The Nation's Financial Condition

[Farfromgeneva]

The Stock Market Fails a Breathalyzer
Beyond Meat, with pea protein, is worth more than the global market for peas.
Andy Kessler

Updated Sept. 12, 2021 10:24 pm ET



A Joby Aviation aircraft outside the New York Stock Exchange during the company's initial public offering in New York, Aug. 11.
Photo: Michael Nagle/Bloomberg News
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Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Does that seem right? In this market, why not? Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six. Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas. Do fundamentals even matter?
I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq. I live at the intersection of innovation and disruption, but when companies are worth more than any possible reality, watch out.
How about those meme stocks still getting hyped on Reddit’s WallStreetBets? Those who bid GameStop shares into the stratosphere waved at Virgin Galactic Holdings as they soared by. A year ago, the stock was $6 and it is now $190—some dupes paid $483, game over. Short sellers Melvin Capital, Point 72 and D1 Capital focused on fundamentals and got their assets handed to them. Shorts lost more than $9 billion between January and June.
New Chairman Ryan Cohen, who is driving change at GameStop, may be a retail genius for turning around Chewy, but Redditors may want to put in a call to hedge-fund manager Eddie Lampert, who bought Kmart and merged it with Sears in 2005, as a highly touted “integrated retail” play, combining stores and online sales, eerily similar to the argument for investing in GameStop today. The stock peaked at $135 in 2007. It is now at $0.30 as the company languishes in bankruptcy. A 1970s Sears Johnny Miller leisure suit is worth more.
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AMC Entertainment’s stock was scraping $2 at the end of 2020. It is now $50 thanks in part to Robinhood speculators, and the company has smartly raised cash. But what about fundamentals? Theaters are still sparse, and Disney and others are willingly putting blockbusters directly onto their streaming services—ask Scarlett Johansson about Black Widow’s ticket sales. Theaters are the new roller rinks.
Read More Inside View
• A Lesson From a Howler Monkey August 29, 2021
• Those Punching-Bag Elites August 22, 2021
• A Chinese Warning for U.S. Tech August 15, 2021
• To Lie Is Human August 8, 2021
• August Is Full of Surprises August 1, 2021
Venture capital is cuckoo. After investing $120 billion in the 2000 dot-com frenzy, and just $16 billion in 2002, U.S. venture capital invested $130 billion in 2020 and then $140 billion in the first half of 2021. Startups these days raise money as “the Uber of gardening” or “Space as a Service.” Oh wait, the latter was WeWork’s pitch, whose founder Adam Neumann declared in 2017, “our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.” Is “spirituality” the S in SPAC?
And check this out: In June, an Italian artist auctioned an invisible statue for $18,000—in reality it was an empty box the artist claimed was a “space full of energy.” WeWork energy? Yeah, maybe fundamentals are a quaint relic of a bygone era.
The Federal Reserve deserves most of the blame. Near-zero interest rates means the market has no true north to help compare stock valuations with reality. We are navigating turbulent seas with a spinning compass. Former Fed Chairman William McChesney Martin once explained that the Fed’s job was “to take away the punch bowl just as the party gets going.” From the looks of it, the entire market would blow about a 0.35 (as in Dow 35000) on a breathalyzer test.
So no, fundamentals don’t matter—well, until they do. In 1989 Tokyo real estate sold for as much as $139,000 a square foot—350 times the value in Manhattan. At that price, Tokyo’s Imperial Palace was worth more than all the real estate in California. Not anymore after Japan’s triptych of lost decades.
Yahoo was once worth $125 billion and AOL $200 billion during the dot-com bubble. Both are worth 99% less today. Tesla CEO Elon Musk recently tweeted, “I thought 1999 was peak insanity, but 2021 is 1000% more insane!” Remember, when the selling starts, fear of missing out turns into fear of losing everything as speculators jump like rats off a sinking ship.
Today’s negative real yields don’t reflect reality. The Fed has warned it plans on tapering bond and mortgage purchases later this year. Someone is at least reaching for the punch bowl. The compass may stop spinning soon. Until then and always, stick with fundamentals

[Farfromgeneva]

Don’t know this woman, I’m sure she’s competent, but the Ex Im Bank has gots to go. I had hoped they wouldn’t renew is in fall of 2019 (was working with a bank in S Fl who was financing a OPIC business which is a subsidiary offshoot of ExIm) when congress had to renew it. Nothing but a wealth transfer to GE, Cummins, Rockwell, Generac, Honeywell and other large ticket industrial manufacturers plus the global crop science businesses (Monsanto etc).

Biden to Nominate Reta Jo Lewis to Lead Export-Import Bank of the United States
President picks ex-State Department official and Washington D.C. mayoral candidate to lead agency that aids exporters

Reta Jo Lewis speaking in Atlanta in 2012.
PHOTO: DAVID TULIS/ASSOCIATED PRESS
By Ken Thomas and Andrew Ackerman
Sept. 13, 2021 3:30 pm ET

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WASHINGTON—President Biden intends to nominate Reta Jo Lewis, a former State Department official, to serve as president and chairwoman of the Export-Import Bank of the United States, according to people familiar with the announcement.

Ms. Lewis, 67 years old, is a senior fellow and director of congressional affairs with the German Marshall Fund of the United States.

If confirmed by the Senate, Ms. Lewis would become the first person of color to lead the federal export credit agency that supports the exports of U.S. goods and services. An announcement related to her nomination is expected later Monday.


Founded in 1934, the federal agency supports U.S. exports through a range of programs, including guaranteeing loans to foreign buyers, credit insurance and some direct lending to foreign companies.

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Supporters of the bank say it puts U.S. firms on a level playing field with other countries that similarly offer financing for their domestic manufacturers. Ex-Im Bank financing in the past has helped large companies such as Boeing Co. sell planes and General Electric Co. export turbines. It has also aided smaller firms seeking to sell overseas.

Some Republicans have argued that the bank provides corporate welfare, saying it puts taxpayers at risk of losing money to finance sales that should be left to the private sector. Conservative Republicans tried to quash the bank as unnecessary and successfully constrained its operations for part of the past decade by refusing to approve board members.

But Congress moved in late 2019 to revive the agency, after then-President Donald Trump changed his position on the agency and backed it as a way to compete with China.

In the past, the bank’s short-handedness meant it lacked a quorum needed to approve financing for deals of more than $10 million. Over nearly four years, approvals to support export deals totaling roughly $40 billion got held up and as much as $20 billion of additional deals may have shifted to countries where companies could obtain export assistance from credit agencies, according to people familiar with the bank’s deal pipeline in early 2020.

In renewing the bank in late 2019, Congress also took steps to ensure the agency would remain fully operational through 2026 even if the Senate again declines to confirm individuals tapped for its board seats. The authorization allows a temporary board to operate should the bank board lack a quorum.


Before joining the organization, Ms. Lewis was an attorney in private practice and served as special representative for global intergovernmental affairs at the State Department under then-Secretary of State Hillary Clinton.

Ms. Lewis previously worked as a special assistant for political affairs to President Bill Clinton. Following the Clinton administration, she served as vice president and counselor to the president of the U.S. Chamber of Commerce.

She also served in the District of Columbia government in the 1990s as chief of staff to the Department of Public Works. She unsuccessfully ran for D.C. mayor in 2014.

Write to Ken Thomas at [email protected] and Andrew Ackerman at [email protected]

[Farfromgeneva]

Amazon Adding 125,000 Workers in U.S., Opening Dozens of Facilities
Company has hired hundreds of thousands of employees throughout the Covid-19 pandemic

Amazon’s latest hiring spree also comes as retailers across the nation are starting their annual holiday hiring push.
PHOTO: JEREMY M. LANGE FOR THE WALL STREET JOURNAL
By Sebastian Herrera
Sept. 14, 2021 6:43 am ET

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Amazon. AMZN -0.35% com Inc. plans to add 125,000 employees throughout its U.S. warehouse operations as the technology giant prepares for the holiday shopping period, in which a tight labor market is set to make it more challenging to find staff.

The company also said Tuesday that it plans to open 100 facilities across the country in September, deepening its pool of locations used to store, sort and ship its packages. Amazon, which has had a starting wage of $15 an hour, said its minimum wage has gone up in many locations and now averages more than $18 across the nation. In some areas, for example, Amazon said it has offered pay of up to roughly $22.50 an hour.

