Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether you're at the grocery store
Speaker 1: or the trading floor. Find the Bloomberg p m L
Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Right now,
Speaker 1: we've got Justin Sink also out of our DC bureau,
Speaker 1: and Justin you're covering the president and you know, we've
Speaker 1: talked to us briefly about his planned trip to Puerto Rico.
Speaker 1: When he gets there, he's not is he gonna find
Speaker 1: any love? Well, I think that's a big question. Obviously,
Speaker 1: the White House is depicted. Um, the response to the
Speaker 1: storm is more than adequate, they've said, you know, they
Speaker 1: think that, Uh, it's been a kind of unprecedented response
Speaker 1: in terms of military personnel and getting supplies down there.
Speaker 1: We've seen a lot of stories from the ground that
Speaker 1: suggests that and heard from the mayor of San Juan
Speaker 1: to suggest that there's a lot of frustration the things
Speaker 1: still aren't great there, that food and water aren't getting
Speaker 1: to people that need it. That power is still not
Speaker 1: on and so uh we are. I think that's going
Speaker 1: to be the big question coming out of tomorrow is
Speaker 1: what kind of reception he receives um and how far
Speaker 1: he goes. It's possible that the president schedule just leaves
Speaker 1: him kind of on a military base where he's unlikely
Speaker 1: to face some of the criticism. But if he does
Speaker 1: decide to go out some of the more storm ravaged areas,
Speaker 1: it's a real question of how people are going to respond,
Speaker 1: you know. Justin I'm really struck by the normal playbook
Speaker 1: that we normally have when there are tragedies. And this
Speaker 1: of course is relevant to the comments that we are
Speaker 1: waiting from President Trump imminently about the Las Vegas shooting. Normally,
Speaker 1: presidents come out and they say, oh, what a horrible catastrophe.
Speaker 1: We will do everything in our power to make things
Speaker 1: as better as we can for the surviving victims. Whether
Speaker 1: it's in Puerto Rico, we have, you know, doubling down
Speaker 1: all of our efforts. Our line is open, call us.
Speaker 1: We want to hear from you. We want to figure
Speaker 1: out how to go go forward in a better and
Speaker 1: bigger way go you know, in the future. This is
Speaker 1: this is so out of the norm to basically try
Speaker 1: to attack people and spin the picture in the process.
Speaker 1: Am I wrong? No? I think I think you're right.
Speaker 1: The presidents of both parties have really tried to play
Speaker 1: that consoler in chief role, you know, um, in the
Speaker 1: light of tragedy, whether it's President Bush going down to
Speaker 1: Katrina after We're going down to New Orleans after Katrina
Speaker 1: and Jack Parking and trying to harness that moment, even
Speaker 1: though obviously I think um it ended up being a
Speaker 1: situation the damage is presidency. Uh. You mentioned Las Vegas,
Speaker 1: and I think some of the most memorable moments President
Speaker 1: Obama's term were has response him actually in events the
Speaker 1: church and Charleston being maybe at the top of that list.
Speaker 1: And Uh, it's not a role that that President Trump
Speaker 1: has really had to confront until the last couple of weeks,
Speaker 1: and it's one where he seems a little uncomfortable. I
Speaker 1: think that this is um, somebody who is throughout his
Speaker 1: political career found um some of the most success in
Speaker 1: in rallying his core supporters and outraging UM some of
Speaker 1: his critics. And and that's an approach that is different
Speaker 1: from what many presidents have taken. At times where you
Speaker 1: might see them try to, I think, bring together a
Speaker 1: national unity. And so it might be a reflection of
Speaker 1: Donald Trump, of a changing political climate, of different expectations
Speaker 1: among Americans. But it's going to be very interesting to
Speaker 1: see how he tried to navigate the speech coming up
Speaker 1: in a couple of minutes. But also, uh, is that
Speaker 1: it's Puerto Rico tomorrow. So justin just sticking Puerto Rico,
Speaker 1: I'm trying to get a sense of just how much
Speaker 1: of a humanitarian disaster it is and where the US
Speaker 1: troops and other first responders are in in uh, in
Speaker 1: dealing with what's going on. I mean power has been
Speaker 1: restored to a lot of people, right, I mean are
Speaker 1: we out of the danger zone? I don't think we're
Speaker 1: quite out of the danger zone yet. And the reason
Speaker 1: that I say that is that, well, you know, there
Speaker 1: has been measurable progress throughout much of the island. There
Speaker 1: are still hospitals that aren't fully online. Um, there are
