Hello and welcome to Sleep Money, your guide to the business and finance news of the week.
I'm Felix Hammond of Axios, I'm here with Emily Peck of Axios.
Hello, hello.
I'm here with Elizabeth Spires of the New York Times.
Hello.
We have a jam-packed show this week, it was such a big news week, what with First Republic
Failing and the Fed hiking rates possibly for the last time and all the rest of it,
that we couldn't do what I actually wanted to do, which was devote this entire show to
my new book.
It's called The Phoenix Economy.
Come please join me in your local independent bookstore and buy it.
We will do that next week.
We will talk about my book next week because I'm very excited about it.
We just don't have room in this week's show because there's so much going on.
Aside from First Republic, which failed in the wake of Silicon Valley Bank and various
other bank failures like Silvergate and Signature and Credit Suisse, we are going to talk about
the Fed and whether that was their last rate hike.
We're going to talk about Timu, which is this crazy Chinese shopping app which is taking
America by storm.
We have a slate plus segment which you really should listen to because it's awesome all
about fake handbags in China.
And yeah, it's all coming up on slate money.
I'm Jonathan Briehlock.
I'm Draw Milligan.
And I'm James III.
And we're those of Black Men Can't Jump in Hollywood.
It's a comedic podcast that reviews films with leading actors of color and analyze them
in the context of race and Hollywood's diversity issues.
Yeah.
Listen to new episodes on Mondays.
And that's wherever you get your podcasts.
I don't care where you get them.
I just want you to listen.
Don't threaten the people we need them to listen to.
Oh, okay.
Okay.
Sorry guys.
Listen to us.
Yeah.
Put on a happy voice.
One more can I say?
No one can.
I mean, can't jump.
It's Hollywood.
This episode of slate money is brought to you by progressive insurance, which I have
a question for you.
Well, if comparing car insurance rates was as easy as putting on slate money with progressive,
it really is.
You just visit the progressive website and you get a quote with all of the coverages
that you want.
You'll see the direct rate and then their tool will provide options from other companies
so you can compare.
And if progressive is the cheapest, all you need to do is choose the rate and coverage
you like.
So today at progressive.com to join the over 29 million drivers who trust progressive.
Progressive casualty insurance company and affiliates comparison rates not available
in all states or situations.
Prices vary based on how you buy.
Okay.
So we have a bank failure.
Wow.
It feels so long ago that first Republic failed, but in fact, it was only a week ago, less than
a week ago.
It happened at 4.30 in the morning on Monday morning, which is never a good sign really
when something takes that long.
It was bigger than Silicon Valley Bank, so it's a big bank and Emily is this clearly
a sign that the banking crisis was not contained and that Silicon Valley Bank was not some
kind of an outlier and that other banks can fall victim to the same forces that brought
down Silicon Valley Bank.
Yes and no.
The fact alone that another bank fails, in this case, it was a cleaner failure because
the sale to JP Morgan was able to go through and it was pretty seamless and the government
didn't have to step in with a systemic risk exception to bail out anyone, uninsured depositors
for didn't have to do that.
So clearly, the banking crisis was not contained because there was another bank failure.
So we can't say it was contained and I think first Republic probably wouldn't have failed
had Silicon Valley Bank not failed.
So yeah, I think you're absolutely right.
They're not the same.
The way I like to think of it was the silicate, like if they both failed because they lost
enormous amounts of deposits and the proximate cause for first Republic bank failing was
that they came out with their first quarter results and announced that $100 billion of
deposits had left in basically the second half of March, which is an insane amount of
deposits.
You know, quick reminder when Washington Mutual failed in 2008, that was because of a $42 billion
bank run.
So, you know, we are talking enormous sums of money here and the difference is that while
the Silicon Valley Bank Bank run was very much panicked driven, it was very much people
pulling their money out for fear that they wouldn't, that they would lose it where the
banks have failed.
I think the US authorities did a pretty good job of reassuring people that the deposits
in first Republic were safe.
In the first case of first Republic, it wasn't so much a feared panic driven run as a greed-driven
run and the amounts of interest that first Republic could afford to pay on deposits were
just simply not enough to be able to retain those deposits and people moved their money
to places that were a safer because clearly first Republic wasn't completely safe, but
b, more importantly, just paid much higher interest.
And that was enough to really sort of hold the first Republic below the waterline.
Yeah, I think there are a couple other factors too, you know, because the SUV run had already
happened and some of it was precipitated by at least according to the government's report,
SUBS, internal analysis over accounting or overestimating the extent to which their
deposits were sticky.
And, you know, you've talked a lot about consumer banking really being predicated on the idea
that people don't really move their accounts very much because it's difficult in the US.
And I think first Republic had already sort of taken that risk into consideration, at
least internally, everybody understood that it was a problem.
And the other thing is that first Republic-
So, wait, wait, let me just stop you there.
When you say that first Republic had taken that risk into consideration and they understood
it was a problem, like, what does that mean and how did that-
I mean, when SUV failed, they knew immediately that it was going to be a risk for them too
because their deposit base is not totally dissimilar to SUV.