Amazon’s hiring announcement comes during what has been a competitive period for hourly employees throughout the country. As the U.S. labor market has tightened, firms from across industries—including warehousing, hospitality and restaurants—have tried to edge each other out by enticing workers with sign-on bonuses and other benefits.


As the nation’s second-largest private employer and one of the most powerful tech companies in the world, Amazon’s size and leverage has enabled it to continue growing at a brisk pace. The company is planning to hold a global recruiting event on Wednesday.

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Last week, the company said it would cover the cost of tuition and books for staff pursuing bachelor’s degrees at various universities nationwide, joining Walmart Inc. and other companies offering the prospect of a free college education to potential workers. In some locations, Amazon has dangled bonuses ranging from $1,000 to $3,000. It has also offered $100 bonuses for hires that show proof of a Covid-19 vaccination.

While Amazon’s national starting pay has remained at $15 since 2018, it has at times raised wages especially in areas where it runs into greater labor shortages or competition. The company earlier this year announced raises of between 50 cents and $3 an hour for more than 500,000 of its workers. Other companies have followed: Walmart earlier this month raised its minimum wage to $12 an hour while increasing its pay for hundreds of thousands of its U.S. store workers.

Amazon’s latest hiring spree also comes as retailers across the nation are starting their annual holiday hiring push, which is the peak shopping period for many companies. Amazon last September pushed to hire about 100,000 employees in the U.S. and Canada.

The pandemic led the company to add hundreds of thousands of workers after shoppers rushed to buy goods online. Amazon this month said it had made more than 450,000 hires throughout the country since the public-health crisis began. The company employs more than 950,000 people in the U.S., most at its hundreds of warehouses throughout the country. It operates more than 930 facilities throughout the U.S., according to logistics consultant MWPVL International.


Amazon has also added scores of employees across its corporate offices. Earlier this month, the company said it sought to fill 55,000 positions globally in corporate and tech roles, including in its cloud-computing unit Amazon Web Services, as well as in divisions such as Amazon Studios, advertising and its broadband satellite Project Kuiper. The company is adding staff in large corporate offices that include New York City, Bellevue, Wash., and Arlington, Va.

—Matt Grossman contributed to this article.

Write to Sebastian Herrera at [email protected]

[Farfromgeneva]

Hey Brooklyn, get some towels and hand sanitizer before reading this

Estate Taxes Are Easy to Avoid. House Democrats Want to Change That.
Some 1,900 filers paid estate tax in 2020, down from more than 50,000 two decades ago

A plan released by House Democrats would eliminate some of the most popular strategies used to minimize the taxes rich Americans pay on inhereted wealth.
PHOTO: STEFANI REYNOLDS/BLOOMBERG NEWS
By Rachel Louise Ensign
Sept. 14, 2021 11:34 am ET

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House Democrats want more wealthy Americans to pay the estate tax.

The tax plan they released Monday would expand the tax to hit people who die with smaller estates and eliminate some of the most popular strategies advisers deploy to minimize the taxes rich Americans pay on inherited wealth.

Two decades of tax-law changes made it easier for rich families to avoid the estate tax when they pass wealth down from one generation to another. About 1,900 filers paid the levy in 2020, down from over 50,000 in 2001, the Tax Policy Center estimates.


The House Democrats’ plan includes changes to the estate tax to help raise the revenue needed to expand the social safety net and combat climate change. The Biden administration’s tax proposal included major increases in capital-gains taxes, including imposing taxes at death on unrealized gains, but it didn’t call for changing the estate tax.

The House plan would reverse the doubling of the estate-and-gift tax exemption that Congress created in 2017. That increase would end after 2021 instead of expiring at the end of 2025. The exclusion would likely fall to around $6 million per individual from $11.7 million. Estates surpassing that threshold, after charitable donations and other deductions, would be subject to the tax, which has a top rate of 40%.

The change could triple the number of people paying the estate tax. The Tax Policy Center previously estimated that letting the higher exemption expire at the end of 2025 would increase the number of taxable returns to 9,000. A similar bump is likely from the Democratic proposal for letting the exemption expire sooner.

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The lower exemption would raise $54 billion over 10 years, according to the Joint Committee on Taxation, while other proposed estate-tax changes would raise $28 billion.

The Democrats’ proposal also limits popular techniques used to keep estates below the estate-tax threshold, including some uses of grantor trusts. Many wealthy families minimize tax bills by placing assets intended for heirs into these vehicles.

“One of the biggest tools in the estate planners’ tool kit is the grantor trust. This change effectively eliminates it as a planning tool,” said Tara Popernik, director of research at AllianceBernstein Holding LP’s private wealth unit.

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The majority of the trusts that wealth manager Rockefeller Capital Management sets up for clients are grantor trusts, said Tim Laffey, head of tax policy and research at the firm. That would likely change if the Democrats’ plan takes effect, he said.

The proposal would also limit the use of large Roth IRAs by the superrich.


While the changes would subject more taxpayers to the estate tax, those affected would remain a tiny fraction of the population, said Len Burman, co-founder of the Tax Policy Center.

Few people die with enough money for the tax to kick in even at the lower exemption level. And those with large estates could still deploy other tax-planning techniques, such as charitable giving or other kinds of trusts, Mr. Laffey said.

[Farfromgeneva]

For anyone who might have any interest in this topic. Clearly not one multiple personality person but it’s a fairly significant issue in global capital markets.

Life After LIBOR

Wed, Sep 29, 2021 2:00 PM - 3:30 PM EDT
Show in My Time Zone
Please join KBRA for a discussion about SOFR, BSBY, and Ameribor, the leading replacement indices for LIBOR, and hear from leading asset managers and banks on how they plan to adapt to life after LIBOR starting next year.

AGENDA:
2:00 PM – 2:15 PM EDT | Opening Remarks
• Ethan Heisler, Senior Director, Strategy, KBRA

2:15 PM – 2:45 PM EDT | What are the new indices replacing LIBOR?
Panelists:
• Richard L. Sandor Chairman and CEO, American Financial Exchange
• David Mullen, Senior Product Manager, Bloomberg LP
• John Coleman, SVP/MD, Fixed Income Group, R.J. O’Brien

2:45 PM – 3:15 PM EDT | The treasurer and asset manager’s perspective on the new landscape.
Panelists:
• Jeff Kuzbel, CFO, FHLB Topeka
• Mark Mershon, Senior Consultant, NBT Bank
• Will Goldthwait, Portfolio Strategist, State Street Global

3:15 PM – 3:30 PM | Closing Remarks

Please reach out to [email protected] with any questions. This event will be closed to members of the press.

[lagerhead]

For anyone who might have any interest in this topic. Clearly not one multiple personality person but it’s a fairly significant issue in global capital markets.

Life After LIBOR

Wed, Sep 29, 2021 2:00 PM - 3:30 PM EDT
Show in My Time Zone
Please join KBRA for a discussion about SOFR, BSBY, and Ameribor, the leading replacement indices for LIBOR, and hear from leading asset managers and banks on how they plan to adapt to life after LIBOR starting next year.

AGENDA:
2:00 PM – 2:15 PM EDT | Opening Remarks
• Ethan Heisler, Senior Director, Strategy, KBRA

2:15 PM – 2:45 PM EDT | What are the new indices replacing LIBOR?
Panelists:
• Richard L. Sandor Chairman and CEO, American Financial Exchange
• David Mullen, Senior Product Manager, Bloomberg LP
• John Coleman, SVP/MD, Fixed Income Group, R.J. O’Brien

2:45 PM – 3:15 PM EDT | The treasurer and asset manager’s perspective on the new landscape.
Panelists:
• Jeff Kuzbel, CFO, FHLB Topeka
• Mark Mershon, Senior Consultant, NBT Bank
• Will Goldthwait, Portfolio Strategist, State Street Global

3:15 PM – 3:30 PM | Closing Remarks

Please reach out to [email protected] with any questions. This event will be closed to members of the press.

