Some More News - Silicon Valley Bank, Financial Nihilism, and EVEN MORE All Caps Tweets

Episode Date: March 17, 2023

Hi. Kyla Scanlon (@kylascan) joins Katy and Cody to talk about what doomed Silicon Valley Bank, how venture capitalists exacerbated the crisis, "woke banks," and if it's possible to bring down inflation without people losing their jobs. Support us on our PATREON: http://patreon.com/somemorenews  Check out our MERCH STORE: https://www.teepublic.com/stores/somemorenews?ref_id=9949  SUBSCRIBE to SOME MORE NEWS: https://tinyurl.com/ybfx89rh    Subscribe to the Even More News and SMN audio podcasts here: Apple Podcasts: https://podcasts.apple.com/us/podcast/some-more-news/id1364825229  Spotify: https://open.spotify.com/show/6ebqegozpFt9hY2WJ7TDiA?si=5keGjCe5SxejFN1XkQlZ3w&dl_branch=1  Stitcher: https://www.stitcher.com/show/even-more-news   Follow us on social media: Twitter: https://twitter.com/SomeMoreNews  Instagram: https://www.instagram.com/SomeMoreNews/  Facebook: https://www.facebook.com/SomeMoreNews/  TikTok: https://www.tiktok.com/@somemorenews  If you're looking for an easier way to take supplements, Athletic Greens is giving you a FREE 1-year supply of Vitamin D AND 5 free travel packs with your first purchase. Go to https://athleticgreens.com/MORENEWS What's better than getting one pair of Shady Rays and not worrying if you break or lose them? Getting two! Go to https://shadyrays.com/morenews and use code morenews and for a limited time, when you buy one pair of Shady Rays, you'll get a second pair FREE. Get a 4-week trial, free postage, and a digital scale at https://www.stamps.com/morenews. Thanks to Stamps.com for sponsoring the show!

Hello and welcome back to even more news the first and only news podcast my name is Katie Stoll. Hi Katie thanks for welcoming me to the podcast you talked about just a moment ago. I'm Cody. Hi. Hi, Cody. You're so welcome for that intro and welcome. And now I'm going to introduce and welcome our guest, writer and podcaster Kyla Scanlon. Hello, Kyla. Hey, thanks for having me. We're so thrilled to have you because your focus is on analyzing the economy from more of a human-centric lens, which I find deeply refreshing. And it just so happens that this week we will be talking about the economics. No, what's going on? The economics. What's going on economically? Explain it.

We're just all as concise as possible. And before we get to know you a little bit, we're going to celebrate some holidays. Because today, the day we're recording, Thursday, March 16th, everything you do is right day. Which is a relief because I thought I did a really bad job starting this show, but I didn't. No, you did a great job. I did. really bad job starting this show, but I didn't. No, you did a great job. I did. Everything was right. I'm lucky because apparently this comes the day after everything you think is wrong day, which would have been yesterday.

And I'm really glad that we're not recording this yesterday. Was that too confusing? It's fine. Everything I do was right today. Yeah, it was not confusing. Or if it was confusing confusing you meant to be confusing right yeah and friday march 17th actual holiday alert sirens alert sounds saint patrick's day should i do my irish accent can you i don't know let's see a cultural no

cultural and religious celebration commemorating the death day of the foremost patron saint of ireland everything i do is right everything i do is right yeah don't worry we're not done oh friday march 17th is also world sleep day a global call to action to organize sleep health awareness activities. So, you know, do that. Yeah. Do that. Sleep better. Sleep better.

Actually, that's a tough day. I think that that is not a well-placed holiday. And I'll explain why. Alcohol affects your sleep. And St. Patrick's Day is, you know, a drinking day. It doesn't have to be. Not everybody drinks, but I think a lot of people do. So that's a hard day to start your healthy sleep pattern.

Also, being a Friday, people tend to go out. Just some notes for the people that put this calendar together. Oh, it's the same day. I thought it was the next day. The same day. The next day, that would make a little more sense. But maybe you can use St. Patrick's Day to get to sleep earlier. But maybe you can use St. Patrick's Day to get to sleep earlier.

Yeah, if you celebrate St. Patrick's Day starting too early by noon, you'll be ready to celebrate World Sleep Day. Right. Yeah, that's not a bad. Get to bed earlier and it will be good sleep because you've been drinking all day and it'll be the bad kind of sleep. But you'll get up earlier because, again, you've been drinking all night. And then just power through and then go to bed early. Yeah. And then everything's fine.

We do have a bonus holiday. I know this is a lot of holidays for... We don't normally do this many, Kyla, but bear with us. Because Thursday, March 16th is also Lips Appreciation Day. Yes, I said lips. Where would all those lovely teeth we paid a bundle for be without a lovely frame do something nice for your lips today buy a lip balm better yet kiss somebody ruth makes some excellent lip balm order some today this is from wellcat they're promoting their wellcat lip balm oh that makes sense wellcat wants to shill their their their product okay where would all those lovely teeth be

without a frame they'd be in your mouth still they wouldn't have moved so you might not have lips but you'd still have them in your mouth skin around it the lips aren't the only thing there i'm saying your your teeth would be fine without lips but you know get that lip balm i guess you know if you're gonna get a lip balm you might as well go and get the thrive cosmetics lip balm they are no longer a sponsor for us as far as i can tell but i love that lip balm and if you're going to get a lip balm, you might as well go and get the Thrive Cosmetics lip balm. They are no longer a sponsor for us, as far as I can tell. But I love that lip balm. And if you tell them I sent you, maybe they will sponsor us again. This is the real reason.

