A New Opportunity for Monetary Reform – John Taylor - The opportunity for monetary reform seems better than it has been in years. Goals such as insulating the Fed from political pressures and creating a more predictable-transparent-accountable policy appear to be common to the Congress and the incoming Administration. To see this, take a look at the often-overlooked monetary passages on pages 44 and 45 of the House economic reform document A Better Way: The Economy. Here’s an excerpt:“… our economy would be healthier if the Federal Reserve was more predictable in its conduct of monetary policy and more transparent about its decision-making…. Legislation sponsored by Rep. Bill Huizenga and approved by the House – the Fed Oversight Reform and Modernization Act (the FORM Act) does the following:
- Protects the Fed’s independence to chart whatever monetary policy course it deems appropriate, but requires the Fed to give the American people a greater accounting of its actions.
- Requires the Fed to generate a monetary policy strategy of its own choosing in order to provide added transparency about the factors leading to its monetary policy decisions.
- Helps consumers and investors make better decisions in the present and form better expectations about the future.
These improvements are important for Americans to enjoy greater economic opportunity. By pursuing this expansion through increased transparency instead of policy mandates, the FORM Act further insulates the Fed from political pressures.” Here is a detailed statement of support of this monetary reform from economists and practitioners. Of course, there is much to be worked out, including incorporating constructive comments from the Fed, which has not yet been forthcoming. Monetary reform is at least as controversial as tax and regulatory reform, but no less crucial to a prosperous economy. The economics behind pursuing monetary, tax and regulatory reforms together can be found in First Principles: Five Keys to Restoring America’s Prosperity.
Contraction In US Real M0 Money Supply Accelerates - In another sign that the Federal Reserve is preparing to raise interest rates, the real (inflation-adjusted) M0 money supply’s decline picked up speed in October. The 13.4% year-over-year decrease is the steepest on record (dating to 1948) and marks a sharp drop from September’s 8.8% slide. M0, which is also known as the monetary base and high-powered money, has declined for ten straight months through October (in year-over-year terms), the longest non-stop run of red ink in eight years. The difference this time: the contraction is significantly deeper than previous declines. The current slide follows years of extraordinarily high rates of growth. But it’s clear that the monetary tide has turned and the Fed looks poised to announce another rate hike at its monetary policy meeting that’s scheduled for Dec. 13-14. Market sentiment is expecting no less at the moment. Fed fund futures are pricing in a 94% probability that the central bank will lift its policy rate (currently at a 0.25%-to-0.50% range) at the FOMC meeting next month, based on CME data (as of Nov. 22). Treasury yields have shot higher too. The policy sensitive 2-year yield settled at 1.07% yesterday (Nov. 22), fractionally below the highest level so far this year, according to Treasury.gov data. Meanwhile, the Treasury yield curve has steepened substantially in recent weeks. In particular, the short end of the curve is at or near the highest levels in recent years through 3-year maturities (see chart below). Overall, there’s been a clear shift higher in the curve compared with yields from 90 trading days earlier (shown in blue). Ten-year inflation expectations ticked up to 1.75% in this month’s update via the Cleveland Fed’s model, but that’s still a middling pace compared with the numbers so far this year. The Treasury market’s implied inflation estimate, however, is on the march, rising in recent days to ~1.90%, the highest level in more than a year (based on the yield spread for the 10-year nominal Note less its inflation-indexed counterpart).
Goldman: "2017 Outlook: Under New Management" --A few excerpts from analysis by Goldman Sachs economists Zach Pandl and Jan Hatzius: 2017 Outlook: Under New Management The prospects for significant changes in policy under the new administration and an economy moving into the later stages of the business cycle implies high uncertainty, and an especially interesting US economic outlook this year. We think the odds of a recession over the next 1-2 years continue to look relatively low, and see signs of firming growth in recent data ...Any fiscal stimulus from the next administration would be an added tailwind for 2017 growth, and we think meaningful tax and spending legislation is likely next year. However, we would caution that (1) the current fiscal backdrop may limit the scope for large deficit-financed tax cuts or spending increases, (2) aspects of the Trump agenda, such as trade restrictions, are less favorable for growth, and (3) the economy is already operating close to full employment, which limits the possible upside to growth without generating higher inflation...For most of the last eight years, policymakers have been solely focused on shoring up the recovery; today they also must consider the risk of overdoing it. Given above-trend growth, and with the prospect of fiscal stimulus, we see the US economy moving into modest disequilibrium over the next 1-2 years, with an unemployment rate falling below its long-run sustainable rate, and inflation rising above the Fed’s target.
Chicago Fed "Economic Growth Increased Slightly in October" - From the Chicago Fed: Economic Growth Increased Slightly in October The Chicago Fed National Activity Index (CFNAI) increased to –0.08 in October from –0.23 in September. All four broad categories of indicators that make up the index increased from September, but all four categories again made nonpositive contributions to the index in October. The index’s three-month moving average, CFNAI-MA3, edged down to –0.27 in October from –0.20 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967. This suggests economic activity was somewhat below the historical trend in October (using the three-month average).
Chicago Fed: Economic Growth Increased Slightly in October - "Index shows economic growth increased slightly in October." This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report:All four broad categories of indicators that make up the index increased from September, but all four categories again made nonpositive contributions to the index in October.The index’s three-month moving average, CFNAI-MA3, edged down to –0.27 in October from –0.20 in September. October’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.The CFNAI Diffusion Index, which is also a three-month moving average, decreased to –0.35 in October from –0.16 in September. Thirty-four of the 85 individual indicators made positive contributions to the CFNAI in October, while 51 made negative contributions. Fifty indicators improved from September to October, while thirty-four indicators deteriorated and one was unchanged. Of the indicators that improved, 21 made negative contributions. [Link to News Release]The previous month's CFNAI was revised downward from -0.14 to -0.23.The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed's website. The index is constructed so a zero value for the index indicates that the national economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth.The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.
October 2016 CFNAI Super Index Moving Average Again Declines: The economy's growth declined based on the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average - and remains below the historical trend rate of growth (but well above levels associated with recessions). If one views the single month index to grasp what is going on - it improved. The single month index which is not used for economic forecasting which unfortunately is what the CFNAI headlines. Economic predictions are based on the 3 month moving average. The single month index historically is very noisy and the 3 month moving average would be the way to view this index in any event. in the table below, see the three month rolling average for the last 6 months - i really has been staying within a very tight range. It is telling me that the economy is really going nowhere. The three month moving average of the Chicago Fed National Activity Index (CFNAI) declined from -0.20 (originally reported as -0.21 last month) to -0.27. A value of zero for the index would indicate that the national economy is expanding at its historical trend rate of growth, and that a level below -0.7 would be indicating a recession was likely underway. Econintersect uses the three month trend because the index is very noisy (volatile). As the 3 month index is the trend line, the trend is currently showing an accelerating rate of growth. As stated: this index only begins to show what is happening in the economy after many months of revision following the index's first release.
GDP Hopes Slashed As Trade Deficit, Inventories Tumble In October - The resurrected hopes of lift-off velocity GDP growth in America suffered a double whammy this morning.A considerably bigger than expected trade deficit (-$62mm vs -$59mm exp) suggests Q4 GDP growth may take a hit…/.and then wholesale inventories tumbled 0.4% MoM (the 2nd biggest plunge in over 3 years) notching more potential from economic growth hopes. Still forget Q4 right? 2017 will be trumperrific. Still, the last two times wholesale inventories contracted year-over-year, the US economy dropped into recession...
A Recession Could Change Everything – Mauldin - How on God’s green earth are we supposed to make sense, from an economic and investment portfolio view, of what is happening?A recession could change everything It has been quite a while since we have had a recession. When we do have one, it’s going to further limit our choices.The economic realities of the world have not shifted much in one week. We still have too much debt, not just in the US but around the world. Budget deficits are out of control, not just i n the US but around the world. The reactionary forces of protectionism are loose, and the results might not be salutary for investors. Markets are stretched to valuations that have historically been dangerous.The choices we have already made make the future we face uncertain and difficult. I know that many Republican leaders are pondering one of my favorite Churchill quotes: “The problems of victory are more agreeable than those of defeat, but they are no less difficult.” Dealing with the deficit, the debt, taxes, healthcare, ISIS, and a whole host of problems in a world that is transforming around us is no less difficult today than it was last week—before we had an election. There will obviously be different answers to those problems, and we will often disagree about them, Before we rush to judgment about the path the new administration is opening up, let’s see who Trump brings in to work with him. Frankly, there is nothing that thrills my heart more than the potential—the hope—that Newt Gingrich will help or maybe lead the effort to install a new paradigm at the Food and Drug Administration (FDA). I have been writing about this for years. The FDA is the biggest obstacle to health care in the world. Period. It does not need to be reformed; it needs to be replaced with a 21st-century drug regulatory authority. (The food administration guys seem to do a pretty good job.) I don’t care whether you are an arch liberal or a rock-ribbed conservative, better healthcare and a longer health span should be of paramount interest to you. And the people who are blocking that future should be moved out of the way.
We've Had Two Lost Decades -- Will The Next Ten Years Be America's Decade? -- November 23, 2016 - Wow -- GDP Now: Latest forecast: 3.6 percent — November 23, 2016. The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2016 is 3.6 percent on November 23, unchanged from November 17. The contributions of real equipment investment and real inventory investment to fourth-quarter growth increased from 0.32 percentage points to 0.38 percentage points and 0.50 percentage points to 0.56 percentage points, respectively, after this morning's advance durable manufacturing report from the U.S. Census Bureau. The forecast of fourth-quarter real residential investment growth declined from 10.8 percent to 7.1 percent after yesterday's existing-home sales release from the National Association of Realtors and this morning’s releases on new single-family home sales, prices, and construction costs from the Census Bureau.
2 Year Treasury Prices At Highest Yield Since 2009, And It Could Have Been Worse -- In light of the recent surge in shorts across the curve, which as the table below shows has pushed repo rates deep into special territory, with the 2-Year going negative ahead of today's auction... ... it may have been the squeeze going into today's 1PM auction announcement that prevent an uglier result for the just concluded sale of $26 billion in 2 Year paper.Pricing at 1.085%, a 0.1 basis point tail to the 1.084% When Issued, today's 2Y auction yield was the highest since the 1.09% auction in December 2009. The high yield would have likely been even higher if there was no squeeze in repo.The internals, however, were fractionally better, with the Bid to Cover rising from 2.53 in October to 2.732 in November, the highest since August. Direct Bidders took down 13.43% of the final allotment, while Indirects were responsible for 50.8% of the takedown, better than the 6 month average of 46.9%. As a result Dealers were left holding 35.8%. Overall, an average auction, but certainly an improvement from the first two "deplorable" auction under Trump which priced two weeks ago at terms that left many wondering if the Bond Vigilantes were now truly stirring.
US Treasuries sell-off continues as inflation fears mount - Financial Times -- The US government bond market suffered a renewed sell-off and the dollar powered to a fresh 13-year high on Wednesday, as stronger economic data bolstered the case for an interest-rate increase and reinforced the view that the multi-decade bond bull market has reached a turning point. The Republican sweep of the White House and Congress, coupled with president-elect Donald Trump’s promise to unleash a $1tn economic stimulus package of tax cuts and infrastructure investments, has caused a seismic shift in global bond markets, with prices tumbling and borrowing costs rising as investors bet that inflation will finally reappear. moves were reinforced by strong US durable goods data, and exacerbated by thin trading in bond markets ahead of the US Thanksgiving holiday. “In what was supposed to be a quiet day, bond vigilantes are putting it to the Treasury market,” said Andrew Brenner, head of international fixed income at National Alliance Capital Markets. The US government debt market staged an afternoon comeback, clawing back some of its earlier losses, but still ended the day in the red. The 10-year Treasury yield at one point climbed by much as 10 basis points to over 2.4 per cent for the first time since the summer of 2015, and ended the day 4bp higher at 2.35 per cent. The two-year note yield, the one most acutely sensitive to interest rate expectations, climbed to a six-year high of 1.15 per cent. The moves came after the US Commerce Department said that orders for durable goods had risen by 4.8 per cent in October, smashing economists’ expectations and reinforcing the sense that any stimulus package will come at a time when the economy is already in reasonable shape, and therefore fuel inflation.
US Treasury Yield Curve Crashes Near 3-Month Flats As Bank-Buying Panic Continues - The long-end of the US Treasury curve rallied on the week (for the first time since Trump's win) with 30Y yields ending down almost 3bps, as a last minute panic bid hit stocks and bonds at the early market close; and despite the exuberance in US bank stocks, the yield curve continues to collapse... At the cash equity close today, bonds and stocks were suddenly both bid... with 30Y back at 3.00%
The consent of the governed: The hole at the heart of economics - The Economist - AMERICA has a debt ceiling. It’s a statutory limit on how much debt the federal government can issue. For most of its existence (the ceiling will turn 100 next year) Congress has simply voted to raise the limit when borrowing threatens to hit it. In 2011 and 2013, however, Republicans in Congress chose a different approach. They threatened not to vote to raise the ceiling unless various budget demands were met. It was a dangerous course of action; had the ceiling not been raised the government would have found itself forced to choose between default—potentially triggering a massive financial crisis—or large, sudden cuts to spending of all sorts, triggering a deep recession. In both 2011 and 2013 the brinkmanship concluded with a deal. Before those deals were cut, as the moment of doom loomed, some economics writers argued that the Treasury should make use of an obscure loophole in a law designed to allow the government to create platinum commemorative coins to issue a $1tn coin, which could then be used to fund government operations without violating the debt ceiling. The measure seemed legal but sounded completely barmy. At one point during the debate, I asked, on Twitter, just when “it just isn’t done” is a valid reason to oppose a particular policy choice. Dan Davies, a financial analyst and internet commentator, responded saying that, “‘it just isn’t done’ is basically the central organising constitutional principle of the UK.” He was right, and not just about the UK. It was Republicans’ violation of the “it just isn’t done” principle that landed America in its debt-ceiling crisis in the first place. As Donald Trump prepares for his presidency, Americans are learning just how useful and valuable a constraint “it just isn’t done” was in past administrations. And in other contexts; “it just isn’t done” is one of the things which keeps people from feeling entitled to hurl racial epithets at others, or spraypaint threatening messages on their homes, or openly embrace Nazism. “It just isn’t done” ought not be an inviolable principle; evolution in the sorts of things proscribed by it has been critical in establishing social equality for women, religious and ethnic minorities, and LGBT individuals and couples. But “it just isn’t done” matters; it is a critical piece of social infrastructure that helps keep society running.
Fiscal Reflation in One Country -- President-elect Trump wants to cut taxes and increase investment in U.S. infrastructure (or at least provide a tax break for existing infrastructure investment) and doesn’t seem especially worried if the result is a larger fiscal deficit. The call for larger fiscal deficits has some parallels to the agenda I think makes sense for balance of payments surplus countries like Germany, or Korea—though I have always advocated for more progressive tax cuts than those proposed by President-elect Trump, and wanted East Asia to use its fiscal space to finance an expansion of social insurance. But just as fiscal expansion should reduce the external surplus of those countries that now run sizable balance of payments surpluses, fiscal expansion in a country with a sizable balance of payments deficit, in any conventional macroeconomic model, implies a bigger balance of payments deficit. The numbers on the fiscal side could be significant. Michael Feroli of J.P. Morgan estimated that full implementation of the proposed corporate and individual tax cuts, together with higher spending on infrastructure and defense, would raise the fiscal deficit by about 3 percent of GDP if they were adopted in full (see Gavyn Davies blog); Ryan Avent of The Economist has a similar estimate. A 3 percent of GDP fiscal expansion, according to the IMF’s coefficients, raises the external deficit by about 1.4 percent of GDP (the coefficient on fiscal deficits was raised to 0.47 in the IMF’s latest external balance assessment; see table 3).* A lot of the rise in U.S. demand from a fiscal stimulus would be shared by the rest of the world. With the U.S. economy operating at close to potential, the fiscal stimulus would lead to the Fed to raise rates — and that in turn would push up the dollar. There is no immaculate adjustment. A 1.4 percent of GDP adjustment in the current account implies a 10 percent or more rise in the dollar (see Joe Gagnon, quoted in Neil Irwin’s well-argued analysis of the tensions between President-elect Trump’s various goals). Of course, many keen political and economic observers (including the previously cited Michael Feroli) expect that the actual fiscal package will be far smaller—maybe one percentage point of GDP a year over several years. That would scale down the impact, not eliminate it.
Trumpism Has Dealt a Mortal Blow to Orthodox Economics and ‘Social Science’ - Grappling with the shock of Donald Trump’s election victory, most analysts focus on his appeal to those in the United States who feel left behind, wish to retrieve a lost social order, and sought to rebuke establishment politicians who do not serve their interests. In this respect, the recent American revolt echoes the shock of the Brexit vote in the United Kingdom, but it is of far greater significance because it promises to reshape the entire global order, and the complaisant forms of thought that accompanied it. Ideas played an important role in creating the conditions that produced Brexit and Trump. The ‘social sciences’ — especially economics — legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy. It is never clear whether ideas or interests are the prime mover in shaping historical events, but only ideas and interests together can sustain a ruling consensus for a lengthy interval, such as the historic period of financialization and globalization running over the last 35 years. The role of economics in furnishing the now-rebuked narratives that have reigned for decades in mainstream political parties can be seen in three areas. First, there is globalization as we knew it. Mainstream economics championed corporate-friendly trade and investment agreements to increase prosperity, and provided the intellectual framework for multilateral trade agreements. Economics made the case for such agreements….Second, there is financialization, which led to increasing disconnection between stock market performance and the real economy, with large rewards going to firms that undertook asset stripping, outsourcing, and offshoring. The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class. Third, there is the push for austerity, a recurrent trope of the ‘neoliberal’ era which, although not favored by all, has played an important role in creating conditions for the rise of popular movements demanding a more expansionary fiscal stance (though they can paradoxically simultaneously disdain taxation, as with Trumpism). The often faulty intellectual case made by many mainstream economists for central bank independence, inflation targeting, debt sustainability thresholds, the distortive character of taxation and the superiority of private provision of services including for health, education and welfare, have helped to support antagonism to governmental activity.
"Obama Set Up The Next President For A Major Recession"... And A Giant Crash Is Coming -- As SHTFPlan.com's Mac Slavo points out... The past many months have carried a lot of noise about the coming crash, about a tipping point that may be fast approaching. The economics are simply giving way, and they can’t hold the illusion forever. Now that Donald Trump will be calling the shots, the money powers can usher in collapse if they wish, and have ready their scapegoat. It won’t just be Trump the man or the president, but the people who elected him, who backed Brexit and who gave up on their system. The people who let loose the chaos that now consumes us. Their rage, their anger and their desperation is brewing unrest. The ascent of populism in the political arena has put the establishment in retreat, and revealed, at last, a most dangerous atmosphere, from which collapse can properly precipitate … one in which all regulatory steadiness on the part of the system has been thrown off balance and out of whack by popular revolt. By the time the hammer falls, and the markets fall to the ground, the people rioting in the streets and losing their civility when ATMs stop working and store shelves go empty – these people will become the face of the disaster. The banks have been planning the next rise and fall for sometime; the next phase is all digital, and tightly monitored and controlled. We Are Being Set Up For Higher Interest Rates, A Major Recession And A Giant Stock Market Crash .. via Michael Snyder's Economic Collapse blog, Since Donald Trump’s victory on election night we have seen the worst bond crash in 15 years. Global bond investors have seen trillions of dollars of wealth wiped out since November 8th, and analysts are warning of another tough week ahead. The general consensus in the investing community is that a Trump administration will mean much higher inflation, and as a result investors are already starting to demand higher interest rates. Unfortunately for all of us, history has shown that higher interest rates always cause an economic slowdown. And this makes perfect sense, because economic activity naturally slows down when it becomes more expensive to borrow money. The Obama administration had already set up the next president for a major recession anyway, but now this bond crash threatens to bring it on sooner rather than later.
527 Pages of New Federal Regulations...TODAY! - The Obama administration added 527 pages worth of new rules and regulations TODAY! That's a new single day record.
The Washington Free Beacon brings the bad news: The Obama administration set a new record Thursday by producing 527 pages worth of new rules and regulations in a single day, bringing the president’s Federal Register up to 81,640 total pages for 2016, the most ever. [...] President Obama owns seven of the ten highest ever federal register page counts. This is the anaconda that (day-by-day) squeezes the life out of the American economy. The federal government has enmeshed itself into the economic, social, and private lives of everyone. To call this "freedom" is to completely misunderstand what freedom means. It's authoritarianism and it grows relentlessly. Take a look of this chart that shows the number of pages of rules and regulations that reside in the Federal Register: Notice that the increase has occurred during both Republican and Democrat administrations. It's been a tag-team effort. There is no such thing as a "limited government" party. The above chart screams loud and clear that we have an "unlimited government" that continually expands without mercy. Will a President Trump weaken the anaconda before total asphyxiation? It doesn't look like it. It's important for his supporters to hold his feet to the fire.
Obama's not-so-secret admirer: Donald Trump | Reuters: After lambasting Obama for months as a failed leader unfit to be president, the Republican president-elect found kinder words on Tuesday for the man he will succeed in the White House on Jan. 20 "I didn't know if I'd like him. I probably thought that maybe I wouldn’t, but I did. I really enjoyed him a lot," Trump said in an interview with the New York Times. Obama, a Democrat, met with Trump at the Oval Office on Nov. 10, two days after the presidential election. White House spokesman Josh Earnest said earlier on Tuesday the two had spoken again since then, citing Obama's commitment to a smooth transfer of power, but offered no other details. "I had a great meeting with President Obama," Trump told the Times. "I really liked him a lot." Obama, who had his own harsh words for Trump as he campaigned for Democrat Hillary Clinton, has made clear he would put the bitterness of the campaign aside to ensure a smooth transition of power and protect a pillar of American democracy.
House GOP business-tax plan upends U.S. policy, bares corporate fault lines | Fox News: Fault lines inside the corporate world are emerging over a proposed rewrite of the U.S. tax code, pitting importers against exporters. At the heart of the fight is a Republican plan in Congress that would impose corporate taxes on imports while eliminating them from exports, a move that would upend decades of tax policy. The proposed shift in effect would curtail existing incentives for U.S. companies to move profits and operations abroad, but it would also pose new challenges for some global businesses. Retailers selling imported products and refiners using imported oil could be hardest hit, while some exporters could see their tax bills vanish. “You’re going to have the big importers fighting the big exporters,” said Lisa Zarlenga, a former U.S. Treasury official and now a partner at international law firm Steptoe & Johnson LLP. The proposal is part of House Republicans’ blueprint for overhauling the entire U.S. tax code and has been around since June. While still not legislation, it has gained fresh momentum—and scrutiny from corporations—since the November election sweep gave the GOP the chance to advance its ideas with its newfound one-party control of Congress and the White House. Lawmakers must now weigh competing business interests to achieve the country’s first major tax revamp since 1986. “Tax reform always hits different industries differently,” said Republican economist Douglas Holtz-Eakin. “It’s the ability to rise above those differences that makes tax reform hard.”Other crucial elements of the business-tax plan would also be a major departure for the U.S. and include dropping the corporate tax rate to 20% from 35%. Companies would also be able to write off capital expenses immediately but couldn’t deduct net interest.
Trump Pushes Apple CEO To Manufacture In US; Promises "Very Large Tax Cuts" - While speaking with the New York Times, President-elect Donald Trump said that he received a call from Apple’s Tim Cook on Monday in which he pushed the CEO about bringing manufacturing jobs back to the United States. “I got a call from Tim Cook at Apple, and I said, ‘Tim, you know one of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States, where instead of going to China, and going to Vietnam, and going to the places that you go to, you’re making your product right here.’ Trump told the NYT on Tuesday. Trump said that Cook understood. He also mentioned that his incentive plan, which includes a “very large tax cut” and “substantial regulation cuts” for corporations, will bring Apple into the U.S. to manufacture. ‘I think we’ll create the incentives for you, and I think you’re going to do it. We’re going for a very large tax cut for corporations, which you’ll be happy about.’ But we’re going for big tax cuts, we have to get rid of regulations, regulations are making it impossible. Whether you’re liberal or conservative, I mean I could sit down and show you regulations that anybody would agree are ridiculous. It’s gotten to be a free-for-all. And companies can’t, they can’t even start up, they can’t expand, they’re choking.Recent reports have suggested that Apple may have some interests in exploring a manufacturing facility in the United States. Key Apple assembler Foxconn Technology Group has been studying the possibility of moving iPhone production to the U.S., sources have 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.,” the source said. “Foxconn complied, while Pegatron declined to formulate such a plan due to cost concerns.”
Cutting Company Taxes is a Race to the Bottom -- naked capitalism Yves here. According to tax maven Lee Sheppard:Compared to other Western governments, the US government taxes at a very low level, about 18% of GDP…Trump’s plan, which has huge tax cuts for business and the rich, emphasizes growth. It would inject $4-6 trillion into the economy over 10 years, mostly by means of business tax cuts. This would be supply-side economics, which you can do with your own currency. Two problems:First, tax cuts would have to be enormous to have any macroeconomic effect on a $16-18 trillion economy. His first plan proposed even larger cuts, and the deficit hawks swooped. Think of it as the tax version of QE. But consumption has fallen, and newly subsidized businesses would still need customers in order for investing to make sense. Second, even if enhanced growth were achieved, it would not be evenly distributed. US income taxes are progressive. Spending is not, so the system as a whole is not redistributive. And as the individual discussion shows, it would not put a lot more money in the hands of people with a high marginal propensity to consume. By Antony Ting: US President-elect Donald Trump made an election promise to cut the US federal corporate tax rate from the current 35% to 15%. A somewhat more modest proposal is under way in Australia. The plan outlined in the 2016-17 budget is to cut the standard company tax rate progressively over 10 years from the current 30% to 25% in 2026-27. Most countries have been reducing their company tax rates over the last two decades.The average company tax rate for OECD countries has declined from 32% in 2000 to 25% in 2015. Most of the tax cuts occurred before 2009, and rate reductions slowed down after the global financial crisis. The largest cut over that period occurred in Germany, by almost 22 percentage points (from around 52% in 2000 to the current 30%). The UK has also been active on this front. Prime Minister Theresa May this week said she wants to cut corporation tax to the lowest among the world’s 20 largest economies. Non-OECD countries are equally keen to maintain a competitive company tax rate. For example, China reformed its enterprise income tax system in 2008. A race to the bottom seems inevitable. But where is the bottom? A look at the OECD data shows that many OECD member states have a company tax rate below 20%.
Bitcoin Users Who Evade Taxes Are Sought by the I.R.S. — The Internal Revenue Service is on the hunt for people who used Bitcoin to evade taxes. The tax agency sent a broad request on Thursday to Coinbase, the largest Bitcoin exchange in the United States, asking for the records of all customers who bought virtual currency from the company from 2013 to 2015. The document, a so-called John Doe summons, said that an I.R.S. agent recently found three cases in which people were using Bitcoin to evade taxes — two of which involved Coinbase customers. The I.R.S. said that those findings — and Bitcoin’s relatively high level of anonymity — have led the agency to think that many more people are using the virtual currency for similar purposes. “The I.R.S. not only has suspicion that the John Doe class includes U.S. taxpayers who are not complying with the law — it knows that the class in the past included such violators, and very likely includes others,” the document says. The summons comes shortly after the Treasury Department’s inspector general issued a report chastising the tax agency for not taking more aggressive action to curb “unlawful activities by those who use virtual currencies.” “None of the I.R.S. operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies,” the report, delivered in September, said. The request this week would require Coinbase, a start-up based in San Francisco with funding from several leading venture capital firms, to turn over the identity and full transaction history of millions of customers — it had about three million customers at the end of 2015. But the company is already gearing up to fight the request. “We want to work with law enforcement — that’s generally our policy,” the company’s head legal counsel, Juan Suarez, said Friday. “But we can’t tolerate sweeping fishing expeditions. We are very concerned about the financial privacy rights of our customers.”
Largest US Bitcoin Exchange Is "Extremely Concerned" With IRS Crackdown Targeting Its Users - Last Thursday we reported that in a startling development seeking to breach the privacy veil of users of America's largest bitcoin exchange, the IRS filed court papers seeking a judicial order to serve a so-called “John Doe” summons on the San Francisco-based Bitcoin platform Coinbase. The government’s request is part of a bitcoin tax-evasion probe, and seeks to identify all Coinbase users in the U.S. who “conducted transactions in a convertible virtual currency” from 2013 to 2015. What makes a “John Doe” unique, is that it represents a special "shotgun" form of summons to look for tax evaders that allows the IRS to obtain information about all taxpayers in a group or class of people, even if the agency doesn’t know their identities. The IRS has deployed the tactic in its recent crackdown on undeclared offshore accounts. In other words, the US government's crackdown on local bitcoin users has begun. In the court filing, the WSJ reports that Justice Department attorneys wrote that an IRS agent had “identified and interviewed three taxpayers who had used virtual currencies as a means of evading taxes” and that two of these taxpayers were corporate entities that “had wallet accounts at Coinbase and attempted to conceal bitcoin transactions as technology expenses on their tax returns.” According to Forbes' tax blogger Kelly Phillips Erb, in his declaration to the court in support of the summons, IRS Senior Revenue Agent David Utzke noted that his investigations included two taxpayers with annual revenues in the millions who “admitted disguising the amount they spent purchasing the bitcoins as deductions for technology expenses on their tax returns.” Those corporate taxpayers had wallet accounts at Coinbase. Unlike other kinds of financial transactions, there is currently no third-party information which requires separate reporting for bitcoin (think of third-party reporting like the forms 1099 issued by your bank). This, says IRS, means that the “likelihood of underreporting is significant.”
Global Wealth Update: 0.7% Of Adults Control $116.6 Trillion In Wealth -- Today Credit Suisse released its latest annual global wealth report, which traditionally lays out what is perhaps the biggest reason for the recent "anti-establishment" revulsion: an unprecedented concentration of wealth among a handful of people, as shown in its infamous global wealth pyramid, an arrangement which as observed by the "shocking" political backlash of the past few months suggests that the lower 'levels' of the pyramid are increasingly unhappy about. As Credit Suisse tantalizingly shows year after year, the number of people who control just shy of a majority of global net worth, or 45.6% of the roughly $255 trillion in household wealth, is declining progressively relative to the total population of the world, and in 2016 the number of people who are worth more than $1 million was just 33 million, roughly 0.7% of the world's population of adults. On the other end of the pyramid, some 3.5 billion adults had a net worth of less than $10,000, accounting for just about $6 trillion in household wealth. And in-between is the so-called global middle class - those 1 billion people who rising anger at the status quo made Brexit and Trump possible.
Are Americans demanding greater wealth redistribution? -- America has long had a below-average voting rate, and those with lower incomes and lower levels of education are least likely to vote. So the potential for low incomes, high inequality, and slow growth to give rise to further political disengagement already appears in some of the current data about the United States. This is no mythical projection, rather it is a simple extrapolation from the world we see around us, namely lots of apathy or disengagement from many of the biggest losers under the status quo. If you look at the new supporters of Donald Trump, they tend to not otherwise be so politically or socially involved, and the most likely outcome is that they end up some mix of disillusioned and disengaged. President Trump cannot in fact resurrect the economic fortunes of that group of people. I’ve heard many a question about when the next Thermidor is coming to the United States, but the data suggest a different story. Since 1970, American survey respondents show no greater preference for government redistribution. Furthermore two notable groups show considerably weaker support for redistributive ideas and policies over time. The elderly decreased their support for redistribution by an amount that is more than half the distance between Democrats and Republicans on this question. Perhaps more surprisingly, African-Americans also have decreased their support for redistribution, with almost half of this change coming from decreased support for race-based forms of government aid. This is in spite of the fact that the black-white wealth gap has been widening rather than narrowing.
Trump’s foundation says it violated 'self-dealing' ban: IRS forms | Reuters: U.S. Republican President-elect Donald Trump's charitable foundation said it violated a ban on so-called "self-dealing" by transferring income or assets to a "disqualified person," according to a copy of its 2015 tax filings made public this week. The Donald J. Trump Foundation's Internal Revenue Service forms, first reported by The Washington Post on Tuesday, showed that the organization said "yes" when asked if it had transferred "any income or assets to a disqualified person. Asked if it had violated the ban on so-called self-dealing in prior years, the foundation also said "yes," according to the forms, also viewed by Reuters. According to the IRS, self-dealing can include the "transfer to, or use by or for the benefit of a disqualified person of the asset of a foundation," except for certain exemptions. On the forms, Trump's foundation said "yes" when asked if any of the income or assets transfers failed to qualify as IRS exemptions. The 30-page filing was signed by the foundation's treasurer, Donald Bender, but not dated, and it was unclear whether they had been filed with the IRS. Representatives for Trump and the foundation did not immediately respond to requests for comment.
BREAKING: 41 Attorney Generals Across America Move To SHUT DOWN Trump Foundation (DETAILS) -It started out with a fight with a Fox News presenter, and may just end with the destruction of Donald Trump’s charity. Trump has apparently been operating for quite some time without viable certifications for a charity and now after New York state opened the floodgates, it looks like attorney generals in up to 41 states will be jumping on board to conduct investigations.Trump will not be able to fundraise for the Trump Foundation any more until this issue is sorted out. He will also need to present flawless financial records about the charity arm of the Trumpire roughly three weeks before Americans go to the polls on election day. The courts will also be able to subpoena Trump and his subordinates. That means he can’t just dodge questions like the ones that government officials and journalists have asked him about his tax records. .You may remember many months ago, when Trump got into a pissing match with Megyn Kelly. The feud turned grotesquely sexist in a heartbeat, and a frustrated Trump decided he would not attend the Republican debate after all. Instead, he told press that he’d throw a fundraiser for members of the U.S. military.The stunt seemed wildly successful, with The Donald bringing in around $5.6 million. He signed that money directly over to The Trump Foundation. But after many months, veterans’ charities still hadn’t seen a penny of it. The news broke that The Donald had been using his charity partly as a funnel for money that he didn’t want to pay taxes on. And in a stunning display of flagrant corruption, it came out that Trump had paid $25,000 to Florida Attorney General Pam Bondi, who subsequently dropped an investigation of Trump’s ill-fated Trump University scam. Fast forward to the present day, and it looks like a group of charity experts have told The Daily Beast that The Trump Foundation may soon become involved in a “long drawn-out process” to investigate whether the organization has been legally operating as a charity at all. The length of the process is due to convoluted charity laws that differ substantially across U.S. states.
Donald Trump and the Emoluments Clause, explained -- Barring a major and unexpected change of course, Donald Trump will run the risk of violating the US Constitution on January 20, 2017 — the very first day he is sworn into the US presidency. The breach stems from the massive conflicts of interest between his presidency and his business empire. Trump has a huge stake in a real estate holding underwritten with a loan from the Chinese government. He has tens of millions of dollars riding on building projects in Saudi Arabia. Foreign diplomats have already admitted to spending money at his hotels to curry favor with the president. Trump has said that the president is exempted from the federal conflicts of interest regulations that usually bind elected officials — and he’s right about that. But that answer misses another big barrier presented by Trump’s clinging to a sprawling business empire: that it will directly violate the Constitution. The Constitution says that no elected official can take an “emolument” of “any kind whatever” from a king, prince, or foreign state. The restriction, known as “the Emoluments Clause,” is intended to prevent political officials from receiving gifts from foreign governments. Trump is putting himself on a course to do exactly that. The president-elect rode to office promising to “drain the swamp” and tamp down on corruption in Washington, DC. At least in the eyes of legal scholars, he instead looks poised to begin his presidency by breaking the highest law of the land for private gain. And unless the Republican Party wants to do something about it, there’s basically nothing standing in his way. There is not unanimity among scholars on the question of whether Donald Trump would be violating the Constitution by allowing foreign governments (and companies backed by foreign governments) from doing business with his private company. But there does seem to be a fairly broad consensus forming. The issue comes down to the meaning of the “emolument” clause of the Constitution in Article I, Section 9. An “emolument” refers to compensation for a service or labor, according to the New York Times, which raises the question of whether foreign payments to Trump-owned businesses constitute forbidden emoluments. One issue is that no American president has ever had anything close to resembling Trump’s international business ties. Nor is there any real case law or precedent for knowing how the courts would interpret the clause, since previous presidents have voluntarily chosen to either invest their assets in a blind trust or else in diversified index funds so the issue wouldn’t arise.
5 Donald Trump Business Ties That Could Pose Conflicts: Experts on government ethics are warning President-elect Donald Trump that he’ll never shake suspicions of a clash between his private interests and the public good if he doesn’t sell off his vast holdings, which include roughly 500 companies in more than a dozen countries. They say just the appearance of conflicts is likely to tie up the new administration in investigations, lawsuits and squabbles, stoked perhaps by angry Oval Office tweets. “People are itching to sue Donald Trump and stick him under oath,” said Richard Painter, chief White House ethics lawyer for George W. Bush.In an interview with The New York Times on Tuesday, Trump insisted that the “law’s totally on my side,” and ethics experts agree that federal conflicts of interest rules don’t apply to the president so he can run his business pretty much the way he pleases while in office. His company, The Trump Organization, had no comment on the conflicts issue, other than a statement reiterating its plans to transfer control of the company to three of the president-elect’s adult children.Painter doesn’t think that goes far enough. In a letter to Trump last week, he joined watchdog groups and ethics lawyers from both Democratic and Republican administrations in predicting “rampant, inescapable” conflicts that will engulf the new administration if the president-elect does not liquidate his business holdings.A look at five areas where conflicts may arise:
Trump Names White House Counsel as Potential Conflicts Loom - Donald Trump named Donald F. McGahn as White House counsel, selecting a seasoned political lawyer who could help navigate the growing scrutiny on potential conflicts of interest between the president-elect’s businesses and his incoming administration. McGahn, a partner at the Jones Day law firm in Washington and a former chairman of the Federal Election Commission, had served as an adviser to Trump’s campaign. His specialties include government ethics, the president-elect’s transition team said in a statement Friday announcing his selection.“Don has a brilliant legal mind, excellent character and a deep understanding of constitutional law,” Trump said in the statement. “He will play a critical role in our administration.” Even before Trump is sworn in as president on Jan. 20, McGahn will be tasked with helping the real-estate developer navigate an extensive web of business ties and commercial interests that stand as potential conflicts of interest. Trump’s licensing deals and other businesses have drawn renewed scrutiny since he was elected president on Nov. 8, yet he said this week in an interview with the New York Times that as a sitting U.S. president, he “can’t have a conflict of interest.” The White House counsel is also responsible for preparing executive orders issued by the president, ensuring that they are constitutional. Trump has pledged to rescind many of President Barack Obama’s orders, saying they exceeded his powers, while vowing to issue his own on issues such as restricting immigration from countries compromised by Islamic terrorists.
Electoral College must reject Trump unless he sells his business, top lawyers for Bush and Obama say - Members of the Electoral College should not make Donald Trump the next president unless he sells his companies and puts the proceeds in a blind trust, according to the top ethics lawyers for the last two presidents. Richard Painter, Chief Ethics Counsel for George W. Bush, and Norman Eisen, Chief Ethics Counsel for Barack Obama, believe that if Trump continues to retain ownership over his sprawling business interests by the time the electors meet on December 19, they should reject Trump. In an email to ThinkProgress, Eisen explained that “the founders did not want any foreign payments to the president. Period.” This principle is enshrined in Article 1, Section 9 of the Constitution, which bars office holders from accepting “any present, emolument, office, or title, of any kind whatever, from any king, prince, or foreign state.” This provision was specifically created to prevent the President, most of all, from being corrupted by foreign influences.
Secret Service in talks to rent space in Trump Tower: report | TheHill: Law enforcement told The New York Post Thursday that the Secret Service is in negotiations with the Trump Organization to take over two vacant floors at Trump Tower. According to The Post, both the Secret Service and NYPD are planning to run a command post out of the space where president-elect Donald Trump's wife Melania and 10-year-old son Barron are expected to live for several months after Inauguration Day. The Secret Service is required to protect the first family wherever they go. When President Obama or Vice President Biden have gone on vacation, security will pay to rent nearby homes or domiciles to set up security and continue to monitor the first and second families. Should these negotiations go through, taxpayers would likely be paying the president-elect's corporation to lease the two floors. The Post reported that a lease deal could cost more than $3 million based on current rates at Trump Tower. Two of the floors, which are 3,000- to 5,000-square-foot spaces, are currently marketed at $105 per square-foot.
Steve Bannon’s Deep, Weird Adoration of Sarah Palin - Before Stephen Bannon was masterminding Donald Trump’s way into the White House, he tried to put Sarah Palin there. The parallels between Palin and Trump—explicit populist appeal, contempt for the D.C. media, and a fast-and-loose approach to facts—point to Bannon’s overarching political strategy: empowering right-wing diehards willing to burn it all down. And by the time Trump caught fire, Bannon was ready to go. He’d already tested out his playbook on Palin. On July 11, 2011, Bannon went on a podcast hosted by Red State editor Ben Howe to promote one of his many documentaries, The Undefeated, a film about Palin featuring Mark Levin, Tammy Bruce, and other conservative pundits. In that previously unreported audio, Bannon—now Trump’s most powerful adviser—praised Palin for pushing the “death panels” lie about the Affordable Care Act and argued she was a viable, credible 2012 presidential contender. He made the documentary as part of an effort to rehabilitate Palin’s damaged reputation in hopes she would run for president in 2012. Palin’s return to Alaska after McCain/Palin’s 2008 loss to the Obama/Biden ticket hadn’t gone well. About six months after her return, she stepped down from the governorship before completing her term amid a blizzard of ethics complaints. But Bannon argued the political damage was only temporary. “We have got to push back and we have got to take control of our own narrative,” he said on the podcast. Palin’s resignation didn’t bother him. And it certainly didn’t deter her Tea Party fans. She became one of the most adored speakers on the conservative circuit, as anti-Obama candidates found momentum in the lead-up to the 2010 midterms. But Republican establishment leaders still detested her, and former John McCain staffers did little to defend her reputation. That’s where Bannon came in. He designed the documentary, as he explained to Howe on the podcast, to persuade disillusioned conservatives and independents that Palin had the experience and gravitas to lead the free world, and that the “lamestream” media’s depiction of her was just plain wrong.
Trump outlines plans for first day in office, meets with Cabinet hopefuls | Reuters: U.S. President-elect Donald Trump outlined plans on Monday for his first day in office, including withdrawing from a major trade accord and investigating abuses of work visa programs, and met with Cabinet hopefuls at his Manhattan office tower. Trump met with Oklahoma Governor Mary Fallin, Democratic U.S. Representative Tulsi Gabbard and former Texas Governor Rick Perry. But he announced no further appointments, keeping candidates and the public guessing about the shape of the administration that will take office on Jan. 20. Fallin, Gabbard and Perry were the latest of dozens of officials who have made their way across the opulent lobby of Trump Tower for talks with the Republican president-elect in a relatively open - and unconventional - transition process since his election victory on Nov. 8. Trump, who has not held a news conference since his election, issued a video on Monday evening outlining some of his plans for his first day in office, including formally declaring his intent to withdraw from the Trans-Pacific Partnership, or TPP, trade deal, which he called "a potential disaster for our country." The 12-nation TPP is Democratic President Barack Obama's signature trade initiative and was signed by the United States earlier this year but has not been ratified by the U.S. Senate. The president-elect said he would replace the accord with bilaterally negotiated trade deals that would "bring jobs and industry back onto American shores." "My agenda will be based on a simple core principle: putting America first. Whether it’s producing steel, building cars or curing disease, I want the next generation of production and innovation to happen right here on our great homeland, America, creating wealth and jobs for American workers," he said.
Trump Says He Will Issue Executive Order On First Day In Office Withdrawing U.S. From TPP -- In a video message released moments ago by Donald Trump, the President-Elect announced that he has asked his team to develop a list of executive actions for his first day as president and announced that he would issue an executive order on his first day of office, withdrawing the US from the Trans Pacific Partnership, and would issue a notification of intent to withdraw from the TPP, voiding Obama's "free-trade legacy." Trump stated that his agenda "will be based on a simple core principle, putting America first... whether it's producing steel, building cars, or curing disease, I want the next generation of production and innovation to happen right her on our great homeland." He added that he would issue a rule, along the lines of what he proposed during his Gettysburg address, that for every new government regulation, two existing regulations must be eliminated, and said that he will direct the labor department to investigate abuses of visa programs. The full clip is below.
No, Trump Didn’t Kill the TPP — Progressives Did – If you read the headlines, Donald Trump’s election has killed the Trans-Pacific Partnership (TPP). The headlines have it wrong. Donald Trump didn’t kill the TPP. Assuming we see the fight through to the bitter end, it’s the cross-border, cross-sector, progressive “movement of movements” that will have defeated the TPP. While overshadowed by the horror of Trump’s election, this victory will be one of the biggest wins against concentrated corporate power in our lifetimes, and it holds lessons we should internalize as we steel ourselves for the many challenges we face heading into the Trump years. Under a banner reading “A New Deal or No Deal,” the first cross-sector demonstration against the TPP in the United States was in June 2010 — a full six years before Trump became the official Republican nominee. It took years of protests at subsequent rounds in Chicago, Dallas, San Diego, Salt Lake City, Maui and elsewhere — coupled with hundreds of other protests in cities and towns across the U.S. and around the world — to slowly, but surely, put the TPP on progressive groups’ radar. Over that time, first thousands, then tens of thousands, then hundreds of thousands and then literally millions of Americans signed letters and petitions urging the Obama administration and Congress to abandon TPP negotiations that gave corporate lobbyists a seat at the table, while keeping the public in the dark.We were up against Wall Street, Big Ag, Big Oil, Big Pharma, the Chamber of Commerce, the Business Roundtable, the President of the United States, the leadership of Congress — in short, we were up against some of the most powerful economic and political interests in human history.Countless people told us we had no chance of winning. But we persevered.Our allies abroad did yeoman’s work convincing their governments to reject the most draconian proposals from U.S. negotiators — something that dragged out the negotiations for years, giving us all more time to organize. Together, globally-coordinated progressive coalitions from a host of different countries developed and publicized analyses of the TPP, pushing out leaked texts when our governments refused to tell us what they were proposing in our names, and hacking away week after week against media blackouts, relying heavily on independent media, social media and word-of-mouth to inform the most active elements of the public about the power grab underway.
The Free Trade Fallacy - John Michael Greer - One of the major currents underlying 2016’s political turmoil in Europe and the United States, in fact, has been a sharp disagreement about the value of free trade. The political establishment throughout the modern industrial world insists that free trade policies, backed up by an ever-increasing network of trade agreements, are both inevitable and inevitably good. The movements that have risen up against the status quo—the Brexit campaign in Britain, the populist surge that just made Donald Trump the next US president, and an assortment of similar movements elsewhere—reject both these claims, and argue that free trade is an unwise policy that has a cascade of negative consequences. It’s important to be clear about what’s under discussion here, since conversations about free trade very often get wrapped up in warm but vague generalities about open borders and the like. Under a system of free trade, goods and capital can pass freely across national borders; there are no tariffs to pay, no quotas to satisfy, no capital restrictions to keep money in one country or out of another. The so-called global economy, in which the consumer goods sold in a nation might be manufactured anywhere on the planet, with funds flowing freely to build a factory here and funnel profits back there, depends on free trade, and the promoters of free trade theory like to insist that this is always a good thing: abolishing trade barriers of all kinds, and allowing the free movement of goods and capital across national boundaries, is supposed to create prosperity for everyone. That’s the theory, at least. In practice? Well, not so much. It’s not always remembered that there have been two great eras of free trade in modern history—the first from the 1860s to the beginning of the Great Depression, in which the United States never fully participated; the second from the 1980s to the present, with the United States at dead center—and neither one of them has ushered in a world of universal prosperity. Quite the contrary, both of them have yielded identical results: staggering profits for the rich, impoverishment and immiseration for the working classes, and cascading economic crises. The first such era ended in the Great Depression; the second, just at the moment, looks as though it could end the same way.
Donald Trump: “My 100-Day Action Plan” - What we’re about to get from the incoming Trump administration is revealed in this two-page PDF released by the campaign in October before the election. I’ve pasted images of the document below. I recommend reading it through in full. Just brief comments here; I’ll say more about some of its points in days to come. Click to open each page in a separate window at full size. Here’s page one: Of the “Six measures to clean up the corruption and special interest collusion in Washington, DC,” all are a farce, including and especially the so-called “ban” on lobbyists. Of the “Seven actions to protect American workers,” the second is moot (we hope), the first and third would be greatly welcomed, including by Bernie Sanders, the fourth is too vague to be meaningful, and the rest would guarantee a radical reshaping of human life on earth — at a faster rate than the Clinton-Obama weak-tea proposals would have done. It’s death by climate under either party’s proposals, but a faster one under Trump. The “Five actions to restore security and the constitutional rule of law,” if he did them, would increase the likelihood of a real, fighting, urban civil war in this country. The U.S. would become increasingly ungovernable. Here’s page 2: This page lists ten bills Trump will try to enact with his Republican Congress, again in the first 100 days of his administration. These include:
- A Bush-style tax relief bill that promises 4% GDP growth. The bill will likely happen; the 4% growth is pie-in-the-sky bait-and-betrayal (“You’ll get pie in the sky when you die,” and not before). Zero-to-anemic GDP growth is the permanent normal, and will never change until the massive burden of private debt is written down, something no money-financed politician — including Trump, almost all Republicans, and the entire Clinton wing of the Democratic Party — will allow.
- A “Trojan Horse” Infrastructure Act that finances, not infrastructure, but tax breaks to infrastructure investors. Trump’s “infrastructure act” offers (a) no guarantee that unprofitable needed projects, like Flint Michigan water system renovation, will ever be undertaken, and (b) no guarantee that one new worker will be hired. It’s a trap, and no Democrat, not one, should sign onto it.
- A School Choice Act that further privatizes education. This accelerates work started under Bush II and continued under Obama, the transfer of public education to wealthy investors as a profit opportunity.
- A “Repeal and Replace Obamacare” Act that is unlikely to be implemented in full, but which you should read to see what he and the Republicans are aiming for. Notice the fast-tracking for drug approvals. That could be good for citizens (if competing drugs are no longer held off the market by deliberately slow FDA approval) or terrible (if largely untested or industry-only-tested drugs are sped onto the market way too soon. Expect the latter only.
- “Community Safety” and “National Security” acts that will certainly increase the arrogance and militarization of police — read, “increase the likelihood of a real, fighting, urban civil war in this country” — and put military and domestic spy spending into overdrive.
In short, there’s absolutely nothing good in these bills, and much that will throw the country into chaos. The federal budget will balloon (not a bad thing if properly spent, since most of the nation has yet to see a recovery), but Trump will give all new money to the wealthy and the Establishment-connected, the very people Trump voters wanted to toss out.
Infrastructure Build or Privatization Scam? – Krugman - Trumpists are touting the idea of a big infrastructure build, and some Democrats are making conciliatory noises about working with the new regime on that front. . So, what do we know about the Trump infrastructure plan, such as it is? Crucially, it’s not a plan to borrow $1 trillion and spend it on much-needed projects — which would be the straightforward, obvious thing to do. It is, instead, supposed to involve having private investors do the work both of raising money and building the projects — with the aid of a huge tax credit that gives them back 82 percent of the equity they put in. To compensate for the small sliver of additional equity and the interest on their borrowing, the private investors then have to somehow make profits on the assets they end up owning.You should immediately ask three questions about all of this. First, why involve private investors at all? ... One answer might be that this way you avoid incurring additional public debt. But that’s just accounting confusion. ... The government’s future cash flow is no better, and worse if it strikes a bad deal, say because the investors have political connections. Second, how is this kind of scheme supposed to finance investment that doesn’t produce a revenue stream? Toll roads are not the main thing we need right now; what about sewage systems, making up for deferred maintenance, and so on? You could bring in private investors by guaranteeing them future government money... But this ... would simply be government borrowing through the back door — with much less transparency, and hence greater opportunities for giveaways to favored interests. Third, how much of the investment thus financed would actually be investment that wouldn’t have taken place anyway? ... Suppose that there’s a planned tunnel, which is clearly going to be built... In that case we haven’t promoted investment at all, we’ve just in effect privatized a public asset — and given the buyers 82 percent of the purchase price in the form of a tax credit. Again, all of these questions could be avoided by doing things the straightforward way: if you think we should build more infrastructure, then build more infrastructure, and never mind the complicated private equity/tax credits stuff. You could try to come up with some justification for the complexity of the scheme, but one simple answer would be that it’s not about investment, it’s about ripping off taxpayers.
Paul Krugman, Who Proposed Fight with Fake Outer Space Aliens to Stimulate the Economy, Now Worried About Quality of Trump’s Spending -- Paul Krugman, a die-hard Keynesian who recently proposed faking an invasion of space aliens to stimulate the economy, is now all of a sudden concerned about the quality of economic spending. On November 11, Paul Krugman, suddenly started worrying about the The Long Haul of deficit spending. “It’s at least possible that bigger budget deficits will, if anything, strengthen the economy briefly. America has a vast stock of reputational capital, built up over generations; even Trump will take some time to squander it,” said Krugman. Backing up to his previous post, What Happened on Election Day, Krugman offers this wealth of information on the stock market: It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover?Frankly, I find it hard to care much, even though this is my specialty. The disaster for America and the world has so many aspects that the economic ramifications are way down my list of things to fear. Still, I guess people want an answer: If the question is when markets will recover, a first-pass answer is never. Krugman took that back right away, but obviously not before posting the above article. The futures reversed faster than his brain. On November 14, in Trump Slump Coming? Krugman was again worried about the long haul. It’s natural and, one must admit, tempting to predict a quick comeuppance — and I myself gave in to that temptation, briefly, on that horrible election night, suggesting that a global recession was imminent. But I quickly retracted that call. Trumpism will have dire effects, but they will take time to become manifest. In fact, don’t be surprised if economic growth actually accelerates for a couple of years. There is always a disconnect between what is good for society, or even the economy, in the long run, and what is good for economic performance over the next few quarters. In a 2011 CNN interview video Paul Krugman proposed Space Aliens as the solution. Direct link: https://youtu.be/nhMAV9VLvHA Please play that in entirety to catch the spirit of it all. Here are key excerpts:
Krugman’s Failure to Speak Truth to Power about Austerity - William K. Black -In the first column in this series I explained how Hillary Clinton, during the closing 40 days of her campaign, showcased repeatedly her promise to assault the working class with continuous austerity. I explained that her threat represented economic malpractice – and was insane politics. I showed that the assault on the working class via austerity was such a core belief of the New Democrats that their candidate highlighted that assault even as the polls showed massive, intense rejection of her candidacy by the white working class. I also noted that in this second series in the column I would discuss the failure of her campaign team, and her de facto surrogate, Paul Krugman to speak truth to power about the dual idiocy of her campaign promise to wage continuous war on the working class through austerity forever.The broader point is the one made so often and so well by Tom Frank – it is morally wrong, economically illiterate, and politically suicidal for the New Democrats to continue to assault the working class via austerity, “free trade” (sic) deals, and financial deregulation. The only thing worse is to then insult the working class for reacting “badly” to being pummeled for decades by the Party that once defined itself as the party of working people. The New Democrats decided to insult the white working class in response to polls showing that the white working class was enraged at Hillary Clinton. Arrogance and self-blindness are boon companions. I grew up in the Detroit-area and saw George Wallace win the Democratic Party primary for the presidential nomination, so none of this is new to me. We all know that the New Democrats are never going to listen to my warnings or Tom Frank’s warnings. But the leaks show that Hillary had many competent staff who raised difficult questions. Why wasn’t any senior campaign staffer willing to tell her that her austerity threats were economically illiterate and politically suicidal? Krugman warned President Obama several times that austerity was a terrible economic policy. Why did he cease speaking truth to power as the election came down to the wire?
Trump’s infrastructure plan is not a simple public-private partnership plan, and won’t lead to much new investment – EPI - President-elect Donald Trump has indicated that one of his first priorities will be a plan to boost infrastructure investment. Normally, this would be welcome news for those of us who have been arguing for years that increased public investment—including but not limited to infrastructure investments—should be a top-tier economic priority. Further, it also seems like a rare opportunity for bipartisanship—after all, Hillary Clinton made infrastructure investment a priority of her campaign’s policy platform, as well.The still-sketchy details of Trump’s plan, however, are a cause for concern. What we know is that the plan is to provide a tax credit equal to 82 percent of the equity amount that investors commit to financing infrastructure. In the coming days, this will invariably be described as creating public-private partnerships (P3s). P3s are a standard model for financing infrastructure that can in theory be used with little downside compared to direct public provision. However, this description of the Trump plan is both not that comforting and incorrect. It’s not comforting because the real-world record of P3s is much spottier than textbook models would suggest. And it’s not accurate because Trump’s plan isn’t as simple as encouraging new P3s. It is instead (at least in its embryonic form), simply a way to transfer money to developers with no guarantee at all that net new investments are made. Let’s start with describing what a textbook P3 would look like and what the rationale for using it would be. P3s are long-term contracts between the state and private companies to build and maintain infrastructure. They can be thought of as sitting somewhere between standard public provision and full privatization of infrastructure. Say that a state or local government wants to build a new road, but is constrained for some reason (usually simpleminded anti-tax politics) from raising the money to publicly finance it. It’s important the democratically-elected and accountable government ensure the project is in the public interest. Having done this, the government can then negotiate with private financiers and developers to get the project built. To reduce costs and provide incentives for development, tax breaks are sometimes provided to holders of bonds issued by the private entities, and the private entities also receive a revenue stream of some kind in exchange for their investment. Often this is an explicit user fee, like a toll for using a road.
Trump Now Has His Joseph Goebbels. As Nominee for Attorney General -- I do not believe that this man will be confirmed. Even despite this. Things of this sort can change, bigly, once confirmation hearings begin. And not just because of his brazen, lifelong white supremacism. Also because, well, among other things, Florida voters just adopted an amendment to the state constitution legalizing medical marijuana. Buy a yuge margin. Read through the NYT editorial I’ve linked to. No one—and I do mean no one—wants this kind of thing. Outside of Alabama and Mississippi, of course. This choice is beyond-belief vile. And by the end of his confirmation hearing, everyone will know the specifics. And that Donald Trump thought it would be fine to reward this man in this precise way for being the first member of Congress to endorse him. So Jeff Flake, Joe Manchin and Susan Collins think he’s fine. Then again, presumably they don’t plan to run for president. Marco Rubio likely does, though. And his own state, the largest swing state, just voted to legalize medical marijuana. And there’s also that large-Hispanic-population thing in his state. Just one example. Here’s betting that McCain won’t vote for him either. He doesn’t plan to run for president, having already been there and done that, but there’s that little thing about Sessions’ support for torture of various kinds, including waterboarding.
Jeff Sessions set to show his steel on white-collar crime - FT - If corporations expected that the Department of Justice in the avowedly pro-business Trump administration would go easy on them, they may be disappointed. Senator Jeff Sessions, nominated to be the next attorney-general, has taken a tough line on white-collar crime. While serving on the Senate judiciary committee, he compared corporate crooks to drug case defendants and supported stiff sentences for offences such as fraud and embezzlement. Mr Sessions spent 20 years as a federal prosecutor in Alabama, where he tried cases involving federal land banks caught up in the 1980s savings and loan crisis. That experience helped cement his belief in the deterrent value of jail time for executives who broke the law. “Jeff Sessions is a traditional law and order prosecutor,” said Larry Thompson, a former deputy attorney-general in the George W Bush administration. “If there’s criminal conduct in the business arena, he’s not going to treat it any differently than if it were criminal conduct by an organised gang.” The Obama administration’s failure to jail any bank executives after the financial crisis undoubtedly fuelled the populist wave that has lifted Donald Trump from the world of reality television to the White House. Mr Sessions, who once bragged that bankers he prosecuted in Alabama “lost everything they had”, will be mindful of public sentiment.
