WEBVTT - Bloomberg Businessweek Weekend - December 10th, 2019 0:00:02.520 --> 0:00:06.200 This is Bloomberg Business Week from Bloomberg Radio. Hi, I'm 0:00:06.280 --> 0:00:08.720 Jason Kelley and I'm Carol Master. Welcome to the weekend 0:00:08.840 --> 0:00:11.640 edition of Bloomberg Business Week. Man, it was a very 0:00:11.720 --> 0:00:14.120 very busy week, so much in the news and so 0:00:14.200 --> 0:00:16.320 much in the magazine. Over the next couple of hours, 0:00:16.320 --> 0:00:18.159 we're going to highlight some of the big stories of 0:00:18.200 --> 0:00:20.360 the week, bring you insights from the magazine, and so 0:00:20.480 --> 0:00:22.440 much more. On this week's show, we're going to take 0:00:22.440 --> 0:00:26.239 you to Australia. Understand the implications of those bushfires. They're 0:00:26.680 --> 0:00:30.440 the massive amount of area that they have encompassed, what 0:00:30.960 --> 0:00:33.800 the tie is to climate change. Also take you to 0:00:33.880 --> 0:00:37.720 Venezuela where they have too many dollars. Well, yeah, go 0:00:37.880 --> 0:00:40.239 figure that's a problem. It's a country with an economy 0:00:40.320 --> 0:00:44.159 that's crippled quarter after quarter of declines, stifling inflation. They've 0:00:44.200 --> 0:00:46.519 attracted a lot of dollars. But as a result that 0:00:46.600 --> 0:00:50.120 has certainly created a problem. And speaking of problems, it's 0:00:50.120 --> 0:00:52.960 been a longstanding one for the Catholic Church, and this 0:00:53.120 --> 0:00:56.680 of course a dealing with sexual abuse charges and claims 0:00:56.760 --> 0:00:59.720 and lawsuits. And what's interesting, they have kind of a 0:00:59.760 --> 0:01:02.680 two wrong strategy when it comes to dealing with some 0:01:02.760 --> 0:01:05.080 of those suits and as a result, those claims that 0:01:05.120 --> 0:01:07.440 are going out to victims not as high as they 0:01:07.520 --> 0:01:10.520 might have been. It's a terrific piece of reporting. Disturbing 0:01:10.640 --> 0:01:13.720 to say the least, but an important one for folks 0:01:13.720 --> 0:01:16.560 to understand. Plus the hidden dangers of the great index 0:01:16.600 --> 0:01:20.039 fund takeover. You've got these funds in your four oh 0:01:20.040 --> 0:01:22.800 one k It's this week's cover story. First up, though, 0:01:22.880 --> 0:01:26.000 let's begin with those ongoing tensions between the United States 0:01:26.000 --> 0:01:28.399 and Iran. For more on that topic, Jason We spoke 0:01:28.440 --> 0:01:30.800 to Economics editor Peter Coy. He took a look at 0:01:30.800 --> 0:01:33.920 that escalation strategy that President Trump is using with Iran, 0:01:34.600 --> 0:01:38.440 taking us back into some history of similar strategies and 0:01:38.480 --> 0:01:40.839 how it really is a risky one, but it also 0:01:41.120 --> 0:01:43.840 has some rewards. It's a strategy he's used all his life. 0:01:44.240 --> 0:01:46.440 Trump is famous for saying, if somebody hits you, hit 0:01:46.480 --> 0:01:49.000 him back ten times. It's hard. It's worked pretty well 0:01:49.040 --> 0:01:51.320 for him in the world of business and politics. The 0:01:51.400 --> 0:01:53.960 question is now will it work as well in the 0:01:54.000 --> 0:01:57.480 world of geo politics? And you know, so far, you 0:01:57.480 --> 0:02:01.440 could argue so good. Knocked off one of America's top 0:02:01.600 --> 0:02:06.360 enemies with relatively small repercussions exactly so far. And the 0:02:06.640 --> 0:02:09.840 question is what happens next, because Iran certainly has other 0:02:09.880 --> 0:02:13.360 ways that can get back at the United States cyber war, 0:02:13.880 --> 0:02:17.200 terrorism and so on, as well as just more attacks 0:02:17.360 --> 0:02:21.080 in Iraq Um. But then there's also the downside for 0:02:21.120 --> 0:02:24.200 the US of the fact that Iran is pulling out 0:02:24.240 --> 0:02:27.560 of its commitments under the nuclear deal. It's it's going 0:02:27.600 --> 0:02:32.160 back to enriching uranium. Uh. The turn of public opinion 0:02:32.560 --> 0:02:37.880 in Iraq await. Until very recently, the Iraqis were turning 0:02:37.960 --> 