Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovik. We're here every day bringing
Speaker 1: you the latest news from the world to business and finance,
Speaker 1: plus technology, politics, economics, all furnishing the power of Business
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Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on the Bloomberg Radio or watch us
Speaker 1: on YouTube. Searched Bloomberg clovel News today's jobs report showing
Speaker 1: that US hiring down shifted abruptly in August, with the
Speaker 1: smallest jobs gained in seven months. As Charlie mentioned, it
Speaker 1: complicates a potential decision by the Federal Reserve to begin
Speaker 1: scaling back monetary policy support by year end. The number
Speaker 1: we got today non farm payrolls increasing two d and
Speaker 1: thirty five thousand last month. Economists surveyed by Bloomberg they
Speaker 1: wanted to see something more in line with seven hundred
Speaker 1: and thirty five thousand, so a big miss there. Let's
Speaker 1: get in to it with Becky franco Witz, president of
Speaker 1: Manpower Group in North America. She joins us as she
Speaker 1: does many jobs days on the phone from Chicago. Becky,
Speaker 1: Really great to have you back on the show. Is
Speaker 1: there any silver lining to this job's report today? Yeah, Tim,
Speaker 1: so definitely not a report anyone wanted to see. Um.
Speaker 1: I would tell you that I'd characterize August is a
Speaker 1: report of dashed hopes on both sides of the labor
Speaker 1: you know, environment. UM employers were hoping for the September
Speaker 1: sunrise that we've spoken about before with increased labor supply
Speaker 1: and recovery of supply chains, you know in delta dash
Speaker 1: fat and workers were hoping for the smooth transition, you know,
Speaker 1: sending kids off to school, returning to work without fear
Speaker 1: of of you know, COVID. That's been dashed too, UM.
Speaker 1: But I will tell you that we believe the situation
Speaker 1: is temporary, and I have real time data that tells
Speaker 1: us why. Well, let's hear about that real time data.
Speaker 1: What does the future look like? Yeah, so hi, Katie. Um,
Speaker 1: you know, we know we still know where in a
Speaker 1: worker's market and here's why. There are ten point one
Speaker 1: million open jobs, so jobs unfilled in our country today.
Speaker 1: Demand remains right now above pre pandemic levels, and unemployment
Speaker 1: continues to decline, So that that is a silver lining,
Speaker 1: Tim's your question. And we also know, and this is
Speaker 1: some new data, we know that the talent shortage is
Speaker 1: especially acute in blue collar rolls. So let's just step
Speaker 1: back and say, you know, in the past year, UM
Speaker 1: demand for knowledge workers so think medical, you know, I
Speaker 1: T space, that demand is increased four and you're you're
Speaker 1: thinking that's a pretty good number. Yet demand for blue
Speaker 1: collar jobs is increased with a fifty percent rise in
Speaker 1: operations logistics alone, as the shift online is here to stay.
Speaker 1: So you know, we anticipate hiring spikes and ops logistics
Speaker 1: retail as we prepare for the holiday period. So that
Speaker 1: is the silver lining. Um. But this job's report in August,
Speaker 1: you know, ahead of the stimulus stoppages we go into September.
Speaker 1: You know, it was a disappointing one. There's no way
Speaker 1: around it. There is, though, still this mismatch between supply
Speaker 1: and demand demand. If there are ten point one million
Speaker 1: open jobs and still millions of people who are on
Speaker 1: the sidelines working looking for work, right now, why aren't
Speaker 1: they hopping off the sidelines. Yeah, so it's it's unfortunately complicated.
Speaker 1: So you know, part of it definitely is stimulus, but
Speaker 1: that can't answer everything. There is fear, you know, rising
Speaker 1: fear now around you, health safety in the workplace, and
Speaker 1: there's complications that you know, some schools are opening, schools
Speaker 1: are constantly threatening or we're gonna go hybrid or not
Speaker 1: go hybrid um. So it's really an uncertain time personally
Speaker 1: and professionally for workers in our country, and and they
Speaker 1: are still fitting on the sidelines. And again, what's so
Speaker 1: disappointing is we all hoped and wanted to believe that
Speaker 1: we would be past this as we went back into
Speaker 1: the back to school season, but we're not quite out
Speaker 1: of the woods yet. Yeah. It's definitely not the start
Speaker 1: to September that I think many companies and just people expected.
Speaker 1: But Becky, I want to pick up on your point
Speaker 1: on stimulus, because we do have those enhanced unemployment benefits
Speaker 1: starting to roll off next week, and like you said,
Speaker 1: there's still ten point one million jobs unfilled. I'm curious
Speaker 1: what you think that the end of those sorts of
Speaker 1: pro ms could mean for the labor market and jobs
Speaker 1: reports going forward. Yeah, so we've been tracking at state
Speaker 1: by state Katie, as the as the stimulus has ended,
Speaker 1: and what we found is it's very uneven. So in
Speaker 1: some states, you know, especially in states in the South,
Speaker 1: where when stimulus came in it didn't have as big
Speaker 1: of a dampening effect, we didn't see as big of
Speaker 1: a recovery effect when the stimulus came off. Um. In
Speaker 1: other states, we're just starting to see it roll off. Now.
