How do you stop bank runs? Bloomberg Opinion's Paul Davies says the less banks, the less runs. We also discuss the US housing market and childcare in America. Bloomberg Opinion's Conor Sen and Kathryn Edwards say, respectively, both are broken. And Opinion columnist Liam Denning also joins, explaining why electric vehicles are a threat to AM Radio. Amy Morris hosts.
You're listening to the Bloomberg Opinion podcast counts Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Welcome to Bloomberg Opinion. I'm Amy Morris. This week we look at the housing market and how mortgages are only part of the issue making buying a home more challenging. We're also taking a look at America's childcare system, where it has failed and how it can be saved. Plus the future of AM radio. Some of you don't even have it in your car anymore. But we begin with the banking system and how to avoid bank runs in the future. The failures of Silicon Valleys, Signature and Credit SUITEE banks have financial authorities thinking about possible rule changes to help make banking safer. US Senate Commerce Committee ranking Member Ted Cruz and House Judiciary Chairman Jim Jordan, both Republicans, sent a bi cameral letter to Federal Reserve Bank of San Francisco President Mary Daily demanding immediate answers on Silicon Valley banks to collapse, and we talked about it with Senator.
Cruz why the San Francisco Fed was essentially asleep at the wheel. The San Francisco Fed is who had supervisory responsibility for Silicon Valley Bank. The duration risks on these bonds was evident on the face of it, and yet the approach of the San Francisco Fed seems to be that oversight cannot be applied to it, that it doesn't have to respond to the American people, it doesn't have to respond to Congress.
Now they say in the letter that the need for transparency from the Federal Reserve is greater than ever. Paul Davies is a Bloomberg opinion columnist covering banking in finance, and he joins me, now, Paul, thank you for taking the time with us today. You write in your column that the only way to eliminate bank runs is to get rid of banks. Yet it's actually come up before, but one that you don't buy into. Walk us through that.
Yeah, So, I mean, it sounds ridiculously flippant, but it's it's kind of semi serious in the sense that one of the ideas that since the last financial crisis in two thousand and eight, people have had as to you know, how to improve banking generally is this is this idea of narrow banks, and a narrow bank is essentially I mean really it doesn't amount to much more than a payment service. It's, you know, instead of having your deposit at a bank and then the bank being able to use that deposit to fund all kinds of different sorts of loans, the bank where you would keep your deposit, the bank that would make payments on your behalf, they would only be able to back that money with you very very safe assets like Central bank reserves which are kind of just like cash really, or you know, very very short term, very high quality US Treasury bills, that sort of thing. So that essentially, the deposit that you have and the bank that holds it, it's all just cash and they can only use it to make payments on your behalf.
And that's it.
Let's talk about liquidity rules, if we could. You compare changing those rules to essentially rearranging the deck chairs, because bank runs and liquidity needs are two entirely different things. Bring us up to speed on that. Why why wouldn't changing the liquidity rules do much more than just rearrange the deck chairs?
Well, so it's It's what this really is about is the fact that a bank run is of an entirely different order of event than any sort of normal drain on a bank's funding that we that we might see due to kind of economic fluctuations or the business cycle or or you know, the changes in circumstances of a bunch of you know, individual depositors. So these lacidity rules that we have nowadays were brought in after the two thousand and eight crisis, and they're designed to ensure that banks hold a bunch of these very liquid assets. That was talking about that a narrow bank would hold all of its balance sheet in these kinds of assets. But it's to ensure that a bank holds enough of these that if there is a sudden need among a lot of its depositors to take out their cash to use it for other things, then the bank would be able to cover that, you know, relatively easily. The problem with it is, I mean it works up to a point. I mean it's good, and banks are kind of healthier for it to some degree, and you could increase the liquidity requirements slightly to make it ever so slightly safer, and ever so make them able to cover slightly more deposits than they can today, but when it comes to a run, that's what happens there is people have a total loss of faith that a bank is going to be able to make payments on their behalf at point in the future. And as long as there is any situation where a bank would have to sell less liquid assets in order to meet people's deposit withdrawal requirements, then you know, there's always a chance that somebody could be the last in the queue who doesn't get their money back. And as long as that chance exists, then you can always have a bank run.
Okay, you said something very important there, and I don't want to gloss over it. We were talking about ways to avoid a bank run. And while changing those liquidity rules may not make that much of a difference, there is deposit insurance. And after watching what happened with Silicon Valley Bank and what happened with Signature Bank, I thought, well, they're going to change those deposit insurance rules. They're going to make sure everybody is covered so that this doesn't happen again. Can't they do that? Can't they just up.
