The Unwanted Art Boom

0:08Hello 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. I'm here with Elizabeth Spiers of the New York Times. Hello. We have a spankingly awesome show. We are going to talk about the boomers and all of the stuff that they are going to bequeath to the rest of us. We are going to talk about the yen and whether it was a good idea for the US to intervene in the FX markets to try to strengthen it. We are going to talk about the weather because, I don't know, we're going to talk about the weather. I am going to tell Emily what a brolly is because she doesn't know. Didn't know. We have a Slate Plus segment on tax avoidance and whether rich people should even be allowed to work.

1:04It's definitely worth subscribing to Slate Plus for that one. It's a rollicking good episode today, so stay tuned. It's all coming up on Slate Money.

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4:05Felix Salmon: Well, that is a perfect way to put it. Let's start with me. Just like a boomer. It's the me generation. Which one was the me generation? Was that meant to be Gen X or was that the boomers? It's the boomers. Gen X, we're slackers. We're slackers, yeah. But we're still selfish. We're the ironists. The boomers are the me generation and they were like, what do I like? I like all of this bad art and I'm going to buy lots of it and it's going to be very expensive and I'm going to put it up on my walls. And then when I die, it's not my problem anymore. I don't need to worry about it. And then the rest of us who end up inheriting the art take one look at it and we're like, we don't want to live or deal with that.

4:48What the hell are we meant to do with it? But it was very expensive. And so we can't just throw it in the dumpster.

4:54Felix Salmon: But Felix, this is personal for you. This is not only a me generation thing. It is a you Felix thing, right? Yeah, I wrote a piece for Bloomberg about what we are calling the great art transfer. There's about, if you just take the tiny sliver of art that is really worth something on the secondary market, which is maybe like less than 1 % of all of the art that people have on their walls, that alone we're going to see about a trillion dollars of art, you know, being transferred, being bequeathed over the next decade or so. It's way, way higher. The auction houses are rubbing their hands, to be honest, because they've never seen such a vast amount of value coming potentially in their direction.

5:45And yeah, I led the article with an anecdote about my wife's grandfather, who was a modernist in first France and then California, and left us a whole pile of really good work. and it went to his kids, both of whom are now dead. And now it's coming to us and we are trying to work out what to do with that. And it is a lot of work. And I talked to a few people who inherited art and, you know, for all the, even if it's, you know, a big expensive collection and the auction houses hold your hand and all the rest of it, it's a lot of work. And no one really wants to face this, especially not the current owners.

6:30who are going to die because they're human.

6:32Felix Salmon: I was getting the impression reading your story that there's way more art than there is market for. The museums now, they don't even want it. They're like, no, thank you. Pay us. Give us a donation if you want us to take your art because we have to pay to store it and keep it up. And we might not even show it. We have such a backlog of stuff. Museums famously show less than 5%, sometimes less than 2 % of their collections anyway. So like, are they desperate for like more second tier California modernists? No, really, they're not. Is there less demand or is it more that later generations don't want art as much?

7:13Elizabeth Spiers: You know, they value experiences or things like that. I would say neither. There is always demand for art, but the stuff that today's 40-year-olds, 50-year-olds like is not the stuff that the 40, 50 year olds of 25 years ago liked. Tastes change. And most art, I mean, like one of the things that happens in journalism is that we wind up spending a lot of time looking at what happens in auction houses because that's the transparent and visible bit of the art market. But the overwhelming majority of art that is bought is not bought from auction houses. It's bought from galleries. And galleries overwhelmingly, again, not entirely, but overwhelmingly represent living artists making work today.

7:59So if you go into a gallery and buy a work of art, what you're going to do is you're going to be walking into a gallery and buying a work of art by an artist who you can probably meet, have dinner with, have drinks with. It represents our time, you know, and all the rest of it. Very few people really, you know, have any appetite to start rummaging around in art history and buying stuff from 1933. So that's part of it. It's not that people are buying less art. It's just that they're buying today's art, which means that the stuff that the boomers bought, which was also today's art at the time, there's less demand for that.

8:31Felix Salmon: I hadn't really thought about it very much, but boomers famously like to buy stuff and they bought stuff at rates and they spent money like no one had ever seen before. And that applied to art. They bought more art than any generation before. They created a market basically for more artists. You lay out all the numbers. They created artists. This is one of the glorious things that they did. If you look at the number of artists in the world, and I don't mean hobbyists with watercolors, I mean people with gallery representation who are actually making real money by selling art. During the period when boomers started really buying art with all of this amazing disposable income that they found themselves in possession of, the number of artists went up by two orders of magnitude.

9:20And so because there was so much demand from the boomers, that created a huge amount of supply and expensive supply in many cases.

9:31Felix Salmon: So I guess my question now is, so there is now going to be this sort of glut of art. Is that demand for art that created all the artists, is that sort of declining now? Is there less demand for art and artists than there was at the height of the boomer spending? I mean, they're still spending, as you point out. There's a big picture and there's a small picture. In the short term, and by the short term, I mean like the last 24 months or so, there has been an anecdotal softening in the art market. There's a bit less demand for art than there used to be. But these things are cyclical. And, you know, it'll probably tick back up again at some point.

10:14it's kind of interesting that it hasn't ticked back up as the stock market has been reaching new record highs because historically there's a lot of wealth effects stuff going on and people like i'm rich i can buy art and then when the stock market goes down they're like i'm not so rich i should start buying art but you know these things are idiosyncratic and plus of course no one really knows how much art is being bought because most of it is private and secret the bigger picture is, you know, there's$60 billion of art traded every year. That has been slowly going up over time, it will probably continue to go up over time.