Speaker 1: We have seen some positive momentum come out of a
Speaker 1: couple of the states since the stimulus stops. But I
Speaker 1: can tell you one thing, no matter what the state does, Um,
Speaker 1: this is not stopping stimulus is not going to have
Speaker 1: the you know, solve effect that we all wanted it
Speaker 1: to have. We're going to have to make sure that
Speaker 1: workers feel safe, they feel valued, they can trust their
Speaker 1: employers to send people home they're sick um that are
Speaker 1: around them, and that really is becoming. You know, This
Speaker 1: trust and care economy is truly the way forward for
Speaker 1: the American worker. Becky Manpower Group is the world's third
Speaker 1: largest staffing firm, so you do have a really good
Speaker 1: understanding of what is happening in different areas of the
Speaker 1: world when it comes to people going back to work
Speaker 1: or what they want at a at a at a firm.
Speaker 1: What are you seeing in terms of the return to
Speaker 1: the office, especially among large Wall Street banks and financial
Speaker 1: services firms. Yeah, so it's quite interesting. We just did
Speaker 1: a big fourteen thousand people's survey in fourteen countries to
Speaker 1: your to your question, Tim, and what we found is
Speaker 1: really generationally demographically, we're seeing some differences. So if you say,
Speaker 1: who's most excited to come back in the office, gen z,
Speaker 1: they're fresh out of college, they're looking to make their friends.
Speaker 1: It's where they find their dating pool. Like they're they're learning,
Speaker 1: they're excited to be back in the office. Who's least excited,
Speaker 1: and this is global data. Millennials. You know, millennials are
Speaker 1: of childbearing, you know, child raising years. They're very they're
Speaker 1: very concerned about their children getting the virus now, which
Speaker 1: you know a year ago we were saying kids aren't
Speaker 1: really susceptible. That's okay, So now we know that that
Speaker 1: was inaccurate, and so there's concerned there. I'm also excited
Speaker 1: to come back in the workplace. Our our gen X
Speaker 1: and our boomers and think about who's running the world,
Speaker 1: you know, companies right now it is the gen X
Speaker 1: and boomers, and so we see really varied interest about
Speaker 1: coming back into the workplace. Now from a vaccination perspective,
Speaker 1: you know that is giving some employees some confidence, particularly
Speaker 1: as headquarters for rolling out vaccinations um. But still, you know,
Speaker 1: it's it's very uneven in terms of the excitement of
Speaker 1: coming back in the office every day the week. Becky Frankowitz,
Speaker 1: President at Manpower Group North America, joining us on the
Speaker 1: phone from Chicago on this job's Friday. Becky, thank you
Speaker 1: so much for taking the time. We really appreciate it.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic from Bloomberg Radio. Well. Senate Democrats
Speaker 1: are discussing a wider range of tax proposals than President
Speaker 1: Joe Biden has proposed. This could include levies on stock buybacks,
Speaker 1: carbon emissions, and even executive compensation. This as part of
Speaker 1: a package of measures to help fund a ramping up
Speaker 1: in a social spending so writes Stephen at T Dennis.
Speaker 1: He is Senate reporter for Bloomberg News, and he joins
Speaker 1: us now on the phone from Washington at d C. Stephen,
Speaker 1: it's really great to have you on the show this afternoon.
Speaker 1: Who are the Senate Democrats who are who are doing this?
Speaker 1: Because we know that not all Democrats feel the same
Speaker 1: when it comes to taxation. Yeah, so basically the first
Speaker 1: thing they need to do is to get the Senate
Speaker 1: Finance Committee Democrats on board. And this is what's circulating
Speaker 1: among those Senate Finance Committee Democrats. They have yet to
Speaker 1: settle on a particular plan amongst themselves, but we do
Speaker 1: basically have the menu. You know, you're either you're either
Speaker 1: a lunch or you're on the menu or something or other.
Speaker 1: Even that's the old thing. Uh, this is this is
Speaker 1: the menu of who's gonna who's gonna make it to
Speaker 1: the lunch and who's gonna get eaten? And uh and
Speaker 1: so you have all kinds of things that would potentially
Speaker 1: affect a lot of stocks, a lot of markets. You know,
Speaker 1: if you start saying, well, stock buybacks should be tax
Speaker 1: just like dividends, or have an excise tax on stock buybacks,
Speaker 1: that would be a huge deal. Uh, supersized CEO pay
Speaker 1: you know they're they're they're talking about having an excise
Speaker 1: tax on CEO pay that exceeds the average worker at
Speaker 1: that company by a margin they considered to be too high. Uh,
Speaker 1: and even things like mark to market rules for billionaires
Speaker 1: with large unrealized cap gains, which would be a big
Speaker 1: tax on a lot of entrepreneurs like Elon Musk or
Speaker 1: Jeff Bezos who have very large amounts of unrealized capital gains.
Speaker 1: And so yeah, the implications widespread. I mean, just this year,
Speaker 1: we've already seen about three hundred and sixty billion worth
Speaker 1: of buy back. So Stephen, I'm curious does this have
Speaker 1: a shot of passing. I mean, like you said, you
Speaker 1: have to get the Senate Finance Committee Democrats on board.
Speaker 1: How likely is that to happen? I think basically any
Speaker 1: one of these proposals is going to have a hard road.
Speaker 1: You know, right now, Joe Mansion wants to press the
Speaker 1: pause button on the whole thing, and he wants a
Speaker 1: much smaller package. Um. He's also, however, taken aim at
Speaker 1: some of the more traditional tax increases that Joe Biden's proposed, Like,
Speaker 1: you know, he doesn't want to go to on the
Speaker 1: corporate tax rate. By He's talked about five percent of
Speaker 1: the corporate tax rate. Well, if you lose several hundred
Speaker 1: billion dollars there, you might be able to make it
Speaker 1: up somewhere else. And the question is whether Joe By,
Speaker 1: whether Joe Manchin would stand in the way of some
Speaker 1: of these things. Now, certainly, I think you're gonna have
Speaker 1: a hard time getting fifty Senate votes for some kind
Speaker 1: of a carbon tax, even if it turns into rebates
Speaker 1: for lower income folks. Uh, taxing plastic. You know, I
Speaker 1: could see some Democrats supporting that. That might be a
Speaker 1: harder sell even with the White House. Um and uh.