There's a lot of overlap.
You know, if you look at the early stage companies and entrepreneurs who were getting mortgages
from SUV, a lot of them also had accounts at first Republic and they moved to first Republic
when the bank run happened with SUV.
So, I think, you know, they knew that it was a risk after SUV collapse.
And then that's-
Right, but knowing that it's a risk doesn't help you, right?
Well, I think it helps you prepare for the inevitability in the way that SUV really seems
to have not done that.
Yeah, I'm not sure.
I don't think any bank could really prepare for a bank run of this magnitude.
Really the thing that allowed first Republic to withstand $100 billion of deposit flight
was not any kind of preparation that they did internally.
It was the Federal Reserve throwing the discount window wide open and basically lending unlimited
amounts of money to banks to cover deposit flight at the discount window.
And as we saw, the Federal Republic took full advantage of that and had massive debts to
the Fed and to the Federal Home Loan Banks when it failed, all of which were repaid.
To Emily's point, there's a really interesting little quirky difference between SUV and first
Republic, which was that in SUB's case, the FDIC and the Treasury declared the systemic
risk exception that would allow the FDIC to ensure all deposits rather than just deposits
under $250,000.
In the first Republic case, they didn't declare the systemic risk exception and yet all deposits
remained safe because JP Morgan assumed all of those liabilities.
All of those deposits are now at JP Morgan and they're perfectly safe because they're
JP Morgan.
And everyone's sort of patting themselves on the back for saying like, we didn't need
to invoke the systemic risk exception.
But there's this weird thing here going on, which is that the FDIC is still losing $13
billion.
Right?
And you're like, if JP Morgan hadn't been arm twisted into keeping all of those liabilities
as uninsured deposits, then the FDIC wouldn't have lost $13 billion.
$13 billion by coincidence is roughly the amount of uninsured deposits that were left
at first Republic.
So it's a kind of insurance of the uninsured deposits, even if technically it isn't.
Right.
I mean, and then you could argue, so the FDIC is obligated to sort of do the cheapest,
the deal that it has the least cost to it.
That's like the law.
It's a little bit.
It's not the law.
I mean, so yeah, the least cost basis or something.
The FDIC is meant to do that, but it can be blocked by the OCC and the OCC made the decision
not to block it.
Right?
So it's just the agency that basically says, too big to fail banks are already too big
and they can't grow by acquisition.
Right?
And so there the agency that historically would always block any merger between JP Morgan
and anyone else.
And the OCC was the agency that ultimately basically, you know, it was the dog that didn't
bark.
They very consciously didn't object to this merger and they allowed it to go through.
It's my understanding that there is an exception built into the rule that big banks can't get
bigger if the bank they're trying to acquire is insolvent.
They can't work.
And there's that inherent tension there between, you know, the regulators, the bank regulators
need to maintain financial stability throughout the system and then antitrust regulators need
to, you know, keep the banks at a certain size.
But in this case, the amount by which JP Morgan grew was pretty tiny, right?
They went from, you know, whatever, it was $3.4 billion, $3.4 trillion of assets, $3.5
trillion of assets or something like that.
Right?
It's not like going to make a signal.
It's not really moving the needle in terms of the size of JP Morgan because JP Morgan
is so unimaginably enormous and also because First Republic had shrunk quite a bit before
it failed.
But that's what I wanted to talk about a little more maybe Felix because it's interesting
that so they saw $100 billion leave the bank kind of slowly relative to what happened with
Silicon Valley bank before it failed.
$100 billion were taken out.
And you're saying it's because people sort of woke up and realized they could get better
interest rates elsewhere.
But I think it was also because people saw what happened with Silicon Valley bank and
they were like, I don't really want to stick around here.
And I could get better interest rates elsewhere.
Let's go.
Like it was more of a slow moving thing than a bank run.
It was pretty fast, but it wasn't a run.
It wasn't like a rush for the exits everyone trying to get out before it closed necessarily.
Like as a First Republic customer, I can tell you that like nothing has changed.
And I think that was entirely foreseeable that nothing has changed.
Nothing would change.
In the case of Silicon Valley Bank, as Elizabeth can attest as an SCV customer, like nothing
has changed there either.
Like there's nothing to worry about from a consumer perspective in terms of having your
bank fail and having it get taken over by someone else.
Elizabeth is now a customer of First Citizens Bank.
I'm a customer of JP Morgan.
But our routing numbers are the same.
Our account numbers are the same.
In the case of First Republic, my assigned personal banker guy who I can call or email
and ask questions about my account is the same guy.
He's still there.
He's now an employee of JP Morgan.
So the customers of First Republic who moved their money out, I think some of them didn't
necessarily understand that.
I do think there's a lack of sophistication among Americans who don't entirely understand
how bank failures work and how bank failures result.
And they do worry like if my bank fails, then I'm going to have to change my bank and
it's going to be terrible and I should move my bank out.
I should move my money before that happens.
In reality, it's fine.
