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Vox's Emily Stewart joins Matt and Dara to unpack what's in the Covid relief bill, now that it's out of committee. They talk about state & local relief, UI extensions, the $15 minimum wage, and why Congress is perma-hamstrung to effect real change. Plus, some research is analyzed about popular trading app Robin Hood, and its possible affect on stock prices.


"The year that Congress just gave people money" by Dylan Matthews, Vox (Feb. 5, 2021)

White paper


Matt Yglesias (@mattyglesias), Slowboring.com

Dara Lind (@DLind), Immigration Reporter, ProPublica

Emily Stewart (@EmilyStewartM), Business and Politics reporter, Vox


Erikk Geannikis, Editor and Producer

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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hello welcome to another episode of the weeds on the box media podcast network. I'm me Glacius here with Emily Stewart, Propublica darlin. We are going to talk again about Covid relief, which we ve done a couple episodes on, but we are now in a more final state of knowing It is actually in this package. The budget committee has completed its mark up. Emily. Maybe you can tell us what like? What does that mean? it means sort of, we have a big version of the bill. Alleys. Howitzer to stand for a few days, so that means the committees did their stuff in terms of deciding what should and should not be in this ultimate reconciliation bell budgets.
On Monday, I went through their own head of market, but just sort of ceremony are mostly didn't make a ton of changes. They put it out. Together and now probably there will be a vote on this by the end of the week on the house, for which would bounce the bell over to the Senate, and so we ve talked alarming. People in general have talked a lot about stimulus checks to not everybody. But almost everybody unemployment, insurance payments to the unemployed. But what else like? What else is in this thing? As you been reporting on it? That is interesting, that people should know about. Why? There's a lot and add a couple of things I think are worth highlighting, and there is a lot of money in here for schools and talking to some of the house committees. They really point to that about twenty percent of that money needs to go to learning laws, which means basically helping kids catch up for
the last time I mean summer, school or extra time. There's also a kind of the day hats way well here in state and local government funding, so a lot of money for state and local governments and that split a little bit, interestingly, so of the money for states, say will be proportional equally, with some of the money will go according to unemployed workers, I'm so certain. We'll get more money than others. There is also a fund for restaurants, restaurant revitalization planets, but twenty five billion dollars the rest. Industry wanted over a hundred dollars, which they didn't get but that's different and there's someone here about internet connectivity for having today. Where the Asian Obama CARE, really a lot in this bill. Obviously it's one point: nine trillion dollars so I dont know, if you know this is kind of going too far down the round. Will she quickly, but I
intrigued by the notion of learning loss in particular, because it does kind of seem like a recognition on the part of congressional Democrats that the things that really look uncertain right now, even more than kind of the baseline economy? Are you know, four month in certain sectors of the economy, including a restaurant industry, but also kind of this in the question of prioritization of school reopenings has become a really really hot issue in its own right and it's not something. The federal government can really do anything about like yes, CDC, has issued the guidelines for schools, but for you for obvious reasons, the CDC catlike turn those into mandates and so throwing money at a public school. Is really being weapon that the federal government has it it's just Basel, but I'm curious about what the keys is did. This is something we can actually address. The educational problems that are lately
arise. You know, given how much time is spinning out of school or for that matter, like the issue that have become apparent. As the fight school reopening has become more intense, and the kind of differences among stakeholders that that's shown that probably won't resolve immediately one schools over no doors for the first time. I'm just curious like how this works in practice. I've been I've, got a kid in school. In my my wife is very involved with that the PTA there. I'm marginally involved the principal well and and the teachers and and all that stuff. Then everyone has been scrambling like so hard to get things up and running and like gathered like we have concerns about kids who who, asked staff in it? It just doesn't seem like there's a timeframe in which to actually who's, this money- and you know like that
Cbos estimates of that seem to indicate that they expect the schools money will just kind of like dribble out over a multi year period which I know it's like from my perspective, like that's. Fine, like schools should have from Honey Biden, campaigned on a permanent increase in federal education funding, so decide reason not to throw this end. But I have a hard time imagining like this summer principles. Teachers and school districts, like some of which are not even open it all now. Turning around and putting all this money to extremely good use. It's a little bit of a I mean it's an odd policy process that we ve had to at this. And also some of the money is for, like give you read through the bill, they talk about. Fixing ventilation system judges away to get kid back to school. That immigration is a challenge that construction take forward ever that's job maybe guy you know just a you'd always likes I mean a it is,