Rich Sandor is smart father of financial futures and us carbon markets, AMERIBOR has a chance with regional banks, BSBY potential alternative rate for major dealers, ARRC has an agenda, look at their makeup. This transition is not going as ARRC/CME would like. While the issuer has the entire term (forward) of bond exposure they can’t hedge it with SOFR because it’s a look back index. ARRC has no statutory right to effect this change CFTC has blessed this single risk free rate to be used in “best practice” guidance. Ever dealt with a regulatory body who gave guidance but not a rule and you didn’t follow it? Borrowing costs are going up you’ll see it soon.

[Farfromgeneva]

For anyone who might have any interest in this topic. Clearly not one multiple personality person but it’s a fairly significant issue in global capital markets.

Life After LIBOR

Wed, Sep 29, 2021 2:00 PM - 3:30 PM EDT
Show in My Time Zone
Please join KBRA for a discussion about SOFR, BSBY, and Ameribor, the leading replacement indices for LIBOR, and hear from leading asset managers and banks on how they plan to adapt to life after LIBOR starting next year.

AGENDA:
2:00 PM – 2:15 PM EDT | Opening Remarks
• Ethan Heisler, Senior Director, Strategy, KBRA

2:15 PM – 2:45 PM EDT | What are the new indices replacing LIBOR?
Panelists:
• Richard L. Sandor Chairman and CEO, American Financial Exchange
• David Mullen, Senior Product Manager, Bloomberg LP
• John Coleman, SVP/MD, Fixed Income Group, R.J. O’Brien

2:45 PM – 3:15 PM EDT | The treasurer and asset manager’s perspective on the new landscape.
Panelists:
• Jeff Kuzbel, CFO, FHLB Topeka
• Mark Mershon, Senior Consultant, NBT Bank
• Will Goldthwait, Portfolio Strategist, State Street Global

3:15 PM – 3:30 PM | Closing Remarks

Please reach out to [email protected] with any questions. This event will be closed to members of the press.

Rich Sandor is smart father of financial futures and us carbon markets, AMERIBOR has a chance with regional banks, BSBY potential alternative rate for major dealers, ARRC has an agenda, look at their makeup. This transition is not going as ARRC/CME would like. While the issuer has the entire term (forward) of bond exposure they can’t hedge it with SOFR because it’s a look back index. ARRC has no statutory right to effect this change CFTC has blessed this single risk free rate to be used in “best practice” guidance. Ever dealt with a regulatory body who gave guidance but not a rule and you didn’t follow it? Borrowing costs are going up you’ll see it soon.

Well Citi and Travelers merged illegally in 1994...

I’ve talked to a half dozen regional banks ($10bn - $50Bn in assets, Cali, Al, Tn, Md, Dirty Jersey and Il) and most don’t seem to want to deal w Ameribor and may just use FHLB (or they’re all talking SOFR still). Keep in mind banking is a Mark to model business. It’s never super precise, even CECL which I’ve built a product for is pretty flawed as it attempts to get banks to Mark to market their loan books. I need to catch up with a buddy at a hedging shop out of Pa called Chatham, they are pretty sharp with this stuff. There’s one in SF DerivPath that I know and might share more. I’m too deep in the deal side these days and haven’t had a Bloomberg in 3yrs so that aspect is only tangential but I have to care because my M&A DD work invoked sampling a loan book, rolling up the sample, modeling 1yr and life of loan book expected loss which is part credit and part rate being discounted.

CLO managers in close with are shoving deals out the door now w Libor.

Don’t know Sandor other than named Ethan Heisler who is w Kroll is a friend. Mershon was treasurer of NBT Bank in Norwich, NY last I heard. Went from bank in Blairsville Ga to Mansfield Pa to Norwich and hated each successive small town more...

[lagerhead]

For anyone who might have any interest in this topic. Clearly not one multiple personality person but it’s a fairly significant issue in global capital markets.

Life After LIBOR

Wed, Sep 29, 2021 2:00 PM - 3:30 PM EDT
Show in My Time Zone
Please join KBRA for a discussion about SOFR, BSBY, and Ameribor, the leading replacement indices for LIBOR, and hear from leading asset managers and banks on how they plan to adapt to life after LIBOR starting next year.

AGENDA:
2:00 PM – 2:15 PM EDT | Opening Remarks
• Ethan Heisler, Senior Director, Strategy, KBRA

2:15 PM – 2:45 PM EDT | What are the new indices replacing LIBOR?
Panelists:
• Richard L. Sandor Chairman and CEO, American Financial Exchange
• David Mullen, Senior Product Manager, Bloomberg LP
• John Coleman, SVP/MD, Fixed Income Group, R.J. O’Brien

2:45 PM – 3:15 PM EDT | The treasurer and asset manager’s perspective on the new landscape.
Panelists:
• Jeff Kuzbel, CFO, FHLB Topeka
• Mark Mershon, Senior Consultant, NBT Bank
• Will Goldthwait, Portfolio Strategist, State Street Global

3:15 PM – 3:30 PM | Closing Remarks

Please reach out to [email protected] with any questions. This event will be closed to members of the press.

Rich Sandor is smart father of financial futures and us carbon markets, AMERIBOR has a chance with regional banks, BSBY potential alternative rate for major dealers, ARRC has an agenda, look at their makeup. This transition is not going as ARRC/CME would like. While the issuer has the entire term (forward) of bond exposure they can’t hedge it with SOFR because it’s a look back index. ARRC has no statutory right to effect this change CFTC has blessed this single risk free rate to be used in “best practice” guidance. Ever dealt with a regulatory body who gave guidance but not a rule and you didn’t follow it? Borrowing costs are going up you’ll see it soon.

Well Citi and Travelers merged illegally in 1994...

I’ve talked to a half dozen regional banks ($10bn - $50Bn in assets, Cali, Al, Tn, Md, Dirty Jersey and Il) and most don’t seem to want to deal w Ameribor and may just use FHLB (or they’re all talking SOFR still). Keep in mind banking is a Mark to model business. It’s never super precise, even CECL which I’ve built a product for is pretty flawed as it attempts to get banks to Mark to market their loan books. I need to catch up with a buddy at a hedging shop out of Pa called Chatham, they are pretty sharp with this stuff. There’s one in SF DerivPath that I know and might share more. I’m too deep in the deal side these days and haven’t had a Bloomberg in 3yrs so that aspect is only tangential but I have to care because my M&A DD work invoked sampling a loan book, rolling up the sample, modeling 1yr and life of loan book expected loss which is part credit and part rate being discounted.

CLO managers in close with are shoving deals out the door now w Libor.

Don’t know Sandor other than named Ethan Heisler who is w Kroll is a friend. Mershon was treasurer of NBT Bank in Norwich, NY last I heard. Went from bank in Blairsville Ga to Mansfield Pa to Norwich and hated each successive small town more...

The D2D market is magnitudes of the regional markets. Their costs of issuing (lending) are going up sharply, the bid ask is starting to move apart. 1/16 markets six months ago are now 1/8 go out the curve they get wider. We will see rates rise along with inflation IMO not pretty the next few years.

[Farfromgeneva]

For any western NY folks - working on a rare instituional property deals in small areas near the region where my father grew up. Was surprised at some intel I got frankly so passing some notes I took down from a call with a broker in the area (cold call there's not a bunch of CBRE and JLL offices in this area as one might guess). Actually a very positive if you can own apartment properties from Elmira-Rochester-Buffalo even if I still don't like the allocated basis in this particular asset among a portfolio.

Western NY treated and trades as one market generally from Buffalo through Rochester to Elmira regions. Has a 33 unit purpose built student housing project in market for sale in Alfred, NY currently for $4.7MM ($142M/unit) and stated that any high quality mutilfamily is typically trading and he could price at a 6.0% cap rate. His offering is slow due to < 10,000 students in area eliminating GSE financing. In general Mr. xxxx stated that everything is full, no new construction is occurring due to replacement/construction costs however rental rates are robust and that “less than 10% of the WNY market is rental compared with areas such as Atlanta MSA where it’s closer to 30%”. Additionally, there is no institutional ownership of bulk single family rental portfolios exists as shadow competition providing a tight market despite declining macroeconomic trends in the region.

[runrussellrun]

Was having second thoughts about this and regret providing the information. IMF is providing grants, correct?

