reality is only those delusions that we have in common...

Saturday, November 19, 2016

week ending Nov 19

 With Trump in Power, the Fed Gets Ready for a Reckoning - — Paul A. Volcker, the Federal Reserve chairman, received an urgent warning two weeks after Ronald Reagan won the 1980 presidential election. Some of the president-elect’s advisers, he was told, wanted to abolish the central bank and replace it with a computer program that would manage interest rates and monetary policy. Today, a Democratic Fed leader is once again bracing to see whether victorious and emboldened Republicans will try to overhaul the central bank. In almost three years as the Fed’s chairwoman, Janet L. Yellen has led an aggressive campaign to stimulate economic growth. Donald J. Trump, the president-elect, has embraced criticism that the Fed is causing more problems than it is solving, and he has surrounded himself with advisers who would like to rein in the institution that has the greatest influence over the direction of the nation’s economy. Mr. Trump can fill a majority of the Fed’s seven-member board with his own nominees over the next 18 months, including replacing Ms. Yellen in February 2018. He also could work with Congress on new constraints, including some form of an old idea on the right that a formula should dictate the Fed’s movements of interest rates. Or Mr. Trump could emulate Mr. Reagan and leave the central bank alone. When the two men finally met, Mr. Reagan asked Mr. Volcker why the country needed a central bank. He apparently found the answer convincing. Like other presidents in recent decades, he decided the Fed was reasonably effective and useful as a scapegoat. And in 1983, he nominated Mr. Volcker for a second term.

How Trump Could Spell Trouble for the Fed - Narayana Kocherlakota - Research has documented that central banks around the world have been better able to control inflation if they enjoy independence from elected officials. The election of Donald Trump seems like a good time to remind ourselves that, historically, the executive branch has presented the greatest threat to the independence of the U.S. Federal Reserve. Since its founding in 1913, the Fed has experienced two big failures of independence. The first occurred during World War II and its aftermath, when the central bank held long-term interest rates down to allow the government to borrow cheaply. Inflation soared to nearly 10 percent during the early days of the Korean War, until the arrangement ended with the so-called Fed-Treasury accord in 1951. The second failure occurred in the latter half of the 1960s and the 1970s. Presidents Lyndon Johnson and Richard Nixon put (largely covert) pressure on Fed chairs William McChesney Martin and Arthur Burns to provide monetary stimulus to keep unemployment low and generate more popular support for their administrations. This led, in part, to the so-called Great Inflation of the 1960s and 1970s.  Now imagine Trump decides that his new appointees should be loyal to him and his pro-growth agenda. He could put private (and possibly public) pressure on the Fed chair to ensure that monetary policy supported his administration’s plans, even if doing so led to high inflation. Presumably, he could also appoint a Fed chair sympathetic to his vision. (This would not be without precedent: Franklin Roosevelt and his Fed chair Marriner Eccles believed strongly in the need for congruence between the Fed’s monetary policy and the White House’s economic policy.) There is absolutely nothing in U.S. law preventing Trump from violating the Fed’s independence, a post-1979 development that rests largely on the restraint of the president. Will Trump show this restraint? We’ll see.

Yellen Vows to Serve Out Term as Fed Chair | American Banker — Federal Reserve Chair Janet Yellen has promised to serve out her term heading the central bank until it expires in 2018, ending speculation that she could resign earlier and give President-elect Donald Trump another important appointment to make when he assumes office in January. In testimony before the Joint Congressional Economic Committee Thursday morning, Yellen was asked by Rep. Carolyn Maloney, D-N.Y., whether she could envision "any circumstances" where she might not serve out her term as Fed chair. "No, I cannot," Yellen responded. "I was confirmed by the Senate to a four-year term which ends at the end of January 2018, and it is fully my intention to serve out that term." Yellen's comments put to rest the idea that she might offer her resignation to Trump upon his inauguration. Trump made various criticisms of Yellen and the Fed's handling of monetary policy under her leadership, calling her actions "political" and suggesting that interest rates were being kept low in order to benefit his Democratic opponent Hillary Clinton. But Yellen defended the Fed and its independence during the hearing, saying there is statistical evidence demonstrating that countries with independent central banks see better outcomes than those whose monetary policy is dictated by elected leaders. The Fed is accountable to Congress and the American people, Yellen said, but its independence allows the central bank to pursue necessary actions that keep the currency stable, even if it may not be politically advantageous to the party in power or politically popular. And in countries where the central bank is directly controlled by the government, it often forces the central bank to buy the government's debt, which harms both the currency and the government's ability to borrow, she said."There is clear evidence of better outcomes in countries where central banks can take the long view, are not subject to short-term political pressures," Yellen said. "Sometimes central banks need to do things that are not immediately popular for the health of the economy. And we've really seen terrible economic outcomes in countries where central banks have been subject to political pressure."

 How Fed Can Reform Itself to Pre-Empt Trump-Inspired Overhaul | Bank Think: One thing we learned during the election is that details are not Donald Trump's strong suit. What is? His intuition about what a big part of the American electorate wants. And what they want is a solution to income inequality. The rich are getting richer, the poor are getting poorer and voters aren't going to take it anymore. Given exit polling showing that a surprising percentage of voters for Trump would have preferred Bernie Sanders, it is only a matter of time before the new administration takes radical action to address economic opportunity and fix lagging middle-class income. The Trump team surely will not approach economic policy as the Fed has done. The new administration will instead craft economic policy by trying to force the Fed out of the way so markets can do the magic in which Trump so strongly believes. Shortly before the election, I laid out how monetary and regulatory policy affects income and wealth distribution to a group of global central bankers. Many told me how worried they were about the inadvertent impact of policies meant only as crisis remedies that, left in place for eight years and counting, now determines who wins and who loses in the financial market. Still, they thought they had time to do more research, refine definitions, test hypotheses and attend a few more conferences. I didn't think they had that luxury then and I know now for sure that there isn't time for still more study. Central bankers and financial regulators must act quickly or their discretion to modify current policy will be replaced by public determination to blow it up.

Fed Watch: December Still A Go - Some back of the envelope calculations: The Fed's long-run real GDP growth estimate - the rate of potential GDP growth - is 1.8%. According to Federal Reserve Vice Chair Stan Fischer last week: If labor force participation was to remain flat, job gains in the range of 125,000 to 175,000 would likely be needed to prevent unemployment from creeping up. However, if labor force participation was to decline, as might be expected given demographic trends, the neutral rate of payroll gains would be lower. If we assumed a downward trend in participation of about 0.3 percentage point per year, in line with estimates of the likely drag from demographics, job gains in the range of 65,000 to 115,000 would likely be sufficient to maintain full employment. Labor force growth of 0.3%. Together, these two points imply a productivity estimate of 1.5%. The Fed's inflation target is 2%. The 2% inflation target plus 1.5% productivity growth suggests that the Fed anticipates wage growth of 3.5% when the economy settles into full employment.Roughly; these are just back-of-the envelope calculations. Notice though that the 3-month moving average for average wage growth ticked up to 3.3% last month:To be sure, 12-month wage growth still lags at 2.8%, but you can see where that trend is headed. Just like inflation, headed higher.Under these conditions, it is reasonable to believe the economy is very close to full employment. Of course, some slack may still lurk in the background. Perhaps it exists in the underemployment estimates: Or perhaps labor force participation will feel more cyclical pull before demographics begin to dominate again. But that would be a short-term impact. Longer run, the aging population will take its toll on the labor force. Anyway you slice it, the Fed's comfort level with their estimate of full employment must be on the rise:

 December Fed Rate-Hike Odds Near 100% (Despite Dismal Economic Growth Expectations) - “The market is expecting an interest-rate hike in December, and there is no fundamental reason for the Fed” to disappoint according to DZ Bank's Birgit Figge, and judging by the spike in futures-market-implied rate-hike odds post-Trump, it's a done deal.As Bloomberg reports, the odds of a Fed move by December have risen from 68 percent at the start of November as inflation expectations surged to near 100%... However, we are not quite sure what The Fed is seeing (apart from its 'managed' employment data) to justify this much jawboning and conviction... Beyond December, swaps trading shows the expectation for a faster tightening cycle.Overnight index swap contracts implied the central bank’s benchmark rate will be 1.25 percent in two years’ time, compared with an expected 0.83 percent on Nov. 7, the day before the U.S. election. That means the market is pricing in another hike as Trump’s win and a Republican-controlled Congress portend a wave of spending to bolster the U.S. economy.St. Louis Fed President James Bullard said there’s a chance the U.S. economy could get a medium-term boost if Trump increases infrastructure spending and tax reforms,though it’s too soon to say how the economy may be affected by the election.  So bottom line - 2017 is gonna be awesome, just you wait and see!!

Fed’s Bullard Leans Toward Backing December Rate Rise   — Federal Reserve Bank of St. Louis President James Bullard said Wednesday that he is still leaning toward backing an interest-rate rise increase in December, saying the outlook for monetary policy in the short term is unchanged following Donald Trump’s victory in this month’s presidential election. “A single policy rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting,” Mr. Bullard said in a speech at an event hosted by UBS Group AG in London. Mr. Bullard is a voting member of the Federal Open Market Committee. The panel meets next month in a gathering many had expected to result in a short-term rate rise, although that outcome had been clouded by Mr. Trump’s unexpected victory. Speaking to reporters, Mr. Bullard said his own view of the economy hasn’t changed since the election, as that data showed continued progress toward the Fed’s goals on unemployment and inflation. “Given the data I have to date, I haven’t changed my outlook,” he said. Mr. Bullard added that, unlike some other Fed officials, he believes just one quarter-point rise in the central bank’s short-term policy rate is necessary over the next couple of years. The St. Louis Fed president has advanced the argument that the U.S. economy is in a low-rate “regime,” where productivity growth and the economy’s potential to grow rapidly are subdued. Mr. Bullard said it would take time for the economic effects of Mr. Trump’s presidency to become clear. During his campaign for the presidency, Mr. Trump talked up the need for greater spending on infrastructure. Mr. Bullard said such spending could raise U.S. productivity in future years.

Janet Yellen: Interest Rate Hike Could Come Soon: — Federal Reserve Chair Janet Yellen sketched a picture Thursday of a U.S. economy that’s still not at full health but is showing enough gains in hiring and growth to raise expectations that the Fed will raise interest rates in December.In prepared testimony to a congressional committee, Yellen notes that the Fed concluded at its meeting early this month that the case for boosting its benchmark rate had strengthened and that an increase “could well become appropriate relatively soon.”Yellen, in her testimony, points out that the job market has made further improvement this year and that inflation, while still below the Fed’s 2 percent target, has started to pick up. With investors and economists expecting the Fed to boost rates, Yellen notes that further delaying a rate increase would present its own risks. The Fed chair’s answers later Thursday to questions from Congress’ Joint Economic Committee will be scrutinized for any hints of what action the central bank will announce at its meeting in mid-December.Yellen is also sure to be asked about President-elect Donald Trump’s plans for tax cuts and infrastructure spending — and their likely effects on government deficits. Since Trump’s election victory last week, investors have driven up long-term bond yields in anticipation that his economic proposals would increase federal debt and elevate inflation.The president-elect’s idea to spend more to upgrade roads, bridges and airports, though, in general mirrors Yellen’s frequent point that Congress should act to supplement what the Fed has done through low rates to encourage spending and spur growth.Trump’s election could affect Yellen’s Fed in other ways, too. The president-elect will be able to fill two vacant seats on the Fed’s seven-member board, which wields outsize power on the panel that sets rate policy. The board has, like Yellen herself, long favored a go-slow approach to rate increases. Trump’s new appointees potentially could affect that consensus.

Yellen: Rate Hike "appropriate relatively soon" - From Fed Chair Janet Yellen's testimony before the Joint Economic Committee, U.S. Congress, Washington, D.C.: The Economic Outlook  The stance of monetary policy has supported improvement in the labor market this year, along with a return of inflation toward the FOMC's 2 percent objective. In September, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent and stated that, while the case for an increase in the target range had strengthened, it would, for the time being, wait for further evidence of continued progress toward its objectives. At our meeting earlier this month, the Committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives. This judgment recognized that progress in the labor market has continued and that economic activity has picked up from the modest pace seen in the first half of this year. And inflation, while still below the Committee's 2 percent objective, has increased somewhat since earlier this year. Furthermore, the Committee judged that near-term risks to the outlook were roughly balanced. Waiting for further evidence does not reflect a lack of confidence in the economy. Rather, with the unemployment rate remaining steady this year despite above-trend job gains, and with inflation continuing to run below its target, the Committee judged that there was somewhat more room for the labor market to improve on a sustainable basis than the Committee had anticipated at the beginning of the year. Nonetheless, the Committee must remain forward looking in setting monetary policy. Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee's longer-run policy goals. Moreover, holding the federal funds rate at its current level for too long could also encourage excessive risk-taking and ultimately undermine financial stability.

Kocherlakota: How Donald Trump could control Federal Reserve - As the country tries to parse out its economic future under President-elect Donald Trump, one of the many areas of interest has been the Federal Reserve and monetary policy. Wall Street analysts wondered whether the election of Donald Trump could lead to the Federal Reserve holding off on interest rate hikes, hiking faster than expected, or even the resignation of Fed Chair Janet Yellen.  One of the most extreme possibilities under a Trump presidency, noted analysts, was the end of the Fed's political independence.Trump attacked Yellen and the Fed during his campaign for allegedly helping President Barack Obama and his Democratic rival Hillary Clinton by keeping rates lower than they should be. This suggested to some analysts that Trump himself will try and exert pressure of the central bank when he comes into office. Writing at Bloomberg View, former Minneapolis Fed President Narayana Kocherlakota laid just how Trump could pack the Fed and exert control over US monetary policy. First thing, noted Kocherlakota, is that pressure from the executive branch on the Fed has traditionally ended poorly. One instance was right after World War II, when the Fed left interest rates unnaturally low so the government could borrow, sending inflation to 10%. The second instance occurred under Lyndon Johnson and Richard Nixon (who, as Kocherlakota referenced, was caught on tape pressuring Fed Chair Arthur Burns to leave rates low) which led to low rates and the high inflation of the 1970s.   Given that negative history, Kocherlakota noted that there are two empty seats on the Federal Reserve Board of Governors. Additionally, Fed Chair Yellen's term expires in 2018, and Vice Chair Stanley Fischer's does too. Thus, with a Republican Congress that would be unlikely to hold up his nominees, by 2018 Trump could have appointed four out of the seven members of the Federal Reserve's Board of Governors.

Key Measures Show Inflation close to 2% in October --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in October. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (4.4% annualized rate) in October. The CPI less food and energy rose 0.1% (1.8% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed released the median CPI details for October here. Motor fuel was up 122% annualized in October!

 Forecasters Predict Slightly Lower Growth over the Next Three Years Growth in the U.S. economy looks slightly weaker now than it did three months ago, according to 42 forecasters surveyed by the Federal Reserve Bank of Philadelphia before the election on November 8. The forecasters expect real GDP to grow at an annual rate of 2.2 percent this quarter and in each of the next four quarters in 2017. On an annual-average over annual-average basis, the forecasters see real GDP growing 1.5 percent in 2016, no change from the estimate in the survey of three months ago. The forecasters predict real GDP will grow 2.2 percent in 2017, 2.1 percent in 2018, and 2.1 percent in 2019. The forecasts for 2017, 2018, and 2019 are slightly weaker than the previous estimates. The projections for unemployment are little changed from those of the previous survey. The forecasters predict the unemployment rate will average 4.9 percent in 2016, before falling to 4.7 percent in 2017, 4.6 percent in 2018, and 4.7 percent in 2019. The current projections for 2018 and 2019 are unchanged from those of the previous survey. On the employment front, the forecasters have revised upward marginally their estimates for job gains in 2016 and 2017. The forecasters’ projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 206,000 in 2016, up slightly from the previous estimate of 204,600, and 173,600 in 2017, up from the previous estimate of 161,100. (These annual-average estimates are computed as the year-to-year change in the annual-average level of nonfarm payroll employment, converted to a monthly rate.) The forecasters see little change in the outlook for headline CPI inflation compared with their predictions of three months ago. Measured on a fourth-quarter over fourth-quarter basis, headline CPI inflation is expected to average 1.5 percent in 2016, 2.2 percent in 2017, and 2.2 percent in 2018. The projections for headline PCE inflation over the next three years remained unchanged from the survey of three months ago. Measured on a fourth-quarter over fourth-quarter basis, headline PCE inflation is expected to average 1.4 percent in 2016, 1.9 percent in 2017, and 2.0 percent in 2018. Over the next 10 years, 2016 to 2025, the forecasters expect headline CPI inflation to average 2.22 percent at an annual rate, up slightly from the previous estimate of 2.15 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent, which is unchanged from the previous estimate.

The long leading indicators: on the cusp of turning negative? - A “long leading indicator” is an economic metric that reliably turns a year or more before the onset of a recession.  I haven’t examined these in detail since the beginning of July.  Then, I found them just slightly positive on balance.  In light of recent interest rate moves, now is a good time for an update. With the sole exception of the 1981 “double-dip,” corporate bond yields have always made their most recent low over 1 year before the onset of the next recession.  Following Brexit, in the beginning of July  BAA corporate bonds yields made a new all-time low, and AAA bonds tied their all time low. Treasuries yields  also made new lows, but interestingly, mortgage rates did not. While that was a big positive, in the last week interest rates have moved near one year highs, as shown by the Bloomberg corporate bond index:  Treasuries also made new lows at the beginning of July, while significantly, mortgage rates didn’t: On net, interest yields on bonds are still a positive, based on the new July lows. But a further increase of about 0.20% in yields to a 12 month high would be enough to make them a negative going forward. HOUSING (updated data): This is a complicated and changing picture. On the one hand, new single family home sales made a new post-recession high 2 months ago:: Like starts, single family permits have also been going sideways for a year, although they did eake out a new high, by 1,000, as just revised for September UPDATE: They made yet another new high in October, as did starts: UPDATE [Nov. 17]. Housing starts and permits for October were released this morning, and showed that both housig starts and single family permits made new post-rrecession highs. And mortgage applications have not made a new high since June, and are on the verge of turning negative YoY (h/t Calculated Risk). A major negative is that housing as a share of GDP has also declined in the last two quarters. As a result, housing cannot reliably be scored a positive beyond Q2 of next year. UPDATE: Octobr’s starts and permits data gives added confidence that housing is a positive through Q3 of next year. CORPORATE PROFITS The picture is mixed here a well. Corporate profits last made a new high over a year ago, but it looks like the May have bottomed in Q4 of last year:

30 Year US Treasury Yields Spike ABove 3.00% - Highest Since Fed Rate Hike - The 30 Year US Treasury bond yield has exploded 55bps in the last few days, snapping the mythical 3.00% level for the first time since January 5th, spiking to its highest since just before The Fed hiked rates in December 2015...

Bond Bloodbath Becomes Buying-Panic As Treasury Yields Tumble Most Since June -- After 3 days of carnage in US Treasuries, pushing longer-dated bond yields notably above US equity dividend yield - and following both Citi and Goldman reports that Trumponomics may be less inflationary than expected (and the yield surge is tightening financial conditions) drastically, longer-dated bond yields are dropping notably in the early Asia session. 10Y yields are down 8bps - the most since June as 30Y drops back below 3.00%.The yield on the 10Y US Treasury note is now 12bps 'cheap' to the dividend yield from the S&P 500 - the highest since Dec 2015...And as Bloomberg reports, Fed speakers this week are unlikely to be as hawkish as the market, which could dent market pricing and lead to profit-taking on rates and USD,according to Citi managing director of G-10 FX strategy Steven Englander.Were the Fed to indicate that it thought three hikes were possible, we could see a lot more damage than we have seen till now, Englander writes in note.Citi however expects a far more dovish tone given:

  • Fed doesn’t know the nature of Trump’s fiscal measures that will be implemented, and they likely won’t be shovel ready
  • It’s cognizant of Dollar Index strength as it approaches log-term highs of 100.33

Foreign selling of U.S. Treasuries hits record in September: data | Reuters: Foreigners sold a record amount of U.S. Treasury bonds and notes in September, data from the U.S. Treasury Department showed on Wednesday, as investors priced in higher interest rates in the near to medium term given a steadily improving U.S. economy. September's outflow of $76.6 billion in U.S. government debt was the largest since the department started recording Treasury debt transactions in January 1978. So far in 2016 until September, foreign investors have sold Treasuries every single month, except in February, when they bought $9.90 billion. Foreign official institutions, which include central banks, sold $45.56 billion in Treasuries, while private offshore investors sold $29.92 billion. As a result of the selling, Treasury yields have risen. Yields on U.S. 10-year notes at the beginning of September were 1.570 percent, hitting a high of 1.752 percent and ending the month at 1.6060 percent. On Wednesday, 10-year yields were at 2.213 percent. Simon Derrick, chief markets strategist at BNY Mellon in London, said after nearly 14 years of unremitting inflows into Treasuries, demand began to taper off from the summer of 2014 onwards. "It is easy enough to see why the various rounds of asset purchases by the Fed between 2009 and October 2014 played a role in keeping the downtrend in bond yields intact," said Derrick.

Saudis, China Dump Treasuries; Foreign Central Banks Liquidate A Record $375 Billion In US Paper -One month ago, when we last looked at the Fed's update of Treasuries held in custody, we noted something troubling: the number had dropped sharply, declining by over $22 billion in one week, one of the the biggest weekly declines since January 2015, pushing the total amount of custodial paper to $2.805 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week's update, foreign central banks continued their relentless liquidation of US paper held in the Fed's custody account, which tumbled by another $14 billion over the course of a week, pushing the total amount of custodial paper to $2.788 trillion, a new post-2012 low. Then today, in addition to the Fed's custody data, we also got the latest monthly Treasury International Capital data for the month of September, which showed that the troubling trend presented one month ago, has accelerated. Recall that a month ago,  we reported that in the latest 12 months we have observed a not so stealthy, actually make that a massive $343 billion in Treasury selling by foreign central banks in the period July 2015- August 2016, something unprecedented in size. Fast forward to today when in the latest monthly update for the month of September, we find that what until a month ago was "merely" a record $346.4 billion in offshore central bank sales in the LTM period ending  August 31 has - one month later - risen to a new all time high $374.7 billion, or well over a third of a trillion in Treasuries sold in the past 12 months.

China Holdings of U.S. Treasuries Decline to Lowest Since 2012 - China’s holdings of U.S. Treasuries declined to the lowest level in four years, as the world’s second-largest economy runs down its reserves to support the yuan. The biggest foreign holder of U.S. government debt had $1.16 trillion in bonds, notes and bills in September, down $28.1 billion from the prior month, according to U.S. Treasury Department data released Wednesday in Washington and previous figures compiled by Bloomberg. That’s the lowest level since September 2012. The portfolio of Japan, the largest holder after China, fell for a second straight month, down $7.6 billion to $1.14 trillion. The Treasury holdings of oil-producing Saudi Arabia declined for an eighth straight month, to $89.4 billion. China’s foreign reserves, the world’s largest stockpile, are down to $3.12 trillion from a record $4 trillion in June 2014 amid support for the currency. The report, which also contains data on international capital flows, showed net foreign selling of long-term securities totaling $26.2 billion in September. It showed a total cross-border outflow, including short-term securities such as Treasury bills and stock swaps, of $152.9 billion. Net foreign selling of U.S. Treasuries was $76.6 billion in September and $3.21 billion in equities, while foreigners purchased a net $1.08 billion of corporate debt and $32.1 billion in agency debt, according to the report.

 Saudis, China Dump Treasuries; Foreign Central Banks Liquidate A Record $375 Billion In US Paper - One month ago, when we last looked at the Fed's update of Treasuries held in custody, we noted something troubling: the number had dropped sharply, declining by over $22 billion in one week, one of the the biggest weekly declines since January 2015, pushing the total amount of custodial paper to $2.805 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week's update, foreign central banks continued their relentless liquidation of US paper held in the Fed's custody account, which tumbled by another $14 billion over the course of a week, pushing the total amount of custodial paper to $2.788 trillion, a new post-2012 low. Then today, in addition to the Fed's custody data, we also got the latest monthly Treasury International Capital data for the month of September, which showed that the troubling trend presented one month ago, has accelerated. Recall that a month ago,  we reported that in the latest 12 months we have observed a not so stealthy, actually make that a massive $343 billion in Treasury selling by foreign central banks in the period July 2015- August 2016, something unprecedented in size. Fast forward to today when in the latest monthly update for the month of September, we find that what until a month ago was "merely" a record $346.4 billion in offshore central bank sales in the LTM period ending  August 31 has - one month later - risen to a new all time high $374.7 billion, or well over a third of a trillion in Treasuries sold in the past 12 months.

 The US Dollar Index Spikes To 13-Year Highs -- With offshore yuan collapsing near 6.90 - record lows - the USD Index has surged this morning, breaking above Dec 2015's 100.51 level to trade at its highest since April 2003... USD Index is up 8 days straight - the biggest surge since May 2015 Comparing the surge in the USD Index to Yuan's weakness suggests plenty of room for the Chinese to let their currency tumble further... At what point does this turmoil ripple back to US equities?

Entire Treasury Curve Now Underwater In 2016 As Bond Bloodbath Continues - 10Y Treasury yields are up a stunning 65bps from the Trump-win lows, spiking to 2.35% - the highest since Dec 2015. 5Y Yields have also reached their 2016 highs... In fact the entire Treasury yield curve is now higher in yield on the year...

The Navy can't fire its awesome new gun because the rounds cost nearly $1 million each -- The US Navy can't fire its awesome new gun that can hit a target more than 70 miles away because the rounds are costing the service nearly a million bucks a piece.  Just a couple weeks after the Navy commissioned its most advanced warship, the USS Zumwalt (DDG-1000), the service says it won't be buying any more of the guided precision munitions the ship's Advanced Gun Systems uses, called the Long Range Land-Attack Projectile (LRLAP).  The 155mm round is "the most accurate and longest-range guided projectile" in Navy history, according to Lockheed Martin. It's also one of the most expensive, with the price of each round costing roughly $800,000 to $1 million, for a total cost of around $2 billion if the service purchased its planned buy of 2,000 rounds, Sam LaGrone of USNI reported.   The Navy wasn't expecting the exorbitant cost when it first began producing the advanced Zumwalt-class destroyers.  It originally planned to build 32 of the stealth ships, but cost overruns led the service to eventually reduce the number down to just three. That reduction in the number of ships also led the cost of its ammunition to rise, Defense News reported.  “We were going to buy thousands of these rounds,” a Navy official familiar with the program told the site. “But quantities of ships killed the affordable round.”

The F-35 Stealth Fighter Is Politically Unstoppable — Even Under President Trump - When president-elect Donald Trump was still a candidate, he criticized the F-35 Joint Strike Fighter — rare for a presidential candidate — during an appearance on the Hugh Hewitt Show.  “I do hear that it’s not very good. I’m hearing that our existing planes are better … [Test pilots] are saying it doesn’t perform as well as our existing equipment, which is much less expensive,” Trump said during the Oct. 22, 2015 radio interview. “So when I hear that, immediately I say we have to do something, because you know, they’re spending billions.”  “This is a plane, there’s never been anything like it in terms of cost,” he added. “And how about, you know, we’re retooling with planes that aren’t as good as the ones we have, and the test pilots are amazing people. They know better than anybody, okay, and I think you would accept that.” But now that Trump will assume the presidency, it’s unlikely he will slow the F-35 program down, and could accelerate it with an expected rise in the Pentagon’s budget — and to fulfill his own plan to grow the U.S. Air Force’s fighter strength. In any case, the F-35 program long ago become unstoppable in Washington.The Pentagon plans to buy 2,400 of the radar-evading stealth fighters in the coming decades in three versions for the Air Force, Navy and Marines. It is history’s most expensive weapons program.

President Obama Leaves Behind a Deplorable Civil Liberties Legacy - More disappointing than the Obama administration itself (which was very disappointing), were the seemingly endless hordes of fake liberals constantly justifying and making excuses for his well documented litany of civil liberties abuses. A New York Times article published yesterday highlighted some of the extremely illiberal policies perpetrated by so-called “liberal” champion, Barack Obama. Here are a few key excerpts: Over and over, Mr. Obama has imposed limits on his use of such powers but has not closed the door on them — a flexible approach premised on the idea that he and his successors could be trusted to use them prudently. Mr. Trump can now sweep away those limits and open the throttle on policies that Mr. Obama endorsed as lawful and legitimate for sparing use, like targeted killings in drone strikes and the use of indefinite detention and military tribunals for terrorism suspects. And even in areas where Mr. Obama tried to terminate policies from the George W. Bush era — like torture and the detention of Americans and other people arrested on domestic soil as “enemy combatants” — his administration fought in court to prevent any ruling that the defunct practices had been illegal. The absence of a definitive repudiation could make it easier for Trump administration lawyers to revive the policies by invoking the same sweeping theories of executive power that were the basis for them in the Bush years.  Two decisions by Mr. Obama in 2009 set the tone for his leave-it-on-the-table approach. They involved whether to keep indefinite wartime detentions without trial and to continue using military commission prosecutions — if not at the Guantánamo prison, which he had resolved to close, then at a replacement wartime prison. Told that several dozen detainees could not be tried for any crime but would be particularly risky to release, and that a handful might be prosecutable only under the looser rules governing evidence in a military commission, Mr. Obama decided that the responsible policy was to keep both the tribunals and the indefinite detentions available. The president refused to use either power on newly captured terrorism suspects, instead prosecuting them in civilian court. But by leaving the options open, he helped normalize them and left them on a firmer legal basis.

TPP’s “Cardiac Arrest”: A Lesson for the Challenges of the Trump Years Ahead - The Trans-Pacific Partnership (TPP)—the corporate-friendly trade deal between the U.S. and 11 Pacific Rim nations that sparked progressive outcry over its threats to everything from democracy to digital rights to climate goals —now appears to be "in full-blown cardiac arrest." Not only is there the fact that President-elect Donald Trump campaigned against the deal that President Barack Obama vigorously pushed, multiple news sources reported Friday that the White House has now given up on its efforts to get approval during the "lame-duck" session of Congress. The Wall Street Journal, for example, reported that the deal "effectively died Friday, as Republican and Democratic leaders in Congress told the White House they won't advance it in the election's aftermath, and Obama administration officials acknowledged it has no way forward now." Reuters reported that the administration said "Friday that the fate of the free trade pact was up to Trump and Republican lawmakers." Senate Majority Leader Mitch McConnell had already signaled in August that the U.S. Senate would not vote on TPP this year. The political newspaper added a statement issued Friday by TPP foe Rep. Rosa DeLauro (D-Conn.), who said that "a strong coalition of members of Congress and labor, environmental, faith, and human rights organizations and activists worked diligently to stop this agreement." That's exactly what some advocacy groups are saying—that the deal's apparent death should not be chalked up to Trump's victory this week but to the grassroots' effort. "Let's make one thing clear," said Evan Greer, campaign director for digital rights group Fight for the Future. "Donald Trump didn't kill the TPP. We did." The deal, she continued, would have "globalized Internet censorship, undermined civil liberties, and devastated our economy and our planet."

Trump Victory Kayoes TPP - naked capitalism -Jerri-Lynn here: In this short post, the Institute for New Economic Thinking’s (INET) Jack Gao reports on some implications of the White House’s concession that the election of Donald Trump has kayoed the Trans Pacific Partnership (TPP) agreement. Although Hillary Clinton also claimed to have reversed her initial support for the TPP, there was widespread suspicion that her public position wasn’t her private one, and that the agreement would have been resurrected in some form if she’d been elected.  I have some reservations about this post.  The most serious is that Gao errs by accepting the framing of TPP as a trade liberalization agreement by its proponents.  As economist Dean Baker has written:The TPP is not about free trade. It does little to reduce tariffs and quotas for the simple reason that these barriers are already very low. In fact, the United States already has trade deals with six of the other eleven countries in the TPP. This is why the non-partisan United States International Trade Commission (ITC) estimated that when the full gains from the TPP are realized in 2032, they will come to just 0.23 percent of GDP. This is a bit more than a normal month’s growth.In fact, the TPP goes far in the opposite direction, increasing protectionism in the form of stronger and longer patent and copyright protection. These forms of protection for prescription drugs, software, and other products, often raise the price by a factor of a hundred or more above the free market price. This makes them equivalent to tariffs of several thousand percent.The bottom line, according to Baker: The real story here is that the TPP is a deal about redistributing more income upward. It’s imposing more competition on those at the middle and the bottom while maintaining and increasing forms of protectionism that benefits those at the top. When reporters call the TPP a “free trade” deal, they are acting as advocates, not reporters. The TPP is a protectionist pact for those at the top who are worried that free trade will undermine their income — like it did for those at the middle and bottom.

You might not like the TPP. You are going to like the alternative less. -- The Trans-Pacific Partnership - the mega-trade treaty - is dead.I am not going to opine on the merits of various provisions in that trade treaty. (There were several I did not like...) However lets take the thirty year helicopter view. Thirty years of an aggressive trade and investment treaty (like the TPP) results in your economy becoming intertwined with your partners' economies. And with the TPP there is a dominant party - the United States. Your economy becoming intertwined with a dominant economy has a name: hegemony. The TPP would have eventually meant sustained US hegemony. -- But that is dead. The TPP did not die in a vacuum. A bunch of countries north of Australia want to have guaranteed open access to big markets and they will wind up signing a trade treaty. This time they will sign with the economy that will honour their commitments: China. And in thirty years time there will for the countries of Australia's north be a hegemony: a Chinese hegemony. -- At the moment the Chinese border is ten hours flying time north of Australia. Look forward thirty years and we have a border of Chinese hegemony at Indonesia. I would prefer a democracy having hegemony. I think most of my readers would too. But we have that choice no longer.

Time spent negotiating TPP wasn’t wasted - The immediate future of the TPP may look dim, at least in the United States, but U.S. Trade Representative Michael Froman and House Ways and Means Chairman Kevin Brady both maintain that aspects of it — if not the deal itself — can and should be preserved and revived later on down the road. ..Speaking at a POLITICO event Monday evening at the Newseum, Froman said that one of the clearest takeaways from last week’s election results is that of utmost concern to many Americans is the worry that they are on an unfair playing field. Addressing that worry — as well as raising other standards regarding things like labor, environment and intellectual property rights — was one of the main motivations for officials as they negotiated the pact, he said. “I’m hopeful that over time, as people look into it and see what’s at stake as the rest of the world moves on and pursues their own trade agendas and that we see what the implications of that are for us, economically and strategically, that we’re able to see that work move into effect,” he said. Asked whether the TPP could be referred to as “dead,” Froman responded: “I think I’d prefer the word purgatory.” Brady, long a supporter of free trade deals, added that withdrawing from the TPP and the Asia-Pacific region completely would let China win “in a big way.” “With the election, clearly the agreement is on hold,” said Brady, whose committee has jurisdiction over trade in the House — but that doesn’t mean the entire trade agenda has to be. He added that he would encourage President-elect Donald Trump to focus on whatever aspects of both the TPP and the North American Free Trade Agreement that he finds most problematic, and work on strengthening those areas to further reduce tariffs and bring more economic freedom to the United States.

We must rethink globalization, or Trumpism will prevail -  Piketty - Let it be said at once: Trump’s victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this. ... The tragedy is that Trump’s program will only strengthen the trend towards inequality. ..The main lesson for Europe and the world is clear: as a matter of urgency, globalization must be fundamentally re-oriented. The main challenges of our times are the rise in inequality and global warming. We must therefore implement international treaties enabling us to respond to these challenges and to promote a model for fair and sustainable development. ...There should be no more signing of international agreements that reduce customs duties and other commercial barriers without including quantified and binding measures to combat fiscal and climate dumping in those same treaties. For example, there could be common minimum rates of corporation tax and targets for carbon emissions which can be verified and sanctioned. It is no longer possible to negotiate trade treaties for free trade with nothing in exchange. ...   It is time to change the political discourse on globalization: trade is a good thing, but fair and sustainable development also demands public services, infrastructure, health and education systems. In turn, these themselves demand fair taxation systems. If we fail to deliver these, Trumpism will prevail.

Trump's Geographical Landslide- Mish - Donald Trump won the presidency, but Hillary won the Popular Vote by a margin of 206,379 or so. That fact caused Simon Rosenberg, a veteran Democratic strategist and the president of the NDN think tank to moan about a Democratic Party in Crisis.“We are the only democracy in the developed world where if you win more votes you don’t control the government and the legislature. There is not a wholesale rejection of the Democratic party and the Democratic brand, that’s not what happened last night despite the fact we now have less power than we’ve had since 1928.” Let’s investigate Rosenberg’s complaint another way. Map courtesy of New York Times. Geographically speaking, Trump won at least 80% of the Nation. The only states Hillary carried are Vermont, Massachusetts, and Connecticut.Trump won every county in Oklahoma and West Virginia. Trump won all but one county in Wyoming, and Kansas. Trump won all but two counties in North Dakota, Kentucky, Tennessee, Utah, and Nebraska.Nearly the entire state of Minnesota, Illinois, New York, Oregon, Iowa, Missouri, Ohio, Michigan, etc., went for Trump.Geographically speaking, except for big cities and a few isolated areas, the country cannot stand Hillary.

How the Election Was Stolen – Palast - Before a single vote was cast, the election was fixed by GOP and Trump operatives. Starting in 2013 – just as the Supreme Court gutted the Voting Rights Act – a coterie of Trump operatives, under the direction of Kris Kobach, Kansas Secretary of State, created a system to purge 1.1 million Americans of color from the voter rolls of GOP–controlled states. The system, called Crosscheck, is detailed in my Rolling Stone report, “The GOP’s Stealth War on Voters,” 8/24/2016. Crosscheck in action: 

    • Trump victory margin in Michigan:                    13,107
      Michigan Crosscheck purge list:                         449,922
    • Trump victory margin in Arizona:                     85,257
      Arizona Crosscheck purge list:                          270,824
    • Trump victory margin in North Carolina:        177,008
      North Carolina Crosscheck purge list:              589,393

On Tuesday, we saw Crosscheck elect a Republican Senate and as President, Donald Trump.  The electoral putsch was aided by nine other methods of attacking the right to vote of Black, Latino and Asian-American voters, methods detailed in my book and film, including “Caging,” “purging,” blocking legitimate registrations, and wrongly shunting millions to “provisional” ballots that will never be counted. Trump signaled the use of “Crosscheck” when he claimed the election is “rigged” because “people are voting many, many times.”  His operative Kobach, who also advised Trump on building a wall on the southern border, devised a list of 7.2 million “potential” double voters—1.1 million of which were removed from the voter rolls by Tuesday. The list is loaded overwhelmingly with voters of color and the poor. Here's a sample of the list

Goldman: "Economic Implications of the Trump Agenda" --A few excerpts from an analysis piece by Goldman Sachs economists Sven Jari Stehn and Alec Phillips:

• President-elect Trump’s proposals, if enacted, would have significant implications for the US economic outlook over the next few years, some positive and some negative. The positive fiscal impulse from his tax reform and infrastructure proposals could provide a near-term boost to growth and, depending on the specifics, could have positive longer-run supply side effects.
• However, other proposals could lead to new restrictions on foreign trade and immigration, which could have negative implications for growth, particularly over the longer term. ...
• We expect scaled-down versions of the tax reform and infrastructure policies to be enacted. We do not anticipate significant changes on immigration policy, but incremental restrictions seem likely. Mr. Trump’s monetary policy views are still unclear, but slightly more hawkish appointments appear likely at this stage. Trade policy is the greatest unknown, but we expect that Mr. Trump would follow through on at least some of the trade policies he has outlined.
• Keeping in mind that our simulations are subject to considerable uncertainty, we draw three main conclusions. First, Mr. Trump’s policies could boost growth in 2017 and 2018, but are likely to weigh on growth thereafter if trade and immigration restrictions are enacted, or if Fed policy turns more restrictive. Second, core inflation and the funds rate are likely to be higher for the next few years in almost all scenarios. Third, the risks around our base case appear asymmetric: a larger fiscal package could boost growth moderately more in the near term, but a more adverse policy mix would likely lead to a significant slowdown, higher inflation and tighter policy in subsequent years.
CR Note: No one knows exactly what Mr. Trump will propose. As an example, Trump has promised his supporters that he would not touch Social Security and Medicare, but House Speaker Paul Ryan has already suggested that cuts to Medicare are on the table. And note that Goldman does not "anticipate significant changes on immigration policy", yet that was Trump's initial campaign proposal. We have to wait and see what the exact proposals will be.

Goldman Warns Of Stagflation Under "Adverse" Trump Scenario - As Goldman frames it, "President-elect Trump’s proposals, if enacted, would have significant implications for the US economic outlook over the next few years, some positive and some negative. The positive  fiscal impulse from his tax reform and infrastructure proposals could provide a near-term boost to growth and, depending on the specifics, could have positive longer-run supply side effects. However, other proposals could lead to new restrictions on foreign trade and immigration, which could have negative implications for growth,particularly over the longer term. President-elect Trump must also make several Fed appointments over the next year, which raises the possibility of somewhat tighter monetary policy than under current Fed leadership." As a reminder, Trump’s three most important fiscal proposals are his tax reform plan, an infrastructure program, and his plan to boost defense spending. Trump’s tax reform plan would reduce the top marginal rate from 39.6% to 33%, and the corporate rate from 35% to 15%. While there is no official estimate of the tax revenue reduction associated with his proposal, estimates by the Tax Foundation suggest an average revenue reduction of 2.1% of GDP over the next ten years, or just over $400bn in 2017, with a roughly $250bn reduction in individual income taxes and another $160bn reduction in corporate income taxes. We provided a simple snapshot analysis of what Trump's policies would mean for individual and corporate taxpayers in a previous post. On the infrastructure side, Goldman explains that it may also run through the tax side of the ledger. Two of Mr. Trump’s advisors recently published a plan that would seek to incentivize the private sector to increase investment in infrastructure projects that would be supported by future fees, such as tolls. They suggest that 17% of the initial investment could be financed with equity and the remainder with debt. The government would then provide a tax credit equal to 82% of the equity to reduce the cost of financing, or $14bn in tax credits for every $100bn in investment. The most important question regarding this plan is how much of the infrastructure investment would be incremental, and how much would simply replace existing municipal debt-financed investment. Mr. Trump also proposes to eliminate the defense spending cuts under sequestration, which would increase defense spending by about $40bn per year. However, he also proposes to reduce domestic spending in other areas, which would offset the defense spending boost and would result in little net change in federal spending. To asses the full impact of the various Trump policies, Goldman then considered the effect of the combination of these policies, in three scenarios: a “full” case that combines the fiscal, Fed, trade, and immigration proposals; a “benign” scenario that includes only the fiscal proposals and an “adverse” scenario that includes more restrictive trade and immigration policies and a more hawkish Fed. The key assumptions for each scenario are listed in Exhibit 5.

What America’s Economy Needs from Trump - Joseph E. Stiglitz - If Trump is serious about tackling inequality, he must rewrite the rules yet again, in a way that serves all of society, not just people like him. The first order of business is to boost investment, thereby restoring robust long-term growth. Specifically, Trump should emphasize spending on infrastructure and research. Shockingly for a country whose economic success is based on technological innovation, the GDP share of investment in basic research is lower today than it was a half-century ago. Improved infrastructure would enhance the returns from private investment, which has been lagging as well. Ensuring greater financial access for small and medium-size enterprises, including those headed by women, would also stimulate private investment. A carbon tax would provide a welfare trifecta: higher growth as firms retrofit to reflect the increased costs of carbon dioxide emissions; a cleaner environment; and revenue that could be used to finance infrastructure and direct efforts to narrow America’s economic divide. But, given Trump’s position as a climate change denier, he is unlikely to take advantage of this (which could also induce the world to start imposing tariffs against US products made in ways that violate global climate-change rules). A comprehensive approach is also needed to improve America’s income distribution, which is one of the worst among advanced economies. While Trump has promised to raise the minimum wage, he is unlikely to undertake other critical changes, like strengthening workers’ collective-bargaining rights and negotiating power, and restraining CEO compensation and financialization. Regulatory reform must move beyond limiting the damage that the financial sector can do and ensure that the sector genuinely serves society.

A badly designed US stimulus will only hurt the working class| Larry Summers - I have long been a strong advocate of debt-financed public investment in the context of low interest rates and a decaying US infrastructure, so I was glad to see Mr Trump emphasise it. Unfortunately, the plan presented by his advisers, Peter Navarro and Wilbur Ross, suggests an approach based on tax credits for equity investment and total private sector participation that will not cover the most important projects, not reach many of the most important investors, and involve substantial mis-targeting of public resources. Many of the highest return infrastructure investments — such as improving roads, repairing 60,000 structurally deficient bridges, upgrading schools or modernising the air traffic control system — do not generate a commercial return and so are excluded from his plan. Nor can the non-taxable pension funds, endowments and sovereign wealth funds that are the most promising sources of capital for infrastructure take advantage of the program. I am optimistic regarding the efficacy of fiscal expansion. But any responsible economist has to recognise that, past a point, it can lead to some combination of excessive foreign borrowing, inflation and even financial crisis. As Dornbusch showed, in emerging markets this can happen quite quickly. In the US the process would take longer. Even without taking account of the likely costs of the infrastructure plan (which the Trump team badly underestimates) or the proposed defense build-up, the Trump tax reform proposals are too expensive. Many, like the proposed abolition of the estate tax, will only benefit the high-saving wealthy. While drastic changes in the proposed domestic programme are necessary for it to work, the general direction of increasing public investment, reforming taxes and adjusting regulation is appropriate. The same cannot be said of Mr Trump’s global plan, which rests on a misunderstanding of how the world economy operates.

Making America Great Again–Infrastructure -- In this post I put aside the negatives of a Trump presidency and focus on some of the positive things that President Trump could do that are still consistent with his stated goals and ideology.  First, and most obviously, infrastructure development. Trump has said he wants to invest a trillion dollars in infrastructure, mostly through public-private partnerships (PPP). As I said in Launching the Innovation Renaissance we need more and better airports, for example. Ironically, New York Governor Andrew Cuomo’s $4 billion PPP to replace LaGuardia’s Terminal B which has as a leading partner Swedish multinational Skansa, is an important model. Around the world there are a number of other successful examples of airport PPPs including in India, Australia, New Zealand, Canada and South Africa.Fortunately, the FAA already has an airport privatization program. To date, the program has had only limited success but the tools are in place if Trump wants to push. We also desperately need an update to our electricity grid. We have more blackouts than any other developed nation. It is a national embarrassment when millions of US residents our thrown into the dark by grid failures. Improving the grid is not just an economic issue it’s an issue of national security. Our grid is under constant low-level attack, and some of these attacks are likely probes for an attack similar to that which brought down the Ukrainian power grid. Electricity infrastructure, it’s worth noting, is less amenable to PPPs than airports because it’s more difficult to monetize quality improvements and the grid by its nature involves many externalities so I think Trump is relying too much on PPPs. Newt Gingrich, however, is a big proponent of improving the grid and he may help convince Trump to invest public funds.

Trump and the rebuilding of America - Jeff Sachs - DONALD TRUMP BECOMES president of a nation that is deeply divided by class, race, health, and opportunity. In his acceptance speech, he pledged to be the president of all Americans. He also gave a promising hint of how to pursue that objective in practice. Trump is a real estate developer, so it’s not surprising that his brief acceptance speech was dominated by the idea of “rebuilding,” a word he mentioned four times: “Working together, we will begin the urgent task of rebuilding our nation and renewing the American dream . . . We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.” Advertisement This is a valid, indeed uplifting perspective. America desperately needs rebuilding. Its infrastructure is decrepit; its energy system is out of date for a climate-endangered economy; its Rust-Belt cities are boarded up; its inner cities are unhealthy for the children being raised in them. Rebuilding America’s inner cities and creating a 21st century infrastructure could be Trump’s greatest legacy. Trump’s pledge to make America’s infrastructure “second to none” is the correct and bold goal for America’s competitiveness, future job creation, and well-being. America today is certainly no longer “second to none.” On a recent Sustainable Development Goals Index, the United States ranked 22nd out of 34 high-income countries. For Americans returning from foreign travel, the well-known sign that they’ve touched down in America is that the elevators, escalators, and moving walkways of our once-proud airports are out of order.A builder-president could indeed restore vitality to the US economy and put millions to work in the process. All the major candidates in this campaign cycle pledged a substantial effort to build America’s infrastructure. Indeed, Trump suggested a hefty price tag of $1 trillion, which is a realistic sum and target for the coming years (roughly 1 percent of national income per year if carried out over 5 years).

Is Trump's $1 Trillion Privately Funded Infrastructure Plan Feasible? --President-elect Trump has made a $1 trillion infrastructure investment one of his first priorities as president, promising in his victory speech early Wednesday morning to “rebuild our highways, bridges, tunnels, airports, schools, hospitals.”  As Goldman's economics research team points out, Trump's plan, as detailed in a report released by his economic advisers Wilbur Ross and Peter Navarro, calls for $1 trillion of spending over 10 years to be funded largely by private sources which would be repaid with tax credits and usage taxes (i.e. toll roads). His infrastructure plan calls for up to $1 trillion in additional spending over ten years, most of it privately financed. A memo released in late October by Mr. Trump’s economic advisors Wilbur Ross and Peter Navarro detailed a plan to finance up to $1 trillion in infrastructure spending over ten years, equal to $100bn per year or about 0.5% of GDP. We previously estimated that a spending boost of this size would reduce the unemployment rate by about 0.3pp and raise inflation a touch, leading the Fed to eventually hike one or two more times by 2019 relative to a baseline without the infrastructure package. The plan described by Ross and Navarro would be largely privately financed, but encouraged by tax credits. The plan would seek to incentivize the private sector to increase investment in infrastructure projects that would be supported by future usage fees, such as road tolls. Ross and Navarro suggest that 17% of the initial investments could be financed with equity and the remainder with debt. The government would then provide a tax credit equal to 82% of the equity to reduce the cost of financing. The large role of debt-financed private investment in Mr. Trump’s infrastructure plan implies that a significant increase in interest rates could be a hurdle for the plan’s feasibility. The first question is can such a massive infrastructure plan pass Congress.  Trump’s financial plan, if the numbers actually pencil, would essentially sidestep the political funding squabbles by focusing mostly on private investment, a concept that both parties generally support.  That said, as the Wall Street Journal points out, the plan could face some push back from Democrats who have been pushing for more public funding.

Trumponomics: It’s Not All Crazy -  Dean Baker -  Trump has proposed large infrastructure spending and also tax cuts that will hugely increase the deficit. Both offer real benefits, although with substantial risks. The infrastructure story is straightforward. Roads and bridges in many parts of the country are badly in need of repair. This is both an economic waste, as people needlessly get caught in traffic, and a health hazard when bad roads increase the risk of accidents. Ideally, infrastructure spending would also go to repair schools and improve water systems so that we don’t have more Flints with people drinking lead in their water. It would be great if some of this funding also went to mass transit and clean energy to reduce greenhouse gas emissions, but that might be expecting too much from a Trump administration. The infrastructure spending would also create jobs. Public construction has traditionally been a source of relatively good paying jobs for men without college degrees. In recent years, the construction workforce has been disproportionately Hispanic. Spending in this area benefits a segment of the labor market that badly needs help. Of course the benefits are considerably less if projects are privatized, as Trump has suggested, and this will have to be part of the battle. The other useful part of Trump’s agenda is that he clearly does not care about budget deficits. His tax cuts could add more than $400 billion, more than 2.0 percent of GDP, to the annual deficit. These tax cuts are not a good use of money. They will overwhelmingly go to the rich who have been the main beneficiaries of economic growth over the last four decades. In addition to not needing the money, if the point is to boost demand, giving tax breaks to the rich is the worst way to do it. If a poor or middle class person gets $1,000 from the government they are likely to spend most or all of it. But if we give another $1,000 or even $1,000,000 to Bill Gates it is unlikely to affect his consumption at all. Even though the bulk of the Trump’s proposed tax cuts do go to the rich, there are still substantial cuts for the middle class, which will provide a real boost to consumption. This boost to consumption, along with the increased demand from his infrastructure spending, will mean a large increase in demand in the economy. The result will be more jobs and a reduction in unemployment.The strengthening of the labor market will also leave workers better situated to get pay increases. The only time in the last four decades when workers at the middle and bottom of the wage distribution saw sustained gains in real wages was the tight labor market of the late 1990s.

Navarro Nonsense on Privatization of Public Infrastructure - - Brad Plumer has a must read discussion on Trump’s plans for infrastructure:  What Trump has right now is an idiosyncratic proposal for Congress to offer some $137 billion in tax breaks to private investors who want to finance toll roads, toll bridges, or other projects that generate their own revenue streams. But this private financing scheme, experts across the political spectrum say, wouldn’t address many of America’s most pressing infrastructure needs — like repairing existing roads or replacing leaky water mains in poorer communities like Flint. It’s a narrow, inadequate policy. For instance: “This is unlikely to do much for road and bridge maintenance,” notes Harvard economist Edward Glaeser. “And [economists] have long believed that the highest returns are for fixing existing infrastructure.” This proposal was written by Peter Navarro and Wilbur Ross. No kidding. As I noted even Greg Mankiw stated how their analysis of the macroeconomics behind the Trump tax cuts was nonsense. But the decision to publicly build infrastructure versus having the private sector has elements of financial economics embedded the discussion so maybe these two have some insights. Navarro and Ross are correct that we are under investing in infrastructure but their political spin on this is beyond belief:  For example, with Hillary Clinton’s full support, only 5% of Obama’s $840 billion program of infrastructure spending, initiated in 2008 at the depths of the Great Recession, was actually spent on “shovel ready” projects. The rest was dissipated, with little stimulus result while our nation’s infrastructure gap has widened.Never mind the fact that Obama’s advisers wanted more infrastructure investment and less in the way of tax cuts but Obama had to deal with Republicans who wanted all tax cuts all the time. But this is not my problem with their paper. I will admit that my two cents on this was not a real analysis:

Trump’s big infrastructure plan? It’s a trap. - As the White House official responsible for overseeing implementation of President Obama’s massive infrastructure initiative, the 2009 Recovery Act, I’ve got a simple message for Democrats who are embracing President-elect Donald Trump’s infrastructure plan: Don’t do it. It’s a trap. Backing Trump’s plan is a mistake in policy and political judgment they will regret, as did their Democratic predecessors who voted for Ronald Reagan’s tax cuts in 1981 and George W. Bush’s cuts in 2001. First, Trump’s plan is not really an infrastructure plan. It’s a tax-cut plan for utility-industry and construction-sector investors, and a massive corporate welfare plan for contractors. The Trump plan doesn’t directly fund new roads, bridges, water systems or airports, as did Hillary Clinton’s 2016 infrastructure proposal. Instead, Trump’s plan provides tax breaks to private-sector investors who back profitable construction projects. These projects (such as electrical grid modernization or energy pipeline expansion) might already be planned or even underway. There’s no requirement that the tax breaks be used for incremental or otherwise expanded construction efforts; they could all go just to fatten the pockets of investors in previously planned projects. Moreover, as others have noted, desperately needed infrastructure projects that are not attractive to private investors — municipal water-system overhauls, repairs of existing roads, replacement of bridges that do not charge tolls — get no help from Trump’s plan. And contractors? Well, they get a “10 percent pretax profit margin,” according to the plan. Combined with Trump’s sweeping business tax break, this would represent a stunning $85 billion after-tax profit for contractors — underwritten by the taxpayers. Second, as a result of the above, Trump’s plan isn’t really a jobs plan, either. Because the plan subsidizes investors, not projects; because it funds tax breaks, not bridges; because there’s no requirement that the projects be otherwise unfunded, there is simply no guarantee that the plan will produce any net new hiring. Investors may simply shift capital from unsubsidized projects to subsidized ones and pocket the tax breaks on projects they would have funded anyway. Contractors have no obligation to hire new workers, or expand workers’ hours, to collect their $85 billion. To their credit, the plan’s authors don’t call it a jobs plan; ironically, it is Democrats looking to align with Trump who have given it that name. They should not fool themselves.

Goldman: "Market expectations of quick fiscal expansion may be running ahead of political and legislative realities" -- A few brief excerpts from analysis by Goldman Sachs economist Alec Phillips: A Fiscal Boost in 2017: How Much, How Fast?  Tax reform has political momentum, which is likely to increase the budget deficit... In light of the election result, we assume that the deficit will increase by more than previously expected. Specifically, we assume that fiscal policy choices under the next Congress will increase the budget deficit by around 0.75% of GDP, or around $150bn, in 2018, and similar amounts over the next few years. .. but the market is more focused on fiscal “stimulus” than Congress is. There are risks in both directions to our fiscal assumptions, but we note that financial markets appear to be more focused on fiscal “stimulus” than lawmakers are. ... Both sides support some type of infrastructure program, but neither side seems enthusiastic. Although President-elect Trump has highlighted infrastructure among the priorities he hopes to address, the reaction from Congressional Republicans has been tepid. While some believe the inclusion of an infrastructure plan in the tax legislation that Congress is expected to consider in 2017 could increase Democratic support for the combined package, others are wary of proposals to use the proceeds from taxing the unrepatriated profits of US multinationals to pay for it. Instead, Republican lawmakers appear more inclined to use the bulk of the proceeds from taxing those overseas earnings to offset the budgetary effects of reducing statutory tax rates. Obamacare “repeal” seems unlikely to change the fiscal picture for 2017 or even 2018. Congress will face a number of challenges in reforming the ACA in 2017, and we would expect that the process to devise a replacement plan will take until late 2017, if not 2018. We would also expect whatever replaces the current system to take effect after the midterm congressional elections, in 2019. Note: The "infrastructure" proposal that many investors are focusing on is really a proposal for about $100+ billion in tax credits to spur private investment in infrastructure (I've seen some people talking about $1 trillion in infrastructure investment - but that is the projected size of the private investment, not the proposed government spending).  This proposal is actually very modest in terms of a fiscal boost.  

Federal budget expert says deficit could climb to $1 trillion annually - Forget about balanced budgets and spending caps. The Trump administration is about to radically change how the federal government spends money, said Qorvis MSLGroup Stan Collender, at Wednesday’s Oregon Economic Forum. Collender is author of “The Guide to the Federal Budget.”On the campaign trail, Trump talked about increased spending for the military, infrastructure, veterans and a wall between the U.S. and Mexico as well as a tax cut that could hit $5 trillion over 10 years. He didn’t talk about any corresponding budget cuts. “The net effect of all of that ... and these are my numbers ... it’ll increase the annual deficit from $600 billion over each of the next couple of years to more than $1 trillion,” he said. “It’ll increase government borrowing by about $5 trillion over the next five years compared to current levels.” Collender said folks could be “a little horrified” by the debt he expects Trump to ring up. As a result, he expects the interest on the national debt will be the fastest-growing part of the federal budget during Trump’s four-year term. “It would have been with any president. It will be with this president for two reasons: He’s going to borrow a lot more. And interest rates are going to rise.” Colleder said roughly 50 percent of the national debt rolls over year year. “If interest rates go up, the government will be borrowing a lot more. It will be the largest one-year adjustable-rate mortgage in history.”

Donald Trump's First Interview Since Winning The Election: Key Highlights And Full Transcript -- In his first televised interview since winning the election this week, a "more serious, more subdued" Donald Trump spoke to 60 Minutes correspondent Lesley Stahl from his penthouse in the Trump Tower.As CBS summarized the interview, "what we discovered in Mr. Trump’s first television interview as president-elect, was that some of his signature issues at the heart of his campaign were not meant to be taken literally, but as opening bids for negotiation.  Among many other things, Trump told Stahl that Clinton’s phone call conceding the election was “lovely” and acknowledged that making the phone call was likely “tougher for her than it would have been for me,” according to previews of the interview released by CBS.Before we get into the details of Hillary's phone call with Trump, for those pressed for time, here are the key highlights from Trump's interview:

  • Trump says he will talk with FBI Director Comey before deciding whether to ask his resignation, says "I respect him a lot"
  • Trump, on pledge to appoint special prosecutor to investigate Clintons, says "I don't want to hurt them. They're good people"
  • Trump says he is "fine" with same-sex marriage; says He Does Not Intend To Overturn Supreme Court Ruling on Gay Marriage
  • Trump confirms he will forego salary as president
  • Trump tells protesters: "don't be afraid"
  • Trump condemns harassment of minorities
  • Trump vows to name pro-life, pro-gun rights Supreme Court justices

Going back to the Hillary Clinton phone call, Trump said “she couldn’t have been nicer. She just said, ‘Congratulations, Donald, well done,'” Trump told Stahl. “And I said, ‘I want to thank you very much. You were a great competitor.’ She is very strong and very smart.” Trump’s tone in the interview contrasted his attacks on the campaign trail, in which he nicknamed Clinton “Crooked Hillary” and encouraged chants to “Lock her up!” during his rallies.  Trump also told Stahl that former president Bill Clinton called him the following day and “couldn’t have been more gracious.” “He said it was an amazing run – one of the most amazing he’s ever seen,” Trump  said. “He was very, very, really, very nice.” Trump did not rule out calling both of the Clintons for advice during his term. “I mean, this is a very talented family,” he said. “Certainly, I would certainly think about that.”

Trump Turns Down $400,000 Salary: President-elect Donald Trump told "60 Minutes" that he would decline a salary when he takes office in January. He said that he'd rather take a dollar every year instead of the $400,000 salary currently earned by Barack Obama. How does the U.S. presidential salary compare with other heads of state around the world? Canadian prime minister Justin Trudeau earns $260,000 every year while Angela Merkel brings home $234,000. Interestingly, Trump isn't the first U.S. president to make the symbolic gesture of forgoing the job's salary. Herbert Hoover and John F Kennedy are two other notable examples. Away from politics, Facebook's Mark Zuckerberg and Google's Sergey Brin and Larry Page are also on a $1 salary. This chart shows the annual salary of selected world leaders in 2016.

GOP To Use Previously Unheard Of Tactic To Slam Dunk Trump Agenda - The Republican congressional leadership is seriously considering an unprecedented procedure to guarantee that its and President-elect Donald Trump’s highest priorities are quickly this novel procedure would enact a sizable chunk of the Trump/GOP agenda without opponents having much…or perhaps…any influence on the outcome. The Republican congressional leadership is seriously considering an unprecedented procedure to guarantee that its and President-elect Donald Trump’s highest priorities are quickly enacted soon after Congress convenes next year. The key is “reconciliation,” the part of the congressional budget process that allows highly controversial policies to be considered in the Senate without any possibility of them being filibustered. But reconciliation by itself isn’t the unprecedented procedure; it’s the novel way the leadership plans to use reconciliation: For the first time in the 4-plus decades’ history of the congressional budget process, reconciliation may occur twice in the same year. Theoretically, two reconciliations in the same year are legally impossible because the Congressional Budget Act only allows one set of reconciliation instructions per budget resolution. But the leadership is considering doing two budget resolutions next year and that would allow two reconciliations to happen. As of now, Congress is expected to adopt a budget resolution for fiscal 2018. But because that probably won’t occur until late May or early June, the reconciliation wouldn’t be completed until September.

RNC Chair Reince Priebus Is Named Donald Trump’s Chief of Staff - WSJ: President-elect Donald Trump named Republican National Committee Chairman Reince Priebus as his chief of staff, a selection that suggests the Republican is interested in a more conventional approach to governing after his insurgent campaign. Mr. Trump on Sunday also named Stephen Bannon as his chief strategist and senior counsel. Mr. Bannon, who was chief executive of the Trump campaign, was in consideration with Mr. Priebus for the White House’s top personnel position. “Steve and Reince are highly qualified leaders who worked well together on our campaign and led us to a historic victory,” Mr. Trump said in a statement. “Now I will have them both with me in the White House as we work to make America great again.” The selection of Mr. Priebus as staff chief is an important marker in Mr. Trump’s high-pressure race against the clock to build the next administration. That effort begins in earnest on Monday, as his broader transition team holds its first formal meetings since a shake-up on Friday that installed Vice President-elect Mike Pence atop the organization. Still, Mr. Trump’s transition is slightly behind the pace set by previous incoming presidents and the timetable established by his own team.Mr. Trump’s victory surprised even his own top advisers, who, before Tuesday, were unable to focus the New York businessman on the 73 days between the election and inauguration, a senior aide said. They said Mr. Trump didn’t want to jinx himself by planning the transition before he had actually won. During their private White House meeting on Thursday, Mr. Obama walked his successor through the duties of running the country, and Mr. Trump seemed surprised by the scope, said people familiar with the meeting. Trump aides were described by those people as unaware that the entire presidential staff working in the West Wing had to be replaced at the end of Mr. Obama’s term. After meeting with Mr. Trump, the only person to be elected president without having held a government or military position, Mr. Obama realized the Republican needs more guidance. He plans to spend more time with his successor than presidents typically do, people familiar with the matter said.

 Donors and lobbyists already shaping Trump’s ‘drain the swamp’ administration --The chant echoed through Donald Trump’s boisterous rallies leading up to Election Day: “Drain the swamp! Drain the swamp! Drain the swamp!”  “We are fighting for every citizen that believes that government should serve the people, not the donors and not the special interests,” the billionaire real estate developer promised exuberant supporters at his last campaign rally in Manchester, N.H.  But just days later, there is little evidence that the president-elect is seeking to restrain wealthy interests from having access and influence in his administration.It’s not just corporate lobbyists who are playing early, visible roles in the new power structure. Some of Trump’s biggest political donors are shaping the incoming administration, including Rebekah Mercer, a daughter of billionaire Robert Mercer, who is figuring prominently in behind-the-scenes discussions, according to people familiar with the transition.Mercer is among four major donors appointed by Trump Friday to a 16-person executive committee overseeing his transition. The others are campaign finance chairman Steven Mnuchin, New York financier Anthony Scaramucci and Silicon Valley investor Peter Thiel.Meanwhile, top campaign fundraisers and a raft of lobbyists tied to some of the country’s wealthiest industries have been put in charge of hiring and planning for specific federal agencies. They include J. Steven Hart, chairman of the law and lobbying shop Williams & Jensen; Michael McKenna, an energy company lobbyist who is overseeing planning for the Energy Department; and Dallas fundraiser Ray Washburne, was has been tapped to oversee the Commerce Department.  Billionaires who served as Trump’s policy advisers, such as Oklahoma oil executive Harold Hamm, are under consideration for Cabinet positions.

What Stephen Bannon wants to do in Trump’s White House - Former Breitbart News executive Stephen Bannon is poised to play a significant role in foreign policy and national security in the Trump administration.  President-elect Donald Trump named the controversial Bannon his chief strategist on Sunday, simultaneously announcing that Republican National Committee Chairman Reince Priebus would serve as chief of staff.  Bannon is best known for his domestic positions, particularly his populist nationalist views on trade and immigration. His detractors accuse him of trafficking in racism and anti-Semitism, which he denies; his defenders believe he has a rare gift for identifying and channeling the nationalist and populist energy building through America and around the world.   Less discussed is Bannon’s fascination with the military and global affairs. Sources who know Bannon say he’s likely be an influential adviser to Trump in the international arena.  Sources close to Bannon say the best way to understand his approach to foreign affairs is to observe the structure and content of Breitbart News. The website supports nationalist movements wherever they arise and advocates a merciless approach against radical Islamic terrorists. Bannon admires right-wing nationalists and hard-line illegal immigration opponents in Europe and elsewhere. He wants to work more closely with them and sees them as part of a worldwide movement to overthrow the “globalists,” according to multiple sources familiar with his thinking.   Bannon often described Speaker Paul Ryan (R-Wis.) as “the enemy” and instructed Breitbart staff to destroy him through their reporting. Bannon viewed Ryan as part of a globalist elite that he believes is conspiring to undermine American sovereignty by supporting open immigration and free trade.  Bannon is a longtime skeptic of international alliances like the United Nations and the European Union. He cheered on Brexit — the decision made by British voters in a June referendum to leave the EU — and he admires French National Front leader Marine Le Pen.

The Architect of the Most Racist Law in Modern American History Has Been Named to Trump's Team -- Kris Kobach, the extremely controversial Kansas secretary of state, has been named to Donald Trump's transition team.  Kansas Secretary of State Kris Kobach has been asked to join President-elect Donald Trump’s transition team. The team will advise Trump on policy issues leading up to his swearing-in in January, preparing him to begin his first 100 days in office. It’s an unpaid position for Kobach.   Kobach called the transition from Obama’s presidency to Trump’s “one of the sharpest transitions we’ve seen,” a 180-degree turn for the country. Why should this terrify you? Because Donald Trump has just named one of the most racist politicians in all of America to his transition team. Kris Kobach was the architect of the most racist law in modern American history. SB 1070 passed in Arizona in 2010. What did it mean? If you have brown skin or an accent, police had a right to stop you, detain you and demand you prove your citizenship.Arizona’s S.B. 1070 compels police to ask for papers from anyone they have a reasonable suspicion of being without status. Under this law any person of color, or anyone with a foreign accent, can be required to prove their status and be jailed—regardless of whether they are a citizen or an immigrant—until they can do so. The Supreme Court indicated that prolonged detention would be impermissible, but people’s rights will likely be violated before that limitation can be enforced.By targeting certain groups of people living within the state, the Arizona law amounts to an ethnically divisive and deeply hostile social policy. It raises the specter of states treating people differently based solely on their appearance rather than on their actions. Every person in Arizona and states that pass S.B. 1070-like legislation will be required to carry proof of their legal status at all times or face the possibility of being detained. In practice it will be people of color that bear the brunt of these policies. It was nicknamed the “Papers Please” law and thanks to Kris Kobach and the right-wing ALEC (American Legislative Exchange Council), two dozen copycat bills quickly spread to other conservative states. Can you imagine walking down the street and police having the power to stop you and your children and throw you in jail on the suspicion alone that maybe you don’t belong? Because you have brown skin or an accent? Terrifying, right?

FirstFT: Trump transition in disarray, China’s cursed unicorns and more - Key figures in Mr Trump’s transition team purged and those remaining are mired in infighting. Infighting and disarray are plaguing Donald Trump’s attempts to assemble his government-in-waiting. Mike Rogers and Eliot Cohen, both mainstream Republicans, are among the key figures who have been purged from the president-elect’s foreign policy team.  Questions are being raised about how the incoming US president will deal with his Russian counterpart. Nato chiefs are alarmed that the spectre of nuclear war is returning to international politics thanks to a sabre-rattling Russian leadership and a US leader who has asked why nuclear weapons exist if they cannot be used. Meanwhile, Russia has launched its long-awaited offensive across Syria, with Syrian regime jets pounding rebel-held eastern Aleppo throughout the past 24 hours. A round-up of what a Trump presidency could mean for the rest of the Middle East has been produced by analysts at the Carnegie Endowment. Asian equities and bonds took Wall Street’s lead and rallied on Wednesday on the so-called “Trumpflation trade” but the speed of the moves has slowed. Speaking in Athens, President Barack Obama blamed the rise of Mr Trump and Brexit on a backlash against globalisation — something hedge fund kingpin Ray Dalio is also warning about.

What Happens if Trump Never Fills All Those Empty Positions in the Executive Branch? - According to a Washington Post summary of the process, the new president, who has never worked for a government before, needs to figure out who should fill about 3,800 temporary government jobs, many of them obscure, in order to keep the executive branch humming along. It's been a bumpy ride. Not only has Trump not nominated any cabinet members, reports have emerged of the transition team fighting amongst themselves, and as of Wednesday Trump's people hadn't yet contacted many federal agencies, including the State Department and the Pentagon, to go over the nuts and bolts of the handover—a tricky operation even in the best of times. Part of the problem seems to be that Trump didn't expect to win and therefore may not have given a lot of thought to the nuts and bolts of being president—Trump reportedly didn't know he even had to hire all his own people to work in the West Wing until he visited Barack Obama last week. To find out how bad is this early confusion at the top of the incoming executive branch is, and what might happen if Trump delays making these hires, I called up Berkeley political science professor Sean Gailmard, who specializes in bureaucratic politics and executive branch structure. Gailmard said even if you aren't a fan of Trump, you probably shouldn't be cheering for lots of human resources fuck-ups inside his government.

Great News On Trump Appointments Flynn for the Win! - I’ve slammed Trump when I thought he might appoint bad guys.  But there’s now cause for celebration. Trump has purportedly offered General Michael Flynn a post as National Security Advisor. This is GREAT news … Flynn  – a 3-star general – is former head of the Defense Intelligence Agency and director of Intelligence for the Joint Special Operations Command. Why do we like Flynn? Because he:

I am hopeful that Flynn will help overturn decades of Neocon and Neoliberal warmongering

What Liberals Should Like About Steve Bannon, Trump’s Chief Stategist -- I’d never heard of Steve Bannon until Trump named him as chief strategist and senior counselor. I soon learned that Bannon is executive chairman of Breitbart, which the media labels an “alt right” news source (I’ve only read a few articles on Breitbart, when linked from other websites). I’ve also heard a lot of accusations that Bannon is a racist, sexist and homophobe. If true, that’s despicable. Indeed, Democrats are so upset by Trump’s naming of Bannon that the Senate Minority Leader (Harry Reid) has demanded that Trump rescind Bannon’s appointment. But there’s one reason that liberals should applaud Bannon’s appointment. The Fiscal Times explains:On Tuesday, BuzzFeed News released a transcript of remarks Bannon delivered to the Christian conservative Human Dignity Institute in 2014. In a lengthy discourse on the causes and aftereffects of the 2008 financial crisis Bannon, himself a former managing partner at Goldman Sachs, blamed the financial crisis and subsequent recession on the “greed” of his fellow bankers and expressed anger at the fact that no bank executives faced criminal prosecution.“Think about it — not one criminal charge has ever been brought to any bank executive associated with 2008 crisis,” Bannon said. “And in fact, it gets worse. No bonuses and none of their equity was taken. So part of the prime drivers of the wealth that they took in the 15 years leading up to the crisis was not hit at all, and I think that’s one of the fuels of this populist revolt that we’re seeing as the tea party.”He continued, “[T]he underpinning of this populist revolt is the financial crisis of 2008. That revolt, the way that it was dealt with, the way that the people who ran the banks and ran the hedge funds have never really been held accountable for what they did, has fueled much of the anger in the tea party movement in the United States.”

Trump taps Sessions for attorney general, Pompeo for CIA -  President-elect Donald Trump is expected to announce later on Friday that he has offered the job of attorney general to Alabama Sen. Jeff Sessions, while retired Lt. Gen. Mike Flynn has been offered the post of White House national security adviser, and Rep. Mike Pompeo has been offered CIA director, according to transition official Sean Spicer. Sessions, one of Trump’s earliest and most prominent supporters in Congress, met with Trump at his home office in New York on Thursday, another transition team source said. ..The job offers mark the most solid signs of progress yet in Trump’s transition effort, which had been plagued for days by reports of disorder and infighting. They also help provide the early outlines of who Trump will rely on as he takes over governing the country. With the earlier appointments of Reince Priebus as chief of staff and Steve Bannon as chief strategist, Trump so far has selected only white men, some of whom have been dogged by controversy for their statements about Muslims and other incendiary rhetoric. And while Trump has maintained a heavy schedule of meetings at Trump Tower since his surprise election — including with past foes such as Ted Cruz and Nikki Haley — the president-elect appears to be rewarding loyalty, at least with his first picks. Sessions, the first senator to endorse Trump, is well-regarded by his Republican colleagues, although his breed of hardline conservatism falls outside the GOP mainstream. He is opposed to creating a path to citizenship for undocumented immigrants and a vocal critic of marijuana legalization, though he worked with the Obama administration and Democrats on legislation supported by civil rights groups that reduced the sentencing disparity for cocaine possession.

Trump picks conservative loyalists for top security, law enforcement jobs | Reuters: U.S. President-elect Donald Trump picked three conservative loyalists to lead his national security and law enforcement teams on Friday, underscoring his campaign promise to take a hard line confronting Islamist militancy and curbing illegal immigration. Trump picked U.S. Senator Jeff Sessions for attorney general, rewarding a staunch supporter whose tough and sometimes inflammatory statements on immigration have reflected his own. The choice was applauded by the top Republican in the Senate but drew sharp criticism from civil rights activists. Retired Army Lieutenant General Mike Flynn, who has championed Trump's promises to take a more aggressive approach to terrorism, was chosen as his national security adviser. Trump named Representative Mike Pompeo, a vocal critic of the Obama administration's security policy, as director of the Central Intelligence Agency. The three choices, announced by Trump's transition team, come as the Republican president-elect works to fill key positions in his administration, which will take over from Democratic President Barack Obama on Jan. 20. The picks could heighten concerns abroad that the Trump administration might carry out campaign promises of banning Muslims from entering the United States or imposing more severe restrictions on migrants from countries or regions with high levels of militant Islamist activity, such as Iraq and Syria. Sessions and Pompeo seem likely to be confirmed by the Senate despite heavy resistance from Democrats. Republicans will control a majority, with at least 51 seats in the 100-seat chamber, when Congress reconvenes in January. Flynn's post does not need Senate confirmation.

