Baum on Money: Cue the Bankers
Good morning, everyone. Here's your daily dose of what I'm reading on the U.S. economy.
Mr. Blankfein goes to Washington
CEOs of some of the biggest U.S. financial institutions trekked to Washington yesterday to tell President Barack Obama and leaders of Congress -- drum roll, please -- to raise the debt ceiling. They said a debt default would be a really, really bad idea. "The financial community is in an excellent position to educate the public about the consequences to everyday folks in the event we default," said Valerie Jarrett, a senior adviser to the president. If only we had the insight of Lloyd Blankfein or the diplomacy of Valerie Jarrett, who managed to both flatter (the CEOs) and belittle ("everyday folks") in the same breath.
Taper? What's that?
It's been at least a week since tapering was front-page news, back when the focus was on the Federal Reserve rather than the federal government. So just to refresh your memory on who said what, when, where and why, the Wall Street Journal's Real Time Economics blog has assembled a cheat sheet. The real window on how close a call the decision to forego tapering was will come next week, when the minutes from the Fed's Sept. 17-18 meeting are released on Oct. 9. Remember when the minutes used to be a sleeper? And just in case you were wondering, Obama is vetting (the next Fed chair) while Congress is fiddling.
An equation for tapering
The formula for the October Fed meeting is simple, according to Tim Duy's Fed Watch. No data + fiscal turmoil = no taper. It's the communication that's hard. Duy says the Fed probably regrets setting, not one, but two unemployment markers: 7 percent for the likely end of asset purchases and 6.5 percent as the threshold for considering any interest-rate increase. He says the Fed started to talk tapering too soon, doesn't fully understand the transmission mechanism, has no idea how to fine-tune the program and speaks with multiple voices. If the Fed is planning to rely increasingly on forward guidance, policy makers need to figure out where they are going in order to communicate properly. Maybe that's why economists prefer reducing everything to a mathematical equation.
This is big
The U.S. is on track to surpass Russia as the largest producer of oil and natural gas this year, according to the Wall Street Journal. Thanks to the Bakken oil field in North Dakota and the Eagle Ford shale formation in South Texas, U.S. energy production is soaring. There's a reason North and South Dakota boast the lowest unemployment rates -- 3 percent and 3.8 percent, respectively -- of the 50 states. Texas is No. 17. While the price of oil is determined on the global market, the less the U.S. depends on certain, uh, unstable parts of the world for energy imports, the better.
Casualties of the government shutdown you may not have heard about
The White House staff goes from 90 to 15, according to the Washington Post. There will be no drug testing for Department of Transportation employees. The Department of Agriculture will not operate its meat-and-poultry hotline. No more wild-horse adoptions for the duration of the shutdown. And no one will be advising the government on "matters pertaining to the arts," whatever they are.
(Caroline Baum is a Bloomberg View columnist. Follow her on Twitter.)