What's covered so they could There's an argument to say that they should increase the limit to some degree. There was a very interesting speech recently by one of the vice chairs of the Federal Deposit Insurance Corporation, which runs deposit insurance in the US, who was pointing out that, you know, since the you know, huge sort of monetary expansion following the financial crisis and particularly during the COVID pandemic, the amount of uninsured deposits has grown by like nearly four times to something like, you know, nine trillion dollars. So there's a lot more uninsured deposits than they used to be, so we could increase the limits, but leaping from that to ensuring all deposits changes the game entirely. If you ensure all deposits, then you would have to think very carefully about what you would let private banks do with those deposits, because they'd always be able to, you know, swing for the fences, try and make big returns on their equity, which is just a small part of the investment in a bank, really, or small part of the bank balance sheet, and if they lose, it doesn't matter because you know, whoever's ensuring the deposit wears most of the loss. So if you have to reach. If so, if we get to the point where you're going to try and do that, you'd have to regulate what banks do so severely that I think ultimately the only logical endpoint really is narrow banking again, and that's, you know, a very inflexible way to do banking.
So they have to keep that element of risk in place to serve as checks and balance exactly.
They have to keep it in place in order to stop the owners and managers of banks from all just doing wild things and not caring. Yeah, they just have to keep it in place.
Where does regulation come into all of this? Is this not an indication of the need for perhaps more regulation more stringent look at this.
So there's you know, a strong argument being made in the US that, you know, when a bunch of prudential regulations were relaxed in twenty eighteen, you know, we created a sort of a two tier system where very large banks are regulated very intensely and smaller banks less. So there's a bunch of things that they don't have to do, including certain stress tests and so on, which perhaps makes them more vulnerable. However, there's another argument that regardless of this, we have a lot of good regulation in place. What we don't do so well is supervised banks properly. So there's another argument to say that what we don't have is good supervision of banks, in the sense that we have a lot of good regulation in place that sort of sets fair boundaries for what banks can do and how they can do it. But what we don't do well enough is the people who are supposed to monitor exactly what banks are doing, what risks they're building up, The supervisors who go in and visit them regularly, who look at their books. They could have done more in a bunch of these situations to ensure that Silicon Value Bank, for instance, didn't build up the kind of interest rate risk that it did build up.
Okay, so that's a look at the regulation then, but what should banks be doing, especially when it comes to their clientele, to help maintain a more stable system. What's their responsibility here?
I guess One of the ways in which I think about deposits and how they work and the idea that you can just take your money out when you want is, you know, we all value this as a service because we want to be able to change our spending patterns in unpredictable ways. Now, that works fine for a bank as an individual bank, so long as all of its depositors don't all want to do the same sorts of thing at the same time. And the issue that we've had with some of the banks that we've seen, you know, lose a lot of deposits very quickly, for example, see the Convary Bank. What's going on with First Republic Bank right now as well, is that it turns out they had a lot of depositors who were very similar sorts of people and who all responded to the same signals in the same way at the same time. So I guess one of the things that we could try and do is to ensure that all banks have a greater diversity of depositor types, different sorts of people, different sorts of companies who were more likely to have different sorts of needs at different times. This is how you know insurance funds work. You know, ins fund only functions, because not everyone's house burns down at the same time. If we could kind of think about bank deposits pools of bank deposits in a similar way, that could be a helpful thing to reduce the likelihood of bank runs.
In your column on the Bloomberg Terminal. You refer to depositor liquidity as a useful fiction, and that once it's exposed, that's when you're going to see a bank run. Can you walk us through that? That almost sounds like an emperor has no close moment?
Well, it kind of is. I mean, this is the point about you know, banks and how they work. You know, this idea of liquidity that we can all use whenever we want is great as long as only a few of us want to use it at any one time. Banks can't just kind of give everyone their money back all at the same time without probably without having to sell a lot of illiquid assets and without probably losing money themselves.
Paul Davies is a Bloomberg Opinion columnist covering banking and finance, and coming up, we'll take a look at mortgage rates buyers just simply can't catch a break. We're going to get the latest from Bloomberg Opinion columnist Connor sent you're listening to Bloomberg Opinion.
