How the Palestinian financial system is tied up in Israel

Make Me Smart May 23, 2024 Transcript

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Kai Ryssdal 

Let’s do it!

Kimberly Adams

He’s so silly

Kai Ryssdal

Hey everybody, I’m Kai Ryssdal. Welcome back to Make Me Smart, where we make today make sense.

Kimberly Adams 

And I’m Kimberly Adams. Thank you everyone for joining us on this Thursday, May the 23rd.

Kai Ryssdal 

I am a little over caffeinated. I apologize in advance.

Kimberly Adams 

I can tell.

Kai Ryssdal 

All right. Anyway. Thursday, we’ll listen back to the big stories of the week. We’ve got some audio clips lined up. This first one is the Secretary of the Treasury Janet Yellen. She was at a press conference ahead of the G7 Finance Ministers meeting. Also, Central Bank Governors meeting today, yesterday, this week at some point, and I forget where they are. I think they’re in Italy. Anyway, here you go.

Janet Yellen

“I’m particularly concerned by Israel’s threats to take action that would lead to Palestinian banks being cut off from their Israeli correspondent banks.”

Kai Ryssdal 

So, look, the thing you need to know. Go ahead. You’re going to do this one?

Kimberly Adams 

Yeah, sure. Okay, so some context on this one. The Palestinian economy uses Israel’s currency, and it relies on Israel’s banks to process transactions. And recently, Israel’s finance minister threatened that they would not renew a waiver that allows Israeli banks to deal with Palestinians. Now, Yellin is warning that Israel cutting ties between the Israeli and Palestinian banks would disrupt crucial imports of food, fuel and electricity. And that would exacerbate Gaza’s humanitarian crisis, and also create instability in the West Bank’s economy, which is a separate area. And this comes after Israel decided to withhold tax revenue from the Palestinian’s governing body in response to certain European countries agreeing to recognize a Palestinian state. And you know, the argument from the Israeli government and in a post on X responding to Yellen’s comments, you know, you had Israel’s finance minister saying that, “the financial system of the Palestinian Authority is infected with terrorism up to its neck.” I’m going to mispronounce the guy’s name, Belazel Smotrich, who’s a member of the far-right Israeli coalition partner that also supports settlements in the West Bank. And he called critics of these policies to kind of cut off these banks hypocrites. And so yeah, it’s a definitely something that could exacerbate the already dicey situation now.

Kai Ryssdal 

Yeah, look, it’s horribly messy. It’s tragic in 97 different ways. And it’s now becoming more of an economic story actually as the story develops.

Kimberly Adams 

Yeah. I’m looking at Reuters where Yellen also went on to say that these banking: “These banking channels are critical for processing transactions that enable almost $8 billion a year in imports from Israel, including that electricity, water, fuel food, as well as facilitating almost $2 billion a year in exports on which Palestinian livelihoods depend.”

Kai Ryssdal

Yeah. Alright.

Kimberly Adams

Okey dokey. Yes, I will. I’m just off today. I don’t know what’s up. Anyway. Moving on. I saw this clip floating around my social media feeds recently, and I want to talk about it. And I’m really interested in your take on this, Kai. It’s from the House Armed Services Committee hearing about the Air Force’s budget request. This was back on Wednesday, April the 17th of this year, and it was hearing about the Air Force budget requests. And in this clip, Florida Congressman Mike Waltz holds up a small bag of little metal parts and asks the Secretary of the Air Force this question.

Mike Waltz

“How much do you think the Air Force pays for this bag of bushings?”

Frank Kendall

“I don’t know, Congressman.”

Mike Waltz

“$90,000. This is a $90,000 bag of bushings that you need for any jet turbine engine.”

Kimberly Adams 

So, the argument there was that these things if you bought them off the shelf could cost like $100. And in response, the Air Force Secretary Frank Kendall said he’s familiar with the issue that Waltz is trying to raise. It’s a systemic one. Basically, defense contractors routinely exploit loopholes that allow them to overcharge the US military for parts, which leads to higher military spending. And CBS did an investigation on this, we’ll link to, part of the problem is transparency. These loopholes allow defense contractors to frequently refuse to turn over their pricing data. So, the Department of Defense doesn’t know if prices are fair. But there’s also the argument that lobbying it could be contributing to the issue. There’s a news site called The Lever that recently reported that certain members of the House Armed Services Committee who’ve received sizable donations linked to the defense industry added provisions to an upcoming spending bill that would give defense contractors even more pricing leeway. Kai, did this come up when you’re in the service a lot?