to improve the school ventilation systems for, like man covered reasons, but some of this right, like a lot of these, are like things Democrats asked for, like a back in the Heroes act right. We're like had this been done like in May then you'd say: ok, like the purpose of this was to get schools open in the fall right with a crash, each back upgrade plan and stuff. Like that. I mean not just the schools like this state and local aid in general right, so the estimates of how much revenue law state governments are facing have been revised down. A lot and Democrats have not really revise their like their own legislating, in place of that, and so state governments are going to get a little bit of like a like a bumper crop of money, and I think it will be interesting to see white governors. Do it right
In his most governors of Republicans most state legislatures, are republicans. I don't think Democrats exactly intend to like facilitate the brain camp round. Santas tax cuts of twenty twenty one, but, like that's, what's gonna happen that, like all like all those republic, or are not going put this money money to like building a social, democratic utopia in Florida, Georgia, no it's gonna, I mean it a little boost the economy. You know, unlike all the normal way, is set, any fiscal policy does, but it's going to be interesting. After all, this talk of a blue state bailout you're going to get actual policy of this pretty different from that tourists Is this just like a reflection of the broader fact that call Kristen. Throw money at things very easily especially when you're talking about such large quantities for end of the tunnel sticker price of the package, that is in cases like education and particularly the
thing that they can do right. Leg- and you know, is certainly with the state level governance as well like they can require that states per More generous, you know unemployment benefits over and above they can't require that states be like to a certain extent. Aggressive in demand, mass mandates, and you know indoor dining bands and nothing to a certain extent. It seems like this is a reflection of Democrats, watches see a world in which there is enough money for schools and school opening is prioritized and there's less pressure on consumers to keep the economy going by continuing to patronize businesses in a way that may not be epidemiologically save and the were the things that they can do or through the money that would be needed at it to make that happen partially is alike. Ok, it's then republican governess what'd they dont do it, but also just as a way to kind of express. This is the we think the pandemic should be dealt with, and we can now go back to our districts and say we ve done what we can
and yesterday was talking to an economist about this, and we got a little bit into like the state and local stuff and what she said was in an ideal world. This money would probably be spent slower or there would be. Mechanisms in this. Build. Have states spend the money a little bit slower than they probably are going to, and she said some obviously some going to do. Tax cuts and that's just kind of the world that we need to live in and, as somebody who lives in a blue state that needs him money, I'm kind of like whatever I did find fine, do a tax cut somewhere like that is okay and me You would be better to do it more targeted and there is a certain lack of targeting here. Right states have more unemployed, people are going to have more money seats and will have more people are going to get more money but leg you Henry to figure you can't kind of get rid of the good for the perfect or whatever. The thing is, you know well, and I do think it's. Its relevant right that these
you have, the house represents San Francisco and the majority leader in the Senate is from New York the city of San Francisco is in a pretty serious sort of budgetary issue, as is New York state not the case that, like systematically places Democrats are from, in budget trouble and places. Republicans are from aren't like Florida, is actually quite a lot of trouble because they about tourism. Economy. California, writ large, has a budget surplus because of people doing their ipos and stuff like that, but like Nancy, Pelosi's District need state district. It Financial assistance and- and I feel like that's probably you know like ends up shaping right, like his as you were saying, Emily right, it's like to do. What you need to do to get the help to the places that need the help they ve wound up, spread some more cash around then is maybe totally needed. But what
What what what else do they have cooking here this, like some stuff to the affordable care, act It looks to me like by campaigned, saying that you wanted to build on Obama CARE and the house kind of. Does that in this bill increases the subsidy levels. Things like that. Our colleague Dylan's got, has done a lot of work on Essen. Basically, it looks like what's going on is dad the bill will have increased subsidies on easier for people to four hundred percent of the poverty level for a couple of years, and so I, the questionnaire becomes. Is it two years. Does it last longer than this Congress find a way to do this for longer, but at least for right now for two thousand one hundred and twenty one in twenty twenty two there's some coverage There's also also something here related to helping people with subsidies for cobra, so people when they lose their jobs. It can be expensive to for health care, all of a sudden when you quit your job or whatever, and so that also put some money towards that.
