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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether you're at the grocery store

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Speaker 1: or the trading floor. Find the Bloomberg p m L

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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now,

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Speaker 1: we've got Justin Sink also out of our DC bureau,

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Speaker 1: and Justin you're covering the president and you know, we've

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Speaker 1: talked to us briefly about his planned trip to Puerto Rico.

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Speaker 1: When he gets there, he's not is he gonna find

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Speaker 1: any love? Well, I think that's a big question. Obviously,

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Speaker 1: the White House is depicted. Um, the response to the

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Speaker 1: storm is more than adequate, they've said, you know, they

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Speaker 1: think that, Uh, it's been a kind of unprecedented response

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Speaker 1: in terms of military personnel and getting supplies down there.

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Speaker 1: We've seen a lot of stories from the ground that

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Speaker 1: suggests that and heard from the mayor of San Juan

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Speaker 1: to suggest that there's a lot of frustration the things

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Speaker 1: still aren't great there, that food and water aren't getting

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Speaker 1: to people that need it. That power is still not

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Speaker 1: on and so uh we are. I think that's going

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Speaker 1: to be the big question coming out of tomorrow is

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Speaker 1: what kind of reception he receives um and how far

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Speaker 1: he goes. It's possible that the president schedule just leaves

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Speaker 1: him kind of on a military base where he's unlikely

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Speaker 1: to face some of the criticism. But if he does

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Speaker 1: decide to go out some of the more storm ravaged areas,

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Speaker 1: it's a real question of how people are going to respond,

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Speaker 1: you know. Justin I'm really struck by the normal playbook

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Speaker 1: that we normally have when there are tragedies. And this

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Speaker 1: of course is relevant to the comments that we are

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Speaker 1: waiting from President Trump imminently about the Las Vegas shooting. Normally,

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Speaker 1: presidents come out and they say, oh, what a horrible catastrophe.

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Speaker 1: We will do everything in our power to make things

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Speaker 1: as better as we can for the surviving victims. Whether

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Speaker 1: it's in Puerto Rico, we have, you know, doubling down

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Speaker 1: all of our efforts. Our line is open, call us.

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Speaker 1: We want to hear from you. We want to figure

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Speaker 1: out how to go go forward in a better and

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Speaker 1: bigger way go you know, in the future. This is

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Speaker 1: this is so out of the norm to basically try

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Speaker 1: to attack people and spin the picture in the process.

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Speaker 1: Am I wrong? No? I think I think you're right.

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Speaker 1: The presidents of both parties have really tried to play

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Speaker 1: that consoler in chief role, you know, um, in the

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Speaker 1: light of tragedy, whether it's President Bush going down to

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Speaker 1: Katrina after We're going down to New Orleans after Katrina

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Speaker 1: and Jack Parking and trying to harness that moment, even

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Speaker 1: though obviously I think um it ended up being a

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Speaker 1: situation the damage is presidency. Uh. You mentioned Las Vegas,

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Speaker 1: and I think some of the most memorable moments President

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Speaker 1: Obama's term were has response him actually in events the

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Speaker 1: church and Charleston being maybe at the top of that list.

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Speaker 1: And Uh, it's not a role that that President Trump

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Speaker 1: has really had to confront until the last couple of weeks,

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Speaker 1: and it's one where he seems a little uncomfortable. I

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Speaker 1: think that this is um, somebody who is throughout his

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Speaker 1: political career found um some of the most success in

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Speaker 1: in rallying his core supporters and outraging UM some of

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Speaker 1: his critics. And and that's an approach that is different

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Speaker 1: from what many presidents have taken. At times where you

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Speaker 1: might see them try to, I think, bring together a

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Speaker 1: national unity. And so it might be a reflection of

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Speaker 1: Donald Trump, of a changing political climate, of different expectations

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Speaker 1: among Americans. But it's going to be very interesting to

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Speaker 1: see how he tried to navigate the speech coming up

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Speaker 1: in a couple of minutes. But also, uh, is that

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Speaker 1: it's Puerto Rico tomorrow. So justin just sticking Puerto Rico,

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Speaker 1: I'm trying to get a sense of just how much

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Speaker 1: of a humanitarian disaster it is and where the US

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Speaker 1: troops and other first responders are in in uh, in

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Speaker 1: dealing with what's going on. I mean power has been

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Speaker 1: restored to a lot of people, right, I mean are

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Speaker 1: we out of the danger zone? I don't think we're

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Speaker 1: quite out of the danger zone yet. And the reason

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Speaker 1: that I say that is that, well, you know, there

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Speaker 1: has been measurable progress throughout much of the island. There

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Speaker 1: are still hospitals that aren't fully online. Um, there are

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Speaker 1: still remote areas of Puerto Rico where we don't have

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Speaker 1: great visibility into both what has already happened and the

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Speaker 1: current status. Uh. But things are getting better uh day

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Speaker 1: to day. And so I think one of the big

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Speaker 1: kind of outstanding questions is what is the extent of

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Speaker 1: the damage since we don't have full communications, since we

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Speaker 1: haven't been able to clear all the roads and get

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Speaker 1: to everywhere. Um, you know, we have a sense of

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Speaker 1: the major population centers starting to it into recovery mode,

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Speaker 1: but I think especially in remote rural areas and areas

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Speaker 1: where communications continue to be a real issue. UM, we

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Speaker 1: just don't have a size or or scope of of

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Speaker 1: what this sort of damage is yet. You know, justin

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Speaker 1: I'm struck by the notion that there may be a

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Speaker 1: connection between the damage that the commonwealth faces and economic

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Speaker 1: decisions that were made years hence in the sense that

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Speaker 1: you know, if you're not able to continually upgrade and