Speaker 1: But there are these things that seem to be relatively
Speaker 1: low hanging fruit, like these supersized i ra s. There
Speaker 1: are some people with tens of millions of dollars they've
Speaker 1: accumulated in their iras, and you could just say, well,
Speaker 1: we're gonna cap those at five million, and anything over
Speaker 1: that you have to have a distribution and pay taxes
Speaker 1: on it. So some of these things I think could
Speaker 1: very well end up in the package and are a
Speaker 1: little bit more likely to happen than others. We should
Speaker 1: note that even today, when the President was speaking after
Speaker 1: that dismal jobs report came out, he did once again
Speaker 1: repeat the line that he will not raise taxes on
Speaker 1: people who make less than four hundred thousand dollars a year.
Speaker 1: It's something that he continues to uh to talk about,
Speaker 1: what what do the Democrats who are proposing these um
Speaker 1: want this money to pay for? Yeah, so there's you know,
Speaker 1: there's three hundred three point five trillion dollar package of
Speaker 1: social spending um everything from childcare benefits to free community college,
Speaker 1: to expanding Medicare benefits for dental and vision and hearing um.
Speaker 1: There's there's just an enormous array of things that have
Speaker 1: been building up, frankly for decades that Democrats have wanted,
Speaker 1: as well as things like paid sick leave and paid
Speaker 1: family leave and maternity leave and all these things. Well,
Speaker 1: that bill cobbles out to about three point five trillion
Speaker 1: over ten years, which is about a five percent increase
Speaker 1: in federal spending. And you're gonna have to find money
Speaker 1: to pay for it. And it gets if your universe
Speaker 1: of who has to pay for it is people making
Speaker 1: more than four dollars a year. That's not a lot
Speaker 1: of people, but that is a lot of money. And
Speaker 1: you know, I think it's going to be very challenging
Speaker 1: to get it through because those people with the biggest
Speaker 1: pockets on earth can afford a lot of good lobbyists.
Speaker 1: And guess what, a lot of those people are voting
Speaker 1: members of Congress. Steven Dennis, Senate reporter at Bloomberg News,
Speaker 1: running us on the phone from Washington, d C. Steven,
Speaker 1: thank you so much for it taking the time. We
Speaker 1: really appreciate it. Check out his story on the Bloomberg
Speaker 1: Terminal Senate Democrats, I taxes on stock buybacks and excess
Speaker 1: CEO pay. You're listening to Bloomberg Business Week with Carol
Speaker 1: Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes tim's Stenovic on Bloomberg Radio. Well. In the
Speaker 1: current issue of Bloomberg business Week, it's the New City's issue.
Speaker 1: It's Bloomberg business Week magazine. It's available on newsstands and
Speaker 1: at Bloomberg dot com slash business Week. It's an issue
Speaker 1: that is focused on cities in one city that it
Speaker 1: does take a very close look at in an area
Speaker 1: of the city is Seattle, and a Seattle commercial district
Speaker 1: that has undergone trial by virus. The pandemic change the
Speaker 1: heartbeat of urban areas across the US, few more so
Speaker 1: than the Pike Pine Corridor of Seattle's Capitol Hill neighborhood.
Speaker 1: So writes Noah bou Hire, finance reporter for Bloomberg News,
Speaker 1: and he joins us now on the phone from Seattle, Noah,
Speaker 1: for people who haven't been to Seattle or visited this
Speaker 1: particular area of Seattle, the Pike Pine Corridor of Capitol Hill,
Speaker 1: what's it like? Well, it's um, I think what a
Speaker 1: lot of people would imagine as a Biberne at all hours,
Speaker 1: retail arts, commercial district. There's music venues on a restaurant. UM.
Speaker 1: It's not uh, giant buildings, but you've got a lot
Speaker 1: of you know, for six seven eight story UM apartment
Speaker 1: blocks that have retail at the ground floor. So it
Speaker 1: was really the part of Seattle that that that felt
Speaker 1: most city like outside of UM downtown. And what happened
Speaker 1: over the last year is the pandemic took hold and
Speaker 1: commuters started staying home and not going to those restaurants.
Speaker 1: And and then just a few months later, in the
Speaker 1: aftermath of the murder of George Floyd, UM activists took
Speaker 1: to the streets there to demand racial justice. Yeah. So look,
Speaker 1: it was an interesting UM neighborhood to follow for all
Speaker 1: those reasons you just mentioned. UM. You know, a lot
Speaker 1: of the businesses in in this corridor UH were the
Speaker 1: kinds of places that you know, relied on a vibrant
Speaker 1: street life and and and people being able to get together.
Speaker 1: And obviously the pandemic UM made that difficult. And UM,
Speaker 1: the other thing that was interesting about this neighborhood is
Speaker 1: that there are just a ton of UM, smaller businesses.