Impact of Trump's Top Appointments on US Domestic & Foreign Policy - Riaz Haq - Who are President-Elect Donald Trump's top picks for his Cabinet and White House staff positions? What are their views on US domestic and foreign policies? How will they shape US policies on national security, immigration, minority rights and foreign relations? Are critics right about their reservations regarding Trump's top choices of Steve Bannon (Chief White House Strategist), Gen Michael Flynn (National Security Advisor), Jeff Sessions (Attorney General), Michael Pompeo (CIA Director) and Chris Kobach (Immigration)? What should Muslims do in response to appointments of known Islamophobes like Michael Flynn, Steve Bannon, Chris Kobach and others? Should they support civil rights groups like Council on Islamic Relations (CAIR), American Civil Liberties Union (ACLU) and Southern Poverty Law Center (SPLC) to challenge any anti-Muslim policies and actions? Should they make common cause with other ethnic and religious minorities to defend their civil rights? Should they put more efforts into inter-faith harmony? What will Team Trump's policy be toward India and Pakistan? Will they favor India over Pakistan? Will they pressure Pakistan to comply with US demands in the region, particularly with respect to Afghanistan? Will they collaborate with India to isolate Pakistan? How will Pakistan respond to such pressure? Is there a risk that Pakistan might go rogue? Viewpoint From Overseas host Faraz Darvesh discusses these questions with panelists Misbah Azam and Riaz Haq https://youtu.be/Otsw3atq5W4
What if foreign countries could just bribe the American president? - Tyler Cowen --Here is a Washington Post look at a related issue. I know bribing a president is illegal and it just…sounds so wrong…but what exactly does the equilibrium look like? Here are a few points:
- 1. Presumably the wealthier countries would be willing to pay more for American security guarantees.
- 2. Countries whose wealth can be easily captured and controlled by hostile forces — oil exporters? — would be willing to pay more for protection.
- 3. Human rights would not matter so much for American security guarantees. So far this is not sounding so different from the status quo. Let’s continue:
- 4. A selfish president might capture income from hard-to-defend countries, not internalizing the higher costs for the U.S. taxpayer. So American guarantees could extend too far and wide from an American perspective, although it is not obvious they will do so from a cosmopolitan perspective.
- 5. Presumably the president also could accept funds not to defend various nations. So large, wealthy foreign aggressors could “buy out” the United States from defending say Georgia or Taiwan. That means a bribed president may not “fold his hand” so quickly on all of these endangered small countries. Alternatively, a bribed president may decide to let one of “the little ones” go just to prove a point to the others.
- You’ll notice that #4 and #5 counteract each other. I suspect this balance would be worse than the status quo, but that doesn’t follow a priori.
- 6. You could imagine an American president who allows foreign countries to fall into especially precarious situations to increase his budgetary intake from bribes. The return to pre-emptive peace initiatives might be strongly negative.
- 7. An alternative perspective is that the American government already collects such bribes in the form of trade agreements, use of military bases, and so on. The real problem is not bribery per se, but rather concentrating so many of the returns in the hands of the president. Tariffs on American exports might go up, for instance, if the president is pocketing the bribes himself.
- 8. A worry is that bribes collected by a president would not lead to as much stability of policy as what might be generated by the decisions of “the foreign policy establishment.” Perhaps commercial arrangements are intrinsically less stable than bureaucratically-generated policies. A president’s utility function and game-theoretic behavior is probably harder to forecast than the wishes of the bureaucracy.
- 9. A related worry is that nations are so very large relative to the avaricious desires of the president. After a small number of payments, the president might act fairly arbitrarily, as extra bribes wouldn’t matter much and the foreign policy establishment already has been cut out of the picture.
It is worth thinking through the dynamics on all this a little more clearly than what I am seeing so far.
Trump chooses South Carolina Gov. Nikki Haley as UN ambassador - President-elect Donald Trump on Wednesday chose South Carolina Gov. Nikki Haley to be his selection as the U.S. ambassador to the United Nations. Haley was an outspoken Trump critic throughout much of his campaign, yet she's now poised to be the first female Cabinet-level official in the Trump administration. Haley still needs Senate confirmation to take the post. "Governor Haley has a proven track record of bringing people together regardless of background or party affiliation to move critical policies forward for the betterment of her state and our country," Trump said in a statement. "She is also a proven dealmaker, and we look to be making plenty of deals. She will be a great leader representing us on the world stage." A Trump spokesperson said Wednesday that Trump and Haley had "natural chemistry" when they met on Thursday and her selection as UN ambassador was an easy choice. Born in South Carolina and of Indian descent, Haley is the second Asian-American to serve as U.S. governor, following ex-Louisiana Gov. Bobby Jindal. In January, Haley, who was beginning to earn buzz as a possible vice presidential pick, delivered the Republican response to President Obama's final State of the Union address. Parts of her speech, however, were viewed as a rebuke not only of Obama, but also of Trump. Early in the Republican primary, Haley campaigned for Florida Sen. Marco Rubio before going on to support Texas Sen. Ted Cruz. Though she never appeared to totally warm to the eventual GOP nominee, she did say she would vote for Trump.
Trump names Haley, a foreign policy novice, as envoy to U.N. | Reuters: Donald Trump on Wednesday named South Carolina Governor Nikki Haley, a former critic with little foreign policy experience, as the next U.S. ambassador to the United Nations at a time of uncertainty over America's international role under his presidency. Haley, one of two women chosen so far for a job in Trump's Cabinet, is "a proven dealmaker, and we look to be making plenty of deals. She will be a great leader representing us on the world stage," the Republican president-elect said in a statement. Trump on Wednesday also picked wealthy Republican donor and school choice advocate Betsy DeVos to lead the Education Department. Haley, the 44-year-old daughter of Indian immigrants, represents what some Republicans hope could be the new face of their party: a younger, more diverse generation of leaders. Haley took Trump strongly to task during the presidential campaign over his harsh rhetoric about illegal immigration and for not speaking forcefully enough against white supremacists. Trump has chosen mostly male conservatives so far for senior positions as he shapes his administration following his victory over Democrat Hillary Clinton in the Nov. 8 election. Trump takes over from Democratic President Barack Obama on Jan. 20. Also on Wednesday, a spokesman for former Republican presidential candidate Ben Carson said Trump had not offered the retired neurosurgeon the post of housing and urban development secretary, disputing a Wall Street Journal report, which the newspaper later corrected.
Trump’s latest Cabinet-level picks mark a move to diversify his administration - President-elect Donald Trump on Wednesday began to follow through on a pledge to put together a diverse administration — not only expanding its makeup along ethnic and gender lines, but also inviting aboard former critics and adversaries. Trump named South Carolina Gov. Nikki Haley (R) to be his United Nations ambassador, tapped billionaire philanthropist Betsy DeVos as education secretary and appeared to be nearing an announcement of retired neurosurgeon Ben Carson to head the Department of Housing and Urban Development. In choosing two women — one the daughter of immigrants from India — and possibly an African American man for Cabinet-level appointments, Trump has cast more broadly than he did with his first five picks for top jobs in his Cabinet and White House. All of those initial selections were white men. Trump’s latest appointments also show that a president-elect famous for demanding unwavering loyalty from those around him is magnanimous enough to look beyond his past grievances — and perhaps has concluded that recruiting potential foes onto his team is a smart strategy for healing and neutralizing the deep divisions within the Republican Party. In a videotaped Thanksgiving message released Wednesday evening, Trump made a broader appeal for political reconciliation after a campaign marked by racial and gender divisions: “We have just finished a long and bruising political campaign. Emotions are raw and tensions just don’t heal overnight.” “It doesn’t go quickly, unfortunately,” the president-elect added, “but we have before us the chance now to make history together to bring real change to Washington, real safety to our cities and real prosperity to our communities, including our inner cities.” His comments came as votes continued to be counted from the Nov. 8 election and showed that his Democratic opponent, former secretary of state Hillary Clinton, has amassed a popular-vote lead that now exceeds 2 million ballots, or a margin of about 1.5 percent. Yet she finished nearly 60 votes behind Trump in the electoral college.
Trump’s CIA Pick Depicted War On Terror As Islamic Battle Against Christianity - Mike Pompeo, Donald Trump’s pick to lead the Central Intelligence Agency, has at times depicted the fight against terrorism as a war between radical Muslims, on one side, and the Christian faith on the other. “This threat to America,” Pompeo told a church group in Wichita in 2014, is from a minority of Muslims “who deeply believe that Islam is the way and the light and the only answer.” “They abhor Christians,” Pompeo said, “and will continue to press against us until we make sure that we pray and stand and fight and make sure that we know that Jesus Christ is our savior is truly the only solution for our world.” At an evangelical church in his district that specializes in addressing “Satanism and paranormal activity” — and standing in front of a Christian flag — Pompeo in 2015 spoke of the “struggle against radical Islam, the kind of struggle this country has not faced since its great wars.” He warned that “evil is all around us,” citing reports of terror plots, and cautioned the congregation not to be deterred by those who might call them “Islamophobes or bigots.” The Kansas lawmaker has frequently appeared on Christian right radio, including on a program hosted by the Family Research Council — a group, like Gaffney’s, that has promoted fears about Islam. Pompeo is an opponent of gay marriage, and was among a handful of legislators to demand that the Air Force return the phrase “so help me God” to its military oath.
The Disruptive Career of Michael Flynn, Trump’s National-Security Adviser - Flynn broke rules he thought were stupid. He once told me about a period he spent assigned to a C.I.A. station in Iraq, when he would sometimes sneak out of the compound without the “insane” required approval from C.I.A. headquarters, in Langley, Virginia. He had technicians secretly install an Internet connection in his Pentagon office, even though it was forbidden. There was also the time he gave classified information to NATO allies without approval, an incident which prompted an investigation, and a warning from superiors. During his stint as Mullen’s intelligence chief, Flynn would often write “This is bullshit!” in the margins of classified papers he was obliged to pass on to his boss, someone who saw these papers told me. The greatest accomplishment of Flynn’s military career was revolutionizing the way that the clandestine arm of the military, the Joint Special Operations Command (JSOC), undertook the killing and capture of suspected terrorists and insurgents in war zones. Stanley McChrystal, Flynn’s mentor, had tapped him for the job. They were both part of the self-described “Irish mafia” of officers at the Fort Bragg Army base, in North Carolina. In Afghanistan and Iraq, Flynn ordered JSOC commandos to collect and catalogue data from interrogations, captured electronic equipment, pocket trash—anything that could yield useful information. By analyzing these disparate scraps of intelligence, they were able to discover that Al Qaeda was not a hierarchical group after all but a dynamic network of cells and relationships. As I learned while doing research for my book “Top Secret America,” Flynn and McChrystal dramatically increased the pace of JSOC attacks on enemy hideouts by devising a system in which commandos on missions transferred promising data—cell-phone numbers, meeting locations—to analysts, who could then quickly point them to additional targets to hit. Multiple raids a night became common. McChrystal, who was appointed to run JSOC in 2003, brought Flynn in as his intelligence chief to help him shake up the organization. Flynn was one of the few high-ranking officers who disdained the Army’s culture of conformity. But McChrystal also knew he had to protect Flynn from that same culture. He “boxed him in,” someone who had worked with both men told me last week, by encouraging Flynn to keep his outbursts in check and surrounding him with subordinates who would challenge the unsubstantiated theories he tended to indulge.
Trump’s Tulsi Gabbard Factor -- Two weeks after Donald Trump’s shocking upset of Hillary Clinton, the imperious and imperial neoconservatives and their liberal-interventionist understudies may finally be losing their tight grip on U.S. foreign policy. The latest sign was Trump’s invitation for a meeting with Rep. Tulsi Gabbard, D-Hawaii, on Monday. The mainstream media commentary has almost completely missed the potential significance of this start-of-the-work-week meeting by suggesting that Trump is attracted to Gabbard’s tough words on “radical Islamic terrorism.” Far more important is that Gabbard, a 35-year-old Iraq War veteran, endorsed Sen. Bernie Sanders in the Democratic primaries because of his opposition to neocon/liberal-hawk military adventures. She starred in one of the strongest political ads of the campaign, a message to Hawaiians, called “The Cost of War.” “Bernie Sanders voted against the Iraq War,” Gabbard says. “He understands the cost of war, that that cost is continued when our veterans come home. Bernie Sanders will defend our country and take the trillions of dollars that are spent on these interventionist, regime change, unnecessary wars and invest it here at home.” In the ad, Gabbard threw down the gauntlet to the neocons and their liberal-hawk sidekicks, by accusing them of wasting trillions of dollars “on these interventionist, regime change, unnecessary wars.” Her comments mesh closely with Trump’s own perspective. After the meeting on Monday, Gabbard released a statement confirming that the focus of the discussion had been her opposition to escalating the war in Syria by following neocon/liberal-hawk suggestions for a “no-fly zone” that would require widespread U.S. military destruction of Syrian government installations and the killing of a large number of Syrians. “President-elect Trump asked me to meet with him about our current policies regarding Syria, our fight against terrorist groups like al-Qaeda and ISIS, as well as other foreign policy challenges we face,” Gabbard said. “I felt it important to take the opportunity to meet with the President-elect now before the drumbeat of war that neocons have been beating drag us into an escalation of the war to overthrow the Syrian government — a war which has already cost hundreds of thousands of lives and forced millions of refugees to flee their homes in search of safety for themselves and their families. …
Tulsi Gabbard’s screw-the-neocons meeting with Trump sparks anger and encouragement - During his round of interviewing potential job applicants, Donald Trump had one meeting with a Democratic politician: Hawaii Congresswoman Tulsi Gabbard, a leading antiwar figure, an Iraq war veteran and Bernie Sanders ally and former rising star in the party. The Monday meeting is important because of what Gabbard said about foreign policy: screw the neoconservatives and dump the idea of regime change in Syria, which Hillary Clinton had supported. The meeting thus contains seeds of ideological convergence between the antiwar left and right. It has been read as misguided, tragic, or hopeful– depending on the observer’s point of view. Here’s a short tour. First off, Gabbard filed her own report, titled “My meeting with Donald Trump.” She said the meeting was all about Syria; and she called out the neoconservatives and others advocating intervention.This was an opportunity to advocate for peace — and I felt it was important to take the opportunity to meet with the President-elect to counteract neocons’ steady drumbeats of war, which threaten to drag us into an escalation of the war to overthrow the Syrian government.This war has already cost hundreds of thousands of lives and forced millions of refugees to flee their homes in search of safety for themselves and their families. It has also strengthened al-Qaeda and other violent, extremist groups in the region. It would have been irresponsible not to accept this invitation. I feel it is my duty to take every single opportunity I get to advocate for peace, no matter the circumstances of those meetings. The New York Times published a report that characterized Gabbard as defensive and delusional. “The report was slanted and pejorative, in a way so easy to penetrate you wonder if they’ve lost their wits,” David Bromwich writes. “How deeply she has offended against the new Cold War consensus.” Bromwich revised the Times piece by putting its prejudicial phrasing in double brackets, and including his amendments and commentary in boldface:
Trump taps billionaire investor Ross for commerce secretary - — Wilbur Ross, the billionaire investor considered the “king of bankruptcy” for buying beaten-down companies with the potential to deliver profits, is President-elect Donald Trump’s choice for commerce secretary, a senior transition official said. The official isn’t authorized to publicly discuss the matter and requested anonymity. Reputed by Forbes to be worth nearly $3 billion, Ross would represent the interests of U.S. businesses domestically and abroad as the head at Commerce. His department would be among those tasked with carrying out the Trump administration’s stated goal of protecting U.S. workers and challenging decades of globalization that largely benefited multinational corporations. With a Florida home down the road from Trump’s Mar-a-Lago retreat, the 78-year-old Ross played a role in crafting and selling the president-elect’s tax-cut and infrastructure plans. Ross has suggested that much of America is disgruntled because the economy has left middle-class workers behind and says Trump represents a shift to a “less politically correct direction.” “Part of the reason why I’m supporting Trump is that I think we need a more radical, new approach to government — at least in the U.S. — from what we’ve had before,” Ross told CNBC in June, referring to Trump’s blunt tone and sweeping promises to reinvigorate economic growth. Despite his embrace of populist rhetoric, Ross has enjoyed a patrician lifestyle. He frequently commutes between his offices in New York and home in Palm Beach, Florida, according to Haute Living magazine. ‘
Chicago Cubs co-owner Todd Ricketts likely deputy commerce secretary - POLITICO: President-elect Donald Trump is likely to tap Todd Ricketts, the co-owner of the Chicago Cubs and a member of the powerful conservative Ricketts family, to be deputy secretary of commerce, POLITICO has confirmed. Wilbur Ross remains the likely choice to lead the Commerce Department. Ricketts is the son of billionaire TD Ameritrade founder and conservative donor Joe Ricketts, and the brother of Republican Nebraska Governor Pete Ricketts. The Ricketts family initially opposed Trump in the Republican primary, with the family helping to fund an anti-Trump super PAC and Todd Ricketts supporting Wisconsin Gov. Scott Walker’s bid. But once Trump sealed up the nomination, the family came on board.
Harold Ford, former Tennessee Congressman, tapped as new Secretary of Transportation – DC Velocity: Former Tennessee Congressman Harold Ford Jr. has been offered the post of Secretary of Transportation in the Trump administration, but has not formally accepted, two people familiar with the matter said today. Ford, a moderate Democrat and scion of a prominent Tennessee political family, is currently a managing director in New York at investment firm Morgan Stanley & Co. Ford, 46, represented Tennessee's 9th Congressional district, centered in Memphis, from 1997 to 2007. His father, former Congressman Harold Ford Sr., held the same seat for 22 years. In 2006, Ford ran for the Senate seat in Tennessee vacated by retiring Bill Frist. However, he lost to Sen. Bob Corker (R) by a narrow margin. Rep. John L. Mica (R-Fla.) is another potential candidate for the DOT job, according to reports.
Trump Names Two Opponents of Net Neutrality to Oversee FCC Transition Team --President-elect Donald Trump has appointed two new advisers to his transition team that will oversee his FCC and telecommunications policy agenda. Both of the new advisers are staunch opponents of net neutrality regulations. Jeff Eisenach, one of the two newly appointed advisers, is an economist who has previously worked as a consultant for Verizon and its trade association. In September 2014, Eisenach testified before a Senate Judiciary Committee and said, “Net neutrality would not improve consumer welfare or protect the public interest.” He has also worked for the conservative think-tank American Enterprise Institute (AEI) and in a blog post wrote, “Net neutrality is crony capitalism pure and simple.” Mark Jamison, the other newly appointed adviser, also has a long history of battling against net neutrality oversight. Jamison formerly worked on Sprint’s lobbying team and now leads the University of Florida’s Public Utility Research Center. Both Eisenach and Jamison are considered leading adversaries of net neutrality who worked hard to prevent the rules from being passed last year. For the uninitiated, the rules passed last year prevent companies internet providers from discriminating against any online content or services. For example, without net neutrality rules, internet providers like Comcast and Verizon could charge internet subscribers more for using sites like Netflix. The FCC’s net neutrality rules would protect consumers from paying exorbitant fees for internet use. The latest news from Trump’s transition team spells bad news for more than just the open internet. In addition to opposing net neutrality, Jamison has also publicly opposed FCC chairman Tom Wheeler’s attempts to open up the cable industry’s monopoly on set-top boxes. Jamison recently wrote that chairman Wheeler’s reason for revisiting cable set-top box rules relied on “bad math and falsehoods masquerading as facts.”
Trump taps economists, investors for transition team -- Trump’s transition team announced 12 men and women from various sectors and industries — including several early campaign supporters — to serve on “landing teams.” The teams will help Trump staff his new administration, though members of the teams won’t necessarily be nominated or hired. Trump’s Treasury Department landing team includes William Walton, a private equity chief who helps lead the transition economic advisory wing. Other members are Curtis Dubay, a tax expert at the Heritage Foundation; Judy Shelton, senior fellow at the libertarian Atlas Network and campaign economic adviser; and Mauricio Claver-Carone, a former Treasury Department adviser and a pro-Cuban embargo advocate. Tom Leppert, a former Republican mayor of Dallas, is the sole person on the Social Security Administration landing team. Leppert endorsed Trump in late February. Trump’s Commerce Department landing team consists of Ray Washburne, a Dallas-based investor who vice-chaired Trump’s fundraising committee; David Bohigian, a venture capitalist and former Commerce assistant secretary under President George W. Bush; and Joan Maginnis, a former Commerce assistant counsel under Bush. Leading the United States Trade Representative team are Dan DiMicco, Trump’s campaign trade adviser and CEO of steel company Nucor, and Robert Lighthizer, a free-trade critical lawyer and deputy trade representative under President Ronald Reagan. Jeffrey Eisenach, director of the fiscally conservative American Enterprise Institute’s Center for Internet, Communications, and Technology Policy, and Mark Jamison, director of the University of Florida’s Public Utilities Research Center, will lead the Federal Communications Commission team. Mary Anne Bradfield, a consultant, former lobbyist and former Small Business Administration (SBA) assistant and counselor under Bush, will lead Trump’s SBA team.
When Public Goes Private, as Trump Wants: What Happens? - Diane Ravitch - The New York Times recently published a series of articles about the dangers of privatizing public services, the first of which was called “When You Dial 911 and Wall Street Answers.” Over the years, the Times has published other exposés of privatized services, like hospitals, health care, prisons, ambulances, and preschools for children with disabilities. In some cities and states, even libraries and water have been privatized. No public service is immune from takeover by corporations that say they can provide comparable or better quality at a lower cost. The New York Times said that since the 2008 financial crisis, private equity firms “have increasingly taken over a wide array of civic and financial services that are central to American life.” Privatization means that a public service is taken over by a for-profit business, whose highest goal is profit. Investors expect a profit when a business moves into a new venture. The new corporation operating the hospital or the prison or the fire department cuts costs by every means to increase profits. When possible it eliminates unions, raises prices to consumers (even charging homeowners for putting out fires), cuts workers’ benefits, expands working hours, and lays off veteran employees who earn the most. The consequences can be dangerous to ordinary citizens. Doctors in privatized hospitals may perform unnecessary surgeries to increase revenues or avoid treating patients whose care may be too expensive. The Federal Bureau of Prisons recently concluded that privatized prisons were not as safe as those run by the bureau itself and were less likely to provide effective programs for education and job training to reduce recidivism. Consequently, the federal government has begun phasing out privately managed prisons, which hold about 15 percent of federal prisoners. That decision was based on an investigation by the Justice Department’s inspector general, who cited a May 2012 riot at a Mississippi correctional center in which a score of people were injured and a correctional officer was killed. There is an ongoing debate about whether the Veterans Administration should privatize health care for military veterans. Republicans have proposed privatizing Social Security and Medicare. President George W. Bush used to point to Chile as a model nation that had successfully privatized Social Security, but The New York Times recently reported that privatization of pensions in Chile was a disaster, leaving many older people impoverished.
Trump "Exploded" At Media Execs During Off-The-Record Meeting: "It Was A F--king Firing Squad" - Earlier today we reported that in a "summit" organized by Trump's campaign manager Kellyanne Conway, executives and anchors from the major US media outlets, including CNN president Jeff Zucker, ABC News president James Goldston, Fox News co-presidents Bill Shine and Jack Abernethy, and NBC News president Deborah Turness, visited Donald Trump at his Trump Tower penthouse for an off the record meeting.Courtesy of the Post, we have a complete list of the participants at the Trump media meeting: the hour-long powwow included top execs from network and cable news channels. Among the attendees were NBC’s Deborah Turness, Lester Holt and Chuck Todd, ABC’s James Goldston, George Stephanopoulos, David Muir and Martha Raddatz, CBS’ Norah O’Donnell John Dickerson, Charlie Rose, Christopher Isham and Gayle King, Fox News’ Bill Shine, Jack Abernethy, Jay Wallace, Suzanne Scott, MSNBC’s Phil Griffin and CNN’s Jeff Zucker and Erin Burnett.The contents of what was discussed were initially unclear. Now, according to the Post, we learn that the President-elect "exploded at media bigs in an off-the-record Trump Tower powow on Monday."“It was like a f—ing firing squad,” one source told the Post.According to the Post's recount of the conversation, “Trump started with Jeff Zucker and said I hate your network, everyone at CNN is a liar and you should be ashamed…."“The meeting was a total disaster. The TV execs and anchors went in there thinking they would be discussing the access they would get to the Trump administration, but instead they got a Trump-style dressing down,” the source added. A second source confirmed the encounter.The Post adds that “the meeting took place in a big board room and there were about 30 or 40 people, including the big news anchors from all the networks…"“Trump kept saying, ‘We’re in a room of liars, the deceitful dishonest media who got it all wrong. He addressed everyone in the room calling the media dishonest, deceitful liars. He called out Jeff Zucker by name and said everyone at CNN was a liar, and CNN was network of liars.
Top network executives, anchors meet with Donald Trump - Nov. 21, 2016: Executives and anchors from the country's five biggest television networks met with President-elect Donald Trump at Trump Tower on Monday afternoon. And they got an earful. Trump vented about media coverage, according to sources who spoke on the condition of anonymity. He was highly critical of CNN and other news organizations. But while Trump showed disdain for the news media, he also answered questions; listened to the journalists' arguments about the importance of access; and committed to making improvements. A source in the room told CNNMoney that there was "real progress" made with regards to media access to Trump and his administration. One specific topic was the importance of the "press pool," a small group of journalists that traditionally travels with the president. The hour-long meeting was off the record, meaning the participants agreed not to talk about the substance of the conversations. But Trump senior adviser Kellyanne Conway, who arranged the meeting, said afterward that it was "very cordial, candid and honest."Some of the attendees were struck by Trump's anti-media posture. During the meeting, Trump revived some of the specific arguments he made weeks before winning the presidency. But one of the participants told CNNMoney that Trump also asked for a positive relationship between his White House and the media. The participant said that a New York Post account -- which had a source describing it as Trump giving the assembled members of the media a "dressing down" like a "firing squad" -- was overstated.
Washington Post Thoroughly Discredits Itself With McCarthy-Style Smear Campaign Against ZeroHedge, Naked Capitalism, Truth-Out, 200+ Others – Mish - The Washington Post stepped well over the line of questionable reporting today, venturing deep into a McCarthy-style smear campaign against hundreds of allegedly “fake news” sites accused of being under control of, or influenced by Russia. Ironically, the Washington Post headline, Russian Propaganda Effort Helped Spread ‘Fake News’ During Election, Experts Say reads like it a “fake news” supermarket tabloid. mThe article, written By Craig Timberg, is even worse. It cites anonymous researchers, who propose a Russian fake news team may have delivered the election to Donald Trump. The article asks Could better Internet security have prevented Trump’s win?. The researchers blame an “online echo chamber” where some players were knowingly part of the propaganda campaign, while others were merely “useful idiots”. “The way that this propaganda apparatus supported Trump was equivalent to some massive amount of a media buy,” said the executive director of PropOrNot, who spoke on the condition of anonymity to avoid being targeted by Russia’s legions of skilled hackers. “It was like Russia was running a super PAC for Trump’s campaign. . . . It worked.” That’s pretty damn amusing. The Washington Post just handed over the website of PropOrNot to those damn Russians (not that they didn’t know it already).ZeroHedge was on The List at PropOrNot along with many other names you will recognize including that bastion of perpetual right-wing, Republican propaganda, Naked Capitalism (Hint – that was sarcasm). I failed to make the grade. This post just might do it. Courtesy of ZeroHedge, here is the highlighted list with some sites that many of you will recognize.
Washington Post Promotes Shadowy Website That Accuses 200 Publications of Being Russian Propaganda Plants - naked capitalism Yves here. As indicated in Links, we’ll have more to say about this in due course. Note, however, that as Blumenthal points out, some of the sites that are listed as PropOrNot allies receive US government funding. As Mark Ames pointed out via e-mail, “The law is still clear that US State Dept money and probably BBG money cannot be used to propagandize American audiences.” So if these sites really are “allies” in terms of providing hard dollars or other forms of support (shared staff, research), this site and its allies may be in violation of US statutes. Originally published at Alternet: A shady website that claims “Russia is Manipulating US Opinion Through Online Propaganda” has compiled a blacklist of websites its anonymous authors accuse of pushing fake news and Russian propaganda. The blacklist includes over 200 outlets, from the right-wing Drudge Report and Russian government-funded Russia Today, to Wikileaks and an array of marginal conspiracy and far-right sites. The blacklist also includes some of the flagship publications of the progressive left, including Truthdig, Counterpunch, Truthout, Naked Capitalism, and the Black Agenda Report, a leftist African-American opinion hub that is critical of the liberal black political establishment. Called PropOrNot, the blacklisting organization was described by the Washington Post’s Craig Timberg as “a nonpartisan collection of researchers with foreign policy, military and technology backgrounds.” The Washington Post agreed to preserve the anonymity of the group’s director on the grounds that exposure could result in their being targeted by “Russia’s legions of skilled hackers.” The Post failed to explain what methods PropOrNot relied on to conclude that “stories planted or promoted by the Russian disinformation campaign were viewed more than 213 million times.” (Timberg also cited a report co-authored by Aaron Weisburg, founder of the one-man anti-Palestinian “Internet Haganah” operation, who has been accused of interfering in federal investigations, stealing the personal information of anarchists, online harassment, and fabricating information to smear his targets.) Despite the Washington Post’s charitable description of PropOrNot as a group of independent-minded researchers dedicated to protecting the integrity of American democracy, the shadowy group bears many of the qualities of the red enemies it claims to be battling. In addition to its blacklist of Russian dupes, it lists a collection of outlets funded by the U.S. State Department, NATO and assorted tech and weapons companies as “allies.” PropOrNot’s methodology is so shabby it is able to peg widely read outlets like Naked Capitalism, a leading left-wing financial news blog, as Russian propaganda operations.
Trump Bypasses Media With Direct YouTube/Twitter Distribution As Feud With Mainstream Outlets Rages -- For the past year and a half the Trump team has played the mainstream media like a fiddle. During the republican primary, he was granted millions of dollars of free air time as the unwitting mainstream outlets thought they were boosting one of Hillary's chosen "pied piper" candidates that could be easily defeated in the general election. Then, after helping to catapult him to the republican nomination the media predictably turned on him in a blatant effort to elect their chosen candidate. Unfortunately for the mainstream media, none of their plans to destroy Trump came close to working and, in fact, he used their corrupt, biased coverage to rally his supporters which is likely a big reason for his ultimate victory. Perhaps no one has summarized Trump's relationship with the media and establishment institutions better than Michael Moore who famously predicted two weeks before election day that Trump's election would be the "biggest fuck you ever recorded in human history": "They [working class voters] see that the elites who ruined their lives hate Trump. Corporate American hates Trump. Wall Street hates Trump. The career politicians hate Trump. The media hates Trump, after they loved him and created him and now hate him. Thank you, media. The enemy of my enemy is who I'm voting for on November 8th." But now that the campaigning is finally over, the true panic is setting in for the mainstream media as Trump is threatening to cut off the one thing they have left: access. While Trump's decision to bypass the media in recent days (starting with the message below posted on YouTube which has received millions of views) by speaking directly with the American electorate through direct distribution outlets like YouTube and Twitter may not seem like a big deal, it has the potential to be quite revolutionary. After running a campaign that proved that blatant, and frankly insulting, pandering to various minority groups and endless cash hoards weren't necessarily direct determinants of election success, Trump seems intent upon proving that the mainstream media can be completely bypassed in the modern world...and it is glorious to watch.
Kissinger: Donald Trump Is Unique, He Enters Office With “No Baggage,” “No Obligations” - Former Secretary of State Dr. Henry Kissinger spoke about his meeting on Friday with President-elect Donald Trump on CNN's "Fareed Zakaria GPS" on Sunday. About Trump's election, he said: "Not enough attention was paid to the fact that [Globalization] was bound to have winners and losers, and that the losers were bound to try to express themselves in some kind of political reaction." "This president-elect is the most unique that I have experienced in one respect," he said: "No baggage. He has no obligation to any particular group because he has become a president on the basis of his own strategy and a program he put before the American public that his competitors did not present. So that is a unique situation.” "I'm not here as a spokesman of the president-elect," Kissinger said. "I'm here to answer questions of my impressions of [him]. "In my view in the present situation, one has to --one should not insist on nailing him into positions that he had taken in the campaign on which he doesn't insist. If he insists on them, then of course this agreement will become expressed, but if he develops another program and leaves the question open of what he said in the campaign, one should not make that the desired development." "I think we should give him an opportunity to develop the positive objectives that he may have, and to discuss -- and to discuss those. And we've gone through too many decades of tearing incumbent administrations apart, and it may happen again, but we shouldn't begin that way. And we shouldn't end up that way, either, but -- so that would be my basic view," he said.
BREAKING: Green Party's Jill Stein to Seek Hand 'Recounts', Forensic Tabulator Audits in WI, MI, PA | The BRAD BLOG: The Green Party's 2016 Presidential candidate Jill Stein is announcing her intention to seek a "recount of votes in the battleground states of Wisconsin, Michigan, and Pennsylvania." The campaign's press release, posted in full below, cites "a multi-partisan effort to check the accuracy of the machine-counted vote tallies in these states in order to ensure the integrity of our elections." The announcement follows on word that leaked out yesterday at New York magazine that top electronic voting experts and election integrity advocates have been encouraging the Hillary Clinton campaign to file for similar hand-counts and forensic analyses of electronic voting and tabulation systems in the same states. The BRAD BLOG has independently confirmed that those efforts have been under way and are still being considered at the top level of the Clinton campaign. We discussed just some of those efforts, and a number of reasons for them, on yesterday's BradCast program. University of Michigan computer science professor Alex Halderman, who has cracked many electronic voting systems in recent years, offers additional reasons to check the results and the systems in WI, MI and PA now right here. As millions of dollars must be raised in a very short time to pay filing fees and attorneys fees for the effort --- filing fees in WI alone, are $1 million, due this Friday --- the Stein campaign has set up a fund raising page for the effort right here. Stein will be my guest on today's BradCast, nationally syndicated via the Pacifica Radio Network and others, at 6p ET (3p PT). You may listen live to the show at that time right here. [UPDATE: My exclusive interview with Stein is now posted here.]
'Why Would Anyone Be Against Counting Votes?': Jill Stein on Filing for 'Recounts' in WI, MI, PA: 'BradCast' 11/23/2016 - On today's BradCast, my exclusive interview with Dr. Jill Stein, the 2016 Green Party Presidential candidate, on her announcement earlier today that her campaign plans to file for hand-counted paper ballot "recounts" and forensic audits of the Presidential election results in Wisconsin, Michigan and Pennsylvania. [Audio link to show and full interview posted below.] "We have to move really fast in order to basically verify the vote and be confident our votes were actually counted," she tells me, citing the many concerns brought to her by computer scientists and voting systems and election integrity experts, all questioning whether paper ballots were counted accurately by error-prone and easily-hacked computer tabulators in WI and MI, and whether touch-screen systems were manipulated in some fashion in PA. Across those three states alone, as we have been reporting, just 50,000 votes flipped from Trump to Clinton --- out of more than 13 million ballots cast in those states, where a number of anomalous results have been found --- could change who becomes the next President of the United States. There is plenty of reason to question whether the results as reported are accurate. And not only because of the surprising results. As I note again on today's show, University of Michigan computer science and voting systems expert J. Alex Halderman, one of those urging the candidates to call for a hand-count, has cracked many electronic voting systems in recent years. He offered still more reasons to examine both the reported results and the systems used in WI, MI and PA earlier today. Stein, explaining that some $2 million must be raised to meet the deadline to file in WI by Friday (and another $4 million or so for the other two states next week), tells me that it's an "outrage we have to go to extraordinary lengths to verify the vote," adding she is doing so, due to her "interests as a citizen, as a person in America, that the vote be valid." (The campaign has set up a fund raising page for the effort right here.)
America Has Never Been More Divided: Gallup -- If there was anything the recent presidential campaign demonstrated vividly, it is that the US may be the most ideologically polarized and divided it has ever been in its history. And, according to a Gallup, this has now been officially confirmed: in a survey released overnight, a record 77% of Americans believe the US is divided on the most important values, while 21% believe it is united and in agreement. Over the past 20+ years, the public has tended to perceive the nation as being more divided than united, apart from two surveys conducted shortly after the 9/11 terrorist attacks. The poll was conducted on Nov. 9-13, one day after the November 8 election and after a contentious presidential campaign involving the two of the least popular candidates in postwar U.S. history. It found that all major subgroups of Americans share the view that the nation is divided, though Republicans (68%) are less likely to believe this than independents (78%) and Democrats (83%). That is consistent with the findings in the past two polls, conducted after the 2004 and 2012 presidential elections, in which the winning party's supporters were less likely to perceive the nation as divided.
Donald Trump Criticized for Decision Not to Go After Hillary Clinton Over Emails - President-elect Donald Trump is being lashed for breaking a campaign promise by deciding not to pursue an investigation into former rival Hillary Clinton for her use of a private email server as secretary of state or for wrongdoing involving her family’s charitable organization. To his fans’ delight, candidate Trump had threatened to appoint a special prosecutor to look into his Democratic opponent’s emails and quipped that she would go to jail. He celebrated with his fellow Republicans in the final weeks of the election season when FBI Director James Comey announced the agency was looking into more emails related to her email server. The FBI had cleared Clinton, but had criticized her email use. On the campaign trail, Trump called Clinton possibly “the most corrupt person ever to seek the presidency of the United States.” At another rally, he promised: “Hillary Clinton will be under investigation for a long, long time for her many crimes against our nation, our people, our democracy, likely concluding in a criminal trial.” And at the second presidential debate on October 10, he directly said to her: “There has never been so many lies, so much deception, there has never been anything like it.... Honestly, you’d ought to be ashamed of yourself.” But his team on Tuesday said the incoming Trump administration won’t pursue charges. “I think Hillary Clinton still has to face the fact that a majority of Americans don't find her to be honest or trustworthy,” Kellyanne Conway, senior adviser to the Trump transition, told Morning Joe. “I think he’s thinking of many different things as he prepares to become president of the United States, and things that sound like the campaign aren’t among them.”
Conservatives "Betrayed" By Trump Decision To Kill Clinton Probe --Trump’s decision not to appoint a special prosecutor to pursue a criminal probe into Hillary Clinton's email server or the Clinton Foundation, confirmed by top advisor Kellyanne Conway on Tuesday morning, appears to be is the first major break the president-elect has had with his diehard fans. In what The Hill believe was the first indication of "strains in the relationship" conservatives expressed "feelings of betrayal" on Tuesday after Conway said - and Trump subsequently confirmed during his meeting with the NYT - that the incoming administration would decline to pursue a criminal case against former rival Hillary Clinton.And indeed, some prominent conservative critics were livid.Breitbart News, whose former executive chairman, Steve Bannon was recently named as a senior advisor in his White House, slammed Trump's decision as a “broken promise.” Wow, Breitbart is unhappy with Donald Trump: pic.twitter.com/YOolCTsDC9 Conservative pundit Ann Coulter accused Trump of “blocking investigators from doing their job. As happy as I am that our long national nightmare's over, NO president shld be blocking investigators from doing their jobs. #EqualUnderLawhttps://t.co/8JCQOO0dSF Even Judicial Watch, the conservative watchdog organization that has pursued Clinton’s emails for more than a year and whose relentless FOIAs into the Clinton inner sanctum - alongside with the Wikileaks revelations - played a critical part in Hillary Clinton's loss, called on Trump to reverse his stance. “Donald Trump must commit his administration to a serious, independent investigation of the very serious Clinton national security, email, and pay-to-play scandals,” organization president Tom Fitton said in a statement. “If Mr. Trump’s appointees continue the Obama administration’s politicized spiking of a criminal investigation of Hillary Clinton, it would be a betrayal of his promise to the American people to ‘drain the swamp’ of out-of-control corruption in Washington, DC."
Trump disavows 'alt-right' supporters - BBC News: Donald Trump has repudiated the fringe "alt-right" group that celebrated his election win with Nazi salutes. In a far-ranging interview with the New York Times, the US president-elect was quoted as saying: "I condemn them. I disavow, and I condemn." He said he did not want to "energise" the group, which includes neo-Nazis, white supremacists and anti-Semites. Mr Trump, who is due to take over from Barack Obama on 20 January, is still assembling his White House team but has already courted controversy with some of his choices. He has defended his chief strategist Steve Bannon, the former CEO of Breitbart News, bristling at claims that the ultra-conservative site is associated with white supremacists. Alt-right supporters were filmed on Saturday in Washington DC cheering as a speaker shouted: "Hail Trump." In the video, Richard Spencer, an alt-right leader, told a conference that America belonged to white people, whom he described as "children of the sun". He denounced the movement's critics as "the most despicable creatures who ever walked the planet".
Will Trump’s New Financial-Engineering Loophole Make Stocks Rally and Bonds Crash? -- The profits that US corporations earned overseas, and that have remained untaxed in the US, have ballooned to $2.6 trillion, according to Congress’s Joint Committee on Taxation, cited by Bloomberg. This “overseas cash” made it onto Trump’s agenda. Wall Street and our Corporate Titans are licking their chops. They can smell a tax holiday or a new loophole to encourage them to “repatriate” this “overseas cash.” Goldman Sachs now told its clients what these corporations are going to use this “cash” for. You guessed it: financial engineering. The exact amount of this “cash overseas” remains a mystery. The numbers thrown around – including the $2.6 trillion above – are guesses. There is no official data. Companies are not required to disclose the details of their assets, in what currencies they’re denominated, or where they’re domiciled. But in 2004, the last time there was a tax holiday for “overseas cash,” our Corporate Titans “repatriated” $300 billion at a tax-holiday rate of 5.25% and used 92% of if for share-buybacks. The number of jobs that were promised to be created as a result of this repatriation? Forget it. But the number of share-buybacks soared by 84%. Now Goldman predicts the same sort of thing in a note to its clients, assuming that the tax holiday or loophole becomes reality in 2017. Bloomberg:“A significant portion of returning funds will be directed to buybacks based on the pattern of the tax holiday in 2004,” the team, led by Chief US Equity Strategist David Kostin, writes. They estimate that $150 billion (or 20% of total buybacks) will be driven by repatriated overseas cash. They predict buybacks 30% higher than last year, compared to just 5% higher without the repatriation impact. Financial engineering comes out on top. “Return to investors,” as Goldman calls it: 42% of the total cash used in 2017 will be dedicated to dividends and share-buybacks, matching the prior record ratio of the glorious acquisition-and-buyback year 2007 before it all fell apart. Cash used for dividends will drop to 18% of total cash used in 2017, from 19% this year. But cash used for buybacks, which was 26% in 2016 and 24% in 2015, will soar to 30% in 2017, the highest ratio since glory-year 2007. And investment “for growth” (capital expenditures and research & development) will drop to 52% of total cash used in 2017, lower even the 55% in 2016, matching the record low of the great financial-engineering year 2007. Goldman expects CapEx to drop to 28% of total cash used, matching the low of 2007. And R & D will drop to 11% of total cash used, matching the lowest ratios going back to 2000.
Dow hits new high of 19,000 as Trump rally continues - The Dow Jones Industrial Average hit a new record high Tuesday, closing above 19,000 for the first time as the stunning market rally since the election of Donald Trump continued on Wall Street. The blue chip index went as high as 19,044 in late afternoon trading and finished the day slightly below that. The Dow, which includes 30 brand name stocks such as Coca-Cola, Walmart, Microsoft, Disney and General Electric, is now up nearly 4% since Trump defeated Hillary Clinton to become the next president of the United States. The S&P 500 and Nasdaq are also at record highs. Of course, it's not as if investors have suffered during Obama's tenure. The Dow has nearly tripled since hitting a low of about 6,400 in March 2009 -- shortly after Obama took office in the midst of the Great Recession. The latest rally is spectacular in how the market has swung in the weeks leading to the election and after. CNNMoney's Fear and Greed Index, which measures seven indicators of market sentiment, is now in Greed territory and is not far from Extreme Greed levels. It was registering Fear just before the election. That's because investors were initially wary of Trump. The market actually fell for nine straight days in the two weeks leading up to the election, as Trump's campaign gained momentum due to concerns about Clinton's emails. Ironically enough, the market rallied sharply the Monday before Election Day after FBI Director James Comey cleared Clinton -- an event that many investors interpreted as a sign that Clinton would wind up defeating Trump after all. So what's changed? The market now seems to think that Trump's win, combined with Republicans retaining control of both the House of Representatives and Senate, should mean that many of Trump's market-friendly policies will be enacted.
Corporate debt returns lure investors back to bond market- The global bond market rout triggered by Donald Trump’s US election victory looks overdone, according to bond investors now betting that the sell-off was too violent and that borrowing costs will remain contained into the start of the new year. Mr Trump is expected to unveil a large, inflation-fuelling economic stimulus package of infrastructure spending and tax cuts, which has stoked fears of an end to the three-decade bull market in bonds. The global fixed income market lost more than $1.8tn of value over the past two weeks, sending yields — which move inversely to prices — to a nine-month high on Friday. But some big investors are betting that the bond turmoil has been excessive, and are dipping back into the market, especially in areas such as US corporate debt, which now offers more attractive returns.
Investors Make Bullish Bet on Trump, and an Era of Tax Cuts and Spending - NYTimes: Two weeks after Donald J. Trump swept to victory, investors from around the world are betting that his promises of tax cuts, fewer regulations and a spendthrift federal government can recharge the American economy. This burst of exuberance sent the major markets to record highs on Monday, as investors continued to pull out of government bond funds whose yields are miserly. The momentum has shown few signs of slowing and has resulted in significant flows of money being poured into United States stocks. The rush of money has also pushed up the value of the dollar against the currencies of developed nations, such as the euro, and those of developing nations like Brazil, Turkey and Mexico. A strong dollar that is underpinned by rising interest rates tends to spell trouble for emerging markets, as investors move money from these countries, creating havoc and making it harder for governments and corporations to pay off their dollar-denominated debts. For that reason, many economists have warned that the downside to a Trump-inspired revival of the United States economy is a spate of calamities in emerging markets, as investors head quickly for the exit. The recent euphoria stands in sharp contrast to Wall Street’s prediction, before the election, of market mayhem if Mr. Trump were to win. The view had been that his unpredictable ways would spook the financial world, not least his threat to rip up trade agreements with Mexico and fight China on its exports to the United States. After a sharp but very brief slide in Asian trading on election night, when it became clear that Mr. Trump would win, markets rallied quickly as the Trump economic agenda was quickly assessed.
October Was The Worst Month For Hedge Funds Yet This Year - Another month, and the pain for the hedge fund industry just keeps getting more intense. According to the latest Evestment report, investors redeemed an estimated net $14.2 billion from hedge funds in October. Year-to-date, there has been a net $77.0 billion removed from the industry. October’s outflow was the fourth month of redemptions in the last five and seventh in 2016. Due to the breadth of products experiencing outflows, and the persistence of redemptions outweighing new allocations, it is clear the industry is experiencing a crisis -like wave of negative investor sentiment. One almost wonders how much higher the market can keep rising with redemption requests flooding countless back offices. We hope to find out soon. Here are the rest of the details on the latest, ongoing, troubles facing the hedge fund industry which, unless something drastically changes soon may end up being a "zero hedge" industry:
- The breadth of redemption pressure in October was the industry’s largest in 2016 with 61% of reporting funds estimated to have net outflow during the month. The last five months have accounted for the majority of the industry’s redemptions in 2016, a time frame which aligns with investors’ processes for analyzing 2015 results, and taking actions on those decisions.
- While investors broadly reduced investments in hedge funds in October, the bigger issue was the lack of meaningful new investment. The portion of funds losing greater than 2% or 5% of their AUM from redemptions was only slightly above average in October, however the portion with new allocations greater than 2% or 5% of their AUM were well below average. Essentially, flows in October were poor not necessarily because investors redeemed from the industry, but no one is really allocating with any enthusiasm.
Trump Picks Industry Vets as 'Landing Teams' for CFPB, Regulators | American Banker– The transition team for President-elect Donald Trump announced a series of names this week for people who will help facilitate an orderly transfer of power at the federal financial regulators. The administrators have been grouped into "landing teams" who will collect information on each agency, ranging from the agency's budget and policies to the status of various rulemakings and the current administration's priorities. Just because someone is heading up a landing team does not necessarily mean they will be converted to a position within the administration, but the job is to inform the transition team and ensure that the incoming appointees can hit the ground running after Trump is sworn into office in January Paul Atkins, who twice served as a director on the Securities and Exchange Commission and is now chief executive officer of Patomak Global Partners, was chosen to lead the landing team for the Consumer Financial Protection Bureau, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. Securities lawyer and former SEC General Counsel Ralph Ferrara is on the landing team for the Federal Reserve Board, while Alex Pollock, the former head of the Federal Home Loan Bank of Chicago, is heading up the efforts with the Financial Stability Oversight Council and Federal Trade Commission. Timothy Bitsberger is leading the efforts at the Federal Housing Finance Agency. Bitsberger was an assistant Treasury secretary in the second Bush Administration and was later a senior vice president at Freddie Mac and a managing director at BNP Paribas. Former National Credit Union Administration board member Mark Fryzel is helping with the transition of the NCUA and economic consultant Sharon Brown-Hruska, who served as a commissioner and acting chairman at the Commodity Futures Trading Commission is on the landing team for the CFTC, Farm Credit Administration and the SEC. The Trump transition website has released five names of people on the Treasury landing team. Curtis Dubay of the Heritage Foundation is the only privately funded member; the others are serving as volunteers. .
Financial Regulators Scramble to Complete Postcrisis Rules - WSJ —Financial regulators are scrambling to complete a series of unfinished rules designed to rein in Wall Street, dismaying congressional Republicans and some business groups that have urged policy makers not to rush new regulations as President Barack Obama’s term winds down. The government’s consumer finance watchdog is pushing to finish a contentious measure that could make it harder for financial firms to force consumers into mandatory arbitration. The Federal Reserve and the Securities and Exchange Commission could each wrap up postcrisis measures that would force banks and swaps dealers to add to their books costly new buffers protecting against big losses during periods of market distress. The SEC also wants to limit risky derivatives in mutual funds sold to the public, while a fellow market regulator wants to adopt new curbs on speculation in oil, gold and other commodities. Other high-profile measures are in doubt. Mr. Obama has for two years pushed a committee of agencies to complete limits on executive compensation, aimed at curbing Wall Street risk-taking. The six agencies required to write the rules are racing to complete them but may run out of time before the change in administration, according to regulatory officials. The efforts to complete the rules before President-elect Donald Trump takes office on Jan. 20 buck calls from Republicans who want the agencies to wait, even on noncontroversial measures required by the 2010 Dodd-Frank financial overhaul, until the new administration takes over. “This type of ’midnight rulemaking’ is neither conducive to sound policy nor consistent with principles of democratic accountability,” Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, told SEC Chairman Mary Jo White at a Nov. 15 hearing. Mr. Hensarling is reportedly under consideration to serve as Mr. Trump’s Treasury Secretary.Regulators deny they are rushing to finish initiatives ahead of the transfer of power and say they are merely working through their normal process to finish rules that were targeted for completion this year. Ms. White, who plans to leave the agency in January, told lawmakers she is finishing rules she had long publicly described as top priorities. Before Mr. Trump’s surprise win earlier this month, some financial firms and their lobbying groups backed the regulators’ efforts to complete their work. At the time, these groups assumed a victorious Hillary Clinton, under pressure from progressive Democrats like Massachusetts Sen. Elizabeth Warren, would adopt a more adversarial approach to Wall Street oversight than the Obama administration. With Mr. Trump’s victory, however, they anticipate policy makers who favor a lighter regulatory touch will be appointed.
Can a New Administration Undo a Previous Administration's Regulations?, CRS Insight, November 21, 2016 - Following the election of Donald J. Trump on November 8, 2016, questions have been raised as to whether and how a new President's administration can amend or repeal regulations issued by the previous administration. In short, once a rule has been finalized, a new administration would be required to undergo the rulemaking process to change or repeal all or part of the rule. If a rule has not yet been finalized, however, a new President may be able, immediately upon taking office, to prevent the rule from being issued. In addition to these administrative actions, Congress can also take legislative action to overturn rules. Changing or Repealing Previously Issued Rules Under the Administrative Procedure Act (APA), "rulemaking" is defined as "formulating, amending, or repealing a rule," meaning that an agency must follow the rulemaking procedures set forth by the APA and other statutory and executive order requirements to change or repeal a rule. (For more on these procedures, see CRS Report RL32240, The Federal Rulemaking Process: An Overview, coordinated by Maeve P. Carey.) Under the APA's rulemaking procedures, agencies are generally required to publish a notice of proposed rulemaking (NPRM) in the Federal Register, allow "interested persons" an opportunity to comment on the proposed rule, and, after considering those comments, publish the final rule. Furthermore, in most cases, the final rule may not become effective until at least 30 days after its publication. Sometimes Congress has required agencies to undertake additional or alternative procedures to issue rules. Such procedures are not addressed here, but also may be required for an agency to amend or repeal a previously issued rule.
Schumer Says He Has The Votes To Block Dodd-Frank Repeal; Threatens Supreme Court Filibuster - One of the catalysts behind the surge in bank and financial stocks since the Trump victory, has been the market's expectation that the new administration will repeal Dodd-Frank, and thus undo years of regulatory hurdles that have prevent banks from engaging in everything from prop trading to levering substantially higher, and have cost them billions in legal fees and settlements. However, the market may be getting ahead of itself. In an interview Sunday on NBC’s “Meet the Press, Senate Minority Leader Chuck Schumer, drawing a line in the sand for the next administration, said he has the votes to stop President-elect Donald Trump from repealing the Dodd-Frank Act and “the rules we put in place to limit Wall Street.”Schumer, who was picked by Senate Democrats to serve as minority leader following the retirement of Harry Reid, said he expects that the Senate’s Democratic minority would get helpfrom Republicans in a fight to preserve Wall Street regulations: “We have 60 votes to block him,” Schumer calculated.Cleaning up the swamp in Washington. These are things that Democrats have always stood for, and frankly, Republicans have always been against. So we're going to challenge President Trump to work with us on those issues where we can. If he doesn't, he'll be breaking his promise to particularly the blue collar workers, many of whom voted for him, on those particular issues. But on issues where our values are at stake, where the president goes in a divisive direction, where his campaign did before, we'll go against him and with everything we've got. We're not going to repeal or help him repeal Obamacare. We are not going to roll back Dodd-Frank. I think they should forget about that. We have 60 votes to block them.
Despite Conflicts, Financial Overhaul Proposals Have Merit - New York Times: The future of financial regulation is murky given the conflicting statements by President-elect Donald J. Trump, congressional Republicans and Senate Democrats. Some may panic, but looking at the whole picture, there may be some cause for optimism, a least when it comes to the big banks and the concept of “too big to fail.” The starting point in all of this is Mr. Trump himself. His campaign rhetoric was hardly bank friendly. He called for breaking up the big banks, as well as for enactment of a 21st century Glass-Steagall Act, the Depression-era law that separated commercial banking from investment banking, a restriction that was repealed during the Clinton administration. Since then, big banks have become bigger. The four largest banks – JPMorgan Chase, Wells Fargo, Bank of America and Citibank — control more than 33 percent of banking assets, according to the Federal Reserve, and 43 percent of deposits. The House Republicans, led by Jeb Hensarling, who is said to be a candidate for Treasury secretary, have proposed their own financial overhaul in a bill of more than 500 pages. The bill, known as the Financial Choice Act, which was proposed before Mr. Trump’s election, would substantially change the way banks are regulated under the 2010 Dodd-Frank Act. Dodd-Frank established a Financial Stability Oversight Board with power over systemic risk and the ability to designate nonbanks like insurance companies as systemically important. It subjects big banks and other financial institutions to heightened regulation. If those companies fail, Dodd-Frank also established an orderly process for liquidating them. Capital charges were put on big banks, and the Volcker Rule limited trading by them, among a host of other requirements.Mr. Hensarling’s House bill does away with much of this regulation. Instead, there is a Chapter 14 inserted into the bankruptcy code to allow these entities to be reorganized in bankruptcy. The Volcker Rule is repealed. Well-capitalized banks have options to avoid the Dodd-Frank restrictions.These are not unreasonable changes. The orderly liquidation authority was criticized because it required multiple approvals for liquidation with one day for a court to consider the decision, making it unlikely to be used and making liquidation anything but orderly. The existence of an oversight board seems conceptually fine but also adds a layer of bureaucracy where the government has not proved particularly good at spotting financial crises (neither has anyone else, frankly).
Fincen Lost Money Due to Bad Case Management Practices: Watchdog - — The Treasury Department's Financial Crimes Enforcement Network mismanaged its system for tracking enforcement cases, allowing some cases to expire before the agency had the chance to impose civil money penalties, according to a government watchdog. In a report by the Treasury's Office of Inspector General issued last week, the watchdog found that seven cases between January 2008 and May 2014 reached their statute of limitations, six years after the initial violation occurred, which kept Fincen from collecting civil money penalties. Another 13 cases were reported as closed before they could be concluded because they were too old, the report found. The result appears to be that Fincen lost money, but it's unclear how much because of a lack of data, the inspector general said. Some cases, which were referred from law enforcement partners, were never recorded in the system. In the same time period, Fincen also closed 184 cases without documenting the reason for it. The agency's troubles were exacerbated in 2014 when the agency began using a new case management system that had "known performance problems," the IG said. Unable to use the system to track civil money penalties, Fincen enforcement staffers instead relied on Excel spreadsheets to keep logs of the important cases. Fincen also mismanaged case files involving civil money penalties in a number of other ways, according to the report. For instance, some of the cases in the system lacked proper documentation — including explanations for the penalty amounts imposed. Out of 21 enforcement cases reviewed in the report, 19 were found to lack crucial documentation. When asked about those missing elements, Fincen officials said "some of the missing documentation might have been saved in caseworkers' own emails or backed-up computer files," the report said. But when the watchdog asked for those missing documents, "the officials told us that they could not produce the documents because of limited staff,"
News Flash: Mary Jo White Claims SEC Produces “Bold and Unrelenting Results” - naked capitalism by Jerri-lynn Scofield - Outgoing Securities and Exchange Commission (SEC) chair Mary Jo White last week touted A New Model for SEC Enforcement: Producing Bold and Unrelenting Results. Does this claim stand up? Reflecting on her SEC tenure, White says: We have brought many innovative and first-of-their-kind cases across the spectrum of the securities laws to protect investors, deter misconduct, cover the landscape of the marketplace, shape industry norms and practices, and send a strong message that the SEC is—and always must be—the tough cop on the financial beat. (Jerri-Lynn here: Note that I have removed all citations from my quotations from White’s speech. I refer interested readers to the full text of that speech, cited above.) These accomplishments have been made possible by a new model for SEC enforcement. Indeed, we have essentially changed the way we do business in enforcement—from the way we identify misconduct, to our investigative processes and tougher settlement approaches, to the types of cases we bring, to our continued focus on individuals in every case, and to our trial work. These changes in the landscape of SEC enforcement have resulted in our renewed identity in the markets as an aggressive, nimble—and importantly— fair regulator. “Tough, but fair,” a label that has sometimes been applied to me, is what we strive for at the SEC, even as we have become bolder and more effective with our new approaches. To give you a sense of how we at the SEC have changed the way we enforce the federal securities laws, I am going to first discuss Enforcement’s emphasis on the need to be trial-ready, reflective of our new “investigate to litigate” philosophy. Jerri-Lynn here: Is that all? Isn’t the entire point of an SEC investigation to pursue litigation, if SEC investigators find federal securities laws have been violated? What has changed here? What, pray tell, was the SEC doing before it decided to “investigate to litigate”?
Wells Fargo Stonewalling on Accounts Scandal, Brown Says - Wel: Sen. Sherrod Brown, the top Democrat on the Senate Banking Committee, sharply criticized Wells Fargo on Friday for failing to respond to questions about the phony-accounts scandal, including when the board and top executives first learned of the illegal sales practices. Wells either ignored or provided insufficient answers to some of the 58 questions submitted in late September by Democrats on the banking panel, Brown said. In some cases, Wells did not answer questions directly, citing an ongoing investigation by its board. For example, Wells could not quantify how many employees were disciplined for not meeting sales goals, and the bank declined to say how much pay former CEO John Stumpf received over the years for cross-selling activities. Brown said he will continue to prod the bank for answers. "It seems unlikely that Wells Fargo can restore the trust of its customers if it continues to ignore or dodge basic questions about the causes and consequences of the fraud that it permitted for years," Brown said. "The bank's illegal actions and its continued stonewalling show why so many hardworking Americans believe the system is rigged against them in Wall Street's favor. This issue isn't going away and I will do everything in my power to make sure the Banking Committee keeps pushing to get to the bottom of it, so we can protect customers from being cheated again." Brown said Wells refused to provide precise dates for when Stumpf, the board and Carrie Tolstedt, the head of retail banking, first learned that employees "were defrauding customers nationwide." He also said Wells failed to provide email and other correspondence between Stumpf, Tolstedt and the board related "to the fraud." Wells was thrust into a reputational crisis on Sept. 8 when it agreed to pay $190 million to settle charges that employees created 2 million sham accounts to meet aggressive sales targets. Wells fired roughly 5,300 employees between 2011 and 2014 for creating the unlawful accounts.