Come back, Thrive. I meant it when I said I loved your products. Why don't you sponsor us anymore? You were so excited to get that, too. I was so excited. You know what? I blame you, the listeners, for not using our promo code. All right.

Can she say that? Use the code Katie sent me. Put in a fake promo code. They'll be like, why are 100 people buying these Thrive cosmetics that Katie sent me? Tag our show somehow. Do a social. Tell them the people want Thrive balm bully them i was gonna say i

was gonna like get a little i'm not gonna say what bully them into sponsoring us again hey whatever works in this economy perfect pivot hi let's talk about the economy so as listeners of this show no i'm not a numbers person I keep trying to pay attention to finance news, but it can be really stressful for me because it's almost like parsing a foreign language. And then a while ago, I guess it was last summer, I read your vibe session post. And I'm sure you talk about this all the time, but we're going to talk about a little bit. But I was really excited because I finally found somebody who was writing about what I was experiencing in a way that I actually understood. And with this SVB debacle, I have been thinking about it again, because it's,

it's like something happens and then everybody takes to Twitter and is really upset, angry, questioning, and they're throwing out all of their different ideas of what will definitely happen. And then it becomes a self-fulfilling prophecy almost of it. So I've been thinking about this for a long time. Where is this recession? Is it actually going to come? Will it, won't it?

Are we in it? So anyway, I'm acknowledging that this is how I found you and how you came to be here because I found it very refreshing. Is this a come easy to you or is this like a purpose, like a calling for you? Is it fun for you to make this digestible for us, for the rest of us? Yeah, yeah, no, it's super fun. I think like, you know, what we're talking about, like is the recession company coming? Like what happened with Silicon Valley Bank?

A lot of it's really absurd right and so i feel like there's a big need to explain it in a way that sort of addresses the absurdity but also explains it concisely without like these big hot takes of what everything means and how the world's gonna end um so that's what i try to do is like strike that balance between humor and fact yeah yeah that's really helpful because i know like so on our show and our other show we glibly often refer to how money is fake and it's like a made-up thing and there are all these rules about it they're all made up we made up this game with money that runs everything um and that's a little reductive but there's also you know i think some truth to it. And it's helpful, I think,

when someone's like, this is all very silly, it's silly stuff, and sort of is able to explain it in a way that maybe isn't as reductive as saying money's fake and stupid. And that's the end of it. Yeah, well, I think it's actually interesting, because the what happened with SCB brought up the whole concept of like, what the heck is money? Like there's a piece in the financial times being like, do we know what a dollar is wrong? Like, and there's also a huge debate, like the do deposits make loans, do loans make deposits within the banking system. And so like the idea that money is fake and not real, it's like true. And we should have more conversations about that because it's totally valid for people to be like what is this because nobody really really knows yeah yeah and there's all these layers on top of it that

like obfuscate that fact even more um with even more made-up bullshit um so i just for all our listeners expert approved uh opinion that money is fake so we're gonna start um signing you in all of our videos um yeah it's frustrating because what happens in the stock market we'll say is not reflective of normal people's lives what happens with all of these rich people that run our financial systems what they're doing with money is so beyond the pale, so beyond what most of us can even have time to think about, to learn about, because you're dealing with the very real realities of your day-to-day life and inflation. And how am I going to pay for my utilities? How am I going to pay rent? And meanwhile, people are gambling with essentially,

I mean, just playing games with money that's made up and profiting off of it at other people's expense. Anyway, it can be very hard to unpack for most of us. It's tough. And it's true. Like there's, you know, incentives in place to gatekeep some aspects of the financial system because it's more profitable that way. You know, it's really unfortunate. Yeah. And there's like, I don you know it's really unfortunate yeah and there's like i don't know there's so many if you have there's like a threshold i feel like if you have like if you get like a certain amount of money and you just find somebody who knows what they're doing you don't have to work ever again uh like in a way where it's like yeah you uh have somebody

take care of this and then it just makes money unless something terrible happens and then it all comes crashing down but it just seems like yeah they're all these sort of like it's so profit motivated in a way that like that that doesn't mean good making profit doesn't mean it's good or that you made it in a good way or that it has a positive effect it just means that you have you personally have more money um and there's so many incentives to only strive for profit and growth and it just seems like it's just i mean that's the main incentive isn't it yeah that's the thing is that there there has to always be growth otherwise it's like a failure a failure and that is hard to wrap your mind around because it's like, can you just keep growing indefinitely?

And yes, at what cost? That's at the cost of, you know, individuals. Or in this case, this recent case, it's at the cost of apps that make meetings better. That's like what all these guys are freaking out about, like their investments in apps for more organizational tools, right? Hello, Liquid fans. If you're like me, you grind everything down

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Incidentally, I've broken over 400 pairs of sunglasses, but not anymore. That's because I now have Shady Rays. Their high quality sunglasses are both affordable and durable, so I can attempt all the backflips that I want. Sometimes my glasses fly off my head when I land on the side of a hill or hit a mailbox, but it's fine now. And that's because if you lose your glasses, Shady Rays will send you a second pair for free. And what's better than getting one pair of Shady Rays and not worrying if you break or lose them? Getting two. So go to ShadyRays.com slash more news and use code more news. And for a limited time, when you buy one pair of Shady Rays, you'll get a second pair for free.