The Sessions Nomination and the "Emergency Exception" - Marcy Wheeler - Donald Trump will nominate Jefferson Beauregard Sessions III to be Attorney General. Most of the uproar over the appointment has, justifiably, focused on the fact that Sessions is such a racist he was denied confirmation to be a District Court Judge in the 1980s. We will also learn, going forward, about how deeply embedded in Alabama’s unique kind of corruption Sessions is. But something more recent is as alarming, albeit for different reasons. In June, Sessions proposed an amendment to ECPA reform that would mandate providers turn over communications content if a government official declared that it was an emergency. (1) A provider of electronic communication service or remote computing service shall disclose to a governmental entity a wire or electronic communication (including the contents of the communication) and a record or other information pertaining to a subscriber or customer if a representative of the governmental entity reasonably certifies under penalty of perjury that an emergency involving the danger of death or serious physical injury requires disclosure without delay. As Al Gidari explained in a post on this provision, providers already can, at their discretion, turn over such communications in case of an emergency. This amendment would have eliminated that discretionary review, which — as Gidari went on to explain — often serves to weed out requests for which there isn’t really an emergency or in which authorities are just fishing to further an investigation. In other words, if this amendment had passed, it would have created a black hole of surveillance, in which authorities could obtain content simply by declaring an emergency (remember, from 2002 until 2006, there was a highly abusive FBI phone metadata program that worked by invoking an emergency). I raise this to point out that in addition to selectively pursuing people of color (and delegitmizing those who defend their due process), Sessions would undoubtedly seek tools that would make it easier to do so without any oversight.

Rudy Giuliani Is Trump's Favorite For Secretary Of State: AP --With ex-Goldman and Soros employee Steven Mnuchin groomed to be Trump's new Treasury Secretary, as Bloomberg reported earlier today, there was just one big question mark remaining: who would fill the other top post in Trump's government: the Secretary of State. The answer arrived moments ago courtesy of AP, which reported that contrary to earlier speculation that Rudy Giuliani would be Trump's Attorney General, the former NY mayor is set to become the top US diplomat under Trump.   AP source: Rudy Giuliani the favorite to be Trump's secretary of state.While we await more details, it is perhaps worth noting that the alternative to Giuliani was even more disturbing. As the WSJ reported earlier in the day, Trump was set to pick between Giuliani and John Bolton, a hawkish conservative diplomat who called last year for the U.S. to bomb Iran.Mr. Trump’s pick for State Department will have to navigate a U.S.–Russia relationship that is fraught with complexities, particularly over how to resolve the Syrian conflict. Asked at The Wall Street Journal CEO Council meeting in Washington on Monday evening if his title would soon be “Secretary,” Mr. Giuliani responded “One never knows.”

Google Gets a Seat on the Trump Transition Team - Dave Dayen - Google is among the many major corporations whose surrogates are getting key roles on Donald Trump’s transition team. Joshua Wright has been put in charge of transition efforts at the influential Federal Trade Commission after pulling off the rare revolving-door quadruple-play, moving from Google-supported academic work to government – as an FTC commissioner – back to the Google gravy train and now back to the government.The Intercept has documented how Wright, as a law professor at George Mason University, received Google funding for at least four academic papers, all of which supported Google’s position that it did not violate antitrust laws when it favored its own sites in search engine requests and restricted advertisers from running ads on competitors. George Mason received $762,000 in funding from Google from 2011 to 2013.Wright then became an FTC commissioner in January 2013, agreeing to recuse himself from Google cases for two years, because of his Google-funded research. He lasted at the FTC until August 2015, returning to George Mason’s law school (now named after Antonin Scalia). But Wright also became an “of counsel” at Wilson Sonsini Goodrich & Rosati, Google’s main outside law firm. Wilson Sonsini has represented Google before the FTC.Wright’s leadership position in the Trump FTC transition flips him back into government work. The FTC has two open seats on its five-member panel, and Chair Edith Ramirez’s term ends in April 2017. So Trump will be able to remake the agency, which has responsibilities over consumer protection and policing anti-competitive business practices, like the employing of monopoly power. Outside of the Justice Department’s Antitrust Division, no government agency is more responsible for competition policy than the FTC.

 Instead of Draining the Swamp, the GOP is Greasing the Wheels -- Donald Trump may have found electoral success campaigning as a political outsider ready to “drain the swamp,” but his first week as President-elect indicates that a Trump Administration may prove to be a stimulus for action in Washington. In stark contrast to the legislative gridlock we’ve seen since the 2010 midterms, now that the GOP has full control of all three branches of government, we should be prepared for of flurry of legislative activity emerge from the beltway.  This would explain not only Trump’s hire of RNC chair Reince Priebus as his Chief of Staff, an establishment bridge to Congress for the former populist candidate,  but also the news today that Republicans will be voting on eliminating the ban on earmarks that was put in place in 2011. This would be a move enthusiastically celebrated in Washington by those who consider legislative inaction a truly terrible thing, since earmarks were among the most effective ways to bribe politicians to support bills they otherwise wouldn’t. In exchange for a wavering member’s support, an earmark ensured that their home district would receive a lucrative project. Earmarks were responsible for the infamous Alaska’s “bridge to nowhere” among a variety of other examples of absurd government waste. The ability to cut such deals within the legislature is likely to be particularly attractive to a president like Trump. After all, the man is not only the author of The Art of the Deal, he is proudly non-ideological, and comes to Washington with an ambitious first 100 days plan. If he can buy support by giving a Congressman the money to build an airport named after themselves, the Donald is exactly the sort of man who would have no problem doing so. Now none of this is say there aren’t sound defenses of the earmark process. As Congressman Ron Paul has pointed out, earmarks give the legislature more control over Federal spending at the expense of the discretion of the Executive branch and its multitude of agencies.  Unfortunately, a return to earmarks will likely coincide with members of Congress finding new justifications for Federal projects, which may be part of the reason we’ve seen a sharp decline in Federal discretionary spending since 2011.

Elizabeth Warren Sends Donald Trump Letter Criticizing Transition Team's Wall Street Ties - Sen. Elizabeth Warren warned President-elect Donald Trump against choosing “Wall Street insiders” for top financial posts, likely previewing the confirmation battles to come in the Senate.In a letter to the president-elect dated Tuesday, the Massachusetts Democrat specifically noted three members of the Trump transition team with ties to Wall Street and “demonstrated records of failure during the 2008 financial crisis” whom she would find unacceptable for top positions: David Malpass,Paul Atkins and Steve Mnuchin. Mr. Malpass, a former Bear Stearns chief economist, is working on shaping Mr. Trump’s Treasury Department, which Mr. Mnuchin is a leading candidate to lead. Mr. Atkins, a former Securities and Exchange Commission commissioner during the George W. Bush administration, is working to fill the ranks of financial regulatory agencies in the Trump administration.Ms. Warren made similar comments Tuesday at The Wall Street Journal’s CEO Council event in Washington, saying the involvement of corporate lobbyists and business leaders contradicted Mr. Trump’s campaign promises to shake up the Washington establishment.

Warren: Trump Has Put 'Swamp Monsters' in Charge of Transition  — Sen. Elizabeth Warren, D-Mass., sharply criticized President-elect Donald Trump's transition team on Thursday, saying he has reneged on his promises to "drain the swamp" and instead has put "swamp monsters" in charge. "He talked a good game during the campaign and he promised to end corruption. He promised to drain the swamp," Warren said in a speech on the Senate floor. But as reports have begun to seep out about possible top spots in the administration, including JPMorgan Chase Chief Executive Jamie Dimon or Goldman Sachs alum Steve Mnunchin as Treasury secretary, Warren accused Trump of giving Wall Street even more influence. "He is stuffing his transition team full of lobbyists" and special interests, Warren said. "That is literally the opposite of what he said during the campaign." She derided a call from the Trump administration to prevent people who joined his administration from lobbying the executive branch for five years, saying it would not do enough to limit the revolving door between the government and the private sector. "Put a clean shirt on a swamp monster doesn't change anything," she said. "Swamp monsters today, swamp monsters wearing clean shirts and ties for the transition team tomorrow and swamp monsters once the transition is over."

Senate Democrats’ Surprising Strategy: Trying to Align With Trump - — Congressional Democrats, divided and struggling for a path from the electoral wilderness, are constructing an agenda to align with many proposals of President-elect Donald J. Trump that put him at odds with his own party. On infrastructure spending, child tax credits, paid maternity leave and dismantling trade agreements, Democrats are looking for ways they can work with Mr. Trump and force Republican leaders to choose between their new president and their small-government, free-market principles. Senator Chuck Schumer of New York, elected Wednesday as the new Democratic minority leader, has spoken with Mr. Trump several times, and Democrats in coming weeks plan to announce populist economic and ethics initiatives they think Mr. Trump might like. Democrats, who lost the White House and made only nominal gains in the House and Senate, face a profound decision after last week’s stunning defeat: Make common cause where they can with Mr. Trump to try to win back the white, working-class voters he took from them, or resist at every turn, trying to rally their disparate coalition in hopes that discontent with an ineffectual new president will benefit them in 2018. Mr. Trump campaigned on some issues that Democrats have long championed and Republicans resisted: spending more on roads, bridges and rail, punishing American companies that move jobs overseas, ending a lucrative tax break for hedge fund and private equity titans, and making paid maternity leave mandatory. Some Democrats are even co-opting Mr. Trump’s language from the campaign. “Every single person in our caucus agrees the system is rigged,” said Senator Debbie Stabenow, Democrat of Michigan.

Bernie Sanders Shuns Democrats: "I Will Finish This Term As An Independent" --In yet another slap in the face of the Democratic party, The Hill reports that Sen. Bernie Sanders (I-Vt.) won’t officially join the Democratic Party even though he was appointed to a leadership position within the Senate Democratic caucus this week."I was elected as an Independent and I will finish this term as an Independent,” Sanders said at a breakfast Thursday morning hosted by the Christian Science Monitor.Sanders has long caucused with Democrats as an independent. That has annoyed some Democrats as Sanders’s star has risen on the left. They are frustrated by his influence within a party that he refuses to embrace.Sanders has acknowledged that he is still foggy on what the new role will entail, but sketched out his early thoughts on how he might handle it.“The real action to transform America won’t take place on Capitol Hill, it will be in the grassroots America among millions struggling economically and young people,” Sanders said. “I initially understand my role to be to get those people into the political process to demand the U.S. congress and government and president, represent all of the people and not just those on top. I’m excited about it, but how we go about it I don’t know,” he added.“Why is it that tens of millions of poor people, young people and working people don’t get involved in the political process? One of the goals is to bring people into politics and make them aware it’s not just Election Day, but the other 364 days of the year are also important.”

Rule by humiliation: whose next to lick Trump's asshole? - Roger Gathman - The press still doesn't have a clue about our Grand Wizard. Their normalization of Trump is par for the course: the media bends over backwards to power. The kind of court society that La Bruyere anatomized in Louis 14th's day is alive and well in D.C. But the press's impulse is to attribute everything to being right or left, to having a theory. Trump don't play that game. His game is: humiliation. The subgroup of Romney voters who voted for him have long sought this, above all things - to humiliate their opponents. The deal is, the thirst to humiliate your opponents, after a while, becomes a whole politics of humiliation. It isn't enough to humiliate your opponent, you crave humiliation in itself. Thus, whether Ryan gets through his plan to privatize medicare depends less on whether he can convince the Kluxxers about Trump of its benefits, than upon whether Ryan needs another dose of humiliation or not. Christie, for instance, has staked his political life upon Trump. Alas, Trump decided he needed to be humiliated. Without warning, hey presto, he's fired and Pence is put into place as head of the transition team. I wonder if Trump even bothered to call him. It isn't just the Dems, or the nation, that is now Trump's bitch. Its the GOP. There are stories of Huey Long's love of humiliating his allies, and of LBJ. Supposedly, LBJ liked to humiliate Bill Moyers, then his aide, by commanding hims to give a report to LBJ while LBJ sat on a toilet and unloaded his barbecue. Trump is, of course, dumber than shit. LBJ was smart, and concerned with politics, But if you can imagine Trump as calling in all of us, every American, to surround him while he takes a dump - you'd have an accurate image of how the next four years will go, And, due to the spending Trump seems apt to spring, we will at the same time have a boom, which GOP people will point to to say, the Grand Wizard was right! Bush engineered one via the same means. Suck out the credit of the masses, then bust em - that is the game that is going to be played at a faster tempo, especially since they don't have that many assets left. Meanwhile what happens at least on the GOP side will depend on who needs to be humiliated next. I don't see Ryan faring very well in this environment, unless he can make his act of licking Trump's asshole extremely convincing.

Hillary Clinton probe will ‘absolutely’ continue – House Oversight Committee chair -  Hillary Clinton will still face investigations into both her use of a private email server and the “pay-to-play” nature of the Clinton Foundation, according to chairman of the House Oversight Committee, Jason Chaffetz. Chaffetz told Maria Bartiromo on Fox’s ‘Sunday Morning Futures’ the investigation “absolutely” continues."This is the largest breach of security, perhaps, in the history of the State Department," he said. “There are dozens of people in that inner circle that we are looking at.” “We have perjury issues that we still want the Department of Justice to look at. We have allegations of a quid-pro-quo, we don’t know where they’re [FBI] at in terms of their investigation into the Clinton Foundation, and the FBI director, we still have some questions.” "It’s this huge, massive mess that has to be cleaned up. So we would be remiss if we just dismissed it and moved on," Chaffetz said. "We have a lot of things that we have to fix, so it never ever happens again."

Jesse Jackson Tells Obama To Pardon Hillary Clinton - Shortly after a haggard-looking Hillary Clinton made her first public appearance since the election, Jesse Jackson called for President Obama to issue a blanket pardon to Hillary Clinton before he leaves office, just like Ford did for Richard Nixon. Speaking at President Gerald Ford's alma mater, while stopping short of saying Clinton did anything wrong, Jackson told a large crowd of University of Michigan students, faculty and administrators gathered at daylong celebration of his career that Obama should short-circuit President-elect Donald Trump's promised attempt to prosecute Hillary Clinton for use of a private e-mail server. "It would be a monumental moral mistake to pursue the indictment of Hillary Clinton," Jackson said and added that issuing the pardon could help heal the nation. In 1974, Ford, a University of Michigan alumnus, issued a full and complete pardon of Nixon for any crimes he may have committed. He said the pardon was in the best interests of the nation. "President Ford said we don't need him for trophy. We need to move on. President Nixon wasn't convicted of a crime. He didn't apply for a pardon. (Ford) did it because he thought it would be best for the country. "Hillary Clinton has not been tried, but there are those who want to drag her for the next three years. It will not stop until they find a reason to put her in jail. That would be a travesty."

Protesters Target Senator Chuck Schumer’s Office Along With Trump Tower - Pam Martens - The corrupt and collapsing two-party political system in the U.S. is coming under renewed attack by the young generation.  Trump Tower in New York City, where Republican President-elect Donald Trump is holed up, has become a veritable police fortress at street level with much of the sidewalk area barricaded from pedestrian traffic. Progressive protesters have been regularly massing outside of the building since Trump’s win in the presidential election on November 8. Many of their posters read: “Not My President.” But yesterday, young progressive protesters targeted the Capitol Hill office of a sitting Democratic Senator, Chuck Schumer of New York. As two of his clerks attempted to look unruffled and busied themselves behind their computers, about two dozen young people marched into Schumer’s office singing this song: “We are standing for our future, we are hearing what is wrong, we are standing for our future, and together we are strong.” Members of the group then delivered a series of passionate speeches providing details on what they see as corrupt within the Democratic Party. Chuck Schumer, with his obscene levels of campaign financing coming directly from Wall Street, made the top of the list. The protesters delivered a message to Schumer’s office, since he failed to appear in person, to step aside as the potential heir to the Senate Minority Leader slot and let Senator Bernie Sanders take the helm. A number of the speakers blamed Schumer, as the titular Senate head of what they called the Wall Street Democrats, for the loss to Trump in the election because his defection to Wall Street overlords had sent the message to the working class that they could not trust the Democratic Washington establishment. The grassroots group behind the protest, All of Us, is asking others to sign their petition to oust Schumer from consideration to lead the Senate Democrats.

Wall Street Democrats Proved Yesterday That They Still Don’t Get It - Pam Martens -  After a humiliating election loss just eight days earlier, the Wall Street Democrats in the U.S. Senate laid the groundwork for another humiliating defeat in the midterms in 2018 by electing Senator Chuck Schumer to be the Senate Minority Leader. Schumer is considered the poster boy for Wall Street — as their mouthpiece for lax regulation and a reliable Senate confirmation vote for Wall Street cronies to lead regulatory agencies. Over the past five years, Schumer has raised over $25.8 million for his campaign committee and Leadership PAC with the leading donors being security and investments firms and their outside law firms, according to data from the Center for Responsive Politics. Schumer’s top ten largest donors over his entire political career include seven major Wall Street banks: Goldman Sachs, Citigroup, JPMorgan Chase, Credit Suisse, Morgan Stanley, UBS and the now defunct Bear Stearns. Also in the top ten are two law firms that regularly represent Wall Street firms when they are charged with fraud: Paul Weiss and Sullivan and Cromwell. The Democrats’ head-in-the-sand vote yesterday came despite progressive activists staging a sit-in in Schumer’s office on Monday to demand that he step aside and allow the Senate Minority Leader post to go to Senator Bernie Sanders – now widely seen across America as the true leader of the Democratic Party. On the same day that Schumer’s office called the Capitol Police and had 17 of the sit-in activists arrested, Senator Sanders appeared on the Late Show and told Stephen Colbert that “something is fundamentally wrong” with the Democratic Party. Sanders’ appearance was part of a promotional tour for his new book Our Revolution which seeks to sustain the political momentum he built during the primaries for serious change from the Washington status quo. Yesterday, Sanders drew a cheering crowd for a speech at George Washington University (GWU) and likely millions more viewers to a live stream of the event that was emailed out to his supporters across the country. In his remarks at GWU, Sanders explained how Trump had won the election:

Trump and net neutrality: How Republicans can make the rules go away - The net neutrality rules implemented during Barack Obama’s presidency don’t seem likely to survive Donald Trump’s administration. Federal Communications Commission Chairman Tom Wheeler crafted the rules to survive lawsuits filed by Internet service providers, and the strategy worked when a federal appeals court upheld the rules in June of this year. But that doesn't mean a new presidential administration can't overturn them. The FCC rules say ISPs may not block or throttle lawful Internet traffic or speed up Web services in exchange for payments from online service providers. A similar set of net neutrality rules was previously struck down in court, leading to Wheeler’s decision to reclassify broadband providers as common carriers under Title II of the Communications Act. The commission’s Title II authority was enough to put the rules on solid legal ground. But once the FCC is in Republican hands, the agency will have multiple options for taking the rules off the books. One is “forbearance.” Wheeler used the legal tool of forbearance to avoid applying the strictest types of Title II regulation (such as rate regulation and tariff requirements) to consumer Internet service providers.Basically, forbearance is a way for the FCC to enforce some parts of a statute but not others. Republicans could decide to forbear from the parts of Title II that were used to impose net neutrality rules, eliminating them without reversing the Title II reclassification. A Republican-led FCC could also reclassify ISPs again, removing Title II from the residential and mobile broadband markets entirely.FCC actions require public notice and comment periods, so the process would take a few months, and net neutrality proponents would rally huge support for maintaining the rules. But ultimately, the decision comes down to the commissioners, and Republicans will have a 3-2 majority. Net neutrality advocates could sue the commission, but the court ruling that preserved Wheeler’s net neutrality rules demonstrated that the FCC has discretion over what entities are treated as common carriers. Even if the existing rules remain in place, a Republican-led FCC might just decline to enforce them vigorously. This week, the FCC told AT&T that it may be violating net neutrality rules by exempting its own DirecTV video from mobile data caps while charging other companies for data cap exemptions.

FCC abides by GOP request, deletes everything from meeting agenda - The Federal Communications Commission has deleted every major item from the agenda of its monthly meeting, apparently submitting to a request from Republicans to halt major rulemakings until Donald Trump is inaugurated as president. Republicans from the House and Senate sent letters to FCC Chairman Tom Wheeler yesterday urging him to stand down in his final months as chairman. The GOP pointed out that the FCC halted major rulemakings eight years ago after the election of Barack Obama when prompted by a similar request by Democrats. Wheeler's office hadn't said whether it will comply with the request, but today it announced the deletion of all items that were originally scheduled to be presented and voted on at tomorrow's meeting. The FCC said the items "remain on circulation," which means they can still be voted on, but a vote doesn't appear likely. Before the change, the agenda included votes on price caps for “special access” business data services; Universal Service funding to expand mobile broadband networks; wireless roaming obligations; and requirements for audio description of TV programming for blind and visually impaired people. The only item not deleted from tomorrow's meeting is part of the "consent agenda," which means it is routine and wasn't going to be presented individually.

With Trump’s Signature, Dozens of Obama’s Rules Could Fall - The New York Times: Dozens of major regulations passed recently by the Obama administration — including far-reaching changes on health care, consumer protections and environmental safety — could be undone with the stroke of a pen by Donald J. Trump and the Republican-controlled Congress starting in January, thanks to a little-used law that dates back to 1996. And it comes with a scorched-earth kicker: If the law is used to strike down a rule, the federal agency that issued it is barred from enacting similar regulation again in the future. The obscure law — called the Congressional Review Act — was passed 20 years ago at the behest of Newt Gingrich, then the House speaker and now a member of Mr. Trump’s transition team. It gives Congress 60 legislative days to review and override major regulations enacted by federal agencies. In the Senate, the vote would not be subject to filibuster. The president can veto the rejection, which usually renders the law toothless. But when one party controls both the White House and Congress, it can be a powerful legislative weapon. So far it has only been successfully used once: In 2001, a Republican Congress invoked it to eliminate workplace safety regulations adopted in the final months of President Clinton’s tenure. President George W. Bush signed the repeal two months after his inauguration, wiping out stricter ergonomics rules that had been 10 years in the making.

14 Obama regs Trump could undo | TheHill: President-elect Donald Trump has vowed to make slashing regulations a "cornerstone" of his administration. On the campaign trail, Trump suggested as many as 70 percent of federal regulations "can go" and also proposed a moratorium on new rules. With control of both chambers, congressional Republicans are also eager to roll back Obama's regulatory legacy. And they have a number of tools at their disposal. The Congressional Review Act allows them to disapprove of rules within 60-days after they were issued. For older rules, Trump can instruct agencies to revisit the regulations or provide guidance to not prioritize their enforcement. “There are a lot of policy disagreements between Trump and congressional Republicans, but one thing they can all agree on is regulations,” said Sam Batkins, director of regulatory policy at the business-oriented American Action Forum. Here’s a look at the top regulations in Trump's crosshairs:

  • 1. Clean Power Plan - Repealing the Environmental Protection Agency’s (EPA) Clean Power Plan is at the top of President-elect Donald Trump’s energy policy agenda, and he is likely to start the process of dismantling it quickly when he takes office.
  • 2. Clean Water rule - The EPA and Army Corps of Engineers’ Clean Water Rule, also known as Waters of the United States, was a frequent Trump target on the campaign trail, and one of the top Obama policies that congressional Republicans oppose.
  • 3. Ozone rule.  Trump didn't give the EPA’s 2015 rule to limit ground-level ozone much attention on the trail, but industry and Republicans have been vocal in their opposition.
  • 4. Fracking rule - Trump made clear throughout the campaign that he likes hydraulic fracturing and wants to stop actions that make fracking more difficult. The rule sets standards for well casing, transparency and wastewater storage for fracking on federal land.
  • 5. Dodd-Frank regulations  Trump has said he is eager to roll back a host of regulations from the Dodd-Frank financial reform law. Topping that list would likely be the “Volcker Rule,” which banned banks from engaging in their own in-house trading for profits.
  • 6. Financial adviser rule The Labor Department's controversial rule for financial advisers is a top target. The rule requires retirement advisers to act in the best interest of their clients and provide more disclosure..
  • 7. Overtime rule - The Labor Department’s overtime rule is sure to be on Trump’s choppng block.
  • 8. Union 'persuader' rule - Democrats have hailed the Labor Department's so-called union persuader rule, saying it will help bring transparency to union elections. The rule requires companies to disclose how much they pay anti-union consultants and what activities they were hired to do on the employer's behalf. Companies often consult with attorneys and labor experts to counter union drives. .
  • 9. Contractor 'blacklisting' rule  Another controversial rule high on Trump's target list is the Labor Department's rule requiring federal contractors to disclose past labor violations when they compete for government business.
  • 10. Mandatory arbitration ban. One of the agencies facing the most dramatic overhaul under Trump is the Consumer Financial Protection Bureau. Created as part of Dodd-Frank, the CFPB has been a constant target by Republicans, who argue it is overpowerful and unaccountable.
  • 11. Rules on payday loans and debt cards  Another major CFPB initiative that could be in trouble is a rulemaking project aimed at payday loans and other types of borrowing that can carry extremely high interest rates.
  • 12. Net neutrality  -Republicans have long had their eye on the Federal Communication Commission’s strict internet rules. The 2015 net neutrality rules require internet service providers to treat all web traffic equally.
  • 13. Menu labels. Health advocates have applauded the FDA's menu labeling rules, which requires restaurants and grocery stores to list calorie counts for the foods they sell. The rules stem from a provision of ObamaCare and supporter say it gives consumers more control over their diets.
  • 14. Expanded tobacco rules -The Food and Drug Administration (FDA) began regulating tobacco in 2009, but the agency stirred controversy last August when it expanded those rules to include electronic cigarettes, cigars, and hookah.

CONGRESS COULD OVERTURN SOME RECENT AGENCY RULES (CRS) - "With a change of presidential administrations taking place in January, some in Congress are paying renewed attention to a parliamentary mechanism that might enable the new Congress and the new President to overturn agency final rules of the Obama Administration issued after late-May 2016," a newly updated brief from the Congressional Research Service explains. The inauguration of Republican Donald J. Trump as President in 2017 may present a finite window during which the [congressional] disapproval mechanism might be used more successfully." See Agency Final Rules Submitted After May 30, 2016, May Be Subject to Disapproval in 2017 Under the Congressional Review Act, CRS Insight, updated November 9, 2016. Other new and updated reports from the Congressional Research Service include the following.
Legislative Actions to Repeal, Defund, or Delay the Affordable Care Act, updated November 10, 2016
"Regulatory Relief" for Banking: Selected Legislation in the 114th Congress, updated November 10, 2016
Retirement Benefits for Members of Congress, updated November 10, 2016
Staff Tenure in Selected Positions in Senate Committees, 2006-2016, November 9, 2016
Staff Tenure in Selected Positions in Senators' Offices, 2006-2016, November 9, 2016
Staff Tenure in Selected Positions in House Committees, 2006-2016, November 9, 2016
Staff Tenure in Selected Positions in House Member Offices, 2006-2016, November 9, 2016
U.S. Trade with Free Trade Agreement (FTA) Partners, updated November 9, 2016
China Issues Decision on Hong Kong Legislative Council Controversy, CRS Insight, November 9, 2016
Navy Force Structure: A Bigger Fleet? Background and Issues for Congress, updated November 9, 2016
Gun Control: FY2017 Appropriations for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and Other Initiatives, November 9, 2016

 Wall Street Critics in Disarray After Trump Victory | American Banker: With Republican Donald Trump's unexpected presidential victory, Wall Street critics are pessimistic about the future of financial regulation in a unified Republican Washington. "The reality of financial regulation is going to be nothing," said Simon Johnson, professor at the Massachusetts Institute of Technology's Sloan School of Business and noted critic of the excesses of the financial sector. "This is de-regulation. Complete and utter de-regulation. It's all over but the shouting." The financial services sector has proved to be unusually high on Trump's agenda already. While he barely mentioned the Dodd-Frank Act during the campaign, he listed financial deregulation as one of his top priorities in an interview with The Wall Street Journal on Friday. His specific plans are not yet clear. "So little was said about financial policy during the campaign on either side that it is something quite difficult to predict exactly what financial priorities he might have," said Arthur Wilmarth, professor of law at George Washington University. Early indications suggest that Trump's vision for financial regulation, such as it is, has been borrowed for the time being from his Republican colleagues in Congress. His transition team Thursday issued a statement about its approach to financial regulation that laments stagnant wages, financial fraud and the growth of large banks and the plight of community banks. But it appears to blame those conditions on Dodd-Frank, and vows "to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation."

Stunned Morgan Stanley Admits Nobody Has A Clue What Trump Will Do: "His Policies Are Like Schrodinger's Cat" -- As the sellside reports analyzing the post-president Trump world keep pouring in, one that caught our attention was from Morgan Stanley's Andrew Sheets in which the strategist openly admits that pretty much nobody has any idea what is coming: "Most remarkably, however, after three debates, two conventions and an election that seemed to last forever, there remains a great deal of uncertainty over what type of president Trump will actually be. In an election that was dominated by coverage of tweets, videos and emails, policy questions received surprisingly little airtime. And those questions are now crucial for markets. To a remarkable extent, investors we’ve spoken to both before and after November 8 disagree on what President-Elect Trump will actually do. Many have told us, confidently, that they believe that, while he said some extreme things on the campaign trail, he is ultimately a moderate, pragmatic businessman. A deal-maker who will delegate policy to experts, lead with market-friendly (almost Keynesian) fiscal stimulus and ultimately avoid a large fight on trade. Other investors take a less benign view. They say the President-Elect should be taken at his word, and that since the start of his campaign he has defied predictions that he would moderate his tone or policy message."The problem, according to Morgan Stanley, is during the campaign, "Trump was a master at keeping both possibilities open, broadening his appeal. Like Schrodinger’s cat, his policies existed in a state of being both pragmatic and radical, all at the same time. Upcoming cabinet appointments offer clues to which interpretation is right. Until then, we promise to keep an open mind, and focus on modelling the different paths a Trump administration could take, and what it means for markets." Here is the full MS note for those who want to add to their confusion:

Hensarling Targets GSE Reform, Dodd-Frank Rollback in Ambitious Agenda | American Banker: — House Financial Services Committee Chairman Jeb Hensarling recited a litany of priorities for his panel next year, touching on everything from the very broad, like housing finance reform, to the specific, including targeting a proposal to rein in payday lending. The Texas Republican appeared energized by the election of Donald Trump, saying that he was already working with the transition team to revamp his bill to dismantle the Dodd-Frank Act and that he plans to reintroduce the legislation early in the next Congress. "There has been a fairly constant dialogue with the Trump transition team about the Choice Act," Hensarling said during a speech Wednesday at the Exchequer Club. "There has also been dialogue with our speaker and our leader in the House." But Hensarling's plans went far beyond pushing the Choice Act, including a revived focus on eliminating Fannie Mae and Freddie Mac, a rollback of a Labor Department rule governing investment advisers and stopping the Consumer Financial Protection Bureau from finalizing a plan to curb small-dollar loans. Following is a guide to what Hensarling is focused on.
- The Financial Choice Act. Hensarling's sweeping regulatory reform bill already cleared the House Financial Services Committee in September, and is widely viewed as a marker for next year. The Texas Republican said he is open to making changes to the bill, which would restructure some federal regulators and ease regulations for banks that agree to hold higher capital.
-  Fiduciary and Payday. Hensarling also criticized a rule by the Department of Labor that would require investment advisers to act in the fiduciary interests of their clients and a plan by the CFPB to rein in small-dollar lending. The Labor Department rule is already final but will likely be rolled back by the new administration regardless of Congress. The future of the payday proposal is less clear, depending partly on the outcome of a court case that could remove CFPB Director Richard Cordray from power.
- Housing Finance Reform. Hensarling highlighted a financial reform proposal that he introduced in 2013 that would wind down Fannie Mae and Freddie Mac and take a more free-market approach to housing finance.
- Monetary Policy and FSOC. Hensarling also raised concerns that interest rates remain low, and noted that his Choice Act includes a provision that would require monetary policy to be dependent on a quantitative rule. "Our economy would be healthier and more Americans would have the opportunity to achieve success if our Federal Reserve did not wander into fiscal policy and if our Federal Reserve conducted monetary policy in a more transparent, rules-like fashion," Hensarling said.

SEC Chair Mary Jo White To Quit With End Of Obama's Term -- The first casualty of the Obama "transition" is now known: SEC chair Mary Jo White, under whose watch the market became an momentum-igniting, stop hunting mess thanks to the limitless proliferation of HFTs, whose lobby had succeeded in thoroughly penetrating and capturing the market regulator, is leaving at the end of the Obama administration.To her credit, under White’s tenure, which began in April 2013, the SEC overhauled the regulation of money-market mutual funds, credit-rating firms, stock exchanges, and electronic trading venues, much of it with mixed results.Mary Jo White plans to step down in January, opening the door to a new Republican-appointed leader. Mary Jo White, a "political independent" appointed by President Barack Obama, said Monday that she will step down as Securities and Exchange Commission chair in January. According to Bloomberg, her "nearly four-year tenure has been highlighted by high-profile enforcement cases and plagued by internal battles that stalled controversial policies."It was mostly marked however, by Mary Jo White continuing the policies of her predecessor, and not launching any material actions against major banks, with the occasional hedge fund taking it on the chin. As Bloomberg adds, with the Senate under Republican control, Trump is likely to have a relatively easy time installing his choices to run the SEC and other agencies, so the vacancy might be filled quickly. The five-seat commission is already two members short and White has essentially represented a tie-breaking vote between Republican Michael Piwowarand Democrat Kara Stein, who split on major issues.

SEC approves vast surveillance system for stock market – FT - The main US markets regulator on Tuesday approved a plan to introduce a vast surveillance system to monitor trading on the $23tn US stock market, ending six years of delays.The move by the Securities and Exchange Commission sets in motion a timetable to bring to reality its Consolidated Audit Trail, a single data warehouse that collects the millions of orders and quotes that daily pass across US equity and options markets in real-time.“With the approval and ultimate implementation of CAT, the commission’s regulatory capacity strongly embraces 21st century technology,” said Mary Jo White, SEC chair. “Through the CAT, regulators will have more timely access to a comprehensive set of trading data, enabling us to more efficiently and effectively conduct research, reconstruct market events, monitor market behaviour and identify and investigate misconduct.”The next step is to choose who will build the system. Three bidders, the Financial Industry Regulatory Authority, SunGard Data Systems and Thesys Technologies are in the running. The architects of the plan, a committee that includes exchanges, have two months to decide. The SEC estimates the system will cost $2.4bn initially and then $1.7bn a year to run.US stock exchanges, Finra and the Options Clearing Corporation, which are known as self-regulatory organisations in the market, must begin reporting to the CAT within a year while large broker dealers have two years and small broker dealers have three years.The idea was first proposed after the 2010 Flash Crash when stocks gyrated rapidly for 20 minutes. The crash revealed that authorities had little understanding of the fractured, complex nature of modern markets, where data and trading was executed in fractions of seconds across dozens of venues. The CAT will include data on the identities of the customers trading in the equity and options markets.“The CAT would essentially be the Hubble Telescope for the securities markets,” said Kara Stein, SEC commissioner, in prepared remarks. Still, the project has been beset by industry concerns over the cost, size and complexity of the project. The scheme is also likely to be one of the last pieces of business enacted by Ms White, who announced yesterday she would step down from the position in January.

Full Repeal of Dodd-Frank Isn't Main Focus of Trump Transition - President-elect Donald Trump vowed anew on Friday to dismantle the 2010 Dodd-Frank financial overhaul, at the same time his transition team is tempering expectations for a full repeal of the sweeping law, people familiar with the matter said. Instead, Mr. Trump's team is focused on rescinding or scaling back the individual provisions Republicans find most objectionable, such as the Financial Stability Oversight Council's authority to designate large nonbanks systemically important and thus subject to tougher regulation from the Federal Reserve. These people said another priority is overhauling a section of Dodd-Frank, Title II, that gives financial regulators the authority to take over a failing financial firm and liquidate it -- an alternative to the government's 2008 strategy of bailing out banks by handing them equity capital. At the same time, a Trump administration is expected to embrace other aspects of the massive law, these people said, including efforts to boost the transparency of credit-rating firms and regulate derivatives products -- the complex financial instruments at the heart of the financial crisis. Mr. Trump's financial policy team is still being assembled and its priorities could change.

House Foe of Dodd-Frank Says Overhaul Will Face Test in Senate - — A prominent Republican lawmaker on Wednesday laid out his agenda for restructuring the financial system in the next Congress, including his plan to roll back major portions of the Dodd-Frank Act. Representative Jeb Hensarling, Republican of Texas and chairman of the House Financial Services Committee, has long been a vocal opponent of the 2010 financial reform law. But he now has an ally in President-elect Donald J. Trump, who has repeatedly called for taking apart Dodd-Frank, and he has Republican majorities in both chambers of Congress. Mr. Hensarling introduced his blueprint for reform, the Financial Choice Act (“Choice” stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) last summer, and he said he was “cautiously optimistic” that a version of the bill could come up for a vote on the House floor early next year. “There has been a fairly constant dialogue with the Trump transition team about the Choice Act,” he said on Wednesday during a lunch meeting of the Exchequer Club in Washington. “There’s also been dialogue with our speaker and our leader in the House.” Mr. Hensarling’s remarks came on the same day that Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, proposed new rules for banks and nonbank lenders to end “too big to fail.” Mr. Trump’s transition team has said on its website that it “will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage growth and job creation.” Mr. Hensarling’s bill seeks to revamp the oversight of financial institutions and how big banks are wound down in times of trouble, as well as make structural changes to the Consumer Financial Protection Bureau and the broader rule-making process. It would also repeal the Volcker Rule, which is intended to stop banks from making risky bets with their own money, and call for stronger penalties for bankers who break the law, among other provisions.

The Regulatory World Won’t Change Overnight - While Trump’s influence on the financial industry may ultimately be substantial, any change is going to be slow to develop — sometimes agonizingly so. To be sure, early signs point to the new administration trying to deliver on promises to reduce regulation. The published reports pointing to ex-Goldman Sachs banker and hedge fund executive Steven Mnuchin as potential Treasury secretary, and Mary Jo White stepping down as head of the Securities and Exchange Commission, both suggest a friendlier approach to the industry. So does the news of David Malpass, a former Treasury Department official in Republican administrations, and former SEC Commissioner Paul Atkins being on the transition team. Still, there are several reasons I believe that change will be slow. First, with a turnover in political party, the Trump administration will enter a White House entirely devoid of resources or personnel. Even the software is likely to be removed from the computers. With transition teams working on issues and appointees, the vetting process is gradual and uneven. The initial focus has been on filling Cabinet-level positions. Second- and third-level administrative positions will likely go unfilled until key Cabinet officials are in place, which could take until at least the spring of 2017. Second, major change requires either legislation or changes in key administration leaders. Though Republicans retained control of both the House and the Senate, Trump has done nothing to establish allies in either body, so he is unlikely to ask congressional leaders to develop policy agendas. Another factor will be the extent to which the new president will make financial regulation a priority. Despite the enormous responsibility, the White House is typically populated by a relatively small number of people. And if Trump’s campaign staff approach will be repeated in the White House, his staff complement is unlikely to be large.

What Trump Can Do to Fix Regulators' Data Flaws | Bank Think: With the continued digitization of financial services through new product innovation and data recordkeeping, regulators have made some attempts to use technology to keep pace. But they have a long way to go. As President-elect Trump forms a new government, he should consider establishing an executive-level office to inform his administration on ushering in a new era of financial regulation — one that is much savvier about new technology and big data. The Office of Financial and Regulatory Technology would be the center of research and innovation to build links between evolving technologies and new regulations. Transparency in near-real time would be its end objective so that regulators charged with overseeing financial institutions can in fact see what’s going on behind the scenes. Regulatory oversight would take on new meaning as computers in financial institutions would be sending financial transactions to regulators’ computers in real time. Analysis of such transaction data would utilize algorithms and get smarter each day as big-data patterns emerge.

Can Financial Regulatory Changes Help Jumpstart Long-Term Investment? - In a presentation here at the Levy Institute, Emilios Avgouleas argued that financial regulatory changes since the crisis have become so complex they represent a source of financial instability, and that new liquidity and capital requirements have contributed to the problem of “short-termism” in finance. Avgouleas proposed regulatory simplification and a reorientation that would create greater relative incentives for funding long-term investment projects (e.g., infrastructure), including a lower regulatory and tax burden on long-term instruments. Empowering issuers of long-term instruments like project bonds with intellectual property rights could, he suggested, help control the quality of these financial products by preventing “slicing and dicing” in derivatives markets, on pain of losing prescribed privileges. You can watch the presentation below: “The Financial Regulation Conundrum: Why We Should Discriminate in Favor of Long-Term Finance”

 Scrutiny of Wells Fargo Will Now Shift to the Board | Bank Think: Already, the high-profile compliance breakdown at Wells Fargo has resulted in consent orders from two regulatory agencies, $185 million of fines and penalties, employee lawsuits, shareholder lawsuits, billions of dollars of lost shareholder value, the resignation of a CEO and the clawback of millions of dollars of compensation from executive officers. Wells Fargo and the entire banking industry have suffered serious reputational damage from this scandal. However, it is far from over. With John Stumpf no longer leading the company, the focus of shareholders is likely to shift to the board of directors, and the following questions are likely to be asked: What did the board know and when? Does the board have responsibility and/or liability for these compliance failures? Whether or not the Wells Fargo board satisfied its oversight responsibilities, it was undeniably tone deaf to the incendiary nature of various aspects of the alleged improper behavior. Those aspects included the fact that sales targets and incentive compensation induced noncompliant and allegedly fraudulent activity that directly and adversely affected as many as 2 million consumers; the firing of thousands of low-level employees compared to the retirement golden parachutes provided to the executive who managed retail operations; and the apparent lack of accountability at the top. As the political firestorm that erupted clearly demonstrates, the board was also mistaken in considering the matter "immaterial" from a public disclosure point of view. This may be as much the fault of those advising the board, but the board apparently allowed itself to be insulated and out of touch with the realities on the ground.

Buffett throws weight behind new Wells chief -- Warren Buffett has thrown his weight behind scandal-hit Wells Fargo, saying it is “a great bank that made a terrible mistake” whose new chief executive Tim Sloan is “exactly right” for the top job. Breaking his months-long silence on the debacle, the head of Berkshire Hathaway, the bank’s biggest shareholder, confirmed he has not sold any shares after the scandal erupted over sales practices. The famed investor also described the bank’s former chief executive, John Stumpf, as a “very decent man” — who had made “a hell of a mistake, and he didn’t correct it”. Wells has been subject of a public outcry after regulators found that, over a period of about five years, thousands of its workers who were trying to meet sales targets had set up bogus bank accounts and credit cards for customers without their consent. “It was a dumb incentive system, which when they found out it was dumb, they didn’t do anything about it,” Mr Buffett told CNN. “If you find out incentives are producing perverse behaviour to what you intended, you got to change it.” “The big mistake was they didn’t do something about it.” His comments were broadcast amid a sharp recovery in the bank’s share price, which has left Berkshire’s holding valued at about $26bn.

How the Wells Fargo Scandal Is Hitting the Bank Where It Hurts -- Consumers might still be wary ofWells Fargo in the wake of its fake account scandal. The bank said that customers opened 44% fewer new accounts this October than they did at the same time last year, Bloomberg reported. Since the scandal became public in early September, new account creation has dropped by 27%.“It takes time to rebuilt trust,” Mary Mack, Wells Fargo’s head of community banking, told Bloomberg. She added that new account creation showed signs of stabilizing this month.Wells Fargo agreed to pay $185 million in fines after employees were found to have created more than 2 million secret accounts in customers’ names. More than 5,000 Wells Fargo workers were fired for creating the accounts and funding them from consumers’ other accounts without their knowledge—allegedly in an effort to meet the company’s aggressive sales targets. If you’re an investor in Wells Fargo—which you might be through your 401(k) or other holdings—you might also be in for some bad news. If the scandal and associated fine continue to affect the bank’s bottom line, its stock price—which has rebounded to pre-scandal levels—might take a hit down the road.

Wells Fargo Gets Tough New Limits as Regulator Amps Up Sanctions -- Wells Fargo & Co. is suddenly under an even tighter vise as one of its chief regulators ripped up parts of a recent settlement over bogus accounts, potentially hamstringing new business moves that need government approval. While Wells Fargo is subject to the terms of its settlement, it will face hurdles to making major purchases, such as buying large loan portfolios or other companies, a statement issued Friday by the Office of the Comptroller of the Currency shows. The move, which revokes common protections granted to banks in settlements, limits Wells Fargo’s ability to make golden-parachute payments to departing employees and requires regulator approval before senior executives are hired. Wells Fargo agreed to pay the OCC and other government agencies a total of $185 million in September, settling a case in which the bank was accused of setting up as many as 2.1 million accounts that weren’t approved by customers. The OCC has torn up part of that agreement and imposed heavier restrictions that will be in place until the bank satisfies all of the demands in the extensive order, including reimbursing customers and fixing the internal problems that contributed to the wrongdoing. Bryan Hubbard, an OCC spokesman, said he couldn’t comment further on what triggered the agency’s latest action. It’s unclear how long the company will be subjected to the unexpected new limits, because major enforcement orders often take many months or even years to satisfy.

Banking's Ethics Problems Run Much Deeper than Wells Fargo | Bank Think: At the heart of the drama over Wells Fargo employees having opened fake accounts was an incentive structure that promoted unethical outcomes. But that structure was hardly limited to one bank or even limited to the banking industry. This scandal finds its origins in an incentive architecture – encouraging bad behavior to happen and failing to punish that behavior (enough) when it does happen – that plagues other industries as well as the government. One of the fundamental tenets of economics is that economic actors respond to incentives. While this may seem obvious, economists take great care to prove across different countries, historical periods and business sectors that people respond to the incentive structure within which they are asked to perform. Driving this structure is what is known as the "principal agent problem." Without an incentive system rewarding effort, an employee hired to perform a task exerts the least amount of effort possible, which is the detrimental to the firm. Higher-powered incentives are the "solution" to this problem, allowing employers the ability to structure rewards based on performance. The ubiquity of how economic actors respond to all incentives of varying degrees explains why thousands of people at Wells Fargo acted in largely the same way. The widespread nature of the incentive disease that permeated Wells Fargo, however, extends far beyond its walls. Since the financial services sector is so politically important and therefore politically connected, the incentive problem in banking affects other stakeholders, such as politicians, regulators, U.S. attorneys, rating agencies, etc. They either explicitly or implicitly promote ethical violations or fragility-creating actions.

Do Financial Institutions Care About Bigotry? - Adam Levitin, Credit Slips -- Do financial institutions care about bigotry?  I don't ask that facetiously.  I want to be clear that I am not raising the question of whether financial institutions themselves want to discriminate based on race, gender, national origin, religion, sexual orientation, etc. (or "have a taste for discrimination" in Gary Becker's terminology).  Instead, what I am asking is whether they care about bigotry and discrimination in society writ large?  That is, do financial institutions believe they have some sort of social responsibility?  Do they, as corporate entities believe in diversity and inclusion, and human rights?  Or even if they don't, do they believe that bigotry and discrimination in society are bad for their bottom line?   Certainly that's what they have told us in the past.  Large banks have repeatedly made statements about how diversity and inclusion help them to be better businesses and to better serve their customers.  Indeed, many large financial institutions have statements of corporate values that typically include things like diversity and inclusion and human rights.  These institutions also sponsor charity events that advocate for these values.  But how much of this is just lip service and token payments to improve community relations?  We're about to find out. The major financial services trade associations just got a letter from the Ranking Democratic Members of the Senate Banking and House Financial Services Committee, as well as from Senator Elizabeth Warren and Rep. Keith Ellison.  The letter outlines concerns about Stephen Bannon's appointment to a senior White House position and asks the trade associations to publicly oppose Bannon's appointment.  Will the trade associations (and the banks that fund them) take a stand against bigotry, even if it costs them political capital with the incoming administration?  If they don't, what sort of message are they sending about their commitment to comply with fair lending laws?  About equal opportunity employment?  About hostile workplace environments?  It'll be interesting to see what happens.  Obviously the trade associations aren't quite the same as their members, and cannot be seen as speaking for any particular member institution, but this is a case in which silence counts as action, and if the trade associations are silent, then it's on the members to speak up if that silence does not represent them. As the letter says, "This moment is a test of the moral leadership of the banking and finance community." 

JPMorgan Chase Will Pay $264 Million to Settle China Bribing ChargesJPMorgan Chase & Co. has agreed to pay $264.4 million in fines to federal authorities to settle charges that it hired friends and relatives of Chinese officials in order to gain access to banking deals in that country.JPMorgan’s Asia affiliate allegedly created a quid pro quo program that would hire the children and friends of high-ranking Chinese officials, regardless of the person’s qualifications, in order to gain favor and win banking deals. The bank will avoid criminal bribery charges as part of the deal reached with the Department of Justice, the Securities and Exchange Commission and other regulators. The bank reached what’s known as a non-prosecution agreement over the allegations.

'Human, Please Look at This': Nasdaq Using AI to Spot Abuses | American Banker: Certain things make Valerie Bannert-Thurner raise an eyebrow when looking for signs of bad behavior on the Nasdaq exchange. Gloating in the chatrooms, for example. "I like the example of excessive cheering because the guys just can't help themselves but cheer," said Bannert-Thurner, who is senior vice president and head of risk and surveillance at Nasdaq. Another worrisome indicator is seemingly too-good-to-be-true trading profits. "If people are excessively profitable given how they trade and in comparison to everybody else trading the same instruments with similar styles, then we ask, is this luck or something else?" Bannert-Thurner said. "You just can't outperform the market all the time." But with 14 million trades a day on Nasdaq and innumerable chats and emails, she and her colleagues can't look at everything. Enter artificial intelligence. This year, the exchange began using AI to help it detect market abuse. Bank clients of Nasdaq and its artificial intelligence partner, Digital Reasoning, are also starting to use the technology — UBS is one. It's another place artificial intelligence is changing work in financial services, along with virtual assistants, back office operations, lending decisions, authentication, compliance, detecting cybercrime, finding fraud, and any place there's simple paperwork that could easily be automated. Nasdaq is one of the first exchanges to use AI. "This is an emerging trend, but not all leading exchanges and vendors have the same capabilities," he said.

Trump Victory Leads To Unprecedented Fund Flows; Trillions In Gains, Losses -- As we reported before, while stocks soared and the Dow Jones hit two consecutive days of record highs after Trump's victory, despite predictions of a crash, on belated hopes of a multi-trillion debt funded fiscal stimulus (one which may very well not happen), bonds crashed. As JPM calculates, the sharp rise in yields inflicted a big loss in the value of the global bond universe. The dollar value of the universe of tradeable bonds globally lost $1.2 trillion over the past week falling from $54.2tr at the end of last week to $53.0tr as of cob November 10th. Most of the loss was driven by government bonds the value of which declined by $0.8 trillion globally. Partially offsetting the massive fixed-income losses, at the same the value of global equities increased by $0.8 trillion over the past week, rising from $51.5 trillion at the end of last week to $52.3 trillion as of November 11th. And while the attention of shocked US traders remains largely focused on hopes for a "bening" inflation spike, the reality is that between the soaring dollar, the unprecedented hit to emerging market currencies and the imminent surge in FX outflows, not to mention the spike in yields which will grind the stock buyback machinery - according to Goldman, Barclays and SocGen the only source of equity upside in recent years - to a halt, likely unleashing the next leg lower in stocks as Deutsche bank warned overnight. In any event, here are some further observations from JPM on the similarities of Trump’s win with Brexit which it says "are clear in terms of the political causes of the win and the failure of pollsters to capture voters’ intentions. However, JPM notes, "the market reaction has been different to that seen after the Brexit referendum, or at least it happened much faster. While a V-shaped equity market reaction took place over a period of a week or so after the Brexit referendum, a similar market reversal took place within hours post this week’s US election. Equities sold off by almost 5% in early trading before finishing Wednesday up by more than 1%. Perhaps a measured speech by the new president-elect played a role for the much faster market reversal, compared to the power vacuum that followed Brexit."

Big banks seek DOJ's blessing for real-time payment system -- The Department of Justice is conducting an antitrust review of a next-generation payment system that is being developed jointly by the nation's largest banks, American Banker has learned. The formal review was requested by The Clearing House, a payments company that is co-owned by 24 big banks and has started work on modernizing the nation's payment rails. The Clearing House has been marketing its faster payment system to smaller financial institutions and a thumbs-up from antitrust officials could prove useful in convincing community banks to sign up. "This isn't being initiated by the DOJ. It's being initiated by The Clearing House," said a source with knowledge of the situation. The New York-based firm is striving to move quickly in a competitive environment in which other companies are also vying to build the rails of a modernized U.S. payment system. The Clearing House first announced plans to build a real-time payment system in 2014 and in April of this year the company said that it was planning a pilot launch for the first quarter of 2017. It remains to be seen whether the antitrust review will affect the timing of the system's launch. The Clearing House declined to comment on the record for this article and a Justice Department spokesman said that the agency does not comment on whether specific matters are under investigation. But a former Justice Department official said that companies frequently forgo the DOJ process because it tends to move slowly, which can lead to delays in launching the business ventures that are under review. "There are no time limits on the government to respond to a request for a business review," said David Balto, a former antitrust lawyer for the Justice Department who is now in private practice. "They proceed oftentimes at a Methuselah-like pace."

Suspected 5th Columnist Streetwise Professor Knocks Blockchain… But Defends Elites - naked capitalism by Clive - Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it. Not quite so easily forgivable, though, are the members of an altogether different cadre who don’t give the impression of having to live paycheck to paycheck. What is it that motivates them? Why do they willingly devise clever — and, I have to say it, some are exceptionally adept — ruses to defend and further the causes of our élites? We have a line that stretches round the block of those in the credentialed classes who, even while they happily critique individual technology or design failings in one example of financial innovation, seemingly can’t help but to cling on to the toxic notion that the concept of financial innovation can never fail to be a good thing. Take, for example, blogger Mike Hearn, who did a grand job of itemising Bitcoin’s manifest shortcomings, in his (now infamous amongst finance technology industry watchers) diatribe, only to betray his underlying Silicon Valley allegiances by concluding: “Bitcoin has no future whilst it’s controlled by fewer than 10 people. And there’s no solution in sight for this problem: nobody even has any suggestions. For a community that has always worried about the block chain being taken over by an oppressive government, it is a rich irony. There are many talented and energetic people working in the Bitcoin space, and in the past five years I’ve had the pleasure of getting to know many of them. Their entrepreneurial spirit and alternative perspectives on money, economics and politics were fascinating to experience, and despite how it’s all gone down I don’t regret my time with the project.” I’ve added my emphasis to the most troubling parts of Mike’s worldview. At the top, we have classic libertarian codswallop, tapping into a Regan-esque framing of incompetent, overbearing big state fears. Then we get a thinly-disguised unicorn sighting, purporting to be the solution. Namely,  “talented people” demonstrating “entrepreneurial spirit”, apparently freeing us from the ever-present constraints of conventional money. It’s a very seductive fiction. And an unpleasant one, too. What, exactly, are the self-appointed “community” who are so sufficiently  “worried” about a central authority that they came up with Bitcoin and Blockchain? Who are the “talented and energetic people” who will deliver the future for us, based on those “alternative perspectives”?

 Innovation Will Stall Without a Regulatory Fintech 'Sandbox' --All policymakers and regulators claim to love innovation, especially if it might help the underserved. Unfortunately, regulators' thinking often fails to keep up with their rhetoric. A particularly frustrating example is the emerging opposition from some in the government, including Sen. Mark Warner, D-Va., and Comptroller of the Currency Thomas Curry, to a regulatory sandbox for financial services. Sandboxes provide a space where companies can try new ideas, under the watchful eye of regulators, but with some degree of regulatory forbearance, including the waiver of certain rules or limits to enforcement actions. Opponents fret that a sandbox would provide companies with a way to avoid consumer protection laws. However, sandboxes need not be a Hobbesian "war of all against all," where the powerful prey on the weak. Instead — provided they are done right — sandboxes can offer an environment where companies can innovate while ensuring consumers are protected. Fear and uncertainty about regulatory risk are major impediments to companies pursuing innovative financial products. Concern is especially high for innovators trying to serve populations who need help the most. The fear of facing the regulator's wrath chills innovation, deprives consumers and encourages firms — especially small innovators — to stay under the radar. In addition to harming companies, innovation and consumers, this state of play isn't good for regulators. Refusing to let innovators experiment in a permissive environment keeps regulators in the dark. For regulators, who all too often have to play catch up, this reality ought to be reason enough for them to accommodate innovators. Regulatory sandboxes are a potential solution to innovators' and regulators' problems. In the U.K., the Financial Conduct Authority runs a sandbox program focused on financial technology companies. This sandbox allows firms to test new products that regulators deem are truly innovative and potentially beneficial to consumers.  The FCA also requires firms to have appropriate consumer safeguards, such as the wherewithal to compensate consumers who are harmed if the test goes awry.

OCC's Curry: Fintech a 'Strategic Risk' for Small Banks | American Banker: — Smaller banks risk falling behind if they do not make space for financial innovation, Comptroller of the Currency Thomas Curry warned Friday. Speaking before the 11th Joint Community Banker Symposium at the Chicago Fed, Curry said that community banks need to assess the strategic risk of the rise of fintech — and ensure they are not left behind. "One particular issue testing banks' strategic risk today is the tectonic shift underway regarding innovation and financial technology," he said. "While fintech companies are still a small portion of the industry, their rapid growth requires banks and regulators to ask big-picture questions about the future of banking." Banks should begin asking themselves questions about how their products fit the needs of their consumers — including the growing millennial contingent, Curry said. He said they should also ask themselves: "Are we offering the right products, and have we identified the right goals? Do we have a plan for adapting to the changing marketplace in the next five or 10 years?" But Curry acknowledged that for cash-strapped community banks, adopting new technologies is easier said than done. "While larger banks and some smaller ones may have the resources to fund innovation labs, conduct their own research and development, or even purchase a more mature fintech company, many smaller banks may have to seek alternative ways to incorporate innovation into their strategies and business plans," he said.

Robo Adviser Camps Take Shape with Wells Fargo-SigFig Pact | American Banker: Two leading choices have emerged among robo-advice platforms for institutions: BlackRock's FutureAdvisor and the UBS-backed SigFig. On Tuesday, Wells Fargo announced that SigFig will power its digital advice offering. "This offering will mark an important step forward in delivering financial advice to the next generation of investors, while building a long-term pipeline for our full-service business," said David Carroll, head of wealth and investment management at Wells Fargo. Earlier this year, Wells Fargo outlined a pilot program to introduce robo advice in 2017 through its community bank unit. The platform would eventually be available to all of its brokers and clients, executives said. SigFig CEO Mike Sha says the partnership with Wells was months in the making. "You can imagine, given the nature of these relationships, it takes quite a bit of time to figure out integration. It's very complex." Sha is endlessly optimistic, buoyed by the string of good news this year for the San Francisco-based startup — particularly the blockbuster partnership with UBS in May — and the wide potential for digital advice to grow. "We obviously are excited to be in a partnership with Wells Fargo," Sha says. "They do reach quite a staggering amount of consumers. Over the next couple of years, we expect to be touching a majority of the market though our partnerships." In addition to its relationship with UBS, SigFig this year announced a partnership with Pershing. The startup also received $40 million in funding from a consortium of investors including Eaton Vance, Comerica and New York Life. Comparatively, FutureAdvisor has lined up agreements to provide its technology to U.S. Bank, BBVA Compass, RBC Wealth Management and LPL.

CFPB Launches Inquiry into Data-Sharing Dispute Between Banks, Fintech | American Banker: — The Consumer Financial Protection Bureau is launching an inquiry into consumer access to financial information that is part of an ongoing dispute between banks and fintech companies about the sharing and control of consumer records. The agency released a 20-page proposal on Thursday seeking public comment on the issue while it holds a field hearing in Salt Lake City about the challenges consumers face in accessing and securely sharing their financial records. The CFPB often uses field hearings to release rulemakings, but the proposal stated that public comments will be used "to evaluate whether any guidance or other action by the bureau is called for, including future rulemaking." The inquiry is focused on consumer choice, security and control, including whether some institutions make it difficult to access financial records, and what information consumers are given about how their records are used. "Consumers should be able to use their financial records and account information and securely share access in an electronic format," CFPB Director Richard Cordray said in prepared remarks. "Technology provides opportunities to use these records to create new consumer tools that help improve financial lives. To realize that potential, we are launching a public inquiry into how much control consumers have over their records and how easy and secure it is for them to share their records with third parties."Cordray first warned banks in October not to limit access to financial data by third parties working on behalf of the customer — comments that elated fintech firms which rely on aggregating data to offer financial advice and other services.

CFPB's Move on Data Aggregation Pits Banks Against Fintechs | American Banker  — Banks are butting heads with consumer groups and fintech firms over the need for new rules governing the use of financial data. The Consumer Financial Protection Bureau opened the door to possible new regulations Thursday by requesting comment on what can and should be done to prevent banks from cutting off third-party access to consumer data where the customer has given permission. At a field hearing in Utah, banking representatives said the furthest the CFPB should go is offering general guidelines. The CFPB should provide "industry guidance via principles, versus via enforceable rules," Ryan Falvey, a managing director at the Center for Financial Services Innovation, said during a panel organized by the CFPB in Salt Lake City. But consumer groups argue that will not be enough to ensure that consumers can use their own financial data as they see fit. "The offer of creating voluntary standards is one that industry makes all the time to delay regulation or to delay legislation and to delay customer protections," said Ed Mierzwinski, director of the consumer program at the Public Interest Research Group. "I was born at night. But it wasn't last night." Tensions between banks and fintech companies that use screen scraping technologies to obtain the information of consumers came to the fore earlier this year when it was reported that several large institutions had moved to shut out third parties. CFPB Director Richard Cordray issued a stark warning this fall that such moves were not acceptable, and reiterated Thursday that more may need to be done.

How Out-of-Date Remittance Rules Worsen De-Risking | Bank Think: Remittances give some banks the compliance heebie-jeebies. So they de-risk. In the U.S., some banks have put blanket bans on remittances, closing down accounts that they perceive are at risk for money laundering or terrorist financing — including those of money transfer services. However, what began as an effort to demonstrate anti-money-laundering compliance has resulted in widespread negative impact on communities that rely heavily on being able to quickly and securely send money home. Hundreds of millions of people — especially in developing countries — rely on remittances sent by family members working abroad as a crucial form of income. Without access to convenient and competitively priced services in the formal financial services sector, money transfers are often pushed underground, moving through informal or even illegal channels. This reduces transparency in the system, leads to greater risk of money laundering and other criminal activity, and adversely affects communities in the world that rely on remittances the most. A 2015 Global Center on Cooperative Security and Oxfam report described the problem accurately: "Overly restrictive AML/CFT measures may negatively affect access to financial services and lead to adverse humanitarian and security implications. Rather than reducing risk in the global financial sector, de-risking actually contributes to increased vulnerability by pushing high-risk clients to smaller financial institutions that may lack adequate AML/CFT capacity, or even out of the financial sector altogether."

 Is Donald Trump Right That Banks Can’t Lend? - Donald Trump wants to spur bank lending by dismantling the 2010 Dodd-Frank regulatory overhaul. That again raises the question of whether banks in the wake of the financial crisis are unable or unwilling to lend, holding back economic recovery, or if the problem is that borrowers haven’t wanted to borrow more.  The president-elect said Friday in an interview with The Wall Street Journal that banks are “unable to lend” because of regulation. Lending data show the issue isn’t cut and dried. And there may be factors other than Dodd-Frank, such as bank capital requirements, at work. “In essence, what Trump is saying is it’s a supply issue,” said Brian Foran, banking analyst at Autonomous Research. “Banks are saying it’s a demand issue.” And banks are lending. Loans and leases in bank credit stood at $9.1 trillion as of Nov. 2, according to Federal Reserve data. That is up about 25% from early 2013, surpassing a crisis-era peak of nearly $7.3 trillion. Business-loan growth has been particularly strong. Over the past five years, so-called commercial and industrial loans measured on a monthly basis have risen at an average rate of 10.6% from a year earlier, according to Fed data. That is well above an average of 8% since 1948. Total business loans made by banks topped $2 trillion earlier this year and eclipsed their crisis-era peak in 2014, Fed data show. Such loans were equal to more than 12% of real gross domestic product in the third quarter, their highest level in at least 50 years. The latter, though, may also be because of the slow-growth economy. On Dodd-Frank, many banks have had a mixed view, saying it has made the financial system safer overall although specific parts have hampered growth. Smaller banks, in particular, have complained the law has imposed onerous costs to meet new compliance requirements while also limiting the kinds of products they can offer customers. More stringent capital requirements and other legislation also have an effect. “We could lend more money if the capital levels were different,” Bank of America Corp. Chief Executive Brian Moynihan said earlier this year at a Wall Street Journal CFO Network conference. He added that annual stress tests, which were called for in Dodd-Frank, are a drag, as well.

What Bankers Want (and Don't Want) from President Trump - American Banker (slides) Optimism is running high in banking after the presidential election, as many bankers see Donald Trump's promises to lower corporate taxes and weaken regulations as potential boons for the economy and their bottom lines. Others, though, doubt Trump would push through or even endorse meaningful regulatory reform and are wary of his protectionist rhetoric. Here's what some bankers have to say to the president-elect.

How to think about banks -- Banking is not an industry; banking is not the real economy. The big banks especially are economic and political behemoths that remain unpopular and poorly understood in the popular imagination. Opinion polls show voters favor breaking them up, and some shareholders do too. While Wall Streeters may bemoan the fact that banks are no longer hot growth stocks, I suspect most voters who chose either candidate would not be saddened to see banks become public utilities. The Republican agenda to roll back Dodd-Frank, if this means unshackling the megabanks from speculating with public and taxpayer funds, will be the first betrayal by the incoming administration of its voter base.  Banks are now basically franchisees of the government's, i.e. the taxpayers', full faith and credit, as recently and eloquently explained by Professors Saule Omarova and Robert Hockett Banks create and allocate capital because the government recognizes bank loans as money and puts taxpayers' full faith and credit behind bank IOUs. The conventional story that banks convert privately-accumulated savings into loans to borrowers is a myth. Because banks are public-private partnerships to create and allocate capital, the public can and should play a central role in insuring that the financial system serves the needs of the real economy, not just the financial economy. So here is the first test for our new federal leaders. Are you tools of Wall Street, doing its bidding by undoing financial reform, or will you turn banks into the public utilities they ought to be? 

 GAO All But Endorses Fed Stress Tests, Dashing Industry Hopes | American Banker: — The Government Accountability Office suggested minor tweaks to the Federal Reserve's stress tests, effectively endorsing the agency's models and disappointing bankers who had hoped the watchdog would push for greater transparency. In a report Tuesday, the GAO said the Fed could improve its communication skills with respect to certain aspects of the stress testing regime and might do more to ensure the efficacy of its models. But it was not the kind of rebuke that many Republicans and the banking industry were hoping for, something that could have provided ammunition to retool the annual tests in ways that the banks favor.   The report outlines findings related to three topics: communication related to the qualitative test; the process for creating and issuing stress scenarios; and examination and improvement of capital performance models and model arrays. The Dodd-Frank Act mandated that the Federal Reserve execute an annual evaluation of all banks designated as systemically important financial institutions — that is, banks with assets of more than $50 billion. The Fed actually has two separate stress tests — the Comprehensive Capital Analysis and Review and the Dodd-Frank Act Stress Test. Both tests examine the performance of a bank's balance sheet under the conditions of three hypothetical stress scenarios over none consecutive quarters: one baseline, one adverse, and one severely adverse. DFAST works by running the banks' balance sheet through the scenarios using a standardized capital management plan, whereas CCAR uses the banks' own capital management plan. The Fed sees whether the banks' capital levels remain above the minimum capital requirements under all three scenarios, but banks cannot "fail" the DFAST test — the only penalty occurs if banks fail to meet minimum post-stress capital levels under CCAR.

Three Federal Studies Show Fed’s Stress Tests of Big Banks Are Just a Placebo -- Pam Martens -- The only thing standing between the American people and another apocalyptic financial collapse among by the biggest banks on Wall Street is the Federal Reserve’s stress tests and capital requirements. After Wall Street laid waste to the U.S. housing market and economy from 2008 through 2010, while propping itself back up with a feeding tube from the taxpayers’ pocketbook, the Obama administration passed the Dodd-Frank financial reform legislation in 2010.  It wasn’t so much legislation as it was an illusory 2300 pages of rules that might someday get implemented in a meaningful way if President Obama appointed tough cops to his financial regulatory bodies – which he decidedly did not do. One of the promises in Dodd-Frank was that the Federal Reserve would annually assess whether the biggest and most dangerous banks have adequate capital to withstand a severe recession and whether the bank has the proper risk-management programs in place to prevent it from imploding and becoming a ward of the taxpayer. Yesterday, the nonpartisan congressional watchdog, the Government Accountability Office (GAO), became the third Federal entity in the last two years to indicate that the Fed is muffing the job of stress testing the big Wall Street banks.The GAO report notes: “…the Federal Reserve’s organizational structure for the stress tests does not include a formal process through which model development or risk management at the aggregate—or system-of-models—level is implemented…By largely focusing the modeling principles on the component models and not applying those principles to the system of models, the Federal Reserve has limited its ability to manage the extent to which model risk is introduced into the supervisory stress test models.” Last year, the Federal Reserve was criticized in a report by its Office of Inspector General over the models in its stress tests. But far more alarming was a report issued just this past March by the Office of Financial Research (OFR), which was also created under the Dodd-Frank legislation.

 FDIC Softens Final Big-Bank Deposit Plan | American Banker: — The Federal Deposit Insurance Corp. on Tuesday finalized a rule that will require big banks to keep readily available records of their insured deposits. The final rule, modified in part from a proposal issued by the agency in February, will require 38 financial institutions to maintain "complete and accurate" data on each depositor, and set up their systems so that the data is accessible within 24 hours of a failure. "Timely access to insured deposits when a bank fails is critical to maintaining public confidence in the banking system," FDIC Chairman Martin Gruenberg said in a press release. "The FDIC is proposing to achieve this goal by generally requiring banks with two million or more deposit accounts to improve the quality of their deposit data and make changes to their information systems." The final rule was softened slightly from the earlier plan. Banks will get more time — three years instead of two — to implement the rule. It will also include different requirements for so-called pass-through accounts — like trust deposits and brokered deposits that are indirectly insured. The rule will go into effect April 1, 2017. The final rule is still more stringent than an earlier regulation that was finalized after a fight with the industry in June 2008. The FDIC has argued that it needs quicker access to banks' data on insured deposits in order to respond to a failure in a timely manner."The FDIC is required to provide depositors with access to their insured accounts as soon as possible after an institution fails," the agency said in the press release. "Typically, this money is available by the next business day."

Kashkari's Plan to End TBTF Comes at High Price— Minneapolis Federal Reserve Bank President Neel Kashkari outlined a dramatic proposal that he says will all but eliminate the risk of another financial crisis, albeit at a cost that is nearly quadruple that of the current post-crisis regulatory framework. Almost exactly nine months after he declared that the biggest banks are still "too big to fail," Kashkari on Wednesday revealed the long-awaited result of his regional bank's inquiry into how to better reduce the risk of both a financial crisis and the need for the government to bail out faltering banks. He said his resulting proposal would solve the problem once and for all, but it wouldn't come cheap. "Regulations can make the financial system safer, but they come with costs of potentially slower economic growth," Kashkari said. "Ultimately, the public has to decide how much safety they want in order to protect society from future financial crises and what price they are willing to pay for that safety." The Kashkari plan has four core pillars:

  • Capital — The first provision would narrow the definition of capital to include only common equity – and then raise the minimum requirement for banks with more than $250 billion of assets to 23.5% of risk-weighted assets from its current level of roughly 13%.
  • Certification — The U.S. Treasury secretary would be required to certify that those banks are not "too big to fail." If he or she will not do so, the bank must retain additional capital under the certification is granted, up to a ceiling of 38%. This process, Kashkari said, is designed to push banks to restructure themselves in such a way as to make them less complex and reduce the risk of failure and the spread of market contagion.
  • Taxing shadow banks — The Minneapolis Plan would also impose a tax on so-called shadow banks with more than $50 billion in assets — including hedge funds, mutual funds, and financial intermediators – of between 1.2% and 2.2%, depending on systemic risk. Such a tax would "roughly level the playing field" between the banking and nonbanking sectors, he said.
  • Regulatory relief — The plan would reduce and streamline the regulatory burden on small banks with less than $10 billion of assets, which "have a vital role to play in American communities" and represent a "relative lack of risk to the economy," Kashkari said.

Watchdog Finds 'Significant Variability' in Oversight Between Fed Banks - A Federal Reserve watchdog says that there is "significant variability" in the supervisory cultures at regional Fed banks, and that more can be done to ensure supervisors can offer dissenting views on how to regulate the largest and most systemically risky banks. The Federal Reserve's Office of Inspector General issued a long-awaited report Thursday that found substantial differences in supervisory cultures, much of which was attributable to management structures and practices. While more than 70% of the respondent supervisors who the OIG surveyed reported that they felt safe to speak up at their banks in general, other survey questions suggested that there was room to improve. "Among the 10 Reserve Banks included in the scope of our evaluation … we noted that significant variability exists in employees' comfort levels sharing views," the report said. "Our survey results and interviews revealed that differences in leadership and management approaches among supervisory leaders at the Reserve Banks contribute to this variability." The report further noted that, of those 10 banks whose regions are home to a large bank subject to enhanced supervision by the Large Institution Supervision Coordinating Committee, the Federal Reserve Bank of New York faces the most pointed challenges in hiring, maintaining and retaining effective managers, and that effect is largely because the New York region is home to so many LISCC banks. "We noted that hiring, developing, and retaining effective managers is a challenge for all the Reserve Banks that supervise large financial institutions; this challenge is particularly acute for the Federal Reserve Bank of New York," the report said. "A greater emphasis on recognizing and acknowledging FRB New York supervision teams and individual employees who share their views may help to send clearer signals to employees about the behaviors that are important to senior leaders."

Bank Statement Loans Are Only as Safe as the Lenders Originating Them: As consumers increasingly accept nontraditional jobs and move away from standard, well-documented income patterns, mortgage lenders are faced with an old dilemma taking on a slightly new form: whether loans made from bank statements documenting a borrower's cash flow into and out of their bank accounts are safe. With many things these days, the answer is that it depends. Theoretically, a bank statement loan can be sufficiently documented under the ability-to-repay rules, depending on the underwriting and reasonableness of the assumptions relevant to the approval. However, lenders are increasingly adopting assumptions for evaluating bank statements that are extremely vulnerable to attack under the ATR laws. These assumptions ignore realities, or uniformly apply standards, that are in many cases erroneous and overstate income. For example, certain lenders have programs determining personal income off of gross business revenue. Of course, depending on the type of corporate structure and the industry, profit realization can widely vary and using a constant is fraught with risk. After all, if a lender assumes the borrower has 30% profit in an industry where the average profit is 10%, it might be hard to convince a jury there was a reasonable good faith belief in the income. Similarly, some lenders are conducting residual income analysis assuming a 25% tax rate. Again, depending on the borrower's income bracket and state of residence, it's very plausible such assumptions exaggerate income in a manner that can be proven with relative ease. Lenders need to re-evaluate alternative documentation loans to ensure that their underwriting standards apply broadly to all borrowers. Otherwise, to the extent a borrower can subsequently demonstrate the standards for a percentage of borrowers were foreseeably inaccurate, the creditor is vulnerable to an ATR claim.

Small Banks Start to Feel Sting of BSA Enforcement -- Carter Bank & Trust in Martinsville, Va., finished 2015 on a high note that culminated in record earnings at the $4.7 billion-asset institution. The notoriously frugal bank had gained momentum bringing in revenue to go along with its tight cost control. Much of that changed when the bank felt firsthand the chilling effect of regulatory burden.Carter disclosed last month that it was hit with a consent order requiring it to beef up compliance tied to the Bank Secrecy Act. The bank said in a letter to shareholders that regulators advised it to increase the number of people in its BSA department from three full-time employees to "a minimum of 22."  "We have no choice to but to comply … and will do so in a timely manner," Worth Harris Carter, the bank's chairman and chief executive, wrote in the letter, which did not cite any specific reason the institution received the mandate. "As of this date, the total cost is not known and we are making every effort to mitigate" the impact.  Officials at Carter Bank, along with the regulators behind the consent order — the Federal Deposit Insurance Corp. and Virginia's Department of Financial Institutions — did not respond to requests for comment.Carter Bank's quandary is further proof that regulators are stepping up BSA and anti-money-laundering enforcement at smaller institutions, industry experts said. "It's a cost of doing business in the United States," "All financial institutions are being held to a higher standard," Fernandez said. The bar for BSA compliance "has been raised across the board."