Where is the line be drawn in terms of like the stuff? The easy super duper directly related to the pandemic early things. The Democrats would have wanted to do before March. Twenty twenty and, like don't have an obvious pandemic hook for like the asiatic the things? I guess course make the argument that is more important now than ever, but, like you can make that argument for anything Democrats ended up in drawing the line between stuff that day, you can put into this bill without creating too much of a problem and stuff. Kind of a nice to have like there was clear, very little appetite at the beginning of this process, despite Bernie Sanders kind of agitating for putting a minimum wage increase into the coat package like where is Where's the line drawn between things that they think hand cells being directly tied to getting. You know you can't back on track and things that are part of maybe the broader field, back better agenda that they're saving for breakfast or whatever I mean it, feels to me that the answer here,
the fifteen dollars minimum wage and that's an answer. We should probably have relatively soon, but that's the one where this is democratic priority, but not necessarily as much as I maybe as a human human being want a fifteen dollars minimum wage. I don't know that that's specifically Covid related that at all and that's kind of where we are now, I think and is that also kind of is that, like our congressional Democrats just wary because they don't think they can make that case or is there also kind of a certain concern about the politics or policy of it on the merits, and this is just kind of becoming a punt by people who would like to run out the clock you Matt, you might know more than me I would guess at least part of the issue is that nobody is quite sure what this will mean economically, even this video says it might costume now you can look at that and say nine thousand people out of poverty is is good, even if that means fewer jobs, but we don't really know there aren't. I
he places that have done a fifteen, our minimum wage, certainly not for a long time and so there, as I was immense, are neither that probably makes some Democrats a lot about wary and just regular people I mean there's two things going on with the fifty dollars hour. Minimum wage in this one is the procedural question. Like. Can Bernie Sanders talk the parliamentarian into the view that this is a budgetary measure. I've gone back and forth on that light. Four different times since since election day, I am now of the view, as as Joe Biden says, that the parliamentarian will say no, it did these costs, back to when Republicans wanted to repeal the eighty eight mandate, and the parliamentarian said they could not do that, that that was not a budgetary measure. I'm sorry, they came back and they said okay instead of repealing. Yet we are going reduce the find to zero dollars The parliamentarian said that was ok, I'm sorry
indicates that the parliamentarian is very Very liberal minded about right. Yes, Yad, in a way that makes no sense, and this wound up becoming like a huge national drama, because that became the basis for it. Education Supreme Court cases. It was like the highlight of inequality, berets, confirmation, hearings, etc, etc, etc. It's seems to me that, given that precedent, if Senator Sanders, truly truly truly wanted to force the issue on this. He would not have put a fifty dollar in our minimum wage into this, he would have put a one hundred percent payroll tax, on wages that are less than fifty dollars an hour, because the prey carrion, has clearly signalled that she's open to like dumb ass gimmicks. Achieving these legislative
They are instead trying to force through Kindly suggests to me the Democrats tanking less on some level because There is substantive disagreement inside the carcass as to how high the minimum wage should be raised and how it should be I mean, I think it s like a really unfortunate situation for low wage workers right. The minimum wage right now is less than eight dollars an hour, Joe Man, says he would raise it up to a level which is a lot more than the current minimum wage, but progressive, separate, so much equities into fifteen, in that they would almost, I think, I'd rather have the whole thing a part that have any body like come down and say what we're gonna work with mansion workin, work, but cinema things like that. It then becomes difficult on the timeline right. They wanna get covered relieved and fast. Whereas negotiating amongst themselves as to exactly how did they thread the needle
because you can say: ok, it's fifty dollars an hour, but its phased in over five years, and states with lower median wages can have special schedule. That's like there's. A lot of things you could do to sort of big makers were already is phased in nobody, you can. You can make your face and slower right, like before fight for fifteen became a thing, the way minimum wage politics would happen is somebody would say like we should raise the minimum wage by three dollars and then somebody else would say how about two. Ever since five for fifteen, they sort of, like everyone agrees on tea in the new negotiate the timeline just like a weird way to think about it. But but like you do it just it might take several months right negotiation and discussions with you know who knows like Mcdowell, franchise owners in West Virginia Amazon is like running ads all over. Like my internet. Is being stalked by Amazon. Ads telling me about how enthusiasts
they are about to fifty dollar. Now, I'm through wage and like the White House, wants to get this covered relief bill done fast right, so the easiest way for them to get this done fast is for the parliamentarian to tell them they can't mess with the minimum wage, and then it just becomes a completely separate top yeah. The argument for kind of question one way or the other is other, at least they do they a marker for second reconciliation or you or subsequent reconciliations for like time immemorial. Since, apparently, that's how legislation is going to get done now and if the in a world where Bernie Sanders were really working in a word were doing you say like that would be great news, Why didn't you know our minimum wage and terrible news for ever being on the democratic agenda that isn't getting passed through. This particular bill that the parliamentarians would hypothetically rule against in future, because at least with the negative parliamentarian rule- and you have some indication that okay, you probably can't do things that are less directly budgetary
Then raising the minimum wage without that ruling anything including things that are maybe more parliamentary acceptable, could have threat for moderate democrats of o the parliamentarian will never agree and because that's the kind of thing that often gets used by people who don't want to support a bill as we use the it can't pass. As I won't vote for it at least having that marker down will, I think, make it a little bit easier. Going forward as we kind of hit the really tricky part of the Congress, which is going to be the lobbying among various stakeholders in the Democratic Party and in Congress, for what goes into the next fact. Well, we really saw this Stephanie Murphy in the house. One of the leaders of the blue dog caucus now You saw her over the weekend Bloomberg like really trying to pump the brakes not on this bill, but on a few.