The FDIC and the banking system are totally set up to be able to make this incredibly seamless
from a customer point of view.
Now, there is a group for whom it does make sense if you see your bank failing to move
your money and that's a very small group and that's those with deposits over $250,000.
There's not that many actual people like that.
It's mostly companies and it's very few 99% of accounts, more than 99% of accounts at
banks in the US are insured.
Although FRB was an exception there.
Yeah.
FRB had a lot of uninsured deposits.
If that's you, if you have uninsured deposits, you do then have a reason to be like, you know
what, I'm moving out of here because it's not 100% clear that you're going to get paid
out in full.
That has happened in all these, in these three bank failures so far.
It hasn't always happened historically.
So then it makes sense.
So there's, well, you basically have two choices, right?
If what you want is 100% certainty that your money is insured and you're not willing to
just trust Joe Biden and Janet Yellen and Jay Powell on like saying that your money is
safe, but you want, you want it like absolutely cast iron guarantee, then you do this thing
called brokered deposits, right?
You can go along to first republic or any other bank in the country and say like, I want,
I want brokered deposits.
I want the money in my bank account to be basically divvied up among a whole bunch of
other insured banks.
It costs, sometimes they'll do it for free, sometimes they'll do it for a tiny fee, but
it's actually really easy to make sure that sort of single digit million dollar accounts
are insured.
That is a product that exists and is sold basically by the private sector.
The banks have worked it out between them and it works pretty well.
So yeah, you have the choice.
You can either just say, can you please brokered my deposit?
So I'm fully insured or you can do what you said, which is just pull your money out entirely
and move it somewhere else.
And that feels a bit sort of a bit more panicky, especially if you have, you know, happy vibes
with your bank, which, you know, the net promoter scores the first republic were off the charts.
Right.
I guess there are two other things I wanted to bring up in this conversation.
One is like, does this crisis actually matter to real people and to the economy overall?
I mean, it definitely matters to the stocks of these banks that have fallen a lot and
to anyone who holds the stocks of the banks.
Okay.
So more broadly, like we just got a jobs report on Friday that was great.
I don't know.
Does it matter?
It speaks to confidence in the overall banking system, especially when you see the markets
react the way that they have to you, Pekwests and Western Alliance.
But I don't know that, you know, we're, we're our most consumer accounts concentrated in
more large banks or regionals.
Large banks.
Yeah.
Probably to the average person, it doesn't matter that much unless they start to conflate
these specific situations with the stability of the overall system.
Well, again, as I say, like for an average person, it really doesn't matter where you
are, right?
You don't have anything to worry about.
You don't have to worry about losing your money.
You don't have to worry about your bank failing because even if your bank does fail, life
goes on entirely normally, right?
So for a normal person, no one has anything to worry about.
From a systemic point of view, there are, I think, two things to worry about.
One is just that the forces that brought down, I see the interest republic, which are basically
high interest rates and what they do to banks net interest margins, are forces that have
weakened the profitability of the banking sector as a whole.
The funding costs of the banking sector have risen by roughly 5 percentage points since
this hiking cycle started at the margin and the amount they can charge in loans has not
gone up by 5 percentage points.
It's gone up less than that.
So they're less profitable than they used to be.
As we have seen, are increasingly unable to rely on depositors to be lazy and just keep
their money in a checking account and in 0%, because it's actually very easy to move your
money to savings account, earning 4.5%, 5% at this point.
So the banking sector is going to make less money.
When the banking sector is going to make less money, that means it's probably going
to make fewer loans and that's going to slow down the economy.
That's going to be a headwind on the economy.
And then the other thing which Elizabeth touched on is people really care about share prices
these days.
It's like a post-pandemic phenomenon we saw in the meme store winter of 2021.
And there's so many headlines about look at this share price and look at that share
price.
For me, like bank share prices are not incredibly interesting.
But I have a reasonably strongly held belief.
I'm not sure about this, but I believe it to be true that if Silicon Valley Bank and
the first republic had been like credit unions or not publicly traded, that they wouldn't
have failed.
That it was actually the proximate cause in both cases of the bank failure was the share
price going down and the share price causing that erosion of trust in the institution.
And I do worry that people are over extrapolating from volatile share prices and that could be
a problem.
I also worry that the American Bankers Association and various other banky types are coming out
and making noises about banning short sales of banks, which I think is a terrible idea.
But that shows the degree of panic in the banking system, which I think is indicative
of something bigger and more dangerous happening.
Yeah, I've been thinking about the bank stocks kind of a lot because I think it's reasonable
that those stock prices have fallen so much because first republic, its shares are now
worth nothing.
Like the shares got wiped out when it failed.
Yes, depositors came out okay, but investors did not.
So if I'm an investor who invests in banks, I'm like, oh, these things aren't worth what
I thought they were.
Like they're not as safe as I thought they were, etc.
And so of course they're going to fall a lot.
I don't know, first republic would have failed though.
It wasn't just the stock price.
It was well, it was the fact that it was a public company and had to come out and fess
up and save it.
