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A decade after Lehman, investors hunt clues for next crisis

By Andrew Mayeda and Enda Curran
A decade after Lehman, investors hunt clues for next crisis
A worker passes a line of oil pumping jacks outside the village of Nikolo-Beryozovka near Neftekamsk, Russia, on March 3, 2016. MUST CREDIT: Bloomberg photo by Andrey Rudakov.

"It's something that happens every five to seven years" is how JPMorgan Chase CEO Jamie Dimon once defined a financial crisis to his daughter. Queen Elizabeth II asked "why did nobody notice" the seeds of the last one.

Stung by their failure to spot the turmoil of 10 years ago and two decades since Asian markets were roiled, policymakers, traders and economists are looking at the clock as they wonder when and where the next meltdown will hit.

At its annual meetings in Bali, Indonesia this week, the International Monetary Fund warning investors may be underestimating the risk of a financial shock.

One of the axioms of financial history though is that no two crises are the same so the search is on for potential triggers in the world economy and markets. A policy mistake by the Federal Reserve, such as raising rates too fast or for too long, could sideswipe the U.S. economy and disrupt markets around the world.

Here is a rundown of potential hot spots, including some you may not have thought of.

- China: Credit fueled China's rapid rise as an economic power. Lately, Beijing has been taking steps to slow the rate of corporate debt growth, but total debt outside the banking sector continued to rise last year and remains on an unsustainable path, according to the IMF.

The odds are against a soft landing. Of 43 cases of rapid growth in debt-to-GDP similar to China's, only five ended without a major slowdown or financial crisis, according to the fund. Many economists still think Beijing has several factors in its favor, including a strong current-account position and room to ramp up government spending. But the trade war with the U.S. could force China to slow its debt reduction, driving financial risks even higher.

"While a China hard landing still remains a low-probability scenario, if it did in fact occur, it would likely unleash a tsunami of contagion across the Asia-Pacific region," according to Rajiv Biswas, chief economist for the Asia-Pacific at IHS Markit.

- Emerging markets: Interest-rate hikes by the Federal Reserve coupled with a rising greenback have sent shock waves through emerging markets, making it harder for companies that borrowed in dollars to pay their debts. Argentina is borrowing $57 billion from the IMF, the largest in the fund's history, to stem the nation's currency crisis. The Turkish lira plunged as investors questioned the ability of Recep Erdogan's administration to contain inflation.

"Emerging markets that are over-leveraged on U.S. dollar debt and large oil importers are probably the most vulnerable," said Hak Bin Chua, senior economist at Maybank Kim Eng in Hong Kong.

Some emerging markets, such as Mexico and Colombia, have avoided being sucked into the maelstrom. But as central banks raise interest rates, investors may not be so discerning.

"Emerging-market risks will likely be confined to idiosyncratic cases, but the potential for contagion is there," said Mark Sobel, former U.S. executive director at the IMF and now U.S. chairman of the Official Monetary and Financial Institutions Forum.

- Corporate debt: Surging private debt has been the driving force behind the steady rise of global debt since 1950, according to the IMF. In the last crisis, U.S. household debt was the ticking time bomb. Consumers have since tightened their belts, but U.S. companies have picked up the slack.

Taking advantage of low rates and strong demand, American companies have issued record amounts of debt, pushing key debt ratios to near 30-year highs, according to Morgan Stanley chief cross-asset strategist Andrew Sheets.

It may be harder for the world to respond this time to turbulence, because central banks still haven't raised rates back to normal levels, leaving them less ammunition if and when they need to provide stimulus, said Jerome Jean Haegeli, group chief economist at Swiss Re Institute.

- Crisis survivors: In some advanced economies, housing prices never crashed despite the 2008 crisis, and the buildup of household debt is now raising red flags. In its latest global financial stability report, the IMF put Australia, Canada and Nordic countries in this category. Australia's 27 years of recession-free economic growth helped fuel a property boom with Sydney house prices leaping fivefold. National prices are now in decline and have fallen for 12 straight months.

- Italy, euro zone: The risk of an ugly exit from the euro zone has a new name: Quitaly.

Fears that Prime Minister Giuseppe Conte will push debt to unsustainable levels by bloating the nation's budget deficit have driven up Italian bond yields to levels not seen since the euro debt crisis.

Italy's public debt tops 2 trillion euros, more than any other European Union country and the equivalent of around 130 percent of its economy. Its government though is planning a wider budget deficit next year, a push which has taken a toll on its bond and equity markets.

- Oil: Rising crude prices are stirring talk of a return to $100 per barrel for the first time since 2014, hitting countries that rely heavily on imports, including India, China, Taiwan, Chile, Turkey, Egypt and Ukraine. Prices have gained more than 15 percent since mid-August and oil traded above $74 a barrel in New York on Wednesday.

While higher prices is a positive for exporters, paying more for oil will put even more pressure on emerging markets vulnerable to rising U.S. interest rates.

- Bad Brexit: Markets are bracing for the risk that the U.K. won't reach a deal on the terms of its divorce from the EU -- causing a disorderly exit at the end of March, when Britain is scheduled to leave. The fallout could be ugly for the financial sector: British banks will lose their "passport" rights in the EU, which may force them to beef up capital, for example. The IMF is warning central banks to stand ready to provide emergency liquidity.

It could take days to find out the midterm election results

By John McCormick and Greg Giroux
It could take days to find out the midterm election results
An American flag is displayed on a voting booth at a polling location in Miami Beach, Fla., on Aug. 28, 2018. MUST CREDIT: Bloomberg photo by Scott McIntyre.

Voters planning to stay up late on Election Night to find out which party wins control of the House and Senate should be prepared for a possible marathon wait.

The unusually large number of close contests, many in states known for slow ballot counting, means the first congressional election of Donald Trump's presidency could go into overtime, perhaps for days after Nov. 6.