Sure bells by saying she wants to see legislation that can pass the Senate, right, which is a way of saying that, like sixty moderate house, members do not want to take votes on controversial, progressive bills that then die in the Senate. They want Senate Democrats to work on bipartisan bills that get sixty votes, which, in a fifty one fifty seven take me in like that. That's a high bar to clear and then it's an easy vote for house members right like she's, saying, like anything you've, you can find nine or ten Senate Republicans to vote for something I'll vote for whatever you want right, but like don't, but don't ask me to vote First right, that's like that's the view of the front line house members That is very different from the view of activists who want to continue pushing the envelope.
The equality act and immigration, I'm like a a brazilian everything or for that matter, from the view of Lake Senate. Democratic leadership with would probably right. As there have most of the car on board with fatigue, strategies and leg. At least you know at at least have a fighting chance on that then kind of go immediately from passing a big package to trying to figure out which of their various priorities to possibly get ten republican boats. Yet, let's, let's take a break who in the relief fell, most of us want to be better, but we're not sure where to begin with this year. You have Chris step to help you tune into TED's new weekly podcast, to hear from guests and past speakers who might just make you a better human, how to be a better human, your guide to becoming a little less terrible, listen now on apple podcasts or wherever you listen to podcasts. If the last year has taught us anything, it's that we don't. What will happen next, but there's
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Our see why c, o r p s dot, Org. For people who you know are sort of in the thick of things. Now, I'm in we talk about some of the kind of indirect staff and an aid to people, but what what did you expect directly? like is ever, I'm gonna get their their fourteen hundred dollars like next, we like really really soon. Can we stop having the where's my check Twitter, like what's goin on where's? My check trader will never die because they're not gonna, be two thousand dollar check. So I'm sorry to inform you of that shout out to former box writer Jeff Stein, who is the person who was going to continue to get ask where his checks are for their renting to yeah? So we will- I mean- I don't think it'll be next week. That will see the checks but the four hundred dollars checks are in this bill and I would have a hard time believing they will go anywhere there, given everything the IRA
Anyone who makes up to seventy five thousand dollars phase out around one hundred thousand dollars. There is also unemployment insurance in here which, as much as everybody likes to talk about the checks which are important, unemployment, insurance, maybe more important, but that is probably and a look like is an additional four hundred dollars a week in federal benefits for unemployed workers right now, they're getting three hundred do march. Fourteenth the house bill. It stands would extend the four hundred dollars through August twenty ninth now, if you think back to buy proposal like his initial thing in January. He wanted it through September, so there's a month being shaved off there that it's not quite clear. Yet if it's going to be back on or not run in the Senate has sort of hinted. He would like to see that extra month back in there, but I don't know, what's going to happen, there it's interesting, though, because I mean the sort of public Health Timeline
You know seems optimistic in terms of when vaccines will be broadly available. Things like that like Our position is that there should be automatic city and that this should be conditions based rather than house members guessing. But, unlike as far as guess it. I guess this is like a terrible guest me. Unlike the March deadline, that was in the last bill, which was slight totally liked, obviously inadequate, time. They passed it and everyone was just like well, you know we're gonna have to do another it's interesting that its described, I realize I saw some survey experiments and and sounds a lot lower to people when you say four hundred dollars a week than when you say like one thousand six hundred dollars a month, even though those are the same amount of money which, which is interesting but, like I do think, the people, have consistently under
estimated throughout this pandemic, like how large the increase in unemployment insurance benefits has been like? That's why these bills have such like large. Applying numbers like this is a big expansion of a kind of typically threadbare sort of programme, and it It's gonna be interesting. When you go away, because, like probably Unemployment insurance should be more general sauna. Like on an ongoing basis. Yeah, I mean- I don't know if any, if either of you have been on unemployment, but a few years ago I was laid off and I got my first check and I was like what are you guys, joking like in New York City? What do you think I'm going to do here? I mean I do hope that this does spark a conversation about what unemployment insurance should look like in the future. If you think of Massachusetts, the average benefits are like five hundred and fifty dollars in Mississippi like two hundred and it shouldn't be. That way, and I think we've seen with this
really has made a difference where people where you are unemployed, you're, looking for a job? Let's be honest right now, there are a lot of jobs in the end, they can actually live airlines. Somebody will enable to save more ever hard time thinking man now like on this? spell I really wish they would put in the automatic stabilizers and I know Matt. You hinted at that, but I ate like. I just don't understand why we're not doing that. Basically, what that would do would be to phase out benefit. Does the economy gets better and you could have different measures? say, unemployment rate or may be vaccines. The duchess play such a better way to phase out women benefits than just literally guessing when the pandemic will be done, because there is moreover, you could face them earlier, but it s very you're, not setting people up for like a random cliff sometime in the summer, so like, as long as we're home. Thinking about you know, reworking an employee It does seem like this is another issue where the fence
government has the money lover, but soon of this is up to the discretion of state government, whether that's you know like levels of benefits, or certainly the way that, how much investment is put into making the system easy for people to navigate which lake certainly in the early months of the pandemic, everywhere, had horror stories about just how impossible it was given the rapidity of the job loss for people to actually be assured that they were enrolled minimal at all- and you know, I wonder if we're talking about this kind of automatic stabilizer like if were aware- that policy wise, sometimes job losses happen more quickly than congressman legislate of bump in unemployment insurance like is there maybe an analogous case to be made for the Deeds need to be able to manage and unemployment benefit system that is serving many more people than they expect to serve in normal times, because either,