Speaker 1: still remote areas of Puerto Rico where we don't have
Speaker 1: great visibility into both what has already happened and the
Speaker 1: current status. Uh. But things are getting better uh day
Speaker 1: to day. And so I think one of the big
Speaker 1: kind of outstanding questions is what is the extent of
Speaker 1: the damage since we don't have full communications, since we
Speaker 1: haven't been able to clear all the roads and get
Speaker 1: to everywhere. Um, you know, we have a sense of
Speaker 1: the major population centers starting to it into recovery mode,
Speaker 1: but I think especially in remote rural areas and areas
Speaker 1: where communications continue to be a real issue. UM, we
Speaker 1: just don't have a size or or scope of of
Speaker 1: what this sort of damage is yet. You know, justin
Speaker 1: I'm struck by the notion that there may be a
Speaker 1: connection between the damage that the commonwealth faces and economic
Speaker 1: decisions that were made years hence in the sense that
Speaker 1: you know, if you're not able to continually upgrade and
Speaker 1: strengthen and bolster your infrastructure and to take account of
Speaker 1: new information such as weather patterns and so on, Uh,
Speaker 1: then you're faced with what the what has happened in
Speaker 1: Puerto Rico. Is there any way that in the rebuilding
Speaker 1: that takes place, it can be framed in such a
Speaker 1: way that it would actually lead to something positive for
Speaker 1: the future not only of the island itself, but of
Speaker 1: the way the economy works. Yeah, So I think there's
Speaker 1: two elements. This one is the sort of rebuilding of
Speaker 1: the infrastructure on the island, and something that Trump administration
Speaker 1: officials are really emphasized as they are sort of rebuilding
Speaker 1: the power grid, which is going to be a huge
Speaker 1: undertaking UM. As they're rebuilding utility services like the sort
Speaker 1: of water and sewage systems, they're going to try to
Speaker 1: future proof those in a way that UM makes them
Speaker 1: less susceptible to the type of damage that we saw
Speaker 1: the after method that's hurricane. So that's going to be
Speaker 1: hopefully positive for the people of Puerto Rico as they
Speaker 1: confront future tropical storms. UH. The second part of this
Speaker 1: is the trickier part, which is that there's still tens
Speaker 1: of billions of dollars of debt that hangs over the
Speaker 1: island's government and that's the problem that's only going to
Speaker 1: get worse as they try to grapple with UM an
Speaker 1: economy that's going to be as devastated as everything else
Speaker 1: on the island. UM. So a big outstanding question is
Speaker 1: whether cong steps in and provides any sort of bailout
Speaker 1: to help the island UM get from under that you know,
Speaker 1: economic news that has really prevented them from doing the
Speaker 1: sort of maintenance and upgrades that that we've seen in
Speaker 1: other states. So far, we haven't seen a big movement
Speaker 1: for that on Capitol Hill. But it's justin let let
Speaker 1: me just break in because it makes me think, is
Speaker 1: there a possibility that the Republicans would take this as
Speaker 1: an opportunity and therefore, because you know, one of the
Speaker 1: issues has always been if you were to in some
Speaker 1: way smooth the path for Puerto Rico to become part
Speaker 1: of to become a state, that would tilt the balance
Speaker 1: in the Senate, and uh, is this an opportunity for
Speaker 1: the Republicans to maybe gain if they seize the moment. Well,
Speaker 1: it's it's tricky politics for sure. The statehood um issue
Speaker 1: is not something that we've seen a lot of traction
Speaker 1: on here in Washington, and I would be very surprised
Speaker 1: if that was now come. But it is going to
Speaker 1: be tricky to navigate, I think for politicians on both
Speaker 1: sides of this, because a lot of Puerto Ricans who
Speaker 1: are displaced by storm are going to end up moving
Speaker 1: to the Continental US where they can vote just like
Speaker 1: any other American citizen and make their voices heard. But
Speaker 1: a lot of that it's likely to happen in Florida,
Speaker 1: where a big influx influx into a state that has
Speaker 1: historically been a swing state kind of fifty fifty Republican Democrat,
Speaker 1: uh could really be impacted by tens or hundreds of
Speaker 1: thousands of people moving there, and they if they are
Speaker 1: upset by the government's handling of of the storm, that
Speaker 1: could really create um some political trouble for Republicans. Similarly,
Speaker 1: if Democrats aren't seen as responsive enough here or in
Speaker 1: some way holding up the relief effort, then you know,