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Speaker 1: strengthen and bolster your infrastructure and to take account of

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Speaker 1: new information such as weather patterns and so on, Uh,

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Speaker 1: then you're faced with what the what has happened in

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Speaker 1: Puerto Rico. Is there any way that in the rebuilding

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Speaker 1: that takes place, it can be framed in such a

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Speaker 1: way that it would actually lead to something positive for

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Speaker 1: the future not only of the island itself, but of

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Speaker 1: the way the economy works. Yeah, So I think there's

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Speaker 1: two elements. This one is the sort of rebuilding of

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Speaker 1: the infrastructure on the island, and something that Trump administration

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Speaker 1: officials are really emphasized as they are sort of rebuilding

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Speaker 1: the power grid, which is going to be a huge

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Speaker 1: undertaking UM. As they're rebuilding utility services like the sort

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Speaker 1: of water and sewage systems, they're going to try to

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Speaker 1: future proof those in a way that UM makes them

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Speaker 1: less susceptible to the type of damage that we saw

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Speaker 1: the after method that's hurricane. So that's going to be

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Speaker 1: hopefully positive for the people of Puerto Rico as they

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Speaker 1: confront future tropical storms. UH. The second part of this

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Speaker 1: is the trickier part, which is that there's still tens

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Speaker 1: of billions of dollars of debt that hangs over the

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Speaker 1: island's government and that's the problem that's only going to

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Speaker 1: get worse as they try to grapple with UM an

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Speaker 1: economy that's going to be as devastated as everything else

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Speaker 1: on the island. UM. So a big outstanding question is

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Speaker 1: whether cong steps in and provides any sort of bailout

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Speaker 1: to help the island UM get from under that you know,

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Speaker 1: economic news that has really prevented them from doing the

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Speaker 1: sort of maintenance and upgrades that that we've seen in

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Speaker 1: other states. So far, we haven't seen a big movement

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Speaker 1: for that on Capitol Hill. But it's justin let let

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Speaker 1: me just break in because it makes me think, is

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Speaker 1: there a possibility that the Republicans would take this as

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Speaker 1: an opportunity and therefore, because you know, one of the

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Speaker 1: issues has always been if you were to in some

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Speaker 1: way smooth the path for Puerto Rico to become part

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Speaker 1: of to become a state, that would tilt the balance

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Speaker 1: in the Senate, and uh, is this an opportunity for

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Speaker 1: the Republicans to maybe gain if they seize the moment. Well,

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Speaker 1: it's it's tricky politics for sure. The statehood um issue

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Speaker 1: is not something that we've seen a lot of traction

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Speaker 1: on here in Washington, and I would be very surprised

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Speaker 1: if that was now come. But it is going to

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Speaker 1: be tricky to navigate, I think for politicians on both

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Speaker 1: sides of this, because a lot of Puerto Ricans who

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Speaker 1: are displaced by storm are going to end up moving

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Speaker 1: to the Continental US where they can vote just like

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Speaker 1: any other American citizen and make their voices heard. But

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Speaker 1: a lot of that it's likely to happen in Florida,

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Speaker 1: where a big influx influx into a state that has

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Speaker 1: historically been a swing state kind of fifty fifty Republican Democrat,

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Speaker 1: uh could really be impacted by tens or hundreds of

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Speaker 1: thousands of people moving there, and they if they are

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Speaker 1: upset by the government's handling of of the storm, that

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Speaker 1: could really create um some political trouble for Republicans. Similarly,

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Speaker 1: if Democrats aren't seen as responsive enough here or in

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Speaker 1: some way holding up the relief effort, then you know,

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Speaker 1: can swing back the other way. But I think a

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Speaker 1: lot of politicians are sort of attuned to the political

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Speaker 1: consequences of what's happened, justin Do you have a sense

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Speaker 1: of the response overwhelmingly in Puerto Rico, because we've seen

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Speaker 1: some conflicting reports out the governor trying to make peace

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Speaker 1: up between the mayor of San Juan and President Trump,

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Speaker 1: others saying look, we have a ways to go, trying

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Speaker 1: to saying kumba ya. Is that the mood among the

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Speaker 1: residents or are they even following this because I know

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Speaker 1: internet has been down, yeah, exactly. So it's it's hard

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Speaker 1: to get a real sense um of what sentiment on

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Speaker 1: the island is both because uh, communications have been difficult,

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Speaker 1: but also I think the primary concern for most of

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Speaker 1: the people in Puerto Rico is can I get somewhere

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Speaker 1: that the air conditioned. Can I get food and clean

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Speaker 1: water and sort of the basic services that people need

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Speaker 1: to to stay alive and live their lives. Can I

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Speaker 1: start rebuilding my business? So uh, it's not clear how

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Speaker 1: engaged um the sort of everyday people of Puerto Rico

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Speaker 1: are and this sort of back and forth spat that

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Speaker 1: we saw over the weekend, But you know, the governor's

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Speaker 1: comments are indicative of I think a politician who knows

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Speaker 1: that massive federal aid is going to be needed and

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Speaker 1: that is going to be distributed through the White House

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Speaker 1: in some way. And so even if I think the

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Speaker 1: governor might be sensing frustration among um, the constituents in

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Speaker 1: Puerto Rico or be a little uh starting to get

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Speaker 1: agitated with the federal response, there is sort of a

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Speaker 1: strategic advantage and keeping uh that sort of come by

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Speaker 1: a spirit together because it's gonna be a long rebuilding process.