State election officials will be contending with potentially narrow margins, absentee and provisional ballots as well as the potential for contested results.

The first results, after polls close in the eastern U.S. beginning as early as 6 p.m. New York time, may give an early indication of whether Democrats managed to generate a so-called wave election that sweeps Republicans out of control in the House and, perhaps, the Senate.

But even a rout is no guarantee of a quick resolution. In 2006, the last wave election, it took two days to determine that Democrats had flipped control of the Senate because of close results in Virginia and Montana.

"In the normal course of any election, there are going to be ballots that take longer to count," said Michael McDonald, a University of Florida professor who tracks voting data. "If those are the states where there are particularly close elections, we may be sitting a few days before we know."

The prospects for ambiguity are higher this year, in part, because of the unusually large number of competitive House races in California, where voting by mail is more popular than in-person balloting. Golden State ballots can be postmarked on Election Day and aren't due in county election offices until the Friday after the election.

The state, where about a quarter of the ballots cast in 2014 were tallied at least two days after the election, is central to Democratic efforts to try to secure the net gain of 23 seats the party needs to take the House. It has seven races rated as competitive -- either tossups or just leaning Democrat or Republican -- by the nonpartisan Cook Political Report.

In that midterm four years ago, it took California officials more than two weeks to confirm a re-election victory for Democratic Rep. Jim Costa. On election night, he trailed Republican challenger Johnny Tacherra, who went to Washington for orientation during the drawn-out tabulation. But Costa ultimately pulled ahead in the full tally that included Democratic-leaning provisional and absentee ballots.

This year's California primary in June is also instructive. It took 19 days to determine the second-place finisher in the 48th congressional district, in a contest where the first and second place winners -- no matter their political party -- advanced to the general election. The race, between incumbent Republican Dana Rohrabacher and Democrat Harley Rouda, is among the seven in the state that Cook rates as competitive.

With 435 House and 35 Senate seats on the nation's ballots, other states could generate counting delays or polling place legal challenges as well.

Washington state, where Cook rates three House races as competitive, conducts all of its voting by mail. Ballots must be postmarked no later than Election Day, or returned to a ballot drop box by 11 p.m. Eastern Time.

Iowa has two House races rated as competitive and makes wide use of absentee ballots. Those votes must be postmarked by the day before the election and received in a county auditor's office no later than noon on the Monday following the election.

The tabulation of provisional ballots in close contests also could slow the congressional verdict. States are required under federal law to provide them to anyone with a problem at the polls, including voters who don't have the required form of identification or those whose names are missing from polling place registration lists.

Election officials review provisional ballots and allow voters to clarify their eligibility after Election Day, and that can be a time-consuming process. Races are often called by the Associated Press and other news organizations even before provisional ballots are counted because the margins of most contests are definitive enough that those additional ballots won't alter the outcome.

If there are races that are extremely close that haven't been called on Election Night, McDonald said his research suggests that provisional ballots tend to break strongly for Democrats. That's because younger voters, who tend to move more often and lean Democratic, are some of the biggest users of provisional ballots.

Four states -- Arizona, California, New York and Ohio, all of which have competitive races -- accounted for three-quarters of the provisional ballots issued in the 2016 election, according to the federal Election Assistance Commission. California alone accounted for more than half nationwide.

Ohio, which has two close House races, uses provisional ballots when a person isn't on a voter registration list, has had a recent address change, or doesn't have the state-required identification. County officials verify the eligibility of these voters after the election and, when confirmed, count their ballots.

With so many Senate elections on a knife's edge, there's a small chance that control of the chamber won't be determined until at least Nov. 27, the date of a likely runoff election in Mississippi. The first-round election on Nov. 6 includes three major-party candidates, two Republicans and one Democrat. All are running on a single ballot, and it's unlikely any of them will win the majority needed to clinch victory without a runoff.

Republican Sen. Cindy Hyde-Smith, who was appointed in April to succeed Republican Thad Cochran and is backed by Trump, would be favored in Republican-leaning Mississippi over Democrat Mike Espy, who was President Bill Clinton's first agriculture secretary and a congressman before that. Democrats would prefer a runoff between Espy and Republican State Sen. Chris McDaniel, a conservative firebrand who almost toppled Cochran in a fractious 2014 GOP primary.

Neighboring Louisiana will also hold all-party, single-ballot House elections Nov. 6, though at least five of the six incumbents are likely to clinch vote majorities then. There's one heavily Republican district where a GOP incumbent may be forced into a Dec. 8 runoff because he's opposed by another Republican and four Democrats.

When tens of millions of Americans do anything, McDonald said, it's only human nature that some things are going to go wrong. That includes the nation's voting and tabulation systems.

"The election administrator's prayer is that the election is decisive enough that we won't have to worry about minutia," he said.

Michelle Obama's vacation is over - now she's claiming her own spotlight

By Peter Slevin
Michelle Obama's vacation is over - now she's claiming her own spotlight
Former first lady Michelle Obama prepares to take the stage during a When We All Vote rally at Chaparral High School in Las Vegas. Obama, the founder and co-chairwoman of the organization, spoke at the September rally with over 2,000 volunteers and eligible voters present. MUST CREDIT: Photo for The Washington Post by Joe Buglewicz

Twenty-one months after she left the White House, Michelle Obama is returning to public life feeling purposeful and invigorated. She launched, within weeks, high-profile social initiatives on voting and girls education while preparing for a mega-book tour unlike any book tour, well, ever.

Fans already have purchased tens of thousands of tickets to hear Obama share stories from her memoir, "Becoming," in basketball arenas in 10 cities. Combined with the celebrity-laden rollouts of her latest projects, the former first lady is demonstrating a mix of uncommon star-power and bankability while advancing themes that have long mattered to her.

Obama, 54, feels liberated after a decade in an unrelenting political spotlight where she was tethered to her husband's career and a White House role marked by both opportunities and constraints alike, say those who know her well. They say she is reveling in the chance to develop meaningful pursuits entirely her own.

