Transcripts For BLOOMBERG Bloomberg BusinessWeek 20240714 :

BLOOMBERG Bloomberg BusinessWeek July 14, 2024

Here is joel weber on tech lash. What it is and why he put it on the cover. Joel there in the zeitgeist right now, tech lash, one of the words of the week. There is this overarching theme of people outraged at tech and the privacy issues. When we thought about that, this image resonated more than any other with us. It was this image that a company, joel steins story, he experimented with how to take back privacy in his own life and disable tech from encroaching in his world. He found a mask. The cover image is creepy. It is for facial recognition technology. It speaks to a larger thing. There is tech lash, in d. C. Especially. That is a theme. Antitrust is a theme. Those things feel out of your domain as an individual. This cover is an attempt for us to say, you as an individual, what can you do in your daily life that will still have a modest consequence . Carol as joels story shows us, it is not so easy. As does maxs story. Joel he has been on gmail for 15 years. The thing that is so part of his life. Its where he communicated and started flirting with his wife years ago. He decided to leave it because of the privacy issue. As he did that, it opened up this whole new can of worms. To have a private email server now, and there have been other private email servers that made headlines, all of these emails he sends around go to your spam folder. Carol it is not so easy to get off gmail. I love felixs story. I feel like, how did we get here . Thats where he goes. Joel section 230, which has come in the crosshairs in d. C. It enables tech platforms in particular to scale and grow, but not always be responsible for the content on their platforms. Carol right. Joel lawmakers in d. C. Have seized on these 26 words and this will be a topic of conversation Going Forward for sure. Felix basically does an anatomy of how that section 230 and those 26 words came to be. Carol and created a safe harbor for technology companies. Joel exactly. Carol not a lot safe harbors this week for investors. There were so many big macro stories everywhere. Joel news, news. Never ends. Carol u. S. China trade. Joel we cant not take into account the news this week. What happened this weekend and to walk into the trade war and the escalation. What started as a trade war and now appears to be becoming a currency war and what the consequences of that are. We have peter mccoy who wrote a fabulous essay about this. Michael shuman writing about what the trade war looks like now. And then also, the market consequences when you have people like xi and trump battling, then also trump and powell battling it out. All of those forces come to bear, not only in the markets, but in the pages of businessweek. Carol its fascinating to hear what mike says and how he played it into this mosh pit. Joel it is a mosh pit and you have three people more powerful than anybody else in the world and all three of them are moving in opposite directions. Carol a great way to stay informed, but also the privacy issue, its a great summary. A scary summary. Joel zeitgeist, right. All of the stuff that is creating angst in the world right now. We tried to distill that down into something you can make sense of. Carol great stuff. Thank you. Joel thank you. Carol President Trump visited el paso, texas on thursday. Here is National Correspondent josh green for businessweek on how the shootings, a plummeting stock market, and trumps trade war with china may hurt his reelection bid. Josh if you look at the events of this past week, it hits three key demographic voting groups, all of which are critical to trumps reelection. The big one are suburbanites who have been outraged by gun violence, by Congress Lack of willingness, trumps lack of willingness to pursue meaningful gun control measures. If you go to last fall and look at where democrats won in a rout, it tended to be former suburban republican areas. Areas like Orange County and the suburbs of new jersey. These are places where trump needs to win in order to get a second term in 2020. Collectively, if you look at the way poll numbers have been moving, gun control is an increasingly important issue. As these massacres dominate the front page and as washington does nothing, you can almost see the shift happening for democrats. Carol and that is a bit of a change. It has certainly been an issue in other political races. Feels like there is a lot more momentum here. Josh thats right. In the past, gun control was a very important issue for people who were against it. The nra rose to power by famously being able to turn out single issue gun voters who tended to be more loyal and more enthusiastic voters than people who support gun control. However, that has changed markedly over the past few years, especially since the parkland shooting. Gun control is now a motivating issue for democrats, which is why i think you saw all of the democratic president ial candidates, one of the reasons they are so critical on trump and the senate for not passing gun control legislation. Carol lets talk about another group that has been key to President Trump, and that is the farm group. Talk to us about that and the farm states. Josh well, of course, one of the things china did last week in retaliation for trumps saying he will impose additional tariffs on china was to announce that they are cutting off agricultural purchases. There is probably no group that has suffered more under trumps presidency than farmers, because they have borne the brunt of chinas retaliatory tariffs. I have done a lot of reporting on this in the last couple of years. Agricultural areas in the midwest have been especially impacted. What is interesting, however, is that this has not really hurt republicans at the ballot box yet. I did a big story looking at which congressional districts rely the most on soybeans, which of course have been a target of tariffs. All 30 of the top districts that voted for trump, 25 of