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Speaker 1: Justin is that is that a contrast to what would

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Speaker 1: happen to a state versus being a commonwealth that you

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Speaker 1: would go directly to the president rather than if you

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Speaker 1: were a state and you had a coalition or a

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Speaker 1: group of colleagues in the Senate in the House. Well,

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Speaker 1: I mean, I think you bring up an important point,

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Speaker 1: which is that, um, you know, one Florida or Texas

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Speaker 1: were hit by the massive hurricanes. They do have to

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Speaker 1: sort of rely on the federal government for aide, but

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Speaker 1: that they have both a state government that is more

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Speaker 1: equipped to borrow money to help with recovery efforts that

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Speaker 1: sort of thing, and they have a congressional delegation of

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Speaker 1: at least you know, well two senators and at least

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Speaker 1: one member of the House of Representatives that can be

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Speaker 1: sort of forceful advocates for them in Washington, and whose

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Speaker 1: colleagues have to interact with them and count on them

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Speaker 1: and need their votes for a whole range of things. Well,

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Speaker 1: when we call upon Mark Gilbert are Bloomberg gad Fly columnists,

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Speaker 1: we want to know one thing, what is the aftermath

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Speaker 1: of the vote in Catalonia, the northeastern region of Spain,

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Speaker 1: where the Spanish government from Madrid did just about everything

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Speaker 1: they could think of in order to prevent the vote

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Speaker 1: from taking place, What went on and what should we

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Speaker 1: take away? Everything went wrong? I mean, they've had three

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Speaker 1: years of notice that that Catalonia was was was heading

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Speaker 1: for an independence vote. They could have diffused it. They

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Speaker 1: could have granted more independence. Economically to Catalonia, it's it's

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Speaker 1: the country's richest region. It contributes about a fifth of

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Speaker 1: the economic output. And yet Prime Minister Mariano RADIOI he's

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Speaker 1: done just about everything wrong. And those those YouTube videos

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Speaker 1: that we're seeing today of police using rubble bullets and

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Speaker 1: batons against the ordinary people who are voting. It's just

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Speaker 1: terrible for for the country, you know. Just there was

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Speaker 1: one image that really stuck out to me when I

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Speaker 1: was looking at the videos and pictures of a woman,

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Speaker 1: an elderly woman with gray hair, with blood coming down

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Speaker 1: her face, after getting into an altercation with the police

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Speaker 1: for voting allegedly illegally, because the Spanish government said that

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Speaker 1: this was not illegal vote. I'm just wondering what's the

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Speaker 1: path ahead. And markets seem incredibly sanguine given the amount

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Speaker 1: of turmoil now. Well even last week, the bookmakers odds

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Speaker 1: were putting the chances of a vote in favor of

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Speaker 1: independence between eighty and but that's largely because of turnout.

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Speaker 1: So they're about five million eligible voters in Catalonian, of

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Speaker 1: whom two point three million actually turned out, and of

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Speaker 1: whom two million backed independence. So you've got about voting

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Speaker 1: in favor of independence, but only on a turnout of

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Speaker 1: a bit more than forty. So the vote in terms

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Speaker 1: of claiming to be the will of the people, that's

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Speaker 1: tricky because a lot of those who oppose independence didn't

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Speaker 1: turn out. They take the government's view that this is

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Speaker 1: an illegitimate vote on the Spanish constitution um and surely

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Speaker 1: didn't turn out there. But you know, it's never a

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Speaker 1: good look on you, honestly, Mark, I mean in the US, honestly,

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Speaker 1: turnout isn't usually all that much more than that, frankly

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Speaker 1: for elections, which shouldn't be necessarily a model. But it's

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Speaker 1: pretty amazing that nearly half of the population voted in

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Speaker 1: this illegal referendum, according to the Spanish government, and then

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Speaker 1: the violence sort of sets up ongoing and escalating tension

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Speaker 1: going forward. Now it does, but the turnout matters for

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Speaker 1: something as momentous as seceding, And let's bear in mind

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Speaker 1: Catle only has debts of about six billion euros. The

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Speaker 1: Spanish country as a whole as debt of about one

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Speaker 1: point two trillion euros. So not only will catalonly have

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Speaker 1: to take on a chunk of that debt, as I said,

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Speaker 1: it accounts for about a fifth of economic output, so

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Speaker 1: on on a competitive basis, it would end up with

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Speaker 1: about a fifth of those debts. The European Union says

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Speaker 1: it won't be part of the EU even if it

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Speaker 1: man it's the succeed so it will be out there

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Speaker 1: on a limb. It would make Brexit look like a

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Speaker 1: walk in the park. And so the turnout really does

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Speaker 1: matter for something as momentous as a readion of Spain

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Speaker 1: seceding from the country as a whole. And the problem

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Speaker 1: is that the government has wanted the problem to go away.

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Speaker 1: It kind of wish they would go away. Now it's

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Speaker 1: on its doorstep. It's not really clear where roy can

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Speaker 1: turn next. Our investors expressing their doubts by pulling money

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Speaker 1: from the stock market. I'm just looking at a chart

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Speaker 1: of the I becks thirty five and if you go

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Speaker 1: back to the beginning of May of of the year,

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Speaker 1: you were looking at well, you know, a peak, right,

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Speaker 1: so over eleven thousand but now we're down almost eight

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Speaker 1: percent and it has been a steady decline. Is that

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Speaker 1: an expression that investors are saying, look, I'm really not

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Speaker 1: interested in adding more capital, so the prices are getting cheaper.

