♪ carol: welcome to "bloomberg businessweek." i'm carol massar. jason: i'm jason kelly. we are joining you from bloomberg headquarters in new york. carol: the u.s. and china continue to talk trade, but are they making real progress? jason: it is the one-year anniversary of president trump's tax bill. the big cuts came with big promises, but the jury is out on what they have done for the economy. carol: theresa may promised there would be a vote in

parliament this weekend. on monday morning, she announced the critical vote would be postponed. jason: on wednesday, parliament held a vote of confidence on her leadership. she survives, but time is running out for her to make a deal with the eu. carol: bloomberg's senior executive editor, john fraher, wrote about brexit. he joined us from london. john: what i tried to do with this piece was take a look at 10 years out from now, and imagine and think through the consequences of what sort of country britain might become 10 years after brexit now. a lot of that is how you imagine britain to look in 10 years time. a lot of it depends on what kind of brexit we get. the scenario we decided to go with is probably still the likeliest scenario. despite all of the chaos and helter skelter events that we are seeing in london right now, that where we will land is a relatively soft brexit. that does not make many people

happy, but it is still the most pragmatic way to avoid a cliff-edge brexit, but that is ultimately the scenario we decided to go with. jason: this is a piece, and i will not spoil too much of it, it is at times clever and at times a little bit bleak, especially of britain and the u.k.'s stature in the world. tell us about that. john: that's right. and you see this happening already in the u.k., that since brexit, we have seen a real polarization in the political debates. we have seen a resurgence in identity politics. and you are really seeing a lot of divisions now across the political divide, and also within parties. and when you sort of take that and look at what is already happened in the last 2.5 years since brexit happened and you telescope it forward, it makes

you wonder how any future british government could deal with some of the pressing issues that caused brexit in the first place, such as rising inequalities, growing angst about globalization and modernization. when you look 10 years in the future, you have to think if trade tensions worsen between the u.s. and china, it will turn the world into three economic superpowers. the eu, china, and the u.s., but the u.k. is outside of it, with the u.k. losing political influence around the world. jason: you do have a little bit of fun from the get-go, although maybe not so fun in the sense that it is a very realistic look. you tell the story through the eyes of king william v. john: that's right. we decided which characters in british society will still be around in 10 years time or will still be famous, that will provide an interesting lens through which to look at this story? we decided the current prince william would be king william v by 2029.

the queen would be 104 by that point. so she has left the stage. prince charles has decided to abdicate to spend more time campaigning against climate change. so, william v is on the throne. for readers who managed to get to the end of the story, there is a bit of a surprise. we reveal who the prime minister of great britain is in 10 years time. that is a secret i tried to keep to myself over the course of that story, and at the end of it, there is a big reveal. hopefully some of our readers will find that an entertaining end to the story. carol: we know there are so many what if's on brexit. banks are watching this closely. jason: depending on what kind of deal the u.k. strikes with europe, london may lose its crown as the financial center of the world, or as some might say, it is already happening.

carol: ed robinson takes a look at how brexit could impact london's banks. edward: that has been the backdrop for the last two years, a widespread assumption that london will have a hard time maintaining the critical mass as the gateway to the european continent for financial services. but what we did is we looked at, what does this mean for the wall street banks? what does this mean for j.p. morgan chase, morgan stanley, bank of america? what is interesting is you cannot lose sight of the fact that it will cleave europe in half. you have the eu 27, and you have the u.k. and in a strange way, this is going to provide wall street with an advantage, because it is very easy for those banks to domicile on the continent as well as remain in london. and they will just be able to soak up a lot of market share that european banks like lose as they try to adjust to the loss of london. jason: it has been amazing to

that european banks like lose as watch, ed, and i know you have been following this very closely, because it comes up in interviews and presentations with the big wall street ceos all the time. and you can almost watch the wheels turning in their head. and as you say, these are opportunistic people. they did not get to where they were, these banks did not get so big, without candidly taking advantage of some dislocation along the way. go a little deeper for us. as they think about the continent, where are they going to be? where are they going to dig in to counter what they will lose in london? edward: what we have been seeing over the last couple of years, even outside of brexit, is the wall street banks, which have been reinvigorated after the crash, they have been taking a lot of market share, bond underwriting, m&a advice, other strategic forms of advice. on the continent they have been taking that from the european banks, which are behind in rebounding from the crash.