CFPB's Arbitration, Payday Plans May Be Derailed, Gutted | American Banker: The Consumer Financial Protection Bureau's contentious rulemakings on arbitration and payday lending may be in jeopardy with the change in administrations and continued GOP control of Congress. President-elect Donald Trump could conceivably take a personal interest in the agency's arbitration plan, given that he is due in court Nov. 28 to defend himself against allegations of fraud brought by students of now-defunct Trump University in a class-action suit. "We do know that Donald Trump is no fan of class actions, since he has one going on right now," said Alan Kaplinsky, who leads the consumer financial services group at Ballard Spahr. "On the industry side, people are feeling very confident that the [arbitration] rule will not become effective." Arbitration is arguably one of the bureau's most contentious rulemakings because it is expected to unleash a wave of class-action lawsuits against lenders, credit card companies and other financial firms. The CFPB's plan would allow consumers to ban together to sue financial companies, a switch from the current setup, under which disputes must be resolved through arbitration. The proposal has been portrayed by as a money grab by the plaintiff's bar that would increase liability for 50,000 businesses, while consumer groups argue it's a much-needed reform that gives more power to borrowers. The arbitration plan was already likely to face litigation prior to Trump's win. The U.S. Chamber of Commerce was widely expected to sue the agency, though that can only happen once a final rule comes out.

Future of CFPB in Play as Warren Digs In | American Banker: — Sen. Elizabeth Warren, D-Mass., delivered a blunt message to fellow Democrats on Monday, warning them not to support efforts to restructure the Consumer Financial Protection Bureau. But whether the progressive Democrat can hold the line with her colleagues — or stave off Republican attempts to rejigger the agency using filibuster reform and other unusual legislative actions — remains to be seen. At the very least, Warren's comments are a dose of reality for the banking industry, whose representatives were beginning to predict that CFPB reform would be swiftly embraced by Democrats. "Let me be clear: It's foolish for any Dem to think that weakening support for the CFPB is good for the country or good for us as a party," Warren said in a message on Twitter. "Anyone in Congress — GOP or Dem—who votes to weaken the CFPB will declare loud and clear they represent giant banks, not working families." Since President-elect Donald Trump's victory last week, and GOP retention of the House and Senate, industry lobbyists have seen CFPB reform as a top priority, predicting that they can successfully replace its single director with a five-member commission. "There is a great opportunity for the Republicans on the Senate Banking Committee to join forces and vice versa with the moderate Democrats on the committee to craft bipartisan commonsensical solutions," said Richard Hunt, president and chief executive officer of the Consumer Bankers Association. "I think A No. 1 is a bipartisan commission for the CFPB. That is a no-brainer."

Warren Warns Trump, GOP Not to Gut CFPB— Sen. Elizabeth Warren said this week that Republicans would be making a grave mistake if they try to gut the Consumer Financial Protection Bureau, saying that the agency embodies the same populist wave that helped elect Donald Trump. "You try and take the legs out from under the Consumer Financial Protection Bureau — I think that is not only a problem for Donald Trump and the Republicans, I think this is something that the American people will say, Enough," the Massachusetts Democrat told a group of business executives Tuesday at a Wall Street Journal CEO Council meeting. While the country might be divided on ideological issues, the CFPB is "doing the people's business," Warren said. "On these core economic issues — how we build a strong middle class going forward — we have a lot of consensus in this country," she said. Warren was also asked what parts of the Dodd-Frank Act she would like to see changed or modified as Republicans look to roll back the 2010 financial reform law in the next Congress. "What I hope happens is that we have some modification. I think that Dodd-Frank was not tough enough," Warren said. She said she would reinstate the Glass-Steagall Act, a 1930s law that separated commercial and investment banking. She pointed to a bill she introduced with Sens. John McCain, R-Ariz., Maria Cantwell, D-Wash., and Angus King, I-Maine, that would reinstate a modern version of the law. "We are going to make boring banking more boring, and if you want to take risks you can't have access to the guaranteed accounts that we have over in the traditional banking system," Warren said. She also said that her version of Glass-Steagall would rein in the nonbank financial institutions, "so it is really about fighting the next war where many of the risks lie." "The guy that was just elected president of the United States gave" Glass-Steagall "two thumbs up," added Warren, noting that Glass-Steagall was included in the Republican platform.

Keep CFPB Reform Out of Budget Bills: Dem Lawmakers | American Banker: – Progressive Democrats sent a letter to congressional leadership on Thursday urging them not to pass a budget bill that would reform the Consumer Financial Protection Bureau and other components of the Dodd-Frank Act. "Congress must not include in end-of-year funding legislation any riders designed to repeal, undermine, or delay any provisions of Wall Street reform," said the letter from Sen. Sherrod Brown, D-Ohio, and Rep. Maxine Waters, D-Calif., to the leaders of the House and Senate. Congress passed a stopgap funding in bill in September that will expire Dec. 9. With the House and Senate back in session after more than a month in recess, they will resume budget negotiations that could ultimately include another stopgap measure to keep funding at the same levels. However, funding bills often carry policy riders like the one the House passed in July that would change the structure of the CFPB from a single director to a commission and subject its funding to congressional approval. A Senate funding bill that was voted out of committee in June but was not approved by the chamber did not include the same policy riders. Brown is the lead Democrat on the Senate Banking Committee, while Waters is his counterpart on the House Financial Services Committee. In their letter, they both expressed concern that reforming the CFPB as the House bill would do could hurt consumers. "Given the recent scandal at Wells Fargo, where the banks' employees were under pressure from bank management to open as many customer accounts as possible, it's clear that our financial markets need stronger rules and oversight, not less," the lawmakers wrote. "We remain opposed to efforts to include any provisions that repeal, undermine, or delay consumer or investor protections, or deregulate our financial system in any end-of-the-year funding legislation."

CFPB Appeals 'Dramatic and Unprecedented' Constitutional Ruling | American Banker: — The Consumer Financial Protection Bureau has formally appealed an October court ruling that undercut the agency's independent status, arguing that the decision laid out a theory of separation of powers without precedent in case law or the Constitution. "A panel of this Court has rendered a dramatic and unprecedented ruling that purports to override Congress's explicit determination to create 'an independent bureau' to exercise regulatory and law enforcement authority in a particular segment of the economy," the CFPB said in the filing. "It thus sets up what may be the most important separation-of-powers case in a generation." At issue is an appeals court ruling in the case of PHH v. CFPB, where a mortgage originator was fined $109 million over what the bureau said amounted to a kickback scheme. The company would allegedly steer borrowers toward mortgage insurance vendors who would buy reinsurance from a company owned by PHH. The CFPB based its fine on a new interpretation of the Real Estate Settlement Procedures Act, known as Respa, which was substantially different from previous interpretations made by the Department of Housing and Urban Development. PHH argued in its legal challenge that the CFPB had no business applying a new interpretation of an existing law retroactively, and the lower court agreed. But PHH also argued that the CFPB could not make any interpretations of Respa because the agency's director could not be fired by the U.S. president but for cause. The single-director structure for an independent agency vests an unconstitutionally large amount of power outside of the president's direct control, PHH claimed. The D.C. Circuit agreed with that argument as well, deciding simply to strike the "for cause" clause, effectively nullifying the CFPB's independent status by allowing the president to remove the director for any reason.The CFPB said in its appeal that the court's decision relies on the assumption that a multimember commission — such as the Securities and Exchange Commission or the Federal Trade Commission — somehow passes constitutional muster while a single-director structure does not. That decision seems to ultimately be based on a simple preference by the judges for multimember commissions, the appeal said.

Goldman Sachs Targets a New Kind of Customer: People in Credit Card Debt - If you’ve racked up some credit card debt—or plan to sometime down the line—Goldman Sachs is looking for your business. In a series of ads that have appeared on platforms like YouTube, Hulu and Pandora, Goldman Sachs is promoting its new line of personal loans—named Marcus, after the bank’s founder—to consumers burdened by credit card debt.“Debt happens. It’s how you get out that counts,” according to the ad’s tagline. The commercial depicts expensive mishaps like a water heater leaking or a couch getting chewed up by a new puppy.The bank launched the product last month to a select group of customers with credit scores above 660, sending them a code by mail to apply for unsecured, no-fee loans on to refinance credit card debt and fund household projects, the New York Times reported. The loans can range in amount from $3,500 to $30,000. They can be paid back in terms between two and six years, with average rates of 12 to 13%, a few percentage points below typical credit card rates.The ads are intended to “destigmatize debt and help consumers explore new ways of managing their debt,” a Goldman official told the Times. The Marcus product isn’t the first time the bank—known for focusing on wealthy clients and corporations—has reached out to mainstream customers. In April, it launched an online savings account that lets customers make deposits with as little as $1, with a near-industry-high interest rate of 1.05%.

U.S. Consumers Are Increasingly Defaulting on Loans Made Online - Bloomberg: A group of online consumer loans that were packaged into bonds is going bad faster than lenders and bond underwriters had expected, the latest sign that some startups that aimed to revolutionize the banking industry underestimated the risk they were taking. Delinquencies and defaults are reaching key levels known as “triggers” for at least four different sets of bonds. Breaching those levels will force lenders or underwriters to start paying down the bonds early. Avant Inc. and its underwriters, for example, are going to have to begin to repay three of its asset-backed notes, according to a person with knowledge of the matter. Two of Avant’s securities breached triggers this month for the first time, the person said, asking for anonymity because the data is not public. Another bond, tied to the subprime lender CircleBack Lending Inc., may also soon breach those levels, according to Morgan Stanley analysts. When the four offerings were originally sold last year, they totaled more than $500 million in size. Around $2.8 billion of bonds backed by online consumer loans were sold in 2015, according to research firm PeerIQ. A representative of Avant declined to comment. CircleBack didn’t respond to messages seeking comment. Online loans have shown other signs of weakening. LendingClub Corp. last month raised interest rates and tightened its standards for at least the second time this year after seeing higher delinquencies among its customers, especially those with the most debt.   LendingClub’s founder, Renaud Laplanche, wanted to change banking as we know it, but many online lenders are now finding themselves in uncharted territory. Steve Eisman, a money manager who famously predicted the collapse of subprime mortgage securities, said some firms have been careless and that Silicon Valley is "clueless" about the work involved in making loans to consumers. Non-bank startups arranged more than $36 billion of loans in 2015, mainly for consumers, up from $11 billion the year before, according to a report from KPMG.

Surge In Online Loan Defaults Sends Shockwaves Through The Industry - Online lenders were supposed to revolutionize the consumer loan industry. Instead, they are rapidly becoming yet another "the next subprime." We first started writing about the P2P sector in early 2015 with cautionary pieces like and "Presenting The $77 Billion P2P Bubble" and "What Bubble? Wall Street To Turn P2P Loans Into CDOs." Things accelerated in February of this year when we first noted that substantial cracks were starting to show in the world of P2P lending, and more specifically, with LendingClub's inability to assess credit risk of its borrowers that were causing the company to experience higher write-off rates than forecast.Below is a chart that was used in a LendingClub presentation showing just how far off the company was in predicting write-off rates - the bread and butter of its business. It was evident then that their algorithms weren't "working very well." At the time we said that what the slide above shows is that LendingClub is terrible at assessing credit risk. A write-off rate of 7-8% may not sound that bad (well, actually it does, but because P2P is relatively new, we don't really have a benchmark), it's double the low-end internal estimate. That's bad.  In other words, we said, the algorithms LendingClub uses to assess credit risk aren't working. Plain and simple.Three months later, in May of 2016, our skepticism was proven right when the stock of LendingClub - at the time the largest online consumer lender - imploded when the CEO resigned following an internal loan review.Since then, despite a foreboding sense of deterioration behind the scenes, there were few material development to suggest that the cracks in the surface of the online lending industry were getting bigger. Until today, that is, when we learned that - as expected - there has been a spike in online loan defaults by US consumers, sending a shockwave through the online lending industry: a group of online loans that were packaged into bonds is going bad faster than lenders and bond underwriters had expected even after the recent volatility in the P2P market, in what Bloomberg dubbed was "the latest sign that some startups that aimed to revolutionize the banking industry underestimated the risk they were taking."

 Trouble Brewing in Commercial Real Estate - WSJ: Defaults are rising in a key corner of the commercial real-estate debt market just as borrowing costs are set to jump, raising the likelihood of a slowdown of the $11 trillion U.S. commercial property sector in 2017. A financial crisis-era regulation is about to take effect that is expected to make some commercial real-estate borrowing more expensive and complicated, analysts said. At the same time, interest rates have increased since the election of Donald Trump as the nation’s 45th president last week and seem poised for a sustained rise from recent historic lows, which would further squeeze an industry built on borrowed money. “I can paint a picture that it could be disastrous, with runaway inflation and high interest rates,” said Charlie Bendit, co-chief executive of Taconic Investment Partners LLC, at a New York industry luncheon last week. The worries raise fresh concerns for the commercial property market as it enters its eighth year of expansion.Already, landlords are battling a slowdown in sales and rising vacancy rates of multifamily housing units across the U.S. and of office space in Houston, Washington, D.C., and other big markets. Commercial property sales volume was down 8.6% in the first nine months of 2016 to $345.4 billion, according to Real Capital Analytics. Now defaults are on the rise as well. More than 5.6% of some $390 billion worth of commercial property mortgages that have been packaged into securities was more than 60 days late in payment in September, according to Moody’s Investors Service. That was up from a 4.6% delinquency rate earlier this year. The culprit: loose lending before the financial crisis. Ten-year loans issued in 2006 and 2007 are now coming due, and many borrowers aren’t able to pay them off despite rising property values. In all, Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year. Suburban office properties and shopping centers are being hit particularly hard, said Edward Dittmer, a Morningstar vice president. “We’re seeing a lot of stress,”

How Big a Collateral Risk Are PACE Loans? - Investors eyeing $557 million of commercial mortgage bonds offered by JPMorgan Chase last month had to consider an unusual risk: The 103 office and industrial buildings that ultimately served as collateral might, at some point in the future, be encumbered by additional debt. The loan on the portfolio gives the property owner, Workspace Property Trust, the right to incur Property Assessed Clean Energy loans to pay for energy efficiency upgrades. Lenders often consent to borrowers taking on additional debt that is subordinate to theirs, since they are assured of being repaid first. But PACE loans create what is known as a super-senior lien. The funds are lent by municipalities and repaid through multiyear assessments against a property; if the borrower fails to make timely payments, any past due amounts take first priority. In the residential mortgage market, this lien priority is controversial. One housing finance regulator, the Federal Housing Administration, has said it will insure mortgages on homes with PACE liens; another, the Federal Housing Finance Agency, bars Fannie Mae and Freddie Mac from acquiring mortgages on a property with a PACE lien. This doesn't stop a homeowner with an existing mortgage from getting PACE financing, but it can make refinancing or selling a home with a PACE lien more difficult. In the commercial mortgage market, by comparison, borrowers often go to the trouble of getting a mortgage lender's consent before obtaining PACE financing. In the case of Workspace Property Trust, the PACE financing was pre-approved, so to speak. The original lender, a unit of JPMorgan, put language in the loan document that allows for future liens, but the current lender must sign off on any additional financing. Now that the loan has been securitized, this falls to the servicer of the securitization, dubbed JPMCC 2016-WPT. Commercial PACE programs are available in 16 states, and to date some 106 lenders have consented to borrowers incurring such liens, according to PACE Nation, an industry trade group.

 Bankers Balk at New HMDA Data Demands - Banks of all stripes have complained that upcoming new requirements for reporting information on mortgage lending will be too expensive to administer and are fearful that regulators won't cut them much slack if they make a mistake. And here's another problem: Banks already fall far short of meeting the existing data guidelines, which are less demanding than the new requirements set to take effect in January 2018. The latest batch of data, released on Sept. 29, shows huge gaps of information about the number of minority consumers who applied for loans, among other measurements because banks either did not collect that data or applicants didn't check the boxes. As required by the Dodd-Frank Act, the Consumer Financial Protection Bureau last year approved a massive overhaul of the Home Mortgage Disclosure Act. Banks will be required to collect far more data than they do now on mortgage lending, as the CFPB added 50 new data fields, such as personal credit scores and the value of properties that secure loans, according to the mortgage analytics firm Mortgage TrueView. The CFPB said when it released the proposal last year that the expanded requirements "will enhance the ability to screen for possible fair-lending problems, helping both institutions and regulators focus their attention on the riskiest areas where fair-lending problems are most likely to exist."  Bankers say the CFPB's overly aggressive demands on data collection will increase their compliance costs, could lead to delays in the loan-closing process and increase the rate of mistakes on HMDA forms, leading to more financial penalties for financial institutions. "You don't want to miss a data point because the penalties are extremely significant and there's little room for mistakes," said Rose Oswald Poels, the chief executive of the Wisconsin Bankers Association. Fair-lending advocacy groups consider HMDA essential to identifying the financial institutions that aren't holding up their end of the bargain on making loans to minority groups.

FHA Fund Jumps Again, Fueling Demands for Premium Cut: The Federal Housing Administration's insurance fund saw its fourth consecutive annual boost in its ratio of reserves to insured mortgages, reaching 2.32% in fiscal year 2016, the Department of Housing and Urban Development said Tuesday. The positive report card — which puts the fund well above its 2% statutory minimum for the second year in a row — will likely accelerate industry pressure on the FHA to cut its annual premium. "The results of the actuaries' report show the MMI fund is strong and continues to grow in value and improve in performance," said HUD Secretary Julian Castro during a conference call with reporters. "FHA remains well positioned to continue to serve the American people for years for to come." Still, a premium cut may not be in the offing due to the election results, which will leave control of HUD in President-elect Donald Trump's hands. It's unclear how his administration will feel about FHA premiums, which traditionally Republicans have wanted to keep high to minimize the government's role in the housing market. Castro could make a cut prior to the end of President Obama's administration, but that is considered unlikely. "I would be surprised if they did it during a transition. That is something you would leave for the next crew,"

Troubled FHA Reverse Mortgage Program May Prevent More Premium Cuts | American Banker: – A second consecutive positive report card for the Federal Housing Administration's mortgage fund is generating more pressure for the agency to make another premium cut, but also sparking concerns about its reverse mortgage program. The Home Equity Mortgage Conversion program experienced a huge swing in its net worth during the fiscal 2016 year, plummeting from a value of $6.8 billion in fiscal 2015 to negative $7.7 billion. "It is certainly time to have a policy discussion around moving the HECM program from the Mutual Mortgage Insurance Fund back into the General Insurance/Special Risk Insurance Fund," said Brian Montgomery, vice chairman of the Collingwood Group. "The amount of volatility is evident by the wide swings in the economic value of the HECM books of business over the last three years." The huge swing in net worth is a result of new models developed by the independent auditors that produce the actuarial report each year. "Two changes essentially resulted in lower recoveries at time of sale for the FHA, negatively impacting the estimated net worth of the HECM program by $8.8 billion," according to a Department of Housing and Urban Development summary of the actuarial report. And a third modeling change erased $4.4 billion in value. "The HECM book of business was essentially unchanged in economic net worth after you subtract out the modeling changes," said Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute. But overall, the reverse mortgage program is clearly weighing down the Mutual Mortgage Insurance Fund. The forward single-family program has reported steadily rising net worth for the past five years, doubling its value to $35.3 billion in fiscal 2016. Industry representatives have already begun lobbying HUD to separate out the reverse mortgage program

Why FHA Lenders Might Have Less to Fear in a Trump Administration: The Justice Department is disbanding a multi-agency task force that has pursued litigation and fines against Federal Housing Administration lenders for many years. And the election of Donald Trump likely signals that the new administration won't be as aggressive in pursuing False Claims Act cases against lenders as the Obama administration and Attorney General Loretta Lynch. "The tone for these FCA cases came all the way from the White House," said Donald Lampe, a partner at Morrison & Foerster in Washington. But he doubts the new president and new attorney general will put as much energy into FCA cases. If President Trump wants to "stimulate business and more lending, those kind of cases would not be a priority," Lampe said in an interview. Meanwhile, the Mortgage Fraud Task Force that has operated during most of the Obama administration is disbanding. "So you won't have this central and multi-agency Mortgage Fraud Task Force giving life to these cases," Lampe said. David Stevens, Mortgage Bankers Association president and CEO, is looking for a new tone at the Justice Department. "MBA hopes that the new attorney general will not follow the trend of this current DOJ regime, and will stop using the False Claims Act to pursue damages against lenders for minor, technical defects," Stevens said in a statement Monday.

Agents Object to New FHA Condo-Occupancy Rule: – When the Federal Housing Administration recently announced a reduction in its 50% owner-occupancy requirement for FHA-approved condominium developments, the National Association of Realtors called it a "big win." The reduction, announced and effective on Oct. 26, allows condominium buildings with a minimum of 35% owner-occupants to become FHA-approved so the owners could qualify for FHA-insured mortgages. But on further study NAR officials realized that FHA included reporting requirements they didn't expect. And it would be difficult for many condominium associations to meet those requirements. So the occupancy requirement would likely remain at 50% in many cases. "There was always a chance that the 50% owner-occupancy requirement would stay in place, so we were pleased to see FHA finally take a big step in the right direction," NAR President Bill Brown said by email on Thursday. "That said, the requirements for a building to qualify for that 35% threshold are strict, and we'll be making the case that the 35% threshold should apply equally to all buildings otherwise eligible for FHA approval." FHA has also proposed a rule that would give the agency the flexibility to reset the owner-occupancy requirement at anywhere from 25% to 75% so it can be responsive to future market changes. The comment period on this proposal ends Nov. 28. NAR will file a comment letter and seek rule changes so more condominiums can qualify for the 35% owner-occupancy requirement.

New Yorkers see drastic spike in home foreclosures | New York Post: October brought an ugly surprise to hundreds of New Yorkers, as new foreclosure cases spiked dramatically. More than 1,100 NYC households fell into foreclosure in October, a 32 percent increase from September, and a 37 percent increase from last year. Queens, which has been hard-hit since the foreclosure crisis began in 2007, had 400 new cases last month, nearly double the number of a year ago. Brooklyn also took it on the chin, with 365 new cases, a 20 percent increase. Statewide, the number of new cases jumped 15 percent, according to real estate research firm Attom Data Solutions. “We’re definitely seeing a spike,” said Westchester-based attorney Linda Tirelli. There’s been a spike in foreclosures on reverse mortgages, a crisis The Post highlighted in July, as well as on mortgages of homeowners shut out of the economic rebound, attorneys said. “People think the foreclosure crisis is toward the end, and it really isn’t,” said Rose Marie Cantanno, supervising attorney of the Foreclosure Prevention Project at the New York Legal Assistance Group. “There are still a lot of people stuck in the middle, trying to do something, but having trouble [negotiating with their lender].” While last month’s results are well below the city’s October 2007 peak of 3,200 new foreclosures, experts fear the October 2016 uptick will continue. The market for residential mortgages has shifted from big banks to specialized servicers and private equity owners.

 Default Rates Rose Before Election: S&P/Experian: The default rates for first and second mortgages rose prior to the presidential election, according to Standard & Poor's and Experian. The first mortgage default rate rose three basis points to 0.7% in October from the month before, according to the S&P/Experian Consumer Credit Default Indices. Similarly, the default rate for second mortgages ticked up two basis points to 0.58% on a monthly basis. While elevated from the month before, the mortgage default rates were lower than the rates for bank cards and auto loans, which were 2.76% and 1.08%, respectively, in October. A year ago, the default rate for first mortgages was higher at 0.81%, while the rate was lower for second mortgages at 0.56%. While it is still too early to determine the extent to which election-related effects will influence default rates and borrowing, David Blitzer, chairman and managing director at S&P Dow Jones Indices, said an increase in interest rates was probable. "Interest rates are likely to rise over the next year and may put upward pressure on consumer credit interest rates and lending terms," Blitzer said in a news release Tuesday. "Most analysts expect the new administration to expand federal spending and cut taxes — two forces likely to push interest rates higher. For consumers, higher interest rates will be seen first in mortgages."

New Home Purchase Applications Increase 8% in October: The number of mortgage applications for new home purchases increased in October, along with the average loan size, according to the Mortgage Bankers Association. Loan applications for new home purchases rose year over year by 8%, but dropped 2% from September, the MBA reported based on its Builder Application Survey. Those figures are not adjusted for seasonal patterns. The average size of a new home purchase loan also increased from $326,998 in September to $329,634 in October. And new single-family home sales were running at a seasonally adjusted annual rate of 547,000 units, the MBA estimated, which is a 7.8% decline from the September pace of 593,000 units. By share, the percentage of new home applications that are for conventional loans grew to 67.9%, compared with 67.1% in 2015. Year over year, new home purchase applications for Veterans Administration-guaranteed loans rose to 13% from 12.5%. In September, new home purchase applications for Federal Housing Administration-insured loans was 18.3% and for U.S. Department of Agriculture Rural Housing Service mortgages it was 0.7%

Mortgage Rates and Ten Year Yield, Expect 4% Mortgage Rates -- Bill Mcbride - Rates are rising with the expectation of much larger deficits next year (tax cuts combined with more spending). With the ten year yield rising to 2.25% today, and based on an historical relationship, 30-year rates should currently be around 4.1%.  As of this morning, Mortgage News Daily reports that 30 year fixed rate mortgages are around 4%. Pretty close to expected. The graph shows the relationship between the monthly 10 year Treasury Yield and 30 year mortgage rates from the Freddie Mac survey.  Currently the 10 year Treasury yield is at 2.25%, and 30 year mortgage rates were at 3.57% according to the Freddie Mac survey last week.  So expect mortgage rates to rise this week to around 4%.Also, we should see a sharp drop in refinance activity.  Currently I don't think this increase in rates will have a significant impact on the housing market.

US Mortgage Rates Soar --Because last week’s election fell in the middle of FreddieMac survey week, it was impossible to determine how closely the mortgage rate would track the post-election sell-off in the Treasury market.  This week, however, the verdict is in: over the last two weeks the 30-year mortgage rate jumped by a whopping 40 basis points to 3.94 percent, almost identical to the 39 basis point increase in the 10-year Treasury yield, and sending the average 30 year mortgage to levels last seen at the start of the year.Some details:

  • 30-year fixed-rate mortgage (FRM) averaged 3.94 percent with an average 0.5 point for the week ending November 17, 2016, up from last week when it averaged 3.57 percent. A year ago at this time, the 30-year FRM averaged 3.97 percent.
  • 15-year FRM this week averaged 3.14 percent with an average 0.5 point, up from last week when it averaged 2.88 percent. A year ago at this time, the 15-year FRM averaged 3.18 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.07 percent this week with an average 0.4 point, up from last week when it averaged 2.88 percent. A year ago, the 5-year ARM averaged 2.98 percent.

Mortgage "Rates Rip to Highest Levels Since July 2015" - From Matthew Graham at Mortgage News Daily: Rates Rip to Highest Levels Since July 2015 It was all pain, all the time for mortgage rates today.  Since the election, the average conventional 30yr fixed rate has risen roughly 0.5%, putting  November 2016 on a short list of 4 worst months in more than a decade.  Two of those months were back to back amid the 2013 taper tantrum and the other was at the end of 2010.  Let it be known that the recent surge in rates is more than a mere post-election knee-jerk.  Financial markets are fully repricing their expectations of the future, and we can't even begin to assess how that future might actually pan out until Trump takes office.  In other words, buckle up for a higher mortgage rate environment.  Rates won't necessarily be immune from good days over the next few months, but I certainly wouldn't expect a quick, triumphant return to the promised land (rates from 2 weeks ago, and below) within the same time frame.   The most prevalent conventional 30yr fixed rate quote is now 4.125% on top tier scenarios, and more than a few lenders are already up to 4.25%.  CR Note: Refinance activity will decline sharply, and I expect some slowdown in housing (still thinking about this). Here is a table from Mortgage News Daily: Home Loan Rates  View More Refinance Rates

 MBA: "Mortgage Applications Decrease in Latest MBA Weekly Survey" -From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 9.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 11, 2016.  ... The Refinance Index decreased 11 percent from the previous week to its lowest level since March 2016. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier to its lowest level since January 2016. The unadjusted Purchase Index decreased 10 percent compared with the previous week and was 3 percent higher than the same week one year ago. "Following the election, mortgage rates saw their biggest week over week increase since the taper tantrum in June 2013, and reached their highest level since January of this year,”   “Investor expectations of faster growth and higher inflation are driving the jump up in rates, and rates have now increased for five of the past six weeks, spurring a commensurate drop in refinance activity." The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since January 2016, 3.95 percent, from 3.77 percent, with points increasing to 0.39 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index since 1990.Note that this was for the week ending Nov 11th.  Rates bumped up further on Monday this week, and the survey next week will probably show a further sharp decline in refinance activity. The second graph shows the MBA mortgage purchase index. The purchase index was "3 percent higher than the same week one year ago".

FNC: Residential Property Values increased 6.0% year-over-year in September - FNC released their September 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.4% from August to September (Composite 100 index, not seasonally adjusted). The 10 city MSA increased 0.4% (NSA), the 20-MSA RPI increased 0.5%, and the 30-MSA RPI also increased 0.5% in September. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The index is still down 9.2% from the peak in 2006 (not inflation adjusted). This graph shows the year-over-year change based on the FNC index (four composites) through September 2016. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

New Listings Post Largest Decline in Nearly Four Years: Redfin: New-home listings declined significantly in October even as increased demand continued to drive faster sales times and higher prices, according to Redfin. New listings fell 6.9% year over year, the largest such drop since December 2012, Redfin said Thursday. Similarly, the inventory of homes for sale declined for the 13th consecutive month with an 8.6% year-over-year decrease, the largest since May 2013. At the same time, the median sales price of a home rose 7% from October 2015, the most since last December, to $269,200. There were six Florida markets among the top gainers in home price appreciation including Deltona, West Palm Beach, Fort Lauderdale, Fort Myers and Lakeland. "While the October market rewarded sellers, their gains came at a cost," said Redfin Chief Economist Nela Richardson. "With no new supply surge on the horizon, finding an affordable home will continue to be an unrelenting challenge for first-time buyers for the remainder of the year and into 2017." Nationwide, homes spent a median of 49 days on the market, which was five fewer than a year ago. More than a fifth of homes went under contract within two weeks during October, while another fifth sold for more than the asking price. Despite these metrics indicating strong competition, the number of homes sold actually shrank 3.2% after two months of double-digit upticks.

San Fran Home Sales Crash To Lowest Level Since 2008 As Pricing Reset Gets Underway --We have frequently written over the past couple of quarters about the bubbly San Francisco housing market that looks set for another epic reversal as home prices have reached staggering new highs just as employment levels seem to be rolling over.  With home prices now implying that only 10-20% of residents can afford the "median" priced home, it's certainly not difficult to understand why demand may be waning.      According to HousingWire and a new report from PropertyRadar, home sales in the Bay Area are finally starting to rollover with Q3 YTD volumes down 10.3% YoY, reflecting the fewest number of homes sold over that same time period since 2008.  Perhaps even more staggering is that distressed property sales fell 35.7% YoY so far in 2016, to the lowest level since 2001, as "low-priced" inventory dried up and buyers have found it financially impossible to move up to higher price tiers. Conversely, non-distressed property sales fell 7.1% on a year-over-year basis. But it should be noted that as a percentage of total sales, distressed property sales accounted for only 7.9% of total sales, compared to 11.1% in 2015 and a high of 56.3% in 2009.“The 35.7% decline in distressed property sales drove the overall decline in Bay Area sales to its lowest level since 2001,” said Madeline Schnapp, director of Economic Research for PropertyRadar. “For several years now, the affordability of distressed properties contributed significantly to overall sales,” Schnapp added. “Distressed property inventory has declined to the point it’s now a drag on overall sales. Bay Area sales will likely remain relatively flat until new, attractively priced, inventory arrives on the scene.”

Update: Real Estate Agent Boom and Bust - Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph. The graph shows the number of real estate licensees in California. The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).  The number of salesperson's licenses is off 31.1% from the peak, and is increasing again (up 3.9% from low). The number of salesperson's licenses has fallen to June 2004 levels. Brokers' licenses are off 12.1% from the peak and have only fallen to March 2006 levels, but are still slowly declining (down 1% year-over-year). It appears we are starting to see a pickup in Real Estate licensees in California, although the number of Brokers is still declining.

Housing Starts increased to 1.323 Million Annual Rate in October --From the Census Bureau: Permits, Starts and CompletionsPrivately-owned housing starts in October were at a seasonally adjusted annual rate of 1,323,000. This is 25.5 percent above the revised September estimate of 1,054,000 and is 23.3 percent above the October 2015 rate of 1,073,000.  Single-family housing starts in October were at a rate of 869,000; this is 10.7 percent above the revised September figure of 785,000. The October rate for units in buildings with five units or more was 445,000. Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,229,000. This is 0.3 percent above the revised September rate of 1,225,000 and is 4.6 percent above the October 2015 estimate of 1,175,000.  Single-family authorizations in October were at a rate of 762,000; this is 2.7 percent above the revised September figure of 742,000. Authorizations of units in buildings with five units or more were at a rate of 439,000 in October. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased significantly in October compared to September. Multi-family starts are up sharply year-over-year. Multi-family is volatile, and this was a bounce back from the decline last month. Single-family starts (blue) increased in October, and are up 22% year-over-year. This is the highest level for single family starts since 2007. Total Housing Starts and Single Family Housing StartsThe second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in October were above expectations - and at the highest level since 2007 - and August and September were revised up. A strong report.

New Residential Housing Starts in October Surprise Expectations -- U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for October new residential housing starts.The latest reading of 1.323M was above the forecast of 1.156M. The September count was revised upward by 7K.Here is the opening of this morning's monthly report: Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,323,000. This is 25.5 percent (±12.6%) above the revised September estimate of 1,054,000 and is 23.3 percent (±14.4%) above the October 2015 rate of 1,073,000. Single-family housing starts in October were at a rate of 869,000; this is 10.7 percent (±10.2%) above the revised September figure of 785,000. The October rate for units in buildings with five units or more was 445,000. [link to report] Here is the historical series for total privately-owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

Housing Starts Smash Expectations, Soar By Most Since 1982 - Last month's unexpected plunge in multi-family housing starts, allegedly the result of hurricane flooding aftereffects in the several key southern states has been fully recovered in the latest data reported by the Census bureau, which saw a 74.5% surge in multi-family starts in October, a rebound from 255K to 445K. However it was the far more surprising surge in single-family units in October, which spiked by 10.7%  from 785K to 869K, a new post-financial crisis high, that was the most surprising data point in the notorious volatile series. As a result, total housing starts soared by 25.5% sequentially in October, the biggest one month surge since July 1982, spiking from 1,054K to a whopping 1,323K, smashing expectations of 1,156K, driven by surges across virtually all regions, but most notably the Northeast and Midwest, where starts soared by more than 44%, while starts in the South and West rebounded by 17.9% and 23.2% respectively.

The post-Brexit lows in interest rates finally ignite the housing market: I have been waiting with increasing concern for the post-Brexit new lows in interest rates to ignite the housing market. This morning's housing starts and permits data shows that has finally happened. To reiterate my mantra, interest rates lead housing permits and starts, with an assist from demographics. Since the prime demographic of those entering the housing market, ages 25-34, started to grow about 5 years ago, it has provided a little "wind beneath the wings" of the housing market. Thus when the "taper tantrum" of 2013 caused interest rates to rise close to 2% at the worst, the housing market only went sideways in 2014 rather than declining. Here is a graph of mortgage interest rates (blue, inverted, left scale) with single family housing permits (red, right scale): Note that I am using single family permits because they are just as leading as permits overall, and avoid the distortions caused by the NYC housing program in spring 2015. The graph shows that housing permits stalled after the "temper tantrum" raised interest rates, and generally have slowly increased since as interest rates declined. The second graph below shows this same information YoY:This shows even more clearly that housing has responded to interest rates with generally a 6 - 9 month lag. Here are single family new home sales through September, showing they made a new post-recession high in July: Here are both housing starts and single family permits through October, showing that each has made new post-recession highs as well: This bodes well for the economy next year.

New Residential Building Permits: October Better Than Forecast - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for October new residential building permits. The latest reading of 1.229M was an increase over a revised 1.225M in September and above the forecast of 1.198M. Here is the opening of this morning's monthly report: Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,229,000. This is 0.3 percent (±2.0%)* above the revised September rate of 1,225,000 and is 4.6 percent (±1.4%) above the October 2015 estimate of 1,175,000. Single-family authorizations in October were at a rate of 762,000; this is 2.7 percent (±1.4%) above the revised September figure of 742,000. Authorizations of units in buildings with five units or more were at a rate of 439,000 in October. [link to report] Here is the complete historical series, which dates from 1960. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

Comments on October Housing Starts -- Bill Mcbride - There was a sharp decline in multi-family starts in the previous month (September), and multi-family bounced back in October. But the big story is single family starts were up again, and there were upward revisions to the prior two months combined.  As always, I wouldn't put too much emphasis on any one report, but the trend is positive! This first graph shows the month to month comparison between 2015 (blue) and 2016 (red). Year-to-date starts are up 5.9% compared to the same period in 2015.  My guess was starts would increase 4% to 8% in 2016, and that still looks about right. Multi-family starts are down 1.8% year-to-date, and single-family starts are up 10.1% year-to-date. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries, although this has dipped lately). Completions lag starts by about 12 months. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics). I also expect completions to move up some more (closer to starts). The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions. Note the exceptionally low level of single family starts and completions. The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions. A strong housing report.

NAHB: Builder Confidence at 63 in November - The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 63 in November, unchanged from 63 in October. Any number above 50 indicates that more builders view sales conditions as good than poor. This graph show the NAHB index since Jan 1985. This was at the consensus forecast of 63, and is another solid reading. 

AIA: Architecture Billings Index increases in October - Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Architecture Billings Index rebounds after two down months After seeing consecutive months of contracting demand for the first time in four years, the Architecture Billings Index (ABI) saw a modest increase demand for design services.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the October ABI score was 50.8, up from the mark of 48.4 in the previous month. This score reflects a slight increase in design services (any score above 50 indicates an increase in billings).  The new projects inquiry index was 55.4, down sharply from a reading of 59.4 the previous month.“There was a collective sense of uncertainty throughout the design and construction industry leading up to the presidential election,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD.  “Hopefully we’ll get a sense of what direction we will be headed once we get a clearer read on how the new administration’s policies might impact the overall economy as well as the construction industry.”
• Regional averages: South (53.7), West (49.7), Northeast (47.3) Midwest (46.8)
• Sector index breakdown:  multi-family residential (51.2) commercial / industrial (49.8), mixed practice (49.5), institutional (49.1)

Retail Sales increased 0.8% in October  - On a monthly basis, retail sales increased 0.8 percent from September to October (seasonally adjusted), and sales were up 4.3% from October 2015. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $465.9 billion, an increase of 0.8 percent from the previous month, and 4.3 percent above October 2015. ... The August 2016 to September 2016 percent change was revised from up 0.6 percent to up 1.0 percent. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 0.7% in October. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 4.5% on a YoY basis. The increase in October was above expectations and the previous two months were revised up; a very strong report.

Retail Sales Continue to Surge - The Census Bureau's Advance Retail Sales Report for October released this morning showed continued growth improvement over the substantial September increase. Headline sales came in at 0.8% month-over-month to one decimal, and September number was revised upward from 0.6% to 1.0%. Today's headline number beat the consensus of 0.6%. Core sales (ex Autos) came in at 0.8% MoM, which beat the consensus of 0.5%, and the September Core was revised upward from 0.5% to 0.7%. Here is the introduction from today's report:The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $465.9 billion, an increase of 0.8 percent (±0.5%) from the previous month, and 4.3 percent (±0.9%) above October 2015. Total sales for the August 2016 through October 2016 period were up 3.3 percent (±0.7%) from the same period a year ago. The August 2016 to September 2016 percent change was revised from up 0.6 percent (±0.5%) to up 1.0 percent (±0.1%).Retail trade sales were up 1.0 percent (±0.5%) from September 2016, and up 4.3 percent (±0.7%) from last year. Nonstore retailers were up 12.9 percent (±1.6%) from October 2015, while Miscellaneous stores retailers were up 9.5 percent (±4.2%) from last year. [view full report] The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

Headline Retail Sales Improves In October 2016 - Retail sales were up according to US Census headline data - and above expectations. Our analysis paints less rosy picture of retail sales. Three things to consider when viewing this data: it is not inflation adjusted - and inflation in this sector is now running around 0.5% although the three month rolling averages of the unadjusted data improved, the year-over-year growth of retail sales was 3.1% - not 4.3% shown in the headlines. there was no growth in retail sales employment this month. The relationship between year-over-year growth in inflation adjusted retail sales and retail employment has inverted - and this is normally a recessionary sign. Backward data revisions were slightly up. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 0.8 % month-over-month, and up 2.2 % year-over-year.
  • unadjusted sales 3 month rolling year-over-year average growth accelerated 0.4 % month-over-month, 3.1 % year-over-year.
  • unadjusted sales (but inflation adjusted) up 1.6 % year-over-year t
  • his is an advance report. Please see caveats below showing variations between the advance report and the "final". in the seasonally adjusted data -
  • there was weakness only in departments stores, furniture stores, and restaurants / bars.

Business inventories edge up in September - MarketWatch: Business inventories rose 0.1% in September, the Commerce Department said Tuesday. Sales surged 0.7% during the month, and were up 0.8% compared to a year ago. Inventories were 0.6% higher than in September 2015. Economists surveyed by Econoday had forecast a 0.2% gain in inventories. The stock to sales ratio was 1.38, a bit leaner than the 1.39 in August and in September 2015.

US Retail Spending Rises Briskly In Q4 Kickoff -- A solid gain in retail sales for October dealt another blow to folks who’ve been warning that a US recession is imminent. Consumer spending increased at a brisk pace last month, advancing 0.8%, which lifted sales 4.3% vs. the year-earlier level—the strongest gain in nearly two years.
A firmer annual trend for retail sales by itself is no guarantee that the expansion will endure. But considering the latest numbers in context with a broad set of indicators from other corners of the economy paints a relatively upbeat profile for the US macro trend through last month.   With most of the October numbers published, it’s clear that economic growth prevailed at a moderate pace. In fact, it would have been surprising to learn otherwise. Last month’s macro trend profile continued to project that business cycle risk was low, and would remain so for the immediate future, and the latest update on retail spending only strengthens the analysis. “The consumer is in good shape,” Michael Gapen, chief U.S. economist at Barclays, tells Bloomberg. “The pace of household spending is fairly solid. We expect a slight acceleration this quarter from the third-quarter rate.” The positive tone is echoed in the latest economic nowcast via the Atlanta Fed’s GDPNow model. The US economy is on track to expand at a 3.3% in the fourth quarter (seasonally adjusted annual rate), based on the Nov. 15 projection—modestly above the 2.9% pace in Q3.

Hispanic Consumer Confidence Surges Post-Trump -- Well, that was not supposed to happen... Based on what the mainstrea media (the real news, not the fake news), and the Democratic politicians, the world should have ended by now with minority groups across America cowering in fear as Hitler's alter-ego took power. But it didn't... and in fact Hispanic Consumer comfort surged post-election, and while white confidence rose very modestly, consumer confidence among black Americans fell only marginally... So much for all that fearmongering? Which makes us wonder, just who are all these protesters? And what are they fearful of?

 A Record 25% Of Used Car Trade-Ins Are Underwater - We have frequently written about the unsustainable trends in new car sales in the United States created by the combination of lower rates, loosening underwriting standards and voracious demand for new securitizations by wall street and pension funds that will do just about anything for an extra 20bps of yield.  Today, we find that Edmunds' "Q3 2016 Used Vehicle Market Report" reveals that many of the same problems also afflict the used auto market.  The most startling takeaway from the report is that the percentage of used cars being traded in with negative equity values continues to spike and currently stands at an all-time high 25%.  Moreover, the average balance of the negative equity also continues to rise and stood at $3,635 for Q3 2016, up from roughly $2,750 in Q3 2011. Meanwhile, the average used car price also continues to rise and stood at $19,200 as of Q3 2016.  This implies that, since most people simply roll their negative equity into their new loans (because, why not?), many used car buyers are likely sitting on loans where ~15-20% of their outstanding balance simply reflects their negative equity from their previous car.

U.S. business inventories barely rise as retail stocks revised lower | Reuters: U.S. business inventories barely rose in September as stocks of goods at retailers were not as large as previously thought, which could have implications for the third-quarter economic growth estimate. The Commerce Department said on Tuesday business inventories edged up 0.1 percent after rising 0.2 percent in August. Economists had forecast inventories, which are a key component of gross domestic product, rising 0.2 percent in September. Retail inventories increased 0.2 percent in September, instead of rising 0.3 percent as reported in an advance report published last month. They increased 0.6 percent in August. Retail inventories excluding autos, which go into the calculation of GDP, were unchanged in September instead of the 0.1 percent gain reported last month. That followed a 0.3 percent increase in August. A rebound in inventory investment contributed six-tenths of a percentage point to the economy's 2.9 percent annualized growth rate in the third quarter. Inventories had weighed on GDP growth since the second quarter of 2015. In September, business sales rose 0.7 percent after increasing 0.3 percent in August. At September's sales pace, it would take 1.38 months for businesses to clear shelves, down from 1.39 months in August.

September 2016 Headline Business Sales and Inventories Improve: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales were not as good as last month - but the rolling averages improved. Unadjusted Inventories grew relative to the previous month and inventory-to-sales ratios remain at recessionary levels. This was a down month for business sales - but inventories remain at recession levels (but moderating). However, the rolling averages for sales are now in expansion. As the monthly data has significant variation, the 3 month averages are the way to view this series. Also consider the disconnect between the year-over-year growth of employment in business and business sales - however this month the inversion was broken but the rolling averages are still inverted.

 Inventory to Sales Ratios: What’s Really Going On? - On November 15, the Census Bureau released its monthly report on Manufacturing and Trade Inventories and Sales. Despite the fact that is it mid-November, we are just now getting data for September. The census bureau headline reads “total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.38.” That’s a decline of 0.1 percentage points.  Iwent back through a number of charts to highlight major flaws inherent in superficial reporting on headline numbers.  Bloomberg Econoday saw things this way:   “Inventories proved tame in September, rising only 0.1 percent against a sharp 0.7 percent gain in sales that pulls the inventory-to-sales ratio one notch leaner to 1.38 from 1.39. High levels of inventories were a concern going into the fourth quarter but this morning’s very strong retail sales report may in fact point to the need to build inventories further.”  The Census Bureau posted this chart.  The above chart certainly does not reflect any need to build inventories. Here are some charts I produced from Fred, the St; Louis Fed data repository. In my first chart I asked “Is this is normal?” three times. However, “normal” is not a constant, and it varies sector by sector. Take autos for example. The distribution mechanism and the way autos are purchased has not changed in decades. The auto inventory-to-sales ratio is the least volatile in the group simply because the auto business has not changed. The number of auto dealers has not skyrocketed like the number of Wal-Mart stores. The number of US auto manufacturers changes very little over very lengthy periods of time.   Manufacturing inventory-to sales is a reflection of just-in-time production and delivery coupled with a more stable influence of autos.Retailer inventory-to-sales is a reflection on a huge move towards online shopping and a massive buildup of new retail stores despite the clear shift towards online shopping.Since auto sales are the biggest component of retail sales, the total inventory-to-sales ratio looks very peculiar. One simply cannot analyze inventories in an aggregate fashion this way. A single chart does not provide enough information.

Consumer Price Index: Inflation Rises Again on Gas and Shelter - The Bureau of Labor Statistics released the October Consumer Price Index data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.64%, up from 1.46% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.14%, down slightly from the previous month's 2.21%.Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.6 percent before seasonal adjustment.As in September, increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 7.0 percent in October and accounted for more than half of the increase in the all items index. The shelter index increased 0.4 percent for the second straight month.The energy index increased 3.5 percent, its largest advance since February 2013. The indexes for fuel oil and gasoline were up 5.9 percent and 7.0 percent, respectively, while the indexes for electricity and natural gas saw relatively smaller increases of 0.4 percent and 0.9 percent. In contrast, the index for food was unchanged for the fourth consecutive month, as the food at home index continued to decline.The index for all items less food and energy rose 0.1 percent for the second straight month. Along with the shelter index, the indexes for apparel, new vehicles, and motor vehicle insurance all increased in October, as did the indexes for education, household furnishings and operations, alcoholic beverages, and tobacco. The indexes for personal care, communication, used cars and trucks, recreation, and airfare all declined. The medical care index was flat over the month. [More…] was looking for a 0.4% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.5% for Headline and 2.2% for Core. The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

CPI Jumps 0.4% on Shelter and Gas Costs --  Robert Oak - The October Consumer Price Index increased by a high 0.4%.  This is a six month high.  The usual suspects were shelter, which soared up 0.4% for the month and gasoline, which rose 7.0% for the month.  Food inflation had no change for the second month in a row. Inflation with food and energy price changes removed increased 0.1% as shelter and medical costs are part of this measure. From a year ago overall CPI has now risen 1.6%, the highest annual increase in two years. Without energy and food considered, prices have increased 2.1% for the year. CPI measures inflation, or price increases. Yearly overall inflation is shown in the below graph and we can see the 1.6% increase. Core inflation, or CPI with all food and energy items removed from the index, has increased 2.1% for the last year. For the past decade the annualized inflation rate has been 1.9%. Core inflation is the figure the Federal Reserve considers for interest rate increase decisions and this month's statistics support an increase. Core CPI's monthly percentage change is graphed below. This month core inflation increased 0.1%, the 2nd in a row. Within core inflation, shelter increased 0.4%, with monthly rental costs increasing 0.4% and home ownership equivalent rent increased 0.3%. Shelter overall is up 3.5% for the year with rent increasing 3.8% annually. Car insurance increased 0.2% and has been rising, now 6.7% for the year. Apparel increased by 0.3% and is now up 0.7% for the year. Airfare plunged by -2.2% and is down by -5.2% for the year. The energy index has inverted and is now up 0.1% from a year ago. The BLS separates out all energy costs and puts them together into one index. For the year, gasoline has declined -0.9%,as has fuel oil. Graphed below is the overall CPI energy index. Graphed below is the CPI gasoline index annual percentage change and for the month gasoline prices increased 7.0%. Graphed below is the rent price index which has been soaring for some time, now up 3.8% annually, and is shown in the below graph. Food prices had no change for the month. Food and beverages have now decreased by -0.4% from a year ago. Groceries, (called food at home by the BLS), declined another -0.2% for the month, and are down -2.3% for the year. Rice fell by -2.4%. for the month. Meats dropped by another -0.7% and are down -6.4% for the year. Dairy increased 0.3% for the month but has declined -1.7% annually. It's no surprise to see food prices drop as the impact of the drought of 2015 has dissipated. Eating out, or food away from home increased 0.1% for the month and is up 2.4% for the year. Graphed below are grocery prices, also referred to as the food at home index. Medical costs are part of core inflation and are a never ending source of price increases. The Medical care index had no change, a rarity. Prescription drugs increased 0.2% while hospital services prices increased 0.1% and physicians services decreased -0.1%. Graphed below is the overall medical care index, which is up 4.3% from a year ago. .

October Producer Price Index: Final Demand Unchanged -- Today's release of the October Producer Price Index (PPI) for Final Demand came in at 0.0% month-over-month seasonally adjusted, down from last month's 0.3%. It is at 0.9% year-over-year, up from 0.7% YoY last month. Core Final Demand (less food and energy) came in at -0.2% MoM, down from 0.2% the previous month and is up 1.2% YoY. MoM consensus forecasts were for 0.3% headline and 0.2% core. Here is the summary of the news release on Final Demand: The Producer Price Index for final demand was unchanged in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.3 percent in September and were unchanged in August. (See table A.) On an unadjusted basis, the final demand index increased 0.8 percent for the 12 months ended in October, the largest 12-month rise since advancing 0.9 percent in December 2014. Within final demand in October, a 0.4-percent increase in the index for final demand goods offset a 0.3-percent decline in prices for final demand services. Prices for final demand less foods, energy, and trade services edged down 0.1 percent in October after rising 0.3 percent in both August and September. For the 12 months ended in October, the index for final demand less foods, energy, and trade services advanced 1.6 percent, the largest increase since climbing 1.7 percent for the 12 months ended September 2014. More… The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we support. Since our focus is on longer term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

October 2016 Producer Price Final Demand Year-over-Year Inflation Is Now 0.8%: The Producer Price Index year-over-year inflation 0.8 %. This is the highest rate seen since December 2014. At the producer level final demand - inflation has been insignificant in 2016. However from the report: On an unadjusted basis, the final demand index increased 0.8 percent for the 12 months ended in October, the largest 12-month rise since advancing 0.9 percent in December 2014. The PPI is now at the highest rate of inflation in the last 12 months - but the rate of increase is small. The month-over-month change is misleading. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate grew from 0.0 % to +0.7 %. In the following graph, one can see the relationship between the year-over-year change in intermediate goods index and finished goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower.

Producer Price Rise Disappoints: Asset Management Fee Collapse Trumps Surging Energy Costs -- Despite a 2.5% MoM rise in Energy costs (9.7% rise in gasoline), Producer Prices were unchanged in October as food deflation weighed on the headline index (with YoY Final Demand up 0.8% YoY - the most sicne Dec 2014). Core PPI stalled at +1.2% YoY (missing expectations of a 1.6% gain YoY) as asset management fees tumbled 5.7% dragging the index lower.The October increase in the index for final demand goods can be traced primarily to a 9.7-percent jump in gasoline prices Simply put - the price of goods was up and services down - Within final demand in October, a 0.4-percent increase in the index for final demand goods offset a 0.3-percent decline in prices for final demand services. A major factor in the October decrease in the index for final demand services was prices for  securities brokerage, dealing, investment advice, and related services, which fell 5.7 percent. The indexes for  food and alcohol retailing; fuels and lubricants retailing; apparel, jewelry, footwear, and accessories retailing;  consumer loans (partial); and hospital outpatient care also moved lower. Conversely, prices for truck  transportation of freight increased 0.3 percent. The indexes for machinery, equipment, parts, and supplies  wholesaling and guestroom rental also advanced.

Import and Export Prices November 15,2016 --Import prices are on the rise but traction is isolated to petroleum products. Import prices rose 0.5 percent in October following September's revised 0.2 percent gain but when excluding petroleum, where prices surged a monthly 7.5 percent following September's 1.6 percent gain, the results turn flat, at minus 0.1 percent for the latest month and unchanged for the prior. Export prices rose 0.2 percent in October following September's 0.3 percent gain and here too the pressure is narrow as the ex-food ex-fuel readings fall to minus 0.2 percent with September unchanged. Prices of agricultural exports rose 0.4 percent in October but follow a string of declines and are down 3.0 percent year-on-year. But total year-on-year rates are showing improvement though they remain in the negative column, at minus 0.2 percent for imports and minus 1.1 percent for exports. Though improvement in this report is narrow, the headlines are moving in the right direction.

Import and Export Price Year-over-Year Deflation Moderated Again in October 2016.: Import and export prices continue to deflate year-over-year - although the year-over-year rate of deflation again moderated this month - with import prices now barely deflating. Analyst Opinion of the Import / Export Price Situation Both import and export price deflation is moderating when looking year-over-year. The month-over-month figures given in the headlines only confuse. At the current rate of moderation of deflation (trend line) - both imports and export prices should start inflating by the end of the year. Import Oil prices were up 7.2 % month-over-month, and export agricultural prices up 0.4 %. with import prices up 0.5 % month-over-month, down 0.2 % year-over-year; and export prices up 0.2 % month-over-month, down 1.1 % year-over-year.. There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships.

 What would a trade war look like today? --  Kevin Erdmann - One of the many risks of a Trump presidency is a disruption in trade.  But, in thinking through the issue, I can't quite imagine what would happen in today's context. The large trade deficit today is peculiar.  Part of the reason it is so large is that many of our most productive corporations operate in frontier information and financial sectors that don't involve the movement of goods across a border.   But, the trade deficit is the mirror image of the capital surplus.  We send a lot of dollars overseas to buy goods, and instead of using those dollars to buy goods from the US, foreigners save a lot of those dollars and invest them in the US.  Funny thing is, though, after decades of this - after trillions of dollars of excess investment - the income US investors make on foreign investments outpaces the income that foreigners make on their US investments by a wider margin than ever before.  Foreigners are running to stay still, at best.   Whatever the cause, the implications of this are interesting.  US firms are reinvesting our foreign profits in high return operations.  If we reinvest $100 billion that will earn 10% returns, then if foreigners can only earn 5% returns, they have to invest $200 billion in the US just to maintain a stable net international capital income. This is why we have a sustainably large trade deficit.  Foreigners have to keep selling us stuff in order to maintain a capital income.  If they stopped selling us stuff to invest it, our net foreign income would balloon, and our firms would end up owning an accelerating portion of their capital.  Currency values, interest rates, trade levels, etc. adjust to an equilibrium that draws foreign capital to the US. So, given this context, what would happen if the US imposed a policy with the aim of reducing the trade deficit?  The causal factor for the deficit - the need for foreigners to save - would not go away.  It wouldn't be that difficult for foreign markets to enact tariffs, etc. to instigate a trade war.  But, they would need to stop our corporations from getting revenues through their foreign subsidiaries.  That is a little more difficult and intrusive.  It would involve some sort of capital repression, nationalization, etc.  Would they be willing to go that far?

 Update: U.S. Heavy Truck Sales Slump Over? - The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the October 2016 seasonally adjusted annual sales rate (SAAR). Heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April and May 2009, on a seasonally adjusted annual rate basis (SAAR). Then sales increased more than 2 1/2 times, and hit 479 thousand SAAR in June 2015.  Heavy truck sales have since declined again - probably mostly due to the weakness in the oil sector - and were at 374 thousand SAAR in October.Even with the recent oil related decline, heavy truck sales are at about the average (and median) of the last 20 years. Sales have been at about the same level for four consecutive months. It is possible the oil related slump in heavy truck sales is over.

Rail Week Ending 12 November 2016 - A Slightly Negative Week Following A Positive Week: Week 45 of 2016 shows same week total rail traffic (from same week one year ago) marginally contracted according to the Association of American Railroads (AAR) traffic data. Rolling averages remain in contraction - but are improving. We review this data set to understand the economy. If coal and grain are removed from the analysis, rail has recently been declining around 5% - but this week was -1.2 %. This week the one year rolling average again improved - but it remains in contraction. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years. A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 541,127 carloads and intermodal units, down 0.5 percent compared with the same week last year. Total carloads for the week ending November 12 were 272,131 carloads, up 0.5 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 268,996 containers and trailers, down 1.4 percent compared to 2015. Six of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included grain, up 23 percent to 26,817 carloads; miscellaneous carloads, up 5.4 percent to 9,566 carloads; and metallic ores and metals, up 5.2 percent to 21,806 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 15.4 percent to 11,146 carloads; forest products, down 5.6 percent to 9,677 carloads; and motor vehicles and parts, down 5.4 percent to 17,227 carloads. For the first 45 weeks of 2016, U.S. railroads reported cumulative volume of 11,347,603 carloads, down 9.6 percent from the same point last year; and 11,700,543 intermodal units, down 2.9 percent from last year. Total combined U.S. traffic for the first 45 weeks of 2016 was 23,048,146 carloads and intermodal units, a decrease of 6.3 percent compared to last year.

Trump’s Surprising Transportation Priorities -- Donald Trump first made his way into the public eye by building things, and while on the Presidential campaign trail he has committed to infrastructure spending as a path to more U.S. jobs and private sector growth. He has proposed spending $1 trillion on roads, airports, pipelines, and the electrical grid, compared to the $305 billion over 5 years approved by Congress in late 2015. That level of spending would put him far beyond the pale of traditional GOP politics. Even more remarkably, Trump has said his infrastructure priorities would include mass transit and high-speed trains. Those are typically a bugaboo for the American right—Republican Florida Governor Rick Scott, for instance, turned down free federal money for a large rail project in 2011. It’s uncertain whether Trump’s endorsement of rail will come to much once he’s actually in office. As a lifelong New Yorker, he seems to understand the economic benefits of mass transit. But with a political base in rural and industrial regions, he might decide acting on that insight doesn’t fit his brand. Then there’s the question of how to pay for that massive spend. Trump had previously proposed using debt. But in late October, two senior advisors to the Trump campaign released a detailed policy paper outlining a much more unusual funding plan for Trump’s infrastructure program. The paper lays out a system of government backing and tax credits intended to attract private investment in revenue-producing infrastructure projects. The paper argues that $167 billion in government-funded equity, along with large tax credits, would be enough to attract the $1 trillion from private investors. Those tax credits would be repaid by additional tax revenue created by the projects, including from income taxes generated by job growth and corporate taxes on contractor profits. According to the paper’s math, that would make the program revenue-neutral. The paper further argues that Trump’s proposed tax holiday on corporate profits returned to America from abroad would increase the capital available for infrastructure projects.

 Industrial Production unchanged in October - Earlier today from the Fed: Industrial production and Capacity Utilization Industrial production was unchanged in October after decreasing 0.2 percent in September. Although the level of industrial production in September was the same as the previous estimate, revisions to the index for utilities raised the rate of change in total industrial production in August and lowered it in September. In October, manufacturing output increased 0.2 percent, and mining posted a gain of 2.1 percent for its largest increase since March 2014. The index for utilities dropped 2.6 percent, as warmer-than-normal temperatures reduced the demand for heating. At 104.3 percent of its 2012 average, total industrial production in October was 0.9 percent lower than its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in October to 75.3 percent, a rate that is 4.7 percentage points below its long-run (1972–2015) average.This graph shows Capacity Utilization. This series is up 8.7 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 75.3% is 4.7% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007. The second graph shows industrial production since 1967. Industrial production was unchanged in October at 104.2. This is 19.3% above the recession low, and is close to the pre-recession peak. This was below expectations of a 0.1% increase.

October 2016 Industrial Production Unchanged - Remains In Contraction: The headlines say seasonally adjusted Industrial Production (IP) was unchanged. Headline manufacturing improved. The market expected marginal improvement this month in industrial production - and there was none. The manufacturing surveys have been mixed, but pointed to marginal improvement - and manufacturing employment growth has evaporated. This sector remains slightly in a recession. Capacity utilization also is contracting year-over-year but in the New Normal - it seems meaningless.

  • Headline seasonally adjusted Industrial Production (IP) was unchanged month-over-month and down 0.9 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth decelerated 0.2 % month-over-month, and is down 0.8 % year-over-year.
  • The unadjusted year-over-year rate of growth was unchanged from last month using a three month rolling average, and is down 0.8 % year-over-year.
  • The market was expecting (from Bloomberg / Econoday):

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.2 % this month (down 0.2 % year-over-year), mining up 2.1 % (down 7.0 % year-over-year), and utilities were down 2.6 % (down 0,1 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %.

Empire State Manufacturing Stabilized in November – This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 1.50 shows an increase from last month's -6.8, and signals improving activity. This is its first positive reading since July. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state.Here is the opening paragraph from the report.Business activity stabilized in New York State, according to firms responding to the November 2016 Empire State Manufacturing Survey. The headline general business conditions index climbed out of negative territory for the first time in four months, rising eight points to 1.5. The new orders and shipments indexes also turned positive, rising to 3.1 and 8.5, respectively. Labor market conditions remained weak, with the number of employees and average workweek indexes both at -10.9. The inventories index fell eleven points to -23.6, pointing to a marked decline in inventory levels. Although price indexes were lower, they remained positive, suggesting a slower pace of growth in both input prices and selling prices. Indexes for the six-month outlook conveyed somewhat less optimism about future conditions than in October. [source] Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

NY Fed: November "General business conditions index climbed eight points to 1.5" - Earlier from the NY Fed: Empire State Manufacturing SurveyBusiness activity stabilized in New York State, according to firms responding to the November 2016 Empire State Manufacturing Survey. The headline general business conditions index climbed out of negative territory for the first time in four months, rising eight points to 1.5...Both employment indexes remained negative in November. The index for number of employees dropped six points to -10.9, a sign that employment levels were contracting, and the average workweek index, little changed at -10.9, pointed to a decline in hours worked. ..Indexes for the six-month outlook suggested that respondents were somewhat less optimistic about future conditions than they were last month. ... Indexes for future employment and the future average workweek, at 10.9 and 10.0, respectively, indicated that firms expected to expand employee rolls and hours worked in the months ahead.  This was above the consensus forecast of -2.3, and suggests manufacturing expanded in the NY region in November.

 Philly Fed Manufacturing Index Continues to Expand in November, Worse Than Forecast - The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index. The latest Manufacturing Index came in at 7.6, down from last month's 9.7, but still in positive territory. The 3-month moving average came in at 10.0, up from 8.2 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 29.3, a decrease over the previous month's 32.6.Today's 7.3 came in below the 8.0 forecast at is the introduction from the survey released today: Results from the November Manufacturing Business Outlook Survey suggest that regional manufacturing activity continued to expand. The indexes for general activity, new orders, and shipments all remained positive this month. Overall, labor market conditions remained weak, however. More firms reported increases in prices in November compared with October. Firms expect continued growth for manufacturing over the next six months, although expectations were less optimistic than last month. (Full Report)The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012, and a shallower contraction in 2013. Last year saw a contraction with an improvement in 2016. In the next chart we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.7.

Kansas City Fed Survey: November Activity Expanded Slightly -- The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001. Here is an excerpt from the latest report: The Federal Reserve Bank of Kansas City released the November Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded slightly. “Factory activity in our region rose for the third straight month in November, following a year and a half of near constant declines,” said Wilkerson. “Firms also remained optimistic about future activity.” [Full PDF release here]  Here is a snapshot of the complete Kansas City Fed Manufacturing Survey.

Ford CEO Folds? Trump Confirms Carmaker Won't Move Production To Mexico - Just hours after Ford CEO complained of the "huge impact" of Donald Trump's proposed trade plans, following the company's plan to move a substantial portion of its passenger-car production to Mexico from a factory in Michigan, Donald Trump tweeted Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky -- no Mexico," seemingly winning his first 'america-first' victory. As WSJ reported yesterday, Ford Motor Co. Chief Executive Mark Fields issued a warning about President-elect Donald Trump’s proposed trade policies, saying high tariffs on automobiles and other products coming into the U.S. would be a blow to the auto industry and broader U.S. economy.Mr. Fields, speaking with reporters on the sidelines of the Los Angeles Auto Show on Tuesday, said Ford has talked to Mr. Trump’s transition team and believes the company can work with the new administration. During a separate interview, he said, “We all share the same objective; we want a vibrant and healthy U.S. economy.”The two sides, however, appear to be at odds on how to achieve that goal.Ford’s plan to move a substantial portion of its passenger-car production to Mexico from a factory in Michigan was heavily criticized by Mr. Trump on the campaign trail. Like many of its rivals, Ford is building more-profitable light trucks in the U.S. while investing in new capacity in Mexico to produce lower-margin small cars.And then hours later, Donald Trump tweeted... Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky - no Mexico. I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me! Which was followed by a statement from Ford confirming Trump's comment..."Today, we confirmed with the President-elect that our small Lincoln utility vehicle made at the Louisville Assembly Plant will stay in Kentucky,”Ford spokesperson Christin Baker says in e-mail statement.“We are encouraged that President-elect Trump and the new Congress will pursue policies that will improve U.S. competitiveness and make it possible to keep production of this vehicle here in the United States” Leaving Donald Trump with his first victory since being elected. The question is - why didn't, wouldn't President Obama do this?

Will iPhone Supplier Foxconn Make iPhones Stateside? - Like other technology companies with supply chains that are extensive in Asia, Trump's protectionist rhetoric has been of concern to Apple investors. That is, will punitive tariffs be applied to practically all the things Apple sells since most of it is made in the Far East? (Is that now the Fear East?) The Nikkei Asian Review has an interesting new article suggesting that Foxconn--the largest Apple supplier based in Taiwan and with many facilities in mainland China--is considering setting up Stateside. (Yes, this is the Foxconn of the now-infamous worker dormitory suicides.) The purpose, evidently, would be to get around the criticism that Apple has been "sending jobs" abroad:iPhones might one day soon carry "Made in America" labels. Key Apple assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, has been studying the possibility of moving iPhone production to the U.S., sources told the Nikkei Asian Review. "Apple asked both Foxconn and Pegatron, the two iPhone assemblers, in June to look into making iPhones in the U.S.," a source said."Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns." Foxconn, based in the gritty, industrial Tucheng district in suburban Taipei, and its smaller Taiwanese rival churn out more than 200 million iPhones annually from their massive Chinese campuses. So it's mainly Apple that is prodding its Taiwanese suppliers instead of them thinking about relocating Stateside. As you'd expect, their concerns mostly deal with increased costs of manufacturing in the US:Another source said that while Foxconn had been working on the request from Apple Inc., its biggest customer that accounts for more than 50% of its sales, Chairman Terry Gou had been less enthusiastic due to an inevitable rise in production costs. "Making iPhones in the U.S. means the cost will more than double," the source said. The person added that one view among the Apple supply chain in Taiwan is that U.S. President-elect Donald Trump may push the Cupertino, California-based tech titan to make a certain number of iPhone components at home

iPhones Secretly Send Call History to Apple, Security Firm Says -  Apple emerged as a guardian of user privacy this year after fighting FBI demands to help crack into San Bernardino shooter Syed Rizwan Farook’s iPhone. The company has gone to great lengths to secure customer data in recent years, by implementing better encryption for all phones and refusing to undermine that encryption. But private information still escapes from Apple products under some circumstances. The latest involves the company’s online syncing service iCloud. Russian digital forensics firm Elcomsoft has found that Apple’s mobile devices automatically send a user’s call history to the company’s servers if iCloud is enabled — but the data gets uploaded in many instances without user choice or notification.

Weekly Initial Unemployment Claims decrease to 235,000, Lowest since 1973 -- The DOL reported: In the week ending November 12, the advance figure for seasonally adjusted initial claims was 235,000, a decrease of 19,000 from the previous week's unrevised level of 254,000. This is the lowest level for initial claims since November 24, 1973 when it was 233,000. The 4-week moving average was 253,500, a decrease of 6,500 from the previous week's revised average. The previous week's average was revised up by 250 from 259,750 to 260,000. There were no special factors impacting this week's initial claims. This marks 89 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

Actually, There Are Still Good Blue-Collar Jobs - Justin Fox - Tom Berryman knows how to put young people in some pretty sweet blue-collar jobs. Graduates of the two-year auto-mechanics’ training courses he oversees at Lawson State Community College’s campus in Bessemer, Alabama, all get work at auto dealerships, most with starting salaries in the high-40s. If they’re lucky enough to end up at a Toyota dealership, they make over $60,000. That’s in a state with a median household income of $44,765. “My guys are much more successful than a lot of four-year students after spending $14,000 for a two-year degree,” Berryman told me. Still, getting enough students to sign up can be a struggle. “If you can get me in front of the parents, I can get the kid here. But if the kid has to go home and explain it to the parents -- good luck!” This was a recurrent theme during my visit to Alabama a few weeks ago. It was recurrent in large part because I happened to be talking to people involved with vocational education in the state. Still, it seemed telling. I met a bunch of people whose job it is to train workers for blue-collar occupations. And one of their biggest challenges is persuading enough young people (and their parents) that pursuing such work is a good idea. “It goes back to World War II,” said Jeff Lynn, the new head of workforce development for the state’s community college system. “Everybody wants their kid to get a four-year degree and become a nuclear physicist.”

State labor markets continue their slow recoveries --The October State Employment and Regional Employment data, released today by the Bureau of Labor Statistics, show state labor markets have mostly continued their trend towards economic recovery. Over the last quarter, a majority of states have seen job growth, no change in unemployment rates, or only slight employment declines, along with increases in the labor force participation rate. These indicators point to healthier labor markets for current workers and preciously discouraged job seekers reentering the work force.From July to October, 34 states and the District of Columbia added jobs, with the largest percentage gains in District of Columbia (+1.1 percent), New Hampshire (+1.0 percent), Tennessee (+1.0 percent), and Washington (+1.0 percent). Over the same period, 16 states lost jobs. Maine (-1.3 percent), Vermont (-1.0 percent), and New Mexico (-0.9 percent), and Connecticut (-0.8 percent) suffered the largest losses. Over the last quarter the Northeast was the only region to experience job loss, but this loss has not been sustained over the past 6 or 12 months.From July to October, the unemployment rate fell in 17 states. Nevada (-1.0 percent), Arizona (-0.8 percent), Massachusetts (-0.8 percent), and Utah (-0.7 percent) experienced the largest declines in unemployment. There were small increases in the unemployment rate in 24 states and the District of Columbia. The largest increases in unemployment rates occurred in New York (+0.5 percentage points), Tennessee (+0.5 percentage points), Virginia (+0.5 percentage points), Kansas (+0.4 percentage points), and Missouri (+0.4 percentage points). Twenty states still have higher unemployment rates than at the beginning of the Great Recession. As the labor market continues its slow but steady recovery, policymakers should make sure the rewards of economic growth are shared by those demographics usually left behind. Federal and state institutions can address gender and racial disparities through a number of policies including progressive revenue increases, a higher minimum wage, and pay equity for women and minorities.

States with Rising Unemployment Went Overwhelmingly for Donald Trump - President-elect Donald Trump won more than three times as many states with rising unemployment as his Democratic challenger Hillary Clinton. Unemployment has been 5% or below nationally for the past year, and stood at 4.9% in October. But there’s wide variation between states: Unemployment rates in October ranged from a low of 2.8% in South Dakota and New Hampshire to 6.8% in Alaska. Just as important as the overall level is whether unemployment is rising or falling. And of the 17 states where unemployment rose over the past 12 months, Mr. Trump won 13 to Mrs. Clinton’s four.Take the swing state of Pennsylvania, which, until this year, hadn’t voted Republican since 1988. It saw its unemployment rate rise from 4.8% in October 2015 to 5.8% in October 2016. Mr. Trump found a welcome audience there with voters who’ve seen manufacturing and other jobs vanish and a rise in immigration, two issues he returned to repeatedly over the course of his campaign.  What about the states where unemployment fell over the year? In those, the two candidates fared about evenly, with Mrs. Clinton winning 16 to Mr. Trump’s 17.  Mr. Trump won some key battleground states with falling unemployment, such as North Carolina and Michigan, whose rates dropped by 0.7 and 0.4 percentage points respectively over the year (Mr. Trump has not yet been officially declared the winner of Michigan, but led by about 11,000 votes according to the Associated Press tally as of Friday afternoon.) And Wisconsin, which, like Pennsylvania, voted Mr. Trump into office this year after decades of backing Democrats, saw its unemployment rate drop to 4.1% in October 2016 from 4.6% a year earlier. But falling unemployment doesn’t necessarily translate into good jobs or jobs for everyone. For the first time in 2016, the bulk of the U.S. labor force was college graduates. The state figures come from Friday’s monthly report on regional and state employment and unemployment, released by the Labor Department.

It's Not the Skills Gap: Why So Many Jobs Are Going Unfilled - Fiscal Times -- Employers across the country, from manufacturers in rural Minnesota to hospitals in New York City, are having trouble filling jobs. It now takes about 28 workdays to fill the average job vacancy, compared to about 24 days, on average, in 2007. The declining unemployment rate has made it more difficult for employers to find workers, but it’s still tougher than it should be given the current jobless rate. Since the recession ended, the number of job openings has increased faster than the number of new hires. The usual explanation offered by business and education groups is that too few Americans have the right skills for the openings. The way to close this “skills gap,” they say, is to improve job training and more closely align higher education to employment. But this solution, promoted by politicians as the way to help workers left behind by globalization and automation — both major challenges for the country in the 21st century — is too simplistic. Throwing more public dollars at education and training won’t be enough to connect willing workers to open jobs. In many places, employers are also setting wages too low, defining qualifications too narrowly, or not recruiting widely enough. Many people who are eager to work can’t because they lack transportation, or don’t have anybody to watch their children during the workday. Besides, a lot of the open jobs that employers are struggling to fill right now don’t require any education or training beyond high school.

CBO inflates its estimates of employer compliance costs - CBO released a report on the economic impact of repealing the Department of Labor’s new overtime rule, which raises the salary level for exemption from $23,660 a year to $47,476, thereby making about 4 million employees newly eligible for overtime pay and strengthening the right to overtime pay for about 8.5 million more. CBO concludes that repealing the new rule would have no appreciable effect on employment, would cut the pay of about 900,000 salaried employees who would lose the right to be paid for overtime they actually work, and would increase employer profits. CBO’s analysis differs in significant ways from the Department of Labor’s, which predicted much greater pay raises for newly eligible workers and much lower compliance costs for employers. CBO exaggerates the extent to which repealing the rule would increase employer profits because it inflates the compliance costs that employers would avoid if the rule were repealed.

CBOs report on the overtime rule makes some questionable assumptions - Jared Bernstein - The Congressional Budget Office just released an analysis of the impact of repealing the new overtime rule. The rule, scheduled to go into effect in a few weeks (December 1, 2016), raises the salary threshold below which salaried workers must receive overtime pay when they work more than 40 hours a week. CBO’s study finds that by repealing the new rule, 3.9 million workers would lose their eligibility for time-and-a-half pay for working overtime and 900,000 workers would “work more hours and have lower earnings than they will under the scheduled changes.” Affected workers would lose $650 in 2017.  Their most consequential assumption is that getting rid of the new OT rule by lowering the threshold under which salaried workers must be paid OT would lead to slower inflation. This drives the positive income results for most families.But a) we are aware of no analysis of the rule that expects to find faster inflation, and b) the magnitudes of the employment and wage numbers seem too small to change the path of economy-wide price growth, so we strongly question this assumption.On the first point, neither the Department of Labor, the National Retail Federation, Goldman Sachs, nor theChamber of Commerce discussed an economy-wide price effect in their studies of the overtime rule. Thus, CBO’s finding that repealing the rule would lower price growth in some reliably measurable way seems well beyond their usual mainstream, research-based approach. On the second point, it seems unlikely that less than 1 million workers working around 20 million more hours in total (about 0.01% of total hours) would move the price index down in any measurable way. The assumption that it would appears to come from the reduction in labor costs, which according to Table 3 range from $1.5 to $2.5 billion (though we argue below that CBOs estimated compliance costs, which consistently dwarf the payroll costs, are inflated).