0:02:41.880 quite negative towards Iran. Now they're pivoting towards being uh 0:02:42.280 --> 0:02:45.280 wanting the US to get out. The Iraqi parliament had 0:02:45.320 --> 0:02:49.600 a symbolic vote to tell the United States to go home. So, 0:02:49.960 --> 0:02:52.919 you know, it's definitely a mixed bag whether this kind 0:02:52.919 --> 0:02:56.320 of strategy works well. And it's a geopolitical story, it's 0:02:56.360 --> 0:03:01.119 also a geo economic story in many ways. This complicates 0:03:01.240 --> 0:03:03.800 so many things when we think about trade, when we 0:03:03.840 --> 0:03:06.480 think about just the relationships between all these countries. This 0:03:06.560 --> 0:03:10.160 is a crucial economic part of the world. Well for sure. Now, 0:03:10.560 --> 0:03:13.320 Trump would argue, and he did argue in his address 0:03:13.400 --> 0:03:16.040 to the nation. That the US is self sufficient in 0:03:16.160 --> 0:03:19.080 oil now close to it it was, still has some 0:03:19.160 --> 0:03:22.000 imports of oil, But that does not mean that the 0:03:22.120 --> 0:03:25.280 oil market does not matter. Matters for all the other 0:03:25.320 --> 0:03:28.240 countries that are buying oil, and the United States remains 0:03:28.600 --> 0:03:31.320 sort of the world's policeman to some degree. And so 0:03:31.360 --> 0:03:34.160 it's a bad thing if suddenly the straight of hormones 0:03:34.280 --> 0:03:36.800 is blocked, for example, by Iran and oil can't get out. 0:03:36.960 --> 0:03:38.839 What I think is interesting and you really do look 0:03:38.840 --> 0:03:41.560 into this whole idea of the escalation strategy. You know, 0:03:41.560 --> 0:03:43.920 you're writing this story that Trump, the president, Trump is 0:03:43.960 --> 0:03:47.040 running into a dilemma that we've seen other US president's face. 0:03:47.240 --> 0:03:49.400 How to fight a foe who pokes and prods using 0:03:49.680 --> 0:03:53.640 asymmetric warfare. This isn't your typical foe. That is fascinating. 0:03:53.720 --> 0:03:55.920 And you go back to Richard Nixon in the world 0:03:56.120 --> 0:03:59.839 in the Vietnam War vent. That was when the US 0:03:59.920 --> 0:04:02.080 was trying to decide what to do, whether they should 0:04:02.080 --> 0:04:06.040 go f after the Vietcong basis and Cambodia, which it did, 0:04:06.560 --> 0:04:11.160 expanding the war and raging US piece of activist and 0:04:11.200 --> 0:04:13.120 what Nixon said at the time was he didn't want 0:04:13.160 --> 0:04:17.440 the US to become a pitiful, helpless giant. That expression 0:04:17.880 --> 0:04:22.880 has gained currency which still gets used today. Trump identically 0:04:23.000 --> 0:04:25.360 does not want the US to be a pitiful, helpless giant. 0:04:26.120 --> 0:04:29.360 It's also interesting too, and Peter, you've written about this before, 0:04:29.440 --> 0:04:32.640 you write about it again. This is the United States 0:04:32.760 --> 0:04:35.480 in a different position in a very different world, and 0:04:35.640 --> 0:04:39.239 that also contributes to this asymmetry that we're seeing. There's 0:04:39.320 --> 0:04:42.080 not a lot of precedent for the US acting in 0:04:42.120 --> 0:04:44.960 this way in a world that is like this. Well, 0:04:45.000 --> 0:04:47.719 the you know, Trump is not your typical president for 0:04:47.839 --> 0:04:50.520 better or worse. Uh that there are people who love 0:04:50.600 --> 0:04:54.000 this kind of strategy. It's about time the United States 0:04:54.400 --> 0:04:58.120 stopped using treating other countries with kid gloves and like 0:04:58.279 --> 0:05:02.360 hit hard. And I talked to people who think that 0:05:02.400 --> 0:05:05.840 this could work. It could create have a deterrent effect 0:05:06.240 --> 0:05:10.520 on further Iranian aggression. Uh So the jury is out 0:05:10.560 --> 0:05:13.760 on this. And that's Peter coy are Economics editor taking 0:05:13.760 --> 0:05:17.120 a little bit of a political bent this week. It 0:05:17.279 --> 0:05:21.760 was the lead of the politics section and a reminder candidly, 0:05:21.920 --> 0:05:24.680 and we talked about this with Peter that politics and 0:05:24.720 --> 