so that has already been going on, but what is happening now is we see companies in europe tapping jamie dimon's bank, brian moynihan's bank for jobs that don't involve accessing the u.s. capital markets, that don't involve a cross-border deal across the atlantic. we now have german mittelstand, midsized companies, tapping the banks for deals that don't even leave europe. this has long been the bread and butter for european banks. they have home field advantage when it comes to these companies. if suddenly, they start losing share on those kinds of deals to the american banks, that is something new. carol: you have great statistics in your story. you talk about five of the top six institutions handling european transactions, they were american, according to bloomberg data.

already, u.s. firms have made some dramatic inroads. edward: yes, that's true. one of the trends that analysts point to the reason this is coming about is that europe never completed banking union or capital markets union after the crash. so, there was this idea that with the euro, they would form one capital market, they would form one banking sector with uniform regulations across the way, and then it could match the u.s. market when it came to scale. it would be like that like. but they never completed those projects. and that has left a lot of investors and european banks deeply frustrated. carol: joel weber joins us now. as we know, brexit front and center this week. and we also have to talk about bitcoin. a couple of good stories on brexit. joel: it is the giving tree. it is the story that just keeps giving. it has been very good to us here at bloomberg for multiple years now. it is something that we know when we look at it in 2019, it will remain such. but we went to 2029 with this john fraher story. not unlike a close card for the

future, what with that look like? jason: one of the things i love, john fraher has been a go-to guy. he runs all of our finance global business coverage overseas, all of that. but he is part of a massive team leading this effort. we essentially have a brexit czar. joel: brexit is a story for us at bloomberg that is an incredibly important one. it is about global finance, too, and the future of europe, not just london and the u.k. we know this story very, very well. that is why we can have some fun with it sometimes and look at 2029. jason: we heard from ed robinson about the applications for not just british banks, but u.s. banks as well. joel: we see an opportunity here, right, and that is what makes it such a significant story, because it affects the global economy in ways that are so interesting. carol: that john fraher story, not exactly dystopian, but it makes you think of where we might be in a decade when it comes to london and the u.k. joel: what america's presence might look like there, right?

for me, it is also about opportunity. on the idea of opportunity, this was an issue that we pivoted to look at crypto and bitcoin. a year ago, bitcoin was flirting with $20,000. there was a lot of hype, a lot of wall street got interested in it. and it feels like that tide has retreated. and this week, the prices were close to $3300. not exactly the same thing $20,000. carol: can i say, you had fun with the cover as well. joel: don't work too hard on it. jason: don't overthink it, and the cue is the color. joel: exactly. carol: what i love about the magazine, and we will hear from our futures editor about the coverage this week, but you guys continue to undercover stories

that we did not know about. i did not know about the one with btm. jason: undercover? uncover. uncovering undercover stories. joel: what we wanted to look at was all the different ways that crypto, that we can look at it as a topic. there is a story you will learn about about btm's, which are a form of atm's, but for bitcoin that has been involved in money laundering. that is a story i don't think anybody knew. and we photographed every single one of the things in new york city. jason: joel weber, thank you so much. later in the show, we will dive deeper into cryptocurrencies with editor max chafkin and matt robinson. everything you wanted to know about bitcoin, but were afraid to ask. carol: and what exactly is going on between china and the united states?

every day, it is like a different signal and a lot of noise. jason: this is "bloomberg businessweek." ♪

♪ carol: welcome back to "bloomberg businessweek." i am carol massar. jason: i am jason kelly. join carol and me for "bloomberg businessweek" everyday on the radio from 2:00 to 5:00 p.m. wall street time. catch up on our daily show by catching up on our podcast. get that at itunes, soundcloud, and bloomberg.com. carol: and you can find us online at businessweek.com, and on our mobile app. jason: the u.s.-china trade dispute maybe cooling, at least a little bit. the two sides talked this week amid reports that china may be willing to lower tariffs on u.s. cars. carol: that happening as president trump suggested he would intervene in the case against huawei's chief financial officer if he thought it would impact trade talks with beijing. jason: shawn donnan, our go-to guy on trade, we caught up with him in washington for the one thing that seems to be certain in these trade talks.