Well, I mean all banks need to fail call reports every quarter, which will show what
happens to their deposits, whether they're public or private.
But the fact is that normal human beings don't pay attention to call reports.
Normal human beings do pay attention to share prices.
Yes, right share prices and announcements.
You know, when I wrote this op-ed saying that SGB bank run was partly precipitated by some
VCs getting panicky, you would be surprised how many supposedly sophisticated people in
my Twitter feed were responding to me and saying, no, it's because the share price dropped.
And then that sort of that reinforces a little bit of what Felix is saying, which is it's
not like these people went into the filings and really examine the balance sheet or anything.
They were reacting to market reaction.
I mean, you could blame some of that on the business press for the past decades.
Yeah, it's all your fault, I believe.
Well, not on me.
So, I think so much on the stock market as the thermometer for everything.
You know, so we've been trained to think of the stock market as the thermometer for the
economy and for reality.
And so, of course, if you see these stocks going lower.
And people have been socialized by politicians to believe that, you know, whenever you see
Donald Trump getting up every day of his administration and pointing to the Dow as if it's the primary
economic indicator that matters when it's not really an indicator at all.
And then the other problem is the number one you have to be right, Emily, it is treated
as an economic indicator and an indicator of health.
But the other thing is that there has always been a large segment of the business press
that is aimed at stock market traders and speculators and investors, right?
Who look at the stock market to be a place where they can make money and they want to
buy stocks that are going up and sell stocks that are going down and that kind of thing.
And that kind of journalism of like, here's stocks which are going up, here's stocks which
are going down.
If you are someone who actively plays in the stock market, you should care about this.
I find unbelievably boring and useless and I would quite happily abolish it all.
But the fact is that to a normal person, it's basically impossible to tell the difference
between that kind of journalism and journalism about companies which just happens to report
on the share price.
And like the big headline all too often is, you know, such and such a company's share
price moved and when you see that big headline, we see big headline screaming about, you know,
hack question, price is down 50% or whatever, it is entirely rational for a consumer of
news to go, well, this wouldn't be a big headline if it wasn't important.
Yeah, there's a little bit of a, this is kind of insight baseball, but a little bit of a
structural problem in financial journalism where there are a lot of publications that
don't prioritize coverage of anything in the market that doesn't relate to market movements
because on the basis that, you know, they're not going to cover, for example, hedge funds
very much because the average person can't invest in them.
I mean, I've been at finance publications where that was part of the mandate.
It was, you know, we'll cover public companies and things that the average retail investor
has access to.
I will say if you, roughly sleep money, listen to who I like very much, is someone who does
invest in the market.
The one thing you should know is that if you're buying or selling bank stocks, bank stocks
by their nature are just incredibly, much significantly more volatile than most other
stocks because they are significantly more levered.
Because of the way that fractional reserve banking works, the amount of the ratio of
liabilities to equity at a bank is way higher.
It's like 10 to 1 compared to maybe one to one a normal company.
And so you just wind up with a situation where it's incredibly easy for a bank to go to zero
and much easier for a bank, you know, common equity to go to zero than it would be for,
you know, a widget-manufactured, first common equity to go to zero.
I mean, should banks not be publicly traded?
I mean, the support of, you know, banks are kind of quasi-governmental companies, if you
ask me, because the government backstops all deposits and I won't have a fail.
But they don't do anything to help the stock price, so maybe they shouldn't be public.
Maybe that's weird.
Well, I mean, the idea is, and it's, I think, perfectly correct, that you need people to
take that first-lost tranche, right?
If you have a risky institution, then you want people who are, who have high risk appetite
owning the riskiest tranche of the capital stack, which is the common stock.
And then you want people who have maybe a bit less risk appetite, but still a substantial
amount of risk appetite owning the second riskiest bit of the capital stack, which is
the bonds, right?
And the place that you find those in greatest abundance is the public markets.
So on that level, it makes sense for people in the public markets with high risk appetite
to be buying these securities.
The problem happens when people think, or people like retail investors start thinking
of bank stocks as though they're just shares of companies like any other shares of companies,
and they're really not.
They're very unique animals in many ways.
So people who invest in bank stocks are like the soldiers at the front of a line, you know,
and they just go and mow down.
Yeah, exactly.
Horrifying.
Let's take a quick break and then talk a bit about monetary policy because, yeah, there's
a lot going on there too.
Reboot your credit card with Apple Card, the credit card created by Apple.
It gives you unlimited daily cashback that you can now choose to grow in a high yield
savings account at 4.15% annual percentage yield.
That's more than 10 times higher than the national average savings rate.
Apply for Apple Card now in the Wallet app on iPhone and start growing your daily cash
with savings today.
Apple Card subject to credit approval.
Savings is available to Apple Card owners subject to eligibility requirements.
Savings accounts provided by Goldman Sachs Bank USA.
Member FDIC.
National average savings rate is from FDIC website, Terms of Play.
This episode of Slate Money has partnered up with Wondery that has a brand new podcast
out called Flipping the Bird.
Elon versus Twitter.