to be serving the normal number people are there weren't any deserve way more and in the light cases newly when you will be able to just have those checks going out on a regular basis. I do think an ideal world. We would have a federal system. But u turn experts on this that we should just be thoroughly social security right by There is a sense, Elise, back in March and April of last year, where even the best system was going to be completely overwhelmed. There were just so many people call, there's no reason to be able to staff up much in normal times the English talking about how to at least incentivize states to be better at this, so that the system isn't so much that we make it so impossible for you that, obviously, at some point, you're just going to give up or the benefits are so bad that obviously you're just not going to try anymore. The problem is, I think, at least in part, that in normal times. Nobody thinks about their sleep by him. A great recession, a large vessel, we're learned and then everybody for a guy. And so now, as I always do as we should do this and then
in a year or two if things are back to normal, the political impetus dies down again ray everything. I don't think even it's a nobody is thinking about this evening. In normal times, this is seen as a lake safety net. Programmes are seen, especially by conservatives in state government, where they have to be balanced budgets as like an easy way to cut programme costs. You dont, want. You know you. Certainly you don't wanna, be spending too much money on the bottom put undeserving or- and you certainly don't be- spending too much money on the government. Workers were supposed to be helping those people- and you know that that kind of flickers in and out in exceptional times is the last in April Nobody was saying that if you lost your job, it was because you deserved it right. It was like those are the times when it becomes very apparent that people lose their job. Jobs for reasons other than being unfit for the job market and that Kind of discontinuity is does seem like in a world where everyone was pretty comfortable
The direct two thousand dollars check benefit like in a world where people really I've been sensitive to the impact on the job market of the pandemic crash bit me Maybe it would be a little more possible to connect those dots and say you need to have system, that's built for the times when you know through no fault of their own, are going to fall into unemployment, not at a level that you associate with well, we we want to discourage people from using this anyway. For social engineering reasons- but this is, you know, I think, beyond questions of like deserving undeserving, poor kind of stuff like there are some topics where the gulf between like right of centre, economists and left of centre? Economists is really big This is one of those topics like right, ready, centre, economists really really really think that it exacerbates recessions to make unemployment benefits more generous during economic downturn,
they think that there are substantial real side adjustments that need to be made during downturns that things that make it easier for people to avoid making those adjustments are very counter productive activity, really telling served by internet drama, but it was like when Weissmann Slates Economics rider, he was making fun of Marty Feldstein? Who was a long time economists in the wagon administration that at Harvard for it like having these worries and then Tyler Cohen, was like one of the big conservative economics writers like ie like went nuclear back against like this is like such a horror, like real belief, are on the right. The pandemic partially alleviate that because there was a sense briefly that ok, this is up. What health emergency and we don't actually want people doing like really
tense job effort? And that's all This kind of bonus unemployment, insurance got done in the first place, but even now and a particularly like thinking about the future. You know your back Just this, I really know meeting of the mines like I sometimes see issues where I think look like if everybody can sort of be reasonable and stop the posturing and the bs, like you, could work out, compromise that achieves like same people's core objectives, but, like this is on, where it's like day and night, like how to recessions work and like what's important for people and end, it feels really kind of am almost hopeless to and then the other thing I've learned through this is how much members of Congress embrace legislating by crisis right so like this bill include, stuff like it's, not just that it doesn't include automatic stabilizers, but in it
its things, like the Biden, enhanced child tax credit and these step, subsidies for the affordable care act, which are clearly intended to be permanent changes, but they are structured as temporary changes Then, if you ask them it's like, what's going on here, they're like well already, We once a year have a huge legislator, crisis around it's called the tax extenders, but like a bunch of business side, tax credits and way back in two thousand and nine the Obama administration passing as part of the two thousand and nine stimulus, the making work pay tax credit, which was at eitc enhancement, enhanced That was a two year programme, but it still with US these years later, see that is a big success right that, like that's a model for legislating going forward is to put weird shit in there that they want to make permanent, that they don't
want to raise taxes to offset because they think just rates- are low, but blue eggs dont want to embrace deficit spending so everywhere prefers to do this. Weird can kicking game which is like look it's terrible Yeah, I think if you try to the island I will explain it to me. I want punch it's such a terrible way to run the government, but like I M, huge subtext, I think to what's going on in this bill, registered instead of saying, ok, we're gonna, take one point: nine trillion dollars we're going to you that money to address this downturn in addressing the smart way, which as automatic city and things like that? It's like we ve got this One point: nine trillion dollar dollar number we're going to just like put a bunch of stuff in their some of which we think is necessary for the short term and some of which is just like stuff. We want to do and we dont want a budget for the out years,
and then we're gonna, like hope, good things happen in some unknown future political clusterfuck. So it's like nobody's gonna know like are their child benefits? Gonna go away? Is their healthcare gonna triple in costs like it's, it's weird. It really is, while the extent to which the arguments on regulation on the real either side are based on the importance of lake business. Is being able to budget for future compliance costs and that and come into back when we're talking about how people who, like our using government support to provide some degree, financial security for their households, lake with, they are, whether they should be able to have any kind of confidence and things going forward. Have you see you're not made worse off. If you like, get an extra easier subsidy for two years and then it goes away like you would rather have that than have it not go, but he liked it still crazy. It's like you sit there with you.