That's S-H-A-D-Y-R-A-Y-S dot com slash more news. Code more news to get a second pair of Shady Rays free. Shady Rays dot com slash more news. Code more news. Look cool while flying through the air. news look cool while flying through the air. So, okay, we are going to talk about Silicon Valley Bank. At this point, I assume that most, if not all of our listeners have heard the basics, but to start, can you walk us through a little bit about what has been going on? Yeah. Yeah. I mean, there's a lot that's been going on, but SVB was

this bank that primarily served tech customers, so startups and venture capitalists. And SVB had made some pretty poor investment decisions. So they had all these securities that were losing a bunch of money because the Federal Reserve began their hiking interest rates path. And SVB was like, well, we don't like really need to hedge. Like we don't really need to protect against the downside here. Things are going to keep on moving and grooving. And then people got a whiff that SBB was pretty much insolvent and has been since September. And all of a sudden you had venture capitalists screaming on Twitter, all caps tweets saying, take your money out of here,

adventure capitalists screaming on Twitter, all caps tweets saying, take your money out of here, explode, you know, social media risk via bank run. And then yeah, SVB got taken over by the government and the government had to put together a certain sort of package. So other banks wouldn't implode. And now they're up and running again, but it was, it was a crazy couple of days. And there's like different exposures that I can talk to. Like, you know, they had a really concentrated customer base with these tech people. So they didn't have diversified deposits. They had made terrible investing decisions. And then they were also really exposed to what the Federal Reserve was doing to try and fight inflation. If people hadn't started screaming from the rooftops, would this have had the same spiraling impact i don't think

so i mean they've been since september so it's kind of right right it was really uh social media driven which is unfortunate and like one guy even had a tweet where he was like yeah me and the buds got in a group chat we were like what if we just got something run and it's so it's like things like that where you have people who are profit motivated um who are just interesting they will face consequences for their actions i hope so i mean i i wrote about this in my newsletter today actually like this concept of the take economy where like if you have the biggest loudest opinion people are going to pay attention to if you're rich which is like what these are so i mean i don't know like it will be interesting to see if our like understanding of vc evolves like how we

think about these people that are supposed to be funding our future and the decisions that we make to like just produce apps or like invest in apps that have us have more productive meetings versus like actually good things yeah yeah it's wild that they see themselves as so important to like the economy at large and society at large because like i mean i think one of the examples you alluded to was like a jason calacanis type of person a david sacks maybe a lot of elon musk's weird like sycophantic friends who pretend to be like concerned about like the working class and like working people, like they're not going to get paid. They're not going to get paid. No, you're not going to get your money.

That's what you're worried about. And it's so transparent and you still have all these people believing them and like, just like, yes, give me, give me the likes, give me like, tell me, tell me what to do. And I, like you said, like I hope that this is at least for some people an eye opener that like, they're not actually like, not only are they just very profit motivated and selfish and like, it's all about just like they, they have investments that they wanted to get back, even though they probably knew about the, the cap on insurance and didn't

care and took the risk anyway, and then got that risk taken away because they were the loudest but hoping that just like some people are like maybe these guys don't care and aren't doing anything actually innovative or interesting like what's the most like i can't even think of a thing that any of these guys have done or like invented or innovated that that has actually like affected people's lives positively and i don't even know when yeah no i mean like some of them like used to be founders or whatever but like the concept and like have made great stuff and like when we talk about vc like obviously it's a very big group of people right not everybody falls into the bucket whatever but i do think like the the concept of like these capital allocators

like having just being powerful because they have a bunch of money and then being able to dictate to a large direction like what ends up being our future and how we interact with technology you know the ai boom the crypto boom uh like how they fund that sort of stuff and what direction the economy and ultimately our jobs and like how we interact with each other ends up going like it's a very powerful position and i don't think that we really reflected upon it until this moment where it's like why can these people be screaming fire in a crowded theater and that be okay right like should we bail them out like why didn't they get together bail out silicon valley bank like how all the big banks just bailed out

first republic right so i think there's a lot of unanswered questions about their behavior Like, why didn't they get together, bail out Silicon Valley Bank, like how all the big banks just bailed out First Republic, right? So I think there's a lot of unanswered questions about their behavior. Yeah, they're yelling fire in a crowded theater. And then, like, they're also getting their ticket refunded and then a free private screening. Right, yeah. interesting i mean like i know twitter was around in 2008 but we obviously are operating in a very different space than we ever have been in the past and how that fuels and affects everything that's happening i'm just reiterating what you're saying with different words but you know this is the first this this this sharing of information and contagion of panic is a new thing to add into this

already complicated soup of different stuff that's going on all at the same time yeah they're also the same people it's interesting this is like the only time they freak out about anything they don't care about anything else um and in fact they will like resist like doing anything for anybody in any other like crisis or situation but it's just this is the one that like pings them because yeah it cost them some money or it didn't actually so is and we'll talk about bailing out and what this bailout means and how that looks. But, you know, is this incentivizing? I think maybe we established that it is to continue making risks because the government, you know, because we'll let it happen. We'll fix it. Yeah. I mean, it's not technically a bailout, right? Right. So, yeah, we should maybe

explain what it is. Right. But like it technically is. So like that's the hard part about this because the treasury is involved. Like it does end up like fiscal authority is there. So it kind of ends up being a bailout. And what I mean by that is like the Federal Reserve, the FDIC, who's in charge of like deposit insurance and things like that. And then the treasury all got together and they're like, don't worry, everybody, like we're going to step in and we're going to make sure that everybody has liquidity. So everybody has money.