0:05:30.040 economics inextricably linked in many ways, especially because so much 0:05:30.040 --> 0:05:33.200 of the interest in the Middle East is ultimately economic, 0:05:33.480 --> 0:05:36.719 be it oil, be it just sort of economic strategy 0:05:36.760 --> 0:05:39.160 in many ways. Well, it really gets to Jason bottom 0:05:39.200 --> 0:05:42.120 line that the president, President Trump has positioned his moves 0:05:42.160 --> 0:05:44.680 against Iran as an attempt to really scare it into 0:05:44.720 --> 0:05:47.880 a more submissive stance toward the United States. But the 0:05:47.920 --> 0:05:51.159 result is could possibly have that opposite effect. And that's 0:05:51.240 --> 0:05:53.960 the game that we're playing right now, or the United 0:05:54.000 --> 0:05:56.280 States is, and the administration is. And I also think 0:05:56.320 --> 0:05:59.000 what's interesting about this is we always look back to 0:05:59.120 --> 0:06:03.200 history for press in history for comparisons, and yet if 0:06:03.200 --> 0:06:06.520 there's one thing we have learned during the Trump administration 0:06:06.640 --> 0:06:09.760 is that history past performance, as they say on Wall Street, 0:06:10.160 --> 0:06:13.599 is not a guarantee of future performance. And you do 0:06:13.800 --> 0:06:17.039 just wonder whether this time really is different. And the 0:06:17.040 --> 0:06:18.320 other thing I just want to get to is, and 0:06:18.360 --> 0:06:20.760 I think we have talked increasingly about these stories in 0:06:20.800 --> 0:06:24.080 the magazine about the United States as a global player, 0:06:24.200 --> 0:06:26.839 kind of backing off from the global stage. And you 0:06:26.880 --> 0:06:30.800 do wonder if ultimately U S forces are out of 0:06:30.839 --> 0:06:34.400 the area, out of Iraq in this case, what kind 0:06:34.440 --> 0:06:36.760 of power vacuum is left and who fills it if 0:06:36.800 --> 0:06:39.360 the United States is not there in some form or another. 0:06:40.120 --> 0:06:42.039 So this story has been front and center, Jason, no 0:06:42.080 --> 0:06:44.400 doubt about. It's been in all of the news reports. 0:06:44.400 --> 0:06:46.520 But I also feel like the Golden Globes, you had 0:06:46.600 --> 0:06:49.320 so many actors and actresses bring attention to the fires, 0:06:49.320 --> 0:06:53.440 the devastating fires in Australia. Well, it's an amazing story 0:06:53.560 --> 0:06:57.120 and a really important one and a reminder of the 0:06:57.160 --> 0:07:00.320 fragility of the climate. Right now, who better to talk 0:07:00.320 --> 0:07:02.880 about that angled in air crossed and he joins us 0:07:02.920 --> 0:07:06.880 from our green team, So tell us what's going on 0:07:07.920 --> 0:07:11.280 in Australia and the implications from a climate perspective. It's 0:07:11.360 --> 0:07:14.680 very difficult to dispel what's going on in the ground 0:07:14.680 --> 0:07:19.240 there and the incredible suffering. There have been two dozen deaths, 0:07:20.080 --> 0:07:25.360 and communities have been uprooted and have uncertain at least 0:07:25.480 --> 0:07:28.640 near term futures. When you take a step back, you 0:07:28.720 --> 0:07:31.480 see that this is a part of a problem we've 0:07:31.520 --> 0:07:34.280 been talking about for a very long time, and that's 0:07:34.360 --> 0:07:38.880 climate change. And the fires aren't over right, the fires 0:07:38.920 --> 0:07:41.720 of this scale, which basically I've never been seen before, 0:07:42.840 --> 0:07:46.160 We'll go on for months. Uh, they've already been going 0:07:46.200 --> 0:07:49.880 on for three or four months, and Australia isn't even 0:07:50.000 --> 0:07:54.360 in its peak summer season yet. Uh, there's not a 0:07:54.400 --> 0:07:58.520 lot firefighters can do. They can try to contain them, 0:07:58.560 --> 0:08:02.920 protect people and property, but expect this to be in 0:08:02.960 --> 0:08:04.920 the news for months. You know. It's interesting. That's just 0:08:04.960 --> 0:08:08.040 stating this story that talks about that the bushfires that 0:08:08.080 --> 0:08:11.400 have burned a combined area twice the size of Swiss Switzerland, 0:08:11.400 --> 0:08:13.680 and as you mentioned, they're not done yet. So just 0:08:13.720 --> 0:08:15.679 to get an idea in terms of size and scope. 