it is uncertainty. shawn: i think when we talk about the trade wars, we talk about tariffs, these tit-for-tat tariffs that we have seen that become this dramatic feature of 2018. but in the background, there is this interesting thing trump has been doing as well, which is weaponizing uncertainty. if you think about it, most presidents have tried desperately to reduce any kind of uncertainty, because uncertainty is bad for business, it is bad for financial markets, it is bad for the economy. companies do not invest when uncertainty is in the air. they want to know their investment is going to go somewhere. but trump has turned that on its head and used uncertainty to build a case for investing in the united states, for rebuilding the u.s. economy. don't like our tariffs overseas, don't like the way china is looking a little wobbly? come here and invest in the united states. that may be an argument that

flies with some people, but there are also signs, and we have seen this in swings in the financial markets in the last couple of weeks, that people are running out of patience with that weaponizing of uncertainty. they want some certainty. carol: well, it is interesting that you say that. it comes in a week when there was a story -- apple is considering moving iphone output if the tariffs went up. they may be thinking about, maybe we need to bring things back home. because maybe we will be able to keep a watch on it more closely. shawn: absolutely. back home is one of the thoughts, and then another thought, and we tend to see this, the bigger thought that most companies are having, is simply move out of china to somewhere else in asia. somewhere like vietnam, malaysia, or cambodia where they can take advantage of cheap production and still get that

back into the u.s. market without hitting these tariffs. we saw that with gopro this week, which announced it will move some production out of china. and this is the interesting part. it was going to move the production for the u.s. market, which is i think about 40% of their sales, out of china and to somewhere else, it had not decided where. but it was going to keep most of its production in china for the rest of the world. and that is this cleaving we are seeing in the supply chains. it is one of the big emerging trends the that we will be watching into 2019. that is part of the goal of the trump administration. there is an argument in the white house, and you hear it from white house advisers like peter navarro, that the u.s. has become too dependent on supply chains that go through china, and that at the very least you need to look at some alternatives. if it is not coming home, maybe it is mexico, or maybe it is vietnam, or it is coming back to japan or korea or taiwan, or some other places.

jason: one of the most interesting elements of this story this week was the recent arrest of the cfo of huawei, and the administration's initial thought, or initial statement, repeatedly, that this was separate from that trade negotiations. then, here comes the president midweek saying that, in fact, he might take actions related to that case if it were to help the trade negotiation. help us sort through that. shawn: there are two things at play here. the first is we need to think about the trade war not just as a kind of war about soybeans, which is often the way it is framed, or about steel or cars. it is really about an innovation war that is going on between the u.s. and china. but huawei is one of the key chinese pieces there, particularly in an area of 5g and mobile networks, where the chinese are trying to set new standards for those, and huawei is their leading company. there is also, there have been for years, and this goes back to the obama administration and the administration of george w.

bush, there have been concerns about huawei and its relationship with the chinese military and how it is putting telecom equipment around the world that possibly chinese intelligence can use to spy on people here in the u.s. the spooks go up to capitol hill and they tell congressmen, do not use a huawei handset, stick with your iphone. so that is one big piece. the second big piece is the way trump is just kind of upsetting the norms again on trade. for years, the u.s. has tried really, really hard to separate criminal justice cases, particularly involving foreign companies, from economic policy and trade agreements, and trump has jumped in and undone years of work, not just by his own administration in recent days -- we are trying very hard to separate these cases -- but also years of economic diplomacy by the u.s.

carol: coming up, the tax cuts and jobs act celebrating its first anniversary. jason: it might be too early to judge its full impact, but there is plenty of data to look at so far. this is "bloomberg businessweek." ♪

♪ jason: welcome back to "bloomberg businessweek." i am jason kelly. carol: i am carol massar. you can also listen to us on the radio on siriux xm, channel 119. and on a.m. 1130 in new york, 106.1 in boston, 99.1 f.m. in washington dc. jason: and a.m. 960 in the bay area. and in london on dab digital, and on the bloomberg business app. carol: president trump signed the tax cuts and jobs act one year ago, and since then, the

u.s. economy has been -- jason: correlation is not causation, going back to your english and economics classes. what economic effects, positive or negative, can we actually trace back to the tax cuts? we have a chart for that. u.s. economy has been -- carol: a good chart this week. it takes a look at gdp growth accelerates, but at the same time, less tax revenue coming in and the deficit expand. jason: the deficit ballooning. that plays through to businesses. they are paying less in taxes, and so, what does it need for earnings? for that, we go to taylor riggs. taylor: if you pay less in taxes, you have more earnings to retain for your shareholders. and so one way that played out in the markets was boosting the all of those earnings-per-share. this is a really cool chart. this is our seasonality chart. we normalized it back to january, and you can see 2015-2016, you had revisions lower. 2017, you started to see some eps revisions higher. 2018 with the tax cuts. take a look at that. almost 18. interestingly enough, as we talk

