Last week, when Marian was preparing Thanksgiving goodies, she decided to go ahead and re-organize some stuff in the cupboards at the same time. Hilbert thought this was a fine idea and hopped up to help. His recommendation: just toss out the spices and recipes and leave a nice, cat-sized area for him. This way he can keep a close eye on all kitchen-related activities without constantly being shooed away. Smart cat.
Jim Pethokoukis draws my attention to Ted Cruz’s theory of why the Great Recession was so great. Here is Joseph Lawler describing Cruz’s questioning of Fed chairman Janet Yellen yesterday:
Cruz began a round of questioning by stating that, in the summer of 2008, “the Federal Reserve told markets that it was shifting to a tighter monetary policy. This, in turn, set off a scramble for cash, which caused the dollar to soar, asset prices to collapse and [the consumer price index] to fall below zero, which set the stage for the financial crisis.”
….Yellen, although used to obscure or hostile questions from members of Congress, seemed taken off-guard. “I think the Fed responded pretty promptly in easing monetary policy to the pressures that were emerging,” she responded, saying that
she wouldn’t blame the financial crisis on the Fed failing to lower rates during the meeting. She also noted that the Fed had lowered its target rate to zero by December.
I think you can argue that the Fed should have responded sooner and more forcefully to the events of 2008, but the problem with Cruz’s theory is that it just doesn’t make sense. Take a look at the chart on the right, which shows the Fed Funds target rate during the period in question. In April 2008, the Fed lowered its target rate to 2 percent. Then it waited until October to lower it again.
So the idea here is that if the Fed had acted, say, three months earlier, that would have saved the world. This ascribes super powers to Fed open market policy that I don’t think even Scott Sumner would buy. Monetary policy should certainly have been looser in 2008, but holding US rates steady for a few months too long just isn’t enough to turn an ordinary recession into the biggest global financial meltdown in nearly a century.
Cruz would like to blame the Fed, but they bear only a modest responsibility. Better culprits include underregulation of shadow banking; a housing bubble fueled partly by fraud and partly by Wall Street irresponsibility; excess systemic leverage; and Republican unwillingness to fight the recession with fiscal policy. Unfortunately, none of those fit Cruz’s agenda. So the Fed it is.
For no reason whatsoever, I am reproducing below the results of a decade-old bit of research that uses student scores from RateMyProfessor.com to construct average hotness scores for different academic disciplines. The authors used a scale from -1 to 1, which is entirely nonstandard in the field, so I’ve renormed the scores to the more generally accepted scale of 1 to 10. I assume professorial hotness is, in fact, average, which means the various disciplines should probably range from about 3 to 7. But not a single one even breaks 5.
What does this mean? University professors are slobs? 18-year-old students have really high standards? Movies and television have conditioned us to think of really hot actors as average, thus making us all disappointed with real life? I dunno. What’s your guess?
With oil prices plummeting below $40 per barrel, OPEC is meeting to decide what to do. The answer is…. probably nothing:
Oil prices dropped Friday as traders braced for official word out of a highly anticipated meeting of the Organization of the Petroleum Exporting Countries. Prices slid following conflicting media reports that OPEC had either kept its oil-output target unchanged or increased it. There was also confusion as to whether production in Indonesia, which just rejoined the group, will be included in the target.
….An internal OPEC document reviewed by The Wall Street Journal showed that, if current production remains unchanged, markets will still be oversupplied by 700,000 barrels a day in 2016….The key issue for OPEC is Iran, which is expected to return to the global oil market after the lifting of the international sanctions early next year. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the oversupply of crude.
Between fracking, Iran, and slow demand growth thanks to the sluggish global economy, oil prices just aren’t likely to increase in the near future. This is:
Oh: and bad news for us peak oil folks. I don’t have any worries that we’ll hit peak oil eventually, but the Great Recession sure put off the date. I had long figured that 2015 was going to be the peak date, but it now looks like it will probably be 2020 at the earliest, and maybe more like 2025 or so.
The American economy added 211,000 new jobs last month, 90,000 of which were needed to keep up with population growth. This means that net job growth clocked in at a brisk 121,000 jobs—nearly all of it in the private sector. The headline unemployment rate stayed steady at 5.0 percent. All of this gain was because more people were employed, not because folks were dropping out of the labor force. In fact, the labor participation rate inched up a bit, and the number of people not in the labor force inched down. This number is genuinely due to more people getting jobs.