0:08:16.000 --> 0:08:19.120 It's not only that, but think about last I guess 0:08:19.520 --> 0:08:23.320 more than a year ago now the California fires and 0:08:23.480 --> 0:08:28.400 those absorbed so many people's attention, caused so much devastation 0:08:29.040 --> 0:08:33.360 in this country. And also we spoke last year in 0:08:33.400 --> 0:08:37.559 two thousand nineteen about terrible fires in Brazil. The Australian 0:08:37.679 --> 0:08:40.840 fires are more than twice as much as the California 0:08:41.000 --> 0:08:45.520 two thousand eighteen and the Brazil two thousand nineteen fires combined. 0:08:46.280 --> 0:08:49.640 And so how does this play into the climate picture? 0:08:49.640 --> 0:08:52.560 I mean, what are the direct ties or even the 0:08:52.640 --> 0:08:56.319 indirect ties that we can draw from this devastation. It's 0:08:56.640 --> 0:09:01.640 pretty straightforward. The two thousand nine was the hottest year 0:09:01.960 --> 0:09:05.079 in Australia on record, which goes back about a hundred 0:09:05.120 --> 0:09:09.160 and forty years. Globally, it was also the driest year 0:09:09.640 --> 0:09:12.440 in Australia on record, and those are the two things 0:09:12.520 --> 0:09:16.920 you need to have a bad fire season. They knew 0:09:17.679 --> 0:09:19.800 months and months ago that it was going to be 0:09:19.840 --> 0:09:23.319 a terrible fire season just because of what two thousand 0:09:23.440 --> 0:09:26.120 nineteen was like in Australia and also what the last 0:09:26.760 --> 0:09:30.560 thirty years have been like in Australia, which is depending 0:09:30.600 --> 0:09:32.400 on what part of the country, we're talking about a 0:09:32.480 --> 0:09:38.080 ten or fifteen percent trend toward drier conditions. I think 0:09:38.080 --> 0:09:39.719 most of us, I think it's safe to say, who 0:09:39.720 --> 0:09:42.120 are you know reading about this? And folks that are 0:09:42.120 --> 0:09:44.439 reporting on it are saying it's climate change. And yet 0:09:44.600 --> 0:09:47.120 from what I understand within the country that they're not 0:09:47.160 --> 0:09:51.680 necessarily saying it's climate change. Is that correct? The political leadership, 0:09:51.760 --> 0:09:57.760 the Prime Minister has not embraced the vast element of 0:09:57.800 --> 0:10:02.440 these fires, that is cimate change. Uh. That is a 0:10:02.559 --> 0:10:07.520 kind of political behavior we've seen for in Australia before 0:10:07.600 --> 0:10:09.400 we see it in the United States, we see it 0:10:09.400 --> 0:10:16.239 in other countries. It's not uh. Based on factually tenable positions, 0:10:16.280 --> 0:10:21.360 you cannot say that climate change is not happening and 0:10:21.440 --> 0:10:26.000 be correct. It is human caused and it's an increasingly 0:10:26.280 --> 0:10:29.600 important factor in everyday weather. What kills me about this story? 0:10:29.600 --> 0:10:31.679 And I just have to bring this up because this 0:10:31.720 --> 0:10:33.640 story kicks off and talks about a report that was 0:10:33.679 --> 0:10:35.840 released back into Live two thousand seven. I think about 0:10:35.840 --> 0:10:39.160 the New York Times that did reporting decades ago, right, 0:10:39.360 --> 0:10:41.520 was it about climate change? And there were things that 0:10:41.520 --> 0:10:44.040 could have been done to prevent where we are today. 0:10:44.080 --> 0:10:46.200 So it's not like, oh my god, we all woke 0:10:46.280 --> 0:10:48.080 up and said, look what's happening to our climate, Like 0:10:48.280 --> 0:10:50.679 there has been a lot of research and reporting done 0:10:50.960 --> 0:10:53.320 for decades that this is where we were headed and 0:10:53.400 --> 0:10:57.200 here we are today. I think it's it's we is 0:10:57.600 --> 0:11:01.040 uh is a is a word that you no, I'm serious. 