Speaker 1: can swing back the other way. But I think a
Speaker 1: lot of politicians are sort of attuned to the political
Speaker 1: consequences of what's happened, justin Do you have a sense
Speaker 1: of the response overwhelmingly in Puerto Rico, because we've seen
Speaker 1: some conflicting reports out the governor trying to make peace
Speaker 1: up between the mayor of San Juan and President Trump,
Speaker 1: others saying look, we have a ways to go, trying
Speaker 1: to saying kumba ya. Is that the mood among the
Speaker 1: residents or are they even following this because I know
Speaker 1: internet has been down, yeah, exactly. So it's it's hard
Speaker 1: to get a real sense um of what sentiment on
Speaker 1: the island is both because uh, communications have been difficult,
Speaker 1: but also I think the primary concern for most of
Speaker 1: the people in Puerto Rico is can I get somewhere
Speaker 1: that the air conditioned. Can I get food and clean
Speaker 1: water and sort of the basic services that people need
Speaker 1: to to stay alive and live their lives. Can I
Speaker 1: start rebuilding my business? So uh, it's not clear how
Speaker 1: engaged um the sort of everyday people of Puerto Rico
Speaker 1: are and this sort of back and forth spat that
Speaker 1: we saw over the weekend, But you know, the governor's
Speaker 1: comments are indicative of I think a politician who knows
Speaker 1: that massive federal aid is going to be needed and
Speaker 1: that is going to be distributed through the White House
Speaker 1: in some way. And so even if I think the
Speaker 1: governor might be sensing frustration among um, the constituents in
Speaker 1: Puerto Rico or be a little uh starting to get
Speaker 1: agitated with the federal response, there is sort of a
Speaker 1: strategic advantage and keeping uh that sort of come by
Speaker 1: a spirit together because it's gonna be a long rebuilding process.
Speaker 1: Justin is that is that a contrast to what would
Speaker 1: happen to a state versus being a commonwealth that you
Speaker 1: would go directly to the president rather than if you
Speaker 1: were a state and you had a coalition or a
Speaker 1: group of colleagues in the Senate in the House. Well,
Speaker 1: I mean, I think you bring up an important point,
Speaker 1: which is that, um, you know, one Florida or Texas
Speaker 1: were hit by the massive hurricanes. They do have to
Speaker 1: sort of rely on the federal government for aide, but
Speaker 1: that they have both a state government that is more
Speaker 1: equipped to borrow money to help with recovery efforts that
Speaker 1: sort of thing, and they have a congressional delegation of
Speaker 1: at least you know, well two senators and at least
Speaker 1: one member of the House of Representatives that can be
Speaker 1: sort of forceful advocates for them in Washington, and whose
Speaker 1: colleagues have to interact with them and count on them
Speaker 1: and need their votes for a whole range of things. Well,
Speaker 1: when we call upon Mark Gilbert are Bloomberg gad Fly columnists,
Speaker 1: we want to know one thing, what is the aftermath
Speaker 1: of the vote in Catalonia, the northeastern region of Spain,
Speaker 1: where the Spanish government from Madrid did just about everything
Speaker 1: they could think of in order to prevent the vote
Speaker 1: from taking place, What went on and what should we
Speaker 1: take away? Everything went wrong? I mean, they've had three
Speaker 1: years of notice that that Catalonia was was was heading
Speaker 1: for an independence vote. They could have diffused it. They
Speaker 1: could have granted more independence. Economically to Catalonia, it's it's
Speaker 1: the country's richest region. It contributes about a fifth of
Speaker 1: the economic output. And yet Prime Minister Mariano RADIOI he's
Speaker 1: done just about everything wrong. And those those YouTube videos
Speaker 1: that we're seeing today of police using rubble bullets and
Speaker 1: batons against the ordinary people who are voting. It's just
Speaker 1: terrible for for the country, you know. Just there was
Speaker 1: one image that really stuck out to me when I
Speaker 1: was looking at the videos and pictures of a woman,
Speaker 1: an elderly woman with gray hair, with blood coming down
Speaker 1: her face, after getting into an altercation with the police
Speaker 1: for voting allegedly illegally, because the Spanish government said that
Speaker 1: this was not illegal vote. I'm just wondering what's the
Speaker 1: path ahead. And markets seem incredibly sanguine given the amount
Speaker 1: of turmoil now. Well even last week, the bookmakers odds
Speaker 1: were putting the chances of a vote in favor of
Speaker 1: independence between eighty and but that's largely because of turnout.