Unfortunately, this didn’t translate into good wage growth, as it did last month. Hourly earnings of production and nonsupervisory employees were up imperceptibly and weekly earnings were essentially flat too. Still, this report is basically good news, and certainly good enough for the Fed to go ahead and raise rates for the first time in a decade. This may not be a good idea, but it was inevitable in the face of anything other than an economic collapse, and it probably isn’t really all that big a deal. It won’t help things, but I doubt that it will hurt much either.
Donald Trump has been grumbling that CNN should pay him for being in their debate a couple of weeks from now. He says he’s been talking with CNN about this, but today he caved:
“When you’re leading in the polls, I think it’s too big of a risk to not do the debate,” Trump said in an interview with The Washington Post at Trump National Golf Club in Sterling, Va. “I don’t think I have the kind of leverage I’d like to have in a deal and I don’t want to take the chance of hurting my campaign. So I’ll do the debate.”
There you have it, ladies and gentlemen: your master negotiator at work. The guy who’d get Mexico to pay for a wall. The guy who’d squeeze Iran like a grape. The guy who’d save us from the wily Chinese. The guy who thinks we got taken for a ride in the TPP talks. The guy who insists he could do better on all these things because our current government is full of very stupid people.
But when it comes to pressing CNN for a bit of chump change, he can’t pull it off. He can’t even get a face-saving little tidbit out of it. CNN told him to get lost, and he promptly folded. He was bluffing the whole time and everyone knew it.
Trump’s record makes it pretty clear that every deal he’s ever negotiated has been pretty routine. His buildings are no more successful than anyone else’s. His golf resorts are, perhaps, a little less successful than average. The only thing he’s been really good at is reality TV. What a blowhard.
Defense Secretary Ashton Carter said Thursday he will formally end the Pentagon’s ban on women serving in combat jobs…. “There will be no exceptions,” Carter told a Pentagon news conference. “This means that, as long as they qualify and meet the standards, women will now be able to contribute to our mission in ways they could not before.”
First blacks, then gays, now women. And mirabile dictu, Republican opposition so far appears to be fairly muted. Next up: will women be required to register for the draft on their 18th birthday? Carter says that will be evaluated within a few weeks.
This is yet another big win for our lame duck president. He’s making quite a go of things in his last two years.
A few days ago, like an evil mastermind on 24, Donald Trump declared that if we wanted to fight terrorists we needed to target their families for death. Today he gave a speech to the Republican Jewish Coalition and told the crowd, “You’re not going to support me because I don’t want your money.” Ha ha. Stupid money-grubbing Jews. As Judd Legum pointed out, this means that 
Trump has now insulted blacks, refugees, immigrants, Muslims, the disabled, and Jews.
I’m now going to double down on my belief that Trump is running the world’s greatest reality show here. I think he got bored one day and came up with an idea that tickled him: “I wonder just how deranged you can get and still retain the support of the tea party wingnuts?” So he made a $1 bet with some of his Democratic friends and performed a test run in 2012 with his maniacal birther stuff. But all that did was show the depth of his challenge. He’d have to do a lot more than that in 2016. He started off slow with wild claims about immigrant Mexican rapists, knowing it would draw in the rubes. Then he laughably claimed that he’d get Mexico to pay for a border wall. Nothing happened. He insulted John McCain for being a POW. Nothing happened. He started telling obvious lies. Nothing. He lied on national TV and was called on it a few minutes later. Nothing. He all but admitted that he knows diddly about the Bible. Nothing. He called evangelical darling Ben Carson a nutcase liar. Nothing. He claimed that thousands of Muslims in Jersey City celebrated 9/11. Nothing. He mocked a disabled reporter in front of the cameras. Nothing. He suggested taking out terrorist families. Nothing. He appeared on the radio show of a crackpot conspiracy theorist. Nothing. Now he’s insulted an audience of conservative Jews.