0:11:01.559 --> 0:11:05.920 That really deserves some scrutiny here, Like, we as a 0:11:06.000 --> 0:11:11.679 human community, led by scientists who study what's going on, 0:11:11.880 --> 0:11:14.520 have known about this for a really long time. We 0:11:15.559 --> 0:11:18.520 people who get up and have families and have jobs 0:11:18.559 --> 0:11:22.000 and are just trying to get through the day do 0:11:22.080 --> 0:11:24.720 not know it's it's an issue climate change, It's an issue. 0:11:24.880 --> 0:11:28.200 It's complicated, or at least until the last few years, 0:11:28.200 --> 0:11:31.560 it's been complicated. Um. So I think there's a lot 0:11:31.600 --> 0:11:33.840 of people who are still waking up and realizing that 0:11:33.920 --> 0:11:38.559 this issue is not like any other issue. Uh. There 0:11:38.679 --> 0:11:43.480 is a scale and an inevitability or inertia to this 0:11:43.559 --> 0:11:48.120 issue that's different and worth noting. The problem is, and 0:11:48.160 --> 0:11:51.920 you guys pointed out fossil fuels still make up of 0:11:52.200 --> 0:11:55.360 our total energy consumption. That's not likely to change anytime soon. 0:11:55.440 --> 0:11:58.520 We hear about automakers and everybody working on it and 0:11:58.640 --> 0:12:00.880 other you know. Uh, but he's working in terms of 0:12:00.920 --> 0:12:04.680 alternative energies. But that's the stark reality of where we 0:12:04.720 --> 0:12:07.600 are and unless we change that. And you guys point 0:12:07.600 --> 0:12:10.240 out in the story that there's the technology out there 0:12:10.320 --> 0:12:13.520 to do it, it's just not being either embraced or 0:12:13.600 --> 0:12:17.360 enacted fast enough. Yes and no, like we do. We 0:12:17.400 --> 0:12:19.840 do have the tools. And the story of the last 0:12:19.840 --> 0:12:24.280 ten years has been absolutely breathtaking and fascinating to watch. 0:12:24.280 --> 0:12:28.480 And that's the decline in the cost of solar power 0:12:28.520 --> 0:12:32.080 in the last ten years, decline in the cost of 0:12:32.600 --> 0:12:35.800 wind power in the last ten years. Uh. And there's 0:12:35.920 --> 0:12:41.800 even there's even really hopeful signs in UH in many 0:12:41.920 --> 0:12:45.960 nations already. There's a really I wish I had it, 0:12:46.280 --> 0:12:53.200 really dramatic depiction of the United Kingdom's energy use historically, 0:12:53.760 --> 0:12:56.800 and the vast majority of it is coal. And so 0:12:56.880 --> 0:13:00.480 this chart is UH most of it is just black 0:13:00.679 --> 0:13:03.520 representing coal. And then what you see in it over 0:13:03.520 --> 0:13:08.080 the last twenty years, UM is this vast use of 0:13:08.200 --> 0:13:13.240 coal goes down to almost nothing as gas comes in, 0:13:13.280 --> 0:13:17.000 as renewables come in, as nuclear comes in. So great 0:13:17.040 --> 0:13:19.959 Britain has done a really remarkable job in a very 0:13:20.000 --> 0:13:23.439 short period of time almost making coal disappear. And this 0:13:23.520 --> 0:13:28.600 is the country that lad the our foray into fossil 0:13:28.640 --> 0:13:31.920 fuels fifty years ago. That's Eric Roston and I have 0:13:32.000 --> 0:13:33.600 to say, Jason, you and I've been talking about this 0:13:33.640 --> 0:13:36.880 story all week long. It's devastating to see the fires 0:13:36.960 --> 0:13:40.400 and the magnitude of these fires over in Australia. And 0:13:40.400 --> 0:13:43.280 the point is, and I still am stuck on that 0:13:43.280 --> 0:13:47.199 that statistic that these fires um a combined area twice 0:13:47.240 --> 0:13:49.559 the size of Switzerland. They're continuing to burn, but that's 0:13:49.559 --> 0:13:52.559 what we're talking about. They are huge, well in the implications, 0:13:52.600 --> 0:13:54.160 you know, you and I have been following this, as 0:13:54.160 --> 0:13:57.840 you say, all week, you know, both online via social media. 