Speaker 1: So they're about five million eligible voters in Catalonian, of
Speaker 1: whom two point three million actually turned out, and of
Speaker 1: whom two million backed independence. So you've got about voting
Speaker 1: in favor of independence, but only on a turnout of
Speaker 1: a bit more than forty. So the vote in terms
Speaker 1: of claiming to be the will of the people, that's
Speaker 1: tricky because a lot of those who oppose independence didn't
Speaker 1: turn out. They take the government's view that this is
Speaker 1: an illegitimate vote on the Spanish constitution um and surely
Speaker 1: didn't turn out there. But you know, it's never a
Speaker 1: good look on you, honestly, Mark, I mean in the US, honestly,
Speaker 1: turnout isn't usually all that much more than that, frankly
Speaker 1: for elections, which shouldn't be necessarily a model. But it's
Speaker 1: pretty amazing that nearly half of the population voted in
Speaker 1: this illegal referendum, according to the Spanish government, and then
Speaker 1: the violence sort of sets up ongoing and escalating tension
Speaker 1: going forward. Now it does, but the turnout matters for
Speaker 1: something as momentous as seceding, And let's bear in mind
Speaker 1: Catle only has debts of about six billion euros. The
Speaker 1: Spanish country as a whole as debt of about one
Speaker 1: point two trillion euros. So not only will catalonly have
Speaker 1: to take on a chunk of that debt, as I said,
Speaker 1: it accounts for about a fifth of economic output, so
Speaker 1: on on a competitive basis, it would end up with
Speaker 1: about a fifth of those debts. The European Union says
Speaker 1: it won't be part of the EU even if it
Speaker 1: man it's the succeed so it will be out there
Speaker 1: on a limb. It would make Brexit look like a
Speaker 1: walk in the park. And so the turnout really does
Speaker 1: matter for something as momentous as a readion of Spain
Speaker 1: seceding from the country as a whole. And the problem
Speaker 1: is that the government has wanted the problem to go away.
Speaker 1: It kind of wish they would go away. Now it's
Speaker 1: on its doorstep. It's not really clear where roy can
Speaker 1: turn next. Our investors expressing their doubts by pulling money
Speaker 1: from the stock market. I'm just looking at a chart
Speaker 1: of the I becks thirty five and if you go
Speaker 1: back to the beginning of May of of the year,
Speaker 1: you were looking at well, you know, a peak, right,
Speaker 1: so over eleven thousand but now we're down almost eight
Speaker 1: percent and it has been a steady decline. Is that
Speaker 1: an expression that investors are saying, look, I'm really not
Speaker 1: interested in adding more capital, so the prices are getting cheaper.
Speaker 1: The benchmark stock index is down about two percent today,
Speaker 1: whereas the rest of Euros benchmark indexes are up. In
Speaker 1: the past month, the IBEX index is underperformed the stock
Speaker 1: six hundred, the benchmark for the Aurozone, by about four percent,
Speaker 1: so clearly it's having an effect. A couple of the
Speaker 1: Barcelona based banks are down about five percent or so today,
Speaker 1: Kaiser Bank, Banco Sabadel. They're being hit the worriors that
Speaker 1: you can end up with a general strike in Catalonia
Speaker 1: um and I think that some of the secessionists are
Speaker 1: threatening to call a general strike in the idea is
Speaker 1: if if, if, if we're in favor independence, then forty
Speaker 1: percent not turn up for work, and again with the
Speaker 1: reason contributing a fifth of Spanish economic output. You know
Speaker 1: there's a nascent economic recovery in Spain, unemployment down, but
Speaker 1: the last thing it needs as a general strike in
Speaker 1: this kind of this kind of strife going on, investors
Speaker 1: have have punished the bonds as well. A ten year
Speaker 1: yields up about time basis points, but it's down from
Speaker 1: where it was earlier this year, so there's not a
Speaker 1: sense of panic. There's not really a sense of crisis,
Speaker 1: and investors have known this was coming for for for
Speaker 1: a couple of weeks now um, but there's definitely a
Speaker 1: feeling that this could turn nasty um and that Prime
Speaker 1: Minister Marini a ra high has got to do something.