And they put together this thing called the bank term funding program. And so if any of the banks need money, they're like, just come to us and we'll help you. And that's backstopped by the treasury. And also they lifted the cap of this 250K deposit. Like, so normally how the FDIC does deals with banking, it's only 250K up to 250K of deposits are insured. But they were like, don't, no, we'll insure everything. And so there's two consequences of that. Number one, with the deposit insurance, it's essentially implicitly infinite now. So Silicon Valley Bank actually has on their new website, because they're up and running again, they're like,

all your money will be insured. And it's wild. Like it's so irresponsible. That's so bold. Oh my God. I didn't know that. And then with the BTFP, so this bank term funding program, any of the banks can go there and like the losses that they have on these securities, which there are a lot of losses on these securities are going to be essentially backstopped by the Federal Reserve. Not 100%, like there's still going to be some losses realized by the banks, but it's definitely like, you know, we got you, everybody. Right. It's like negligible to them in a way.

It's like, yeah, it's like a little bit, but it's ultimately fine. That's so wild. They will learn nothing. Oh my God. Just so we have a sense of the consequences, what would have happened if they didn't say, we're going to guarantee everything, $250,000 is the cap. Who would have lost? Would thousands, tens of thousands of people have lost their jobs because of payroll?

I guess we don't know, but what do you see as being the main few consequences? How accurate were the all-cash tweets? Silicon Valley Bank was funding a lot of different payrolls. So not even like their own customers, but they were doing payroll for a bunch of other companies. And then you just had, you know, billions and billions of dollars tied up into there. So I think there would have been like some pretty extreme consequences. I think the more extreme consequences would have been for like what that means. Right. So like the contagion that we're seeing now, we're still seeing contagion with First Republic, another California bank that is not doing well, just got 30 billion injections. Yeah. Yeah. But like we would have like people would have been like, oh, my gosh. And then you would have seen massive bank runs at all these like community banks, I think.

And that would have been really bad. So the Federal Reserve and the Treasury and fdic did what they had to do quickly like really impressively but yeah the contagion would have been pretty stark i think so as far as the contagion are we out of the woods is there going to keep being some spreading happening like what's what's up here it's a good question um and remember you can't be wrong today so anything you say is right i mean if i like ideally but yes the contagion is over but i think like this injection into first republic like that was pretty crazy so the fact that the big banks went to their competitor and they're like here's 30 billion my guy like no worries anymore the fact that they did that is like what's going on

with them like why did they feel like yeah backstop a bank and then also credit suisse which is you know yeah always causing issues just got a dollar injection from the swiss government um and so like you have these and and i think like another worrying thing is that like i was talking about these smaller banks like these local banks um i think you could worrying thing is that like I was talking about these smaller banks, like these local banks. I think you could, and this is like, it's not so much contagion, but consolidation. So people could pull their money from these local community banks and go to like a JP Morgan or go to a Bank of America, which did receive, I think, 15 billion in inflows. And if we see money exit local communities, like not be at local banks, be at these big behemoths, like what does that mean for how local businesses are funded?

What does that mean for how a hairdresser can get a loan? Can they get a loan from one of these big banks? And so I think that's what I'm more worried about. It's like not even the contagion that could happen, even though that's concerning, but the consolidation of assets at these behemoths. That's a really good answer and definitely something to worry about. And I hadn't thought about it like that before. Yeah.

Oh, boy. I have a question that I think is on everyone's mind, and we haven't talked about it yet. Just how woke were these banks? Thank you. Yeah. That's the most important question to ask, honestly. I think that's pretty silly.

Oh, hot take. It's very silly to say that the bank is woke. Yeah. And if you look at the board or whatever, it was not diverse. So I think that's not accurate. I think maybe we should read this little quote from the Wall Street Journal op-ed published by Andy Kessler this week. Quote, in its proxy statement, SVB notes that besides 91 percent of their board being independent and 45 percent women, they also have one black, one LGBTQ plus and two veterans. one black, one LGBTQ+, and two veterans.

I'm not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demand. End quote. So that's kind of been wrapped up in this bank being too woke. I'm sorry. If that's the extent of their diversity measures then they absolutely can't be called woke this is just there's so much to be said there about that that's so i didn't read that passage that is you did not um uh i know that everyone's complaining about woke banks and sometimes when

a topic like that comes up my brain shuts off and i just can't engage uh even if it's like silly and just like looking and pointing um because like okay what do you mean like i'm not saying 12 white men would have avoided this mess but the company may have been distracted by diversity demands so you are saying that you think that 12 white men would have avoided the mess because they wouldn't have been distracted by diversity demands i mean they certainly don't seem to be too distracted by it also if you're saying uh quote one black yeah whatever uh but like one lgb one lgbtq plus and two veterans those can still be white men yes yeah our veteran veterans are part of dei yeah is it is like also like is veteran woke now is that what it means that if you're you were if