Speaker 1: So you know, uh, Amazon has one of their Grocery
Speaker 1: Stories stores there. There's a Starbucks reserve roster in the neighborhood,
Speaker 1: so there's some corporate presence, but there were also a
Speaker 1: lot of small, uh scrappy businesses that just had to
Speaker 1: figure it out. UM. And UH you know, with this piece,
Speaker 1: I I followed UM a number of them uh through
Speaker 1: the last year and a half to figure out how
Speaker 1: they did it. Because while you know a number of
Speaker 1: businesses did UM go under during the pandemic, UM, a
Speaker 1: lot managed to get to this point uh through UM
Speaker 1: the generosity of customers, through UM government assistance programs, and
Speaker 1: just a lot of scrappiness that I don't think um
Speaker 1: uh people have fully appreciated. And so No, it's a
Speaker 1: great piece. And one of the reasons why it's such
Speaker 1: a good read is because you did track a group
Speaker 1: of four businesses over the past year and a half.
Speaker 1: And I'm curious. You know, you mentioned the scrappiness of
Speaker 1: the businesses and the business owners, but I'm curious if
Speaker 1: there was a uniting common denominator and how they were
Speaker 1: all able to get through the pandemic. Yeah, that's a
Speaker 1: great question. UM I I really think it is the
Speaker 1: constellation of factors. It was. It was you know, these
Speaker 1: these were established businesses with with loyal customers and UM
Speaker 1: you know, to the extent UH some of them were
Speaker 1: able to do go fund means government assistance, which is
Speaker 1: absolutely key UH programs like the Paycheck Protection Program. Pretty
Speaker 1: much everyone took that money. UM. It was either a
Speaker 1: form of bridge financing or um uh to get them
Speaker 1: to other federal grants or UM or or it was
Speaker 1: the thing itself that that helped get them through UM.
Speaker 1: And then you know, I think another uh under appreciated
Speaker 1: part of this is that, UM we're talking about a
Speaker 1: city where a lot of people have been willing to
Speaker 1: get vaccinated. And even though we've had pretty strong, UM
Speaker 1: strong public health restrictions here in Washington State throughout the pandemic,
Speaker 1: UM people were willing to go back to this neighborhood
Speaker 1: when when those things lifted, because we're talking about a
Speaker 1: city where, you know, seventy five more than seventy of
Speaker 1: UH people twelve and up have have gotten their jobs. Well,
Speaker 1: it's interesting because one of the one of the elements
Speaker 1: of this that really sticks out to me, that really
Speaker 1: caught my attention is the graphical representation of the change
Speaker 1: in weekly visits from nine that are in here charts
Speaker 1: that just show how foot traffic has not returned to
Speaker 1: retail establishments there too, restaurants there even after the vaccine rollout,
Speaker 1: to music venues for example, in some cases restaurant visits
Speaker 1: they're still down even after vaccinations from How are these
Speaker 1: business owners dealing with that? Yeah, that's a that's a
Speaker 1: great question. I do. I do want to highlight that
Speaker 1: the data here is really interesting. We were able to
Speaker 1: get UM foot traffic data on about fifty locations around
Speaker 1: this neighborhood. Most of them were you know, commercial establishments
Speaker 1: and UM I think that data really does show you,
Speaker 1: like you said, that things are a far are far,
Speaker 1: far far from being back to normal. Um. And the
Speaker 1: reason these businesses are still you know, any of these
Speaker 1: owners will tell you things are not back to normal.
Speaker 1: I mean they are. They are still very much in
Speaker 1: the thick of this and we're you know, going into
Speaker 1: the fall when things like outdoor dining are going to
Speaker 1: be harder to do and frankly in Seattle just not
Speaker 1: comfortable because it rains so much here. So I think
Speaker 1: that's a big part of this part of this story
Speaker 1: is that these businesses have been resilient, but they are
Speaker 1: by no means, you know, out of the woods yet
Speaker 1: and so no. One of the stats that caught my
Speaker 1: eyes in the story is that the medium income in
Speaker 1: the city is over one hundred thousand dollars, which, as
Speaker 1: you note, is more than fifty percent higher than the
Speaker 1: national average. I'm curious how important was that factor in
Speaker 1: explaining the resiliency of some of these businesses. I don't
Speaker 1: think it can be understated. Um. Look, there are academics
Speaker 1: who you know, started studying the pandemics effect on small
Speaker 1: business and um, you know, while the lens of of
Speaker 1: this story is one particular neighborhood. What I can say
Speaker 1: is anecdotally, UM, having customers and people who like your
Speaker 1: businesses and supported them, and who were willing to come
Speaker 1: in and spend more money, and who you know, maybe
Speaker 1: kept their jobs throughout the pandemic has just been crucial. Um.
Speaker 1: You know, two of these businesses had had fundraisers and
Speaker 1: they raised tens of thousands of dollars and that was
Speaker 1: just um, completely instrumental to them, you know, being able
Speaker 1: to survive to this point. Yeah, not something that would
Speaker 1: necessarily be possible in other parts of the country where
Speaker 1: the clientele who frequent these places don't have these same
Speaker 1: household incomes and wouldn't necessarily be able to afford, at
Speaker 1: least during a pandemic and during a time of uncertainty,
Speaker 1: to throw money and support throw money at these businesses
Speaker 1: and support them even in difficult times. Noah bou Hire
Speaker 1: is finance reporter for Bloomberg News. Noah, thank you so
Speaker 1: much for joining us. The story is a Seattle Commercial
Speaker 1: Districts trial by virus. Bloomberg tract a group of businesses
Speaker 1: in the Capitol Hill neighborhood for a year and a
Speaker 1: half and were amazed by their resilience. Check it out.