10:48And one of the interesting reasons why it will continue to go up over time is because the boomers are actually still buying. They're not just sellers, they're also buyers. And the younger boomers are still in their, you know, late 60s, late 70s, and or even early 60s, in some cases. And so they have quite a lot of buying ahead of them. So a bunch of the art that gets sold by the heirs of boomers who are inheriting and selling art will actually be bought by other boomers. So in the long term, all of that art will wind up in like a glut somewhere. But that isn't going to happen in the next 10 years.

11:28It'll happen in the next 30 years.

11:30Elizabeth Spiers: In your piece, you also mentioned that when people try to offload some of this art to museums, now very often they are paying the museums to take it because the cost of preserving and you know insurance around collections is a burden uh is that cyclical or museums just having trouble with capacity that is secular the museums are pretty full and while there are certainly museums who will take art without asking for money they are the first thing that nearly every museum does when offered a piece is like also say well that's lovely but can you also offer us a donation and if you don't offer the donation a A lot of the time they'll be like, eh, you know, we don't really need that piece.

12:09That really started during the pandemic when museum finances sort of fell off a cliff. And I don't see it reverting back ever.

12:18Felix Salmon: But your story, which was excellent and got me thinking about art, which I never do. No offense. Is a great excuse to talk about this Bloomberg story from last year about all the stuff. All of the stuff. Not just the fancy art. This is my colleague, Chris, who wrote a fantastic piece about the great stuff transfer. And the thing about Chris's story, which is also fantastic, is that, you know, while there is, you know, a trillion dollars worth of like genuinely valuable art that is going to wind up getting inherited over the next 10 years. When we're just talking about stuff, when we're talking about like Pez collections or whatever, like that's just stuff.

13:01No one is going to buy that.

13:03Felix Salmon: so much stuff i mean his story like we just need to linger on it starts with the pez collection massive pez collection and then like devolves to a woman someone's mom just had passed away in the piece unexpectedly and she was an artist who kept all her stuff in not one ladies and gentlemen but two soho lofts which is like oh my god all the pez one for me and one for my pez collection yeah and some of this the quote stuff she had included cocaine from the 70s i don't think she was collecting that though it was just left over yeah but i mean who throws their coke away seriously you might want it one day it was a great story that kind of like got me thinking about baby boomers more generally because they're a great like punching bag and in the business press we're always talking about this wealth transfer and now art transfer and like you know we're talking about the economics or whatever.

13:58Felix Salmon: But then boomers, and I didn't have this realization until I was reading Jessamyn shared a piece from Tom Wolfe where he calls them the me generation back in the 70s. They were actually the product of, I don't want to say socialism in America, but like the most prosperous time in Americans' lives when there was actual movement up amongst the classes. Like the undercurrent of Wolf's piece is really about how these like working class folks, the proletariat, had finally gotten a hold of some money and now they were spending it and now they were selfish. That had been the privilege of the aristocrats for a long time.

14:38What's the point of upward mobility if you can't buy stuff? Yeah.

14:42Felix Salmon: So it blew my mind because at first you're always thinking, like now we always think of the boomers as these like rich, entitled, spoiled people. But it's an interesting turn because the undercurrent of the wolf piece is kind of like, can you believe these like classless, poor hordes now are, you know, have money and they like dare to think selfishly. I know. Tom Wolfe is so like gloriously patrician, like Snoopy. He's like, you know, look at these Arabists with their nouveau, you know. That's what it was. And then for a long time in the middle of the 20th century, famously a prosperous time for like the working class, everyone.

15:19Felix Salmon: And Wolfe kind of snidely is like they left the cities and moved to the suburbs with their houses and their lawns. Like he's just sneering at all of it. But then so then famously that all like kind of like explodes into the 80s. And then it seems like everyone decided these people were just, they kind of went with the Wolfian critique without realizing it. They were like, these masses are disgusting in their selfishness. And then eighties onward, we spent the time just like dismantling all the economic support we had given working people and middle-class people for like the next, I don't know, 50-ish years.

15:52Felix Salmon: And to the point where we're now again, just simply asking, can we have a little bit more money? Do you know what I mean?

15:58Elizabeth Spiers: Some of it is just that every generation reacts to the circumstances of the prior one. And the greatest generation went through financial crises and the Great Depression. And so they were always operating from a scarcity mindset to kind of hoard money and things and were extremely frugal. And so some of it too was just a reaction from the boomers wanting to do the opposite. We have money, we're going to be more acquisitive, more materialistic. And I think that trend kind of still continues. We do see generational differences in the way that people choose to spend their wealth.

16:33Felix Salmon: But like they had money because we had all these policies that sort of shared the wealth that enabled working people who typically, you know, had to really scrimp and save enabled working people to take vacations, have two cars, have houses in the suburbs, all this stuff. But to be clear, like even since then, the number of square feet per household has been going up steadily for, you know, many, many decades. And the amount of space with which we fill our life, you know, stuff just stuff as everyone knows, stuff will expand to fill the space available. You know, however much space you have, you will fill it with stuff.

17:12And then some.

17:12Felix Salmon: Yes. And as the wonderful stuff piece points out, fewer and fewer of the younger generations can afford these bigger houses to stuff with stuff. So they are starting to deprioritize stuff in favor of quote unquote experiences or technology has advanced to the point where we don't need the stuff anymore. We have Spotify. We don't need a record collection. You know, some people don't buy books anymore. They just have their Kindles, no magazines, no, no newspapers. Yeah. And then I think that's right. So disposable, like, like silverware, you know. No, I think that's right. People don't go out and buy massive, you know, porcelain collections anymore in the way that, you know, folks used to, you know, that the idea that you would get like a dinner service as a wedding present seems to have like largely gone out of fashion and so on and so forth.