you're a veteran you're woke or hiring a veteran you don't have to have the answers to that it's a rhetorical question veterans isn't this it's just absurd and i don't spend more time on it like this is why we don't need to spend any more time on that unless kyle if you have any uh uh woke thoughts no i mean i think like have you ever read society as a spectacle like absolutely not no so it's really good like it's 70s but he talks a lot about how we live in an illusion of reality versus reality itself and we get so distracted it by like we get distracted by the image of images and so i think that's kind of what's happening

here is that these there's this underlying goal for whatever reason to distract from what's actually going on by focusing on this like thing that essentially doesn't matter to incite rage in one direction um and it's a political tool at the end of the day 100 percent um in every sector too uh if no matter what you're talking about the economy uh uh military like whatever it is just say woke and then you don't have to talk about the actual problem right right woke school lunches i think was a topic yesterday oh good paying oh yeah but that's not going to solve your well yeah feeding kids school lunch doesn't doesn't solve doesn't solve child hunger yeah oh good to know now you know not the more yeah now you know okay you know what here's something

you're about to know we're gonna take a quick ad break oh no i know that for an advertisement not from thrive's cosmetics for a product no for a product get in there thrive come on but other brands that we like. Yeah. These are also good, too. As a Hollywood show business professional, I need to send out a lot of slam poetry cassette tapes. Sometimes I'll send 50, maybe even 60 tapes just to one producer or actor. It's a small business of mine, which is why I use stamps.com. They give you access to everything you need to ship packages or letters for your small business. All you need is a computer and printer and they will do the rest. You even get rates you can't find anywhere else,

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plus free postage and a free digital scale no long-term commitments or contracts just go to stamps.com click the microphone at the top of the page and enter code more news and we are back as promised for even more news i was refilling my tea and jonathan you had an idea of what we would talk about next. So take it away, Jonathan. happened uh without and i and i didn't get like i you know read some articles and there is a lot of debate there was a lot of like oh this might have been not as bad or it might have not impacted it at all what do you think um there was just like a clear lack of regulation like silicon valley bank was like silicon i don't sorry i always say it wrong, but I like silicone. No, like I know it's whatever, it's like the same in my head. But anyway, so like they essentially advocated to not be regulated

very deeply by the Federal Reserve and like by FASO 3 and by all these other things. And so they ended up sort of navigating a lot of regulation in general. So I think additional regulation would have helped here just even to flag this stuff, But also like, you know, their credit rating was super great until all of this happened. So the big question is like, who's really looking at what and would regulation help if no one's looking at the right thing? Right. One thing I read was that even if that specific regulation that was rolled back in 2018 wouldn't have stopped this, there was a general, like, as the Trump presidency went along, just kind of a lack of interest from the Fed and like, you know, keeping up with these banks and making them do stress tests, even if they weren't required. And it just seemed like kind of a free-for-all is that also true with biden as well like has anybody been looking in or now that those have been rolled back what could have been done differently i guess is how do you actually prevent something like this from happening beyond uh

taking away jason calacanis's twitter account or at least taking away the all caps lock button. At least the caps lock, yeah. The banking system is weird, right? Because like they're essentially designed to make money on our money, which is how more money is made. But it also creates a really strange incentive model for them to like not pay people a lot on their deposits

and then to also like give out a lot of loans or invest in really theoretically non-risky securities but risky if you don't hedge against them so i think like maybe it's time to sort of think about the model of banking and it's like this for-profit model the best system we could have like like that sort of stuff might be important to address and like does the federal government essentially own the banking sector at this point? Would even something like, I mean,

it's not going to be the exact same thing, but like we've talked about even just like basic things, like making sure that like you can do like postal banking and stuff like that, where there is a little more attention and oversight and like internal regulation to just ensure that like people's money is taken care of and easily accessible. But yeah, I mean mean these are all changes that i feel it's like seismic shifts in our financial system are feel further away than getting health insurance health care not health

insurance or child care or child care anything that we desperately need. Do you guys have more questions about SVB before we pivot to other things? I think I still don't quite understand it. So I think we're good. Yeah. I don't think anybody like totally understands it. There's a lot of like, this shouldn't have happened, but it did sort of conversations. Yeah.

I don't know. It really is breaking up a lot of questions about like the financial landscape. Because what also happened with the run up that we had in the stock market is there was like a lot of little neobanks that popped up and got a lot of funding from the venture capitalist. And like crypto is like this promise to transition away from traditional banking. And I don't know, it just like it brings up more questions and answers right now for sure yeah yeah it seems so chaotic and like like a lot of people agree on certain things but there just seems to be so much debate on the details and like what actually caused it whether or not like what was done was the right thing to do or helped or

they shouldn't have done like whatever it just seems like nobody i mean like every subject nobody agrees um why or uh why it happened what should have happened and how to fix it and anything um which i don't know it doesn't seem to bode well for future situations like this it's it's pretty alarming uh because, as you said, this is not, that's not contained just to this story, this topic. That's true across the board about everything from big issues to the tiniest, most inconsequential issue. There is a diversity of opinion, which is the nice way to put it of, and there's never seems to be a consensus. My instinct at first is this is another story where

