We need to talk about interest rates

[Bloomberg](   New to Bloomberg Opinion Today? [Sign up here](. Today's Agenda - Higher interest rates are [spooking markets]( and [hurting housing](. - Khashoggi’s disappearance is inspiring [strong reactions](. - Trump is causing problems for [purple-district Republicans](. - China’s taking [a risky stance]( in the trade war. Higher Rates Are Taking a Bite I’m sorry, but we need to talk about interest rates. They are rising, specifically. This can be a good thing, in the sense that it means the economy is strong. But higher rates have caused problems for emerging markets all year, clamping down the flow of cheap money to investors. And it’s putting noticeable dents in the U.S. stock market, which suffered another [mini-sell-off today](. One trigger for this (maybe; [who really knows](?) were the minutes of the Federal Reserve’s September meeting, which scared investors [mainly for what they didn’t say](, notes John Authers. Specifically, there was no hint of the Fed changing its apparent determination to raise rates more than markets expect, and no sense of guilt about emerging-market pain. Rising rates have something to do with why, as Robert Burgess points out, this has been an [unusually lousy year for markets](, in which almost nothing is working: Tim Duy argues everybody needs to calm down, that [the Fed can always change its mind]( – if it sees signs the economy is weakening, it won’t blindly keep raising rates. It doesn’t seem worried about runaway inflation, suggesting it will be OK with cooling it on the rate hikes if need be. But rising interest rates are already starting to pinch a key aspect of the U.S. economy: housing. Danielle DiMartino Booth notes [mortgage rates have jumped to their highest]( levels since early 2011. This hurts affordability and makes it far less appealing to refinance or borrow against equity. All of this is bad for the economy. Bonus Fed reading: At least the Fed has finally [noticed the risky rise]( of leveraged loans. – Brian Chappatta The Khashoggi Pressure Grows Treasury Secretary Steve Mnuchin [finally bowed out]( of the “Davos in the Desert” conference in Riyadh. This suggests the White House is withering under the pressure to crack down on Saudi Arabia over the disappearance and apparent murder of journalist Jamal Khashoggi. If you think about it, it’s pretty strange/unfair that Khashoggi’s death is inspiring far more scrutiny of the Saudis and Crown Prince Mohammed bin Salman than, say, the deaths of thousands of Yemeni civilians. Noah Feldman writes about the moral dilemma of people, such as himself, who knew Khashoggi personally and feel more passionate about him than about other Saudi misdeeds. But Noah writes this is not amoral – for whatever reason, humans just [need to put a face on outrage]( before they can really feel it. As for the prince, some powerful people who thought he was a real reformer are now writing him off as just another autocrat. But Hussein Ibish argues he is actually a little of both. The prince’s desire for social and economic reform seems real, but he also seems to feel a need to [protect those reforms by crushing all dissent](. Bonus Khashoggi reading: Siemens’s CEO [shouldn’t cancel]( his “Davos in the Desert” appearance. – Leonid Bershidsky How Do You Solve a GOP Problem Like Trump? With the midterm elections just 18 days away, please spare some thoughts and prayers for the purple-district Republicans, who must run while carrying President Donald Trump on their backs. Trump is, spoiler alert, [not very popular](, and the midterm elections [increasingly look to be a referendum on him](. This is a problem for New Jersey Representative Tom McArthur, to take one example. He wants voters in his district – a purplish, state-spanning stretch that voted for Obama twice and barely went to Trump in 2016 – to think he’s some kind of check on the president. And yet McArthur has voted with Trump consistently, including on tax cuts and Obamacare repeal. As a result, he’s a tossup in a district he won by 20 points in 2016. He’s a prime example of [Republicans facing tough re-elections]( in November trying to have it both ways, to hang onto the Republican base while not turning off swing voters, writes Al Hunt. Another way Trump [makes life difficult for Republicans]( is the enthusiasm he generates among Democrats. And social media and technology have helped activists turn that enthusiasm directly into firehoses full of cash, [targeted with pinpoint accuracy on races and causes that need them](, writes Jonathan Bernstein.  Bonus political reading: If you thought the politics of the Great Recession were bonkers, then wait until you see [the politics of the next recession]( (maybe in just in time for [2020](!). – Conor Sen Some Trade War Advice As we’ve written [here before](, China feels like it can afford to wait for Trump to blow off his trade-war steam. Mohamed El-Erian argues it can’t, particularly now that Trump has a new Nafta agreement aimed at isolating China. Beijing should play along and [make a few concessions](, or its further development will be at risk, Mohamed warns. It can’t be good news for China that Trump has finally hinted doing something smart in the trade war – ditching an antiquated postal-rate agreement that lets China mail stuff to the U.S. on the cheap. Bloomberg’s editorial board encourages Trump’s instincts on this, but warns there’s a [smarter way to do it than just storming out]( of the 144-year-old agreement entirely, as Trump has threatened to do. Bonus trade reading: A U.S. promise to cut a trade deal with a post-EU Britain is [a gift to Brexiteers](, though the details may not be. – Therese Raphael Charty McChartface J.C. Penney Co. is [starting to lose the faith of investors](, writes Sarah Halzack. If it doesn’t have a strong holiday season, then people may start calling it the next Sears (and not in a good way). Big-bank earnings were [awfully padded this quarter](, notes Stephen Gandel. If they’re not doing as well as they seem on the surface, then it’s worth asking if the economy really is either. Quick Hits Trump is the greatest president of all time, ever! If you believe that, then you may be under the influence of something science calls the “[confidence heuristic](.” – Cass Sunstein Now would be a good time for consumers to [ditch Google Chrome and Search](. – Leonid Bershidsky Italy just got itself a little bit of [breathing room with a bond swap](, but its financing troubles remain. – Marcus Ashworth It’s not just Elizabeth Warren; we’re [all giving DNA too much credit](. It can’t really tell us all that much about who we are or what will become of us. – Faye Flam ICYMI Trump threatened to close the border if Mexico doesn’t [stop a caravan of Honduran migrants](. That caravan inspired John Kelly and John Bolton to hold a [loud-cursing contest]( at the White House. Here comes [more Apple stuff](. Kickers Mmm, [edible candles](. To be fair, it is pretty brave to try to scare off criminals using only [bullet noises you make with your mouth](. Easter Island evidence suggests people can live on (a certain kind of) [water from the sea](. (h/t for the first three kickers to Scott Duke Kominers) FINALLY, a database of [paper-airplane designs](. Carroll Spinney, who has played Big Bird and Oscar the Grouch on “Sesame Street” since 1969, [is retiring](. The 30 [best independent films of this century]( so far. The Beastie Boys on the [making of “Paul’s Boutique](.” Note: Please send edible candles, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net. *** New subscribers can [sign up here](. [FOLLOW US [Facebook Share]]( [Twitter Share]( SEND TO A FRIEND [Share with a friend] You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. [Bloomberg.com]( | [Contact Us]( Bloomberg L.P. 731 Lexington, New York, NY, 10022 If you believe this has been sent to you in error, please safely [unsubscribe](.