What So Many People Don’t Get About the U.S. Working Class - For months, the only thing that’s surprised me about Donald Trump is my friends’ astonishment at his success. What’s driving it is the class culture gap. One little-known element of that gap is that the white working class (WWC) resents professionals but admires the rich. Class migrants (white-collar professionals born to blue-collar families) report that “professional people were generally suspect” and that managers are college kids “who don’t know shit about how to do anything but are full of ideas about how I have to do my job,” said Alfred Lubrano in Limbo. Barbara Ehrenreich recalled in 1990 that her blue-collar dad “could not say the word doctor without the virtual prefix quack. Lawyers were shysters…and professors were without exception phonies.” Annette Lareau found tremendous resentment against teachers, who were perceived as condescending and unhelpful. Michèle Lamont, in The Dignity of Working Men, also found resentment of professionals — but not of the rich. “[I] can’t knock anyone for succeeding,” a laborer told her. “There’s a lot of people out there who are wealthy and I’m sure they worked darned hard for every cent they have,” chimed in a receiving clerk. Why the difference? For one thing, most blue-collar workers have little direct contact with the rich outside of Lifestyles of the Rich and Famous. But professionals order them around every day.  The dream is not to become upper-middle-class, with its different food, family, and friendship patterns; the dream is to live in your own class milieu, where you feel comfortable — just with more money. “The main thing is to be independent and give your own orders and not have to take them from anybody else,” a machine operator told Lamont. Hillary Clinton, by contrast, epitomizes the dorky arrogance and smugness of the professional elite. The dorkiness: the pantsuits. The arrogance: the email server. The smugness: the basket of deplorables. Worse, her mere presence rubs it in that even women from her class can treat working-class men with disrespect. Look at how she condescends to Trump as unfit to hold the office of the presidency and dismisses his supporters as racist, sexist, homophobic, or xenophobic.

Trump plans to immediately deport or jail 2 to 3 million immigrants -- President-elect Donald Trump told "60 Minutes" in an interview set to air Sunday night that he planned to deport or jail 2 to 3 million immigrants living in the country illegally upon taking office. "What we are going to do is get the people that are criminal and have criminal records, gang members, drug dealers, where a lot of these people, probably 2 million, it could be even 3 million — we are getting them out of our country or we are going to incarcerate," Trump said in the interview, according to a preview released by CBS. "But we're getting them out of our country. They're here illegally," he said. Seeming to soften his rhetoric regarding one of his earliest campaign promises, however, Trump did not commit outright to deporting the estimated 8 million other immigrants thought to be living in the US illegally. "After the border is secure and after everything gets normalized, we're going to make a determination on the people that they're talking about who are terrific people, they're terrific people, but we are going to make a determination at that," he said. "But before we make that determination ... it's very important, we are going to secure our border." Trump also seemed to tone down his plan to secure the US's southern border with a wall by telling "60 Minutes" that the wall would include "some fencing."

"They're Going To Be Gone" - Donald Trump Vows To Deport Millions Of 'Criminal' Undocumented Illegal Immigrants --With the campaigning now over, a blindsided mainstream media is hysterically analyzing every comment and maneuver from the Trump team to assess exactly which of his many policies will take precedent on day 1 and those where there may be a little "wriggle room" on implementation.  Obviously, reforming immigration policies in the United States was a cornerstone of the Trump campaign after he repeatedly made promises to build a border wall and deport all illegal aliens with criminal records.  In an interview with 60 Minutes, which is set to air tonight, reports suggest that Trump will confirm his plans to immediately deport the 2-3 million illegal immigrants currently in the United States with a criminal record.  Trump is also set to confirm that construction of a border wall along our southern border will begin soon after inauguration.  That said, according to The Hill, Trump failed to comment on the fate of the other 7-8 million immigrants who are in the United States illegally but do not have a criminal record, saying instead that his administration would make a "determination" on that point after the border is secure. “What we are going to do is get the people that are criminal and have criminal records, gang members, drug dealers, where a lot of these people, probably two million, it could be even three million, we are getting them out of our country or we are going to incarcerate,” the president-elect said in an interview with CBS' "60 Minutes" to air Sunday evening.  “But we’re getting them out of our country, they’re here illegally.”

The Insane Numbers Behind Trump’s Immigration Reform Plan - As he pursued his campaign for the presidency, Donald Trump rarely drew more applause from his fans — or criticism from Democrats — than when he promised to build “a big, beautiful, powerful wall,” along the U.S. border with Mexico. And the president-elect, who characterized immigration as both a law-and-order issue and an economic one, went on to propose a number of other enforcement measures, including apprehending and deporting millions of people. Now that Trump is setting priorities for his incoming administration, he appears to be ready to make good on his threat. In an interview aired Sunday night on CBS‘s 60 Minutes, Trump doubled down on his plan to build the proposed wall, suggesting he would deport several million undocumented immigrants immediately. “What we are going to do is get the people that are criminal and have criminal records, gang members, drug dealers, where a lot of these people, probably two million, it could be even three million, we are getting them out of our country or we are going to incarcerate,” Trump told 60 Minutes. “But we’re getting them out of our country, they’re here illegally.” While Trump stopped short of insisting that all 11 million immigrants could be removed — as he has done in the past — he said on Sunday others would face a “determination” by the government “after the border is secure and after everything gets normalized.” So just what might that actually entail? Trump has frequently cast his position as largely a matter of enforcing the current U.S. immigration laws — suggesting that it doesn’t represent a radical departure from existing policy. Putting his plan in place, however, would involve far more than a few new strongly worded memos sent to America’s immigration agencies. In fact, experts say, the proposal – at least in the expansive form he campaigned on — could cost hundreds of billions of dollars to implement and require the hiring thousands of new enforcement agents, a vision that Trump critics have likened to the creation of a police state. These steep costs are in addition to any secondary effects on U.S. economic growth, which many economists warn could be broadly negative.

 Chicago And Boston Join Cali In Refusing Assistance To Trump's Deportation Efforts - On a recent "60 Minutes" interview, Trump confirmed his campaign pledges to immediately deport 2-3 million illegal immigrants with a criminal record.  Here is what he said:“What we’re going to do is get the people that are criminal and have criminal records, gang members, drug dealers, where a lot of these people, probably two million, it could be even three million, we are getting them out of our country.”As expected, many "sanctuary cities," or jurisdictions around the country where law enforcement officials refuse to cooperate with federal immigration officers, are now doubling down on their vows to protect illegal immigrants.  That said, it will be interesting to see how these so-called sanctuary cities will respond if Trump follows through on his vow to "cancel all federal funding to sanctuary cities.”After California's LAPD Chief confirmed yesterday that his department would "not help deportation efforts," Chicago and Boston also joined in with similar comments today.  Per WGN News, Chicago's Mayor Rahm Emanuel made the following comments: "You are safe in Chicago.  You are secure in Chicago.  You are supported in Chicago.  Now administrations may change but values and principles as it relates to inclusion do not."

 Pennsylvania government goes deeper in debt to treasury: (AP) – The deficit-strapped Pennsylvania state government is going deeper into debt to the state treasury. The state Treasury Department said Wednesday it’s providing another $600 million to keep the state from overdrawing its main bank account. That puts Pennsylvania $2.2 billion in debt to the treasury as it draws money on a credit line until more tax collections flow in. The treasury’s 0.75 percent-interest credit line must be repaid by June 30. Pennsylvania’s tax collections are lagging expectations four months into the fiscal year. The state is facing a projected $1.7 billion deficit next year, and the potential that human services programs are also underfunded by hundreds of millions of dollars this year. This is the seventh time since the recession the Treasury Department has provided such assistance.

 Mass incarceration in America, explained in 22 maps and charts - America is number one — in incarceration. Over the past several decades, the country has built the largest prison population in the entire world, with the second-highest prison population per capita behind the tiny African country of Seychelles. But how did it get this way? Although it may be easy to blame one specific event, the US's path to mass incarceration was decades in the making. Starting in the 1970s, America's incarcerated population began to rise rapidly.  But around the mid-1990s, the crime rate began to drop as the number of incarcerated Americans continued to climb. After two decades of the crime decline, local, state, and federal lawmakers have begun to reconsider previous tough-on-crime policies — leading the prison population to drop for the first time in decades in 2010. Although the US makes up about 4 percent of the world's population, it accounts for 22 percent of the world's prison population. The US is out of line not only with its developed peers but also with authoritarian nations like Cuba, Russia, and China. Part of the reason for America's high levels of incarceration is that the country has way more lethal crime than its developed peers. And unlike regimes like China, it makes less use of punitive punishments like the death sentence and forced evictions. But that doesn't explain the whole difference; studies have shown that US prison sentences are simply much longer than other nations'.

Over 200 Incidents of Hateful Harassment and Intimidation Since Election Day - Southern Poverty Law Center documentation as of November 11 - Reports of hateful intimidation and harassment erupted across social media networks in the wake of the presidential election Tuesday night.  Pulling from news reports, social media, and direct submissions at the Southern Poverty Law Center's website, the SPLC had counted 201 incidents of election-related harassment and intimidation across the country as of Friday, November 11 at 5pm. These range from anti-Black to anti-woman to anti-LGBT incidents. There were many examples of vandalism and epithets directed at individuals. Often times, types of harassment overlapped and many incidents, though not all, involved direct references to the Trump campaign. Every incident could not be immediately independently verified. Among the findings: (graph) Anti-Black and Anti-immigrant incidents were far and away the most reported with anti-Muslim being the third most common. The category of "Trump" consisted of incidents where there was no clear racially defined target, like the pro-Trump vandalism of a "unity" sign in Connecticut. Some of the reports that came directly to the SPLC include:  My 12 year old daughter is African American. A boy approached her and said, "now that Trump is president, I'm going to shoot you and all the blacks I can find". We reported it to the school who followed up with my daughter and the boy appropriately. (more anecdotes)

How Wall Street Firms Make Money From Donald Trump’s Prison Policy - President-elect Donald Trump is a fan of privatization in general, and the privatization of prisons and detention facilities in particular.  That's good news for the two corporations that dominate the industry— Tennessee-based CoreCivic and Florida-based GEO Group. It’s also a potential boon for Wall Street banks, which have quietly bankrolled these companies as they profit from detaining and incarcerating people.   A new report released today by In The Public Interest reveals that six major Wall Street firms work in tandem with the industry: financing its debts, servicing its bonds, and extending billions of dollars in credit to pay for its operating expenses and expansion into related markets, like selling ankle GPS systems to monitor immigrants. By acting as a credit card for private prisons, those six banks — Bank of America, JPMorgan Chase, BNP Paribas, SunTrust, US Bancorp and Wells Fargo — help the prison companies avoid corporate taxes. That doesn’t sit well with Oregon Sen. Ron Wyden, a Democrat. He’s been trying to push legislation that would make it harder for private prison companies to keep registering themselves as Real Estate Investment Trusts — entities that pay low tax rates, keep little cash on hand, and borrow heavily from banks. “It is wrong for private enterprises to bring a profit motive to incarceration and rehabilitation in this country, and I’m particularly concerned by how it’s fueled by tax laws,” Sen. Wyden told International Business Times. “In my view, most taxpayers would be disturbed to learn that their dollars are subsidizing corporate profits from the mass incarceration of minority and low-income Americans.”

Is America’s racism problem getting better or worse? –- That is the topic of my latest Bloomberg column.  Here is part of the optimistic case: There is historical evidence that racist propaganda is most effective when communicated to young people and propagated through schooling. There isn’t such a danger in the U.S. now, when surveys show less prejudice among the young and schools promote multiculturalism. The cultural impact of millennials will increase as they age and more of the elderly die. Nor does American big business show interest in jumping on the pro-prejudice bandwagon — quite the contrary. It’s worth remembering that attacks targeted at minorities are hardly new. In 2014, 59 percent of religiously connected hate crimes were directed at Jews. That’s no excuse for the current wave of anti-Semitic oratory, but maybe we’re just noticing it more because of the election. Smartphones, viral videos and social media will bring the worst events to our attention.The broader historical data suggest that discrimination can persist across many generations, and of course the U.S. has a long history of prejudice toward many groups. The real lesson might be, “We’ve been worse all along,” rather than, “Things are getting worse again.” That’s not comforting, but it might imply greater sustainability for what we cherish in current American institutions. The 200-plus reported incidents in election week (an annual rate of about 10,400) have to be compared with the 293,900 hate crimes reported for 2012 (note that the two numbers do not use exactly the same counting metric).  Yet I don’t quite buy it, all things considered:  Overall, I find the pessimistic scenario to be more convincing.  Do read the whole thing to see why.

Suicide Hotlines Get Record Number Of Calls After Trump Win: "Phones Have Been Ringing Off The Hook" - Things have gotten steadily worse for Democrats after Donald Trump’s election to the Presidency of the United States. Scores of celebrities are freaking out across social media, Hillary supporters are holding “Cry Ins” to help each other cope, visits to Canada’s immigration website have skyrocketed, and coping videos are starting to make the rounds online. While many shocked Clinton supporters have found solidarity with thousands of others by protesting and rioting in the streets, some, like movie star Robert DeNiro, have fallen into a depressive state. And according to The Hill, those overwhelming feelings of depression have led to suicidal thoughts in many. So much so that suicide hotlines across the country are struggling to keep up:Phones have been ringing off the hook at suicide hotlines since Donald Trump was named president-elect Tuesday.According to multiple reports, many of those calling or texting into hotlines are members of the LGBTQ community, minorities and victims of sexual assault who are worried about Trump’s victory. The Suicide Prevention Lifeline told “The Washington Post” it is seeing calls “unmatched in the hotline’s history,” with a response unlike that in 2008 or 2012.

Steve Bannon’s Cure For Mental Illness? ‘Spank Your Children More’ - In news that will shock practically nobody, Steve Bannon seems to think mental health issues are something to dismiss or joke about.Old emails reveal that Bannon, the newly appointed chief strategist to President-elect Donald Trump, doesn’t believe mental health issues and policy are worth addressing.The December 2015 exchange, released by The Hill last month, is a conversation between Bannon, executive chairman of the alt-right website Breitbart News Network, and Breitbart’s Washington editor Matt Boyle. Boyle suggested posting a story supporting Speaker Paul Ryan’s plan to overhaul the government’s mental health system last year. The move, Boyle said, could “open a bridge” to Ryan.Bannon shot down the idea.“I’ve got a cure for mental health issue[s],” Bannon wrote. “Spank your children more.”Bannon’s prejudicial viewpoint on mental health couldn’t be more wrong. His comments reflect the deeply embedded stereotype that people with mental illness are self-indulgent, rather than grappling with a serious health condition. And, even if we were to treat this statement credulously, research shows that spanking children could be linked to more mental health problems ― not fewer. Here’s the reality: Nearly one in five Americans will experience a mental health disorder in a given year. Research also shows that there’s a stigma attached to these disorders (see: comments like Bannon’s) and that such an outlook prevents people from seeking help. Experts agree that medical treatment is the best way to manage a mental health condition..

Chicago Public Schools delays sale of $426 million in bonds - After having its already low debt rating cut by one agency, Chicago Public Schools has delayed plans to sell hundreds of millions of dollars in bonds that analysts said would hit the market this week. CPS cited "changing market conditions" when it said it would hold off on selling $426 million in bonds until sometime next year. That means the district will wait for another chance to refinance some debt and pay for new infrastructure. It's not clear when the district will sell the rest of up to $1 billion in long-term bonds authorized last month by the Chicago Board of Education. "We'll sell the bonds when market conditions are optimal," district spokeswoman Emily Bittner said Monday in an email.Word of the delayed sale came as financial analysts at Standard & Poor's said familiar financial concerns prompted the agency to drop the school system's credit rating deeper into junk territory last week. Those problems include the district's continued reliance on costly short-term borrowing to cover daily expenses, plus $55 million in costs added to this year's budget by the recent Chicago Teachers Union pact. CPS has said the contract costs will be paid for with help from new revenue that Mayor Rahm Emanuel's administration pulled from special city taxing districts for schools.

Wyoming schools face $1.8 billion projected shortfall, report shows | Education | Wyoming’s education system is projected to face a roughly $1.8 billion shortfall by the end of the 2022 fiscal year, according to a recent report to the Joint Education Interim Committee. The staggering number, which comes amid an energy industry downturn, has prompted some lawmakers to discuss further spending cuts and the need to raise additional revenues. The school operations shortfall for 2019 and 2020 was projected to be about $720 million. The deficit was anticipated to increase another $800 million for the two years after that. Meanwhile, school construction and maintenance are funded under a separate account, where income is already insufficient to meet the major maintenance needs of the state schools, much less any new construction. “You’re looking at about a $186 million shortfall for the 2019-20 (budget cycle), then about a $189 million shortfall in 2021-22,” said Matt Willmarth, of the Legislative Service Office, referring to the building account. “The reason for these larger shortfalls is, as we have noted in our reports, the past couple years no coal lease sales, and no bonuses, are forecast in our projections.” The committee was told that the capital construction account would essentially be empty by mid-2018. When the school operations and capital construction are added together, the Legislative Service Office estimates the total will be a $1.79 billion deficit by 2022. The committee also received an update on the 2017 and 2018 budget, and the news was not any better. The education budget for the two years is $1.34 billion, but declining revenues have meant $640 million was not covered by income.

Giuliani: Trump presidency will be ‘best thing’ for charter schools | New York Post: Donald Trump’s election as president will provide a boost to charter schools, a top adviser told The Post. “President-elect Trump is going to be the best thing that ever happened for school choice and the charter school movement,” said Rudy Giuliani, a vice chairman of Trump’s transition team said. “We’ve spoken about it. Donald is going to create incentives for that promote and open more charter schools. It’s a priority,” said Giuliani, who promoted charter schools and providing private school options to low-income students when he was New York City mayor. During the campaign, Trump proposed a $20 billion federal block grant for states to use to provide school choice to 11 million students living in poverty. “As your President, I will be the nation’s biggest cheerleader for school choice. I want every single inner city child in America who is today trapped in a failing school to have the freedom – the civil right – to attend the school of their choice,’’ Trump vowed in September. Trump’s plan would redirect money from the federal budget to create the $20 billion school choice block grant. “Distribution of this grant will favor states that have private school choice, magnet schools and charter laws, encouraging them to participate,” Trump said during the campaign. “Each state will develop its own formula, but we want the dollars to follow the student. “This $20 billion will instantly extend choice to millions more students.”

Black Freshmen At University Of Pennsylvania Receive Racist Messages Depicting Lynchings | The Huffington Post: A number of black freshmen at the University of Pennsylvania on Friday received multiple messages via a mobile group messaging application containing graphic racist imagery and racial slurs. The students were added to a GroupMe account titled “Mud Men” that contained “violent, racist and thoroughly repugnant images and messages,” the university said in a statement about the incident. The school added that it is still trying to determine how many students had been targeted . GroupMe is a mobile app in which users can add people to a group chat and then send them photos and messages; the UPenn students were added to the racist group without their consent. It remains unclear how those responsible for the group obtained the contact information of the freshmen, and university officials declined to comment on the matter. Screenshots of the group chat posted to social media show a series of vile messages, including a photo depicting lynchings with “I love America” written below it. Another message came in the form of a calendar invitation to a “Daily lynching” event set to Friday’s date, with a statement reading “Never be a n****r in SAE,” a college fraternity. The profile picture for the group, which appeared to have been altered, showed an African-American man wearing an orange prison jumpsuit.

In-Person Coaching at University versus Technology: Proactive, Constant Contact Matters - Questions over the value of a university education are underscored by negative student experiences. Personalised coaching is a promising, but costly, tool to improve student experiences and performance. This column presents the results from an experiment comparing coaching with lower cost ‘nudge’ interventions. While coaching led to a significant increase in average course grades, online and text message interventions had no effect. The benefits of coaching appear to derive from the trust-based nature of relationships and personalised attention. Policymakers and academics share growing concerns about stagnating college completion rates and negative student experiences. Recent figures suggest that only 56% of students who pursue a bachelors’ degree complete it within six years (Symonds et al. 2011), and it is increasingly unclear whether students who attain degrees acquire meaningful new skills along the way (Arum and Roska 2011). Students enter college underprepared, with those who procrastinate, do not study enough, or have superficial attitudes about success performing particularly poorly

California Teachers Offered "Anti-Hate, Trump Teaching Plan" To "Empower Students" --Following last week's dissonance-destroying victory for Donald Trump, San Francisco teachers are being offered a 'Donald Trump lesson plan' to "help students understand the election," but, as NBCBayArea reports, opponents counter that it is leftist propaganda meant to scare children about the incoming president.Fakhra Shah, a teacher at Mission High School, drafted the plan with the goal of empowering students, she said.“This is anti-hate,” Shah said. “This is not just anti-Trump.”On the heels of Trump’s stunning Nov. 8 victory, Shah wrote a letter to staff, in which she said, “A racist and sexist man has become president.” She also urged them to use a new, optional lesson plan that will allow students to say what’s on their minds."It’s a call to educators to take that anti-racist stance, to take the anti-sexist stance and to tell the students, ‘We are there for you. We will talk about this,’” Shah explained.The plan also asks teachers to tell students they don’t have to “go back to where they came from” – as fears and rumors of deportation run rampant.According to Shah, the lesson plan is about being open regarding the President-elect’s agenda.“I want to be clear that we are not brainwashing anyone,” Shah stressed. “This is about a dialogue.”Here is the full lesson plan:

UC Irvine Professors Modify Curriculum To Prepare Students For "Life Under An Avowed White Supremacist President" - For over a week now we have all sat grinding our teeth as we read story after story of our precious, millennial, snowflake children melting down at universities around the country over Trump's victory.  Some took to the street to protest and destroy private property while others were just so distraught that they convinced professors to postpone tests or simply cancel classes altogether so they could stay in bed all day. Well, some professors at the University of California Irvine have decided to be a bit more proactive in addressing the psychological needs of their distressed students who are all apparently finding it very difficult to exist in Trump's new America.  Specifically, professors of the university's composition department have a decided to craft a whole new syllabus that will "help prepare our students for life under an avowed white supremacist presidential administration.” While dissatisfaction with the results is not entirely surprising, what is more concerning is that instructors are discussing means of changing course content because of Trump’s win. On Wednesday, instructors from the university’s composition department met to discuss ways to shift course curricula to help prepare students for life under Trump. In an email sent earlier this week and shared with InsideSources, a course administrator asked graduate teaching assistants for the writing courses to gather for a meeting “wherein we could discuss ways to use the various composition curricula to help prepare our students for life under an avowed white supremacist presidential administration.”

Colleges Are Promoting Psychological Frailty and We Should All Be Concerned - More and more colleges are creating “bias response teams” that students can contact if they feel they have been victimized by microaggressions. There is an increasing demand for safe spaces and trigger warnings to protect students not from physical danger, but from ideas, course material, and viewpoints they may find offensive. Conservative speakers are being banned from campus because students claim to find them threatening. Professors are being investigated for not being sufficiently politically correct in class, failing to predict what material might trigger students, or refusing to use gender neutral pronouns that are not even part of the English language. The problem is that these efforts, even if well-intended, promote a false psychology, that humans are inherently emotionally fragile and can be mentally destabilized or incapacitated by subtle and ambiguous offenses. Unless students are suffering from a severe mental illness, the type of pathology that would likely keep them from being able to attend and succeed in college to begin with, they should be perfectly capable of remaining psychologically healthy in the face of offensive Halloween costumes, distasteful jokes or comments, and sensitive course material.People are generally quite psychologically resilient. Ironically, the victim protection campaigns many colleges are engaged in not only underestimate human resilience, they may actually cause the problems they are designed to solve because they suggest to students who wouldn’t otherwise feel like victims that they are, in fact, victims. For instance, feminist professors are encouraging college women to feel fragile and vulnerable, and teaching them that they are not in charge of their own destiny but instead are victims of the patriarchy. Nothing good can come from treating colleges like hospitals, places where sick students come to be quarantined and healed. Instead, we should treat colleges like fitness centers for the brain, places where students learn to build their mental muscles. Training is hard, sometimes painful. But it makes one stronger.

Peak Snowflake - Students, Professors Blast University Of Virginia Head For Quoting Thomas Jefferson -- Snowflake university culture in America may have just hit peak safe-space stupidity. Here’s what happened according to the University of Virginia’s Cavalier Daily: Several professors on Grounds collaborated to write a letter to University President Teresa Sullivan against the inclusion of a Thomas Jefferson quote in her post-election email Nov. 9. In the email, Sullivan encouraged students to unite in the wake of contentious results, arguing that University students have the responsibility of creating the future they want for themselves. “Thomas Jefferson wrote to a friend that University of Virginia students ‘are not of ordinary significance only: they are exactly the persons who are to succeed to the government of our country, and to rule its future enmities, its friendships and fortunes,’” Sullivan said in the email. “I encourage today’s U.Va. students to embrace that responsibility.” Note that Jefferson was specifically addressing the UVA student body in the chosen quote. It’s pretty obvious why she chose that particular one. Some professors from the Psychology Department — and other academic departments — did not agree with the use of this quote. Their letter to Sullivan argued that in light of Jefferson’s owning of slaves and other racist beliefs, she should refrain from quoting Jefferson in email communications. “We would like for our administration to understand that although some members of this community may have come to this university because of Thomas Jefferson’s legacy, others of us came here in spite of it,” the letter read. “For many of us, the inclusion of Jefferson quotations in these e-mails undermines the message of unity, equality and civility that you are attempting to convey.” The letter garnered 469 signatures — from both students and professors — before being sent out via email Nov. 11. Signees included Politics Prof. Nicholas Winter, Psychology Prof. Chad Dodson, Women, Gender and Sexuality Prof. Corinne Field, College Assistant Dean Shilpa Davé, Politics Prof. Lynn Sanders and many more. Asst. Psychology Prof. Noelle Hurd drafted the letter.

Iowa Lawmaker Introduces "Suck It Up, Buttercup" Bill To Stop Student-Coddling At Universities -- An Iowa lawmaker plans to put forth a bill that will target state universities that use taxpayer dollars to coddle students with sit-ins and grief counseling – such as “cry zones” – in order help them cope with events like President-elect Donald Trump’s victory over Hillary Clinton. Rep. Bobby Kaufmann plans to introduce the piece of legislation he’s calling the “Suck It Up, Buttercup Bill” when the legislature resumes in January. While issuing fines to those universities who want to pamper their students with child-like comfort, the bill would also establish new criminal charges for protesters who shut down highways, a circumstance that has risen out of the many anti-Trump protests that kicked off after the election. “I’ve seen four or five schools in other states that are establishing ‘cry zones’ where they’re staffed by state grief counselors and kids can come cry out their sensitivity to the election results,” said Iowa’s Bobby Kaufmann to the Des Moines Register. “I find this whole hysteria to be incredibly annoying. People have the right to be hysterical … on their own time.”Following the Donald Trump victory in the Nov. 8 election, schools such as Cornell and Yalewent as far as setting up a “cry-in” and a “primal scream” so students could let out their grief and frustration over the results.Other elite universities offered students coloring books, puppies, play dough, Legos and bubbles to comfort students who felt distraught post-election.

Winning an election does not entitle one to upend basic values --Larry Summers - I will never again use the term “political correctness.” Whatever rhetorical value the term may have once had is far more than offset by what has been unleashed in the name of resistance to it since the presidential election.I have made no secret over the years of my conviction that the sensitivities of individuals or members of various group should not be permitted to chill free speech on college campuses. I have the scars to show for speaking out against overdoing the idea of microaggression, the regulation of Halloween costumes and the prosecution of students for taking part in sombrero parties – all of which have struck me as “political correctness” run amok. But the events of the last week are giving me pause about that term and its usage and the complex issues underlying it. It’s not that I now think speech codes are wise or that we should stamp out microaggressions wherever they are perceived. Rather, my reaction is to the way the President-elect has been heard during the campaign and the terrifying events his election has set off. ...Black students, gay students, Hispanic students, Muslim students, disabled students, female students – all of them now fear that the basic security and acceptance on which they relied is at risk. Help lines are flooded with calls. Those who seek to count hateful incidents report an upsurge. I cannot convince myself that that fear is irrational. ...In the face of all this, the President-elect and his staff ... have allowed, without adequate response and rejection, the celebration of victory to metastasize into something dark and evil. It is surely wrong to hold the President-elect personally responsible for all the words and deeds of all who support him. Equally, the President-elect has a moral obligation to stand up for tolerance and against intolerance whatever its source. The fight for academic freedom and for ideological diversity on college campuses should and will go on. But given what opposition to “political correctness” has licensed, it time to retire the term. More importantly, democracy does not mean electrocracy. Winning an election does not entitle one to upend our basic values. The refusal to tolerate blatant racism, bigotry and misogyny are beyond compromise. The first obligation of anyone currently in a leadership position is not to find common ground with our new President-elect now that the ballots have been counted and the election is over. It is instead to once again make it possible for all who live in our country to feel safe.

Degree of debt impacting millions with college loans - “I wanted the American dream,” Danielle Alluto tells us. Alluto’s dream meant taking the path of a college education. “I’m going to graduate, I’m going to get this really great job,” she recalls thinking to herself, years ago. At 30 years old, Alluto’s trip on the road of life has a big pothole: $104,000 in college debt. She says this six-figure detour has derailed her plans - her picture-perfect life erased. “I’ll never get married or buy a house or buy a new car or any of that stuff, no,” she says. “It's out, out of the picture - kids, all of that. Why would I do that to my children?“ After nearly a decade of digging out of that financial pothole, she's barely made a dent and is still trying to pay off $90,000 in college debt. Alluto is not alone. This picture can be drawn for many of the more than 41 million Americans with college loans. All totaled, they total around $1.3 trillion, which dwarfs credit card and auto loan debt. The government tracks the colleges with the most students having problems, identifying each school's repayment rate, the percentage of students succeeding in paying their loans back. And for some schools, the numbers look bleak. The Memphis Institute of Barbering has the lowest student repayment rate in the country: just 6 percent. “That means a lot of students probably are not getting what they bargained for out of that education,” Statewide, students in Mississippi have the lowest repayment rate in the country at 48 percent. Next are Arkansas, Kentucky and Arizona, at 52 percent. All totaled, 2,100 colleges across the country have less than 50 percent of their former students repaying their loans. That's roughly one third of the colleges the government collects this data from.

Student loans, and why Clinton lost the Election  - Over the past ten years, nearly $1 Trillion has been added to the nation's student loan tab. Today, there are 44 million people saddled under this debt, and a majority of these people are unable to make payments on the debt. During this time period, student debt has eclipsed credit card debt, auto loans, and every other type of non-housing consumer debt. The lending system has exploded in a predatory mushroom cloud in the absence of standard consumer protections that exist for every other type of loan, like bankruptcy and statutes of limitations. Hillary Clinton used to know this. Ten years ago, she introduced the Student Borrower Bill of Rights Act (S.511) in the Senate. This bill paved the way for the return of standard bankruptcy protections, put repayment caps on loans, and offered several other significant and substantial benefits to borrowers. It is interesting to note, also, that 10 years ago (around the time the republicans lost both the House and the Senate), a leaked strategy memo from Sallie Mae, the student loan behemoth, listed keeping bankruptcy protections gone from student loans as the company's highest legislative priority.Similarly, the Department of Education has been fighting tooth-and-nail behind the scenes to keep bankruptcy protections gone from student loans, particularly since they took the lending system over under Obama in 2010.For this election, however, Clinton never even uttered the term "bankruptcy" and "student loans" in the same sentence. In reviewing internal briefing documents sent to John Podesta for approval within the Clinton campaign (thanks Wikileaks), it becomes obvious that the campaign had zero intentions of returning bankruptcy to federal student loans, and that they planned to perpetuate the absence of bankruptcy for the vast majority of private student loans as well.

For-profit colleges could prosper under Trump: Barron's | Reuters: For-profit education stocks have surged on expectations that President-elect Donald Trump and a Republican Congress may ease regulations imposed on the industry by the Obama administration, Barron's said in a report. Stocks such as Grand Canyon Education, DeVry Education Group and Capella Education rose about 14 percent last week. Trump won an upset victory in Tuesday's presidential election. Jeff Silber at BMO Capital Markets said Trump's election could be good news for for-profit education companies, according to Barron's. A federal court trial in San Diego is set to begin on Nov. 28 over claims by former students of now-defunct Trump University that they were defrauded by a series of real estate seminars. A Trump lawyer has requested that the trial be delayed until after Trump's inauguration on Jan. 20. Trump denies the students' allegations.

Trump Lawyers to Begin Settlement Talks on Trump University -- Donald Trump's attorneys on Thursday agreed to enter settlement talks in a class-action fraud lawsuit involving the president-elect and his now-defunct Trump University, raising the possibility of a quick end to the 6 ?-year-old case just before it goes to trial. Daniel Petrocelli, Trump's lead attorney on the case, also asked to delay the trial to early next year, saying Trump needed time to work on the transition to the presidency. "The good news is that he was elected president. The bad news is that he has even more work to do now," The lawsuit alleging Trump University failed on its promise to teach success in real estate begins in San Diego on Nov. 28 before Curiel, an Indiana-born jurist who Trump accused of bias during the presidential campaign for his Mexican heritage. Both sides accepted Curiel's offer to work with U.S. District Judge Jeffrey Miller, who is based in San Diego, on a possible settlement. Patrick Coughlin, an attorney for the former students who sued, told reporters that previous attempts failed. "We've been miles apart," he said outside the courthouse. Curiel didn't signal how he would rule on the request for a trial delay, but he encouraged efforts to settle. He has been reluctant to postpone it any longer. The judge said more than 100 potential jurors would be in court Nov. 28, and nine would be picked to begin hearing arguments no more than two days later. He expects both sides to finish presenting their cases around Dec. 14.

Trump Settles "Trump University" Fraud Claims For $25 Million - One of the bigger headaches hanging over Donald Trump as he enters the transition period of his presidency, was the ongoing litigation over the Trump University lawsuit. Well, no longer. Moments ago, the president-elect agreed to settle fraud lawsuits relating to his Trump University series of real estate seminars for $25 million. The settlement ends a dispute that dogged Trump throughout his presidential election campaign and led to one of the more controversial moments of his run when he claimed the judge overseeing two of the cases was biased because he was of Mexican ancestry. Lawyers for the president-elect have been arguing against students who claim they were they were lured by false promises into paying up to $35,000 to learn Trump's real estate investing "secrets" from his "hand-picked" instructors.There were three lawsuits relating to Trump University: two class actions suits in California and a case brought by New York Attorney General Eric Schneiderman. All of the cases would be covered in the possible settlement, the person said. Schneiderman has said over 5,000 students across the country were defrauded out of about $40 million.This is what NY AG Schneiderman said:In 2013, my office sued Donald Trump for swindling thousands of innocent Americans out of millions of dollars through a scheme known at Trump University... Today’s $25 million settlement agreement is a stunning reversal by Donald Trump and a major victory for the over 6,000 victims of his fraudulent university,” N.Y. Atty General Eric T. Schneiderman says in statement.As part of settlement, Trump will pay $1m in penalties to N.Y. for violating education laws. The $25 million settlement agreement would include roughly $4 million to resolve Schneiderman's claims.

Trump Says Same-Sex Marriage Is Settled Law, Abortion Isn’t -  President-Elect Donald Trump said the issue of marriage equality in the U.S. is settled Supreme Court law and he’s “fine with that,” yet pledged to support overturning the 1973 high court decision that a woman has a right to choose to have an abortion. Speaking on CBS’s “60 Minutes,” the Republican said it was “irrelevant” whether he personally supports same-sex marriage. “It was already settled,” Trump said Friday at Trump Tower, according to a transcript released by the network for the interview airing Sunday. “It’s law. It was settled in the Supreme Court. I mean it’s done.”Republican leaders in Congress have criticized the June 2015 ruling, and Trump’s statement puts him at odds with members of the party he now leads. He’s already broken with Republican orthodoxy on issues like trade and infrastructure spending.Still, he stands firmly with party members when it comes to Second Amendment gun rights and abortion. Trump reiterated a campaign pledge to nominate Supreme Court justices that would overturn the landmark Roe v. Wade decision that said a woman has a right to privacy when it comes to ending a pregnancy. The high court in subsequent rulings has allowed some restrictions, while continuing to uphold the basic tenets of that decision. “I’m pro-life,” Trump said in an interview with correspondent Lesley Stahl. “The judges will be pro-life.” He said the issue would be decided by individual states if the ruling were overturned.  Trump said he’ll move quickly to nominate someone to replace Justice Antonin Scalia, who died in February. Republican leaders have refused to consider President Barack Obama’s nominee, appeals court Judge Merrick Garland.

 State of Illinois' pension debt jumps to $130 billion - Every Illinois household just got a gift from the state government: $4,000 in additional pension debt.That’s not good news for Illinoisans already suffering under one of the worst job recoveries in the nation, one of the country’s highest unemployment rates, collapsing manufacturing, record-high outmigration and the nation’s highest property taxes.Illinois’ pension debt has jumped to $130 billion in 2016, up from $111 billion in 2015, according to the Commission on Government Forecasting and Accountability. State pension funds now have only 38 cents on hand for every dollar they need today to pay out future benefits.Households in Illinois now owe more than $27,000 each in state pension debt, an increase of over $4,000, or 17 percent, from 2015. Illinois’ pension debt has more than tripled since 2002, when Illinoisans owed $7,600 per household. Illinois’ pension crisis has only grown worse over time. Yearly pension costs now consume 25 percent of the state’s general fund budget and are crowding out spending on social services, higher education and nearly every other core government service.

Illinois Pension Funding Ratio Sinks To 37.6% As Unfunded Liabilities Surge To $130 Billion --  As we've noted before, Defined Benefit Pension Plans are, almost by definition, a ponzi scheme. Current assets are used to pay current claims in full in spite of insufficient funding to pay future liabilities: classic Ponzi.  But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit.  Everyone from government officials to union bosses are incentivized to maintain the status quo - public employees get to sleep better at night thinking they have a "retirement plan," public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.  That said, certain states are better at the ponzi game than others and the great state of Illinois, we must say, is one of the best.  As we noted a few months ago, Illinois governor Bruce Rauner even admitted to being a willing participant in his state's pension ponzi warning that should his largest public pension fund do what it should have done long ago, it would put a big dent in the state's already fragile finances and lead to "crippling" pension payment hikes.  But, if you ignore the problem then surely it will just go away...good plan.And, while the pension ponzi can likely outlast Rauner's term as governor, eventually funding for current claims can only be borrowed from future generations for so long before finally running out of cash.  As the latest "Special Pension Briefing" report from Illinois' Commission on Government Forecasting and Accountability (CGFA) points out, that time may be getting very near.Per the latest actuarial valuations, the 5 largest publicly-funded Illinois pensions are now $130BN underwater and only 37.6% funded.

Pensions Slash Hedge Fund Allocations After Decade Of Subpar Returns -- After a 15-year love affair with hedge funds, pensions and endowments are finally growing weary of their excessive fees, lackluster returns and manager arrogance.  Pensions led a huge rotation into hedge funds in the early 2000's as investment managers sought higher returns to repair their massively underfunded balance sheets.  That said, after a 15-year trial run, these managers are finally waking up to the fact that they could recreate the performance of most hedge funds with a couple of index positions and simply pocket the "2% & 20%" fees they would have otherwise paid.  As Bloomberg notes, pensions pulled a record $28 billion from hedge funds in 3Q 2016, the most since 2009. Unhappy with mediocre results and high fees, pensions in states like Illinois, New York and Rhode Island are slashing their allocations to hedge funds. More than one in four endowments and foundations, from colleges to museums to hospitals, are doing the same or considering it, according to a survey by consultant NEPC. Many are demanding lower fees and better terms to stick around, and usually getting it.Disappointing returns were certainly a factor. But another reason was the public’s perception of hedge funds as highly risky and run by guys with penthouses and yachts, said David Peden, chief investment officer for Kentucky’s $16 billion portfolio. That was poison at a time when taxpayers were being asked to fork over more to close a 60 percent gap in pension liabilities. All told, redemptions hit a 2016 peak in the third quarter when investors pulled a net $28 billion from hedge funds, the most since early 2009, according to Hedge Fund Research Inc.The backlash is part of a broader rebellion that has seen an avalanche of money move from actively-managed funds to low-cost passive products like index funds.The $3 trillion hedge fund industry, however, has become the poster child for the sins of active management because it charges among the highest fees even as performance lags.

CalPERS Considers Cutting Out Private Equity Firms, Making Direct Investments in Companies -Yves Smith - CalPERS appears to be reading the handwriting on the wall. The giant public pension fund, which regularly serves as a de facto standard setter for its peers, is looking into cutting out ludicrously overpaid private equity middlemen and making private equity investments directly. Admittedly, it would take a while for CalPERS to flesh out a plan and to get a narrow carve-out from the state rules that prohibit employees from profiting from state expenditures or investments. Participating in the upside of successful private equity investments is a widespread industry standard and it would be difficult to attract experienced people. But it’s puzzling that CalPERS has not considered this step before, in light of the fact that seven public pension funds in Canada have been making direct investments in private equity for years. Admittedly, they started out by investing along-side private equity firms, but these in-house teams have built up their skill levels over time. With private equity total fees and costs an estimated 7% a year, why haven’t more limited partners gone this route sooner? It is fair that developing a new set of capabilities takes time, and managements are often leery about undertaking long-term, ambitious initiatives. But one also has to wonder about the role of McKinsey in deterring CalPERS and other limited partners from going this route.

Multiemployer Pension Program’s Deficit Soars to Record High | Bloomberg BNA: — The PBGC, which backstops defined benefit pension plans, has seen its multiemployer plan insurance program’s deficit rise by $6.5 billion in the last fiscal year to a record-high $58.8 billion. The agency’s multiemployer program is projected to become insolvent by 2025 or earlier, PBGC Director Tom Reeder said in a Nov. 16 press call announcing the Pension Benefit Guaranty Corporation’s fiscal year 2016 annual report. Multiemployer plans are generally collectively bargained and involve more than one employer. The 12.4 percent increase in the multiemployer program deficit was driven by the 11 additional plans that are expected to run out of money within the next 10 years, and by decreases in interest rate factors used to value PBGC’s liabilities, Reeder said. To prevent the multiemployer program from becoming insolvent, “reform is urgently needed,” Reeder said. Congress needs to permit the PBGC to raise plan premiums, he said. The Obama administration’s FY 2017 budget proposes a $15 billion increase in multiemployer premium revenues over the 10-year budget window. “Such an increase would eliminate most of the risk of the multiemployer program becoming insolvent within 20 years,” PBGC’s press secretary Marc Hopkins told Bloomberg BNA in an e-mail.The insolvency threat of the multiemployer program would be reduced if Congress were to pass pending bipartisan legislation ( S. 1714) that would allow transfers of unspent money from a fund for cleaning up abandoned mines to the United Mine Workers of America 1974 Pension Plan

Of Course, By This Time Next Year Medicare As We Know It May Be Gone -- November 19, 2016 - But for now, the Medicare premiums for 2017 have been released: link here. This is what I was looking for:  Retirees don't all pay the same Medicare Part B premium. While most Medicare beneficiaries will experience a modest premium increase next year, a few specific groups of seniors will have to pay much higher premiums. Existing Social Security beneficiaries. Medicare premiums are prevented by law from increasing faster than Social Security payments for existing beneficiaries. The Social Security cost-of-living adjustment was just 0.3 percent for 2017. So, the monthly Medicare Part B premium will only increase by a few dollars from $104.90 in 2016 to $109 in 2017 for most existing Social Security recipients.  New Medicare enrollees. Retirees who sign up for Medicare in 2017 will pay the standard Medicare Part B premium of $134 for 2017, up 10 percent from $121.80 in 2016. These new enrollees will pay $300 more for Medicare Part B in 2017 than existing Social Security recipients. "Because of the 'hold harmless' provision covering the other 70 percent of beneficiaries, premiums for the remaining 30 percent must cover most of the increase in Medicare costs for 2017 for all beneficiaries," according to a statement from the CMS. New enrollees include people who will turn 65 in 2017 and those who were previously covered by group health insurance through their job and elect to join Medicare in 2017.

The GOP could kill traditional Medicare without premium support. Here’s how. -- Not a word of this is intended as endorsement of any particular policy. If you’re concerned that Speaker Ryan’s, and perhaps President-Elect Trump’s, ambition is to enact a premium support regime in Medicare that would effectively phase out the traditional program, you’re probably worried about the wrong thing. There’s a much simpler, and more politically feasible way to kill off traditional Medicare (TM), leaving only private plans in the program. Here’s how: Step 1: Do not repeal the Affordable Care Act’s (ACA’s) cuts to traditional Medicare reimbursement rates. Over time, they will compound to deep cuts to what TM pays hospitals and doctors. Just look at these charts from the CMS Office of the Actuary: Step 2: Sever the link between TM spending and government subsidies paid to Medicare Advantage (MA) plans. Right now, thanks to the ACA, payments to MA plans are tied to TM per capita spending. So, as per capita TM spending falls (or rises more slowly than the cost of care) — as it will given the charts above — so do subsidies paid to MA plans. This, more or less, keeps the attractiveness of MA and TM in balance. More money to MA relative to TM allows plans to offer more benefits above and beyond TM, thereby enticing more enrollees away from TM (a good deal for beneficiaries is not necessarily one for taxpayers). MA payments weren’t always tied to TM spending in this way. Pre-ACA, they weren’t. They soared. Severing that link again (paying them more) would put make MA comparatively more attractive than TM to beneficiaries, and increasingly so over time. Step 2 would require Congress to act. Could it be accomplished under budget reconciliation, thereby avoiding a filibuster? It sure seems budget relevant to me, but it’s not my call. More importantly, it’s deep in the weeds. Lots of Americans would not understand what had happened.

If you’re obeying the law, you’re contributing CEOs' astronomical salaries If you pay for health insurance, you’re giving billions upon billions to health insurance CEOs, hospital administrators, pharmaceutical company CEOs. So, if you’re obeying the law, you’re contributing to their astronomical salaries. In fact, Cigna’s CEO made around $49 million this past year, if you read the various reports on the Internet. The CEO at a non-profit hospital in New Jersey (Morristown Medical Center) made some $5 million back in 2014. And of course, we all know about Mylan Pharmaceutical’s CEO. She made about $26 million in 2014; all for skyrocketing the price of a medication that should be about a dollar a dose. So when I read about insurance premiums increasing in 2017, and about the government attempting to “bring down health care costs” by “paying for quality care,” I can’t help but think that we may be going about it all wrong. Presently, physicians are gearing up for the latest attempt at cost-containment, known as MACRA. If you don’t know what MACRA means, don’t worry, according to the latest AAFP survey, 80 percent of physicians don’t know what it means either. So presently, your physician is reading about governmental regulation, quality measures, value-based care, and MIPS instead of reading about your lab tests, your medicines, and recent developments that could improve your quality of life. Or, they could be in the 46 percent of physicians in a recent Forbes survey that are throwing up their hands in exhaustion and planning on getting out of medicine as fast as they possibly can. Meanwhile, my patients with COPD can’t afford the inhalers that improve their quality of life. My patients with diabetes can’t afford the insulin that’s necessary to reduce potential complications. And many of them will not be able to afford health insurance after the 25 percent increases that are anticipated in 2017.

Valeant Tumbles On News Philidor Executives Have Been Arrested In "Multi-million Dollar Fraud And Kickback Scheme" - Another day, another round of selling of Valeant stock, which tumbled at the open on a news that the US has announced criminal charges in connection to a Valeant probe and that the ex-CEO of Valeant's "secret pharmacy" Philidor, Andy Davenport as well as another executive, Greg have been arrested "for engaging in a multi-million dollar fraud and kickback scheme." The stock is promptly down: According to the Southern District of New York, there will be a press conference today to noon announce charges against Gary Tanner, a former executive at Valeant Pharmaceuticals International, Inc., and Andrew Davenport, the former Chief Executive Officer of Philidor Rx Services LLC, for engaging in a multi-million dollar fraud and kickback scheme.    More details from the SDNY here.

 Bogus claims by homeopathic drug makers will now face wrath of FTC -The Federal Trade Commission will no longer turn a blind eye to bogus or misleading claims by homeopathic drug makers, according to an enforcement policy statement the commission released Tuesday.Makers of over-the-counter (OTC) homeopathic drugs and products that claim to cure or treat ailments will now have to clearly disclose in their advertisements and labeling that: 1) there is no scientific evidence that they are effective, and 2) that any claims of effectiveness are only based on homeopathic theories, which are not accepted by modern medical experts.In its statement, the FTC asserted that it has long had the authority to crack down on false and misleading claims. That includes in the decades after the Food and Drug Administration allowed homeopathic products to go on the market without demonstrations of their efficacy. “Nevertheless, in the decades since the Commission announced in 1972 that objective product claims must be substantiated, the FTC has rarely challenged misleading claims for products that were homeopathic or purportedly homeopathic,” the agency noted.But “in light of the burgeoning mainstream marketing of OTC homeopathic products alongside other OTC drugs,” the FTC has decided to step up enforcement.As Ars readers are likely aware, homeopathy is a thoroughly debunked pseudoscience that hinges on the idea that “like cures like.” That is, homeopaths say that diseases can be cured by heavily diluted doses of toxic substances that, in larger quantities, would produce the disease or similar symptoms. Believers say that homeopathic remedies can cure everything from AIDS to teething pain.Last month, the FDA warned parents to stop using homeopathic teething gels and tablets following reports of hundreds of illnesses and 10 infant deaths. Based on the reported symptoms, the products may have contained an improperly diluted amount of belladonna, aka deadly nightshade. The FDA investigation is ongoing. In light of the FTC’s new policy, those products and other homeopathic OTC drugs will likely be getting new packaging.

The incredible reason east sides of cities are poorer than west sides -The east sides of New York, London and Paris are noticeably and famously poorer than their western sides. And it turns out there’s a reason for that. Researchers have found that it’s due to the impact of air pollutants at the time of the Industrial Revolution, as prevailing winds in the U.S. and Europe typically blow from west to east. And it’s an impact that has lasted into today. A paper from the Spatial Economics Research Centre examined 5,000 industrial chimneys in 70 English cities in 1880, and then re-created the spatial distribution of pollution. That historical pollution explained up to 15% of within-city deprivation in 1881. “A pollution differential equivalent to the one between the 10% and 90% most polluted neighborhoods of Manchester would be associated with a gradient of 18 percentage points in the share of low-skilled workers,” the paper found. Perhaps more incredibly, that difference has continued to this day even though the pollution that caused them has waned. “Past pollution explains up to 20% of the observed neighborhood segregation whether captured by the shares of blue collar workers and employees, house prices or official deprivation indices,”

Climate change is already altering the world’s gene pool  - The dire impact of human-caused climate change on ecosystems, species, and public health is already well under way, a landmark study published Friday in the journal Science warns.The study authors analyzed an array of studies showing how climate change is altering the world around us and concluded that the planet’s warming has interfered with more than 80 percent of biological processes, including genetics, body mass, sex ratios, and productivity. “Climate change has already impacted almost all aspects of life on Earth,” lead author Brett Scheffers, an assistant professor of wildlife ecology and conservation at the University of Florida, said in an email. These changes have occurred after an average global temperature increase of just 1 degree Celsius since preindustrial times. Experts predict that the planet might see 2- to 3-degree-Celsius warming by the end of the century. It was the first time scientists had analyzed and described all of these changes in their entirety. “Our paper is unique in that we compiled published case studies showing evidence of climate change responses observed in nature,” Scheffers said. “There are literally thousands of scientific studies on climate change, spanning disciplines from physical to chemical to biological sciences. The power of our research is that it is not a single voice saying climate change is impacting nature but rather a collective voice of research from around the globe, all showing responses to climate change.”

New study: Salmonella thrives in salad bags -Research is showing that green leafy salads containing lettuce and spinach are subject to colonisation by food poisoning bacteria, most frequently Salmonella, E. coli and Listeria.   In February 2016, more than 50 people in Victoria, Australia developed salmonellosis after eating bagged salad leaves, while in July 2016, 161 people fell ill in the UK after eating mixed salad leaves and two people died. The EU league table of sources of food poisoning outbreaks now ranks green salads as the second most common source of food-borne illness. Foods such as salad leaves pose a particular infection risk because they are usually minimally processed after harvesting and consumed raw. Consequently, it isn’t surprising that considerable research effort has been made into improving the microbial safety of salad leaf culture as well as optimising protocols for processing and packaging.  But outbreaks still occur with devastating consequences and thus far very little has been known about what happens to the behaviour of food poisoning bacteria when in the actual salad bag – until now.  In our latest study, we concentrated on Salmonella as it is an aggressive pathogen that has been implicated in salad-associated infections. We found that juices released from the cut-ends of the salad leaves enabled the Salmonella to grow in water, even when it was refrigerated – this was a surprise as Salmonella has a temperature preference of 37C. Over the course of a five-day refrigeration – a typical storage time for a bagged salad – 100 Salmonella pathogens multiplied into more than 100,000 bacteria. Salad juices also helped the Salmonella to attach itself to the salad leaves so strongly that even vigorous water washing could not remove the bacteria. Salad leaf juice also enhanced the pathogen’s ability to attach to the plastic bags and containers used to contain salads for sale. Most concerning was that we found that exposure to the juices released from the salad leaves appeared to enhance the Salmonella’s capacity to establish an infection in the consumer.

Alarming Levels of Monsanto’s Glyphosate Found in Popular U.S Foods - A new report by Food Democracy Now! and the Detox Project exposes shocking levels of glyphosate contamination in popular American foods, including Cheerios, Doritos, Oreos, Goldfish and Stacy’s Pita Chips. Levels found in these product are well above the levels found by independent peer-reviewed studies which show that ultra-low levels of glyphosate can cause organ damage starting at 0.1 parts per billion (ppb). This is 1,750 times lower than what the EPA currently claims is safe. The highest levels detected were found in General Mills' Original Cheerios, which were simply off the charts, at 1,125.3 ppb or nearly twice the level considered potentially harmful according to the latest scientific research in a single serving.  As a result, we’re calling on the EPA Inspector General to investigate the agency’s failure to properly test and regulate glyphosate, end the practice of pre-harvest spraying of Roundup as a drying agent and release ALL of the industry data submitted to federal agencies, but kept hidden from the American public as "trade secrets." Demand that your regulatory agencies, like the EPA, FDA and USDA protect the American people from toxic chemicals in our food, water and air! It’s time to get Monsanto’s Roundup off your plate, ban glyphosate and label GMOs! We need your help today. Every voice counts! The report can be viewed here.

FDA Suspends Testing Foods for Glyphosate Residues -- Government testing for residues of glyphosate has been put on hold, slowing the U.S. Food and Drug Administration's (FDA) first-ever endeavor to get a handle on just how much of the controversial chemical is making its way into U.S. foods. The FDA, the nation's chief food safety regulator, launched what it calls a "special assignment" earlier this year to analyze certain foods for residues of the weed killer after the agency was criticized by the U.S. Government Accountability Office for failing to include glyphosate in annual testing programs that look for many less-used pesticides. Glyphosate is under particular scrutiny after the World Health Organization's cancer experts declared last year that the chemical is a probable human carcinogen . Several private groups and nonprofits have been doing their own testing and have been finding glyphosate residues in varying levels in a range of foods, raising consumer concerns about the pesticide's presence the American diet. The FDA's residue testing for glyphosate was combined with a broader herbicides analysis program the agency set in motion in February of this year. But the glyphosate testing has been particularly challenging for the FDA. The agency was finally forced to put the glyphosate residue testing part of the work plan on hold amid confusion, disagreement and difficulties with establishing a standard methodology to use across the agency's multiple U.S. laboratories, according to FDA sources. Equipment issues have also been a problem, with some labs citing a need for more sensitive instruments, sources at the FDA said.  FDA spokeswoman Megan McSeveney confirmed the testing suspension and said the agency is not sure when it will resume.

 Amid post-election fallout, EPA quietly approves Monsanto’s volatile, drift-prone herbicide dicamba - The EPA has quietly approved the usage of Monsanto's brand new herbicide, which the company says is less "volatile" than all alternative dicamba-based compounds that have caused massive crop damage, lawsuits and even bloodshed in the past. The US Environmental Protection Agency approved the usage of the dicamba-based herbicide XtendiMax with VaporGrip Technology, on Wednesday, although the event went almost unnoticed by the media and activists, who have been otherwise preoccupied with the US Presidential elections' fallout.The company still needs to get approval from individual states before the product can be sold to farmers, but according to Monsanto's spokesman Kyel Richard, it should be in the market by the start of next growing season. Dicamba is a decades-old herbicide, proven to be extremely volatile and drift-prone, vaporizing from treated fields and potentially affecting neighboring crops. Dicamba functions basically by increasing a plant's growth rate to the point that it outgrows its nutrient capabilities and dies.  The weed killer has seen a surge in usage this year, since Monsanto's new dicamba-resistant seeds entered the market before XtendiMax. Monsanto introduced Bollgard II XtendFlex cotton in 2015 and Roundup Ready 2 Xtend soybeans were introduced earlier this year.  Farmers had to use third-party older dicamba-based herbicides with Monsanto's seeds, despite the company's warnings. According to multiple reports, such activities caused a massive damage to off-target non-GM crops in at least ten states in America.

Local Governments Can Prohibit GE Crops, Says U.S. Court of Appeals - The U.S. Court of Appeals for the Ninth Circuit issued its decisions Friday on whether federal and Hawai'i state laws preempt Hawai'i counties' authority to regulate genetically engineered (GE) crops and pesticide use. Of significance to state and local communities throughout the U.S., the Ninth Circuit ruled that federal law—specifically, the Plant Protection Act—does not prohibit states and counties from passing local laws to regulate and ban commercially-grown GE crops.   Today's decision to allow states and counties to ban or regulate GE crops is an important victory for GE-free seed sanctuaries and small communities and farmers around the country," George Kimbrell, senior attorney for the Center for Food Safety , said.  In granting its decision the court recognized potential harm to farmers and environment from the widespread planting of GE crops, asserting, "the cultivation and testing of GE plants raise several well-documented concerns." Notably, the court affirmed, "transgenic contamination has previously caused significant economic impacts on farmers of conventional, non-GE crops." The court acknowledged as well that "the cultivation of GE crops also may raise environmental concerns, such as harm to beneficial plants and animals caused by the increased use of pesticides sometimes associated with testing and growing GE crops, the proliferation of ' superweeds ' and other pests resistant to pesticides, and the reduction of biodiversity." The court went on to declare: "The regulation of commercialized crops, both of GE and traditional varieties, remains within the authority of state and local governments."  At the same time, however, the court ruled that under Hawai'i law, counties and municipalities do not have the authority to regulate GE crops (as some in other states do), and that Hawai'i state law places such authority in the hands of the State alone.

Another record-breaking harvest | World Grain: World grains production will break records again this year. Although usage also is expected to rise, ending stocks will be higher and export availabilities will be ample. “A positive outlook for global cereal production in 2016, together with abundant stocks, points to a generally comfortable supply and demand balance in 2016-17,” the Food and Agriculture Organization (FAO) said in a Cereal Supply and Demand Brief issued Oct. 6. “In 2016, world cereal production is set to increase by 1.5%, or 38 million tonnes, to hit a new record of 2.569 billion tonnes, topping by at least 5.5 million tonnes the preceding peak of 2014,” it said. “The current FAO forecast is over 3 million tonnes higher than projected in September, with most of the upward revisions concerning wheat and rice.” World wheat production in 2016 is expected to exceed the 2015 record by 1.2%, underpinned by output increases in India, the Russian Federation and the United States, it said. “Similarly, global rice production is forecast to grow by 1.3%, to an all-time high, driven by recoveries in Asia, as well as by gains in Africa and North America,” the FAO said. “Global production of coarse grains is set to rebound by 1.8% from last year’s reduced level, mostly reflecting prospects for record maize crops in the United States, Argentina and India.” The FAO expects global grain utilization in 2016-17 to rise by 1.6% to 2.560 billion tonnes, with feed usage up by 2.7% in a market with large supplies of maize and low quality wheat.

Ethanol is bad for the economy and the environment - Is the end in sight for ethanol? We hope so. The consensus is clear; ethanol is not the green fuel it’s billed as, and the Environmental Protection Agency’s Renewable Fuel Standard is bad for the economy and worse for the environment.  “Ethanol foes are expected to face off again over the federal mandate that requires ethanol and biodiesel to be blended into the nation’s fuel supply later this month,” the Des Moines Register reports. “The U.S. Environmental Protection Agency is supposed to release its final Renewable Fuel Standard rule by the end of November.” Here s the jaw-droppingly inaccurate statement from EPA official Janet McCabe: “The Renewable Fuel Standards program is a success story that has driven biofuel production and use in the U.S. to levels higher than any other nation. This administration is committed to keeping the RFS program on track, spurring continued growth in biofuel production and use, and achieving the climate and energy independence benefits that Congress envisioned from this program.”  Each part of that statement is untrue. Let’s break it down.  Is the RNS a successful program? Hardly. Signed into law in 2007, it set unattainable (and inadvisable) goals that have never been met. And as Ryan Alexander of Taxpayers for Common Sense points out, “The maze of historic subsidies for ethanol has allowed the federal government to distort energy and agriculture markets, pick winners and losers, contribute to expansion and overproduction of ethanol in the industry, and result in numerous unintended consequences that cause long-term taxpayer liabilities.” He puts the cost to taxpayers at tens of billions of dollars. Next, Ms. McCabe claims climate and energy independence as benefits indeed as goals of the RFS program. She’s wrong on both counts. “The corn ethanol that is forcing its way into the marketplace is likely increasing greenhouse gas emissions, according to the National Academy of Sciences,” Alexander notes. “In fact, corn-based ethanol nearly doubles GHG emissions over 30 years and increases greenhouse gases for 167 years, according to researchers from Princeton University and Iowa State University.”  It takes more energy to grow, harvest and convert corn to ethanol than the ethanol itself yields. And how is it grown? With big, smelly, diesel-driven tractors.

Betting the Farm and Losing: Banks Seek Collateral as Debts Rise: -- Betting the farm on record crop, livestock and dairy prices has turned into a losing investment for an expanding share of America’s agricultural heartland. The level of debt to income is the highest in three decades, and growers are increasingly unable to make loan payments. Four years after record U.S. crop and farmland values boosted purchases of land and equipment, a global surplus has sent prices tumbling and farm income into the longest slump since 1977. The Federal Reserve says growers are borrowing more to pay bills, repayment rates are plunging, and the number of bankers requesting additional collateral is the highest in 25 years. While low interest rates and savings from big paydays not long ago have kept farmers in better financial shape than the bankruptcy crisis of the mid-1980s, signs of stress are increasing, especially for growers who invested during the boom years. Farm income is down 42 percent from a record in 2013, government data show, and MetLife Agricultural Finance predicts farmland values will tumble 20 percent by 2018. “Unquestionably, some farmers are not going to make it,” “If they made aggressive growth decisions and did it with debt, that won’t work out well. Credit quality is starting to slip on the farm and smaller agricultural businesses. Bankers are asking if they have the cash flow to pay bills.”The Federal Reserve Bank of Kansas City said last week that rural lenders it surveyed are seeing an erosion of financial health and credit conditions for crop and livestock producers in a seven-state region from Missouri to Colorado. In the third quarter, nearly 30 percent of the banks reported a significant deterioration of working capital for farmers, about twice as many as the same time in 2015, the Kansas City Fed said in its Nov. 10 report. An index tracking loan-repayment rates in the region was the lowest since 1985.

 Avocados are driving deforestation in Mexico - It sounds eerily reminiscent of palm oil. Demand for the luscious green fruit is resulting in expanded groves, at the cost of native forest. Most avocados sold in the United States and Canada come from a region in western Mexico called Michoacán, that is responsible for 80 percent of avocados exported worldwide. Unfortunately, these avocados are a leading cause of deforestation in the country, according to an announcement made by the attorney general’s Office for Environmental Protection on Monday.Talia Coria, who heads the office’s division in Michoacán, said that nearly 50,000 acres of forest land are converted to agricultural uses each year in the state, and that between 30 and 40 percent of the annual forest loss is due to avocados, about 15,000 to 20,000 acres. (Previous deforestation, before avocados were so popular, happened at a much lower rate—around 1,700 acres per year between 2000 and 2010.)Now that demand and prices of avocados are on the rise, however, growers are eager to do whatever they can to reap the benefits of avocado farming, even if it means destroying the lush forests that are so valuable to the region. Business Insider explains why this is alarming: “Experts say a mature avocado orchard uses almost twice as much water as fairly dense forest, meaning less water reaches Michoacán's legendary crystalline mountain streams on which trees and animals in the forests depend. Species like the monarch butterfly also rely on Michoacán forest as habitat, though Coria said there does not appear to have been damage to the monarch wintering grounds from avocado expansion yet.”

Sand’s End - Miami Beach is a resort community of just under 100,000 people, though its population swells with a steady stream of tourists. Through the wall of hotels that line its shore is the city's central draw: the wide, white stretch of Miami Beach's beach. To the casual observer, the beach may look like the only natural bit of the city, a fringe of shore reaching out from under the glass and pastel skyline. But this would be false: the beach is every bit as artificial as the towers and turquoise pools. For years the sea has been eating away at the shore, and the city has spent millions of dollars pumping up sand from the seafloor to replace it, only to have it wash away again. Every handful of sand on Miami Beach was placed there by someone. That sand is washing away ever faster. The sea around Miami is rising a third of an inch a year, and it’s accelerating. The region is far from alone in its predicament, or in its response to an eroding coast: it’s becoming hard to find a populated beach in the United States that doesn’t require regular infusions of sand, says Rob Young, director of the Program for the Study of Developed Shorelines at Western Carolina University. Virginia Beach, North Carolina’s Outer Banks, New York’s Long Island, New Jersey’s Cape May, and countless other coastal cities are trapped in the same cycle, a cycle whose pace will become harder to maintain as the ocean rises. "There isn’t a natural grain of sand on the beach in Northern New Jersey; there is no Miami Beach unless we build it," Young says. "The real endangered species on the coast of the US isn’t the piping plover or the loggerhead sea turtle. It’s an unengineered beach." The sea has been slowly cutting a divot into the shore in front of Miami Beach’s iconic Fontainebleau hotel, encroaching nearly to the promenade. Patching it would normally be a small job. But Miami Beach has a problem, one more cities will soon face: it has run out of sand in the ocean nearby.

Vancouver Considers Abandoning Parts of the Coast Because of Climate Change - Vancouver prides itself on being a coastal city, nestled between the Rocky Mountains and the Pacific. Like every other part of the world, it’s under threat from climate change, as warming temperatures cause sea levels to creep ever-higher. The city is looking at many options to hold back the rising water—and for the first time, retreat from the coast is one of them. This week, Vancouver officials put out a report laying out plenty of options to deal with sea level rise, including barriers, dykes, and seawalls. But it also suggests that, at least in some parts of the city, they may want to consider just getting people out of the way. The option of retreat from the coast is on the table in Vancouver, and other cities might soon follow.  Around the world, coastal cities are making tough decisions about how to best protect their populations from the inevitable increase in flooding. New York City, for example, has committed billions to climate change adaptation efforts, including seawalls and flood barriers.  But the option of retreat has rarely been seriously considered by officials, in Vancouver or elsewhere, due to its tricky politics. Having people leave their homes, sometimes decades before an actual flood occurs, is an unpopular ask to say the least.  According to the report, retreat in Vancouver would involve the city buying up residences and other property and ‘re-naturalizing’ them. This means essentially allowing them to flood, in order to protect other areas. Of course, many residents of the city—where the average price of a detached home is well over $1 million—may not be eager to up and move.

Charge landowners fees for stormwater, says environmental commissioner - Windsor - CBC News: Ontario's Environmental Commissioner wants homeowners to pay an additional fee to deal with flooding. Dianne Saxe, the Environmental Commissioner of Ontario, calls on every municipality to manage stormwater runoff by charging landowners a new levy, according to a report she authored called Urban Stormwater Fees: How to Pay for What We Need. The suggested fees could cost $3.95 to $14.92 per month for an average home, to give municipalities stable, predictable funding, explained Saxe, an independent officer of the Legislature. "We have a huge problem with stormwater management in Ontario and it's going to get a lot worse," Saxe said. "Without better municipal funding models for stormwater, our future will include more overland and basement flooding." City of Windsor engineer Mark Winterton said a levy like that is potentially on the table for Windsor. "We are working on the asset management plan, and part of that asset management plan is how to fund the asset going forward. And storm water is absolutely a part of that," he said. Any potential levy would have to be approved by city council. Saxe outlines three main factors that are causing flooding, including a growing population, aging infrastructure and climate change. "[Climate change] is increasing the intensity and severity of extreme events, which lead to flooding as we saw in Windsor and Tecumseh this summer," Saxe said.

These videos of thousands of dead fish clogging a Long Island canal will haunt your dreams - I stumbled upon these horrifying videos of thousands of silver bunker fish jiggling and flapping and struggling to get one last breath before they die. The water looks like it’s bubbling. It’s a nightmare. That was the view yesterday at Shinnecock Canal in Hampton Bays, New York. The water was filled with dead floating fish. By now, most of them have probably sunk to the bottom, the New York State Department of Environmental Conservation told CBS News. Residents have posted photos and videos on social media — and thank god technology doesn’t allow us to embed smells yet. The fish videos are likewise going viral — and people are obviously asking what caused all these poor, smelly animals to die en masse. Environmental officials won’t say. But Chris Paparo, the manager of Southampton Marine Science Center, told CBS News that blue fish were spotted in the bay on Sunday. Blue fish eat bunker fish. It’s likely that the blue fish chased the bunker into the closed canal, causing a stampede situation where the bunker fish depleted the oxygen in the water. Fish can’t live without oxygen any more than we can, so they all died. That’s a gruesome, terrifying situation — worse than getting food poisoning from sushi.

When seabirds smell plastic in the ocean, they think it’s time to eat - Seabirds mistakenly eat plastic debris in the ocean not just because it looks like food, but because it smells like it. When mealtime comes around, many species of ocean-faring birds, including albatrosses and petrels, follow their noses to the smell of dying algae, a sure sign that tasty krill are eating up the microscopic plants. In this tiny feeding frenzy, the algal cells burst and release a distinct-smelling sulfurous compound. The algae use this chemical as a kind of distress call, signaling their bird allies to come eat their predators. But it’s possible for this process to be hijacked, according to a UC Davis study published this week in Science Advances.Plastic pollution presents a growing threat to marine life. According to a 2014 analysis, 5 trillion pieces of plastic (weighing a combined 250,000 tons) are floating in the oceans. More than 200 species of marine mammals, turtles, birds and fish have been found to mistakenly eat plastic, and Australian researchers recently projected that by 2050, 99% of all seabird species will have ingested at least a little of the man-made material.  The researchers behind the new study suggest plastic pollution may set a kind of “olfactory trap” for the seabirds as they sniff out prey. As plastic floats in the ocean, it accumulates a host of organic matter, including that stinky sulfur compound known as dimethyl sulfide, or DMS. When the birds get a whiff of the plastic, they eat it up as if it were their natural prey. “If your nose has told you that you can find food here, it’s much more likely that you’ll let your guard down and eat garbage by accident,” said study leader Matthew Savoca, a UC Davis doctoral student in ecology.

In graveyard of dead coral in Pacific, hope and life bloom: — In a ghost town of dead coral off a remote Pacific island, scientists have found a bit more life. In excursions a year ago and then last April, scientists examined the normally stunning coral reefs around the island of Kiritimati and pronounced it mostly a boneyard of dead coral. About 85 percent of the coral was dead, 10 percent was sick and bleached but still technically alive, and only 5 percent was doing OK. The same scientists returned this month and found that 6 to 7 percent of the coral is alive and not bleached, said University of Victoria coral reef scientist Julia Baum, speaking by Skype from the island. "We left with a sense of dread and came back with a renewed purpose because there are some corals that literally came back from the brink," said Georgia Tech climate scientist Kim Cobb, who returned from the expedition earlier. "It's the best we could have hoped for." Many of the fish that rely on the reef and had been absent seem to be back, Cobb said. Hot water — mostly from El Nino, the natural occasional warming of the Pacific that changes weather worldwide, and man-made global warming — had made the area one of the worst hit coral spots in the world. Later, nearby Jarvis Island was even more damaged. And the death of 85 percent of the coral of the better known and much larger Great Barrier Reef has been reported, said C. Mark Eakin, coral reef watch coordinator for the National Oceanic and Atmospheric Administration. "But despite this mass mortality, there are a few small signs of hope," Baum said. "It's clear that coral reefs have great resilience and the coral here is trying to recover."

A giant reservoir that supplies a California county’s drinking water is nearly empty   - Lake Cachuma, a giant reservoir built to hold Santa Barbara County’s drinking water, has all but vanished in California’s historic drought. It reached an all-time low this summer — 7 percent capacity, which left a thick beige watermark that circles the hills framing the lake like an enormous bathtub ring. “We’re just amazed,” Keller said. Under a sky that hardly ever delivers rain, the lake will only continue to fall, putting nearly a half-million county residents in an ugly situation. As early as January, the depth is expected to be too low to distribute water. Barring a winter miracle of massive snows and rains extending into April, weather that has forsaken Southern California for more than five years, there will be “no water available next year from the reservoir,” said Duane Stroup, deputy area manager for the south-central region of the federal Bureau of Reclamation. The entire Santa Ynez Valley will then face a future without water. The 3,000-acre reservoir supplies half of what the valley needs to recharge an underground aquifer that nearly every household, business and farm uses to pump water.“I don’t know what will happen if we get the same amount of [precipitation] we got this winter. The wells will go dry, and they will fail. There are people in agriculture that will be required to fallow crops,” meaning destroy them, said Bruce Wales, general manager of the Santa Ynez River Water Conservation District. He predicts the area could one day resemble the Central Valley to the east. Residents there couldn’t wash or flush after 2,000 wells recently went dry, and the state has been forced to provide huge tanks and water to hundreds of homes.

 Record-Breaking Drought and Wildfires Plaque Southeast -- The atmospheric spigots have been turned off across most of the U.S. over the last several weeks. According to the weekly U.S. Drought Monitor report from Nov. 10, more than 27 percent of the contiguous U.S. has been enveloped by at least moderate drought (categories D1 through D4). This is the largest percentage value in more than a year, since late October 2015 .  The upward trend of the last month is worrisome given the outlook for the coming winter: Drier-than-average conditions are projected by the National Oceanic and Atmospheric Administration across the southern half of the contiguous U.S., a frequent outcome during La Niña winters.  It's common for parts of the mountainous U.S. West to take until late autumn or early winter to build up a proper snowpack, but such a delay seldom extends to the entire region. This month, nearly all of the high country of the Western U.S. is running far below the seasonal average for the amount of water held in snowpack. Ski areas are feeling the pain, especially since temperatures have rarely been cold enough this autumn for snowmaking to supplement nature. Several of Colorado's major resorts have already postponed their opening dates , including Keystone, Breckenridge and Copper Mountain.  The paltry snowpack is especially striking in the Pacific Northwest, which just experienced its wettest October on record. Most of that precipitation came in the form of rain, leaving all but the highest mountains snow-free. "Still early in winter but snowpack is terrible," tweeted Brad Udall , senior water and climate scientist at the Colorado Water Institute. Outside the Pacific Northwest, precipitation has been scanty and temperatures have been consistently warmer than average.  East of the mountains, the Plains and Midwest have been especially mild this month (see Figure 3 above). The Minneapolis-St. Paul International Airport has yet to see a temperature below freezing, breaking the city's all-time latest-freeze record of Nov. 7, 1900. La Crosse, Wisconsin and Peoria, Illinois, have also broken their latest-first-freeze records as they wait to dip to 32 F.

Tehran shuts schools after thick smog kills hundreds of people - At this time of the year, citizens of Tehran are accustomed to a thick curtain of fog that falls across the city, veiling everything from the 435 metre-tall Milad tower to the nearby Alborz mountains. This week, however, the blanket of smog smothering the Iranian capital has been blamed for a string of deaths and prompted unprecedented emergency measures by the city’s authorities. Habib Kashani, a member of Tehran’s municipal council, said on Tuesday that pollution in Tehran had led to the death of 412 citizens in the past 23 days, according to the state news agency, Irna. City authorities announced that all schools would be closed on Wednesday. The concentration of ultra-fine airborne particles (known as PM2.5) reached more than 150 this week, setting a new record. These particles of less than 2.5 micrometres in diameter can penetrate the lungs and pass into the bloodstream and have been linked to increased rates of chronic bronchitis, lung cancer and heart disease. Irna reported that on four of the past six days, air quality reached dangerous levels for people suffering from respiratory diseases, and on two days it was dangerous for everyone. PM2.5 levels are seen as the best measure of the impact of air pollution on health.  The new World Health Organisation database of worldwide air pollution measures, released in May, put the Iranian city of Zabol, on the eastern border with Afghanistan, as the world’s most polluted city, based on PM2.5. Pollution is a perennial problem in Tehran, which is surrounded by mountains and has little wind to disperse the smog. Millions of cars throng the city’s congested streets, and locally refined petrol has also been blamed as a key polluting factor.