you have to wait and see how things play out as you learn more information yeah well i think there's especially with like i think with topics like this too specifically like katie you were talking earlier early on the episode of just like yeah it's kind of like it's all a foreign language to me um yeah i just don't get it and some of that is kind of by design some is just like the nature of like of the system and i think with specifically economic stuff it's uh it can be difficult to parse because if you don't really know what you're talking about and don't really know the details you have a kind of idea you're just watching all these people who say that they know what they're talking about like disagreeing with each other really aggressively and like making points that make sense like oh they said this okay that kind of makes sense and then someone else like well no

it's not that it's this and like oh that also makes sense so it's really hard to even like parse if you're just listening to people uh who do know what they're talking about talk about this yeah the ecb president so the european central bank they are their federal reserve she came out today and she was like nobody knows where rate hikes like are gonna go so even them who have like all the information theoretically like all the knowledge the smartest people in the world they don't know so honestly like that's a little more comforting that they're at least able like willing to say that like yeah we don't know. Honestly, that's a little more comforting that they're at least able, like willing to say that. Like, we don't know.

Very much respect that. Because we're trying to figure it out. Instead of like pretending like they know and like, don't worry, it's all under control when it absolutely isn't. Yeah, well, that kind of takes the wind out of my sails for my next question. Oh, God. Are they going to keep raising rates? Yeah, it's your question. We don't know.

No, we don't. And I think there's so many different threads to pull on with that. You could honestly talk for hours about even just whiteboard it out. But what happened is the Federal Reserve was raising rates to fight inflation, which is the most blunt tool in the world. They're essentially taking a hammer to the economy and being like, it'll hit something. And now it hit the banks. And they're like, oh, actually, financial instability is a huge part of raising rates. And we have to make sure that that is stable before we can continue probably on our hiking path. But if they don't raise rates next week at their meeting, then will it look like

a crisis of confidence? Like, will it be an admission that things are way worse than anybody actually thought? And we still have inflation, right? Like we had a CDI print, which is like a measure of inflation that was pretty hot still. So I think that's like going to be the hard part is like we still have inflation. The Fed's toolkit to fight that is raising rates. Raising rates could cause further harm to these banks that can't get it together, but they can't not raise rates because of inflation. the argument against it is like, that will look like we're in crisis. Oh yeah. People will be upset on Twitter and writing their articles about it. And that will feed the feedback loop that makes me want to pull my hair out.

I'm not going to, cause it would hurt, but that is ridiculous. Yeah, no, it's, it's wild. And it's, it's a limited tool. Like I, you know, I've interviewed Mary Daly who works at, she's the president and CEO of the San Francisco federal reserve. And that was like a key thing in our meeting. And she's a limited tool. Like, you know, I've interviewed Mary Daly, who works at, she's the president and CEO of the San Francisco Federal Reserve. And that was like a key thing in our meeting. And she's like, yeah, pretty blunt. And of course, she said it much more eloquently than that. But I think that's like a big thing is that this monetary policy toolkit, which is primarily

used for price stability. So fighting inflation has all these financial instability consequences. And we don't really have a great answer for that other than the Federal Reserve doing an element of quantitative easing. It's not necessarily quantitative easing, so going into the bond market, but providing a lot of support to markets through this BTFP program that also could serve as countering their rate hikes also. That was a lot yeah yeah i was gonna ask yeah what are other tools than a blunt tool oh no i got everything i understand everything you said that could have been employed i was all i was gonna bring up the bt i was already gonna bring

that up so i'm glad that you got to it is it possible to combat inflation without hoping a bunch of people get fired? Yeah. That's a good question. No, it's so fair. And like that's Employee America, they're a think tank. They have a lot of really good research on this. But yeah, I mean, it's totally possible. So right now we're relying on the monetary policy toolkit to fight inflation, raising

rates. And that essentially makes it more expensive to be alive. And then companies are like, dang, it's really expensive to run a company. Better fire these people. And so the Fed is projecting that unemployment will go up and that'll be good for their inflation fighting goals. But we also have the government. So like fiscal policy could step in, whether that

be raising taxes, expanding the labor market. So we actually have more labor supply, which is what we need. We don't need people getting fired right now. That would be extremely helpful. And also fighting those inflation goals versus just relying on this pretty indirect transmission mechanism of raising rates. So that's what Arkansas is trying to do by legalizing child labor, is they're just trying to bring down inflation to make kids work in factories. Yeah, they're using a tiny hammer on a child's leg. So proportionally, it's just as bad. Great point, Jonathan.

About the importance of child labor i i'm more referring to like immigration reform and uh support for working parents and things sure sure yeah potato potato i wasn't suggesting you were pro child labor i want to make that clear i just wanted to clarify smart expert approved uh money is fake. And child labor, maybe. We're hurting all the topics today. This trend of buy now, pay later loans. This is a pivot away from what we were just talking about. But, you know, it can be appealing to people that don't have that much cash, also could be very predatory especially for people of

color other lower income communities is it predatory this is another predatory bubble about to burst and yeah you know oh yeah okay like right like everything should be taken with a grain of salt but yeah like people are very over leveraged right now. Like people, this is not necessarily with buy now, pay later, but like people are starting to default on their auto loans. They're not able to pay back their credit cards. And buy now, pay later has enabled a lot of elements of consumerism where people are like, oh, I'm just going to go buy and I'll like pay it off later.