"The possibilities are infinite," said longtime friend and former White House adviser Valerie Jarrett, who describes Obama as fired-up and happy. "Now she's able to lead her best life and to create and own it in her own image."

Thursday on a New York television stage, Obama unveiled a project intended to help educate tens of millions of adolescent girls denied the chance to finish high school. The Global Girls Alliance, developed quietly over the past year, scored an hour of coverage on NBC's "Today Show," ending with a concert by Jennifer Hudson, Meghan Trainor and Kelly Clarkson.

The education project is the second of three very public moves by Obama this fall after a stretch when she took a breather - including time with friends and some glam vacations - as she turned to writing her book. Last month, the former first lady launched an initiative to get more people to register and vote, addressing thousands of cheering fans at rallies in Las Vegas and Miami.

"Becoming" will be released on Nov. 13 with a conversation in front of more than 20,000 people at Chicago's United Center. The book tour is being managed by Live Nation, which more typically stages events for the likes of Rihanna, U2 and Pink. She has sold tens of thousands of tickets from Los Angeles and Dallas to Detroit, Boston and Washington, D.C.

Demand was so intense she added second appearances in Washington and New York. In Dallas, just days after tickets went on sale for a Dec. 17 appearance, all but the most expensive seats were gone. A pair of the cheapest remaining seats at the 20,000-seat American Airlines arena cost $3,909, before tax. At each event, Live Nation pledges 10 percent of the tickets will be given away free.

The Chicago launch represents a homecoming for Obama, who built a 20-year career largely independent of her husband. She quit her job as a hospital executive in service to his ambitions and the responsibilities of first lady. Although she compiled a series of accomplishments, along with approval ratings in the high 60s, she made no secret of her desire to escape.

Obama described the book in a viral video - 1.7 million views and counting - as "honest" and "totally and utterly me." She crafted it from the stories of her life, asking friends to help her remember anecdotes and staff to help her write. She devoted hundreds of hours to the manuscript in her Washington office, her aides said, editing on paper, rather than on a computer.

Other former first ladies have written memoirs, most recently Laura Bush and Hillary Clinton, but none have launched them with such stratospheric expectations. David Drake, executive vice president of Crown Publishing Group, said his team felt reassured in June when Obama drew frequent applause and a standing ovation from 9,000 librarians in New Orleans.

At that session, organized by Penguin Random House to introduce the book, Obama talked about the influence of her parents, her sometime frustration in Chicago that her career took a back seat to her husband's and the tightrope of the couple being the first African-American president and first lady.

"We did not have the luxury to make mistakes," she said then, adding their years in Washington were hardly error-free. Explaining that she hopes readers will see themselves in her doubts, missteps and triumphs, she added that the book depicts "the ordinariness of an extraordinary story."

Jarrett said this may be the first time in Obama's life when she can wake up each day and do what she wants to do. Money is certainly not a worry, given the Obamas' reported $65-million joint book contract, a Netflix deal and a raft of six-figure speaking engagements.

They paid $8.1 million for their house in D.C.'s Kalorama neighborhood, and travel is on the agenda. Obama and her daughter Sasha, a high school senior, popped up in Paris this summer at a concert by her friend Beyoncé.

"She's earned this phase in her life where she can make more of her own decisions," said Melissa Winter, who is Michelle Obama's chief of staff. "There were always duties in the White House that she was required to perform as first lady. She doesn't have to do that stuff anymore."

---

Obama largely stepped out of the public eye after January 2017. She vacationed, she read novels, she spent time with friends. But, ever disciplined, she also spent time laying out a plan for her post-FLOTUS life. She thought about what issues mattered to her and would move the needle, as everyone on her staff likes to say.

"You have this very large platform and attention, but there's no road map to what's the best use of it. I think that is far more daunting than people realize," said former East Wing chief of staff Tina Tchen. "Whatever she does has to be authentic to her. You can't promote something that you don't believe in."

The preparations mirrored Obama's approach in the White House, where her team often invested a year in research and networking before rolling out a major initiative. Tchen described Obama's view this way: "You can't just show up and say, 'I'm Michelle Obama.' You have to seriously bring something to the table of value."

Obama is playing a leading role in the development of the Obama Presidential Center, due to open in Chicago in 2021, walking distance from her childhood neighborhood of South Shore. In addition to housing a museum and a public library, the complex will include a garden that echoes the vegetable garden she installed on the south lawn of the White House.

The former first lady has weighed in on the foundation's values and ambitions as well as "minute details," including where the coat-check room and elevators will be located in the museum, said David Simas, CEO of the Chicago-based Obama Foundation.

She is not "a wing-it person," said Eric Waldo, who directs Reach Higher, a project exported from the White House that aims to guide disadvantaged young people to higher education and training. Obama is a board member of Reach Higher and has continued to don a Princeton T-shirt and appear at college signing day events, most recently on May 2 in Philadelphia with 7,000 high school students.

---

Before putting herself forward as a spokesperson for the When We All Vote effort, Obama wanted to know whether she would be seen as a good messenger. The Benenson Strategy Group conducted focus groups with unregistered voters younger than 36 in Detroit and Las Vegas and found that participants "trusted her motivations" and "assumed positive intentions," reported Benenson's Amy Levin, who briefed Obama on the results.

The voting crusade and the girls education initiative will be an early test of Obama's ability to mobilize audiences without her White House staff and megaphone. In search of multipliers, she is using corporate partnerships and targeted marketing, as she did as first lady. When she contacted singer Janelle Monáe recently and asked her to become a co-chair of the voting initiative, Monáe readily accepted, joining Lin-Manuel Miranda, Faith Hill, Tim McGraw, Chris Paul and Tom Hanks.

"When she's passionate about something, she'll follow up with it. It's not an act, it's not a show. She talks about it behind closed doors," Monae, 32, said in a telephone interview before hosting a voting rally at Spelman College.