18:03And you're absolutely right that a lot of the stuff that people do spend money on, as Elizabeth says, is like experiences rather than things. I don't think this applies specifically to art in particular. But if you talk about, you know, stuff in general, all of this is true. And yet, the houses aren't going anywhere. The suburbs aren't going anywhere. The storage units aren't going anywhere. Like, you know, the storage unit industry is still booming because people have so much stuff. This stuff isn't going anywhere. And, you know, you can talk on a sort of case-by-case basis about how, you know, here's some millennial who's living in a city in a small apartment and doesn't have any space for anything.

18:48And, like, what are they, you know... But in aggregate, you know, once the boomers have left the earth, their suburban tract houses are still going to exist and they're still going to be full of stuff.

19:00Elizabeth Spiers: So much. That's true. But I wonder also just culturally if the boomers, you know, when they inherited things from their greatest generation parents, there are kinds of things that people inherited, like, you know, heirloom china sets and things like that. And a lot of the stuff in the stuff story really, really is not that kind of thing. You know, what I'm thinking about in particular is the kind of like eccentric collecting where somebody has four million salt and pepper shakers. And there is absolutely no secondary market demand for that stuff. And I think that's a problem that the boomers just have not experienced themselves because they didn't have to deal with a greatest generation collection of random shit.

19:40And one of the things I spent a lot of time thinking about in my art piece was this idea that, you know, the journey is more valuable than the destination in terms of building a collection. that like if you have an art collection you really love your art collection and you value your art collection and the one thing that almost everyone with an art collection wants is to keep the collection together when it's bequeathed to you know a museum ideally but like to anyone really because they're like this is a this is greater than the sum of its parts this is i've just put a lifetime of effort into assembling this great collection and if you break it up all of that effort goes to naught right and so they really value the collection part of it but the fact is the only person who really values the collection part of it is the person who put the collection together very few people inherit a collection in toto and like oh this is such a great perfectly balanced collection i love it as it is because they didn't put the effort in they

20:41Felix Salmon: didn't create it and i mean i think collection generally outside of the art market is sort of like a dying hobby perhaps because they're we have instagram now and people you know they're like collect stamps or just stare at instagram and they choose perhaps instagram there is one exception to this rule which is good old-fashioned vinyl records they seem to be having a boom and people seem to be record collecting now i i'm planning a money talks on this coming up but

21:13Elizabeth Spiers: yeah in general you're right do either of you have collections so i used to have a felix the cat museum in my spare bathroom and i had like and i collected a whole bunch of felix the cat stuff and then we moved house and there was nowhere to put the felix the cat museum and so i packed it all up into some cardboard boxes and gave it to my friend's kid felix and i don't think he appreciated it for exactly the same reason that he he hadn't put it together so it's like, eh, I don't know how to do this.

21:47Felix Salmon: I was going to say that another thing that probably happened to the baby boomers is when they were sort of younger, it was pre-China shock and stuff was more expensive to acquire and there wasn't as much of it. But once, you know, we opened up the door to China and they started making stuff and there was, you know, the rise of Walmart and Amazon, there's just so much more you can buy and for so much more cheap now. But like if you grew up kind of where that wasn't the case it's like so much more even more exciting to be able to just buy all this even more stuff so it's like they already had the propensity to buy it and then there was so much more of it available and for so much cheaper that's got to have had an exponential sort of like growth effect on the accumulation of said stuff so i love amelie that you have brought in the international angle here, because this is going to be the segue to Beat All Segues, which is that one of the interesting things that one sees among the younger generation of collectors in the United States, especially if you're looking at the millennials and Gen Z, I love plugging the Bloomberg Weekend stories here on Slate Money.

23:04We have a great Bloomberg Weekend story this weekend from my colleague Madison Derbyshire about hunting camo, which is very hot these days. And vintage hunting camo from like the made in America days from back in like the 80s and 90s is super valuable. There was this one like best that just managed to sell for$4 ,000. There's one coat, which everyone wants with a corduroy collar. And where does one go to find this vintage made in America hunting camo? Japan.

23:34Felix Salmon: Japan. And the Japan great stuff transfer is a good like, 20 years ahead of the American Great Stuff Transfer. And one of the things that Americans have been doing over the past few years is the yen has been really weak, is they've been going to Japan and buying up vintage clothes, buying up vintage watches, buying up a whole bunch of stuff that the Japanese collected 20 or 30 years ago, and is now super collectible here in the United States. And because the yen is so weak, they can buy it for like relatively cheap. And so it comes back to the United States as part of this whole sort of, this is actually a sort of significant cultural export now for Japan, which is like American stuff being re-exported back to America.

24:18Felix Salmon: There's this great podcast about how American prep, that style, actually originated in Japan. That's David Marks. Yes. Amazing. This is David Marks' whole thing. And it's true that like so many American style trends are being re-imported from. And now it's happening not only in terms of style, but also in terms of actual objects. Yes, it was a book. I think the book was called Prep or something where the guy, he went to like Princeton or Yale or something and took pictures of the kids and how they were dressed on campus. And then it became kind of like really popular in Japan. And then it actually changed the way people in America dress to look more like those kids on campus.

24:59Felix Salmon: And their whole thing was they didn't care how they were dressed. Yeah, it's called Amatora, How Japan Saved American Style by David Marks. And he's got a few other books as well. But that one's the really famous one.