We've been underestimating the costs of natural disasters by up to 60%, according to a World Bank study  - Natural disasters have a more devastating impact on the poor than widely thought, forcing some 26 million people into poverty each year and setting back global spending on goods and services by the equivalent of $520 billion annually, the World Bank said on Monday. The human and economic costs of disasters, caused by extreme weather and earthquakes, have been underestimated by up to 60 percent because they ignore the high toll on the consumption and related well-being of the poor, the bank said in a new study. “Severe climate shocks threaten to roll back decades of progress against poverty,” said World Bank Group President Jim Yong Kim in a statement. "Building resilience to disasters not only makes economic sense, it is a moral imperative.” Stephane Hallegatte, lead author of the report, said poor people tend to suffer more from disasters as they often live in places that are hit more often, and lose a bigger share of their income. They also receive less support from governments, friends and family, he added. The report notes that a flood or earthquake can be disastrous for poor people but have a negligible impact on a country's overall wealth or production if it affects people who own almost nothing and have very low incomes.But for them, disasters can have damaging long-term effects, such as forcing families to take a child out of school or to spend less on healthcare, it adds.

2016 will be the hottest year on record, UN says  -- 2016 will very likely be the hottest year on record and a new high for the third year in a row, according to the UN. It means 16 of the 17 hottest years on record will have been this century. The scorching temperatures around the world, and the extreme weather they drive, mean the impacts of climate change on people are coming sooner and with more ferocity than expected, according to scientists. The World Meteorological Organization (WMO) report, published on Monday at the global climate summit in Morocco, found the global temperature in 2016 is running 1.2C above pre-industrial levels. This is perilously close to to the 1.5C target included as an aim of the Paris climate agreement last December. The El Niño weather phenomenon helped push temperatures even higher in early 2016 but the global warming caused by the greenhouse gas emissions from human activities remains the strongest factor. Paris explainer “Another year. Another record,” said WMO secretary-general, Petteri Taalas. “The extra heat from the powerful El Niño event has disappeared. The heat from global warming will continue.” “Because of climate change, the occurrence and impact of extreme events has risen,” he said. “‘Once in a generation’ heatwaves and flooding are becoming more regular.” The WMO said human-induced global warming had contributed to at least half the extreme weather events studied in recent years, with the risk of extreme heat increasing by 10 times in some cases.

Second-warmest October cements hottest year  -  October was the second hottest on record for the planet, NASA data released Tuesday shows. The month was the latest in a string of record- and near record-warm months that will see 2016 easily take the title of hottest year in the books.  While an exceptionally strong El Niño helped to boost temperatures early in the year, most of the excess heat has built up over decades as greenhouse gases have accumulated in the atmosphere. Discussions to implement a landmark agreement to limit manmade warming are currently underway in Morocco, though negotiators are concerned that the election of Donald Trump could derail these efforts.  October was 1.6˚F (0.89˚C) warmer than the 1951-1980 average that NASA uses as a baseline, but well below October 2015, which was the first month in NASA records to reach 1˚C above average.

Weak La Niña Expected to Persist into 2017 - After a few months of on-again, off-again prospects for a La Niña in 2016-17, NOAA pulled the trigger on Thursday. In its monthly El Niño/Southern Oscillation (ENSO) Diagnostic Discussion issued on Thursday, NOAA placed its alert system into La Niña Advisory mode. A La Niña Advisory means that La Niña conditions are now present and expected to continue--in this case, through winter 2016-17.  The NOAA advisory follows a cooling trend that’s persisted for months across the central and eastern equatorial Pacific, including the Niño3.4 region. The core definition of La Niña is a cooling of sea surface temperatures (SSTs) over the Niño3.4 area to at least 0.5°C below the seasonal average. To be considered full-fledged La Niña conditions, the SST shift must be accompanied by La Niña-supportive trends in the overlying atmosphere, such as a strengthening of Pacific trade winds and increased shower and thunderstorm activity in the western Pacific. SSTs entered La Niña territory back in July, but the atmospheric cofactors were less consistent and more ambiguous until the last month or so. The nagging uncertainty, which was backed up by less-than-enthusiastic computer model runs, led to NOAA’s issuing a La Niña Watch in April, implementing a La Niña Advisory in July, reverting to a La Niña Watch in August, cancelling that watch in September, and reissuing it in October. In an NOAA ENSO Blog posted Thursday, Emily Becker outlines the step-by-step process guiding NOAA’s decision-making on La Niña. According to Becker, “The atmospheric response overall is fairly weak, going along with the borderline cooler sea surface temperatures of this La Niña…but it’s been consistent for a few months, meaning that we are seeing a change on seasonal timescales, and it’s time to formally welcome La Niña conditions!” Australia’s Bureau of Meteorology (BOM) issued a La Niña Watch in April and has stuck with it ever since, including its November 8 update. The agency uses a more stringent definition than NOAA for La Niña: SSTs in the Niño3.4 region must be at least 0.8°C below average, together with other cofactors.

Global CO2 emissions begin to plateau - From Domainfax: Global carbon dioxide emissions from fossil fuels and industry have stabilised for a third year in a row, in a shift that will reduce the risks of dangerous climate change if the trend continues, researchers say. CO2 emissions from the two sources last year were steady at about 36.4 gigatonnes, slowing from a pace that had reached as much as 3 per cent a year during the past decade, according to the Global Carbon Project.“It’s really remarkable,” said Pep Canadell, executive director of the Global Carbon Project at the CSIRO. “We’re moving from an era of super-fast growth in emissions that we saw in the 2000s.” The recent plateau in fossil fuel-related emissions, though, wasn’t enough to prevent an acceleration of atmospheric levels of CO2 last year. And while the pause is welcomed, its longevity may be shortlived as pollution from nations such as India increases.

World CO2 emissions stay flat for third year, helped by China falls: study | Reuters: World greenhouse gas emissions stayed flat for the third year in a row in 2016, thanks to falls in China, even as the pro-coal policies of U.S. President-elect Donald Trump mean uncertainty for the future, an international study said on Monday. Carbon dioxide emissions from fossil fuels and industry were set to rise a tiny 0.2 percent in 2016 from 2015 levels to 36.4 billion tonnes, the third consecutive year with negligible change and down from three percent growth rates in the 2000s, it said. The Global Carbon Project, grouping climate researchers, welcomed the flatlining of emissions amid global economic growth. But it cautioned that the world was not yet firmly on track for a greener economy. "It's far too early to say we've reached a peak in emissions," co-author Glen Peters, of the Center for International Climate and Environmental Research in Oslo, told Reuters, referring to the findings issued at U.N. talks on climate change in Marrakesh, Morocco. "So far the slowdown has been driven by China," Peters said, adding Beijing's climate change policies would also be the dominant force in future since it accounts for almost 30 percent of global emissions. Chinese emissions were on track to dip 0.5 percent this year, depressed by slower economic growth and coal consumption. U.S. emissions were projected to fall by 1.7 percent in 2016, also driven by declines in coal consumption, according to the study published in the journal Earth System Science Data. By contrast, emissions in many emerging economies are still rising. Carbon dioxide is the main man-made greenhouse gas blamed for trapping heat, stoking disruptions to world water and food supplies with heat waves, floods, storms and droughts.

Why the Arctic waters are reluctant to freeze -- Barrow’s average temperature for October 2016 was a balmy -1C, significantly warmer than the long-term average of around -8C. And over the North Pole the air has been a full 10C warmer than average of late. Much of the reason for these warm temperatures and the sluggish rate of sea-ice formation is the exceptional summer sea-ice melt that occurred this year. By 10 September the National Snow and Ice Data Center reported that Arctic sea-ice had shrunk to an area of just 4.14m square kilometres – tying with 2007 for second lowest sea-ice extent on record, and some 740,000 square kilometres short of the record set in 2012.  The rapid melting of this ice earlier in the season gave plenty of time for the surface waters of the Beaufort, Chuckchi, Barents and Kara Seas to warm up, and it is these warm waters, combined with persistently warm dry weather blowing up from the south, that have boosted air temperatures and slowed the progress of fresh sea-ice formation. Summer sea-ice has been diminishing for a number of years in this region now, and research recently published in Nature Climate Change indicates that this change may be responsible for shunting the Arctic polar vortex towards the Eurasian continent during winter. The resulting change in atmospheric circulation patterns may be causing a cooler end to winter over parts of the Eurasian and North American continents.

The North Pole is an insane 36 degrees warmer than normal as winter descends -- Political people in the United States are watching the chaos in Washington in the moment. But some people in the science community are watching the chaos somewhere else — the Arctic. It’s polar night there now — the sun isn’t rising in much of the Arctic. That’s when the Arctic is supposed to get super-cold, when the sea ice that covers the vast Arctic Ocean is supposed to grow and thicken. But in fall of 2016 — which has been a zany year for the region, with multiple records set for low levels of monthly sea ice — something is totally off. The Arctic is super-hot, even as a vast area of cold polar air has been displaced over Siberia.At the same time, one of the key indicators of the state of the Arctic — the extent of sea ice covering the polar ocean — is at a record low. The ice is freezing up again, as it always does this time of year after reaching its September low, but it isn’t doing so as rapidly as usual. In fact, the ice’s area is even lower than it was during the record-low 2012: (National Snow and Ice Data Center) Twitter’s expert Arctic watchers also are stunned. Zack Labe, a PhD student at the University of California at Irvine who studies the Arctic, tweeted out an image on Wednesday from the Danish Meteorological Institute showing Arctic temperatures about 20 degrees Celsius higher than normal above 80 degrees North Latitude. “Today’s latest #Arctic mean temperature continues to move the wrong direction . . . up. Quite an anomalous spike!,” Labe wrote. Here’s the figure:  “Despite onset of #PolarNight, temperatures near #NorthPole increasing. Extraordinary situation right now in #Arctic, w/record low #seaice,” added Daniel Swain, a climate scientist at UCLA. This is the second year in a row that temperatures near the North Pole have risen to freakishly warm levels. During 2015’s final days, the temperature near the Pole spiked to the melting point thanks to a massive storm that pumped warm air into the region.

As Trump Heads to Washington, Global Warming Nears Tipping Point - Bloomberg: Global temperatures continue to shatter records this year, rising to within less than one degree of the level that scientists say would be catastrophic, according to the United Nations. During the first nine months of the year, temperatures were 1.2 degrees Celsius (2.16 degrees Fahrenheit) above those recorded at the end of the 1800s, the UN’s World Meteorological Organization said in a report Monday. If the Earth warms more than 2 degrees beyond those pre-industrial levels, scientists have warned that climate change could hit an irreversible tipping point, unleashing a torrent of floods, droughts and storms.The WMO’s findings, based on 136 years of data from three scientific agencies, come days after the U.S. presidential election of Donald Trump, who has said climate change is a hoax perpetrated by the Chinese. The Republican has vowed to pull the U.S. out of the Paris climate agreement, which scientists say is a crucial step toward keeping the globe from crossing the 2-degree threshold. “Because of climate change, the occurrence and impact of extreme events has risen,” WMO Secretary-General Petteri Taalas said in a statement. “‘Once-in-a-generation’ heatwaves and flooding are becoming more regular.” Violent weather has reverberated around the globe this year. The deadliest storm has been Hurricane Matthew, which ripped through the Caribbean and the U.S. Southeast in October and killed at least 1,000 people in Haiti alone. In Asia, Typhoon Lionrock swept through Japan, Russia, China and North Korea, killing more than 100 and destroying thousands of homes. And in Africa, droughts in Malawi, Angola, Zambia and elsewhere have led to food shortages that could impact an estimated 17 million people by early 2017.

Paris Climate Deal Is Too Weak to Meet Goals, Report Finds -  As negotiators meet in Morocco to hammer out details of the landmark global climate change accord reached in Paris almost a year ago, the independent International Energy Agency warned that the nearly 200-nation deal was too weak to meet its avowed temperature target. The I.E.A.’s annual World Energy Outlook stated that reaching the Paris targets to reduce greenhouse gas emissions was possible, and that meeting those targets would slow climate change. Yet the agency’s estimates also showed that the result of those reductions was not likely to keep the temperature increase beyond preindustrial levels “well below” 2 degrees Celsius, as hoped. Instead, the report’s authors estimated, meeting the national commitments to reduce carbon dioxide emissions would still allow temperatures to rise 2.7 degrees Celsius by 2100. Meeting the most ambitious temperature goal discussed at the conference would be next to impossible, the report stated: “The transformation required for a reasonable chance of remaining within the temperature goal of 1.5 degrees Celsius is stark.” A shifting mix of energy sources that favors renewable energy and more efficient energy use are putting those targets within reach. The annual report of the International Energy Agency, based in Paris, noted that renewable energy was booming, with more capacity added in 2015 than for coal, oil and nuclear power combined. Still, fossil fuels will have a substantial role to play in the global energy mix for many years to come — especially natural gas, which is rapidly displacing coal.

 Radical energy shift needed to meet 1.5C global warming target: IEA | Reuters: A radical shift in the energy sector, cutting emissions to zero by around 2040, is needed to limit the global rise in temperature at 1.5 degrees Celsius (2.7 Fahrenheit) the International Energy Agency (IEA) said on Wednesday. The IEA's first report on meeting the climate target aspired to in the Paris agreement, comes as more than 190 nations meet in Marrakesh, Morocco, to thrash out the details of the global deal forged last year. "The unavoidable conclusion is that there is an urgent need for immediate radical reductions in energy sector CO2 (carbon dioxide) emissions if there is to be any chance of achieving the 1.5 degree Celsius goal," the IEA said in its World Energy Outlook 2016. Some 90 percent of electricity production would need to come from nuclear power plants or renewables such as wind and solar, while fossil fuel generation such as gas would need technology to capture and store emissions, the report said. Under the IEA's new policies scenario, which factors in adopted measures as well as declared policy intentions, renewable electricity generation is expected to make up 37 percent of the total by 2040. In addition, all passenger and light-commercial vehicles would need to be electric, while trucks and buses also need to be increasingly electrified for the 1.5 degree goal to be met, the report said. Just 1.3 million out of a global stock of nearly 1 billion cars would be powered by electricity by the end of 2016, the IEA said.

Climate conference: Who′s afraid of President Trump? : The nice young woman from the American delegation at the UN climate conference in Marrakesh is unable to provide the German journalist with an interview partner – someone who could answer questions on what will happen now, following the election of Donald Trump as the next US president. Donald Trump, who believes that climate change is a hoax invented by the Chinese. Who wants to build the controversial oil pipeline from Canada that Barack Obama blocked on environmental grounds. Who wants to cancel, with immediate effect, Obama's plan to reduce environmentally damaging emissions from coal-fired power stations. Everyone here in Marrakesh is talking about Donald Trump. "Our climate envoy Jonathan Pershing will hold a press conference at the start of the week; you'll have to wait until then," the nice young woman continues. This will probably be Pershing's last climate conference; presumably he, like many of President Obama's team, will be replaced. Meanwhile, the outgoing secretary of state, John Kerry – a driving force behind the United States' progressive climate policy in recent years – is also awaited in Marrakesh. Questions to members of the official German delegation meet with more icy reservation: No comment, we don't even know yet who we'll be negotiating with, they say. But we're also hearing that people want to get as much as possible finalized in Marrakesh, before Trump takes office in January. The Paris climate agreement, reached with the US last year, is to be fleshed out in detail. Some 100 countries have already ratified the Paris agreement, in record time, as if they knew what was on the cards for climate protection policy. "NoIf the United States withdraws from international climate policy, it means that others – Europe and China – will just have to do more," says Bärbel Höhn, the head of Germany's federal environment committee, who is in Morocco for a few days. But she doesn't believe that Trump will be able to do all the things he's promised to do: "In rural areas in particular, in the Midwest, where people voted for him, many farmers are already working with renewable energies. He can't alienate them completely," says Höhn.

What President Trump means for the future of energy and climate - President…Donald…Trump. The first impulse may be to describe the future in apocalyptic phrases. Game over for the climate! Game over for NATO! Game over for the Clean Power Plan! Game over for Planned Parenthood! While there are certainly extreme outcomes possible for these and many other issues that divide our nation, we may see some moderation, especially on matters where the divisions do not rigidly follow ideological fault lines. Of course, the president-elect himself is famous neither for hewing to right wing orthodoxy nor for consistency between his various pronouncements. As he has said: “I like to be unpredictable.” But make no mistake, in the energy and climate space Trump’s number one priority is to dismantle the Obama legacy as he sees it. And he sees it largely through the lens of organizations like the U.S. Chamber of Commerce and the American Petroleum Institute, pro-fossil fuel organizations severely allergic to regulations. A prime target is the Environmental Protection Agency and its regulation of greenhouse gases via the Clean Power Plan and methane emissions measures, which are described as “job killers.” The Clean Power Plan, which sets limits on carbon emissions from power plants, has been stayed by the courts for the moment, but one should not forget that EPA’s responsibility to regulate CO2 emissions under the Clean Air Act was affirmed by the Supreme Court. This sets up a potential conflict among the executive, legislative and judicial branches. President Trump and a Republican-controlled Congress may hollow out and handcuff the EPA, but EPA’s responsibility to regulate greenhouse gases will remain unless existing law is modified by Congress or by a Court returned to full strength with Trump appointees. Trump would put fossil energy production on steroids, opening up or selling federal lands for exploration and production of oil, gas and even coal. He has called this an “energy revolution” that will produce “vast new wealth” for the country. The only limitation to a policy of “drill, baby, drill” and “dig, baby, dig” evident in his past positions is an acknowledgment that local communities should have a say in whether hydraulic fracturing is permitted in their environs. Whether this respect extends to communities affected by other energy infrastructure projects, such as the Dakota Access Pipeline, remains to be seen.

 Trump begins filling environmental posts with clowns -  I admit it. I admit that after Trump’s election victory, I secretly hoped and even thought that his rhetoric was worse than its bite. He only said those crazy things during the campaign to get elected. He wouldn’t really follow through on his plans to completely gut the US commitment to keeping the Earth habitable. Oh how naive we were. Trump’s plan to fill positions in his administration shows things are worse than we could have ever feared.According to recent reports, Trump has picked long-time climate denier and spokesperson for the fossil fuel industry Myron Ebell to head the Environmental Protection Agency transition. This basically means the EPA will either cease to function or cease to exist. It also appears that the US will pull out of any agreements to limit greenhouse emissions. It means we have missed our last off-ramp on the road to catastrophic climate change. That may sound hyperbolic, but I study the rate that climate change is happening – the amount of heat accumulating in the Earth’s system. We didn’t have any time to waste in implementing Obama’s aggressive plans, and Trump will result in a decade of time lost.So who is Myron Ebell? He is a director at the Competitive Enterprise Institute and chair of the Cooler Heads Coalition. Where did he get his PhD in science? Nowhere. In fact, he isn’t a scientist at all, but he does have a degree in economics. Yeah!Is there any conflict that E bell’s Competitive Enterprise Institute is funded by companies such as ExxonMobil and groups such as the Charles Koch Charitable Foundation? Surely not.  What this selection also tells us about Trump is that he is surrounding himself with people who are not knowledgeable in a topic and will not effectively educate him. Not that educating Trump was ever possible. But there was always the outside chance he would take his contrarian streak to a new level and be contrarian to the contrarians. We now see that is not going to happen. If Trump listens to anyone, it will be people who think like he does and represent special interests who would be most affected by his policies. We have a fox guarding the hen house.

OK, I See Where This Is Going...  Dave Cohen - Dave Roberts put his 2 cents in about Trump and climate change at Vox. The story is called Trump’s election marks the end of any serious hope of limiting climate change to 2 degrees. the story about the world unifying to take bold, dramatic action on climate change, beyond what was pledged in Paris, has gone from unlikely to utter fantasy. The best climate activists can hope for is that Trump loses in 2020 in a giant Democratic wave that involves redoubled commitment to climate action.But even in that wildly optimistic case, the chance of limiting temperature to 1.5 or 2 degrees is, for all intents and purposes, gone. There’s going to be severe, dangerous climate change. Millions of people will suffer. The larger climate struggle is not over, of course. It never will be — 3 degrees is much worse than 2 and 4 much worse than 3. The fight goes on. But it is time to honestly acknowledge our failure and grapple with its consequences.Honestly acknowledge our failure? Hmm...We won’t avoid dangerous climate change. That’s what the US decided last night. There’s no point pretending otherwise. The key phrase is emphasized above. Meeting the Paris targets has gone from "unlikely" to "utter fantasy." And yet, back in October, before Trump was elected, Dave Roberts wroteAre any of the countries that signed the Paris agreement taking the actions necessary to achieve that target? No. The US is not. Nor is the world as a whole. The actions necessary to hold to 2 degrees, much less 1.5 degrees, are simply outside the bounds of conventional politics in most countries. So the world was failing to meet those Paris targets as of October, but now meeting them is "an utter fantasy" in November because Donald Trump won. Back in October, human failure was nearly universal because the Paris targets "are simply outside the bounds of conventional politics in most countries."  Now, in November, per the usual Flatland magic, humanity's failures have disappeared. Now, and in the future, it will be Donald Trump's fault that humanity failed to meet the Paris targets. I daresay that humans are hard-wired to "reason" like this. It's impossible for humans to acknowledge their generalized failures. They are wired to find someone to blame.

China says didn't invent global warming, vows to fight climate change - CHINA has come out to deny Donald Trump’s claim years ago that global warming was nothing but a so-called hoax created by their country to harm U.S. competitiveness, also offering America’s newly-elected president a history lesson on the subject. Reports from the United Nations talks in Marrakech, Morocco, on Wednesday said China’s vice Foreign Minister Liu Zhenmin addressed the issue by pointing out that it was Trump’s predecessors who had started climate change negotiations in the 1980s.According to Bloomberg, Liu reminded Trump that it was U.S. presidents Ronald Reagan and George H. W. Bush who supported the Intergovernmental Panel on Climate Change in initiative talks on global warming before China even knew that negotiations to reduce pollution were beginning.“If you look at the history of climate change negotiations, actually it was initiated by the IPCC with the support of the Republicans during the Reagan and senior Bush administration during the late 1980s,” he was quoted as telling reporters during an hour-long briefing. Officials from nearly 200 countries are in Marrakech this week for a UN Climate Change Conference 2016 where delegates are looking for ways to implement the 2015 Paris Agreement. The talks have, however, been overshadowed by Trump’s shock victory in the U.S. presidential polls last week. U.S. representatives at the conference have found themselves hammered with questions on U.S.’ commitment to the Paris deal to cut global greenhouse

Trump looking at fast ways to quit global climate deal: source | Reuters: Donald Trump is seeking quick ways of withdrawing from a global agreement to limit climate change, a source on his transition team said, defying widening international backing for the plan to cut greenhouse gas emissions. Since the U.S. President-elect was chosen, governments ranging from China to small island states have reaffirmed support for the 2015 Paris Agreement at 200-nation climate talks running until Nov. 18 in Marrakesh, Morocco. Trump, who has called global warming a hoax and has promised to quit the Paris Agreement, was considering ways to bypass a theoretical four-year procedure for leaving the accord, according to the source, who works on Trump's transition team for international energy and climate policy. "It was reckless for the Paris agreement to enter into force before the election" on Tuesday, the source told Reuters, speaking on condition of anonymity. The Paris Agreement won enough backing for entry into force on Nov. 4. Alternatives were to send a letter withdrawing from a 1992 Convention that is the parent treaty of the Paris Agreement, voiding U.S. involvement in both in a year's time, or to issue a presidential order simply deleting the U.S. signature from the Paris accord, he said. Many nations have expressed hopes the United States will stay. Host Morocco said the agreement that seeks to phase out greenhouse gases in the second half of the century was strong enough to survive a pullout."If one party decides to withdraw that it doesn't call the agreement into question," Foreign Minister Salaheddine Mezouar told a news conference.

From France to Canada, countries are reeling from Trump’s climate plans -  As Donald Trump prepares to take office in January, climate scientists and activists have begun to speculate about how his presidency could affect the success of the Paris climate agreement. And in fact, just one week in, Trump’s election has already begun to make waves in the dialogue surrounding the international community’s climate efforts. On Monday, former French president Nicolas Sarkozy suggested that Europe impose economic repercussions on the United States should Trump actually withdraw from the Paris agreement as he’s promised. “Donald Trump has said that he would not respect – it will be seen whether he sticks to this commitment – the conclusions of the Paris accord on climate,” Sarkozy told the French television station TF1. “And so I ask that Europe construct a carbon tax at Europe’s borders, a tax of one to three percent for all the products that come from the United States, if the United States exempts itself from the environmental regulations that we ourselves have imposed on our businesses.” Such a move could be a major blow to American exporters — and the suggestion isn’t without teeth. Sarkozy, who was president of France from 2007 to 2012, is currently considered a front-runner to become the center-right Les Républicains party candidate in next year’s election. The comments came as representatives from around the world entered into their second week of meetings at the UN climate change conference in Marrakech, Morocco. There, attendees are now considering the potential future of the Paris accord minus U.S. involvement.

U.S. will be 'rogue' state if it ditches climate accord: U.N. envoy | Reuters: - The United States would become "a kind of rogue country" if it pulls out of an international agreement to combat global warming, leaving the world more vulnerable to droughts and other climate extremes, warned Mary Robinson, a former Irish president and human rights advocate. "It would be a tragedy for the United States and the people of the United States if the U.S. becomes a kind of rogue country, the only country in the world that is somehow not going to go ahead with the Paris Agreement," Robinson said in an interview with the Thomson Reuters Foundation on Sunday. U.S. President-elect Donald Trump, a Republican, has promised to pull the United States out of that global climate accord, which was agreed last year by 193 countries and which came into effect earlier this month, just in advance of his election. The deal aims to hold climate change to "well below" 2 degrees Celsius of warming by moving the world economy away from fossil fuels. The agreement provides for $100 billion a year in international funding from 2020 to help poorer countries develop cleanly and adapt to the already inevitable impacts of climate change. Robinson, who now runs a foundation focused on seeking justice for people hit hard by climate impacts despite having contributed little to the problem, said she was confident other countries would continue their backing for the accord regardless of any action taken by the United States. "I don't think that the process itself will be affected (if) one country, however big and important that country is, decides not to go ahead,"

I'll tax U.S. goods if Trump reneges on trade deals, says France's Sarkozy | Reuters: Nicolas Sarkozy, seeking to return to power as French president, said on Tuesday he would tax U.S. imports if Washington turned its back on international trade and climate accords under Donald Trump. Five days from a primary contest where polls predict Alain Juppe will win their party ticket for the presidential contest, Sarkozy is seeking to tap voter fears of globalisation and portray himself as a harder hitter than his chief rival. In an RTL radio interview, Sarkozy, 61, president from 2007 to 2012, said: "There's no reason why Europe should not protect and defend its interests. "Protectionism is not the danger to peace in the world. The big danger to world peace is if China, Brazil, Russia and the United States protect and defend their interests with all their might while Europe fails to protect its interests." If he were elected president next May he would convene a meeting of European Union leaders to decide to reserve public works contracts for firms who do the work in Europe, Sarkozy said. The European Commission, the EU executive, does the negotiating on trade issues, meaning France would have to convince fellow countries rather than dictating the EU's stand. If Trump reneged as he has said he would on the international Paris climate change accord, Sarkozy said he would ensure France and Europe imposed a carbon tax of 1 to 3 percent on all U.S. goods coming into the continent.

India’s silence on Trump noted at Marrakech climate talks - India was a vocal presence at the 2015 Paris climate summit, holding regular press conferences and feeding the media a wealth of information on the emerging economy’s green ambitions. A year on, the country’s climate diplomacy team has gone to ground in the wake of Donald Trump’s election as US president. Questions posed to staff at the lavish Indian pavilion – which features a giant water feature and a rotating globe decked with wind turbines – are dealt with politely but rarely deliver answers. And while Chinese diplomats has been vocal supporters of the Paris climate agreement, their Indian counterparts are counselling patience and keeping their cards tight. “I’ve seen no strong signals from the Indians either way,” said UK climate minister Nick Hurd in a Thursday media briefing. “China intends to stay the course… we understand they are very much in.” Apart from an intervention on a climate finance roadmap presented by the UK and Australia, “I don’t recall hearing much else from them,”

Exclusive: Billionaire green activist Steyer vows to battle Trump, says money not an issue | Reuters: Billionaire environmental activist Tom Steyer, who has spent more than $140 million on fighting climate change, said on Tuesday he will spend whatever it takes to fight President-elect Donald Trump's pro-drilling and anti-regulation agenda. The former hedge fund manager from California is putting together a strategy that will "engage voters and citizens to fight back" once Trump takes the White House in January, he told Reuters in an interview. However, he stressed he was not planning to fight Trump through the courts. Instead, he would focus on "trying to present an opposite point of view and trying to get that point of view expressed, and communicated to citizens." Steyer’s pledge to fight Trump suggests an intensifying battle for U.S. public opinion on global climate change, an issue that has already divided many Americans, lawmakers, and companies between those who consider it a major global threat and those who doubt its existence. Other U.S. environmental groups are also preparing to resist Trump’s agenda, with some vowing street protests and more established organizations that helped draft some of President Barack Obama’s environmental regulations preparing to defend them in court. “We have always been willing to do whatever is necessary," Steyer said, when asked how much money he was willing to spend to oppose Trump's agenda.

 Overnight Energy: Obama defends Paris deal as Trump reality sets in | TheHill: Donald Trump's presidency-in-waiting is, naturally, dominating the discussion of energy and environmental policy in the United States -- and around the world. Six days after his election to the presidency, Trump hasn't outlined any more extensive details on his energy and environmental policy than what he laid out in his campaign. But his campaign promises, paired with the leaders in his transition team, are stoking fear among environmentalists and climate diplomats, and excitement in the GOP and energy industry. Here is some of the fallout from Monday over Trump's potential policy moves: OBAMA TO TRUMP: DON'T EXIT PARIS: President Obama tried laying out the reasons why Trump shouldn't fulfill his campaign pledge to pull the United States out of the Paris climate agreement. At a Monday news conference, Obama said the pact "made our economy more efficient, it's helped the bottom line of folks and it's cleaned up the environment." He continued, saying that the accord "says to China and India and other counties that are potentially polluting: come on board. Let's work together so you guys can do the same thing." Obama put the Paris pact on par with the Iran nuclear agreement, saying they're both international agreements that could likely prove more difficult to cancel than to just stay the course.

Kerry warns of climate threat at talks overshadowed by Trump | Reuters: U.S. Secretary of State John Kerry had hoped his presence at a Marrakesh conference to decide on the finer points of a historic agreement to stave off climate change would be a victory lap. Instead, he found himself having to address the uncertainty created by the election of Donald Trump, and what his presidency might mean for the U.S. commitment to the 2015 Paris agreement to cut global greenhouse gas emissions. In a speech on Wednesday, Kerry urged countries to treat the earth's changing climate as an urgent threat, citing melting glaciers, stronger storms, and record-breaking droughts. "While I can't stand here and speculate about what policies our president-elect will pursue, I will tell you this: In the time that I have spent in public life, one of the things I've learned is that some issues look a little bit different when you're actually in office compared to when you're on the campaign trail," he said. Trump has called climate change a hoax, and said he would rip up the Paris deal, halt any U.S. taxpayer funds for U.N. global warming programs, and revive the U.S. coal sector. If he follows through on his promises, he would undo the legacy of President Barack Obama, who has made climate change a policy priority and called the rising temperatures and other fallout from climate change "terrifying". Kerry spoke of his trip last week to Antarctica, where he met scientists alarmed at the trends.

Even Climate Denier Glenn Beck Calls Trump's New Chief Strategist Steve Bannon 'Terrifying' --Donald Trump's selection of Steve Bannon as his chief strategist and senior advisor is "terrifying" for many reasons. Stories published under his watch as executive chairman of the alt-right website Breitbart News include racist, homophobic and sexist rhetoric and headlines. Not only that, Bannon's role as the president-elect's top White House advisor is a major red flag to the climate movement. "President-elect Trump's choice of Steve Bannon as his top aide signals that white supremacists will be represented at the highest levels in Trump's White House," a spokesman for Senate Minority Leader Harry Reid said about the former Goldman Sachs investment banker.  Even climate-denier Glenn Beck warned that Bannon "is a guy who wants to tear this system down and replace it with a new system. He is a frightening … no, he is a terrifying man. A terrifying man."

Climate diplomats aim at Trump, but weapons are carrots not sticks - Former French President Nicolas Sarkozy’s suggestion to tax United States imports for carbon emissions if it walks out on a global climate deal reached last year in Paris is a non-starter, diplomats and policy experts here said. “Addressing climate change should not be an obstacle for promoting trade,” Liu Zhenmin, China’s top climate change negotiator, said at a Wednesday press conference. He later added: “Promoting free trade and promoting participating on the Paris agreement should be a parallel process.” National representatives are looking at any number of ways to keep the US striving for emissions reductions under President-elect Donald Trump, who has threatened to withdraw America from the Paris agreement for greenhouse-gas reduction. But economists, negotiators, and environmental groups fear that a punitive measure on trade would further deter US climate engagement. Perhaps a bit biased as bulwarks of international governance, the diplomats also said such a move would threaten institutions like the World Trade Organization. Instead, economists and diplomats said the best way to encourage US participation is by providing benefits from cooperation rather than punishing recalcitrant countries.“It’s always been recognized that the Kyoto Protocol and these various climate regimes did not have serious penalties either for non-compliance or non-participation and that the one credible instrument would be trade restrictions,” Robert Stavins, an environmental economics professor at Harvard University, said in an interview here. “However, the fear has always been – and I think it’s a reasonable fear – that the cure may be worse than the disease and by turning back 40 years of international trade regime … would be a serious mistake."

Most people are wildly underestimating what Trump’s win will mean for the environment - Vox: Unified Republican control of the federal government over the next two years augurs a sea change in US environmental policy like nothing since the late 1960s and ’70s, when America’s landmark environmental laws were first passed. If Donald Trump and the GOP actually follow through on what they’ve promised, this time around will be a lurch in the opposite direction. Federal climate policy will all but disappear; participation in international environmental or climate treaties will end; pollution regulations will be reversed, frozen in place, or not enforced; clean energy research, development, and deployment assistance will decline; protections for sensitive areas and ecosystems will be lifted; federal leasing of fossil fuels will expand and accelerate; new Supreme Court appointees will crack down on EPA discretion. Some of these moves will be easy for Trump and Republicans in Congress to pull off. Others will be harder: Senate Democrats and environmental groups in court will fight them tooth and nail, as they did during the Reagan and Bush years. But there’s no escaping the fact that the GOP is in a strong position to demolish and reshape the regime of environmental protection that has been built up over the past 50 years. Donald Trump’s promise to dismantle President Obama’s climate regulations have gotten plenty of attention. But it is only the tip of the iceberg, a fraction of what Republicans in Congress have been pushing for over the years. Obama has amassed a considerable record on green policy. His agencies have implemented a range of new standards and regulations on everything from appliances to cars to power plants, and he has stimulated the growth of several clean energy industries with loans and grants. The GOP wants to undo all that. But it wants much more as well. Few people understand just how radical the GOP environmental agenda is, but it’s not a secret. While Obama has been in office, Republicans in Congress have floated myriad budget bills that reveal their legislative priorities. Many of those bills were blocked by the Senate or White House, so they rarely got attention. You can see a partial list of past House Republican bills here.

 Why Fighting Donald Trump On Climate Change Is A Waste Of Time -- Captain Paul Watson, Founder Sea Shepherd -- Before everyone gets overly upset about Donald Trump and Climate Change consider this one thing: Donald Trump's denial of Climate Change is irrelevant. Climate Change is a scientific reality and the denial of Climate Change as a problem does not make the threat go away. The reality cannot be changed by the personal beliefs of the President of the United States. This is akin to King Canute demanding that the tide cease to rise. Presidents, like kings, have no authority over Nature. And when you really think about, just what is the difference between a President that denies Climate Change and a Prime Minister who acknowledges it, yet acts as if he is denying it?  I'm not sure how making contributions to Greenpeace, the Sierra Club and EDF is going to stop Trump.  Not much was accomplished over the last eight years outside of promises on paper and some nice speeches by some politicians. What will people receive in return for their donations? Certainly not any influence over Trump or the Republican Congress. What has the U.S. under Obama done?  I mean really!   Trump will not diminish the Obama, Bush and Clinton efforts. He would actually have to try hard to do less than they did. Fighting Trump on this issue will also serve to send a message to all those who voted for him that he's their man. Making the Libs, the Greenies and the Lefties angry is something that will endear him even more in their minds. They want him to be seen as the Climate Change denying hero. Instead we need to ignore him because Climate Change deniers are irrelevant to reality. By challenging the deniers, we validate them, we engage them and thus they are taken even more seriously.  Donald Trump is not really a stupid man, although he plays the role quite well. He knows damn well that Climate Change is real but he needs to tell his base what they want to hear and challenging him on this helps him to send that message even stronger.

Trump carbon and the Paris agreement « The recent US election has prompted cries that the decision on Earth’s climate has now been irrevocably made, that the US has unilaterally decided to scrap the peak warming target from the Paris agreement of 1.5 oC. What do the numbers say? Is Earth’s climate now irrevocably fracked?   Carbon emissions from the United States have been dropping since the year 2000, more than on-track to meet a target for the year 2020. Perhaps with continued effort and improving technology, emissions might have dropped to below the 2020 target by 2020, let’s say to 5 gigatons of CO2 per year (5000 megatons in the plot). In actuality, now, let’s say that removing restrictions on energy inefficiency and air pollution could potentially lead to US emissions by 2020 of about 7 gigatons of CO2. This assumes that future growth in emissions followed the faster growth rates from the 1990’s.  Maybe neither of these things will happen exactly, but these scenarios give us a high-end estimate for the difference between the two, which comes to about 4 gigatons of CO2 over four years. There will also probably be extra emissions beyond 2020 due to the lost opportunity to decarbonize and streamline the energy system between now and then. Call it 4-6 gigatons of Trump CO2.  This large quantity of gas can be put into the context of what it will take to avoid the peak warming threshold agreed to in Paris. In order to avoid exceeding a very disruptive warming of 1.5 oC with 66% probability, humanity can release approximately 220 gigatons of CO2 after January, 2017 (IPCC Climate Change 2014 Synthesis report, Table 2.2, corrected for emissions since 2011). The 4-6 Gtons of Trump CO2 will not by itself put the world over this threshold. But global CO2 emission rates are now about 36 gigatons of CO2 per year, giving a time horizon of only about six years of business-as-usual (!) before we cross the line, leaving basically no time for screwing around. To reach the catastrophic 2 oC, about 1000 gigatons of CO2 remain (about 20 years of business as usual). Note that these estimates were done before global temperatures spiked since 2014 — we are currently at 1.2 oC! So these temperature boundaries may be closer than was recently thought.

7,000 cities around the world are way ahead of targets to cut carbon emissions - Cities are home to over half the world’s population and produce around 75% of its carbon emissions, but they’re leading the way in the global fight against climate change.The 2015 Paris Climate Agreement demanded that by 2020 cities reduce their emissions by 20% compared to 1990 levels. But the Covenant of Mayors, a project headed jointly by the European Union and former New York mayor Michael Bloomberg, set a more ambitious target of 27%. And they’re well on the way to meeting that, according to a new report by the European Commission’s Joint Research Center.The cities have already seen a 23% overall reduction, with the building sector performing the best—dropping its emissions 27%.The long-term goal is 40% reductions by 2030. To meet that, cities will have to target reducing emissions due to transport, a sector that has only dropped its emissions by 7% since 1990, according to the report.The encouraging numbers came amid a bleak atmosphere for climate activists in the US, given president-elect Donald Trump’s appointment of climate denier Myron Ebell to lead the administration’s Environmental Protection Agency transition. And renowned social scientist Benjamin Barber believes American cities hold the way to protecting the future.“Cities have a very large role to play,” he said in a recent interview. “Most greenhouse gas emissions come from cities and cities also control about 80% of GDP. They can do a lot to combat climate change, whether or not Trump undermines the COP21 agreement.”

US, EU offer to help African countries deliver climate plans -- What did the Paris climate agreement ever do for Africa? It’s the question many of the continents envoys and politicians have been asking since it was signed off in the French capital last December. In the past 11 months many African governments have struggled to build on the low carbon plans they presented as part of that deal. And as Climate Home has reported, envoys have been warning that they would miss their targets, because they still needed money and infrastructure to adapt to hotter temperatures. As the climate changes faster than expected and the plea of developing nations gets harder to ignore, parties of the UN might be finally taking a decisive step in the right direction. Morocco, Australia, the US, the EU and more than 30 other countries and development banks have joined forces to deliver not only money, but also the knowledge needed to apply for more. The partnership was launched on Tuesday in Marrakech with technical assistance from the World Resources Institute, and buddies up developed and developing nations so they can learn from each other and share resources.

Global warming to impact credit ratings of countries: Moody’s | South China Morning Post: Countries’ creditworthiness could be increasingly affected by climate change, with African and South Asian sovereigns most susceptible to the economic effects of global warming, ratings agency Moody’s said on Monday. By contrast, Western Europe, North America and Australia as well as the huge landmasses of Russia and China were least vulnerable, Moody’s found. “Climate change is expected to become an increasingly dominant factor in our analysis of the credit profiles of those sovereigns that are most susceptible to its effects over the coming decades,” it said in a new report. Climate change has ramifications for countries’ credit profiles through potential economic impact, damage to infrastructure, rising social costs, and population shifts, Moody’s said. For example, gradual desertification in Israel, Lebanon and Jordan caused by global warming is leading to land degradation and infertility. Authorities in Lebanon, rated B2 negative by Moody’s, predict the economic damage from climate change could reach more than US$80 billion by 2040, or 1 1/2 times its current GDP. Mozambique, which suffered heavy floods last year and is already on the brink of default at a rating of Caa3 , was calculated to be the most susceptible of any country Moody’s rates. Jamaica and Belize, small countries with high debt and Caa2 ratings, are seen as the next two most vulnerable, while India is also seen as highly at risk from climate change, with 48 per cent of its workforce in the agricultural sector.Moody’s measured sovereigns’ vulnerability by their “exposure” and “resilience” to climate change. Exposure was determined by a sovereign’s geographic location and economic diversification, while resilience was measured by its adaptive capacity, fiscal flexibility and income levels.

Climate Protection Advocates Fear a Rollback of Emissions Standards - The New York Times: Of all the climate policies the Trump administration has promised to undo, auto emissions standards could be the most consequential. America’s 250 million cars, together with other modes of transport, now emit more carbon dioxide than any other segment of the United States — more than its power stations, factories or households.The sheer volume of auto emissions has made the fuel-efficiency goals introduced by President Obama, intended to reduce auto pollution and drive up gas mileage, one of the single biggest steps any nation has taken to fight global warming. Those targets are now likely to be scaled back or even scrapped. Aides to Mr. Trump, who campaigned on promises to revive the fossil fuel industry, roll back environmental regulations and “cancel” the Paris climate deal, signaled over the weekend that he would look for a quick exit from America’s commitment to reduce greenhouse gas emissions. A Trump senior adviser, John Mashburn, better known for his advocacy of anti-abortion issues, told The Wall Street Journal that the administration intended to begin a comprehensive rethinking of all federal regulations — including “a review of the fuel-economy and emissions standards to make sure they are not harming consumers or American workers.” The Trump transition team did not respond to a request for comment.

 Fiat Chrysler, GM Soar as Trump May Weaken Fuel Rules - The EPA is scheduled next year to evaluate President Barack Obama’s ambitious fuel-economy regulations that were originally intended to double the efficiency of the nation’s light-vehicle fleet to 54.5 miles per gallon of gasoline by 2025. Myron Ebell, a director at the Washington-based Competitive Enterprise Institute and climate-change skeptic, is leading the agency’s transition to the Trump administration. “We believe it is unlikely that new fuel-economy rules will be passed or that existing ones will be strengthened,” Adam Jonas, an analyst at Morgan Stanley, said in a report to clients. “Enforcement and preservation of current CAFE standards is unclear.” That could be positive for automakers looking to sell more profitable pickups and sport utility vehicles and negative for makers of hybrids or pure-electric vehicles. Fiat Chrysler, which sells the highest proportion of light trucks among the biggest automakers, surged 9.7 percent, the most since Oct. 29, 2014, to close at $7.59. GM climbed 5.7 percent, the most since Oct. 21, 2015, to $32.73. Ford finished at $11.94, a 3.1 percent gain, the biggest since April 28.Trump will “follow the national Republican Party platform on the EPA, which will actually demote it as an agency and have it report to a joint bipartisan committee and essentially take away much of its independence,” said Sean McAlinden, an automotive economist in Ann Arbor, Michigan. “The CAFE rules would be canceled,” he added, referring to the corporate average fuel economy standards.

Can Trump Derail The EV Revolution? - The day after the November 8th U.S. presidential election, the stock prices for electric car maker Tesla plunged 5 percent. Solar and wind stocks also fell, while the share prices for coal and oil companies surged. Peabody Energy, for example, the world’s largest private sector coal producer, saw its stock skyrocket by more than 40 percent on speculation that the Trump administration could breathe new life into the dying sector. The energy industry, in other words, could be substantially altered by a change in government policy, with clean energy in danger of being left behind while fossil fuels rebound. But the solar and wind industries have made enormous strides in bringing costs down, which will probably insulate them from a more antagonistic White House. Scrapping government support might slow growth rates, but the clean energy train has likely left the station. But the market for electric vehicles is much smaller and less mature than solar and wind. EVs still depend on generous federal tax credits and, even then, sales have been slow in a world of cheap gasoline. Automakers are still confident in the longer-term – a carbon constrained world and volatile crude oil prices almost certainly means that EVs have a bright future. But the short-term could be rocky. Automakers are set to roll out some 19 new EV models over the next few years, adding choice, supply and momentum to the EV industry. GM will release its all-electric Bolt in the coming weeks, a mass market vehicle with a 238-mile range and a sticker price around $37k. Tesla will follow that up with its Model 3 next year, a 215-mile EV that will be slightly cheaper. Then there are the plug-in hybrids that have a combination of electric and gasoline, which gives motorists greater peace of mind in regards to recharging. The Chevy Volt will have an all-electric range of over 50 miles before gasoline kicks in, and costs roughly $33k-$34k. The cheaper alternative, Toyota’s new Prius Prime, will have a shorter range of 25 miles, but will cost just $27k. All of these cars will benefit from federal tax credits that run as high as $7,500.

Trump victory won’t halt the U.S. clean energy boom -- Since Mr. Trump thinks climate change is a hoax, that pretty much eliminates the case for clean energy – right? Not so fast. The reality is that clean energy has been booming in the United States for a whole bunch of reasons that don’t have much to do with climate change. Things such as health, security and innovation, which lead to high levels of support amongst Republicans – yes, Republicans – for harnessing the power of American water, wind and sun.Those federal tax credits for wind and solar? They were passed last December by a Republican Congress with bipartisan support. Revoking them would require a legislative effort that may not be looked upon kindly by the many Republican lawmakers who have renewable energy manufacturing and development in their states. Lawmakers like Senator Chuck Grassley, an Iowa Republican, who said this summer: “If he wants to do away with it, he’ll have to get a bill through Congress, and he’ll do it over my dead body.” He won’t be the only one: looking across the country – and the electoral map – the top-10 wind-energy producing congressional districts are represented by Republicans. Besides, much of the renewable energy boom has been driven by state policy. You might recall that back when he was governor of Texas, George W. Bush passed legislation requiring utilities to buy renewable energy.It led to a building boom that has made the state the largest producer of wind power in the United States. Iowa, South Dakota, Kansas, Oklahoma and North Dakota lead the United States in the proportion of electricity generated by wind, and all are led by Republican governors. Ditto North Carolina, which trails only California in the development of new solar projects. Up in New Hampshire, which also went for Mr. Trump, the newly elected Republican governor won on a platform that included support for the Northern Pass transmission line, which would move clean hydroelectricity from Quebec into New Hampshire and the New England power grid

Repealing the investment tax credit could cut the US solar market in half -  When Congress narrowly passed multi-year extensions of federal solar and wind tax credits at the end of 2015, almost no one expected to be talking about their death less than a year later.   But when Donald Trump and the Republican party dominated last week's national elections and took control of Washington, speculation about the future of those tax credits began almost immediately.  Neither Trump nor his surrogates indicated during the campaign that they want to repeal federal tax support for wind, solar and other renewables.  So why suddenly all the speculation -- especially since these credits were designed to be phased out anyway? For the first time in 30 years, America's tax system could get an overhaul. The last time Congress passed a comprehensive tax reform bill was in 1986, under the presidential leadership of Ronald Reagan. An alliance between Trump and House Speaker Paul Ryan is expected to result in another tax reform package.  And there's one potential glitch. America's first Investment Tax Credit (ITC) for solar was killed in 1986 in order to fund the Reagan tax cuts. It's possible the same thing could happen under a new plan to slash corporate and individual income taxes. If that happens, the U.S. solar market would be in for a dramatic reversal. To understand what America's solar market would look like with and without the ITC, it's helpful to revisit GTM Research's pre-extension projections from last fall.  The tax credit was expected to support 25 gigawatts of additional solar installations -- a 54 percent increase that amounted to $40 billion in new investment through 2020. By the time the ITC falls to 10 percent in 2020, GTM Research expects the industry to be adding 20 gigawatts of new capacity yearly. By comparison, 6 gigawatts of natural-gas power plant capacity were added in 2015.  Reversing those figures provides a rough estimate of what might happen to solar if the tax credit is cut. Installations could fall by roughly half.

US Interior finalizes methane rule, industry sues to overturn -  As part of a sprint by regulators to complete Obama administration rules to combat climate change before the Trump administration takes over, the US Interior Department Tuesday finalized it rule aimed at curbing venting, flaring and leaking from oil and natural gas operations on federal lands. Within minutes of the final rule's release, industry groups filed a lawsuit seeking to overturn it, claiming Interior lacks authority to regulate air quality.US Senator John Barrasso, a Wyoming Republican, committed to repealing the new methane rule. "The Republican majority in Congress will not let this rule stand," Barrasso said in a statement. "We will work with President-elect Trump to revoke this rule either administratively or through the use of the Congressional Review Act." The rule sets up new leak inspection and equipment replacement requirements, limits venting from storage tanks and sets up a new system for when operators owe royalties on flared gas, giving the government authority to set royalty rates at or able 12.5% of the value of production, Interior said. "This is an 11th hour shot by an administration that doesn't fully understand how its rules impact our businesses," said Dan Naatz, a senior vice president with the Independent Petroleum Association of America which, along with the Western Energy Alliance, filed the lawsuit in the US District Court in Wyoming. The rule, developed by Interior's Bureau of Land Management, sets up new requirements for oil and gas producers to use "currently available technologies and processes" to reduce flaring from oil wells in half on public and tribal lands.

 Rich countries told to shut coal plants by 2030 to save climate - Rich countries must close all their coal-fired power plants by 2030 to have a chance of holding global warming to tolerable levels, a report from an environmental research group said. China would have to phase out the most polluting fossil fuel by 2040 and the rest of the world by 2050, according to Climate Analytics, a Berlin-based non-profit that is studying how nations can meet the emissions goals they agreed at United Nations talks in Paris last year. The findings in a report released on Monday illustrate the difficulty in achieving the UN goal of holding global warming to well-below 2 degrees Celsius (3.6 degrees Fahrenheit). The world already has 8,175 coal plants and is building another 733, providing about 40 of all electricity. Envoys from more than 190 nations are meeting this week and next in Marrakech, Morocco, to discuss how to take forward the ambitions they set out in Paris. “Both shutting down existing coal and avoiding new coal build is absolutely essential to avoid devastating air pollution and climate impacts,” said Jennifer Morgan, executive director of the environmental group Greenpeace International.

Illinois lawmakers introduce energy bill with controversial coal supports - Illinois legislators today introduced a long-awaited massive energy bill that would provide subsidies to keep nuclear plants and coal plants running and introduce a controversial demand charge, along with fixing the state’s Renewable Portfolio Standard, increasing energy efficiency investments and other measures. For more than a year, Exelon has been pushing a bill mandating ratepayer supports— now pegged at up to $265 million a year — for two nuclear plants the company says would close otherwise. This bill, dubbed the Future Energy Jobs Bill, is an attempted collaboration between Exelon and other generators, utilities ComEd and Ameren Illinois, and environmental groups and renewable energy companies. Negotiations between these stakeholders have been going on for many months, but people familiar with the negotiations say that the most controversial provision, which would keep downstate coal plants running, was just added recently and could be a deal-breaker for environmental groups. The proposed FRAP, or Fixed Resource Adequacy Plan, would put the state in charge of determining capacity prices paid to generators, most notably two downstate coal plants owned by Dynegy. Under the proposed bill, these prices would likely be significantly higher than the capacity prices that would otherwise be paid through auctions run by the Midcontinent Independent System Operator (MISO).The costs will be passed on to ratepayers, and are expected to mean the coal plants would keep running, rather than closing.

Rising coal production in India may push up atmospheric CO2 levels - With its plans to double its coal production by 2020, India is likely to be the engine that drives global carbon dioxide pollution over the next few years. Global carbon dioxide production has virtually remained unchanged at about 36.4 billion tonnes a year for the last three years. Global carbon dioxide emissions from fossil fuels and industry grew at over 3% per year in the 2000s. Growth slowed in the 2010s and has leveled off in the last three years, according to annual analysis of trends published by the Global Carbon Project in the journal Earth System Science Data.  “It is great news that global carbon dioxide emissions have been flat in the last three years, but it is far too early to proclaim we have reached a peak,” said Glen Peters, a senior researcher at the Center for International Climate and Environmental Research – Oslo (CICERO) and co-author of the study. The study attributes the drop and leveling off in the amount of carbon dioxide produced globally to a sharp slowdown in Chinese coal consumption since 2012 and reductions in US coal consumption making important contributions in single years, particularly 2012, 2015, and 2016. Chinese emissions went down 0.7% in 2015 and are projected to go down another 0.5% in 2016. China has officially pledged to peak its carbon dioxide emissions around 2030.  “Despite positive progress in Chinese, US, and EU emissions, there are increasing concerns with emissions growth in India and other developing countries”,

Australia dubbed 'fossil of the day' after lobbying for coal mine at climate talks -  Australia has used a summit on reducing greenhouse gas emissions to lobby the US energy minister in support of the development of one of the world’s largest coalmines.The move, by the Australian environment and energy minister, Josh Frydenberg, at the Marrekech meeting, won Australia the “fossil of the day” award, announced daily by the Climate Action Network to the countries that perform the worst at UN climate talks.Awarding the fossil of the day award, the activists said: “Australia ratified the Paris agreement last Friday, so lobbying for coal expansion at the United Nations climate negotiations is an ugly, ugly thing to be doing. Shape up, Australia.” Frydenberg said he raised concerns with the US energy secretary, Ernest Moniz, that Moniz’s Democratic party colleagues were associated with US activists who were trying to stop Adani’s Carmichael coalmine in Australia. If the Carmichael mine goes ahead, it would be the biggest coalmine in Australia and one of the biggest in the world. The annual emissions from burning the coal it produces would be similar to that of the whole of Malaysia or Austria and more than New York City.

29% of Water Deemed Unsuitable for Human Consumption in China's Top Coal Province --  The environmental impact of the coal industry is vast and devastating. And now, production of this cheap energy source has rendered nearly a third of the surface water in China's largest coal province unsuitable for human consumption. The Shanxi Environmental Protection Bureau, a local environmental watchdog, announced that 29 out of 100 surface water sites tested in the first three quarters of 2016 were found to be "below grade five," Reuters reported. At that pollution level, water has "lost functionality" and may only be suitable for industrial or agricultural use. According to Reuters, the bureau said that while the water quality improved at 11 test sites compared to the year before, eight had deteriorated, including five sites in the major coal hub of Datong. Coal production in Shanx i decreased to 944 million tonnes in 2015 compared to 976 million tonnes in 2014. Sure, China's coal industry provides jobs and allows people to heat their homes but the smog-choked country has p  aid a price for it. As Dr. David Suzuki wrote , "Beijing's 21-million residents live in a toxic fog of particulate matter, ozone, sulphur dioxide, mercury, cadmium, lead and other contaminants, mainly caused by factories and coal burning . Schools and workplaces regularly shut down when pollution exceeds hazardous levels. People have exchanged paper and cotton masks for more elaborate, filtered respirators. Cancer has become the leading cause of death in the city and throughout the country."

Japan’s Nuclear Industry Finds a Lifeline in India After Foundering Elsewhere - The New York Times: — Despite objections from antinuclear campaigners, Japan’s government cleared the way on Friday for companies that build nuclear power plants to sell their technology to India — one of the few nations planning big expansions in atomic energy — by signing a cooperation agreement with the South Asian country. The deal is a lifeline for the Japanese nuclear power industry, which has been foundering since meltdowns at the Fukushima Daiichi power plant in northeastern Japan in 2011. Plans to build a dozen new reactors in Japan were canceled after that, a gut punch for some of the country’s biggest industrial conglomerates, including Toshiba and Hitachi. With the domestic market moribund, Japanese companies had been pursuing deals abroad, but success was elusive. The economic case for nuclear energy has weakened as a result of low oil and gas prices, prompting utilities and governments around the world to rethink construction. The Fukushima disaster increased safety concerns. And Japanese vendors have had to fight lower-cost rivals from places like Russia and South Korea for a shrinking number of customers. India looks like a rare opportunity. It is planning 20 new reactors over the next decade or so, and as many as 55 more have been proposed. Shinzo Abe, the Japanese prime minister, and Narendra Modi, his Indian counterpart, are hoping that trade can underpin a broader strategic relationship, aimed in part at fending off China.

 Maryland asks EPA to crack down on pollution from Midwest coal plants - Maryland environmental regulators are asking their federal counterparts to crack down on 19 coal plants in five other states whose emissions — carried hundreds of miles by the wind — make the air here unhealthy to breathe on hot summer days. The plants have spent billions of dollars on technology to reduce pollution, but according to Maryland officials, they don't use it every day during the summer, when heat and sunshine cause the pollutant ozone to form and make air quality its worst. Ben Grumbles, the state's environment secretary, is asking the U.S. Environmental Protection Agency to step in before this summer. "We're saying to EPA we know for a fact those power plants have the existing control technologies, they have installed them, but for whatever reason, they're not running them every day during the ozone season," Grumbles said. "That is one very easy way for downwind states like Maryland to benefit." Maryland environmental officials estimate that 70 percent of this state's ozone pollution comes from upwind states. Such air pollution contributes to health problems that include respiratory illness and heart disease. "Any effort to clamp down on that noxious pollution can only be of benefit to breathers in Maryland," said Frank O'Donnell, president of Clean Air Watch, an advocacy group in Washington. "There are multiple tools within the Clean Air Act to deal with interstate pollution." Maryland's petition concerns 36 coal-fired units at 19 plants in Indiana, Kentucky, Ohio, Pennsylvania and West Virginia. Grumbles said the state has been tracking data and air pollution models for the past three years to learn that efforts to cut pollution have fallen short of their potential.

Cuyahoga Council expected to approve wind and solar energy power agreement | - The Cuyahoga County Council is expected Tuesday to approved a 10-year, power-purchase agreement with Cleveland Public Power that includes buying locally generated wind and solar power. The clean energy would come from a yet-to-be-constructed wind farm in Lake Erie and a solar farm to be built on a brownfield in the Cleveland area. "There's no question in my mind that it will pass," Council President Dan Brady said of the legislation. Advocates hope the Icebreaker six-turbine wind farm will encourage the placement of more wind turbines in the Great Lakes and that Northeast Ohio will become a manufacturing center for the industry. The agreement with Cleveland Public Power is complex. It would provide 20 to 23 percent of the electricity to 17 county buildings, including the Justice Center complex in downtown Cleveland and the Juvenile Justice Center at the corner of Quincy Avenue and East 93rd Street. The agreement also calls for the county to construct a solar farm on a brownfield and for the farm to provide power to the county. The location of the brownfield has not been determined, but three in Cleveland and one in Brooklyn are under consideration, said Mike Foley, director of the county's department of sustainability. The 10-year contract with Cleveland Public Power would cost an estimated $68 million, but the expectation is that it will ultimately be extended over 25 years for a total cost of about $166 million. Estimates have the county saving $2.5 million to $3.2 million over that time period, Foley said.

Against the wind: Ohio lawmaker pushes for stricter rules on wind development | Midwest Energy News: An Ohio lawmaker who played a key role in tripling property line setbacks for wind turbines wants regulators to adopt strict rules when implementing the setbacks and other provisions for new commercial wind farms, which industry experts say are already effectively banned in the state. “If wind farms cannot be developed without borrowing or stealing their neighbors’ nonresidential property in order to satisfy the setback, health, and safety requirements, then perhaps they should not be developed at all,” state Sen. Bill Seitz (R-Cincinnati) asserted in comments filed on October 31 with the Ohio Power Siting Board, of which Seitz is a non-voting member. The proposed rules aim to implement setback provisions in Ohio House Bill 483, mandating that each wind turbine be about a quarter of a mile from any adjoining property line. The proposed rules would also require measurements at the property lines for sound and so-called flicker effects, additional bird monitoring, and added studies and technical reports. Critics say the rules are not based on safety or health. “What HB 483 put in place in terms of setbacks essentially functions as a ban on wind energy in Ohio,” said Andrew Gohn at the American Wind Energy Association. The provisions “effectively zoned new wind projects out of the state, decimating the prospect of new wind projects, and injuring clean energy progress,” Before HB 483 came into effect, the required property line setback for turbines on Ohio wind farms was roughly 550 feet, or 110 percent of the height of a turbine. “One hundred ten percent of the turbine height to the property line is what we see pretty universally,” Gohn said. “That’s really sort of the safety-based standard in case of any sort of issue with the turbine.” Beyond that, the law before HB 483 called for a 1,125-foot setback to the outer wall of the “nearest, habitable, residential structure” on neighboring property. That kind of requirement is “really sort of a good neighbor policy of having a separation distance to existing occupied structures,” rather than a safety standard, Gohn said. The new setback terms were a last-minute addition to a massive 2014 budget review bill. Seitz was the only lawmaker to speak in favor of that provision during less than 10 minutes of discussion on the Ohio Senate floor.

It's past time for fracking foes to obey will of people - Once again on Tuesday, voters in Youngstown resoundingly said no to a misguided effort to ban hydraulic fracturing in the city. And once again, the self-righteous leaders of the charter amendment refused to accept defeat and are now contemplating a seventh futile try in the May 2017 primary. The only difference in this fall’s sixth attempt at passing the unconstitutional ballot initiative came in the size of voter turnout. As this was the first time the misnamed Community Bill of Rights appeared on a presidential ballot, some 22,000 voters had their say on the matter, the largest chunk of the city electorate by far since the measure first began polluting municipal elections in 2013.  But bigger wasn’t better for its supporters. Once again, a strong 55 percent to 45 percent majority wisely said no. That clear and hulking defeat should serve as a clue to the FrackFree Mahoning Valley organizers that enough is enough. But some of the clueless organizers of the campaign refuse to respect the clear-cut will of the people and vow to press on.  It’s time now for a concerted effort to explore legal avenues to ban the anti-frackers from continuing their exercise in futility. We would urge city leaders, state legislative representatives and civic groups such as the Youngstown-Warren Regional Chamber to brainstorm options to put in place reasonable limits to the number of times a defeated ballot issue can reappear before voters.

Local activists and others deliver 92000-signature petition opposing national forest drilling - Athens NEWS -Anti-fracking activists from southeast Ohio and around the country on Monday personally delivered a petition signed by more than 92,000 people asking the U.S. Bureau of Land Management (BLM) to stop its auction of 1,600 acres of Wayne National Forest for oil and gas development. The activists traveling to Washington, D.C. to deliver the petition included two leading anti-fracking activists from Athens County – Andrea Reik and Roxanne Groff. The federal government last month announced it had scheduled the oil and gas lease sale to start on Dec. 13. The decision dealt a blow to area environmentalists who oppose oil and gas development on the national forest.On Oct. 14, Dean Gettinger, district manager of the Northeastern States District of the federal Bureau of Land Management (BLM), signed a finding of no significant impact (FONSI) for drilling on 40,000 acres in the Marietta Unit, which covers parts of Washington, Noble and Monroe counties, northeast of Marietta.  At that point, oil and gas companies had thus far filed expressions of interest to drill for natural gas on 18,000 of those acres, with 1,600 acres contained in the first round of land entering the lease program.

 Protest Calls on BLM to Reject Fracking Plan in Ohio's Wayne National Forest - Center for Biological Diversity (press release) - Conservation groups just filed an administrative protest asking the Bureau of Land Management to halt an oil and gas lease auction next month in Ohio’s Wayne National Forest due to its failure to address concerns over fracking, climate change and effects on endangered species.The plan to allow dangerous hydraulic fracturing, or “fracking,” on 1,600 acres of the state’s only national forest would degrade streams and groundwater, fragment wildlife habitat and worsen climate change, the groups said. The BLM also ignored the likelihood that opening these parcels to development would facilitate more fossil fuel extraction on adjacent private land.The groups highlighted the Bureau’s failure to address groundwater and surface-water contamination risks from wastewater disposal and other fracking operations. “This will be bad for wildlife, bad for recreation and bad for the health of Ohio's only National Forest,” said Nathan Johnson of the Ohio Environmental Council.  “The BLM failed to do its duty to take a ‘hard look’ at the impact these new fossil fuel leases would have on other fracking on private land nearby. In fact, the agency seems to be actively facilitating this new extraction,” said Wendy Park, a senior attorney with the Center for Biological Diversity. “At this critical time, the Obama administration should act to halt all new leasing of public lands for oil and gas fracking.”“The proposed Wayne National Forest leasing in Appalachia Ohio continues the extraction paradigm of centuries past,” said Loraine McCosker of the Ohio Sierra Club. “The legacy of this past extraction continues to negatively impact southeast Ohio economies. We simply must demand that the Wayne not be leased by the BLM and that the Forest Service withdraw these parcels for leasing." “Public lands are for the people, not for the benefit of Big Oil and Gas,” said Lena Moffitt, director of the Sierra Club’s Beyond Dirty Fuels campaign. “Drilling for oil and gas means more fracking, and fracking means poisoning our air and water, and threatening the health of our communities and our environment. At a time when clean energy like solar and wind is proving to be safest, healthiest and most cost-effective way to power our country, it's high time we recognized that we need to leave dirty fuels like coal, oil and gas in the ground.”

Study: Old gas wells are major emitters of methane: Certain types of Pennsylvania’s scores of abandoned oil and gas wells are associated with higher emissions of the greenhouse gas methane, according to a study published Monday that could help government agencies prioritize efforts to plug the biggest leaks. The study of 88 wells across Western Pennsylvania led by Mary Kang, a postdoctoral fellow at Stanford University, revealed that high-emitting wells tend to be natural gas wells that are either unplugged or that are plugged but vented in coal-rich areas. Abandoned oil wells had consistently lower emissions than the abandoned gas wells in the study. Proximity to active natural gas storage fields or new shale gas wells appeared unrelated to methane flow rates from abandoned wells, according to the report in the Proceedings of the National Academy of Sciences. The highest emitters are a particularly valuable target in efforts to curb releases of the powerful greenhouse gas, which has 86 times the heat-trapping potential of carbon dioxide in the atmosphere over a 20-year period. Researchers found that wells with high methane emissions were leaking at steadily high rates across years of sampling, indicating that they “may have been emitting at these levels for many decades and will likely continue for decades into the future.” Ms. Kang and her fellow researchers first reported the significant but largely uncounted contribution that abandoned wells can have on total methane emissions in a 2014 paper. That drew the attention of state and federal regulators, who are now trying to begin to account for abandoned wells in their official inventories of emissions.

Doctors to Gov. Wolf: For the Sake of Human Health Ban Fracking-- A comprehensive report , authored by Nobel Peace Prize-winning organization Physicians for Social Responsibility and Concerned Health Professionals of New York , was released Thursday demonstrating the tremendous amount of scientific evidence of the health impacts, water contamination and climate risks of fracking . The Compendium of Scientific, Medical and Media Findings Demonstrating Risks and Harms of Fracking brings together findings and studies from scientific and medical literature, government and industry reports, and journalistic investigations. "The available evidence overwhelmingly indicates that fracking is incredibly harmful," said Sandra Steingraber , PhD, co-founder of Concerned Health Professionals of New York. "Scientific studies have demonstrated that drilling and fracking can increase risk of cancer , respiratory conditions and migraines in communities surrounding fracking sites. Fracking pollutes the air, water and land in nearby towns and cities, and has resulted in explosions and earthquakes . There are least 17 million Americans living within one mile of a fracking site, whose lives will be negatively impacted and potentially shortened, by fracking."  There are now more than 900 peer-reviewed studies on the impacts of fracking, the vast majority of which indicate risks and adverse impacts. The new compendium includes summary and analysis of the trends in the scientific findings over the years. With the release of the compendium, a group of doctors gathered in Harrisburg, Pennsylvania to hand-deliver it and more than 100 of the most recent studies—many about public health—demonstrating the harms of fracking to Gov. Wolf. Pennsylvania is the focus of many of the scientific studies, where drilling and fracking have been linked to widespread water contamination and health impacts.

 Chesapeake Energy Divests Natural Gas Assets -- Chesapeake Energy Corp. (CHK) announced last week that it will divest natural gas holdings in the Devonian shale in Kentucky and West Virginia. Although it has not been confirmed by either company, the potential buyer is most likely US junior Core Minerals, a privately held company. (See also: Chesapeake Energy by the Numbers.) The deal includes the divestiture of some 882,000 acres with 5,600 wells, as well as related infrastructure and other assets. The move is in line with the company’s earlier decision to leave Barnett Shale in northeast Texas; sources say that Chesapeake also plans to rid itself of assets in the Haynesville play in Louisiana. The company has 73,000 acres in northern Sabine and southern DeSoto parishes up for bid, as well. (See also: Chesapeake Energy Rebounds after Investor Day.) The Appalachia divestiture deal includes a volumetric production payment (VPP), which guarantees the operator will sell Chesapeake rights to a defined amount of production over a specific period of time in exchange for an upfront payment. Chesapeake plans to use funds from the sale of the assets to purchase the VPP. Chesapeake reported third quarter earnings on Nov. 3, when it declared EPS of $0.09 compared to Street estimates of -$0.03. Revenue was $2.28 billion, beating consensus estimates of $2.18 billion, down 22% from last year at this time, but up from last quarter’s $1.62 billion. Analysts are predicting total 2016 revenue of $7.93 billion. The median 12-month price target is $7.13, with a low of $2.50 and a high of $11.

Which Way Did Marcellus Shale Natural Gas Go in October? - In its Drilling Productivity Report on November 14, 2016, the EIA (U.S. Energy Information Administration) estimated that the Marcellus Shale’s natural gas production totaled ~18.1 Bcf (billion cubic feet) per day in October 2016. That’s a marginal ~0.1% lower than September 2016’s production level, but ~9% higher than its production in October 2015. Month-over-month, natural gas production growth in the Marcellus Shale has been relative steady in the past year.Over a longer period, natural gas production growth at the Marcellus Shale has been outstanding. Natural gas production rose from ~1.5 Bcf per day in October 2008 to ~18.1 Bcf per day in October 2016. The number of active rigs in the Marcellus Shale increased to 35 in October 2016 compared to 31 in September. In October 2015, there were 46 drilling rigs in the region. The EIA calculates that the average Marcellus Shale rig added production of ~11.9 million cubic feet of natural gas per day in October 2016, a 19% rise compared to October 2015. In the past eight years, the gain amounts to ~16x.

 The Weather Forecast For Gas - The year is already over if you happen to be long U.S. natural gas. At this point, all that matters is whether 2016 offers any chance of clearing the crushing glut weighing on the market.The short answer: Don't get your hopes up. Just like the oil market, a gas rally requires supply to diminish, consumption to rise, or a combination of both. With gas, weather can make or break the market: Over the past five years, U.S. gas demand in the first quarter has averaged as low as 81 billion cubic feet a day and as high as 97 billion. This winter has been exceptionally mild in the northeast. Put that together with resilient U.S. gas production and you get today's depressed gas market.As of December 11, there was roughly 3.85 trillion cubic feet of gas in storage in the U.S., or 322 million above the five-year average, according to the Energy Information Administration. Those inventories should keep declining until March, which for the gas market is when the winter season ends and gas starts flowing back into storage in preparation for the next winter. The key to understanding how prices will fare next year rests largely on how much of that stored gas gets used up in the next three months or so, and then how much heads back into storage between April and November. In its latest short-term projection, the EIA estimated gas inventories would end the year at 3.38 trillion cubic feet. Mild weather makes that look suspect already: Inventories would need to drop by more than 150 million cubic feet a week through the last three weeks of this month, much higher than the five-year average for late December. If you assume instead that inventories drop at the low end of the range for the past five years -- roughly 105 million cubic feet a week -- then they should end 2015 at 3.53 trillion cubic feet.Truism or no, 3.53 trillion of anything is a lot. In this case it would be even higher than the level at the end of 2011 -- just a month or so before the price of natural gas made its last nosedive below $2.The chart below takes that storage figure as the starting point and maps out 2016 using a few different assumptions. The central case takes the EIA's own estimates of gas withdrawals from, and injections into, storage. The high case assumes that weather effects mean withdrawals run about 3 billion cubic feet a day lower than that during the winter and injections run about 2 billion cubic feet a day higher in the summer due to mild weather. The low case assumes the opposite.

US emerges as net exporter of natural gas -  In a historic first, the US in early November began seeing small net volumes of natural gas exports that recently climbed above 1 Bcf/d, an analysis of data from Platts Analytics' Bentek Energy showed Monday. The emergence and rapid acceleration in export volumes comes amid a recent decline in Canadian imports and a ramp up in feedgas volumes delivered to the Sabine Pass LNG export terminal. In November, imports of Canadian gas have averaged just 4.5 Bcf/d and are down 21% from imports that averaged 5.7 Bcf/d in October. Over the same period, feedgas deliveries to Sabine Pass have climbed to record highs, averaging 1.5 Bcf/d month to date, up from an average 249 MMcf/d in October.The balance of gas imports and exports that began shifting in November was accompanied by a recent rise in Canadian gas prices and the restart of liquefaction processes at Sabine Pass. In November, prices at Canada's AECO hub in Alberta have climbed to an average 36 cents/MMBtu discount to Henry Hub and are up 40% from an average 60-cent discount in October, S&P Global Platts data showed. From the start of November, rising Canadian gas prices have prompted a dropoff in imports, most noticeably to the Midwest market area and the Pacific Northwest. Month to date, imports of Canadian gas to the Midwest are down 765 MMcf/d from the month prior and are averaging just below 2.3 Bcf/d. Imports of Canadian gas to the Pacific Northwest, meanwhile, have fallen over 380 MMcf/d on average in November and are down about 12% from October. The dramatic ramp-up in feedgas deliveries to the Sabine Pass LNG export terminal comes following the end of maintenance activity in late October and the introduction of commissioning-feedgas volumes to Train 3.

US natural gas storage increases 30 Bcf to 4.047 Tcf: EIA - US natural gas in storage increased 30 Bcf to 4.047 Tcf in the week ended November 11, the US Energy Information Administration reported Thursday, breaking the previous all-time high of 4.017 Tcf set the prior week. The net injection was exactly in line with a S&P Global Platts survey of analysts expecting a 30-Bcf injection. In the corresponding week last year the EIA reported a 26-Bcf injection, while the five-year average is a 3-Bcf build. This was the first build of the 2016 injection season that was larger than both the corresponding week last year and the five-year average. As a result, stocks were 51 Bcf, or 1.3%, higher than the year-ago level of 3.996 Tcf, and 216 Bcf, or 5.6%, more than the five-year average of 3.831 Tcf.

Normal winter weather could push US gas prices higher in Q1 2017 - Platts Snapshot video -- The winter approaches, more heating demand — and more natural gas demand — is expected to shape American markets, as Bob Yu demonstrates in an analysis of the fundamentals. US gas storage stocks have climbed over 4 Tcf, but various scenarios point toward the first quarter of 2017 being tighter than the first quarter of 2016, which will have implications for prices.