The Global Girls Alliance grew from a 2013 conversation in the White House with Pakistani human rights advocate Malala Yousafzai, then a teenager, whose work focuses on the estimated 130 million girls who are denied education for reasons ranging from war and economic pressure to cultural norms and outright prejudice.

Obama added international girls education to her portfolio in 2015 in a project called Let Girls Learn, which remained with the White House when the Obamas departed. To measure the current need, Obama Foundation staff drew on previous research done by the Brookings Institution and asked experts and organizers in the field whether there continued to be a valuable role for Obama to play.

"The overwhelming consensus was, absolutely, there's a strong need to have someone like her, with her platform, championing this issue to spread the word," said Tiffany Drake, director of the alliance, which is housed at the foundation.

In May, out of public view, the foundation started a Facebook page to connect people around the world who working on girls education. It quickly grew to 1,300 members, and now more, who are sharing ideas and cheering one another on. The foundation will be providing webinars, tool kits and other content.

A central component is a feature developed with GoFundMe, the crowdsourcing company, to deliver money to organizations vetted by the foundation. Six projects at a time will be highlighted, seeking amounts from $5,000 to $50,000. When one project's goal is reached, a new organization will take its place on GoFundMe.

Not everyone has been rapturous about Obama's return, a reminder of the criticism she drew in the White House. When Obama praised her husband's record in Las Vegas on Sept. 23, Fox News commentator Tomi Lahren challenged her claims, ending with the comment, "Sit down, Michelle."

---

Obama has never delighted in electoral politics, although she campaigned hard during her husband's two presidential campaigns and lent her voice to a select group of other candidates. Her most pointed political comments came in 2016, when she criticized Donald Trump, then the Republican nominee, as "erratic and threatening," a candidate who "traffics in prejudice, fears and lies."

Since then, she has spoken more elliptically in public events, and her staff said as recently as this week she has made no decision about whether to campaign or raise money for Democratic candidates in the final weeks of the 2018 campaign. In Miami last month, she made a not-so-veiled comment about the Republican treatment of Christine Blasey Ford, who accused then-Supreme Court nominee Brett Kavanaugh of sexually assaulting her when they were teenagers.

Speaking at a When We All Vote rally, Obama cited decisions that elected politicians make, including "how victims of sexual assault are treated." The remark prompted loud cheers.

"Wouldn't you want to be sure," she continued, "that those elected officials were thinking about all of us, not just some small percentage of us, when they're making those decisions? Well here's the truth: Voting is the only way to ensure that your concerns matter. Period."

Obama expects the effort, which is officially nonpartisan, to extend well beyond November. She said, "We've got to make voting trendy. We've got to hashtag it. We've got to sing about it."

The effort is facing skepticism in Republican quarters. "This is the furthest you can possibly get from being nonpartisan," said Keith Schipper, spokesman for Sen. Dean Heller, R-Nevada, fighting to retain his seat against a Democratic challenger.

Obama's Las Vegas rally turned out Democrats such as Karen Houston, who flew in from California. The 66-year-old executive assistant said she had never voted in a primary or a midterm election until this year, but will now.

"I'm just in awe of that woman. I love her intelligence, her class, her grace. She was expected to do less, but she did more. She was a role model," Houston said. She thinks Obama should not enter politics, "because I know the tweets will fly."

A few rows away, Kate Frye, a 80-year-old seamstress, had a different view.

"I want her to run in 2020," Frye said.

Obama has made crystal clear, in public and in private, she has no interest in running for office. She once said, "No, nope, not going to do it." Yet the loudest cheers of the Las Vegas night came after someone shouted, "Run for president!" She turned back to her voting theme and said, "You know, we need you guys."

Undeterred, the crowd erupted into a chant, "We need YOU! We need YOU!"

Pulitzer-winning opinion from the most respected voices in the world.

The economy is crushing it - just like in 2008!

By dana milbank
The economy is crushing it - just like in 2008!

DANA MILBANK COLUMN

(Advance for Sunday, Oct. 14, 2018, and thereafter. Web release Saturday, Oct 13, 2018, at 8 p.m. Eastern time.)

(For Milbank clients only)

By DANA MILBANK

After the Dow Jones industrials plunged 832 points on Wednesday, Larry Kudlow, President Trump's chief economic adviser, walked up the White House driveway and proclaimed that there was no cause for concern. Not about the stock market, or turmoil in China's economy, or American casualties of Trump's trade fights, or the president's attempt to bully the Federal Reserve into an easy-money stance.

"Our economy and the people and the workers and entrepreneurs, they're killing it. We're the hottest in the world," Kudlow proclaimed in front of the CNBC camera. "We're crushing it right now, and I think that's going to continue regardless of China."

Kudlow, standing outside the West Wing, offered versions of this happy talk -- "I don't think this is anything resembling a sugar high ... America is on a tear" -- to any other reporter who would listen.

But the Pollyanna performance didn't play well on Wall Street. The Dow lost another 546 points Thursday. The index had a partial recovery Friday but finished the week down 4.2 percent, the third straight weekly decline.

Maybe that's because investors had heard Kudlow say such words once before.

Ten months before the crash of 2008: "There's no recession coming."

Seven months before the crash: "The economy will be rebounding sometime this summer, if not sooner."

Six weeks before the crash: "An awful lot of very good new news."

Markets rise and markets fall, and this last week's volatility doesn't necessarily mean the economy will tank. But it does show the limits of Trump's hucksterism.

Though Trump called the stock market a "bubble" during the campaign, he has boasted scores of times about new records it has set during his presidency. On Saturday, he told a crowd: "Your 401(k)s, you all look like a bunch of geniuses -- thank you, Donald, very much." So far, that has worked, because economic growth has continued under Trump, and indeed accelerated after the massive stimulus of a tax cut and spending increase. Republicans would otherwise be facing bigger losses in next month's midterms.