1) Your Full Name:
2) Phone, and Mobile:
3) Home Address:
4) Profession, Age, and Marital Status
5) Drivers License Or Passport ID

Kindly send the above required information to us via and upon the receipt of the above-mentioned information we shall proceed in filing a claim with the bank and get back to you with further details on how your fund will be released. Awaiting your earliest response.

Best Regards,
Mrs. Priscilla Braver
Senior Resident Representative in the USA.
International Monetary Fund (IMF).

People make their living doing this kind of thing........cool.

[youthathletics]

I received money...you should try it.

[Farfromgeneva]

I received money...you should try it.

If it’s from Nigeria it’s Legit!

[runrussellrun]

stay awesome, taats.

https://calstart.org/national-team-awar ... t-vehicle/

“We recognize that for automated transit vehicles to move beyond pilot demonstrations and into commercial deployments, the conversation needed to be transit operator driven. The participation of our transit partners in the development of the specifications means we are producing a vehicle that is focused on meeting their needs,” said Maureen Marshall, CALSTART’s Midwest Director and manager of the project.

Right.....focus on a private companies "needs".......don't use public dollars for the public good.

carry on......who should we hate today ?

[Farfromgeneva]

There’s one person who asked once what this is and so I’ve dropped a few pieces of information on this space in the past few weeks. I think this and SME (small business) non bank lending is where we will see the next finance driven turn in the economy (as opposed by Covid, 9/11, business cycle though the last will come in conjunction w finance). To em consumer finance was always boring, just a bunch of granular data on a tape but have learned more over time working with players in that area the last few years and it’s a wild world.

Amazon Is Doing It. So Is Walmart. Why Retail Loves ‘Buy Now, Pay Later.’
Retailers big and small are using installment plans to wring more sales out of shoppers who can’t get credit cards

Shoppers spend more at Macy’s when they use installment plans offered through Klarna Bank, Macy’s CEO Jeff Gennette said on a recent earnings call.
PHOTO: GABRIELA BHASKAR/BLOOMBERG NEWS
By AnnaMaria Andriotis
Sept. 16, 2021 5:30 am ET

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Alexis Luedtke got her first “buy now, pay later” plan in 2019 after she was rejected for a credit card. She has used at least five more since to buy face cream, T-shirts and birthday gifts.

Installment plans are back in style. PayPal Holdings Inc. PYPL +0.16% last week said it was buying Japanese installment payment startup Paidy Inc., following Square Inc.’s $29 billion deal for Afterpay Ltd. APT -0.06% Macy’s Inc. M +4.22% and Bed Bath & Beyond Inc. BBBY +0.75% have added the option at checkout over the past year. Even Amazon.com Inc. AMZN +0.22% is doing it.

One reason: shoppers like Ms. Luedtke who don’t qualify for credit cards. Buy-now-pay-later companies say they rely less on—and in some cases bypass altogether—traditional credit scores and reports. Doing so allows them to approve more consumers. Shoppers gain the ability to buy things even without cash on hand—translating to higher sales for retailers.


Afterpay said it expects the company’s U.S. merchants will see an $8.2 billion increase in sales this year because of payment plans. Affirm Holdings Inc. AFRM +7.34% last year said purchases made with its payment plans were 85% larger, on average.

Shoppers spend more at Macy’s when they use installment plans offered through Klarna Bank AB, Macy’s CEO Jeff Gennette said on a recent earnings call. Klarna also is helping the retailer attract younger customers, he said.

Afterpay merchant partners in North America
Source: Afterpay
Note: Fiscal year ends June 30
FY2019
'20
'21
0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
22,500
25,000
27,500
30,000
“The value that most retailers see in buy now, pay later is customer acquisition,” said David Sykes, Klarna’s North America head.

Ms. Luedtke, 26, has credit cards now but still prefers installment plans. Just last month, she used them to buy about $40 of Peter Thomas Roth skin-care products and $65 in clothing from Shein.

“It definitely influences how much more I buy or would spend,” she said. “It’s easier to pay $200 over so many weeks compared to $200 right now.”

Buy now, pay later is a new twist on an old idea. Big retailers have for decades offered installment plans for big-ticket items like washing machines. Today, these plans come in a variety of flavors. Afterpay offers payment plans that shoppers usually attach to their debit cards. Others, like Affirm, also facilitate new loans.

Interest rates and other terms vary by payment-plan provider. Affirm interest rates range from 0% to 30%, with some 43% of its transactions during its last fiscal year not charging interest at all. The company doesn’t charge late fees. Afterpay doesn’t charge interest but does collect late fees.

Affirm transactions
Source: Affirm
Note: U.S. and Canada transactions; fiscal year ends June 30
1QFY2020
2Q
3Q
4Q
1Q'21
2Q
3Q
4Q
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
$2.6
billion
Merchants take no credit risk with these plans, but the fees they incur can be higher than on credit-card purchases—often between 3% and 5% of the purchase price, according to people familiar with the matter.

Buy-now-pay-later companies say they can approve more customers than banks, including people who have thin or no borrowing history. Some 53 million adults in the U.S. lack traditional credit scores, according to FICO score creator Fair Isaac Corp. Installment plans are safer, they say, because they are often smaller than credit-card spending limits and approved on a per-transaction basis.


Affirm said that it had a net charge-off rate of 1% in the quarter ended June 30, down from 2% a year earlier. Afterpay said it wrote off 0.6% of the total dollars it processed in payments during the company’s fiscal year ended June 30, up from 0.4% the year prior.

Working with a web of retailers, buy-now-pay-later companies can create self-contained payment ecosystems. They factor payment behavior into future underwriting decisions. Customers who pay late or not at all risk losing the installment option at other participating retailers.

“Most merchants want a partner who has real advantage and real ability to underwrite,” said Affirm CEO Max Levchin. “These are not deeper approvals, but they are different approvals.”


Affirm facilitates new loans among other payment plans.
ILLUSTRATION: AFFIRM
Amazon AMZN 0.25% and Walmart Inc. are both working with Affirm. Both have said they want their financial partners to extend credit to more of their customers.

Amazon is reviewing proposals, as it weighs whether to replace its longtime card issuer, JPMorgan Chase & Co. Amazon is looking for “commitments to underwrite competitively to widen the acquisition funnel,” the retailer said in a request for proposals reviewed by The Wall Street Journal.


A desire to boost loan approvals was among the reasons Walmart in 2018 decided to end its decadeslong credit-card partnership with Synchrony Financial. (Capital One Financial Corp. now issues Walmart-branded credit cards.) The retailer made Affirm loans available to most of its customers the following year.

“Our goal is financial inclusion for all,” said Julia Unger, Walmart’s vice president of financial services.

Some banks now offer installment options on their credit cards. Citigroup Inc. saw a sevenfold increase in the dollar amount of credit-card purchases converted to installment loans in July, compared with the same month a year prior, said Gonzalo Luchetti, head of Citigroup’s U.S. consumer bank.

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Synchrony, the largest U.S. store-credit-card issuer, will launch a buy-now, pay-later plan in October. Capital One will test out its own offering later this year, CEO Richard Fairbank said at a conference Monday.

Wells Fargo & Co. and Bank of America Corp. are exploring adding installment plans on their credit cards, according to people familiar with the matter. Visa Inc. said it has been testing out ways for shoppers to check if they qualify for installment plans when they enter their card numbers at checkout.

Write to AnnaMaria Andriotis at [email protected]

SHARE YOUR THOUGHTS

Have you used buy now, pay later to make a purchase? Why or why not? Join the conversation below.

[youthathletics]

Amazon is giving them out like candy. With $40 late charges

[Farfromgeneva]

Amazon is giving them out like candy. With $40 late charges

Some people think this will replace the payment system but I see two different functions.

Late charges are nice but when banks have Net interest margins below 3% (top 10 banks) which is the spread between the cost of money for the bank and the yield on a loan, they like the double digit spread on these consumer financings a whole lot.

[Farfromgeneva]

Covid-19 Lockdowns in Asia Deepen Commodity Supply-Chain Pain
Palm-oil plantations and coffee farms struggle with labor shortages and transportation curbs as cases surge

Travel restrictions in Malaysia have led to a steady decrease in the number of available workers in the palm-oil sector.
PHOTO: LIM HUEY TENG/REUTERS
By Jon Emont
Sept. 17, 2021 5:30 am ET

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The recent surge in Covid-19 cases in Southeast Asia has throttled ports and locked down plantations and processors, sparking extended disruptions of raw materials such as palm oil, coffee and tin.