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You're listening to Bloomberg Opinion i Amy Morris. Home Buyers are holding out hope that mortgage rates will fall in housing will become more affordable, but that is not necessarily how it's going to happen. Even if we do see lower mortgage rates, housing costs will likely still be inflated. We find out why from Bloomberg Opinion columnist Connor sent He joins me now, Connor, always a pleasure, thank you for taking the time with us, and you spell out this problem pretty clearly in your column on the Bloomberg Terminal. Home Buyers simply need more supply exactly.
So last spring, when mortgage rates started going up, we saw both new and existing home inventories rise because buyer demand fell off. Builders had this big backlog that they had built during the pandemic that they hadn't sold yet, And it was reasonable back then to think if mortgage rates come down, affordability improves, there's plenty of supply and we're good. But unfortunately for buyers today, we have mortgage rates that are still around six and a half percent, but new and existing inventories have both come down. New listings from sort of existing home buyers or existing home sellers aren't happening because they're just sitting on their low mortgage rates. And so at this point, if we were to get a drop in mortgage rates, it probably would just pump up home prices, but not really improve a portability for buyers.
Now. Traditionally lower mortgage rates would help home buyers. Why is it different.
Now, Well, normally we have plenty of homes for sale, and right now we have this crazy housing market where sort of the millennial generation is in their peak home buying years. We didn't build enough homes for the past ten years. We have this weird situation where we have all these people with mortgage rates much lower than current rates, and you just have this kind of broken market where there aren't enough homes for sale. You have enough people who have to buy a home for maybe life reasons, and they're paying whatever they have to pay to get that piece of property.
Who broke it? How did it become a broken market?
You've got a lot of factors. I mean again, sort of the baby bitmer generation, including my parents, have been sitting on homes for decades and they're not going anywhere for a while, and that supply will eventually hit the market, but not in twenty twenty three, not in twenty twenty four. Then you have again all the people who bought their homes prior of the pandemic, who locked in those mortgage rates. You have the after effect of the Greater Recession where we just didn't build enough homes for ten years. And then you have this generation that's in its prime home buying years that is trying to get going and start their families and build their lives, and you put it all together and it's a market that doesn't work very well.
So this has been brewing for a while. We can't just point the finger at the pandemic. This has been a lot long time coming.
No, absolutely, And people have been talking about this since at least the mid twenty tens, where they said we're not building enough homes, Millennials one day are going to buy homes, We're going to have this crunch. And it's just that the pandemic seemed to be the catalyst to kick this off, where maybe that was the moment that made people think it's finally time to move out of the city or go from brentsik to owning. That coincided with a lot of stimulus money with very low mortgage rates. So you have this dynamic where everyone bought homes and locking these low mortgage rates, and then you had the inflation impact coming out of it, which puts mortgage rates up, and then you think, well, maybe I'd like to sell or move, but it doesn't make sense when I have this great mortgage rate, and so we just have a market where if you want to buy, you're just in a bad spot.
Okay, So what would incentivize builders then to create more homes? Because the more we talk, the more it sounds like the problem is we don't have enough homes, so go build.
Some, right, And they were doing that until mortgage rates started rising rapidly last spring, when demand fell off and they cut back housing starts by about twenty or twenty five percent. Fortunately, demand the spring has been pretty strong, and in part it's been strong because they're not much resale inventory for sale, so builders are sort of stepping in to fill that gap. So the builders that have reported earnings in recent weeks have said they're likely to increase housing starts and months to come and that's encouraging, but we can't keep spooking builders by you know, you have this two to three quarter period where demand falls off, builders get spooked, they pull back production. You just need to keep conditions perpetually strong so that builders have the confidence to keep building and not have to pull rate in things when markets get tough.
What is likely to happen if mortgage rates do fall?
If mortgage rates fall from six and a half percent to five and a half percent, if you're a thirty year mortgage rate person, that increases affordability by about ten percent. And my concern is it's just my push off home prices by ten percent because you have this big sort of demand rush as people come in to try to take advantage of lower mortgage rates. You also haven't had much institutional buying because they've gotten spooked because of the market pulled back over the past year. So institutional buyers could come back in with lower mortgage rates and on the flip side, on the supply side, I'm not sure that mortgage rates falling from six and a half to five and a half percent, it's going to be the catalyst for somebody to say now it's time to sell my home. It's easier to see the demand response than it is the supply response.
Would lower interest rates connor be get more people into the market in the least boost transactions. The more people who are in the market, the more likely that the market can.