The pivotal role of the Perryville Hub in transforming US natural gas flows. -  Natural gas pipeline takeaway projects under development out of the U.S. Northeast would enable ~10 Bcf/d to flow south from the Marcellus/Utica supply area. About half of that southbound capacity is geared to serve growing power generation demand directly south and east via the Mid-Atlantic states. But another nearly 5.0 Bcf/d is headed southwest to the Louisiana and Texas Gulf Coast for growing LNG export and Mexico demand—and that is on top of about 4.4 Bcf/d of reversal (or backhaul) capacity already added over the past two years. Much of the Gulf Coast-bound backhaul capacity will converge on the Perryville Hub, a market center located in northeastern Louisiana, about 220 miles north of the U.S. national benchmark Henry Hub. As such, the ability for gas to move through Perryville and get to downstream demand market centers will be key to balancing the natural gas markets. Today, we take a closer look at the historical and future pipeline capacity in and around the Perryville Hub. The Perryville Hub pricing location has long been a pulse-point for gas flows through the Gulf Coast region, although arguably an under-appreciated one, given that it sits in the shadows of Henry Hub. One of the touchstones of a successful trading hub is optionality, and Perryville has no shortage of that. For one, it is a highly connected, high-capacity hub. For another, its location gives it just about 360-degree access to supply regions. Much like Henry Hub (as described in our blog Henry the Hub I Am, I Am), the Perryville pricing hub is not a hub-and-spoke system in the classic sense. Rather it is a collection of pipeline interconnects starting in Ouachita Parish, LA and extending as far east as Madison Parish, LA, but for the most part the supply converges at two major nodes: around Perryville, LA, on the western side of the hub and near Delhi, LA, on the eastern side. The multitude of interconnects allow gas to hop from one pipeline to the other on its way from supply to demand market areas, changing direction along the way if need be.  Although a large volume of gas physically moves through Perryville, comparatively little of that gas changes hands at the hub.

Enterprise's plan to help move gas to Texas export markets - Intrastate natural gas pipelines in Texas reach far and wide, and can transport extraordinary volumes of gas. The problem is, the traditional supply/demand dynamics that spurred the development of all that pipe decades ago are being up-ended by burgeoning Marcellus/Utica production headed to the Gulf Coast and the demand-pull of gas to planned LNG export terminals along the Texas coast and to Mexico. Lone Star State pipelines that for years have flowed north and east to the Houston Ship Channel and beyond now must flow south and west. Today, we continue our review of efforts to rework and expand key elements of Texas’s intrastate gas pipeline network to meet growing export needs, this time with a look at plans by Enterprise Products Partners.  As we said in Part 1, planned liquefaction/LNG export facilities along the South Texas coast and growing demand from Mexico’s electric power sector together will require several billion cubic feet/day of additional U.S. natural gas over the next three to five years. These export markets are being targeted by gas producers across the country, from the Marcellus/Utica to the Permian Basin, but a lingering question is whether Texas’s existing pipeline infrastructure is sufficient to deliver all that gas. Reversed interstate pipelines can move increasing volumes of gas from Pennsylvania, Ohio and West Virginia to Louisiana and into Texas, but that’s not enough. A critically important part of the solution will be optimizing the use of Texas’s vast network of intrastate pipelines, many of which are operated by three major players in the market: Enterprise, Kinder Morgan and Energy Transfer Partners. Last time we looked at Kinder Morgan’s recently completed Tejas Crossover Pipeline Project, a 52-mile, 36-inch-diameter connector between the company’s two primary intrastate systems that will enable up to 1 Bcf/d of gas to flow south from the Katy, TX gas hub (about 30 miles west of downtown Houston) and Kinder Morgan’s 1 Bcf/d Houston Central Complex gas processing facility in Colorado County, TX to the Agua Dulce hub in Nueces County, TX (near Corpus Christi), the starting-off point for two major pipelines to Mexico: NET Midstream’s nearly two-year-old 2.1-Bcf/d NET Mexico Pipeline to the U.S.-Mexico border.

Texas natural gas pipeline capacity, flows, and basis -- the fretboard model. - The natural gas pipeline grid in Texas is undergoing a historic transformation as interstate pipelines designed to move gas north and east from the Gulf Coast region are being reversed, enabling Marcellus/Utica gas to flow to LNG export markets in Louisiana and Texas, and via Texas for pipeline export to Mexico.   With a history of oil and gas production going back more than 100 years, no region in the world has a more convoluted network of pipelines than Texas.  The state can be viewed as a dense “spaghetti bowl” of interconnected interstate and intrastate systems that defies traditional gas market analysis, in part because intrastate pipelines do not post receipts and deliveries on their systems as required by federally regulated interstate pipelines.  However, it is possible to assess the dynamics of regional flows and capacities by examining the morass of flow data available from interstate pipelines in the region that connect to the intrastates. To help make sense of this data, RBN has developed a simplified model that facilitates an understanding of Texas natural gas flows and capacities that we call (unsurprisingly since it’s RBN) the Fretboard Model because the region’s interstate pipelines and capacity constraints look (with just a bit of artistic license) very much like a guitar fretboard.  In today’s blog, we introduce this model. We’ve discussed the interstate pipeline reversals that will move increasing volumes of Marcellus/Utica gas to Louisiana in several blogs (most recently in Two Much Pipe on My Hands) and in Part 1 and Part 2 of our three-part Drill Down Report, “Miles and Miles of Texas,” which takes a big-picture look at U.S. LNG exports and pipeline gas deliveries to Mexico. We’ve examined major enhancements to Texas’s intrastate pipeline systems in our ongoing “Over, Under, Sideways, Down” blog series, Part 1 of which focused on Kinder Morgan’s Tejas Crossover project, which will enable about 1.0 Bcf/d of natural gas to zig-zag over to and down the Texas coast to export markets; Part 2 addressed Enterprise Product Partners’ plan for expanding capacity on its intrastate system.   And we covered the connections between Texas intrastate and interstate pipelines to the LNG export terminals being developed at Freeport and Corpus Christi in Last Mile of the Way.

Texas Now Has As Many Oil Rigs As Rest Of The Country Combined - The majority of new oil and natural gas drilling in the U.S. is happening in Texas, according to a report published Tuesday by the federal Energy Information Administration (EIA). American oil and gas drilling is increasingly concentrated in the Permian Basin, which spans parts of western Texas and southeastern New Mexico. The Permian now has nearly as many active oil rigs as the rest of the U.S. combined, according to an EIA report.  Oil production in the region has spiked drastically since early 2015, while production in other areas has fallen due to low oil prices. Permian oil is relatively cheap to access and refine since it’s close to most American refineries. Fracking for oil and natural gas in Texas produces $11.8 billion each year and creates more than 107,000 permanent jobs, according to a report published by the industry group North Texans For Natural Gas. Texas’s Barnett Shale is estimated to hold 172 million barrels of shale oil and 176 million barrels of natural gas liquids, twice as much natural gas and oil as expected, according to a December study by the U.S. Geological Survey (USGS). To put those reserves in some context, Saudi Arabia’s total proven oil reserves are estimated to be 268 billion barrels, according to the CIA. The Barnett Shale is not the only formation reassessed by the USGS to have double the reserves expected thanks to fracking. An updated assessment of the Bakken Formation in North Dakota came to a similar conclusion in 2013, as did a 2011 assessment of the Marcellus Shale.

As drilling jumps, Wolfcamp has 20 billion barrels of oil: USGS -  The Wolfcamp shale formation in Texas' Permian Basin contains an estimated 20 billion barrels of crude oil, almost three times as much oil estimated to be in the Bakken-Three Forks formation, the US Geological Survey said Tuesday. The estimate, the largest estimate of continuous oil that the agency has ever assessed in the US, comes as government data shows that US oil drilling continues to climb in the Permian, while it continues to fall in the Eagle Ford and Bakken, amid persistently low prices. In its estimate, USGS said the Wolfcamp play in the Permian's Midland Basin also contains 16 Tcf of associated natural gas and 1.6 billion barrels of natural gas liquids. "The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more," Walter Guidroz, program coordinator for the USGS Energy Resources Program, said in a statement. "Changes in technology and industry practices can have significant effects on what resources are technically recoverable, and that's why we continue to perform resource assessments throughout the United States and the world." The Wolfcamp play has seen a spate of recent unconventional drilling, including more than 3,000 horizontal wells which have been drilled and completed. This has been particularly positive in the Wolfcamp since continuous oil and gas can be found throughout the formation "than existing as discrete, localized occurrences, such as those in conventional accumulations," the USGS said.

Big Oil: Feds Call West Texas Deposit ‘Largest’ in History - A western Texas oil and natural gas shale formation was labeled the “largest” of its kind by the U.S. Geological Survey on Tuesday. Federal surveyors announced that the Wolfcamp shale in the Midland Basin portion of Texas’ Permian Basin now holds the record for most oil, natural gas, and gas liquid deposits that are “undiscovered, technically recoverable resources.” The USGS notes that within its survey spanning from north of Lubbock to remote regions southwest of San Angelo, an estimated and previously unaccounted for 20 billion barrels of crude oil; 16 trillion cubic feet of natural gas; and 1.6 billion barrels of natural gas liquids are able to be extracted by means typically involving slant drilling and hydraulic fracturing, commonly known as “fracking”. The figures are based on official methods that project untapped resources amid formations already surveyed and exploited. A government spokesperson underscored the historic nature of the finding in a release. “The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” said Walter Guidroz, for the USGS Energy Resources Program. “Changes in technology and industry practices can have significant effects on what resources are technically recoverable, and that’s why we continue to perform resource assessments throughout the United States and the world.” The USGS notes that it does not account for the profitability of new deposit extractions. The previous discovery record dates back to 2013 for North Dakota’s Bakken-Three Forks oil accumulation. Texas’ latest discovery dwarfs the northern high plains state by a factor of three.

Shale oil in Permian’s Wolfcamp formation called biggest field in U.S. - In a troubled oil world, the Permian Basin is the gift that keeps on giving. One portion of the giant field, known as the Wolfcamp formation, was found to hold 20 billion barrels of oil trapped in four layers of shale beneath West Texas. That’s almost three times larger than North Dakota’s Bakken play and the single largest U.S. unconventional crude accumulation ever assessed, according to the U.S. Geological Survey. At current prices, that oil is worth almost $900 billion. The estimate lends credence to the assertion from Pioneer Natural Resources CEO Scott Sheffield that the Permian’s shale could hold as much as 75 billion barrels, making it second only to Saudi Arabia’s Ghawar field. Irving-based Pioneer has been increasing its production targets all year as drilling in the Wolfcamp produced bigger gushers than the company’s engineers and geologists forecast. “The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, coordinator for the geological survey’s energy resources program, said in the statement. Oil explorers have been flocking to the Permian Basin in West Texas and New Mexico to tap deposits so rich that they can generate profits even at lower oil prices. A race to grab land in the Permian has been the main driver of a surge of deals in the energy patch and the industry’s main source of good news. Although the Permian has been gushing crude since the 1920s, its multiple layers of oil-soaked shale remained largely untapped until the last several years, when intensive drilling and fracturing techniques perfected in other U.S. regions were adopted. The Wolfcamp, which is as much as a mile thick in some places, has been one of the primary targets.;

The largest oil deposit ever found in America was just discovered in Texas - The US Geological Survey said Tuesday that it found what could be the largest deposit of untapped oil ever discovered in America.  An estimated average of 20 billion barrels of oil and 1.6 billion barrels of natural gas liquids are available for the taking in the Wolfcamp shale, which is in the Midland Basin portion of Texas' Permian Basin.  Based on a West Texas Intermediate crude oil price of $45 per barrel, those deposits are worth about $900 billion.  US oil exploration companies have flocked to the superrich Permian Basin in recent years and used shale-drilling technology to create an oil boom that simultaneously helped trigger a price crash two years ago. The count of active oil rigs fell with prices, but has risen over the past few months, mostly in the Permian. Bloomberg noted that the Wolfcamp, where this deposit was found, has been one of the primary targets of shale drillers. "The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more," Walter Guidroz, program coordinator for the USGS Energy Resources Program, said in a statement.  More than 3,000 horizontal oil wells have already been drilled and completed in the Midland Basin Wolfcamp section, according to the USGS. To get the oil, producers fracture, or "frack," the earth below with a high-pressure liquid mixture to untap oil and gas from shale rock.  This map from the USGS shows the area where the deposit was found:

 Why The Permian Just Got Even Hotter | The U.S. Geological Survey just published an assessment of oil reserves for a section of the Permian Basin, revealing the largest estimate of continuous oil that the agency has ever assessed. The Wolfcamp shale in the Midland Basin, which is part of the Permian Basin, is one of the most prized shale formations in the United States, and for good reason. The USGS estimates that the West Texas shale formation could hold an estimated mean of 20 billion barrels of oil, 16 trillion cubic feet of associated natural gas, and 1.6 billion barrels of natural gas liquids. Those figures are the largest for any single continuous pool of oil the USGS has ever surveyed. Other areas of the country have seen oil booms and busts over the past half-decade. The Eagle Ford in South Texas and the Bakken in North Dakota each had their heyday, but they pale in comparison to the Permian basin right now. Output from the Bakken has dipped below 1 million barrels per day (mb/d) in recent months, dropping to a two-year low of 971,000 barrels per day in September. The Eagle Ford has seen an even more dramatic decline – it is expected to fall below the 1 million-barrel-per-day mark next month, down from a peak of 1.7 mb/d reached in March 2015. Meanwhile, the Permian is going in the other direction, having seen output steadily rise over the past several years to break through 2 mb/d this year. And there is still more potential for the Permian. The USGS believes that the oil sitting in the Wolfcamp is almost three times larger than what is located in the Bakken-Three Forks, according to a 2013 assessment of the region. Not only that, but the current estimate only covers a portion of the Wolfcamp located in the Midland Basin; the USGS did not look at the Wolfcamp in the neighboring Delaware Basin.

Obama administration cancels 25 Colorado oil, gas leases -  The Obama administration Thursday formally cancelled 25 undeveloped oil and natural gas leases and put new conditions on 40 other leases in Colorado's Thompson Divide, a decision which drew criticism from industry. The leases, which are located in the Mancos Shale in the Piceance Basin of Colorado, were granted over a decade ago, but were fought by environmental groups due to "deficiencies in the original environmental analyses and process used to support the initial issuance of oil and gas leases in the region," the US Interior Department said in a statement. "This resolution strikes the right balance by protecting one of Colorado's most spectacular places and important watersheds, and ensuring that any future development is done responsibly and held to high standards," Interior Secretary Sally Jewell said in the statement. In that statement, Colorado Governor John Hickenlooper, a Democrat, said the resolution is one that "protects the beautiful environment of the Thompson Divide, that acknowledges the investments companies have made in the area and lets people get back to business."But Kathleen Sgamma, a vice president with Western Energy Alliance, an industry group, said the leases were cancelled and conditions were changed due to a minor technicality in the environmental review, not a substantial issue which impacted the environment. "As a federal lease holder you are subject to the whims of the federal government, let's face it," Sgamma said. "It's like adding clauses to your homeowners' contract ten years after you buy your house."

Obama Administration Finalizes Rule to Reduce Methane Pollution, But What Will Trump Do? -- The Bureau of Land Management (BLM) announced a final rule on Tuesday to cut natural gas waste and methane pollution from oil and gas operations on public lands.  A new federal rule seeks to curb significant waste and benefit our nation by reducing the output of one of the largest contributors to global warming—methane gas.  The new rule aims to reduce natural gas waste and its associated methane pollution from all oil and gas operations on lands the BLM leases to oil and gas companies for drilling.  If implemented correctly, over several years the BLM rule is expected to reduce the waste of natural gas from federal oil and gas operations by more than 40 percent.   This is a major victory in the fight against climate change , but like other Obama administration orders and priorities, we expect it may come under attack in the Trump administration.

Production Declines in Big Seven Plays to Continue Next Month, EIA Says - Oil and natural gas production from the nation's seven largest unconventional plays, which has been trending lower for months, is expected to decline once again in December, according to data from the Energy Information Administration (EIA). Total oil production out of the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica plays will be an estimated 4.49 million b/d in December, down from an estimated 4.52 million b/d this month, EIA said in its latest Drilling Productivity Report (DPR), which was released Monday.EIA forecast December oil production out of the Permian (2.07 million b/d) and Niobrara (404,000 b/d) to be up slightly compared with November, and oil production out of the Marcellus (38,000 b/d) and Haynesville (43,000 b/d) to be unchanged. But the estimated total was dragged down by declines expected in the Bakken (918,000 b/d, compared with 932,000 in November), Eagle Ford (978,000 b/d, compared with 1.01 million b/d) and Utica (52,000 b/d, compared with 54,000 b/d).Natural gas production from the Big Seven is expected to fall to 46.96 Bcf/d, compared with 47.05 Bcf/d this month. As it has several times this year, EIA said it expects the biggest decline in gas production to be in the Eagle Ford, with the agency forecasting 5.56 Bcf/d in December, down 196 MMcf/d from 5.76 Bcf/d this month.Declines are also expected in the Bakken (1.60 Bcf/d, compared with 1.61 Bcf/d), Haynesville (5.92 Bcf/d, compared with 5.94 Bcf/d), Niobrara (4.16 Bcf/d, compared with 4.19 Bcf/d) and Utica (4.09 Bcf/d, compared with 4.11 Bcf/d). Two plays should see increases in natural gas production next month, EIA said: the Marcellus (18.30 Bcf/d, compared with 18.17 Bcf/d in November) and the Permian (7.32 Bcf, compared with 7.27 Bcf/d).EIA released its first DPR in October 2013,but didn't forecast month-to-month production declines until September 2015. Since then, the agency's production forecasts have followed a steady downward trend. The seven regions during 2011-2014 accounted for 92% of domestic oil production growth and all gas production growth. Drilled but uncompleted (DUC) well counts as of the end of October totaled 4,232 in the four oil-dominant regions -- Permian, Bakken, Eagle Ford and Niobrara -- an increase of 48 from September, EIA said. There also were 922 DUCs in the three gas-dominant regions -- Haynesville, Marcellus and Utica -- a decline of 2.

US shale oil production declines continue to slow - US shale oil production declines over the past year and a half are forecast to slow to 20,000 b/d in December, down from a 30,000 b/ddrop in November, US Energy Information Administration data showed Monday. December’s shale oil output is estimated to be at 4.498 million b/d, compared to 4.518 million b/d in November, the EIA said in its monthly Drilling Productivity Report. This compares to a decrease of 118,000 b/d to 4.949 million b/d over the same time period a year ago. Production peaked at 5.618 million b/d in March 2015, according to the EIA. But crude oil production in two of the four the main producing shales areas covered by the report, the Permian in West Texas and New Mexico, and Colorado’s Niobrara are forecast to increase production, while Texas’ Eagle Ford, and the Bakken Shale of North Dakota and Montana are expected to see production fall. The Permian is expected to increase production 27,000 b/d to 2.065 million b/d in December, while the Niobrara is forecast to raise output by 2,000 b/d to 404,000 b/d. The increases in those two regions would be offset by drops of 33,000 b/d to 978,000 b/d and 14,000 b/d to 918,000 b/d in the Eagle Ford and Bakken Shales, respectively. Greater output in the Permian has been expected by analysts due to the dramatic run up in rigs over the last six months. The Permian had 218 rigs operating as of last week, which is up by 86 from when the rig count bottomed out there in April this year, according to Baker Hughes.

North Dakota Oil Production Falls To 31-Month Low -- November 16, 2016 --Link here.

  • North Dakota’s crude oil output in September fell to the lowest level in more than two years, staying below the 1M bbl/day level for the second month in a row
  • production fell 1.1% for the month to 971K bbl/day in September, the most recent month for which data is available, 10K bbl/day less than August and the lowest level since February 2014, when output was 952K bbl/day
  • natural gas production in North Dakota fell 1.7% in September to 1.61B cf/day, the state also reports
Director's Cut is here

North Dakota Crude Output Drops To Lowest Since Feb. 2014 | Rigzone  - Oil production in North Dakota dropped more than 10,000 barrels-per-day (bpd) in September, the state Industrial Commission reported on Wednesday, citing continued weakness in oil prices. The state pumped nearly 972,000 bpd in September, the lowest level since February 2014, data showed. In August, output dropped below the 1 million bpd mark for the first time in over two years. The latest figures from November show North Dakota's current drilling rig count is 38, up from 33 in October. Going forward, "operators are shifting from running the minimum number of rigs to incremental increases throughout 2017 as long as (U.S.) oil prices remain below $60/barrel," Lynn Helms, head of the state's Department of Mineral Resources (DMR), said in a statement. U.S. crude prices hovered just below $46 a barrel on Wednesday. The state issued 82 drilling permits in October, a large increase from 63 in September, although down from 99 in August, data showed. "Operators are maintaining a permit inventory that will accommodate a return to the drilling price point within the next 12 months," Helms added.

Bakken Update: Adding To The Glut With Bakken Oil Production Per Well Increasing 27.3% - Summary:

  • Mega-Frac style wells continue to show impressive production results, with an increase of 27.3% from 2013 to 2015.
  • Enhanced well designs are still in its infancy, and should continue to accelerate from a production standpoint.
  • From 2014 to 2015, the number of completions decreased by 30% but oil production decreased just 16% and natural gas 1.5%.
  • These improvements have been seen in all US plays and we will cover the Eagle Ford in our next submission.
  • Trump is bullish the US oil industry and we expect protectionist policies will accelerate oil production growth in all US plays.

Oil and gas has been through significant changes since the price of oil dropped from north of $100/bbl. Prices have stabilized, but volatility is expected. In the short term, prices could pull back to $40, and take the US Oil ETF with it. Longer term we think the price is moving higher. Whether the price of oil stays around $50/bbl. in 2017, or heads to $70/bbl., it is important to know the difference in operator economics. Every operator is unique with respect to costs and production, but the main identifier to success is geology. Geology is better understood when isolated by location. Pulling production and cost over several counties is not helpful when looking at one company. Significant changes in production can be seen from one section to the next, so it is important to know the specifics of each prospect to get an idea of value. Each prospect should be examined specifically, as this provides insight to operator viability.

Analysis: Bakken discounts deepen as competition heats up - Oil | Platts News Article & Story: Bakken Blend differentials at terminals close to North Dakota wellheads held their lowest assessment since December Tuesday, closing at the calendar-month average of the NYMEX light sweet crude oil contract (WTI CMA) minus $6.25/b. While one factor dragging on Bakken differentials has clearly been a tight Brent/WTI spread -- trading around 42 cents/b Tuesday, well in from the steady $2/b seen this summer -- the return of Louisiana Light Sweet to the Midwest market may also be having an impact, according to traders. One trader said there was an increase in volumes heading up the Capline pipeline, however, differentials suggest LLS is still too expensive, at least compared to Bakken. Platts assessed LLS at WTI plus $1.15/b Tuesday. Considered by some to be the "champagne of crudes," it is unclear what appeal LLS still has for a Midwest refiner as margins for LLS actually -- and unusually -- lag those for Bakken.S&P Global Platts data shows LLS cracking margins in the Midwest closed at $3.30/b Monday, compared to Bakken cracking margins of $6.37/b. In fact, the advantage of cracking Bakken has grown steadily since August. Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co. What is clear however, is that the steeper discounts available for Bakken provide the biggest incentive for a Midwest refiner. The cost of getting Bakken to this market is around $3.48/b, according to Platts netback calculations, compared to just $1.02/b for LLS.

EOG Reports High-Volume Proppant Well -- 21 Million Lbs; "1.5 Section" -- 960-Acre Drilling Unit -- November 17, 2016 -- Note, 21 million lbs of sand, in a lateral that was not a "two-section lateral":

  • 31248, 1,272, EOG, West Clark 104-0136H, Clarks Creek, middle Bakken, 36 stages, 21 million lbs, t5/16; cum 86K 9/16; drilling unit: 960 acres; TVD around 10,600 feet; TD, 18,185 feet; total lateral, 7,338 feet; target total, 7,338 feet (100%); KOP December 4, 2015; cease drilling December 8, 2015; from surface, well was sited in southwest corner of section 1-151-95; proceeded northeast and then northnortheast under section 1-151-95, ending just short of the halfway mark in section 36-151-95W (according to diagram on page 29 -- but it obviously ended in section 36-152-95).
  • 21,029,167 lbs; 36 stages; 7,338 feet: 584K lbs/stage; 2,866 lbs/foot

DAPL Ignores 2nd Army Corps Request to Stop Construction for 30 Days - The U.S. Department of Justice is about to announce next steps on de-escalating the standoff regarding construction of the Dakota Access Pipeline, according to the Standing Rock Sioux Tribe. "Today, the Department of Justice announced in federal court that it will be announcing the next steps on a ‘path forward’ for the Dakota Access Pipeline crossing at Lake Oahe,” said Standing Rock Sioux Chairman David Archambault II in a statement on November 10. Energy Transfer Partners is refusing to stand down on its construction plans despite two requests from the U.S. Army Corps of Engineers that it do so. The company, builders of the Dakota Access Pipeline (DAPL), said on Tuesday November 8 that it planned to begin drilling in two weeks—even though at the moment it does not have the easements necessary for it to tunnel under the river legally. Building without approved easements is a violation of federal law, the Army Corps emphasized. "Any work must adhere to federal regulations,” the Army Corps said. “Failure to comply can bring legal action. Construction without proper permits or easements in place can result in fines and legal action." The tribe said nothing will do but a complete environmental impact statement at the least, and a rerouting of the pipeline.“The only possible path forward for the Standing Rock Sioux Tribe is a decision that denies the easement or subjects it to a full environmental impact statement and tribal consultation,” Archambault said. “The only urgency here arises from DAPL’s reckless decision to build to either side of the Missouri River without a permit. It even continued construction when the U.S. Government asked it to voluntarily stop.”

Trump’s Personal Investments Ride on Completion of Dakota Access Pipeline --Donald Trump's surprise election win has encouraged Energy Transfer Partners's Kelcy Warren, the CEO of the parent company of Dakota Access LLC, which is building the Dakota Access Pipeline (DAPL). In an interview with CBS This Morning, Warren said he is "100 percent" confident that the president-elect will help the company finish the project.  The Standing Rock Sioux and their allies have been trying to block the controversial project since spring. The planned route cuts through the Missouri River, and protestors fear that a potential spill will contaminate the tribe's main source of drinking water and destroy sacred sites.  More than 80 percent of the pipeline has already been constructed. The final phase is an easement to build a tunnel beneath the federally protected river, but it first needs approval from the Obama administration.  "We will get this easement and we will complete our project," Warren insisted in his CBS interview. The U.S. Army Corps of Engineers is mulling alternative routes and has requested a temporary halt to the $3.8 billion project but Dakota Access LLC is pushing ahead with construction. According to a Nov. 8 release, the company said it is "currently mobilizing horizontal drilling equipment to the drill box site" and will commence drilling activities upon completion of mobilization in about two weeks. Yesterday, Army Corps's Omaha office said it was "concerned" that the company plans to continue building despite the Corps's request.  Trump has not spoken about the DAPL but holds stocks that are directly funding the Dakota Access Pipeline. According to Trump's financial disclosure forms, The Guardian reported that he has invested between $500,000 and $1 million in Energy Transfer Partners. The ardent supporter of fossil fuels wants to bring back the Keystone XL and announced plans to undo President Obama's climate change and environmental policies.

Whose Pipeline? - Volatility by Russ - Letter to all the people exercised about the Dakota Access Pipeline and cheering on the fighters, but who also support the Democrat Party and are even asking questions like, “Where is Obama on this?” (And of course those who voted for Clinton.*):  Those are Obama’s cops, in case you were too clueless to notice.Of course energy projects of this scale require all kinds of federal regulatory approval. And it is, of course, impossible for a significant energy project to exist without massive federal subsidies. So in both ways, it’s impossible for such a project to exist against the will of the president. On the contrary, it requires lots of action from the executive branch to make anything happen at all. All that corporate welfare doesn’t hand itself out, and all those federal thugs and federally subsidized and equipped thugs don’t outfit and deploy themselves. You do know, right, that there’s barely a cop in America who isn’t dependent upon the federal gravy train. Certainly not the kind of cop the corporations deploy against the faithfully active people at a place like this. But then, we know that almost everyone engaged in social media meta-“activism” on the occasion of the pipeline fight, which basically means circulating memes and clicking on the “Angry” button, really supports Big Oil and voted for it this last circus as they’ve voted for it every previous circus. After all, progressive opinions are fine to have, but those personal cars won’t fuel themselves.

Video Shows Wild Buffalo Held Without Food or Water Near Dakota Access Pipeline Construction Site -- A new video appears to show wild buffalo corralled behind razor wire and 8-foot deep trenches near the Dakota Access Pipeline (DAPL) construction site in Standing Rock, North Dakota. The video, posted on Facebook by Indigenous Rising Media on Nov. 11 with more than 1.2 million views, accuses DAPL builders of fencing off the animals in order to finish construction of the controversial pipeline.  "As of today, Dakota Access pipeline has fenced our sacred wild buffalo and they are building a razor wire wall to protect the last stretch of construction," the Facebook post's accompanying text states.  Reports claim that the buffalo are being held without access to food or water.  According to the fact-checking site Snopes , "Bison are not necessarily a rare sight at the reservation. The Standing Rock Sioux have long-range plans to increase the size of their buffalo herd to 1,000. To handle a herd of that size, the tribe would need 20,000 acres of rangeland."  Buffalo are sacred to the Sioux. "Buffalo ( Tatanka in Lakota) are a significant animal to Sioux and other plains peoples, who use it for food and clothing ," Snopes writes.  The Animal Legal Defense Fund (ALDF) has since launched an investigation into the matter.  "It has been reported that wild buffalo are being corralled and held behind razor wire fencing without food or water near the Dakota Access Pipeline—and that there have been threats of killing the buffalo by the construction company," the ALDF wrote on their Facebook page . "The Animal Legal Defense Fund is confirming reports, collecting additional information and investigating the legality of the treatment of these buffalo."

Reports from Standing Rock detail horrific conditions | TheHill: A couple weeks ago one of my best students disappeared from the argumentation and advocacy class I teach at the local community college. I emailed to see if she was ok. I learned she was on her way to Standing Rock to protest the Dakota Access Pipeline. I had just made a donation to the Standing Rock legal defense fund earlier that week. I was supportive of the fact that she was going to go out into the world to practice advocacy; the real world experience is valuable, and it strikes me as fair that if the people of Bismarck have the right to reject the pipeline, the people of Standing Rock deserve the same right. On November 17, I received a follow up email from my student thanking me for the donation I had made to the Standing Rock Legal Defense Fund, because they had bailed her out of jail. The content that followed disturbed me. “I'm back at camp now, but they did put us in actual dog kennels. There were photos of the types of dogs on the walls and piss stains on the floor. They also didn't read me my rights or even say I was under arrest. I was arrested along with 28 others of the 400+ protesting on the 15th.” This sparked an email exchange between Miranda and me that lead to a phone call. During the call she passed the phone to a fellow protester who with a slight quiver in her voice told me she was afraid to share her name because she feared for her safety. If my writing identified her, maybe law enforcement would target her or her friends; she had been arrested, they had her identity, and she didn’t know what to expect. “There’s danger everywhere here,” she said.

On the Knife-Edge of Western Globalization: A Stint at Standing Rock -- Armed men in jackboots, some masked and toting assault rifles, stand mockingly, defiantly, heavily on the mound of graves – a sacred indigenous burial ground.  A site non-natives can understand as similar to Arlington National Cemetery.  How US nationalists would feel if the situation were reversed, and people were occupying or plowing up Arlington to bury a pipeline that will hasten the destruction of the planet and likely poison a major water-source, does not, at this time, seem to matter or occur to the militants trampling the bones.  While some appear to be “just following orders”, the infamous defense, ruled invalid, of many Nazi grunts who were then executed by the US at Nuremberg, others are smiling – apparently enjoying themselves, enjoying the near absolute power over their unarmed victims – people trying to protect water, indigenous sovereignty, and the global environment.  The thought occurs that there may be an equivalent between some of these armed invaders and Internet trolls, a personality type exposed a couple of years ago in a spate of psychological evaluations as sadists – people who derive pleasure from causing others pain and anguish.  There is certainly a place for sadism in the armed wings of a social system founded on murder, enslavement, and theft.  Many of the nation’s founding atrocities took place on and near, and proudly lend their names to, these very grounds.  While traditionally the indigenous people here would simply have been sent to concentration camps or murdered, often after being hog-tied, today, with cameras and white faces behind the natives, the militants employ mostly torture weapons – tools to erect a living wall of pain and suffering between the protectors and the expanding tide of smog, death, destruction, and desecration they are attempting to halt.   As the militants look down at their victims, I recall that we are told by the US corporate state that we should be outraged when ISIS forces destroy religious sites in the Middle East, but intentionally ignorant, suspicious of the natives, or, at most, neutral, when occupying forces desecrate “solemn” treaties and religious sites in the US – more founding practices without which the US would not exist in its current form.  While such facts are often consigned to Orwell’s “memory hole”, perhaps a more common approach historically has been for the society to celebrate them, as was done, for example, by popular author Christopher Hitchens in the left-liberal bastion The Atlantic.

Army Corps to Engage Standing Rock Sioux on Dakota Access Pipeline -- The U.S. Army Corps of Engineers announced today that it would delay a decision on granting an easement to Energy Transfer Partners for the Dakota Access Pipeline.  The Army Corps determined that discussion with the Standing Rock Sioux Tribe and analysis are warranted, and "construction on or under Corps land bordering Lake Oahe cannot occur because the Army has not made a final decision on whether to grant an easement."  The Army Corps informed the Standing Rock Sioux Tribe, Energy Transfer Partners and Dakota Access, LLC, that it "has completed the review that it launched on September 9, 2016" and "determined that additional discussion and analysis are warranted in light of the history of the Great Sioux Nation's dispossessions of lands, the importance of Lake Oahe to the Tribe, our government-to-government relationship and the statute governing easements through government property."  The Army Corps went on to say that it "invites the Standing Rock Sioux Tribe to engage in discussion regarding potential conditions on an easement for the pipeline crossing that would reduce the risk of a spill or rupture, hasten detection and response to any possible spill, or otherwise enhance the protection of Lake Oahe and the Tribe's water supplies." The agency's remarks concluded by saying, "We fully support the rights of all Americans to assemble and speak freely, and urge everyone involved in protest or pipeline activities to adhere to the principles of nonviolence."  The $3.8 billion pipeline project is now entering its final stretch. More than 80 percent of the pipeline has already been constructed . Last week, Energy Transfer Partners's Kelcy Warren, the CEO of the parent company of Dakota Access LLC, told CBS News he is confident the pipeline will finish despite the ongoing protests now that Donald Trump will be America's next president.

 Feds call for further discussion before Dakota pipeline can move forward -- The Army Corps of Engineers will not grant an easement for construction of the controversial Dakota Access Pipeline until it has discussed the matter further with the Native American tribe that is suing to stop it. In a Monday statement, the Army Corps said it has completed its two-month review of the permitting decisions that went into the Dakota Access Pipeline project. That review approved of the permitting process, with the Corps saying in a letter to Dakota Access developers and tribal opponents that its “previous decision comported with legal requirements.” But the agency said it would not issue the easement necessary for construction of a stretch of the project until it has had a chance to discuss the pipeline with the Standing Rock Sioux Tribe. “We take seriously our government-to-government relationship with the tribe,” Assistant Secretary for the Army Jo-Ellen Darcy wrote in the letter. “This history, the importance of Lake Oahe to the tribe and our government-to-government relationship call for caution, respect and particular care regarding the proposed DAPL crossing at Lake Oahe.” The letter said “additional discussion with the Standing Rock Sioux Tribe and analysis are warranted.” The Standing Rock Sioux Tribe has sued against the pipeline, warning that it threatens cultural heritage sites and the tribe’s drinking water supply at North Dakota’s Lake Oahe. A federal judge in September ruled in favor of the Army Corps’ permitting process for the pipeline, a decision that allowed construction on most of the line to move forward. But the Army Corps has not granted an easement for construction at Lake Oahe. Amid tribal and environmentalist protests against Dakota Access, the Army Corps said it would review its approval process for the pipeline and decide afterward whether to issue the easement.

Dakota Access pipeline protests spread, firms fight back | Reuters: Demonstrators fanned out across North America on Tuesday to demand the U.S. government halt or reroute the Dakota Access pipeline as the companies behind the controversial project asked a federal court for permission to complete it. In what organizers said were the largest demonstrations to date against the pipeline, thousands of people rallied outside Army Corps of Engineers offices, banks and energy companies, a day after the Obama administration delayed granting a permit needed to finish the project. There were arrests in North Dakota, where the most heated protests took place. The $3.7 billion Dakota Access project has drawn opposition from the Standing Rock Sioux tribe as well as environmental activists who say it could pollute water supplies and destroy sacred historic tribal sites. Morton County Sheriff's Department reported 26 arrests in Cannon Ball, North Dakota near the path of the pipeline, and said demonstrators attempted to block a railroad with a pickup truck then tried to set the vehicle on fire. "Their job is to protect us, but instead they're protecting corporate interests and profits and money," said Cannon Ball protester Fumi Tosu, 38, of San Jose, California, adding that police used mace on demonstrators. Robert F. Kennedy Jr, founder and president of Waterkeeper Alliance, said the Dakota Access pipeline was an "environmental crime." "There's real victims," Kennedy told reporters at the Cannon Ball protest.Energy Transfer and its subsidiary, Sunoco Logistics Partners, filed papers in U.S. district court in Washington, D.C., seeking to "end the Administration's political interference in the Dakota Access Pipeline review process." Energy Transfer asked the court to declare that the project had the legal right to proceed and needed no further government approvals. "To propose, as the Corps now does, to further delay this pipeline and to engage in what can only be described as a sham process sends a frightening message about the rule of law,"

Construction of Dakota Access Pipeline Continues Despite Army Corps Delay on Permit Decision -- At approximately 3 a.m. Nov. 16, independent media makers from Digital Smoke Signals spotted a horizontal drill at the highly militarized drill site next to the Missouri River. This sighting comes two days after the Army Corps statement made on Nov. 14. The Army Corps alerted Dakota Access Pipeline (DAPL) that "Construction on, or under the corps land bordering Lake Oahe cannot occur because the Army has not made a final decision on where to grant an easement." The response from Dakota Access was to sue the Standing Rock Sioux Tribe, the Cheyenne River Sioux Tribe and the Army Corps of Engineers claiming all permits were granted. Despite the Army Corps statement that DAPL construction "cannot" continue, Dakota Access has moved in a horizontal drill and prepares to bore under the Missouri River at their highly fortified drill site.Dakota Access builds militarized construction site w/ hesco walls & razor wire to protect oil pipeline from water protectors. #NoDAPL — Unicorn Riot (@UR_Ninja) November 11, 2016 Water protectors continue to gather in prayerful resistance at Oceti Sakowin against the Dakota Access Pipeline and prepare for the first winter storm of the season.

New Front Line for NoDAPL Attorneys: Criminal Courts - I drove through police barricades, past Bureau of Indian Affairs (BIA) command centers and DAPL mercenaries with cameras, guns and who knows what else aimed at me. I prayed each day that the snipers perched in the nearby prairie didn’t determine it was a good day to fire. None of that deterred me from my purpose—to assist the efforts of the Water Protector Legal Collective (WPLC, formerly the Red Owl Legal Collective), to interact with individuals within the camp and to listen and record the stories of water protectors. None were easy to hear, but all shared a common theme of increased, indiscriminate, and excessive use of militarized force against a Native community and its allies. These, and subsequent stories, highlight the extent of force and intimidation used: security dog attacks, tear gas and mace, sound cannons and flash-bang grenades, armored vehicles, rubber bullets and snipers. Once arrested, the individuals face strip searches, being kept in pens resembling dog kennels, the ransacking of impounded cars, personal property “lost,” and sacred items destroyed. More recently, the WPLC reports, “a dumpster-load of seized property was recovered at a Bureau of Indian Affairs checkpoint . . . When protectors returned for their things, they found sacred item after sacred item had been defaced, with apparent intentionality. One item, a bull skull, had its horns snapped clean off.” All contribute to the ongoing civil, human and religious rights violations endured by the water protectors. The next frontline for some of them will be in courtrooms, first to defend themselves from criminal complaints and then to hold authorities accountable for human and civil rights violations. That’s where we attorneys come in.

Dakota Access pipeline decision unlikely until early 2017 - A federal judge likely won't decide until early next year whether to give the developer of the Dakota Access oil pipeline permission to finish the $3.8 billion project, according to court documents. That leaves open the possibility that a resolution to the matter might still come through federal regulators rather than the courts. But it also creates the potential for many more weeks of protests in southern North Dakota, where opponents have started digging in for winter, and millions more spent on law enforcement-related costs. Dallas-based Energy Transfer Partners asked U.S. District Judge James Boasberg on Tuesday to declare it has the legal right to lay pipe under a Missouri River reservoir in southern North Dakota, the remaining unbuilt chunk of the 1,200-mile pipeline to move North Dakota oil to a shipping point in Illinois. The company's move was spurred by the U.S. Army Corps of Engineers calling Monday for more study and input from the Standing Rock Sioux before deciding whether to approve an easement for the pipeline to cross under Lake Oahe, the reservoir from which the tribe draws drinking water. The tribe believes the pipeline threatens water and cultural sites. Company lawyers have proposed a schedule under which a hearing would be held "on or about" Jan. 3, and Boasberg would make a decision sometime after that. When the tribe asked Boasberg in August to temporarily stop pipeline construction, he ruled 12 business days after a hearing. If he follows a similar timeline, a decision on ETP's request would come Jan. 19 — one day before Donald Trump, who has said he wants to rebuild energy infrastructure and owns stock in ETP, assumes the White House. Attorney Jan Hasselman with environmental group Earthjustice, which is representing the tribe in its lawsuit, doesn't think the Obama administration will leave the matter to Trump.

Oil market latest pressure for Dakota Access pipeline (UPI) -- There are concerns about how exposed the Dakota Access oil pipeline is to financial risk in the energy market, a group with ties to climate research said.Energy Transfer Partners, one of the main companies behind the $3.7 billion pipeline, filed a legal challenge against alleged "political interference" in the project. With nationwide protests against the project mounting, the company said more delays that followed a lengthy review process were contrary to the rule of law."Dakota Access Pipeline has been granted every permit, approval, certificate, and right-of-way needed for the pipeline's construction," Energy Transfer Partners CEO Kelcy Warren said in a statement.With only a few hundred feet left in construction, the U.S. Army Corps of Engineers ordered a halt to the process to take time for "additional discussion and analysis" of the potential threat to the interests of the Sioux tribe and area waters.The last few hundred feet of construction requires drilling under the Missouri River. Outside of the environmental and tribal concerns, the Institute for Energy Economics and Financial Analysis said there were concerns about the economic risks for the project.According to the IEEFA, if the pipeline isn't completed by Jan. 1, the project consortium may have to revisit some of the contracts for shipping oil through the 1,110-mile pipeline. The institute said further that crude oil prices being about 50 percent lower than they were at the height of the U.S. shale era means the regional economic prospects are far from certain.

Judge throws out felony charges against several north camp protesters - A judge has thrown out felony charges against several Dakota Access Pipeline protesters arrested during a raid of the northern camp on Oct. 27. After the raid, 139 people were charged with one felony count of conspiracy to endanger by fire or explosion and two misdemeanor counts. The prosecutors filed a single complaint and supporting affidavit against all of them on Nov. 10. The affidavit alleges protesters at least implicitly agreed to set multiple fires throughout the day, thereby endangering law enforcement, firefighters and nearby pastureland. But South Central District Judge Cynthia Feland was not convinced the prosecutors had made a case against each person. She notes that the prosecutor failed to specifically name who committed the crime, how and when they committed it or how they agreed to commit the crime together. "As far as the court can tell from the facts alleged in the affidavit, these fires were set sporadically, at different locations, by different individuals, seemingly at random. The state has not alleged facts sufficient to show an explicit or implicit agreement between the 139 defendants to commit the offense charged," Feland wrote in an order to dismiss the felony charge against Yenglin Jeysien Verdugo. Court records show identical orders also are filed with nine other protesters. Four additional protesters, whose cases were assigned to Feland, will also have their felony charge dropped, according to the Morton County Clerk's office. It is not clear yet whether felony charges will stand against the other 125 people named in the complaint, whose cases are assigned to different judges.  The felony charge was dismissed without prejudice, meaning a prosecutor can re-charge the case if the prosecution can provide probable cause.

U.S. native groups promised input on development as pipeline... (Reuters) - The United States plans to gather more input from native people as officials contemplate projects like the Dakota Access Pipeline, according to a White House notice posted on Thursday that could delay the controversial plan. The Army Corps of Engineers plans to "revise its regulations" to ensure its consultations with sovereign tribes are "confirmed by the U.S. Constitution, treaties, statutes, executive orders, judicial decisions and presidential documents and policies." The proposed change comes in the form of what is known as an Advance Notice of Proposed Rulemaking, which states an agency's intention to issue a new regulation. The Army Corps of Engineers, which manages many federal infrastructure projects, did not immediately respond to a request for comment Thursday evening. The pending rule is being contemplated in the final weeks of President Barack Obama's term when the administration is mulling whether or not to allow the Dakota Access crude pipeline. President-elect Donald Trump is due to be sworn in on Jan. 20. Under federal law, the incoming president has authority to invalidate many last-minute decisions from an outgoing administration. The notice, which was posted on the website of the U.S. Office Information and Regulatory Affairs, said the public will be able to comment on the proposal until Jan. 1, 2017. The Obama administration has been in a quandary over whether to issue a permit to allow the completion of the final leg of the pipeline. Demonstrators fanned out across North America on Tuesday to demand that the U.S. government either halt or reroute the pipeline, while Energy Transfer Partners, the company behind the controversial project, asked a federal court for permission to complete it.

Developer says Dakota Access pipeline will not be rerouted: AP | Reuters: Energy Transfer Partners LP Chief Executive Officer Kelcy Warren said the company will not consider rerouting its Dakota Access oil pipeline despite concerns voiced by U.S. native groups, according to an Associated Press interview published on Friday. President Barack Obama said earlier this month that the government was examining ways to reroute the pipeline. Energy Transfer did not immediately respond to calls and emails seeking comment. Warren did tell the AP that he would like to meet with tribal leaders to ease their concerns about the project. The Dakota Access Pipeline has been delayed since September, when federal regulators including the Army Corps of Engineers decided to re-review permitting under Lake Oahe, a federally owned parcel of land where the pipeline needs to cross. The stoppage came after protests from the Standing Rock Sioux tribe, whose reservation is adjacent to the federal land where the pipeline runs. The U.S. Army Corps of Engineers elected to review their permitting again, and this past week deferred a decision, citing concerns about the tribe having been moved off its lands in the past. On Friday, North Dakota Governor Jack Dalrymple asked the Army to resolve the permitting issues, citing protests that have sometimes turned violent at Cannon Ball, where the Standing Rock Sioux have erected a large camp that they plan to man throughout the winter. He also asked for assistance in law enforcement from federal authorities. “Further delays simply prolong the risks to public safety, prolong the hardships endured by area residents and increase costs incurred by the state of North Dakota and Morton County,"

US Department Of The Interior Cancels 15 Oil And Gas Leases On Sacred Sites | 15 oil and gas leases that were issued 30 years ago are now in the process of being cancelled. The Department of the Interior made the move to preserve 130,000 acres of land near Glacier National Park, in Montana. Located in the Badger-Two Medicine area, the land is held sacred by members of the Blackfeet Indian Tribe in Montana, and the Blackfoot tribe in Canada. In addition to the spiritual component, the area is also home to grizzly bears and bighorn sheep. Interior Secretary Sally Jewell commented on Wednesday that the leases, which date back to the late 1980s, should never have been issued in the first place, adding that the move sets the tone for how leases should be issued in the future. The leases in question were held by Devon Energy, and the company has not drilled on them. Company president David Hager agreed with Jewell, noting that Devon will receive around $200,000 in compensation. Montana Senator Jon Testor praised Devon for its willingness to cooperate with the decision by the Department of the Interior (DOI). This is not the first cancellation in the Badger-Two Medicine area. In March of this year, the DOI cancelled a 6,200-acre lease owned by Solenex LLC of Baton Rouge. Unlike Devon, Solenex, which had plans to drill for gas on its lease, has challenged the decision by the DOI in U.S. District Court in Washington, D.C. There are still two oil and gas leases in the area, which are also slated for cancellation. But the cancellation efforts have been slowed by the fact that the federal government is so far, unable to locate the owners.

 Harold Hamm, Anti-Keystone Oil Billionaire, Could Be Trump's Energy Secretary: An oil billionaire who has been saying for years that the U.S. doesn’t need Canada’s Keystone XL pipeline is a leading candidate to be the next energy secretary of the United States. According to documents obtained by the Associated Press, Harold Hamm, an entrepreneur in North Dakota's Bakken oil shale fields, is one of three people being considered for the post, along with Rep. Kevin Cramer, an early Trump supporter from North Dakota, and venture capitalist Robert Grady, who worked in President George H.W. Bush's administration. The fact that two of the three potential choices for energy secretary are linked to North Dakota’s shale oil fields could be bad news for Keystone XL builder TransCanada, and for Canada’s oilsands as a whole, which are in direct competition with North Dakota’s oil fields. Hamm, who is CEO of Continental Resources and whose net worth is estimated at more than US$11 billion, has argued that the Keystone XL pipeline has become irrelevant to the U.S., thanks to the development of shale oil.  Donald Trump campaigned on a vow to approve the Keystone XL pipeline, though on the condition that the pipeline’s builder, TransCanada, would share the profits with the U.S. government. Some analysts said that idea could be legally problematic.

Palin over Hamm for Energy Secretary? -- Oil and gas website The Surge threw around the idea of Sarah Palin as energy secretary. Last week, we touched on the notion of Harold Hamm, CEO of Continental Resources and the “fracking king” of oil and gas taking the post. And while Sarah Palin might have been governor of one of the biggest oil producing states, she said her first objective would be to get rid of the department. According to Sarah, the first thing she would do as head of the Department of Energy would be to get rid of it. Huh? I’ve heard of the phrase “physician, heal thyself” but never “Cabinet member, fire thyself”. Palin believes her skills are in line with the needs of the department. Rigzone reports: Eight years ago when Palin was running for vice president, her mantra on the road was, “Drill, baby, drill.” Although it was unsuccessful in 2008, Trump’s victory has revived those who voice the conviction. It does seem, in fact, that Trump’s administration will strongly support policies that encourage an increase in drilling, removing many of the regulations that industry folks say get in the way of successful and productive operations. But abandoning all energy regulations isn’t necessarily the panacea that some argue, said Ed Hirs, economics fellow at the University of Houston. “The industry doesn’t go out and deliberately blow regulations,” Hirs said. “What sort of regulations are going to be necessary to remove? What are you going to do – let people who are stoned get on the rigs? You’re going to let guys who are stoned and drunk handle $28 million rigs drilling $8 million wells? I don’t think so. You’re not going to relax all of those regulations.”

Senate GOP leader says he asked Trump to back keystone: The Senate's top Republican said Friday he asked President-elect Donald Trump to move swiftly in approving construction of the Keystone XL pipeline, which has drawn strong opposition from environmentalists. Senate Majority Leader Mitch McConnell of Kentucky told reporters he made the request during his Capitol Hill meeting with Trump a day earlier. "That's the kind of thing that I hope he'll be looking at, and we're helping him look at - things that he can do quickly on his own," McConnell said. "Because much of what President Obama did that slowed our economy he did on his own, either executive orders or regulations." "So one of the ways to get this economy growing again, I think, is to deal with regulatory changes," McConnell added. Trump touted the stalled Keystone project during a late October campaign swing through Florida, saying: "We're going to approve energy infrastructure projects like the Keystone pipeline and many more." He listed the project among his top priorities for the first 100 days of his administration, saying it could provide "a lot of jobs, a lot of good things." McConnell said he's confident the new Trump presidency will "get off to a good start." Obama rejected the proposed Keystone XL pipeline last November, declaring it would have undercut U.S. efforts to clinch a global climate change deal at the center of his environmental legacy. The 1,700-mile pipeline would carry oil from tar sands in Alberta, Canada, to refineries in the Houston area, passing through Montana, South Dakota, Nebraska, Kansas and Oklahoma.

What's ahead for the energy railway industry after crude by rail went bust? -  The crude by rail landscape must be in a dire state when delegates from the railway industry are toying with the idea of hauling water to draught-prone regions or shale production sites in order to repurpose the currently 113,000 rail tank cars — 28% of the entire 400,000 strong fleet — sitting idle on offline tracks or in storage amid declining CBR volumes. Lease rates for the 287,000 tank cars that are still moving have declined to $300-375/month from a high of over $2,400/month during the CBR boom in 2013-2014 and $700-800/month a year ago. The one faction that didn’t mind the downturn in the CBR landscape were the rail car service companies that are cleaning the tank cars, in order to prevent corrosion during storage. BNSF’s executive chairman Matthew Rose opened the conference, held October 27-28, by pointing to the structural decline in both the oil and coal business and that natural gas liquids could well be the next commodity for the railroads. Shortline companies, such as Omnitrax, were optimistic about railing frack sand to shale producing fields, as the increased use of sand below ground resulted in higher yields above ground. In other words, alternatives to crude by rail was on the forefront of delegates’ minds, in order to circumvent the current bust cycle of the crude by rail landscape.According to the Energy Information Administration, total CBR shipments, not including Canada, have more than halved in the past two years from a peak of 1 million b/d in late 2014 to 348 MBD in August 2016. 85% of that volume is sourced in PADD 2 railing Bakken crude to those US refinieries where there is no pipeline capacity.

Reversing Middle East Dependence: U.S. Begins Exports Of Shale Gas To Oil-Rich UAE And Kuwait -- Here’s a crazy thought: Imagine that exports of American energy began flowing to importing countries in the Middle East, and that those countries were growing increasingly dependent on U.S. exports. Sound bizarre? Since March of this year, that is exactly what has been happening. Amid all the election tumult, the United States quietly began exporting natural gas to the Middle East. Two cargoes of shale gas liquefied at Cheniere Energy’s Sabine Pass terminal in Louisiana were exported to Kuwait. A third went to the United Arab Emirates. Jordan imported two more. This ought to sound odd to the average American. Kuwait and the UAE are two of the most petroleum-rich countries on earth, with a combined 12% of global oil and 4% of global gas reserves. The usual narrative suggests that America is dependent on the Middle East for energy, not the other way around. President-elect Trump is even suggesting we reduce our dependence by halting imports from Saudi Arabia. Why would Kuwait and UAE need American gas? They sit in a region that holds more than 40% of global gas. Iran alone owns 18% of known reserves. Qatar has 13%. And, just 90 miles from Kuwait City, Iraq flares off 700 million cubic feet per day of associated gas from its southern oilfields. Estimates put the value of the wasted gas at $1.8 billion per year. How on earth is it possible that these two countries are importing shale gas all the way from America? Even though Kuwait and the UAE each hold more than 100 years of gas reserves at current rates of production, they are genuinely short on natural gas. The root cause is government subsidies that fix domestic natural gas prices at very low levels – less than $2 per million BTUs. At those prices, demand for gas is rampant. So is demand for electricity, which is also subsidized. But with prices fixed at a dollar or two, nobody wants to invest in natural gas production. There is no money in it.

Trump adviser promises a return to ‘Drill, Baby, Drill’  An adviser to President-elect Donald Trump has now promised that the incoming administration will collect “hundreds of billions of dollars” in revenue by “opening up” federal lands and oceans to oil, gas, and coal development.But the fact is that vast majority of federal fossil fuel resources are already open to energy companies for mining and drilling. Opening more lands won’t significantly increase revenues, but could put sensitive habitats, human health, and the recreation business at risk.“We think we can raise significant amounts of revenues for the federal government by opening up more of our federal lands for leases for oil and gas development and coal development,” Stephen Moore, one of Trump’s economic advisers, said in an interview with NPR.“And the energy companies will actually pay the federal government to be allowed to drill and mine on some of these lands. We’re not talking about environmentally sensitive lands, but lands that just have been taken off the grid. We think we could raise hundreds of billions of dollars over the next 10 years,” he said. In reality, oil companies recently cut back on drilling because of an oil glut and correspondingly low global prices. Coal companies are failing because of declining demand for their high-pollution product and competition from cheaper and cleaner alternatives.

US Interior offshore oil and natural gas leasing plan may be complicated by Trump win -  The Interior Department is expected this week to unveil its final five-year plan for offshore oil and natural gas lease sales and both industry and environmental sources believe proposed Arctic sales are more likely to be eliminated due to Republican Donald Trump's electoral victory. The plan, with the proposed sales in the Beaufort and Chukchi seas cut out, could put the incoming Trump administration in the precarious position of scrapping the plan but halting all offshore oil and gas sales for the bulk of his four-year term or going forward with a limited number of sales, potentially only in the Gulf of Mexico. Interior's Bureau of Ocean Energy Management is expected to unveil the final plan for offshore lease sales between 2017 and 2022 as early as Wednesday, according to sources, who spoke on the condition of anonymity. BOEM unveiled the proposed plan in March and while a planned sale for the Atlantic included in an earlier version was removed, it still included 10 Gulf of Mexico sales, a 2020 Beaufort sale, a 2021 Cook Inlet sale and a 2022 Chukchi sale. The Obama administration has faced intense pressure from environmentalists to cut the Beaufort and Chukchi sales from the program. Interior spokespeople did not respond to requests for comment Friday and the White House has given very little indication on whether it plans to cut these Arctic sales from the five-year plan.

Trump may open up Arctic drilling   - Much has been made about President-elect Donald Trump’s plans to dismantle environmental regulations and streamline regulations that could lead to the construction of more pipelines. But there are a few other controversial energy issues that President Trump might ram through a Republican Congress, which would hand the oil and gas industry new areas for drilling that have long been off limits. No other place has been more contentious, more fought over, than the Arctic National Wildlife Refuge (ANWR), a large swathe of territory in northeast Alaska, east of Prudhoe Bay where much of the state’s drilling is located. As its name suggests, the refuge is home to scenic mountains, rivers and lakes rich in wildlife and biodiversity. But it is also thought to hold large volumes of oil and gas reserves, and has been the subject of heated debate since the late 1970s over whether or not oil and gas companies should be allowed to drill. Republicans have long sought to open ANWR up for drilling, but Democrats have stymied them for decades. But that deadlock could be broken with the unusually brazen President-elect, who is hoping to deregulate large sectors of the U.S. economy. And he has the allies in Congress to take on hugely controversial items. Alaska Dispatch News reports that the Alaskan congressional delegation, led by the powerful Senator Lisa Murkowski (R-AK), who chairs the Senate Energy and Natural Resources Committee, was shocked on election night (as was everyone else), and quickly thought to put ANWR on the table for President Trump’s agenda in his first 100 days. When asked about ANWR by a reporter on election night in Anchorage, Sen. Murkowksi voiced cautious optimism. "Well, as you know, we have been working to advance ANWR for decades now. And we need to have the support of the Congress," Murkowski said. "But if the numbers continue for us with the Senate and you have a president who has expressed support, I will be chairing the energy committee again, and I am going to look to push that early on," she added.

Alaska Sees 'Astounding' Rise in Temperature as 'Drill, Baby, Drill' Planed for Arctic -   As 2016 is set to be the warmest year on record , Alaskans are seeing an " astounding " rise in temperature. Throughout October, average temperatures in Alaska ran 6.7 degrees above normal.  Barrow , the northernmost community in the U.S., set its warmest October on record. Its monthly average came in at 30.1 degrees Fahrenheit, an astonishing 12.9 degrees warmer than the 1981-2010 average. Oct. 10 was the warmest October day ever, with a high of 44. The Arctic is warming twice as fast as the rest of the world. This year, the sea ice tied for its second-lowest extent after a record-early spring melt set in. And it's having a lot of trouble reforming for the winter.  In October, the sea ice covered 2.5 million square miles, the lowest October ever seen. It remains low in the Beaufort, Chukchi, East Siberian and Kara Seas, where water temperatures were above normal. It's the slowest regrowth of Arctic sea ice on record.  With new oil discoveries in Alaska and a fossil-fuel friendly president about to enter the White House, the future looks even darker.  Here are seven key concerns when it comes to drilling in the Arctic:

  • 1. Smith Bay: Caelus Energy announced what it called a "world-class" find in Smith Bay that could prove to be one of the largest oil fields in Alaska. The site, just 50 miles from Barrow, could produce 200,000 barrels per day of light, highly mobile oil, the company said.
  • 2: Moose Pad: Hillcorp Alaska is set to drill up to 44 wells in an area 25 miles from Prudhoe Bay. The company expects to begin drilling in 2018.
  • 3. Liberty Field: Another Hillcorp site in the North Slope, this one on the outer continental shelf, could add up to 70,000 barrels of oil per day to the 40-year old trans-Alaska pipeline .
  • 4. North Slope and Beaufort Sea: Alaska is conducting a lease sale now on state-owned land on the North Slope and state-owned waters of the Beaufort Sea.
  • 5. Beaufort and Chukchi Seas: Alaska Gov. Bill Walker has asked the U.S. Department of the Interior to include the two Arctic seas in the federal offshore leasing program. These include areas where Shell drilled in 2015.
  • 6. Fiord West: Last month, ConocoPhillips ordered a monster new drilling rig that can radiate outward to reach oil within 125 square miles from a single site. It will use the rig to develop the Fiord West field on the North Slope.
  • 7. Arctic National Wildlife Refuge: A political battleground for decades, with the control of the federal government now squarely in Republican hands, "pro-development Alaskans could already taste oil," wrote Alaska Dispatch News following the election.

Obama's Offshore-Oil Plan Forces Drillers to Focus on US Gulf -- The Obama administration’s decision to forgo auctions of new oil and gas drilling rights in U.S. Arctic waters deals a blow to energy companies seeking to lock up new territory beyond the long-explored Gulf of Mexico. Interior Secretary Sally Jewell said the move, announced Friday, strikes the right balance, by sustaining oil and gas development in the Gulf, while blocking the activity in remote and fragile Arctic waters that could be devastated by an oil spill.   "The plan focuses lease sales in the best places -- those with the highest resource potential, lowest conflict and established infrastructure -- and removes regions that are simply not right to lease," Jewell said in a statement. "Given the unique and challenging Arctic environment and industry’s declining interest in the area, forgoing lease sales in the Arctic is the right path forward." The Interior Department already had abandoned plans to offer leases in the Atlantic Ocean in a proposed version of its 2017-2022 offshore oil plan but had maintained the option of auctioning tracts in the Chukchi and Beaufort seas north of Alaska. However, those waters were left out of the final version of the five-year program released Friday, leaving only 10 auctions in the Gulf of Mexico and one in Alaska’s Cook Inlet. The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe. Friday’s announcement fell short of fulfilling environmentalists’ pleas for more enduring protections that would keep U.S. Arctic, Atlantic and Pacific waters permanently off limits, though President Barack Obama could issue such a declaration any time before leaving office on Jan. 20. President-elect Donald Trump’s administration can rip up the five-year plan, but substantially replacing it and putting the Atlantic and Arctic back on the auction block would take years because of legally required public comment periods and environmental reviews. Some Alaska residents and former military leaders had joined oil companies in arguing that drilling could drive the development of critical infrastructure in the Arctic, helping ensure the U.S. can protect its interests in the region, as melting sea ice opens up once-clogged waterways. Arctic drilling also could yield new sources of crude to fill the aging Trans-Alaska Pipeline System.

Oil From BP Spill Has Officially Entered the Food Chain - Researchers in Louisiana have found carbon from the BP Deepwater Horizon oil spill in the feathers and digestive tracts of seaside sparrows, proving for the first time that oil from the disastrous 2010 spill has entered the food chain. The study , published today in Environmental Research Letters, was conducted by scientists from Louisiana State University and Austin Peay State University in Tennessee. They found oil carbon signatures consistent with the Deepwater Horizon event in each of 10 birds tested. These marsh-dwelling sparrows inhabit an area known to have been contaminated by the spill. Sediments from the site also tested positive for oil with the same fingerprints as that found in the tested birds. The Deepwater Horizon accident followed the blowout of the wellhead at the Macondo oil rig and lasted for 87 days. Eleven workers died and 4.9 million barrels of oil flowed into the Gulf of Mexico. It became the largest oil spill in U.S. history and was called the "worst environmental disaster the U.S. has faced" by White House Energy Adviser Carol Browner. Oil sheens continued to be seen as much as three years after the event. The source of many were never discovered, but the containment dome failed and had to be plugged in 2012. The immediate effects of such major spills are readily apparent. Oiled birds, dead fish and beaches covered in crude-oil sludge are often the first, horrific results. Disasters like Exxon Valdez, Deepwater Horizon and the Santa Barbara oil spill damage critical wildlife habitat and destroy fisheries.  Longer-term, the pernicious oil enters the food chain. The first signs of Deepwater Horizon oil were found in blue crab larvae in 2010. Oil likely entered the food chain through zooplankton. A 2012 study found traces of oil in zooplankton impacted by the BP oil spill.

RIN costs and their widely varying impact on refiners and refining. - Over the past few weeks, publicly traded independent refining companies reported their latest quarterly results, and nearly all lamented on a common theme: the cost of Renewable Identification Numbers (RINs) is out of control. However, the financial burden is not felt equally across the industry, as companies with integrated marketing operations (refining, blending and retailing) don’t face the same RINs-cost albatross as merchant refiners who don’t have retail operations. Today we review the escalating RIN costs that obligated parties have endured this year and explain how the degree of financial pain depends on the level of refiners’ downstream integration.  RINs have become a leading topic of conversation—and angst—in the refinery sector, and we’ve been exploring the matter in the RBN blogosphere. In our initial blog a few years ago (A Market of Contradictions: Ethanol Mandates, Motor Gasoline and the Blend Wall), we described the evolution of ethanol mandates and the limits on how much ethanol can be blended into gasoline without affecting engine performance. We followed that up with The RIN and Stimpy Show and, more recently, with a two-part series: Magical Mystery Tour - Turmoil in U.S. Gasoline Markets and the Arcane World of RINs and Magical Mystery Tour - Is a Showdown on the RFS and RINs in the Offing?

 Trump presidency seen as favorable for oilfield services sector: analysts -  The election of Donald Trump to the US presidency last week should further help an already upturning domestic E&P sector through his backing of oil and gas development and potentially streamlining the permitting process on US federal lands, analysts said. Even as many sectors of the US remain wary of billionaire celebrity Trump, a Republican, his presidency that begins next year is "clearly a net positive" for oilfield services since he has said he wants a fossil fuel revival, Evercore ISI analyst James West said. "This will add a little bit of fuel to the fire on the North American side," West said during a Wednesday conference call by his investment bank on the implications of the election on drilling. "If everything Trump as president-elect wants to do is done, this will only add more growth [in that arena]." North American land drilling has already been moving to what longtime oilfield services analyst West believes will be a robust recovery next year. "We're in the early stages now, and expect to see continued rig count, well count and pricing traction ... as [oilfield services regain] some economic rent they lost to the E&P industry during the last two years of the downturn," he said.

Exxon's Oil Sands Reserves Announcement May Mean Little for the Climate --ExxonMobil's recent warning to investors that it might slash the estimate of its Canadian tar sands reserves could undermine investor confidence in the company's future. But the shift appears unlikely to affect the oil giant's climate impact any time soon. In a financial disclosure filed Oct. 28, Exxon warned shareholders that after nearly quadrupling its reserves in the oil sands over the past decade and defending its assessment of their worth, it may be forced to erase most of those deposits from its books. Exxon said that the average price of oil this year has been so low that 3.6 billion barrels of oil at its Kearl tar sands field, as well as 1 billion barrels of oil and gas equivalent elsewhere in North America, may no longer be claimed under accounting formulas imposed by the Securities and Exchange Commission. The total represents nearly 20 percent of its global reserves.Exxon is already posting lower earnings as a result of sinking oil prices, and any resulting write-downs could further depress its reported income.It was a remarkable concession by a company that has long defended its reserve accounting as conservative and unwavering. The disclosure came as Exxon is under pressure from the New York attorney general and the SEC, which separately are examining whether the company has kept investors informed about the value of its assets. For critics who say Exxon has been reckless in the face of a global attempt to create a clean energy economy, the announcement was momentous—a sign that carbon-heavy tar sands operations are likely to remain bad economic bets for the foreseeable future.

End Of The U.S. Major Oil Industry Era: Big Trouble At ExxonMobil - The era of the mighty U.S. major oil industry is coming to an end as the country’s largest petroleum company is in big trouble.  While ExxonMobil has been the most profitable U.S. oil company in the past, it suffered its worst year on record.For example, just four years ago, ExxonMobil enjoyed a $45 billion net income profit in 2012.  Now compare that to a total $5 billion net income gain for the first three-quarters of 2016.  If Exxon continues to report disappointing results for the remainder of the year, its net income will have declined a stunning 85% since 2012.Actually, the situation at Exxon is much worse if we dig a little deeper. To understand the real profitability of a company we have to look at its cash flow, or what is known as free cash flow.  Free cash flow is calculated by deducting capital expenditures (CAPEX) from the company’s cash from operations.  ExxonMobil’s free cash flow declined from $24.4 billion in 2011 to $1 billion for the first nine months of 2016:So, here we can see that Exxon’s free cash flow of $1 billion (2016 YTD) is down 95% from $24.4 billion in 2011.  The reason for the rapidly falling free cash flow is due to skyrocketing capital expenditures and falling oil prices.  But, this is only part of the picture. If we include dividend payouts, Exxon’s financial situation drops down another notch.  While free cash flow does not include dividend payouts, the money Exxon pays its shareholders must come from its available cash.  By including dividend payouts, the company was $8.3 billion in the hole in 2015:

Does the oil-and-gas industry still need tax breaks? - AEI: The call to eliminate tax deductions for the oil and natural-gas industry is no less absurd today than it was in 2013, the last time the issue was a headline-maker. These incentives have encouraged domestic investment in energy production and enabled U.S. companies to compete with overseas rivals, allowing the American petroleum industry to flourish. But the tax breaks haven’t just been good for oil-and-gas firms; they’ve also led to billions of dollars in savings for American consumers and businesses from lower energy costs. Have no illusions about it: Tax incentives are essential for unconventional oil-and-gas production, and there would have been no shale revolution without them. Incentives such as the intangible drilling deduction and the special percentage depletion allowance encouraged energy firms to invest hundreds of billions of dollars in the advanced technologies needed to tap shale formations richly endowed with oil and natural gas. Tax breaks also enabled producers to unlock sizable deposits of oil and gas in ultradeep waters. Together, these investments have put the U.S. on the path to becoming energy independent, a hopeless quest only 15 years ago. Oil powers more than 90% of the transportation sector, while natural gas heats almost half of our homes, powers much of the manufacturing sector and now generates the largest share of our electricity. Considering oil and gas are indispensable to our economy, we should be looking for ways to encourage more production, not looking for ways to punish producers.

 China Oil Companies’ Push Into U.S. Faces Uncertainty With Trump Victory — China’s beleaguered oil sector could face fresh challenges following DonaldTrump’s election as president, with some in the industry warning that a harder U.S. line toward China could stymie potential investment in the U.S. energy patch. State-owned giants such as PetroChina Co. and China Petroleum & Chemical Corp. long viewed the U.S. as the golden egg of their global deal making ambitions, with its huge oil-and-gas reserves and a stable regulatory and political climate. Now Mr. Trump’s election is brewing new uncertainty in the energy patch as experts see an inherent contradiction between Mr. Trump’s pledge to promote oil-and-gas drilling and his campaign rhetoric decrying globalization. “Nobody knows what he’ll do,” said a person with ties to China’s top oil executives who has promoted the idea of more Chinese energy investment in the U.S.  It has been “a constant barrage of questions about what does this really mean,” On one hand, Mr. Trump and his team could likely be convinced of the value to the U.S. economy of exporting more energy, he said.“But as you start to think about Asian investment—Chinese or otherwise—into U.S. energy infrastructure, and taking a stronger role perhaps in the U.S. energy market, and then having the ability to export the commodity to their home country, I think it becomes a bit of a guessing game at this point,”  As a candidate, Mr. Trump pledged to slap a 45% tariff on Chinese imports and to brand China a currency manipulator. Either one would likely trigger retaliation by China’s government, and sour bilateral ties between the countries.

In Canada, a Direct Link Between Fracking and Earthquakes - The New York Times: In the debate over fracking of oil and gas wells, opponents often cite the risk that the process can set off nearby earthquakes. But scientists say that in the United States, fracking-induced earthquakes are not common. In Canada, however, a spate of earthquakes in Alberta within the last five years has been attributed to fracking, or hydraulic fracturing, in which water, chemicals and sand are injected at high pressure into a well drilled in a shale formation to break up the rock and release oil and gas. Now, scientists at the University of Calgary who studied those earthquakes, near Fox Creek in the central part of the province, say the quakes were induced in two ways: by increases in pressure as the fracking occurred, and, for a time after the process was completed, by pressure changes brought on by the lingering presence of fracking fluid. “The key message is that the primary cause of injection-induced seismicity in Western Canada is different from the central United States,” said David W. Eaton, a professor of geophysics at the University of Calgary. In their work, Dr. Eaton and Xuewei Bao, a postdoctoral researcher, looked into the links in more detail, analyzing seismic data from a series of quakes at Fox Creek in late 2014 and early 2015, and records from wells where fracking was occurring at the time. Advertisement Continue reading the main story They found two patterns to the seismicity. To the east in the fault zone, most of the earthquakes occurred during the fracking process itself, which lasted up to a month. To the west, there were few immediate quakes; they occurred intermittently over several months after the fracking ended. Dr. Eaton said the fracking process could be likened to small underground explosions, shocks that travel into the rock formation and rapidly change the stress patterns within. “If there is a critically stressed fault, those stress changes are sufficient to push it over the edge,” he said. That appears to be what happened in the eastern direction. Once the fracking stops, those stresses relax fairly quickly, he said. But they found that to the west, much of the fracking fluid remained underground in the fractured shale. That would lead to more persistent pressure within the fault zone, and more earthquakes over time.

Groundbreaking Study Shows Direct Link Between Fracking and Earthquakes -- Geoscientists have revealed a direct link between hydraulic fracturing, or fracking , and earthquakes in Canada . The groundbreaking study found that earthquakes can even occur intermittently over several months after drilling operations end. According to a new study published in the journal Science , seismic activity in northwest Alberta over the last five years were likely caused by fracking, in which chemically-laden water and sand is injected at high pressures into shale formations to release oil or gas.  The article, Fault activation by hydraulic fracturing in western Canada , was authored by Xuewei Bao and David Eaton from the University of Calgary.  For the study, the researchers mapped out more than 900 seismic events near Duvernay shale drilling sites around the Fox Creek area dating back to December 2014. This included a 4.8-magnitude earthquake in January in northern Alberta that's likely the strongest fracking-induced earthquake ever. They found that there were two main causes for quakes. The first was immediately from pressure increases as the fracking process occurred. "We were able to show that what was driving that was very small changes in stress within the Earth that were produced by the hydraulic fracturing operations," Eaton told DeSmogBlog . The second cause comes from pressure changes from lingering fracking fluid. According to the Globe and Mail , a fault shakes when fluids infiltrate tiny spaces in the porous rock and increases pore pressure. "If that pressure increases, it can have an effect on the frictional characteristics of faults," Eaton told the Globe and Mail. "It can effectively jack open a fault if the pore pressure increases within the fault itself and make it easier for a slip to initiate."

Trudeau Clears Path for Canada to Approve Kinder Morgan Pipeline - Bloomberg: Prime Minister Justin Trudeau has set the table for Canada to approve Kinder Morgan Inc.’s Trans Mountain pipeline expansion by announcing environmental measures aimed at placating opposition to the project. Trudeau unveiled a national carbon price in October, and over the past few weeks has pumped billions into marine protection and “green” infrastructure, as well as begun an overhaul of the federal energy regulator and granted crown protection to a rainforest that essentially blocks a rival proposal. He regularly says it’s his job to get Canada’s resources to market while balancing the environment and economy. The Liberal prime minister has also backed a hydro dam and natural-gas project favored by British Columbia Premier Christy Clark, as any quid-pro-quo support from her for Kinder Morgan would help him claim consensus ahead of the Dec. 19 deadline for a final decision by the Trudeau cabinet. However, opposition from Vancouver’s mayor, indigenous communities and environmentalists will test Trudeau’s resolve to approve the pipeline and defend the decision against a likely court challenge by its detractors. “You could interpret all these signs as part of a grand design to make construction of one or two pipelines possible,” said Tom Flanagan, a former adviser to Stephen Harper, Trudeau’s Conservative predecessor. “Let’s hope he has the stomach to see it through if the opposition continues after the announcement of cabinet approval, because I think it will.”The election of Donald Trump as U.S. president has also raised hopes that TransCanada Corp.’s Keystone XL pipeline will be revived, giving Canada -- home of the world’s third-largest proven oil reserves -- another option for its growing crude production. While Trudeau supports Keystone, he and his officials regularly stress Canada’s need to get its resources to “tidewater,” suggesting the TransCanada project isn’t enough. Alberta Premier Rachel Notley has echoed that, saying the oil-producing province still wants a pipeline to the ocean regardless of Keystone and will back Trudeau’s carbon pricing plan if he gets “energy infrastructure” built.

