Newsletter: Forgiving Student Loans and 5-Hour Workdays

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Mario Draghi presides over his last policy meeting as as head of the European Central Bank today. But first, let’s talk about forgiving student debt, cutting the workday to five hours, why the auto industry poses a little-appreciated risk to the world economy, and the sad fact that most Americans think they’re stuck in a lousy job.

Student Debt: ‘Stop the Insanity’

A top student-loan official in the Trump administration said he will resign Thursday and endorse canceling most of the nation’s outstanding student debt, calling the student-loan system “fundamentally broken,” Josh Mitchell reports.

  • A. Wayne Johnson, a senior student-loan official in the Trump administration, said repayment trends suggest much of the debt will likely never be repaid.
  • “We run through the process of putting this debt burden on somebody, they take the burden out now, but it rides on their credit files—it rides on their back—for decades,” he said. “The time has come for us to end and stop the insanity.”
  • Research shows high levels of student debt push younger Americans to put off marriage, home ownership and having children.


The European Central Bank releases a policy statement at 7:45 a.m. ET and ECB President Mario Draghi holds a press conference at 8:30 a.m. ET.

U.S. durable goods orders for September are expected to drop 0.8% from the previous month. (8:30 a.m. ET)

U.S. jobless claims are expected to inch up to 215,000 from 214,000 a week earlier. (8:30 a.m. ET)

IHS Markit’s preliminary U.S. manufacturing index for October is expected to fall to 50.7 from 51.1 at the end of September. (9:45 a.m. ET)

U.S. new-home sales for September are expected to fall to an annual pace of 709,000 from 713,000 a month earlier. (10 a.m. ET)

The Kansas City Fed’s manufacturing survey for October is out at 11 a.m. ET.


Work Smarter, Not Longer

Lasse Rheingans realized taking time to check Facebook or respond to reply-all emails distracted him from work goals and caused him to spend extra hours at the office rather than with his young daughters. So when he acquired a German tech consulting firm in late 2017, he introduced a radical idea: Reduce the workday to five hours while leaving worker salaries and vacation time the same, Eric Morath reports.

  • The firm’s 16 employees start work at 8 a.m. and may leave at 1 p.m. Mr. Rheingans says employees can deliver the same output during a focused 25-hour week as in 40 hours interrupted with distractions.
  • Other tech firms have discovered a drawback: “Everyone’s outside life got so much better, at the expense of their passion for the work,” says Stephan Aarstol, CEO of a San Diego-based firm that experimented with a shorter workday in 2015.

Stall Speed

“Peak car”—a world with all the cars it needs—is approaching. That’s a problem for global growth, Greg Ip writes.

  • The International Monetary Fund estimates the sector accounts for 5.7% of global economic output and 8% of world trade. Given the industry’s outsize influence, retrenchment poses a little-realized risk to the world.
  • The IMF thinks autos contributed a fifth of last year’s slowing in global gross domestic product and a third of the slowdown in trade. World-wide sales fell in 2018, are expected to drop again this year, and Moody’s Investors Service projects another decline in 2020.

Heavy Duty Downgrade

Caterpillar cut its profit forecast for this year, saying that global economic uncertainty is prompting customers to hold off on big purchases. “People who are buying large capital equipment are impacted by the uncertainty in the global economy,” CFO Andrew Bonfield told the WSJ’s Austen Hufford. “Our customers are not in financial difficulties. Our customers are being cautious.”

Eurozone Economy Stagnating

The eurozone economy is stuck in the mud. IHS Markit’s composite purchasing managers index, which measures activity in the manufacturing and service sectors, inched up to a preliminary reading of 50.2 in October, barely above the 50-mark that separates expansion from contraction. “The manufacturing downturn remains the fiercest since 2012, and continues to infect the service sector,” IHS Markit economist Chris Williamson said.

More Than Just the Reigning Rugby World Cup Champions

The World Bank is out with its annual rankings of 190 economies for their “Ease of Doing Business.” The bank’s rankings study the regulatory environment to measure how quickly one can start a business, get reliable electricity, obtain construction permits, register property, take out loans, enforce contracts, pay one’s taxes and so on. The idea is two-fold—first that improving the regulatory environment boosts growth and second that naming (and in some cases shaming) countries for their performance will create public pressure for them to improve.

The top of the rankings changed little from last year. The U.S. improved slightly, from 8th to 6th, owing in part to a lower corporate tax rate. Most improved honors went to Saudi Arabia, Jordan, Togo, Bahrain and Tajikistan, countries that implemented a wide range of reforms. At the other end of the spectrum, Libya, Yemen, Venezuela, Eritrea and Somalia scored the worst.

  1. New Zealand
  2. Singapore
  3. Hong Kong
  4. Denmark
  5. South Korea
  6. U.S.

—Josh Zumbrun

Keep an Eye on the Repo Market

The Federal Reserve Bank of New York is boosting the amount of temporary liquidity it is willing to make available to financial markets. As of Thursday, the minimum size of its overnight repurchase-agreement, or repo, operations will rise to $120 billion, from what had been at least $75 billion. The Fed said it was raising the minimum operation sizes “to mitigate the risk of money market pressures that could adversely affect policy implementation,” Michael S. Derby reports.

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Former New York Fed President Bill Dudley thinks the central bank should do more to help calm money markets. “Set up a standing repo facility, which would lend against Treasury collateral at a rate slightly above the normal repo rate,” he writes at Bloomberg Opinion.


About 60% of employed Americans say they’re stuck in a bad or mediocre job. “The implication is that high job quality cannot be assumed to follow from low unemployment, and key features of the U.S. economy may help explain the disconnection. One problem is rising income inequality. In recent decades, economic growth has disproportionately favored the top 10%—and especially the top 1%—of income earners, with little to no gain in labor income for Americans at or below the median,” Jonathan Rothwell and Steve Crabtree write in a report from Gallup.

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