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Speaker 1: The benchmark stock index is down about two percent today,

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Speaker 1: whereas the rest of Euros benchmark indexes are up. In

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Speaker 1: the past month, the IBEX index is underperformed the stock

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Speaker 1: six hundred, the benchmark for the Aurozone, by about four percent,

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Speaker 1: so clearly it's having an effect. A couple of the

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Speaker 1: Barcelona based banks are down about five percent or so today,

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Speaker 1: Kaiser Bank, Banco Sabadel. They're being hit the worriors that

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Speaker 1: you can end up with a general strike in Catalonia

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Speaker 1: um and I think that some of the secessionists are

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Speaker 1: threatening to call a general strike in the idea is

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Speaker 1: if if, if, if we're in favor independence, then forty

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Speaker 1: percent not turn up for work, and again with the

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Speaker 1: reason contributing a fifth of Spanish economic output. You know

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Speaker 1: there's a nascent economic recovery in Spain, unemployment down, but

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Speaker 1: the last thing it needs as a general strike in

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Speaker 1: this kind of this kind of strife going on, investors

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Speaker 1: have have punished the bonds as well. A ten year

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Speaker 1: yields up about time basis points, but it's down from

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Speaker 1: where it was earlier this year, so there's not a

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Speaker 1: sense of panic. There's not really a sense of crisis,

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Speaker 1: and investors have known this was coming for for for

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Speaker 1: a couple of weeks now um, but there's definitely a

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Speaker 1: feeling that this could turn nasty um and that Prime

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Speaker 1: Minister Marini a ra high has got to do something.

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Speaker 1: He's gonna have to offer some kind of olive branch

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Speaker 1: otherwise you can end up with this general strike and

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Speaker 1: that would be economically very damaging to the region and

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Speaker 1: to the country. Hey, Mark, when when do you think

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Speaker 1: you're gonna start to get to those analysts reports to

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Speaker 1: talk about how there's some value out there because these are, yes,

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Speaker 1: there are social and political events. They turned violent. They

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Speaker 1: make great headlines, and we feel for the people without,

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Speaker 1: you know, with physical injury and all that. But as

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Speaker 1: an investor, you know your job is supposed to be

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Speaker 1: able to find those things that other people have dropped

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Speaker 1: or have neglected because they are swayed or they are

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Speaker 1: manipulated by fear or or things that may not be

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Speaker 1: a long term positive. What you've sensed that at all,

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Speaker 1: And I'm sorry if you're taking so long, give you

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Speaker 1: about ten seconds or so. Now, Well, the in the

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Speaker 1: broader market, the euros down as well today. Now that

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Speaker 1: could be partly dullar strength, but it's definitely part of

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Speaker 1: the sentiment. Look, we saw the German election with the

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Speaker 1: populous DAFD winning some of the votes. That comes after

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Speaker 1: Macrome won the French election. This is populism in Spain.

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Speaker 1: It's a reminded. Look, we've got Italian elections coming up

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Speaker 1: at some point. It's a reminder of the political landslape

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Speaker 1: in Europe is not completely settled, even after Macrome won

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Speaker 1: the French presidency. It's a reminder of the risks. There

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Speaker 1: is it a buying opportunity? Well, I mean, what is

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Speaker 1: there Is there a particular company, let's say in Spain,

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Speaker 1: because you know, just because it's in Spain doesn't mean

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Speaker 1: it just has a Spanish market. I think for example

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Speaker 1: of Iberdrola, And I mean you have very large companies

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Speaker 1: that are financials. I was looking at earlier. We Banko

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Speaker 1: San Sanderia is one of it's one of the biggest.

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Speaker 1: You say, you know, maybe this is you know, people

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Speaker 1: that have been looking to get into equities. You know,

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Speaker 1: if there was a catastrophe the United States, God forbid,

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Speaker 1: then you know you look at the same kind of thing. Listen,

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Speaker 1: the Eurozone economic revival is here, it is real. The

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Speaker 1: p m I is the Purchasing Manager indexes have been

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Speaker 1: rebounding for Europe all this year. European central banks about

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Speaker 1: to take its photoph the accelerator, but it's not quite

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Speaker 1: there yet. European stocks have been have been performing well. Um,

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Speaker 1: and this is this is a hic up, but it

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Speaker 1: is a reminder that the political backdrop to the whole

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Speaker 1: European Union project, Brexit notwithstanding, is still not set in stone,

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Speaker 1: and there could still be my steps ahead. You know,

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Speaker 1: I have to say I would take the other view. Frankly,

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Speaker 1: PIM is that you're saying there could be buying opportunities,

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Speaker 1: but there isn't that much selling. And perhaps the reason

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Speaker 1: why there isn't so much selling is because investors really

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Speaker 1: are looking at this and saying it's just a hiccup.

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Speaker 1: This has all been smoothed out in the past, even Brexit.

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Speaker 1: Yes we've seen consequences, but it hasn't been that serious.

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Speaker 1: Even the ten year treasure ten year yields in Spain.

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Speaker 1: It went up not tremendously. People don't seem that worried,

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Speaker 1: and perhaps it's because it's never been paid off to

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Speaker 1: to be too worried about some of these political events,

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Speaker 1: right well. I think that this one is particularly pressing

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Speaker 1: because of the implications for what it says about populism

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Speaker 1: in Europe, which you know, investors thought was off the

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Speaker 1: table with the election of Macron in France, which has

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Speaker 1: come back with the German election a few weekends ago.