Wall Or No Wall: Trump Needs The Mexican Oil Industry - Two of Donald Trump’s main pledges during the presidential race were building a wall along the border with Mexico, and making the U.S. energy-independent. Now that the election is over, these issues are coming to the fore. First, the president-elect said that the wall, which he mentioned on the campaign trail and in numerous debates, is still very much on the table, though what type of “wall” that may be is an unknown. Second, he said he planned to start deporting illegal aliens—those with criminal records—which could amount to as many as three million individuals. And if NAFTA is no more, tariffs will rise for all imports. What does all this mean for the future of oil imports to the U.S.?  The United States imported over 670,000 bpd of crude and fuels from Mexico in August, according to the EIA. Another 773,000 bpd came from Venezuela. Together, the two countries ranked third in the U.S. oil and products import mix, after Canada and Saudi Arabia. While supplies from Canada are unlikely to be threatened, thanks to traditionally warm bilateral relations with the country, the situation is different for both Mexico and Venezuela because of the illegal immigration issue and the blatantly anti-U.S. Caracas regime. Whether Trump is successful in cutting back—or cutting entirely—imports from Saudi Arabia is yet another unknown And while it’s possible that Mexico and Venezuela could suffer a drop in exports to the U.S., if Trump stays true to his campaign promises, other forces are also influencing the matter. The situation in Venezuela remains highly volatile, but there is a ray of hope on the horizon as the government of President Nicolas Maduro and the leaders of the opposition party MUD begrudgingly discusses the direction Venezuela should take. But no matter the outcome of these talks, the starving country will need markets for its crude oil, and the U.S. happens to be the largest one, so it is very unlikely that anyone there would seek to antagonize Trump. Things are a bit different in Mexico, since many of the illegal immigrants Trump wants to deport come from the southern neighbor—a factor that may stress relations. But with the liberalization of the Mexican energy market in the last few years, Mexico is turning out to have lucrative opportunities for the U.S. energy industry, to include oil and gas production, refining, marketing, and, of course, transportation—the full deck. And U.S. energy businesses need these opportunities to sustain their profitability, just as Mexico needs to sell its crude. In short, the neighbors need each other.

USGC distillate exports to Europe at 1.14 million mt in Nov to date - About 1.14 million mt of distillates have left the US Gulf Coast for arrival in Europe and North Africa in November, according to an estimate based on Platts trade flow software cFlow. S&P Global Platts calculates cargo volumes based on the size of each ship and standard diesel export sizes from the US to Europe. In October, a total of 1.16 million mt had been tracked loading from the USGC for discharge into European and North African ports. This month, the 1.14 million mt are split into 28 clips, 19 of which are currently heading towards Northwest Europe including 10 towards the Amsterdam-Rotterdam-Antwerp hub.Of the remaining nine vessels, four -- potentially carrying high sulfur gasoil -- are expected to discharge into Algeria, Egypt and Libya. In October, no USGC cargoes were seen going into North Africa, and in September, only two were spotted discharging into Libya's Zawiyah and Tunisia's La Skhirra ports, according to cFlow. While a trickle of cargoes continues to make its way to Europe, the US-Europe arbitrage for middle distillates has been shut for weeks and remains unworkable this week, according to traders. "We're not seeing any US [product], but it was the same last month, so there's no real change on that front," a source said.

Analysis: US under Trump may pump more oil, but economics key for export to Asia -  Asian refiners are hopeful that US President-elect Donald Trump's policies might boost US crude production and back out imports, leading to an increase in available crude supply halfway around the world. But, sources say, US crudes will remain an arbitrage choice and how much of it comes to Asia will depend on economics. Trump will not be able to directly influence the volume of US crude exports during his administration but policies that stimulate US oil production or help move more crude to Gulf Coast refiners and terminals, for example, could play an indirect role in boosting exports. "To some extent, [we] can expect the new Trump government to support US producers to pump more, sell more, export more to Asia," an Asian crude trader said. "But honestly, no matter how much government backing they [US producers] get, US crudes will remain just one of many arbitrage choices for Asia -- they are not going to become a regular import option," the trader said, referring to the complexity of economics of different crude benchmarks, delivery timing and freight rates. Trump has said he wants to open more federal lands to drilling, roll back environmental regulations on industry and approve major infrastructure projects -- all of which could increase production. He is expected to quickly approve the 470,000 b/d Dakota Access Pipeline that will move Bakken light crude from North Dakota to Illinois before linking with another pipeline to Texas. Trump has also encouraged TransCanada to refile its application for the dormant Keystone XL project, which proposed carrying 700,000 b/d of diluted bitumen from Alberta to Nebraska, then linking with a since-built pipeline to the Texas Gulf Coast.

 Pakistan eyes doubling oil product storage capacity with foreign investment - Pakistan's government is aiming to double the country's oil product storage capacity by inviting foreign and local companies to build additional facilities, a Ministry of Petroleum official said Thursday. The country's current storage capacity equates to around 20 days of consumption at 1.2 million-1.3 million mt, and oil marketing companies typically maintain stock levels below that to minimize inventory losses due to price volatility, the official said. The government will both invite privately-owned domestic and foreign companies to build additional storage capacity and ask oil marketing companies to increase their storage volumes, he said. "We will provide tax benefits and companies could acquire loans at lower interest rates to hasten the process of increasing the capacity," the official added.Pakistan's motor gasoline consumption has increased sharply in the past two years as the economy gathers pace, he said. Consumption averaged 557,000 mt/month over July-October, up from 365,000 mt in fiscal 2015-16 (July-June) and 311,000 mt in fiscal 2014-15. Raising storage capacity was necessary given the sharp increase in the consumption of oil products in Pakistan, especially gasoline, said Zeeshan Afzal, director of research at Insight Securities. It would also help meet any shortfall in supply or delay in seaborne cargo arrivals, he said.

Indonesia offers three unconventional natural gas blocks - Indonesia has invited bids for three unconventional gas blocks as part of government efforts to meet future domestic demand, the energy and mines ministry's spokesman, Sujatmiko, said Tuesday. The blocks comprises one shale gas and two coalbed methane blocks, Sujatmiko said. The shale gas block, Batu Ampar in onshore East Kalimantan, is being offered through a regular tender. Two coalbed methane blocks, Bungamas and Raja in onshore South Sumatra, are being offered through a direct tender. Indonesia has two mechanism of block tender. Under the regular bidding system, the government would offer the blocks and interested companies submit their proposal. Under the direct offer mechanism, a company interested in acquiring a certain block, which was not offered under regular bidding, may express its interest to the government.The government then looks for a better offer from other firms. If certain blocks draws no other bidder or the other bidder's offer is less favorable, then the company would automatically get the block. Indonesia is making concerted efforts to ramp up exploration and development activity, having seen its crude output fall because of natural decline at ageing fields. Indonesia's oil and gas proven reserves stand at 3.7 billion barrels and 101.54 Tcf, respectively. The country is estimated to contain 574 Tcf of shale gas.

Red tape, not militancy, putting Nigeria's oil future at risk - The Barrel Blog: Nigeria, mired in some of its toughest battles yet to halt resurgent militancy in the oil-rich Niger Delta, is facing longer term threats to its oil wealth; the government’s failure to endorse fiscal and regulatory reforms needed to keep oil investors interested. While militancy and pipeline vandalism remain the short-term major headache, it is the uncertainty around fiscal terms and the slow progress in implementing key oil and gas legislation that has been the major handbrake on oil growth in sub-Saharan Africa’s largest crude producer. Lauded as the biggest shake-up in Nigeria’s oil industry for decades, the Petroleum Industry Bill (PIB) aims to bring in sweeping reforms of the country’s dysfunctional sector. But it has been stuck in Nigeria’s legislature for eight years, held up by political wrangling and objections by the IOCs which argue that the significantly higher fiscal terms envisaged in recent PIB drafts are unacceptable, especially in the current low oil price environment. Nigeria is ripe for a comprehensive review of the fiscal and regulatory framework applicable to its oil and gas industry. Existing laws are severely outdated and in need of change. Though oil and gas accounts for about 80% of government revenues, the state-run Nigerian National Petroleum Corporation (NNPC) is considered one of the most corrupt corporations of any oil-producing nation. Oil minister Emmanuel Kachikwu, who has been given the task with overseeing the restructuring of the NNPC, wants to break up the corporation into seven units, with each given responsibility for overseeing 20 separate NNPC divisions. But the NNPC has proven remarkably resilient to past reform initiatives. Faced with plummeting global oil prices and dwindling state coffers, how long can the government afford to allow the NNPC to operate much as it did before?

Iran eyes natural gas exports to Oman with international oil companies - Senior officials from state-owned National Iranian Gas Exports Co have met with Oman's oil ministry and three international oil companies -- Shell, Total and Korea Gas Corp -- to look at the potential to pipe gas from Iran to Oman, the students ISNA news agency reported Monday. The officials held a two-day meeting in Tehran examining cooperation in the project, the reports said without giving further details. In 2013, Tehran and Muscat agreed on a 15-year gas exports plan via a seabed pipeline. The pipeline, estimated to cost around $1.5 billion, will have the capacity to transport 1 Bcf/d of Iranian natural gas to Oman. "We can confirm that Shell is a member in the Advisory Task Force of the Iran/Oman gas pipeline Project. The scope of the work of the project is subject to confidentiality", a spokesman for Shell said Monday.Total did not respond to a request for a comment, while Kogas could not be reached for comment. The details of the project are yet to be finalized. Iran plans to build a 200 km onshore pipeline from Rudan to Kooh Mobarak in the southern Hormozgan province on the Persian Gulf. An offshore pipeline of roughly the same length would extend from Kooh Mobarak to Oman's Sohar port. The construction of the pipeline is expected to take two years. Iran is considering two shallow and deep sea routes, including one which would circumvent any maritime borders and therefore would not require permission from its neighbors.

 Saudi Arabia Warns Trump Not To Block Oil Imports -  As the FT reports, "Saudi Arabia has warned Donald Trump that the incoming US president will risk the health of his country’s economy if he acts on his election promises to block oil imports." In a sign of the difficulties Mr Trump faces over his campaign pledges to create “complete American energy independence” from “our foes and the oil cartels”, Saudi Arabia’s energy minister pointedly reminded the president-elect that the US “benefits more than anybody else from global free trade”, adding, “energy is the lifeblood of the global economy”. The veiled threat is obvious: should you proceed to stimulate and subsidize the US shale industry - whose resurgence under Obama drastically cut the amount of US oil imports - in a bid for energy independence, there will be consequences.  And just like that we can add Saudi Arabia to the long list of countries - like China first and foremost - that is engaging in veiled threats that preserving the status quo is in the best interest of America. “At his heart President-elect Trump will see the benefits and I think the oil industry will also be advising him accordingly that blocking trade in any product is not healthy,” Khalid al-Falih, who is also chairman of Aramco, the state-run oil company, told the Financial Times in Marrakesh, where he is leading Saudi Arabia’s delegation in UN climate talks. The Saudi minister said that although the US imported millions of barrels of oil, it had also “benefited hugely” from being able to freely sell “significant amounts” of exported products. This free trade had underpinned a thriving refining industry and a shale revolution that had been able to “create a lot of jobs and value”, he said. Appealing to Trump's patriotism, the Saudi added that “the US is sort of the flag-bearer for capitalism and free markets." The gambit is risky: if Trump pushes hard with restoring shale production and providing economic benefits to US energy companies, which in turn would lead to a surge in global oil supply and a sharp drop in oil prices, Saudi Arabia - whose budget deficit has already soared in the past two years due to low oil prices - faces a financial, economic and social crisis.

IEA Sees Peak Oil Demand After 2040 - WSJ: Global oil demand won’t stop growing before 2040 despite pledges made at the Paris climate change summit last year to cap greenhouse-gas emissions, the head of the International Energy Agency said. IEA Executive Director Fatih Birol’s comments have added to a debate over when oil consumption—which has steadily grown for decades—will begin a sustained decline, a change known as peak demand. Royal Dutch Shell PLC’s Chief Financial Officer Simon Henry caused a stir earlier this month when he said the company believes demand for oil could stop growing within the next two decades and as soon as five years. Mr. Birol said demand will keep rising for longer because there are currently scant alternatives to oil for road freight, aviation and petrochemicals, despite increasing investment in renewable energy. Even efficiency gains in petrol engines and an increase in the number of electric vehicles on the road won’t be enough to halt a rise in oil demand, he added. “The era of fossil fuels appears to be far from being over,” Mr. Birol said. Mr. Birol’s remarks were made as the IEA publishes its annual report, forecasting global energy supply and demand to 2040. Oil companies have started to look at a future in which consumer demand for their core product could stop growing due to climate policies and efficiency gains. “We’ve long been of the opinion that demand will peak before supply,” Mr. Henry of Shell told analysts this month. “And that peak may be somewhere between five and 15 years hence and it will be driven by efficiency and substitution.”Saudi Arabia, the world’s largest exporter of crude oil, has begun preparing for a day when oil is no longer the dominant fuel. The kingdom is planning to publicly list a small piece of its giant state-run petroleum company, Saudi Arabia Oil Co., and use the money to invest in developing its economy away from crude. However, Saudi Arabia hasn’t put an estimate on the timing of peak demand.

 The Catastrophic Consequences Of Peak Oil Demand - With OPEC’s 2016 World Oil Outlook now grimly forecasting that peak oil demand could become a reality in just over a decade, and natural gas and renewables chomping at the bit to cannibalize commodity market growth, it may be good for the environment, but the trade-off will be global instability on a catastrophic level.The dynamics of the rush to adopt natural gas and renewable energies - launched by the landmark climate change agreement signed in Paris last year – was about protecting our planet. But without an effective back-up plan, resource-cursed nations such as Venezuela, Libya, Nigeria and Iraq—among others—will not survive this evolution and economic destabilization and sociopolitical instability would irrevocably change the geopolitical landscape. Destitution spells disaster in this scenario.  Hundreds of trillions of dollars have been spent worldwide over the past century to develop technologies for the safe transport and use of “black gold,” which, in turn has built energy-driven economies on practically every single continent, aside from Antarctica.Venezuela, Libya, Nigeria and Iraq are the first nations that come to mind when compiling a list of oil-dependent states, mostly because of their current plights caused by the two-year oil price crisis, as well as the political instability, civil war, domestic militancy and terrorism threats that each country faces, respectively.Chronically low prices compromise the ability of oil-addicted economies to tackle domestic unrest, which was brought about by stinted revenues in the first place.If OPEC’s predictions on the imminent-ness of peak oil prove to be true, underdeveloped producers that have not yet planned for a fossil fuel-free world will inevitably face sociopolitical collapse. As oil demand spirals downward, the world’s major exporters are expected to ramp up output in order to profit as much as possible before the commodity becomes a relic of the past. And, as we know from the state of current markets, the bigger the glut, the sadder the prices.

Kemp: Playing Game Of Chicken -- From Reuters/John Kemp: OPEC members are making the task of oil market rebalancing harder by maximising their production ahead of a ministerial conference at the end of November, 2016.OPEC output is actually increasing, putting downward pressure on oil prices, even while the organisation's members are in talks designed to reduce output in future, with the intention of pushing prices up. Not for the first time, OPEC's members are engaged in a high stakes game of chicken.Crude production rose by 240,000 barrels per day (bopd) to a record 33.64 million bpd in October.Output is now between 640,000 bpd and 1.14 million bpd above the production ceiling of 32.5 million to 33.0 bpd ministers agreed at the end of September, 2016.Member countries are all trying to establish the highest possible baseline for their own allocations when it comes to sharing out the production target.In addition, Saudi Arabia is trying to back up its demand for credible production restraint from other countries by signalling that if they do not agree it is ready to flood the market and push prices lower.Saudi Arabia has maintained production close to the record set in July even though the summer power burn season has passed.   And when they finally release their allocation shares, they will cheat anyway. 

 Will Trump Send The Price Of Oil Soaring? - In its latest, monthly oil production update, OPEC reported that its crude oil output increased by another 240,000 barrels a day in October to 33.64 million barrels a day, a new record high, with Nigeria, Libya and Iraq driving the supply boost and with total production about 1 million barrels higher than the plateau agreed upon in Algiers at the end of September. As a result of OPEC's relentless increase in total output, the cuts OPEC would needs to enforce to reach the Algiers output target just get bigger and bigger... most of its as a result of soaring Iranian oil exports - by roughly 1 million bpd - since the easing of sanctions by the Obama administration: It is also the reason why oil has continued to slide in recent weeks, as the upcoming OPEC production cut (or even freeze) - which will have to be shouldered almost entirely by Saudi Arabia due to production cut exemptions granted to other states, most notably Iran - has lost almost all credibility with the market. However, suddenly there is a ray of hope in OPEC's dark world, and it comes courtesy of president-elect Donald Trump, who just may eliminate as much as 1 million barrels of OPEC oil output, or the cartel's entire excess production, should he undo the deeply unpopular within GOP circles Iran nuclear agreement, which would also collapse Iranian oil exports and send the price of oil surging. Recall that Trump's stated number one priority from his pre-election circuit has been to dismantle the "disastrous" Iran deal - although as Bloomberg notes, his to-do list might have changed since saying that back in March. And, as Bloomberg's Julian Lee calculates confirming our math from just right after the Algiers (non) deal, tearing up the Iran nuclear agreement would remove almost a million barrels a day of supply at a stroke: a million barrels is about the same size as the cut OPEC needs to make.The next question: can Trump actually undo Obama's landmark Iran nuclear agreement? According to Lee, the answer is yes, "despite assertions to the contrary from Iran's President Rouhani and a slew of analysts." Here's how:

Oil Tumbles After BMI Slashes Probability Of OPEC Deal Due To Trump Victory; Dollar Surge -- Yesterday we reported that there is a small, but not improbable, chance that Trump could end up becoming OPEC's best friend should the president elect seek to undo Obama's landmark foreign policy deal, the Iran Nuclear Agreement: "suddenly there is a ray of hope in OPEC's dark world, and it comes courtesy of president-elect Donald Trump, who just may eliminate as much as 1 million barrels of OPEC oil output, or the cartel's entire excess production, should he undo the deeply unpopular within GOP circles Iran nuclear agreement, which would also collapse Iranian oil exports and send the price of oil surging." It remains to be seen if Trump has changed his view on the Iran deal, and certainly if he would engage in an action that would benefit Saudi Arabia while making millions of US motorists sad once gas prices spike should Iran's 1mmbpd in excess oil supply be taken offline. Some of our readers pointed out that far from sending the price of oil spiking, there was an alternative explanation, to wit:  "if there is a possibility, however slight, of the Iran nuclear deal being torn up in 68 days on 20 January 2017, then what does this mean for Saudi Arabia and the upcoming OPEC negotiations?" It does 4 things:

  1. Further highlights the importance of collective OPEC cuts
  2. Encourages Iran to produce MORE not LESS oil
  3. Further reduces the likelihood of a material deal
  4. Reduces likelihood of material cuts from Saudi Arabia, for if they cut and the Iran deal is torn up, then they will have given away market share that will be reclaimed by Libya, Nigeria, Iraq and Russia

On Friday, Fitch's BMI unit issued a report that corroborated this more bearish perspective on oil as a result of the Trump presidency. According to BMI, "prospects for OPEC members to agree on an output cut or freeze have “reduced notably” following Donald Trump’s victory at the U.S. elections." According to the analysis, BMI now expects a 45% probability of a “wait-and-see” stance and no deal on Nov. 30, vs previous forecast of 25% chance.

Oil Investors Shrug Off U.S. Election While Focused on OPEC - Bloomberg: Oil investors seem to be the only ones uninterested in Donald Trump’s election. Money managers raised bets on falling oil prices by the most in more than four years in the week leading up to Trump’s surprise win, amid waning belief in OPEC’s ability to meaningfully cut production. Members of the Organization of Petroleum Exporting Countries are due to meet Nov. 30 to finalize a deal to curb output. Failure to reach one may send oil lower amid “relentless global supply growth,” the International Energy Agency said Nov. 10.“The market is focused on the OPEC meeting,” said Mike Wittner, head of oil-market research at Societe Generale SA in New York. “It’s looking like the obstacles to an agreement are getting bigger with both Iraq and Iran raising new issues.” The rally that followed OPEC’s preliminary deal reached in Algiers on Sept. 28 has evaporated, sending speculators scrambling. A surge in West Texas Intermediate short positions, or wagers the U.S. benchmark crude will decline, helped send the resulting net-long position to the biggest slump since May 2012 in the week ended Nov. 8, Commodity Futures Trading Commission data show. Brent shorts surged, posting the biggest increase in more than five years. WTI dropped 3.6 percent to $44.98 a barrel in the report week. Prices surged 5.8 percent to $45.81 a barrel on Tuesday, the biggest gain in seven months and a rebound from the lowest close in eight weeks. Futures rose 0.6 percent on Nov. 9 amid speculation Trump and a Republican-controlled Congress will pursue business-friendly policies. The market declined the following three days as the dollar climbed to the highest level in more than nine months against its peers, curbing investor interest in commodities priced in the U.S. currency.

Oil rebounds from three-month lows on renewed hopes for OPEC cut | Reuters: Oil prices were largely steady on Monday, rebounding from three-month lows, on a report saying that OPEC members were seeking to resolve their differences on a deal to cut production ahead of a meeting later this month. OPEC kingpin Saudi Arabia and fellow exporters Iran and Iraq have been at odds over how to rein in supply to reduce a glut in global markets. The lack of agreement within the Organization of the Petroleum Exporting Countries following a tentative deal in September has put pressure on benchmark prices. Qatar, Algeria and Venezuela were leading the push to overcome the divide between the group's biggest producers ahead of an output policy meeting on Nov. 30 in Vienna, according to a Bloomberg report. ( Saudi Arabia, Iraq and Iran are still at odds over how to share output cuts, the report said. Saudi Energy Minister Khalid al-Falih said it was imperative for OPEC to reach a consensus on activating the deal made in September in Algiers to cut production, according to Algeria's state news agency APS on Sunday. Brent crude futures LCOc1 settled at $44.43 per barrel, down 0.72 percent, after falling to as low as $43.57. U.S. crude CLc1 ended the session down 0.2 percent at $43.32, after hitting a low of $42.20. Both benchmarks' session lows were the weakest since Aug. 11. "Record OPEC production clearly has the market nervous about a potential deal, but we believe that most OPEC producers are already producing flat out as much as they can," said Michael Tran, director of energy strategy at RBC Capital Markets in New York.

US crude settles higher for biggest gain in seven months: Oil prices jumped nearly 6 percent on Tuesday, bouncing back from multi-month lows on expectations that OPEC will agree later this month to cut production to reduce a supply glut. Saudi Energy Minister Khalid al-Falih is expected to travel to the Qatari capital, Doha, this week for meetings with oil-producing countries on the sidelines of an energy forum, sources familiar with the matter told Reuters. The Organization of the Petroleum Exporting Countries is due to meet on Nov. 30 to agree to limit output. An outline deal was reached in September but negotiations on the detail are proving difficult, officials say. Traders and analysts also pointed to a report from Monday about a last ditch effort by OPEC to bring the world's top producers together to rein in production, saying it triggered a wave of short covering.North Sea Brent crude oil was up $2.50 a barrel, or 5.6 percent, at $46.93 by 2:38 p.m. ET after hitting a three-month low of $43.57 on Monday. U.S. light crude settled up $2.49 a barrel, or 5.8 percent, at $45.81. It reached a three-month low of $42.20 on Monday. "Clearly the market is now seeing increased chances of an OPEC production cut," Commerzbank analysts said in a note. "There is doubtless considerable pressure to take action, as the oversupply will not reduce itself"

Crude Slides After Biggest Cushing Build Since August - WTI Crude prices are lower after API reported a bigger than expected build in crude inventories (+3.66 vs +1mm exp) and the biggest Cushing build since August. The machines managed to tag the stops at the high of the day for WTI as gasoline drew down (though less than expected) but Distillates saw the biggest build since September. API:

  • Crude +3.65mm (+1mm exp)
  • Cushing +1.13mm (+150k) - biggest since August
  • Gasoline -155k (-1.1mm exp)
  • Distillates +2.98mm - first build in 8 weeks

Bigger than expected Crude and Cushing builds (biggest since August) along with a huge build in Distillates (first in 8 week)...

Oil Surges To 'Algiers' Lows After Obama Statement & Well-Timed OPEC Headline Just as Morgan Stanley warned, be careful getting too bearish into the OPEC meeting as OPEC's ability to engineer a short-squeeze (via well-placed but meaningless headlines) trumps any dismal fundamentals. Sure enough, WTI is surging by the most in 7 weeks to pre-Algiers levels on spurious headlines today, which builds on a reversal yesterday that started as President Obama discussed the Iran Deal. As a reminder, here is what MS said last week... Be Careful About Getting Too Bearish Ahead of OPEC Meeting Poor fundamentals don’t prevent headline-related price reversals.Skepticism about the ability for OPEC to execute on its Algiers agreement is warranted. A number of producers are claiming exemptions, OPEC production is rising, greater cuts may be required to achieve the top end of the range, and OPEC has a poor compliance history. Reuters also suggested that Saudi Arabia threatened to raise production, and former Saudi Energy Minister Ali Al-Naimi stated that OPEC can’t cut by itself. Nevertheless, we would be nervous being short from these levels going into the meeting despite what appears to be a poor fundamental backdrop and our downbeat outlook for 2017. OPEC can still spook markets. Although OPEC’s actions have not matched its words (i.e. promoting the need for production restraint while quietly growing production), the cartel has become adept at talking up declining markets. The group has repeatedly made bullish announcements about OPEC intervention during periods of low liquidity (e.g. US holidays), and whenever short positions become large. Despite the  fact that many investors are skeptical of OPEC’s ability to change the outlook, prices still move on these headlines. Investors have proven that they are not willing to press short positions against OPEC, even if the odds of intervention are low. In essence, this is similar to the old adage of “Don’t Fight the Fed.” And sure enough, OPEC unleashes a slew of headlines...

Oil Panic-Bid To $46 On OPEC Headline Despite Across-The-Board Inventory Builds -- Following API's big builds in Crude, Cushing, and Distillates, DOE reported notable inventory builds across the entire energy complex with a bigger than expected crude build sparking initial selling pressure in WTI. Every segment was 'worse' than expected (from a price perspective) but the machines have decided it is time to panic buy after another spurious OPEC headline. DOE:

  • Crude +5.274mm (+1mm exp)
  • Cushing +691k (+150k) - biggest since August
  • Gasoline +746k (-1.1mm exp) - first build in 4 weeks
  • Distillates +310k- first build in 8 weeks

Crude build bigger than expected but builds across the entire complex for the first time since August...

 Oil Fades After Iraq, Iran And Nigeria Oil Ministers All Decide To Skip OPEC Doha Meeting In yet another sign that behind the frequently blasted OPEC headlines meant to suggest a sense of OPEC unity yet which do nothing more than incite a short squeeze (as even Morgan Stanley has now admitted), there is far less cohesion, moments ago we learned that Nigeria's Oil minister Emmanuel Kachikwu is the latest to skip this week's Doha meeting scheduled for November 17 and 18. Earlier today we found that Iraq’s oil minister would likewise bypass the energy talks this week in Qatar, where rival producer Saudi Arabia plans to hold talks with Russia on possible collective action to limit production. Earlier today Bloomberg reported that his Iranian counterpart is also said to be giving the meeting a miss. Iraq and Iran both want exemptions from any OPEC cuts in output, putting pressure on Saudi Arabia, the producer group’s biggest member, to bear the brunt of a possible reduction. The Organization of Petroleum Exporting Countries has yet to find a way to finalize a preliminary deal it reached in September to curtail supply, ending a two-year policy of pumping without limits. The apparent acrimony comes at a time when OPEC is record amounts of oil, and with many countries granted exemptions from an oil production cut, it means that ahead of the Vienna summit in two weeks time, there is absolutely no coordination on who will cut supply, if anyone. As Bloomberg notes, Saudi Arabian Energy Minister Khalid Al-Falih is leading the efforts to rein in global production to support prices. He’ll join several fellow OPEC members in Doha this week for informal consultations with Russia, the biggest energy supplier outside the group. They plan talks on the sidelines of the Gas Exporting Countries Forum. As a reminder, it was headlines from Russia moments after today's DOE report that sent oil surging. However, many of the biggest oil producers will not be present: Iraqi Oil Minister Jabbar Al-Luaibi won’t be traveling to Doha this week, the ministry’s spokesman, Asim Jihad, said Wednesday by phone. Hamed Al-Zobaie, Iraq’s deputy minister for natural gas affairs, will represent the country instead, Jihad said.

OilPrice Intelligence Report: Oil Prices Waver As OPEC Makes Final Push - Oil prices spiked this week on the renewed push by OPEC to overcome differences on a production cut. WTI and Brent rose back above the mid-$40s per barrel, up from lows seen earlier in the week. The bullish move came from news that OPEC is trying hard to actually seal a deal. Saudi Arabia’s energy minister Khalid al-Falih said that OPEC was targeting the lower end of its proposed range of 32.5 to 33.0 million barrels per day. That sparked a rally in oil prices. "I'm still optimistic that the consensus reached in Algeria for capping production will translate, God willing, into caps on states' levels and fair and balanced cuts among countries," Al-Falih said. Oil prices moved down slightly during midday trading on Friday, hovering at $45 for WTI and $46 for Brent. The strength of the U.S. dollar continues to put downward pressure on crude prices.   The two major hurdles to an OPEC deal are the cartel’s second and third largest producers, Iraq and Iran. However, Algeria’s energy minister Nouredine Bouterfa said that Iran would not scuttle a deal. "Iran is not a problem. Iran is a particular situation and needs particular treatment. They will not have the same rule for the reduction. We will study what the best solution is for Iran,” he told Reuters. "There is strong consensus among OPEC producers for a freeze.”  A separate Reuters report finds that Iraq would be forced to compensate international oil companies who operate in country if Iraq signs onto an OPEC cut. Iraq pays private oil companies a fixed fee per barrel of oil produced, and contracts with these companies include stipulations requiring compensation if Iraq forces them to cutback. That could make it much more difficult for Iraq to agree to a cut in Vienna. A source at the Iraqi state-owned South Oil Company said this won’t be a problem because Iraq has no intention of cutting its output. "On the contrary, we're encouraging the foreign companies to raise production as much as they can," the official told Reuters. But to confuse matters even further, Iraq’s oil minister Jabbar al-Luaibi, told the Wall Street Journal on Friday that he is optimistic about a deal on Nov. 30. As always, we won’t know the outcome of the OPEC meeting until it happens.

 OPEC moves closer to oil output deal as Iran gets new offer | Reuters: OPEC is moving closer toward finalizing this month its first deal since 2008 to limit oil output, with most members prepared to offer Iran significant flexibility on production volumes, ministers and sources said on Friday. Iran has been the main stumbling block for such a deal because Tehran wants exemptions as it tries to regain oil market share after the easing of Western sanctions in January. Iran's rival Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries, has argued Iran's output has peaked and it should not be granted major concessions. On Friday, several OPEC oil ministers including Saudi Arabia's Khalid al-Falih met in Doha on the sidelines of a gas forum. Iranian officials attended the gathering although minister Bijan Zanganeh did not come. At the meeting, OPEC member countries proposed Iran cap its oil output at 3.92 million barrels per day (bpd), a source familiar with the proposal told Reuters. Iran has previously said it would accept a freeze at between 4.0 and 4.2 million bpd. Gulf OPEC sources have said they wanted Iran to cap output at around 3.6-3.7 million bpd - the volume the Islamic Republic is currently producing, according to OPEC estimates. The source said Tehran had yet to respond to the proposal.

US Gasoline Exports Surging -- November 19, 2016 - From FuelFix, an update on surging US gasoline exports, some data points:

  • Valero Energy Corp shipped excess supplies to Canada instead of Colombia
  • Phillips 66 sent the first gasoline shipment in 16 months to Egypt
  • Mercuria Energy Group is storing 60,000 tons of gasoline blending components produced in India at an offshore site in the Bahamas
  • lower refinery utilization in Latin America + abundant US export capacity = bad news for those foreign refineries
  • US gasoline exports reached 1.07 million bpd, week ended November 4, 2016; first time the figure has topped 1 million bpd (somewhat of an anomaly due to two Colonial Pipeline spills which resulted in closure for six days in October; and in closure for 12 days in September)
    • shipments rose 35% in the week ended November 4, 2016; have almost doubled since the September 9, 2016, Colonial outage
    • the latter move corresponds with a late-August adjustment in how the EIA calculates its export data: the agency shifted to using near-real-time Customs data rather than extrapolating from monthly estimates
  • two other records set simultaneously:
    • US refiners and gasoline blenders churned out 10.5 mllion bbls of gasoline/day
    • Gulf Coast inventories of gasoline climbed to the highest seasonal level ever
  • driving demand slid about 2%

US oil rig count rises by 19 to 471 for biggest jump in 5-month recovery: A stronger dollar and rising U.S. oil rig count weighed down oil prices on Friday, but Brent crude was headed for its first weekly gain in five on hopes that OPEC might agree to limit production cuts at the end of the month. The Organization of the Petroleum Exporting Countries is moving closer to finalizing its first deal since 2008 to limit output, with most members prepared to offer Iran flexibility on production volumes, ministers and sources said. Iran has been the main stumbling block for capping production, and while it has not yet responded to the proposal, it suggests OPEC members may be coming nearer to a consensus ahead of their meeting in Vienna on Nov. 30. Prices, however, were depressed by a stronger U.S. dollar, which reached its highest levels against a basket of currencies since 2003 after U.S. Federal Reserve Chair Janet Yellen said that a rate increase could happen "relatively soon," indicating higher chances of a hike in December. A stronger dollar makes oil, which is priced in the greenback, more expensive to buyers using other currencies. Oilfield services firm Baker Hughes reported the largest weekly rise in its count of oil rigs operating in U.S. fields since a recovery began at the end of June. The count rose by 19 rigs to 471 in the last week.Brent crude oil futures were down 22 cents at $46.27 per barrel at 1:13 p.m. ET, but it was still on track for its first weekly increase in five weeks. U.S. West Texas Intermediate (WTI) crude oil futures were down 35 cents at $45.07 a barrel and were on track for a their first weekly gain in four.

Rig count jumps by 20; largest increase in two years | Fuel Fix: The number of oil and gas rigs in U.S. fields boomed this week, rising by 20 — the largest jump since the peak of the shale oil boom two years ago. U.S. oil drillers collectively sent 19 more rigs into the patch, the Houston oilfield services company Baker Hughes reported Friday. Gas drillers added one rig. The rise was driven largely by drillers in West Texas’ Permian Basin, which added 11 rigs. The total rig count rose to 588, up from a low of 404 in May. U.S. oil companies haven’t added this many rigs since May of 2014, when oil was still bringing $100 a barrel. The count, however, still lags the same period last year, when 757 drilling rigs were operating in U.S. oil and gas fields. The number of active oil rigs jumped to 471 this week. Gas rigs ticked up to 116. Even the number of offshore rigs rose, by 3 to 23, down 7 year over year. Total rig counts lifted by eight in Texas, four in Louisiana, four in Oklahoma, three in Ohio and two in Colorado. They fell by one in North Dakota, Pennsylvania and Wyoming. Drilling activity has followed the modest rebound in prices, from February’s low of about $26 a barrel to more than $50 in recent weeks. Prices stabilized this week at about $45 a barrel.

Saudi Arabia set to reveal depth of oil reserves FT. Saudi Arabia is preparing to lift the lid on one of the global energy industry’s most closely guarded secrets as it prepares to sell shares in Saudi Aramco: how much crude lies beneath the desert kingdom’s sands.“This is going to be the most transparent national oil company listing of all time,” Khalid al-Falih, the energy minister of Saudi Arabia, told the Financial Times in an interview.Ever since the kingdom completed the nationalisation of the formerly US-controlled Saudi Aramco in the 1980s, the size of proven reserves of the world’s largest oil exporter have remained consistently around the 260bn barrels mark, according to officials.But the profiles of oilfields and reserves estimates have remained a source of intrigue among international energy executives and investors who have been unable to verify the government’s figures. Mr Falih said independently audited numbers would soon be disclosed.“Everything that Saudi Aramco has, that will be shared, that will be verified by independent third parties,” he said, adding this would include financial statements, “reserves … costs [and] profitability indicators”.Speculation about whether detailed data on the kingdom’s reserves — managed by the state oil company — would be given to investors has intensified since January, when Saudi Arabia announced it was looking at a stock market listing of Saudi Aramco as part of a drive to diversify its oil-dependent economy. If the government data proved accurate, this would be significant as it would mean the kingdom has managed to replace each barrel it has produced with oil from new discoveries or higher estimates of the amount of oil it can recover from existing fields.

Are The Saudis About To Reveal The Best Kept Secret In Oil? -- One of the oil world’s longest and best kept secrets may finally be revealed. Saudi Arabia is preparing to unveil how much oil it holds, a closely guarded state secret that has been kept quiet for decades. The decision to bring such important data to light comes as Saudi Aramco is preparing to partially privatize its assets, an IPO that could bring in some $100 billion. The IPO will be a monumental event, one that the Wall Street Journal says could offer Wall Street some of the largest fees in history. Saudi Arabia often trades off with Russia – and more recently, with the U.S. – as the world’s largest oil producer. But while it produces at similar levels as Russia and the U.S., it is long been a vastly more influential player in the oil world. That is because of two reasons – the size of its reserves, and the ability to use latent spare capacity to quickly adjust supply, affording it an outsized influence on crude oil prices. But while everyone believes Saudi Arabia has some of the largest oil reserves in the world, perhaps rivaled only by Venezuela, there has been a lot of uncertainty and skepticism over exactly how much sits beneath the Saudi desert. The world’s largest oil field, Ghawar, has been producing since the 1950s, raising speculation about the longevity of the supergiant oilfield. It alone is thought to hold around 75 billion barrels, and it churns out more than 5 million barrels every single day. Surely, it cannot continue like this indefinitely, but the Kingdom has not revised its official reserves for years, which have stood at 260 billion barrels since the 1980s. It is hard to overstate how valuable this information is, and how fiercely Saudi leadership protected it. However, the collapse of oil prices since 2014 has pushed the Saudi budget deep into the red. The Deputy Crown Prince Mohammed bin Salman is undergoing an historic transformation of the Saudi economy, a multi-decade plan to diversify the country’s economic base and create new sources of revenue. At the heart of the plan is spinning off roughly 5 percent of Saudi Aramco, the most valuable oil company in the world. Saudi officials believe that the company is worth between $2 and $3 trillion.

Global oil market to become more dependent on OPEC crude in long-term, IEA projects -  OPEC's diverse 14-country membership has responded to the oil price malaise of the past two years in contrasting ways, perhaps permanently altering the group's dynamics as the world becomes more reliant on its crude in the long-term, according to the International Energy Agency. OPEC's share of global oil production, including condensate, will approach 50% by 2040, up from its current 42%, the IEA said Wednesday in its World Energy Outlook, as non-OPEC production will significantly drop off after 2020. But any benefits from OPEC's increased market share will be spread unevenly, as its Middle East members figure to grow more influential, at the expense of its African and South American members. Middle Eastern OPEC countries -- Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the UAE -- will see their oil production grow by 8.2 million b/d from 2015 to 2040 to 36.9 million b/d, according to the report. That would represent 77% of OPEC's production, an increase from 73% in 2015.Non-Middle East members will see growth of just 800,000 b/d in the same span up to 11.2 million b/d. "Some countries, including ... Saudi Arabia, have reacted to low prices by pressing ahead with a process of reform, but for others, particularly Venezuela and some parts of the Middle East, instability has been exacerbated," the IEA said in its annual outlook. "Either way, key producer countries are unlikely to emerge unchanged from the downturn, even if prices rebound." The report assumes that OPEC will return to its policy of active market management, which it abandoned the last two years until announcing a preliminary deal in late August to freeze production between 32.5 million to 33 million b/d. The world in 2040 will become more dependent on growth from Iraq and Iran, along with continued robust supplies from OPEC kingpin Saudi Arabia, the IEA said. "In our projections, Saudi Arabia maintains its pre-eminence among OPEC producers and its central role in global oil markets, even though Iran and Iraq enjoy a greater level of growth," the IEA said.

 Russia Puts Strategic Bombers On Combat Alert For Imminent Strikes On Syrian Targets -- While America is busy pointing fingers at who exactly failed to predict the Trump presidency, Putin is taking advantage of the chaos and the immediate political power vacuum left in the aftermath of the stunning transition from the Democratic president to a Republican sweep. First, as we reported last night, NATO promptly freaked out after Putin spokesman Dmitry Peskov urged President-elect Donald Trump to begin rebuilding the U.S.-Kremlin relationship "by urging NATO to withdraw forces from the Russian border." Peskov told the Associated Press that such a move  "would lead to a kind of detente in Europe." Second, fast forward to this morning when Russian Tass news agency reported that the crews of Russian strategic bombers Tu-160 and Tu-95 located at the "Engels" airbase, have been put on combat readiness, in preparation for imminent strikes on targets in Syria. Tass adds that the Russian strategic bombers have been armed with cruise missiles. According to a Tass sources, the "engineering staff at the base is loading the aircraft with cruise missiles and preparing them for combat use" adding that the "air strike group at the base is preparing to perform tasks with combat launches of cruise missiles."

 Putin & Trump discuss Syria and US-Russia relations in phone call – Kremlin -US President-elect Donald Trump and Russian President Vladimir Putin have held their first telephone call, in which the two leaders discussed Syria and agreed to improve and develop bilateral ties, the Kremlin said in a statement.  In their telephone conversation, the two leaders agreed that they share a common view on “uniting efforts in the fight with the common enemy number one – international terrorism and extremism,” the Kremlin said in a statement published on its website late Monday. The Kremlin added that Putin and Trump also discussed ways to settle the Syria crisis.Putin and Trump paid special attention to the importance of establishing a stable basis for bilateral relations by developing trade and economic ties between the two countries and working toward "constructive cooperation," the Kremlin said.The president and the president-elect agreed to keep in contact by telephone and have discussed the idea of meeting in person.Next year, Russia and the US will celebrate 210 years since the beginning of their diplomatic relations, which might motivate them “reversing towards pragmatic, mutually beneficial cooperation that would satisfy the interests of both countries, promote stability and safety around the world,” the statement also says.Trump’s team has issued a statement saying Putin congratulated the US president-elect on his election victory.Trump is “very much looking forward to having a strong and enduring relationship with Russia and the people of Russia,” the statement said.

Syria's Assad says Trump 'an ally if he fights terrorists' - France 24: Syrian President Bashar al Assad said on Tuesday Damascus would have to "wait and see" if U.S. President-elect Donald Trump would change Washington's policy on Syria but that he was ready to cooperate with him in fighting militants. In his first comments on Trump's election victory, Assad said the Republican leader had made promising comments on the need to battle Islamists in Syria's war but "can he deliver?" "We don't have a lot of expectations because the U.S. administration is not only about the President ... So we have to wait and see when he embarks on his new mission as president in two months' time," he said. "What about the countervailing forces within the (U.S.) administration?" Assad told a Portuguese television channel in remarks released by Syrian state television, pointing to what he said were rival "lobbies and powers" that traditionally influence any incumbent U.S. president.

Former Turkish general: Trump could broker peace in Syria and end the civil war – A former top Turkish general said Donald Trump’s election could hasten the end of the Syrian civil war by opening the door to negotiations with the Syrian government of President Bashar Assad.“I’m thinking that Donald Trump seems a realistic and a pragmatist man,” retired Gen. Ilker Basburg, a former chief of staff of the Turkish military, told reporters Wednesday. “I think he will open a direct link with the central Syrian government.”The United States and Turkey have demanded that Assad step down as part of any agreement to end the five-year Syrian war. However, Trump has said the main U.S. goal in Syria is the defeat of the Islamic State group and not the future of the Syrian government. He said the ouster of Arab strongmen in Eygpt, Yemen and Libya have served to destabilize the Middle East and lead to the rise of Islamic extremists.Basburg’s views do not reflect those of the Turkish government of Recep Tayyip Erdogan. In fact, Basburg was imprisoned for life in 2013 for conspiring against the Turkish government but the courts overturned the conviction in 2014. Nevertheless, Basburg said Turkey’s interests in Syria have evolved since the war began in 2011, in large part because of the role of Kurdish militants, whom the Turks consider an enemy. But the Kurds are supported by the United States, Turkey’s longtime ally. Turkey was alarmed when a Kurdish-dominated rebel alliance seized the border city of Manbij from the Islamic State group.

How Donald Trump will make Russia great again in the Middle East -- Donald Trump has his admirers in the Middle East, in spite of his stigmatisation of Muslims and ostensible tolerance of anti-Semites. Yet the burning question is whether he plans to douse a region already in flames with more petrol. Local citizens find it no easier than anyone else to deduce Trumpian policy from bullet points that are all bullet. But many sense that, even if the next US president turns out to be a blip and most of his rhetoric bluster, he could do real damage in the Middle East. It is not that liberal democracy has had much purchase in the region. But if the west was often regarded with mistrust for its support for tyrants, the US now risks discredit as the spiritual home of illiberal democracy, led by a champion of national populism.  Mr Trump will get along just fine with local strongmen. Abdel Fattah al-Sisi, the Egyptian army chief who took power in 2013 in what was initially a popularly backed coup, was among the first to congratulate him. The president-elect has argued against too much criticism of President Recep Tayyip Erdogan for the purges that followed this July’s failed coup in Turkey. The construction tycoon, in any case, makes them look moderate since neither leader publicly endorses torture or killing the families of terror suspects. In broad terms, a Trump administration will almost certainly de-emphasise human rights, gender equality and the rule of law. Man-made climate change afflicts the ancient fertile crescent but, unlike Mr Trump, its inhabitants probably doubt it is “a hoax” (drought and desertification were factors behind the initial uprising in Syria).  The fixation of Barack Obama’s administration is the defeat of Isis in Syria and Iraq. That will remain true under a Trump administration, but with a difference. President Obama lost interest in helping Sunni rebels topple Bashar al-Assad’s regime. Mr Trump seems inclined towards co-operating with President Vladimir Putin, Mr Assad’s patron and another strongman soulmate, in ways that will do more to make Russia than America great again.

Russian Aircraft Carrier, Frigate Launch "Massive Strikes" On Syrian Terrorist Targets -  Moments ago Russian Defense Minister Sergey Shoigu announced that the Russian military launched a large-scale operation against terrorists stationed in Homs and Idlib provinces of Syria. "Today at 10:30 and 11:00 we launched a large-scale operation against the positions of Islamic State and Al-Nusra [terrorist groups] in the provinces of Idlib and Homs," Shoigu said at a meeting between Russian President Vladimir Putin and the top leadership of the Russian Armed Forces.The Russian "Admiral Grigorovich" frigate located next to Syria's coast targeted terrorists in Syria with Kalibr cruise missile strikes, Shoigu said. The "Admiral Grigorovich [frigate] takes part in the operation. Today, it launched Kalibr cruise missiles on [terrorist] targets that had been confirmed by intelligence data and determined in advance," the minister said at a meeting of Russian President Vladimir Putin with top officials of the Russian Armed Forces.The 'Admiral Kuznetsov' aircraft carrier, the flagship of the Russian Navy, is also taking part. This is the first time the 'Admiral Kuznetsov' has taken part in a military operation according to RT. Sukhoi Su-33 fighter jets have been launched from the deck of the carrier, the defense minister said.The strikes target factories and arms depots operated by the jihadists in Syria, he said. "The main targets of the strikes are warehouses with ammunition, [terrorist] gatherings and terrorist training centers, as well as plants for the production of various kinds of weapons of mass destruction of the population," Shoigu detailed.He stressed that terrorists had actual factories, not merely workshops, for weapons production. "They are factories, not workshops, more specifically the plants for the production of all sorts of rather serious means of mass destruction.""Clearly, this is a well-established industrial production, these are the targets for today's strikes. And they will continue," the minister stated. The minister noted that the Russian military had thoroughly surveilled the targets before striking them, choosing the most important.

The End of American World Order - The Diplomat - By “end of American world order,” I specifically refer to the crisis and erosion of the international order that the United States had built and maintained after World War II, which some call the liberal hegemonic order,meaning a liberal order under U.S. dominance. As I have argued in my book, The End of American World Order, whether the United States is declining as the world’s No. 1 power or not is a matter of much debate, although this has less to do with who is in the White House than long-term structural shifts in the global economy and politics. The United States still leads in the world in terms of the overall military power, and relative economic power (defined more comprehensively than just overall GDP, and taking into account the role of the U.S. dollar as the global reserve currency). So we don’t have agreement on whether or to what degree the United States itself is declining. You can find equally persuasive arguments and evidence from both sides of the debate. But the United States is less and less able to get its way with the international community and shape and control the agenda of global multilateral institutions that it helped to create. U.S. leadership in the world has declined. Hence the real question about world order today is not whether America itself is declining, but that the American world order is coming to an end. I think it’s a very important distinction and that the latter is happening. Furthermore, Brexit and Donald Trump, and the rising tide of nationalism and protectionism they represent, along with the erosion of liberal democracy in the West, signals the decline not only of liberal ideology but more surely of the liberal international order.

USS Trump Pivots to Asia - - Yves Smith  - The latest news from Team Trump is a big departure from the president-elect’s initial stance of favoring more modest ambitions for the US in order to focus resources on domestic priorities. But as soon as Trump won the Republican nomination, he moved sharply to take up more traditional party messages, such as a much greater emphasis on law ‘n order and calling for a military buildup.  The most charitable spin one can put on Giuliani’s priorities, which one would assume mirror Trump’s, is that more better pork is the price of winding down our involvement in the Middle East and de-escalating with Russia. We will presumably have better intel on how this decidedly belligerent posture came about (assuming these press statements are official views, as opposed to more Trump throwing stuff at the wall and seeing what sticks) in coming days and weeks.  From The Australian:The frontrunner to become ­Donald Trump’s secretary of state has revealed the US president-elect is committed to building a ­“gigantic” military force to thwart China’s ambitions in the Pacific. Rudy Giuliani, the New York mayor during the terror attacks of September 11, 2001, and who is ­assisting Mr Trump’s transition to the White House, said yesterday the military expansion would be designed to allow the US to fight a “two-ocean war’’. The hawkish comments are a strong sign the Trump adminis­tration will not neglect the Asia-­Pacific region, and follow the president-elect’s criticisms during the election campaign that America’s NATO allies and Japan were not pulling their weight.“We (will) take our military up to 550,000 troops (instead of) going to 420,000,’’ Mr Giuliani told global business leaders in Washington. “We (will) take our navy up to 350 ships, (instead of) going to 247. “At 350, China can’t match us in the Pacific. At 247 ships, we can’t fight a two-ocean war; we gave up the Pacific. If you face them with a military that is modern, gigantic, overwhelming and unbelievably good at conventional and asymmetric warfare, they may challenge it, but I doubt it.”

China October crude oil output drops to lowest since May 2009 | Reuters: China's daily crude oil production in October fell to the lowest in more than seven years, statistics bureau data showed on Monday, as producers remain reluctant to drill new wells amid tepid oil prices and as output drops from aging wells. Oil output last month in China, the world's second-largest crude consumer, dropped 11.3 percent from the same time a year ago to 16.05 million tonnes, the National Bureau of Statistics reported. The figure is up slightly from September's 15.98 million tonnes. On a daily basis, October production was 3.78 million barrels per day (bpd), the lowest since May 2009, and down from 3.89 million bpd in September. "Producers have not ramped up output even as oil prices rebounded in October. Many of them see the uptick in prices as unsustainable," a Beijing-based crude trader said. Prices for international crude benchmark Brent climbed to as high as $53.73 a barrel in October though prices ended the month 1.5 percent lower than at the end of September. Brent was at $44.80 on Monday. Sinopec's Chairman Wang Yupu told investors in August that the energy giant would open new discovered reserves if crude prices were between $45 to $50 a barrel to make up for falling output. [nL3N1BP1IP] Major upstream producer PetroChina reported in October that its crude output for the first nine months of 2016 fell to 696.6 million barrels from 722.9 million a year earlier. Offshore oil specialist CNOOC recorded a 7.7 percent decline in net oil and natural gas production in the third quarter

Analysis: Access to major oil, natural gas pipelines unlikely to benefit Chinese independent refiners - China's state-owned oil companies, which control almost all of the country's oil and gas pipelines, recently released a list of lines that will be available for third-party use but the move is unlikely to ease the logistical woes facing the independent refiners given their location and lack of spare capacity. The list released by CNPC, Sinopec and CNOOC includes 14,475 km of crude oil pipelines, 7,812 km of oil products pipeline and several gas pipelines across the country. The move is in response to a requirement by the National Administration of Energy, which is responsible for planning the country's energy sector, to allow third-party access to the country's oil and gas pipelines and is seen as a step towards state-owned companies' reforms."The pipelines were designed and constructed for the three big companies' specific refineries and these are located far away from the independent ones. I also don't think there is spare capacity for the oil giants to share," a Shanghai-based analyst said. China's independent refiners were given access to imported crude in mid-2015, but suffer from high logistics costs compared with their state-owned peers due to lack of pipeline access to move crude oil and refined products. S&P Global Platts China Oil Analytic estimates that three in every four independent refineries in Shandong have to rely "either in part or entirely" on trucks to transport crude, oil products or both. Only one pipeline built by a state-owned company is currently used by the independent sector -- PetroChina's 447 km pipeline to connect Rizhao port and Dongming in Shandong province with a capacity of 10 million mt/year (200,822 b/d).

Another Chinese Speculative Buying Frenzy In Commodities Collapses - Fool me once, shame on you; Fool me twice, I must be a Chinese commodity speculator. In a disastrous case of deja vu all over again, commodities from copper to iron ore and from rebar to coking coal have exploded higher in the past few weeks... just like they did in April/May of this year. And, as Reuters reports, just like we saw in May, the spike in volume relative to open interest has prompted exchanges to crackdown on the rampant speculation, increasing transaction fees and margins fuelling a "panic among investors," as they rush to sell. As a reminder, this is what happened in April/May... As Reuters reports, a sharp, broad fall in Chinese commodities "suggests that the crazy jump last week cannot be sustained and so we're seeing self correction," said Wang Di, analyst at CRU consultancy. Iron ore on the Dalian Commodity Exchange, which rose as high as its exchange-set ceiling in the previous four trading sessions, has fallen 14% in the last 2 trading days. Rebar steel also slid 14 percent and coking coal is down 12%. But it's different this time, right?

Gauging the Trump effect on global commodities - The Barrel Blog: There is perhaps no better reminder that the US presidency is a position of extraordinary power. Since the victory of US President-elect Donald Trump last week, businesses and governments have been working overtime to try to discern exactly what his presidency might mean for a range of important policy areas. Across the world, every campaign statement, interview, tweet and early appointment by Trump’s transition team is now being carefully examined for clues as to how the newly-elected Republican will act once he moves into the White House. The questions over the President-elect’s positions are more numerous than they would have been had Democratic rival Hillary Clinton triumphed. Trump has never held public office previously, and made many bombastic statements on the campaign trail that have so far been backed up by little in the way of detail. Businesses operating in the commodities sector are every bit as hungry for information as others. Trump’s surprise victory has left many in the industry uncertain, puzzled and “scratching their heads over what to expect from this Washington outsider,” said Chris Newkumet, S&P Global Platts Bureau Chief in Washington, DC. Newkumet spoke during a special Platts webinar, which was held November 11 to explore the possible ramifications of a Trump presidency for the oil, coal, gas, power and steel sectors. During the webinar, titled The Trump Effect: Energy, Commodities and Their Markets, senior Platts’ editors drew attention to many of Trump’s stated positions and sought to give a flavor of how the next four years could change commodities markets. Of all the areas discussed, steel is the one in which the overall picture was most upbeat. Trump portrayed himself as a stout defender of domestic steelmakers during the campaign, ready to slap tariffs and countervailing duties on cheap imports as necessary. He also said he would double a five-year plan unveiled by Clinton calling for $275 billion in infrastructure spending, noted Joe Innace, Metals Content Director, Americas.

Latest China economic data shows a mixed bag --New Chinese data shows a mixed economic picture, as the economy appeared on track to grow by at least 6.5% this year amid signs of slowing next year. Retail sales rose a weaker-than-expected 10% in October from a year earlier, slowing from September's 10.7% growth, the National Bureau of Statistics said Monday. Meanwhile, it said that industrial output, a proxy for economic growth, expanded 6.1% in October from a year earlier, matching September's pace but remaining a hair below economist expectations. The bureau said fixed-asset investment, a closely watched gauge of construction activity, climbed by 8.3% year on year in the January-October period, as economists expected. For now, the economy remains solidly on track to reach its 6.5% to 7% target for 2016 following growth of 6.7% in the first three quarters, many economists said. "We're looking at stability for now," said Macquarie Group Ltd. economist Larry Hu. "We're in a kind of a sweet spot, although next year things are likely to see a slowdown by the second quarter." Slowing auto and property sales dragged down October retail sales, which grew at their weakest pace in five months, a trend that economists predict will continue next year as real estate ebbs further. Economists said decelerating retail sales last month were prompted by the winding down of tax breaks that have fueled auto sales in recent months. Consumption also was hurt by government purchase restrictions aimed at tempering speculative growth in major property markets, which has dampened demand for furniture and other household products, they added. Last week, the central bank cited the danger of asset bubbles in the increasingly leveraged economy. Housing sales rose 38.3% by value in October from a year earlier, according to calculations based on data released by the statistics bureau Monday. Their value grew by a torrid 61.2% in September. Industrial production continued to grow at a steady pace last month, helped by easy money policies, economists said. Coal, steel and cement prices have jumped in recent weeks, pushing up rail freight volumes last month to their highest level in over a year. But this has also led to higher raw material costs for manufacturers.

China Unveils New Rules to Cope with Massive Local Government Debt: — China has announced new rules on how it will deal with several trillion dollars in local government debt as part of its efforts to curb financial risks and maintain social stability as economic growth slows. The new rules classify provincial and local debt by severity, restrict further borrowing and investment in many cases, and order delinquent borrowers to sell assets, restructure fiscal spending and even lay off staff. “Debt payment capabilities of some local governments have weakened and some areas’ debt ratios have exceeded the alarm level,” an unnamed finance ministry official said in a statement accompanying the Monday announcement. China has relied heavily on government-backed infrastructure projects and an overheated property market to fuel growth in recent years, with local authorities embracing a borrowing binge. However, concerns are rising about potential payment defaults on local government debt as economic growth loses momentum. Beijing has issued a series of policies to rein in reckless borrowings, including banning fundraising channels other than bond issuance. The State Council, China’s cabinet, on Monday published contingency plans for local governments to pay their debts. The plan comes two years after it said that the central government would no longer offer bailouts when defaults occur. The plans are a “key reserve policy to fend off fiscal and financial risks” and will play “a positive role” in regulating fundraising activities by local governments and “guiding reasonable expectations of financial institutions,” the official Xinhua news agency said.

In phone call, China's Xi tells Trump cooperation is only choice | Reuters: Chinese President Xi Jinping told U.S. President-elect Donald Trump that cooperation was the only choice for relations between the world's two largest economies, with Trump saying the two had established a "clear sense of mutual respect". There has been intense speculation over the impact of Trump's win on issues facing the two countries, from global trade and climate change to the security balance in the Asia-Pacific. Trump lambasted China throughout the U.S. election campaign, drumming up headlines with his pledges to slap 45 percent tariffs on imported Chinese goods and to label the country a currency manipulator on his first day in office. His election has injected uncertainty into relations at a time when Beijing hopes for stability as it faces daunting reform challenges at home, slowing growth and a leadership reshuffle of its own that will put a new party elite around Xi in late 2017. In their first interaction since the U.S. election, Chinese state media said Xi told Trump in a telephone call on Monday that as the world's largest developing and developed economies, there were many areas where China and the United States could cooperate. "The facts prove that cooperation is the only correct choice for China and the United States," China Central Television (CCTV) cited Xi as saying.

Why Trump won't want China to stop 'manipulating' its currency: November 15 2016 Why Trump won't want China to stop 'manipulating' its currency Patrick ComminsFollow on Twitter If US President-elect Donald Trump stands by his promise to label China a "currency manipulator" on his first day in office, then he will have to do so in defiance of mainstream economic analysis, as well as advice of his own Treasury department. And in an added twist, if Chinese policymakers were to stop intervening, the renminbi would go down rather than up, economists say."The simple answer is 'no'," ANZ's Singapore-based head of Asia research, Khoon Goh, said. "Based on the current criteria that the US Treasury has set out, China is not a currency manipulator." Only this week the Treasury Department's semi-annual report to Congress found that "no economy satisfied all three criteria" that would constitute "unfair currency practices". That trio of factors, only formalised following the passing of the Trade Facilitation and Trade Enforcement Act of late 2015, assess whether a country has a "significant" bilateral trade surplus with the US, a "material" current account surplus, and is engaged in "persistent one‐sided intervention in the foreign exchange market". US officials judge China to satisfy the first criterion, but not the others. That's not to say that China hasn't manipulated its currency in the past. "China for a long time did hold down the value of its currency," Capital Economics China economist Julian Evans-Pritchard said. "A few years ago it wouldn't have been a totally unfair accusation, but a lot has changed."

China-U.S. Economic Ties Run Deeper Than Official Estimates, a New Report Says - China and the U.S. invest far more in each other’s economies than government statistics estimate, according to a new report by the Rhodium Group, a New York market research firm. Rhodium estimates that U.S. firms have invested at least $228 billion in Chinese companies since 1990—about three times higher than U.S. or Chinese government estimates. Adjusting those investments for inflation and currency fluctuations, Rhodium says, boosts the value of the U.S. direct investment in China to $383 billion.Over the same time period, Rhodium estimates, Chinese companies—state-owned and private—have invested $64 billion in the U.S., about 1.5 to four times U.S. and Chinese government estimates. During the past few years, though, Chinese foreign direct investment to the U.S. has outstripped U. S. investment in China as U.S. companies have reduced their pace of investment in a slowing Chinese economy. The new estimates underscore how intertwined the world’s two largest economies have become—and the perils of trying to remake that relationship, as President-elect Donald Trump has said he wants to do. Mr. Trump, for instance, has said he would penalize China for artificially depressing the value of its currency, the yuan, which could lead to the U.S. imposing tariffs on Chinese imports. Should Mr. Trump go through with his threat, Beijing could retaliate in many ways, including by restricting U.S. firms already doing business in China. Many of those firms already complain that they are being hampered by unfair regulations and antitrust investigations.

China’s October Reserve Sales, And A New Reserves Puzzle -- My preferred indicators of Chinese intervention are now available for October, and they send conflicting messages. The changes in the balance sheet of the People’s Bank of China (PBOC) point to significant reserve sales (the data is reported in yuan, the key is the monthly change). PBOC balance sheet foreign reserves fell by around $40 billion, the broader category of foreign assets, which includes the PBOC’s “other foreign assets”—a category that includes the foreign exchange the banks are required to hold as part of their regulatory requirement to hold reserves at the central bank—fell by only a bit less. $40 billion a month is around $500 billion a year. China uniquely can afford to keep up that pace of sales for some time, but the draw on reserves would still be noticeable.The foreign exchange settlement data for the banking system—a data series that includes the state banks, but historically has been dominated by the PBOC—shows only $10 billion in sales, excluding the banks sales for their own account, $11 billion if you adjust for forwards (Reuters reported the total including the banks activities for their own account, which raises sales to $15 billion). China can afford to sell $10 billion a month ($120 billion a year) for a really long time.  The solid green line in the graph below is foreign exchange settlement for clients, dashed green line includes an adjustment for the forward data, and the yellow line is the change in PBOC balance sheet reserves.* As the chart illustrates, the PBOC balance sheet number points to a sustained increase in pressure over the last few months after a relatively calm second quarter. The PBOC balance sheet reserves data also corresponds the best with the balance of payments data, which showed large ($136 billion) reserve sales in the third quarter. Conversely, the settlement data suggests nothing much has changed, and the PBOC remains in full control even as the pace of yuan depreciation against the dollar has picked up recently and the yuan is now hitting eight year lows versus the dollar.

 China, Manipulation, Day One, the 1988 Trade Act and the Bennet Amendment - President-elect Trump has said that he plans to declare China a currency manipulator on day one. I am among those who think this is a bad idea. This isn’t the right time to signal that China’s long-standing exchange rate management has crossed over the line and become manipulation. If China responded by ending all exchange rate management—no daily fix, no band, no intervention, a true float—the renminbi would certainly fall, and potentially fall by a lot.Uncomfortable as it is to say, right now it is in the United States’ economic interest for China to continue to manage its exchange rate. Subsequent to the yuan’s August depreciation last summer, China has been selling large sums in the market—sums that increased in q3, after falling in q2—to control the yuan’s decline.A freely floating yuan makes long-term architectural sense: the other SDR currencies float against each other, and China’s monetary policy shouldn’t be linked to that of the United States. But for China to be in a position where it can transition to a free float in a way that stabilizes the world economy, it needs both to do a serious recapitalization of its banks and to introduce a set of policy reforms that would strengthen the domestic base of China’s economy. Such reforms should include policies aimed at lowering China’s still exceptionally high level of savings.  My read of the Treasury’s April foreign exchange report is that this semi-annual currency report now satisfies two distinct statutory requirements.* The 1988 Omnibus Trade and Competitiveness Act (section 3004), and the 2015 Trade Facilitation and Trade Enforcement Act (and specifically the Bennet Amendment; Section 701). However, the 1988 act doesn’t authorize any specific sanctions that follow from naming a country a manipulator, only the initiation of negotiations with the named country. Manipulation is a label, nothing more. See Alan Beattie.

BHP Billiton: World will be in ‘trauma’ if Donald Trump imposes tariffs on China: Donald Trump’s plan to impose tariffs of up to 45pc on Chinese products would induce “trauma” across the world, BHP Billiton’s outgoing chairman has warned. Jac Nasser, speaking to shareholders at the FTSE 100 mining group’s AGM in Brisbane, expressed his fear that policies bandied about by the president-elect before his election could be the precursor to a trade war. “The whole world will start to be in complete trauma if tariff levels of that size and magnitude are put on across the board,” he said. However, Mr Nasser, a former Ford chief executive who announced last month that he would step down from BHP next year, added that he thought that Mr Trump would row back on some of his more extreme rhetoric used in the run-up to the election. “Some of the policies that have been listed at this stage will probably be moderated over time,” he said. BHP Chief executive Andrew Mackenzie expressed his hope that the president-elect would not rip up climate change agreements to reduce greenhouse gas emissions. The company also reiterated its intention “to do the right thing” in helping victims of the Samarco mining disaster in Brazil. Nineteen people were killed last year in a mudslide after a dam at a mine co-owned by BHP collapsed. The Anglo-Australian miner has attracted criticism for not allowing local people to have more say in the clean-up operation.

  China Ridicules Obama's Last Foreign Tour: "Washington's Leadership In Global Affairs Has Decayed" - Over the past several years it has become abundantly clear that China does not have a high opinion of President Barack Obama. As a reminder, at the start of September, during his final trip to China, China "welcomed" Obama with a very undiplomatic greeting when an unusual tarmac altercation involving Chinese and U.S. officials, including national security adviser Susan Rice, devolved into a shouting match by a member of the Chinese delegation. First, there was no staircase for Obama to exit the plane and descend on the red carpet, so he had to use an emergency exit.Then a member of the Chinese delegation began shouting at White House staff, demanding the pool leave the arrival scene. A White House official said "Obama was our president and Air Force One was our plane" and that the press was not going to move from the designated area. The Chinese official angrily responded "This is our country. This is our airport."It only got worse from there.Fast forward to today when overnight in commentary released by China's communist party mouthpiece, Xinhua, which usually is a conduit for the official of the politburo, token author Chen Shilei took a vicious stab at Barack Obama, mocking his trip abroad, and saying that Obama's last overseas visit while in office, "which became a last-minute conciliatory trip after Donald Trump's victory in the presidential elections, will in the end reassure nobody."As the Chinese media outlet recaps, Obama on Monday started the trip, which will take him to Greece, Germany and Peru, amid concerns that Trump's election will change U.S. foreign policy and affect U.S. strategic relations with its allies and partners around the world.The three-nation trip, during which Obama is expected to discuss regional and global issues with European leaders and attend a summit of leaders of the Asia-Pacific Economic Cooperation (APEC), was planned when his Democratic colleague Hillary Clinton seemed to be winning the race to the White House.It gets better: launching a full-on attack on Obama's hypocrisy, the article said that "Obama, who criticized Trump during the general elections for lacking "basic knowledge" about critical issues in Europe, Asia and the Mideast, now is ironically convincing U.S. allies and partners that his successor will not behave as he predicted and America will maintain its core interests in the globe."

World’s Biggest Real Estate Frenzy Is Coming to a City Near You - If they were anywhere else in Beijing, the five young women in cowboy hats and matching red, white, and blue costumes would look wildly out of place. But here at the city’s biggest international property fair -- a frenetic gathering of brokers, developers and other real estate professionals all jockeying for the attention of Chinese buyers -- the quintet of wannabe Texans fits right in. As they promote Houston townhouses (“Yours for as little as $350,000!”), a Portugal contingent touts its Golden Visa program and the Australian delegation lures passersby with stuffed kangaroos. Welcome to ground zero for the world’s largest cross-border residential property boom. Motivated by a weakening yuan, surging domestic housing costs and the desire to secure offshore footholds, Chinese citizens are snapping up overseas homes at an accelerating pace. They’re also venturing further afield than ever before, spreading beyond the likes of Sydney and Vancouver to lower-priced markets including Houston, Thailand’s Pattaya Beach and Malaysia’s Johor Bahru. The buying spree has defied Chinese government efforts to restrict capital outflows and shows little sign of slowing after an estimated $15 billion of overseas real estate purchases in the first half. For cities in the cross-hairs, the challenge is to balance the economic benefits of Chinese demand against the risk that rising home prices spur a public backlash. “The Chinese have managed to accumulate very large amounts of wealth, and the opportunities to deploy that capital in their own market are somewhat restricted,” said Richard Barkham, the London-based chief global economist at CBRE Group Inc., the world’s largest commercial property brokerage. “China has more than a billion people. Personally, I think we have just seen a trickle.”

Korea raises its voice: Up to 1 million South Koreans took to the streets of central Seoul on Saturday, demanding President Park Geun-hye’s resignation over a scandal involving her longtime confidante Choi Soon-sil. In the largest anti-government rally in decades, protestors flooded the streets running through City Hall, Gwangwhamun Square and Anguk Station, turning the area into a vast sea of candlelight in the evening. Streets just hundreds of meters from Park’s presidential residence of Cheong Wa Dae were also packed, with participants chanting “Park Geun-hye resign!”Organizers said over 1 million gathered for the protest, but the police’s estimate was 260,000. At Cheong Wa Dae, lights were seen turned on deep into the night. The embattled president watched Saturday’s colossal protest from her residence, while her staff, in a somber mood, discussed how to cope with the situation, sources at the presidential office said. Many had expected Saturday’s rally to be a watershed moment for Park’s presidency in a crisis sparked by allegations that she let civilian friend, Choi, manipulate power from behind the scenes. Park’s approval ratings have sunken to an abysmal 5 percent, with a majority of people demanding her immediate removal from office. While Cheong Wa Dae kept silent Sunday, political parties on both sides of the aisle were seen clearly affected by the overwhelming demonstration of public anger.

Japan’s Economy Grows Faster Than Expected - WSJ: Japan’s economy grew more quickly than expected in the third quarter, marking the third straight quarter of expansion, but the upbeat figure masked continued sluggishness in spending at home. Gross domestic product expanded at an annualized 2.2% pace in the three months through September, the government said Monday, higher than the 0.9% rise expected by economists. It was the longest stretch of growth since 2013.The surprise was driven by a rebound in exports, which rose 2% compared with the previous quarter. Shipments of smartphone components including semiconductors rose, according to the Cabinet Office. Domestic indicators told a different story. Both household spending and capital investment, which together account for roughly 70% of GDP, were flat on quarter, despite efforts by Prime Minister Shinzo Abe to get companies to spend more of their cash piles. “The Abe government has been trying to achieve domestic-led growth, but the third quarter GDP shows that the growth is reliant on exports,” said Shunsuke Kobayashi, economist at the Daiwa Institute of Research. Mr. Abe has tried to lift growth with a combination of monetary and fiscal stimulus since taking power in late 2012, but growth has since been uneven. He recently introduced a new package of government spending and other stimulus measures. Economists say that households are still hesitant to spend because many workers haven’t seen significant pay increases.

Inflation and Japan’s Ever-Tightening Labor Market -  – NY Fed - People commonly express a very grim opinion of the Japanese economy, with the country’s output growing at an average rate of only 0.5 percent per year over the past ten years. A factor often not considered is that, for all its bad press, Japan’s per capita output growth has almost matched that of the United States since 2000. So, it would seem that the perception of Japan having a feeble economy is in part due to demographic rather than economic reasons. This shift will be increasingly important in considering future growth since Japan’s population is set, according to the United Nations (UN), to fall at a 0.25 percent rate over the next five years, a faster decline than the 0.10 percent rate in the last five years.  Japan offers a preview of future U.S. demographic trends, having already seen a large increase in the population over 65. So, how has the Japanese economy dealt with this change? A look at the data shows that women of all ages have been pulled into the labor force and that more people are working longer. This transformation of the work force has not been enough to prevent a very tight labor market in a slowly growing economy, and it may help explain why inflation remains minimal. Namely, wages are not responding as much as they might to the tight labor market because women and older workers tend to have lower bargaining power than prime-age males.

New Japan real estate loans hit record, eclipse bubble economy peak | Reuters: lending to Japan's real estate sector rose to a record in the first half of the fiscal year, exceeding lending during the bubble economy of the 1980s in a warning that the sector could be overheating. Real estate is a sensitive subject because land and asset prices inflated rapidly during the 1980s economic bubble. Asset prices then collapsed in the early 1990s, and Japan still has not fully shaken off the impact. New real estate lending in the April-September period rose 16 percent from the same period a year earlier to 5.9 trillion yen ($53.94 billion), Bank of Japan data showed on Wednesday. This exceeded the previous peak in real estate lending in the first half of fiscal 1989. Total new lending in April-September also rose 16 percent from the same period a year earlier to 23.9 trillion yen. Bank lending, which has been rising since 2013 when the BOJ began quantitative easing, has accelerated even further after the central bank said in January it would adopt negative interest rates. The BOJ said last month it is closely monitoring bank lending to the real estate sector to guard against excessive credit but did not see signs of a bubble.

Abe to meet Trump in first bilateral with foreign leader FT - After an election campaign during which he questioned basic assumptions about US strategy in Asia, Donald Trump will on Thursday give the first clues about his actual approach to the region when he meets Shinzo Abe, the Japanese prime minister, in New York. Mr Abe will become the first foreign leader to meet the president-elect since his election victory last week, giving the Japanese leader the chance to lobby Mr Trump at a time when many of his policies have yet to take shape. Although Mr Trump is expected to maintain his promise to abandon the Trans-Pacific Partnership (TPP) trade deal, a move that will particularly upset the Japanese, he could surprise Washington’s allies in the region with other aspects of his strategy. During the campaign Mr Trump raised the prospect of a US retreat from Asia when he suggested that it would pull troops out of Japan and South Korea if they did not pay more, leaving more space for China to expand its interests in the region. However, the initial indications from the Trump camp since the election have suggested an approach that is much more sceptical about Beijing, including a significant build-up of the US Navy to meet the challenge from China in the western Pacific. John Kirby, state department spokesman, said there had been no contact with the Trump campaign about the planned meeting, but Japanese officials say the main point is for the two men to get to know each other. Mr Abe is likely to play it by ear on whether to raise a long list of substantive issues, from the cost of US forces in Japan, to relations with Russia and the TPP deal.

Why All Eyes Are Suddenly Back On The Bank Of Japan - As a result of the ongoing bond rout, an interesting dynamic has emerged post the recent sell-off. With 10 year Japanese yields edging back above zero intra-day yesterday and again this morning (currently 0.027%) for the first time since September 21st the market is now watching the BOJ's every move, and specifically whether the Japanese central bankwill defend the zero level, as it declared it would at its especially if the global yield sell-off gathers pace over the coming weeks and months. Asa reminder, on September 21, the BOJ surprised the world when it announced its latest monetary policy iteration dubbed “QQE with Yield Curve Control", according to which the BOJ would buy JGBs such that 10-year yield remain at the current level of around zero percent. Ironically, at the time - when yields were far lower - the BOJ was implicitly threatening it would taper purchases to prevent yields from going too low. It is now, however, facing the opposite problem as suddenly global yields are soaring following the Trump presidency. Why the keen focus on what Kuroda will do next? Because as DB's Jim Reid explains, "it would be a strange decision to abandon the new policy so soon after announcing it so assuming global yields remain elevated they may be forced to buy more JGBs than they thought when the new scheme was announced." But where the BOJ's reaction gets more interesting is what it means internationally: if the BoJ sticks to defending zero in a world where the US is likely to increase fiscal spending then you could make an argument that there is full blown helicopter money except that the BoJ is flying the copter over the US and may be about to become the new US government’s best friend.