Speaker 1: It's featured in the New City's issue of Bloomberg Business
Speaker 1: Week magazine. It's available on newsstands and at Bloomberg dot
Speaker 1: com slash business Week. You're listening to Bloomberg Business Week
Speaker 1: with Carol Messer and Bloomberg Quick Takes Tim Stinovic on
Speaker 1: Bloomberg Radio. We cannot, Katie Graidfeld, talk enough about crypto.
Speaker 1: Share a bitcoin, I almost said, shares a bitcoin bitcoin
Speaker 1: price higher by eight hundred and thirty four dollars right now.
Speaker 1: That's trading at fifty dollars three hundred and eighty three
Speaker 1: right now. David Knitski is chief executive officer at Kracking Bank.
Speaker 1: Cracking Bank is one of the largest crypto exchanges, with
Speaker 1: over eight million users world ride. They've had approximately one
Speaker 1: point five million new sign ups over the course of
Speaker 1: the second quarter of one. That is why I'm saying
Speaker 1: we cannot talk enough about crypto. David, thanks so much
Speaker 1: for joining us. You were joining us live from Cheyenne, Wyoming,
Speaker 1: where you are based. Katie and I were both talking
Speaker 1: during the breaking We said, Wyoming, Why Wyoming? Tell us why? Yeah? Well,
Speaker 1: Wyoming A pass the first of its kind new regulatory
Speaker 1: license here for a special special purpose depository institution. It's
Speaker 1: a state chartered bank. Uh. And up until now, crypto
Speaker 1: companies have really been round peg square hold into existing
Speaker 1: licenses and regimes that didn't make a ton of sense.
Speaker 1: And we're kind of locked out of the existing banking world. UH.
Speaker 1: So for that reason, we'll bring in the US business
Speaker 1: under a more certain, more formal, and better regulatory regime,
Speaker 1: as well as expanding into new opportunities, new products and markets.
Speaker 1: As you see, everything's converging between crypto, neo bank, spintech,
Speaker 1: traditional and so were we want to be at the
Speaker 1: heart of that market. But you do call yourself a bank, Yeah,
Speaker 1: we are. We are state chartered bank. And so Wyoming
Speaker 1: is interesting obviously has positioned itself to be a crypto hotbed.
Speaker 1: Where does that stand with the rest of the United States?
Speaker 1: Are other states uh moving towards Wyoming? Or is Wyoming
Speaker 1: really an outlier at this point? Wyoming definitely got the
Speaker 1: ball started, but the ball rolling. But a number of
Speaker 1: states have let's say, borrowed liberally from the Wyoming playbook
Speaker 1: and enacted their own version of a similar charter. UH
Speaker 1: And it's provoking federal regulators to take action as well.
Speaker 1: That's kind of the beauty of our republic and our
Speaker 1: system here where states can be uh the laboratories of
Speaker 1: innovation and push things forward faster than the federal government have.
Speaker 1: So it's really been a spark that's moved the whole
Speaker 1: industry forward. David, you say that Cracking will be the
Speaker 1: first United States crypto bank, it's I'm wondering the problem
Speaker 1: that you're you're setting out to solve here, what is
Speaker 1: not being met by traditional finance. Yeah, so in the
Speaker 1: traditional regimes right now, you can either apply for fifty
Speaker 1: state money transmission licenses or you can try and none
Speaker 1: of them have like crypto specific language. They're built for
Speaker 1: like Western unions and fin techs of the world. Uh.
Speaker 1: And then or you could try to pursue a banking license.
Speaker 1: But the federal regulators, the s i C, have been
Speaker 1: inconsistent about that UM and they don't have written moved
Speaker 1: about how they're going to treat crypto UM that has
Speaker 1: a dedicated supervisory and over site manual. We just want
Speaker 1: to know, Hey, this is how we're going to be
Speaker 1: regulated and what our expectations are. And we can meet them.
Speaker 1: So for those reasons, the lack of clarity around some
Speaker 1: of the stuff in other states is really suboptimal. Um
Speaker 1: and banking has been a traditional problem for crypto cracking.
Speaker 1: Is lucky to have a swath of good third party
Speaker 1: banking partners, but there's nothing like vertically integrating, controlling your
Speaker 1: own destiny direct to the FED. And so, David, I've
Speaker 1: always been curious, you know, how do you scale? Obviously
Speaker 1: there are regulatory hurdles, but in terms of the average
Speaker 1: American who maybe only has a passing understanding of what
Speaker 1: bitcoin and what cryptocurrencies are, how do you convince them
Speaker 1: that this is the next uh you know wave of banking,
Speaker 1: This is the next evolution of how you handle money.
Speaker 1: How do you bring that message beyond just the cryptocurrency community. Now, well, one,
Speaker 1: the crypto currency community is growing rapidly, and more and
Speaker 1: more kind of mainstream adopt is taking place. We think
Speaker 1: that's going to continue. So on the one hand, the
Speaker 1: market is coming to us. But on the other hand, yeah,
Speaker 1: this banking license lets us offer online mobile uh checking
Speaker 1: accounts and savings accounts and traditional equities brokerage things like
Speaker 1: that that you know, mainstream America are used to. And
Speaker 1: so if you put that side by side for crypto,
Speaker 1: it's a kind of a great conversion mechanism. You do
Speaker 1: know on Cracking Bank's website that you are not f
Speaker 1: d I c ensured. The money that you put in,
Speaker 1: the crypto you put in is not f d I
Speaker 1: c ensured. Um, explain why that is a little bit
Speaker 1: and and why you think that consumers from who might
Speaker 1: be a little concerned about that should or should not
Speaker 1: be yeah anything, Uh, their advantages to our structure. So
Speaker 1: the way that the the SPDI charter works is we
Speaker 1: are required to be a fully reserved, fully back bank,
Speaker 1: so we maintained we take customer deposits and we keep
Speaker 1: a hundred percent of it in cash, so we don't
Speaker 1: have the types of market or credit risk or insolvency
Speaker 1: risk that the FBI c was meant to protect against.