Kai Ryssdal 

No. But I was on the pointy end of the sword, right? I mean, I’m not. You know. We would requisition a part for the radar system, and it would show up and somebody else paid the bill. But look, this entire story of the Pentagon spending insane amounts of money for relatively small amounts of product. I mean, you know, the $600 toilet seat is a story from, you know, decades ago. I will read you though an article from Reuters. November the 15th 2023. Washington, DC. November 15. Reuters. “The Pentagon failed an independent audit of its own accounting systems for the sixth consecutive year, a Pentagon official said on Wednesday. The Pentagon is striving for a ‘clean audit,’ this official said, but that is still years away.” The Pentagon, I don’t think has ever passed in its entirety an audit. So, it’s not. Yes, it’s an ongoing abuse of the system of defense procurement. It is not however, unheard of.

Kimberly Adams 

Which is wild, because I feel like in most other sectors of government, if we had this level of kind of gaming the system, there would be a lot more pushback on it. And you know, worth noting, Waltz is a Republican here, you know, and yet, there’s just so little energy it seems to look into these kinds of things because who wants to go after military funding when there are so many other things you can go after in Congress.

Kai Ryssdal 

We should tell you we did reach out to the Air Force for comment. Didn’t get back to us in time for the drop with today’s episode. Alright, so let’s see. One, two, three, four, five, six. Six letters in Nvidia and many, many billions of dollars. Here we go.

Jensen Huang

“The demand for GPUs in all the data centers is incredible. We’re racing every single day.”

Kai Ryssdal 

That was Jensen Huang. He’s the CEO of a company called Nvidia, which makes the high-end chips that go into all the AI computers and all that jazz. They reported earnings yesterday Wednesday, $26 billion in revenue for three months, that’s versus $7 billion in the same three months a year ago. They’re making money hand over fist. Revenues up 260% if you want to do the math. Here’s the thing. It doesn’t show any signs of slowing. It’s just unbelievable. They’ve got this brand-new blockbuster chip coming out, which is supposed to be like, like orders of magnitude better than the old chips, but people still want the older chips too. I can’t even tell you. It’s just such a remarkable juggernaut of the AI economy. It’s totally driving things. Totally driving.

Kimberly Adams 

It reminds me of what they used to say about newspapers. It’s like a license to print money.

Kai Ryssdal 

Yeah, totally. Totally. It’s like oil company money except more. You know?

Kimberly Adams 

Yeah, except a lot more. All right, last one for today. And I’ll let you take it, Kai car since I stole yours at the top.

Kai Ryssdal

All right. No worries Here we go.

Merrick Garland

“It is time for fans and artists to stop paying the price for Live Nation’s monopoly.”

Kai Ryssdal 

So, that was the Attorney General in the United States, Merrick Garland talking about a suit that they filed today, antitrust suit against Live Nation, Ticketmaster parent company alleging monopolistic control. I mean, if you’ve ever bought a ticket, you know. There are few structures that are unbelievable, but if you dig down a little farther, it’s about venues and how those get controlled and how tickets get sold for them. What the artists stand to gain and how the fans are getting squeezed. This is going to be one of those lawsuits that takes years and years and years. But it’s a big deal. It’s very Biden administration centric, right? And that, you know, the FTC under Biden, and also the Justice Department are going after these monopolistic behaviors. We’ll see what happens. It’s an interesting story, though.

Kimberly Adams

Yeah, and Nancy Marshall-Genzer forwarded around earlier the statement from Live Nation in response to this and it was very, very, how shall I say snarky. It says “Calling Ticketmaster a monopoly may be a PR win for the DOJ in the short term, but it will lose in court because it ignores the basic economics of live entertainment, such as the fact that the bulk of service fees go to venues and that competition has steadily eroded Ticketmaster’s market share and profit margin. Our growth comes from helping our artists tour globally, creating lasting memories for millions of fans, and supporting local economies across the country by sustaining quality jobs.” And it goes on to say many more things, but I imagine.

Kai Ryssdal 

See ya in court.

Kimberly Adams

Yeah. See ya in court. Exactly.

Kai Ryssdal

I mean, come on. Holy cow. Yeah. All right. That’s it for today, on a Thursday, reasonably quick. More news and drinks tomorrow, Economics on Tap. That YouTube livestream is at 3:30 Pacific 6:30 Eastern. Do not miss it. Ah, Jay.

Kimberly Adams 

Make Me Smart is produced by Courtney Bergsieker. Audio Engineering by Jay Siebold. Ellen Rolfes writes our newsletter. Thalia Menchaca is our intern.

Kai Ryssdal 

Marissa Cabrera is our senior producer. Bridget Bondar is the director of podcasts. Francesca Levy is the executive director of Digital.

Kimberly Adams 

You gotta go burn off some of that caffeine.

Kai Ryssdal 

Yeah. Well, it’s a busy morning. Busy afternoon.