about moving the story forward a little bit to 2019, a lot of this is starting to slow down a little bit. you are hearing some analysts starting to pull back those forecasts as we wait and see how the deficit plays into how companies feel. carol: we see how that feeds into concerns about the growth outcome. thank you, so much. jason: in the economic section, editor peter coy takes a look at the tax cuts and what their impacts might be in the year ahead. peter: it is still early, right? a year is not really long enough to gauge the full effects of a cut. people are still arguing over the impact of the 1986 tax reform act under reagan. economists -- carol: it is amazing. peter: but i think it is early enough to say some things. and what we have seen is that the impact has been stimulated

on the demand side of the economy, which makes it more of a keynesian democratic-style cut. people talk about a sugar high. it fuels growth, but it does not last. carol: why doesn't it last? if you are continually getting a tax cut year after year? peter: let's say you're spending is here. now you have a tax cut. it brings your spending up to here. that is it. you got the tax cut. your taxes are not going to go down and down and down. they went down, that is it. it's gone. it is nice, but ok. so you can see that in the gdp numbers. the second quarter was very strong, 4.2%. third quarter, 3.5%. those are both well above the history of growth from the end of the last recession in 2009 through the end of 2017. carol: can we say that is all because of the tax cuts? peter: no, we cannot. the congressional budget office would estimate it at 0.3 percentage points.

another 0.3 -- people forget about this -- another thing trump did is he signed a lifting of the spending caps which were put in place to eliminate deficits. he lifted those, with the agreement of republicans and democrats in congress. carol: defense spending, non-defense spending. jason: exactly. that is another 0.3%. then you get about 0.2% out of emergency relief for disasters, hurricanes, wild fires, and so on. carol: that is a full percentage point almost. peter: you are getting up there. that explains the bulk of the jump in gdp. the second and third quarter were strong. the fourth quarter, the one we are in now, is coming in a bit lower still. we are off the 3.5%, maybe down toward 3%. and by the end of 2019, the economists who were surveyed by bloomberg predict that the fourth quarter of 2019 is around 2% growth, which is kind of

ordinary. it is fine, but it does not feel like -- it's not an ongoing, big increase, and nothing like what trump promised. carol: what you say would have more of an impact in terms of the economy is capital expenditures. we talked to our guests, and i do not feel i have a real handle, because i think some folks come on and say companies are spending. others say it is not showing up in the data. peter: it did show up. the second quarter was very strong. everything took a little lag. but then, it rapidly started receding towards more normal levels. that was pretty dismaying to the people who thought the big supply side effects. what happened? why aren't you still investing? carol: still ahead, one of the world's leading brands celebrates the beauty of philanthropy. a special gala honoring women of worth. jason: a lot of value there. something that has not held its value quite so much is bitcoin. the rise and fall of cryptocurrencies is this week's

cover story. carol: this is "bloomberg businessweek." ♪

♪ >> welcome back. still ahead in this issue if you've got a few extra million elite universities will be glad to invest it for you. jason: you might have a little extra time to read over the holidays. we've got a book review. carol: first up, our coverage story on crypto currencies. we touched on it earlier but there is more to say.

jason: max chafkin oversees our feature, he was in charge and we got his perspective on crypto's rise and fall. max: i will take you back to when the price of the coin hit $20,000 in 2017. for everyone, that was a crazy moment because it is this asset that does not really mean anything, is not worth anything, that was suddenly bought not just by institutions, but regular people. people were getting their jobs -- people i knew were quitting their jobs and doing things in crypto. the price has come way down and we wanted to take a minute after the crash and assess what happened, and basically commission some stories that tried to make sense of both the bubble up but also the busting of the crypto bubble. >> to be fair, it was a crash, but the folks that went in a couple years ago still made a