OCC Restricts Wells Fargo's Golden Parachutes, Exec Changes– The Office of the Comptroller of the Currency has rolled back some of the relief from regulatory restrictions on corporate activities afforded Wells Fargo under federal law before its recent troubles. The move appears to give the agency more control over executive changes and pay practices at the third-largest U.S. bank by assets. Wells in September agreed to a $190 million settlement after regulators determined that certain employees had created roughly 2 million phony accounts over several years in order to meet sales quotas and earn bonuses. Wells fired roughly 5,300 employees between 2011 and 2014 for creating the unlawful accounts. The settlement agreement had preserved Wells Fargo's eligibility for expedited treatment of certain regulatory applications, and leeway in naming officers and directors and setting executive pay, that are granted to healthy, well-managed banks that meet all the U.S. requirements for such treatment. However, the OCC said in a news release late Friday that it had revoked those privileges, including Wells' ability to name new directors and senior executive officers or change the duties of existing officers without first notifying the agency. The bank is now required to give 90 days' notice, and the agency has the power to reject the moves.In addition, Wells will face significant limitations on its ability to make so-called golden-parachute payments to top executives. The OCC did not specify what prompted the changes now. A spokesman for the agency declined to comment about them when contacted by American Banker. However, a Reuters report quoted a government official as saying the move positions the OCC to claw back compensation that Wells Fargo paid to John Stumpf, who resigned as chief executive in October, and former retail banking chief Carrie Tolstedt.
Wells Fargo Grapples With New Set of Management Restrictions - WSJ: Executives at Wells Fargo & Co. over the weekend were grasping to understand more-stringent management restrictions newly imposed on the bank by the Office of the Comptroller of the Currency. The lender remained in the dark about both the reason for and implications of the banking regulator’s mandate, which was issued in a terse statement late Friday. The agency is now requiring the bank to get approval before making a wide range of business decisions or rewarding departing executives with severance payments. The new restrictions reverse some freedoms the OCC initially granted in its September agreement with Wells Fargo that was part of a larger $185 million civil settlement with another regulator and a city official. The findings showed that Wells Fargo opened as many as 2.1 million accounts using fictitious or unauthorized customer information over five years.The OCC had first issued a waiver to the San Francisco bank that provided relief from tight restrictions on the bank’s operations, such as needing to seek extensive approval for any change in its business plan, like opening a branch, as well as the hiring or firing of management and the board. Those restrictions typically kick in when an enforcement action is issued for any bank, but the OCC often gives relief to large banks when it cites them so that the action doesn’t further impair the bank’s operations. Now, though, Wells Fargo has to go through a much longer and cumbersome process to get OCC approval on any change in leadership or business plan. It is also restricted from executive severance payouts, sometimes called “golden parachutes.” Bankers and advisers over the weekend were analyzing the OCC’s waiver change, saying it could have implications for other banks that often get multiple waivers in settlements with the OCC. It is unclear whether any new stance would impact other settlements that have already been signed. “This could be OCC’s shot across the bow that firms shouldn’t be assuming that they will be allowed to continue to enjoy the benefits of those waivers,” said a person familiar with the OCC’s processes.
Wells Fargo asks U.S. court to dismiss account scandal lawsuit | Reuters: Wells Fargo & Co (WFC.N) has asked a U.S. court to order dozens of customers who are suing the bank over the opening of unauthorized accounts to resolve their disputes in private arbitrations instead of court, according to legal documents. The motion, filed in the U.S. District Court in Utah on Wednesday, is in response to the first class action lawsuit filed against Wells since it agreed to pay $185 million in penalties and $5 million to customers for opening up to 2 million deposit and credit-card accounts in their names without their permission. The scandal has shaken Wells, the third-largest U.S. bank by assets. Its former Chief Executive Officer John Stumpf stepped down amid the furor, it has been put under tougher regulatory scrutiny and its reputation has been damaged as it faces multiple probes. The move to enforce the mandatory arbitration clauses comes as Wells Fargo has launched an advertising campaign to win back customer loyalty in the wake of the scandal. "We are saddened that despite Wells Fargo's commercials and promises to make things right, Wells Fargo is choosing to harm their customers once more," said Zane Christensen, the plaintiffs' lawyer in Sandy, Utah, in a statement. A spokesman for Wells Fargo declined to comment on the filing. In a written response to questions from U.S. lawmakers, published last week, the bank said it would stand by its arbitration policy but was offering free mediation services to affected customers. Mandatory arbitration rules inserted into account-opening agreements prohibit customers from joining class actions or suing Wells Fargo. Instead, the agreements require individual, closed-door arbitration.
Low Morale, Racial Bias Claims Beset Another Dodd-Frank Agency | American Banker: — Employees at the Office of Financial Research have raised concerns about racial discrimination and dysfunction at the agency, according to internal documents and videos posted online. The agency, tasked with gathering data and conducting research about the stability of the financial system, is struggling to combat low morale, as shown by two years of employee survey data. An anonymous person or group of people has also posted two videos to YouTube raising concerns about the agency's treatment of African-American employees, prompting an investigation by the head of the OFR. The alleged problems come on the heels of similar ones at the Consumer Financial Protection Bureau revealed in a series of reports by American Banker starting in 2014. The new concerns suggest that management issues at agencies created by the Dodd-Frank Act may be more widespread than previously reported. The revelations also come as the OFR prepares for a new future under President-elect Donald Trump. Although the OFR is an independent office, it is housed within the Treasury Department. Analysts have already predicted that substantive work could grind to a halt at the Financial Stability Oversight Council, which the OFR supports with its research, and it's possible the same could happen within the office. This year's survey results show that just 42% of employees are satisfied with the office and their jobs, down from 63% in 2012, the first year for which survey data is available. The decline compares with more stable employee satisfaction results at the Treasury Department overall, where rates have hovered between 60% and 72% back to 2006. Top OFR officials acknowledge those statistics show there is a problem."These scores are not good enough and do not represent what the OFR is capable of achieving together," Director Richard Berner said in a statement to American Banker. "We will focus on improving the scores and focus on addressing employees' concerns. We are a new organization that is constantly changing and change can be difficult. The OFR is still expanding and implementing new policies and procedures and this takes time. I take these scores seriously and have taken steps to address such concerns."
Blockchain startup R3 cuts fund-raising target to $150 million: source | Reuters: Blockchain company R3 CEV has reduced the amount it aims to raise from bank members in its first large round of equity funding to $150 million from $200 million and is changing the structure of the deal, according to a person familiar with the plans. R3, a New York-based startup that runs a consortium of more than 70 financial institutions, now plans to give bank members a 60 percent equity stake in exchange for the funding, the source said. More than 90 percent of its original 42 bank members have expressed an interest in investing, the source said. Initially, it aimed to create a new company providing shared services for the owners, who would get a 90 percent stake. R3 would have run this utility for 10 years and retained a stake in it. Goldman Sachs Group Inc (GS.N) and Banco Santander SA (SAN.MC), both original participants, are not renewing their memberships and not investing in the deal, spokespeople said. Morgan Stanley (MS.N) and National Australia Bank (NAB.AX) are also not participating, said the source, who requested anonymity to discuss plans that were not public. Most other banks have agreed to the new terms of the deal, but R3 does not expect all existing members to join the round, said the source. R3's fundraising comes as banks and other large institutions ramp up their investments in blockchain, which is also known as distributed ledger technology. It first emerged as the technology underpinning digital currencies such as bitcoin but is now being adapted for use in more traditional financial tasks, such as transaction processing.
Another Bank (Santander) Quits Blockchain Alliance R3 - The Spanish banking giant Santander has withdrawn from the bank consortium R3 CEV, becoming the second defector from the blockchain group this week after Goldman Sachs. Officials at Santander, a founding member of R3, declined to discuss the decision beyond confirming that it was leaving the group. Santander will refocus its blockchain efforts on other projects, according to a person with close knowledge of the matter who asked not to be named. The projects are said to include: Utility Settlement Coin, a blockchain project co-launched with Bank of New York Mellon, Deutsche Bank and UBS to create a global, blockchain-based clearing and settlement system, and the Global Payments Steering Group, the standards-setting group formed in September with five other global banks for the use of distributed ledger technology developed by Ripple. Santander’s venture capital arm invested $4 million in Ripple last year. Goldman was said to have left for other reasons. It reportedly backed out of its membership when conditions of the investment framework for member banks changed recently. R3 initially sought to raise $200 million from its bank members in a round that would have granted them 90% of the firm’s equity and R3 the remaining 10%, Reuters first reported Monday. In early fall the deal was renegotiated to a $150 million target, with members to be given a 60% equity stake and R3 to get the remaining 40%. Goldman allegedly sought more leverage in the deal and a seat on the board, Forbes reported Monday. Those details were confirmed by a separate source who was familiar with the deal and asked not to be named. That deal has not been finalized, the source said. Morgan Stanley and National Australia Bank will not participate in the new deal, according to the Reuters report.
Bitcoin and blockchain seem more and more like solutions looking for a problem -- The bitcoin and blockchain world is in a bit of an investment slump. Venture money flowing into startups working on cryptocurrencies or the technical principles underpinning them, generally known as blockchain technology, is getting harder to come by, according to data from trade publication CoinDesk. “It really seems like we’re in a slow phase with bitcoin and blockchain right now where people are mainly building infrastructure,” says Zavain Dar, a venture capitalist at Lux Capital who has taught classes on cryptocurrency at Stanford and has invested in Blockstream, one of the biggest companies in the sector. What’s more, efforts to adapt blockchain tech to replace legacy financial systems by the world’s biggest banks seem to be hitting roadblocks. This week saw the departures of Goldman Sachs and Santander from one of the highest-profile attempts to create a consortium of financial institutions to work on the technology, called R3CEV. It seems that both risk-loving venture capitalists and generally risk-averse banks are dialing back their investment in a technology that was supposed to change the world—but hasn’t, as Timothy B. Lee at Vox has pointed out. Startups working on blockchain tech have raised $376 million so far this year, which is 17% less than the amount raised over the same period last year, according to CoinDesk’s latest quarterly research report. Funding declined every quarter in 2015, in stark contrast to three quarters of successive growth the previous year. Even as bitcoin had a slow 2015—both in terms of VC interest and its price—a wave of interest took hold of the world’s biggest financial institutions who saw blockchain tech as the key to increasingly expensive regulatory demands and outmoded infrastructure. Here was a way for banks to increase transparency, cut costs, and appear to be on the bleeding-edge of technology while doing so. Yet the blockchains in service of banks haven’t produced a revolution, either. Most firms appear to be either paying lip service to talk of innovation or are reluctant to commit more than a sliver of resources to experimenting with the technology. As Simon Taylor, the former blockchain lead at Barclays in London and now a co-founder of fintech consultancy 11FS, has pointed out, there are a lot of the same old proofs-of-concept floating around, and few, if any, production-ready software systems.
Citi and JPMorgan top list of globally systemic banks | Reuters: Citi has joined JPMorgan at the top of global regulators' list of systemically important banks, replacing HSBC and meaning the U.S. bank will have to hold extra capital from 2019 to help preserve financial stability. The group of 20 economies (G20) agreed after the 2007-09 financial crisis that top banks, whose size and complexity mean a collapse could wreak havoc in markets, should hold extra capital, according to the level of risk they present. Members of the list of 30 lenders will also have to begin holding bonds from 2019 that can be written down to help replenish capital that is burnt through in a crisis. In the annual update of rankings published on Monday by the G20's Financial Stability Board (FSB), Citi has replaced HSBC in the top "bucket" facing a 2.5 percent capital surcharge on top of global minimum requirements. The measure announced by the FSB does not have an impact on any of Citi's binding regulatory metrics, the bank said in an e-mailed statement. No lender joined or dropped out of the top 30 list this year. Lenders on the list typically already meet or exceed the amount of capital they must hold due to pressure from regulators and markets to dispel any doubts about their resilience. HSBC joins BNP Paribas and Deutsche Bank in the next category down, with a surcharge of 2 percent. Bank of America rose a category to join them.
Citigroup Leads U.S. Banks Higher in Global System Risk List - Bloomberg: Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. all face higher capital surcharges after they rose in the Financial Stability Board’s latest ranking of the most systemically important banks in the world. Meanwhile, New York-based Morgan Stanley and London-based lenders HSBC Holdings Plc and Barclays Plc saw their buffer levels fall, the FSB said in a statement on Monday. HSBC’s capital surcharge falls to 2 percent of risk-weighted assets from 2.5 percent, while Citigroup’s buffer rises to 2.5 percent from 2 percent, the FSB said. Barclays surcharge falls to 1.5 percent from 2 percent; Wells Fargo rises to 1.5 percent from 1 percent; and the Industrial and Commercial Bank of China surcharge rises to 1.5 percent from 1 percent. The drop in HSBC’s surcharge is positive for the lender and “further enhances the capital return prospects” in the long term, Citigroup analysts said in a note. The FSB’s list is headed by Citigroup and JPMorgan Chase & Co. Citigroup said in a statement that its rise in the FSB list “does not drive a binding capital constraint” on the bank, and that it’s already subject to a stiffer 3 percent surcharge imposed by the U.S. Federal Reserve.
How Bashing Big Banks Could Help China | Bank Think: Politicians from both sides of aisle state that they want to break up the large American banks. But they have failed to consider a worrisome consequence if banks — through the process of downsizing — put their subsidiaries up for bid or exit certain business lines. If large banks divest assets or business units, no one has asked whether that opens the door for large foreign conglomerates — including Chinese banks — to acquire larger pieces of America's banking system. In China, the largest banks are state-owned. Would our country reject such as acquisition for national security and economic issues? I hope so. Right now, this is only a "what if" question, because our largest banks are American-owned. But if we were faced with such a reality, the extent to which we would allow Chinese interests into our banking landscape would have huge ramifications. It is easy for political reasons to bash our systemic-risk banks that have a global presence. But it is important to remember that in our country we need all banks — large, regional and community banks — to have a strong economy. If you review the 2016 list of the top 50 banks in the world, there are only four FDIC-chartered American banks on it. There are 12 banks from China, including four of the top five. Chinese companies are already looking to gain further entry into our financial services system and other sectors as well. Recently, a Chinese conglomerate offered to purchase Genworth Financial for $2.7 billion. Will that purchase be approved? In 2005, UNOOC, a Chinese oil company 70% owned by the Chinese government, dropped its $18.5 billion bid to purchase an American-based oil company, Unocal.
What Hensarling Pick for Treasury Would Mean for Bankers | American Banker — If President-elect Donald Trump selects House Financial Services Committee Chairman Jeb Hensarling as his Treasury secretary, it would be a clear sign that he intends to embrace a more traditional GOP agenda when it comes to financial services issues. The Texas Republican is a fierce opponent of the Dodd-Frank Act, and a conservative ideologue who has preferred to stick to his principles rather than compromise to move forward on legislation. In virtually every banking issue of note during his 13 years in Congress, Hensarling has pushed toward the right. That includes housing finance reform, where the protégé of former Sen. Phil Gramm, R-Texas, has sought to eliminate Fannie Mae and Freddie Mac and dramatically curb any government role in the mortgage market. He has particular enmity toward the Dodd-Frank Act, which he has blamed for slow economic growth; the Consumer Financial Protection Bureau; which he views as an unaccountable agency run amok; and the Financial Stability Oversight Council, which he wants to abolish. "In my world," the FSOC "would play probably no role," Hensarling said in a speech last week. "I do not believe that FSOC is adding value to our economy." Ironically, if Hensarling is confirmed as Treasury secretary, he would be nominally in charge of the FSOC, acting as its chairman. He would also be a key player in setting much of the Trump administration's economic policy. Among his likely first objectives is the passage of his own bill, the Choice Act, which dismantles much of Dodd-Frank, curbs the powers of federal banking regulators and offers institutions a chance to ease regulations in return for holding higher capital. His well-documented record on financial issues makes him a known entity to the financial industry, which respects Hensarling's knowledge and intellect but views him as inflexible on certain issues, including housing finance reform.
'Our Banking Partners Disapprove of What You're Doing' | American Banker: Cody Wilson is probably not a name that banks like to see on an application. Famous — or, more accurately, infamous — as the inventor of the world's first 3D-printed handgun, Wilson is an avowed crypto-anarchist who has committed himself to pushing the First and Second Amendments to extremes. His company, Defense Distributed, began as a nonprofit supposedly conducting firearms research. It dropped this fig leaf after making millions of dollars selling a product it calls the Ghost Gunner, a $1,500 computerized milling machine designed to turn partially finished AR-15 lower receivers into finished parts. (While the sale of finished lower receivers is regulated, it is generally legal in the United States to buy one that is 80% finished and complete the job yourself. After that, it is fairly easy to acquire the other parts necessary to make a working, and unregistered, rifle.) Wilson's reputation has complicated his relationships with banks and payments companies, to say the least. In a recent conversation with American Banker he described, in unusual detail for such situations, his struggles to open and keep the accounts necessary to run a business. While an edge case, his story provides a fascinating window onto the dynamics of de-risking. Financial institutions around the world, under pressure from policymakers to detect and choke off illicit activity, are cutting ties with legitimate businesses and pulling out of whole markets where they feel unsure of their ability to present an effective bulwark against financial crime. American businesses that seem to skirt the border of acceptability, such as those in the marijuana industry, or Wilson's, can find themselves without a banking partner. Far from trying to clean up his image, however, Wilson, who dropped out of the University of Texas School of Law to run Defense Distributed full time, is planning a new venture: a crowdfunding site for guns. It has been ready to go for six months, he said, but he needs to get more merchant processors on board before he can launch. That has proven difficult. "It wouldn't be successful without me," he said, "but at the same time, because I'm me, I can't get it done." Wilson has been called an "American insurrectionist" — though the design for his Liberator pistol has been exhibited at the Museum of Modern Art and was added to the permanent collection of the Victoria and Albert Museum in London as an example of cutting-edge technology that crosses over into being art. While running his company, he is fighting a costly legal battle with the State Department over his posting of the Liberator blueprints, which were downloaded more than 100,000 before the feds ordered him to take them down. They remain available on file-sharing sites.
Inside a Bank that Went All In on Hyperconverged Infrastructure | American Banker: Hyperconverged infrastructure (also called hyperconverged integrated systems) combines virtualized computing, storage and network equipment in an integrated "stack" that can be managed with software. The stack can also include backup, recovery, replication, deduplication and compression. Nutanix, SimpliVity, Cisco, HPE, Dell EMC, Pivot3 and VMWare are among the vendors that offer hyperconverged infrastructure. It's the latest stage in the evolution toward software-defined computing, in which all technology in an IT environment is tightly integrated and can be managed with one software program. About 40% of all companies use hyperconverged infrastructure, according to the information technology research firm 451 Research. In financial services the numbers are slightly higher: 41.3% use the technology today and more than 25% plan to use it in the near future, according to the firm's latest surveys, which were conducted in the second quarter. "There's a larger contingent of folks who are either using it or have it planned in finance than any other vertical," said Christian Perry, research manager at 451. The company expects that number to grow over the next two years. It's still being used in a limited way, however. Gartner analysts say less than 5% of data in data centers is stored in hyperconverged infrastructures today. By 2019, they expect 30% of stored data in enterprise data centers to be deployed on such systems. And 20% of mission-critical applications will transition to hyperconverged by 2020.
On the Front Lines of the Most Underbanked States | American Banker: Expanding access to mainstream financial services has proven especially challenging in a handful of states, mostly in the South, as local banks struggle to overcome misperceptions and mistrust. Some of those banks have found that the key to getting unbanked individuals to open savings accounts is making sure they have money to put in them — even if that requires making a small loan first. At least a third of the population in eight states is either unbanked or underbanked, based on recently released data from the Federal Deposit Insurance Corp. The data shows that, in six states, more than a tenth of the citizens are unbanked. Bankers and other community advocates are working to address many of the underlying issues behind the numbers. The FDIC, in its biennial report on the subject, noted that key factors include concerns over privacy, a lack of trust and high fees. The biggest reason, however, was individuals' belief that they didn't have enough money to merit an account, the FDIC report said. "It's cultural, it's generational, it's obviously economic, so there's a lot of dimensions to it," . "In order to make any sort of inroad … you really have to spend time on the front lines working with these people and trying to understand what their needs are and how you can participate in bringing them around to a more mainstream financial relationship."
Will Trump's AG Pick Just Say No to Pot Banking? | American Banker: The fragile détente between the federal government, the cannabis industry and the banking sector is suddenly in jeopardy. President-elect Donald Trump's nomination of Sen. Jeff Sessions for attorney general means that one of pot's fiercest opponents is poised to become the nation's top law enforcement official. Sessions, an Alabama Republican, made headlines in April when he said, "good people don't smoke marijuana." He has also spoken admiringly about Nancy Reagan's '80s-era "Just Say No" message. His selection Friday drew loud howls from the pot industry, which just last week was celebrating the passage of legalization ballot measures in eight states. Voters in California ratified the drug's recreational use, while Floridians approved medical marijuana. "Jeff Sessions is a drug war dinosaur, which is the last thing the nation needs now," Ethan Nadelmann, executive director of the Drug Policy Alliance, said in a press release Friday. Trump himself has taken a softer line on marijuana than his pick for attorney general has. He has called state-level legalization of recreational pot a "bad" experiment, but has also expressed support for providing medical marijuana to very sick patients. "In terms of marijuana and legalization, I think that should be a state issue, state by state," Trump said last year.
How to Protect Consumer Rights in Battle Over Data Access - Earlier this fall, CFPB Director Richard Cordray — in a keynote at the Money20/20 event — called on financial institutions to ensure consumers have continuous, unfettered access to their data, and expressed “grave concern” that several financial institutions are limiting their customers'data access. The bureau followed up on his remarks last week by seeking public comment on what regulatory steps might be needed to ensure access. Software tools, which require access to financial data, can help Americans create and monitor a budget, minimize the fees they incur from their financial institutions, optimize their investments, help manage fixed incomes and more. To improve their financial health, consumers' right to access and share their financial data is critically important. According to the Federal Reserve's 2016 survey on Americans' economic well-being, 42% of Americans were unable to pay their bills at least one month within the last year. The survey also found nearly half of American households would have to incur debt or sell assets to pay for a surprise $400 expense. In this reality, the clearest path toward improving Americans' financial lives is one that allows Americans to access their financial information via the tools and providers they choose. Thankfully, Congress presciently codified consumers' right to their data. Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ensures that consumers are supposed to be given the opportunity to take advantage of the broad range of technology-powered, data-driven tools that are available in the market to empower them to improve their financial health. Despite this section, access to financial transaction data to power these impactful tools is under threat. Several U.S. financial institutions have instituted a range of technical and administrative hurdles that interfere with the consumers' rights of access to their financial data. A small number of financial institutions have moved to limit the amount of data that consumers can access. Other institutions are seeking to define bilateral agreements with onerous contractual terms. There are ways in which the wider financial community can look to remedy this situation and build on Section 1033 of Dodd-Frank. One solution is a consumer bill of data rights that codifies a consumer's absolute right to control access to their financial data in whatever manner they choose and, in turn, to utilize the power of technology to improve their financial well-being.
Consumer Loans Souring Fast in Bonds Tied to Online Lenders - 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.
Now it Begins to Unravel - Wolf Richter -- Debt is good. More debt is better. Funding consumer spending with debt is even better – that’s what economists have been preaching – because the consumed goods and services are gone after having been added to GDP, while the debt, which GDP ignores, remains until it is paid off with future earnings, or until it blows up. Corporations too have gone on a borrowing binge. Unlike consumers, they have no intention of paying off their debts. They issue new debt and use the proceeds to pay off maturing debts. Funding share-buybacks and dividends with debt is ideal. It’s called “unlocking value.” Debt must always grow. For that purpose, the Fed has manipulated interest rates to rock bottom. Actually paying off and reducing debt has the dreadful moniker, bandied about during the Financial Crisis, “deleveraging.” It’s synonymous with “The End of the World.” At the institutional level, “debt” is replaced with more politically correct “leverage.” More leverage is better. Particularly if you can borrow short-term at near zero cost and bet the proceeds on risky illiquid long-term assets, such as real estate, or on securities that become illiquid without notice. Derivatives are part of this institutional equation. The notional value of derivatives in the US banking system is $190 trillion, according to the Office of the Comptroller of the Currency. Four banks hold over 90% of them: JP Morgan ($53 trillion), Citibank ($52 trillion), Goldman ($44 trillion), and Bank of America ($26 trillion). Over 75% of those derivative contracts are interest rate products, such as swaps. With them, heavily leveraged institutional investors that borrow short-term to invest in illiquid long-term assets hedge against interest rate movements. But Treasury yields and mortgage rates have moved violently in recent weeks, and someone is out some big money. These credit bubbles always unravel to the greatest surprise of those institutions and their economists. When they unravel, the above “End-of-the-World” scenario of orderly deleveraging turns into forced deleveraging, which can get messy. Assets that had previously been taken for granted are either repriced or just evaporate. But they’d been pledged as collateral. Suddenly, the collateral no longer exists….
Linking Pyramid Schemes (aka Multilevel Marketing Companies) and Consumer Bankruptcy - A couple weeks ago, on Last Week Tonight, John Oliver started what promises to be the greatest pyramid scheme ever. In an effort to help him, watch the segment here (warning: language). More seriously, multilevel marketing companies that sell products directly to customers through salespeople working out of their homes (Herbalife, Amway, Nu Skin, the relatively new Rodan + Fields) operate by way of a concerning sales structure. Salespeople recruit salespeople, who recruit more salespeople, who recruit yet more salespeople. The salespeople at the top make money off of the salespeople at the bottom. And the salespeople at the bottom often are left with stockpiles of soon-to-expire product in their homes and garages. Indeed, as noted by John Oliver, in July of this year, Herbalife consented to a $200 million settlement with the FTC in which they agreed to change their business tactics. When asked about Herbalife's business model, FTC Chairwoman Ramirez said, "they were not determined not to be a pyramid." Now, the potential (probable?) connection to bankruptcy filings. There is evidence that people sign up to sell these products because they need to make extra money--which makes sense. Signing up to be a salesperson for a multilevel marketing company could be one of many coping tactics used by someone hopelessly deep in debt. Get a second job, sell some belongings, go without insurance or food . . . and try to sell products from your home. People may get the idea from friends or financial gurus. For instance, Dave Ramsey's website has a page titled, "Guide to Joining a Multilevel Marketing Company," which includes some of the same inspirational, "go-getter," pull yourself up by your own bootstraps, you hold the key to your own success language that accompany Facebook posts that try to entice people to join Rodan + Fields. Of course, that means it is your fault when you fail, right? Yet merely failing isn't the biggest problem for people who may be using this coping strategy. The first thing that people must do when they join the sales team is buy the products they will sell. If they are in already precarious financial situations, they may do so with credit cards, plunging themselves further into debt, and making it even more likely that they ultimately file bankruptcy. Which leads to my main question after watching the segment: What do we know about people who file bankruptcy, in part, because they got trapped in multilevel marketing companies?
CFPB Sues Structured Settlement Firm for Alleged Lead Paint Scam - The Consumer Financial Protection Bureau filed a lawsuit Monday against a Maryland company that allegedly targeted victims of lead paint poisoning and got them to sign away future settlement payments for immediate cash at a deep discount.The CFPB's lawsuit against the structured-settlement company Access Funding of Chevy Chase, Md., is similar to a suit filed in May by Maryland Attorney General Brian Frosh. Both lawsuits allege the company and a successor firm, Reliance Funding, aggressively targeted Baltimore City adults between the ages of 18 and 26 who had lead paint poisoning as children. The company offered lump-sum payments that represented roughly 30 cents on the dollar, the CFPB said."Many of these struggling consumers were victimized first by toxic lead, and second by a company that saw them as little more than income streams to be courted and harvested," CFPB Director Richard Cordray said in a press release. "The Consumer Bureau is fighting to help vulnerable consumers who were swindled out of their settlements, and to prevent future abuses." Freddie Gray, the Baltimore man whose death in police custody in 2015 sparked violent protests, suffered lead paint poisoning as a child and had sold part of a structured settlement to Access Funding. The company also faces a pending class-action lawsuit. Access Funding conducted approximately 70% of its settlement transfers in Maryland; the company sought court approval for approximately 200 transfers in Maryland from 2013 to 2015, of which at least 158 have been approved. Consumers received a steeply discounted lump sum in return for signing away their future payment streams. The lump sums that Access Funding provided consumers typically represented only about 30% of the present value of those future payments.
The Glory Days of Elizabeth Warren’s CFPB Are Numbered - - On Nov. 9, Senator Elizabeth Warren paid a visit to the headquarters of the Consumer Financial Protection Bureau in Washington, the agency she helped create before she got to Congress. The Massachusetts Democrat’s meeting with CFPB staffers had been scheduled before the election. Taking in the surprise result, Warren offered a sobering description of the uncertainties that lay ahead for the young agency with Republicans in control of both the White House and Congress, according to people familiar with her remarks. She told the staffers she would fight against any attempts to change the agency’s structure or funding, or any of the rules the regulator was working on. Warren is digging in because of what the CFPB’s work means to her. The agency is part of the Dodd-Frank Act, which was passed to rein in the financial-services industry after the crisis of 2008. Its charge is to combat “unfair, deceptive, or abusive acts and practices” at banks and credit unions with more than $10 billion in assets. The CFPB is also a watchdog for mortgage servicers, payday lenders, and debt collectors. And it’s been very active. The agency levied a $100 million fine against Wells Fargo after disclosures that employees had opened unauthorized accounts for customers in an effort to meet sales goals. It has compelled lenders to verify that borrowers can afford to repay loans and has mandated improved disclosure in mortgage, credit card, and student loan forms and on monthly statements. In all, the CFPB has provided almost $12 billion in relief to about 27 million consumers since it opened its doors in 2011. It has won praise from consumer-rights activists. “A lot of the people who voted for Trump are people who got the short end of the economic stick,” says Ira Rheingold, executive director of the National Association of Consumer Advocates. “And the fact is, the CFPB is an important protector of those people.” From the start, the agency has been a lightning rod for Republicans and many in the financial-services industry who say certain rules restrict consumers’ access to credit and financial products they want. They complain that the director, Richard Cordray, has too much power. Some of the language in the statute that created the bureau “is so broad and vague that it has let them go after anything they don’t like, even if there’s no evidence of any consumer harm or injury,” says Alan Kaplinsky of the law firm Ballard Spahr, who fought the CFPB’s work to change arbitration clauses that prevent consumers from suing. Democrats respond that the CFPB must report extensively to Congress.
All the Fury Over CFPB Ignores Its Modest Mission | Bank Think: Even since its creation, the Consumer Financial Protection Bureau has been the focus of heated controversy, with banks and politicians alike calling for cutbacks in its authority if not the agency's outright elimination. The threats to the agency's future became far more real on Nov. 8, with the victory of Donald Trump, and Republican control of both chambers of Congress, setting the stage for the GOP to turn back many of the CFPB's policies. Trump has spoken of repealing the Dodd-Frank Act, which created the consumer bureau. House Financial Services Committee Chairman Jeb Hensarling (rumored to be a possible Treasury secretary pick in the Trump administration) has proposed to substantially weaken the CFPB in the Financial CHOICE Act. The bill would reduce the bureau's rulemaking authority including by repealing all guidance on auto lending, require a cost-benefit analysis of all proposed rules, give Congress direct oversight of its budget and replace the current single-director leadership structure with a five-person commission. But let's take step back amid all this fury. When analyzed objectively, the bureau has a rather modest mission, making it hard to see what all the fuss is about. The mission of the CFPB is to ensure that markets are truly safe, fair and free. Among its goals is to eliminate fraudulent, unfair, deceptive and discriminatory practices. For example, the bureau has established a seemingly straightforward (yet controversial) standard for mortgage lenders to assess a borrower's "ability to repay." This is similar to the standard set forth in a proposal on short-term, small-dollar lending. The financial services industry has railed against such a principle, yet all it seeks is for lenders to make sure borrowers have the resources to pay back a loan. This has traditionally been viewed as simply sound underwriting — a "best practice."
Lawmakers Raise Concerns on Dodd-Frank Appraisal Restrictions: — A shortage of appraisers in rural areas is sparking concerns among key lawmakers that might lead to legislative changes to the Dodd-Frank Act next year. Several lawmakers flagged the issue during a House subcommittee hearing last week, arguing that government regulations have cut down on the number of appraisers. "In rural Missouri we have a real problem with appraisers," said Rep. Blaine Luetkemeyer, R-Mo., the chairman of the housing subcommittee. "We have no appraisers in my county. We have a county of 20,000 to 30,000 people and no appraisers." Conducting appraisals in rural areas can be more complex than in suburban and urban areas because there are fewer sales and comparable properties. In addition, rural appraisers face the same regulatory restrictions and requirements as other appraisers. "We increased the requirements for appraisals," said Joan Trice, chief executive and founder of Clearbox, which provides services to appraisers, real estate agents and lenders, during the hearing. "But they make about half what they use to make. So no one wants to enter the profession with that kind of economic environment." Critics blame Dodd-Frank for making the situation worse because it emphasized appraiser independence and the importance of keeping arm's-length relationships between appraisers and lenders. Under the law, almost any effort to influence an appraiser's judgment can be considered a violation of the Dodd-Frank Act. Yet any person with an interest in a real estate transaction can ask the appraiser to consider additional property information or additional comparable properties. They can also ask to correct errors in the appraisal report.
FCC Denies Mortgage Servicers Bid for Robo-Calling Waiver: The Federal Communications Commission has denied the Mortgage Bankers Association's request for exemption from part of the Telephone Consumer Protection Act requiring servicers to get consent before robo-calling mobile phones. "We find that MBA has not shown, as a threshold matter, the exempted calls would be free of charge to called parties," the commission said in an order Tuesday. "Separately, we find that MBA has not shown that it should be able to make or send non-time-sensitive robo-calls, including robo-texts, to consumers without first obtaining consumer consent," the FCC added. An enforcement advisory Friday indicated the FCC will particularly crack down on "unwanted robo-texts." The decision can be appealed, according to the FCC. The MBA is evaluating its options, according to Pete Mills, senior vice president of residential policy and member services. "We are surprised [by the] procedure the FCC utilized to deny our petition, because they had not used it previously," he said. Consumer advocates were pleased with the order. "We had a win, which is pretty unusual this month," said attorney Margot Saunders, who works with the National Consumer Law Center. The Federal Housing Finance Agency also has asked the Federal Communications Commission to carve out an exemption for the mortgage industry. An exemption exists for government-backed debt. The FHFA is the regulator and conservator of Fannie Mae and Freddie Mac, which aren't strictly governmental, but rather government-sponsored.
Hedge Fund Managers Expect a Return on Their Investment in Donald Trump -- Trump’s victory has facilitated one of the most audacious hedge fund plays in recent U.S. history — one poised to pay off in billions of dollars. Billionaire investors are buying worthless stocks in the hope of bullying the government into re-animating them. And now the government just might grant their wish. The holdings in question are mortgage giants Fannie Mae and Freddie Mac, which the government put into federal conservatorship in 2008. The Treasury Department in 2012 changed the terms of the deal, sweeping all of Fannie’s and Freddie’s profits into the government. After these maneuvers, shareholders were thought to have been wiped out. But hedge funds continued to buy stock in the companies. They wanted to force the government to recapitalize Fannie and Freddie and release them back into the private sector. In that event, the stock price would shoot up (before the financial crisis, each traded at $60 a share), giving investors an astronomical return on their investment. Hedge funds don’t have to disclose their stakes in individual stocks, but reports indicate that just one, Bill Ackman’s Pershing Square Capital, has $475 million invested in the companies. The hedge funds mounted pressure on several fronts to ensure they’d win their bet. They lobbied Congress to privatize the mortgage companies. They built advocacy groups to argue for their position. They fought Treasury’s profit sweep in a series of lawsuits. And this year, they embarked upon buying themselves a president.John Paulson, one of the largest investors in the Fannie and Freddie play, has a history of getting rich off the housing market. He famously worked with Goldman Sachs in 2007 to short subprime mortgage bonds, without informing investors on the other side of the bet about the poor quality of the underlying loans. That was worth $4 billion. Since profiting off homeowner misery, Paulson has struggled with uneven returns. In the first quarter of this year, his main two funds each fell 15 percent, and his assets under management have dropped from $36 billion to $13 billion in just six years. But Paulson still had his Fannie and Freddie play, and he donated millions to the effort to influence the government on its behalf. Besides, Donald Trump, one of Paulson’s fund investors and business partners (Paulson was one of the owners of the Doral Golf Club when Trump purchased it), happened to be running for president.
Freeing Fannie Mae and Freddie Mac - NYTimes: The election has resurrected the fiasco of how to fix Fannie Mae and Freddie Mac. Shares of the two bailed-out mortgage agencies have rocketed over the last two weeks on hopes that the Trump administration might end government oversight. Big political roadblocks remain, though. Fannie and Freddie, which buy or guarantee home loans, needed $188 billion of taxpayer aid in the 2008 financial crisis and were placed under government conservatorship. Debates about whether to reduce their role went nowhere because they play a large role in the 30-year mortgage market. Allowing them to shake off their government training wheels is a long way off. Even Representative Jeb Hensarling, a Republican and the House Financial Services Committee chairman, reckons his plan to do so is a long shot. Worries about hurting the housing market, and in turn angering voters, are strong enough that some Republican lawmakers would probably join their Democratic rivals in opposing any such attempt. There is one relatively easy tweak, though, that could please most sides: allowing Fannie and Freddie to keep their earnings. Since 2012 they have been forced to hand over all profit as dividends to the Treasury. So far, they have sent $256 billion, none of which counts toward repaying the bailout. That would allow them to rebuild their capital. They currently have just $600 million each set aside against a total of $5 trillion of loans on their books, and that is scheduled to fall to zero in 2018. That raises the embarrassing prospect of one or both of them having to go cap in hand to Uncle Sam for another bailout in even a mild housing downturn.
Trump on Twitter: Ben Carson Might Be HUD Secretary: – President-elect Donald Trump said in a tweet Tuesday that he is considering Dr. Ben Carson — one of his opponents in the Republican primary — to head the Department of Housing and Urban Development. "I am seriously considering Dr. Ben Carson as the head of HUD. I've gotten to know him well--he's a greatly talented person who loves people!"The tweet from Trump is the latest evidence of his unorthodox campaign and prolific use of social media to advance his agenda. It's unclear exactly why Carson, a retired neurosurgeon, would be a good fit for HUD. He had been earlier rumored as a possible candidate to head up the Department of Health and Human Services. But Carson appeared to take himself out of the running for that job — or any cabinet post — when he reportedly indicated to the transition team that he didn't feel up to the task of running a government agency. Carson later quarreled with that idea, posting on Facebook that his decision not to seek a cabinet position had "nothing to do with the complexity of the job." He told Fox News on Sunday that his preference is to be an outside adviser to Trump, but he might consider a cabinet post if offered.
Trump Offers Ben Carson HUD Secretary Job - As was speculated yesterday in various media outlets, moments ago Bloomberg confirmed that Ben Carson, the man who ran for president then said he wouldn't feel comfortable having a role in the Trump administration because he has no government experience, has been formally offered the position of secretary of the Department of Housing and Urban Development. As AP adds, a person close to Carson, who was not authorized to discuss the offer publicly, told The Associated Press Carson would spend his Thanksgiving mulling over whether to accept the position. Earlier in the day, Donald Trump tweeted that he was "seriously considering" Carson as the head of HUD because he's a "greatly talented person who loves people!" Carson was also being floated as potential secretary of education or health and human services, AP reports. Carson's business manager, Armstrong Williams, previously said the "last thing" Carson would want to do was "take a position that could cripple the presidency," but he would be open to considering a role if Trump made it clear there was no one else for the job — this must mean the only option is having a retired neurosurgeon lead the government agency that strengthens the housing market to bolster the economy and protect consumers and utilizes housing as a platform for improving quality of life.
Conforming Loan Limits Raised for First Time Since 2006: The maximum baseline conforming loan limit in 2017 is being increased to $424,100 by the Federal Housing Finance Agency. This is the first increase since 2006, and it is an indication of rising home prices. Since 2006, the baseline maximum conforming loan limit for loans purchased by Freddie Mac and Fannie Mae was $417,000. The baseline loan limit applies to most of the country, with the exception of high-cost areas where 115% of the local median home value exceeds the baseline loan limit. In these areas, higher loan limits apply. The new ceiling loan limit that applies to the areas with the most expensive homes will be $636,150, which represents 150% of the maximum baseline, the FHFA said. The choice to raise the loan limit is a result of higher home prices nationwide. The Housing and Economic Recovery Act, which established the previous baseline loan limit, required that the limit be adjusted every year to account for fluctuations in the national average home price. But the legislation also required prices to recover following the financial crisis to pre-housing bust levels before such adjustments could be made. Home prices were 1.7% higher in the third quarter of 2016 than during the same period in 2007, according to the FHFA's Home Price Index, also released on Wednesday. The increase to the baseline conforming loan limit matches that 1.7% uptick. "Until this year, the average U.S. home price remained below the level achieved in the third quarter of 2007 and thus the baseline loan limit had not been increased," the FHFA said in its announcement of the increase.
FHFA Ups Conforming Loan Limit to $424,100 - After leaving them in a holding pattern for 10 long years the Federal Housing Finance Agency (FHFA) has raised conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac. Separate loan limit announcements are expected shortly from FHA and the Veterans Administration. The current loan limit, $417,000, has been in place since 2006. When the housing crisis hit, the Housing and Economic Recovery Act of 2008 (HERA) set the baseline loan limit at that existing level for one to four family houses in most of the U.S. and required it be adjusted each year to reflect any changes in the national average home price. When prices continued to decline HERA also made clear that the baseline could not be adjusted upward until the average U.S. home price returned to its pre-decline level. As reported here, FHFA reported on Wednesday that its third quarter House Price Index (HPI) is now 1.7 percent higher than in the third quarter of 2007 and the agency has raised conforming loan limits by 1.7 percent to $424,100. The new loan limits are effective as of January 1, 2017. FHFA designates as so-called high-cost areas, markets where 115 percent of the local median home value exceeds the baseline loan limit. HERA sets the maximum loan limit as a function of the area median home value with a ceiling on the limit of 150 percent of the baseline limit. Under this formula, the new limit for the highest cost areas will have a ceiling of $636,150 in 2017. Other counties will have limits below that amount, but higher than the new baseline. FHFA said as a result of generally rising home values, the increase in baseline loan limit, and the rise in the ceiling loan limit, the maximum loan limit rose in all but 87 counties (or county equivalents) in the country. There are additional separate calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands for one-unit properties with additional exceptions for some especially high cost specific locations. A list of the maximum conforming loan limits for all counties and county-equivalent areas can be found at http://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx, along with a link to a map showing loan limits across the county.
Higher Loan Limits Could Mean Increased Mortgage Volume - The Federal Housing Finance Agency's choice to raise conforming loan limits in 2016 for the first time in a decade is being met with enthusiasm from the mortgage industry, as it should prove to be a positive for future origination volume. The agency said Wednesday that it would increase the maximum baseline conforming loan limit in 2017 for mortgages purchased by Fannie Mae and Freddie Mac to $424,100 from $417,000, the level set back in 2006. The FHFA also lifted the ceiling loan limit that applies to the areas with the most expensive homes to $636,150, equivalent to 150% of the maximum baseline."The rise was not unexpected," Mortgage Bankers Association CEO David Stevens said in an interview. "And it reflects the reality that we are in an improving housing market driven by an improving economy."Beyond that, the move could add to mortgage origination volume at a time when economists predict that refinance activity will dip as a result of higher interest rates.In a report released in early November, Black Knight Financial Services calculated that raising the conforming loan limit by $10,000 could result in 40,000 additional originations for $20 billion in loan balances.Additionally, the report found that 17 times as many originations occur at the conforming limit as compared with preceding slices based on dollar amount. Immediately above the limit, originations drop by 70%, Black Knight reported. "It's marginal at a macro level in a $1.4 trillion run-rate market," Stevens said. "But it is impactful on the margin to those individuals who are now in the range."
FHFA to Keep Multifamily Caps at Current Levels in 2017: The multifamily lending caps for Fannie Mae and Freddie Mac will stay the same as they were in 2016 next year, the Federal Housing Finance Agency announced. Each of the government-sponsored enterprises will have a cap of $36.5 billion in multifamily purchase volume next year, the FHFA said Tuesday. The caps were based on the projected size of the size of the 2017 multifamily finance market, which the agency expects to remain similar to its 2016 levels. "FHFA is announcing the caps now to maintain continuity in the market and to provide all stakeholders adequate time to plan their 2017 pipelines," the agency said in its announcement. Exclusions from the caps for affordable and underserved market segments exist and will mostly remain the same as they were in 2016. The one change the agency is making to these exclusions regards loans that finance energy or water efficiency improvements. Next year, loans through Fannie Mae's Green Building Certification program or Freddie Mac's Green Certified program must support properties where at least 20% of the units will be deemed affordable. FHFA added that it will review its estimates on a quarterly basis and make adjustments if necessary, but that it wouldn't reduce the lending caps "as this could cause disruption in the market." In May, the agency increased its cap on the amount of multifamily loans that Fannie Mae and Freddie Mac could purchase from $31 billion to $35 billion. The FHFA raised the cap again in August to its current level at $36.5 billion.
Lawler: Table of Distressed Sales and All Cash Sales for Selected Cities in October - Economist Tom Lawler sent me the table below of short sales, foreclosures and all cash sales for selected cities in October. On distressed: The total "distressed" share is down year-over-year in most of these markets. Short sales and foreclosures are down in these areas. The All Cash Share (last two columns) is mostly declining year-over-year. As investors continue to pull back, the share of all cash buyers continues to decline.
Fewer Homes Underwater, but Some Areas Have a Big Problem: Attom: While the rate of homeowners who owed more on their home than what it is worth decreased nationwide, there were 17 neighborhoods with a large percentage of underwater homeowners. Overall, 6,063,326 U.S. homeowners were seriously underwater as of the end of the third quarter of 2016, according to a report from Attom Data Solutions. This represents 10.8% of all U.S. homeowners with a mortgage and a decrease of more than 854,000 homeowners from a year ago. In 17 ZIP codes across the country, two-thirds or more of homeowners were seriously underwater on their properties, with a loan-to-value ratio of 125% or higher, Attom said. And not all of those neighborhoods were located in cities with notably high underwater rates. Even though six of the areas were located in Detroit, which has one of the overall highest underwater rates in the United States, some were in metropolitan areas like Trenton, N.J., Milwaukee, St. Louis and East Stroudsberg, Penn., that don't have notably high shares of such homeowners. In addition to Detroit, six cities have underwater rates above 20%: Las Vegas, Akron, Ohio, Cleveland, Toledo, Ohio, Dayton, Ohio, and Lakeland-Winter Haven, Fla. Other metropolitan areas with a large share of underwater homeowners include Chicago and Kansas City. On the other end of the spectrum, 13,125,367 U.S. homeowners are equity rich with an a 50% LTV or lower, representing 23.4% of all homeowners. This figure grew by more than 2.6 million from a year ago.
Michael Hudson: How Debt-Driven Home Price Increases Shafted Homeowners - naked capitalism - Yves here. The use of Donald Trump by The Real News Network as the frame for this interview is a bit of a stretch, since the discussion is only peripherally about Trump. In addition, Hudson gives the impression, perhaps unintentionally, that Trump’s tax plan is in flux. In fact, it’s been set forth in detail, which does not mean it won’t change as it goes through Congress. Lee Sheppard of Tax Notes provided a detailed analysis at Forbes. The changes in tax law are more on the corporate side, although Trump also has a big gimmie to Clinton voters in the form of ending the alternative minimum tax. The AMT hits high earners who itemize deductions. Those are typically households with high state income taxes and high mortgage interest payments, such as professionals who live in blue cities like New York and San Francisco.
Metropolitan Home Prices and the Zillow Home Value Index - Piggybacking off our piece in May on 49 Years of Income and Home Values, we now dig into home values in metropolitan areas. According to the Census Bureau, 84% of the U.S. population lives in metropolitan areas. They define a Metropolitan Statistical Area (MSA) as a region with at least one urbanized area of population 50,000 or more. In contrast, a Micropolitan Statistical Area comprises only 10% of the population and is defined as an area containing at least one urban cluster with a minimum population of 10,000, but less than 50,000. The remaining U.S. population is outside of the CB’s Core Based Statistical Areas.With 84% of the population living in MSAs, it seems important to focus on home sale prices and changes in home prices in metropolitan areas. Our data source is Zillow Group (of Zillow.com), which has a wide range of useful real estate data. In addition to sale prices, Zillow Group has created the Zillow Home Value Index (ZHVI), which uses Zillow’s “Zestimate” to create home values in metropolitan areas. The “Zestimate” is a proprietary valuation calculated from estimated sale prices. The ZHVI uses a methodology that takes into account the changing composition of properties sold in different time periods.We examined the ZHVI in the 5 most populous MSAs in the United States. The ZHVI data spans 20 years, is seasonally adjusted, and uses single family home, condo, and co-op data. To adjust for inflation, we’ve used the Bureau of Labor Statistics’ CPI Owner’s Equivalent Rent, which measures the average change over time in the implicit rent that owner occupants would have to pay if they rented their homes. In the first chart below, you’ll notice some interesting patterns. Since 1996, the national median price looks to have appreciated slightly, while those in Los Angeles and New York City are significantly higher today. Surprisingly, Chicago prices are lower today than they were 20 years ago.
FHFA House Price Index Up 1.5% in Q3 - The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. Here is the opening of the report: U.S. house prices rose 1.5 percent in the third quarter of 2016 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). House prices rose 6.1 percent from the third quarter of 2015 to the third quarter of 2016. FHFA’s seasonally adjusted monthly index for September was up 0.6 percent from August. The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. FHFA has produced a video of highlights for this quarter. [Link to report] The chart below illustrates the HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter.
Spike in interest rates could trigger housing crash: CMHC -- A severe global economic depression could cut Canadian housing prices by 25 per cent and push unemployment to 13.5 per cent, according to stress testing done by Canada Mortgage and Housing Corp. (CMHC).But the federal housing agency says it could withstand the $3-billion loss it would suffer under that scenario — one of several tested to ensure CMHC’s mortgage insurance and securitization businesses can withstand a severe economic storm.The results aren’t considered predictions or forecasts and the extreme scenarios that CMHC models “have a very remote chance of happening,” said chief risk officer Romy Bowers.The tests demonstrate that CMHC has the capital requirements to weather a serious financial storm, said Jason Friesen of Verico Premier Mortgage Centre Inc.“It helps pacify taxpayer risk that CMHC could collapse should any market dynamics shift at all. It really doesn’t have an immediate or direct impact on any bank decisions as they will also analyze their own exposure and risk to any serious changes to the markets,” he said. This week Canadian lenders bumped mortgage rates due to a rise in bond yields in the wake of Donald Trump’s election to the U.S. presidency.On Wednesday, TD announced it had raised its special rate offer for a four-year fixed mortgage by five basis points to 2.44 per cent and for a five-year fixed mortgage by 10 basis points to 2.69 per cent. The changes apply to all amortization periods. The day before, RBC lifted its five-year fixed rate mortgage 30 basis points to 2.94 per cent and its four-year rate to 2.79 per cent. Borrowers with amortization rates longer than 25 years are paying more.
MBA: Mortgage "Purchase Applications Drive Increase in Latest Weekly Survey " - From the MBA: Purchase Applications Drive Increase in Latest MBA Weekly Survey -- Mortgage applications increased 5.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 18, 2016. ... The Refinance Index decreased 3 percent from the previous week to its lowest level since January 2016. The seasonally adjusted Purchase Index increased 19 percent from one week earlier. The unadjusted Purchase Index increased 13 percent compared with the previous week and was 11 percent higher than the same week one year ago. “Mortgage rates have continued to move higher in the post-election period, as investors worldwide are looking for increases in growth and inflation, with the 30-year mortgage rate reaching its highest weekly average since the beginning of 2016,” “Refinance volume dropped further over the week, particularly for refinances of FHA and VA loans. The increase in purchase activity was driven by borrowers seeking larger loans and that drove up the average loan amount on home purchase applications to $310 thousand, the highest in the survey, which dates back to 1990.” ... 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, 4.16 percent, from 3.95 percent, with points unchanged at 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. With the current level of mortgage rates, refinance activity will probably decline further. The second graph shows the MBA mortgage purchase index. The purchase index was "11 percent higher than the same week one year ago".
Existing-Home Sales Jump Again in October - This morning's release of the October Existing-Home Sales increased from the previous month to a seasonally adjusted annual rate of 5.60 million units from an upwardly revised 5.49 million in September. The Investing.com consensus was for 5.43 million. The latest number represents a 2.0% increase from the previous month and a 5.9% increase year-over-year. Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says the wave of sales activity the last two months represents a convincing autumn revival for the housing market. "October's strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply," he said. "Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes." Added Yun, "The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion. These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 was previously available in the St. Louis Fed's FRED repository and is now only available from January 2013. It can be found here.
Existing Home Sales increased in October to 5.60 million SAAR -- From the NAR: Existing-Home Sales Jump Again in October Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 2.0 percent to a seasonally adjusted annual rate of 5.60 million in October from an upwardly revised 5.49 million in September. October's sales pace is 5.9 percent above a year ago (5.29 million) and surpasses June's pace (5.57 million) as the highest since February 2007 (5.79 million). ... Total housing inventory 3 at the end of October declined 0.5 percent to 2.02 million existing homes available for sale, and is now 4.3 percent lower than a year ago (2.11 million) and has fallen year-over-year for 17 straight months. Unsold inventory is at a 4.3-month supply at the current sales pace, which is down from 4.4 months in September. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in October (5.60 million SAAR) were 2.0% higher than last month, and were 5.9% above the October 2015 rate.The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 2.02 million in October from 2.03 million in September. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.Inventory decreased 4.3% year-over-year in October compared to October 2015. Months of supply was at 4.3 months in October.
September 2016 Headline Existing Home Sales Improves: The headlines for existing home sales improved and say "tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion". Our analysis of the unadjusted data is worse than the headlines. We do not see sales as strong as the NAR suggests - there is significant variation between the adjusted and unadjusted data. The data overall is not terrible but there is no indication the rate of growth is improving. Econintersect Analysis
- Unadjusted sales rate of growth decelerated 2.7 % month-over-month, up 0.5 % year-over-year - sales growth rate trend was marginally declining using the 3 month moving average.
- Unadjusted price rate of growth accelerated 0.1 % month-over-month, up 4.4 % year-over-year - price growth rate trend marginally improved using the 3 month moving average.
- The homes for sale inventory marginally declined this month, but remains historically low for Octobers, and is down 6.8 % from inventory levels one year ago).
- Sales up 2.0 % month-over-month, up 5.9 % year-over-year.
- Prices up 6.0 % year-over-year
- The market expected annualized sales volumes of 5.250 M to 5.450 million (consensus 5.350 million) vs the 5.60 million reported.
A Few Comments on October Existing Home Sales -- First, these October existing home sales closed escrow before the recent increase in mortgage rates (rates started increasing after the election). Also, the recent increase in mortgage rates will probably have little impact on November closed sales, since most of those sales were already in process.
With the recent increase in rates, I'd expect some decline in sales volume as happened following the "taper tantrum" in 2013. So we might see sales fall to 5 million SAAR or below over the next 6 months. That would still be solid existing home sales. We might also see a little more inventory in the coming months, and therefore less price appreciation.
Usually a change in interest rates impacts new home sales first, because new home sales are reported when the contract is signed, whereas existing home sales are reported when the contract closes. So we might see some impact on new home sales for November (not October since that was before the recent increase). On inventory, here is a repeat of some comments I wrote earlier: I expected some increase in inventory last year, but that didn't happened. Inventory is still very low and falling year-over-year (down 4.3% year-over-year in October). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases. Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply. Of course low inventory keeps potential move-up buyers from selling too. If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade.
The previous three months were revised down by a total of 34 thousand (SAAR). "Sales of new single-family houses in October 2016 were at a seasonally adjusted annual rate of 563,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.9 percent below the revised September rate of 574,000, but is 17.8 percent above the October 2015 estimate of 478,000" The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales since the bottom, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply increased in October to 5.2 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). "The seasonally adjusted estimate of new houses for sale at the end of October was 246,000. This represents a supply of 5.2 months at the current sales rate." Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low. The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate). In October 2016 (red column), 45 thousand new homes were sold (NSA). Last year, 39 thousand homes were sold in October. This was the highest sales for October since 2007. The all time high for October was 105 thousand in 2005, and the all time low for October was 23 thousand in 2010. This was below expectations of 590,000 sales SAAR in October.
October New Home Sales Down 1.9% MoM, New Median Price at 304.5K - This morning's release of the October New Home Sales from the Census Bureau came in at 563K, down 1.9% month-over-month from a revised 574K in September. Seasonally adjusted estimates for July, August, and September were revised. The Investing.com forecast was for 593K. Here is the opening from the report: Sales of new single-family houses in October 2016 were at a seasonally adjusted annual rate of 563,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.9 percent (±13.1%)* below the revised September rate of 574,000, but is 17.8 percent (±16.9%) above the October 2015 estimate of 478,000. The median sales price of new houses sold in October 2016 was $304,500; the average sales price was $354,900. The seasonally adjusted estimate of new houses for sale at the end of October was 246,000. This represents a supply of 5.2 months at the current sales rate. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. We've included a six-month moving average to highlight the trend in this highly volatile series.
October 2016 New Home Sales Slow: The headlines say new home sales declined. The median sales price for homes declined. This data series is suffering from methodology issues which manifest as significant backward revision - and this month the revisions were moderately downward. Home sales move in spurts and jumps - so this is why we view this series using a three month rolling average (rolling averages declined}. Overall I view this as an OK report, which was slightly below market expectations. Dispite the fact the data jumps around, the three month rolling averages are solidly improving. Econintersect analysis: unadjusted sales growth decelerated 13.2 % month-over-month. unadjusted year-over-year sales up 15.4 %.. Year-over-year growth rate this month was well above the range of growth seen last 12 months. three month unadjusted trend rate of growth decelerated 3.4 % month-over-month - is up 19.1 % year-over-year.Econintersect analysis:
- unadjusted sales growth decelerated 13.2 % month-over-month.
- unadjusted year-over-year sales up 15.4 %.. Year-over-year growth rate this month was well above the range of growth seen last 12 months.
- three month unadjusted trend rate of growth decelerated 3.4 % month-over-month - is up 19.1 % year-over-year.
- seasonally adjusted sales down 1.9 % month-over-month
- seasonally adjusted year-over-year sales up 17.8 % (last month was reported at 29.8 %)
- market expected (from Bloomberg) seasonally adjusted annualized sales of 580 K to 620 K (consensus 590 K) versus the actual at 563 K.
The quantity of new single family homes for sale remains well below historical levels.
Sales of New Homes Declined to Four-Month Low in October: Purchases of new homes declined in October to a four-month low, showing the residential real estate market began to soften a month prior to a jump in borrowing costs. Sales decreased 1.9% to a 563,000 annualized pace, Commerce Department data showed Wednesday. The median forecast in a Bloomberg called for a 590,000 rate. The government's new-home data, while volatile from month to month, have been advancing in uneven fashion over the last five years, bolstered by steady job gains and income growth. The market now faces a test after mortgage rates climbed last week by the most since mid-2013. Estimates ranged from 550,000 to 616,000. The Commerce Department revised the September reading down to a 574,000 pace from a previously estimated 593,000. The slowdown in demand last month was led by a 13.7% decrease in the Midwest to a six-month low and a 3% drop in the South. In the West, purchases climbed 8.8% to a 148,000 annualized pace, the strongest this year. The supply of homes rose to 5.2 months from 5 months in September. There were 246,000 new houses on the market at the end of October, the most in seven years. Of those, 42,000 have not yet been started, the most since December 2008. The median sales price of a new house increased 1.9% from October 2015 to $304,500, Wednesday's report showed. New-home sales, which account for about 10% of the residential market, are tabulated when contracts are signed. That makes them a timelier barometer than transactions on existing homes.