Restrictions in Malaysia, the world’s second-largest producer of palm oil, have prevented migrant laborers from traveling to plantations, raising prices of the ubiquitous edible oil used to make candy bars, shampoo and biofuel.

Lockdowns in Vietnam, the world’s No. 2 coffee exporter by volume, have delayed the processing and export of coffee beans, adding to production concerns caused by poor weather in Brazil. The global tin supply has been hit by Covid-19-related interruptions at a smelter in Malaysia, contributing to higher prices for the industrial metal, which is used to connect computer chips to circuit boards in electronics.



A coffee warehouse in Vietnam in 2019, before Covid-19 took hold in Southeast Asia.
PHOTO: YEN DUONG/REUTERS
Prices for each of these commodities have risen to multiyear highs in recent months, adding costs that are being passed on to consumers.

“These supply shocks reverberate globally because Vietnam and Malaysia hold large market share of key commodities,” said Trinh Nguyen, a senior economist at Natixis.

Businesses including Unilever PLC, the consumer-goods company, and J.M. Smucker Co. , which includes Folgers coffee, have said increasing prices of raw materials are contributing to cost pressures.

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“The price of palm oil, a key ingredient for our skin cleansing products, is now 70% higher than its long-term average, with increased demand and lower harvest yields driving up the price,” Graeme Pitkethly, Unilever’s chief financial officer, said in July. He added that the company had already raised prices for some products.

One reason for the elevated price of palm oil is a surge in Covid-19 cases in Malaysia. The Southeast Asian country has recently been recording around 19,000 new cases and 400 deaths a day in its worst outbreak since the pandemic began. Travel restrictions in place since March last year have made it difficult for workers to reach plantations, leading to a steadily declining number of laborers. The palm-oil sector relies on migrants from Indonesia, which is the world’s largest producer of the commodity, as well as Bangladesh and India.

Rigid internal-movement curbs put in place in recent months in response to rising cases have added to the challenges facing palm-oil companies, as have outbreaks on plantations, causing shutdowns.


Malaysia’s exports of palm oil, derived from the plant’s fruit, has dropped as the industry contends with a labor shortage.
PHOTO: JOSHUA PAUL/BLOOMBERG NEWS
Sime Darby Plantation 5285 -1.55% Bhd. said its labor shortfall in Malaysia has worsened to about a fifth of its total needs, meaning around 6,000 unwanted vacancies compared with 2,000 in March 2020. The company said it produced about 6% of Malaysia’s crude palm oil last year. The labor shortfall and lower rainfall contributed to a 5% drop in its production of palm oil in Malaysia in the first half of the year, the company said.

The company said it has invested in new mechanization and automation to reduce its reliance on manual labor.


FGV Holdings Bhd., which said it produces around 15% of the country’s crude palm oil, said it has faced challenges in producing expected volumes because of the recent surge in Covid-19 cases in Malaysia. The company said infections on company estates and milling operations led to mandatory lockdowns.

The overall effect has been a 13.6% decline in Malaysia’s palm-oil exports over the first eight months of 2021 compared with the same period last year, according to data from the Malaysian Palm Oil Council, an industry group.

“You don’t have enough workers going around to harvest the fruits,” said Ivy Ng, regional head of agribusiness research at CGS-CIMB Securities in Malaysia.

As the government plans to reopen the economy late this year, Ms. Ng predicts regulations on foreign workers will be relaxed by early next year, which would help palm-oil plantations boost their labor forces.

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Covid-19 travel restrictions in Asia are also hitting coffee. Beginning in July, an outbreak in Vietnam prompted the government to introduce curbs on movement that have interfered with shipments. Vietnam is the world’s largest exporter of the bitter-tasting robusta beans used in instant coffee and espresso blends.

“Vietnamese exporters are having difficulty transporting goods, including robusta green coffee and King Coffee products, to the ports for shipping around the world,” said Le Hoang Diep Thao, chief executive of TNI King Coffee and vice president of the Vietnam Coffee and Cocoa Association.


Vietnam’s coffee exports from January through Aug. 15 fell 8.2% from the same period last year. “Local and foreign traders are extremely worried,” Ms. Le said, adding that the coffee association was lobbying Vietnam’s government to loosen restrictions to avoid delivery delays.

Large coffee companies often use both robusta and its aromatic cousin, arabica, in their mixes and brews. Prices of both types have risen sharply this year, mainly driven by drought and frost in Brazil, the world’s largest coffee exporter. Vietnam’s production troubles over the past several months are contributing to higher prices.

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Western coffee companies said higher prices will filter down to consumers. “Coffee costs have gone up,” Smucker Chief Financial Officer Tucker Marshall said on an August earnings call, adding, “We will take additional pricing actions and measures to ensure that we recover the inflationary impact.”

Michael Orr, spokesman at JDE Peet’s JDEP -1.16% NV, said the Dutch coffee company has over the past year “seen a sharp rise in ingredient, freight and other costs, which will require us to take appropriate measures. Historically, significant fluctuations in green coffee prices have been reflected in the market and we expect that precedent to continue.”

Tin prices rose in recent months after Malaysia Smelting Corp. Bhd., one of the world’s largest producers of refined tin, reduced smelter staff and halted operations for stretches over the past several months to comply with government regulations to limit the spread of Covid-19.


Malaysia’s tin exports decreased 29% in June from a year earlier. A representative for the company said tin production had yet to return to normal, but added that it expected to restore operations to pre-pandemic levels gradually as Malaysia’s government reopens the economy.

“Tin prices continue to trend upwards, lifted by continued demand for tin solder in consumer electronics, and supply disruptions due to lockdowns in tin-producing countries around the world,” the company said in a financial report last month.

—Lam Le and Chester Tay contributed to this article.

Write to Jon Emont at [email protected]

[youthathletics]

Sure wish we had more manufacturing in the US.....oh wait, someone wanted that for our country, who was that?

[Farfromgeneva]

Sure wish we had more manufacturing in the US.....oh wait, someone wanted that for our country, who was that?

Like everything else it’s not that simple but we can all reduce things to simplified if misdirected and off target generalizations. I think Triple RRR/Leasfarwheathatejohnshopkins accuses me of that every other day.

Like if you pay off your debt and find the liquidity preference value was higher (for that nutsack surgery or a future opportunity you can’t take down because you used up all your liquidity it’s totally your fault because OS said everyone should always pay off debt no matter what as if it was part of the 15, wait, ten, Ten Commandments that came down via Moses)

[seacoaster]

Interesting; this is a transcript of the Ezra Klein podcast on the Times's website. It is often really good. Here, he is interviewing an historian of economics named Adam Tooze. This is the first half of the transcript. I will post the second half in another post:

https://www.nytimes.com/2021/09/17/opin ... anscript=1

"I’m Ezra Klein, and this is “The Ezra Klein Show.”

It’s obviously not a novel observation to point out that the global economic response to the pandemic was astounding in size. But I want to start today with just some numbers to put this in context. So the O.E.C.D., which is a consortium of a lot of richer nations, estimates that its members issued a total of 18 trillion in debt in 2020 alone. That is the largest surge in debt ever recorded in peacetime.

A whopping 11 trillion of that was just between the months of January and May. Nearly 70 percent of that debt — 70 percent — was in the U.S. alone. The $2.2-trillion CARES Act — that was passed by a Republican Senate. It was signed into law by a Republican president. And it was more than double the size of the 2009 stimulus. In a matter of weeks, the Federal Reserve bought 5 percent of the entire $20-trillion bond market. At the peak of its action, the Fed was buying bonds at the rate of a million dollars per second. These are wild numbers.

But the most revealing part of that response wasn’t what happened. It was what didn’t happen. Bond vigilantes didn’t send markets into a tailspin. Interest rates didn’t skyrocket. Inflation — well, we’re going to talk about inflation a lot in this. But there was certainly no evidence of a hyperinflationary spiral. Private investment didn’t plummet. The terrified view of future uncertainty hasn’t stopped everyone from hiring or making new capital investments.

Instead, the Treasury market stabilized. The financial markets not only recovered, they surged. The decades of doomsday predictions of what would happen if the government should spend huge amounts of money without paying for it — they didn’t materialize, not in the moment anyway.