But now come scattered signs of trouble. The Fed has been raising interest rates -- in part because Trump's massive stimulus during an expansion threatens to set off inflation. China's economy has been unstable, in part because of Trump's trade dispute.

And though the trade deficit with China hit a record in September, Trump's tariffs have hurt many U.S. producers; Ford, claiming the tariffs cost it $1 billion, is planning workforce cuts.

No amount of fact-checker Pinocchios will stop his followers from accepting Trump's word that Robert S. Mueller III is on a witch hunt, global warming is a hoax, North Korea no longer is a nuclear threat and Democrats are a dangerous mob. But they can feel the economy personally. When the downturn comes, huge deficits, which Trump widened, will leave the federal government with little power to cushion the fall. If this happens on his watch, even Trump's ardent supporters would see it's not fake news -- and that would be the end of him.

Trump needs reassurance -- and Kudlow, the former TV business pundit, now plays the carnival barker's carnival barker.

With cameras in the room for a prescription-drug bill signing Wednesday, Trump introduced "the great Larry Kudlow, whose voice is so beautiful. ... The economy, Larry, how is it doing?"

"Couldn't be better," replied Kudlow.

And Kudlow's message couldn't be otherwise:

Oct. 7: "Right now, the American economy is crushing it."

Sept. 28: "We're crushing it, we're absolutely crushing it."

Sept. 17: "We're crushing it."

Sept. 6: "We're crushing it."

Aug. 28: "America today is just crushing it everywhere."

Aug. 17: "We are crushing it. And people say this is not sustainable, it's a one-quarter blip? It's just nonsense."

In Thursday's interview, Jim Cramer, Kudlow's former partner on CNBC, tried to temper Kudlow's mania. Cramer cautioned about a slowdown in business in key economic sectors, a peak in real estate, slower lending, declining demand for luxury goods -- "a pastiche that I'm concerned about."

Kudlow brushed off the worries. "I'm just saying there's so much good news out there that we shouldn't just try to find a couple of numbers that don't look great, okay?" he said. "This is a heck of a story. Let's embrace it."

Sound familiar? "The Bush boom is alive and well," Kudlow said before the 2008 crash, calling the soon-to-collapse economy "still the greatest story."

Until it wasn't.

Follow Dana Milbank on Twitter, @Milbank.

(c) 2018, Washington Post Writers Group

Jamal Khashoggi -- a Saudi patriot and an indomitable journalist

By david ignatius
Jamal Khashoggi -- a Saudi patriot and an indomitable journalist

DAVID IGNATIUS COLUMN

(Advance for Saturday, Oct. 13, 2018, and thereafter. Web release Friday, Oct. 12, 2018, at 8 p.m. Eastern time.)

(For Ignatius clients only)

By DAVID IGNATIUS

WASHINGTON -- The long road that took Jamal Khashoggi to the front door of the Saudi consulate in Istanbul and the horror that lay inside began in the 1980s in Afghanistan, when he was a passionate young journalist who supported the Saudi establishment -- but couldn't resist criticizing the royal family when he thought they were wrong.

Khashoggi's path took him through risky territory. He was friendly with Osama bin Laden in his militant youth; his patron in mid-career was Prince Turki al-Faisal, the longtime Saudi intelligence chief; he travelled sometimes to Qatar in the past decade, as a poisonous feud grew between Riyadh and Doha. But his public writings and private messages show that, in his head and heart, he was always a Saudi patriot.

Conversations with some of Khashoggi's close friends, who shared texts they exchanged with him over the years, reveal a man whose greatest passion became journalism itself -- which he expressed in a fearless, unblinking commitment to the cleansing power of the truth, regardless of the personal cost.

A portrait of the young Khashoggi comes from Barnett Rubin, one of America's top experts on Afghanistan. They met in 1989 at the U.S. consulate in Jeddah, when Rubin was on a speaking tour. Khashoggi, then 31, shared a two-part series he had written the year before about his travels with the Arab mujahedeen in Afghanistan.

Khashoggi couldn't have traveled with the mujahedeen that way without tacit support from Saudi intelligence. But Rubin remembers that during the conversation, Khashoggi criticized Prince Salman, then governor of Riyadh and head of the Saudi committee to support the Afghan mujahedeen, for unwisely funding Salafist extremists.

"It was typical Jamal," remembers Rubin. "We had just met for the first time and he began complaining" to a near-stranger about mistakes by the royal family.

There's a fatal symmetry to that 1989 conversation with Rubin: Salman is now king of Saudi Arabia, and his son Mohammed bin Salman (MBS) is crown prince.

What happened after Khashoggi entered the Saudi consulate in Istanbul is a macabre mystery. Turkish officials say he was interrogated, killed and hacked into pieces by a 15-man hit squad sent from Riyadh. What's certain is that Khashoggi's disappearance was a flagrant attack on a courageous journalist.

Maggie Mitchell Salem, one of Khashoggi's closest friends, first met him in 2002 when she was working for the Middle East Institute. (She now heads the Qatar Foundation International, a cross-cultural organization partially funded by Qatar.) Khashoggi was in Washington to attend a conference sponsored by a group supported by members of Saudi Arabia's Faisal family, who were his friends and patrons.

Khashoggi was close to these royals, but he was prepared to criticize the monarchy's clerical establishment, too. In 2003, he became editor of Al-Watan, owned by the Faisal family. But he was fired after less than two months for criticizing the Saudi religious leadership. He returned to the publication in 2007 and got sacked again three years later for challenging Salafist extremists.

He launched a satellite TV channel in Bahrain in 2015, with money from Prince Alwaleed bin Talal, but it lasted only a day -- after Khashoggi ran an interview with a dissident Bahraini Shiite.

The Bahrain episode defined a quality of optimism described by several of Khashoggi's close friends. Salem explains it this way: "He had an eternal belief that things were good, and that right would win."