New Home Sales Slide To Four Month Low After Sharp Downward Revisions -- With mortgage rates soaring, it is only a matter of time before US housing is adversely impacted. And while the just released October new home sales data focused on sales of houses based on contracts signed in the month before the election, some concerns were already evident, when the number of new homes sold tumbled to 563K from a pre-revised 593K, badly missing expectations of a 593K print. This was the weakest new home sales print going back to the 558K new homes sold in the month of June. Furthermore, and as has traditionally happened with this volatile series, the the previous 3 months of data were all revised uniformly lower, with the September surge to 593K, now reduced to a more modest 574K.The silver lining is that the drop in sales lifted the supply of homes available for sale to 5.2 months at the current selling rate, matching the highest since March. An interesting observation in the latest data is that despite the recent increase (and surge, most recently) in mortgage rates, the median sales price was mostly unchanged, declining from $314K to $305K, the second highest since the summer and suggesting that future homes prices are set to drop, in a move inversely proportional to the recent surge in mortgage rates.
A few Comments on October New Home Sales -- New home sales for October were reported below the consensus forecast at 563,000 on a seasonally adjusted annual rate basis (SAAR). And the previous months were revised down. However, sales were up 17.8% year-over-year in October, and this is the best month for October (NSA) since 2007. And sales are up 12.7% year-to-date compared to the same period in 2015. The glass is more than half full. This is very solid year-over-year growth and just suggests that expectations were ahead of reality. This is why we look at the trend and not just one month. Note that these sales (for October) were before the recent increase in mortgage rates. This graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate). Sales to date are up 12.7% year-over-year, because of very strong year-over-year growth over the last seven months.Overall I expected lower growth this year, in the 4% to 8% range. Slower growth seemed likely this year because Houston (and other oil producing areas) will have a problem this year. It looks like I was too pessimistic on new home sales this year. And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next several years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through October 2016. This graph starts in 1994, but the relationship had been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales. However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.
Quarterly Housing Starts by Intent - Bill McBride -In addition to housing starts for October, the Census Bureau also released the Q3 "Started and Completed by Purpose of Construction" report last week. It is important to remember that we can't directly compare single family housing starts to new home sales. For starts of single family structures, the Census Bureau includes owner built units and units built for rent that are not included in the new home sales report. For an explanation, see from the Census Bureau: Comparing New Home Sales and New Residential Construction However it is possible to compare "Single Family Starts, Built for Sale" to New Home sales on a quarterly basis. The quarterly report released last week showed there were 150,000 single family starts, built for sale, in Q3 2016, and that was close to the 148,000 new homes sold for the same quarter, so inventory increased slightly in Q3 (Using Not Seasonally Adjusted data for both starts and sales). This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale. Single family starts built for sale were up about 2% compared to Q3 2015. Owner built starts were up 4% year-over-year. And condos built for sale not far above the record low. The 'units built for rent' has increased significantly in recent years, but is now moving more sideways.
Mortgage Debt's Share Of Total Debt Keeps Declining – St Louis Fed - Mortgage debt remains the largest share of debt for many households, but its share has been on the decline, according to the latest issue of the Quarterly Debt Monitor. Don Schlagenhauf, chief economist of the St. Louis Fed’s Center for Household Financial Stability, and Lowell Ricketts, senior analyst of the center, noted that mortgage debt comprised 74 percent of total debt nationally at its peak in the third quarter of 2007. Following the peak, however, consumers shed $340 billion in mortgage debt in a year. This was one factor in mortgage debt’s share of total debt declining 6 percentage points since the peak.Schlagenhauf and Ricketts noted that per capita mortgage debt grew marginally in the second quarter on a year-over-year basis. This was the first increase since the first quarter of 2009. Auto and student debt, on the other hand, have grown rapidly and have increased their share of total debt. The authors noted that auto and student debt have grown 2.2 percentage points and 6.4 percentage points, respectively, since the third quarter of 2007. The two categories now account for 9.1 percent and 10 percent of total debt, respectively. Mortgage debt grew 0.6 percent in the second quarter of 2016 on a year-over-year basis, while home equity lines of credit decreased 2.3 percent. All other categories of consumer debt rose during the second quarter:
- Auto debt rose 8.3 percent.
- Credit card debt rose 1.9 percent.
- Student debt rose 3.9 percent.
Michigan Consumer Sentiment: November Final Increases, Greater Optimism - The University of Michigan Final Consumer Sentiment for November came in at 93.8, up from the October Final reading. Investing.com had forecast 91.6. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: The initial reaction of consumers to Trump's victory was to express greater optimism about their personal finances as well as improved prospects for the national economy. The post-election gain in the Sentiment Index was +8.2 points above the November pre-election reading, pushing the Index +6.6 points higher for the entire month above the October reading. The post-election boost in optimism was widespread, with gains recorded among all income and age subgroups and across all regions of the country. The upsurge in favorable economic prospects is not surprising given Trump’s populist policy views, and it was perhaps exaggerated by what most considered a surprising victory as well as by a widespread sense of relief that the election had finally ended. To be sure, no surge in economic expectations can long be sustained without actual improvements in economic conditions. Presidential honeymoons represent a period in which the promise of gains holds sway over actual economic conditions. Presidential honeymoons, however, can quickly end if they are unaccompanied by prospects that economic conditions will actually improve in the future. President-elect Trump appears to appreciate the importance of his first hundred days; the key issue is whether his economic policies will resonate with the nation's consumers. The data indicate that consumer spending will advance by 2.5% in 2017. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Trump Victory Sends Black American Consumer Confidence Surging To 22-Month Highs -- Well that's unexpected... Bloomberg's consumer comfort survey shows Black Americans are at their most confident since Jan 2015 following the Trump election win, now more confident than white Americans. We also note that Hispanic Americans are more confident now than before the election also. So it makes us wonder just who all these snowflake protesters are?
American "Hope" Spikes To Highest In 18 Months After Trump Win -- Inflation expectations (short- and long-term) have risen notably in the latest Uiniversity of Michigan survey data but it is "hope" that has soared. Consumer Expectations spiked most in over 3 years to 85.2 in November to 18 month highs following the election of Donald Trump as US president. While current conditions remain well off the summer highs (107.3 vserus 110.8 in June), it is the surge in "hope" that is most notable. Furthermore Business Expectations soared from 80 to 92 post-election. So why the surge in optimism? One word: Trump. According to the report, the initial reaction of consumers to Trump's victory was to express greater optimism about their personal finances as well as improved prospects for the national economy. The post-election gain in the Sentiment Index was +8.2 points above the November pre-election reading, pushing the Index +6.6 points higher for the entire month above the October reading. The post-election boost in optimism was widespread, with gains recorded among all income and age subgroups and across all regions of the country. The upsurge in favorable economic prospects is not surprising given Trump’s populist policy views, and it was perhaps exaggerated by what most considered a surprising victory as well as by a widespread sense of relief that the election had finally ended. To be sure, no surge in economic expectations can long be sustained without actual improvements in economic conditions. Presidential honeymoons represent a period in which the promise of gains holds sway over actual economic conditions.UMich however warns that "Presidential honeymoons can quickly end if they are unaccompanied by prospects that economic conditions will actually improve in the future." As UMich concludes, "President-elect Trump appears to appreciate the importance of his first hundred days; the key issue is whether his economic policies will resonate with the nation's consumers. The data indicate that consumer spending will advance by 2.5% in 2017."
Will newly confident GOP voters actually start spending more? --- I ran across the following graph at a Doomer website I occasionally check: So, are Happy Days Here Again because of Trump? Well, first of all, the article noted that Gallup had found a profound difference in the changes in confidence between democrats and republicans: Democrats' confidence declined by 15%, but GOP confidence soared by over 30%!The real question is, does this translate into actual spending?We have been here before. Back in early 2013, I wrote that spending by affluent democrats may have been boosting the economy. Here's what I said then: So the first thing I noticed is that the dividing line between upper income consumers and the rest is $90,000 annual income. David lives in southern California, so he may not be aware, but the only way somebody with a $90,000 income is getting into a home in the Hamptons is as a caterer or landscape contractor. But the next thing that got my attention, being a total data nerd, is that big spike upward in the confidence of the lower 75% back in September 2012, that continued upward through November and seems to have had a lasting effect. So I did some searching of archived Gallup reports, and lo and behold, Gallup found a very specific reason for that spike: Because the Gallup Economic Confidence Index is based on daily tracking of consumer attitudes, we can pinpoint the day that confidence increased. That day was Sept. 4, the first night of the Democratic National Convention. [NDD note: the night of Bill Clinton's keynote address] After averaging -27 in August, and registering -28 on Sept. 3, the Gallup Economic Confidence Index jumped to -18 on Sept. 4, and has mostly remained at or near that improved level.Here's the graph from that time: If you go back to the first graph above, you can see that 10% increase in late 2012 that I wrote about in 2013. In fact, you can also see a transitory 20% spike when Obama was elected in 2008. In 2013 the economic confidence of (especially affluent) democrats translated into actual spending, according to Gallup: My suspicion is, the current spike will fade as did the one in November 2008. But the bottom line is, it will actually be a positive if the newly confident GOP voters actually start spending more.
Meet The "Gardening Blogger" Who May Have Overcharged Americans Billions For Supermarket Chicken --Billions of dollars worth of chicken are sold in the United States each year through various supermarket chains. Given the shear volume of chicken sales, most Americans simply take for granted that the prices are set based a transparent, competitive marketplace of buyers and sellers. Certainly, before now, not many would have guessed that their grocery bills for poultry were being determined by a single, self-described "gardening blogger" from the Georgia Department of Agriculture. Unfortunately, it's looking increasingly like that is exactly what happened and it likely resulted in Americans being overcharged billions of dollars for chicken purchased in supermarkets. When it comes to chicken pricing, there is very little infrastructure and processes in place to determine a truly "market price" for poultry. Per the Washington Post, a significant portion of chicken sold to retailers is actually priced off an index maintained by the Georgia Department of Agriculture which is frequently referred to as the "Georgia Dock" price. And while that may sound "official," we're now finding out that the Georgia Dock price has been unilaterally set by a single, untrained, "gardening blogger" based on a survey of just a couple local producers who refused to provide backup for their pricing. While many chicken companies and retailers are secretive about how they set prices for buying and selling chicken, some very large players have acknowledged that the Georgia Dock is the basis of, or a factor in, the price they pay for chicken.“Over time, most retail grocery customers and their suppliers have come to trust the Georgia Dock whole bird price quoted weekly by the Georgia Department of Agriculture as the most reliable reflection of the supply and demand dynamics of the fresh chicken market,” officials at Sanderson Farms, one of the nation’s largest chicken producers, wrote to the SEC earlier this year.
Is Microsoft Purposefully Degrading/Crashing Internet Explorer to Bully Users into Upgrading to Windows 10 & Edge? - Having spent years burning through any remaining goodwill among its users still clinging to Internet Explorer, Microsoft is apparently having problems getting them to use its Edge browser that is part of Windows 10. Even after about 15 months and three upgrades, the market share of Edge is still minuscule. And IE has dropped to 4th place with a 10% share. A few years ago, well, many years ago, before the arrival of Chrome, IE was the number one browser, having crushed Netscape during the First Browser War (being bundled with Windows did the trick). According to Net Market Share, Edge 12, 13, and 14 combined have a market share of 5.2%. Everyone has slightly different market-share numbers. But at that level – whether it’s 3% or 5% doesn’t matter – Edge is an also-ran, something statistically insignificant, abandoned by burned-out IE users. So Microsoft appears to go to extremes to force Windows users who still cling to their IEs to upgrade to Windows 10 and switch to Edge. It had already gone to extremes to get Windows 7 users – a reasonably happy crowd, unlike the Windows 8 crowd – to upgrade for “free” to Windows 10. The inescapable desktop harassment-and-interdiction campaigns from Microsoft finally stopped a few months ago, and Windows 7 users could go about their business unmolested. The survivors all knew: If someone is trying to push you that hard to “upgrade” to a “free” program that took years and thousands of people to put together, it’s a sign that you are the product, and you’re going to get sold.
Office Depot caught claiming out-of-box PCs showed “symptoms of malware” - Office Depot and its sister retailer OfficeMax have stopped using a technically dubious piece of malware-scanning software after two news services caught the stores recommending costly fixes for PC infections that didn't exist. According to an investigation conducted by KIRO TV News, four out of six stores in Seattle and Portland, Oregon claimed that out-of-the-box PCs showed "symptoms of malware" that required as much as $180 for repairs and protection. The computers, according to the report, had never been connected to the Internet and were diagnosed as free of malware by security firm IOActive. A separate TV News team from WFXT in Boston reported on Friday that the same free scanning service OfficeMax offers similarly misdiagnosed two of three brand-new PCs as potentially infected. Officials at Office Depot, the parent company that operates both chains, said they are suspending use of software known as PC Health Check for scanning customers' computers for malware. The officials went on to say they didn't condone the conduct reported by the TV news organizations and have undertaken a review of the assertions. According to an IOActive security researcher who spoke to KIRO, PC Health Check automatically signals a malware problem when store employees check any one of four boxes indicating that a customer has experienced pop-up problems, slow speeds, virus warnings, or random shutdowns. "When any four of them is checked [in] any combination and single, as long as one of those boxes is checked you will see the malware symptoms in the report," Derek Held, the IOActive researcher, was quoted as saying. "It didn’t matter anything else that was on the report. It was automatic that made it show up on the report."
Vehicle Sales Forecast: Sales Over 17 Million SAAR Again in November, Possible Record Year in 2016 The automakers will report November vehicle sales on Thursday, December 1st. There were 25 selling days in November 2016, up from 23 in November 2015. From WardsAuto: Forecast November U.S. Light-Vehicle Sales Leave Potential for Record Year U.S. light-vehicle sales results are expected to track above the year-to-date pace for the third straight month in November, leaving open the possibility that 2016 still could finish with record volume. With an upward bias, November sales are forecast to end at a 17.7 million-unit seasonally adjusted annual rate, the third consecutive month the SAAR finished above the year-to-date total, which stands at 17.3 million through October... If November’s outlook holds firm, year-to-date volume will total 15.8 million units, a smidgeon above 11-month 2015’s 15.7 million, but keeping the prospect alive that 2016 could end as a record year...WardsAuto is forecasting 2016 to end ahead of 2015. An initial look at December points to a 17.8 million SAAR. Based on the November-December projections, sales will end the year slightly above 17.4 million units, barely topping 2015’s record volume of 17.396 million. Here is a table (source: BEA) showing the 5 top years for light vehicle sales through October, and the top 5 full years. 2016 will probably finish in the top 3, and could be the best year ever - just beating last year.
Peak Autos? - Increasing Light Vehicle Useful Life Is Disastrous For Auto OEMs - IHS Markit today released their annual study on the average age of light vehicles registered in the U.S.. As expected, the average fleet age continues to tick up and currently stands at 11.6 years. While this may be great news for consumers, higher quality and longer useful lives can have a detrimental impact on annual auto sales.“Quality of new vehicles continues to be a key driver of the rising average vehicle age over time,” Mark Seng, global automotive aftermarket practice director at IHS Markit, said in a statement.Not only are vehicles getting older, consumers are keeping their vehicles for longer, too, IHS said. As of the end of 2015, the average length of ownership was 79.3 months -- a record -- up 1.5 months from the previous year.About 11 million light vehicles were scrapped during 2015, or about 4.3 percent of the overall population, according to IHS.IHS forecasts that the volume of vehicles in the new- to 5-years-old category will grow 16 percent by 2021, while vehicles in the 6- to 11-year-old range will grow 5 percent, and vehicles that are 12 or more years old will grow 10 percent.The market research company said the oldest vehicles on the road are growing the fastest. Vehicles 16 years and older are expected to grow 30 percent from 62 million units today to 81 million in 2021.IHS research also showed that there will be more than 20 million vehicles on the road in 2021that will be more than 25 years old.
Trucking Data Mixed In October 2016: Truck shipments declined or improved in October - depending on the data source. Trucking, like rail, may be in contraction - but is likely improving. Analyst Opinion of Truck Transport This month it is agreed between the data sources that trucking sector is in contraction year-over-year. It was not agreed whether October was better than August. I tend to believe the CASS index which shows a moderate improvement month-over-month as it is more consistent with the rail data. It is also interesting that the current trucking employment pattern resembles the period before the 2001 recession.This situation is mirroring the trends in wholesale trade and manufacturing - which all remain in contraction. Prior to the New Normal, this would have indicated a recession - in 2016 it seems only to be indicating very weak near term economic conditions. The American Trucking Associations' (ATA) trucking index decreased 0.3 % in October following a 6.3 % decline in September. From ATA Chief Economist Bob Costello: While seasonally adjusted tonnage fell, meaning the not seasonally adjusted gain wasn't as large as expected, the bottom of the current tonnage cycle should be near. There are some recent trends that suggest truck freight should improve, albeit gradually, soon. Retail sales, housing starts, and even factory output all improved in October, which is a good sign. Most importantly, there has been considerable progress made in clearing out excess stocks throughout the supply chain. While that correction is still ongoing, there has been enough improvement that the negative drag on tonnage shouldn't be as large going forward.
Rail Week Ending 19 November 2016: Improvement Trend Continues: Week 46 of 2016 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. Long term rolling averages remain in contraction - but the 4 week rolling average is now in positive territory. 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 -2.1 %. 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. For this week, total U.S. weekly rail traffic was 547,804 carloads and intermodal units, up 2.8 percent compared with the same week last year. Total carloads for the week ending November 19 were 271,420 carloads, up 1.3 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 276,384 containers and trailers, up 4.4 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were grain, up 19.9 percent to 25,916 carloads; farm products excl. grain, and food, up 3.5 percent to 17,057 carloads; and coal, up 1.7 percent to 94,751 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 6.9 percent to 11,076 carloads; metallic ores and metals, down 3.4 percent to 19,099 carloads; and motor vehicles and parts, down 2.5 percent to 18,611 carloads. For the first 46 weeks of 2016, U.S. railroads reported cumulative volume of 11,619,023 carloads, down 9.3 percent from the same point last year; and 11,976,927 intermodal units, down 2.7 percent from last year. Total combined U.S. traffic for the first 46 weeks of 2016 was 23,595,950 carloads and intermodal units, a decrease of 6.1 percent compared to last year.
Chemical Activity Barometer "Continues Strong Performance" in November - Note: This appears to be a leading indicator for industrial production. From the American Chemistry Council: Chemical Activity Barometer Continues Strong Performance with Eighth Consecutive Gain The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), featured another solid gain of 0.3 percent in November, following a gain of 0.3 percent in October and a 0.4 percent gain in September and August. Accounting for adjustments, the CAB is up 4.2 percent over this time last year, a marked increase over earlier comparisons and the greatest year-over-year gain since August 2014. All data is measured on a three-month moving average (3MMA). On an unadjusted basis the CAB climbed 0.3 percent in November, following a 0.2 percent gain in October...Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index. This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production. It does appear that CAB (red) generally leads Industrial Production (blue).
October Durable Goods Orders Surge – dshort - The Advance Report on Manufacturers’ Shipments, Inventories and Orders released today gives us a first look at the latest durable goods numbers. Here is the Bureau's summary on new orders: New orders for manufactured durable goods in October increased $11.0 billion or 4.8 percent to $239.4 billion, the U.S. Census Bureau announced today. This increase, up four consecutive months, followed a 0.4 percent September increase. Excluding transportation, new orders increased 1.0 percent. Excluding defense, new orders increased 5.2 percent. Transportation equipment, also up four consecutive months, led the increase, $9.5 billion or 12.0 percent to $88.2 billion. Download full PDF The latest new orders number at 4.8% (4.81% to two decimal places) month-over-month (MoM) was substantially above the Investing.com consensus of 1.5%. The series is up 2.1% year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 1.0% MoM, which beat the Investing.com consensus of 0.2%. The core measure is only up a fractional 0.3% YoY.If we exclude both transportation and defense for an even more fundamental "core", the latest number is up 1.3% MoM but only up 1.0% YoY.Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It rose 0.4% MoM but is down 4.0% YoY. For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.
Durable Goods New Orders Improved in October 2016: The headlines say the durable goods new orders improved. The unadjusted three month rolling average improved this month and is now in expansion. Transport was the main driver this month. This series has wide swings monthly so our primary metric is the three month rolling average which improved and is now in expansion. The real issue here is that inflation is starting to grab in this sector making real growth much less than appears at face value. Overall the trends are improving but far from the sense you get from the headlines. Econintersect Analysis:
- unadjusted new orders growth accelerated 0.8 % (after decelerating a revised 2.0 % the previous month) month-over-month , and is up 1.3 % year-over-year.
- the three month rolling average for unadjusted new orders accelerated 2.7 % month-over-month, and up 1.4 % year-over-year.
- Inflation adjusted but otherwise unadjusted new orders are up 0.5 % year-over-year.
- Backlog (unfilled orders) accelerated 0.7 % month-over-month, but is contracting 1.1 % year-over-year.
- The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth up 0.4 % month-over-month, up 0.6 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, but the trend over the last year is relatively flat.
Durable Goods Surge On Aircraft Orders Spike, Ex-Air Shipments Tumble For 15th Straight Month - Durable Goods Orders jumped 4.8% MoM in October, the highest since the October 2015 (start of government fiscal year) bounce last year, thanks to a yuuge in transportation orders (up 12.0%) which included a surge in orders for civilian aircraft (up 138.5%) and military aircraft new orders (up 33.1%). However, Core Capital Goods Shipments, i.e. true CapEx, has now declined 15 straight months year-over-year (the longest non-recesionary streak in history). Lots of excitement that Durable Goods (ex transport) turned green year-over-year for the first time since Dec 2014. But away from the unsustainable Boeing and Military orders... And, Core Capital goods shipments continue to decline...
Richmond Fed Manufacturing: Activity Expands in November - Today the Richmond Fed Manufacturing Composite Index increased 8 points to 4 from last month's -4. Investing.com had forecast 1. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at -2.7, indicates contraction. The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.
Richmond Fed Manufacturing Survey Moves Into Expansion In October 2016.: Of the four regional Federal Reserve surveys released to date, all are in expansion. For the first time in a long time, the regional Fed surveys seem to be saying uniformly that growth is weakly expanding. [note that values above zero represent expansion]. Fifth District manufacturing activity expanded in November, after a three-month contraction period. New orders increased in the most recent survey period, while shipments remained flat. Hiring activity continued to strengthen mildly across firms and wage increases were more widespread. Prices of raw materials and finished goods rose at a somewhat slower pace in November. Manufacturers anticipated positive business conditions during the next six months. Producers expected faster growth in shipments and in the volume of new orders. Survey participants looked for backlogs to grow in the months ahead and anticipated increased capacity utilization. Firms looked for slightly longer vendor lead times during the next six months. Looking ahead, survey participants planned more hiring. In November, more respondents reported future wage increases, while they anticipated somewhat longer average workweeks. Manufacturers looked for faster growth in prices paid and prices received. Current Activity Overall manufacturing conditions expanded this month. The composite index for manufacturing gained eight points, moving into positive territory to end at a reading of 4. The new orders indicator increased this month, ending at a reading of 7, while the shipments index remained at a flat reading of 1. The manufacturing employment index changed little this month. The index added two points to end at 5.
Markit Manufacturing PMI: Strongest Rise Since March 2015 - The preliminary November US Manufacturing Purchasing Managers' Index conducted by Markit came in at 53.9, up from the 53.4 October final. Today's headline number came in above the Investing.com consensus of 53.4. Markit's Manufacturing PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release: November data highlighted a sustained acceleration in production growth across the U.S. manufacturing sector, and the latest upturn was the fastest since early-2015. Higher levels of output were supported by a continued rebound in new business volumes, with strong domestic demand helping to offset subdued export sales growth. Manufacturers also reported a moderate rise in staffing numbers and another robust increase in purchasing activity. At 53.9 in November, up from 53.4 in October, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) signalled a further solid improvement in overall business conditions across the manufacturing sector. The headline index was the highest since October 2015, largely reflecting robust output and new business growth during the latest survey period. [Press Release] Here is a snapshot of the series since mid-2012.
US Manufacturing PMI Rebounds To 13 Month Highs On Post-Election Optimism, Decouples From Production Slump --Following the bump in Eurozone PMIs this morning, Markit reports November US manufacturing at 53.9 (better than 53.5 expected) and its highest since Oct 2015, showing "further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook." However, hope in the PMI survey seems to be decoupling from reality in actual production. Under the covers, everything looks awesome with new orders rising (highest since Oct 2015), employment spiked to one of the largest of the year, and output jumped to its highest since March 2015. Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:“US manufacturers enjoyed a strong post-election bounce in November,further tilting the scales toward the Fed hiking rates in December. Many factories reported that demand from customers had picked up as uncertainty about the election result cleared. Domestic demand rose especially sharply, helping to make up for subdued export growth, linked in turn to the strong dollar.“The survey also found further signs of factories and their customers moving away from destocking to inventory-building amid a more optimistic outlook, accompanied by an upturn in hiring. The increase in employment was one of the largest seen so far this year.
Markit Services PMI Signals Continued Expansion - The preliminary November US Services Purchasing Managers' Index conducted by Markit came in at 54.7 percent, down 0.1 percent from the final October estimate. The Investing.com consensus was also for 54.8 percent. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction. Here is the opening from the latest press release: U.S. service sector companies reported another robust increase in business activity during November, with the pace of expansion holding close to the 11-month peak seen in October. As a result, growth momentum remained much stronger than seen in the first half of 2016. [Press Release] Here is a snapshot of the series since mid-2012.
US Services Economy Declines Post-Trump, But Markit Sees "Green Light" For Fed Hike - Just days after Market reported a surprising upward impulse for the US manufacturing sector under President-elect Donald Trump, moments ago we learned that the US service industry declined in the month of November. As Markit notes, “the November PMI surveys provide the first snapshot of US business conditions in the wake of the surprise election result, and show a reassuring picture of sustained solid economic expansion and hiring." New business improved at the fastest rate in a year but job creation remains flat (the rate of staff hiring was only modest in November and remained weaker than the average seen since the jobs rebound began in early-2010) as growth prospects fell slightly MoM. Pick your poison...
Special Report: U.S. manufacturing economy fails employers and workers | Reuters: Brown tried to hire a dozen workers for his metal foundry here. Half of them flunked the drug test. Those results are typical, says the president of Bremen Castings Inc, a family-owned employer of 350 workers who make parts for trucks and other equipment. Drug problems are one factor contributing to a labor shortage that delayed filling orders earlier this year. “We’ve become a recruiting company,” Brown said of the relentless struggle to maintain a strong workforce. Bremen Castings illustrates the central tension in U.S. manufacturing: Plant managers complain of a talent shortage, while workers see too few acceptable jobs. The paradox has echoed through the presidential campaign, with both major candidates lamenting the loss of factory jobs - even as unemployment in most industrial regions has dropped to rates usually considered healthy. The jobless rate in the county surrounding the Bremen plant, for instance, is less than 4 percent, according to state data. The national rate is 5 percent. Such statistics, however, obscure the struggles of manufacturers and workers, particularly in the Midwestern U.S. Factories in the countryside are distant from pools of unemployed workers in cities. Drug tests are disqualifying more applicants. Low wages discourage others from taking jobs that are available, and employers say tougher immigration enforcement makes it difficult to fill many low-wage jobs. Bremen Casting in August raised its starting wage to $14 per hour from $13 - after raising it from 11.50 earlier this year. The company pays up to $27.50 for its top hourly workers. Brown said he’s nearing the limit of what he can pay because of pricing pressure from his customers.
Where Will Employees Come From For Trump's Plans? -- From Bloomberg: “I don’t think we should look at mining to be an engine for job growth,” said Thomas Costerg, senior U.S. economist at Standard Chartered Bank in New York. “You could see a pickup in employment. But on the scale of the U.S. labor market, which is really huge, if you compare what’s really driving job growth right now, which is mostly services,” the sectors affected by energy policy changes are “quite marginal.” Several charts will flesh out the above statement: The number of employment jobs relative to total payroll employment has consistently decreased over the last 70+ years, falling from 3% in the 1940s to less than half a percent today. The same pattern emerges with manufacturing jobs: Manufacturing jobs have fallen from about 30% of total U.S. employment right after WWII to a current level of just below 10%. The reality is that service sector provides most U.S. jobs: Service jobs increased from about 50% in the 1960s to 70% today. Even if we see policies that aggressively promote manufacturing, the U.S. simply doesn't have a large enough pool of potential employees to staff those jobs in large enough quantities to make a meaningful difference in the above figures. That would require an economy wide series of massive programs on par with a military mobilization. I seriously doubt that any administration would undertake such a program, much less a Republican administration.
Weekly Initial Unemployment Claims increase to 251,000 - The DOL reported:In the week ending November 19, the advance figure for seasonally adjusted initial claims was 251,000, an increase of 18,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 235,000 to 233,000. The 4- week moving average was 251,000, a decrease of 2,000 from the previous week's revised average. The previous week's average was revised down by 500 from 253,500 to 253,000. There were no special factors impacting this week's initial claims. This marks 90 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The previous week was revised down. The following graph shows the 4-week moving average of weekly claims since 1971.
Outside Looking In: Why Has Labor Force Participation Increased? - Atlanta Fed's macroblog - The labor force participation rate (LFPR) is an estimate of the share of the population actively engaged in the labor market. The LFPR has increased about 30 basis points over the past year (from the third quarter of 2015 to the third quarter of 2016)—a modest reversal in the precipitous decline in the LFPR that began in 2008. What accounts for this stabilization and—given the demographic and cyclical forces in play—how much longer can it last? The following is perspective through the lens of the reasons people give for not participating in the labor force. Perhaps the component most responsive to changes in labor market conditions is what I will refer to as the "shadow labor force," which is made up of people who are not in the official labor force and are not actively seeking employment, but who say they want a job. (This group includes people discouraged over job prospects.) During tough times, the share of the population in the shadows rises, and during good times it falls. In the third quarter of 2016, about 2.3 percent of the population fell into this category—down from a high of 2.8 percent but still a bit above prerecession levels (see the chart). But focusing solely on the decline in the shadow labor force to explain the recent reversal in the LFPR would be a mistake. In fact, high unemployment in the aftermath of the Great Recession was accompanied not only by a rise in the share of the shadow labor force, but also by an increase in the share of the population who said they didn't currently want a job—because of either a health issue or engagement in some other activity. Although some of this likely reflects trends already at work before the recession, some of it was also probably a cyclical response to weak job opportunities. The chart below shows how these various factors cumulatively contribute to the decline in the LFPR between the third quarter of 2007 and the third quarter of 2016. It shows that, in addition to a larger share in the shadow labor force, the reasons for the decline between 2007 and 2016 also stemmed from a greater age-adjusted share who were too sick or disabled to work (purple) or in school instead of working (light blue). Interestingly, the share out of the labor force but wanting a job (dark blue) actually exerted the smallest downward force on LFPR of all of these three reasons. The green section represents the impact of the baby boomers: an increasing share of the population of retirement age. Partly offsetting this shift in the age distribution was a decrease in the propensity of these workers to actually retire (orange).
October 2016 Philly Fed Coincident Index Shows Continuing Slowing Of Economic Rate of Growth: The year-over-year rate of growth of the US Coincident Index slowed relative to last month's revised level. A comparison of this US Coincident Index with the Aruoba-Diebold-Scotti business conditions index, Conference Board Coincident Index, ECRI's Coincident Index, and the Chicago Fed National Activity Index follows. The sad reality is that most of the economic indicators have moderate to significant backward revision - but this month it seems the rear view mirror says the USA economy is slowing. Out of this group of coincident indicators discussed in this post, only ECRI and the Aruoba-Diebold-Scotti business conditions index have no backward revision - and both have a good track record of seeing the economy accurately in almost real time. For October, it appears the majority of indices show slowing or poor growth - and show that the economy is very weak but not recessionary. Economic indicators that coincide with economic movements are coincident indicators. Coincident indicators by definition do not provide a forward economic view. However, trends are valid until they are no longer valid, making the trend lines on the coincident indicators a forward forecasting tool.The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2016. In the past month, the indexes increased in 39 states, decreased in five, and remained stable in six, for a one-month diffusion index of 68. Over the past three months, the indexes increased in 41 states, decreased in eight, and remained stable in one, for a three-month diffusion index of 66. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed's U.S. index rose 0.2 percent in October and 0.7 percent over the past three months.
Will early 2017 be Indian Summer for employment? I've been writing that the economy is in Indian Summer. By that I mean, a spell of good economic data well after the mid-point of an expansion. A variety of measures that tend to peak near the middle of the expansion did so at about year-end 2014. We had a poor period early this year, but by Q3 the economic metrics had improved. One such mid-cycle indicator that is particularly un-noisy is the YoY% change in employment: As you can see it tends to be quite smooth, and tends to peak near the midpoint of economic expansions, except in those cases like the 1980s and 1990s when the Fed goes through 2 loosening and tightening cycles.In this expansion YoY employment growth peaked at about 250,000 per month. Recently employment gains have been averaging about 150,000 to 175,000 a month. I suspect we may have a period of improvement over the next quarter or two, perhaps to over 200,000 per month. Here's why. First, while the relationship is noisy, real retail sales tend to lead employment. Here is the YoY% change in real retail sales vs. employment for the last 25 years: By no means is there even remotely a 1:1 relationship (see e.g. the late 1990s) but in general a waxing/waning in real consumer spending tends to lead to a waxing/waning of employment growth over the next 3-6 months. We've had a little spurt in consumer spending in the last several months:You can also see that upward jag in the YoY graph above. So that suggests an increase in monthly employment growth in the next few periods. Secondly, a much tighter leading relationship exists between initial jobless claims and the unemployment rate. Here's the graph going back 50 years: The leading relationship is pretty obvious. Now here is a close-up of this economic expansion (you can disregard the green line for now): Again the relationship has been pretty consistent. Now here is the same relationship expresses in YoY%s: This is a remarkably tight correlation. Once again, here is this economic expansion:We can see that as the YoY change in jobless claims turned nearly flat beginning late last year, and the unemployment rate similarly stopped declining a few months later. Since initial jobless claims have fallen to 40 year lows in the last few months, there's a very good chance that the unemployment rate will similarly decline, at least a little further. perhaps to the 4.6%-4.7% range. Not only do several leading relationships suggest that monthly employment growth is likely to pick up a little, and the unemployment rate further decline, but that in turn suggests that we may see a little more wage growth, at least nominally.
Trump, on YouTube, Pledges to Create Jobs - The New York Times: President-elect Donald J. Trump on Monday released a two-and-a-half-minute infomercial-style video, turning to social media to deliver a direct-to-camera message in which he vowed to create jobs, renegotiate trade agreements, end restrictions on energy production and impose bans on lobbying. Mr. Trump offered what he called an update on his transition, which he said was going “very smoothly, efficiently and effectively.” Reading from a script and looking into a camera, he steered clear of his most inflammatory campaign promises to deport immigrants and track Muslims and his pledge to repeal the Affordable Care Act. “Whether it’s producing steel, building cars or curing disease, I want the next generation of production and innovation to happen right here, in our great homeland: America — creating wealth and jobs for American workers,” Mr. Trump said in the video. The brief YouTube video offered one of the few opportunities for the public to hear from Mr. Trump directly since he was elected two weeks ago. The president-elect has declined to hold a news conference since his victory, and instead has used early-morning Twitter bursts to communicate. Mr. Trump gave a brief middle-of-the-night speech after Hillary Clinton called him on Nov. 9. And he sat for an interview with The Wall Street Journal and an appearance, surrounded by his family, on CBS News’s “60 Minutes” last week. Since then, he has mostly been behind closed doors as he assembles a cabinet and White House team.
Trump’s Energy Job Promise to Clash With Scant Supply of Labor - World markets are flush with coal and oil, keeping prices subdued and making it difficult for producers to profit from new investments. At the same time, the U.S. labor supply is thinning, meaning that adding millions of jobs in the energy industry alone is a tall order. The entire sector now employs 628,700 people in the U.S., about half of the peak in 1981, according to Labor Department records. Trump’s unexpected electoral victory was in part built on his appeal to workers whose industries have suffered long-standing job losses, including coal workers in West Virginia, which registered more than twice as many votes for the billionaire businessman as for Democrat Hillary Clinton. “I don’t think we should look at mining to be an engine for job growth,” said Thomas Costerg, senior U.S. economist at Standard Chartered Bank in New York. “You could see a pickup in employment. But on the scale of the U.S. labor market, which is really huge, if you compare what’s really driving job growth right now, which is mostly services,” the sectors affected by energy policy changes are “quite marginal.” The planned energy reforms are slated to add $147 billion in revenue to the U.S. economy over 10 years, Trump economic advisers Peter Navarro, a business professor at the University of California at Irvine, and Wilbur Ross, a private equity investor, said in a Sept. 29 report. Assuming an average of $15 billion a year, that would be the equivalent of less than 0.1 percent of gross domestic product.
Judge blocks Obama rule extending overtime pay to 4.2 million U.S. workers | Reuters: A federal judge on Tuesday blocked an Obama administration rule to extend mandatory overtime pay to more than 4 million salaried workers from taking effect, imperiling one of the outgoing president's signature achievements for boosting wages. U.S. District Judge Amos Mazzant, in Sherman, Texas, agreed with 21 states and a coalition of business groups, including the U.S. Chamber of Commerce, that the rule is unlawful and granted their motion for a nationwide injunction. The rule, issued by the Labor Department, was to take effect Dec. 1 and would have doubled to $47,500 the maximum salary a worker can earn and still be eligible for mandatory overtime pay. The new threshold would have been the first significant change in four decades. It was expected to touch nearly every sector of the U.S. economy and have the greatest impact on nonprofit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold. The states and business groups claimed in lawsuits filed in September, which were later consolidated, that the drastic increase in the salary threshold was arbitrary. On Tuesday, Mazzant, who was appointed by President Barack Obama, ruled that the federal law governing overtime does not allow the Labor Department to decide which workers are eligible based on salary levels alone. The Fair Labor Standards Act says that employees can be exempt from overtime if they perform executive, administrative or professional duties, but the rule “creates essentially a de facto salary-only test,” Mazzant wrote in the 20-page ruling.
Overtime injunction is an extreme and unsupportable decision | Economic Policy Institute: This evening, a United States District Court in Texas issued an injunction against the Obama administration’s changes to the overtime rule, arguing the Labor Department does not have the authority it has exercised since 1938, under 10 presidents, including FDR and George W. Bush, to set a minimum salary requirement for overtime exemption. This is an extreme and unsupportable decision and is a clear overreach by the Court. For 78 years the Department of Labor has used salary as well as duties to determine overtime eligibility. Congress has amended the Fair Labor Standards Act many times and has never objected to the salary test. The law is clear on this. The District Court’s ruling is wrong. It is also a disappointment to millions of workers who are forced to work long hours with no extra compensation, and is a blow to those Americans who care deeply about raising wages and lessening inequality.
Minimum Wage Protesters Call For "Day Of Disruption" In 340 US Cities - In what may be an early crisis test for the president-elect, on November 29, the nationwide campaign to increase the federal minimum wage in the United States has calling for a "Day of Disruption", namely strikes and civil disobedience, on November 29 in the latest push to raise the minimum wage in the US to $15. The Fight for 15 group is preparing to protest in 340 cities across the United States, and is calling for airport and fast-food workers to strike. Group representatives have stated that they expect subcontracted service staff at roughly 20 airports to participate. It is anticipated to be the largest day of protest in the organization’s four year history, coinciding with the anniversary of the launch of the movement. “Tuesday, November 29, the #FightFor15 is staging a national day of disruption. We won’t back down,” the Fight for 15 Twitter account posted on Monday morning. BREAKING: Tuesday, November 29, the #FightFor15 is staging a national day of disruption. We won't back down. RSVP: https://t.co/4pJIXGkLjq pic.twitter.com/eJcUdCQJIE — Fight For 15 (@fightfor15) November 21, 2016 On its website, the campaign writes the following statement: “For too long, McDonald’s and low-wage employers have made billions of dollars in profit and pushed off costs onto taxpayers, while leaving people like us – the people who do the real work – to struggle to survive. That’s why we strike.”
Industry groups say OSHA's silica rule is not necessary or feasible | Reuters: A broad coalition of industry groups has asked a federal appeals court to strike down a federal rule for workplace exposure to silica dust, claiming that regulators failed to show the new requirements are necessary to protect workers, affordable for some businesses to implement or that compliance is technically feasible in certain industries. More than three dozen groups, including the National Association of Manufacturers, Associated Builders and Contractors and the National Association of Home Builders, filed a 131-page brief detailing their argument to the U.S. Court of Appeals for the D.C. Circuit on Friday. Jackson Lewis and Hunton & Williams represent the groups. To read the full story on Westlaw Practitioner Insights, click here: bit.ly/2f5XMzG
We don't need a wall. The solution to too many immigrants will include more immigrants. - Kevin Erdmann - It is ironic that in 2016, it is the anti-immigration candidate who won the surprising election. Immigration has been dead for a decade. The unavoidable irony here is that animus toward immigrants will always tend to happen when there aren't many immigrants. That's because economic stress is the root cause of that animus, and immigrants aren't particularly attracted to places with economic stress. If you work in a working class industry and live in a town where 2% of the population are immigrants, and the local economy is stagnant, you are apt to see the immigrants as disruptive competition. If that same town was thriving with an 8% immigrant population, you would be less likely to be concerned. This is one of many reasons why growth is fundamentally important. We solved the migration problem in 2008 by killing the economy. It was a bipartisan effort, and it was very successful. On one side of the aisle or the other, we made sure that mortgage originators failed, that MBS defaulted, that middle and lower-middle class households didn't have access to mortgages any more.
Reinstating A Muslim Registry Is Literally At The Top Of Kris Kobach's Agenda For Trump Administration -- If there was any doubt that Kansas Secretary of State Kris Kobach (R) wants to reinstate a Muslim registry if he gets into the Trump administration, Monday offered photographic proof that he wants to do so. Kobach met with Donald Trump Monday in Bedminster, New Jersey, where the president-elect has been having a series of meetings as he works to put together his Cabinet. Although Kobach was talked about as a potential attorney general, it seems like he may now be in the running to be Homeland Security secretary, based on the meeting notes that he failed to hide in a folder before getting his photo taken by the press. The Topeka Capital-Journal zoomed in on the papers Kobach carried into his meeting with Trump, which was his “strategic plan” for the department in the first year of a Trump administration. At the very top of his agenda were these items:
- 1. Update and reintroduce the NSEERS screening and tracking system (National Security Entry-Exit Registration System) that was in place from 2002-2005. All aliens from high-risk areas are tracked.
- 2. Add extreme vetting questions for high-risk aliens: question them regarding support for Sharia law, jihad, equality of men and women, the United States Constitution.
When Kobach served in the Justice Department during President George W. Bush’s administration, he was the architect of NSEERS. The program, instituted in 2002, required that men 16 and older from 25 countries register in person ― with fingerprinting and questioning ― with the Immigration and Naturalization Service when coming into the country. The vast majority of the countries covered under the program were predominantly Muslim nations, and the program was widely referred to in the press at the time as “Muslim registry.” By the time the Bush administration ended the domestic registration portion of the program in December 2003, it had registered nearly 100,000 men and led to the deportation of nearly 14,000 ― many of them for overstaying visas or ignoring previous deportation orders. It did not lead to a single terrorism charge against any individuals.
Obama built a deportation machine that Trump can follow - Viridiana Martinez is tired of hearing how bad life will be for those – like herself – living in the country illegally under the Trump administration. The 30-year-old immigration activist from Mexico has heard the president-elect’s rhetoric about her homeland sending its worst people to the United States and his plans to deport millions. A federal agent walks among shackled Mexican immigrants being deported in 2010. AP i She finds the talk disgusting, but she also figures that if Donald Trump’s immigration record is anything like President Barack Obama’s in terms of what politicians will say in order to get elected versus what they actually do once in power, then Trump could turn out pretty good. “Obama told us the right things, but he did the wrong things,” Martinez said. “In a way, I’m happy that we have an administration that thinks immigrants should be deported – and they’re saying that. They’re not saying something else. They’re not making false promises. I’m glad the cards are on the table and there is not a hidden agenda. Because then we can fight accordingly.”
Obama Admin Fines, "Forces Sheriff's Dept. To Hire" Illegal Immigrants The lawlessness of the Obama Administration knows no bounds. Not only has President Obama made every move he can through executive order to create and foster amnesty for illegal immigrants, but his Justice Department is now attempting to force people to hire undocumented workers. Ironically, the agency on the other end of intimidation is the Denver County Sheriff’s Office. Incredibly backwards… via the Daily Caller:Denver County’s sheriff office has been slapped with a fine by the Department of Justice (DOJ) because it refused to hire non-citizens as deputies.From the beginning of 2015 through last March, the Denver Sheriff Department went on a major hiring binge, adding more than 200 new deputies. But those jobs ended up only going to citizens, because the department made citizenship a stated requirement on the job application. The department admitted as much in a new settlement with the U.S. government, which requires it to pay a $10,000 fine.The department will also have to comb through all of its job applications from the past two years, identifying immigrants who were excluded from the hiring process and giving them due consideration.How can someone be hired to enforce the law, if they are living in violation and ignorance of it?How can counties, state agencies, small businesses or individuals be forced to hire in violation of the law, in order to comply with non-discrimination? Obviously the system has a logical loop failure, either that, or someone wants this country to eat itself.
As a Sex Worker, I’m Terrified for the Next Four Years -- We exchange pleasantries, settle in, share a drink. I quickly scan the room for an unmarked white envelope. When I find it, I excuse myself to the bathroom and count. Once I establish that the money is all there, I tuck it away and let the night unravel. This is the best-case scenario as a full-service sex worker. In the worst case, I might be detained in transit by the police for carrying a knife as protection or for having a a "suspicious number of condoms" in my purse. The medications I take to protect my sexual health—an oral contraceptive and Truvada, an antiviral used to treat and reduce the risk of HIV infection—might fail. I might encounter an abusive client. I might be assaulted, robbed, or arrested. These threats are the reality of my job, but many sex workers worry that they'll grow more severe over the course of the next four years, while Donald Trump is president. Trump, who's praised stop-and-frisk and encouraged harsher sentences on crime, who's threatened to defund Planned Parenthood and suggested that women are sexual objects for the taking, is assembling a cabinet of politicians who have a terrible track record with women's rights. As a sex worker, these policies mean I could stand to lose my healthcare, my livelihood, and even my life. Women, people of color, those who identify under the LBGTQ spectrum, and sex workers run some of the highest risks in falling victim to violent crime in America. Those catalogued into more than one of these groups have an even more increased risk. Female prostitutes especially face statistically high murder and violent crime rates in comparison to civilians. It's estimated that for every 100,000 full service workers, 204 will be murdered. But the criminalization of sex work only furthers these risks, by driving our industry underground and failing to offer protection. The "crime" in selling sex is a victimless one, yet both parties involved can be at legal risk. Fear of mistreatment and incarceration can prevent sex workers from reporting assault or other crime committed against them, seeking proper medical care, or even just speaking up about the realities of the industry. The longer sex workers are forced to be complacent in our treatment and our silence, the sooner our rights are forgotten.
Report: Cities nationwide enacting more policies to criminalize homelessness - CBS News: -- A new report says cities nationwide are enacting more policies that criminalize homelessness. The National Law Center on Homelessness and Poverty said Tuesday many cities have banned living in vehicles, camping in public areas and panhandling. The center says policies that criminalize homelessness harm communities because they create barriers to employment, housing and education. Honolulu is among a handful of cities named in the report’s “hall of shame” for what the authors call bad policies. The report says Honolulu issued more than 16,000 warnings to people violating its sit-lie ban since it was enacted in Waikiki in 2014. Honolulu officials say the ban is necessary so people can safely use public sidewalks and because tourists and residents complained. Denver, Dallas and Puyallup, Washington, also were criticized for criminalizing policies. In Portland, Oregon, in August, the mayor announced the end of pilot program that allowed homeless people to sleep on the streets undisturbed by law enforcement, saying it created confusion because some believed it legalized public camping, but defended his overall approach.“The ‘safe sleep’ policy was well intended, but it created a lot of confusion and maybe some accidental or deliberate misunderstandings,” the mayor said. “It was never intended to legalize (street) camping.”
We Are All Deplorables - Chris Hedges -- My relatives in Maine are deplorables. I cannot write on their behalf. I can write in their defense. They live in towns and villages that have been ravaged by deindustrialization. The bank in Mechanic Falls, where my grandparents lived, is boarded up, along with nearly every downtown store. The paper mill closed decades ago. There is a strip club in the center of the town. The jobs, at least the good ones, are gone. Many of my relatives and their neighbors work up to 70 hours a week at three minimum-wage jobs, without benefits, to make perhaps $35,000 a year. Or they have no jobs. They cannot afford adequate health coverage under the scam of Obamacare. Alcoholism is rampant in the region. Heroin addiction is an epidemic. Labs producing the street drug methamphetamine make up a cottage industry. Suicide is common. Domestic abuse and sexual assault destroy families. Despair and rage among the population have fueled an inchoate racism, homophobia and Islamophobia and feed the latent and ever present poison of white supremacy. They also nourish the magical thinking peddled by the con artists in the Christian right, the state lotteries that fleece the poor, and an entertainment industry that night after night shows visions of an America and a lifestyle on television screens—“The Apprentice” typified this—that foster unattainable dreams of wealth and celebrity. Those who are cast aside as human refuse often have a psychological need for illusions and scapegoats. They desperately seek the promise of divine intervention. They unplug from a reality that is too hard to bear. They see in others, especially those who are different, the obstacles to their advancement and success. We must recognize and understand the profound despair that leads to these reactions. To understand these reactions is not to condone them. The suffering of the white underclass is real. Its members struggle with humiliation and a crippling loss of self-worth and dignity. The last thing they need, or deserve, is politically correct thought police telling them what to say and think and condemning them as mutations of human beings. Those cast aside by the neoliberal order have an economic identity that both the liberal class and the right wing are unwilling to acknowledge. This economic identity is one the white underclass shares with other discarded people, including the undocumented workers and the people of color demonized by the carnival barkers on cable news shows. This is an economic reality the power elites invest great energy in masking.
State Regulators Deny The Homeless A Free Meal --The holiday season is officially upon us, which means Americans will soon be feeling extra charitable. However, while random acts of kindness and helping those in need are as intertwined with the holiday season as colorful lights and gift giving, the government has chimed in to remind us that charitable efforts must be first be approved by the state.The American Royal’s World Series of Barbecue is a longstanding tradition for community members of Kansas City, Missouri. Since 1899, the event has attracted the most talented barbecue chefs from all corners of the state, who gather annually to show off their skills. With so many BBQ experts in one place, there tends to be a fair amount of leftover food once the festivities come to a close.Hating to waste such a vast amount of quality barbecue, some of the event’s BBQ gurus got together and founded the charitable group, Kookers Kare. Partnering with the Harvesters Community Food Network, Kookers Kare has made a tradition of donating the leftover food to local homeless shelters at the end of each annual event.This year, the two groups collected over 3,000 pounds of meat and 1,200 pounds of sides, all bound for a local nonprofit organization called Hope City, where it was to be served to over 3,000 homeless citizens in need.However, the Kansas City Health Department put the kibosh on Kookers Kare’s attempts to feed the homeless before anyone was even able to enjoy the food.Claiming they had no fore knowledge of this charitable tradition, the health department forbid the food from being served to the needy. Suspiciously, the inspectors just happened to be doing a random inspection of Hope City the day the BBQ arrived.“All of that food was uninspected, so that makes it from an unapproved source, it cannot be served to the public,” Kansas City Health Department Operations Manager Joe Williamson said in response to the department’s decision to stop the food from being consumed. The health department did not stop at simply forbidding the food from being served, they demanded that it be destroyed immediately. Those who had worked diligently to collect the food were forced to douse over 3,000 pounds of award-winning barbecue food with bleach, in order to ensure its destruction and appease the local health department. Meanwhile, 3,000 homeless individuals went without a meal that day.
Startling Look At How Much Money Food Stamp Recipients Spend On Junk Food A new study just released by the USDA, offers a very detailed look at exactly how participants in the "Supplemental Nutrition Assistance Program" (SNAP, aka Food Stamps) spend their taxpayer-funded subsidies. Unfortunately for taxpayers, the amount of money spent on soft drinks and other unnecessary junk foods/drinks is fairly staggering. But, we suppose it's a nice taxpayer funded subsidy for the soda industry...so score one for Warren Buffett and the Coca Cola lobbyists.Per the study, nearly $360mm, or 5.4% of the $6.6BN of food expenditures made by SNAP recipients, is spent on soft drinks alone. In fact, soft drinks represent the single largest "commodity" purchased by SNAP participants with $100mm more spent on sodas than milk and $150mm more than beef. Soft drinks were the top commodity bought by food stamp recipients shopping at outlets run by a single U.S. grocery retailer.That is according to a new study released by the Food and Nutrition Service, the federal agency responsible for running the Supplemental Nutrition Assistance Program (SNAP), commonly known as the food stamp program.By contrast, milk was the top commodity bought from the same retailer by customers not on food stamps.In calendar year 2011, according to the study, food stamp recipients spent approximately $357,700,000 buying soft drinks from an enterprise the study reveals only as “a leading U.S. grocery retailer.” That was more than they spent on any other “food” commodity—including milk ($253,700,000), ground beef ($201,000,000), “bag snacks” ($199,300,000) or “candy-packaged” ($96,200,000), which also ranked among the top purchases.
Puerto Rico’s Top Creditors Flex Muscles in Bond Fight WSJ - Puerto Rico’s largest mutual-fund bondholders have broken their silence in an ongoing $30 billion creditor standoff, underscoring tensions between the commonwealth’s traditional municipal investor base and the hedge funds now involved in its financial restructuring. Funds controlled by fixed-income giants Franklin Advisers and OppenheimerFunds asked a federal judge last week to enter them as defendants in a lawsuit brought by hedge funds holding general obligation, or GO, bonds that have been in default since July. The lawsuit pits those creditors against investors holding $17 billion in competing bonds known as Cofinas for their Spanish acronym and backed by sales tax revenues. If successful, the lawsuit could compromise the Cofina bondholders’ liens and free up a fresh source of repayment for the GO bondholders, which are guaranteed under the Puerto Rican constitution.The courts, on the other hand, could affirm the commonwealth’s longstanding position that the sales-tax revenues are off-limits to the GO bondholders. U.S. District Court Judge Francisco Besosa could also freeze the dispute in the hopes that the warring investor groups will negotiate a settlement, as the Cofina investors have urged. Congress installed a federal oversight board over the summer to take over Puerto Rico’s financial decision-making, but it has yet to announce the hiring of legal and financial advisors with whom creditors will negotiate. The legal status of the Cofina revenues has never been tested in the courts, and resolving it now would take a major question on creditors’ rights out of the board’s hands. For now, it wants the dispute paused under the automatic stay provisions of the Puerto Rico Oversight, Management and Economic Stability Act, or PROMESA. With $2.8 billion of their exposure in subordinated Cofina debt, the mutual funds said they have the “greatest possible interest” in protecting the sales taxes from being diverted. Junior Cofina bonds would suffer the most if the revenue stream were interrupted, although they have continued to be paid even with the territorial government in default on its constitutional debt.
Dallas Stares Down a Texas-Size Threat of Bankruptcy - Picture the next major American city to go bankrupt. What springs to mind? Probably not the swagger and sprawl of Dallas. But there was Dallas’s mayor, Michael S. Rawlings, testifying this month to a state oversight board that his city appeared to be “walking into the fan blades” of municipal bankruptcy. “It is horribly ironic,” he said. Indeed. Dallas has the fastest economic growth of the nation’s 13 largest cities. Its streets hum with supersize cars and its skyline bristles with cranes. Its mayor is a former chief executive of Pizza Hut. Hundreds of multinational corporations have chosen Dallas for their headquarters, most recently Jacobs Engineering, which is moving to low-tax Texas from pricey Pasadena, Calif. But under its glittering surface, Dallas has a problem that could bring it to its knees, and that could be an early test of America’s postelection commitment to safe streets and tax relief: The city’s pension fund for its police officers and firefighters is near collapse and seeking an immense bailout. Over six recent weeks, panicked Dallas retirees have pulled $220 million out of the fund. What set off the run was a recommendation in July that the retirees no longer be allowed to take out big blocks of money. Even before that, though, there were reports that the fund’s investments — some placed in highly risky and speculative ventures — were worth less than previously stated. What is happening in Dallas is an extreme example of what’s happening in many other places around the country.Elected officials promised workers solid pensions years ago, on the basis of wishful thinking rather than realistic expectations. Dallas’s troubles have become more urgent because its plan rules let some retirees take big withdrawals. Now, the Dallas Police and Fire Pension System has asked the city for a one-time infusion of $1.1 billion, an amount roughly equal to Dallas's entire general fund budget but not even close to what the pension fund needs to be fully funded. Nothing would be left for fighting endemic poverty south of the Trinity River, for public libraries, or for giving current police officers and firefighters a raise.
Dallas Bankruptcy Threat Attracts National Attention -The threat of bankruptcy for the city of Dallas over unfunded public safety pension and back pay liabilities made front page news for nationwide readers of The New York Times Monday. The headline said "Dallas, a Hive of Growth, Flirts With Bankruptcy," and Dallas Mayor Mike Rawlings said it is ironic but true. Cranes dot the city skyline with new high-rise construction and yet a possible $6 billion total unfunded expense could make the city government go broke. "This is the best time in Dallas's history, and I think all of America is looking at us. So we've got to work hard not to even flirt with that," Rawlings said. "But having that on the horizon, I think, sobers everybody up. They're taking it seriously." Dallas bankruptcy attorney Mark Ralston said reorganization for city government could be painful for employees and taxpayers. "For a municipality, it's the last resort," Ralston said. Services could be reduced and employee benefits reduced even further than the cuts police and firefighters are being asked to approve now in pension fund changes.
Betsy DeVos, selected for Secretary of Education - DeVos, an advocate for school vouchers, has chaired the Michigan Republican party and played a key role in some major education policy decisions there in recent years. But unlike former D.C. schools chief Michelle Rhee and charter-school leader Eva Moskowitz, two others Trump considered for the education secretary position, DeVos has kept a relatively low national profile. She has neither worked in public education nor chosen public schools for her own children, who attended private Christian schools. Earlier this week, Chalkbeat compiled a few things we could reasonably surmise from a DeVos pick: 1. Trump intends to go through with his sweeping voucher plan. On the campaign trail, Trump vowed to use federal funds to encourage states to make school choice available to all poor students, including through vouchers that allow families to take public funding to private schools. That’s exactly what DeVos has zealously worked to make happen on a state-by-state basis for decades. In 2000, she helped get a ballot measure before Michigan voters that would have enshrined a right to vouchers in the state’s Constitution. After the measure failed, she and her husband formed a political action committee to support pro-voucher candidates nationally. Less than a decade later, the group counted a 121-60 win-loss record. One recipient of its support: former Indiana Gov. Mitch Daniels, who created the voucher program that Trump’s vice president-elect, Mike Pence, later expanded. Indeed, DeVos’s vision puts her more in line with Pence, who has supported private school vouchers for both low- and middle-income families, than with Trump, whose plan extends only to poor families. Here is much more information.
