SYLVIE DOUGLIS, BYLINE: NPR.
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DARIAN WOODS, HOST:
It's THE INDICATOR FROM PLANET MONEY. I'm Darian Woods. And I'm here with Adrian Ma. Hello, Adrian.
ADRIAN MA, BYLINE: What's up?
WOODS: We're also here with our very special guest, Wailin Wong, who is a Planet Money reporter. Welcome.
WAILIN WONG, BYLINE: Hello. Great to be here.
WOODS: Very good to have you here. And there has been so much economic news this week that we wanted to get off to a head start with an early Indicators of the Week. Stay tuned.
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WOODS: OK, Adrian Ma, tell me about your indicator.
MA: My Indicator of the Week is three. Three is the number of companies that General Electric is splitting up into. And this is a huge milestone for GE because for most of its 130-year history, GE was known as this giant corporation - right? - with divisions that did all sorts of different things. They started out making light bulbs. They helped develop the X-ray machine and later got into household appliances. And then they just kept going. And they got into trains and aviation and on and on and on. And there was basically a time where you couldn't go through a day without touching or interacting with something made by GE, which is, you know, part of the reason why they made fun of GE on the sitcom "30 Rock."
MA: Love that show.
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UNIDENTIFIED ACTOR: (As character) GE owns Kitchenol (ph) of Colorado, which in turn owns JMI of Stanford, which is a majority shareholder in pokerfastlane.com, which recently acquired the Sheinhard (ph) Wig Company, which owns NBC outright. NBC owns Winnipeg Ironworks (ph), which owns the Opjinagi (ph) Party Meats Corporation of Pyongyang, North Korea.
MA: Everybody got that?
WOODS: That's a conglomerate, if I've ever heard of one.
MA: Oh, yeah. And in the 1980s, they expanded into even more businesses. They acquired media companies and oil drilling and energy companies. And they even dove deep into financial services.
WOODS: So this huge company made up of a bunch of smaller companies, it grew even larger.
MA: Yes, to include dozens of subsidiaries. And what's interesting is around the era this was happening, a lot of Wall Street types looked at conglomerates, and they said, this is not a good business model. But for a lot of investors, GE was the exception. You know, they had Jack Welch as CEO, who was sort of idolized for being this management genius. And then from the decade starting in 1990, their share price just exploded.
WONG: Did any of you remember to buy GE in 1990 as a baby investor?
WOODS: Baby bonds. I was not in the investment game at that age, I'm sorry to say.
WONG: So it sounds like they were flying high for quite a while. But then the past several years have not been as good for GE, right?
MA: Yeah, I think that's putting it nicely. Their revenue fell. Their stock plummeted. And they started selling off all of these different businesses. And basically, they were just trying to cut off body parts to save the patient, right?
WOODS: That is a gruesome-but-effective metaphor, Adrian.
MA: Thank you. And, you know, when this latest decision takes effect a few years from now, GE will become separate companies for aviation, energy and health care.
WOODS: I mean, why didn't they do this beforehand? I mean, it seems pretty obvious.
MA: Yes. I mean, for some investors and armchair CEOs, Darian, this move seemed overdue, right? Like, why continue to have these very different businesses under the same corporate conglomerate umbrella?
WOODS: Yeah. Like, GE was the exception to the rule that things that a business owners should roughly have something to do with each other.
MA: Right. It doesn't really seem to fly anymore.
WONG: Well, thanks for bringing us the party meats today, Adrian.
MA: You're welcome. I hope that was not too hard to digest.
WONG: No, went down easy.
WONG: But you know what might not be going down so easy is some indigestion in the bond market.
WOODS: Love the segway. All right. So my Indicator of the Week is the interest rate on Treasury bonds, and that's how much the government will pay you every year to hold on to government debt. A lot of people hold on to these in their pension funds because they're safe. They're almost boring, even. And this week, you could buy a Treasury bond that will pay you - wait for it - half a percentage point a year for two years.