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29:07Back to the whole segue. is that these, you know, big multi-decade long cultural transfer, like changes to global culture, are also weirdly very connected to the foreign exchange markets.

29:28Felix Salmon: Oh, I was like, how's he going to tie this to the weather?

29:33Elizabeth Spiers: We're going to go from Pez Collections to you, Scott Besson, and you guess how.

29:40Felix Salmon: I have my red string, so. Exactly. I am drawing a piece of red string from vintage hunting camo to Scott Besson, the former George Soros hedge fund manager, who was a foreign exchange trader. That was his job when he was working for George Soros. People can sneer at Besson and talk about how bad of a job he's doing until the cows come home, but motherfucker knows his FX. That's the one thing he knows. He understands how the FX markets work. He understands the big macro forces. He understands when government intervention works. He understands when it doesn't. He understands why it works. He understands how to intervene.

30:23All of this stuff is like his very, very specialized area of knowledge. And guess what he just did? He intervened in the foreign exchange markets by selling euros, interestingly, where the Treasury had this pile of euros. I'm not entirely sure it was in some foreign exchange stabilization fund somewhere, selling euros and buying yen because he wanted to support the Bank of Japan in propping up the yen, which, you know, has been weak for a while and it's just been getting weaker. And at one point it reached like 165 yen to the dollar, which is crazy.

30:56Felix Salmon: 40-year low. and like he was like no this is too low for a whole bunch of reasons and this is very much aligned with the sort of trumpian view of international trade which is you know if we export that's good and if we import that's bad obviously when the yen is weak that helps japanese exporters which means japan exports more and that is something that is bad in the eyes of donald trump so selling this intervention to trump is going to be very easy it's going to be like i I want to make the yen stronger so that Japanese imports become less attractive. And so, yeah, he did that. And it had quite a violent effect in the yen-dollar exchange rate.

31:36You know, it's come back a little bit now, but it basically went from like 165 to 150-something, you know.

31:45Felix Salmon: But I don't think that's why. I mean, maybe that's the argument he made behind the scenes to President Trump, who, of course, said the reason they did this was because we're friends with Japan. And except for Pearl Harbor, they've been good to us, literally is what he said. But I think the reason observers think that Besant intervened to prop up the yen is because he didn't want the Bank of Japan DIYing this and selling a bunch of treasury bonds to prop up the yen. because the worry was sell a bunch of treasury bonds and Japan holds like over more than a trillion dollars worth of treasuries. If Japan had done that, it might have pushed up yields even more on treasuries and they're already going kind of bonkers high right now.

32:30So he's not only intervening to prop up the yen by buying yen in the FX markets, he's also twisting the arm of the Fed to sort of extend this credit facility to the Bank of Japan, where the Bank of Japan, rather than selling treasuries, can just borrow against its treasuries from the Fed and then just sell those dollars and buy yen rather than selling the actual treasuries. And it kind of looks like the Fed is going to go along with this, but we don't know for sure.

33:06Elizabeth Spiers: I think we should also mention that Besson's nominal justification for doing this is that he's saying that the yen is undervalued, which doesn't really hold water. Well, I think it does. I think the yen is undervalued. It's clear that his primary reason is to protect Japan from selling off U.S. treasuries. I don't think normally the treasury secretary would look at another currency and say it's undervalued, so we should... Oh, yeah. Wait, so you're not saying that the yen isn't undervalued. You're not saying that's not a reason to intervene.

33:34Felix Salmon: That's not why he intervened. Yeah, he intervened to prop up treasuries so that the yields didn't go up even higher.

33:41Elizabeth Spiers: I mean, particularly given that the last time the U.S. intervened was in 1998 during the Asian crisis. This is an unusual move. Yeah. I think the big picture here is we've talked a little bit about this in previous episodes. It's that, like, inflation is a thing now in Japan. And if you think that inflation is a major political issue in the United States, just go to Japan. Because Japan has had basically zero inflation for as long as anyone can remember. And now it has inflation. And this is causing major political upheaval. This is why they want to cut sales tax and all of the rest of it so that things come down in price.

34:22And as inflation comes up, interest rates go up. And that's good. Like you don't want Japan being at ZERP forever. Like having like slightly more normalized interest rates is ultimately a good thing. But if the interest rates come up, then the thing that has basically financed America's massive current account deficit for the past 50 years goes away, which is the yen carry trade, right? Basically, most of Japan and most hedge funds in the world have had this very lucrative trade for decades, which is that you borrow yen at 0%, buy treasuries at 4%, and you make that 4 % carry. And it's just like free money forever because the Japanese interest rates never come up.

35:17But as the Japanese interest rates come up, all of those Japanese and all of those hedge funds start thinking to themselves, well, I don't actually get that much of a yield pickup by investing in treasuries. I can stop taking that FX risk and I can just buy Japanese bonds instead. And so that massive demand for treasury bonds that has been, you know, the driving the huge inflows into America for decades, that could go away.

35:43Felix Salmon: Well, I don't understand. And I mean, I think I do understand, but part of the problem seems to be that the Bank of Japan isn't raising rates when it really should. Like that would help prop up its currency and might unwind the carry trade like you're laying out. But like seems like what you that is what one does when there is inflation. You raise interest rates, but it seems like they're they don't want to do that or something. Do you know anything? Well, they have. I mean, a little bit, but not as much. So higher than they have been in living memory, but you're right. They should probably raise them a bit more.

36:17But there's a lot of, like, remember that Japanese national debt is like 215 % of GDP or something enormous like that. Already, interest payments account for a quarter of all government spending in Japan. If Japan raised rates even further, they would probably reach a third. and at some point it starts becoming like almost unsustainable.