Education Association Slams Trump's "Anti-Common Core" Nominee For Education Secretary -- Continuing his announcements of cabinet appointees, Donald Trump said he is nominating Betsy DeVos for Education secretary - a billionaire GOP donor, she also once served as head of the Michigan Republican Party. In a statement Wednesday, Trump called DeVos a "brilliant and passionate education advocate." “Under her leadership we will reform the U.S. education system and break the bureaucracy that is holding our children back so that we can deliver world-class education and school choice to all families. I am pleased to nominate Betsy as Secretary of the Department of Education," Trump said. She is the current chairwoman of the American Federation for Children, an education advocacy group pushing school choice policies. DeVos said she was "honored" and vowed to work with the president-elect on his "vision to make American education great again." She said in a statement that “the status quo in education is not acceptable" and added that "together, we can work to make transformational change that ensures every student in America has the opportunity to fulfill his or her highest potential. DeVos could face scrutiny from conservatives over her past support for Common Core educational standards. DeVos is a vocal advocate of school choice and vouchers to allow parents to send their children to alternative schools. Clearly, those policies are strongly opposed by teachers unions, and as the president of the National Education Association, Lily Eskelsen Garcia, tweeted, "nominating Betsy DeVos shows just how out of touch @realdonaldtrump is with what works best for students, parents, educators & communities." DeVos originally supported the controversial standards at the state level, and funded a group, the Great Lakes Education Project, to promote them. Other notable Republicans who once backed those standards similarly changed their views, arguing that they were an example of federal overreach, including former Gov. Jeb Bush (R-Fla.). Bush faced tough questions from conservatives during his own failed presidential bid about his education policies, in particular Common Core.
State says literacy not a right in Detroit - Attorneys for Gov. Rick Snyder and state education officials say no fundamental right to literacy exists for Detroit schoolchildren who are suing the state over the quality of their education. The lawyers are asking a federal judge to reject what they call an “attempt to destroy the American tradition of democratic control of schools.” Timothy J. Haynes, an assistant attorney general, made those statements in a 62-page motion to dismiss a lawsuit filed against Snyder and state education leaders in September by seven Detroit children who allege decades of state disinvestment and deliberate indifference to the city schools have denied them access to literacy. The motion was filed last week in U.S. District Court in Detroit.Haynes says claims laid out by plaintiffs — including deplorable building conditions, lack of books, classrooms without teachers, insufficient desks, buildings plagued by vermin, unsafe facilities and extreme temperatures — go far beyond mere access to education.“(They) ask this court to serve as a ‘super’ Legislature tasked with determining and dictating educational policy in every school district and school building throughout the United States where an illiterate child may be found,” the response says.“Such a path would effectively supersede democratic control by voters and the judgment of parents, allowing state and federal courts to peer over the shoulders of teachers and administrators and substitute court judgment for the professional judgment of educators.”The Detroit schoolchildren, represented by a California public interest law firm, sued state officials Sept. 13 in what legal observers say is an unprecedented attempt to establish that literacy is a U.S. constitutional right. The suit claims the state has functionally excluded Detroit children from the state’s educational system. It seeks class-action status and several guarantees of equal access to literacy, screening, intervention, a statewide accountability system and other measures.
North Carolina charters serve wealthier kids overall - Charter schools enjoy strong support in Mecklenburg County and across North Carolina. Last month, every gubernatorial candidate supported expanding the state’s charter sector. Statewide data show that more charter students are at grade level proficiency than public school students at nearly every level. So the 13 new charters approved statewide for 2017 and the fact that Mecklenburg’s charters are seeing faster growth than its district schools seem like great news. However, charters aren’t popular everywhere. The NAACP has called for a national moratorium on charters, claiming that they lack accountability and take the most advantaged students, to the harm of nearby district schools. Charter supporters, on the other hand, argue that they purposefully serve the least advantaged students who are poorly served in district schools. Both sides are telling the truth. Nationwide, there are many charters that serve far more poor students than nearby district schools, and just as many that serve far fewer. Nationally, these extremes tend to balance each other out. But North Carolina’s sector is one of the least balanced in the nation. It can be difficult to make apples-to-apples comparisons because charters are typically located in urban areas, which often have higher poverty rates, while district schools cover the map. The fairest way to study charter schools is to compare them to their closest district school neighbors. My research shows that in over 70 percent of N.C. charter schools, poverty rates are more than 5 percent lower than in their neighbors, the biggest poverty disparity of any state. Over half of the state’s charters serve a student body with poverty rates that are lower by more than 20 percentage points.
LGBT activists fear a Texas bill could force teachers to out students to their parents -- LGBT rights activists in Texas fear that teachers will be forced to out pupils to their parents if proposed legislation becomes law next year. Konni Burton, a Republican state senator from Fort Worth, filed the bill ahead of the 2017 legislative session. It asserts that parents have the right to all records and information related to their child, from test scores to details of their physical and mental health and “any general knowledge”. Critics argue that if a child has confided in a teacher but not a parent it is probably because they fear harmful repercussions at home. But the bill warns that educators who fail to comply face disciplinary action, regardless of the child’s wishes. “This is a violation of personal privacy and the legislation puts LGBT youth in harm’s way,” said DeAnne Cuellar of the advocacy group Equality Texas. “Teachers can’t effectively do their job if they’re worried about being penalised for not outing their students to their parents. Classrooms have always been a refuge and a safe space for students to confide in their mentors, their counsellors and teachers.” Burton issued a statement on Monday saying the proposed bill aims to streamline and enhance existing state law on parents’ right to know about elements of their child’s life. There is an exception for reports of abuse. “Currently, a teacher may decide when and how to proactively reach out to a parent about anything of importance to them, which is how it should work. The proposed bill does absolutely nothing to change this present mechanism for a parent’s right to know,” she said. “The bill does, however, strengthen the existing expectation that when a parent contacts a school and inquires about their child, they will receive accurate information and not be punished by local policies that while well-intended, do more harm than good.”
Teach math in the morning -- Having a morning instead of afternoon math or English class increases a student’s GPA by 0.072 (0.006) and 0.032 (0.006), respectively. A morning math class increases state test scores by an amount equivalent to increasing teacher quality by one-fourth standard deviation or half of the gender gap. Rearranging school schedules can lead to increased academic performance. That is from a new paper by Nolan G. Pope, who is on the job market this year from the University of Chicago. Here is his overall profile. His job market paper (pdf), with Nathan Petek, suggests that evaluating teachers by multi-dimensional metrics, and not just test scores, can bring big gains to educational quality.
Stanford researchers find students have trouble judging the credibility of information online - When it comes to evaluating information that flows across social channels or pops up in a Google search, young and otherwise digital-savvy students can easily be duped, finds a new report from researchers at Stanford Graduate School of Education. The report, released this week by the Stanford History Education Group (SHEG), shows a dismaying inability by students to reason about information they see on the Internet, the authors said. Students, for example, had a hard time distinguishing advertisements from news articles or identifying where information came from. "Many people assume that because young people are fluent in social media they are equally perceptive about what they find there," said Professor Sam Wineburg, the lead author of the report and founder of SHEG. "Our work shows the opposite to be true." The researchers began their work in January 2015, well before the most recent debates over fake news and its influence on the presidential election. The scholars tackled the question of “civic online reasoning” because there were few ways to assess how students evaluate online information and to identify approaches to teach the skills necessary to distinguish credible sources from unreliable ones. The authors worry that democracy is threatened by the ease at which disinformation about civic issues is allowed to spread and flourish. The assessments reflected key understandings the students should possess such as being able to find out who wrote a story and whether that source is credible. The authors drew on the expertise of teachers, university researchers, librarians and news experts to come up with 15 age-appropriate tests -- five each for middle school, high school and college levels. "In every case and at every level, we were taken aback by students' lack of preparation," the authors wrote.
The Professor Watchlist - The Professor Watchlist is a project of Turning Point USA. The mission of Professor Watchlist is to expose and document college professors who discriminate against conservative students, promote anti-American values, and advance leftist propaganda in the classroom. Help us identify, and expose more professors who have demonstrated liberal bias in the classroom. Below are professors currently featured on The Watchlist. Check our full listing to see if any of your professors have made the list.
Xerox Overcharged Student Debtors, State Prosecutor Says - Xerox Corp. has agreed to pay $2.4 million to settle Massachusetts state prosecutors’ accusations that the company mistreated student debtors in violation of state law banning unfair and deceptive practices, Attorney General Maura Healey said. Xerox, known more for its photocopiers than for its student loan business, allegedly took months to process debtors’ applications to make reduced payments under a federal program, charged excessive fees, harassed borrowers with numerous phone calls, and overcharged active-duty service members in violation of federal law, according to a copy of the settlement filed on Monday in Massachusetts state court. Xerox denied liability. The company “regularly undermined the opportunity for students to access appropriate repayment plans,” Healey said in a statement. “This conduct increases the already high cost of education, damages credit, and prevents students and their families from achieving long-term economic security.” The agreement is the latest in a growing list of settlements struck between government agencies and student loan companies accused of misconduct, part of a government crackdown following years of widespread consumer complaints of shoddy customer service. Since 2014, federal regulators have settled similar allegations lodged against companies such as Navient Corp., formerly known as Sallie Mae; Wells Fargo; and Discover Financial Services. The Massachusetts agreement is probably the first in what is expected to be a much broader settlement between the company and numerous state and federal regulators over its student loan practices. In January the federal Consumer Financial Protection Bureau told Xerox that its enforcement staff had amassed enough evidence in a two-year investigation to indicate the company violated federal laws banning unfair practices, according to Xerox’s securities filings. CFPB officials are considering whether to sue the company in court.
Trump's Student Loan Plan Treats the Symptoms, Not the Disease - Free market advocates had hoped that Trump’s proposals would constructively tackle the causes of the student loan bubble. Alas, this was not to be. Instead, Trump’s plan bears more similarities to alternative plans released by Obama, Clinton, and Sanders than many conservatives would like to admit. Called “the most liberal student loan repayment plan since the inception of the federal financial aid program” by The Washington Post, Trump’s proposal would cap repayment at 12.5 percent of a borrower’s discretionary income. Furthermore, a borrower’s remaining student loan balance would be forgiven after he or she makes their full payments for 15 years. While it’s possible that Trump has considered restoring the pre-2010 system, in which private banks (instead of the government) issue student loans, such loans would still be subsidized and guaranteed by the federal government, eliminating much of the risk that incentivizes banks to engage in prudent and sustainable lending. Basic economics helps us predict how Trump’s student loan plan would affect the greater economy and the financial welfare of individuals. At any given time, there exists a limited amount of funds available in capital markets. This capital can be directed toward any number of alternative uses (home loans, car loans, business loans, etc.). But government artificially boosts demand for student loans when it intervenes in the market by enabling student borrowers to repay less than the balance of their loan. Moreover, when student loans are subsidized — as they are today — demand is greater (and thus, prices are higher) than they would have been otherwise. This artificial demand for student loans bids capital away from alternative uses, making it more difficult for families and businesses to receive loans for other important purposes. Moreover, the cost of Trump’s plan to taxpayers would be steep. The federal government (and, by extension, current and future generations of taxpayers) would be responsible for paying the remaining balance of everyone’s student loan debt after their loans are forgiven. Colleges and universities would grow even richer, receiving billions of dollars as wealth is redistributed from America’s taxpayers to its institutions of higher learning.
LA County’s $50 Billion Retirement Time Bomb: --The County of Los Angeles has prided itself on being better managed than the City of Los Angeles. In 2007, Mayor Antonio Villaraigosa and the Eric Garcetti led City Council approved a five year labor contract that granted the City’s civilian employees a 25% raise. While this contract was based on wishful thinking from the beginning, it turned into an unmitigated mess when the recession smacked the City’s unrealistic revenue projections, resulting in huge budget deficits. To balance its budget, the City reduced services, furloughed workers, dumped over 1,600 employees (and their unfunded pension liabilities) on our Department of Water and Power, laid off almost 500 employees, and implemented the $600 million Early Retirement Incentive Program for 2,400 senior employees. The County, on the other hand, did not grant any meaningful raises during this period, and, as a result, did not have to cut services or furlough or layoff its employees in order to balance its budget. The Supervisors also believe that the County’s pension plan, the Los Angeles County Employees Retirement Association, is in better shape than the City’s two pension plans, the Los Angeles City Employees Retirement System and the Los Angeles Fire and Police Pension Plans.
Pension funding to weigh on Chicago's credit rating -S&P | Reuters: Chicago will maintain its low-investment grade rating with its fiscal 2017 budget that reduces a chronic deficit, but the city still faces pressures on its credit quality due to pensions and other expenses, S&P Global Ratings said on Monday. The spending plan for the fiscal year that begins Jan. 1 reduces Chicago's structural deficit to $137 million, the lowest gap since 2011, S&P said in a report. While the budget incorporates increased revenue as part of a plan to bolster the city's four pension funds, that plan could be threatened by poor investment returns by the retirement systems, the report added. The city's pension costs are expected to increase starting in 2022, when its payments will be based on the plan's goal of bringing the systems to a 90 percent funded level over 40 years. "Credit quality could be threatened if the measures taken to date by the city prove insufficient to achieve structurally balanced budgets in the next two years," S&P said. Credit ratings for the nation's third-largest city have been deteriorating due largely to an unfunded pension liability that stood at $33.8 billion at the end of fiscal 2015. S&P cited factors including unplanned pension funding increases, public safety expenses, and a raise on reserve funds for operating expenses, that could weaken the city's BBB-plus general obligation rating. Mayor Rahm Emanuel's $3.7 billion operating budget passed by the city council last week includes the first phase of hiring more than 900 police officers. That expense comes after the council previously enacted major tax and fee increases for pensions.
US Pension Crisis: This is How Families Get Squeezed to Bail Out Pension Funds in Chicago - Wolf Richter: Chicago is a trailblazer. But it’s not alone. Other cities are lining up behind it. Bankruptcy may still be the route to go. But until then, homeowners, renters, drivers, users of phones, etc. – in other words regular families who’re just sitting ducks – are going to get squeezed dry, in order to slow the momentum of the public-employee pension crisis eating up the city’s and the school district’s finances.“Because of a new accounting rule, Chicago now has to report its pension debt on its balance sheet,” explains Truth in Accounting. “As a result, the city’s reported pension debt grew from $8.6 billion in 2014 to $33.8 billion in 2015.”The funding hole for pensions amounts to $18.6 billion, according to current estimates, despite six years of booming asset prices. What is this going to look like when asset prices sag?The City Council approved Mayor Rahm Emanuel’s $8.2 billion budget yesterday. Crisis or no crisis, it’s up 4.8% from last year. There wasn’t anything to debate because the tax and fee hikes had been done outside the budget process. But this is what Chicago has to deal with. On November 9, S&P Global Ratings cut Chicago Public Schools (CPS) to deep junk (triple-C), citing the district’s “continued weak liquidity in its most recent cash flow forecast and reliance on cash flow borrowing, combined with the increased expenditures in the district’s new labor contract that exacerbate the district’s structural imbalance challenges.” On Monday, the district scrapped efforts to sell $426.3 million of bonds this year, citing “changing market conditions.” It coincided with the post-election jump in interest rates. A spokeswoman told the Chicago Tribune, “We’ll sell the bonds when market conditions are optimal.”
Illinois' billions: Pension debt and unpaid bills total more than $140B - Illinois Gov. Bruce Rauner’s budget office estimates the state will have a budget deficit of over $5 billion by the end of fiscal year 2017, and billions more in the years to come. The Illinois comptroller’s website shows the state has a $10 billion mountain of unpaid bills. And the General Assembly’s analysts have announced the state’s pension debt has spiked to a record $130 billion.For many, tax hikes look like the only solution to Illinois’ fiscal woes. But tax hikes will only make things worse. Illinoisans are already burdened with some of the highest taxes in the nation, including the highest property taxes of any state.As a result of Illinois’ dysfunction, the state is bleeding people and its tax base. Between July 2014 and July 2015, approximately 300,000 people left Illinois for good and only 200,000 moved in, according to the U.S. Census Bureau. This resulted in a loss of 105,000 residents on net to other states – an all-time high for Illinois. Tax hikes will only chase more residents away.The only way to keep Illinoisans here is to bring fiscal sanity back to the state through major spending reforms that bring Illinois’ budget in line with what ordinary Illinoisans can afford. Here is a look at Illinois’ financial crisis, and its impact on the state:
CalPERS, CalSTRS Considering More Rate Increases | PublicCEO: The state’s two largest public pension systems never recovered from huge investment losses during the deep recession and stock market crash in 2008. CalPERS lost about $100 billion and CalSTRS about $68 billion. Now after a lengthy bull market, most experts are predicting a decade of weak investment returns, well below the annual average earnings of 7.5 percent that CalPERS and CalSTRS expect to pay two-thirds of their future pension costs. The two systems are still seriously underfunded, CalPERS at 68 percent and CalSTRS at 65 percent. This is not money in the bank. It’s an estimate of the future pension costs covered by expected employer-employee contributions and the investment earnings forecast. Last week, the CalPERS and CalSTRS boards got separate staff briefings on how the “maturing” of the two big retirement systems creates new funding difficulties. Both are nearing a time when there will be more retirees in the system than active workers. The California State Teachers Retirement System board, for example, was told that in 1971 there were were six active workers in the system for every retiree. Today CalSTRS only has 1.5 active workers for every retiree, similar to the CalPERS ratio.
Insurance fund for US pensions could be insolvent by 2025, agency director warns - Last week the Pension Benefit Guaranty Corporation (PBGC) released its 2016 annual report, which showed that its multiemployer program deficit had risen by $6.5 billion to a record-high debt of $58.8 billion. The agency’s combined debt for its single and multiemployer program totals $79.4 billion. In a conference call, last week, PBGC Director Tom Reeder said the agency is set to run out of funds by 2025 unless action is taken. The Pension Benefit Guaranty Corporation (PBGC) is an independent government agency created in 1974 to ensure the payment of pensions. The PBGC pays out pensions up to a federally defined maximum (about $60,000 a year in 2016) when pension plans under its protection break down. The growth of the combined PBGC debt to nearly $80 billion testifies to the deep crisis of the US pension system. Amid the deepening global economic crisis, employers, both public and private, have launched an attack on workers’ pensions. Employers have sought to end defined pension plans and replace them with cheaper and weaker 401(k) plans. When employers are unsuccessful at reducing pensions and retirement health benefits they use bankruptcy, as well as merger and acquisition, to tear up old contracts. The PBGC’s debt is an estimation that it makes based on the balance between expected defaults of pension plans that it covers and its incoming funds, primarily based on premiums paid by suppliers of these pension plans. The large increase this year of the PBGC debt is based on their estimation that more plans they cover are expected to default in the coming decade.
U.S. healthcare spending up 5 percent in 2015 - UPI.com: -- Privately insured Americans spent nearly 5 percent more on healthcare last year than in 2014, largely because of escalating prices, new research shows. The 4.6 percent increase was significantly more than that of previous years, and reflects higher costs for prescription drugs, ER visits and hospitalizations, according to the nonprofit Health Care Cost Institute. "Using data from four of the nation's largest health insurers, we're able to look closely at the changes in health care use and prices over time to understand what is driving costs," said the institute's executive director, David Newman. "Year after year we see one constant: Rising prices that are accelerating spending growth," Newman said in a news release from the organization. The Washington, D.C.-based group analyzed 3.7 billion insurance claims for nearly 40 million Americans covered by the insurers Aetna, Humana, Kaiser Permanente and UnitedHealthcare. Patients lived in 18 states and the District of Columbia. Spending increased just 2.6 percent in 2014 and 3 percent the year before that, the report found. But prices for prescription medications, hospitalizations and outpatient care jumped between 3.5 and 9 percent in 2015. According to researcher Amanda Frost, "Spending grew faster than we might have expected in 2015, given the low growth of previous years. The combination of people using more health care services and faster growth in prices pushed up spending, with prices playing the biggest role."
A Battle to Change Medicare Is Brewing, Whether Trump Wants It or Not - - Donald J. Trump once declared that campaigning for “substantial” changes to Medicare would be a political death wish. But with Election Day behind them, emboldened House Republicans say they will move forward on a years-old effort to shift Medicare away from its open-ended commitment to pay for medical services and toward a fixed government contribution for each beneficiary. The idea rarely came up during Mr. Trump’s march toward the White House, but a battle over the future of Medicare could roil Washington during his first year in office, whether he wants it or not. “Let me say unequivocally to you now: I have fought to protect Medicare for this generation and for future generations,” Senator Joe Donnelly of Indiana, a Democrat running for re-election in 2018, said this week in a video message to constituents. “I have opposed efforts to privatize Medicare in the past, and I will oppose any effort to privatize Medicare or turn it into a voucher program in the future.” For nearly six years, Speaker Paul D. Ryan has championed the new approach, denounced by Democrats as “voucherizing” Medicare. Representative Tom Price of Georgia, the House Budget Committee chairman and a leading candidate to be Mr. Trump’s secretary of health and human services, has also embraced the idea, known as premium support. And Democrats are relishing the fight and preparing to defend the program, which was created in 1965 as part of Lyndon B. Johnson’s Great Society. They believe that if Mr. Trump chooses to do battle over Medicare, he would squander political capital, as President George W. Bush did with an effort to add private investment accounts to Social Security after his re-election in 2004. Democrats will “stand firmly and unified” against Mr. Ryan if he tries to “shatter the sacred guarantee that has protected generations of seniors,” said Representative Nancy Pelosi of California, the Democratic leader.
I read 7 Republican Obamacare replacement plans. Here’s what I learned. If there’s one thing Republicans have been clear about for the past six years, it is that the top of their agenda includes repealing Obamacare. But Obamacare repeal would leave an estimated 22 million Americans without coverage and wreak havoc on the individual insurance market. It’s becoming increasingly clear that Republicans can’t just repeal Obamacare — they need to replace it with something. It turns out Republicans have a lot of choices: There are at least seven different replacement plans that Republican legislators and conservative think tanks have offered in recent years. I’ve spent the past week reading them, and what I’ve learned is this:
- Yes, Republicans have replacement plans. It is true that the party has not coalesced around one plan — but there are real policy proposals coming from Republican legislators and conservative think tanks. There is a base that the party can work from in crafting a replacement plan.
- There is significant variation in what the plans propose. On one end of the spectrum, you see plans from President-elect Donald Trump and Sen. Ted Cruz that would repeal Obamacare and replace it with virtually nothing. On the other end of the spectrum, there are plans from conservative think tanks that go as far as to keep the Affordable Care Act marketplaces and continue to give low-income Americans the most generous insurance subsidies.
- If we can say one thing about most Republican plans, it is this: They are better for younger, healthy people and worse for older, sicker people. In general, conservative replacement plans offer less financial help to those who would use a lot of insurance. This will make their insurance subsidies significantly less expensive than Obamacare’s.
- Economic analyses estimate that these plans reduce the number of Americans with insurance coverage. The actual amount varies significantly, from 3 million to 21 million, depending on which option Republicans pick. They will near certainly provide more coverage than Americans had before Obamacare, but also less than what exists currently under the health law.
I’ve spent the past week talking to authors of Republican replacement plans, economists who support them, and economists who oppose them. I’m focusing here on the two plans that are likeliest to be the most influential in the coming replacement debate: Better Way, from House Speaker Paul Ryan (R-WI), and the Patient CARE Act, from Sen. Orrin Hatch (R-UT), who chairs the Senate Finance Committee.
Healthcare Triage News: Republicans’ Many Plans to Replace Obamacare - (video) What policy changes would be minimally necessary for Republicans to claim that they’ve succeeded in “replacing” Obamacare? Health wonk and Incidental Economist Editor Adrianna McIntyre asked what would be seen as sufficient to rebrand the law. Let’s discuss. This is Healthcare Triage News.This episode was adapted from one of Adrianna’s recent posts. Links to references and further readings can be found there.
ACA Repeal and Replace: Views from the Left -- Adrianna, Nicholas, Aaron, and Austin and Aaron have written thoughtful pieces about what the Republicans will do about the ACA. The Republicans have power and hold the initiative. Even so, progressives have choices about how to respond, conditional on what the Republicans do. Austin discussed the Democrats’ choices here. Let’s take that discussion a step further. The Republicans can repeal and, if they choose, replace the ACA. They can do it either through budget reconciliation bills or through an ordinary resolution. If the Republicans proceed only through reconciliation, they do not need Democratic votes. The Democrats will hate an ACA replacement passed this way. They would hate it because of the procedure. But they’d also hate the bill itself. It’s a selection effect. If Republicans had a bill that Democrats liked, they would pass it through an ordinary resolution. In the short run, if the Republicans replace the ACA through reconciliation, progressive options are protesting and then watching in horror. But at some point, a left/centre coalition will regain control of the US government. When it does, health care progressives will need a new design for health care reform. By this point the ACA will be, as Trotsky said, in the dustbin of history. So while the left is out of power, progressives need to clarify what they want. Republicans did not do this and are paying for it in confusion about what the ACA replacement will contain. So what happens if the Republicans try to pass an ACA replacement through an ordinary resolution? An ordinary resolution will need 60 votes to overcome Democratic filibusters.* Getting to 60 requires the Republicans to find Democratic votes. If the Republicans offer the Democrats a deal, should they take it? I expect that there will be two points of view. Call them the compromise and the intransigent views. The compromise view is this: take the deal if it gives more people health insurance than a reconciliation bill would. As Austin put it, the Republicans have a gun to the Senate Democrats’ heads, so to speak. “Do you want something or nothing?” This is the moral argument for compromise. The well-being of the uninsured was the main point of the ACA. Refusing the deal will deprive tens of millions of people of insurance. Getting something for a subgroup beats getting nothing for anybody.Intransigent progressives would refuse the deal.
Let’s Say Obamacare Is Repealed. What Then? - The election of Donald J. Trump gives the Republicans in Congress a chance to act on their often-stated desire to get rid of Obamacare, a wish that Mr. Trump mostly says he shares. Aaron E. Carroll and Austin Frakt, the health policy analysts for The Upshot, discuss: Then what? Aaron: I think it’s safe to say few in Congress thought they would have this opportunity. But like the proverbial dog who has finally caught the car, after untold futile attempts, Republicans have finally come within reach of repealing the Affordable Care Act. Now comes the essential question: Will they actually do it? They’ve been promising it forever, but I am still skeptical that it will happen. I believe you disagree. I’m going to let you go first. Why do you think they’ll do it? Austin: I think they’ll do it because they so thoroughly own the idea of repeal, having passed bills to repeal, partly repeal, delay or defund the A.C.A. in the House something like 60 times. Just the other day Senator Mitch McConnell endorsed repeal (again). The House and Senate also agreed to do so, in large part, in a budget reconciliation bill earlier this year. The only thing that prevented it was that President Obama vetoed it. I doubt Mr. Trump would do the same if given a similar opportunity. Now, I know that a budget reconciliation dismantling of the law is not a full repeal, because according to the rules it can only touch budget-related provisions. This excludes things like requiring insurers to take all comers for premiums that vary only by age and smoking status or preventing them from imposing coverage caps and lifetime limits, among other measures. I also must add that I’m much less confident of a repeal (or partial repeal) without agreement on a replacement. But I’ll turn it back to you, Aaron. Do you think the G.O.P. has to offer a full replacement to get its members to sign on to repeal? Or can it offer something that would cover fewer people and with fewer benefits?
Consumers decline health insurance amid uncertain future for Affordable Care Act - Steven Lopez has gone without health insurance for 15 years, and the Affordable Care Act hasn’t changed his mind. Once again this year he will forgo coverage, he said, even though it means another tax penalty. Last tax season, the 51-year-old information technology professional and his family paid a mandatory penalty of nearly $1,000, he said. That’s because they found it preferable to the $400 to $500 monthly cost of a health plan under Obamacare, as the law is known. “I’m paying $6,000 to have the privilege of then paying another $5,000 (in deductibles),” said Lopez, who lives in Downey, a suburb of Los Angeles. “It’s baloney — not worth it.” While millions of people have gained coverage through the Affordable Care Act, an estimated 28 million Americans remain uninsured. And preliminary data shows that about 5.6 million paid a tax penalty rather than buy health insurance in 2015, according to The New York Times. Now, amid the uncertain future of Obamacare in President-elect Donald Trump’s administration, some resisters like Lopez are feeling vindicated and other consumers simply don’t see the need to sign up. Still others, according to Affordable Care Act advocates, are eager to take advantage of what will likely be at least one more year of subsidized coverage. Doreena Wong, a project director at the Los Angeles-based nonprofit Asian Americans Advancing Justice, said consumers have already begun to express doubts on whether they should bother enrolling. That is despite redoubled efforts in recent days by the state and federal exchanges to encourage sign-ups. “I do think the election result will impact our ability to enroll as many people as we’d like to,” she said. “Some people may ask: If it’s going to be dismantled, why sign up?”
The enormous pop-up clinic trying to bridge America’s health divide - Nearly 33 million Americans – more than 10% of the country’s population – have no health insurance. While the very poorest are entitled to Medicaid coverage, millions more narrowly fail to qualify, but remain too poor to pay for private health insurance. Among those who do qualify for subsidised plans or manage to pay insurance contributions, paying for minor treatments such as fillings and eye tests is often a problem, as they may not be covered by basic healthcare plans. Even finding local doctors who accept Medicaid can be so challenging that it can seem easier just to work through the pain or to self-medicate. Virginia is one of 19 states refusing federal dollars to close the healthcare “coverage gap” for people not poor enough for Medicaid, but too poor for anything else. Yet at the Wise County Fairgrounds in Southwest Virginia, for one late-July weekend each year, there is a small glimmer of hope. For three days, a non-profit organisation known as Remote Area Medical (RAM) builds a pop-up clinic – the largest of its kind in the US – from the ground up, and serves more than 2,000 patients from more than 15 different states. These patients come in the hope of getting cavities filled, lungs x-rayed and new pairs of glasses made – for free. RAM was founded in 1985 by Stan Brock, a British philanthropist, actor, author, naturalist, cowboy and former TV host. The organisation is funded entirely via private donations and – except for a small, paid staff – completely dependent upon thousands of volunteers for everything from performing oral surgery to making up bags of Cheerios to hand out to patients’ toddlers. In addition to international and disaster-relief missions, the group has held more than 800 general health-clinic events across 12 states throughout the southern and south-western United States. In the past five or six years, it has added urban stops such as Los Angeles and Chicago to its regular locations.
CDC Scientists Expose Agency Corruption -- Last month, The Hill published a letter sent by "more than a dozen" senior Center for Disease Control (CDC) scientists charging the agency with nursing an atmosphere of pervasive research fraud. The group, which claimed to represent scientists across the CDC's diverse branches, calls itself SPIDER (Scientists Preserving Integrity, Diligence and Ethics in Research). The letter to CDC Chief of Staff, Carmen Villar, expressed alarm "about the current state of ethics at our agency." The scientists complained that "our mission is being influenced and shaped by outside parties and rogue interests" and "circumvented by some of our leaders." The scientists told Villar that, "questionable and unethical practices, occurring at all levels and in all of our respective units, threaten to undermine our credibility and reputation as a trusted leader in public health." The letter charged that staff level scientists "are intimidated and pressed to do things they know are not right," and that, "Senior management officials at CDC are clearly aware and even condone these behaviors." The scientists cited several recent scandals involving scientific corruption at CDC. The scientists complain that the "climate of disregard" at CDC puts "many" agency scientists in difficult positions. "We are often directed to do things we know are not right." The public record supports SPIDER's allegations that scientists who insist on research integrity suffer persecution by CDC supervisors. The recent SPIDER letter highlights the culture of deep-rooted scientific corruption that has metastasized across CDC and become the subject of a decade- long parade of investigations. Given this long history of deeply entrenched scientific chicanery at the CDC, it's no surprise that scientists are now complaining. If Donald Trump is sincere about his promise to "Drain the Swamp" in the federal bureaucracy, he should begin by appointing an honest and able CDC director who can restore transparency, credibility, robust science and regulatory independence at the agency and who will turn around the culture of corruption that has been so damaging to children's health.
U.S. Dementia Rates Are Dropping Even as Population Ages --Dementia is actually on the wane. And when people do get dementia, they get it at older and older ages.Previous studies found the same trend but involved much smaller and less diverse populations like the mostly white population of Framingham, Mass., and residents of a few areas in England and Wales.The new study found that the dementia rate in Americans 65 and older fell by 24 percent over 12 years, to 8.8 percent in 2012 from 11.6 percent in 2000. That trend that is “statistically significant and impressive,” said Samuel Preston, a demographer at the University of Pennsylvania who was not associated with the study.In 2000, people received a diagnosis of dementia at an average age of 80.7; in 2012, the average age was 82.“The dementia rate is not immutable,” said Dr. Richard Hodes, director of the National Institute on Aging. “It can change.” And that “is very good news,” said John Haaga, director of the institute’s division of behavioral and social research. It means, he said, that “roughly a million and a half people aged 65 and older who do not have dementia now would have had it if the rate in 2000 had been in place.”
Fentanyl billionaire comes under fire as death toll mounts from prescription opioids - Before they were arrested last year, Alabama doctors John Couch and Xiulu Ruan were prized customers of Insys Therapeutics Inc., maker of a powerful and highly addictive type of synthetic opioid known as fentanyl. Drs. Couch and Ruan prescribed a combined $4.9 million of the painkiller, called Subsys, to Medicare patients in 2013 and 2014, among the most of any doctors in the U.S., federal data show. Insys, based in Chandler, Ariz., went to unusual lengths to keep these high-prescribing doctors happy. Insys Executive Chairman John N. Kapoor, the company’s billionaire co-founder, personally traveled to Mobile, Ala., to attend a business dinner with them, said people familiar with the matter. The doctors were also frequent speakers and consultants for Insys, which paid them $270,700 in combined fees over 21 months, according to government data. Many of those fees were bribes paid by Insys to reward the doctors for prescribing large quantities of Subsys, federal prosecutors allege in a 22-count criminal indictment filed in Mobile against the doctors this April. Overall, the pair wrote more than a quarter-million prescriptions for fentanyl, oxycodone and other controlled substances including Subsys over five years, some of which were abused by addicts or diverted to drug traffickers, the indictment alleges. The doctors deny the allegations. Insys declined to respond to specific questions for this article but said in a statement that it is “committed to working with the health care community to help ensure the proper prescribing and use of our products.” The company itself hasn’t been accused of any crimes.Fentanyl, an opioid drug up to 50 times as powerful as heroin, is helping to fuel an addiction crisis in America that killed 29,500 people in 2014. Most of the illegal use involves street versions of the drug, which can be quickly made from chemical ingredients—often imported from China—and pressed into pills or cut into heroin. But prescription fentanyl is an increasing focus of law-enforcement authorities, including Subsys, a mouth-spray form approved for treating severe pain.
How China Trade Could Help Explain Rising Mortality Among White Middle-Aged Men -- New research has found a link between rising imports from China and a wave of suicides and drug-related deaths across the U.S. The study, by Federal Reserve economist Justin Pierce and Peter Schott of Yale University, adds a new piece to the puzzle of rising mortality among middle-aged white men in many parts of the U.S., as well as the surge of antitrade rhetoric during the presidential election. It finds a “statistically significant relative increase in suicide…concentrated among white males” from 2000, a year that saw Congress grant China permanent normal trade relations, which helped codify China’s status as a rising trade power. Since then Chinese imports to the U.S. have surged around fivefold to $483 billion last year. The authors investigated how suicide and drug-related death rates changed across U.S. counties from 2000. They found those counties with workers whose jobs were relatively more vulnerable to Chinese competition—as measured by employment-weighted implied tariff cuts their industries experienced—saw increases in death rates that couldn’t be explained by other factors. The authors were motivated by recent research by Anne Case and Nobel laureate Angus Deaton that showed rising mortality rates for white U.S. men ages 45 to 54. “The thing about that paper that we noticed was that the trend started in 2000, when you see a big jump in U.S. imports from China and a huge loss in manufacturing jobs,” Mr. Schott said. Around half of the decline in total U.S. manufacturing employment, which fell around three million over the five years from 2000, has been linked to rising Chinese imports. The authors found that the most affected counties were in the Southeast. Around a quarter were barely affected at all, as they contained little manufacturing or agriculture, sectors more susceptible to trade competition. Counties with an average level of exposure to Chinese competition experienced roughly a 3.5% increase in their suicide rate and a 24% jump in accidental poisoning. Those levels imply a few thousands extra deaths a year across the country. The effects appeared to be lasting. “Suicides could lead to more suicides or new economic consequences could take time to push people over the edge,” Mr. Schott said.
What Happened When a Prison Brought in a Brain Injury Specialist - No one has a good estimate of the number of US prison inmates who have suffered traumatic brain injuries. The Centers for Disease Control estimates the portion of the male incarcerated population with these kinds of problems somewhere in their past at a frustrating 25 to 87 percent. It is clear that the percentage is far higher than the roughly 8.5 percent of the general population that reports traumatic brain injury.The proliferation of head trauma adds another mental health challenge to America's mess of a prison system. Depression and anxiety, substance abuse, violence and suicidal thoughts are all associated with head injuries. Cognitive impairment can also make prison life—rife with rules, jobs and social norms—more difficult, and the culture shock and byzantine prohibitions imposed by parole practically unbearable.For these reasons, the state Commission on Crime and Delinquency awarded the Brain Injury Association of Pennsylvania a $250,000 grant to screen for head trauma among men on track to be paroled from Graterford, the idea being to smooth their transition back into the outside world. The prison, with more than 3,000 inmates, is about 35 miles from Philadelphia and releases men into the five counties around the city. The program is one of a few around the country aimed at tailoring reentry to the unique needs of a traditionally brain injury-prone population as some states and localities (and for now, at least) the federal government scale back incarceration. "I knew that we had a lot of men with brain injuries," says Matthew Mauriello, Graterford's psychological services specialist. "I was shocked to find out how many."
The Chemical Erin Brockovich Warned About Is in Water All Over America - Thousands of Americans drink tap water poisoned by unsafe levels of a cancer-causing heavy metal, and government authorities are doing little to stop it, according to a new report from clean water activists. The chemical hexavalent chromium, also known as chromium-6, gained notoriety as the carcinogenic water contaminant that Erin Brockovich sued a utility over in California—and the new report from advocacy organization Environmental Working Group finds that it shows up in the water systems of major cities all over the country. The data estimate that water supplies serving 218 million Americans—more than two-thirds of the population—contain more chromium-6 than California scientists have deemed safe. The group estimated that if nothing changes, chromium-6 in tap water will lead to more than 12,000 excess cases of cancer by the end of the century. The findings are one more sign of a broken state and federal regulatory system that enabled crises in Flint, Michigan, and Hoosick Falls, New York, among other cities where dangerous contaminants in tap water threatened public health, advocates say.“This is a repeating story of the lack of regulatory oversight and scientific updates to ensure clean drinking water,” Bill Walker, a coauthor of the report, told TakePart. “A basic aspect of public health is being able to drink the tap water. We have not achieved that in the U.S.” The EWG report analyzes data on chromium-6 collected for the first time under a federal monitoring rule passed four years ago. The current federal standard for chromium in drinking water was set in 1991, when the U.S. Environmental Protection Agency set a limit of 100 parts per billion for total chromium, including chromium-3, a less threatening contaminant. Back then, chromium was linked to skin rashes, but the potential cancer threat posed by the pollutant had not been thoroughly researched. Knowing what we know now, activists say the federal standard is meaningless.
China's water quality is getting worse - (Reuters) - China is making progress in battling the damaging smog that can shroud its big cities, but in many areas - from parts of the giant Yangtze river to the coalfields of Inner Mongolia - its water pollution is getting worse. Despite commitments to crack down on polluters, the quality of water in rivers, lakes and reservoirs in several regions has deteriorated significantly, according to inspection teams reporting back to the Ministry of Environmental Protection (MEP). In documents published this week, inspectors found that a fifth of the water in the Yangtze's feeder rivers in one province was unusable, and thousands of tonnes of raw sewage were being deposited into one river in northeastern Ningxia each day. Worried about unrest, China launched its war on pollution in 2014, vowing to reverse the damage done to its skies, rivers and soil by more than three decades of breakneck industrial growth.Over the first nine months of this year, 70.3 percent of samples taken from 1,922 surface water sites around China could be used as drinking water, up 4 percentage points from a year ago, Zhao said. China has long been worried about a water supply bottleneck that could jeopardize future economic development. Per capita supplies are less than a third of the global average. A survey published by the MEP last year showed that nearly two thirds of underground water and a third of surface water was unsuitable for human contact, with much of it contaminated by fertilizer run-offs, heavy metals and untreated sewage.
World Bank: Only 10 percent of Gazans have access to safe drinking water — The World Bank denounced the worsening water crisis in the Gaza Strip, calling the situation in the besieged Palestinian enclave “alarming” on Wednesday. In a statement released by the World Bank, senior water and sanitation specialist Adnan Ghosheh stated that only 10 percent of the population in Gaza had access to safe drinking water. “So much water has been pumped out of the natural aquifer underneath Gaza since (the late 1990s that seawater has seeped in, making it too salty to drink,” Ghosheh said. “There are some 150 operators who provide some kind of desalinated water that has been filtered to make it acceptable for drinking and for cooking. It’s more expensive and not an improved source of water, according to our definitions of water clean enough to drink.” Ghosheh went on to add that the quantities of freshwater brought into the blockaded Palestinian territory from Israel as per the 1993 Oslo Accords “falls far short” of the needs of the Gazan population. The World Bank has been supporting plans by the Palestinian Water Authority to build a water desalination plant to address the scarcity of drinkable water. However, many internationally funded infrastructure projects, including desalination and wastewater treatment initiatives, have been halted or significantly delayed due to the vastly insufficient electricity supplies in Gaza. The situation has been further worsened by damage inflicted to the existing water infrastructure during Israeli offensives on the coastal enclave, Ghosheh said. The near decade-long Israeli blockade has plunged the Gaza Strip’s more than 1.8 million Palestinians into extreme poverty and some of the highest unemployment rates in the world. Gaza’s infrastructure has yet to recover from the devastation of three Israeli offensives over the past six years. The slow and sometimes stagnant reconstruction of the besieged coastal enclave has only been worsened by the blockade Ghosheh corroborated warnings by the United Nations that Gaza could become uninhabitable by 2020.
The Uncertain Benefits of GMO Labeling – - How does one put a price tag on avoiding an unlikely catastrophic agricultural disaster, or on the benefits of preventing it? Over the next two years, the U.S. Department of Agriculture (USDA) may have to face these and other similarly difficult questions as it creates a labeling standard for genetically modified organisms (GMOs). Under the National Bioengineered Food Disclosure Standard, USDA is required to develop and implement a mandatory labeling standard for foods that contain GMOs. Because the labeling standard is required by law, it is possible that the standard may be implemented even if its costs outweigh its benefits. However, USDA will nonetheless have to engage in cost-benefit analysis when it presents its standard to the White House Office of Information and Regulatory Affairs (OIRA) for review. In a forthcoming paper, Harvard Law School Professor and former OIRA Administrator Cass Sunstein argues that USDA will face a significant challenge in presenting the costs and benefits that justify mandatory labeling for GMOs. Although determining the costs of mandatory labeling of GMOs will be, on the whole, fairly straightforward, the process is likely to be contentious. The initial cost USDA will have to grapple with—the cost of producing the labels—is unlikely to present any great difficulties, as production costs are readily quantifiable. On the other hand, costs to the consumer, such as the loss of enjoyment from discovering that their favorite food contains GMOs, are difficult to ascertain. However, because the cost of reading the label is unlikely to be very high, Sunstein suggests that USDA could provide an upper or lower bound for the cost, or simply assert that the cost will not be large.
New USDA Data Shows 85% of Foods Tested Have Pesticide Residues - As Americans gather with their families for Thanksgiving this week, new government data offers a potentially unappetizing assessment of the U.S. food supply—Residues of many types of bug-killing pesticides , fungicides and weed killing chemicals have been found in roughly 85 percent of thousands of foods tested. Data released last week by the U.S. Department of Agriculture (USDA) shows varying levels of pesticide residues in everything from mushrooms to potatoes and grapes to green beans. One sample of strawberries contained residues of 20 pesticides, according to the Pesticide Data Program report issued this month by the USDA's Agricultural Marketing Service. The report is the 25th annual such compilation of residue data for the agency, and covered sampling the USDA did in 2015. Notably, the agency said only 15 percent of the 10,187 samples tested were free from any detectable pesticide residues. That's a marked difference from 2014, when the USDA found that more than 41 percent of samples were "clean" or showed no detectable pesticide residues. Prior years also showed roughly 40-50 percent of samples as free of detectable residues, according to USDA data. The USDA said it is not "statistically valid" to compare one year to others, however, because the mix of food sampled changes each year. Still the data shows that 2015 was similar to the years prior in that fresh and processed fruits and vegetables made up the bulk of the foods tested. Though it might sound distasteful, the pesticide residues are nothing for people to worry about, according to the USDA. The agency said "residues found in agricultural products sampled are at levels that do not pose risk to consumers' health and are safe …"
Court Fails to Protect Bees From Toxic Pesticides - A judge in the Northern District of California delivered a crushing blow Monday to the nation's beekeepers and imperiled honeybees . The judge ruled against the beekeepers and public interest advocates in a lawsuit seeking to protect honeybees and the broader environment from unregulated harms caused by the U.S. Environmental Protection Agency's (EPA) lax policies for seeds coated with certain insecticides known to cause massive die-offs of honeybees. The seed-coatings in question are the bee-killing neonicotinoids, or "neonics," which are strongly linked to the record-high colony mortality suffered by commercial beekeepers, as well as to water pollution and risks to birds and other beneficial species. Corn and soybean seeds, in particular, coated with these chemicals are planted across nearly 150 million acres of the U.S., in what is by far the most extensive type of insecticide application in the nation. "It is astounding that a judge, EPA or anyone with any common sense would not regulate this type of toxic pesticide use, especially when the seed-coatings are so broadly applied and there is so much at risk," Andrew Kimbrell, director of Center for Food Safety, said. "Study after study has shown that seeds coated with these chemicals are a major culprit in catastrophic bee-kills. Now more than ever our country's beekeepers, environment and food system deserve protection from agrichemical interests and it is EPA's job to deliver it." The EPA has exempted the seeds from regulation or mandatory labeling, despite their known toxicity. This exemption was the basis of the lawsuit filed by Center for Food Safety in the public interest and on behalf of several impacted beekeepers. The judge dismissed the case on an administrative procedure basis, not on the fundamental question of whether the exempted seeds are harming honeybees. In fact, the judge stated in his conclusion: The court is most sympathetic to the plight of our bee population and beekeepers. Perhaps the EPA should have done more to protect them, but such policy decisions are for the agency to make.
Deformed wing virus: Major risk to bee colony collapse -- Bee populations are in decline globally. There are several reasons: pesticides, habitat loss, mite infestation and viruses. New research has focused on a pathogen called deformed wing virus, and offers some hope. With the deformed wing virus, scientists have, for the first time, managed to simulate the course of disease using artificial genetic material of the virus. Understanding this process is key to helping bee colonies in many regions of the world. Bees are major contributors to global agriculture. Deformed wing virus is associated with Varroa mites. Varroa mites can only reproduce in a honey bee colony. It attaches to the body of the bee and weakens the bee by sucking hemolymph. The virus is concentrated in the heads and abdomens of infected adult bees. The virus is suspected of causing the wing and abdominal deformities. The lifespan of an infected bee is reduced to under 48 hours. Although the virus is most probably carried by mites, the virus has been found to be present in many hives where there are no mites.
Avocados imperil Monarch Butterflies’ winter home in Mexico — The green volcanic hills that tower above Apútzio de Juárez have begun to fill with swarms of monarch butterflies, which return each year for the winter stretch of their celebrated — and imperiled — migration. But downhill from the monarchs’ mountain roost, in the oak and pine forests that border this small farming town, there lurks a new threat to their winter habitat: a lust to grow the lucrative avocados that are being consumed at record rates in the United States. Spurred by soaring demand for the creamy fruit, farmers here in the western state of Michoacán are clearing land to make room for avocado orchards, cutting oak and pine trees that form a vital buffer around the mountain forests where the monarchs nest. “It’s scandalous what people are doing now to grow avocado,” said Arturo Espinosa Maceda, who has for years grown avocados, peaches and strelizia flowers at a farm some 12 miles north of Apútzio. “But it’s mega-business.” Apútzio sits on the western edge of the Monarch Butterfly Biosphere Reserve, a 135,000-acre protected area where the butterflies rest on oyamel, or native fir, trees. The butterflies’ numbers have dwindled sharply in recent years, as milkweed declined in the United States and deforestation affected their Mexican habitat. Each year environmentalists hold their breath to see how many butterflies will arrive in Mexico. Omar Vidal, director general of the World Wildlife Fund in Mexico, said that conserving the winter sanctuary was “fundamental to the survival of the migration.” Deforestation “has to be reduced to zero,” he said. But the avocado boom could complicate that goal.
Why the Dead Sea is getting saltier – and shallower - The Dead Sea may soon live up to its name, environmentalists say. The world’s most historic salt lake has been shrinking by about three feet every year, according to environmentalist group EcoPeace Middle East . Excessive tourism is taking its toll on the Dead Sea, the group warns, and inflow has slowed to a trickle. The lake’s water, which is increasingly extracted for use in cosmetic and "therapeutic" products, simply isn’t being replaced. If the Dead Sea really is drying up, it joins many other dwindling reservoirs across the globe. Many, such as the Ogallala aquifer in the Midwestern United States, are victims of poor water management . Others may suffer the effects of climate change, such as drought and increased salinity. But there are plans that could save the Dead Sea – and maybe the other lakes, too. The Dead Sea is nestled at the lowest point on our planet – about 1,400 feet below sea level – and wedged between Israel, Jordan, and the West Bank. It is also among the oldest natural attractions in the world, drawing Mediterranean travelers to its shores for thousands of years. The lake’s unusually high density allows swimmers to float with ease. Its hypersaline waters are renowned for their "healing powers". Today, cosmetic companies extract mineral water from the Dead Sea to make shampoos and skincare products. As those products become increasingly popular, extraction becomes more prevalent. Traditionally, the Dead Sea has been replenished by other natural sources, such as the Jordan River basin. But about 50 years ago, neighboring countries diverted many of those inflow sources back to cities as water supply. The region’s dry-heat makes it difficult to the lake to restore itself, and lost water increases the relative salinity of the lake.
Record Number of Fur Seals Washing Up Dead or Emaciated Off California Coast - Rare Guadalupe fur seals are once again washing up in California's Bay Area in record numbers likely due to unusually warm waters threatening their food supply. The East Bay Times reported that about 75 seals have been stranded around the Golden State with even more seals that have died in the ocean. This is not the first time seals are washing up sick or dead off California's coast. Last year, about 80 Guadalupe fur seals surfaced. Forty-two were found dead and only 16 of the 38 found alive survived. The unprecedented occurrence led the National Oceanic and Atmospheric Administration to declare an unusual mortality event for the seals. The Sausalito, California-based Marine Mammal Center alone has already responded to 32 strandings this year, with some animals found dead, sick or emaciated. "To put those numbers into perspective, during our 40-year history prior to 2015, the record number of Guadalupe fur seals we had rescued in any given year was five," the Marine Mammal Center wrote in a blog post . Guadalupe fur seals are classified as " threatened " under the U.S. Endangered Species Act. There are about 15,000 individuals left after being hunted to near extinction in the 1800s. They now primarily breed on Guadalupe Island, about 150 miles off the coast of Baja California. Healthy fur seals live to be about 20 years old but like many other creatures on Earth, Guadalupe fur seals have become victims of climate change . Unusually warm waters in the eastern Pacific Ocean is one culprit behind the increase in strandings. "As prey populations move away to cooler waters, mother fur seals have a harder time finding the food they need to nourish themselves and their pups," the Marine Mammal Center said.
Climate changing 'too fast' for species - BBC News: Many species will not be able to adapt fast enough to survive climate change, say scientists. A study of more than 50 plants and animals suggests their ability to adapt to changes in rainfall and temperature will be vastly outpaced by future climate change. Amphibians, reptiles and plants are particularly vulnerable, according to US researchers. And tropical species are at higher risk than those in temperate zones. Some animals might be able to move geographically to cope with rising temperatures, but others live in isolated areas where they cannot move, such as in nature reserves or on mountains or islands. Ecologists analysed how quickly species had changed their climatic niches (the conditions where they can survive) over time, and how these rates compared with that of global warming. They analysed populations of plants and animals, including insects, amphibians, birds, mammals and reptiles. Rates of change in climatic niches were much slower than rates of projected climate change, by more than 200,000 fold for temperature (on average), they said. "Overall, our results show that rates of climatic niche change among populations of plants and animals are dramatically slower than projected rates of future climate change,"
Massive forest death continues in California – California’s long-term drought has claimed another 36 million trees, the U.S. Forest Service said this week, announcing the results of a new aerial survey. Since 2010, more than 100 million trees have died across 7.7 million acres, the agency said. The die-off intensified in 2016, after four years of drought, with mortality increasing 100 percent. Millions of additional trees are weakened and expected to die in the coming months and years. Forest Service leaders once again emphasized that their ability to address safety issues linked with dead trees has been severely hampered by climate change and limited resources. Agriculture Secretary Tom Vilsack said a broken budget for the Forest Service sees an increasing amount of resources going to firefighting while less is invested in restoration and forest health. “These dead and dying trees continue to elevate the risk of wildfire, complicate our efforts to respond safely and effectively to fires when they do occur, and pose a host of threats to life and property across California,” said Vilsack. “USDA has made restoration work and the removal of excess fuels a top priority, but until Congress passes a permanent fix to the fire budget, we can’t break this cycle of diverting funds away from restoration work to fight the immediate threat of the large unpredictable fires caused by the fuel buildups themselves.”The majority of the 102 million dead trees are located in ten counties in the southern and central Sierra Nevada region. The Forest Service also identified increasing mortality in the northern part of the state, including Siskiyou, Modoc, Plumas and Lassen counties.
‘Unprecedented’: More than 100 million trees dead in California - California’s lingering drought has pushed the number of dead trees across the state past 100 million, an ecological event experts are calling dangerous and unprecedented in underlining the heightened risk of wildfires fueled by bone-dry forests. In its latest aerial survey released Friday, the U.S. Forest Service said 62 million trees have died this year in California, bringing the six-year total to more than 102 million. Scientists blame five-plus years of drought on the increasing tree deaths — tree “fatalities” increased by 100 percent in 2016 — but the rate of their demise has been much faster than expected, increasing the risk of ecologically damaging erosion and wildfires even bigger than the largest blazes the state’s seen this year. “It’s not beyond the pale to suggest that this is a pretty unprecedented event in at least recent history,” said Adrian Das, an ecologist with the U.S. Geological Survey. There are about 21 million acres of trees spread across California’s 18 national forests, and the latest figures show 7.7 million of them — more than one-third — are dead. The U.S. Forest Service has earmarked $43 million in California to help restore eroded sections of roads and trails throughout the state’s wooded areas, but officials say too much money is being spent on fighting wildfires that are becoming more and more common, as opposed to restoring the scarred forests. It’s been a record-setting year for those wildfires, which have burned through 56 percent of the U.S. Forest Service’s budget, leading U.S. Secretary of Agriculture Tom Vilsack to petition Congress to classify wildfires as disasters, which would free up additional federal funding to fight them. "These dead and dying trees continue to elevate the risk of wildfire, complicate our efforts to respond safely and effectively to fires when they do occur, and pose a host of threats to life and property across California,” Vilsack said in a statement.
102 million dead California trees 'unprecedented in our modern history,' officials say - The number of dead trees in California’s drought-stricken forests has risen dramatically to more than 102 million in what officials described as an unparalleled ecological disaster that heightens the danger of massive wildfires and damaging erosion. Officials said they were alarmed by the increase in dead trees, which they estimated to have risen by 36 million since the government’s last survey in May. The U.S. Forest Service, which performs such surveys of forest land, said Friday that 62 million trees have died this year alone. “The scale of die-off in California is unprecedented in our modern history,” said Randy Moore, the forester for the region of the U.S. Forest Service that includes California. Trees are dying “at a rate much quicker than we thought.” Scientists say five years of drought are to blame for much of the destruction. The lack of rain has put California’s trees under considerable stress, making them more susceptible to the organisms, such as beetles, that can kill them. Unusually high temperatures have added to the trees’ demand for water, exacerbating an already grim situation. Adrian Das, an ecologist with the U.S. Geological Survey, needs only to step outside his office in Sequoia National Park to see the extent of the damage. “You look across the hillside on a side of the road, and you see a vast landscape of dead trees,” he said. “It’s pretty startling.” Das said the parts of the forest at lower elevations — about 5,000 to 6,000 feet — continue to get hit the hardest. In the higher elevations, it can sometimes appear as if there is no drought and the trees are much healthier. “We have sugar pines here — grand trees that can live for 500 years,” he said. “Everywhere you walk, through certain parts of these forests, at least half of these big guys are dead.”
Bolivia declares state of emergency due to drought, water shortage: (Reuters) - Bolivia's government declared a state of emergency on Monday due to water shortages in large swaths of the country amid the worst drought in 25 years, making funds available to alleviate a crisis that has affected families and the agricultural sector. Bolivia's Vice Ministry of Civil Defense estimated that the drought has affected 125,000 families and threatened 290,000 hectares (716,605 acres) of agricultural land and 360,000 heads of cattle. President Evo Morales called on local governments to devote funds and workers to drill wells and transport water to cities in vehicles, with the support of the armed forces, from nearby bodies of water. "We have to be prepared for the worst," Morales said at a press conference, adding that the current crisis was an opportunity to "plan large investments" to adapt to the effects of climate change on the country's water supply. The national state of emergency comes after 172 of the country's 339 municipalities declared their own emergencies related to the drought. Last week, residents of El Alto, near La Paz, briefly held authorities with a local water-distribution company hostage to demand the government explain its plans to mitigate the shortage. The drought has prompted protests in major cities and conflicts between miners and farmers over the use of aquifers.
Drought-hit women struggle as "compassion" runs dry at climate talks -- In southern Mozambique, women and girls are struggling to cope with a two-year drought, the worst in 35 years, and are resorting to survival tactics such as eating less and selling sex for food or money, aid group CARE International says. Women in Inhambane province are spending up to six hours a day in search of water, three times as much as before the drought, which was made worse by a strong El Niño climate pattern, according to research by CARE, issued at the U.N. climate talks in Morocco this week. And with four-fifths of families forced to cut meals to just one or two daily rations, tens of thousands of children in the southeast African nation are expected to be acutely malnourished. Teenage girls are particularly at risk, the agency said, because they lack the knowledge to protect themselves and their children from hunger. "We found that girls as young as 11 or 12 years have been lured away from water collection points by older men in exchange for food stocks or money. Some of the girls discover later that they are pregnant and are consequently stigmatised by the community and family," said Marc Nosbach, CARE's Mozambique director. The charity argues the increasingly "destitute" situation of women and girls like these is why rich countries should cough up more funding to help hard-hit communities adjust to extreme weather and longer-term climate change. But the response to the call by CARE and other humanitarian groups at the Marrakesh talks fell short, they said.
Two die and thousands fall sick as freak phenomenon hits Melbourne - A major storm that hit Melbourne on Monday night appears to have caused a mass outbreak of an illness known as “thunderstorm asthma”. The Age reports that an unprecedented number of people fell acutely ill on Monday after the storm struck at around 6pm. Two people in Melbourne’s west died, including a man waiting 30 minutes for an ambulance. Other emergency services helped respond to the unexpected demand and hospitals were also overwhelmed as people presented at emergency departments with respiratory problems. The smaller particles mean it can induce an asthma attack in people who have never had symptoms before. Symptoms include shortness of breath, chest tightness, coughing and wheezing. Anyone with a rye grass allergy is highly susceptible to the illness. (There’s more details on how it happens are here.) The ABC reports that some hospitals and pharmacies ran out of Ventolin puffers and St Vincent’s Hospital, in Fitzroy, enacted its “code brown” procedure for the first time in five years in a bit to free up beds. Victoria SES volunteers responded to more than 130 requests for assistance due to damaged buildings and downed trees last night, especially in the Hobsons Bay and Wyndham regions in the city’s west. Ambulance Victoria executive director emergency operations Mick Stephenson said it was an “unprecedented workload” after the severe storm hit at 6pm following the hottest day since March. “Between about 6 o’clock and 11 o’clock we responded to in excess of 1870 cases, which is six times the workload for that period of the day,” he said. “Most of those cases were respiratory-related.”