Speaker 1: So as a result, we're kind of exempt from having
Speaker 1: to apply for that. There is no you know risk
Speaker 1: because we're not lending money out in the mortgage portfolios,
Speaker 1: we're not putting it into we're not even putting the treasury,
Speaker 1: let alone longer duration or riskier instruments, and so quickly David,
Speaker 1: I'm curious. You know, Cracking was the first crypto exchange
Speaker 1: to receive a banking charter, and Cracking, along with Crypto
Speaker 1: Bank of Auntie, have tried to tap into the Federal
Speaker 1: Reserves payment system. Little luck so far, and I'm curious
Speaker 1: whenn't using the FEDS payment system sort of go against
Speaker 1: the spirit of crypto. And David, we just have about
Speaker 1: thirty seconds, but then we're gonna come back with you
Speaker 1: have to readA some news. Yeah. Well, one our our
Speaker 1: mission is to kind of promote the adoption of cryptocurrency
Speaker 1: to enable more financial freedom. One way to do that
Speaker 1: is to get a bridge from the legacy or traditional
Speaker 1: system to crypto, and then once they're in crypto, they
Speaker 1: can take all advantage of the crypto centric kind of
Speaker 1: eat up. Let's get back to David Knitski, CEO at
Speaker 1: Kracking Bank, joining us once again on the phone from Cheyenne, Wyoming. David,
Speaker 1: Kracking Bank, and I should say Crackton was the first
Speaker 1: crypto exchange ever to receive a banking charter. I'm wondering,
Speaker 1: given the increased interest in crypto, the way we do
Speaker 1: see traditional financial institutions starting to embrace it, if you
Speaker 1: expect to get significant competition from the big names in
Speaker 1: banking and even community banks. Yeah, I mean I expect
Speaker 1: more and more to realize the opportunity and coming to
Speaker 1: the market. Um, we welcome them, not particularly concerned about it.
Speaker 1: As you see any news like technology medium, normally it's
Speaker 1: the folks who are kind of that native to that
Speaker 1: medium are the ones that do best. I think it'll
Speaker 1: be pretty challenging for institutions and incumbents to really adopt
Speaker 1: the crypto fully, but I think it does help the
Speaker 1: market more broadly, and I do think the question is
Speaker 1: to find the existing financial industry coming to crypto rather
Speaker 1: than crypto coming to the financial industry. And so I
Speaker 1: want to switch gears and talk about stable coins because
Speaker 1: I'm kind of sessed with them. Uh. For those listening
Speaker 1: who don't know, stable coins are cryptocurrencies that try to
Speaker 1: maintain a fixed exchange rate with another fiat With a
Speaker 1: fiat currency, usually it's the dollar. They try to maintain
Speaker 1: a one to one peg. They've come under a lot
Speaker 1: of scrutiny lately. Uh. Some people might have heard of Tether.
Speaker 1: It's the largest stable coin. It was supposed to be
Speaker 1: back to one for one by US dollars. We learned
Speaker 1: in May that it wasn't that actually holds a ton
Speaker 1: of commercial paper, maybe thirty one billion if you look
Speaker 1: at Tether's market cap. I'm curious what that could look
Speaker 1: like going forward. We know that UM Treasury Secretary Jennet
Speaker 1: Yellen is concerned about stable coins. Some FED policymakers have
Speaker 1: made worried noises as well. I'm curious, David, whether you
Speaker 1: think that we could see regulation in that space. Yeah.
Speaker 1: I always expect regulation in new financial markets, no doubt. UM.
Speaker 1: I think the stable coins are a net U in
Speaker 1: a boon. In fact, the US should love stable coins.
Speaker 1: It is the best way to uh maintain our dollar
Speaker 1: reserve and hegemony uh and for our kind of global
Speaker 1: reach and global economic clouds, and so the U s
Speaker 1: should love stable coins. But we know that the US
Speaker 1: doesn't love stable coins, and you do have banks like
Speaker 1: Barkley's warning that this could raise some really thorny issues
Speaker 1: for the FED. If there is a run on Tether
Speaker 1: people trying to redeem their holdings, that could cause Tether
Speaker 1: to dump commercial paper on mass. And the commercial paper
Speaker 1: market is crucially important to just the functioning of companies.
Speaker 1: So I'm curious what would get the US on board
Speaker 1: if they should love stable coins. Yeah, I mean, look,
Speaker 1: I think that looks it's not surprising that a bank
Speaker 1: would be wary of something that definitely is competitive to it.
Speaker 1: Um And there are certain areas of stable coins that
Speaker 1: you know, could potentially use a little bit more transparency,
Speaker 1: no doubt. And in fact, even teather, which is certainly
Speaker 1: the more questionable ones in the market, like, it's getting
Speaker 1: better and it is definitely changing. It's kind of like
Speaker 1: balance sheet, uh to to these concerns. Um So, I
Speaker 1: do think that's going to change over time, and there's
Speaker 1: going to be more transparency, whether by force or just
Speaker 1: by market dynamics. Um So, I expect that to happen,
Speaker 1: um sooner rather than later. Hey, David, and really have
Speaker 1: a minute left, give us an idea of the type
Speaker 1: of regulation you'd like to see on a federal level
Speaker 1: so we can see these types of charters become more widespread. Yeah.