This new podcast unravels the story of Elon Musk's unexpected bid to buy Twitter and
all of the drama that has happened since then, including as we all know him actually buying
it.
As we have talked about many times, too many times, to be honest on this show, Elon epitomizes
the Silicon Valley ethos of move fast and break things and he has moved fast.
He has broken a lot of things.
He has laid off 75% of the Twitter workforce.
Yet, somehow, Twitter is still alive.
Did we expect this?
There's been a lot of surprises along the way.
So is Elon all talk or are his unruly methods actually the work of a genius?
Stay tuned to the end of this episode to hear a preview of Flipping the Bird.
This podcast is brought to you by Progressive Insurance.
Hey listeners, whether you love true crime or comedies, celebrity interviews, news or
even motivational speakers, you call the shots on what's in your podcast queue, right?
And guess what?
Now you can call the shots on your auto insurance, too.
Enter the name your price tool from Progressive.
The name your price tool puts you in charge of your auto insurance by working just the
way it sounds.
You tell Progressive how much you want to pay for current insurance, then they'll show
you a variety of coverages that fit within your budget, giving you options.
Now that's something you'll want to press play on.
It's easy to start a quote and you'll be able to choose the best option for you, fast.
It's just one of the many ways you can save with Progressive Insurance.
Quote today at progressive.com to try the name your price tool for yourself and join
the over 29 million drivers who trust Progressive.
Progressive Casualty Insurance Company and Affiliates, Price and Coverage Match Limited
by State Law.
Okay, Emily, we have a couple of very big things going on here in terms of the Federal
Reserve.
They raised rates by a quarter point this week and the big question is, is that the
end of the, of the hiking cycle?
Is the next move by the Fed going to be up or down?
And no one seems to know the answer to that.
If the banking crisis gets significantly worse, then that could cause a financial crisis
and in order to help stabilize the financial system, maybe the Fed will be forced to cut
rates.
On the other hand, as you mentioned, we had an incredibly strong jobs report on Friday
and that showed that the broader economy seems to be at least so far, pretty much unaffected
by the banking crisis and the, the Fed has really not taken the fuel out of the economy
that they were worried about and that they might need to continue to hike before they,
you know, satisfied that inflation is going to come back down to that 2% target.
It's a kind of tough place for the Fed to be, but the good news for the Fed is that they
have, you know, a month and a half to wait and see what happens.
Yep.
I mean, it's all just so, it all comes down to firming.
I don't know if you guys know about firming, but in the last, the last time the Fed puts
out, you know, a statement before it, when it raises rates and in March, put out a statement
that said something like, we anticipate that some additional policy firming may be appropriate,
which in English just means like, we think we'll probably raise rates again.
And then when they put out their statement this month, they took the sentence out and
they said something like, the extent to which additional firming may be appropriate over
a time we'll take into account factors, which means like, shruggy, like it means like we're
keeping our eye on the economy and we'll see what happens.
And then we may or may not raise rates.
And I'm not just making up that it's significant like Fed Chair Powell said in his press conference,
he was like, you'll notice that sentence is gone.
Like it's so bananas, right?
Like just say in English what you mean, but anyway, it's fine.
He just said firming.
So I mean, I don't think they know what's going to happen next month, but instead of
saying we're in their way, we're definitely going to raise rates.
They're saying we're going to see what happens.
So like, yeah, we're going to see what happens in the economy.
And when the statement came out, the markets were basically pricing in a rate cut this
year.
Yeah.
That pretty much disappeared on Friday morning when the jobs report came out.
Now the markets are like, yeah, no.
So the, but I mean, you can't.
So the idea of a rate cut that doesn't mean they expect another rate hike, but it does
mean that basically I think, and I guess my base case assumption, you know, and it's low,
you know, I have no particularly strongly held prediction here, but I would expect the most
likely outcome is that rates stay where they are for the rest of the year and that they
neither hike nor cut for the rest of the year.
I mean, it's worth just stepping back and acknowledging like they raised rates really
high in a really short amount of time.
And it created like a lot of drama and chaos and crisis.
Like the bank, the previous segment we just talked about wouldn't have happened if these
dudes hadn't kept raising rates so much in such a short amount of time.
Like the stock market fell a lot, a lot last year because they raised rates in such a
short amount of time.
The housing market has come to kind of a standstill because they raised rates in such
a short amount of time.
Like they have unleashed a lot of chaos into the economy.
They're also just in a win position, you know, weight just also went up in the report.
And so they're really rate hikes are the only tool that they have to meaningfully fight
inflation, at least in theory, but they keep hacking rates.
You know, you see the sort of the problems with that.
If we get pushed into recession, it'll be the best fault.
As far as consumers are concerned.
The Fed has said very, very explicitly that if they need to push the country into recession
in order to bring down inflation, then they're happy to do that.
Like that is not even a trade off they're worried about.
They're saying like we are going to do everything we can to bring inflation down.
And if that means recession, then so be it.
Although obviously we hope that it doesn't.
I will say that in terms of wages, we're running at about 4.4, 4.5% year on year, something
like that.