Speaker 1: He's gonna have to offer some kind of olive branch
Speaker 1: otherwise you can end up with this general strike and
Speaker 1: that would be economically very damaging to the region and
Speaker 1: to the country. Hey, Mark, when when do you think
Speaker 1: you're gonna start to get to those analysts reports to
Speaker 1: talk about how there's some value out there because these are, yes,
Speaker 1: there are social and political events. They turned violent. They
Speaker 1: make great headlines, and we feel for the people without,
Speaker 1: you know, with physical injury and all that. But as
Speaker 1: an investor, you know your job is supposed to be
Speaker 1: able to find those things that other people have dropped
Speaker 1: or have neglected because they are swayed or they are
Speaker 1: manipulated by fear or or things that may not be
Speaker 1: a long term positive. What you've sensed that at all,
Speaker 1: And I'm sorry if you're taking so long, give you
Speaker 1: about ten seconds or so. Now, Well, the in the
Speaker 1: broader market, the euros down as well today. Now that
Speaker 1: could be partly dullar strength, but it's definitely part of
Speaker 1: the sentiment. Look, we saw the German election with the
Speaker 1: populous DAFD winning some of the votes. That comes after
Speaker 1: Macrome won the French election. This is populism in Spain.
Speaker 1: It's a reminded. Look, we've got Italian elections coming up
Speaker 1: at some point. It's a reminder of the political landslape
Speaker 1: in Europe is not completely settled, even after Macrome won
Speaker 1: the French presidency. It's a reminder of the risks. There
Speaker 1: is it a buying opportunity? Well, I mean, what is
Speaker 1: there Is there a particular company, let's say in Spain,
Speaker 1: because you know, just because it's in Spain doesn't mean
Speaker 1: it just has a Spanish market. I think for example
Speaker 1: of Iberdrola, And I mean you have very large companies
Speaker 1: that are financials. I was looking at earlier. We Banko
Speaker 1: San Sanderia is one of it's one of the biggest.
Speaker 1: You say, you know, maybe this is you know, people
Speaker 1: that have been looking to get into equities. You know,
Speaker 1: if there was a catastrophe the United States, God forbid,
Speaker 1: then you know you look at the same kind of thing. Listen,
Speaker 1: the Eurozone economic revival is here, it is real. The
Speaker 1: p m I is the Purchasing Manager indexes have been
Speaker 1: rebounding for Europe all this year. European central banks about
Speaker 1: to take its photoph the accelerator, but it's not quite
Speaker 1: there yet. European stocks have been have been performing well. Um,
Speaker 1: and this is this is a hic up, but it
Speaker 1: is a reminder that the political backdrop to the whole
Speaker 1: European Union project, Brexit notwithstanding, is still not set in stone,
Speaker 1: and there could still be my steps ahead. You know,
Speaker 1: I have to say I would take the other view. Frankly,
Speaker 1: PIM is that you're saying there could be buying opportunities,
Speaker 1: but there isn't that much selling. And perhaps the reason
Speaker 1: why there isn't so much selling is because investors really
Speaker 1: are looking at this and saying it's just a hiccup.
Speaker 1: This has all been smoothed out in the past, even Brexit.
Speaker 1: Yes we've seen consequences, but it hasn't been that serious.
Speaker 1: Even the ten year treasure ten year yields in Spain.
Speaker 1: It went up not tremendously. People don't seem that worried,
Speaker 1: and perhaps it's because it's never been paid off to
Speaker 1: to be too worried about some of these political events,
Speaker 1: right well. I think that this one is particularly pressing
Speaker 1: because of the implications for what it says about populism
Speaker 1: in Europe, which you know, investors thought was off the
Speaker 1: table with the election of Macron in France, which has
Speaker 1: come back with the German election a few weekends ago.
Speaker 1: This reminds people that in Italy, which is the really
Speaker 1: sort of the the core of of of the problem
Speaker 1: of the Eurozone and its political issues, Italy still has
Speaker 1: a five Star movement which is doing well in the polls,
Speaker 1: which is still anti the euro and at some point
Speaker 1: they're going to be an election in Italy. I think
Speaker 1: that it's a reminder that that maybe the political backdrop
Speaker 1: you're investing against is not too settled as as it
Speaker 1: looked even a few weeks ago. Mark Gilbert, thank you
Speaker 1: so much for your insights. Mark Gilbert is a Bloomberg
Speaker 1: gad Flight columnists covering asset management and debt markets. Talking
Speaker 1: about the Catalonia independence referendum and the ongoing turbulence that
Speaker 1: has that it has engendered. I want to bring in
Speaker 1: Chris Mackie now. He is the founder of Solution Nomics,
Speaker 1: based in New York, and it is a platform described
Speaker 1: as being dedicated to developing and disseminating return on investment
Speaker 1: based corporate tax policy. Chris Mackie, thank you very much
Speaker 1: for being with us. A former contributed to the Federal
Speaker 1: Reserve Beije book. Uh your topic, and I want you
Speaker 1: to expand if you can, though, because tax reform is
Speaker 1: you know, it can lead you down a rabbit hole.