ton of money. max: the current price of bitcoin, around $3300, that is still a lot of money. way more than two years ago. it still has been pretty bad when you look at a lot of the activity that has happened over the past year. we have a great piece about ico's, initial coin offerings, that were all the rage about a year ago. we had one of the crypto reporters here at bloomberg do an analysis of the biggest ico's over the last two years, and it is ugly. if you bought into any of these you are losing money, and many of these companies have colorful problems. >> tracy alloway talks a little bit in her overview of this about some of the characters who have come in and out of this, and at times there are some

dodgy corners of this. max: absolutely. it is great. we are so lucky as journalists to have bitcoin because you can't make this stuff up. the idea that this technology that is simultaneously embraced by drug dealers and mike and legendary hedge fund managers and traders. we have a wonderful piece by matt robinson on btm's, bitcoin atm's which i vaguely knew about -- >> i didn't. >> i didn't. we'll hear more in a few minutes. give us a tease about what that is all about. max: everyone vaguely knows that crypto is useful when you are trying to hide dirty money. what i did not realize is there are these machines in pretty much every neighborhood, in every major city in the united states and around the world, and they are used by some shady characters and there are some crazy things, it is straight out of true crime tv going on, and i

am sure matt will fill you in on that. >> but what i think is interesting as well, and digs into where regulators are or how companies in the sector trying to get a one up on competitors are saying, see with these guys are doing? they are doing it badly. but i feel like you do not necessarily have a story dedicated to regulatory oversight because they are still finding their way. max: we have been waiting for years and years for regulators to bless this and they haven't. it is hard to know why that is, but i think the most obvious explanation is that there is still a lot of shady stuff out there and while this technology is really important and potentially world changing, it is also a little bit scary. you didn't mention the story about the marshall islands, another story where you have kind of an unlikely group, the republic of this tiny country in the middle of the pacific, embracing a cryptocurrency, and it appears, getting burned on it.

jason: as we heard from max, one of the most fascinating cryptocurrency stories in this issue is btm's, atm's that take cash in exchange for bitcoin or other digital currencies. carol: i love the story. we spoke with one of the stories authors. matt: the first one came out in 2013 and now there are about four thousand worldwide, the most of which are in the u.s. you got about 100 in new york. there's one on 2nd avenue right now. what spin interesting about this , the number of machines going up. they are continuing to grow.

>> a lot of regulatory issues as we have state laws and federal laws. is if youching theme are going to start a business, if you wanted to, you have to follow, you have to make sure you know who your customers are. >> do you have to show a license? have reasonable policies and procedures to know this person is. they are going to ask you questions about who you are more rigid the money. now it's like they want to make over $10,000u go in any transaction, even if you do five different transactions, that has to be reported to treasury.

no one is laundering money on your machines. they call a ky see policies and procedures. >> is pretty easy to do. using these machines and it has become pretty popular. we know bitcoin is pretty popular. thing is itesting is in parts more transparent -- it is the currency of choice. >> tell us what you see, cause i think you went to the bodega uptown.

matt: to be honest, before doing the story i probably walked by a bunch of them. they are actual atm machines but with different software. how often do you look at an atm and say ok, what kind of an atm is that? from there, you talk to folks -- oftentimes a store owner will get presented -- hey, can i put the machine here, i will give you a certain percentage or a certain amount to month. the store says, ok fine. maybe some foot traffic, people use it, and that is kind of it. people buy a coke, couple twinkies and they are on their way. >> you talk about one company in particular. cottonwood vending. are they one of the big players here? matt: one of the biggest in new york. what is interesting, the biggest is only about 5% of the whole market, even the biggest is quite small. we highlighted another company in l.a. they advertise that they do not take information.

>> so they are already saying hey, we are not abiding with the law. >> totally anonymous. matt: so my broad point, even if you have four machines, you can launder a lot of money if you are doing it that way. jason: coming up, a new twist on charitable giving. instead of writing a check to your college, let the manager -- let them manage your money. they will take a cut, though. carol: and loyal was women also thriving with fabulous gala to celebrate grassroots giving. we will take you there. jason: that's next on "bloomberg businessweek." ♪

jason: welcome back to "bloomberg businessweek." i'm jason kelly. carol: and i'm carol massar. join us every day on the radio from 2:00 to 5:00 p.m. wall street time. you can also listen to our podcast on itunes, soundcloud, and bloomberg.com. jason: you can also find us at businessweek.com and on our mobile app.