La Niña cycle halfway complete - what's next? - Braun | Reuters: According to the latest forecasts, 2016/17 should be stamped in history as an official La Niña season. And although its relative weakness has somewhat downplayed its existence, La Niña is already halfway through its run. La Niña is the cool phase of the El Niño-Southern Oscillation, which is very closely monitored by commodity markets as ENSO is one of the most reliable long-term indicators of weather patterns on the global scale. In its monthly ENSO discussion last week, the U.S. Climate Prediction Center issued a "La Niña Advisory," its first official recognition of the phenomenon’s presence. The agency left the probability for weak La Niña to persist through the Northern Hemispheric winter months unchanged at 55 percent. Weekly sea surface temperatures in the key Niño 3.4 region have been hovering in La Niña territory since July, though it has taken the surrounding waters of the equatorial Pacific Ocean a little longer to cool down (reut.rs/2geLt40). Other than just saying "time flies," we can perhaps best explain how La Niña's expected life cycle is already half over by examining its exact definition. According to the National Oceanic and Atmospheric Administration, “La Niña is a phenomenon in the equatorial Pacific Ocean characterized by a five consecutive 3-month running mean of sea surface temperature anomalies in the Niño 3.4 region that is below the threshold of minus 0.5 C.” This may sound like a mouthful, but the most important takeaway is that NOAA bases the requirements for La Niña and its warm counterpart El Niño on three-month averages rather than the monthly data itself in order to better isolate ENSO-related variability. So far in the 2016/17 cycle, two of the five ONI readings that are required for La Niña are already in the book. At the conclusion of November, a third La Niña-qualifying ONI reading is nearly guaranteed (reut.rs/2fWWJzv). This means that the ONI for the October through December and November through January periods must also come in equal to or less than minus 0.5 degree C, and this is also predicted to occur. By the first week of February, we will know whether the ongoing event will officially join the ranks of La Niñas past.
Study: U.S. record high temperatures to overwhelm record lows - If man-made climate change continues at its current pace, record high temperatures are forecast to outnumber record lows in the U.S. by a whopping 15 to 1 ratio by the end of the century, according to a new scientific study released Monday. . "More and more frequently, climate change will affect Americans with record-setting heat," said senior scientist Gerald Meehl of the National Center for Atmospheric Research (NCAR), and lead author of the new study. "An increase in average temperatures of a few degrees may not seem like much, but it correlates with a noticeable increase in days that are hotter than any in the record, and nights that will remain warmer than we've ever experienced in the past," he said. Man-made climate change, or global warming, is caused by the burning of fossil fuels such as coal, oil and gas, which emit greenhouse gases such as carbon dioxide and methane into the atmosphere. Extreme heat poses significant risks to human health, particularly to vulnerable populations like the elderly, according to Climate Central. It can also damage agriculture and push rain-starved areas into drought. By about 2065, U.S. temperatures will rise by an average of slightly more than 5.4 degrees, if society maintains a “business as usual” increase in the emission of greenhouse gases, the study said. The ratio of record warmth to record cold has been increasing over the past several decades, with an average value of 2:1 over the first decade of the 21st century, the study said. "Even with much warmer temperatures on average, we will still have winter and we will still get record cold temperatures, but the numbers of those will be really small compared to record high maximums," Meehl said. Meehl told the Washington Post's Capital Weather Gang that the model used in this study "relied on datasets for which methods were developed to correct for urbanization."
Get used to heat records; study predicts far more in future - (AP) — The United States is already setting twice as many daily heat records as cold records, but a new study predicts that will get a lot more lopsided as man-made climate change worsens.Under normal conditions, without extra heat-trapping gases from human activity, the nation should set about the same number of hot and cold records over the course of several years. But that's not happening and it's steadily getting worse, scientists said.If and when the nation warms another 4.5 degrees (2.5 degrees Celsius), expect there to be around 15 heat records for every cold one, the new study in Monday's Proceedings of the National Academy of Sciences predicts. That warming can be as early as 50 years from now if greenhouse gas emissions — from the burning of coal, oil and gas — continue at their recent pace or a century away if carbon pollution slows down, said study lead author Gerald Meehl, senior scientist at the National Center for Atmospheric Research ."This climate is on a trajectory that goes somewhere we've never been. And records are a very easy measure of that," said study co-author Claudia Tebaldi, who's also at the atmospheric center in Boulder, Colorado.They used records from the nation's weather stations for their statistical calculations.After an earlier study in 2009, Meehl and Tebaldi looked further in the past and into the future. In the Dust Bowl hot 1930s, there were 1.1 hot records for every cold. After a couple decades of more cold records and an even one-to-one ratio in the 1980s, the number of high heat marks left cold in the dust. So far in the 2010s there have been 2.2 hot records for every cold, including six hot records for every cold this year, Meehl said.
Rates of Hothouse Gas Accumulation Continue to Spike as the Amazon Rainforest Bleeds Carbon -- Back in June, atmospheric carbon monitors indicated that the Amazon Rainforest was leeching out more carbon dioxide than it was taking in. This is kind of a big deal — because the vast expanse of trees and vegetation in the Amazon represents a gift nature has given to us. For all that lush vegetation draws in a considerable amount of carbon dioxide and stores it in leaves, wood, bark and soil. And this draw-down, in its turn, considerably reduces the overall rate of atmospheric carbon accumulation coming from human fossil fuel burning. Over the years and decades, this great service has saved the world from an even more rapid warming than it is presently experiencing. But not even the great forests could stand for long against the unprecedented plume of carbon coming from human fossil fuel industry. For the great belching of heat-trapping gas by all the world’s engines, furnaces, and fires is equal to about 4 or 5 of the Siberian flood basalts that triggered the worst hothouse extinction event in Earth’s deep history. And so the world has warmed very rapidly regardless of the mighty effort on the part of forests like the Amazon. And that very heat is now harming the trees and damaging the earth to which they are wed. For when soils warm, the carbon they take in is leached out. And along with the heat comes fires that can, in a matter of minutes, reduce trees to ash and return the captured heat-trapping carbon to the world’s airs. Now such a destructive process appears to be well under way. And it seems that an apparent blow-back of greenhouse gasses from one of the world’s largest carbon sinks is presently ongoing even as rates of atmospheric carbon dioxide accumulation are spiking. For in 2016, the world is now on track to see a record annual rate of atmospheric CO2 increase in the range of 3.2 to 3.55 parts per million. This rapid build-up is occurring despite a shift to La Nina — in which somewhat cooler ocean surfaces tend to take in more atmospheric carbon — and despite a pause in the rate of carbon emissions increase from fossil fuel related industry around the world.
Arctic heat wave “scary” -- From the FT: Scientists are struggling to understand why a burst of “scary” warming at the North Pole has pushed Arctic temperatures nearly 20C higher than normal for this time of year. …“We’ve been processing this data since 1958 and we haven’t really seen anything like this at this time of year,” said Rasmus Tonboe, a sea ice expert at the Danish Meteorological Institute. “We are watching the situation and trying to analyse what is going on but it’s very surprising.” This had reduced the temperature difference between the Arctic and more southerly regions, causing a “wavier” jet stream — a great river of fast-moving air about 10km above the earth that acts as a barrier separating the North Pole from warmer latitudes.…“That is scary because it is showing us how rapidly the climate system is changing … We expected for a long time to see the ice disappear and the Arctic warm up and perhaps the jet stream doing bizarre things, but it’s happening much faster than I think anyone expected. Phew. Glad it’s a UN conspiracy.
The big melt: Sea ice hits record lows at North and South Poles - Sea ice levels in both the Arctic and the Antarctic have hit record lows, NASA climate scientists report. The northern record, while bleak, isn’t all that surprising – Arctic sea ice has been on a consistent decline for years. But until recently, Antarctic sea ice was actually expanding. Climate change skeptics have often pointed to ice gain in the Southern Hemisphere, which hit record highs between 2012 and 2014, but now that trend appears to be reversing.Scientists previously attributed Antarctic ice gains to natural fluctuation in the atmosphere. Simply put, weather at the poles can be erratic – that’s why researchers are hesitant to say that recent southern ice loss is reflective of a trend. But while it’s too early to say for sure, new lows could indicate a longer pattern of melting in the region. The timing of northern lows has also concerned researchers. It is currently “polar night” in the Arctic, which means much of the region receives no sunlight at all. During October and November, ice over the Arctic Ocean thickens and grows as a result of sub-zero temperatures. But these months have been unusually hot this year, preventing much of that freeze. That could cause significant meteorological changes down the line, even outside the region. Shifting Arctic climates can affect the polar vortex, which spills cold air into North America, Europe, and Asia. Consequently, any change in the polar vortex could change the frequency and intensity of winter storms on those continents.
‘Things are getting weird in the polar regions’ - As extraordinarily warm temperatures continue in the Arctic — temperatures tens of degrees Fahrenheit above normal for this time of year in some locations — Arctic sea ice, a key indicator of the overall state of this system, seems to be responding in kind. It is kind of unbelievable: On Nov. 19, the extent of Arctic sea ice was nearly 1 million square kilometers lower (8.633 million vs 9.504 million) than it was on that date during the prior record low year of 2012, according to data from the National Snow and Ice Data Center. On Nov. 20, the gap widened further, with 8.625 million square kilometers in 2016 versus 9.632 million in 2012. This is happening in a time of year when ice is supposed to be spreading across the polar ocean — yet instead, it is flat or even declining a little lately. “I think that it’s fair to say that the very slow ice growth is a response to the extreme warmth (still ongoing as of today),” said Mark Serreze, director of the National Snow and Ice Data Center in Boulder, Colorado, by email on Sunday. “Over the past few days, extent has actually decreased in the Arctic, and while I don’t think that such a short term decline is unprecedented for this time of year, it is highly unusual, for November is a month when we normally see a quite rapid ice growth.” And as if the Arctic data isn’t enough, at the very same time, ice around Antarctica is also pushing surprising new lows: Antarctic sea ice extent on Nov. 19 also represented a record low for this time of year, based on the center’s data. The dataset in question goes back to the year 1979. “Why Antarctic extent is also very low right now is something we are still puzzling over,” said Serreze. “However, there’s really no connection between the extreme mutual anomalies in the two hemispheres that we are aware of. We have to wait and see what happens. Having said this, things are getting weird in the polar regions.”
Global sea ice has reached a record low – should we be worried? - It’s an internet sensation. An alarming graph showing the global area of sea ice falling to unprecedented lows for this time of year has gone viral. The graph adds together the area of sea ice in the Arctic and Antarctic to show the global total. It was compiled by a contributor to the Arctic Sea Ice blog called Wipneus, rather than an official source, but it is accurate. The latest version can be found here. One scientist suggested the trend was due to a sensor error, but this is not the case. So, should we be worried? What’s happening in the Arctic would be impossible without a century of global warming causing a long-term decline in sea ice levels — but it is actually a short-term weather event. At this time of year, sea ice should be growing rapidly as winter sets in. But the cold air that usually sits over the pole has flowed south over Siberia, while warmer air has flowed north. This has resulted in temperatures an astonishing 20 °C warmer than usual, so sea ice is melting when it should be forming. Here’s what the temperature anomaly looks plotted out via Zack Labe of Cornell University: Today’s latest #Arctic mean temperature continues to move the wrong direction… up. Quite an anomalous spike! pic.twitter.com/C93cQWUKV9 In fact, it’s two weather events. On the other side of the planet, the sea ice around Antarctica is falling during the southern summer. The sea ice reached its maximum winter extent unusually early this year and has been falling fast, to a new record low for this time of year (see graph below). Antarctic sea ice is pretty much at an all time low for this time of year. pic.twitter.com/oqTdTpPCrr So, sea ice levels at both poles are much lower than the seasonal average.
Mysterious Winds Cause Rapid Melting of Antarctic Ice - A peculiar storm swept across the mountains of the Antarctic Peninsula in February of this year. Several scientists hunkered down in their tents as a torrent of horizontal-blowing snow washed through. The wind had scoured this snow off the surfaces of glaciers as it accelerated down the east side of the Peninsula’s mountains. When the winds finally let up, Pettit emerged from her tent to find the snow mushy beneath her boots. The temperature had topped 40 degrees Fahrenheit. Training her binoculars on the lower reaches of Starbuck Glacier, six miles to the east, she saw that it had taken on a bluish tint: The wind had melted enough snow to form hundreds of ponds on the glacier’s surface. It was just the sort of observation that Pettit and three other researchers had come here looking for. After studying Antarctica’s warming climate for decades, scientists are making a surprising discovery: In some places, much of that abnormal warmth is invading in the form of powerful, downhill winds called föhn (pronounced “fone”) winds. Pettit, a glaciologist from the University of Alaska in Fairbanks and a National Geographic explorer, now suspects that these winds contributed to a series of dramatic glacial collapses that have been steadily redrawing the map on the east side of the Antarctic Peninsula for the last 30 years. Föhn winds may have escaped scientists’ notice because they don’t just blow during summer—some of their most impressive heat waves actually strike in the dead of winter, eroding glaciers at a time of year that no one thought possible. “They seem to impart a lot more melt onto the ice shelf than we had imagined,” says Adrian Luckman, a glaciologist at Swansea University in the United Kingdom, who studies this region of Antarctica. The winds result from subtle changes in the atmospheric circulation due to climate warming; they could have major consequences.
World Energy Outlook 2016 and the Rebound Effect -- I've been asked to make some brief comments on the 2016 World Energy Outlook just published by the IEA at the ANU Energy Change Institute's 2016 Energy Update. It's a huge report, but I'll focus on the global projections for energy use and GHG emissions. I think that the IEA are still over-optimistic about the potential for energy intensity improvements and underestimate the future contribution of non-fossil energy. Under the "Current Policies" scenario they expect fossil fuels to have 79% of total energy in 2040 vs. 81% today. The current rapid growth of renewables under current policies makes me skeptical about that. The decline in world energy intensity is also more rapid than in recent decades. Three main scenarios used throughout the report are summarized in the following Figure: The "New Policies Scenario" includes policies from NDC's where the policy to implement the pledge appears to actually exist. The "450" Scenario is where policies that actually limit warming to 2 degrees C are implemented. Clearly, decarbonization is minimal under the current policies scenario and not that great under the new policies scenario. But the improvement in energy intensity is very large under all scenarios and does the vast majority of the work in reducing CO2 emissions. How plausible is this huge reduction in energy intensity? Here, I plot the historical global trend in energy intensity and the growth rates projected under the current and new policies scenarios:The current policies scenario projects an increase in the rate of reduction in energy intensity relative to the 1990-2015 mean. This is possible, the rate of change might accelerate, but I am skeptical. Just looking at the data, we see that in the last few business cycles, energy intensity rose or fell slowly after recessions compared with later parts of boom periods. So, we seem likely to go through other cycles like these. Another issue is that the Chinese economy might have grown slower than the government admitted to in the recent couple of years. This would have exaggerated the global decline in energy intensity but probably not be a lot. The main reason, is that energy efficiency improvements do not translate one-for-one to reductions in energy intensity. The rebound effect, which we are researching in our ARC DP16 grant, means that improvements in energy efficiency lead to increases in the use of "energy services" - like heating, lighting, transport etc. which mean that energy use does not decrease as much as it would if all the efficiency improvement flowed through to energy consumption.
Under Trump shadow, climate talks set 2018 deadline to agree rules | Reuters: Nearly 200 nations agreed around midnight on Friday to work out the rules for a landmark 2015 global deal to tackle climate change within two years in a new sign of international support for a pact opposed by U.S. President-elect Donald Trump. At the end of two-week talks on global warming in Marrakesh, which were extended an extra day, many nations appealed to Trump, who has called climate change a hoax, to reconsider his threat to tear up the Paris Agreement for cutting greenhouse gas emissions. Showing determination to keep the Paris Agreement on track, the conference agreed to work out a rule book at the latest by December 2018. A rule book is needed because the Paris Agreement left many details vague, such as how countries will report and monitor their national pledges to curb greenhouse gas emissions. Two years may sounds like a long time, but it took four to work out detailed rules for the 1997 Kyoto Protocol, the Paris Agreement's predecessor, which obliged only developed countries to cut their emissions. Paris requires commitments by all. The final text also urged rich nations to keep building towards a goal of providing $100 billion a year in climate finance for developing countries by 2020. Moroccan Foreign Minister Salaheddine Mezouar told a news conference that Marrakesh had been the start of turning promises made in Paris into action. "We will continue on the path," he said, urging Trump to join other nations in acting to limit emissions.
Donald Trump’s first staff picks all deny the threat of climate change - Ten days removed from the presidential election, President-elect Donald Trump has finally begun filling out his team, releasing a slew of offers for various high-level positions, from CIA director and attorney general to national security advisor.Unlike the Departments of State or the Interior, these posts have less of a direct impact on domestic and international climate and energy policy. But climate change is a problem that permeates all policy realms — especially national security.The Department of Defense has called climate change a “threat multiplier,” noting that it has the potential to exacerbate conflict and threaten national security. And in September, 25 military and national security experts — including former advisers to Presidents Ronald Reagan and George W. Bush — issued a report warning that climate change poses a “significant risk to U.S. national security and international security.” Middle East experts have suggested that the Syrian civil war is a contemporary example of a climate-driven conflict, one where widespread drought and crop failures helped tip the scale.Trump, on the other hand, does not believe in the scientific consensus on climate change. He has called climate change a “hoax,” and has vowed to roll back nearly every single climate policy enacted under the Obama administration, from the Clean Power Plan to the Paris climate agreement.So it should be no surprise that, when it comes to climate change, Trump’s first five advisers also reject the scientific consensus, as well as national security community’s warnings, regarding the dangers of global warming. Here’s a rundown of Trump’s first five staff picks, and how they stack up on climate change.
Donald Trump expected to slash Nasa's climate change budget in favour of sending humans back to the moon - and beyond: US President-elect Donald Trump is set to slash Nasa's budget for monitoring climate change and instead set a goal of sending humans to the edge of the solar system by the end of the century, and possibly back to the moon. Mr Trump, who has called climate change a "Chinese hoax", is believed to want to focus the agency on far-reaching, big banner goals in deep space rather than "Earth-centric climate change spending". According to Bob Walker, who has advised Mr Trump on space policy, Nasa has been reduced to "a logistics agency concentrating on space station resupply and politically correct environmental monitoring". Mr Walker, a former congressman who chaired President George W. Bush's Commission on the Future of the US Aerospace Industry, told The Telegraph: "We would start by having a stretch goal of exploring the entire solar system by the end of the century. "You stretch your technology experts and create technologies that wouldn't otherwise be needed. I think aspirational goals are a good thing. Fifty years ago it was the ability to go to the moon."
Trump to scrap Nasa climate research in crackdown on ‘politicized science’ - Donald Trump is poised to eliminate all climate change research conducted by Nasa as part of a crackdown on “politicized science”, his senior adviser on issues relating to the space agency has said. Nasa’s Earth science division is set to be stripped of funding in favor of exploration of deep space, with the president-elect having set a goal during the campaign to explore the entire solar system by the end of the century. This would mean the elimination of Nasa’s world-renowned research into temperature, ice, clouds and other climate phenomena. Nasa’s network of satellites provide a wealth of information on climate change, with the Earth science division’s budget set to grow to $2bn next year. By comparison, space exploration has been scaled back somewhat, with a proposed budget of $2.8bn in 2017. Bob Walker, a senior Trump campaign adviser, said there was no need for Nasa to do what he has previously described as “politically correct environmental monitoring”. “We see Nasa in an exploration role, in deep space research,” Walker told the Guardian. “Earth-centric science is better placed at other agencies where it is their prime mission. “My guess is that it would be difficult to stop all ongoing Nasa programs but future programs should definitely be placed with other agencies. I believe that climate research is necessary but it has been heavily politicized, which has undermined a lot of the work that researchers have been doing. Mr Trump’s decisions will be based upon solid science, not politicized science.”
Trump's Plan To Defund NASA's Climate Research Is... Yikes -- Today, The Guardian reported that President-Elect Donald Trump plans to defund NASA’s Earth Science Division to cut down on what a campaign advisor referred to as “politically correct environmental monitoring”. NASA may instead focus on a Cold War-era throwback space race to explore the cosmos, leaving climate research to other agencies. But NASA’s unique position as a space agency means that it has a view of Earth that other agencies like the National Oceanic and Atmospheric Administration (NOAA) are rarely afforded. Indeed, NOAA and NASA often partner on climate-monitoring projects like the recently launched GOES-R satellite or the DSCOVR climate observatory, which watches for space weather that can knock out electrical grids (among many other things). No one is denying that exploration is a core mission for NASA. The agency should be out exploring strange new worlds. But if we really want to explore other planets or moons in our solar system, shouldn’t we make sure we know what’s happening with our own first? Earth is not somehow a separate place from space. Our climate’s biggest driver is the light from our Sun, which drives wind and ocean currents, enables plants to grow, and makes the seasons change. Our moon controls the daily flow of tides around the Earth. Asteroid impacts have shaped not only the surface of the planet, but the path of life as it evolved. Our atmosphere is the only barrier between all known life and the vast vacuum of space. Understanding that fragile, thin envelope of air and wind can’t be accomplished by only studying what happens at the lowest level of our atmosphere, where it meet’s the Earth’s surface. If we want a full picture, we need to also monitor what’s happening at the atmosphere’s outer boundary, where it meets the great unknown.
Myron Ebell, Trump’s Nihilistic EPA Selection, Soft-peddled by the New York Times - The US press has generally played a dismal role in warning people of the imminent dangers of climate breakdown and upcoming thresholds beyond which humanity may not survive as an organized species or a species at all. The media should be every day reporting on both the record breaking temperatures of 2016 as well as alarming changes in the surface of the earth that have resulted and will likely result from the enormous heat. Questions for the recent 2016 US Presidential debates reflect the norms of disregard for climate among US pundits and the press, as no single question during the debates was posed that had anything directly to do with climate change and carbon constraints. That Donald Trump was able to win the electoral college, came close to frontrunner Clinton on the popular vote with 60+ million votes, and therefore win the Presidency on a platform that included straight-out “hard” climate denial is in part a function of the “soft climate denial” rampant in the “liberal” political elite and media. Hard climate denial, for that matter any climate denial, should in an adequately aggressive media environment, be viewed in 2016, by far the hottest year on record, as a disqualifier for high office. The mostly pro-Clinton elite media, in the latter part of the election, were supposedly either exposing or informing the public clearly about the implications and dangers of Trump’s positions, yet, as consistent with “soft climate denial”, treated Trump’s “hard climate denial” with avoidance and/or delicacy, seemingly out of fear or maybe, charitably, disbelief. Myron Ebell is one of these either true-believing or cynical “free market” ideologues who has shilled for both tobacco and fossil fuel interests most often via the Competitive Enterprise Institute. While, Ebell, a non-scientist, entered the arena of science commentary from a right-wing “free-market” philosophical view, this has not inhibited him from calling into question the conclusions and motives of climate scientists who, for the most part are trained scientists and rarely “profit” from predicting dire consequences for the biosphere, from fossil fuel use and human-caused disturbance of natural carbon stores. Ebell, as do other key climate denialists, specializes in throwing up a cloud of doubt about climate science and keeping the debate focused upon whether the climate is warming or any dangers of that warming not, crucially, how to stop that human-caused warming. Ebell, either cynically or credulously holds fast to the idea that the quasi-religious free market ideology and the “pathology of the will” that underlies it can substitute for a careful analysis of data from the non-human world, i.e. natural science. He thinks he can erase all of its inconvenient findings with a clever utterance or alternative non-scientific “spin” on the scientific findings.The New York Times has published a piece in which Ebell is presented in very gentle and even “heroic” terms. Below you see the headline as it originally appeared.
Climate summit chief pleads with Trump not to ditch Paris treaty -- The president of the COP22 climate summit in Marrakech has made a direct plea to the incoming US president Donald Trump to join the struggle against global warming for the sake of humanity and the planet. Salaheddine Mezouar, who is also the Moroccan foreign minister, had spent most of the week-long summit diplomatically trying to steer clear of questions about Trump, telling reporters at one point that “no one can stop history”. But asked for a direct message to the president-elect in the last question of the summit’s final press conference, Mezouar issued a heartfelt plea. “We count on your pragmatism as well as your commitment to the spirit of the international community, in a huge struggle for our future, for the planet, for humanity and the dignity of millions and millions of people,” he said. “This is about what our planet is going to be tomorrow, and what we are going to leave behind,” he added. Trump was a spectre haunting much of the COP proceedings and a final “Marrakech call” by nearly 200 nations yesterday affirmed their “highest political commitment” to combating climate change, in a thinly coded warning to the far-right tycoon. But his election did not prevent some of the world’s poorest countries from announcing a major emissions-cutting initiative before delegates boarded their planes home. In total, 48 nations promised to cut their carbon emissions dramatically and rapidly move to 100% renewable power as the UN climate summit in Marrakech drew to a close on Friday. Bangladesh, Ethiopia and the Philippines were among the countries which said they would now file plans for becoming zero-carbon societies by the middle of the century, in line with the Paris deal’s aspiration of limiting global warming to 1.5C. Al Gore, the former US vice-president, hailed the announcement as “a bold vision that sets the pace for the world’s efforts to implement the Paris agreement”.
Trump wants to dump the Paris climate deal, but 71 percent of Americans support it, survey finds - Since the election of Donald Trump as president, climate change has rushed to the front of the news because of Trump’s pledges to wipe away major U.S. attempts to address it. Of particular concern to scientists and environmentalists around the world is Trump’s vow to “cancel” U.S. participation in the Paris climate agreement, negotiated by nearly 200 countries late last year and the foundation for a global push to reduce greenhouse gas emissions, country by country. However, a new survey released by the Chicago Council on Global Affairs on Monday suggests that if Trump were to withdraw from the agreement, that may not be popular in the United States. The survey of 2,061 Americans, conducted in June, finds that 71 percent support the Paris deal, including 57 percent of Republicans — – a notable finding on a topic that, at least so far, does not seem to have received much polling attention. Here was the question asked, and the response:Note that the Paris agreement is so new that not all Americans may have even heard of it, but the one sentence description here is an accurate (if very brief) one.The finding, notes the Chicago Council, comports with Americans’ long-standing general support for international climate treaties, but it also somewhat masks deep disagreement about the reality and severity of climate change that persists between Democrats and Republicans. Those differences reappeared when respondents were asked whether they agreed that climate change is “a serious and pressing problem” that should be addressed even if there are “significant costs”:
Thwarting Trump’s Climate Change Rollback: The Green-State Climate Agreement -- In January Donald Trump will endorse climate denial, renouncing the Clean Power Plan and climate targets in general. This will damage the fragile global momentum toward emission reduction, established in last year’s Paris agreement. If the United States refuses to cooperate, why should much poorer, reluctant participants such as India do anything to cut back on carbon? Suppose that many of our state governments got together and told the rest of the world about our continuing commitment to action: we are still abiding by the U.S. pledges under the Paris agreement, or even planning to do more. Not just NGO reports, blog posts, or individual signatures, but an official, coordinated announcement from government bodies with decision-making power over emissions – primarily states, perhaps joined by Indian tribes and major city governments. The participating states could in theory be on either side of the partisan divide, but of course one side is more likely to sign on at present. Think of Green-State America, initially, as the states that voted for Clinton, and have either a Democratic governor or both houses of the legislature controlled by Democrats. (As it happens, that’s all the states that voted for Clinton except Maine and New Hampshire.) Those 18 states plus the District of Columbia account for 30 percent of U.S. greenhouse gas emissions. The governor or the legislative leadership of each state could sign the Green-State Climate Agreement, pledging their state to continued dialogue, cooperation, and rapid reduction in emissions. Tribal leaders and city mayors could do the same for their jurisdictions. Green-State America is the world’s fifth-largest emitter, behind only China, the rest of America, India and Russia. We emit more greenhouse gases than Japan, Brazil, or Germany. If we were a separate country, our participation would be essential to international climate agreements. Even though we are states rather than a nation, we might be able to help reduce the international damage, by letting the world know that much of America still cares about the global climate.
President Trump Will Use the Rest of World's Low Carbon Push to "Bring Home" U.S Jobs - As I read this NY Times piece, I had a premonition. President-Elect Trump will play the following strategy in his attempt to make America Great Again. He will withdraw from the COP 21 Carbon Mitigation treaty and intentionally enrage the rest of the world. These nations will respond by enacting the carbon tariff that the NY Times piece discusses. As this tariff goes up, President Trump will respond by raising U.S tariffs. International companies that export to the United States and that are energy intensive will have two incentives to relocate to the U.S. They would jump over the tariff wall and they would avoid the carbon tax in their current nation. U.S employment for low skill guys will rise. These new factories will locate in depressed areas of the nation where land prices are low and energy prices and wages are low. Erin Mansur and I study this point in our 2013 paper. A slightly funny point is that as the physical distance between U.S supply chains narrows (as input suppliers come home) that the transportation component of carbon emissions will decline. Who will lose if this dynamic plays out? U.S consumers will face higher prices and the U.S carbon emissions will actually rise. U.S exporters will face a cost increase for their products and they will redirect their sales to the U.S market. Will China keep its carbon tariffs in place if it is costing it export sales to the U.S?
Trump, in Interview, Moderates Views but Defies Conventions - -President-elect Donald J. Trump on Tuesday tempered some of his most extreme campaign promises, dropping his vow to jail Hillary Clinton, expressing doubt about the value of torturing terrorism suspects and pledging to have an open mind about climate change. But in a wide-ranging hourlong interview with reporters and editors at The New York Times — which was scheduled, canceled and then reinstated after a dispute over the ground rules — Mr. Trump was unapologetic about flouting some of the traditional ethical and political conventions that have long shaped the American presidency. He said he had no legal obligation to establish boundaries between his business empire and his White House, conceding that the Trump brand “is certainly a hotter brand than it was before.” Still, he said he would try to figure out a way to insulate himself from his businesses, which would be run by his children. He defended Stephen K. Bannon, his chief strategist, against charges of racism, calling him a “decent guy.” And he mocked Republicans who had failed to support him in his unorthodox presidential campaign. Continue reading the main story AdvertisementContinue reading the main story In the midday meeting in the 16th-floor boardroom of The Times’s publisher, Arthur Sulzberger Jr., Mr. Trump seemed confident even as he said he was awed by his new job. “It is a very overwhelming job, but I’m not overwhelmed by it,” he said.
Trump keeping 'open mind' on pulling out of climate accord | Reuters: U.S. President-elect Donald Trump said on Tuesday he was keeping an open mind on whether to pull out of a landmark international accord to fight climate change, in a softening of his stance toward global warming. Trump told the New York Times in an interview that he thinks there is "some connectivity" between human activity and global warming, despite previously describing climate change as a hoax. A source on Trump's transition team told Reuters earlier this month that the New York businessman was seeking quick ways to withdraw the United States from the 2015 Paris Agreement to combat climate change. But asked on Tuesday whether the United States would withdraw from the accord, the Republican said: “I’m looking at it very closely. I have an open mind to it." A U.S. withdrawal from the pact, agreed to by almost 200 countries, would set back international efforts to limit rising temperatures that have been linked to the extinctions of animals and plants, heat waves, floods and rising sea levels. . Trump, who takes office on Jan. 20, also said he was thinking about climate change and American competitiveness and "how much it will cost our companies,” he said, according to a tweet by a Times reporter in the interview. Two people advising Trump’s transition team on energy and environment issues said they were caught off guard by his remarks.
Trump Admits Human Link To Climate Change After Earlier Calling It A Chinese Hoax - Donald Trump said Tuesday he thinks there is “some” connection between human activity and climate change. It was a puzzling half-turn by the president-elect, who has called climate change a “hoax” numerous times, and in 2012 said it was invented by the Chinese. His tune changed ― kind of ― during an interview with The New York Times. Does Trump think human activity is linked to climate change? “I think there is some connectivity. Some, something. It depends on how much.” Trump said he is worried about the “cost” to American companies of policies and regulations meant to mitigate the effects of global warming. He also left the door open to the U.S. keeping its commitment to the Paris climate accord, which the Obama administration joined last year with nearly 190 other countries. The historic agreement set a cap on global warming at “well below” 2 degrees Celsius above pre-industrial levels. It marked the first time rich and poor nations agreed to reduce greenhouse gas emissions and to help each other adapt to droughts, rising sea levels and other impacts of global warming.
Washington Won’t Have Last Word on Climate Change - Michael Bloomberg - In the wake of the presidential election, there has been much speculation about whether the U.S. will fulfill the pledges our nation made in Paris. Last week, China’s chief climate negotiator, Minister Xie Zhenhua, said that no matter what the U.S. does, China will remain committed to taking action. That’s a responsible thing to do for the Chinese people and the world. I can’t tell you what Donald Trump's administration will do -- and in all fairness, they will need time to figure it out themselves. What’s said on the campaign trail is one thing; actually carrying out a specific policy is another. I hope they’ll recognize the importance of the issue. But I am confident that no matter what happens in Washington, no matter what regulations the next administration adopts or rescinds, no matter what laws the next Congress may pass, we will meet the pledges that the U.S. made in Paris. The reason is simple: Cities, businesses and citizens will continue reducing emissions, because they have concluded -- just as China has -- that doing so is in their own self-interest. The U.S.’s success in fighting climate change has never been primarily dependent on Washington. Bear in mind: Over the past decade, Congress has not passed a single bill that takes direct aim at climate change. Yet at the same time, the U.S. has led the world in reducing emissions. That progress has been driven by cities, businesses and citizens -- and none of them are letting up now. Just the opposite: All are looking for ways to expand their efforts. Mayors and local leaders around the country are determined to keep pushing ahead on climate change -- because it is in their interest to do so. Over time, as more and more Americans come to recognize what climate change means to their families and their futures -- by seeing the increasingly severe impact of storms, droughts and other weather events -- they will demand action from the federal government, too. But in the meantime, mayors and other local officials will lead the way.
Canada gives $3.3bn subsidies to fossil fuel producers despite climate pledge - Canada’s attempt to act on climate change is being undermined by $3.3bn in government subsidies flowing to oil and gas producers in the country a year, a new report has warned. The prime minister, Justin Trudeau, has vowed to place a national price on carbon dioxide emissions by 2018. Last week, Trudeau said he would not be deterred by the election as US president of Donald Trump, who has called climate change a “hoax”, and would forge ahead with the plan to “show leadership that quite frankly the entire world is looking for”. But a study by four major Canadian environmental groups has shown that carbon pricing risks being undermined by billions of dollars in subsidies to fossil fuel interests, from both federal and provincial governments. The $3.3bn annual subsidy, made up of extraction incentives and research and development, amounts to paying polluters $19 for each tonne of carbon dioxide they emit, according to the green groups. This would conflict, they say, with the planned carbon price, which will ramp up to $50 a tonne by 2022.“This system is like taxing consumers when they buy cigarettes while giving massive tax breaks to tobacco companies that encourage them to produce more cigarettes. It doesn’t make sense,” said Alex Doukas of Oil Change International. Dale Marshall of Environmental Defense added: “Unless Canada phases out massive subsidies to oil and gas companies, Trudeau’s carbon price will do little to encourage polluters to cut carbon emissions. The $3bn in annual subsidies could be put to much better use by investing in climate action, healthcare or other initiatives.”
Poor countries are carbon-shaming rich ones into doing more about climate change - There’s an irony at the heart of climate change. Rich, industrialized nations created and have historically benefitted from most of the world’s carbon emissions, and those with large and fast-growing economies are pumping out carbon in an effort to catch up. But it’s the countries that are still poor that will feel the effects first. Now, those countries at the sharp end of climate change are shaming the energy-intensive giants. Last week, 47 vulnerable countries promised to try to move to 100% renewable energy by 2050. And they want to push places like the US and China—the world’s top emitters, which still get most of their energy from coal and gas—into making similar commitments. “We don’t know what countries are still waiting for to move towards net carbon neutrality and 100% renewable energy,” said Edgar Gutierrez, Costa Rica’s minister for energy and the environment. “All parties should start the transition, otherwise we will all suffer.”Costa Rica is ahead of the curve. For much of the year the country uses its large hydropower resource to produce all the electricity it needs.Only a handful of countries make enough electricity from renewables to call themselves 100% green. For most, it will take two big changes to really make the move: better storage of energy, which requires breakthroughs in battery technology, and (a related challenge) moving all transport to renewable fuels.The Climate Vulnerable Forum (CVF), which made the statement on 100% renewable power on Nov. 18 at this year’s global meeting on climate in Marrakech, Morocco, is a collection of countries that first organized back in 2009, and have lately become increasingly vocal. It includes several island nations such as the Marshall Islands and the Maldives, which are particularly vulnerable to rising sea levels, and countries in Africa where droughts and other extreme weather are exacerbating existing problems like lack of food. At the COP21 meeting in Paris last year, where countries agreed to limit global warming to below 2ºC, the CVF called for a more ambitious upper limit of 1.5ºC.
Massachusetts AG 'surprised' at deposition order in Exxon case - U.S. District Judge Ed Kinkeade in Dallas on Thursday ordered Massachusetts Attorney General Maura Healey to appear in the city on Dec. 13 to face questions from Exxon lawyers. The company claims her probe into the company’s public statements about global warming is politically motivated. New York Attorney General Eric Schneiderman, who is running a parallel investigation into Exxon, was added to the company’s lawsuit last week. He’s fighting to avoid being deposed, but was "advised" by the judge to appear in Dallas on the same date. Douglas Gansler, the attorney general of Maryland from 2007 to 2015, said he’s never heard of an instance where a company under investigation by a state sues and wins permission to question law-enforcement officers. "Not only is it unusual, it’s unprecedented," Massachusetts, New York and other states are investigating whether Irving, Texas-based Exxon violated securities laws and consumer-protection rules by withholding from investors information allegedly obtained as early as the 1970s that man-made emissions were changing the climate and may impact its businesses. The states are also looking into whether Exxon has properly accounted for its oil-and-gas reserves following a global drop in prices. Exxon has denied the allegations, saying the valuation of its assets meets all legal standards. “For the first and only time, a federal judge is forcing the chief law enforcement official of a state to disclose sensitive sources and methods before even being allowed to gather evidence,” Campbell said in an e-mailed statement. “Drug lords and mobsters will use this ruling as a new shield against investigation and prosecution.” Schneiderman filed his own lawsuit against Exxon in state court in New York, saying the company has failed to comply with a demand for records about the impact of climate change on the valuation of its assets. The state’s top cop claims Exxon is likely delaying in the hope that it’ll succeed in the Texas case before the company is forced to hand over the documents.
US biofuels industry heartened by EPA's 2017 blending mandate: The US Environmental Protection Agency on Wednesday released its final 2017 biofuel blending mandate, with higher requirements that has some in the biofuel industry feeling grateful before the Thanksgiving holiday. Wes Swift, associate editor for agriculture, and Josh Pedrick, associate editor for biofuels, break down the numbers for ethanol, biodiesel and more, as well as feedback from the industry, early reactions in the biofuels and RINS markets and how the long holiday weekend may put a wrinkle in immediate market reactions. See the biofuel blending mandate specifics here.
Filling Up the Gas Tank with Corn, Sugar Cane, and Wood – RegBlog - Whether they know it or not, many drivers around the United States already fill their gas tanks with something other than pure gasoline. And under a new proposed rule from the U.S. Environmental Protection Agency (EPA), they soon may be filling up their tanks with more corn, sugar cane, and wood than ever before. The fuel industry has blended ethanol—a renewable fuel made from corn, sugar cane, and other plant materials—into U.S. gasoline for decades, giving the renewable fuel a supporting rather than leading role in powering American drivers. But this paradigm could change in the near future, according to the EPA. EPA recently proposed several updates to the standards that govern ethanol and other renewable biofuels, aiming to further encourage their production, distribution, and use. Most of the gasoline now sold in the United States already contains a small percentage of ethanol because existing regulations mandate adding renewable fuel to traditional fuels. In the United States, fuel manufacturers mainly use corn to produce ethanol, but scientists continue to develop and apply methods of making ethanol from new sources such as food waste and previously overlooked plants. With its proposed rule, EPA intends to strengthen existing renewable fuel standards through several methods: re-labeling fuel blends that include between 16 and 83 percent ethanol as a brand new category called “ethanol flex fuel” rather than gasoline; reducing regulatory burdens for producers who process their biofuels at multiple facilities; and approving new biofuel sources such as separated food waste and wood. Increasing support for biofuels, EPA argues, will advance national climate change goals by reducing greenhouse gas emissions. The Agency notes that although all gasoline engines can use the low-ethanol fuel blends currently in the market, only vehicles equipped with specialized engines would be able to use the “ethanol flex fuel” covered in the proposed rule, thus limiting the fuel’s reach. The U.S. Department of Transportation and U.S. Department of Energy estimate that, of the approximately 260 million vehicles in the nation today, just 20 million contain the engines necessary to use these newer fuel blends. And, of these drivers, many remain unaware that their vehicles can use flex fuels.
Oil company announces installation of solar panels at 5,000 gas stations, first step to convert them into EV charging stations? - Total, the major French multinational oil and gas company, announced today a $300 million investment to install about 200 MW of solar capacity at 5,000 gas stations around the world. The investment is being presented as a way for Total’s operations to reduce its carbon footprint, but what if its the first step to convert the gas stations into electric vehicle charging stations? As the global car fleet transition from being powered by gasoline and diesel to being powered by electricity, the refueling infrastructure is also bound to change. Gas stations have already mostly all become convenience stores, but they still depend on the traffic from drivers refueling their tanks. Obviously, we will need less charging stations than gas stations when electric vehicles will be more common since the majority of the charging happens at home, but a significant number of stations will still be required for long distance travel and for EV owners without home access to charging, like apartment dwellers. If you are to offer charging, you might as well produce the electricity from solar energy on location where it is economically viable, which is far from being everywhere yet, but it is quickly expanding in different markets. Total didn’t specify where its new solar installations will be deployed other than at “5,000 of its service stations worldwide” including “800 in France” and they will be deployed over the next five years. The panels will be supplied by Sunpower, which is owned by Total.
Trump urges British allies to lobby against windfarms near golf courses - The president-elect said he was “dismayed that his beloved Scotland has become overrun with ugly wind farms which he believes are a blight on the stunning landscape”, according to a member of the delegation that came with the UKIP leader, Nigel Farage, to meet Trump on the first weekend after his shock election win. Andy Wigmore, the communications director for Leave.EU – the successful Brexit campaign led by Farage – said Trump urged the group, which included UKIP’s major donor Arron Banks, to campaign against the spread of windfarms in Scotland. “He has a bugbear,” Wigmore said. “He doesn’t like windfarms at all. He said ‘When I look out of my window and I see these windmills, it offends me. Nigel, Arron, Andy, you have got to do something about these windmills.’ “He said: ‘Let’s put them offshore, but why spoil the beautiful countryside.’ So he has asked us to campaign about getting rid of windfarms in the way they currently stand. I don’t want Scotland, the most beautiful country ever to be sullied by these awful windmills.” Nick Eardley (@nickeardleybbc)@realDonaldTrump used meeting with @Nigel_Farage to renew criticism of wind farms in Scotland, says attendee @andywigmore pic.twitter.com/1FQS6d0HWg Trump did not dispute the conversation during a meeting with New York Times staff on Tuesday, according to journalist Maggie Haberman.
Chinese solar firm to build plant in Chernobyl exclusion zone | Reuters: Two Chinese firms plan to build a solar power plant in the exclusion zone around the Chernobyl nuclear reactor, which has been off limits since a devastating explosion contaminated the region with deadly radiation in 1986. GCL System Integration Technology (GCL-SI), a subsidiary of the GCL Group, said it would cooperate with China National Complete Engineering Corp (CCEC) on the project in Ukraine, with construction expected to start next year. "There will be remarkable social benefits and economic ones as we try to renovate the once damaged area with green and renewable energy," Shu Hua, the chairman of GCL-SI, said in a press release. The 1-gigawatt plant was part of the group's plan to build an international presence, he added. CCEC, a subsidiary of state-owned China National Machinery Industry Corp, will be in overall charge of the project, while GCL-SI will provide and install solar components. GCL-SI did not say how much it would cost. The Chernobyl reactor, which is due to be covered next year by a 1.5 billion euro ($1.6 billion) steel-clad arch, is surrounded by a 2,600 square km (1,000 square mile) exclusion zone of forest and marshland. GCL-SI would not disclose exactly where the solar plant would be built, but a company manager told Reuters that the site had already gone through several rounds of inspections by the company's technicians.
IEA: $44 trillion in energy investment won’t limit climate change to 2 degrees - The world will need to invest $44 trillion in the global energy supply, and another $23 trillion in energy efficiency, to cover the growth in energy demand through 2040 and meet current policy goals. The findings from the International Energy Agency’s newly released World Energy Outlook only take into account policies put in place by mid-2016, and so they do not include any pledges as part of the Paris climate agreement that have not yet been codified as policy. The IEA states that with current policies, “This is sufficient to slow the projected rise in global energy-related CO2 emissions, but not nearly enough to limit warming to less than 2 [degrees Celsius].” Of the $44 trillion, only about 20 percent will go to renewable energy under the business-as-usual scenario. The investment will not only fail to meet the target of limiting global warming to 2 degrees Celsius, but it will also leave hundreds of millions of people without basic energy services up through 2040. Currently, about 1.2 billion people lack basic access to electricity, and more than a billion additional people only have unreliable access to modern energy services. The report was also issued before the most recent U.S. election, which has thrown into question the United States' degree of commitment to the Paris Agreement. Without investment and commitment from the U.S., other countries would likely have to step up their efforts even further. The IEA would not comment on how the recent U.S. elections could alter its forecasts. To get to even a 50-50 chance of achieving the Paris climate goals of limiting temperature rise to 2 degrees Celsius, it would not require more investment, according to the IEA. In fact, the investment would be $4 trillion less for energy supply, although energy efficiency spend would need to rise by $12 trillion to $35 trillion by 2040.
Canada will dump its coal power plants by 2030 - While US President-elect Trump has promised to bring jobs back to the coal-mining industry despite market forces favoring cheaper natural gas, America’s northern neighbor is pressing to move beyond the fuel that started the Industrial Revolution. On Monday, Minister of Environment and Climate Change Catherine McKenna announced a plan to completely phase out coal-burning power plants by 2030—unless those plants capture and store their carbon dioxide emissions. Although fossil fuels only account for about 20 percent of Canada’s electricity due to a significant amount of hydroelectric power, coal is responsible for about three-quarters of energy CO2 emissions. That's equivalent to the emissions of 1.3 million cars, the government said. In October, Prime Minister Justin Trudeau announced that all provinces would be required to implement carbon emissions pricing programs by 2018. British Columbia has had a carbon tax since 2008, while Alberta will have a carbon tax starting on January 1. Ontario and Quebec are already operating carbon cap-and-trade schemes. Either sort of program will fulfill the requirement as long as the price per ton of emissions meets the federal standard. While Canada currently gets about 80 percent of its electricity from “non-emitting sources” (renewables and nuclear), it is aiming to hit 90 percent by 2030. The overall goal is to reduce Canada’s greenhouse gas emissions by 30 percent below 2005 levels by 2030.
Can Trump Really Make U.S. Coal Great Again? - Yves Smith - Not surprisingly, coal country largely voted for Trump, including Pennsylvania, which although considered a battleground state, voted for the Democratic candidate in the previous six elections. The election of Trump instilled some hope into the coal mining industry, especially compared to the Clinton alternative. That said, even if Trump were to be able to single-handedly change all the anti-coal energy rules, there are real economic factors that could hinder coal demand and prevent mining jobs from returning to the highs seen in the 1970s. The first of these real factors is the fact that there is now abundant and cheap natural gas, courtesy of the U.S. shale revolution of the past decade, which is burning coal’s market share as an energy source. Then, there’s the global drive toward cleaner energy, and even if the U.S. President-elect is skeptical about global warming and climate change, the fact remains that the world continues to push for cutting carbon dioxide emissions and reducing carbon footprints. Next, projections for the global coal consumption for the next two decades are not rosy, mainly because China is trying to diversify its fuel mix in its fight against air pollution. Some electric utility officials in the U.S. see the development of new coal-fired generation as very difficult as well. Last but not least, the number of mining jobs is unlikely to return to the 1970s boom, not only because of the current state of the industry, but also because technology and higher-mechanized forms of mining are increasingly being used in lieu of human labor.
Coal prices wait on China production and winter severity - Energy Spotlight podcast - S&P Global Platts editors Jacqueline Holman and Cameron Carswell discuss recent moves in European and Asian thermal coal markets, from the rapid increase in prices which saw the Australian market hit $115.50/mt FOB for 6,000 NAR kcal/kg cargoes, to the more recent price retreat and where the market might head next. Download a transcript of the podcast (PDF).
Final Nail in Indian Point's Coffin? - In a unanimous decision, the New York State Court of Appeals Monday upheld a state agency's right to review applications for renewal of federal licenses to operate two Indian Point nuclear power plants for another 20 years, delivering a setback to the facilities' owner, Mississippi-based Entergy Nuclear. Indian Point's two remaining operating reactors reached the end of their original 40-year operating licenses in September 2013 and December 2015. New York state Gov. Andrew Cuomo and former Sec. of State Hillary Clinton have argued for closing down the plants due to its proximity to the New York metropolitan area. Twenty million people live within a 50-mile radius of Indian Point, which lies along the east bank of the Hudson River, about 30 miles north of New York City. The Ramapo Fault system, which saw a 3.8-magnitude earthquake in 1985, lies near the plant. "This decision effectively stops the Nuclear Regulatory Commission from re-licensing Indian Point." The New York Department of State had asserted its right to review Entergy's applications under the Coastal Management Program. Entergy argued that it was exempt. In its decision , the Court of Appeals wrote, "Entergy's current application for a license to operate the Indian Point nuclear reactors for an additional 20 years is a new federal action, involving a new project, with different impacts and concerns than were present when the initial environmental impact statements were issued over 40 years ago." In recent years, the aging plants have had their share of trouble . In 2010, 600,000 gallons of radioactive steam were released into the atmosphere and radioactive water leaked into the groundwater earlier this year. A transformer blew up in 2010 and another failed in 2015, causing a shutdown of Reactor 3. Environmental concerns have dogged the Indian Point facility since the first plant, now decommissioned, opened in 1962. Hudson River water cools the reactors, killing about one billion small fish and fish larvae each year as they are sucked into the cooling system.
Powerful M7.3 Earthquake Strikes Japan Off Coast Of Fukushima, Tsunami Warning Issued -- A powerful earthquake, with a preliminary magnitude of 7.3 on the Richter scale has struck Japan, 156 miles from Tokyo, off the coast of Fukushima, the site of the 2011 natural disaster and tsunami that resulted in the worst nuclear power plant disaster since Chernobyl. MAP: Tsunami warning issued for Fukushima Prefecture in #Japan. Tsunami advisories for areas surrounding after powerful quake. #breakingpic.twitter.com/pnPU7kiqdL Some seismic reports have the #quake off #Fukushima, #Japan at M7.3.https://t.co/7SXCpLpUjE #VOAalert pic.twitter.com/HgoV8wAKcE Worst of all, a warning for a possible 3 meter Tsunami in Fukushima has been issued according to media reports. The Tsunami is expected to hit Fukushima within minutes. Developing.
New Quake Tests Resilience, and Faith, in Japan’s Nuclear Plants - There was no avoiding fearful memories of the Japanese nuclear disaster of 2011 on Tuesday morning after a powerful earthquake off the coast of Fukushima caused a cooling system in a nuclear plant to stop, leaving more than 2,500 spent uranium fuel rods at risk of overheating.But this time, the Tokyo Electric Power Company, or Tepco, the utility that operates three nuclear plants, restored the cooling pump at the Fukushima Daini plant in about an hour and a half. The Daini plant is about seven miles south of Fukushima Daiichi, the ruined plant where three reactors melted down five years ago after tsunami waves inundated the power station and knocked out backup generators.Tepco reported that it never lost power at either the Daini plant or its neighbor to the north after the Tuesday quake, which had a magnitude of 7.4, according to the Japanese weather service. “We took the regular actions that we should take when handling troubles,” Yuichi Okamura, acting general manager of the nuclear power division at Tepco, said at a news conference on Tuesday.The company was prepared for big tsunamis, having built sea walls rising to about 46 feet at the Fukushima plants and enclosing backup generators in waterproof facilities, Mr. Okamura said. Critics of Tepco, which struggled to keep on top of a crisis that unfolded over the weeks that followed the calamity in 2011, said they were relieved that there had been no immediate damage. But they said they remained skeptical that the company had done enough to prepare for a disaster on the scale of the earthquake five years ago. That quake, which had a magnitude of 8.9, set off tsunami waves as high as 130 feet in some places. (The highest waves on Tuesday reached about 55 inches.)
Vietnam abandons plan for first nuclear power plants | Reuters: Vietnam's National Assembly voted on Tuesday to scrap plans to build two multi-billion-dollar nuclear power plants with Russia and Japan, parliament delegates said, after government officials cited lower demand forecasts, rising costs and safety concerns. The parliament vote was taken in a closed session after delegates discussed a government proposal to abandon the project earlier this month. In November 2009 Vietnam approved the project to build the two plants and awarded construction to Russia's Rosatom and a consortium of Japanese firm led by private utility-led Japan Atomic Power.
6th Circuit upholds dismissal of challenge to Ohio land used for fracking | Reuters: A U.S. appeals court has upheld dismissal of a whistleblower lawsuit brought by Ohio residents who argued a watershed district improperly granted leases for oil and gas exploration on land deeded to it by the federal government for flood control. The three residents, who oppose hydraulic fracturing, argued the Muskingum Watershed Conservancy District's sale of the lease rights to private companies violated a 1949 deed and required the property to revert back to the federal government. To read the full story on Westlaw Practitioner Insights, click here: bit.ly/2fqhnWp
Ohio Residents Lose Fight Over Fracking Leases - – Fracking can continue in 18 Ohio counties after the Sixth Circuit ruled that leases for oil and gas reserves do not violate the state’s deed to the land.The Muskingum Watershed Conservancy District, a political subdivision of the state also called MWCD, covers one-fifth of Ohio and was created to manage flooding and conserve water in the southeastern part of the state.Five years ago, the district, which includes 18 Ohio counties, executed the first of several lease agreements granting private firms the right to develop oil and gas reserves on land granted by the federal government in 1949, including the right to use the controversial hydraulic fracturing, or fracking, extraction method. Ohio residents, led by plaintiffs Leatra Harper, Leslie Harper and Steven Jansto, opposed the plan to allow fracking in the watershed.Studies have raised serious concerns that the chemicals used in fracking wells, including bromic acid and hydrochloric acid, may contaminate groundwater and pose hazardous risks to humans and wildlife.With legal support from the Southeastern Ohio Alliance to Save Our Water, the residents used the terms of the federal government’s deed of land against the district.They argued that MWCD’s effort to lease fracking rights was an “attempt to alienate” the land, because it was no longer being used for recreation, conservation or reservoir development. Under the terms of the deed, the lease agreement allegedly triggered the reversion of the land back to the federal government.However, the federal government declined to intervene in the action, and a judge dismissed the lawsuit based on the False Claims Act’s public-disclosure provision, finding the residents did not show they were original sources of the information in the leases.The Sixth Circuit affirmed Monday that the residents have no viable challenge to the district’s fracking leases.
Investigating the Health Impact of Fracking - Yale News - Elise Elliott, a fifth year doctoral student in Public Health, is conducting research on the front lines of the debate over the health effects of fracking. To better understand the possible health effects of fracking, Elliott led a team of scientists from Yale to eastern Ohio, where fracking began in 2011 and has expanded dramatically over the past five years. They collected water and air samples and administered health questionnaires to 66 residents of Belmont County, looking at reported health problems and studying environmental pollutants. They used residential proximity to gas wells to compare their findings. Elliott designed, planned, and implemented the study, overseen by Professor Deziel.“Quantification of the potential exposure to toxic and carcinogenic chemicals by monitoring drinking water and air in people’s homes is a critical factor in understanding the public health impact of hydraulic fracturing,” says Elliott. She first became interested in environmental health issues when she learned about the chemical contamination of drinking water sources. Following the fieldwork in Ohio, Elliott worked with a team at Yale to analyze the water samples for the presence of organic compounds related to fracking. Limited earlier studies have suggested an increase in hospitalizations, adverse birth outcomes, and respiratory or skin irritation in areas where hydraulic fracturing occurs. The analysis is ongoing, and when it is complete, the new data will provide insight into whether contaminants are present and whether they are associated with elevated health problems in Belmont County.
Abandoned oil and gas wells are still leaking methane The development of oil and gas has a 150-year history in the US, with wells stretching across the nation from California to Texas to Pennsylvania. We continue to reap the benefits of the infrastructure we built in earlier eras. But the downside to this long history comes in the form of millions of abandoned, poorly documented wells scattered throughout the country. Recently, a team of researchers examined some of the abandoned wells in Pennsylvania to build a better picture of how this history continues to impact us today. Measurements of methane emissions revealed that abandoned wells may still be a significant source of methane to the atmosphere. Methane is one of the more common greenhouse gases, and its warming potential is 86 times greater than carbon dioxide over a 20-year period. So limiting methane emission is an important strategy to curb global warming. Unfortunately, little is known about the ways old wells contribute to methane emissions because they are outside of our greenhouse gas emission inventory system. Despite the long presence of these wells in the US, there isn't much data about what happens to them after they're abandoned. Many attributes can influence leakage, including depth, plugging status, well type (oil or gas), geographic location, and abandonment method. To tackle this problem, a group of researchers analyzed a compilation of historical documents and modern databases, and they also did some present-day field work. During the field investigations, the scientists visited numerous Pennsylvania wells to measure the flow rate of methane, the presence of different carbon isotopes in the methane, and the concentration of a variety of other gases. Their analysis focused on a few key well attributes, including depth, plugging status, well type, and proximity to subsurface energy extraction and coal mining.
Natural Gas Gains as Winter Weather Approaches - Natural gas price rose to a three-week high on Monday, as colder weather boosted optimism over demand for heating consumption. Futures for December delivery settled up 10.7 cents, or 3.8% to $2.950 a million British thermal units on the New York Mercantile Exchange. Prices traded at the highest level since Oct. 31, and were up three of the past four sessions. The natural gas market has been under pressure from warmer-than-average temperatures this month, as well as a record level of supply in storage. However, the approach of the winter season and colder temperatures has given prices a boost, as investors bet that heating demand will pick up and help work through high levels of inventory. “The market now agrees that some cold weather is coming,” said Kent Bayazitoglu, director of market analytics at Gelber & Associates, in a client note. “For more than a month, there have been multiple indicators of this occurring…Finally these indicators are starting to play out.” Exports of natural gas have also exceeded imports this month, which analysts have read as a positive development for future demand. “Once touted as potentially the largest importer of LNG globally, the U.S. just completed its natural gas market 180,” Barclays analysts wrote in a Sunday note. “Export levels should continue to grow, something we see as supportive of U.S. natural gas prices.” However, without a substantial pick up in winter demand, natural gas prices may still face challenges in the coming months, traders said. “Unless we just get severe cold for over a month, I don’t think you’re going to see this turn into a major bull market,”
Natural Gas Prices Rise to 3-Week High on More-Normal Temperatures - WSJ: Natural gas prices closed at a three-week high on Tuesday, as forecasts for more-normal temperatures in the coming weeks boosted the outlook for demand. Futures for December delivery settled up 3.2 cents, or 1.1% at $2.9820 a million British thermal units on the New York Mercantile Exchange, the highest close since Oct. 31. Prices have risen in four of the past five sessions. Forecasts for cooler temperatures have helped boost natural gas prices, after weeks of warmer-than-average weather have weighed on demand. Andy Huenefeld, price-risk manager at Kinect Energy Group, formerly known as U.S. Energy Services, said the market transition into the winter season has helped support prices, as cold weather should lead to withdrawals from record high storage levels. “We are seeing expectations for heating... kind of ramp up over the past several days,” Mr. Huenefeld said. Investors are also looking to storage numbers from the U.S. Energy Information Administration, scheduled for release on Wednesday, which will signal whether demand is impacting record inventory numbers. Analysts and brokers surveyed by The Wall Street Journal expect an average of 4 billion-cubic feet to have been added to inventories in the week ended Nov. 18. Trading activity will be muted for the shortened holiday week, analysts noted. Going forward, prices should depend largely on whether the winter season will lead to an uptick in demand, as natural gas is largely used to heat homes in the U.S., and prices rise with colder temperatures.