36:45Felix Salmon: And that's when you get all the takes that are like, is that a warning sign for the United States, which has high inflation, higher rates, higher deficits going up and up and up, borrowing costs going up and up and up. Like, is this our future? I don't know.

37:00Elizabeth Spiers: Well, that's part of the critique of this move by Besson, aside from the fact of whether it's appropriate for somebody in his role, is that it doesn't really address any of the underlying systemic problems that are causing this for Japan anyway, which aside from the enormous public debt, the aging population rapidly is being... I mean, I feel like you're holding Besson to a very high bar here. Like, don't do any kind of intervention unless you're solving all of the underlying systemic problems. Well, yeah, obviously, if that's the bar, you're not going to do any kind of intervention. It's a terribly high bar when intervention from the Treasury Secretary is so rare.

37:39Elizabeth Spiers: I think we have to justify it. Why should it be rare, Elizabeth? I think what Besant is doing here is not dissimilar to what he did in Argentina, right? Where you have an ally and you intervene in their markets to help them out for political reasons. And you make money on that trade because he's like a hedge fund manager. and you wind up making money, that you wind up helping your friendly government, the dislocations in the global markets kind of ameliorate a little bit. Like all of the effects of your intervention are... I think people have that critique about the Argentinian intervention too.

38:18No, I understand that this is a critique, but what I'm saying is you're coming at this from the point of view of intervention should always be a very, very rare thing and you only do it if you can like, you know, solve systemic underlying blah blah blah and besant would push back on that he's like why should it be rare and i'm gonna ask you that why should it be rare it's not really the role of the

38:42Elizabeth Spiers: treasury secretary to do that to reg you know try to manipulate or move foreign currency markets if that's going to be within the scope of what treasury does it would be much more expansive than historically what we've well i mean treasury i'm i you know i think you're right as a matter of like empirical fact. Like historically, Treasury hasn't done this kind of thing very much. I don't think it's a particularly strong norm. I don't, I'm not of all of the norms that the Trump administration is violating, you know, every Monday morning and, you know, eight times before breakfast. Like this, this one does not bother me particularly much.

39:23I don't think there's any massive unintended consequences of violating this norm. I think if Bessent wants to do it, and he's making money at it and he's helping his allies. Would I do it? Probably not. But is this getting my back up?

39:36Elizabeth Spiers: Well, I think of the Trump administration cabinet members, Besson is one of the most competent. But where the sort of danger lies is that kind of expansion in executive power. And if you had somebody who was kind of an idiot, not a Scott Besson, who was able to do that, what would the consequences be? I think that is fair. But I will also say that, you know, as we have been discussing, there is a very close relationship between foreign exchange and interest rates. They move very closely together. It's basically impossible to disentangle them because the whole point of FX is that you earn an interest rate on the currency that you hold.

40:14But insofar as you can disentangle the two, in America, rates have always been the Fed and FX has always been the Treasury. and for as long as I can remember going back to Bob Rubin and before you would have the treasury secretary coming out in press conferences and intoning this you know magical incantation of a strong dollar is in the national interest and and the dollar would move every time the treasury secretary so much as hinted that they had an opinion about the dollar and it has always been a generally accepted part of Treasury's job to like care about the dollar and on some level to try and optimize where it's trading.

40:57And yes, what Besant did here was very focused on the yen rather than the dollar broadly. But the dollar-yen exchange rate is one of the two most important exchange rate, or at least three most important exchange rates in the Treasury portfolio. The only exchange rates that the Treasury really cares about are dollar yen, dollar remnant B, and dollar euro. Dollar euro, Besant, came out and said he thinks it's fine. He doesn't see a problem with that FX rate. Dollar yen, he thinks the dollar is way too overvalued, and so he wants to bring it down. And he has had some success doing that. And dollar remnant B, as we know, there's a massive trade war going on with China, and they hate each other.

41:38Felix Salmon: The last question is, I mean, we saw the violent, I like the use of the word violent, decrease or increase in the value of the yen after Besant did his thing. And we're seeing it come back a little bit now. I was reading some commentary that argued that currency intervention is most effective when you're working to weaken a currency, as is what Besant did with his friend George Soros. I guess they're not friends anymore, I don't know, with the British pound. But this was something in the opposite direction, is intervening to prop up a currency. And the commentary I read, which I was convinced by but can easily be unconvinced on, said that it's much harder to prop up than push down.

42:22Felix Salmon: So is that true? Tell that to the Swiss. I'll tell it to the Swiss. I think it can happen both ways, quite violently.

42:31Elizabeth Spiers: What was the logic in the paper for why it would be more difficult?

42:35Felix Salmon: It was like gravity is going to gravity and like there's only so much you can do. That was my takeaway. I'm sure it was more technical, but, you know, I'm skimming a lot of analysis every day, Elizabeth. I don't know. I didn't write about it, so I didn't go back. But I was like, that makes sense. You know, if something wants to go down, it seems like gravity will pull it down. You know, Japan is struggling. Like if this carry trade is unwinding, maybe there's nothing that can be done actually. Are you saying the systemic problems will still matter? I think in general, if a currency is overvalued and is being propped up by a country, and that's what happened to the pound, you know, back in 1989, I think, when George Soros broke the pound, like the pound was being kept at an artificially high level.

43:18And then they were just placed so much pressure on it. But it went down to the level at which it was, it wanted to be basically. That's not what was happening in Japan. The Bank of Japan was not propping up the yen and keeping it in an artificial high level.