And that is fine.
That is not inherently inflationary.
That's where we were pre pandemic that, you know, we saw that kind of wage growth with,
you know, below target inflation for many, many years.
So I'm not what I don't think that wages are at this point a major driver of inflation.
By the same token, though, it doesn't seem that they're going to be a driver of bringing
inflation down to where the Fed wants it to be.
I mean, it's been really interesting to see how resilient the labor market has been to
the right hiking cycle.
Like unlike the stock market, the housing market, the things I just said, like the labor market
is just kind of chugging along.
We've created over a million jobs just this year.
Yeah.
But I mean, if you look at a chart month to month, like the number of jobs added goes
down like a little smidgey bit.
So it does look like it's slowing down a little bit.
You kind of need to squint.
But yeah, but when they started hiking rates, everyone was like, Oh my gosh, they're going
to hike rates.
Unemployment's going to really jump and like progressive lawmakers are still out there
saying this.
Elizabeth Warren's like, you have to stop hiking rates because unemployment blah, blah,
blah, blah, blah.
Meanwhile, black unemployment just hit 4.7%, which isn't all time low.
The first time it's ever been below 5.5%.
Right.
And yeah.
So it's like maybe it's time for, and you know, it takes a long time for these things to shake
out, but like maybe it's time for the economists to go back to their little models and think
again about how the thing again about the link between raising rates and unemployment
because it does feel like it's different than it used to be.
It feels very different.
The models aren't working.
And as our colleague Courtney Brown mentioned on Friday in her newsletter, like it feels
like we're in a completely unprecedented situation.
We've never had a labor market or a rates market like this.
We're in uncharted territory here and no one really knows what was going on.
I think part of it, and but this is only part of it that I think about like when everyone
goes back and looks at the connection between rate hiking and unemployment, they look at
the 70s and 80s when they hiked rates a ton and unemployment hit like 10% at one point.
Back then like labor could demand really high wages and they really had a legitimate
wage price spiral.
But now it's just labor isn't as strong as it was at that time.
So I feel like that kind of helps keep things in check in a way that wasn't possible before.
That's one of my crack bad theories.
I like your crack pot theories.
Keep them coming.
All right.
Let's take another break and talk about Timu.
Reboot your credit card with Apple Card, the credit card created by Apple.
Apple Card gives you unlimited daily cash back up to 3%.
Now you can choose to automatically send that daily cash to a high yield savings account
where it'll grow on its own.
And savings is built right into the wallet app so it's easy to monitor your progress.
Apply for Apple Card now in the wallet app on iPhone with no impact to your credit score
and start growing your daily cash with savings today.
Apple Card subject to credit approval.
Accepting an Apple Card after your application is approved will result in a hard inquiry,
which may impact your credit score.
Savings is available to Apple Card owners subject to eligibility requirements.
Savings accounts are provided by Goldman Sachs Bank USA.
Member FDIC.
Terms apply.
I'm Jonathan Brelock.
I'm Draw Milligan.
And I'm James III.
And we're those of Black Men Can't Jump in Hollywood.
It's a comedic podcast that reviews films with leading actors of color and analyze them
in the context of race and Hollywood's diversity issues.
Yeah.
Listen to new episodes on Mondays.
Find us wherever you get your podcasts.
I don't care where you get them.
I just want you to listen.
Don't threaten the people we need them to listen.
Oh, OK, OK, OK.
Sorry, guys.
Listen.
Listen to us.
Yeah, put on a happy voice.
One more, can I say this?
I mean, can't jump.
It's not like that.
Emily, what is T-Moo?
I called it T-Moo earlier.
I cannot download this app because if I do, I know I will be just socially engineered into
buying a massive amount of junk that I really, really do not need.
And the only way I can avoid doing this is by not downloading the app.
Therefore, I know nothing about this company.
Brandwise, T-Moo is sort of the opposite of Tumi, which is it.
Right.
Tumi is the extremely expensive luggage, right?
And this is extremely cheap luggage and everything else that you could possibly want.
Yeah.
So T-Moo is this kind of like unhinged Chinese shopping app, essentially, where you open
it up and they're selling you just all kinds of random stuff, something to clean your earbuds,
your AirPods with really cheap off-brand AirPods.
What did I say?
I saw rugs.
I saw those little things you put in your crocs, those little gigous.
I don't know what they're called.
You can get 100 of those for 50 cents.
Just like all the crap that's made in China, you can get in this app.
And I hope Patrick will play for listeners, the Super Bowl commercial, because that maybe
give you a sense too.
I feel like a billionaire.
I'm shopping like a billionaire.
I'm shopping like a billionaire.
Let's go.
See you.
See you.
I'm shopping like a billionaire.
Shop like a billionaire.
I love this.
I like a billionaire.
The idea being that everything is so cheap, you can buy whatever you like without it impacting
your checking account to any visible degree.
You can just splurge.
I like that as a kind of aspirational app.
You can impulse buy a million things for the cost of a Starbucks coffee.
Yeah.
Yeah, you can.