Natural Gas Prices Rise on Cooler Weather -- Natural gas prices rose to a one-month high, as cooler forecasts continue raising expectations for increased demand. Natural-gas futures for December delivery settled up 5.9 cents, or 1.9%, at $3.085 a million British thermal units on the New York Mercantile Exchange. A five-session winning streak has produced gains of 14% and the best two-week run since the end of 2015. The December contract gained 24.2 cents, or 8.5%, this week. The December contract expires on Monday and options expired at Friday’s settlement, which came early because of the U.S. Thanksgiving holiday weekend. The more actively traded January contract gained 5.5 cents, or 1.8%, to $3.202/mmBtu. Friday’s weather forecasts were mixed, broadly predicting some below-average temperatures settling in, though not temperatures as cold as previous forecasts’. That matters less, though, because the longer-term trend has been a return toward normal, cool temperatures for late November, seemingly an end to the historic warmth that started the autumn, said Tom Saal, a broker at INTL FCStone Latin America in Miami. About half of U.S. homes use natural gas for heat, making winter weather the most-common driver for demand and prices. Autumn is usually the time when traders position themselves for the winter-heating season, and many this year have been betting that a decline in drilling activity and record gas consumption from power plants will start erasing a glut that has plagued the market. “Let’s just call it a normal winter or close-to-normal winter, that all in itself has a chance to eat away at” the glut, said Dean Hazelcorn. “There’s no reason not to like natural gas.”
US EIA says Gulf Coast jet production highest on record - The amount of jet fuel produced by US Gulf Coast refiners reached its highest level ever recorded during the week ended November 18, Energy Information Administration data showed Wednesday. Gulf Coast jet output climbed 24,000 b/d to 946,000 b/d, reaching its highest level since EIA began reporting it in 1990. "Probably one of the reasons [I am] hearing jet getting smoked," said a jet trader. Airlines have been ramping up service heading into the Thanksgiving holiday weekend, and that was reflected in jet fuel demand figures last week. EIA said product supplied, which measures demand, climbed 374,000 b/d to 1.92 million b/d. That marked its highest level since reaching 1.96 million b/d on October 20, 2000. November 18, marked the start of the airlines' Thanksgiving travel season. Airlines for America predicted that 27.3 million passengers will travel on US airlines through November 29, a year-on-year increase 2.5%. The airlines have added capacity to accommodate the increased demand. S&P Global Platts assessed benchmark Gulf Coast 54 grade jet fuel on Colonial Pipeline at the NYMEX December ULSD futures contract minus 13.50 cents/gal Tuesday, unchanged from Monday.
Drill, baby, drill? Election reignites offshore-oil debate - The controversy over drilling for oil in the Atlantic Ocean has been reignited by the election of Donald Trump, and environmentalists and coastal businesses say it could be the first major fault line that divides them from the new president. The Obama administration has moved to restrict access to offshore oil drilling leases in the Atlantic, as well as off Alaska. Commercial oil production has never happened off the East Coast - and environmentalists consider that a major victory during Obama’s tenure. But President-elect Trump has said that he intends to use all available fuel reserves for energy self-sufficiency - and that it's time to be opening up offshore drilling. While supporters say that expanded oil exploration is poised to become one of Trump’s signature accomplishments, environmentalists and other opponents see oil drilling policy as a looming conflict. Jacqueline Savitz, vice president of the ocean conservationist group Oceana, said she fears a return to the hard-fought struggles environmentalists faced with the previous Republican administration. "We’re hoping we’re not about to fall back into the “drill, baby, drill” way of thinking," she said. "Offshore drilling in the Atlantic is not a good investment." The American Petroleum Institute, a key voice of the oil and gas industries, has long said more aggressive drilling is needed for the U.S. to remain a world leader in energy production. The group accused Obama in May of lacking a long-term "vision" for fossil fuels extraction; its leaders say that Trump's presidency represents a new dawn and that they intend to hold him to his word about fossil fuels.
What happens when Texas becomes a net natural gas demand region - Some 3.2 Bcf/d of new LNG export capacity will be coming online along Texas’s Gulf Coast over the next two and a half years, and 8 Bcf/d of new natural gas pipeline capacity is under development to transport vast quantities of gas through Texas to the Mexican border. But while gas-export opportunities abound, Texas gas production is down, mostly due to a big fall-off in Eagle Ford output, so exporters will need to pull gas from as far away as the Marcellus/Utica to meet their fast-growing requirements. That will flip Texas from a net producing region to a net demand region once when you factor in exports that will flow through the state. This profound shift will put extraordinary pressure on Texas’s unusually complex network of interstate and intrastate pipeline systems, which will need to be reworked and expanded to deal with the new gas-flow patterns. It also will have a significant effect on regional gas pricing––putting a premium on Texas prices. These issues and more are addressed in RBN’s latest Drill Down Report, highlights of which we discuss in today’s blog. One thing that U.S. natural gas producers have to be thankful for this week––and likely for many years into the future ––are the prospects for growing foreign demand for U.S. gas supplies. The potential for piping additional billions of cubic feet a day of Texas, Marcellus/Utica and other gas to Mexico and shipping increasing volumes of super-cooled gas as LNG to South America, Europe, and Asia is good news for gas producers, who need new demand sources to gobble up their product… well, enough Thanksgiving and turkey references––you get the idea.
Adding Oil To The Glut, Part 2; Eagle Ford Production Increased 46.5% Per Well In 2015 – Filloon -- At SeekingAlpha:
- Mega-frack style completions are showing even bigger improvements in the Eagle Ford than the Bakken
- Operators are increasing the number of stages, and volumes of frack sand and fluids with good results
- Completion design is still in its infancy, and we believe better technologies and design are on the way
- The Bakken and Eagle Ford improvements are nothing short of spectacular, and the reason breakevens continue to head lower
Adding To The Oil Glut,Part 3, Midland Basin Production Increases 262% Per Well In 2015 - Summary:
- We continue to see production increases per well in all major US basins.
- The Midland Basin has thrived using newer well designs, as production per well has increased 262% from 2014 to 2015.
- We expect further growth in the Permian as lower well costs and increasing production provides the possibility of a significant improvement in the coming years.
Lower oil prices have had impact on the US oil industry. Not only have prices decreased from over $100/bbl, the US Oil ETF (NYSEARCA:USO) has also declined precipitously. A large number of rigs are now offline, but more has changed. The number of employees has decreased significantly. Most of the workforce may never go back to work, unless we see oil prices improve a great deal. The probability is low. Not only is OPEC able to increase production, it has a lower breakeven price than the best core US areas.
Understanding lease operating expenses (LOE) and how they drive production - With today’s low crude oil and natural gas prices, the survival of exploration and production companies depends on razor-thin margins. Lease operating expenses––the costs incurred by an operator to keep production flowing after the initial cost of drilling and completing a well have been incurred––are a go-to variable in assessing the financial health of E&Ps. But it’s not enough for investors and analysts to pull LOE line items from Securities and Exchange Commission filings to find the lowest cost producers, plays, or basins. More than ever we need to understand—really, truly, deeply—what LOEs are, why they matter, how they change with commodity prices, production volumes, and other factors, and how we should use them when comparing players and plays. Today we begin a series on a little-explored but important factor in assessing oil and gas production costs. A key metric in assessing how well (or how poorly) E&Ps are doing on the cost side of the ledger is LOEs, which as we said are the costs incurred by an operator to keep production flowing after the initial cost of drilling and completing a well have been incurred. What’s included in the LOE “basket”? For one thing, the costs associated with employees known as “pumpers,” “well tenders,” or “lease operators,” who regularly monitor and maintain onshore wells. Their wages, vehicle expenses, gasoline costs, and any other expenses they have for items they use while tending to the wells (such as methanol for de-icing) are all LOEs. Other LOE elements come from operating and maintaining the on-site production equipment used to keep wells flowing and to process the hydrocarbons they produce so that they will be in a form suitable for transportation away from the lease. However, not all well costs are included in the LOE basket. For example, the initial cost to purchase and install the equipment is capitalized as part of the “producing property,” but the expenses for fuel used to power and maintain equipment at the lease site are included among LOEs.
Residents file class-action suit over man-made earthquakes | News OK: — Residents of the town hit by Oklahoma's worst earthquake have filed a class-action lawsuit against dozens of energy companies, accusing them of triggering dozens of temblors by injecting wastewater from oil and gas production underground. Pawnee residents filed the suit Thursday against at least 27 companies, saying they operate wastewater injection wells even though they know the method causes earthquakes. The lawsuit seeks an unidentified amount for property damage and devaluation, plus emotional distress. A magnitude 5.8 earthquake struck Pawnee in September. The lawsuit claims 52 more have hit the area since. Oklahoma has had thousands of earthquakes in recent years. Nearly all have been traced to underground wastewater disposal.Regulators have asked oil and gas producers to either close injection wells or reduce the volume of fluids they inject.
Fracking Causes Earthquakes. Period. | Food & Water Watch - The oil and gas industry and its supporters would like to dismiss the fact that many new earthquakes sweeping across the nation are fracking-related. It has already been shown that underground injection of fracking wastewater can induce seismicity, but a new, significant study by researchers at the University of Calgary has linked fracking to earthquakes in Western Canada. In May of 2015 Food & Water Watch released research on fracking and earthquakes. In it we explained that fracking itself could induce seismicity, but that these tremors tended to be smaller and less frequently felt than those produced from underground injection control wells. The new University of Calgary study reaffirms that fracking can trigger “stress changes” or “pore-pressure changes due to fluid diffusion along a permeable fault zone” resulting in – you guessed it – earthquakes. Likewise, just five months ago a Seismological Research Letters study linked fracking (not injection of fracking waste) to most of the inducted seismicity in Western Canada. However, fracking-induced earthquakes are not only occurring in Western Canada, nor are these the only recorded incidents or studies on the matter. In 2011 fracking was associated with a 3.8 magnitude earthquake in British Columbia, two earthquakes large enough to be felt in Blackpool, England, and another one that was large enough to be felt in Garvin County, Oklahoma. In 2014 a Seismological Research Letters study found that fracking was the likely culprit of about 400 small tremors from October to December 13, 2013. Of those, 190 occurred within a 39-hour period after fracking began at a nearby well. Although the tremors were not large enough to be felt by residents, one of the authors said in a press release, “…the earthquakes were three orders of magnitude larger than normally expected.” Later that year, two fracking-induced earthquakes in Poland Township, Ohio caused the Ohio Department of Natural Resources to order a company in the vicinity to cease drilling and fracking in the Utica Shale until a cause was pinpointed. Fracking had activated a previously unknown fault causing a swarm of 77 earthquakes in just eight days.
Feds block mining near Yellowstone National Park - The Obama administration on Monday blocked mining on 30,000 acres of public land near Yellowstone National Park. Under an order from Interior Secretary Sally Jewell, federal officials will ban new mining claims on 30,0000 acres of U.S. Forest Service land near Yellowstone’s northern entrance in Montana. The order means federal agencies will not issue new permits for mining gold or other metals in the region for at least two years. During that time, the Interior and Agriculture Departments will consider whether to withdraw the land from mine permitting programs for up to 20 more years. “There are good places to mine for gold, but the doorstep of Yellowstone National Park is not one of them,” Jewell said in a statement. “As we celebrate 100 years of the National Park Service, today’s action helps ensure that Yellowstone’s watershed, wildlife and the tourism-based economy of local communities will not be threatened by the impacts of mineral development.” The two-year ban does not apply to current mining activities in the area. The fate of a long-term ban will depend on who President-elect Trump selects to lead his Interior Department, though Trump himself has been hostile to environmental regulations that he says threaten American jobs.
Wyoming and Montana file legal challenge to BLM methane rule (AP) — Wyoming and Montana are pushing to block a rule that President Barack Obama's administration issued last week seeking to restrict how oil companies burn off natural gas on public lands. In the federal lawsuit filed Friday in Cheyenne, the states argue that the U.S. Bureau of Land Management lacks authority over air quality issues. Energy companies frequently "flare," or burn off, large volumes of natural gas at drilling sites because it makes less money than oil. Wyoming Gov. Matt Mead says his state already has effective limits on venting and flaring of natural gas. The federal rule seeks to reduce waste and harmful methane emissions to address climate change. Although the incoming Republican administration of President-elect Donald Trump could rescind the rule, doing so would likely take months.
Another EOG High-IP Well In The Bakken -- November 21, 2016 I track high-intensity fracks here. Note the amount of proppant: *31247, 1,613, EOG, West Clark 103-0136H, Clarks Creek, 37 stages, 21.1 million lbs, s12/10/15; TD, 12/20/15; TVD, 10,552 feet; TD, 17,965 feet; again, only a 1.5 section lateral; 960-acre spacing; middle Bakken; t5/16; cum 114K 9/16;
Sunoco Logistics acquiring Energy Transfer (AP) — Sunoco Logistics Partners L.P. is buying rival Energy Transfer Partners in a stock deal worth about $20 billion that the energy companies' hope will boost their operations. But shares for both companies fell in afternoon trading. The deal comes as Energy Transfer Partners remains at the center of controversy over the Dakota Access oil pipeline that will transfer oil from North Dakota to Illinois. Construction of the $3.8 billion pipeline has been the object of protests for months by the Standing Rock Sioux, whose reservation lies near the pipeline route, and the tribe's allies, who fear a leak could contaminate their drinking water. Energy Transfer shareholders will receive 1.5 common units of Sunoco stock for each Energy transfer share they own. Based on Sunoco's closing price Friday, the deal was worth about $21.31 billion. The deal is expected to close in the first quarter. The companies said they expect the deal to produce more than $200 million in commercial benefits and savings annually by 2019. Kelcy Warren, current chairman of Energy Transfer, will be CEO of the new company. Michael J. Hennigan is currently CEO of Sunoco Logistics and is expected to have a management role with other executives after the deals. Shares of Newtown Square, Pennsylvania-based Sunoco Logistics fell $2.05, or 7.9 percent, to $24.14 in afternoon trading. Shares of Dallas-based Energy Transfer Partners fell 3.50 percent, or 8.9 percent, to $35.86.
Energy Transfer to merge its pipeline network with Sunoco Logistics in $20 billion deal | Fuel Fix: Dallas pipeline magnate Kelcy Warren is merging the two pipeline arms of his Energy Transfer empire — Energy Transfer Partners and Sunoco Logistics Partners — in a $20 billion deal to simplify the number of publicly traded businesses. Philadelphia-based Sunoco Logistics Partners would actually acquire Dallas’ Energy Transfer Partners with the publicly traded Energy Transfer Equity remaining the overall parent business. Warren would become the chief executive officer of the merged pipeline business, Energy Transfer announced Monday morning.Energy Transfer is the primary owner of the controversial Dakota Access Pipeline, which is 85 percent complete, but mired in delays by the Obama administration and ongoing protests by environmentalists and Native American tribes. The proposed merger, which would close by the end of March, is not expected to impact the project. Energy Transfer and Sunoco said the deal will give them increased scale and cost savings. Energy Transfer previously acquired Sunoco in 2012 for more than $5 billion, but maintained them as separate public businesses. Energy Transfer’s fourth publicly traded business, Sunoco LP, would remain the gas station and convenience store wing of the Energy Transfer umbrella. Energy Transfer president and chief operating offer Mackie McCrea would become chief commercial officer of the merged Sunoco Logistics entity under Warren.
Police clash with North Dakota pipeline protesters, arrest one | Reuters: Hundreds of protesters opposed to a North Dakota oil pipeline project they say threatens water resources and sacred tribal lands clashed with police who fired tear gas at the scene of a similar confrontation last month, officials said. An estimated 400 protesters mounted the Backwater Bridge and attempted to force their way past police in what the Morton County Sheriff's Department initially described as an "ongoing riot," the latest in a series of demonstrations against the Dakota Access Pipeline. A statement from the agency said one arrest had been made by 8:30 p.m. local time (0230 GMT Monday), about 2 1/2 hours after the incident began 45 miles (30 miles) south of Bismark, the North Dakota capital. About 100 to 200 protesters remained after midnight. The Backwater Bridge has been closed since late October, when activists clashed with police in riot gear and set two trucks on fire, prompting authorities to forcibly shut down a protesters encampment nearby. The Morton County Sheriff's Department said officers on the scene of the latest confrontation were "describing protesters' actions as very aggressive." Demonstrators tried to start about a dozen fires as they attempted to outflank and "attack" law enforcement barricades, the sheriff's statement said. Police said they responded by firing volleys of tear gas at protesters in a bid to prevent them from crossing the bridge.Activists at the scene reported on Twitter that police were also spraying protesters with water in sub-freezing temperatures and firing rubber bullets, injuring some in the crowd.
As Dakota pipeline saga drags on, rancor builds | Reuters: The September decision by the Obama administration to delay final approval for the Dakota Access Pipeline was intended to give federal officials more time to consult with Native American tribes that have faced dispossession from lands for decades. But the delays have also caused increased consternation among company officials and led to growing violence between law enforcement and protesters, with both sides decrying the actions of the other in recent days. Energy Transfer Partners LP's $3.7 billion Dakota Access project has drawn steady opposition from environmentalists and Native American activists, led by the Standing Rock Sioux tribe. Their tribal lands are adjacent to the Missouri River, where federal approval is needed to tunnel under a 1-mile (1.6 km) stretch to complete the pipeline. The activist movement has grown steadily since the tribe established Sacred Stone Camp in Cannon Ball, North Dakota, in April, a temporary site founded as a point of resistance to the pipeline. The movement has remained strong even as temperatures have turned frigid. The most violent clashes took place over this past weekend. Police used water hoses in below-freezing temperatures to keep about 400 protesters at bay, a move criticized by activist groups, the American Civil Liberties Union and elected officials concerned about freedom of expression and the escalation of violence. "Almost the entire camp was in shock," Salim Matt Gras, 64, of Hamilton, Montana, said at the main camp. "They talk about using non-lethal weapons, but when you're talking about soaking people with freezing water in frigid temperatures, that's life-threatening."
The Conflicts Along 1,172 Miles of the Dakota Access Pipeline - NY Times interactive map - The construction of a crude oil pipeline through four states has spurred months of clashes near the Standing Rock Sioux Reservation in North Dakota. Protesters, concerned about the pipeline’s environmental impact, have been trying to stop the construction of its Missouri River crossing.Though legal disputes about water safety, Native American lands and eminent domain have delayed the project, the pipeline is nearly complete. The pipeline has to travel across hundreds of waterways. At least 22 of these crossings, highlighted in blue, have to be drilled deep under large bodies of water.The pipeline crosses disputed Sioux land that was promised to the tribe in the 1851 Treaty of Fort Laramie but was later taken away.An alternative route north of Bismarck, N.D., was proposed but rejected because of its proximity to areas that supply water.There have been large protests at the Lake Oahe crossing over potential water contamination and the damage of sacred tribal sites. The Missouri River is the Standing Rock Sioux Tribe’s primary source of drinking water.The police confronted hundreds of protesters on Monday. Nearly 300 people were treated for injuries resulting from the use of police force, according to the Standing Rock Medic and Healer Council.The crossing at the James River was rerouted to avoid three other bodies of water, which made the pipeline two miles longer. In September, the Yankton Sioux Tribe filed a lawsuit against the Army Corps of Engineers, challenging the authorization of the pipeline construction. The route near Sioux Falls, S.D., was initially rejected by the City Council because of its proximity to a landfill west of town. The Iowa Utilities Board granted around 200 parcels of land, highlighted in yellow, for pipeline use under eminent domain. The owners of 17 parcels sued. In early November, protesters set up an encampment to block construction near the Des Moines River crossing. Another protest camp was set up near the Mississippi River crossing in late August and lasted until construction there was completed.
Water Cannons Fired at Water Protectors, Hundreds Injured - Hundreds of water protectors were injured at the Standing Rock encampments Sunday evening when law enforcement blasted them with water cannons in freezing temperatures. The attacks came as water protectors used a semi-truck to remove burnt military vehicles that police had chained to concrete barriers weeks ago, blocking traffic on Highway 1806. Water protectors' efforts to clear the road and improve access to the camp for emergency services were met with tear gas, an LRAD (Long Range Acoustic Device), stinger grenades, rubber bullets and indiscriminate use of a water cannon with an air temperature of 26 degrees Fahrenheit. "It is below freezing right now and the Morton County Sheriff's Department is using a water cannon on our people, that is an excessive and potentially deadly use of force," Dallas Goldtooth of Indigenous Environmental Network said. Some flares shot by law enforcement started grass fires which were ignored by the water cannons and had to be extinguished by water protectors. Law enforcement also shot down three media drones and targeted journalists with less lethal rounds. National Lawyers Guild legal observers on the frontlines have confirmed that multiple people were unconscious and bleeding after being shot in the head with rubber bullets. One elder went into cardiac arrest at the frontlines but medics administered CPR and were able to resuscitate him. The camp's medical staff and facilities are overwhelmed and the local community of Cannonball has opened their school gymnasium for emergency relief. Hundreds are receiving treatment for contamination by CS gas, hypothermia, and blunt traumas as a result of rubber bullets and other less lethal ammunition.
"It Feels Like A Warzone": 400 North Dakota Pipeline Protesters Clash With Police; 167 Injured - In the latest in a series of protests against the North Dakota oil pipeline project, overnight an estimated 400 protesters clashed with police who fired tear gas at the scene of a similar confrontation last month. The protesters mounted the Backwater Bridge and attempted to force their way past police in what the Morton County Sheriff's Department initially described as an "ongoing riot." Protesters say the pipeline threatens water resources and sacred tribal lands. According to Reuters, one arrest had been made by 8:30 p.m. local time (0230 GMT Monday), about 2 1/2 hours after the incident began 45 miles (30 miles) south of Bismark, the North Dakota capital. About 100 to 200 protesters remained after midnight. The Backwater Bridge has been closed since late October, when activists clashed with police in riot gear and set two trucks on fire, prompting authorities to forcibly shut down a protesters encampment nearby.The Morton County Sheriff's Department said officers on the scene of the latest confrontation were "describing protesters' actions as very aggressive." Demonstrators tried to start about a dozen fires as they attempted to outflank and "attack" law enforcement barricades, the sheriff's statement said. Police said they responded by firing volleys of tear gas at protesters in a bid to prevent them from crossing the bridge. Activists at the scene reported on Twitter that police were also spraying protesters with water in sub-freezing temperatures and firing rubber bullets, injuring some in the crowd. A total of 167 demonstrators have been injured according to a medic on site, as cited by Indigenous Rising Media. The police were reportedly targeting demonstrators’ heads and legs. Seven people have been hospitalized for severe head injuries. Three of those injured are reportedly elders of the Standing Rock Sioux tribe.
Dakota Access Pipeline Protester Might Lose Arm After 'Shot With a Concussion Grenade' During Police Standoff - Sophia Wilansky, a water protector from New York, was seriously injured and could lose her left arm following Sunday evening's standoff with police over the controversial Dakota Access Pipeline (DAPL). According to a GoFundMe page launched on her behalf, the 21-year-old was handing out bottles of water to fellow protestors when she was allegedly "shot with a concussion grenade" by authorities. "This was the response of police and DAPL mercenaries as she and other brave protectors attempted to hold the line against the black snake in service of protecting our water," the GoFundMe description states. Photos of Wilansky's graphic injury have surfaced on social media. She was one of the hundreds who were injured at the Standing Rock encampments on Sunday. Eyewitnesses say that law enforcement used tear gas, pepper spray, a Long Range Acoustic Device, stinger grenades, rubber bullets and water cannons to blast away pipeline protestors in freezing temperatures. In a statement, the Standing Rock Medic & Healer Council has called Sunday's clash "a mass casualty incident" with approximately 300 injuries "identified, triaged, assessed and treated by our physicians, nurses, paramedics and integrative healers working in collaboration with local emergency response." The council says the 300 injuries were the "direct result of excessive force by police over the course of 10 hours" and at least 26 people were taken to three area hospitals, with many patients needing treatment for hypothermia.
Dakota Access Pipeline protester ‘may lose her arm’ after police standoff - A 21-year-old woman was severely injured and may lose her arm after being hit by a projectile when North Dakota law enforcement officers turned a water cannon on Dakota Access pipeline protesters and threw “less-than-lethal” weapons, according to the woman’s father. Sophia Wilansky was one of several hundred protesters injured during the standoff with police on Sunday on a bridge near the site where the pipeline is planned to cross under the Missouri river. Graphic photographs of her injured arm with broken bones visible were circulated on social media. “The best-case scenario is no pain and 10-20% functionality,” said Wayne Wilansky, Sophia’s father, who travelled to Minneapolis where his daughter underwent eight hours of surgery on Monday. He said his daughter had been hit by a concussion grenade thrown by a police officer and that the arteries, median nerve, muscle and bone in her left arm had been “blown away”. Sophia will require additional surgery in the next few days and her arm may still have to be amputated, he added. “She’s devastated. She looks at her arm and she cries,” he said. Sophia Wilansky is one of thousands of activists who have travelled to the Standing Rock Sioux reservation in North Dakota to attempt to halt the construction of the pipeline. Members of the Standing Rock Sioux tribe established a “spiritual camp” on the banks of the Missouri in April. The tribe fears the pipeline will jeopardise their water supply and say that construction has disturbed sacred burial grounds. The activists, who call themselves “water protectors”, have faced a heavily militarised police force. More than 400 protesters have been arrested by law enforcement officers who have deployed pepper spray, teargas, rubber bullets, Tasers, sound weapons and other “less-than-lethal” methods. Following Sunday’s confrontation 26 protesters were taken to hospital and more than 300 injured, according to the Standing Rock Medic & Healer Council. Most of the injured had hypothermia after being hit by a water cannon in below-freezing weather.
Exclusive Video: #noDAPL Protestors Share Experiences of Police Repression (video and transcript)
- DEMONSTRATOR: We got a bunch of water protectors out here demonstrating on a public roadway and the police who are paid to protect and serve us are shooting teargas and flashbang grenades and shooting a cannon of mace at all of us. Those that don’t clear out have shields and they’re shooting those people with rubber bullets right now.
- REPORTER: Where were you when you got shot?
- LOTUS: Right up here. I was standing there like this. Standing there like this. Then they sprayed the mace. They’re spraying out the bear mace. They’re spraying it at us, I was standing there like this. Spray it on me I just go like this to keep it out of my eyes. Then I think they started throwing in the teargas. Then like some noise went off really loud and then they just shot me.
Hundreds of Veterans to Join Water Protectors at Standing Rock to Protest Dakota Access Pipeline - Hundreds of veterans are preparing to join the Water Protectors at the Standing Rock Sioux Reservation in North Dakota early next month to peacefully protest the Dakota Access Pipeline (DAPL). A Facebook page for the event, Veterans Stand for Standing Rock , has more than 600 confirmed reservations with more than 4,500 other people expressing interest. High-profile veterans including U.S. Rep. Tulsi Gabbard of Hawaii and retired Baltimore police officer/whistleblower Michael A. Wood, Jr. plan to attend. "This country is repressing our people," Wood Jr. told Task & Purpose . "If we're going to be heroes, if we're really going to be those veterans that this country praises, well, then we need to do the things that we actually said we're going to do when we took the oath to defend the Constitution from enemies foreign and domestic." The "operations order" states: "In response to the assertion of treaty rights, citizen rights, tribal rights and protection of the most valuable of resources, water, the Sioux tribes and allied comrades, are under sustained assault by agents of and working for private interests under the color of law. First Americans have served in the United States Military, defending the soil of our homelands, at a greater percentage than any other group of Americans. There is no other people more deserving of veteran support and this situation encapsulates whether we are called heroes for violence and cashing paychecks or for justice and morality." They say their mission is to "prevent progress on the Dakota Access Pipeline and draw national attention to the human rights warriors of the Sioux tribes regarding the United States lack of treaty enforcement."
Veterans Organizing “Like a Military Unit” to Defend DAPL Protesters from Militarized Police - Resistance to the Dakota Access Pipeline (DAPL) is about to get a major boost. On Dec. 4, U.S. military veterans — possibly numbering in the hundreds — plan to gather “like a military unit” to stop the Dakota Access Pipeline. Having witnessed the police state brutality inflicted on Native Americans attempting to protect sacred land and natural resources, the former service members feel compelled to stand with the Standing Rock Sioux.According to the Veterans for Standing Rock GoFundMe page: “We are veterans of the United States Armed Forces, including the U.S. Army, United States Marine Corps, U.S. Navy, U.S. Air Force and U.S. Coast Guard and we are calling for our fellow veterans to assemble as a peaceful, unarmed militia at the Standing Rock Indian Reservation on Dec 4-7 and defend the water protectors from assault and intimidation at the hands of the militarized police force and DAPL security.” Rep. Tulsi Gabbard from Hawaii, a combat war veteran, will be joining the act of resistance, according to the Facebook page Veterans Stand for Standing Rock. As Task and Purpose notes, federal government ignored their duty under the National Historic Preservation Act to consult the Standing Rock Sioux before approving DAPL. Some of the pipeline construction will take place on sacred land that was taken from the tribe over the past 150 years, and the pipeline will be buried under the tribe’s drinking water source. The main man behind it all is Wes Clark, Jr., son of Gen. Wesley Clark, a former Supreme Allied Commander who ran for the Democratic presidential nomination in 2004. Clark Sr. called for action on climate change, and this motivation is also driving his son to fight against DAPL. Wes Clark, Jr., is best known as a co-host for the Young Turks, and sees the Dec. 4 resistance at DAPL as “the most important event up to this time in human history.
Sheriffs Refuse to Send Troops to Standing Rock as Public Outrage and Costs Mount - Agents with the U.S. Customs and Border Protection will be the latest agency assisting Morton County Sheriff Department deputies to guard Dakota Access pipeline construction as it prepares to drill under the Missouri River. But as tensions mount, along with costs to keep up with militarized attacks on water protectors, there are signs that North Dakota’s resources are stretching thin. Sheriff Kyle Kirchmeier announced the aid of CBP officers Monday following the most violent confrontation yet near the Standing Rock Sioux reservation. Dozens of activists were hospitalized after Sunday night’s standoff when police sprayed water on hundreds of people in 26-degree temperatures and fired what has been described as concussion grenades. One activist, Sophia Wilansky, 21, may face the amputation of her arm. Even before Sunday’s subfreezing assault on the Backwater Bridge, the escalating violence, the masses of arrests—528 as of Monday—and even the routine response to demonstrations were taking their toll on local agencies. The policing costs have reached nearly $15 million. The courts are taxed. The jail is burdened. The 34 local law enforcement officers are stressed. All this comes amid an increasingly loud public outcry against the militarized policing.
The Latest: AG approves ranch sale to pipeline developer - KSWO (AP) - The Latest on the protest against the Dakota Access oil pipeline (all times local): 4:30 p.m. North Dakota's attorney general has signed off on a purchase of ranch land by the company developing the Dakota Access pipeline. Energy Transfer Partners bought some 6,000 acres of ranch property near an encampment where the Standing Rock Sioux and others have protested the pipeline for months. The company said the land, part of a century-old operation known as the Cannonball Ranch, would give its workers better access to its construction sites and the finished pipeline. State law generally bars corporations from owning agricultural land, though there are exceptions. Attorney General Wayne Stenehjem said in a statement Tuesday that the purchase was temporarily necessary for commercial development. He said he would monitor how the land is used to make sure the company is complying with the corporate farming law.
Army Corps Sends Eviction Notice to Standing Rock -- The chairman of the Standing Rock Sioux Tribe, Dave Archambault II, received at letter today from the district commander of the Corps of Engineers, John Henderson, informing him that the Army Corps will be "closing the portion of the Corps-managed federal property north of the Cannonball River to all public use and access effective December 5, 2016." This decision is necessary to protect the general public from the violent confrontations between protestors and law enforcement officials that have occurred in this area, and to prevent death, illness, or serious injury to inhabitants of encampments due to the harsh North Dakota winter conditions. The necessary emergency, medical, and fire response services, law enforcement, or sustainable facilities to protect people from these conditions on this property cannot be provided. I do not take this action lightly, but have decided that it is required due to the concern for public safety and the fact that much of this land is leased to private persons for grazing and/or haying purposes as part of the Corps' land management practices ... The Corps of Engineers has established a free speech zone on land south of the Cannonball River for anyone wishing to peaceably protest the Dakota Access pipeline project ... Any person found to be on the Corps' lands north of the Cannonball River after December 5, 2016, will be considered trespassing and may be subject to prosecution under federal, state, and local laws. This letter comes just 12 days after the Army Corps announced that it would delay a decision on granting an easement to Energy Transfer Partners after determining 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 $3.8 billion pipeline project is now in its final stretch with more than 80 percent of the pipeline already constructed .
Army Corps of Engineers to close Standing Rock protest camp - The Army Corps of Engineers announced Friday it will be closing a portion of its property north of the Cannonball River, near where the Dakota Access Pipeline protesting camp is located, and establishing a free speech zone south of the river. In a letter to the leader of the Standing Rock Sioux Tribe, the USACE announced it will close the portion of corps-managed federal property north of the Cannonball River on Dec. 5, to: "protect the general public from the violent confrontations between protesters and law enforcement officials that have occurred in this area, and to prevent death, illness, or serious injury to inhabitants of encampments due to the harsh North Dakota winter conditions."The land is leased to private citizens for Corps land management practices, the letter reads, meaning the general public, including protesters, can be on the Corps' lands. Anyone found on the land after Dec. 5 will be considered trespassing.The Corps established a free speech zone south of the Cannonball River for people "wishing to peaceably protest the Dakota Access Pipeline project." The letter calls upon the Standing Rock Sioux Tribal leader, Dave Archambault II, to encourage members of the tribe and other protesters to move to the south side free speech zone or "more sustainable location for the winter." In a statement, Archambault said the Tribe is "deeply disappointed" in the United States' decision, but added that their resolve is "stronger than ever."He also expressed disappointment in the timing of the decision, which comes the day after Thanksgiving."The best way to protect people during the winter, and reduce the risk of conflict between water protectors and militarized police, is to deny the easement for the Oahe crossing, and deny it now," Archambault said.
Trump offloaded investment in company building controversial pipeline, ethics questions mount - Dallas Business Journal: The disclosure comes as worries have mounted about whether Trump would tilt policy decisions to favor his investments and business dealings. Trump told The New York Times that he would like to create a separation between him and his businesses but has not given any details. Ethics groups have called on Trump to divest his holdings, but no law requires him to do so. "We think it's high time for them to revisit conflict of interest law," said Jordan Libowitz, a spokesman for the Citizens for Responsibility and Ethics in Washington. (Click on the slideshow to view holdings Trump has in other Dallas-based companies. Hicks did not immediately say if Trump has divested from any of them.) The U.S. Army Corps of Engineers extended its review of a critical juncture of ETP's Dakota pipeline under Lake Oahe earlier this month, potentially pushing the decision into next year under the new administration. Local Native American tribes and environmentalists protesting the project claim the pipeline threatens sacred cultural sites and the local water supply. ETP executives are still confident a pipeline deal can get done this year to avoid any overlap with Trump. Lawyers for the Army said in a court filing Monday they would need until Dec. 30 to respond to ETP’s motion to expedite the project, which was filed after the Army said it would continue deliberations.
For Standing Rock Sioux, new water system may reduce oil leak risk | Reuters: For months, North Dakota's Standing Rock Sioux tribe has been protesting the Dakota Access Pipeline's planned crossing under the Missouri River, adjacent to their lands, in part due to worries about contamination of their primary water source. As of early next year, however, the Native American tribe will be gathering their water 70 miles (113 km) downstream of the oil pipeline's location, thanks to a long-awaited water treatment plant. The reservation, which spans North and South Dakota, currently gets water 20 miles away from the pipeline's planned location. While the scope of contamination of a future oil leak is difficult to predict, the distance from the pipeline to the new intake could reduce widespread contamination risks, regulators and environmental analysts said. The Standing Rock Sioux say the new supply point is not enough to ease their concerns over the pipeline. The developer behind the pipeline, Energy Transfer Partners LP (ETP.N), has vowed not to reroute the line. "Just because the new intake is 70 miles away doesn't mean our water is still not threatened," said David Archambault, chairman of the Standing Rock Sioux tribe. The project, which has received little attention in the months-long fight over the Dakota Access pipeline, has been a goal for the Sioux for more than a decade. It was first funded in 2009.
World's Largest Methanol Refinery to Be Built Along the Columbia River - Communities on the frontlines of fossil fuel development are taking a stand against dangerous fossil fuel projects. Take a look at the big fight in the small town of Kalama, Washington. The Chinese government is planning to build the world's largest methanol refinery to convert fracked natural gas to liquid methanol for export to China to make plastics. This four-minute video on the Kalama methanol refinery shows why these residents of this town are fighting and winning: From a greenhouse gas perspective, this fight is a big deal. The methanol refinery alone would use more natural gas than all industry in Washington combined. Flip it around: If we win this one battle and stop the methanol refinery, we stop the equivalent of doubling industrial natural gas usage in Washington State. While the gas industry tries to spin natural gas as clean, new science shows just the opposite. The bulk of natural gas is methane, a potent greenhouse gas. Methane leakage from gas wells and pipelines led scientists to conclude that fracked gas can be as bad coal for our climate . And it gets worse. Gas production in North America relies heavily on fracking , a process famous for polluting air and water, endangering the health of nearby residents. On the Columbia River, we're no stranger to the fossil fuel industry's pipe dreams. Liquefied natural gas. Coal. Oil-by-rail. Our communities have celebrated major victories. The fossil fuel industry's love affair with the Columbia ignores our region's fierce passion for clean air, salmon and standing up for our neighbors. The coal and oil projects that remain—the nation's largest proposals for coal export and oil-by-rail terminals—face a high-profile movement led by cities, businesses, Tribes, faith leaders, conservationists and others to hold the line on short-sighted, high-impact fossil fuel proposals. But the Kalama methanol refinery represents a new wave of fossil fuel export. This project would drive demand for massive new pipelines and lock the Pacific Northwest into a half century or more of fracked natural gas consumption, further delaying the transition to cleaner energy alternatives.
End of downturn at hand? Operators’ behavior suggests so – The way US E&P operators are adding rigs, planning activity ramp-ups, preparing to raise capex and looking forward to renewed production growth in 2017, you’d be tempted to write finis to a harrowing two-year industry downturn. During third-quarter 2016 earnings calls in the last few weeks, oil operator after operator unveiled what became surprisingly repetitive near-term plans: stirring the production pot by slipping a rig or two into the field during the final months of this year, kicking up the capital budget modestly and then returning to production growth in 2017. “Third quarter results tell the story of good, old fashioned American ingenuity,” Robert W. Baird analyst Ethan Bellamy told S&P Global Platts. “Costs are down, productivity is up, and capital is flowing into the most productive regions.” CEOs certainly displayed sunnier dispositions on conference calls than a couple of quarters ago when the specter of what then was a recent period of $30/b oil was fresh in their minds. But now, with a new year looming, oil executives seemed energized by their victory over a low-priced oil world after two years of squeezing costs and efficiencies from oil fields and developing precise completion designs to extract still more oil and gas per well. So they appeared willing to open the purse strings a bit next year—and if oil prices cooperated, rev up the drilling machine and production spigot in the months to come.But beneath their show of confidence, oil executives appeared mindful of the sobering and ongoing volatility of oil prices. Most clearly conveyed that any stepped-up activity would be done prudently until price signals indicated otherwise. Larger operators in particular said higher prices of mid-$50s/b to $60/b were needed for next-stage growth.
Tesla Shock Means Global Gasoline Demand Has All But Peaked - The International Energy Agency forecasts that global gasoline consumption has all but peaked as more efficient cars and the advent of electric vehicles from new players such as Tesla Motors Inc. halt demand growth in the next 25 years. That shift will have profound consequences for the oil-refining industry because gasoline accounts for one in four barrels consumed worldwide. “Electric cars are happening,” IEA Executive Director Fatih Birol said in an interview in London, adding that their number will rise from little more than 1 million last year to more than 150 million by 2040. The cresting of gasoline demand shows how rapidly the oil landscape is changing, casting a shadow over an industry that commonly forecasts decades of growth ahead. Royal Dutch Shell Plc, the world’s second-biggest energy company by market value, shocked rivals this month when a senior executive said overall oil demand could peak in as little as five years. The IEA doesn’t share Shell’s pessimism. While the agency anticipates a gasoline peak, it still forecasts overall oil demand growing for several decades because of higher consumption of diesel, fuel oil and jet fuel by the shipping, trucking, aviation and petrochemical industries. For Philip Verleger, president of the consultant PKVerleger LLC in Colorado and a veteran oil-market analyst, the IEA’s outlook is one of the more optimistic outcomes for the global industry.“Refiners across the globe can only hope that this forecast turns out to be right -- because all the indications are today that consumption is going to begin dropping not in 2030, but probably in 2020,” said Verleger. “It’s the best news a dying patient can hope to get.”The projections are part of the analysis the Paris-based IEA did for its “World Energy Outlook 2016” flagship report. The agency forecast that gasoline demand will drop to 22.8 million barrels a day by 2020 from 23 million barrels a day last year. By 2030, consumption will rebound slightly, reaching a peak of 23.1 million barrels a day, before falling again toward 2040. The forecast is more pessimistic than the one released a year ago, when the IEA saw robust demand growth from now until 2030.
Electric Cars Provide Little Threat To Oil Demand | OilPrice.com: Chevy is about to release its all-electric Bolt. Tesla will soon put its Model 3 on sale. More than a dozen additional EV models will be launched in the next few years. Battery costs are falling fast, making EVs close to becoming cost-competitive with the internal combustion engine. Yet, oil demand will continue to rise, at least for another 25 years. That conclusion comes from the International Energy Agency, which does not see oil demand reaching a peak until at least 2040. In its recently released World Energy Outlook, the IEA projects only tepid growth for EVs, with the EV stock rising from 1.3 million in 2015 to a cumulative total of 150 million by 2040. That would only displace a meager 1.3 million barrels of oil per day (mb/d), which to be sure, would have some price impact, but it would not represent any sort of existential threat to the oil industry. In fact, the IEA sees oil demand continuing to rise, jumping by about 13.5 mb/d between now and 2040, rising from 94.1 mb/d to 107.7 mb/d. EVs have made substantial progress to date. Battery prices have plunged by more than two-thirds since 2010. EV sales continue to grow, up 20 percent in the first half of this year in the EU compared to the same period in 2015, and up 130 percent in China. Charging stations have climbed around the world, jumping from 110,000 in 2014 to 190,000 a year later. Much of the gains so far have been achieved with a heavy dose of policy support. The U.S. has a $7,500 tax credit for the purchase of EVs. China and much of Europe have similar incentives. Other policies include exemptions on registration fees, free parking in certain areas, free charging at public charging stations, and access to HOV lanes. Continued policy support will be critical to the success of EVs.
Obama scraps Arctic lease sales through 2022 - The Obama administration on Friday ruled out Arctic drilling from its 2017-22 plan for US offshore oil and natural gas lease sales, arguing the Gulf of Mexico and Alaska's Cook Inlet hold the best potential and lowest risks. Republicans attacked the plan for locking up too much of the country's offshore energy resources when the economy needs a boost. The US Chamber of Commerce called on the incoming Trump administration and Republican majority in Congress to "immediately rescind and replace" the plan while continuing with the planned lease sales. Trump could scrap the plan, but the legal process to do so could stretch two to three years, making it hard for his administration to schedule additional lease sales much sooner than 2020, when the first of the canceled Arctic sales was to be held. He has said he wants to open more federal lands and waters to oil and gas development. The 2017-22 plan announced Friday offers 11 potential lease sales in four planning areas, including 10 in the Gulf of Mexico -- one in 2017; two each in 2018, 2019, 2020 and 2021; and one in 2022 -- and one off the coast of Alaska in the Cook Inlet in 2021. The Interior Department excluded the Beaufort and Chukchi seas from leasing after "receiving extensive public input and analyzing the best available scientific data." "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," said Interior Secretary Sally Jewell. "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."
Obama Halts Arctic Oil Leases and Undoing It Won't Be Simple for Trump - No new offshore oil and gas leases will be offered in the Alaskan Arctic through 2022, according to a new five-year plan for offshore drilling released Friday by the Obama administration. President-elect Donald Trump could overturn the ban, but that could take years and may not draw much industry interest if oil prices stay low. The Interior Department's five-year plan laid out all of the proposed auctions for drilling rights on the outer continental shelf of the United States. It allowed for no leases between 2017 and 2022 in the Beaufort or Chukchi seas, Arctic waters north and west of Alaska. A prior draft of the plan included the potential for offshore drilling in both the Beaufort and Chukchi Seas when it was released in March. The current plan limits potential leases in the next five years to the Gulf of Mexico and the Cook Inlet off south-central Alaska. "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," Interior Secretary Sally Jewell said. "Given the unique and challenging Arctic environment and industry's declining interest in the area, foregoing lease sales in the Arctic is the right path forward." Some Republicans voiced opposition to the plan before it was even published. "This would not only unilaterally harm Alaska's economy and kill thousands of good jobs, it fundamentally misunderstands what is going on in the country right now," Sen. Dan Sullivan (R-Alaska) said on the Senate floor on Thursday. "It fundamentally misunderstands the enormous opportunity of energy for America." "Shell had to spend 7 years and $7 billion to get permission from the Obama administration to drill one exploration well in 100 feet of water," Sullivan said. "And eventually they just said we give up, we're leaving."
Ryan vows to undo Obama drilling plan | TheHill: House Speaker Paul Ryan (R-Wis.) on Friday said Republicans will look to undo an offshore drilling plan released by President Obama that blocks oil exploration in the Arctic Ocean. “In its final days, the Obama administration is throwing up more barriers to American energy development. This plan to exclude the resource-rich Arctic from exploration possibilities squanders our ability to harness the abundant, affordable energy sources that power our economy,” Ryan said in a statement. “Our Better Way agenda outlines a plan to unleash our energy potential and create American jobs. That’s why we will work to overturn this plan, and to open up the Arctic and other offshore areas for development.” Ryan joined much of the oil industry in slamming the drilling plan, a five-year policy that will allow for oil lease sales in the Gulf of Mexico but not the Atlantic or Arctic Oceans. The industry had hoped Obama would allow drilling in the Arctic as part of the plan. “Our national energy security depends on our ability to produce oil and natural gas here in the U.S., and this decision could very well increase the cost of energy for American consumers and close the door on creating new jobs and new investments for years,” American Petroleum Institute President Jack Gerard said in a statement. “We are hopeful the incoming administration will reverse this decision.” Undoing the drilling plan will take time. Because the plan is not a regulation, it is not subject to the Congressional Review Act, which allows Congress to undo executive branch rules.President-elect Donald Trump has spoken about allowing more offshore drilling, and he could rewrite the drilling plan to expand exploration in the Arctic and beyond. But that’s a lengthy process — the current plan was years in the making. Even so, some environmental groups are so concerned about the prospect of Trump expanding drilling that they’re asking Obama to issue an emergency order to withdraw some of the Arctic Ocean from the drilling program altogether, something they say he can do under existing law.
Bella Bella Fights Massive Diesel Spill After Tugboat Runs Aground - ICTMN.com: Bella Bella, British Columbia, is in the heart of the Heilsuk Nation, where harvesting clams, crab and kelp, and fishing for salmon, herring and other marine creatures is the lifeblood for all who live there. Now those waters have been poisoned by 52,850 gallons of diesel that they are still struggling to clean up a month after it happened. On October 13 the Nathan E. Stewart tug was traveling under a waiver that allowed it to transit Canadian waters without a Canadian marine pilot when it went ashore and sank in Seaforth Channel. More than 52,850 gallons (200,000 liters) of diesel fuel spilled into the coastal waters near the isolated community of Bella Bella when the tugboat ran aground and ripped open two fuel tanks onboard. Thousands of years of tradition and rich culture now hang in the balance as spill response crews struggle to contain the massive diesel spill while efforts have been plagued by harsh weather and high swells, making containment nearly impossible. “At the moment unfortunately things are stalled,” said Heiltsuk Council Member Jess Housty earlier this month. “In order to get the tug dragged out to deeper waters and lifted onto a salvage barge, we need a good weather window, and we haven’t got one, and likely haven’t got one coming for another few days.” The spill could not have happened at a worse time, as the community was in the middle of harvesting food for the winter months. It also came as the federal government develops an oil tanker ban for the Central Coast of British Columbia to protect the largest temperate rainforest in the world, the Great Bear Rainforest.
Could we yet witness Keystone XL pipeline return from the dead? - Capitol Crude podcast - It's alive! After being buried in the White House policy graveyard last year by President Barack Obama, the Keystone XL pipeline is back from the dead following Donald Trump's election win. TransCanada is considering applying again for a permit for the 1,700-mile pipeline and Trump has vowed to approve it. But it's not a done deal. Jane Kleeb, the founder of Bold Nebraska and, arguably, the leading voice in the fight against Keystone XL, talks with S&P Global Platts senior editors Brian Scheid and Meghan Gordon on the renewed effort to stop the pipeline from being built.
Groundbreaking study shows link to fracking and earthquakes: In a University of Calgary study of earthquakes west of Fox Creek, Alberta, the geoscientists discovered a link between fracturing, or fracking, and earthquakes in the region. According to the new study published in the journal Science November 17, seismic activity in northwest Alberta over the last five years was likely caused by fracking, a process in which chemically-laden water and sand are injected into shale formations under high pressure to release oil or gas. Researchers mapped out over 900 seismic events that occurred near the Duvernay shale deposit around the Fox Creek and Duncan Canyon area, dating back to December 2014. This includes the 4.8 magnitude earthquake that occurred on January 12, in Northern Alberta that was considered to be the strongest fracking-induced earthquake ever, reports EcoWatch.Under current rules, according to CBC News, if an earthquake in the Fox Creek area is a 4.0 magnitude or above, operations must be ceased immediately. Repsol did just that after the January earthquake. The study found there were two main causes for the earthquakes. The first is the immediate pressure increases as the fracking process is occurring. "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," said David Eaton, co-author of the study, reports DeSmogBlog. The second cause comes from pressure changes created by lingering fracking fluids. A fault will shake when the fluids seep into tiny spaces in the porous rock, causing increased 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."
Argentina plans railway to help lower shale drilling costs - Argentina's national government is in the preparatory stages for equipping an aging railway and laying new train tracks to service the Vaca Muerta shale play. Jorge Ocampos, a legislator in the province of Rio Negro, made a presentation of the $1.2 billion project late Wednesday, according to a statement Thursday. The railway is to run from the port city of Bahia Blanca in Buenos Aires province through Rio Negro to Anelo and Rincon de los Sauces, a town and city at the heart of Vaca Muerta activities in the southwestern province of Neuquen. The project also includes building more roads and highways, Ocampos said in the statement.While there is no start date for the project, Ocampos said the cargo train is scheduled to be in operation in five years, citing a plan drafted by the national Ministry of Transport. The ministry did not respond to a request for further information. The Diario Rio Negro newspaper reported that the project involves revamping 1,300 km of lines from Bahia Blanca to Neuquen City, and laying 250 km of new tracks from Chichinales, Rio Negro to Anelo and Rincon de los Sauces. The train would help lower the cost of moving proppant for fracking from national or foreign suppliers, the paper reported, citing unnamed sources in the Ministry of Transport. With the project, the government wants to increase the transport speed to 90 km/hour, and run eight to 10 trains per day, the paper said.
Oil and Gas: Venezuela oil company PDVSA delays bond payments - (AP) — Venezuela's state oil company reportedly is delaying $404 million in bond payments in an apparent sign that the oil giant's financial woes are worsening amid the slump in petroleum prices. A JPMorgan analysts' note said Monday that the oil company PDVSA is taking advantage of a grace period to delay payments on 2021, 2024 and 2035 bonds. The terms of the bonds permit PDVSA to put off payment for 30 days before being considered in default. Analysts do not expect the company to default, but the delay highlights cash flow problems and raises the specter of non-payment. PDVSA is the lifeblood of Venezuela's faltering economy, which is beset by high inflation and shortages of basic goods. Oil is virtually the country's only source of export revenue.
Nigerian economy shrinks further in Q3 on declining oil output - The Nigerian economy shrank further by 2.24% year-on-year in the third quarter on the back of a slump in oil production, the country's economic mainstay, according to government figures Monday. Nigeria, which was Africa's largest oil producer until a few months ago, slipped into recession after its economy shrank by 2.06% in Q2, as the impact of militant attacks on oil facilities weighed on the country's economy. Data released on Monday by the National Bureau of Statistics showed that Nigeria's oil production averaged 1.63 million b/d in Q3, lower than the average 1.69 million b/d output in Q2, and 25% lower than the 2.17 million b/d production a year ago. "As a result, real growth of the oil sector slowed by 22.01% (year-on-year) in the third quarter of 2016. As a share of the economy, the oil sector contributed 8.19% of total real GDP, down from figures recorded in the corresponding period of 2015 and the preceding quarter of 2016 recorded at 10.27% and 8.26% respectively," the government agency said. Nigerian oil output has fallen sharply this year as renewed militancy in the oil-rich Niger Delta region resurfaced after some years of relative calm. Production was slashed from 2.2 million b/d earlier in the year after militants continued to bomb facilities, and at one point this year left four Nigerian crude export grades -- Bonny Light, Brass River, Forcados and Qua Iboe -- under force majeure. The attacks have continued even with the government trying to reach a peace deal with militants and activists in the Niger Delta following Nigerian President Muhammadu Buhari meeting with leaders around three weeks ago.
Oil wildcatters flee African deep water to weather rout - Drillers burned by a two-year slump in crude prices are slowing exploration of deep-water prospects off the coast of Africa, undermining a key driver of growth on the continent. In the 25 years since 1982, African oil output doubled to more than 10 million barrels a day. Now, with prices sitting below $50 a barrel, international drillers have cut their plans for capital expenditure in the next five years by $100 billion, according to a Nov. 2 report by Wood Mackenzie Ltd. The change could drop the region’s oil production 46 percent by 2030, the report said. Hardest hit: Nigeria and Angola, countries that are already struggling economically and depend on oil for almost all their foreign income. To revive deep-water exploration on the continent, crude prices would have to rise to $60 to $70 a barrel, according to Keith Myers, managing director of the consulting firm Richmond Energy Partners. “Africa suffered the most of any region in terms of the decline in frontier exploration," Myers said in an e-mail. Deep-water exploration was “the driver for production growth in the region.” In September, the number of offshore oil and gas rigs in Africa fell to just nine, down from a high of 48 in November 2014, according to Baker Hughes Inc. data. That’s the lowest level in more than a decade. Overall, the number of rigs on the continent dropped to a five-year low of 77. “We’re being more disciplined,” said Oliver Quinn, director of Africa and global new ventures at Ophir Energy Plc, speaking at the Africa Oil Week conference in Cape Town this month. The London-based explorer has plans to drill three to five frontier wells over the next two years, split between Africa and Asia, according to Quinn. “We don’t want to go out and spend capital that we can’t replenish to do exploration,” he said.
USGC distillate exports to Europe at 1 mil mt in Nov to date - A total of about 1 million mt of US Gulf Coast distillates could land 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 total, 25 vessels were spotted on the US Gulf Coast-Europe route, including eight heading towards the Mediterranean. Of the 17 ships sailing towards Northwest Europe, nine are heading towards the Amsterdam-Rotterdam-Antwerp hub. Some cargoes originally expected to discharge in Europe diverted over the course of last week, resulting in a lower arbitrage volumes week on week. This notably included the Medium Range tanker Turquoise, originally headed for Milford Haven in the UK and now en route for Brazil.Trading sources said that on the back of healthy demand, Latin America was competing with Europe to attract US barrels, even though arbitrage economics to ship distillate across the Atlantic remain poor. In October, about 1.16 million mt of distillates were exported from the US Gulf Coast to Europe.
UK gas-for-power demand hit 71-month high November 23 - The amount of natural gas used by UK power stations to generate electricity neared a six-year high Wednesday, confirming the 2016 trend of gas -for-power demand posting large year-on-year gains, data from National Grid showed. Gas-for-power demand in the UK hit 79 million cu m Wednesday, the highest for a single day since mid-December 2010, after having climbed from 74 million cu m Tuesday and 69 million cu m Monday. This pushed the month-to-date average up close to the 70 million cu m/d mark, higher than the October average of 65 million cu m/d where total monthly gas-for-power demand was above the 2 Bcm mark for only the second time since January 2011.Gas-for-power demand in the UK this year so far is almost 50% higher than the 2015 period on the back of coal-fired power plant closures and more favorable generation economics. Moreover, cumulative gas-for-power demand since the beginning of the winter-delivery period on October 1 of 3.6 Bcm is already closing in on the Q4 2015 total of 3.7 Bcm and is on course to be the highest for a fourth quarter this decade. The month-ahead clean spark spread -- the theoretical margin available to a 50%-efficient HHV gas-fired power plant including emissions -- was assessed at GBP24.253/MWh Wednesday by S&P Global Platts, with the quarter-ahead equivalent at GBP20.876/MWh. However, gas-fired generation economics were expected to become tighter in the short term with the Summer 2017 spark spread at GBP6.135/MWh and the Summer 18 peer at GBP2.688/MWh. Nonetheless, with coal-fired power plants expected to be more expensive to run than gas-fired power plants in the coming years, gas can be expected to continue to be the majority fuel in the UK generation mix in the coming years despite the narrower spreads.
NYMEX December gas settles 10.7 cents higher at $2.95/MMBtu - The NYMEX December natural gas futures contract continued to rally on Monday as traders reacted to colder weather encompassing much of the northern tier of the nation. The December contract settled at $2.95/MMBtu, up 10.7 cents from Friday's close. "This rally isn't what I would call bullish, but the market is certainly less bearish than a few weeks ago," Kyle Cooper of ION Energy Group said. "If we have even normal temperatures this winter, I think gas supplies will be at a premium during 2017." Monday's price gains coincided with a revised long-term National Weather Service forecast that now calls for below-average temperatures into next week for major gas-consuming regions of the Mid-Atlantic, Great Lakes and Southeast.According to the weather service, strong northwesterly winds on the backside of a low-pressure system brought heavy lake-effect snow Monday from Michigan to upstate New York. The colder weather is a relief to gas pipeline and storage operators as the storage stocks reached a record 4.047 Tcf for the week ended November 11, according to the US Energy Information Administration. Demand forecasts are providing support for Monday's pricing gains. According to Platts Analytics' Bentek Energy, total US demand is expected to climb to 83.2 Bcf Monday and average about 82 Bcf for Thanksgiving week. Dry gas supplies for the Lower 48 states were expected at 71.8 Bcf Monday and remain close to that level for the week ahead.
Producers urged to ignore conventional oil, gas at their peril - The future for conventional oil projects is far from over despite the recent slump in large finds and an industrywide shift to developing tight oil, delegates at an upstream event in London heard last week. While fewer conventional exploration wells are being drilled as a result of the upstream spending collapse in the wake of the oil price slump, many in the industry have prematurely concluded that sources of conventional oil are running out, according to the head of exploration research at Wood Mackenzie Andrew Latham. "People do tend to look at the total volumes being added in recent years and conclude that we are running out of subsurface potential, I find that unlikely," Latham told the PETEX conference. "It's our view that conventional exploration is a perfectly viable growth and renewal option, particularly for those that are good at it."Conventional oil finds will remain a key driver of new production growth, Latham said, particularly as industry costs come down and access to new acreage begins to ease. Some 10 million b/d of current global oil production is being sourced from conventional oil finds made since 2000, he said, a figure that is likely to double to around a fifth of total world oil production by the mid-2020s. Pointing to new exploration plays such the prolific gas carbonate geology offshore Egypt and Cosmos' recent finds in Senegal and Mauritania, Latham said discovered volumes of conventional oil and gas remain, on a per well basis, on par with historical averages. "In reality, a lot of exploration's recent decline is nothing more than the fact that it's drilling fewer wells in the downturn," he said.