Respond, right, That is the one area where that would be encouraging. And even if maybe it wouldn't lead to an overall increase in the number of homes for sale. Maybe some people with maybe they've got a four percent mortgage rate and they think if rates are only at five or five and a half percent, that gets them to give up that mortgage rate. Maybe they move, so they're buying a home and selling a home at the same time. So you get more transactions. That's good news for realtors and movers and the people who benefit from housing transactions. So that's encouraging. It just that I'm not sure it would lead to a lot more supply on the market for everybody.
You talked about spooking the builders. What has them currently, What are they facing, what are their challenges?
So they're doing okay, they say that sort of. They're working down the inventories they built up last year. They're very profitable even with profit margins having fallen, lumber costs have fallen. They're now able to build a home faster than they could a year ago because supply chains have gotten better. But they read the news like everybody else, and if the Federal Reserve is still talking about raising interest rates and maybe having a recession a year from now, they don't want to get too aggressive on the building side when they could find themselves in a very different economic environment six or twelve months from now.
And we also talked about the pandemic and how the pandemic is not the catalyst necessarily because this has been a long time in coming, But did it also on the other end of this sort of fundamentally change how all of this works. As you mentioned, so many people, let's say, bugged out of the city, went to a vacation home or went to the suburbs and made a home there, did a lot of home improvement. We saw a lot of that happening during the pandemic. Has that changed how market works?
It has to some extent, And I think we have to talk about remote and hybrid work at least a little bit where maybe prior to the pandemic. I think it's something like four percent of workdays we're spent working from home. Now it's more like twenty percent, and so even if most people are back to the office, that's just a lot more demand for a home office, more space, and you see the weakness in the office market to some extent is the flip side of the strength and the residential market, where people are spending more time at homes and so they want to own rather than live in an apartment.
So it also seems like that would beef up demand then and and then the builders would be less spooked, and then they would go out and build more homes, and then they would increase the supply and that would help resolve the issue.
And again you're seeing growing confidence from builders. It's better than it was in December. But you know, starting at home now in April of twenty twenty three probably doesn't get done until the early part of twenty twenty four. So maybe in the middle of the next year things get a little better. Although right now they're still completing more homes than they are starting new ones, and so inventories are still likely to fall for the next several months. So you know, it's going to take many, many years to work our way out of this hole, and it's unfortunately for buyers. You have to just deal with the fact that this is the market we're likely to have for the foreseeable future.
Okay, so homes could be out of reach for a while. It seems like that could lead to other problems within the society.
Yeah, people are they can't move if they want to move. If you're having a kid and you want more space, it might be way way more expensive to buy a home than rent. And even though to some extent housing is fungible when you think about school districts and things like that, it's not always an equivalent product. So you just have a lot of people where they can't make the light decision they want to make because you have this market that isn't functioning very well. There's not much inventory, there are many transactions.
It seems like the pendulum is going to have to swing at some point.
It will, and it's going to work itself out over time. Builders will build to meet this to sort of make up for the lost production, and eventually baby boomers will transition out of their homes. But this I don't think it's going to really happen until the later part of this decade. So if you have to make a decision in the next two or three years, you're just in a bad spot. Unfortunately.
Connor Sen is a Bloomberg opinion columnist, and don't forget we are available as a podcast on Apple, Spotify or your favorite podcast platform. Even at prohibitively high prices, America's childcare market cannot meet demand, preventing children, parents, and the entire economy from reaching their full potential. Bloomberg's Emily Chang spoke last month with Melinda Gates on International Women's Day.
Women are saying, I can't do my job at the same intensity as before or at all if I don't have safe and affordable childcare.
That is just a problem. Katherine Edwards is a labor economist and a Bloomberg opinion columnist, and she joins us now. Catherine, thanks so much for taking the time with us today. And in your column you minced no words. You called the childcare market in the US an abject failure. Tell us about that.
The market for childcare in the US is marked by some pretty terrible features, which I can tell you as a labor economist, or I could tell you as a mother who has had to secure care for her children. Prices for childcare have risen faster than rents and medical care over the past thirty five years, which is nearly twice the pace of inflation. Overall, since the pandemic, we've lost almost a third of spots at the start of the pandemic and we're still fighting to regain those backs, still down from the number of childcare spots that there were before the pandemic begin and it's a market that is also not expanding. So one way to look at this is that if you were to look at the number of children under five and the number of workers who work in daycare, that number has flatlined for the past twenty five years, meaning that if you consider there to be some type of ratio of number of childcare workers to the number of children under five, is a general supply of childcare in our economy, it has not expanded in almost in over two decades.
If it's a failure, how have we gotten this far with this system? And your calling you explain how more than seventy percent of women with children younger than eighteen years old are in the workforce. That is not a small number. How have we gotten here?