43:34Felix Salmon: But it has been trying to prop it up. I mean, a little bit. But if you look at, as you say, the yen is trading at a 40-year low. There's no— But they have done some intervention. There has been some intervention, and that intervention— In general, the rule, I think, in general, the rule for FX interventions is they always work best when you have the wind at your back. if there's some weird like artificial reason why the currency is trading where it is but it kind of wants to be somewhere else then if you push in that direction then it's easy and if you push in the opposite direction then it's hard yes the yen wants to be down but i don't know that the yen wants to be down and i think that besant would agree with me on this one that in fact they are like best friends the weakening of the yen looks kind of looks like it's gone too far and it might actually want to bounce back a bit okay what the yen wants that's the hot rom-com that's the new slate money rom-com what a yen really wants what a yen yen's for what a yen yearns for I'm here all day folks or as you might say like what is the dollar yen exchange rate equivalent to a perfect 72 degree day with the sun out.

44:52Elizabeth Spiers: Let's talk about the weather. I can literally see the red stream between those two.

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47:23Felix Salmon: We're gonna talk about weather. I'm so excited. So excited. Can I just go here? Go. I'm gonna just wind you up and now go. Folks, we're going to talk about weather apps and their tyranny over our lives and the economic well-being of small and large businesses, for-profit and non-profit all over the world. They're struggling in the face of this tyranny. As I said, the tyranny of the weather app. Everyone is checking the weather. They're looking at it quickly, glancing at the five-day. They see a little umbrella. They see some rain. They're like, oh, not going to go to the beach. Oh, not going to go to the zoo.

48:02Felix Salmon: Not going to go to the museum. there's a 36 % chance of rain. These apps and these icons are having a real effect. This is an article I read in Business Insider by the other Emily, Emily Stewart, wonderful reporter that really got me thinking because I know that the app, the weather app holds sway over me. And I know that one of the problems that she reports on is that the weather app is forced to sort of boil down a very complex situation, i.e. the weather. Not so simple, even though it's the subject of small talk throughout the world. It's forced to boil it down into one we picture. The we picture is misunderstood and misread just because it says 20 % of rain doesn't mean it's going to rain.

48:47Felix Salmon: Also, the 20 % of rain is in a big geographical area. So as Elizabeth was saying before we even started recording, might not even apply to where you live. There's another piece all about the tyranny of the weather app in the UK, which is really interesting. And I want to hear everything Felix and Elizabeth have to say about that. But Elizabeth was talking about South Brooklyn. In other words, everyone is living or dying by these weather apps. It's controlling our lives. We need to break big weather and just live our lives. Go outside. It's fine. You'll be okay.

49:18Elizabeth Spiers: What's fascinating to me is how much these apps are kind of constructed around predictable human behavior and biases we have. So there was something that one of the reporters called the wet bias. The wet bias. If it's possibly going to rain, you're more likely to see the icon suggesting that it will because people get really mad if they think they're going out for a nice day and they get rain or more mad than they do if they are told it's raining and then surprise, it's actually a nice day. Yes. This is not, by the way, this is not a conspiracy theory. This is a fact. Yes. This is a reported fact.

49:49And so like the meteorologists and one of the things that Emily Stewart said that is absolutely right is that our ability to predict the weather has never been better. We have more sophisticated models that can do better forecast now than we've ever had in the history of the world. And they spit out probabilities and no one knows how to read a probability. And one of the things that happens is if the model spits out a probability of 20 percent that it's going to rain, a number is just added to that. like somewhere between five and 10. And so like what it will show in the app is 25 or 30 % that it's going to rain.

50:26The probability of rain, it can go down. If it's absolutely at zero, they will put it at zero. But anything above zero, they will add five or 10 points to. And this, I think, I'm pretty sure I read about this in Nate Silver's first book. I think Nate had a whole chapter on this, that just people don't want an accurate forecast of the weather. What they want is reassurance that it's not going to rain. And so that's why they do this.

50:52Elizabeth Spiers: There's an irony to this. When you look at surveys about trust in media, the type of journalists that people trust the most is their local weather anchor. So weirdly, the actual meteorologist people love, but the inaccurate weather.

51:07Felix Salmon: But the stories say to like watch TV for the best assessments of the weather forecast, you need to watch the local weather guy or gal and not just look at the app. Yeah, 100 % because a whole bunch of things are happening when you watch local TV and see the weather report. Number one, it's super local, right? And so if you watch the weather report on New York One, which is like a New York City weather station, that... News station. News station, yeah. New York City news station. But that weather person can be like, it's probably going to be raining in the Bronx, but it will be dry in Queens in a way that it's very hard to do on like, you know, if you just have some global weather app.

51:45The other thing is that if you have a 60-second weather forecast slot to be able to explain the subtleties of what's happening over the course of the day and where weather is going to happen and where it's not going to happen, that allows you to convey those subtleties to some greater or lesser extent. If all you have is a single icon in a little widget on your phone screen, there is no conveyance of subtleties. It's just like a rain cloud symbol and maybe a percentage number if you're lucky. And people just see that rain cloud symbol and they're like, oh, it's going to rain. I'm not going to go out today.

52:18Even though what it actually means is there is like a 20 % chance that there will be a shower at some point in the day. We don't know when, maybe. And like, if you go out, it's probably going to be fine. But people don't read it that way.

52:31Elizabeth Spiers: Yes, I feel like this would be apps would be better if they just had, you know, a kind of secondary stat about confidence levels and some explanation. No, they wouldn't because no one can read percentages. No one can read confidence level. Like, this is the whole point. This is the entire problem. Well, maybe for 2 % of us, this would be better.