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Speaker 1: This reminds people that in Italy, which is the really

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Speaker 1: sort of the the core of of of the problem

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Speaker 1: of the Eurozone and its political issues, Italy still has

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Speaker 1: a five Star movement which is doing well in the polls,

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Speaker 1: which is still anti the euro and at some point

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Speaker 1: they're going to be an election in Italy. I think

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Speaker 1: that it's a reminder that that maybe the political backdrop

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Speaker 1: you're investing against is not too settled as as it

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Speaker 1: looked even a few weeks ago. Mark Gilbert, thank you

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Speaker 1: so much for your insights. Mark Gilbert is a Bloomberg

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Speaker 1: gad Flight columnists covering asset management and debt markets. Talking

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Speaker 1: about the Catalonia independence referendum and the ongoing turbulence that

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Speaker 1: has that it has engendered. I want to bring in

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Speaker 1: Chris Mackie now. He is the founder of Solution Nomics,

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Speaker 1: based in New York, and it is a platform described

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Speaker 1: as being dedicated to developing and disseminating return on investment

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Speaker 1: based corporate tax policy. Chris Mackie, thank you very much

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Speaker 1: for being with us. A former contributed to the Federal

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Speaker 1: Reserve Beije book. Uh your topic, and I want you

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Speaker 1: to expand if you can, though, because tax reform is

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Speaker 1: you know, it can lead you down a rabbit hole.

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Speaker 1: But specifically, what is the the US administration trying to

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Speaker 1: do with the relationship between US corporations, what they earned overseas,

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Speaker 1: how much tax they should pay, and how to get

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Speaker 1: as much of that money back to the United States

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Speaker 1: as possible. Well, good morning, it's a pleasure to be

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Speaker 1: with you. What they are trying to do is, and

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Speaker 1: this is their broader perspective in their entire proposal is

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Speaker 1: they're trying to stimulate job growth and higher wages. And

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Speaker 1: one of the theories is that if we lower the

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Speaker 1: tax rate on the earnings from overseas, that will entice

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Speaker 1: companies to use that cash to create more jobs in America.

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Speaker 1: And well, I commend the Republicans for undertaking a reform

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Speaker 1: of the tax code. That the problem is it's actually

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Speaker 1: not a reform, it's just more of the same. It's

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Speaker 1: let's lower the tax rates more unconditionally, which means that

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Speaker 1: whether or not those the foreign or in profits create

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Speaker 1: jobs in America, the tax rates will go down. Now

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Speaker 1: there's an alternative, which is to say, when companies increase

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Speaker 1: American employment and when they increase American wages, then we'll

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Speaker 1: have lower tax rates. And that's what we mean by

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Speaker 1: an r o I based tax policy. But Chris, I

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Speaker 1: wonder how much of this is a rhetorical exercise. And

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Speaker 1: so many companies pay a lower tax rate, they probably

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Speaker 1: pay more in line with where the government would like

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Speaker 1: to cut the taxes due to all of the deductions

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Speaker 1: and other engineering that accountants do. So to me, I mean,

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Speaker 1: is this just you know, you could say, you know what,

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Speaker 1: what sounds better if you use it on a stump speech,

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Speaker 1: but in reality, the plan is just to try to

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Speaker 1: simplify things, uh, you know, to to get things into

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Speaker 1: a more kind of understandable level. Well, you bring up

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Speaker 1: a very good point, because the effective tax right, the

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Speaker 1: tax rate that companies have paid on average since two

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Speaker 1: thousand has actually been nineteen and a half percent, So

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Speaker 1: that's already below the statutory right. Now, the devils in

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Speaker 1: the details and whether or not they eliminate all of

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Speaker 1: the deductions that are currently out there that get companies

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Speaker 1: down to nineteen and a half percent. But regardless of

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Speaker 1: what they do with the rate, if they don't tie

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Speaker 1: each company's tax rate to each company's rate of job

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Speaker 1: creation and wage level, it won't be real reform. It

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Speaker 1: will be just a continuation of a hope based policy.

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Speaker 1: Well but hold on a second, Chris, because if you

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Speaker 1: start to single out companies and start to evaluate what

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Speaker 1: job creation means, what individual companies sort of contribution to

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Speaker 1: the U. S. Economy is, this starts to look a

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Speaker 1: little more subjective and could end up being uh, somewhat

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Speaker 1: counter to sort of the spirit of capitalism. Now, oh no,

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Speaker 1: absolutely not. It is the embodiment of capitalism. It is

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Speaker 1: a merit based approach. I mean, you know, you know

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Speaker 1: we're talking about overseas profits. Well, that's you know, subjective,

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Speaker 1: whether or not the profits were how much the profits

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Speaker 1: were overseas or sys domestics. So the solution i'mics approaches. Look,

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Speaker 1: rather than haggling over winnowing profits in the US versusan

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Speaker 1: tax havens, let's actually focus on the job creation. Mean, look,

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Speaker 1: these companies already know how many people they're hiring, how

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Speaker 1: many people they're firing, they know the wages of their pain.

432
00:24:27,359 --> 00:24:30,080
Speaker 1: So we've already got the information. So it's just a

433
00:24:30,119 --> 00:24:34,680
Speaker 1: matter of using that information in creating a merit based

434
00:24:34,800 --> 00:24:38,000
Speaker 1: tax policy. You know, the Republicans talk about a postcard

435
00:24:38,040 --> 00:24:41,520
Speaker 1: for the individual tax fair, Well, we're proposing a postcard.

436
00:24:41,560 --> 00:24:44,080
Speaker 1: So you just have four metrics. You score each company

437
00:24:44,080 --> 00:24:48,440
Speaker 1: on those four metrics, and that determines their tax rate. Okay,

438
00:24:48,560 --> 00:24:50,600
Speaker 1: so can we I just want to get a bigger

439
00:24:50,880 --> 00:24:54,359
Speaker 1: sense here, because let's just get you know, scrub away

440
00:24:54,440 --> 00:24:57,400
Speaker 1: some of the phography can and say, all right, let's

441
00:24:57,400 --> 00:24:59,680
Speaker 1: just pretend for a minute that all the companies really

442
00:24:59,680 --> 00:25:01,399
Speaker 1: want to do and all the government really wants to

443
00:25:01,400 --> 00:25:03,960
Speaker 1: do is help them get the money that's now uh

444
00:25:04,280 --> 00:25:07,600
Speaker 1: is sitting in accounts overseas back to the United States.