Khashoggi's world darkened with the rise of MBS, whose father became king in January 2015. MBS introduced some reforms that Khashoggi supported, like allowing women to drive, opening movie theaters and other entertainment, and suppressing religious extremism. But MBS toppled Mohammed bin Nayef as crown prince in June 2017, and in November ordered sweeping arrests of more than 200 Saudis, including many princes, who were held at the Ritz-Carlton in Riyadh.

Khashoggi feared for his safety. In the summer of 2017, he moved to America and in September, he began writing columns for The Washington Post.

As always, Khashoggi wondered if he could step back and reduce the danger. When he visited Salem for the last time two months ago at her office, he told her: "I'm thinking that for two years, I want to go to a faraway island." He wondered aloud: "Can I just give this up? Can I just not do this anymore?" The answer was always the same: No, he couldn't give up.

David Ignatius' email address is davidignatius@washpost.com.

(c) 2018, Washington Post Writers Group

Cocktails in the Kanye-Trump asylum

By kathleen parker
Cocktails in the Kanye-Trump asylum

KATHLEEN PARKER COLUMN

(Advance for Sunday, Oct. 14, 2018, and thereafter. Web release Saturday, Oct. 13, 2018, at 8 p.m. Eastern time.)

(For Parker clients only)

By KATHLEEN PARKER

WASHINGTON -- Amid hurricanes, a vanished journalist, the recent Supreme Court hearings, midterms and "mobs," it is little wonder that Americans are drinking more than ever.

Factually, this is so. More than 70 percent of Americans imbibe each year, and about 40 percent drink excessively, according to two separate studies last year. A comparison to 2014 data showed a 10 percent increase in the number of heavy drinkers.

I mention these sotted stats for context. Lately, at least from my perch on the porch, the evening cocktail has become less an aperitif than a medicinal slug made necessary by the alternative of ripping off my face. To bear witness to These Times In Which We Live is to go insane, join a cult or pour your favorite poison.

Please, if you're one of the roughly 30 percent who haven't strayed from the wagon, do not feel compelled to share. We've had enough scolding from Democrats lately, which is another point of cognitive dissonance. In our topsy-turvy world, the Democratic Party, once a haven for working-class Americans, has become a green room of shaggy intellectuals who lecture the nation about the decline in morality and civility.

The Republican Party, the erstwhile home to the Moral Majority, is now wedded to a porn-star-linked president, who last week was made to look like a somber adult seated across from a stentorian Kanye West, who seemed to have (a) lost his mind or (b) emptied a bottle of Adderall into his coffee before arriving at the White House for lunch with the president.

Ostensibly, the purpose of his visit was to discuss prison reform and plead for clemency for Larry Hoover, a convicted murderer and gang kingpin. Instead, the rapper embarked on a wildly disjointed, stream-of-consciousness lecture with such rapid-fire madness that one half-expected he might suddenly start crawling up the wall and across the ceiling -- or, forgetting that his "Make America Great Again" cap wasn't (BEG ITAL)really(END ITAL) the Superman cape he thought it was, plunge through the window fully expecting to fly.

Here's a taste of his soliloquy about Hoover: "So there's theories that -- there's infinite amounts of universe and there's alternate universe so it's very important for me to get [Larry] Hoover out, because in an alternate universe, I am him. And I have to go and get him free."

Among other topical points, West mentioned that Hillary Clinton and her "I'm With Her" slogan didn't do it for him in 2016 because he was a child of separated parents and didn't get enough father time. (This is perhaps the most interesting and true thing he said.) Thus, West went with Big Daddy Trump and is proud to be an African-American supporter of the president. He said he loves Trump and threw down some choice expletives for emphasis.

His performance was, shall we say, head-swiveling and definitely alternative universe-ish. This writer can do no better than the expression on ABC News' Jonathan Karl's face during the screed. It was the look of a man who has just realized that he's the last rational being on the planet.

Throughout the 10-minute speech, Trump remained nearly mute and interchangeably bemused and, just possibly, terrified. Toward the end, his arms folded tightly across his chest, he nodded and said, "Really very interesting." Meanwhile, serious news of enormous import loitered in the vestibule awaiting the president's attention. Hurricane Michael had recently finished decimating the Florida panhandle and, on the very day of this epic confab, was drenching the Carolinas, which were still foundering from Hurricane Florence. Reports were also coming in that a Washington Post columnist who had disappeared into the Saudi consulate in Istanbul may have been tortured, murdered and dismembered on orders from Saudi Crown Prince and Jared Kushner buddy Mohammed bin Salman. Speaking of the incident Thursday evening, Trump said dismissively: "It's in Turkey, and it's not a citizen."

When the world has gone barking mad, when high-school yearbook jottings can nearly take a good man down, when a hip-hop artist and the president convene a surreality show in the Oval Office, when millions are suffering the aftermath of a killer storm and Trump seems chillingly unmoved by a reporter's alleged murder -- well, you'd best make mine a triple.

Cheers.

Kathleen Parker's email address is kathleenparker@washpost.com.

(c) 2018, Washington Post Writers Group

Refugees should not be political fodder

By e.j. dionne jr.
Refugees should not be political fodder

E.J. DIONNE COLUMN

(Advance for Monday, Oct. 15, 2018, and thereafter. Web release Sunday, Oct. 14, 2018, at 8 p.m. Eastern time.)

(For Dionne clients only)

By E.J. DIONNE JR.

In the madness of the Trump era, terrible things happen with almost no notice. An announcement is made, some news stories are written, and the issue quickly disappears, engulfed in a storm of crazy tweets and lies, followed by expressions of outrage among President Trump's foes.

A good example is the administration's decision last month to slash the number of refugees who can be resettled in the United States next year to 30,000, down from the already shamefully low level of 45,000.