And our brains can't compute time that well. So like we're like later, we'll never come. But then when it does come, they're still in the same sort of financial situation that they were. So I think it enables a lot of excess spending at a time where people are not able to afford it, right? And it's ultimately very predatory. I feel like all of that doesn't help inflation either. We're trying to cool down things. Instead, you're giving people permission to just keep spending and accumulate more debt. You just mentioned something that is alarming. But yeah, people not being able to pay off. Is that been?

Are we starting to see those kinds of effects in the economy of people not being able to make their payments? She's nodding. Yeah. Yeah. Yeah. And like the Federal Reserve, the Liberty Street Economics, which is the New York branch, they do a bunch of research on this. And yeah, they were like, yikes, especially younger consumers are just totally strapped for cash. And also student loan payments are starting back up. So I think that we've sort of had this free fall excess, like people were locked inside for so many years of pandemic. Now we're all running free and still wanting to spend money. But there's limits to that. Right. And so I think that's the big worry is that people are spending more than they can. But there's also like a financial nihilism thread

that ties through that. So what you all were saying about like, oh, money is this language that I don't really understand. A lot lot of people take that they translate that for themselves it's like money is something i would never understand and it's useless for me to try to understand it so i'll just live way beyond my means and figure it out eventually um and that's like another thing too yeah yeah i can't imagine thinking like that. Wow, what a fantastical scenario in person you've invented. People should get a grip. I have what might be a really dumb inflation question. But I was reading about inflation and how...

I can't remember who the person was who was expressing this viewpoint, but they were like, you can't chase inflation with wage gains. Eventually that catches up with you. So like inflation is not a big deal if everyone is making more money, right? In theory, but then you can't keep chasing and inflation will just keep going up. Is that true? And why is that? That true?

Yeah, no, it's not a dumb question. It's actually a theory, right? So like there's the wage price spiral theory, which is like, think what this person is getting at. So like if inflation is raging, people are going to go to their company, be like, please pay me more. I can't afford to be alive. And the company is going to be like, okay, sure. I'll pay you more, but I'm also going to raise the prices on goods that I'm selling or the services that I'm selling. And then the person who just got a pay raise is like, dang, everything is way more expensive because you're raising your prices. Like, please pay me more. And so it ends up being this endless loop of a wage price spiral.

So you can have wage gains, but if inflation keeps on rising at the same time because companies are raising prices, that's problematic. rising at the same time because companies are raising prices that's problematic um lael brannard who used to work at the fed uh she was the vice chair um she proposed like not necessarily a wage price spiral but a price price spiral like maybe we shouldn't focus on people actually getting paid more but focus rather on how companies are responding to that through raising their prices right like how much should they be able to raise their prices that sort of thing yeah so yeah your person is right like you can't chase after it forever like inflation does need to calm down um but yeah would it be something you could do in amidst that because i feel like whenever like you're talking about scenario we're like okay you need to keep paying employees more um so that

they can live right and in order to pay for that, we need to raise prices. And so then that sort of caused the spiral. But also couldn't the people, like couldn't CEOs make less money in order to pay their employees more? And then they wouldn't have to raise the prices and then people could live more comfortably? Is that a scenario that's possible?

The people up top keep getting richer. Yeah. Wealth disparity has been a really big issue during all of this like um i'm getting a couple presentations sort of like on that topic and i have two charts like i have one chart where it's the top one percent just making bank right now like just doing so well but also people have been able like lower income earners have been able to demand more wage gain so like inflation has actually enabled a lot of people to ask for pay raises and to get paid more

so i think like that's sort of a good thing. But yeah, you're right. Like we have this other side of the coin where wealth disparity is just becoming such a big problem. Like, you know, being a billionaire. It's so much. It's just like I. And again, like it's all these guys who like invest in apps to make their meetings faster. And like, so if you only have meetings for a living, then maybe.

Yeah. Or things like blah, blah blah car acquiring klaxit what the fuck did you just say to me what i just saw yourself john what no i just saw this news story that says blah blah car is acquiring klaxit get the fuck out of here what no what put it in the chat blah blah car this is a lie. You're making a fake website right now to send me. I'm sure these are both real companies doing really valid stuff. This isn't an Onion article. No, it's not.

Look at all the diversity in this picture of their team. Sorry. I used to apply her clax at a small... All right. Good for blah, blah, car and clax it. It's an aside. We really don't need to spend 20 minutes no we won't i'm not gonna read that i'm not quite sure what i'm about to say but at some point it was it popped

into my head so as we're going around our lives in this vibe session over the last few months i've been just struck i recently moved to the mountains um thinking yeah and i love it but uh things are cheaper but not everybody really feels the pinch of it here because like things are generally cheaper, but especially right now, you know, the price of groceries and different things and how inflation is hitting it. But then I go to Los Angeles a lot because work is there and I walk around and it's like people, I mean, I have to imagine a lot of people are just spending outside of their means, but it's like they don't feel it. There's just people having these big dinners, you know, at all the restaurants all the time with bottles of $100 wine and all sorts of stuff and I'm feeling really like there's a disconnect between how people's behaviors

are people's behaviors in the reality of what's happening and and I don't know if it's just people living outside their means people that still genuinely can afford it but I don't know what I'm trying to say except is they're they're not helping things like because it's like we're going to continue to pay the higher prices is what i'm getting at yeah no i think that gets back into it so like la is sort of a funky place uh to look at consumer spending but um because everybody's trying to like it's performative right you want you want people to see you buying a hundred dollar bottle and so on and so forth yeah but like it gets into the concept of financial nihilism too where it's like these people um because there's been a lot of like research about this

like it's like how are people spending so much money when things are so expensive and like it's credit cards like they will have like 10 plus credit cards where they're just taking out loan after loan after loan and they'll pay it back one day maybe um or declare bankruptcy so it's like things right right yeah where um you have over leveraged consumer but it's it's it is wild to me yeah just that disconnect and yeah financial nihilism that's a good term for me to keep in my mind in my back pocket just to pinpoint what it is just a priority is it but you know we live in a world and we're marketed to on all these social media platforms and in our lives. And you it's become expected that you have these things, things that should be luxuries, things that should be a treat. Not trying to moralize here, it's just this is a new era that we live in now where people just spend like everyone's a millionaire.