445
00:25:08,080 --> 00:25:10,879
Speaker 1: What would be the most effective way to make that happen?

446
00:25:10,920 --> 00:25:13,840
Speaker 1: Because let's forget about time frames. What would what would

447
00:25:13,880 --> 00:25:17,200
Speaker 1: they need to do to make that happen? Do you think? Well,

448
00:25:17,240 --> 00:25:19,720
Speaker 1: first of all, the objective is not to get the

449
00:25:19,760 --> 00:25:22,400
Speaker 1: money back to the United States. The objective is to

450
00:25:22,400 --> 00:25:26,199
Speaker 1: get them to increase hiring and higher wages. So you

451
00:25:26,200 --> 00:25:29,760
Speaker 1: could have two companies they could both bring the profits back.

452
00:25:29,920 --> 00:25:32,040
Speaker 1: No, No No, I understand that. I understand that. But I'm

453
00:25:32,080 --> 00:25:35,040
Speaker 1: just asking what would let's be you know, I want

454
00:25:35,080 --> 00:25:38,960
Speaker 1: to be as a cynical as possible here. What what

455
00:25:38,960 --> 00:25:41,760
Speaker 1: what would be the way to get it back quickly? Oh?

456
00:25:41,800 --> 00:25:43,520
Speaker 1: The way to get it back quickly is to say, look,

457
00:25:43,560 --> 00:25:45,439
Speaker 1: the more jobs that you create in America and the

458
00:25:45,480 --> 00:25:47,880
Speaker 1: higher wages you pay, we're going to lower your tax

459
00:25:47,960 --> 00:25:51,120
Speaker 1: rate on those foreign earned profits you do. That will

460
00:25:51,160 --> 00:25:54,119
Speaker 1: lower the rates. Chris Mackie, thank you so much for

461
00:25:54,200 --> 00:25:56,359
Speaker 1: joining us. Chris mackey is a founder of Solution Omics,

462
00:25:56,840 --> 00:26:00,159
Speaker 1: which is based in New York, and also a contributor

463
00:26:00,200 --> 00:26:01,879
Speaker 1: to the Beige Book, so he has a good handle

464
00:26:02,240 --> 00:26:05,800
Speaker 1: on the US economy. Talking about what has been proposed

465
00:26:06,000 --> 00:26:09,000
Speaker 1: with respect to the tax code and what Chris would

466
00:26:09,000 --> 00:26:11,760
Speaker 1: like to see, which is uh, some kind of merit

467
00:26:11,800 --> 00:26:14,880
Speaker 1: based tax rate based on how many jobs you create

468
00:26:14,960 --> 00:26:29,480
Speaker 1: for the US. Here with us is Lily Kat's, a

469
00:26:29,560 --> 00:26:33,359
Speaker 1: fintech reporter for Bloomberg News who wrote a couple of

470
00:26:33,400 --> 00:26:36,080
Speaker 1: fascinating pieces in the past few days. First of all,

471
00:26:36,119 --> 00:26:38,199
Speaker 1: I want to talk about overstock dot Com, which I

472
00:26:38,240 --> 00:26:41,080
Speaker 1: think of when I was looking for bunk beds for

473
00:26:41,200 --> 00:26:44,440
Speaker 1: my kids and I saw a lot of overstocked items

474
00:26:44,480 --> 00:26:47,280
Speaker 1: that they were selling. Um. I think of this as

475
00:26:47,320 --> 00:26:50,840
Speaker 1: a sort of discount online retailer. I do not think

476
00:26:50,880 --> 00:26:55,200
Speaker 1: of this as a cyber currency provider, and yet that

477
00:26:55,359 --> 00:26:57,280
Speaker 1: is what's fueling it's returns right now. Can you can

478
00:26:57,320 --> 00:26:59,639
Speaker 1: explain a little bit. Yeah, it's pretty interesting. You know,

479
00:26:59,760 --> 00:27:03,800
Speaker 1: first Stock actually got into the cryptocurrency blockchain space back.

480
00:27:05,200 --> 00:27:07,320
Speaker 1: They were one of the first, if not the first

481
00:27:07,440 --> 00:27:12,440
Speaker 1: retailer to start letting people buy stuff online with cryptocurrencies.

482
00:27:12,720 --> 00:27:14,800
Speaker 1: And so they first started letting people use bitcoin to

483
00:27:14,880 --> 00:27:16,879
Speaker 1: buy you know, that bunk bett you might want to

484
00:27:16,880 --> 00:27:21,720
Speaker 1: purchase for your kid. Um. And they also inteen started

485
00:27:21,760 --> 00:27:25,880
Speaker 1: this initiative to develop blockchain technology. They called it Medici

486
00:27:25,960 --> 00:27:30,399
Speaker 1: Ventures and Medici Uh. The main part of Medici is

487
00:27:30,440 --> 00:27:33,400
Speaker 1: this other business called t zero, which I think includes

488
00:27:33,440 --> 00:27:36,080
Speaker 1: as it includes a fintech company and two broker dealers

489
00:27:36,280 --> 00:27:39,800
Speaker 1: and UM recently, the most recent exciting news that they've

490
00:27:39,800 --> 00:27:44,120
Speaker 1: announced is that they're starting a cryptocurrency exchange to actually

491
00:27:44,520 --> 00:27:50,880
Speaker 1: let people buy and sell different cryptocurrencies, so I they

492
00:27:51,200 --> 00:27:54,359
Speaker 1: Other than that, they've also started letting people pay with

493
00:27:54,480 --> 00:27:58,640
Speaker 1: other cryptocurrencies aside from Bitcoin on their website. So yeah,