The new figure is the lowest ceiling imposed on the refugee program since it was created in 1980 and reflects a sharp decline from the cap of 110,000 that President Obama proposed in his last year in office.

In all circumstances, the move would be short-sighted, mean, politically opportunistic and embarrassingly out of line with what we have always claimed our values are. But it is even more cruel and wrongheaded now, as the world confronts what Rep. Jim McGovern, D-Mass., called the "worst refugee crisis since World War II."

"We are turning our backs on it," McGovern recently told me, "when we should be exercising global leadership."

The Trump Administration has "taken a hatchet to the program" said David Miliband, President of the International Rescue Committee. Now, he added in an interview, "America is closing its doors to the world's most vulnerable, and it's a green light to others who want to do the same."

Can anyone honestly believe that this makes America great?

The moral tragedy is also a political tragedy. Historically, refugee resettlement was a bipartisan issue. Administrations of both parties understood not only the United States' obligations to humanitarian relief, given our country's wealth and international status, but also the nation's self-interest in reducing the instability that large concentrations of refugees can create.

"Part of the way you protect our homeland is by not letting children grow up in refugee camps," McGovern said. "It promotes resentment towards us. That's where terrorism breeds."

There are still glimmers of cross-party cooperation on the issue. McGovern co-chairs the Tom Lantos Human Rights Commission (named after the late congressman who championed this cause) with Rep. Randy Hultgren, R-Ill. They joined in a statement condemning the administration's decision.

"The United States cannot abandon its role as a place of sanctuary for the individuals and families seeking to escape violence, turmoil and persecution," they said.

He noted in an interview that the actual number of refugees admitted runs well below the cap. "We can do better than this," Hultgren noted in an interview. "These are incredible people who aren't looking for anything but a place of security. They are working hard and taking care of their families. This a part of the story that doesn't get told enough."

But Trumpian Republicanism means turning away from basic decency in the name of politically motivated attacks on newcomers to our shores.

The policy of reducing the ceilings on refugees has been pushed hard by Stephen Miller, the president's senior policy adviser who never met a form of nativism he didn't like. Miller reportedly overcame the objections of officials in both the Defense and State departments. They challenged Miller's ill-founded claim that letting in more refugees would make it harder to deal with a backlog in asylum-seekers.

And as Rep. Hultgren's comments on who these refugees are suggest, it is a libel to link them with terrorism, especially given a highly intensive vetting process. As a 2016 Cato Institute report noted, the risk of an American being killed by a refugee in a terrorist attack in any given year was 1 in 3.64 billion.

Especially appalling -- "the worst of the worse," said Rep. Jim Himes, D-Conn. -- is the way the administration is making entry to the U.S. exceedingly difficult even for the tens of thousands of Iraqis and Afghans who have helped American diplomats and the military during our wars. This, Himes noted, stands in sharp contrast to our policies toward rescuing our Vietnamese allies after one of the most unpopular wars in our nation's history.

In an election year, McGovern noted, "Going out and saying that we have to resettle more refugees might not win you more votes." But "most people in our country are good, and I think they understand what's right here."

"You're not going to lose an election," he added, "by saying we're going to do our share with other countries to help people in dire need." And you surely shouldn't win one for refusing to do so.

E.J. Dionne's email address is ejdionne@washpost.com. Twitter: @EJDionne.

(c) 2018, Washington Post Writers Group

Trump's arm-twisting of the Fed is what's truly 'loco'

By catherine rampell
Trump's arm-twisting of the Fed is what's truly 'loco'

THE MILLENNIAL VIEW

(FOR IMMEDIATE PRINT AND WEB RELEASE)

(For Rampell clients only)

By CATHERINE RAMPELL

WASHINGTON -- President Trump keeps saying that Democrats want to model the United States on Venezuela. But the only one actually trying to turn us into Venezuela is Trump.

As stock markets plummeted Wednesday and Thursday, Trump lashed out at the Federal Reserve. He blamed the central bank, and not his trade wars, for the bloodbath.

"The Fed is going wild. I mean, I don't know what their problem is that they are raising interest rates and it's ridiculous," Trump told Fox News. "The Fed is going loco, and there's no reason for them to do it. I'm not happy about it," he said.

While economists may disagree about the exact pace of interest-rate hikes, raising rates now -- gradually, after keeping them at historically low levels for more than a decade -- is hardly "loco."

We're in one of the longest expansions on record. Unemployment has touched 49-year lows. Inflation appears to be picking up. Plus, Trump recently passed $2.7 trillion of fiscal stimulus during a robust recovery, adding to inflation risks. Such unjustifiably loose fiscal policy only bolstered the case for tighter monetary policy.

You know what is "loco," though? The fact that Trump thinks it's appropriate to arm-twist the Fed, whose political independence is supposed to be sacrosanct.

There's good reason to safeguard central-bank independence: It's that we don't want to turn into Venezuela. Or Argentina. Or pre-euro Italy. Or basically any hyperinflationary basket case whose population doesn't believe that monetary policy is free of political influence.

As these economies have shown many times over, putting the money supply in political hands is disastrous.

Politicians are always tempted by easy-money policy, especially in an election year. Why? In the short term, at least, loose monetary policy can goose the economy. It squeezes out a little more growth, boosts asset prices (including stocks) and pushes down unemployment.

Which tends to be helpful for scoring votes. There's a trade-off, though.

Loose monetary policy can also lead to inflation, especially when the economy is already doing well. And inflation can be caused not just by policymakers actually printing money today, but also by the belief that they might do so in the future.

If the public doesn't believe the government is committed to keeping prices stable -- because, say, an election is coming -- businesses might start pre-emptively jacking up prices. Which leads customers to go out and buy up products before prices rise further, which can lead to further price hikes, and so on.

In other words, an inflationary spiral.

The solution is to shield decisions about the money supply from day-to-day politics. In the United States, we do this by outsourcing decisions about interest rates to the Federal Reserve.