And the shipping is relatively slow.
We are talking about this.
Yeah, it takes like two or three weeks.
Exactly.
At this point, you're buying a stuffed tardigrade for your seven-year-old.
I'm like, does the seven-year-old care whether it arrives tomorrow or in three weeks?
No, it is not.
Am I right?
And what are you buying that stuffed tardigrade?
No, but I have to say, I just downloaded the app this morning.
And the first thing I saw was they have smaller vendors that are usually based in China directly
selling things was a vendor named John Maynard Keynes selling wraparound sunglasses for $3.67.
Amazing.
So the reason we're talking about this is because John Herman, who is amazing, wrote this really
smart piece about it in New York magazine, and he made this point, which is basically
that we have gone from a world where Amazon would source products from Chinese manufacturers
and then sell them to Americans to a world where Amazon basically allowed the Chinese
manufacturers to list stuff directly on Amazon.com as part of the Amazon marketplace.
And so you had the manufacturers just directly selling to US consumers, but by our US app,
we do where we are now where the Chinese sellers are selling directly to US consumers via a
Chinese app and there's no American intermediation whatsoever.
And I think we've seen this with shine in fashion as well.
And I just got back from a little trip to Morocco.
And because I'm old, I remember the days when traveling to less wealthy countries meant
that things cost less.
But given what's happened to sort of globalization and supply chains, that's really not the case
anymore.
That we, the technology that connects Americans via apps like Timu to low-cost manufacturers
in China is so sophisticated at this point.
The goods just cost whatever they cost, wherever you are in the world.
And that kind of like, travel as arbitrage has completely disappeared.
And it's interesting to think about, at the same time, I mean, this is making, this is
globalization.
This is, you know, you're going direct to the manufacturers in China and Chinese apps
have figured a way to sell into these markets where they used to have an intermediary.
That's globalization.
It's coming at a time when everyone's talking about decoupling China from the economy.
And you know, countries are worried about it.
But what's really happening on the ground is quite the opposite.
Yeah, I think we should also mention that Timu has some of the same political problems
that TikTok has.
There's some concern about data mining and things like that.
The company's ownership is kind of hazy.
If you read in John Herman's piece, he's like, the brand is headquartered in Boston.
It has a sister company, Pin duo duo based in China, both owned by a company called PDD
Holdings, which is publicly traded and was headquartered in Shanghai until this year.
And now it's headquartered in Ireland.
Yeah.
So that's a lot of, I don't know how to feel, because you unpack that.
I mean, the TLDR is that, yeah, it's basically Chinese.
But, yeah, there's obviously a bunch of regulatory arbitrage going on here.
Yeah.
Okay.
So it's still, it's just Chinese companies.
Do you have any kinds of Chinese?
If it becomes a major cultural phenomenon, as it does seem to be doing, then I'm sure
the China hawks in Congress are going to start making noises about it, because that's what
they do.
But I mean, while social media and TikTok may be controversial and we can wring our hands
about the children-
There's nothing more American than shopping.
Yes.
That's what I was going to say.
You can't keep Americans away from like $3.99 for a shelf you can install into your kitchen
for reasons to put your sponge or something.
That would be unconstitutional to take away my right to cheap stuff.
Don't forget Congress.
Quite right, too.
Yeah.
I want to talk about the less crappy end of Chinese import markets in the form of extremely
high quality handbags.
We can do that in Slate Plus.
But for the time being, we should probably have a numbers round.
Emily, do you have a number?
Yes.
I was this number.
I wanted to do it because Felix talked about chicken-saxing a few episodes ago.
I don't know if people will remember.
My number is $6.5 billion.
Okay.
$6.5 billion is the number of male chicks that are killed as soon as they're hatched
each year.
Ah!
Ah!
I didn't know anything about this, but in an article called Save the Male Chicks, which
is just a good title in Vox.
I learned that the poor little cute male chicks are tossed into grinders as soon as they're
born because they're not valuable in the industry because they don't lay eggs and their meat,
I guess, isn't as good.
But now, don't worry, some countries have banned this practice because it's icky.
It's sad to think about the little chicks.
So they banned it like Germany and France.
And also, there are new technologies that allow you to sex the chicks in the eggs before they're
born.
Oh, you see, is this artificial intelligence putting chicken-saxes out of work?
Maybe.
I don't know.
Maybe.
But in the US, there's no push for this.
So we're like very behind the curve on no one cares about the male chicks in the US, but
maybe they will if they read this Vox piece, Save the Male Chicks, but you can't eat
your own.
But we're not really saving them.
We're just preventing them from being born in the first place.
Right.
You could have a whole pro-life kind of like really deep debate.
You could get really political with it, I suppose, if you wanted to.
If you wanted to.
Elizabeth, what's your number?
My number is 450,000.
And that's the number of tech layoffs.
A guy named Roger Lee is catalogued on a site called layoffs.fai.
That just operates within the tech sphere.
And he started at the beginning of the pandemic as just kind of a spreadsheet.
And now it's sort of turned it into a business because the government doesn't really provide
really granular data on layoffs by sector.