many companies with community programs are saluting those who make a difference. carol: i attended the gala for l'oreal's women of worth initiative. there were so many brand ambassadors, including juliannemoore, and these were everyday women who simply do extraordinary things in their community. maura: we have always believed in the intrinsic worth and beauty of all women. we wanted to come up with a philanthropic endeavor that would recognize those women and the extraordinary impact they make on their communities. carol: and these are everyday women? something happens to them, and they want to make something better. maura: oftentimes, the organizations they have founded come from great adversity and hardship, where they are able to dig inside and go deep, take

that pain and make it a mission that they sought to contribute into the world. carol: i want to highlight one of the women i got introduced to, she is really interesting, and she is basically taking food that is left over from events and through a sharing economy, being able to bring it to organizations and people who need it. mora: she was probably one of the breakout stars. she really saw herself in terms of food scarcity and saw herself somewhat as intervening to the problem. as a college student, going to nyu at the end of big meetings, seeing tons of pizza boxes, and said, this isn't fair. there is a scarcity issue in new york city. so she was able to, as she described it, come up with a food service app that operates like uber and picks up food that corporations or organizations are done with and redistributes it to homeless shelters. jason: tell us about the national honorary, carry silver.

what a powerful story. what in your estimation made her stand out even more from this amazing group of nominees? mora: the honory is ultimately chosen by public vote, and so many people could not imagine suffering the loss of a child. and one that seems, in a way, that is so traumatic and one that can also be quite predictive. with a simple ekg you are able to determine in upwards of 70% of cases whether or not there is a heart defect that could lead to a sudden cardiac arrest. so that was the organization she founded, based on the loss of her son, that was so moving to so many people. jason: one of the things i found so powerful about her story was

the very specific action that she was able to take. mora: we come up with this idea that volunteerism or starting your own philanthropic organization seems so daunting. you don't have to boil the ocean immediately. so many of the stories from this year's honorees were doing something within one or two people, starting small, and seeing it slowly grow. there was a hopefulness and an encouragement in so many of those stories like christie's. carol: staying with the theme of giving back, this is the prime time of year for colleges and universities to get big gifts from major donors. jason: in the finance section, there's a section of the growing popularity of donor advised funds with a twist. we learned about these investment vehicles that spread their returns to worthy causes, including some of the world's best-known universities. >> let's say you want to give away money to charity. this time of year, you are

thinking of giving by the year's end, but if you have a donor advised fund, you do not have to make that decision anytime. you give your money to a university you are typically affiliated with, or you could give it to a schwab or vanguard or the like. you get an immediate tax deduction, and the charitable arms of these investment firms will help you. if you have appreciated assets, stock, complex assets, they will take care of all of that for you, and you give away the money as you see fit and you do not have to do it immediately. you could do it over time. there are not a lot of constraints. the charities that manage these funds have to approve it. so you are giving it to a real 501(c)(3). but you do not have to give it away immediately, you can do it over time. carol: some of them say you can do it over time, but you have to be doing it. if you don't they will do it for

you. >> for example, dartmouth college requires 5% every year that you have to be giving away. there is a criticism that you get immediate deductions, but the charities might not get this money for a long time, if ever. some of the schwab's of the world, the charitables, they do have parameters. so if you have not spent money in a couple of years, they will nudge you and by five years, they will have some parameters -- fidelity may close your account or others might take 5%. carol: but if you create this donor advised fund, ultimately the money will go to some charity, right? if you don't do it and you are not proactive about it, the body that is overseeing the money, whether it is a university or fidelity or schwab, they are going to do it. >> there are some parameters. i don't know about universities. it is about $110 billion. carol: will the money go back to you? >> no, because then you would have a lot of tax and locations.

but say you went to stanford or yale and wanted to create a donor advised fund at your school. not every school's endowment is big enough to handle something like this. at yale, there is a pretty steep minimum, you have to give at least $5 million and have to give at least half of it to yale. most of the schools that sponsor these have those parameters, because they are doing work on your behalf. for the other half, they are making those donations and doing the due diligence and some administrative work. the upshot is, well, your money is invested with david swenson. carol: how cool is that? >> your charitable money is growing at the rate of the yale endowment. that was a big draw for some people. at notre dame, the idea that you could capture these returns and give bigger bucks to your local parish or charity. jason: straight ahead, carol, modesty is making a fashion statement. the pursuit section looks at how brands are expanding the concept of sheikh.