them had republican members in the house. I looked after the midterm elections and there was a grand turnover of one seat towards the democrats. Farmers are looking like they will have to bear more economic pain. These areas tend to be so deep red that it may not cost trump quite as badly in electoral terms as some of the other groups he is losing. Carol staying with politics, how the nra responded to the pair of tragic shootings in the u. S. , or rather how it did not, speaks to the turmoil within the gun rights group. This is the first incidents where the nra is dealing with a mass shooting without their very long time, very established pr firm ackerman mcqueen. That pr firm really kind of helped to build the nra we know today. The organization that said the only way to stop a bad guy with a gun is a good guy with a gun, that whole image has been a result of their work with the pr firm. Carol i want to get back to what happened a week ago. Take us back to what happened in february of 2018. We had another shooting at that florida high school. Tell us about the nra reaction after that. Polly one of the big things that happened after that is that a lot of Corporate America very quickly chose to cut ties with the nra. That was very unique. The nra had a number of different corporate sponsorships. For example, if you were an nra member, you could get a discount on a flight or car rental. Almost all of those relationships were severed. That was a huge difference in what we have seen before. It was a huge difference from what the nra had seen before. They were very used to staying quiet. Maybe issuing a week on. By the time they were going to issue a statement, all of these companies had already said we are done with this group, we do not want to have anything to do with them. Carol what is also interesting is, didnt the former nra chief lobbyist, right, longtime powerbroker when it came to the nra and dealing with washington, he actually went to the white house and met with the president . Polly thats right. About two weeks after the attack, the president sat down with different lawmakers and said to one of them, you are afraid of the nra. He advocated for different kinds of gun control during that televised meeting. The next day, chris cox was at the white house in the oval office with President Trump and by about 10 00 p. M. That evening he tweeted that President Trump has no interest in gun control. Trump went on to tweet he had a wonderful meeting with the nra. In this case, chris cox is no longer with the nra. Carol very different. Just about a year in terms of, unfortunately, several Mass Shootings, but a very different reaction from the nra. Lets talk about whats going on at the nra. Why is chris cox not there . There has been a lot of turmoil within the organization. Polly thats right. Turmoil is the perfect word for what is going on here. We are seeing basically a consolidation of power at the nra with wayne lapierre, the longtime leader of the group. Chris cox led all of the nra, everything from local efforts, to state efforts, to federal efforts, chris cox was the guy. If there was a senator who needed a meeting with the nra, they were going to see chris cox. Carol right. Polly because of this power struggle at the top, chris cox is ousted. Lapierre felt he had been disloyal and cox was gone. Another person we saw leave was oliver north of irancontra fame. He was basically outed. He felt there was a power struggle with wayne lapierre. Lapierre did not want him to maintain control. Now you have two powerhouses gone from the nra and the person who is left is lapierre. Carol michael bloomberg, the owner of bloomberg lp, the Parent Company of bloomberg news, is a founder of and helped fund every town for gun safety, a nonprofit that advocates for gun violence prevention. And other gun safety measures. Coming up, also in the headlines this week, the escalating u. S. China trade war. Why a weak yuan is a strong weapon against the u. S. This is Bloomberg Businessweek. Carol welcome back to carol welcome back to Bloomberg Businessweek. I am carol massar. In this weeks remarks, making sense of the u. S. And china confrontation. It has turned dramatically and not to President Trumps advantage. Economics editor peter coy explains how trumps tariffs lose strength in the face of a currency shift. Peter what happened this past week is that china allowed the value of its currency to depreciate to weaker than 7 yuan to the dollar. That sort of does what trump wanted in the sense that it makes chinese products potentially cheaper in the u. S. , and therefore, it actually does cause china to absorb the impact of the tariffs rather than the american consumers. But trump is furious about it. Carol china is a currency manipulator. That happened this week. Peter exactly. The day after he tweeted that china was manipulating its currency, the trade department declared china a currency manipulator. The irony is that up until then, china had been manipulating to keep its currency up. Carol right, stronger. Peter we briefly removed that manipulation, thats precisely when it was labeled a currency manipulator. Carol what i find interesting and we got to talk about this story earlier in the week, and this line stays with me. You say, scarily, the president does not seem to have a clear idea of how Foreign Trade works or ultimately what his objective is and how to achieve it. That is a pretty big deal for a president in the midst of very important trade negotiations. Peter that seems to be the case. Does he want china to absorb the cost of tariffs or not . The only way that u. S. Companies are going to regain market share from china is if the price of chinese products in fact does go up, which inevitably means some pain during the interim for american consumers. He is trying to shield them from that. There is a little bit of cognitive dissonance there. Carol you also remind us, and this week was a drmatic one in terms for investors, watching what china did with the yuan, we have to