0:13:58.080 --> 0:14:01.440 You know, you flagged a tweet that noted that a 0:14:01.480 --> 0:14:04.160 billion animals have been killed. You know, you've had a 0:14:04.160 --> 0:14:06.520 couple of dozen people who have been killed in all this, 0:14:06.920 --> 0:14:11.120 and yet the ramifications go far beyond that in many ways, 0:14:11.360 --> 0:14:15.480 in terms of the economy, but also the geography, the 0:14:15.600 --> 0:14:19.120 topography of this continent. This story one line in it. 0:14:19.280 --> 0:14:21.880 You know, we talked about climate change, and we hear 0:14:21.920 --> 0:14:24.000 about academic studies and so on and so forth, but 0:14:24.040 --> 0:14:26.760 they say, what's what's crucial about what's happening here is 0:14:26.760 --> 0:14:29.520 that you're getting the real life feel for just how 0:14:29.560 --> 0:14:33.040 bad things might become because of climate change. Right, it's 0:14:33.080 --> 0:14:35.400 front and center and you can't ignore it. So really 0:14:35.400 --> 0:14:37.920 really trouble, and you do wonder if behavior does start 0:14:37.960 --> 0:14:40.760 to change with big examples like this, we'll see. So 0:14:40.840 --> 0:14:42.560 one story in the economic section that we wanted to 0:14:42.560 --> 0:14:45.440 bring to everybody's attention. It's about a country we're talking about, Venezuela, 0:14:45.520 --> 0:14:47.400 that has attracted a lot of US dollars. You and 0:14:47.400 --> 0:14:49.600 I were talking about this and the introducer I know 0:14:49.720 --> 0:14:51.960 because I read this story. I read the headline. I 0:14:52.000 --> 0:14:54.720 was like, wait, what is happening here? Because dollars usually 0:14:54.960 --> 0:14:57.920 a pretty good thing for most people in the world. 0:14:57.960 --> 0:15:00.680 But leave it to Venezuela to figure out, you know, 0:15:01.040 --> 0:15:05.080 a way to make it. It's unbelievable what's going on? 0:15:05.240 --> 0:15:08.640 So tell us about the excess of dollars and the 0:15:08.760 --> 0:15:11.560 consequences of editor Christina a little blad here. Thank you, 0:15:11.680 --> 0:15:15.360 you're welcome. Well, there's some good, uh you know things 0:15:15.360 --> 0:15:17.720 have come from it, which is I mean, basically people 0:15:17.720 --> 0:15:20.720 are gravitating to the dollar because you know, the believer 0:15:21.040 --> 0:15:23.760 just you know, keeps like losing its value. It like 0:15:23.840 --> 0:15:28.560 basically depreciate it almost against the dollar last year. So, um, 0:15:28.560 --> 0:15:31.600 you know, everyone from like you know, like haircutters to 0:15:31.800 --> 0:15:34.400 you know, people selling popsicles you know, on the street 0:15:34.440 --> 0:15:37.320 now want to take dollars. The problem is, though you 0:15:37.360 --> 0:15:40.720 cannot open dollar accounts in Venezuela. Banks are not allowed to, 0:15:41.320 --> 0:15:44.040 so there's nowhere to stash your money. So we talked 0:15:44.040 --> 0:15:48.280 to this woman who's in an insurance business who wraps 0:15:48.280 --> 0:15:50.720 her dollars in a plastic bag and taps them to 0:15:50.800 --> 0:15:54.600 the inset of her toilet tank in her office. Um, 0:15:54.800 --> 0:15:56.800 so there's a big concern that this is going to 0:15:56.960 --> 0:16:00.560 spark another wave of crime like the one that Venezuela 0:16:00.600 --> 0:16:02.440 saw at the end of the ninety nineties, which is 0:16:02.480 --> 0:16:05.080 pretty severe. Help me understand something first. Let's talk about 0:16:05.080 --> 0:16:07.200 the bank situation. So like, if I go to a 0:16:07.200 --> 0:16:09.640 bank in the US and I have a foreign currency, 0:16:09.800 --> 0:16:12.640 can't they change it and deposit it? Well? But nobody 0:16:12.720 --> 0:16:15.440 but see, nobody wants to change their dollars into believers 0:16:15.440 --> 0:16:17.560 because it's worth nothing. Yeah, because like you know, a 0:16:17.600 --> 0:16:20.200 week later, like you so do you want to keep 0:16:20.200 --> 0:16:23.440 your dollars? But you know, very it's very few countries 0:16:23.880 --> 0:16:27.320 are banks really like in the business of opening foreign 0:16:27.320 --> 0:16:29.720 currency accounts. So people are hiding them truly, like as 0:16:29.760 --> 0:16:32.160 you said, under their toilet seat or in their mattresses. 