My guest today is Adam Tooze. Adam Tooze is a brilliant economic historian at Columbia University. He’s the author of the book “Crashed,” which, for my money, is the single best history of the financial crisis, and now of “Shutdown: How Covid Shook the World’s Economy.” He’s also co-host of the new podcast “Ones and Tooze.” Yeah, that is Tooze spelled T-O-O-Z-E like his name. So who said economic historians don’t have a sense of humor?

Tooze’s angle, though, as a scholar, is using financial crises as a lens into the ideology of economics, using them as a way to understand where our economic theories and models match the world, how they’re really created, and then the moments in which they are changed by the world, whether or not the economists behind them admit it. And in just the past 15 years, we’ve lived through two such moments. And so that is what this conversation is about.

As always, my email — ezrakleinshow@nytimes. I always appreciate your feedback, your guest suggestions, your recommendations of things to read, listen to, pay attention to, play, watch. But here’s Adam Tooze.

Adam Tooze, welcome to the show.

Adam Tooze
Great to be here.

Ezra Klein
So you’ve written that one of the central takeaways of the last year and a half is that, quote, “John Maynard Keynes was right when he declared, during World War II, that anything we can actually do, we can afford.” Tell me about that idea.

Adam Tooze
So it’s double-edged. I think that’s the key. And the penny took a while to drop, for me. But 2020, I think, illustrates both sides of this. So on the one side, there is the emancipatory promise, this open-handed “we can afford anything,” by which I think Keynes means, money is a technical issue.

In the end, it’s a question of mobilizing finance, stringing together the financial engineering, doing some of the central-banking arithmetic we might need to do. But in the end, what limits what we can do is not whether we can afford something, but whether we can actually do it.

And this is why 2020 is — it’s a slightly academic way of putting it, but it’s a kind of beautiful illustration of the force of this point, because we could pay for all sorts of things. But could we organize ourselves to collectively socially distance? Well, in the end, in some places, yes, and in many places, no.

Could we roll out a vaccine? Well, we didn’t know ahead of time. Early in 2020, I remember sitting in meetings with science colleagues at Columbia and them saying, we’ve never done this before. We’ve never had a coronavirus vaccine. And we ended up with a whole suite of them. And that depended on the extraordinary skill of the scientists manipulating nature to produce that result. But then again, can we actually organize to roll that out to the entire world’s population? Certainly not at the pace that we’d want to.

So the book is really a kind of meditation on that, on the one hand, enabling discovery: that really finding the money isn’t the problem, and not just in the rich countries. But if the Fed settings are right, and you’ve got competent management, in fact, in much of the world economy right now, that isn’t the problem. The problem is the nitty-gritty. The problem is what economists call the — if you like — more the supply side, the real economy. That turns out to be where the problems are that we need to overcome.

Ezra Klein
I want to drill on this idea for a minute because it is simultaneously deceptively simple and not how we have been taught to think. So what you’re saying here, what Keynes was saying here, is that money can be invented in whatever quantity we want, really. The Federal Reserve can just create more of it. But things cannot be invented in whatever quantity we want.

So if you have 100 jet planes that you can make, and you only have, quote unquote, “money” for 80 of them, the government can create the money for 100. But if you want 120 jet planes, and you can only make 100, then you can’t. And so is the idea here that we’ve often gotten which side the scarcity is on wrong?

Adam Tooze
I think that’s a really good way of putting it. And part of the tension, part of the stress caused by discovering that, really, budgetary arithmetic is just really budgetary arithmetic, is that without it, we face the really harsh political questions of, could we agree to do this? And if we’re not doing it, it’s because you, the other people, our antagonists, don’t want to do it. You’ve got something else you’d rather do. Or it’s the humbling realization that, will it as much as we will, we just can’t do it. We just don’t have the technical wherewithal.

So it’s either the stubbornness of power or the stubbornness of nature that constrains us. And there’s moments when you would quite like to have the budgetary arithmetic back, because that presents these constraints in a more abstract form.

Ezra Klein
Well, it also makes a pretense of constraint. So you wrote a great piece in your newsletter, “Chartbook,” which I subscribe to and others should, too, about what you can tell by how much money we spent on the Iraq and Afghanistan wars without an inflationary problem, without a crowding-out problem. We just spent it. We didn’t pay for it. It’s trillions and trillions of dollars.

We clearly could do that, financially. Although, often, when people wanted to critique the wars, they pretended we couldn’t. They would say, you shouldn’t be building, as John Kerry famously said, firehouses in Baghdad when you need them here at home. I think he said Boston, if I’m not misremembering.

At the same time, I’ve covered economic politics and policymaking in Washington for two decades now, basically. And the number of tiny “tens of billions of dollars” programs I have watched die on the view that we can’t afford them are high. Right now, as we speak,

there is a fight going on in the Democrats’ reconciliation bill over whether or not they will make the child tax credit refundable, whether or not that will go to the poorest families who don’t file taxes. And the argument being made by some is, well, we can’t afford this entire bill, which, of course, costs a lot less, in its totality, than those wars did.

So this is what you’re getting at here, which is that it is convenient to say we can’t afford to do something, rather than to say, I don’t want to do something. But if you actually look at the way we act when we do want to do something, you can see that we often can afford it.

Adam Tooze
Well, exactly. And I think, for me, ultimately, the tragedy of the global war on terror is that that was the one thing that the American political elite, over a period of decades, could, in fact, to a certain degree, at least, agree to do together. Whereas everything else came incredibly hard. And when it came to everything else, the budgetary arithmetic rapidly becomes, as you say, penny-pinching. But when it came to that project, in fact, there was a high degree of unanimity, and the budgets tended to move upwards rather than downwards.

And so the criticism is not so much, really, the criticism of, well, we couldn’t afford this. Look at the damage this will do to the balance sheet in future generations. Though, there will, of course, be a bill to pay. But that bill will circulate within society. Other Americans will get paid, and some foreign investors as well. The real critique should be, the real question should be, how on Earth have we arrived at a point where that is the one thing that we can agree on doing on real scale, as opposed to all of the other projects that we need?

Ezra Klein
So you make an argument in the book that the pandemic was a moment where, at least for a period of time, we could agree to spend. And we did spend at a level we’ve almost never seen before. But even that agreement is now beginning to break down around inflation fears, around party polarization. And we’ll talk about all that in a minute.

But in the past, when the U.S. has decided to spend huge amounts of money, the debate at least hasn’t been framed as purely political. If you go back to 2009, 2010, there had been quite a bit of stimulus spending. Obamacare gets passed in 2010.

And the argument that emerges is this deep fear that we’re going to see interest rates rise, that bond-market vigilantes are going to come, people are not going to want government debt, or that the size of deficits is going to create this thing called uncertainty, and businesses will not hire. They’re not going to invest. They will not create or pursue new opportunities, because they’re going to be so afraid of the future taxation environment or the future spending environment that they won’t feel they have the certainty needed to plan.

And we didn’t really see either of those things happen then, and we aren’t seeing them now. So what went wrong in these treasured theories of fiscal consequence, such that there really was no interest-rate or bond-market or even obvious corporate reaction?

Adam Tooze
Yeah. Your description there summoned up memories of Paul Krugman’s famous confidence fairies. There was this idea that excessively large-scale action would send a tremor of uncertainty, as you say. Radical uncertainty was the great buzzword of the moment.

I think, first of all, it’s really important to say that we’re not there yet, right? So on that timeline you just laid out so nicely, the shock to 2008, 2009. There’s still the scrambling response. The argument over Obamacare begins. Dodd-Frank, likewise. And the austerity turn doesn’t happen until 2010. Another Krugman bon mot, it all went wrong in 2010. So if you run that clock on us now, we really need to worry about what happens next year. That’s where these debates will come.

And I would actually wager money that we will see very similar arguments like that made next year. The question is whether they will be allowed to win out. In Europe, you can already see the battle lines being drawn. There was a memo just, I think, by eight conservative finance ministers yesterday on precisely this issue, saying, it’s time for fiscal consolidation. We need to start worrying about how we achieve a sustainable, credible fiscal framework. And from credibility to confidence to uncertainty — that’s a short step.