Or budget in its war. How like can we afford to rent a different house and its law I don't know right library, if you're, if you're going to get the Asia Subsidy subsidy anyway, it would be helpful for you to know his hands and the child tat spread it all. This stormy, especially as Congress, is want, fascinated all the time in Sunday. You can see the negative effects of this. If you looping, backed unemployment the end of the year, everybody. Procrastinated, so much in December, around that nine hundred billion dollar bill that a lot of states, unemployment systems were screwed up and people had delays anyway. Because it just takes time to do stuff, and so May I just like the inability to plan around the government is a wild feature of America and the members profess to be annoyed at how little do, but then they themselves at don't do very much
It's a frustrating is a frustrating situation to be I waste. We saw this in the confirmation hearings after mare, garland, Ben SAS randomly was like how come the legislative branches abdicated all authority, and you know my girl, like he's, been a judge all these years. His answers, like I don't know, but it's like what has been said, has done in the past four years. It's written like literally nothing. I think, like this This no SAS bill. One could argue that asking someone who's going from the judicial branch to the executive branch. Why because the legislative range seated so much power to people like you is to kind of beg. The question right, re read ever be an added. This is like this Congress is acting here, but you can see Even so they act like people who don't want to be relied on as, like the mainstay stay of anything in
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matter like what is the difference that they are making obvious thing games office other make a difference but like what is the difference in so basically, comes you a handful of conclusions, it kind of figures out that, whether Robin the traders are doing what they are buying and selling doesn't really predict whether or not the stock is a good idea. A kind of that they are noise, which is kind of like guessing at their trades. I got us in any way to think about that way, it also finds when they are not in the market, vote until it he goes down in the market is kind of better market quality improves, at least for the stock that they're interested in and now the funny thing about this. It malady from Bloomberg flagged also. Is that The way that these researchers figure this out is that they looked at outages for Robin Hood revenues and, after that crash the lot, and so they were able to tend to make these deductions, because the act itself doesnt work so well
can you talk through a little bit how their measuring market quality here is? Like I admit I tried with this paper and be exceeded to its financing, I assume that you are familiar with everything they're talking talking about is really unusual, even among economics White papers. We cover on the weeds because it's not like the not making independent assessments of lake. You know whether this was a good investment or subsequent they're they're, not looking at subsequent stock performance and going like they like captured excess gains. Here right. It's like it's based on an existing measure that ties quality to liquidity. Well, to one of the authors about this a couple of weeks ago, because I was like. I need you to dumb this down for me honestly and what he said was basically, like volatility, is down on the stock that they're interested in so not the whole stock market. But if you Follow these whilst rebound switches a farmer earlier Robin Hood, latent certain stocks,
popular with them. Certain stocks are not, and so you can kind of sea and also can have the transaction costs are better. So, basically, the praise you're gonna, get between when you're, buying and selling is a little bit. Better so basically like when you hear all of these kind of rich guys and CNBC being like that retail traders Robin guys cyclic, maybe tourism, a monetary reason for them to be saying that I do not their right, but you know you never know so I bid just to just sort of back this outbreak of people. Don T know the full context. You know Robin Hood is like it's an app on your phone and a lot of stuff. Yes, he's been happening because, like phones are cool, at an good at design is good, but traditionally to trade stocks when you have had to pay commissions to stockbrokers right and those commissions used to be really high, like inner in a traditional brokerage, and the broker would make a lot of money just off the fact that you are made
trades, but that's also like a strong disincentive to actually trade stocks right, like you might make some investments, but like if you buy and sell stocks frequently you're gonna lose money just cause you, your paintings fees, part of the internet financial deregulation from the late. Ninety S was to create places like e trade Charles Schwab, has one where the fees are much lower and so becomes practical for a normal person, to make shorter term kind of bats. Are the stock market like a message, is advisable, but like in theory, you could make with with shorter term kind of trades, with lower commissions, Robin Hood has come in and it's no commission at all. They are making money. It seems like
like a lot of things on the internet like they are selling data about you to make money rather than charging you as customer. So that creates this opportunity for, like random people sitting in their living were to act like let me not to act like high frequency traders, because those are very very very fast but, like you could make profitable trades based on data day movements in in the stock market there. This, like a big question, is like like. Is that good right like Yahoo like what? What is it? What are the implications