494
00:27:58,640 --> 00:28:00,760
Speaker 1: it's pretty interesting to see a re tailor in in

495
00:28:00,760 --> 00:28:03,360
Speaker 1: this space, right. You know, I'm not going to make

496
00:28:03,400 --> 00:28:06,720
Speaker 1: you do the definition thing because it always goes over

497
00:28:06,760 --> 00:28:09,159
Speaker 1: my head. Anyway. I want to know, though, if you

498
00:28:09,240 --> 00:28:12,320
Speaker 1: said cryptocurrencies, take out the word crypto, do they need

499
00:28:12,359 --> 00:28:14,320
Speaker 1: a license in order to be able to do this

500
00:28:14,359 --> 00:28:18,080
Speaker 1: in the public venue. That is a great question, a

501
00:28:18,200 --> 00:28:21,560
Speaker 1: very dimond question, and a question that a lot of

502
00:28:21,560 --> 00:28:25,000
Speaker 1: people have different answers to. You know, the sec recently

503
00:28:25,000 --> 00:28:29,359
Speaker 1: came out with guidance saying, uh, you know, cryptocurrency, some

504
00:28:29,400 --> 00:28:33,719
Speaker 1: cryptocurrencies might be securities if um, you know, if you're

505
00:28:33,760 --> 00:28:37,520
Speaker 1: buying them and you're getting a return on them. Um.

506
00:28:37,640 --> 00:28:39,959
Speaker 1: The CFTC has come out and said these things might

507
00:28:40,120 --> 00:28:43,440
Speaker 1: be commodities. There are also lots of different licensees you

508
00:28:43,480 --> 00:28:47,360
Speaker 1: can get within different states, so a lot of exchanges,

509
00:28:47,360 --> 00:28:50,600
Speaker 1: for example, are regulated by state and maybe not by

510
00:28:50,800 --> 00:28:53,880
Speaker 1: federal regulators. So it's kind of like this big gray area.

511
00:28:53,960 --> 00:28:56,440
Speaker 1: It's kind of it's still such a new area, and

512
00:28:56,480 --> 00:28:59,120
Speaker 1: I don't think regulators have fully figured out how to

513
00:28:59,200 --> 00:29:02,440
Speaker 1: regulate it yet. Well. And it's interesting because the Commodity

514
00:29:02,520 --> 00:29:07,360
Speaker 1: of Futures UH Trading Commission just right now is looking

515
00:29:07,520 --> 00:29:11,320
Speaker 1: at some odd trading on coin base that they're calling

516
00:29:11,360 --> 00:29:14,840
Speaker 1: a flash crash in a cryptocurrency that you wrote about

517
00:29:15,400 --> 00:29:17,600
Speaker 1: in a story on the Bloomberg today. I thought this

518
00:29:17,680 --> 00:29:21,720
Speaker 1: was fascinating. You have UH cryptocurrency flash crash and the

519
00:29:21,760 --> 00:29:25,000
Speaker 1: specter of perhaps an unknown amount of leverage behind this

520
00:29:25,080 --> 00:29:28,240
Speaker 1: transaction that might have spurred such a crash. Can you

521
00:29:28,240 --> 00:29:32,040
Speaker 1: give us a sense of what happened here? And is

522
00:29:32,080 --> 00:29:34,520
Speaker 1: this is this? Does this matter? I mean, is this

523
00:29:34,640 --> 00:29:36,960
Speaker 1: enough money to matter at this point? Yeah, it's a

524
00:29:36,960 --> 00:29:39,959
Speaker 1: lot to digest, but um on. So back in June,

525
00:29:40,360 --> 00:29:44,560
Speaker 1: what happened was so there's this very popular cryptocurrency exchange

526
00:29:44,600 --> 00:29:47,160
Speaker 1: called coin base. It's where you know, most people go

527
00:29:47,240 --> 00:29:50,880
Speaker 1: to buy and sell Bitcoin and the second largest cryptocurrency,

528
00:29:50,880 --> 00:29:54,320
Speaker 1: which is called ether UH. And on June one, there

529
00:29:54,360 --> 00:29:58,000
Speaker 1: was this flash crash, and basically there was this big

530
00:29:58,040 --> 00:30:01,560
Speaker 1: twelve point five million dollar cell order that came in,

531
00:30:01,760 --> 00:30:04,920
Speaker 1: which was like one of the biggest ever on the exchange,

532
00:30:05,520 --> 00:30:09,920
Speaker 1: and that the exchange kind of couldn't handle that much volume,

533
00:30:10,040 --> 00:30:14,240
Speaker 1: and it caused the price of ether too plunge a bit,

534
00:30:14,440 --> 00:30:17,680
Speaker 1: and then that triggered a lot of other cell orders

535
00:30:17,720 --> 00:30:21,360
Speaker 1: to happen and so zooming out the price of Ether

536
00:30:21,720 --> 00:30:24,800
Speaker 1: within like forty five milliseconds crash from you know, around

537
00:30:24,840 --> 00:30:28,640
Speaker 1: three to ten cents and then shot back up because

538
00:30:28,680 --> 00:30:31,000
Speaker 1: of a twelve and a half million dollar or right yeah,

539
00:30:31,200 --> 00:30:33,120
Speaker 1: And it's I mean in the greatest scheme of things

540
00:30:33,160 --> 00:30:35,280
Speaker 1: looking at the stock market, right like that. And the

541
00:30:35,360 --> 00:30:38,480
Speaker 1: reason that then we all care so much about this

542
00:30:38,640 --> 00:30:42,960
Speaker 1: is what because the hype around digital currencies and blockchain