Speaker 1: But specifically, what is the the US administration trying to
Speaker 1: do with the relationship between US corporations, what they earned overseas,
Speaker 1: how much tax they should pay, and how to get
Speaker 1: as much of that money back to the United States
Speaker 1: as possible. Well, good morning, it's a pleasure to be
Speaker 1: with you. What they are trying to do is, and
Speaker 1: this is their broader perspective in their entire proposal is
Speaker 1: they're trying to stimulate job growth and higher wages. And
Speaker 1: one of the theories is that if we lower the
Speaker 1: tax rate on the earnings from overseas, that will entice
Speaker 1: companies to use that cash to create more jobs in America.
Speaker 1: And well, I commend the Republicans for undertaking a reform
Speaker 1: of the tax code. That the problem is it's actually
Speaker 1: not a reform, it's just more of the same. It's
Speaker 1: let's lower the tax rates more unconditionally, which means that
Speaker 1: whether or not those the foreign or in profits create
Speaker 1: jobs in America, the tax rates will go down. Now
Speaker 1: there's an alternative, which is to say, when companies increase
Speaker 1: American employment and when they increase American wages, then we'll
Speaker 1: have lower tax rates. And that's what we mean by
Speaker 1: an r o I based tax policy. But Chris, I
Speaker 1: wonder how much of this is a rhetorical exercise. And
Speaker 1: so many companies pay a lower tax rate, they probably
Speaker 1: pay more in line with where the government would like
Speaker 1: to cut the taxes due to all of the deductions
Speaker 1: and other engineering that accountants do. So to me, I mean,
Speaker 1: is this just you know, you could say, you know what,
Speaker 1: what sounds better if you use it on a stump speech,
Speaker 1: but in reality, the plan is just to try to
Speaker 1: simplify things, uh, you know, to to get things into
Speaker 1: a more kind of understandable level. Well, you bring up
Speaker 1: a very good point, because the effective tax right, the
Speaker 1: tax rate that companies have paid on average since two
Speaker 1: thousand has actually been nineteen and a half percent, So
Speaker 1: that's already below the statutory right. Now, the devils in
Speaker 1: the details and whether or not they eliminate all of
Speaker 1: the deductions that are currently out there that get companies
Speaker 1: down to nineteen and a half percent. But regardless of
Speaker 1: what they do with the rate, if they don't tie
Speaker 1: each company's tax rate to each company's rate of job
Speaker 1: creation and wage level, it won't be real reform. It
Speaker 1: will be just a continuation of a hope based policy.
Speaker 1: Well but hold on a second, Chris, because if you
Speaker 1: start to single out companies and start to evaluate what
Speaker 1: job creation means, what individual companies sort of contribution to
Speaker 1: the U. S. Economy is, this starts to look a
Speaker 1: little more subjective and could end up being uh, somewhat
Speaker 1: counter to sort of the spirit of capitalism. Now, oh no,
Speaker 1: absolutely not. It is the embodiment of capitalism. It is
Speaker 1: a merit based approach. I mean, you know, you know
Speaker 1: we're talking about overseas profits. Well, that's you know, subjective,
Speaker 1: whether or not the profits were how much the profits
Speaker 1: were overseas or sys domestics. So the solution i'mics approaches. Look,
Speaker 1: rather than haggling over winnowing profits in the US versusan
Speaker 1: tax havens, let's actually focus on the job creation. Mean, look,
Speaker 1: these companies already know how many people they're hiring, how
Speaker 1: many people they're firing, they know the wages of their pain.
Speaker 1: So we've already got the information. So it's just a
Speaker 1: matter of using that information in creating a merit based
Speaker 1: tax policy. You know, the Republicans talk about a postcard
Speaker 1: for the individual tax fair, Well, we're proposing a postcard.
Speaker 1: So you just have four metrics. You score each company
Speaker 1: on those four metrics, and that determines their tax rate. Okay,
Speaker 1: so can we I just want to get a bigger
Speaker 1: sense here, because let's just get you know, scrub away
Speaker 1: some of the phography can and say, all right, let's
Speaker 1: just pretend for a minute that all the companies really
Speaker 1: want to do and all the government really wants to
Speaker 1: do is help them get the money that's now uh
Speaker 1: is sitting in accounts overseas back to the United States.
Speaker 1: What would be the most effective way to make that happen?