that for society, because you could be utopian about right and say look! This is huge mass of people. Everybody knows a little bit about the economy right, it's like you work places you have friends, and so we are aggregating information even more efficiently than the old market dominated by professional said. This influx of amateurs is creating more efficient pricing structures and their finding that that is not the kicks right that, like somebody, may be making inform stock trades on this basis, but like in the aggregate, it's just noise like it's just a bunch of people operating at random and it doesn't provide any like price discovery value why that's important is like a whole other theoretical topic, but in the finance world, if you could show that bringing all these randos into the stock market was improving price discovery, people would say: oh that's, good. Our capital markets are working
better now than they used to be and the final years that that is not the case. It's worth emulate you can can tell from the common sense narrative like how even you can logically predict how that might of influence. The number of people who feel like now capable of getting into higher frequency trading. They actually do site as research on Robin Hood from two thousand and nineteen even pre pandemic, which is when we know a lot of kind of people who had not previously thought about stop trading started getting onto that at the time nineteen research they said here says that they mean investor average investor and Robin Hood is thirty, one years old, with an account balance between one thousand and five thousand dollars which lake even compared to the retail investors are then it is like, never mind the kind of professionals, but a dataset that is,
it apparently decided. A lot and finance economics from the nineties is a mean age of fifty years old, with a balance of forty seven thousand dollars. So it really is, it does appear that Robin hood in particular, or the kind of subsequent waves of e treating have brought a group of people into the daily activity of the stock market, who just would never have been able to have access previously, and so it is like that that potential even if you were just to think about in terms of like the aggregate amount of information, if you of stock race. Is as information. And which is the way that classically there there thought about like kind of why the difference in why volatile he's by the difference in transaction costs by not just like you are going you end up getting a nasty surprise if you buy the stock. For you know, if you, if you just stop for a higher price than you decided to buy the stock for, but also because it reflects a certain amount of uncertainty about the true value of the company.
You can see a world where it's just like the more data points. We have the better and what this is showing is that those data points art making things. Watch, worser everybody else there not like. You know, they're there not distorting the market in ways that make it harder to figure out what's going on, but they are things that should be kind of ignored. If you're looking to assess the kind of true value of something by the stop price, I mean, I do think it important to at least say that it's not bad, people are trading more, at least in my view, in maybe I'm to market friendly that leave. When I say, by this, I think that my initial reaction to Robin Hood was their game of eyeing trading they're, making it too easy there pushing people into bad things, and certainly there there is some truth to that that they are pushing people urban or towards risk. They may be, is a deal that it hard to say these kinds of should only be for institutions and for wealthy people, and so when I hear I guess, okay in the people in their fifty s, now it's people in their thirties
why not it's also really hard to build wealth. Here and like if you have a couple thousand dollars to stand that you can afford to lose, which I think is an important caviar deadly. Why not give it gal where's comes a worrying Wiped out in a lot of people do like last year did a story on this, and I heard the same story over and over, which was, I got really in options. Treating I thought I was genius- and I also have my money in that happened- often, but then everyone's right- talk to somebody who, like genuinely has made some money now you hear a lot more about people losing a lot of money, ass well and probably more, but I do think that Retail traders are here to stay there like twenty percent, a market volume now on some days in and that's a lie. Why? You think it's you know when you are talking about. Like? Should people do this in Japan? like what you are considering the counter factual to be re. So
like if you're trying to save money and you're considering should I buy and hold index funds, or should I try to pick stocks on Robin Hood, I think trying to pick stocks on Robin Hood- is a poor choice. On the other hand, if you're saying should I try to pick stocks on Robin Hood or should go to a casino and try to do You know, because I am a smart guy- and I know mass that I can calculate things for me to try to implement optimal blackjack betting strategy right leg probably better off doing the stock day right now casino, might be more fun, but the something also might be more free like it. Just the it's. It's a matter of personal taste and different people enjoy different thing I think we understand that like in most cases going to the casino, even if you try to be really rigorous and really disciplined about it, is not like a good way to