Speaker 1: So again, like I as I said before, I think
Speaker 1: kind of the framing has been backwards a bit. It's
Speaker 1: not the main question is not how to fit crypto
Speaker 1: in the existing frameworks in financial world today, is how
Speaker 1: to update our financial industry for the economy of the
Speaker 1: future and stay innovative. H and so, what I'd like
Speaker 1: to see is clarity, right so, and lack like less discretion,
Speaker 1: more clarity, defined treatment of crypto assets and expectations in
Speaker 1: terms of compliance, and require and dedicated supervisory and oversight
Speaker 1: programs that understand how crypto works. All right, We're gonna
Speaker 1: have to leave it there. David Knitsky, CEO of Cracking Bank,
Speaker 1: joining us on the phone from Cheyenne, Wyoming. David, thank
Speaker 1: you so much for taking the time. A fascinating conversation, Katie. Um,
Speaker 1: I know we got to get him on our other show,
Speaker 1: Quick Take Stocks, each and every day at noon Eastern
Speaker 1: time at Bloomberg dot com slash quick Take. Yeah, and
Speaker 1: I mean stable coins. They're in almost every cryptocurrency transaction.
Speaker 1: It's the perfect interscction of fixed income with cryptocurrencies. You
Speaker 1: can't ask for anything better. If you're Katie Griffield, you
Speaker 1: can't ask for anything better. I'm brother journal Yeah, but
Speaker 1: you let me drive. Oh no, no, no, all right, please,
Speaker 1: I'll do right. I want to try it the Drive
Speaker 1: to the close down on Bloomberg Radio. It is the
Speaker 1: drive to the close. We're just over ten minutes away
Speaker 1: from the close of trading on this job's Friday, September one.
Speaker 1: Brian Jacobson is joining US now senior investment strategist at
Speaker 1: Wells Fargo Asset Management, six hundred and four billion dollars
Speaker 1: of assets under management. Brian joins us on the phone
Speaker 1: from Milwaukee. We heard an update from Charlie Pellett just
Speaker 1: moments ago about what exactly is happening in the markets
Speaker 1: right now? Stock struggling to find a direction. Uh, the
Speaker 1: SMP five hundred is just down, not even a full point,
Speaker 1: so pretty much flat right now. Well, the NASDAC is
Speaker 1: in the green and the Dow is lower by one
Speaker 1: tenth of one per cent. Brian talked to us a
Speaker 1: little bit about the equity market reaction to today's jobs numbers.
Speaker 1: The US hiring slow sharply amaled a delta variant non
Speaker 1: from perils increasing only two thousand last month, a huge miss.
Speaker 1: Why not a bigger equity market reaction? Well, you know
Speaker 1: that's a good question. When I saw the headline, my
Speaker 1: eye brows went up. Yeah, I said a little bit
Speaker 1: of shock, But you know, when and I think it's
Speaker 1: just because the equity market in resists in general. Are
Speaker 1: looking at the details here, right, that leisure and hospitality
Speaker 1: was very weak, Retail is very weak, and so I
Speaker 1: think people can attribute it mainly to the rise of
Speaker 1: the delta variant, just affecting consumer behavior, maybe potential employee
Speaker 1: behavior that they're not as willing to go in those
Speaker 1: kind of high contact jobs. So there was strengthen the
Speaker 1: manufacturing sector. And so I think that's really the explanation
Speaker 1: is it's still a good number. It's not great, right,
Speaker 1: going from great to good doesn't have to be bad
Speaker 1: when we can attribute. But it was such a big miss.
Speaker 1: I mean, seven thirty three thousand is the survey of
Speaker 1: economists that from Bloomberg. That's what that's what we're looking for. Well,
Speaker 1: that's truly, Yeah, it is an awfully big miss. But
Speaker 1: it is I think, to use the term that the
Speaker 1: FED has really enjoyed using. It looks transitory to the
Speaker 1: extent that the delta variant looks like it might be peaky.
Speaker 1: I think that we could see a nice surge in
Speaker 1: September or October for job creation. Well, it's let's wrap
Speaker 1: that into what we're expecting out of the FED if
Speaker 1: September is a really strong month for the labor market,
Speaker 1: I don't know. In conversations today, it feels like a
Speaker 1: FED September tapering announcement is off the table. I'm curious
Speaker 1: how you think, UH, Federal Reserve policymakers and Jero and
Speaker 1: Pal are looking at today's number knowing that we have,
Speaker 1: for example, enhanced unemployment benefits rolling off just next week. Yeah,
Speaker 1: that is one of the factors that could lead to
Speaker 1: a September urge in hiring, if it's the rolling over
Speaker 1: of delta, the expiration of those enhanced benefits. UH, and
Speaker 1: our position is that we think that the said wasn't
Speaker 1: going to announce spring per se in September, that they
Speaker 1: would actually likely like to tee up capering in September,
Speaker 1: and so ever since the Jackson Hole speech, that's been
Speaker 1: our position is that they would like to see that
Speaker 1: further progress on the labor front, and that likely in September.
Speaker 1: They'll still say that if we continue to see decent
Speaker 1: gains and high inflation, that would be appropriate in the
Speaker 1: next few meetings, which for us then that would mean
Speaker 1: likely in December to actually start caperingber I'm sorry, would
Speaker 1: this be considered a decent gain. Well, I think so.