So those arguments are yet to be had. But what we discovered in the moment was that you could issue truly epic quantities of debt, like we haven’t seen since World War II, without, what as it were, simple, neoclassical, standard economics. And one should not generalize about economics in a silly way, because it’s a huge discipline full of incredibly bright people. But let’s just accept there’s a schoolbook version. And it would say that if you borrowed a huge amount of money, you would expect the price of borrowing to go up. In other words, the interest rate would go up. And in fact, the opposite happened, right? A huge quantity of money was borrowed, and interest rates have fallen to extraordinarily low levels.

Now, I think it would be presumptuous for me to say that we know, or I know, the answer to why that has happened. It’s one of the great mysteries of economics at this moment. There are a variety of different theories out there, some very long-term theories. People see this as the result of the forces of secular stagnation. Or it could be to do with demographic factors.

But in the moment, in 2020, I think the shock factors are more important. And what we’re seeing is a huge quantity of household expenditure just stopping in its tracks in March and April. So money-market mutual funds, where upper-middle-class Americans put their spare cash, are flush with cash. So if the U.S. Treasury wants to issue short-term bills — not long-term treasuries, which they didn’t do much of in 2020, but short-term bills — there’s a huge appetite for them. They get snapped up by those kind of investment funds.

So in a sense, what the government is doing here is basically stepping into the void left by the contraction of private-sector activity. And if that weren’t enough, the other thing, of course, that’s happening is, the central banks in the U.S., but all over the world — they’re also just gobbling up huge quantities of government debt. They’re buying, on the whole, the Treasuries — so the longer-term, the 5-, 10-, 30-year paper, not the short-term bills which are being absorbed by money-market mutual funds and vehicles like that.

But the combined effect of, as it were, a surge in private saving and a huge sucking noise in the accounts of the central banks — the Fed bought 5 percent of the Treasury market in a matter of weeks. It’s absolutely staggering. That naturally, because it drives the prices of Treasuries up, and the inverse of the price of the Treasury is the yield, or in other words, the interest rate. So as that sucking effect happened in the Treasury market, yields plunged. And we had the topsy-turvy. It was a completely topsy-turvy effect.

And faced with that, bond vigilantes attempting to sell Treasuries because they weren’t feeling like holding them, or they were trying to punish the American government for pursuing a large, expansive fiscal policy — they’re just an irrelevance. It really is men on horseback — the vigilantes on horseback — meet the 101st Airborne or something. They’re just complete disproportion of force. So the entire vision of the ‘90s in which bond markets dominate government fiscal policy, which was very much a thing of, say, the Clinton administration, sort of evaporated.

Ezra Klein
This is really important. To extend your analogy a bit, the reason you weren’t supposed to send the 101st Airborne after the bond vigilantes on horseback was, you’d break the time-space continuum. You’re not supposed to fight the past with the future.

And the idea is that if the central banks began buying up the debt, they would spark, potentially, an inflationary spiral. People understood that central banks could create money and buy debt. And then, in some way, it was unlimited — the amount of debt you could offer — because you would never face a problem in interest rates. But it was believed that there would be all kinds of terrible consequences if you did this. And so in general, they didn’t do it. Or if they did do it, they did it in really weird backdoor ways.

But a story you tell in your book, which I’d like you to tell here, is that during the pandemic, there almost is a true crisis in the Treasury markets. And then the Fed steps in. And their stepping in stabilizes the situation, but it doesn’t set off the secondary crisis. So can you tell a bit more of that story, of what almost happened and then why it was unusual to see the Fed do what they did?

Adam Tooze
Yeah, this is really the hidden drama of March 2020. Lord knows we had enough to concentrate on in March 2020. But there was something truly terrifying happening in the most important financial market in the world.

There are three broad segments of the global financial markets. There’s the equity market, which is what generates so much of the headlines, the buying and selling of shares in Apple or whatever. Then there’s the private corporate-bond market, which is much more boring than shares, where companies like Apple issue debt, which carries an interest rate.

But the really crucial one, where all the macroeconomics, all the argument about inflation and central banks comes to bear, is the market for government debt, so Treasuries. And the most important of all is the American Treasury market. It is, depending on how you count it, somewhere between $17 and $21, $22 trillion worth of debt in various people’s hands.

And the thing about those is that they are like a cash piggy bank. So they yield an interest rate. But the market is huge. And normally, you’re able to sell these for cash more or less instantaneously. You can sell huge volumes of them, and your selling of them — that huge volume — doesn’t affect the price. So in any given day, you know what it’s worth. And you can then liquidate as much as you like. So this is the piggy bank of the global financial system. It’s the source of safe assets.

So that market is crucial for the stability of the whole system. And in 2008, what happened is that as people panicked in investment banks, in mortgage-backed securities, people ran for safety into this debt. And this has a stabilizing effect, because as people run in, prices go up, and interest rates go down. And that’s exactly what the economy needs at a moment of stress.

The terrifying thing that we saw, really starting in the second week of March, starting on Monday night, is that, first of all, that relationship broke down. And people were not just selling equities. They were selling Treasuries as well. And when we say people, what I’m talking about are foreign managers of large dollar-exchange holdings.

Not to get out of dollars, but to get out of Treasuries into cash, investment funds of various types, which, again, invest in a range of things — they had their clients panicking, trying to pull their funds out. It was very difficult to sell shares in those days because equity prices were collapsing. So they sold the next best thing, or rather the better thing, which is easy to turn into cash, which is Treasuries. So they were piling into the market.

And then there were a bunch of hedge funds which had done very complicated trades depending on the future development of Treasury prices, which were now completely upended by this. And hedge funds speculate, so they borrow to own these Treasuries. And when their prices go AWOL, those deals unravel. And then you need to sell quickly because you don’t actually have the money to hold the Treasuries in the first place.

And those three forces together created true turmoil in the Treasury market. So as share prices fell, Treasury prices fell, too. So interest rates were going up. And as the panic began to spread, something even more terrifying began to happen, which is that if you wanted to sell Treasuries, you couldn’t find ready buyers at whatever the prevailing price was. In fact, it was quite difficult to find buyers at any price.

I was talking to somebody in Hong Kong the other day who was telling me that he will never forget, for the rest of his life — and this is how significant this is for financial-market actors — the moment when he tried to sell a couple of billion dollars of U.S. Treasuries and couldn’t find a buyer. Because what that tells you — if there’s no buyer for U.S. Treasuries, as this spins out over the next couple of weeks, the buyers for practically everything else will evaporate, too, because in the end, the Treasury is, as it were, the thing that’s almost as good as cash. And that basic relationship was breaking down.

And if it does fundamentally snap, the problem is that all portfolios in the world are anchored on piggy banks of Treasuries, which are used as the cash equivalent. So you can hold the less-liquid stuff, the stuff that’s harder to turn into cash, because you have this stash of Treasuries, which you can instantly turn into cash. If you can’t, any longer, make that transformation, then the entire portfolio is misbalanced. And really, you have to offload the rest, too.

And so the fear was that this tension in the Treasury market would basically just blitz the entire financial system in the United States and globally. The tremors spread to London in the third week of March, where, basically, the gilt market, which is one of the oldest in the entire world, stopped functioning, according to the Bank of England. And there was stress in Europe as well.

And the answer is — and there’s only one possible answer to a crisis like this — is for a buyer of last resort to simply say, look, anyone want to sell Treasuries? We’re here for you. Here’s the cash. And the only agency that can do that is the Federal Reserve. And so from late March, they were buying a million dollars of Treasuries and mortgage-backed securities a second. They were buying over $70 billion a day for several weeks. And this is just an absolutely shocking intervention in a market that shouldn’t need this kind of stabilization.

Ezra Klein
On one level, that’s very convenient. If the Federal Reserve can pop in and buy as many Treasuries as the Treasury Department wants to offer, that means, functionally, the Treasury Department can issue as much debt as it wants to, and we have the money to do anything we want. So tell me, traditionally, why people did not want the Fed to do this.

Adam Tooze
Well, because what you’re doing is just pumping huge quantities of liquidity into the global financial system. And if you have a simple quantity-theory type view of inflation — in other words, the “back of the envelope” idea that inflation results for more money chasing the same quantity of goods — then this should basically be the trigger for inflation.