As an independent institution, whose officials are nominated by the president but can be removed only for cause, the Fed is free to do unpopular things, even in election years: to "take away the punch bowl" just when the party gets going -- that is, to prevent the economy from overheating.

Or even to cause some near-term pain in service to longer-term price stability, as then-Fed Chair Paul Volcker famously did when he raised rates to tame out-of-control inflation.

The Fed hasn't always been free of political influence. The high inflation that Volcker doused has been blamed in part on political pressure placed on Fed chairmen by the Johnson and Nixon administrations. And occasionally since then, members of presidential administrations (including George H.W. Bush himself, as well as Bill Clinton's budget chief) have publicly jawboned the Fed.

But for the most part, for the past several decades, administrations have maintained a policy of not commenting on monetary policy. They understood that raising even the specter of a compromised Fed was just too risky.

Trump clearly has no such understanding. He wants more punch for everyone, at least while he's president, and he wants to be the one who serves it. In fact, in May, former Fed Gov. Kevin Warsh told Politico about his own interview for the Fed chairmanship, in which Trump did not seem to understand that the Fed is supposed to be independent.

While the Fed has undoubtedly made mistakes in the past, it has spent decades cultivating its reputation for independence, and independence has been crucial to its ability to make a credible commitment to stable prices and thus the long-term health of the economy. Trump would do well to remember that reputation -- fairly or not -- is always easier lost than won.

Catherine Rampell's email address is crampell@washpost.com. Follow her on Twitter, @crampell.

(c) 2018, Washington Post Writers Group

On global warming it's mission impossible

By robert j. samuelson
On global warming it's mission impossible

ROBERT J. SAMUELSON COLUMN

(Advance for Monday, Oct. 15, 2018, and thereafter. Web release Sunday, Oct. 14, 2018, at 8 p.m. Eastern time.)

(For Samuelson clients only)

By ROBERT J. SAMUELSON

WASHINGTON -- If there were any doubt before, there should be none now. "Solving" the global climate change problem may be humankind's mission impossible. That's the gist of the latest report from the Intergovernmental Panel on Climate Change (IPCC), the United Nations group charged with monitoring global warming.

Unless we make dramatic reductions in greenhouse gas emissions (carbon dioxide, methane and others), warns the IPCC, we face a future of rapidly rising temperatures that will destroy virtually all the world's coral reefs, intensify droughts and raise sea levels. We need to take action immediately, if not sooner.

The IPCC says that emissions need to be cut 45 percent from present levels by 2030 and virtually eliminated by 2050. This would keep the projected increase in global temperatures since the early 1800s to 1.5 degrees centigrade, or 2.7 degrees Fahrenheit. We would escape the worst consequences of global warming.

It's not clear how this would be done. The reality is that global carbon emissions are rising, not falling. Emissions today are about 60 percent higher than in 1990, according to the World Bank.

There are at least three obstacles frustrating the IPCC's agenda.

First, we don't have the technologies to reduce and eventually eliminate emissions from fossil fuels (oil, coal and natural gas). Yes, solar and wind power have made advances, but they still provide only a tiny share of the world's total energy, about 4 percent. Electric vehicles don't solve the problem, because natural gas and coal are the underlying energy sources for much of the electricity.

Second, even if we had the technologies to replace fossil fuels, it's doubtful that we have the political will to do so. Democracies -- or, for that matter, dictatorships -- have a difficult time inflicting present political pain for future, hypothetical societal gains. Voters abhor higher gasoline and heating-oil prices, which are an integral part of most proposed solutions for global warming. They would dampen demand for fossil fuels and spur investment in substitutes.

The clearest proof of America's political bias against the future is the treatment of Social Security and Medicare. For decades, we have known that an aging population would significantly boost spending for these programs. What did we do to prepare for this inevitability? Not much.

Finally, assuming (unrealistically) that today's advanced societies -- led by the United States -- overcome these obstacles, it's unclear whether poorer and so-called "emerging market" countries would follow suit. These countries represent the largest increases in fossil-fuel demand, as they attempt to raise living standards. Already, China is the world's largest source of carbon dioxide emissions, nearly twice as high as the United States.

Economic and population increases boost energy demand. Consider air conditioners. The world now has 1.6 billion air conditioning units, reports the International Energy Agency. By 2050, that could triple to 5.6 billion units. People in advanced societies won't abandon air conditioning, and people in poorer countries won't surrender the chance to enjoy it. Much of future demand will come from three countries -- China, India and Indonesia.

What is to be done?

Maybe nothing. This seems to be the choice made by many Republicans and the Trump administration, which is withdrawing from the Paris agreement's commitments to reduce emissions. Trump's hostility is not as crazy as it sounds. If suppressing global warming is as hard as I've argued, one likely response is a series of half measures that don't much affect global warming but do weaken economic growth. The politicians' real aim is to brag that they've "done something" when all they've really done is delude us. Trump would skip this stage.

My own preference is messier and subject to all the above shortcomings. I would gradually impose a stiff fossil-fuel tax (not a 10 or 15 percent tax but a doubling or maybe a tripling of prices) to discourage fossil-fuel use and encourage new energy sources. In addition, some of the tax revenues could reduce budget deficits and simplify income taxes. With luck, a genuine breakthrough might occur: perhaps advances in electric batteries or storage. That would make wind and solar power more practical.

There are risks. It can be argued that this sort of policy, aside from relying on unpopular energy taxes, would represent a triumph of hope over experience. In the name of fighting global warming, we might justify a host of energy boondoggles.

Combatting global warming is a noble crusade, but it's much harder than the rhetoric implies. If we were serious about cutting greenhouse gases, we could adopt comprehensive wartime controls that empower the government to mandate changes. Or we could accept a worldwide depression as a way to quash job growth and greenhouse gases. Obviously, neither is in the cards.

(c) 2018, The Washington Post Writers Group

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