Oh yeah, by hook or by crook. One way to think of a market failure, because that's something that's a term that's thrown around a lot, is not to think of necessarily status but direction. Is the market going to get better on its own? You know, after a recession, the labor market takes a huge hit, and then as the economy expands, the labor market recovers. Just because the labor market might be in crisis doesn't mean that it's in failure because we know that with the economy, the labor market will recover. What's different about childcare is that it doesn't seem to be moving in any type of direction towards getting better. Price growth is not slowing, Slots are not expanding at the pace we want. So failure not only indicates you know, status, but also direction, and that's for me, is the real concern. Now, how have we gotten this far? What have women done well? You know, I joke to say that it's my hook or by crook, but women use and deploy several strategies to make up for childcare deficits. They pay through the teeth, They rely on family and friends, They use informal care arrangements with neighbors or with grandparents, or they have some type of kind of home care situation. Some of these are licensed, some of these are not, or they set out the labor force even though they would like to.
I see, so the onus is going to fall upon the caregiver, usually the parent, maybe a grandparent, and almost always the.
Mom, almost always the mom.
There seems to be political ambivalence with this, but why politically it would be a slam dunk if somebody were to be able to solve this problem.
That's an area that I struggle to understand, the political trade offs of supporting or not supporting something. I think that the common argument you hear is that, you know, well, this is telling women they have to go to work, and this is only valuing women for work and not for being moms. I find that to be a little anacritistic, because it's not nineteen seventy anymore. The vast majority of mothers, even with mothers under three, are working. I think that that's just a little bit of a cultural bait and switch of like I get to say that the government is telling you what to do with your children, as opposed to parents telling the government, like I need help finding care for my children. Part of it for me, I think, and what I hinted at in my column was that there's a bit of a slippery slope for childcare. You know, this is a market that's in failure, this is a market that's not improving, and it's a market that's in high demand. If I were to put those three sentences together, a market in failure, a market not improved, in a market in high demand, there's gonna be a lot of things that that applies to. That applies to things like housing, that applies to things like health insurance. And I have always wondered if the reluctance to support childcare and early childhood investments is perhaps a little bit of a hedge that, well, if we give people childcare, what will they want next?
You mentioned the seventies, Catherine, childcare has been a problem for decades. What have we learned? Have we learned anything? Have we seen any improvements?
What we've learned has mainly been from other countries or certain small scale interventions in the US. And that's that early childhood investments are some of the highest economic returns that you can gain as a country because you are investing in children's basic skills before they enter school. So closing the education gap, increasing education and earnings throughout those child's life is it is a absolutely bang for the buck investment that when you invest in young children and help them, you know, attain those preschool skills and preschool abilities that will pay dividends throughout their entire life. The other thing that we've learned is that you know, in almost anything that you do between the hours of eight thirty and five thirty that put children somewhere safe at a relatively low cost, women will work and earn more. Hold on, like, put on this cap of like let's say you hate children, like I'm not paying for somebody else. It's not know as kids. Okay, I didn't have kids. Those aren't my kids. I don't care if they have early childhood exposure. And then let's extend this further and say that you kind of hate women like moms get everything. They complain all the time. We're supposed to treat them nice. I don't see why it matters to me while they work. I don't really care about supporting mom's work. I work on my own. I don't need someone support like moms do. So put yourself in that mindset of like you're just in it for you well, investing in childcare and invest in the dividends of labor force participation that benefits the entire economy. You know, we have heard for you know, almost years now, coming out of the pandemic, that we have a worker shortage, and we are willing to blame everything except for the structural barriers and the labor market that prevent people from working. Like I still hear people say that the reason why we can have workers is because they got an unemployment benefit that was generous fourteen months ago. Right, There are true barriers to people working, and the size of the US economy is a function of the number of people working in it. Just because there's a bridge in Minnesota that I'm not going to drive over doesn't mean that I don't think that that bridge might be important to economic development and regional growth. I don't have to benefit to know maybe we should have good bridges somewhere. I'm not going to go. Same thing's true with child care and investments in these early childhood and labor force programs.
What you're describing there is somebody who believes in the zero sum game. If you are getting a benefit, that means I'm missing out and people have gotten this sort of entrenched division. Is there a way to get around that or to get past that so that people can look at the long game of investment, not just in the infrastructure to allow women to go to work and keep their children safe, but in the children themselves.