money, but it is a fun thing you can do with money that offers the possibility that you will come away with more money than you had before is like part of what is entertaining. About it right like trying to do options trades that work like that. That I, like you, might enjoy researching right, like you, don't get it People do a lot of stuff with their time, like my dad used to like meticulously keep score and baseball games that he wants. Regulatory facebook in there you go and, like I don't know like people just like stuff fright, and you know trying to like track different stock- opportune yes and price movements like you, can see how its appealing to people right am I as a thing to do with your time, and your money like, I can think of many worse things to do, but it would be bad. I think too I did. This is like a great strategy to make sure you can have a secure retirement thirty years in the future, because
you probably can't I invested aye Aye invested in in I hop stock cause, I'm I'm looking forward to pancakes after the pandemic. I mean Finally, why? Even last summer, I did like a fake trading, a cow when I was buzz reporting less than Robin Hood, and I made a paper trading. I can't I just guess, based on sound some Austria, Belgium and ITALY triple my fake money, Why don't I just get? You knows if we do not wearing a Volmer groups, which is why a lot of people are being who bear therein Genius is right. Now I may be, are not by lake event entertain Amy, I feel entertained by my own like take success. Do you want to come back to the paper? A little bit discharge was route. That's in particular because, They use discussion of stock on Wall Street back as like an indication of whether its of interest to the kind of Robin Hood trading plants, which
initially, I was like okay you're, just kind of reaching for the nearest available variable. This isn't necessarily a good reflection, but they demonstrate that actually it is, and there is a demonstration, correlation between now. Only Lake when Robin Hood, working a correlation between stocks getting mentioned on the sub. Read it and activity on the app but a correlation when Robin Hood is down. There's a lot more discussion of Robin Hood on Wall Street beds, which suggest that like people who would have, please be spending time trading on Robin Hood- are taken to Wall Street bets to express their frustration that they can't be trading on Robin Hood. So it's in staying jet lake and that has such a wide pick up is associated with a single fairly year off the beaten path. You do what you do have to do: a certain amount of active searching to finding separated work, unless you know somebody who happens to be to be involved, but it also does indicate you know kind of coming back the question of Lake Matt saying everybody knows a little bit about the economy,
does say something about how people are making their decisions, not necessarily based on lake. Looking at the places where they individually have the most expertise and hand of winning their knowledge by trying to do a wisdom of crowds thing among the crowd. Is also on their and what became do you know what what there too, Unity is saying the hot that's are, which is not necessarily it's. It's very zig with this mentality and you can kind of understand a little bit looking at how the game stop stuff played out, how that can be both when it. Works out very successful collective buying strategy and a big liability for any individual trigger. Now I mean definitely see certain stars, and it's not just in terms of its policy, but even if you look at certain twitter counter, Tiktok
like certain stocks, start to kind of take certain certain ideas and last summer, herds which had declared bankruptcy took off among the retail traders, and there is a big heard spume that made no sense, because the company was bankrupt. So yeah I mean. Sometimes it doesn't make sense, and maybe most of the time it doesn't make sense, but I think a lot of these people also, I mean they're there to make money but they're also like massive they're. Just having a good time on the internet, I think it would be interesting to see how sticky any of this remains. I mean like this, I don't know like I've been using clubhouse more, which strikes me, is like not a bad, app or service, but just like something I would do less if it were more like safe to go. Hang out with my friends, there's like a boom market in at home entertainment that are a particularly just like ones that are new and like something new. You could try, as everyone's a little bit stir crazy,
and were stocks also like the pandemic- has coincided with this. Slightly odd phenomena were like the market, fell off a cliff last march, but then has been on a kind of long study upward March. Ever since then, which is always like you ought to benchmark your trades against alike by an hole strategy, but obviously in your head. It's like any time here in the green like you're a winner the market as a whole is up. It's like everyone's a winner and it'll, be interesting to see if it goes down, because it's like real professionals keep making investments even during their markets and try to do well, but, like I personally wish find that to be a bummer like make make trade so that you lose less money than you would have lost had you does it held an index? I'd like that's, not! Does every entertainer, even though, like the economics of the same
we will we'll see what happens when then the market doesn't not down in turn by being overrun out People are home in I don't know his eyes, you're not going with money, you can't lose like I wish. Andrew and Robin Hood. I I really understand the view seems really fun. Me and I'll never go down because we're gonna build back better. You know it's just: can we profits for everybody? Maybe I think so much Emily thinks is always to our sponsors are producer to not guess and the means will be back on Friday,
Transcript generated on 2021-05-12.