Slate Money — “Horse Loose in A Hospital” Edition

Release Date: February 2, 2019
Host: Felix Salmon (Axios)
Guests: Anna Szymanski (emerging markets expert), Emily Peck (Huffington Post)

Episode Overview

The “Horse Loose in A Hospital” edition of Slate Money tackles the week’s major business and finance news. The hosts dig into American financial dominance via the Treasury Department’s OFAC (Office of Foreign Assets Control), the wider global influence of U.S. dollar policy, and the Trump administration’s aggressive use of sanctions. The conversation snakes through the Venezuela crisis, sanctions against Russian aluminium giant Rusal, the U.S.-China confrontation involving Huawei, the Federal Reserve’s announced pause on rate hikes, and the bankruptcy of PG&E (Pacific Gas & Electric) as a potential harbinger of climate-driven financial crises.

The hosts combine nerdy enthusiasm, critical skepticism, and humor—riffing on John Mulaney’s “Horse Loose in a Hospital” bit as an apt metaphor for political and economic unpredictability.

Key Discussion Points & Insights

1. The Unmatched Power of the U.S. Treasury & OFAC

• What is OFAC?

  • OFAC is the enforcement arm of the U.S. Treasury, wielding extraordinary power due to global dependence on the U.S. dollar.
  • Felix Salmon (03:19):

    “If treasury decides to slap sanctions on you and say you're not allowed to deal with that company, then that company essentially gets excommunicated from the entire global economy. ...Treasury can do this. No other finance ministry can do this. Treasury has an extraordinary amount of power and the arm they use to do this is called OFAC.”

• Global Dollar Dominance:

  • Sanctions affect not just U.S. businesses but any entity dealing in dollars worldwide, giving the U.S. a unique role in economic geopolitics.

2. Venezuela’s Crisis & the Use of Sanctions

• U.S. Moves Against Venezuela

  • The United States immediately recognized Juan Guaidó as Venezuela’s interim president, prompting other countries to follow (with major exceptions being Russia and China).
  • OFAC sanctions targeted Venezuela’s state oil company (PDVSA), effectively blocking access to global markets.

• Market Implications

  • These sanctions bewilder investors who are unable to sell affected Venezuelan bonds due to new restrictions, causing liquidity dilemmas.
  • Anisha Mansky (04:30):

    “If you're tracking the EMBY and you own them, you then can't sell them.”

• Rationale Behind Sanctions

  • Emily Peck (05:07):

    “Basically Maduro was reelected for a second term. Most people think he stole the election. He's… a bad leader. A lot of Venezuelans are essentially starving... The United States took the rare step...of saying, yeah, this new guy is a legit leader, and then they place all these sanctions on Venezuela to essentially force Maduro out.”

3. America’s Geopolitical Muscle and Increasing Aggression

• “Americans are really in charge now.”

  • The hosts note a shift: The U.S. is more aggressively wielding its control over the global financial system through OFAC and other instruments.
  • Trump administration’s use of sanctions has soared—names on OFAC lists up 30% vs. the late Obama era.

• Discussion of Rusal (Russian Aluminium Company) Sanctions

  • The process was inconsistent, creating confusion in global markets. Democrats and some Republicans criticized the way the company’s owner could reduce his stake to get Rusal off the sanctions list.
  • Felix Salmon (08:24):

    “A bunch of Democrats…kind of approved of putting him on the OFAC list and they're disapproving of…taking his company off it.”

• China and Huawei Lawsuit

  • The Department of Justice filed significant charges against Huawei for fraud and espionage, further ratcheting up trade tensions.
  • Use of multiple instruments—sanctions, lawsuits, tariffs—has complicated and unpredictable effects on both foreign giants and U.S. stakeholders.

• Long-Term Risks of Overusing Dollar Power

  • Anna warns that aggressive use of sanctions could push other countries to seek alternatives to the dollar—despite few viable options now.

  • Notable Quote (Emily Peck, 16:52):

    “They're injecting politics into places where it's becoming, I think, too...messy. ...John Mulaney, the comedian, has a bit comparing Trump to if a horse was loose in a hospital. It's just total chaos. ...There’s no consistency in the policy.”

4. The Federal Reserve: Rate Pause and Policy Uncertainty

• Fed’s Interest Rate Pause

  • After consistent hikes in 2018, the Fed signals a sudden pause—surprising markets.
  • Some data doesn't justify a pause (strong jobs report), but other factors (slowing global growth, soft corporate earnings, and recent volatility) may justify caution.