0:16:32.240 --> 0:16:35.320 And you're talking in some cases thousands of dollars, right, 0:16:35.360 --> 0:16:37.920 I mean, some banks are allowing people to put them 0:16:37.920 --> 0:16:40.960 in their safety deposit box. But imagine how you'd have 0:16:41.000 --> 0:16:43.000 to take out many right after a while if you're 0:16:43.000 --> 0:16:46.440 a business trying to share dollars that the safe and 0:16:46.440 --> 0:16:49.480 you have people, you know, trying to get the dollars 0:16:49.480 --> 0:16:52.200 out of the country. Even there are limits on what 0:16:52.320 --> 0:16:53.920 you can do so you have an anecdote in the 0:16:53.920 --> 0:16:56.440 story about someone who sent I believe his wife and 0:16:56.520 --> 0:17:01.440 daughter each with his other thousand dollars. Right, is the 0:17:01.680 --> 0:17:03.600 is the limit that you can bring into the yes 0:17:03.640 --> 0:17:05.880 without declaring it to custom So right, so you went 0:17:06.040 --> 0:17:08.240 right under. Yeah, he has a bank account in Miami, 0:17:08.280 --> 0:17:10.280 but he wasn't able to you know, wire the money 0:17:10.280 --> 0:17:13.200 in there. So Christina, my question is why doesn't Venezuela 0:17:13.320 --> 0:17:16.800 just adopt the US dollars, especially since it's been in 0:17:16.880 --> 0:17:19.919 some regards a stabilizing factor for the country. Right as 0:17:19.960 --> 0:17:22.720 a means of transaction, it has, but politically it's a 0:17:22.880 --> 0:17:25.520 radioactive option. I mean other countries have done it though 0:17:25.640 --> 0:17:29.200 it's true, but I mean the US has sanctioned Venezuela. 0:17:29.240 --> 0:17:31.600 I mean this these are this is basically like the 0:17:31.720 --> 0:17:34.960 US is kind of, you know, diplomatically at war with 0:17:35.040 --> 0:17:38.840 this country. So it would be a loss of sovereignty, 0:17:39.080 --> 0:17:42.080 sovereignty that would be unacceptable to the Madua regime. At 0:17:42.119 --> 0:17:45.000 the same time you know that the government has has 0:17:45.040 --> 0:17:48.960 actually I mean Moudas publicly said that, you know, dollar 0:17:49.160 --> 0:17:53.040 informal dollarization has been good for Venezuela, you know, because 0:17:53.040 --> 0:17:56.280 it has provided more price stability it has, you know, 0:17:56.320 --> 0:17:58.920 there's an incentive now to save and invest that there 0:17:58.920 --> 0:18:02.840 doesn't exist with the believe it is right, so it's 0:18:02.840 --> 0:18:04.760 sort of it will stay in a gray area. A 0:18:04.800 --> 0:18:07.960 lot of other countries actually tolerate this, you know, and 0:18:08.000 --> 0:18:12.080 there's countries in Africa and other places that haven't formally dollarized, 0:18:12.320 --> 0:18:15.680 but you know, tolerate informal dollarization. There was during the 0:18:15.720 --> 0:18:18.560 economic section. It's about a country hoping to attract a 0:18:18.640 --> 0:18:21.320 sports industry and Jason, it has to do with kind 0:18:21.320 --> 0:18:24.400 of making over its image. It's also about diversifying its economy. 0:18:24.400 --> 0:18:27.960 We're talking about we're talking about Saudi Arabia Politically, it's 0:18:28.000 --> 0:18:30.960 been in the news a lot over the last couple 0:18:30.960 --> 0:18:34.119 of years, not in a good way. Economically, it's one 0:18:34.119 --> 0:18:37.439 of the most fascinating stories across the globe. The de 0:18:37.520 --> 0:18:42.320 facto ruler uh Deputy Crown Prince Mohammed been Salmon. He 0:18:42.480 --> 0:18:46.119 is trying to change the culture and the economics of 0:18:46.160 --> 0:18:49.600 the place. Christina Lynn Blad she oversees the economics coverage. 0:18:49.680 --> 0:18:51.560 This is a fascinating story. We were talking before we 0:18:51.600 --> 0:18:54.199 came on air. I really love the richness of this 0:18:54.280 --> 0:18:58.840 pun intended because this is a very tangible way that 0:18:58.880 --> 0:19:02.840 the kingdom is trying to move itself into the modern era. 0:19:03.080 --> 0:19:07.119 That's right. So they have a blueprint called Vision for 0:19:07.160 --> 0:19:09.520 how to diversify the economy, and part of it is 0:19:09.600 --> 0:19:14.159 to boost UH kind of Western style entertainment, So everything 0:19:14.200 --> 0:19:18.320 from music concerts to sports events, and the sports events 0:19:18.359 --> 0:19:20.640 is something that they've been leaning very hard on in 0:19:20.640 --> 0:19:24.160 in this last year, and