543
00:30:43,040 --> 00:30:47,480
Speaker 1: technology is so great that there's a proliferation of potential

544
00:30:48,000 --> 00:30:50,520
Speaker 1: uses or well a lot of people, I mean people

545
00:30:50,520 --> 00:30:52,600
Speaker 1: are putting a lot of money into this space, right Like,

546
00:30:52,920 --> 00:30:56,040
Speaker 1: people lost a lot of money from that flash crash happening,

547
00:30:56,040 --> 00:30:57,720
Speaker 1: and the space is only getting bigger and bigger. In

548
00:30:57,720 --> 00:30:59,920
Speaker 1: the last just this year alone, I think two billy

549
00:31:00,040 --> 00:31:03,360
Speaker 1: in dollars has flowed into initial coin offerings, which are

550
00:31:03,400 --> 00:31:08,440
Speaker 1: these new cryptocurrencies that are getting started. Um, but with

551
00:31:08,560 --> 00:31:11,120
Speaker 1: the flashcraft thing that I was just talking about. Um,

552
00:31:11,160 --> 00:31:16,760
Speaker 1: the CFTC we just learned is looking into what happened here,

553
00:31:16,800 --> 00:31:20,360
Speaker 1: and they've sent coin Base they Exchange a letter asking

554
00:31:20,400 --> 00:31:24,520
Speaker 1: a bunch of questions about one like about that twelve

555
00:31:24,560 --> 00:31:28,640
Speaker 1: point five million dollar trade, and to about margin trading,

556
00:31:28,640 --> 00:31:33,320
Speaker 1: which is when you extend buyers and sellers leverage so

557
00:31:33,400 --> 00:31:36,400
Speaker 1: they can you know, buy or sell more of an

558
00:31:36,440 --> 00:31:39,600
Speaker 1: asset than they'd otherwise be able to. Are these cryptocurrencies

559
00:31:39,680 --> 00:31:42,360
Speaker 1: not very frequently traded or is it just that they

560
00:31:42,440 --> 00:31:46,320
Speaker 1: usually treated in much smaller sizes the latter. Yeah, they

561
00:31:46,320 --> 00:31:48,920
Speaker 1: are frequently traded, right, most people don't do twelve point

562
00:31:48,920 --> 00:31:50,800
Speaker 1: five million dollar trade. Well, but but it's sort of

563
00:31:50,880 --> 00:31:53,400
Speaker 1: surprising because if coin base wants to be the big

564
00:31:53,440 --> 00:31:55,840
Speaker 1: player in this going forward, they have to have the

565
00:31:55,880 --> 00:31:58,200
Speaker 1: technology to be able to manage this. No, this is

566
00:31:58,240 --> 00:32:00,920
Speaker 1: commonplace and almost any other market out there. Yeah, No,

567
00:32:00,960 --> 00:32:03,840
Speaker 1: it's true. And they've they've been plagued by a lot

568
00:32:03,840 --> 00:32:06,640
Speaker 1: of other issues, uh, in the last year. So they've

569
00:32:06,640 --> 00:32:11,200
Speaker 1: had outages, they've had issues with the exchange being slow,

570
00:32:11,360 --> 00:32:13,600
Speaker 1: which you know, prevented people from being able to buy

571
00:32:13,640 --> 00:32:15,560
Speaker 1: and sell at certain points. And I mean, if you

572
00:32:15,560 --> 00:32:18,840
Speaker 1: think about it, it's kind of like like the startup

573
00:32:18,880 --> 00:32:21,520
Speaker 1: company that came into the space and maybe it didn't

574
00:32:21,560 --> 00:32:25,760
Speaker 1: expect this crazy volume to start hitting the exchange. So

575
00:32:25,800 --> 00:32:28,360
Speaker 1: maybe they're not prepared for this much. That's heavy of

576
00:32:28,400 --> 00:32:31,600
Speaker 1: a flow, you know. Thank you very much, Lily Cats,

577
00:32:32,040 --> 00:32:34,720
Speaker 1: fintech reporter for Bloomberg News. You know, just a quick

578
00:32:34,720 --> 00:32:37,760
Speaker 1: thing I want you, can you tell people your Twitter handled,

579
00:32:37,800 --> 00:32:40,080
Speaker 1: because this is a topic that we need all the

580
00:32:40,120 --> 00:32:42,560
Speaker 1: guidance we can get on and you're one of the

581
00:32:42,600 --> 00:32:44,960
Speaker 1: best sources I can. It's a very simple Twitter handle.

582
00:32:44,960 --> 00:32:47,240
Speaker 1: It's at Lily Cat's l A L y K A

583
00:32:47,320 --> 00:32:49,960
Speaker 1: t Z. Anything else you recommend us should be read.

584
00:32:50,040 --> 00:32:52,040
Speaker 1: I mean we read everything you right here at Bloomberg.

585
00:32:52,360 --> 00:32:55,200
Speaker 1: Read Read Bloomberg. We have good coverage of cryptocurrencies lately.

586
00:32:55,280 --> 00:32:58,600
Speaker 1: Well done. Thanks very much, Lily Cat's fintech reporter for

587
00:32:58,720 --> 00:33:04,600
Speaker 1: Bloomberg News. Thanks for listening to the Bloomberg P and

588
00:33:04,720 --> 00:33:07,760
Speaker 1: L podcast. You can subscribe and listen to interviews at

589
00:33:07,800 --> 00:33:12,240
Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm

590
00:33:12,280 --> 00:33:15,720
Speaker 1: pim Fox, I'm on Twitter at pim Fox. I'm on

591
00:33:15,760 --> 00:33:19,040
Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You

592
00:33:19,040 --> 00:33:21,560
Speaker 1: can always catch us worldwide on Bloomberg Radio