For me, the economic question is everyone benefits from a stronger economy, even if that investment isn't necessarily in you. Everyone benefits from a stronger economy. The reluctance to see how dividends to other people can be part of your return, I think comes down to just how hard and punishing the labor market has been for so many people. Over the last four decades. Starting around nineteen seventy nine, we have seen wage and income in wealth inequality take off at a just absolutely breath taking rate. Wages for the bottom half of the men's wage distribution have fallen over that time period. So to say it's a zero sum game might not be a very radical conclusion for them because they haven't seen a return. You know, it really speaks to kind of what I was saying earlier about the slippery slope of that you know, yes, I'm here. I'm a labor economist. I specialize in low wage workers and women, and so I'm telling you let's get some childcare. But that's not to say that that's the only drawback in our labor market. And I think that your question is really getting at what are all the number of failures, not just the childcare market, but the number of failures and investments that have driven wage and equality over the past four decades. Because it's not an unfair conclusion to say the labor market hasn't done me that many favors. So I think recognizing that there are lots of struggles beyond just can't find childcare is an important part of being able to address them and make the type of economy wide investments where people do see the return even if it's not in their account.
Okay, Catherine, we're going to continue to watch this with you, Bloomberg Opinion columnist Katherine Edwards. Thank you so much for taking the time. Thank you stay with us now. Bloomberg Opinion continues with a look at the future of AM radio. There are some rum lanes that it might be on its way to the scrappy. This is Bloomberg.
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You're listening to Bloomberg Opinion. I Amy Morris, and there's a theory floating around out there that electric vehicles are not installing AM radios in order to damage conservative talk radio, but the actual reason is considerably less sensational. Still doesn't vode very well for AM radio. Liam Denning is a Bloomberg Opinion columnist covering energy and commodities, and he joins me, now, Liam, set us all straight. Electric vehicles are not installing AM radio. Is that true?
Some ev manufacturers are no longer offering it, so I believe BMW was probably the first to put out an electric vehicle that didn't offer that service, But we've seen Forward make announcements that they're not going to be carrying it from next year, and Tesla hasn't offered it in their vehicles for some years now. I think it's safe to say that this is probably not a nefarious plot against the talk radio as some prominent commentators have put it, including Sean Hannity at Fox News. I think there's something much more simple going on here, but I think it does speak to kind of a growing problem we have when it comes to technological change in the US, particularly around energy.
Okay, first of all, let's clarify why they're not doing it, and then let's get into the problems around the technological change.
So the vehicle manufacturers justify it by essentially saying, you know, AM radio, it's very useful because it travels long distances, but it's actually a fairly low quality signal, which is why we tend to use it more for things like sportscasting talk radio rather than music. And the problem is in electric vehicles, you have very powerful electromagnetic fields because you're using very powerful electric motors, and the vehicle manufacturers say that interferes too much with the AM radio signal. And while they could install fielding to protect the AM signal, some of them have simply deemed it not worth the bother.
I know, yes, I am speaking on the radio and so and inherently biased, but we need it. It's part of the emergency broadcast system.
Well, with no disrespect to do the show that I'm currently on. It turns out actually not that many Americans do need AM radio. If you go back to the beginning of the century, the year two thousand, about a third of Americans over the age of twelve listen to AM radio fairly regularly. That held reasonably steady until about twenty ten, and then it drops quite sharply, and today only about a sixth of Americans adult Americans really listen to AM radio with any kind of frequency. The reason for that big change in the twenty tens, there's various theories, but I think the most obvious one is we all got smartphones. I mean, you can actually listen to a lot of AM stations with a better signal via your smartphone. You mentioned the emergency broadcast system that is a live topic. Senator Ed Markey has raised that issue, and the issue there is we actually have several layers of public emergency systems. I'm sure you occasionally get those alerts that light up your phone when a child has been abducted or something like that, and we have these various systems, and AM radio is kind of the real backup one. As I say, the signal travels very far, particularly to remote rural areas, and that is a concern. However, I would suggest that right now only one percent of cars on the road at evs. Not all EV manufacturers are ditching AM radio. Hyundai has said it won't at least for now, so I think we've got a fair bit of time to figure out other ways of alerting the nation to potential emergencies.
William Denning is a Bloomberg Opinion COLUMNISTY covers energy and commodities, and that does it for this week's Bloomberg Opinion. We're produced by Eric Mullow and you can find all of these columns on the Bloomberg Terminal. We're available as a podcast on Apple, Spotify or your favorite podcast platform. Stay with us today's top stories in global business headlines coming up. I'm Amy Morris, and this is Bloomberg.