Speaker 1: Because let's forget about time frames. What would what would
Speaker 1: they need to do to make that happen? Do you think? Well,
Speaker 1: first of all, the objective is not to get the
Speaker 1: money back to the United States. The objective is to
Speaker 1: get them to increase hiring and higher wages. So you
Speaker 1: could have two companies they could both bring the profits back.
Speaker 1: No, No No, I understand that. I understand that. But I'm
Speaker 1: just asking what would let's be you know, I want
Speaker 1: to be as a cynical as possible here. What what
Speaker 1: what would be the way to get it back quickly? Oh?
Speaker 1: The way to get it back quickly is to say, look,
Speaker 1: the more jobs that you create in America and the
Speaker 1: higher wages you pay, we're going to lower your tax
Speaker 1: rate on those foreign earned profits you do. That will
Speaker 1: lower the rates. Chris Mackie, thank you so much for
Speaker 1: joining us. Chris mackey is a founder of Solution Omics,
Speaker 1: which is based in New York, and also a contributor
Speaker 1: to the Beige Book, so he has a good handle
Speaker 1: on the US economy. Talking about what has been proposed
Speaker 1: with respect to the tax code and what Chris would
Speaker 1: like to see, which is uh, some kind of merit
Speaker 1: based tax rate based on how many jobs you create
Speaker 1: for the US. Here with us is Lily Kat's, a
Speaker 1: fintech reporter for Bloomberg News who wrote a couple of
Speaker 1: fascinating pieces in the past few days. First of all,
Speaker 1: I want to talk about overstock dot Com, which I
Speaker 1: think of when I was looking for bunk beds for
Speaker 1: my kids and I saw a lot of overstocked items
Speaker 1: that they were selling. Um. I think of this as
Speaker 1: a sort of discount online retailer. I do not think
Speaker 1: of this as a cyber currency provider, and yet that
Speaker 1: is what's fueling it's returns right now. Can you can
Speaker 1: explain a little bit. Yeah, it's pretty interesting. You know,
Speaker 1: first Stock actually got into the cryptocurrency blockchain space back.
Speaker 1: They were one of the first, if not the first
Speaker 1: retailer to start letting people buy stuff online with cryptocurrencies.
Speaker 1: And so they first started letting people use bitcoin to
Speaker 1: buy you know, that bunk bett you might want to
Speaker 1: purchase for your kid. Um. And they also inteen started
Speaker 1: this initiative to develop blockchain technology. They called it Medici
Speaker 1: Ventures and Medici Uh. The main part of Medici is
Speaker 1: this other business called t zero, which I think includes
Speaker 1: as it includes a fintech company and two broker dealers
Speaker 1: and UM recently, the most recent exciting news that they've
Speaker 1: announced is that they're starting a cryptocurrency exchange to actually
Speaker 1: let people buy and sell different cryptocurrencies, so I they
Speaker 1: Other than that, they've also started letting people pay with
Speaker 1: other cryptocurrencies aside from Bitcoin on their website. So yeah,
Speaker 1: it's pretty interesting to see a re tailor in in
Speaker 1: this space, right. You know, I'm not going to make
Speaker 1: you do the definition thing because it always goes over
Speaker 1: my head. Anyway. I want to know, though, if you
Speaker 1: said cryptocurrencies, take out the word crypto, do they need
Speaker 1: a license in order to be able to do this
Speaker 1: in the public venue. That is a great question, a
Speaker 1: very dimond question, and a question that a lot of
Speaker 1: people have different answers to. You know, the sec recently
Speaker 1: came out with guidance saying, uh, you know, cryptocurrency, some
Speaker 1: cryptocurrencies might be securities if um, you know, if you're
Speaker 1: buying them and you're getting a return on them. Um.
Speaker 1: The CFTC has come out and said these things might
Speaker 1: be commodities. There are also lots of different licensees you
Speaker 1: can get within different states, so a lot of exchanges,
Speaker 1: for example, are regulated by state and maybe not by
Speaker 1: federal regulators. So it's kind of like this big gray area.