Speaker 1: I think that they would likely look through this, look
Speaker 1: at the details the s that, you know, it's still
Speaker 1: a decent number on a three month moving average. We're
Speaker 1: not going to get another employment situation report by the
Speaker 1: September one, so they'll look at some of the other data.
Speaker 1: But I don't think they want to uh pooh pooh
Speaker 1: this job's report too much. So I'd like to talk
Speaker 1: a little bit more about tapering regardless of when we
Speaker 1: get the announcement, when tapering actually starts, When the FED
Speaker 1: does start to reduce the pace of its monthly bond buying,
Speaker 1: how do you expect that to play out in markets,
Speaker 1: and particularly the bond market, because theoretically there will be
Speaker 1: less demand for bonds. I would think, just buy the
Speaker 1: laws of supply and demand. That should make yields go higher.
Speaker 1: But you haven't really seen that happen in the wake
Speaker 1: of Pal's Jackson Hole appearance. Well, no, you know, and
Speaker 1: the Fed is a quite price insensitive buyer of bonds
Speaker 1: eight billion a month for treasuries and forty billion a
Speaker 1: month for mortgage backed securities. We also know that we
Speaker 1: have the debt ceiling so maybe issuance isn't quite what
Speaker 1: it will be uh come October, assuming that Congress passes
Speaker 1: a new budget and perhaps with the death ceiling, and
Speaker 1: so we could have those technical factors at play where
Speaker 1: simple supply and demand would suggest that we should likely
Speaker 1: see yields rise, and that's been our position. We are
Speaker 1: expecting to see that, especially on the long end of
Speaker 1: the yield curve, because we know that the said has
Speaker 1: wanted to be somewhat neutral along the curve as far
Speaker 1: as what they're buying, and so we think that we
Speaker 1: could see the ten year treasury move up. We're actually
Speaker 1: more position for the longer and say the thirty year
Speaker 1: to move back above two percent. We're kind of down
Speaker 1: around one point nine five is percent. We think we
Speaker 1: could get back up to uh you know too and
Speaker 1: a quarter maybe two point one five to two and
Speaker 1: a quarter by the end of the year. So a
Speaker 1: pretty decent move from here. Hey, how are you thinking
Speaker 1: about inflation? Because we did see in this report. I
Speaker 1: guess you could say the silver lining was wage growth,
Speaker 1: and I'm wondering how what that signal that sends you
Speaker 1: about potential price increases. In other words, inflation not necessarily
Speaker 1: being transitory, because wages aren't necessarily something that go down. Yeah,
Speaker 1: that is one of the factors I think that could
Speaker 1: play into the Fed's thinking on this, that maybe they
Speaker 1: don't want to uh kind of remove or push out
Speaker 1: the timeline for tapering is that you do see the
Speaker 1: wage growth. Uh. Some economists fear a wage price spiral.
Speaker 1: I personally don't think that that's necessarily always in the data.
Speaker 1: We haven't really seen real wage games, especially for lower
Speaker 1: income workers, for this recovery or over the last few months.
Speaker 1: So if you look at the inflation numbers, those have
Speaker 1: increased faster than what we have seen the wages, especially
Speaker 1: on the lower end of the spectrum. So you know,
Speaker 1: in a way, I think that the FED would be
Speaker 1: kind of welcomes to see that wage game, but you
Speaker 1: don't want it to want to see it jump too
Speaker 1: much to instill fear and investors that you are going
Speaker 1: to see some sort of wage wage price spiral. And so, Brian,
Speaker 1: I'm going to bring up a kind of taboo topic because,
Speaker 1: like you say, inflation is high, we know there's wage pressure.
Speaker 1: If you look at the labor markets, still millions of
Speaker 1: jobs short uh, and the rate of economic growth is slowing,
Speaker 1: So when can we talk about stagflation. Well, I don't
Speaker 1: think we can really get to stag inflation until we
Speaker 1: see negative growth. Um. And it's mainly because the stag
Speaker 1: inflation of the nine seventies, right, you had a double
Speaker 1: digit inflation growth and uh, you know right now we're
Speaker 1: running uh anywhere from three to five percent. So until
Speaker 1: we get above say seven percent with inflation, and if
Speaker 1: we see economic growth rancheting down to something closer to
Speaker 1: maybe one percent real, I don't think that stag inflation
Speaker 1: is appropriate. It's more about reflation. So you have the
Speaker 1: higher inflation, but you still have a reco free pace
Speaker 1: of economic growth. And that's why I think that the
Speaker 1: equity markets can still remain fairly attractive. You have low yields, Yes,
Speaker 1: you have high inflation. Hopefully it's transitory, but there is
Speaker 1: still decent growth. Going from great growth to good growth
Speaker 1: doesn't have to be bad. Brian Jacobsen, we're gonna have
Speaker 1: to leave it there. Thank you so much for taking
Speaker 1: the time and joining us on Bloomberg Business Week. Brian
Speaker 1: senior investment strategist at Wells Fargo Asset Management. More than
Speaker 1: six hundred billion dollars in assets under management. He joins
Speaker 1: us on the phone from Milwaukee. Thanks for listening to
Speaker 1: Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or
Speaker 1: Bloomberg dot com, and you can also listen to our
Speaker 1: radio show at two pm Eastern on Bloomberg Radio or
Speaker 1: watch us on YouTube search Bloomberg Global News.