Yeah. And we used to like i mean this has obviously happened in the past 150 years or so but like pre-industrial revolution like there wasn't a big trend of like spending to consume like spending to have like you spent to subside like you spent yeah um but now it's like we have to have shiny little trinkets all the time um which is like nice like i like tiny little trinkets too but yeah we love gizmos here yeah and like there's like a whole you know other thread though on on like the consequences for the planet of how we yes like our shiny little things um and the spending patterns that those create absolutely and we're incentivized to spend because consumer spending is 70 of gdp which is

how we measured the economy so there's a huge incentive to keep people out there spending money. So the, like it's circling back to the very beginning of our conversation so we can grow. And so we can profit when really like, we should probably sit back and be like, do we need to just chill? Like, yeah. Right. Yeah. We never, that's never on the table of like, we don't, it doesn't need to be this fast all the time and growing at this rate. And what if we calm down and just sort of like figured out how to provide for everybody in a comfortable way. So that then everybody maybe can get a shiny trinket every once in a while. Like that's kind of the ideal, right?

Yeah. I do need to interject that. Obviously when we're talking about this, we don't mean, in terms of like uh podcast promo codes those are there to help you combat the effects of inflation so you know just you know you have to be smart about it guys there's shiny trinkets and there's uh there's practical there's practical good trinkets that everybody you're buying stamps anyway you know you you need vitamins so i guess i'm told we're told anyway sorry i just had to make sure everyone was clear

what we're saying here our promo code still good um do you guys have any more questions for kyla while we have her um i i mean i i'm curious if there's like is there like a policy or or um some like move that you really think needs to happen that like not solve everything but like is there something that like you're really like you're most passionate about? Like we should, we just need to do this one thing and it would help in certain ways or anything like that.

I mean, labor market reform, I think would be awesome. Like rethinking that. So, you know, immigration reform, support for working parents, support for people with disabilities, all of those things would go in a really long way

and like creating a better working environment probably, a more happy worker, and then also helping us fight inflation. Isn't that interesting how it's all interconnected? Yeah, I know it is. You make people comfortable and happy and then maybe they'll be more productive actually and growth will happen

because everyone will be healthier and happier. I have a great idea. Maybe it's a terrible idea. What if, because we know there's going to be more bank bailouts or technical bailouts. Oh yeah, until the end of time. So why don't we match those?

Like, okay, we can keep doing those. We'll keep bailing you out, banks, but then we get an equal you know student debt forgiveness program or child tax program like okay so you need this 200 billion dollars right now that's totally fine but now this these five programs that have been stalled

up for a decade we don't do handouts Jonathan sorry pay for them no that won't work will it they won't do it they got it they don't have that money. Do they, though? Do they? It would be good.

I think an element of this controversial, but an element of those profits should be designated towards social services, because I don't know why they have to be so profitable. Yeah. Not controversial around here. Not. I was like, yeah, you can take it as far as you want to here.

This is a safe space for that kind of talk, not for the other kind of talk. Maybe stop socializing all the losses and privatizing all the profits. This has been really interesting. I completely understand everything now. Yeah, I feel like an expert. I'm so glad that me six or seven months ago was like we should get this gal on the show and then um a bunch of terrible shit happened last week but you were here so it was like wow what a get thank goodness you it could have just been an hour of us asking

you about desantis's pudding fingers. The three, right? Yeah, three. Oh, so you're up on the latest news. Okay, so what we need... Pudding run! So what that just suggests to me is that we need to get you back, but to talk about things outside of just financial stuff.

Oh, yeah. Yikes. I like the Fed. I get called a Fed for a reason, so I'm happy to talk about that. Okay, okay. I like the Fed. I get called a Fed for a reason. So I'm happy. Okay. Okay. Oh, so this is the point in the show where we ask you to promote your stuff, your different,

your pluggables, your things you want to direct people to. Yeah. Yeah. So I have a newsletter at kyla.substack.com. I have a YouTube channel under my name, Kyla Scanlon, TikTok at Kyla Scan, Instagram at Kyla Scan, Twitter at Kyla Scan. And then I have a podcast called Let's Appreciate. And then I work with various news outlets as well.

So Bloomberg Opinion, some stuff with FT, New York Mag. So yeah. Yeah, I really highly recommend you check out her stuff. Highly digestible, entertaining approach to dissecting very complicated topics. Also, you throw in some poetry and like Kowski and stuff and love that. Like, OK, yeah, now i understand this like on an emotional level yes i love that kind of stuff okay that does it for us this week uh we'll be back next week and what am i forgetting what are you forgetting let's see oh right we love you very much