And this has been one of the great mysteries of the global economy since 2008, is that we’ve seen successive waves of liquidity pumped into the global economy. And rather than inflation, our problem has, in fact, been lowflation, or even deflation, in the worst case. And that, indeed, was what the central banks had been fighting in 2020, is a slump, the fear of the global economy contracting and prices falling, as they did spectacularly, for instance, in the global oil market in April, where, famously, the price went negative for a day.

Ezra Klein
But that is not the problem now. And this is going to connect a few parts of our conversation. You were saying, a few minutes ago, well, we’re not on the timeline yet by which we began having the austerity fears in 2010. And you’re right. And I think we’re getting there. But we’re not going to get there over deficits and interest rates. It’s going to be over inflation.

We are seeing inflation. We’re seeing concerns from center-left economists like Larry Summers, like Olivier Blanchard, like Jason Furman. There is now an argument as to whether or not it’s transitory inflation, it’s just going to ease up once we get more cars on the market and semiconductors out, or whether or not it’s going to become built into expectations.

So it does seem that we are seeing at least part of one of the feared consequences. And the question is how much to fear what we’re seeing. How do you read what’s going on with inflation in the U.S. right now?

Adam Tooze
Well, I think one can see people joining the dots in those ways. And I actually like your political analysis. I think you’re absolutely right. That is the way this argument is going to run. It’s already begun running, basically.

Ezra Klein
Yes. You already see Joe Manchin, the senator from West Virginia, and Kyrsten Sinema. They are using inflation as an argument for not doing the full, at least, $3.5-trillion budget-reconciliation bill. It is already being used to block further investment.

Adam Tooze
Same in Europe. So inflation rates in Germany popped over 3 percent, and there was a lot of hawkish talk there immediately. On the substance, I think this is not a very convincing analysis. It’s not very convincing, because there are obvious drivers of these spikes in prices, which are from the supply side, on the whole. They are completely out of proportion. In other words, they’re far too small relative to the scale of the liquidity we’ve injected.

And then furthermore, I think there’s every reason to think that they will ebb away over time. Already, in fact, we’re seeing signs that the really rapid surge in inflation that we saw in some sectors at the beginning of the year is decelerating. So month-on-month inflation rather than year-on-year inflation is now much calmer than it was earlier in the year. So if you take the year-on-year measures, you are, as it were, lagging. You’re not quite capturing how rapidly things are calming down.

So I think the jury is out. Obviously, it’s too early to tell. But there is a fundamental reason, I think, beyond, as it were, the empirics, for thinking that there’s very little reason to fear a return to 1970s-style inflation dynamics. And let’s face it. That’s the last time we actually had substantial inflation in the United States or Europe.

And the difference is political economy. In the ‘70s, we had the mechanisms of a wage-price spiral. In other words, we had powerful bargaining partners on each side of the labor market — organized labor on one side, capital on the other. And they became directly involved in price and wage setting. And the entire logic of inflation had a dynamic of acceleration, or at least sustained increases in wages and prices.

This is where the economist preoccupation with expectations really had grip, because you could study wage-setting and price-setting in the ‘70s and see the way in which negotiators would explicitly invoke the track record of inflation to date as a justification for further forward-looking increases in wages and prices. There were even cost-of-living adjustment clauses that built this in automatically.

And we know that the power balance in labor markets has radically shifted. In fact, somebody like Larry Summers started 2020 by publishing a rather brilliant paper on precisely this point. And so it’s particularly surprising, I think, to find somebody like him now arguing what seems like the other side of the same point.

Ezra Klein
Can you say what he said in that paper?

Adam Tooze
Well, he was arguing there that the fundamental unifying fact — if you just had to point to one idea, the grand, unifying theory of political economy, in the current moment — is the shift in the power balance between labor and employers, and that it helped to explain profit margins. It helped to explain inequality. It helped to explain the tendency towards low inflation that we see across most of the advanced economies.

And now, all of a sudden, now we’re in 2021, and he’s concerned about inflation. And yet, the power dynamic, of course, has not shifted. If anything, the position of workers is, in total, weaker than it was before. Now we have an administration which is in the business of trying to shift that parameter.

So you could add that in as a political argument. In other words, the markets reflect the fact that they no longer trust the conservative biases of the Biden administration. In fact, the Biden administration has been quite forward about saying that it wants to shift the power balance. But I think to accord that — the efficacy that that would imply — I think, is to exaggerate. And as you say, the counterargument is operating very powerfully already. In other words, there’s x, y, z we can’t do, because, look. Inflation is happening.

Ezra Klein
And so I want to slow this down just a little bit. So one of the arguments being made here is, in the ‘70s, you have stronger unions throughout the economy. You have contracts being set. And one thing you begin to see built into contracts is wage increases tied to inflation. So that becomes very clear how you get a wages-prices spiral. They begin to go up automatically with each other. But there isn’t that dynamic now. And whatever you might say about the Biden administration, they actually have not passed any legislation that is going to lead to a rapid increase in unionization in the next year or two.

But this then cuts into this whole question of expectations. And I do find, traveling around the inflation debate, that how different economists and people think about expectations becomes really important. And so let’s hold on Larry Summers for a minute, because one of the arguments he’s been making is that it is the very things the Fed is doing that will change inflation expectations.

And I’ll quote here from an op-ed he wrote in the Washington Post where he says, quote, “the Fed used to believe in preempting inflation. Then it announced it would not act until there was evidence. Now it is in a posture of not even beginning to reduce the most generous monetary accommodation in history until presented with conclusive proof of excessive inflation.” And what he’s saying there is, the Fed is doing all this quantitative easing. There is evidence of inflation. But they are treating it so differently now that you have to assume that that is going to change how the market thinks the Fed will act in the future, and thus begin to create more inflationary expectations. What do you think of that argument?

Adam Tooze
It’s an interesting argument. It accords huge power to the Fed. That’s not a plausible story in the economy at large, when you look at price-setting and wage-setting at large. But when you invoke the market, as you did there, what we’re talking about is the bond market.

And I think it’s definitely true that in the loop between the Fed commentators, like Larry Summers and other journalists, and the bond market, there is a kind of extraordinary hall of mirrors in which the Fed’s announcement — that it intends to allow prices and inflation to go above the 2 percent target to offset undershoots — induces a kind of idea of a regime shift. But in a sense, you’ve got to go back to the beginning here. The whole point of the Fed’s announcement was to induce a regime shift, because in the real economy, they judge that protracted periods of low inflation are a very bad thing. And so what, precisely, we need to do is encourage the idea that the Fed, broadly speaking, favors slightly higher inflation rates. That’s the entire point. The argument gets serious when you suppose that if you do achieve that goal, it then becomes runaway.

So the Fed’s announced intention is to try and reset inflation expectations to a slightly higher level. The objection to that, I think, is a serious objection — not when you say, well, they’re trying to reset inflation expectations to a higher level, because the Fed pleads guilty to that — but if you say, ah, and then I see a dynamic which could produce escalating inflation, ever-greater tension, panic in the bond market. That would then cause the necessity for some sort of very painful action, and that would be very bad. I think that’s where the argument is.

So then the question is not, will this reset inflation expectations? The intention is to do that. The question is, will they become unstable? Unanchored is the phrase that’s used. And I don’t really see why anyone should think that. And if you look at the bond markets, which, through their pricing of interest rates, give us an idea of what the really big money thinks inflation is going to be, we can read it off the interest rates that you get for investing at different maturities. There’s not much evidence in the bond market for that kind of panic.

And the Fed itself, which, after all, is one of the great centers of data processing about the economy, is also fairly confident, I think, that the inflation shock is transitory. They’re not totally on a consensus about that. And there are bits of the Fed say, the Dallas Fed would like to go begin tightening a little bit sooner. But nevertheless, their general position is one of being reasonably relaxed.

So I think that’s the gamble, right? The gamble is, yes, we want to get to a slightly higher level of inflation. And we think we can do that without this becoming runaway. And the good reason for thinking it’s not going to become runaway is, the fundamental political economy is really different, and the position of workers is much weaker. And that’s actually kind of a bad thing, really. And if it did, in some way, in some degree, shift the advantage in favor of workers, well, that will be a good problem to have. And we’ll address it when we get there.