already in the year, we've 0:19:24.160 --> 0:19:26.679 had a very busy calendar. Wee. In December there was 0:19:26.760 --> 0:19:30.560 a big boxing match UH, and then last weekend it 0:19:30.600 --> 0:19:33.240 was the beginning of the Dakar Rally, which Saudi Arabia 0:19:33.320 --> 0:19:36.000 is hosting for the first time UM. And then they're 0:19:36.040 --> 0:19:39.880 going to be a series of UM soccer exhibition matches 0:19:40.080 --> 0:19:42.760 that they've cut a hundred and thirty million dollar deal 0:19:43.119 --> 0:19:48.000 with Spain's Federation Soccer Federation for that. And that's Christina 0:19:48.240 --> 0:19:51.840 Lynn Blad talking about Venezuela and then Saudi Arabia. I 0:19:51.920 --> 0:19:54.600 really liked the Saudi Arabia story. I mean in part 0:19:54.600 --> 0:19:56.600 because I've spent a fair amount of time in the UAE. 0:19:56.840 --> 0:19:58.760 I've spent some time and cutter as well, sort of 0:19:58.800 --> 0:20:02.760 seeing the transformation of those economies, what the rulers and 0:20:02.800 --> 0:20:05.679 that's what they are of those countries and emirates have 0:20:05.720 --> 0:20:09.120 been able to do, attracting a lot of big name 0:20:09.200 --> 0:20:13.640 brands and in this case, big brand athletes in some cases. 0:20:13.680 --> 0:20:16.399 And yet it's also a reminder that it's not so easy. 0:20:16.440 --> 0:20:19.560 Money doesn't solve every problem. Yeah, it's a really interesting story. 0:20:20.119 --> 0:20:22.920 Black Rock Vanguarden, State Street. They have a mass trillions 0:20:22.920 --> 0:20:25.359 of dollars under management, Jason. They hold by eight percent 0:20:25.440 --> 0:20:27.600 of all Index money, and that's why they become known 0:20:27.680 --> 0:20:29.679 as the Big Three. They've got a nickname, that's what 0:20:29.760 --> 0:20:32.080 insiders call it. But it's a real thing in a 0:20:32.119 --> 0:20:36.280 lot of ways, and owing a lot to the extraordinary power, 0:20:36.800 --> 0:20:39.639 at least on paper, they hold. But we want to 0:20:39.640 --> 0:20:42.480 look into what that power actually means, how they're using it, 0:20:42.560 --> 0:20:46.920 and how it might be differently construed. Any Massa helped 0:20:47.000 --> 0:20:50.040 write the story. It's in this week's Business Week. She's 0:20:50.080 --> 0:20:52.239 in New York. Hi, Hi, how's it going right? This 0:20:52.320 --> 0:20:54.959 is really important for people to understand, in part because 0:20:55.240 --> 0:21:00.320 literally everyone listening to or watching this touches these estment 0:21:00.400 --> 0:21:02.960 firms in some way or another. I would imagine exactly 0:21:03.000 --> 0:21:06.320 Index funds have just enjoyed explosive growth over the past 0:21:06.359 --> 0:21:09.600 decade or more, especially in the wake of the financial crisis, 0:21:09.760 --> 0:21:12.119 when investors have realized, hey, it makes a lot more 0:21:12.240 --> 0:21:15.280 sense in a lot of cases to just put my 0:21:15.359 --> 0:21:18.240 money in a passive index product and just track markets 0:21:18.280 --> 0:21:21.399 that way instead of paying for active management. And over time, 0:21:21.680 --> 0:21:25.199 you've concentrated a lot of first of all assets and 0:21:25.240 --> 0:21:28.720 second of all voting power then um through the shares 0:21:28.760 --> 0:21:31.000 that they own in the big three that you mentioned, 0:21:31.119 --> 0:21:33.000 And we want to get into that concentrated power in 0:21:33.040 --> 0:21:35.840 this kind of common ownership by one entity or just 0:21:35.880 --> 0:21:39.119 a few entities. But remind us, I mean when index 0:21:39.160 --> 0:21:40.760 funds kind of came on the scene, they've been around 0:21:40.760 --> 0:21:42.760 for a few decades already, we've all thought what a 0:21:42.760 --> 0:21:46.119 great thing, right, lower fees is as good for investors. Yes, 0:21:46.280 --> 0:21:50.560 they are unquestionably a great innovation for investors, and investors 0:21:50.600 --> 0:21:53.120 who are trying to just make the smart financial decision 0:21:53.480 --> 0:21:55.320 may well decide it makes a lot more sense to 0:21:55.359 --> 0:21:57.879