Trump is probably frustrated. He’s basically dialed it up to 11 already, and the crowds are still swooning. What does he have to do? Tell a story about how he was abducted by aliens back in the ’90s? Promise to nuke Tehran if he’s elected president? Suggest the world would be a better place if we’d never invented any HIV treatments?
Even Trump must be scratching his head wondering what to do next. There’s gotta be something that finally goes too far. Right?
Politico has a fascinating story today. It’s all about Mitch McConnell’s months of LBJ-worthy maneuvering to get legislation passed that would repeal Obamacare and defund Planned Parenthood, thus paving the way for a clean budget bill later this year. But here’s the kicker: he wasn’t engaged in Herculean negotiations with Democrats. He was engaged in Herculean negotiations with his own party. The goal was to somehow trick them into supporting the Obamacare/PP bill, which was entirely symbolic since President Obama would veto it instantly, 
paving the way for a budget bill later this month that Obama could sign.
McConnell marshaled a secret weapon that ultimately would work in his favor: Anti-abortion groups.
Since the summer, the Senate majority leader had spoken with influential organizations opposing abortion such as National Right to Life and the Susan B. Anthony List to ensure they would back his move to link the Obamacare repeal with a measure to defund Planned Parenthood….Anti-abortion groups vowed to score against any senator who rejected the anti-Planned Parenthood provision, exerting additional pressure on conservative lawmakers who would have seen their sterling pro-life ratings tarnished if the defunding language was dropped.
Apparently McConnell persuaded the anti-abortion folks that their cause was better served by electing a Republican president in 2016, and the best way to do that was to avoid a protracted government shutdown over a budget bill that Democrats would fight if it included the PP defunding language. Instead, he proposed a symbolic standalone bill that allows everyone to vote against Obamacare and Planned Parenthood. Obama will veto it; everyone will shrug and say “we tried”; and then a clean budget bill will be negotiated and signed.
This is a strategy that firebrand conservatives opposed, but apparently they aren’t willing to risk their 100 percent scores from anti-abortion groups. So they caved.
And that’s that. In today’s Washington, passing bills isn’t a matter of getting Republicans and Democrats to agree. They can usually manage that. The trick is somehow neutering the wingnut faction of the Republican Party. Once that’s done, negotiations between the two parties are (relatively speaking) a piece of cake. Welcome to 2015.
A leveraged loan is sort of like a junk bond: a high-interest loan provided to a company already deep in debt. The loans are typically tranched and then syndicated to various investors by a commercial bank. They’re non-investment grade, and in today’s low-interest environment where everyone is chasing yield, they became increasingly popular in 2012 and 2013.
Except with federal regulators:
“We learned a lesson” from the financial crisis, says one former regulator who pushed for a crackdown when leveraged loans surged
in 2013 and standards slipped. “You can’t wait.”
….In response, the Fed, OCC and Federal Deposit Insurance Corp. strong-armed U.S. banks for the first time ever to comply with minimum underwriting standards on leveraged loans no matter who shoulders the credit risk….Regulators were explicit about loan characteristics that would grab their attention, such as lax repayment time lines and the absence of loan covenants. Any loan that left a company with debt exceeding six times its earnings before interest, taxes, depreciation and amortization, known as Ebitda, “raises concerns for most industries,” regulators wrote in the guidelines.
Lenders seemed to shrug—and kept on making leveraged loans….Starting in late summer, roughly a dozen big banks received a “Matters Requiring Attention” letter from the OCC and the Fed. The letters chided the banks for putting the financial system at risk because of lax and inadequate application of the leveraged loan guidelines, regulators claimed.
Banks, naturally, argue that tighter standards will deny credit to people who need it. And this is true. But just as there were lots of people who shouldn’t have bought houses in 2005 even though they really, really wanted one, the same is true of firms. Deteriorating lending standards are a normal sign of a frothy market, and we’re best off keeping a rein on bad loans now, instead of waiting for the market to collapse when a recession suddenly produces a string of defaults that ripple through the whole financial system.
Of course, if US regulators won’t allow these loans, it’s possible to go elsewhere. “The crackdown also has encouraged companies to take their leveraged loan business to firms that aren’t regulated by the Fed and OCC, such as Leucadia National Corp.’s Jefferies Group LLC and Nomura Holdings Inc. of Japan.” Stay tuned.
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