So if you read a time story about layoffs or something, it'll probably quote layoffs.fai.
But there's a profile of this guy in the Times.
And he seems like a just very optimistic, sunny, Pollyanna type.
So the silver lining for his layoffs business is that he's starting another one that just
covers compensation for tech executives, which is kind of like the flip side of the
layoffs piece of it.
And recruiters are using the layoffs piece of it to find new engineers and new labor.
So he has to do this.
So he has to do this.
I found this guy last year.
And usually I'm not one of those reporters, but I'm just saying I profiled Roger Lee last
year.
And I also wrote about the launch of his compensation site.
I just, we can even cut the new times is very late to Emily's story.
They're just copying Emily.
No, their story was really good.
Like the words available to them.
But yeah, he's been doing this for a while.
But also read, but also read Emily.
Yeah, if you want to be ahead of the curve, subscribe to Axios markets.
Laoste.f where is the new fucked company.com.
And it's true.
It's so interesting with layoffs because you know, used to be people were a little embarrassed
about getting layoffs, but getting laid off.
But now people, as soon as they're laid off, they like, they post about it.
And then there's always these spreadsheets, not always, but often people within the company
I'll make a big spreadsheet of contact information for everyone.
And then yeah, and then the recruiters get ahold of it and reporters too.
And it's all very transparent and nice, especially in tech.
Talking of layoffs, my publicist at Harper Collins got laid off last week, which was
very sad.
And it's the launch week for my book.
So my shameless number this week is 32.19.
That's the number of dollars that you can buy the audiobook of the Phoenix economy for
if you go to libro.fm.
A lot of people don't realize that you can buy audiobooks just on their own.
You don't need to buy some expensive, weird Amazon, audible subscription thing.
You can buy them from independent bookstores.
It's basically the same thing as bookshop.org.
You can buy this audiobook and support your local bookstore, libro.fm.
It costs $32.19.
And you support your local bookstore.
And you support me.
And it's very good and it is read by me.
So if you are a slight money listener who likes listening to me, then please buy my
book at libro.fm.
That would be lovely.
Thank you.
And people, if they don't buy the audio, they could buy the regular book.
And we're going to talk about it next week, right, Felix?
Correct.
We had too much to talk about this week, so we couldn't do it this week.
But we'll talk about it next week.
So buy it today, get it delivered by Amazon to your house.
On Tuesday.
By then, by probably Saturday or Sunday.
It will arrive on Tuesday.
It will arrive on Tuesday.
Okay.
Or by having your local independent bookstore.
Then cram so that you're ready for next Saturday's slate money.
You'll have thoughts.
You can email Felix your questions ahead of the episode.
Exactly.
I have written a bunch of bits and pieces that you can read to prepare on axios.com.
If you just go to my author page, you'll see a bunch of those.
And there's a piece in the Boston Globe, which is kind of excerpt as well, which you can
read.
And I think of, airmail hasn't accepted.
Anyway, there's a few different places.
But come back next week and we will talk about the Phoenix economy in much greater detail.
So until then, thanks for your emails.
Let me know what you want me to talk about the book.
And thank you to Patrick Fort for producing.
And we'll be back on Monday with slate money succession.
Twitter is under new ownership.
Elon Musk has arrived at Twitter's San Francisco offices.
And he's got big ideas about how his platform should be.
I believe in the free flow of ideas.
Is someone you don't like allowed to say something you don't like?
That is a sign of a healthy, functioning, free speech situation.
Except maybe for one Twitter employee who does just that.
Open up my phone, open up Twitter.
One of the first tweets I saw when I opened the app was from his new boss.
I'd like to apologize for Twitter being super slow in many countries.
The app is doing more than 1,000 poorly-batched RPCs just to render a home timeline.
I was like, this doesn't make sense.
So he responds in the free flow of ideas, tagging Elon for effect.
I spent six years working on Twitter for Android and can say this is wrong.
Turns out, there are limits to what Elon will tolerate on his platform.
He's fired.
From Wondery comes a new series, Flipping the Bird, Elon vs Twitter.
A story about what happens when the richest man on the planet decides to acquire a powerful
social media company in the name of free speech.
Or is this all just about Elon?
It really just felt like, okay, this really is just a platform being ruled by a dictator
who does things on his own whim.
It just felt like everything he was kind of descending into chaos.
I'm Jonathan Brelock.
I'm Draw Milligan.
And I'm James III.
And we're the hosts of Black Men Can't Jump in Hollywood.
It's a comedic podcast that reviews films with leading actors of color and analyze them
in the context of race and Hollywood's diversity issues.
Yeah.
Listen to new episodes on Mondays.
Find us wherever you get your podcasts.
I don't care where you get them.
I just want you to listen.
Threaten the people we need them to listen to.
Oh, okay, okay, okay.
Sorry guys.
Listen.
Listen to us.
Yeah.
Put on a happy voice.
One, four, ten, I say.
No one.
I mean, can't jump.
It's Hollywood.
It's Hollywood.
Hollywood.