Speaker 1: It's kind of it's still such a new area, and
Speaker 1: I don't think regulators have fully figured out how to
Speaker 1: regulate it yet. Well. And it's interesting because the Commodity
Speaker 1: of Futures UH Trading Commission just right now is looking
Speaker 1: at some odd trading on coin base that they're calling
Speaker 1: a flash crash in a cryptocurrency that you wrote about
Speaker 1: in a story on the Bloomberg today. I thought this
Speaker 1: was fascinating. You have UH cryptocurrency flash crash and the
Speaker 1: specter of perhaps an unknown amount of leverage behind this
Speaker 1: transaction that might have spurred such a crash. Can you
Speaker 1: give us a sense of what happened here? And is
Speaker 1: this is this? Does this matter? I mean, is this
Speaker 1: enough money to matter at this point? Yeah, it's a
Speaker 1: lot to digest, but um on. So back in June,
Speaker 1: what happened was so there's this very popular cryptocurrency exchange
Speaker 1: called coin base. It's where you know, most people go
Speaker 1: to buy and sell Bitcoin and the second largest cryptocurrency,
Speaker 1: which is called ether UH. And on June one, there
Speaker 1: was this flash crash, and basically there was this big
Speaker 1: twelve point five million dollar cell order that came in,
Speaker 1: which was like one of the biggest ever on the exchange,
Speaker 1: and that the exchange kind of couldn't handle that much volume,
Speaker 1: and it caused the price of ether too plunge a bit,
Speaker 1: and then that triggered a lot of other cell orders
Speaker 1: to happen and so zooming out the price of Ether
Speaker 1: within like forty five milliseconds crash from you know, around
Speaker 1: three to ten cents and then shot back up because
Speaker 1: of a twelve and a half million dollar or right yeah,
Speaker 1: And it's I mean in the greatest scheme of things
Speaker 1: looking at the stock market, right like that. And the
Speaker 1: reason that then we all care so much about this
Speaker 1: is what because the hype around digital currencies and blockchain
Speaker 1: technology is so great that there's a proliferation of potential
Speaker 1: uses or well a lot of people, I mean people
Speaker 1: are putting a lot of money into this space, right Like,
Speaker 1: people lost a lot of money from that flash crash happening,
Speaker 1: and the space is only getting bigger and bigger. In
Speaker 1: the last just this year alone, I think two billy
Speaker 1: in dollars has flowed into initial coin offerings, which are
Speaker 1: these new cryptocurrencies that are getting started. Um, but with
Speaker 1: the flashcraft thing that I was just talking about. Um,
Speaker 1: the CFTC we just learned is looking into what happened here,
Speaker 1: and they've sent coin Base they Exchange a letter asking
Speaker 1: a bunch of questions about one like about that twelve
Speaker 1: point five million dollar trade, and to about margin trading,
Speaker 1: which is when you extend buyers and sellers leverage so
Speaker 1: they can you know, buy or sell more of an
Speaker 1: asset than they'd otherwise be able to. Are these cryptocurrencies
Speaker 1: not very frequently traded or is it just that they
Speaker 1: usually treated in much smaller sizes the latter. Yeah, they
Speaker 1: are frequently traded, right, most people don't do twelve point
Speaker 1: five million dollar trade. Well, but but it's sort of
Speaker 1: surprising because if coin base wants to be the big
Speaker 1: player in this going forward, they have to have the
Speaker 1: technology to be able to manage this. No, this is
Speaker 1: commonplace and almost any other market out there. Yeah, No,
Speaker 1: it's true. And they've they've been plagued by a lot
Speaker 1: of other issues, uh, in the last year. So they've
Speaker 1: had outages, they've had issues with the exchange being slow,
Speaker 1: which you know, prevented people from being able to buy
Speaker 1: and sell at certain points. And I mean, if you
Speaker 1: think about it, it's kind of like like the startup
Speaker 1: company that came into the space and maybe it didn't
Speaker 1: expect this crazy volume to start hitting the exchange. So
Speaker 1: maybe they're not prepared for this much. That's heavy of
Speaker 1: a flow, you know. Thank you very much, Lily Cats,
Speaker 1: fintech reporter for Bloomberg News. You know, just a quick
Speaker 1: thing I want you, can you tell people your Twitter handled,
Speaker 1: because this is a topic that we need all the
Speaker 1: guidance we can get on and you're one of the
Speaker 1: best sources I can. It's a very simple Twitter handle.
Speaker 1: It's at Lily Cat's l A L y K A
Speaker 1: t Z. Anything else you recommend us should be read.
Speaker 1: I mean we read everything you right here at Bloomberg.
Speaker 1: Read Read Bloomberg. We have good coverage of cryptocurrencies lately.
Speaker 1: Well done. Thanks very much, Lily Cat's fintech reporter for
Speaker 1: Bloomberg News. Thanks for listening to the Bloomberg P and
Speaker 1: L podcast. You can subscribe and listen to interviews at
Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
Speaker 1: pim Fox, I'm on Twitter at pim Fox. I'm on
Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
Speaker 1: can always catch us worldwide on Bloomberg Radio