money.

45:02Thank you.