WONG: So I wouldn't be able to colonize the moon with that kind of money.
WOODS: No, it is not to-the-moon money, but the U.S. government is very likely to pay you back. That's one plus. And that's one reason, among many others, why interest rates in rich countries like the U.S. have only gone in one direction for the last 40 years, and that direction is down. In the early 1980s, the interest rates on bonds were in the double digits, but for a while, they've been hovering close to zero, maybe a percentage point or two. And it is a puzzle why interest rates that governments pay has fallen so much over the last few decades - lower growth, higher inequality, aging populations, those pools of retirement cash looking for somewhere safe to go. These have all been part of possible answers.
But I'm watching these numbers very closely right now because I feel like we're at this turning point in the economic recovery. So you have central banks, they keep the economy in balance. And at the start of the pandemic, to get us all out of the recession, the central banks around the world flooded their economies with cash. But now these central banks are starting to say it might be time to slow down that flood of cash ever so slightly. And the way they do that is by raising interest rates and by buying fewer bonds. And this has got me wondering. Historically, that kind of action means short-term bond interest rates go up. And we've seen it with that two-year bond rate I talked about spiking just a little bit. Now, is this the beginning of the end of that 40-year downward trend? Is this a calm breeze before a storm?
MA: Yeah, because so many people have bought up houses and started businesses assuming lower and lower interest rates, so it could really upend the way we see the world if interest rates keep rising. So thank you, Darian, for that cheerful indicator.
WOODS: I'm here to serve. And by the way, talking about serving - Wailin from Planet Money, what have you got to serve us?
WONG: Planet Money is all over the infrastructure bill this week that you might have heard of it, that little $1.2 trillion bill that passed over the weekend. It covers everything from roads to bridges to airports. But what I'm interested in and what I'm bringing you today is a very techie number from the section of the bill. That's about building out broadband networks. OK, here's the number. It's kind of a mouthful. Do not panic. It is 100 megabits per second slash 20 megabits per second.
WOODS: Oh, I think I can guess what this is about. So is that like some kind of universal declaration of the minimum right to download speeds?
WONG: Yes. My goodness. Ding, ding, ding. Got it in one. Got it in one.
WOODS: Yes. I feel happy about this.
MA: I was like, I heard that number, and I immediately felt like I had to, like, push my brain back into my ear.
WONG: So what the infrastructure bill does is it sets a benchmark for what speeds actually count as broadband. Like Darian was saying, what is your kind of like minimum acceptable level of broadband? So that's where this number comes in - 100 megabits per second for downloads and 20 megabits per second for uploads. Internet providers that want federal money to set up broadband networks, their speeds have to be at least this level - 100/20. Otherwise, it's not considered broadband.
WOODS: So what do they call themselves, just like wires connecting you to internet?
WONG: Just sad tubes.
WOODS: Sad tubes. OK.
MA: What do these numbers mean for us, like, internet users?
WONG: Yeah. So let's tackle the download number first - 100 megabits per second. This is the speed that matters for loading a web page or streaming a movie. And Netflix says you need 5 megabits per second to watch something in HD. And then the upload number, this is the one that has become really important during the pandemic because this is the speed that affects the quality of a video call, like, how people on the other end of a Zoom sees you.
WOODS: I - can't - hear - you. Sorry. Sorry. I'm going through a tunnel right now.
WONG: Right now, the Federal Communications Commission says most Americans have broadband, but their definition is way, way lower. Bottom line - the infrastructure bill is saying the current definition of broadband does not cover all the activities people need to do online video calls, telehealth appointments, remote school, and that's why it's asking internet providers to deliver this higher speed - 100/20.
WOODS: Thanks so much, Wailin, for that indicator. And for more on the entire infrastructure bill, check out yesterday's episode of Planet Money.
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WOODS: The show is produced by Julia Ritchey, with help from Isaac Rodrigues. It was fact-checked by Taylor Washington. Viet Le is the senior producer, and Kate Concannon edits the show. The INDICATOR is a production of NPR.
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