BOJ acts to curb interest rate spikes following Trump victory | The Japan Times: The Bank of Japan on Thursday announced its first fixed-rate buying operation since the policy’s introduction in September, in a bid to curb surges in interest rates following the victory of Republican Donald Trump in the U.S. presidential race. The BOJ said it would buy an unlimited amount of Japanese government bonds with maturities of one to three years and those with maturities of three to five years. The central bank decided to carry out the operation “taking into account spikes in short-term and mid-term interest rates,” a BOJ official said, but no financial institutions offered to sell Japanese government bonds this time. Interest rates in Japan have been on an upward trend in line with increases in U.S. Treasury yields, amid growing speculation that the administration of the president-elect may boost government spending, causing higher inflation in the United States. The yield on the bellwether 10-year Japanese government bond briefly hit a nine-month high of 0.035 percent Wednesday.At its Policy Board meeting in September, the BOJ decided to shift its policy target to the government-bond yield curve instead of quantitative easing, aiming to prepare for a long-term battle to realize its 2 percent inflation goal. Since then, the BOJ has modified the framework of its bond-buying program to keep the yield of the 10-year Japanese government debt at around zero percent, while leaving unchanged the negative interest rate of minus 0.1 percent on a portion of reserve funds held by private banks at the BOJ.

Bank of Japan Surprises With Plan to Buy Unlimited JGBs at Fixed Rates - WSJ: The Bank of Japan on Thursday offered to buy an unlimited amount of Japanese government bonds at fixed rates for the first time since the introduction of a new policy framework—a sign of its concerns over recent rises in yields. The move is the first clear sign from the central bank that it intends to take action to keep a lid on rising yields, and took market participants by surprise. “I thought there was still a lot more room left” before the BOJ took action" The BOJ’s move followed a sharp rise in government bond yields globally, sparked by expectations that the presidency of Donald Trump would lift inflation and growth. Japanese government bond yields have risen as well, but not as sharply. The 10-year yield rose to its highest level since March on Wednesday. Yields on two-year and five-year Japanese government bonds fell Thursday after the BOJ’s announcement. The 10-year yield also briefly fell to 0.010% after hitting as high as 0.025% earlier in the morning. Speaking in parliament, Bank of Japan Gov. Haruhiko Kuroda said he wouldn’t allow market pressure from abroad to dictate the course of Japanese government bond yields, highlighting his resolve to hold interest rates down. “Interest rates may have risen in the U.S., but that doesn’t mean that we have to automatically allow Japanese interest rates to increase in tandem,” Mr. Kuroda said In Thursday’s action, the BOJ offered to buy unlimited amounts of government bonds with terms of between one year and five years at a fixed price. It was the first such move since the central bank introduced what it called “yield curve control” in September, an attempt to keep short-term interest rates low while allowing longer-term rates to rise. The BOJ said its offering price would be slightly lower than prevailing prices on those bonds. A BOJ official said the offer was meant to send a signal that the central bank wanted to counter sharp rises in short- and midterm yields.

The world is 14 per cent less nuts… Wait, that can’t be right - Negative bond yields are a traditional source of nutty commentary, but we’re gonna need a formal hierarchy of nuttiness soon aren’t we? Maybe with some sort of time-based normalisation function built in?  We mean, negative bonds, do they even count as nuts anymore? From Bloomberg: The market value of the world’s negative-yielding bonds plunged 14 percent last week to $8.7 trillion as investors dumped government debt at a record clip after Donald Trump’s upset win stoked speculation that his ambitious fiscal plan would flood the market with new Treasuries and boost inflation. The $1.4 trillion decline from Nov. 4 in the total amount of debt certain to lose money if held to maturity was fueled mostly by increased government-bond yields following the U.S. presidential election.

Vietnam PM backs off from U.S-led TPP, emphasizes independent foreign policy | Reuters: Vietnam will shelve ratification of a U.S.-led Pacific trade accord due to political changes ahead in the United States, but wants to maintain good relations with Washington as much as it does all other countries, its prime minister said on Thursday. Vietnam's legislature was almost certain to ratify the 12-nation Trans-Pacific Partnership (TPP) agreed last year but had deferred it until after the U.S. presidential election won by Republican Donald Trump, whose protectionist agenda on the campaign trail has unnerved Asian economies. The TPP, the signature economic policy of President Barack Obama's Asia-Pacific rebalance, looks increasingly uncertain with a Republican Congress and an incoming president who had called the agreement a "disaster". The TPP would be a big boon for Vietnam's exports and manufacturing economy, which is receiving record foreign investment due to its numerous trade accords, cheap labor and relative stability. "The United States has announced it suspends the submission of TPP to the parliament so there are not sufficient conditions for Vietnam to submit its proposal for ratification," Prime Minister Nguyen Xuan Phuc told the National Assembly. Post-U.S. election responses by the Asian countries on the TPP varied, from suggestions by Malaysia that it would focus efforts on wrapping up a multi-nation trade pact led by China, and Japan trying to stick with the TPP and push ratification. According to TPP's statutes, it can only be adopted if the United States is part of it, given its economy represents about two thirds of the combined GDP of the original 12 members.

Indonesia police name Jakarta governor as blasphemy suspect Indonesia police name Jakarta governor as blasphemy suspect: Indonesian police on Wednesday named the minority Christian governor of the country's capital as a suspect in a blasphemy investigation in a major test of the Muslim-majority nation's reputation for religious tolerance. Earlier this month the capital Jakarta was rocked by a massive protest by conservative Muslims against the governor. One person died and dozens were injured in rioting. Hardliners have threatened more protests if Ahok isn't arrested. Police announced at a press conference that the popular governor, Basuki "Ahok" Tjahaja Purnama, cannot leave the country while the investigation is underway. However they said he is not being detained because investigators and religious experts were sharply divided over whether the comments at issue were blasphemous."After long discussions, we reached a decision that the case should be tried in an open court," said National Police chief detective Ari Dono. The accusation of blasphemy against Ahok, an ethnic Chinese and Christian who is an ally of president Joko "Jokowi" Widodo, has galvanised Jokowi's political opponents in the nation of 250 million where about 90 percent of people are Muslims. It has been also been a gift to politicians vying against Ahok, who is seeking a second term as Jakarta governor in elections in February. Among them is the son of former president Susilo Bambang Yudhoyono, who courted controversy by calling for Ahok's arrest and saying he supported the November 4 protest. The Islamic Defenders Front, a vigilante group that wants to impose Shariah law, began demanding Ahok's arrest after a video circulated online in which he joked to an audience about a passage in the Quran that could be interpreted as prohibiting Muslims from accepting non-Muslims as leaders.  In a speech on September 27, he said: “Ladies and gentlemen, you don’t have to vote for me because you’ve been lied to by those using [the Quran’s] Surah al-Maidah verse 51. That’s your right.”

Two-Thirds Of Workers In Developing Nations To Be Replaced by Robots, Report Warns  An alarming new report from the United Nations is the latest in a litany of studies suggesting that the coming age of automation and workforces dominated by robots will be upon us much faster than previously thought. The U.N. now claims two-thirds of the human labor force in developing nations will be replaced by automation.The U.N. says a Universal Basic Income will be necessary as a stop-gap for the 75% of humans left without work.Anti-Media previously reported on predictions that half the American workforce could bereplaced by automation within the next two decades. Another report’s statistics suggested automated software could fleece 1.7 million truckers of their jobs within a decade.The U.N.’s UNCTAD report notes that taken on a global scale, we’re seeing“premature deindustrialization.”“The increased use of robots in developed countries risks eroding the traditional labor-cost advantage of developing countries,” the report explains.A disturbing additional report from the World Bank observes: “The share of occupations that could experience significant automation is actually higher in developing countries than in more advanced ones, where many of these jobs have already disappeared.”

Australia Snubs Obama, Dumps TPP, Opts For China-Sponsored Trade Deal - President Obama made a foolish decision to not welcome China in the formation of the Trans-Pacific Partnership (TPP).  It was ludicrous for Obama to leave China out of things. China is the second biggest economy in the world, third if you treat the EU as a block.  Had China been in the deal all along, we may not have seen the ludicrous provision that allowed companies to sue governments. That provision was one of the key reasons the deal failed. With the election of Trump, TPP is officially dead. China, not the US, will be at the center of a new Asian trade pact. On November 10, in the wake of Trump’s election, Beijing sought to fill the void left by TPP by reviving its proposed Free Trade Area of the Asia-Pacific pact. The Financial Times reported Beijing Plans Rival Asia-Pacific Trade Deal After Trump Victory.Xi Jinping is rekindling efforts to promote a rival to the US-led Trans-Pacific Partnership trade agreement in the wake of Donald Trump’s election victory, Chinese officials said on Thursday.With Mr Xi set to travel to Peru this month for the annual Asia-Pacific Economic Co-operation summit, Li Baodong, vice-foreign minister, said China’s plan could fill the void. Chinese officials have previously sought to promote the proposal at Apec, only to encounter resistance from US officials who wanted to prioritise TPP negotiations.“Protectionism is rearing its head and the Asia-Pacific region faces insufficient growth momentum,” Mr Li said at a briefing on China’s plans for Apec, which starts next weekend. “China believes we should set a new plan to respond to the expectations of industry and sustain momentum for the early establishment of a free trade area.”US officials have warned for months that the failure of the TPP would open the door to China to promote its own trade agreements.“We are seeing that play out in real time,” Mike Froman, the US trade representative, said in an interview this week. “We are the only ones who are going to be left on the sidelines as others move forward if [TPP] doesn’t happen.”

More calls to eliminate large denomination bank notes -  UBS is the latest to call for Australia to scrap large denomination bank notes, citing that it would help eliminate the black economy. From Bloomberg:“Removing large denomination notes in Australia would be good for the economy and good for the banks,” UBS analysts led by Jonathan Mott said in a note to clients on Monday. Benefits would include reduced crime and welfare fraud, increased tax revenue and a “spike” in bank deposits, he said…In Australia, 92 percent of all currency by value is in A$50 ($38) and A$100 notes, the larger of which is “rarely seen,” according to the UBS report. Removing bigger denominations would boost digital payments in a country where the use of cash payments is continuing to fall, the analysts wrote…The program would also be positive for banks. If all the A$100 notes were deposited into accounts at the lenders, household deposits would rise by about 4 percent, the UBS analysts said. That would likely be enough to fill the big banks’ regulatory-mandated net stable funding ratios and reduce reliance on offshore funding, they said.Fairfax’s Peter Martin has been calling for the elimination of large denomination bank notes for nearly a decade. As Martin wrote in September:…it’s the use of $100 notes – the kind most of us hardly ever see, and the kind bank transfers should have rendered redundant – that is exploding. Twenty years ago there were only five $100 notes per person in circulation. They were less common than $20 notes, which was appropriate given they were far less used. A decade later in 2005 after the introduction of the goods and services tax (the one we were told would kill the cash economy) we had seven per person, and now we have 12. A graph included in the latest Reserve Bank annual report shows the number of $100 notes in circulation climbing faster than any other denomination.

War on Cash intensifies: Citibank to stop accepting cash at some branches - Less than a week after India’s surprise move to scrap its highest denomination cash notes, another front in the War on Cash has intensified down under in Australia. Yesterday, banking giant UBS proposed that eliminating Australia’s $100 and $50 bills would be “good for the economy and good for the banks.” (How convenient that a bank would propose something that’s good for banks!) This isn’t the first time that the financial establishment has pushed for a cashless society in Australia (or anywhere else).In September 2015, Australian bank Westpac published its “Cash Free Report”, suggesting that the country would become cashless by 2022. In July 2016, Australian payments firm Tyro published an enormously self-serving blog post touting the benefits of a cashless society and saying, “it’s only a matter of time.” Most notably, two days ago, Citibank (yes, THAT Citibank) announced that it was going cashless at some of its Australian branches. The media and political establishments have chimed in as well. In February of this year, the Sydney Morning Herald released a series of articles, some of which were written by officials from Australia’s Department of the Treasury, suggesting that eliminating cash will “save billions”, and that “moving to a cashless society is the next step for the Australian dollar”. This is how it works. The government, media, banks, and even academia have formed a single, unified chorus to push this idea out to consumers that “cashless” is good for everyone. And it’s happening across the planet, from Australia to India to Europe to North America.

Banks Lure $30 Billion Deposits as Indians Struggle to Find Cash - Bloomberg: Indian government’s surprise move to ban high-denomination banknotes on Nov. 8 has seen lenders lure 2 trillion rupees ($29.8 billion), as customers across the nation queue for hours to deposit the old bills. The decision has also put tremendous pressure on the banking system to replenish the funds, as the banned bills accounted for 86 percent of money in circulation. More than 70 million transactions were recorded up to mid-day of Nov. 12, the Ministry of Finance said in a statement late Saturday. There’s adequate money in the currency chests at more than 4,000 locations and re-configuration of dispensing machines to disburse new notes will be completed within two weeks, Finance Minister Arun Jaitley said. Lenders have been caught out by Prime Minister Narendra Modi’s unexpected and widely-praised announcement of the withdrawal of 500-rupee and 1,000-rupee notes, part of a crackdown on tax evasion and the underground economy. The Reserve Bank of India on Sunday urged the public not to be anxious and avoid going to banks repeatedly to draw and hoard cash. “A big regret is that people are getting inconvenienced, but currency replacement of this magnitude will cause some problems,” Jaitley said at a press conference in New Delhi on Saturday. “There are long, but orderly queues. Such a big currency replacement can’t be done overnight.” Jaitley urged people to wait for a few days and to conduct financial transactions using electronic transfers, checks and credit and debit cards.Modi is seeking to fulfill his election promise of recovering illegal income, locally known as black money. The government will take more steps to curb tax evasion, including action against benami property, he said at an event in Goa on Sunday. Benami is property actually owned by someone but held in the name of a third party. Even so, the cash crisis has seen people standing for hours in long lines to exchange the now-defunct notes, and political rivals of Modi’s Bharatiya Janata Party relaying images of the chaos on social media.

"There's Chaos Everywhere" - Indians Angry As ATMs Run Dry After Cash Ban - The blowback from the world's latest strike in the war on cash is unraveling fast in India. This week's decision by PM Modi to ban some high-denomination banknotes (on the premise of fighting corruption) has left "chaos everywhere" according to one official who accused the prmeier of wreaking havoc on the poorest Indians. As Reuters reports, nearly half of India's 202,000 ATMs were shut on Friday and those that operated quickly ran out of the new notes as scores of people descended upon them. Bloomberg's somewhat calming perspective on the events taking place in India... India’s banks have been caught out by Prime Minister Narendra Modi’s unexpected and widely-praised announcement late on Tuesday of the withdrawal of 500-rupee and 1,000-rupee notes, part of a crackdown on tax evasion and the underground economy. Jaitley urged people not to rush to banks immediately and wait for a few days and to conduct financial transactions using electronic transfers, cheques and credit and debit cards. “A big regret is that people are getting inconvenienced, but currency replacement of this magnitude will cause some problems,” said Jaitley.“There are long, but orderly queues. Such a big currency replacement can’t be done overnight.” Indians rushed to deposit 478.68 billion rupees ($7.1 billion) of cash at State Bank of India after the government’s surprise move to abolish high-denomination banknotes, as customers queued for hours to deposit or exchange the old bills and ATMs ran dry. Are very different from the more frantic scenes described on social media and reported on by Reuters... Anger intensified in India on Saturday as banks struggled to dispense cash following the government's decision to withdraw large denomination notes in an attempt to uncover billions of dollars in undeclared wealth. Tempers frayed as hundreds of thousands of people queued for hoursoutside banks for a third day to swap 500 and 1,000 rupee bank notes after the notes were abolished earlier in the week. The banned bills made up more than 80 percent of the currency in circulation, leaving millions of people without cash and threatening to bring much of the cash-driven economy to a halt.

Modi's demonetization: chaos is a feature, not a bug - Prime Minister Narendra Modi's aggressive demonetization of the 500 and 1000 rupee note is causing plenty of chaos in India. A general shortage of money has emerged, massive lineups have formed at banks, and cash-based business has come to a standstill. All this would seem to indicate that the process has been ineptly carried out. But I'd argue that the problems listed above are exactly what one should expect of a well-designed aggressive demonetization. Chaos is a feature, not a bug. As I mentioned in my previous post, a regular demonetization isn't meant to harm anyone. To ensure that no one is left behind, legacy note are gradually replaced with new ones, a process that often takes decades to carry out. See for instance the below pamphlet published by the Bangko Sentral ng Pilipinas (BSP), the Philippines central bank. It shows a slow and staged approach to replacing old peso notes with new ones. The goal of an aggressive demonetization like Modi's is exactly opposite: to leave people behind. To get this effect, the demonetization has to begin suddenly and end quickly.  Why didn't Modi make more preparations for the retirement of the Rs 500 and 1000 note? For instance, to reduce lineups at banks and ATMs the Reserve Bank of India could have begun supplying banks with extra 100 rupee notes several weeks ago in order to ensure that there was sufficient supply come November 8. And maybe the RBI could have nudged banks to purchase more safety deposit boxes to hold cash and hire extra staff to handle the rush. One reason for lineups is that with the demise of the 500 and 1000 note, ATMs are running at a fraction of their capacity.  Indian ATMs have four "cassettes", each holding around 2000 notes. Two cassettes are typically configured for the old 500 rupee note, one for the legacy 1000, and one for the still-existing 100. They typically do not dispense 50s. Thus the maximum an Indian ATM can provide in a post-demonetized India is one cassette worth of 100s, or 200,000 rupees (US$3,000). If everyone in the lineup removes 2000 rupees, the daily limit, that means just 100 people can be served.

India cash crunch update: Still chaotic -  --There were many ATMs and they were all shuttered. More so, there were queues of 50-100 people outside of every open bank branch we passed, similar in size to the queues we passed on the way into work this morning. The simple fact here is that short-term pain is both rising and proving an inadequate description for those bearing an unfair weight in India’s fight against corruption, black money and the informal economy*. It’s a fight that was kicked into high gear on November 8 and saw 86 per cent of currency in circulation — by value — rendered worthless outside of a bank branch. It’s a fight that featured justifiably high on prime minister Modi’s list of election promises. And it’s a fight which has suddenly, we have to imagine, gotten way more disruptive than Modi intended. The simple questions at this stage are:

  • Will the ongoing pain be worth it or will the costs outweigh the benefits?
  • Will the government get what is an increasingly botched job under control? Today’s announcement that banks are to use indelible ink to deter people from converting old cash more than once isn’t comforting.
  • And how long will India’s people put up with this if not?

Without trying to be be tedious, the short answer is that we don’t really know. There have been previous demonitisations in India before, in 1946 and 1978, but they were on a much smaller scale, even if they did betray some clear trends. Here’s Nomura’s Sonal Varma’s guess as to the macro-effects based in part on those previous episodes. It’s from a note out last Friday, with our emphasis and more in the usual place: The government’s decision to demonetise the 500 and 1,000 rupee notes (~86% of the total value of notes in circulation) is a radical step, which will have short-term costs but long-term benefits. Along with the goods and services tax (GST), this move will accelerate the shift of the shadow economy (20-25% of GDP) towards the formal economy.

Government’s Demonetisation Shock Has Hit the Poorest the Most -- For the last few days the world is watching the bizarre spectacle of millions of Indians waiting in long, unending queues to recover their own money from banks, post offices and ATMs even as the government at the Centre remains firmly in denial about the untold hardship to the poor who cannot afford to stay away from their daily wage work even for a day. Some senior citizens have died of exhaustion standing in queues for hours on end. Families have suffered as private hospitals refuse to take currency notes of 1000 and 500 denomination, legal tender just till the other day. To rub salt in their wounds Prime Minister Narendra Modi, on a visit to Japan, makes a statement that he had anticipated short term pain to the ordinary people and goes on to warn that even harsher measures could come to tackle black money in the near future. Meanwhile, the finance minister Arun Jaitley goes about his daily briefings spouting platitudes about how the people are willing to suffer some pain to promote the larger cause of fixing the black economy. He has however admitted that it will take a few weeks for the adequate supply of new currency notes to materialise and that the bank ATMs will take time to  be able to adjust to the size of the new notes. All this comes as no relief to the people of this country who are left wondering whether the government could not have prepared better to face what is undeniably the most extraordinary situation India’s economy has faced since independence. It is now becoming clear that the sheer magnitude of the ongoing exercise of replacing 85% of all currency in circulation was not fully thought through in terms of its logistical complexity. Its basic economics  and ability to prevent future black money generation is also questioned by many. No wonder, developed as well as emerging economies have rarely resorted to demonetisation of this magnitude i.e replacing 85 % of all currency in circulation.

India’s Cash Crackdown: Chaos Continues - naked capitalism by Jerri-lynn Scofield - India is currently in a state of economic chaos, as poor implementation of the government’s ill-conceived demonetization plan to crack down on black money has created massive queues for newly issued currency, and an acute shortage of cash for day-to-day transactions. Just over a week ago, on November 8, Prime Minister Narendra Modi announced a plan to render all Rupees (Rs) 500 and 1000 notes– accounting for more than 85% of cash outstanding– non-legal tender as of midnight that night. I outlined the details of that plan in this post from last week. [Rs 500 is today roughly equivalent to $7.37, while Rs 1000 is about $14.75] To no one’s surprise, the impact of the policy has fallen hardest on India’s poor. About 75% of India’s economy is in the informal sector– meaning it is cash-based– including nearly all the economic activity that the poor participate in. In fact, a handy rule of thumb might be, the poorer the Indian, the more dependent that person is on cash. While in theory, up to Rs 4500 in old 500 and 1000 notes may now be exchanged directly into new currency at either an Indian Post Office or a bank, this is only possible if sufficient supplies of new currency and other old small denomination notes are available to meet demand– which has been far from the case. Any sums above that threshold must first be deposited into a bank account, and can later by withdrawn, subject to limitations. Yet as of 2014, only about 53% (up from 35% in 2011) of Indians have bank accounts. Even those with bank accounts usually receive wages in cash, while only 4% of those aged 15 or older have their wages paid into a bank account.  Moreover, poorer Indians also don’t have credit cards, which the more well-off have been able to use to mitigate the policy’s impact.  In fact, only 22% of Indians even have debit cards (all figures are from the World Bank, as of 2014 unless otherwise noted). Even for those with access to plastic, basic ordinary transactions are conducted largely in cash (e.g., taking public transit or taxis; purchasing vegetables or other foodstuffs; buying medicines,or medical care; and paying school fees (often paid weekly).  As luck would have it, I landed at Kolkata’s Netaji Subhas Chandra Bose airport for a short visit just a couple of hours after Modi made his November 8th speech.  At that time, it was still possible to use the old currency, and I forked over a Rs 500 note to pay the Rs 350 prepaid taxi fare to get to the centre of town– having no idea that would be the last time I’d be able to use one of those notes.  Once I arrived at my destination, I had all of Rs 650 left– including a no-longer-legal-tender Rs 500 note– to pay immediate incidental expenses.  This was not something I was particularly worried about, as I expected to be able to withdraw money from an ATM the next morning.  Little did I know that the ATMs would remain shut for two days, that when they reopened, they would be besieged by queues, and withdrawals– which before the policy change could be made in increments up to Rs 15,000, with multiple transactions permitted– would be strictly limited to Rs 2000 (subsequently increased to Rs 2500).

Indian Economy Grinds To A Halt After Cash-Ban: "Demonetisation Has Shaken Our Faith In The Monetary System" -- Amid scenes of panic across India, following PM Modi's shock decision to withdraw high-value bills in the middle of the sowing and wedding season, Reuters reports the move, aimed at cracking down on the shadow economy, has brought India's cash economy to a virtual standstill. With over 90% of all transactions done in cash, money flows in and out of the black-and-white system... until now, as Devangshu Datta exclaims, "The system works because everybody believes that those pieces of paper will be accepted by everybody else... This move has shaken that trust." Farmers have been left stranded as traders have no cash to pay for their produce, while millions of Indians lined up outside banks and post offices for the ninth day to exchange old banknotes or withdraw rationed money from their accounts.And so India's government on Thursday announced immediate steps to ease a cash crunch for farmers amid widespread criticism. In the latest in a series of ad hoc steps, Modi allowed farmers to withdraw up to 25,000 rupees ($368) a week against their crop loans to ensure that sowing of winter crops "takes place properly", a senior finance ministry official said. But, as Devangshu Datta explains, the demonetisation of Rs 500 and Rs 1,000 currency notes came as a surprise to almost everyone. The details of re-monetisation are still to become entirely clear. What follows is a set of personal opinions of likely outcomes arising from this move to demonetise. Each of those opinions could be entirely wrong but they are all centred on subjects that are worth thinking about.

India’s Cash Crisis May Take Months, Not Weeks To Resolve - naked capitalism  -By Jerri-Lynn Scofield - Economic chaos in India continues, as further details emerge concerning the government’s inadequate planning for implementing its plan to demonetize all Rupees (Rs) 500 and 1000 notes in an anti-corruption effort. Prime Minister Narendra Modi in a November 8 speech announced that these notes– accounting for more than 85% of cash outstanding– would no longer be legal tender as of midnight that night. I outlined the plan in this post last week.  Demonetization has sparked widespread economic suffering, especially among the poorest Indians, as I discussed in this post from earlier this week. I also examined how the government seriously underestimated the technical challenges that accompany making a currency changeover of this magnitude, and only appointed a task force on Sunday to address one of these challenges, the tricky technical task of recalibrating ATMs.Since I published that post, additional information has come to light, suggesting that the Modi government–  including the Finance Ministry and the Reserve Bank of India (RBI), the central bank– is far behind the curve in implementing demonetization, especially in producing the necessary new currency to supply demand. There remains an acute shortage of cash for day-to-day transactions– a shortage that is now expected to take months to resolve– rather than the weeks that the government  previously estimated. This short video of an English language interview with former Finance Minister Palaniappan Chindambaram discusses  the Modi government’s miscalculation: 2,100 crore in currency notes must be replaced [Jerri-Lynn here: under the Indian numeric system, a crore is equivalent to 10,000,000].The capacity of existing printing presses is 300 crore notes per month. If the government wants to replace (and print) 2,100 crore notes, by equivalent  denomination notes to those made non-legal tender by demonetization, it  would take them seven months simply to print the notes, which is why Rs 2000 notes are instead being printed.

The US And CIA Could Finally Be Charged For Their War Crimes Overseas --The International Criminal Court (ICC) may break its longstanding practice of unfairly targeting African nations by charging the United States and the CIA with war crimes.The chief prosecutor for the ICC revealed on Monday that the results of a preliminary probe have suggested the U.S. likely committed war crimes by torturing detainees in Afghanistan.“Members of US armed forces appear to have subjected at least 61 detained persons to torture, cruel treatment, outrages upon personal dignity on the territory of Afghanistan between 1 May 2003 and 31 December 2014,” the report stated.These abuses appeared to be widespread, as the crimes “were not the abuses of a few isolated individuals. Rather, they appear to have been committed as part of approved interrogation techniques in an attempt to extract ‘actionable intelligence’ from detainees.”The report continued: “The information available suggests that victims were deliberately subjected to physical and psychological violence, and that crimes were allegedly committed with particular cruelty and in a manner that debased the basic human dignity of the victims.” Following this assessment, ICC prosecutors have said they will decide “imminently” whether to seek authorization to open a full investigation into the United States’ conduct in Afghanistan that could then lead to war crimes charges. In order to open a full investigation, ICC prosecutors have to establish whether the court has jurisdiction and whether the alleged crimes are already being investigated and prosecuted in the countries involved. Even though the United States is not a member of the ICC, because the crimes were reportedly committed in Afghanistan (a member of the ICC) the American personnel responsible can ultimately face prosecution at the court’s headquarters in the Hague, which is located in the Netherlands.

Implications of Trump’s Victory for Muslims, India and Pakistan - (30 minute video) How did all the pollsters and pundits read the US Presidential Elections 2016 so wrong?
Why did Hillary Clinton fail to get the majority of the electoral votes that pollsters forecast?Who voted for Donald Trump and why? Will America’s international image as a tolerant and inclusive society be damaged by Trump’s win?Will President Trump follow through on his Muslim ban?Will American Muslims be alienated or marginalized by the incoming Trump administration?What will be President Trump’s policy vis a vis India and Pakistan?Viewpoint From Overseas host Faraz Darvesh discusses these questions (in English) with panelists Misbah Azam and Riaz Haq (

Why the Bangladesh Government Is Pleased Trump Will Be the Next US President - The Wire: One of the very first letters of congratulation received by Donald Trump after his startling defeat of Hillary Clinton in the US presidential elections came rather surprisingly from the prime minister of Bangladesh, Sheikh Hasina. In the letter, sent apparently “within hours of the victory’”, Hasina told Trump (addressing him as ‘Excellency’) that she thought his electoral success was down to his “extraordinary leadership to serving the American people and also the global humanity” (sic), and she invited the president-elect and his wife to Bangladesh. The Independent report wondered why, in light of Trump’s comments about Muslims, the prime minister of a country “with the fourth largest Muslim population in the world” would “welcome Donald Trump with open arms and a fawning letter”.   To understand why Hasina will have been relieved that Clinton lost, one must first go back to the vicious 2010 dispute between the Bangladesh government and Noble Peace Prize winner Muhammad Yunus, the founder of the micro-credit agency, Grameen Bank.The dispute involved Hasina calling Yunus a “blood sucker of the poor”, the government (through its proxy, the country’s Central Bank) removing him as managing director of the microcredit bank, the lodging of numerous criminal cases against Yunus (including for defamation and food adulteration), and a vitriolic campaign against both him and Grameen Bank in the pro-government media.Government attacks against any other Bangladesh citizen would likely have gone unnoticed by the US but Yunus was not only a Nobel Peace Prize winner but also someone very well known to Clinton, the US secretary of state at that time. Clinton, a strong supporter of Yunus’s work, was aghast at the action the Bangladesh government sought to take against her friend as well as the microcredit bank itself. As a result, the US state department lobbied very hard to stop his removal from the bank, going as far as to put on hold ‘high-level interaction’ with the Bangladesh government as punishment.

What Will Trump’s Foreign Policy Mean for the World? An Interview With Patrick Cockburn - Patrick Cockburn is a journalist for the Independent who has covered the Middle East for decades and is credited with forecasting the Islamic State’s ascendance in 2014. Seymour Hersh has called him “the best western journalist at work in Iraq today.” Cockburn is the recipient of numerous awards, including the Orwell Prize for Journalism, the Martha Gellhorn Prize and many others. AlterNet interviewed Cockburn, who at the time was based in Erbil, Iraq, about 80 kilometers from Mosul, the location of the major coalition offensive against the Islamic State. We discussed topics ranging from Donald Trump to the efficacy and civilian toll of the Mosul offensive. The interview has been lightly edited for readability.

Dollar’s Rapid Gain Triggers Angst in Emerging Markets - WSJ: The dollar extended its powerful rally, spurring central banks in developing countries to take steps to stabilize their own currencies and threatening to create headwinds for the long-running U.S. expansion. The U.S. currency moved closer to parity with the euro after rising for the 10th straight day, the dollar’s longest winning streak against the euro since the European currency’s inception in 1999. The dollar also moved higher against the yen, which fell to its weakest levels against the U.S. currency since May 30. The gains are even greater against many emerging-market currencies, prompting central banks in a number of countries to intervene to slow the slide. The Mexican peso has fallen 11% against the dollar to record lows since the election, while the Brazilian real has tumbled 6.3%. The currency’s gains make foreign goods and travel cheaper for U.S. consumers and could give a boost to exports from Japan and Europe. But they also are reigniting fears that the dollar’s strength could slow U.S. corporate profit growth and intensify capital flight from the developing world, which would complicate the prospects for economic growth.The dollar’s gains have been driven by bets that fiscal spending and tax cuts proposed by President-elect Donald Trump will spur U.S. economic growth, as well as by the rising probability that the Federal Reserve will raise interest rates next month. Fed Chairwoman Janet Yellen said Thursday that the central bank could act “relatively soon.” The ICE U.S. Dollar Index, which measures the U.S. currency against six others, reached its highest level in more than 13 years Friday. It is up 3.4% since the Nov. 8 presidential election, a period in which the dollar has reversed its recent losses against the euro, yen and Swiss franc. Late Friday in New York, the euro was at $1.0591, from $1.0627 late Thursday, while the greenback bought ¥110.90, from ¥110.13 Thursday. For the week, the dollar gained 2.5% versus the euro and 4% against the yen. The speed of the move has set off reactions by monetary officials around the world. Indonesia’s central bank has intervened repeatedly in the past week by selling dollars and buying government bonds in hopes of slowing the rupiah’s slide. China intervened as well, setting the currency lower for several days but using state-owned banks to prevent the yuan from falling too far, traders said.

Brazil recession worsens in Q3, central bank data shows | Reuters: Brazil's recession deepened in the third quarter, central bank data showed on Thursday, adding to pessimism that there would be no quick end to country's two-year-long downturn. Economic activity in Brazil fell 0.78 percent in the third quarter from the previous one, compared with a decline of 0.42 percent in the second quarter, according to the IBC-Br index, which takes the pulse of the agriculture, industry and services sectors. Brazil's recession - the worst in at least eight decades - began in mid-2014. On a monthly basis, however, the data showed a bright spot. Economic activity rose 0.15 percent in September compared with August, against a decline of 1.01 percent in August versus the preceding month, the central bank said. A Reuters poll of economists had forecast growth of 0.20 percent in September. The recession has left 12 million people unemployed and helped build support for the ouster of President Dilma Rousseff in August after an impeachment trial.

Brazil: Protesters storm Congress seeking military rule - BBC News: Dozens of protesters demanding a military coup have forced their way into Brazil's lower chamber of Congress in the capital, Brasilia. At least 40 demonstrators scuffled with guards and took over the podium as a session began on Wednesday. Denouncing government corruption, they called for a return to military rule - which Brazil saw from 1964 to 1985. In Rio de Janeiro, police fired tear gas at public sector workers protesting against cuts. The protesters swept past security guards and smashed a glass door to get into the parliament chamber, where they shouted "general here, general here" and sang the national anthem. It took police three hours to round up all the protesters, according to Reuters news agency. They were all detained.Later in the day, President Michel Temer's spokesman, Alexandre Parola, called the protest an "affront" and said it was a "violation of the norms of democratic co-existence." "It's worrying and serves as a warning. We are returning to an era of extremes," said one congressional deputy, Betinho Gomes. Public confidence in Brazilian institutions has been eroded by a massive corruption scandal and the impeachment of President Dilma Rousseff. Mr Temer was Ms Rousseff's vice-president before being promoted after her dismissal. Last week she filed court documents accusing him of accepting a large bribe. His party says the money was a legal campaign donation.

Trudeau pitches public-private infrastructure projects to major investors amid global insecurity - Prime Minister Justin Trudeau and a cadre of cabinet ministers are meeting with major Canadian and international investors Monday as part of an effort to convince them to invest their billions in the country's infrastructure. The government is hoping to facilitate a new era of private investments to close an infrastructure gap that some groups peg at roughly $120 billion and growing. Finance Minister Bill Morneau has already committed billions in new public funds to projects across the country, but with deficits ballooning, Ottawa is turning to major pension funds and institutional investment firms such as BlackRock to invest in return for a stable revenue source. BlackRock, the world's largest asset manager, was tapped by the government to help organize the event. Trudeau met the company's founder, Laurence Fink, in January at the World Economic Forum in Davos, Switzerland, and again in New York City in March. "In order to create good jobs, grow the economy and strengthen the middle class, the private and public sectors must work together as partners," he said Monday after meetings at the Shangri-La Hotel in Toronto. Trudeau said investors such as Fink are eager to park their money in Canada — an island of relative stability that is "looking very attractive" — amid growing anti-globalization sentiments around the world.

Goldman Just Killed The "Trump Euphoria" - Concludes Global Growth Will Suffer Under Trump No Matter What -Earlier today, we presented an analysis by Goldman Sachs which emerged with a lukewarm take on Trump's policies as to how they stand to impact US domestic growth, with only Goldman's "adverse" scenario resulting in a "stagflationary", i.e., recessionary outcome. However, in a follow up report by another set of Goldman economists Nicholas Fawcett and Sven Jari Stehn, one which looks at the broader global set of Trump policy consequences on the entire world, it finds that virtually every scenario leads to a global contraction, something we noted yesterday in our post titled "What’s Good For The US In This Case, Is Not Good For Emerging Markets." Here is the summary from Goldman:

  • The November 12 US Economics Analyst used the Fed staff’s FRB/US model to analyse the consequences for the US economy. In today’s companion piece, we assess the potential global economic spillovers from the Trump agenda using our global macro model.
  • Following the US simulations, we analyse four of Mr. Trump’s policy proposals, including fiscal stimulus, trade tariffs, restrictive immigration policies and a hawkish tilt in Fed policy. We first analyse the policies individually and then combine them into possible packages, including our own assumed policy outcomes.
  • Fiscal stimulus has positive global spillovers, as stronger US demand boosts imports for foreign goods and services. Dollar strength reinforces the positive spillovers to DM economies with floating exchange rates, but limits the gains in EM economies.
  • The other components of Mr. Trump’s agenda (trade policies, immigration and Fed) have negative global spillovers as US inflation is higher and US growth slows. The growth drag is generally muted for DM economies with floating exchange rates but significantly negative for some EM economies (including China).
  • Taken together, our analysis suggests that Mr. Trump’s policies might act as a modest drag on global growth. DM growth receives a brief boost from the fiscal stimulus but then weakens and spillovers into EM economies are negative throughout. Moreover, the risks around this base case appear asymmetric. A larger fiscal package could boost global growth moderately more in the near term, but a more adverse policy mix would likely act as a significant drag on world growth in subsequent years.

Barack Obama seeks to calm US allies over Trump concerns - BBC News: President Barack Obama has sought to assure US allies that President-elect Donald Trump will honour the country's international alliances when he takes office in January. Mr Obama told reporters that Mr Trump had "expressed a great interest" in maintaining the US commitment to Nato. During the campaign, Mr Trump said he might abandon a guarantee of protection for fellow Nato countries. His statements alarmed the Baltic states, which fear Russian aggression. Article 5 of the Nato treaty commits allies to come to the aid of a member state under attack.However, in July Mr Trump said the US would only come to the aid of allies if they have "fulfilled their obligations to us". The US has long been pressing its European allies to spend more on defence.

  Turkey Warns Citizens About Travel To US Over "Social Tensions", Anti-Trump Protests - Several days after the US Embassy in Istanbul ordered the families of employees to depart, and advised U.S. citizens to avoid travel to southeast Turkey and "carefully consider the risks of travel to and throughout the country", Turkey has responded by warning its citizens on Saturday about travel to the United States, in response to what the foreign ministry called "increasingly violent protests against President-elect Donald Trump." "Within the context of risks caused by the incidents and of social tension, our citizens who live in the U.S., or who are considering traveling there, should be cautious," the ministry said in a statement. The advisory said the unrest began after Tuesday's elections: "Sometimes the protests turn violent and criminal while protesters (are) detained by security forces," the ministry of foreign affairs said Saturday, adding that "racists and xenophobic incidents increased in USA." "Considering the risks, we advise our citizens living and traveling to US to follow local media, to follow the warning of our embassy in Washington and American security forces, to stay away from protests, to increase their security in work space and to apply to local security when there is a racist or xenophobic attack while keeping calm," the statement added.

Putin Calls Trump, Agree To Normalize Relations --Moments ago the Kremlin released a statement in which the Russian presidency reported that Putin and Trump held a conversation, in which the Russian leader congratulated his American counterpart again on his victory in the presidential election, wished him "success in the implementation of the pre-election program, and noted his willingness to build a partnership dialogue with the new administration on the principles of equality, mutual respect and non-interference in the internal affairs of each other."During the conversation, Putin and Trump "not only agreed to assess the current unsatisfactory state of bilateral relations, but also spoke in favor of active joint work to normalize relations and aim for constructive cooperation on a wide range of issues. The call emphasized in particular the importance of creating a solid foundation of bilateral ties through the development of trade and economic relations. In the call, it was also noted that that "next year marks 210 years since the establishment of diplomatic relations between Russia and the United States, which in itself should stimulate a return to pragmatic, mutually beneficial cooperation, which would meet the interests of both countries, stability and security throughout the world." Putin and Trump shared thoughts on the need for joint efforts in the fight against the common enemy number one - international terrorism and extremism. In this vein, and discussed issues of the settlement of the crisis in Syria.The two agreed to continue contact by phone and agreed to meet in person in the future.

A Trump administration thaw with Russia is ‘unacceptable,’ McCain says - Sen. John McCain, the chairman of the Senate Armed Services Committee, sent his first shot across the bow of President-elect Donald Trump’s national security plans Tuesday, saying that any attempt to “reset” relations with Russia is unacceptable.  “With the U.S. presidential transition underway, Vladi­mir Putin has said in recent days that he wants to improve relations with the United States,” McCain (R-Ariz.) said in a statement released by his office.  “We should place as much faith in such statements as any other made by a former KGB agent who has plunged his country into tyranny, murdered his political opponents, invaded his neighbors, threatened America’s allies and attempted to undermine America’s elections,” he said.  McCain gave tepid support to Trump after the Republican nominating convention, then withdrew it in October after the leak of a 2005 recording revealing Trump making demeaning remarks about women, and then declined to speak about him as he headed toward his own reelection last week. His comments about Russia followed a telephone call between Trump and Putin on Monday and came amid reports of upheaval in the national security transition.In their conversation, the Kremlin said, Putin and Trump agreed that U.S.-Russia relations are “unsatisfactory” and vowed to work together to improve them. Trump’s office later said that they had discussed shared threats and challenges, and the long-term relationship between them.

Ridiculous Lame Duck Agreements: Obama, EU Agree to Keep Sanctions on Russia - Outgoing US president Barack Obama agreed with the EU to Keep Sanctions on Russia. It was an agreement that neither may be able to live up to.  US president Barack Obama and EU leaders agreed on Friday to keep in place economic sanctions imposed on Russia over the Ukraine crisis, dispelling suggestions they might be eased because of president-elect Donald Trump’s expressed sympathies for Moscow.The move by six government heads at an informal summit in Berlin hosted by chancellor Angela Merkel highlighted their commitment to close transatlantic cooperation amid concerns that Mr Trump’s election might bring divisions between the US and the EU, reports Stefan Wagstyl in Berlin. Mr Obama, making a farewell visit, urged the EU leaders to work on common challenges with the incoming Trump administration “on the basis of the core values that define the United States and Europe as open democracies,” said the White House.I am a firm believer in two things. Sanctions don’t work. Free trade does work.I would love to see a statement by Trump that the sanctions against Russia will end day one. That would set the proper tone for NATO discussions.The EU lost as much by those sanctions in loss of trade as it harmed Russia. And speaking of the EU, those diplomats cannot guarantee anything. All it takes to sink sanctions on Russia is a single EU country that refuses to go along.

Russia-friendly political novice wins Bulgaria presidential election: exit polls | Reuters: Bulgarian Socialist ally Rumen Radev, a Russia-friendly newcomer to politics, won Sunday's presidential election by a wide margin, exit polls showed, prompting centre-right Prime Minister Boiko Borisov to pledge to resign. Radev, 53, entered Bulgarian politics on a wave of discontent with the ruling centre-right's progress in combating corruption, disappointment with the European Union and concerns among voters over alienating an increasingly assertive Russia. A former air force commander, Radev has argued Bulgaria needs to be pragmatic in balancing the requirements of its European Union and NATO memberships while seeking ways to benefit from a relationship with Moscow. Exit polls showed Radev, who is backed by the opposition Socialist party, winning 58.1-58.5 percent of the vote, compared with 35.3-35.7 percent for Tsetska Tsacheva, the 58-year-old candidate of the ruling GERB party. Compounding GERB's problems, Tsacheva was seen as lacking Borisov's charisma. "The loss of GERB is definite and clear," Borisov told reporters after exit polls were published. "In this election, the people showed us that something is not as it should be. That our priorities may be good, but obviously there are better ones. So the most democratic thing, the right thing to do is to (resign)," he said.

Bulgaria Elects Pro-Russian Pro-Military President in Shock Election Result for EU -- In what can only be a shocker to the West and the pro-war branch of NATO and the European Union, the Bulgarian people, much like the United Kingdom and United States voted tonight and said: Enough! From Reuters:A former air force commander, Radev has argued Bulgaria needs to be pragmatic in balancing the requirements of its European Union and NATO memberships while seeking ways to benefit from a relationship with Moscow.Exit polls showed Radev, who is backed by the opposition Socialist party, winning 58.1-58.5 percent of the vote, compared with 35.3-35.7 percent for Tsetska Tsacheva, the 58-year-old candidate of the ruling GERB party.Compounding GERB’s problems, Tsacheva was seen as lacking Borisov’s charisma.“The loss of GERB is definite and clear,” Borisov told reporters after exit polls were published.“In this election, the people showed us that something is not as it should be. That our priorities may be good, but obviously there are better ones. So the most democratic thing, the right thing to do is to (resign),” he said.Borisov’s resignation would likely lead to an early election as soon as March and could be followed by months by difficult coalition talks among several political groupings. “There isn’t an alternative to take over government,” said political analyst Ognian Minchev. “The Socialists and the ethnic Turkish MRF party have lost much of their public trust only two years ago…Early elections are inevitable,” he said.

Kremlin Gains Two More European Allies As Bulgaria, Moldova Elect Pro-Russian Presidents - The good news just keeps going Putin's way. Just days after Trump defeated the Kremlin's nemesis Hillary Clinton, and at the same time as NATO is panicking over a potential shift in strategy and funding by the Trump administration and as Russian forces prepare for another blitz assault on Syria to cement their hold over Syria, on Sunday pro-Russian candidates won presidential elections in Moldova and Bulgaria on Sunday, giving Moscow new allies in its efforts to regain influence in parts of Eastern Europe it regards as its backyard. And while Russia is the clear winner, one loser to emerge bruised from the two votes is the European Union. In the former Soviet republic of Moldova, Socialist party candidate Igor Dodon won 55.5% of the vote, according to preliminary results from Moldova’s electoral commission, beating his pro-European Union rival, Maia Sandu, in a second-round runoff. In Moldova, Socialist party candidate Igor Dodon won 55.5% of the vote, according to preliminary result In Bulgaria, Socialist-backed Rumen Radev secured 58.1% of the vote, according to an exit poll by Alpha Research released on national television, seeing off the center-right government’s favored candidate, Tsetska Tsacheva. Prime Minister Boiko Borisov said he would resign, possibly opening the way for a snap election in the European Union’s poorest member state.

A swan song for TISA talks - The prospects for concluding negotiations on the Trade in Services Agreement now appear slim after a senior trade official close to the talks told POLITICO that it’s looking less likely that trade ministers will gather for an anticipated early December meeting in Geneva — a get-together at which negotiations had been expected to wrap up.  “I think it’s less certain whether ministers will get together for TISA; that will depend on whether they think a deal is possible,” said the official, adding that negotiators at the technical level are still expected to meet at the end of the month. The effort to finalize TISA talks has been hampered by friction with the European Union, which the U.S. blames for dragging its feet on how to handle rules on data flows. The agreement being negotiated by the U.S., EU and 21 other governments could now lie fallow for a while, given President-elect Donald Trump’s critical view of new trade initiatives. But the official held out some hope that a Trump administration could put its attention on the deal at some point. “There is a higher likelihood that a Trump administration decides to pursue TISA than there is that the EU will get its act together on data in the next four years,” the official said. “I doubt very much that the Trump administration has thought very much at all about TISA. When they do think about it, they may look at it as being a different kind of trade agreement, because it’s not dealing with industrial goods. They may see the broad support for it among U.S. stakeholders. They may see the support for it in Congress and see it’s interesting.”

Chaos Ensues As Europe Splinters In Response To Trump: UK, France, Hungary Snub EU Emergency Meeting - While America's so-called "establishment", the legacy political system and mainstream media, appear to be melting, and transforming before our eyes into something that has yet to be determined, Europe also appearst to be disintegrating in response to the Trump presidential victory, and as the FT reports, Britain and France on Sunday night snubbed a contentious EU emergency meeting to align the bloc’s approach to Donald Trump’s election, exposing rifts in Europe over the US vote. Hailed by diplomats as a chance to “send a signal of what the EU expects” from Mr Trump, the plan fell into disarray after foreign ministers from the bloc’s two main military powers declined to attend the gathering demanded by Berlin and Brussels. The meeting, which comes as Trump appointed his key deputies - chosing the more moderate establishment figure, RNC chairman Reince Priebus, to be his chief-of-staff over campaign chairman Stephen Bannon, who becomes chief strategist and counsellor - was supposed to create a framework for Europe in how to deal with a "Trump threat" as Europe itself faces an uphill climb of contenuous, potentially game-changing elections over the coming few months as we described last week in "European Politicians Terrified By "Horror Scenario" After Brexit, Trump." Instead The split in Europe highlights the difficulties "European capitals face in coordinating a response to Mr Trump, who has questioned the US’s commitments to Nato and free trade and hinted at seeking a rapprochement with Russian president Vladimir Putin" much to the amusement of famous euroskeptic Nigel Farage who was the first foreign political leader to meet with Donald Trump at the Trump Tower over the weekend.

 German media demands military buildup in response to US election: In German commentaries on the foreign policy consequences of the American presidential election, a central theme has emerged: With the election of Donald Trump, the United States has departed from the community of Western politics and values, and Germany must therefore build itself up militarily, unite Europe under its leadership, and take on the international responsibility for the defence of “Western values.” This is a thread which runs through every political camp. While some in the conservative media want to maintain close relations with the US under Trump, they combine this with the demand for military buildup and a common European defence policy. Thomas Schmid, publisher of the Welt newspaper, considered it “reckless to now bid farewell to the US,” saying that Europe and America belonged together. “At the same time,” he added, “Europe should and must become something like a great power if it wants to assert itself in the world and on the side of the perhaps foundering United States.” In the Frankfurter Allgemeine Zeitung (FAZ), Berthold Kohler lamented “America’s turn away from the world,” and drew the following conclusion: “The divided Europeans will have to come together on the important questions and fortify themselves to look after their interests.” In the same paper, Holger Steltzner added: “The member states [of the European Union] will have to substantially increase their spending for domestic and foreign security.” Both Kohler and Steltzner are editors of the FAZ.

Trump right on defence spending, says NATO chief Jens Stoltenberg: US President-elect Donald Trump is right to call on Europeans to spend more on defence, NATO Secretary General Jens Stoltenberg said on Friday. Stoltenberg made his remarks in an interview with euronews at an event organised by the German Marshall Fund of the United States in Brussels. Trump called the 70-year-old alliance “obsolete” during his election campaign and said the US might only stand by the principle of collective defence if those members who had been attacked had paid their NATO dues. It left some members from eastern Europe and the Baltic states worried that the United States would not intervene if they were attacked. Below is an excerpt from that interview with the head of NATO.

Germany Launches Biggest Crackdown On Islamists In 15 Years: Raids 190 Mosques, Bans Radical Organization -- In its latest massive crackdown on the domestic radical Islamist threat, German police launched dawn raids in 60 different cities on about 190 mosques, flats and offices believed to have links to the Islamist missionary network ‘The True Religion,’ which is known to have been distributing free Korans at infostands throughout Germany.De Maiziere said Tuesday's actions across 10 German states were the biggest crackdown on a group since the government shut down a movement known as Kalifatstaat (Caliphate State) in 2001, accusing it of "extremist activities". The government has also banned five other organization accused of having Islamist-Jihadist aspirations since 2012.The raids were carried out in Hesse, North Rhine-Westphalia, Bavaria, Bremen, Lower Saxony and Hamburg. The operation is also being carried out in the capital, Berlin, where some 50 apartments and offices have been searched. In total, police raided the network’s premises in 60 German cities, German Interior Minister Thomas de Maziere said at a press conference that followed the operation. There have been no reports of arrests as of yet. The group is widely known for its ‘Lies!’ (read) initiative, which distributes free copies of the Koran while calling on Germans to “read the noble” book. This morning, apparently in response to the police operation, they wrote a post declaring that “Germany has banned the Koran.”

Harsh words between Germany and Turkey: There has been a testy exchange of views between the foreign ministers of Germany and Turkey. Relations between Ankara and Brussels have been particularly strained since a failed Turkish coup in July. European leaders worry that Ankara is using the attempted putsch as a pretext to crack down on dissent. Turkey, meanwhile, has been angered by what it sees as a lack of solidarity. Speaking at a joint press conference in Ankara, Germany’s Foreign Minister voiced concern about the mass arrests and treatment of the media since July’s attempted coup in Turkey. Frank-Walter Steinmeier said he was against the EU breaking off accession talks with Turkey, a crucial partner for the bloc in stemming the influx of migrants from the Middle East. He also added that Germany supports its NATO partner in fighting militant threats. Turkish Foreign Minister Mevlut Cavusoglu says Turkey is “fed up” with the condescending attitude of the European Union in talks over its application to join the bloc. His blunt comments reflect growing exasperation in Turkey about EU criticism of its record on human rights. There is also frustration that, 11 years after starting negotiations, Ankara’s prospects of gaining membership look more remote than ever. Cavusoglu added that the Turkish people would decide whether or not to reinstate the death penalty, a decision that could spell the end of Turkey’s accession bid.

  French Government Creates Illegal Database On Over 60 Million Citizens -- By setting up a single database centralizing information on the entire French population behind their backs, France’s Socialist Party (PS) government is giving the state vast repressive powers. Coming amid the state of emergency, it constitutes a fundamental threat to democratic rights, in particular to opposition within the working class to austerity and war. The database, named “Secure Electronic Titles” (TES), was decreed into existence on October 30. It centralizes the personal and bio-metric data of all holders of passports or national identity cards. It concerns over 60 million people, that is, virtually the entire French population. The official launch of the database took place last Tuesday in the Yvelines area and will be extended across France at the beginning of 2017. The database was prepared in violation of the law, behind the backs of the population. It was first proposed in 2011 at the National Assembly, during a debate on a secure national ID card, and sharply criticized by the National Commission on Information-Processing and Liberties (CNIL). While recognizing as “legitimate the use of bio-metric information to identify a person,” the CNIL ruled that “bio-metric data must be conserved in an individualized data system.” The new TES replaces and combines a former TES, which contained passport data, and the National Management Database (FNG), which contained ID card data. It also adds data, including a digital photo of the face, fingerprints, eye data, and physical and electronic addresses. These data are conserved for 15 years (for passports) and 20 years (for ID cards). The TES database violates legal limits on the use of bio-metric data, moreover, since fingerprints and retina scans are indelible and can be used to remotely identify individuals, and not simply authenticate that an individual presenting himself to the state indeed is who he purports to be. In 2012, the Constitutional Council invalidated an attempt to set up a similar database, ruling that such a database would serve not only to authenticate but also to identify individuals.

80,000 Catalans Gather Demanding Independence From Spain - After Brexit in the UK and Donald Trump's election in the US, the political elites of the world are slowly waking up to the inevitability that the will of the people can not be ignored forever.  In Northern Europe, the electorate has rebelled against political elites, like Angela Merkel, who have embraced "open borders" and the influx of refugees from war-torn areas in the mid-east that have brought with them increasing violence and terror attacks.  In the U.S., the rebellion is the direct result of Americans being fed up with a federal government that is defined by cronyism and complete dysfunction.  Now, the latest demonstration of an electorate fighting back against its elected officials comes from Spain as 80,000 people rallied in Barcelona on Sunday in a show of support for Catalan leaders locked in a political battle with Madrid over an independence referendum.  In Catalonia, separatists complain their relatively wealthy region is overtaxed by an oppressive central government in Madrid to subsidize poorer regions of the country.   While separatists site a November 2014 "mock referendum" in which 90% of Catalans supported secession, other polls suggest the population is roughly split on the idea.  Meanwhile, Spain's central government has consistently held that individual regions do not have the constitutional authority to hold their own referendum votes that concern the "integrity of the country."  Per the Associated Press: Separatist sentiment has been on the rise in recent years in the wealthy northeastern region that speaks Catalan along with Spanish. Separatists complain that Catalonia pays more taxes than it should to the central government. In 2014, then-president Mas ignored an order by Spain's Constitutional Court to suspend a mock referendum on Catalan secession. Mas' regional government went ahead with the informal poll anyway, staffing voting stations with volunteers. Nearly 90 percent of the ballots were in favor of independence, but only 2 million of the 5.4 million eligible voters cast ballots.

 One reason why it's almost impossible for Italy to become the next country to leave the EU - A little-known article of the Italian constitution means that it is highly unlikely that Italy will be the next country to leave the European Union — an event that would have the potential to cause chaos across Europe.  Writing in a research note discussing the likely outcomes and impacts of the country's upcoming referendum on constitutional reforms, Morgan Stanley staff members Daniele Antonucci and Phanikiran Naraparaju point to Article 75 of Italy's written constitution, which enshrines the fact that Italy cannot hold a referendum on anything related to international treaties.  Here is the pertinent passage of the constitution:  "A general referendum may be held to repeal, in whole or in part, a law or a measure having the force of law, when so requested by five hundred thousand voters or five Regional Councils. No referendum may be held on a law regulating taxes, the budget, amnesty or pardon, or a law ratifying an international treaty."   Membership of both the European Union and the euro, are by definition international in nature, and as a result, for Italy to give its people a say on leaving either, the constitution would have to be changed. Obviously, that is no easy task and would require a strongly eurosceptic government with a serious will to leave the EU. Greenpeace sent me, and thousands of others, a message yesterday. They see Trump as an opportunity to raise funds.

 Monte Paschi Taps Bondholders for Swap as Rescue Deadline Nears - Banca Monte dei Paschi di Siena SpA is offering stock to holders of 4.3 billion euros ($4.6 billion) of bonds, a key piece in the plan to raise funds from investors and turn around the ailing Italian lender. The world’s oldest bank will give equity up to 100 percent of face value for the subordinated bonds, according to a statement late on Monday. Monte Paschi’s 369 million euros of notes due April 2020 -- which are included in the plan -- rose to as high as 81 cents on the euro on Tuesday before paring to 73 cents at 10:10 a.m. in London, according to data compiled by Bloomberg.Chief Executive Officer Marco Morelli is under pressure to secure fresh funding for a bank that was bailed out twice and has burned through 8 billion euros in investors’ equity since 2014. While the CEO has pledged to raise 5 billion euros in capital, the deal is under threat from an Italian referendum on Dec. 4 that could topple the government of Prime Minister Matteo Renzi and further undermine investor confidence in the country’s troubled lenders.“The banks are being helped one by one, which is slowly solving the problem,” said Tomas Kinmonth, a credit strategist at ABN Amro Group NV in Amsterdam. “If Monte Paschi goes well, the top five banks are insulated so the industry won’t collapse, but there are still over 100 smaller zombie banks weighed down by non-performing loans.”  Monte Paschi, which emerged from European stress tests published in July as the region’s weakest lender, is struggling to restore profitability and raise capital. CEO Morelli, 54, who has been running Italy’s third-biggest bank for just two months, is seeking to persuade shareholders that the lender can turn a corner by cutting bad loans and eliminating jobs.

Sweden Begins Planning Transition From Cash To Digital Currency - In the aftermath of the ECB halting production of the €500 banknote, and more recently, India phasing out its highest denomination bills instantly eliminating some 86% of the cash in circulation as increasingly more countries make a move toward a cash-free society, another central bank - the world's oldest - has started planning its own transition away from paper cash. Sweden’s Riksbank, which was the first central bank in the world to issue paper currency in the 1660s, is preparing to become a monetary pioneer yet again, and has launched a project to examine what a central bank-backed digital currency would look like and what challenges it would pose. As Reuters writes, the RIksbank could become the first major central bank in the world to create its own virtual money as the use of cash declines, Deputy Governor Cecilia Skingsley said on Wednesday. The central bank hopes to take a decision on whether to start issuing what it calls an ekrona in the next two years. What is perhaps more notable is that should the central bank launch a digital currency few would notice; the value of cash in circulation in Sweden has fallen to around 1.5% of GDP from 10% of GDP in 1950. Sweden is already mostly a non-cash nation: just like Citi in Australia, local bank branches are moving away from cash handling while cash machines are scarce in much of the country. Some shops have stopped accepting cash payments altogether. The Riksbank, like other central banks, already provides electronic money through accounts to banks and clearing organisations. But it only provides central bank money to individuals through notes and coins. Digital currency functions like payment cards, allowing users to make online transactions across borders instantaneously. It has been growing in popularity as more people use the internet to shop. The major difference between digital and paper currency is that every single transaction is logged, and the value of money can be remotely "adjusted", making it impossible to use cash as an value-preserving alternative to negative interest rates. It is also the reason why central bankers loathe cash in a time of negative interest rates.

Julian Assange Gives Sweden First Ever Statement Over Rape Allegations -- In the first signs of movement following years of legal limbo involving the exiled Wikileaks founder Julian Assange, whose releases of hacked DNC and Podesta emails over the past few months have had a dramatic impact on the US political system, Swedish Chief Prosecutor Ingrid Isgren arrived at Ecuador's London embassy to question Assange, following a prolonged deadlock in an alleged rape case opened in Sweden more than six years ago. As CNN reports, Assange gave a statement in the presence of a Swedish prosecutor regarding allegations he sexually assaulted two women in the country six years ago, WikiLeaks tweeted Monday. The questioning took place in the Ecuadorian Embassy in London, where the 45-year-old Australian has been residing since claiming political asylum back in 2012, when Sweden issued a European arrest warrant for him. An Ecuadorean prosecutor is interviewing Assange, asking questions the Swedish side had submitted previously. The interview is attended by Sweden’s chief prosecutor Ingred Isgren.

Swedish women get hotline to report mansplaining - Women who have things mansplained to them in the workplace can now report it to a dedicated hotline. Unionen, Sweden’s largest union, is encouraging members to call up when male colleagues give them unsolicited lectures on things they already understand.  The organisation, which represents 600,000 private sector workers, launched the advice line on Monday and said it will be open from 10am to 4pm everyday for a week as part of a campaign to highlight and stamp out the insidious and damaging practice. For those who might not be familiar with the modern portmanteau, the union defined mansplaining as when “a man explains something to a woman without being asked, particularly something which she might already know more about than the man”. Unionen said the commonplace practice diminishes women, by making them appear less competent than they are. A study by the American Psychological Association found that men "tend to overestimate their intelligence to a much greater extent than women" and showed that "self-assurance in men grows with age".

 Germany rejects debt relief for Greece after Obama offers support | Reuters: Germany on Wednesday opposed calls for debt relief for Greece after U.S. President Barack Obama offered support for such a mechanism for the recession-hit euro zone state during a trip to Athens. German Finance Minister Wolfgang Schaeuble said late on Tuesday granting Greece debt relief would do it a disservice. "Whoever says 'we will relieve your debts' is doing Greece a disservice," the finance ministry confirmed Schaeuble as saying after the Passauer Neue Presse daily reported it. Schaeuble's comments were not made directly in response to Obama, a finance ministry spokesman added. Athens signed up to a third economic bailout package of up to 86 billion euros last year but wants long-term debt restructuring to exit its crisis. Germany, which has long said there is no immediate need for debt relief for Greece as it would discourage much-needed structural reforms, said it noted the comments from Obama, who flies to Berlin later on Wednesday. "We have noted that President Obama has pointed to the importance of debt relief. The euro group agreed in May on a timetable on exactly that subject .. regarding measures for the short term, and later in 2018 for mid-term measures," said government spokesman Steffen Seibert at a news conference.

  ECB primed for stimulus boost, if needed: minutes -  European Central Bank policy makers signaled at their last meeting that they were ready to boost their EUR1.7 trillion stimulus again if needed to support the eurozone's weak economy, and expressed concerns about weak inflation. At the October 20 rate-setting meeting, ECB officials agreed widely on the need "to execute [the bank's] asset purchases in line with its past decisions, and to adopt further measures, if needed," according to minutes of the meeting, published on Thursday. The ECB delayed in October a decision on whether to extend its EUR80 billion a month bond-purchase program, which is due to end in March. Most economists expect the central bank to announce a six-month extension of the program at its next rate-setting meeting on Dec. 8. According to the minutes, policy makers expressed concerns that underlying inflation "still lacked a convincing upward trend." They warned that the bloc's economic recovery "continued to be predicated on the prevailing very favorable financing conditions" for households and firms, which largely reflected the ECB's easy-money policies, the minutes said. Still, policy makers were "mindful not to trigger undue expectations in financial markets" about future monetary policy steps.

Wolfgang Schäuble sets out tough line on Brexit FT - Germany’s finance minister has set out a tough line on EU divorce talks with Britain on issues from tax breaks to exit costs, dashing Downing Street hopes Berlin would soften Europe’s stance on a UK departure from the bloc. Theresa May’s government has been looking to Germany, a net exporter to the UK, to temper French demands that Britain “pay a price” for its decision to leave. But Wolfgang Schäuble told the Financial Times that, even after Brexit, the UK would be bound by tax rules that would restrict it from granting incentives to keep investors in the country — and would also face EU budget bills for more than a decade. “Until the UK’s exit is complete, Britain will certainly have to fulfil its commitments,” he said. “Possibly there will be some commitments that last beyond the exit … even, in part, to 2030 … Also we cannot grant any generous rebates.” Berlin had been one of the most UK-friendly EU governments in the immediate aftermath of the vote to leave the EU, with Chancellor Angela Merkel signalling Europe risked damaging ties to Britain if it drove a hard Brexit bargain. But following intense lobbying by French President François Hollande, who is concerned an easy exit could encourage anti-EU political forces within his own country, Germany has begun to harden its line. In addition to demands for long-term financial payments, Mr Schäuble insisted Britain must stick to international rules on investment incentives, a clear signal Berlin would closely watch commitment like those Mrs May made to carmaker Nissan, which recently won government assurances before it agreed to build new models in the UK “These rules apply to all whether EU members or not,” he said.

Brexit and the Law -  A round-up of Brexit options, hard and soft. Originally published at Bruegel. What’s at stake: last week, the UK High Court ruled that the triggering of Article 50 – and therefore the Brexit process – should involve the UK Parliament. The Government will appeal the decision but this has created a new wave of uncertainty about the timing of Brexit, and on what this involvement can mean in practice. We review the different opinions. Jo Murkens on the LSE blog has a very good explainer of the legal basis of the judgement, which he considers exemplary in its clarity and reasoning. The decision’s focus is strictly constitutional, not political: the only question it examined was whether, as a matter of UK constitutional law, the Crown, acting through the government, is entitled to use prerogative powers to trigger Article 50 in order to cease to be a member of the European Union. This – it turns out – hinges on a balance between constitutional requirements and individual rights. David Allen Green writes in the FT that the High Court decision is as strong as it could be and creates a substantial problem for the prime minister’s Brexit policy. The government should look hard at the reason for the court’s judgment. Central to the judges’ thinking is the impact that leaving the EU will have on the rights of UK citizens: the court has said that extinguishing such rights cannot be done by mere executive action. But the problem is more than one of form. The difficult and interlocking legal issues created by the UK leaving the EU are such that the matter is not for a prime minister, or indeed a court, to decide. Camilla Macdonald discusses three options and argues that the ruling is not a victory for “soft” Brexit. The first option is for the government to succeed in overturning the result on appeal to the Supreme Court. MPs will then have the chance to debate at length, but they will have lost the leverage over the Government that the current ruling affords them. Second, the Government may lose the appeal and yet manage to “face down the rebels” in the Commons in time to meet May’s timetable of triggering Article 50 by March. third option – which Macdonald considers the most likely – is that the Government loses its appeal and is forced to introduce primary legislation, i.e. a Brexit bill, that will make it difficult, but not impossible, to meet the deadline. This is likely to force the Government to make concessions to MPs, but not necessarily in any form that will amount to a commitment to a “soft” Brexit.

Theresa May facing Cabinet backlash over refusal to deal with Nigel Farage despite his links to Donald Trump - Theresa May is facing a growing Cabinet backlash over her decision to dismiss Nigel Farage despite him being the only British politician to meet with Donald Trump since his victory.The Telegraph understands a number of members of the Cabinet and other Government ministers believe the Prime Minister's allies have made a mistake by referring to Mr Farage as an “irrelevance”.One Cabinet source also accused Downing Street of having "made no plan" for a Trump victory, despite Government claims that officials have for months been holding talks with members of his inner-circle.   Mrs May has made clear that none of her ministers will be allowed to speak to Mr Farage, the interim Ukip leader, despite his close links to Mr Trump. Mr Farage on Saturday spent nearly one hour with the president-elect at Trump Tower in New York. Writing in the Telegraph, Mr Farage says that he was greeted like a “long-lost friend” by Mr Trump, who he supported on the campaign trail in America. Mr Farage also discloses that Mr Trump’s team has raised concerns about the “unrelentingly negative” comments made about him by senior Conservatives and members of Mrs May’s Downing Street staff. He also refused to deny that Government ministers have already been in touch with him to talk about Mr Trump. Senior sources in the Government have now made clear that Downing Street will have to back down and allow ministers to have conversations with Mr Farage if it helps them to develop their relationship with the president-elect’s inner circle.

Theresa May’s Donald problem --  — U.K. Prime Minister Theresa May had a simple message during her first foreign policy speech at the Lord Mayor’s banquet in London Monday: Free trade can save the world, and Britain will be its champion. “Our departure from the European Union is not — as some people have wrongly argued — Britain stepping back from the world,” May told an audience of business leaders. “But an example of how a free, flexible, ambitious country can step up to a new global role.” Her only problem: U.S. President-elect Donald Trump. As she steers a course for her country after Brexit, May has cast herself on the international stage as a global advocate of responsible free markets. But the success of that agenda, and Britain’s foreign policy, now hang on her ability to influence the new man in the White House. “There is one particular problem for Theresa May,” said former foreign secretary Sir Malcolm Rifkind. “On the free trade issue, she’s going to run right up against Trump’s protectionism — but this is an area, along with NATO and various other things, where she might be able to influence him.” In Monday’s speech, the prime minister presented a vision of Britain that was both “profoundly pro-business,” striking free-trade deals across the world, and also an advocate for the “overlooked,” a nation that made sure that “prosperity delivered by free trade and free markets is shared by all.” It is a blueprint she thinks other countries can emulate to hold back the populist tide. As world leaders come to terms with last week’s U.S. election result, British diplomats have scrambled to try to establish the president-elect’s priorities and likely policy direction. Over the weekend, a memo from Britain’s U.S. ambassador, leaked to the Sunday Times newspaper, assessed Trump as “open to outside influence.” The British team in Washington believe they have better ties with Trump’s team than any other country — with or without UKIP leader Nigel Farage, whose bid to become an unofficial envoy to Trump’s team is viewed extremely dimly by Downing Street insiders. “Trump has already made it clear in specific deeds and words that the U.K. is the country he is most comfortable with, partly because of Brexit,” said Rifkind, a veteran of both Margaret Thatcher and John Major’s cabinets and now a senior associate fellow at the Royal United Services Institute think tank.

‘There is no plan’ for Brexit, leaked memo says - The government says it "does not recognise" a leaked memo's claim that it has no overall plan for Brexit.  A spokesman said the "unsolicited document" came from an external accountancy firm and had "no authority". Obtained by The Times, it warns Whitehall is working on 500 Brexit-related projects and could need 30,000 extra staff. And it highlights "divisions within the cabinet" over Brexit strategy. Transport Secretary Chris Grayling said he had "no idea" where the report - which claims it will take another six months before the government decides precisely what it wants to achieve from Brexit or agrees on its priorities - had come from. Speaking on BBC Radio 4's Today programme, Mr Grayling said the document was not a government memo and rejected its contents. "My own experience is very different to that," he said, describing the Brexit project as a "team effort". Mr Grayling said negotiations would be "complex but by no means the challenge that is set out in today's newspaper story". He rejected the memo's estimate of an extra 30,000 civil servants, saying: "I do not know what 30,000 people would do in this process." Prime Minister Theresa May hopes to invoke Article 50 - beginning the formal two-year process for leaving the EU - by the end of March next year.

Theresa May attacks Deloitte and BBC over leaked Brexit memo - Theresa May has launched direct attacks on one of the world’s biggest consultancy firms and the BBC after a leaked memo claimed the Government could not cope with Brexit. The memo from Deloitte said that an extra 30,000 civil servants may be needed to cope with the additional workload, adding that Whitehall is working on 500 Brexit-related projects. The report in The Times newspaper, which claimed that the memo had been “prepared for the Cabinet Office”, was at the top of the news bulletins on BBC Radio 4’s Today programme yesterday morning.  However, the Prime Minister’s official spokesman said the memo was “unsolicited” and that the consultant who wrote it had not been working for the Government. She accused Deloitte of “touting for business” and criticised both The Times and the BBC for the way in which they reported the story. Iain Duncan Smith, a former work and pensions secretary, said that Deloitte should be stripped of Government contracts.Senior Eurosceptic Conservative MPs said the story was “patent nonsense” and suggested the release of the document was part of a plot by Remain campaigners to frustrate Brexit. After a day of criticism Deloitte released a statement admitting that the memo was “not commissioned by the Cabinet Office” and was “conducted without access to No 10 or input from other government departments”. It said that the memo, which was written on Nov 7 by Keith Leslie, a partner at Deloitte, had been intended for an “internal audience”.

How the House of Commons will fight Brexit— If you thought Brexit was chaotic now, just wait until divorce proceedings actually start. Within the next two years, U.K. Prime Minister Theresa May must get parliament’s approval to kickstart Britain’s withdrawal, convert all EU law into U.K. law, introduce an immigration bill restricting freedom of movement from the Continent and negotiate a divorce deal with Brussels that doesn’t wreck the economy or spark a fresh bid for Scottish independence. Even assuming she is able to strike a deal with 27 EU leaders, May must ensure her 328 MPs keep discipline throughout the process and do not break ranks to back pro-EU wrecking amendments or hardline Brexit rebellions designed to force her hand. Ameet Gill, former director of strategy for the previous Prime Minister David Cameron, said: “From my experience, working for the leader of the Conservative Party, you never want to put anything with Europe in its title — or anything Europe-related — on the floor of the House of Commons because you know what the Tory party is like on this.” And that’s before the House of Lords is added into the mix. In a series of conversations with POLITICO, senior figures who have worked at the highest levels of government said May’s strategy for engaging parliament was a recipe for chaos and warned of dramatic late-night votes, knife-edge results, sudden rebellions and unexpected government climb-downs in a drama that will shape British politics for years to come.

Drop Brexit case appeal, senior Tories urge May - BBC News: Theresa May should abandon an appeal against the court ruling that means MPs must vote on the UK leaving the EU, leading Conservatives say. Sir Oliver Letwin, former head of the government's Brexit preparations, and two former law officers said the case should not go to the Supreme Court. Instead, they want ministers to bring a bill to Parliament to start the process of Brexit as soon as possible. The government said it would robustly defend its position at the appeal. The MPs voiced their concerns after the Supreme Court decided on Friday that the Scottish and Welsh governments should have a say at the appeal hearing in December. Former minister Sir Oliver, who oversaw a "Brexit Unit" in the Cabinet Office after the referendum, told BBC Radio 4's Today Programme that the Supreme Court hearing could see ministers' powers outside Parliament curbed. He added that one of the advantages of bringing a "fast and tightly timetabled and constrained bill" to Parliament, giving the government the ability to trigger Brexit without any constraints on its negotiating power, was that it avoided "any risk of the Supreme Court deciding to accord the devolved administrations some rights or even some veto powers" over triggering Article 50.

Government scraps plans for controversial nationality census for 2-5 year-olds in humiliating U-turn - Nursery schools will no longer be forced to collect details on the nationality and birth place of children as young as two, The Independent can reveal, following a Government U-turn over the controversial school census. Since September this year, schools, colleges and nurseries have been required to ask parents to provide details of where their children were born, as well as nationality and English language proficiency – a move MPs say has “all the hallmarks of racism”.The new legislation, which comes as part of an expansion on the existing school census, have been met with fierce backlash from parents, campaigners and MPs, who have criticised the census as “dangerous and divisive” and raised concerns over how the information is being used. On Wednesday The Independent reported that Government ministers planned to push ahead with collection data on pupil nationality, a move campaigners said was "deeply disappointing".After meeting with campaign group Schools Against Border for Children (ABC), Department for Education officials said the collection of data on nationality and country of birth would not be extended towards children aged two to five, despite previous Government guidance stating the contrary. The requirement still stands for children of primary and secondary school age, however, in spite of cross-party opposition and a motion lodged by Jeremy Corbyn to block the new legislation.

FCA not ruling out future fee rules for hedge funds and private equity -- The FCA published its long-awaited interim report into the UK's investment industry on November 18, in which it mainly focused on the fees and performance of active managers and scrutinised the role of investment consultants.However, the report also touched on charges and transparency in hedge funds and private equity.The FCA found that institutional investors felt “some hedge funds can be unclear about the assets in which they are invested” and that information about charges was “not always clear and transparent”.The regulator added: “Although private equity funds were not in scope of our market study we heard comments that this is a particularly opaque part of the asset management sector, and we will consider whether any remedies should apply in this part of the sector.”  Remedies could include requiring hedge funds and private equity firms to comply with a proposed industry-wide standard template for cost disclosures to institutional investors.  The FCA asked for feedback on whether hedge funds and private equity should be forced to comply with such a disclosure template by February 20, 2017. It plans to publish its final report on the asset management industry in 2017.

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