carol: welcome back to bloomberg businessweek. i'm carol massar. jason: and i'm jason kelly. you can listen to us on the radio in new york, boston, and washington, d.c. carol: and in london on dab digital and also on the bloomberg business app. in pursuits this week, a new book that will give you insights into the steamy side of global business. here's a review. >> there is an argument for bribery, which is to say, the

argument is it is pro-business, that it helps businesses in many countries keep and grow their own businesses by greasing whatever channel they need in a place where there is not necessarily pre-articulated bureaucracy. that is the justification that a lot of companies use, and a lot of companies have paid tremendously large settlements for bribes along these lines and reasons for that. jason: and through the course of reviewing this book, you are not talking about people who have never heard of the shadowy underworld. these are brand-name companies who have fairly openly in some cases used bribes to great advantage, especially in emerging markets around the world. >> after the 2003 invasion of iraq, the u.s. military

discovered that through the united nations, there was a tremendously large kickback scheme involving thousands of companies paying massive sums to saddam hussein. volvo, johnson & johnson, huge companies ending up paying $1.6 billion in settlements to parties in the u.s. and germany. carol: so they are not advocating for bribes, but the point is it greases the wheels and gives access necessarily to establish companies in emerging markets that provide products services to folks that might not otherwise have them. that is the plus side? >> that's the plus side. the downside is in two parts -- one, it is unjust. it is effectively a tax on the poor because it ends up trickling down in increased cost

to the public. the top of that society, people receiving kickbacks are the ones that make more money off of it. that is one part. the other part is anticapitalist. in a market where there is basically no competition, inferior products come onto the market and are allowed to stay there, when in theory, in a capitalist society, there is innovation, competition, and that will breed efficiency. carol: we also caught up with chris rouser about an interesting trend in apparel. jason: for the many cultures and religions that value modesty, fashion brands are making close that are simple, but are not dull. >> modest fashion is coming up in the industry. a lot of muslim dressing, conservative dressing has been a huge business, but has not been high-fashion for the past few years. major designers are releasing collections, and models who wear the fashion are becoming influential on instagram. >> how major in terms of

designers? >> ones like oscar de la renta, valentino, burberry, because they realize it is a huge market and they should be in it. jason: a huge market in the middle east, parts of europe, asia, and even here in the united states as well. high-fashion designers only do it if there is a market. >> totally true. muslim dressing in particular was a $250 billion market in 2016, and they expect it to get up to $350 billion in the next two years. that is second only to the consumer market in the u.s. and china. that is a huge group of people and they want to cater to it. carol: and it is not boring or plain, it looks unbelievable. it looks like high-fashion. >> our model is an influencer and wearing valentino on the cover of the section. you wouldn't even realize it. and a lot of these designers are not marketing them to a modest audience. it is jackets and dresses with sleeves, not stuff you think of as being particularly modest. jason: when you think about modest, you think about it's a prairie or a a pilgrim look.

>> and it's not. it's beautiful. this is a market that has not been catered to, from muslims, orthodox jews to catholics, and these women want beautiful things but want to dress a certain way. carol: bloomberg businessweek is available on new stands now. jason: what is your favorite read? carol: i like the one about what life is like in london, the u.k. after brexit. it is not quite dystopian but it is all the implications that could play out. as a result of brexit. i loved it. >> it's almost future dis-kenserian. i like to the btm story. they are bitcoin mediums, essentially -- bitcoin atm's essentially. he went on some serious reporting trips for this. carol: check your neighborhood.

there is probably a btm in your neighborhood. you can find more stories on businessweek.com over the weekend, so check that out. jason: and our podcast is available on itunes, soundcloud, and bloomberg.com. carol: we talked to many honorees on the list of bloomberg 50, and people to keep an eye on in 2019. jason: paul rabe, bruce linton, the ceo of canopy growth. carol: also, cathie wood of ark investment. jason: more bloomberg television starts right now. ♪ ♪ there's no place like home ♪

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haidi: welcome to "daybreak: australia." i'm haidi stroud-watts in sydney. shery: i'm shery ahn. sophie: i'm sophie kamaruddin in hong kong. we are counting down to the open. ♪ haidi: zero the top stories we are covering. china taking more steps to ease trade tensions. let's talk about restarting purchases on american corn. nissan product or's plan to talk about ghosn.