52:48Felix Salmon: And then The Guardian in May, this wonderful reporter, had a story called, quote, I stopped checking the weather forecast and got a series of wonderful surprises. It's all by this woman who was like, you know what, I saw that weather apps are costing British businesses 137 ,000 pounds a day or something per venue because people just don't go to things because they think it might rain. So this reporter... Because this is England. It always might rain. Yeah, that's true. Actually, it makes even less sense when you point that out. But so she just stopped checking the weather and she just went outside and just let it rip.

53:25Felix Salmon: And by the end of the piece, she's like pretty into it. She's like, you know, I brought... And she uses all the words that I don't understand. Yeah, what's a broly, Felix? What's a broly? B-R-O-L-L-Y. Wait, do you guys really not know what a brolly is? No. No. Amazing. A brolly is an umbrella. But why is it with an O? Shouldn't it be a... A brelly? Shouldn't it be a brelly? Why is she laughing at me? It's fine. It's fine. It's a brolly. She was like, I didn't bring my brolly. I brought my brolly. I wore my... What's the raincoat word? What was the raincoat word, Elizabeth? I don't remember. Mac?

54:04Felix Salmon: Yeah. Yeah, her Mac and her Brali. She's bringing it. Mac is short for Macintosh. Sure, whatever. She also said something about a bracket or a jacket. Anyways, doesn't matter. Good piece. Barber? There's anorak. But yeah, I will also say, though, that this is the worst possible time to do this reporting because England is in the middle of a world historical drought and it hasn't rained in England for months. So if you go out in England this summer, of course it's not going to rain.

54:31Elizabeth Spiers: Maybe that's why the reporter said that she had a generally good experience of doing this because she was surprised by... It's never raining now.

54:39Felix Salmon: Well, that's the other thing I was wondering, like in the age of extreme weather, which we're clearly in, right? We all agree on this. Yes. I mean, just look at what's happening in France right now. Crazy wildfires. The last time I came into the city, I looked at the forecast and it was like, hailstones the size of golf balls, maybe a tornado. And I was like really stressed about it. Oh my God, have you seen the crocodiles coming out of the subway is crazy.

55:05Elizabeth Spiers: We have had a back channel where Emily DM'd me and should I come in because it says that it's just going to be floods and rains. And, you know, I look out my window and it's fine. It's fine.

55:15Felix Salmon: Elizabeth was my weather app. She was my accurate forecaster. She was like, it's fine here. And I was like, okay, okay. As we record on Friday, on Thursday evening, there were these massive delays at JFK and like three hour delays on all of the planes trying to leave JFK Airport in Queens. And this was on the socials and all of the comments underneath it were like, why? This makes no sense. The weather is fine. It's not raining. It's all fine. Apparently there were massive storms at JFK, but like in the rest of the city, nothing was happening. Yeah, it's weather. It turns out very local. Very local.

55:50So don't be trusting your apps. Just trust your eyes. If it's not raining, what that means is it's not raining.

55:58Felix Salmon: Yeah, maybe wing it. Maybe we should all be winging it like this reporter in the UK. We should all be winging it. Stop checking the app. Just go outside. Bring a brolly. Don't bring a brolly. Who knows what a brolly is anyway? Doesn't matter. Or just get wet. If you go outside in New York and it does start raining, guess what? A whole bunch of brolly vendors pops up out of nowhere to sell you a brolly. So you'll be fine. It's true.

56:32We should have a numbers round. Elizabeth, do you have a number?

56:35Elizabeth Spiers: I do. It's$122 ,000 and that's dollars. And for$122K, you can get your very own H12 general purpose humanoid robot from a Chinese company called Unitree that just went public on Thursday. And I mentioned this because this particular robot did a big performance, or a group of them did a big dance performance for Lunar New Year that you can find on YouTube. They did a lot of Kung Fu and there were swords involved. But I was thinking about this because I was reading an interview with Colson Whitehead in the UK Observer where he kept being asked about AI. And finally he said, you know, I don't like AI, but I really love videos of watching robots malfunction, which I do too.

57:17Elizabeth Spiers: And I wonder if this is a new kind of schadenfreude where, or resent the fact that these robots are interloping in our general space. I'm interested, when you say that for$122 ,000 you can buy one of these robots, is the you here like Americans? Because all I've been doing is reading all of these stories about how we're not going to be able to buy Roombas anymore because of all of these rules about we can't import Chinese robots for national security reasons. This is a very specific civilian-use robot, So it's stripped of all the stuff that you would want if you were going to repurpose it for military or whatever.

57:53Felix Salmon: Can robots clean your house? Roombas are like military grade?

57:56Elizabeth Spiers: I don't know about Roombas. This is a totally different thing.

57:59Felix Salmon: But if the price could come down and then the robot does more than a Roomba, which is just a vacuum cleaner that like gets stuck in corners all the time. So what does it do, Elizabeth?

58:07Elizabeth Spiers: Yeah, what does it do? Whatever you program it to do, I guess. In theory, we all want a robot who will do the housework. But yes, that is what we want. But this is not a solved problem. There is no such thing as a humanoid robot that will do the dishes. I mean, at some point there will be, but it doesn't exist yet. Yeah, my point is that you can custom program it to do stuff. I don't know what its limitations are. There's an educational version you can buy. Most of it is powered by NVIDIA's technology. So do what you will.

58:36Felix Salmon: I mean, we're in a place now where you can have like a robot friend at home. Like the Times had a whole episode of the Daily about this like very old woman living in a very remote corner of the Northwest who has a robot friend that she lives with and talks to. And now OpenAI is doing like a new device that talks to you too. So just a matter of time before they talk to you and do your dishes. It's heaven. No, it is definitely inevitable that we're going to have all of these wonderful humanoid robots. I've talked about this on the show in the past, like replacing all blue collar work and it's going to be terrifying and amazing at the same time.