• Quantitative Tightening (QT) Explained

  • Fed moving from buying to gradually offloading assets acquired during crisis-era QE.
  • Debate on how much QT matters: Some say it’s technocratic, others (including markets) see it as real monetary policy.
  • Felix Salmon (21:15):

    “What Jay Powell has been trying very aggressively to say is look, this is just a technocratic unwind. It's not really monetary policy at all. And the markets are like pull the other one, this is monetary policy.”

• Political Pressure from the Trump Administration

  • Trump’s vocal anti-hike stance adds another layer to Fed deliberations.

5. PG&E’s Bankruptcy — A Financial Catastrophe of Climate Change

• Unusual Insolvency

  • PG&E is not technically insolvent, but files for bankruptcy in anticipation of massive liabilities from wildfire lawsuits.

• Skeevy Move or Inevitable?

  • Anna feels it’s prudent, Emily sees it as self-serving and potentially harmful for ratepayers, renewable energy partners, and employees.
  • Felix Salmon (28:08):

    "Bankruptcy, especially for utilities, is an incredibly convoluted and involved and expensive and time consuming process... At some point, I feel like you do actually need to just own this. And, and this seems to me like they just rushed into this a little bit too gleefully."

• Broader Implications

  • Is this the first major U.S. financial crisis driven directly by climate change?
  • Tensions between public vs. private utility provision and regulatory fixes (insurance pools, new policies) get debated.

Notable Quotes & Memorable Moments

• On U.S. Power & Sanctions:

  • Felix Salmon (03:19): “Treasury has an extraordinary amount of power and the arm they use to do this is called OFAC.”

• On U.S. Dollar Dominance:

  • Anisha Mansky (06:36): “Most global trade is in dollars…debt that’s issued globally is denominated in dollars…The US has been much more aggressive in using this power.”

• On the Chaotic Policy Environment:

  • Emily Peck (16:52): “They're injecting politics into places where it's becoming...too messy…(Like) if a horse was loose in a hospital. It's just total chaos.”

• On Fed’s Policy Shift:

  • Felix Salmon (21:15): “This is just a technocratic unwind. It's not really monetary policy at all. And the markets are like pull the other one, this is monetary policy.”

Timestamps for Key Segments

• 00:10 — Episode Introduction and Main Topics Preview
• 03:19 — OFAC’s Global Power & the Role of the U.S. Dollar
• 04:30 — Implications of Venezuela Sanctions
• 05:07 — Venezuela: Political Context (Maduro, Guaidó, U.S. Recognition)
• 06:36 — U.S. Hegemony and Dollar Leverage
• 09:19 — Case Study: Rusal Sanctions Impact
• 10:27 — The Huawei Lawsuit and China Tensions
• 16:52 — Government Policy as a “Horse Loose in a Hospital” (John Mulaney Reference)
• 18:35 — Is the Huawei Lawsuit Political or Valid?
• 19:29 — The Fed’s Rate Hike Pause: Data and Rationale
• 21:04 — Quantitative Tightening (QT) Explained
• 23:01 — Weighing Impact of Trump’s Pressure on Fed
• 25:15 — PG&E Files Bankruptcy: A Climate Change Case Study
• 28:08 — Debate on Bankruptcy as a Solution for Climate-Driven Liabilities
• 31:45 — Should Utilities Be Public or Private? Policy Solutions
• 36:23 — Numbers Round (Notable stats: Estate tax proposal, Super Bowl QB ages, Facebook daily users)

Numbers Round (36:23):

• 77% — Bernie Sanders’ proposed estate tax rate on estates over $1 billion.
• 17 — Age difference between Super Bowl quarterbacks Tom Brady and Jared Goff.
• 2 billion — Daily users of Facebook’s services, underscoring the company’s global reach and potential regulatory scrutiny.

Conclusion

This episode delivers a wide-ranging yet cohesive conversation connecting the rise in U.S. sanctions, the risks of overplaying dollar dominance, the unintended consequences of financial and foreign policy maneuvers, and the intersections of economics with climate change-driven disasters. The hosts punctuate their analysis with humor, candor, and sharp disagreement—making esoteric topics accessible and engaging.

Closing Vibe:
The world economy, policymaking, and even the energy grid feel like a horse loose in a hospital—chaotic, unpredictable, sometimes effective, but mostly in desperate need of a new playbook.