continue to watch that yuanu. S. Exchange rate. That is key. Peter it is. Because it is yuan to the dollar, when the yuan gets weaker, that means it is more. The number goes above seven, and thats what happened. China does an official fixing everyday. It just edged this week above seven for the first time in many years. So china is not manipulating it to weaker, but its withholding some of the support it provides. China does not have an easy situation here. Its economy is softening. The trade war is harming china. It would benefit to some degree from a weaker currency, but it also is vulnerable to capital flight if investors, both chinese and foreign, conclude that china is taking away some of the support for the currency. There could be a mad dash for the exits. While there are currency controls in place, people desperate enough will find ways to evade them. China will have to massively use its stock of dollars to try to buy it up and support it. Carol the escalation of u. S. China trade tensions played out in Financial Markets this week. In the finance section, Senior Editor mike regan calls it the chaos cycle. Powell speaks, trump tweets, markets react. Mike i dont ever remember a time when the three individuals, specifically President Trump, Jerome Powell, and xi jinping, for these three people to have this much influence on the markets on a daytoday basis is very unusual. We see conflicting interests, not just between President Trump and the president of china, but also Jerome Powell has his own mandate to do whats best for the u. S. Economy. Obviously, President Trump has made it clear that he does not agree with what he is doing and wants more aggressive rate cuts. It is this very strange dynamic that is very unique. Carol whats fascinating too, mike, in the last week and a half or so, and it kind of started with the fed meeting and some comments jay powell made. Mike he cut Interest Rates, as expected. He mentioned, he called it a midcycle adjustment, which kind of shocked people. They were hoping he would sort of do a mario draghi and say we will do whatever it takes to keep the expansion going. He tempered that. He sort of is keeping those cards close to the vest saying it is a midcycle adjustment, which the markets signal, maybe it is just one Interest Rate cut, maybe two, not this full on aggressive easing that the market and President Trump was hoping for. Carol there was so much debate going into that fed meeting about, could we possibly see an aggressive fed and can we possibly see 50 basis points . Mike there was some conflicting messaging coming out of the various speakers from the Federal Reserve leading up to that. There was this notion that a big shock and awe 50 point basis cut early in the easing cycle might be enough to kickstart the economy. That was always priced in as kind of long odds. The market did not really expect that, but enough people expected that. If not that, expected a signal from powell that this would be a very whatever it takes type of reaction to whats going on in markets. They did not get that. Thats really what set the ball rolling. Carol one day after mike President Trump comes out and threatens tariffs on the remainder of imports from china. That was like throwing gasoline on the fire of this market. Markets are up in doubledigit percents. We have pulled back substantially. Carol if you stretch the chart out further, we are below where we were at the beginning of 2018. That is when the market, everyone was very excited about the prospect of tax cuts. Over the last 18 or 19 months, we have basically got nowhere. Carol i love this line in your story. You say, each collision in the mosh pit involving these three individuals exposes the fragility of the Global Economy and the markets. Each time we chip away, we realize kind of how vulnerable we might be. Mike this is coming to a head at a time when markets are really craving sort of peace in the trade war. Carol some certainty. Mike some certainty. One thing everyone looks at closely are the purchasing managers indexes for the Manufacturing Sector of the economy and services sector. Manufacturing is very weak. Services is kind of following in its wake. They are both getting close to that level that signals contraction rather than a continued expansion of the economy. Remember, the trade war ostensibly was to bolster the domestic manufacturing industry. These gauges of those industries are nearing sort of recession levels. Not there yet but they are starting to point to basically grind to a halt in growth. If they keep going at this trajectory, we will be seeing declines, shrinkage in those sectors of the economy, which is very alarming. Carol still to come, u. S. Companies are borrowing billions but its not helping the economy. We will look at why. This is Bloomberg Businessweek. Carol welcome back to Bloomberg Businessweek. I am carol massar. You can also listen to us on the radio on sirius xm channel 119 and a. M. 1130 in new york, 106. 1 in boston, am 960 in the bay area, in london on dab digital, and of course on the Bloomberg Business app. When the fed cuts Interest Rates, it is supposed to deliver a direct boost to the economy. One key part of that machinery has broken down. Here is reporter Liz Mccormick with borrowing billions to buy stock not invest. Liz if you took out your economics textbook, which we all used to look at, it would be lower rates help companies borrow, just like it helps you and i borrow, because it is cheaper, and they should invest more. We should see that come through in the numbers and investment and economic growth. The recovery has not been great. Investment has been going down. It is a little mindbending what is happening. We looked into it, ben holland and i, and there is a lot of theory that says there were some changes, and companies were just plowing this money back into their shares by buybacks and dividends to help the shareholders feel better. Carol we know this. I feel lik

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