59:07I'm just pretty sure that, you know, we're not quite there yet. Emily, what's your number?

59:11Felix Salmon: My number is 53.7. That's a percent, 53.7%. That is labor's share of national income. It is at a record low. In the 1960s, the number was about 65 % and it hovered above 60 % for a long time. This is basically the percentage of money produced by the U.S. economy that goes to workers through wages and benefits, like the amount of money real regular people make from working. That share is going down and a greater share of the money is going to corporate profits, dividends, interest. That's capital. So in the decades-long, centuries-long, millennial-long tug-of-war between capital and labor, right now labor is losing.

59:56Felix Salmon: And it's losing badly, folks. The pie is getting bigger, but labor is getting a smaller slice of it. And that's not just a problem for labor, for humans who work and get money and who feel angry about it, but it's something that's going to have, I think, personally, I believe, will have problems for the U.S. economy because we don't tax capital as much as we tax labor, as we all know and we talk about all the time. And I think we're talking about in the plus. And so as more money goes to capital instead of labor, that means that the U.S. government isn't capturing that money through taxes, which could be a long-term problem for the deficit and all the other stuff we talked about, vis -à-vis yen, vis -à-vis yields.

1:00:39Felix Salmon: Do you like how I said vis -à-vis? It's very French. Are you cosmopolitan and ooh-la-la? I'm all brawly and vis-a-vis. Very European. My number is six. If you look at the top grossing opening weekends of all time in America, all six of the top six biggest movies that have had the biggest opening weekends have a colon in their titles. Whoa. What are they? So the number one biggest weekend of all time, for reasons that I don't entirely understand but have guessed at in my newsletter this week. Tom Holland and Zendaya. Number one, as we say, is Spider-Man colon Brand New Day. It edged out the previous record holder, which was Avengers colon Endgame.

1:01:29And then in number three is Spider-Man colon No Way Home, which is also Tom Holland and Zendaya. And then number four was Avengers colon Infinity War. So you can see they're going back and forth. But guess what? Five and six are neither Spider-Man nor Avengers. Five is Star Wars colon episode seven. And six is Star Wars colon episode eight.

1:01:57Felix Salmon: Wait, which is seven and eight? Doesn't matter. It's almost like comic book franchises do well at the box office. If you go by the IMDb typography, not only do all six have colons, but four of them have hyphens.

1:02:11Elizabeth Spiers: And how many of them have Tom Holland? Tyranny and the colon. I think four of them have Tom Holland because I think he's one of the Avengers as well.

1:02:21Felix Salmon: But is the secret Tom Holland or is the secret the colon? Should we just have more colon? Should we be slate money, colon, more money? Yeah, more colon, more better. But then once you get after the top six, then seven, eight, nine, ten, and eleven don't have colons. 12 has a colon, 13 doesn't, 14. Yeah, it kind of goes back and forth after that. But like at the very top, it's colon city right there. Why do they do that? Spider-Man colon. Just call it whatever the movie is. If you're editing for brevity, which I do, because I work at Axios, you should delete the stuff before the colon. You think they shouldn't have called it Spider-Man colon brand new day?

1:02:59They should just call it brand new day.

1:03:00Felix Salmon: Or just call it like Spider-Man 3. Well, Spider-Man 3 was a movie, which did quite well. Oh, crap. Okay. I don't know. I should mention for my number that I got that from Matt Phillips at Axios. He's my co-author on Axios Markets. Just if we can put that in somewhere. Oh, your labor and capital number? Yeah, that was Matt. Thanks, Matt. Okay, well, I think that is it for us this week. Thank you for listening. Thank you to Jessamyn Molly for producing. Thank you for being a Slate Plus member. If you're a Slate Plus member, if you are, then you get to listen to us talk about Cliff Asness and tax loss harvesting and never paying taxes.

1:03:36Otherwise, you are awesome. We love you. Have a great summer weekend. And we will be back next week with more Slate Money.

1:03:50Slate Money is sponsored this week by Your Next Dollar, a podcast from Nerd Wallet Wealth Partners. Your Next Dollar is built specifically for high earners like you. It covers the financial complexity that comes with a higher income. If you have equity compensation, RSUs, tax planning, housing decisions, figuring out when it's actually okay to enjoy your money, it turns out that the more you earn, the more complicated the questions get. And yet, somehow, there's even less content built for you until now. Your next dollar covers both sides of the equation, building wealth and spending on what actually matters to you.

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1:05:12Felix Salmon: This is Hannah Berner, the co-host of Giggly Squad. We could all just stay in bed scrolling through other people's vacations forever, but where is the fun in that? The best memories come from stepping outside of your little bubble and being open to the unexpected. And what better way to be open to the unexpected than finally booking that trip to Europe. You guys know I'm a Delta girly. Every time I go, I get my Delta headphones. And when I fly to Europe, Delta treats me like a queen and they'll treat you too. I was always a little nervous about navigating a foreign country, but then I realized it's so important to grow and see different cultures and to put yourself in different situations.

1:05:52Felix Salmon: And Delta held my hand the whole time. Being away just helps you put life into perspective. and your little worries are not so bad. Travel really is the best way to discover something new about yourself and grow from the experience. Step outside your comfort zone this summer, get some Delta headphones, and fly with Delta Airlines. They truly are the best way to get to Europe, and they just make the whole journey feel so comfortable and seamless. Go book your next chapter right now at delta.com.