Indonesia allows private companies to build domestic refineries - The Indonesian government has issued a new regulation allowing private companies to build and operate domestic refineries with the aim of accelerating construction of new projects and cutting Indonesia's dependency on fuel imports, a government official told S&P Global Platts late Monday. Under a decree issued November 10, private companies can now import crude or condensate to meet their refining needs and can export refined products if domestic needs have been met. They will also be able to sell their products on the retail market and will be appointed to distribute subsidized fuel by the government, energy and mines ministry spokesman Sujatmiko said. Indonesia still appoints some companies, besides state-owned Pertamina, to distribute fuel throughout Indonesia.Separately, the government plans to invite bids on new mini-refinery in Maluku, in the eastern part of Indonesia, this year. About three to five investors have expressed interest in participating in the tender, oil and gas director general I Gusti Wiratmaja Puja said on the directorate general's website. Maluku is an area estimated to have about 3,000-3,500 b/d of crude that could be refined at the proposed refinery, Puja said. The government will also invite bids for other locations next year, Puja said.
China's teapot refiners making ripples overseas. -- On the last day of October 2016, the first-ever shipment of Chinese motor gasoline to the U.S. was delivered to Buckeye’s Reading terminal in New York Harbor. The vessel took a circuitous route to New York, taking on cargo in the Hong Kong lightering zone, stopping in South Korea to take on another parcel of clean product, dropping off some benzene in Houston, and then finally heading to New York. That complicated journey suggests that the economics of a regular China-to-East Coast gasoline trade route are not there (at least for now), but the shipment highlights a trend: China is becoming more assertive as an exporter of petroleum products and the implications are global. In an international market defined by oversupply, inroads by China necessarily result in other producers losing market share. In today’s blog, we examine the impact of rising clean petroleum product exports—particularly from China, but also from India—and the corresponding ripple effects both on the world market and on U.S. refiners. A structural shift in China’s desire to improve the efficiency of privately held, so-called “tea-pot” refineries has opened the door to tea-pot refiners being free—for the first time—to export their clean products to the global market. Clean products include gasoline and middle distillates (diesel, fuel oil, jet fuel). Further supporting this emerging trend is that these same tea-pot refiners are finding it harder to sell their products in their home market. The combination of tighter Chinese environmental regulations and slowing domestic demand growth have created a surplus of Chinese petroleum products, which are now finding their way to compete overseas. As you might expect, the first area in the U.S. to feel the impact of a larger outflow of petroleum products from China is the West Coast. U.S. West Coast imports of middle distillates—gasoil and jet fuel—from China more than doubled to 11,600 b/d through the middle of November 2016 compared to the average last year. In 2015, Chinese imports were less than 6% of total middle distillate deliveries to the West Coast, while so far in 2016, China’s market share stands at 9.6%. While the short-term impact is muted, it may only be the beginning. While middle distillate exports from China to the West Coast are up, ClipperData’s cargo tracking data shows that there were no similar exports of gasoline into the West Coast—including blending components and naphtha. This is partly because Chinese refiners cannot meet stringent West Coast gasoline specifications, but also because China, overall, is short gasoline (though its exports of gasoline are growing, as we’ll get to in a moment).
Major investment needed to avoid output fall at Iran's South Pars natural gas field: Petropars - Iran will need to invest heavily in compression platforms at its giant South Pars gas field if it is to arrest falling gas and condensate production, the CEO of state-owned energy firm Petropars said Sunday. "Many phases of the South Pars gas field have entered the dropping region of production plateau. To overcome the production drop, compression platforms have been planned to compensate the drop in reservoir pressure," Petropars CEO Hamid Akbary said at the Condensate and Naphtha forum in Dubai. Studies have already begun for the compression platforms and the first engineering, procurement and construction contracts are expected in 2018, he added, saying the required investments are "substantial." This is the first time any Iranian official has spoken about production from South Pars falling naturally unless mitigated, Iman Nasseri, a senior consultant with Facts Global Energy, said at the Dubai conference.Iran's condensate production has exceeded 610,000 b/d this year, with 561,000 b/d of this -- or around 90% -- coming from the 16 operating phases at the giant offshore South Pars gas field in the Persian Gulf, Akbary said. The latest additions to the project were phases 17, 18 and 19, which came into operation this year, Akbary said. In addition, eight new phases are currently being installed at the field. Phases 20 and 21 will become operational in 2017, Akbary said, while phases 13 and 22-24 are expected to begin in 2018. Iran hopes the entire development will be completed in 2021. By then, South Pars condensate production will exceed 1 million b/d.
Oil at 3-week high as Russia’s Putin feeds expectations for OPEC output deal - Oil futures settled at a three-week high on Monday, buoyed by a renewed push by members of the Organization of the Petroleum Exporting Countries to resolve differences ahead of next week’s key meeting and non-OPEC Russia’s apparent willingness to freeze production. December West Texas Intermediate crude tacked on $1.80, or 3.9%, to settle at $47.49 a barrel on the New York Mercantile Exchange on the contract’s expiration day. That was the highest settlement for a front-month contract since Oct. 28, according to data from Dow Jones. January WTI crude which is the new front-month contract, added $1.88, or 4.1%, to end at $48.24 a barrel. January Brent crude on London’s ICE Futures exchange rose $2.04, or 4.4%, to $48.90 a barrel.On Monday, oil prices got a boost as Putin voiced his “belief that an output deal will be reached later this month,” Craig Erlam, senior market analyst at OANDA, said in a note to clients. Putin said he sees a “high probability” that an agreement to curb oil production will be reached at the Nov. 30 meeting in Vienna. “We will do everything that our partners from OPEC are expecting. To freeze crude production is not an issue for us,” Putin said Sunday at a news conference in Lima after an Asia-Pacific Economic Cooperation summit, according to Reuters. Russia isn't a member of OPEC, but is among the world’s biggest oil producers.
Oil Wagers Surge To 9 Year Highs As OPEC Decision Looms - In the aftermath of Trump victory and as an OPEC 'deal' decision looms, hedge funds, oil producers, and consumers have placed the largest number of bets on WTI's next move since August 2007. Producers and merchants increased short positions, or protection against lower WTI prices, to the highest level since March 2011. They added 66,613 bearish contracts over the past two weeks as prices retreated from last month’s peak at above $50 a barrel. Money managers’ net-long position in WTI advanced for the first time since mid-October,climbing by 3,906 futures and options to 163,321. Shorts climbed 14 percent while longs rose 8.1 percent.While WTI is exuberantly rising this morning on the heels of Putin's positive 'deal' comments... We note that Oil VIX costs are at their highest in 7 months suggesting traders expect significant price swings no matter what.As Bloomberg reports, “There’s tension in the market, with both producers and consumers worried about what OPEC does or won’t do on Nov. 30,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “They want to be protected from surprising price moves.”“I suspect that when the OPEC meeting is over there will have been a lot more smoke than fire,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “If they don’t come up with a convincing agreement, they’ll be forced to revisit the issue before long.”
Oil prices rise to highest this month on hopes of OPEC deal | Reuters: Oil prices rose on Tuesday to their highest this month as a growing consensus emerged in the market that OPEC would overcome internal disputes and scepticism to strike a deal that materially reduces crude output. Some warned a failure by the Organization of the Petroleum Exporting Countries to reach agreement at a Nov. 30 meeting, or, more importantly to implement it, would send prices crashing as a two-year glut of crude remained unabated. Many in the market think OPEC would harm its reputation if a deal were not struck and so focus has shifted to which countries would bear the brunt of the cuts, when exactly the global market could become balanced and how the cartel could raise prices without triggering a burst in U.S. shale oil output. Brent crude oil futures were up 22 cents a barrel at $49.12 by 1212 GMT (7:12 a.m. ET), having earlier risen $1 in a push against the $50 mark for the first time since the end of October. U.S. West Texas Intermediate (WTI) crude futures were up 14 cents at $48.38 a barrel. Prices were boosted by comments from a Nigerian official attending an OPEC technical meeting, which is trying to hammer out details of a deal, that it was likely all countries would be "on board" by the end of Tuesday. OPEC is trying to bring its 14 member and non-OPEC producer Russia to agree on a coordinated cut to prop up the market by bringing production into line with consumption.
Russia, Saudi Arabia On Shaky Common Ground -- Zeits -- November 21, 2016 - From SeekingAlpha:
- President Putin this morning re-iterated Russia’s position in the production control negotiations
- While Russia’s “bid” falls far short of Saudi Arabia’s “ask,” Russia may win this negotiating round
- However, to achieve a durable oil price response, OPEC and Russia need to achieve market re-balancing in substance, not just before the media
- Saudi Arabia has significant negotiating power, as its sponsorship for the production pact is vital for Russia's and other producers' export revenues
Goldman Now Expects OPEC To Reach Production Cut Deal, Raises Oil Price Forecast -- Among the reasons for today's rebound in oil prices, as noted earlier, is renewed hope that OPEC will reach a deal during the cartel's upcoming meeting in Vienna on November 30. The catalysts include Iraq and Iran, both of whom signaled optimism surrounding the proposed OPEC supply-cut deal, while Russian President Vladimir Putin said his nation is ready to freeze crude output at current levels, and sees no obstacles to an agreement. To emphasize this, moments ago Putin was quoted by newswires as reiterating a position he laid out over the weekend: PUTIN SAYS WILL NOT BE DIFFICULT FOR RUSSIA TO FREEZE OIL OUTPUT. On the other hand, Iraq, OPEC’s second-biggest producer, said it would offer proposals this month to help the producer group reach an agreement on an output freeze to shore up prices. Curiously, there was no mention of Iraq actually agreeing to cut production and by how much, or just how much of the delta to 32.5 mmbpd Saudi Arabia is willing to absorb. As Bloomberg notes, details of the Iraq proposals were not provided in an e-mailed statement from the Iraq Oil Ministry on Monday, probably for a simple reason: there were none, as OPEC's strategy remains simple: jawbone shorts into further covering ahead of the OPEC meeting. The nation’s “legitimate demands” shouldn’t be considered as obstacles to reaching an accord, Oil Minister Jabbar al-Luaibi said in the statement. Iraq has sought an exemption from joining any production cuts, arguing that its fight against Islamic State justifies special treatment. The Organization of Petroleum Exporting Countries agreed in September in Algiers to cut their collective output to 32.5 million to 33 million barrels a day. While quotas will be decided at OPEC’s Nov. 30 meeting, Libya, Nigeria, Iran and Iraq have said they should be exempt.“Iraq’s legitimate demands should not be perceived as an obstacle to reaching a new agreement to freeze production,” al-Luaibi said in the statement. Iraq looks forward to “reaching a fair agreement that would take into consideration everyone’s interests and that puts an end to the glut.” Iraq will take “new proposals and ideas” to OPEC this month to help members reach an accord, al-Luaibi said in the statement. An agreement will “help achieve the common objectives of the producers, including market stability and shoring up prices to acceptable levels.”
OPEC Technical Talks Falter As Key Members Reject Cut -- Oil prices hit recent highs on Monday on OPEC deal hopes, but hit a snag on Tuesday as Iraq and Iran remain hesitant towards an output cut. Oil prices soared on Monday following news that OPEC is making progress on a deal to cut production. The potential breakthrough is coming from Iraq, which is widely seen as the most obstinate of all OPEC members (along with Iran), arguing that it needs higher production to pay for its war against the Islamic State. Iraqi officials said they will offer three new proposals at the technical meeting taking place this week in Vienna. The WSJ reports that the proposals “will be consistent with OPEC policy and are designed to bolster the unity of the group,” although few specifics were available. “All of the options will be logical and in line with OPEC policy,” Iraqi oil minister said. WTI spiked by nearly 4 percent and Brent was up 4.6 percent on Monday before falling back a bit on Tuesday afternoon. On top of the new openness from Iraq, comments from other prominent OPEC and non-OPEC officials buoyed the markets further. Iran’s oil minister said that it’s “highly probable” that OPEC reaches a deal. Russian President Vladimir Putin said he sees no obstacles to a deal. “It is likely everybody will be on board by the end of the day,” said Ibrahim Waya, a Nigerian official. One last thing that could boost the chances of a deal: the latest proposal being discussed in Vienna is a deal that could last for just six months rather than a year, making it easier to stomach for some of the holdouts.
Oil Slides: OPEC "Deal" Suddenly In Jeopardy --Earlier today, oil spiked and pushed stocks to new all time highs, after the Nigerian OPEC delegate Ibrahim Waya said that not only is "everyone on board" ahead of the November 30 Vienna cartel summit, but that he expected details of the output accord would be finalized today.That, however, was put in question later in the morning when OPEC members said that Iran, Iraq and Indonesia were all said to have "reservations" about a proposed 4.5% production cut. Worse, according to the news, it appeared as if Iran would not be part of the exempt from production cuts group at all, contrary to the Algiers agreement, suggesting that Saudi Arabia had changed its mind once again.And now, moments ago, oil tumbled to intrday lows on the latest batch of headlines according to which the OPEC Vienna "deal" is now suddenly in jeopardy when Bloomberg reported that the OPEC committee is said to defer the issue of Iran and Iraq - the second and third largest producers in OPEC - to the November 30 meeting altogether, confirming what the skeptics knew all along - that not only will a deal not be finalized today, but that a deal may not even happen next week in Vienna, as the rift between what Saudi Arabia is willing to "cut" to reach a deal and what it demands from its key competitors in a jockeying for market share, remains as wide as ever. Oil promptly dropped to day's lows on the news.
Oil Slides After Bigger Than Expected Gasoline Build -- After a day of frenetic OPEC headlines being all that matters, oil traders may briefly focus on fundamentals as API reports an unexpectedly large build in gasoline inventories ( +2.68mm vs 900k exp). Overall crude, cushing, and distillates saw inventory draws which left wti slightly lower post-data. API
- Crude -1.28mm (+1mm exp)
- Cushing -140k (-100k exp)
- Gasoline +2.68mm (+900k exp)
- Distillates -350k
After last week's across the complex builds, it was ony gasoline that saw a build this week (which fits seasonally)
OPEC's Matrix: If 1 Million Bpd Are Cut, Oil Will To Rally To $59 - While the market has taken the latest round of "optimistic" jawboning by OPEC members in stride, sending crude higher by 4 percent ahead of next week's meeting in Vienna where the terms of the OPEC production cut are expected to be finalized, the reality is that a favorable outcome may be problematic. As Bloomberg's Julian Lee explained overnight, "OPEC says it’s close to a deal to cut oil output for the first time since 2008, a move that may halt a 2 1/2-year price slump. The actions of individual member states tell a different story. The simple math supporting cuts looked solid at OPEC’s meetings in June and December. Prices then were way below most members’ fiscal break-even points. An output cut now of 1.5 million barrels a day, or 5 percent, would need to boost the oil price by only $2.50 a barrel for OPEC nations collectively to be better off. A $5 price increase would boost the value of what they pump by about $100 million a day." As Lee notes, while OPEC Secretary-General Mohammed Barkindo has been touring member nations to shore up support for an agreement before the Nov. 30 meeting, culminating with a trip to Doha for talks last week, "the meeting didn’t resolve much. It certainly didn’t tackle any of the thorniest questions that OPEC must still overcome if coordinated measures are to happen." Meanwhile, OPEC production continues to surge, hitting new all-time highs this month, effectively leaving the cartel little option but to reduce supply, however even with a cut it would only bring down production to a level seen as recently as May of this year. As a result, as Bank of America notes, downward oil price pressures are now coming mostly from within the cartel itself. "Will OPEC decide to end the price war or not? For starters, it is important to note that the cartel is running with very limited spare production capacity. As a result, we would argue that it makes good economic sense to end the price war, or at least declare a truce, at this stage." While BofA is not expecting a return to the old regime, where Saudi micromanaged global oil stocks, it does project OPEC crude supply to drop sequentially (Chart 16). Under this scenario, BofA's base case, WTI crude oil prices will average $55/bbl in 1H17 and $59/bbl over the course of the year. The cut would enable a fast rebalancing of global crude markets and possibly a shift into backwardation. Moreover, the deal would likely incorporate a production freeze from Russia.
Will We Ever See $100 Oil Again? | OilPrice.com: A report from auditors PricewaterhouseCoopers (PwC) has revealed that oil prices are unlikely to climb back to the $100 level, and will have a limited rise from the current spot price to between $60 and $70 per barrel over the next few years. The rise, which would pull oil prices up from the below $50 per barrel mark where it has sunk since late October, should facilitate a rise in capital expenditure (capex), PwC argued. The report highlights the precipitous decline in global upstream capex, where some commentators have said that there has been a 40 percent reduction in this genre of spending, compared to the highs of 2014. Oilfield service companies have also been battered by a broad decrease of drilling activity, and operational costs. For example, there has been a 30 percent decrease in the day rates for drilling ships this year, compared to two years ago. In a chilling statement for oil companies, the report concluded that there is no longer a ‘ceiling’ of $100 barrels of oil that there used to be, before prices started to slide in the second half of 2014. Research and development is also an area that has been badly hit, with oilfield service companies spending less, a significant trend as they spend more as a percentage of sales compared to the major oil companies. A lack of innovation could be costly to competitiveness in some areas, such as the North Sea in the UK the report opined.New technology is essential to allay the lack of attractiveness of the zone, due to the high costs of production.
US Crude Production Rises As Rig Count Reaches 10-Month Highs -- For the 24th week of the last 26, oil rigs rose (by 2) to 474, the highest since January 2016. US crude production rose again last week tracking the lagged trend of rising rig counts in the US. Notably US crude production looks set to rise given the rig count moves (and if OPEC agrees a deal and spooks prices higher, that production may well arrive sooner).
US Rig Count up 5 This Week to 593; Pennsylvania up 4 - ABC News: number of rigs exploring for oil and natural gas in the U.S. increased by five this week to 593. A year ago, 744 rigs were active. Depressed energy prices have curtailed exploration although the rig count has been rising in recent weeks. Houston oilfield services company Baker Hughes Inc. said 474 rigs sought oil and 118 explored for natural gas this week. One was listed as miscellaneous. Pennsylvania gained four rigs, Texas three and Colorado two. Wyoming declined by three, New Mexico two and North Dakota one. Alaska, Arkansas, California, Kansas, Louisiana, Ohio, Oklahoma, Utah and West Virginia were unchanged. The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May at 404. The weekly tally, normally released Friday, was released Wednesday because of Thanksgiving.
BHI: US rig count up 5 in short holiday week - Oil & Gas Journal - The overall US drilling rig count increased by 5 to 593 during a week ended Nov. 23 that was shortened by the Thanksgiving Day holiday, according to Baker Hughes Inc. data.The latest movement comes after last week’s 20-unit jump, the largest since April 2014 (OGJ Online, Nov. 18, 2016). Up in 22 the past 26 weeks, the count has added 189 units since bottoming at 404 on May 27.Oil-directed rigs gained 3 units this week to 474, an increase of 158 since May 27. Gas-directed rigs rose 2 units to 118, up 35 since Aug. 26 due in part to a resurgent Marcellus shale. One rig considered unclassified remains operating.All 5 of the units to come online are land-based, horizontal rigs, bringing those tallies to 568 and 475, respectively. The horizontal count is now up 161 since May 27. Despite a 1 unit loss this week to 228, the Permian has been the primary catalyst for the US drilling rebound since last spring. Drilling rigs, drilled but uncompleted wells, and anticipated barrels of production continue to mount in the basin, where one operator in particular has undertaken a large expansion of its acreage position over the past year. Midland-based Concho Resources Inc. said it now plans to run 8 rigs in the northern Delaware basin during 2017 following its agreed upon acquisition of 16,400 net acres in the region announced this week (OGJ Online, Nov. 21, 2016). The new rig count for the area will double the firm’s 2016 average. In its third-quarter earnings report published prior to the latest acquisition agreement, the firm said it intended to allocate 35% of its total 2017 drilling capital to the northern Delaware, accounting for 7 rigs working (OGJ Online, Nov. 14, 2016). Spreading its presence around the basin, Concho since January has also acquired acreage in the southern Delaware and Midland basins. The Permian is up 94 units since May 13.Helping advance the gas-drilling rebound, Pennsylvania led the major oil- and gas-producing states with a 4-unit rise this week to 29, an increase of 16 since July 8. The Marcellus also gained 4 units and now totals 38, up 17 since Aug. 12.Texas tallied 3 more units to bring its count to 279, up 106 since May 27. Colorado and the DJ-Niobrara each rose 2 units to 22 and 20, respectively. Elsewhere, the Mississippian increased a unit to 4.North Dakota and its Williston basin each dropped a unit to 33. New Mexico lost 2 units to 29. Wyoming decreased 3 units to 13. The Cana Woodford relinquished 2 units to 38.US offshore rigs and those drilling in inland w aters remain at respective totals of 23 and 2.
WTI Spikes After Iraq Headlines, Unexpected Crude Inventory Draw - A crude draw and bigger than expected gasoline build overnight from API did nothing for oil prices as OPEC headlines dominate trading and DOE data confirmed API with a modest crude draw and bigger than expected Gasoline build. Oil prices are rising on Iraq headlines even as crude production rose very modestly. DOE
- Crude -1.255mm (+1mm exp)
- Cushing -97k (+300k exp)
- Gasoline +2.317mm (+900k exp)
- Distillates +327k (-1mm exp)
Confirming API data, DOE reports a bigger than expected Gasoline build and modest crude draw (as crude imports dropped 845k last week). Notably Distillates are still building at a time when seasonal norms should see a draw. US Crude Production rose very modestly on the week.
Is OPEC Playing The Oil Markets Again? -- Oil prices moved back up closer to $50 per barrel on the sudden surge in optimism surrounding an OPEC deal. With the meeting just days away, everybody is playing ball and sticking to the script, and the odds of an agreement have improved markedly compared to a few weeks ago. Iraq offered three proposals to OPEC members, showing a renewed willingness to negotiate after weeks of disputing production data and demanding an exemption from the proposed cuts. Details of the proposal were kept quiet, but Iraqi officials sounded cooperative in an emailed statement. “Iraq’s legitimate demands should not be perceived as an obstacle to reaching a new agreement to freeze production,” Iraqi oil minister Jabbar al-Luaibi said, according to Bloomberg. Iraq is optimistic about “reaching a fair agreement that would take into consideration everyone’s interests and that puts an end to the glut.” Officials from Iran, Nigeria and even Russia also offered positive words about the prospects of an accord.m Oil prices shot up by more than 4 percent on Monday on the news. Oil has rallied once again in recent days after dropping into the low-$40s per barrel. Now back up close to the $50 per barrel threshold, OPEC has once again succeeded in jaw-boning the oil market.Goldman Sachs hiked its oil price forecast this week by a substantial amount. The investment bank expects oil prices to average $55 per barrel in the first half of 2017, up sharply from the previous estimate of $45 to $50. The bank is now “tactically bullish” on oil. “With greater confidence that the global oil market can finally shift into deficit later next year, we now believe that there is a strong rationale for low-cost producers to deliver a swift production cut to normalize inventories,” Goldman analysts wrote in a research note this week. In fact, Goldman Sachs sees prices rising across a range of commodities next year. The optimism has not trickled over into the oil futures market, at least not yet. Hedge funds and other money managers have stepped up their short bets on crude oil ahead of the OPEC meeting, covering against a steep downfall in prices should OPEC fail to come to terms. While the short positions on oil were notable, trading volume in general is way up. Bloombergnotes that as of mid-November, oil price volatility was at a seven month high. Bets on oil futures reached 1.47 million contracts for the week ending on November 15, the largest trading volume in nearly a decade.
Oil prices edge down on doubts about OPEC-led cuts | Reuters: Oil prices fell slightly on Wednesday amid investor doubts that OPEC will agree to a production cut large enough to make a significant dent in the global glut of crude as U.S. drilling rises. Members of the Organization of the Petroleum Exporting Countries (OPEC) will meet next week on Nov. 30 in Vienna to decide on the details of an agreement to cut output that the group has been trying to hammer out since September. Oil prices fluctuated throughout the day, starting lower in the morning and later briefly turning positive after the Energy Information Administration said U.S. crude stocks unexpectedly fell 1.3 million barrels last week after three straight weeks of builds. Reports that U.S. drillers added rigs this week tempered the gains ahead of the settlement. [RIG/U] In the U.S. market, West Texas Intermediate (WTI) crude oil futures CLc1 settled down 7 cents, or 0.2 percent, at $47.96 a barrel. Brent crude futures LCOc1 settled down 17 cents, or 0.35 percent at $48.95 a barrel. Calendar spreads, the difference in price between one month and the next in the futures market, showed little signs that traders are pricing in a big change in market fundamentals. The front to second-month WTI calendar spread traded at its widest level in seven months on Tuesday, although it narrowed slightly on Wednesday. The one to six-month spread traded at one of the widest levels since August. The WTI cash roll, which allows physical traders to roll long positions forward, traded down to negative $1.80 a barrel on Tuesday, the weakest since March. All are indications that traders expect little change in oversupply in the market in the near term.
Oil Prices Await Effect of OPEC Deal - WSJ: OPEC will meet next week amid a growing consensus the cartel will strike a deal to cut crude production. A question remains: How much would that actually affect oil prices? The days of $100 a barrel oil prices are over, oil-industry analysts said, no matter how strong any deal that the Organization of the Petroleum Exporting Countries cuts in Vienna on Wednesday. The more likely scenario is that a strong statement from OPEC, the 14-nation cartel that controls a third of the world’s oil production, would put a floor under prices of $50 a barrel in 2017, analysts said. A credible deal, with production targets for each country and enforcement mechanisms, could send prices above $55 a barrel, analysts said.“It’s looking more like a deal will go ahead,” said Warren Patterson, commodity strategist at ING Bank. “However, it will be important what the details around the deal will actually end up being.” Conversely, a breakdown in talks would send oil plunging back down to $40 a barrel or less, analysts said. “The stakes are high that an agreement will be reached,” said Rob Thummel, portfolio manager at Tortoise Capital Advisors, which manages $15 billion in energy assets. Underscoring the uncertainty about the deal’s prospects, banks polled by The Wall Street Journal kept their price forecasts largely unchanged from the previous month. The 14 banks in the survey predict that international Brent crude will average at $56 a barrel next year while U.S. benchmark West Texas Intermediate will average $54 a barrel next year. On Friday, Brent was trading at $48.54 a barrel while WTI was at $47.60 a barrel. Those prices are still down by more than half from mid-2014. OPEC agreed in September to reduce its record output, but its members have since increased production even more, complicating its calculations for a cut. That means the nitty-gritty details of any OPEC agreement on Wednesday will be more important than usual. OPEC members produced 33.643 million barrels a day in October, a record, after agreeing in September to cut down to between 32.5 million and 33 million barrels a day. Saudi Arabia is now backing a push for OPEC to cut to the 32.5 million mark and get Russia and other big producers outside of OPEC to join in with a cut of 500,000 to 600,000 barrels a day.
Dubai crude spreads rally mid-week ahead of OPEC meeting - Benchmark Dubai crude intermonth spreads rallied Wednesday in Asia ahead of a meeting next week at which OPEC members are expected to reach consensus on the terms of a final production agreement that would limit the group's output. The spread between December and January Dubai crude swaps was seen at a one-month high of minus 29 cents/b Wednesday at 13:33 pm Singapore time (0533 GMT). It was last assessed at minus 36 cents/b Tuesday, up from a nine-month low of minus 66 cents/b on November 8, S&P Global Platts data showed. The gaining of momentum in the market around a potential OPEC production cut was putting upward pressure on the Middle Eastern sour crude market amid expectations those barrels would be the first impacted by any cuts, trading sources said Wednesday. "The market may feel OPEC may reach some agreement at the end of this month," said a North Asian crude trader, adding that the physical Middle East sour crude market also remained strong amid steady end-user demand.OPEC will meet in Vienna on November 30 to work through the details of a proposed production freeze at 32.5 million-33 million b/d from early 2017. "Market [is] certainly pricing in OPEC cuts, which means if [there were to be] any non-agreement next week, then market [will] dump hard," said a Singapore-based crude trader.
In Last Minute Twist OPEC Demands Big Production Cuts From Non-OPEC Members; Russia Balks - With less than a week to go until the much anticipated OPEC meeting in Vienna on November 30, the oil exporting cartel still seems unable to determine the terms of production cut quotas, who will be exempt from cutting, and even who will participate. According to Reuters, in the latest twist to emerge, as OPEC tries to find the sweet spot for production that reduces the oversupply of crude, the organization will ask non-OPEC oil producers to also make big cuts in output, as it seeks to share the burden of declining output and prevent market share gains by non-OPEC nations. The oil minister of Azerbaijan was quoted as saying the cartel may want non-OPEC producers to cut output by as much as 880,000 barrels per day (bpd). "It could be expected that OPEC members may ask non-OPEC countries to cut production volumes for the next six months starting from Jan. 1 2017 ... by 880,000 barrels from the total daily production," Azeri newspaper Respublika quoted the country's oil minister, Natig Aliyev, as saying. Reuters countered that according to an OPEC source the group had yet to decide on the final figures to be discussed on Nov. 28, when OPEC and non-OPEC experts meet in Vienna. As previously reported, OPEC is expected to discuss production cuts of 4.0-4.5% among its members at the Vienna meeting to comply with the roughly 1.2mmbpd reduction as set forth in the Algiers meeting which expects total OPEC output of 32.5-33.0mmbpd, but Iran and Iraq still have reservations about how much they want to contribute. A cut of 880,000 bpd would represent less than 2% of current total non-OPEC output. Shortly after the report came out, Russian energy minister Alexander Novak said Russia was working with Kazakhstan and Mexico, though not the United States, on joint output curbs, but reiterated Moscow preferred to freeze output over cuts. He said that a freeze would be “quite a difficult and harsh situation for us as our plans envisioned an output growth next year." In an amusing twist, Russia floated the concept of a "pro-forma" cut, saying that by keeping its production fixed, it would be an effective "cut" to its 2017 production plan.
Update On OPEC November, 2016, Meeting -- Zeits -- November 25, 2016 --From Zeits at SeekingAlpha:
- Iraq’s statement of support for a 1-million-barrel production cut signals continued success at the negotiation table
- The chances are high that progress is being made not only on the text of the resolution at the meeting, but also with the implementation mechanism
- OPEC’s ability to put in place a successful price support policy should not be underestimated
WTI at about $47 right now
breakevens below $25 in the Bakken right now (posted earlier)
OPEC has yet to meet; tea leaves suggest OPEC is getting its act togther
Feature: OPEC scrambles to clinch oil output freeze deal ahead of Vienna meeting - OPEC meets Wednesday with its credibility on the line, as ministers race against a self-imposed deadline to finalize a long-debated oil output freeze aimed at hastening the market's rebalancing and shoring up slumping prices. Details of the freeze pact, first unveiled in Algiers in late September, remain in flux, with various countries -- even from outside the producer group -- talking up their positions through the media, as they angle for leverage. Oil prices, which have whipsawed over the last two months, have risen in the past week on reports that OPEC members were apparently narrowing their differences. But close watchers say the stubbornly lingering obstacles -- including individual country allocations, exemptions for certain members and which production statistics to use -- may yet be a bridge too far."Ultimately, I do believe members are trying to reach a deal, but right now, it's hard to know what is posturing as part of a negotiating position and what is an absolute red line," said Yasser Elguindi, a Philadelphia-based analyst with Medley Global Advisors. "Unless the positions staked out so far are negotiable, it's quite possible that there will not be a deal in Vienna." All that has been settled at the moment is what was announced in Algiers: a goal for OPEC to freeze production between 32.5 million b/d to 33 million b/d, which would require a cut of between 640,000 b/d to 1.14 million b/d from October levels, according to the organization's own estimate. If finalized, it would be OPEC's first coordinated cut since 2008. Any deal will have to be based on goodwill and trust, as OPEC has no formal authority to enforce compliance within its own membership, let alone externally among the non-OPEC producers it hopes to engage. By all accounts, OPEC kingpin Saudi Arabia is eager to seal the freeze to provide some fiscal relief, but all along, it has been insistent that any cut burdens have to be shared equitably and transparently, as it withdraws from its long-standing role as the market's sole significant swing supplier. While Saudi Arabia is apparently willing to exempt Libya and Nigeria from the freeze as they recover from internal strife, it has been less amenable to requests from Iraq and Iran for relief.
The Economy Needs Higher Oil Prices – Goldman Sachs - OPEC is closing in on a deal to cut production, which will surely cause oil prices to rise. Oil is already almost back to $50 per barrel, so cuts of nearly 1 million barrels per day could boost prices well into the mid-$50s, even up towards $60 per barrel. That will provide a windfall to oil producers around the world and the sacrifice for OPEC members will be more than paid for by higher revenues. For example, Iraqi officials say that for every $1 increase in the price of a barrel of oil, their revenues jump by $1 billion per year. As a result, the odds of rising crude oil prices are high. But while that could be welcomed by the industry, consumers might not be as excited to see cheap gasoline disappear. After all, U.S. motorists have enjoyed two years of incredibly cheap fuel. Will rising oil prices put a dent in already tepid U.S and global economic growth? Perhaps not. As Bloomberg reported, Goldman Sachs wrote in a Nov. 22 research note that the global economy could benefit from higher oil prices. That conclusion may not be obvious, but here is the logic the investment bank lays out: Higher oil prices lead to a wave of capital that flows into major oil producing countries such as Saudi Arabia. Unable to use all the capital, Saudi Arabia sends the excess savings back into the global financial system. Banks then use that capital to lend. Interest rates also fall as the financial markets are more liquid. The end result is lower interest rates, more financial liquidity, higher asset values and ultimately greater consumer confidence. In short, higher oil prices could boost economic growth. These conclusions echo those from a team of IMF economists from earlier this year. In March, the IMF said that the assumed connection between oil prices and GDP (falling oil prices will boost GDP as consumers have more money in their pockets) is not as solid as previously thought. Many analysts, including those at the IMF, once assumed that although oil producing countries such as Saudi Arabia would be damaged from low oil prices, the benefits to consuming countries would more than offset those losses, delivering net benefits to the global economy.
Oil Slides As Saudis Refuse To Attend Non-OPEC Producers Meeting --WTI crude prices were already fading this morning, after a subdued day yesterday, but the first major headline from Vienna has sparked further weakness as Reuters reports that Saudi Arabia has told OPEC it will not attend a meeting with non-OPEC producers on Monday. Reuters reports that Saudi Arabia wants a deal agreed before they will agree to send anyone to the NOPEC talks. For now the reaction is modest (even with a heavy volume spike)
Saudis Said to Quit Russia Talks as OPEC Deal No Closer - Saudi Arabia pulled out of planned talks with non-OPEC nations including Russia as disagreements about how to share the burden of supply cuts stood in the way of a deal to boost prices just days before a make-or-break meeting in Vienna. OPEC officials were scheduled to meet with non-members including Russia on Monday before a ministerial meeting in Vienna two days later. The meeting was later canceled entirely after the Saudis decided not to take part. Instead, the group called another internal meeting to try to resolve its own differences, particularly the question of whether Iran and Iraq are willing to cut production, said two delegates, asking not to be identified because the deliberations are sensitive. Saudi Arabia wants an OPEC deal in place before conversations with other producers such as Russia, one delegate said. The setback suggests that Saudi Arabia remains split from its two biggest Middle Eastern rivals at the Organization of Petroleum Exporting Countries. Iran insists it should be allowed to restore output to pre-sanctions levels, while it remains unclear if Iraq is still disputing the OPEC supply estimates that would provide the basis for any cuts. With less than a week until the crucial ministerial meeting, the refusal of just one major producer to participate could scuttle the whole of the agreement reached in September in Algiers. "The whole Algerian deal wasn’t clear from beginning and their approach was ‘leave it to later’,” said Abdulsamad al-Awadhi, a former OPEC official for Kuwait who is now an independent analyst in London. Two months after the initial accord "OPEC leaders are confused and the group’s founding members can’t solve differences, but they want to have a deal with non-OPEC. This is a tough call." Brent fell 3.6 percent to $47.24 a barrel in London on Friday. In New York, West Texas Intermediate fell to $46.06 a barrel.
OilPrice Intelligence Report: Saudis Withdraw From Non-OPEC Meeting, But Odds For Deal Are Still Good -- Oil prices held steady just below $50 per barrel at the end of the week, before falling back a bit as a result of bearish Saudi rhetoric. Iraq added momentum to the market in the lead up to the Vienna summit, agreeing to shoulder some of the burden for the cartel’s production cuts. After resisting for weeks, Iraq’s Prime Minister said that his country will participate. “Iraq will cut its output to preserve prices,” Al-Abadi told reporters in Baghdad on November 23. Iraq was one of the largest stumbling blocks to a deal, so things are looking pretty good for some sort of agreement next week. If they succeed, the deal would take effect in January.. To fall into the range that OPEC set out in Algiers – between 32.5 and 33.0 million barrels per day – OPEC will need to cut between 600,000 and 1.1 million barrels per day. Taking the midpoint, or about 900,000 barrels per day, would go a long way to erasing the global supply surplus. However, Saudi Arabia is reportedly on board with an aggressive approach: Making cuts of 1.1 mb/d in order to take output down to 32.5 mb/d, plus asking Russia and other non-OPEC countries to contribute another 500,000 to 600,000 barrels per day in reductions. If that were to occur, the agreement could take 1.6 percent of global supplies off the market. OPEC has surprised and disappointed the oil markets many times in the past two years, so nothing should be taken for granted. But if a deal is signed, oil prices could rise substantially. A survey of analysts conducted by The Wall Street Journal finds that oil watchers think prices would rise to $55 per barrel if OPEC succeeds, but could fall to $40 per barrel or less if they don’t. Needless to say, the stakes are high. IEA executive director Fatih Birol sees oil prices climbing to about $60 per barrel if OPEC succeeds in cutting output. That would be a boon to OPEC but it could also provide a spark to U.S. shale, which is already holding up with oil prices below $50 per barrel. Production from the Permian basin in particular will continue to soar if oil prices rise. Already very profitable at today’s prices, the Permian has captured a growing share of global oil investment this year. If output from the U.S. rises, the IEA says the OPEC deal could lead to another downturn in prices within nine months to a year. In other words, the OPEC deal may only provide a short-term boost to prices, which will lead to higher output and another downturn.
Oil Erases The Week's Gains After Reports Monday OPEC/NOPEC Meeting Cancelled - Having topped $49 earlier in the week, hopes of a 'freeze' deal are fading fast as first Saudi Arabia abandons Monday's planned meeting with non-OPEC producers and now Reuters reports a delegate confirming Monday's OPEC/NOPEC meeting has been cancelled...
Can OPEC Get It Right At Long Last? | OilPrice.com: OK, 2016 – this is it. This is your last chance to get something right. OPEC meet on November 30th to do a deal that would see the biggest oil producers across the world agree to limit output for the first time since 2008. Do NOT let us down. The omens – well, at first glance, they look good folks. The last meeting ended on a somewhat ambiguous 'let's nail those details down later' note, but credit where credit's due - the lengthy discussions, endless phone-calls and flurry of negotiations have taken place, and made ground. Algerian Energy Minister Noureddine Boutarfa told reporters, “The goal was to prepare for Vienna. We won't turn back on the decision made in September in Algeria. All the countries, 11 present in today's meeting, agreed to support the Algiers Accord.” OPEC Secretary-General Mohammed Barkindo said “all hands are on deck” to ensure the deal is made. Obviously, the stumbling block was Iran. After the Obama administration agreed to the nuclear deal, Iranian oil Minister Bijan Zanganeh was determined to see his country's production rise to pre-sanctions levels, and it's been widely reported that any talk of a freeze would have to be around the 4 million bpd mark. Since the end of last week, insiders have reported that the majority of members will accept giving Iran greater flexibility than any other member state and ask for a freeze at 3.92m bpd. This is more than Tehran is currently producing – about 3.6 – 3.7m bpd. On Saturday Zanganeh said “it is highly likely” that OPEC will reach agreement.
Why Saudi Arabia’s Oil Giant Aims to Be Big in Chemicals, Too - WSJ: Saudi Arabian Oil Co. has been the world’s single largest crude producer for decades. It wants to be a lot more than that now, as a new petrochemical complex shows. Among the Dutch corn fields here is a tangle of pipes, vats and catalyzers that the company uses in its Arlanxeo plant to transform what was oil into synthetic rubber for products ranging from auto-engine hoses to plastic wine corks. Aramco, as it is commonly known, until recently focused on pumping great quantities of oil and, like the Standard Oil companies of John D. Rockefeller, processing it through its refineries. Aramco now aims to vastly expand its petrochemical operations, turning itself into a modern integrated energy company along the lines of Exxon Mobil Corp.Thousands of miles away, near the Saudi Arabian city of Al Jubail on the Persian Gulf, an army of workers is finishing the $20 billion Sadara petrochemical complex, an Aramco joint venture with Dow Chemical Co. Sadara will use ethane refined by Aramco nearby to make a petrochemical called butadiene to ship world-wide to facilities, likely including its Dutch plant. Aramco, one of the world’s most powerful and secretive companies, is undergoing an unprecedented makeover, as the oil-price rout hurts its revenue and uncertainty clouds the future of fossil-fuel demand. Its transformation is intertwined with a long-term plan to diversify the Saudi economy. That plan, led by a powerful deputy crown prince who wants his nation to grow beyond being a petrostate, is accelerating the Aramco shift in ways now becoming clear. By positioning the company to generate more domestic jobs and non-oil revenue, Aramco aims to help provide the funding needed to carry out the prince’s vision.
Honeymoon is over for new Saudi leader as reform pain kicks in - One of hundreds of thousands of Saudis who studied in the US on a government-funded programme, the 30-year-old mechanical engineering graduate has yet to find a job which he spent years training for. Instead, he makes an uncertain living, operating an illegal airport taxi, risking fines from the police. “The economy is bad, where are the jobs?” he says. “All my friends are cursing the government.” His generation’s travails highlight the peril of reform for Deputy Crown Prince Mohammed bin Salman, who, just a few months ago, was hailed as a vibrant contrast to Saudi Arabia’s previous generations of gerontocracy. The powerful prince has spearheaded plans for economic diversification as the kingdom grapples with low oil prices. His vigour for bold reform was matched by his determination to check Iran’s regional influence by launching an air campaign against the Islamic republic’s proxies in the war in Yemen. But under the 31-year-old’s stewardship, the Middle East’s largest economy has plunged to the brink of its first non-oil sector recession for three decades. Unpaid government invoices have savaged business confidence; cuts to public sector workers’ benefits have hit consumer spending; and Saudi Arabia’s expensive intervention in Yemen has cost lives and triggered international opprobrium. “The honeymoon is indeed over,” says one fund manager. “There has not been one bit of good news for the government — from the economy to the disaster in Yemen.” The domestic grumbling is ramping up pressure on Prince Mohammed as he oversees a highly ambitious reform programme intended to wean the kingdom off its dependence on oil and develop the private sector to create jobs for young Saudis. His plans are laid out in two documents, “Vision 2030” and the National Transformation Plan [NTP], which were released to much fanfare earlier this year. Many Saudis acknowledge the need to transform the kingdom and understand the impact of low oil prices on the economy. But voices of dissent are emerging over the means and pace of change.
Obama Seeks to Fortify Iran Nuclear Deal - WSJ: The Obama administration is considering new measures in its final months in office to strengthen the landmark nuclear agreement with Iran, senior U.S. officials said, with President-elect Donald Trump’s first appointments foreshadowing an increasingly rocky road for the controversial deal. Action under consideration to buttress the pact includes steps to provide licenses for more American businesses to enter the Iranian market and the lifting of additional U.S. sanctions.The effort to shore up the agreement was under way before the election and is not aimed at boxing in Mr. Trump, who opposes the deal, the officials said. Officials also acknowledged the proposals are unlikely to make the nuclear agreement more difficult to undo. Mr. Trump’s first two picks for his national security team—retired Army Gen. Mike Flynn as national security adviser and Rep. Mike Pompeo (R., Kan.) as Central Intelligence Agency director—are hard-liners on Iran who have voiced opposition to the nuclear deal. Trump transition team officials didn’t respond to questions about their plans for the agreement or the current administration’s efforts to shore it up. During the presidential campaign, Mr. Trump talked at times of ratcheting up sanctions on Iran, but also said U.S. companies shouldn’t be at a disadvantage in entering the Iranian market. “All of these countries are going to do business with Iran,” Mr. Trump said at a campaign event in September 2015. “They’re going to make lots of money and lots of other things with Iran...And we’re going to get nothing.” \Within the Obama administration, officials say they recognize that there is little they can do from a policy perspective if the incoming administration is determined to scuttle the accord. But they plan to make a forceful case to the president-elect’s team of the grim consequences they believe the U.S. would face if it ended up being blamed for the agreement’s failure.
Iran warns of retaliation if U.S. breaches nuclear deal | Reuters: Extending U.S. sanctions on Iran for 10 years would breach the Iranian nuclear agreement, Iran Supreme Leader Ayatollah Khamenei said on Wednesday, warning that Tehran would retaliate if the sanctions are approved. The U.S. House of Representatives re-authorized last week the Iran Sanctions Act, or ISA, for 10 years. The law was first adopted in 1996 to punish investments in Iran's energy industry and deter Iran's pursuit of nuclear weapons. The Iran measure will expire at the end of 2016 if it is not renewed. The House bill must still be passed by the Senate and signed by President Barack Obama to become law. Iran and world powers concluded the nuclear agreement, also known as JCPOA, last year. It imposed curbs on Iran's nuclear program in return for easing sanctions that have badly hurt its economy. "The current U.S. government has breached the nuclear deal in many occasions," Khamenei said, addressing a gathering of members of the Revolutionary Guards, according to his website. "The latest is extension of sanctions for 10 years, that if it happens, would surely be against JCPOA, and the Islamic Republic would definitely react to it." The U.S. lawmakers passed the bill one week after Republican Donald Trump was elected U.S. president. Republicans in Congress unanimously opposed the agreement, along with about two dozen Democrats, and Trump has also criticized it. Lawmakers from both parties said they hoped bipartisan support for a tough line against Iran would continue under the new president.
Syria and Iraq caught between the “new analysts’ and the politicised media - The wars in Syria and Iraq celebrated the unfortunate end of the “free and independent press” and the rise of the “neo-analysts”. They sit in far-off lands, with no ground knowledge of the war, collecting information and analysing the colourful bin of social networking sites. They have even the temerity to believe they can dictate to the US administration what measures should be taken, who to support and, as if they had mastered the “art of war”, they even push for a nuclear war with Russia. It is most surprising to see respectful media rushing to embrace the opinion of these “neo-Analysts”, in fact only because what these amateurs say happens to match what mainstream media desire to hear. So we see for example a “Hezbollah Lebanon expert” or “Shia group expert” in Iraq only because he can count (he collects and analyses the Shia flags and groups he sees on Facebook and Twitter) but has never met commanders or leaders of the groups that should fall within his field of expertise in both countries. Also, many so-called “Syria experts” have never even seen the streets of Damascus, Homs, Hama, Aleppo or any other Syrian city even in peace time before 2011. Of course, Twitter and Facebook are the sufficient and unique sources of information because they have no other alternative sources. It is quite interesting, amazing in fact, to see these people producing articles and having easy access to reputable publications.However, the views of the US administration and the one of the “neo-analysts” – are in conflict in terms of professional ethics, values and principles, even though they are both based on fighting terrorism. Journalists, and analysts, are astonishingly supporting “Qaidat al-Jihad” in Syria, fiding enough space even to report the “Islamic State” (ISIS/ISIL) material when fighting against the Iraqi Army and the so-called (sectarian) “Popular Mobilisation Units ” (al-hashd al-Sha’bi – PMU) in Iraq.
New Onslaught Of Airstrikes In Aleppo Hit World-Famous Cat Sanctuary - Renewed airstrikes in Aleppo this week have killed at least 32 people, including children. The attacks, which struck a children’s hospital and a blood bank, were carried out by either Syrian or Russian warplanes, Reuters reported, citing the Syrian Observatory for Human Rights. The bombings also hit an internationally celebrated animal sanctuary that was hailed as a place of peace and hope in the war-torn city. The sanctuary was a refuge for hundreds of cats as well as local children who would spend time with the animals and play on an adjacent playground. Excuse us today we can not show you the cats,because .... ladies and gentlemen, this is our home of Ernesto cats today. pic.twitter.com/XiaVzAOH6x Mohammad Alaa Aljaleel, the man who runs the sanctuary and cares for the cats, is alive, said Alessandra Abidin, an Italian woman who helps Aljaleel run a Facebook group to communicate with his supporters. Aljaleel, an electrician and ambulance driver, has stayed behind in Aleppo to care for the city’s many stray cats, some of which had been left behind when their owners fled the region. He told the BBC in a September interview that he would stay and protect the animals, “no matter what.” House of cats Ernesto in Aleppo pic.twitter.com/V2YTlkMpk6 On Wednesday, Abidin announced on social media that bombs had hit the sanctuary and killed multiple cats and a dog (warning: graphic images). The dog, named Hope, was known as the sanctuary’s mascot. The strike also hit Aljaleel’s house, killing two cats, including a tabby that had been entrusted to him by a young girl when her family fled to Turkey.
There are no more working hospitals in eastern Aleppo - (AFP) - There are no more functioning hospitals in the rebel-held eastern part of Syria's Aleppo, where more than 250,000 people are living under siege and many need urgent medical care, the UN has said. Health facilities have repeatedly been targeted during the country's brutal civil war, a pattern that has continued in a ferocious government assault launched last Tuesday to recapture eastern Aleppo. "There are currently no hospitals functioning in the besieged area of the city," the World Health Organization (WHO) said in a statement on Sunday, citing reports from its partners in the area. "More than 250,000 men, women and children living in eastern Aleppo are now without access to hospital care," the United Nations agency added. WHO noted that some health services in the devastated area "are still available through small clinics," but that trauma care, major surgeries and other responses to serious conditions have stopped.
Eastern Aleppo Could Be ′Gone by Christmas′ - Following a visit to Damascus, UN special envoy Staffan de Mistura was "very worried" about the future of east Aleppo. In an interview published in Friday's "Süddeutsche Zeitung" newspaper - following an interview he gave to DW earlier this week - de Mistura repeated that if the bombing continued as it had up until now that "by Christmas, there would be no east Aleppo anymore."He had the impression that the government was seeking to accelerate its military activity in the embattled city, control of which is split between the regime and various rebel forces. He said it was possible that Assad's forces would succeed in taking over the eastern rebel-occupied part of the city when it was almost destroyed. In such a case, he said tens of thousands of refugees would make their way to Turkey. The head of the Syrian "White Helmets" urban rescue volunteer group told Reuters news agency on Thursday that besieged residents of Aleppo were about 10 days from starvation. De Mistura said he feared that if no lasting political solution was found, coming years would see guerilla warfare in rural areas and car bombs in the cities. He also said no one, including Russia, wanted such situation. Along with Iran, Russia is among the biggest supporters of Syrian President Bashar al-Assad."That's why we believe that there must be a compromise for east Aleppo," de Mistura said. He also said that lasting victory against the terror groups "Islamic State" and the Nusra Front would only be possible if there was an "inclusive political solution" in Syria.
Conflict Has Displaced More Than Half The Syrian Population: All efforts to even enforce partial cease fires in places like the city of Aleppo have not been successful. Another one is planned to come into effect on Friday. Needless to say that, like in any other armed conflict, the civilian population suffers most. According to data compiled by VoxEU, more than half of Syrians are on the move, either within Syria itself or have fled to neighbouring countries or further afar. As our chart shows, the number of refugees who have been voluntarily offered shelter by third parties is minimal. This chart shows how many people have been displaced in Syria and where they have found shelter
Turkey Warplanes on Alert After Syrian Strike on Turkish Troops: — Turkish F-16 warplanes were put on emergency standby Thursday after Ankara accused the Syrian government of having carried out an airstrike on Turkish troops operating in northern Syria that left three soldiers dead and 10 others wounded, one critically. Western diplomats expressed concern the airstrike overnight Wednesday by a Syrian air force L-39 Albatros light-attack warplane marks a highly dangerous turn of events in the five-year-long Syria conflict and risks bringing Syria and Turkey into a major clash.Initially, the death of the soldiers near the town of al-Bab, northeast of Aleppo, was blamed on the Islamic State (IS) terror group. But in a statement Thursday the Turkish military said the Syrian air force was responsible. The bodies of the killed soldiers were transferred to the southern Turkish border town of Kilis. "In the air strike assessed to have been by Syrian regime forces, three of our heroic soldiers were killed and 10 soldiers wounded, one seriously," according to a Turkish armed forces statement. The Syrian government has so far failed to comment. A pro-opposition network of activists, the Syrian Observatory for Human Rights, disputed Ankara's claim, saying it believed the Turkish deaths were caused by an IS suicide bomb. President Recep Tayyip Erdogan and Prime Minister Binali Yıldırım held emergency phone calls with Defense Minister Fikri Isık and the Chief of General Staff Gen. Hulusi Akar before placing a gag order on the Turkish media, ordering broadcasters not to report on the attack. Yıldırım vowed later that the attack will “not be left unanswered." He told reporters that the alleged air strike won't affect the Turkish army’s determination to clear northern Syria of "terrorist groups." "This attack and other such attacks will be retaliated,” he said.
Donald Trump Jr. Held Talks on Syria With Russia Supporters —Donald Trump’s eldest son, emerging as a potential envoy for the president-elect, held private discussions with diplomats, businessmen and politicians in Paris last month that focused in part on finding a way to cooperate with Russia to end the war in Syria, according to people who took part in the meetings.Thirty people, including Donald Trump Jr., attended the Oct. 11 event at the Ritz Paris, which was hosted by a French think tank. The founder of the think tank, Fabien Baussart,and his wife, Randa Kassis, have worked closely with Russia to try to end the conflict. Ms. Kassis, who was born in Syria, is a leader of a Syrian group endorsed by the Kremlin. The group wants a political transition in Syria—but in cooperation with President Bashar al-Assad, Moscow’s close ally. The disclosure of a meeting between the younger Mr. Trump and pro-Russia figures—even if not Russian government officials—poses new questions about contacts between the president-elect, his family and foreign powers. It is also likely to heighten focus on the elder Mr. Trump’s stated desire to cooperate with the Kremlin once in office. In an interview, Ms. Kassis said she pressed the younger Mr. Trump during the meeting on the importance of cooperating with the Russians in the Middle East. “We have to be realistic. Who’s on the ground in Syria? Not the U.S., not France,” Ms. Kassis said from Moscow. “Without Russia, we can’t have any solution in Syria.” Of the president-elect’s son, she said: “I think he’s very pragmatic and is flexible.”
Keep It Simple, Stupid...Why Oil & Commodity Demand Is Set To Fall Indefinitely - Following James Carville's sage advice, I will attempt to explain to president-elect Trump, Fed-head Yellen, and the average American why global oil, commodity, and consumer demand is set to collapse using the Carvillian principle..."keep it simple stupid". The combined 35 OECD wealthy nations (list HERE) plus China, Russia, and Brazil represent70% of global oil consumption while they represent about 40% of global population(chart below). In comparison, Africa and India (combined) make up 8% of oil consumption despite being 33% of global population (& nearly 100% of all present and future net population growth).
Second Chinese Firm in a Week Found Hiding Backdoor in Firmware of Android Devices - Security researchers have discovered that third-party firmware included with over 2.8 million low-end Android smartphones allows attackers to compromise Over-the-Air (OTA) update operations and execute commands on the target's phone with root privileges. Mobile experts from Anubis Networks discovered the problem this week. This is the second issue of its kind that came to light this week after researchers from Kryptowire discovered a similar secret backdoor in the firmware of Chinese firm Shanghai Adups Technology Co. Ltd.. This time around, the problem affected Android firmware created by another Chinese company named Ragentek Group. Researchers say they've discovered the issue after one of their researchers bought a BLU Studio G smartphone from Best Buy. They say the smartphone used an insecure Over-the-Air update system, powered by the Ragentek firmware, which contacts remote servers via an unencrypted communications channel. The lack of SSL support means an attacker can carry out a basic Man-in-the-Middle attack and fake responses from the OTA server, sending rogue commands to the user's smartphone.
Bogus Divorces Fuel China Property Boom - WSJ: Earlier this year, a Shanghai couple with a newborn daughter made a practical decision: They got a divorce in order to buy their fourth home. The couple wanted to live near Shanghai Jiangning School, in the city’s Putuo District. Ms. Li, who works in internet operations in Shanghai, and her husband hoped to one day enroll their daughter there. But Shanghai regulations barred the couple, who already owned three homes in the city, from buying another together as a family. So they used a loophole: If they divorced, they could transfer their properties to one partner, which would free the other to buy a first home as an individual. They ended up with a two-bedroom, roughly five million yuan ($726,000) apartment just minutes away from the school. “Divorce is not some great thing,” said Ms. Li, who declined to disclose her full name. But “we needed to buy before it got more expensive.” Shanghai authorities recently started targeting so-called fake divorces in a campaign to tighten credit-lending standards and rein in frothy home prices.Average home prices in Shanghai were up 27.5% in October from a year earlier, outpacing the 18.2% price increase across 100 Chinese cities, according to SouFun, China’s largest online real-estate portal. Earlier this month, Shanghai said commercial banks should review borrowers’ ability to repay mortgages based on their “family credibility.” Banks should inspect applications of those wishing to apply for mortgages, including divorcées, adult children and parents in particular, according to a post on the official WeChat account of the Shanghai government.
China Devalues Yuan For Longest Streak Ever To 8 Year Lows -- For the 12th consecutive day, China has weakened the official fix of the Yuan against the USD, slashing its currency by over 2.2% in that time - a move only beaten by the "one-off" devaluation in August 2015 that crashed global stock markets. With a 189pip 'devaluation' tonight, Yuan is now trading at its weakest since June 2008... In December 2015, China weakened Yuan 10 days straight leading into The Fed's rate-hike decision. The current 12-day weakening streak is an all-time record for the Yuan fix. The last four times that Yuan has plunged, US equity market volatility has exploded (and stocks have tumbled)... But this time is different... as Yuan has collapsed, VIX has crashed too... so far.
Yuan Falls to Eight-Year Low as Central Bank Cuts Reference Rate - The yuan dropped to its lowest level in more than eight years as the central bank weakened the reference rate. The currency fell 0.12 percent to 6.8963 per dollar at 4:41 p.m. local time. A Bloomberg gauge of the greenback’s strength jumped the most since 2008 in the past two weeks amid speculation President-elect’s Donald Trump’s reflationary economic policies will trigger faster monetary tightening. Betting against the yuan with 12-month non-deliverable forwards is one of Goldman Sachs Group Inc.’s favorite trades in 2017, the bank’s strategists wrote in a note last week. The Chinese currency will weaken to 7 against the greenback -- a level unseen since before the global financial crisis -- in the first half of next year, according to 14 of 16 analysts and traders surveyed by Bloomberg. "The depreciation pressures on the yuan will persist and extend into 2017, as we believe an orderly yuan depreciation versus the dollar is in Chinese regulators’ interest," said Gao Qi, a Singapore-based foreign-exchange strategist at Scotiabank. The People’s Bank of China cut its daily fixing by 0.27 percent to 6.8985 Monday. The CFETS RMB Index, which tracks the yuan against 13 exchange rates, rose to the highest in a month. "By the end of this year, we expect 94 to be a soft support level for the CFETS RMB Index as policy makers seek to avoid fueling market fears for competitive currency devaluations," Qi said.
Stratfor: China’s Economy is Living on Borrowed Time - Forecast
- Barring a decision to loosen government controls on credit, investment and home purchases, China’s housing and construction sectors will slow in 2017.
- Industries that hold the bulk of China’s outstanding corporate debt, including commodities, building materials and other sectors related to construction, will bear the brunt of a sustained housing slump.
- Sluggish construction growth and skyrocketing debt, coupled with sharp reductions in debt maturity periods, could cause corporate defaults and bankruptcies to spike next year, testing Beijing’s legal and institutional abilities to cope with them.
- Meanwhile, increasing U.S. protectionism and other international developments could put even more pressure on the Chinese economy, forcing Beijing to trade its economic reforms for greater spending to keep the economy afloat.
Next year is shaping up to be a decisive one for China’s economy. In the eight years since the global financial crisis struck, the vitality and importance of low-cost exports — the kind the Chinese economy used to rely on — have steadily declined. Scrambling to prop up the country’s growth and protect its near-universal employment, China’s leaders have embraced monetary and fiscal stimulus measures, causing the country’s outstanding debt to balloon to almost 250% of gross domestic product. Corporate debt, by far the largest share of China’s total debt, has likewise surged by more than 60% to top 165% of GDP. Now, a nationwide debt crisis looms at Beijing’s doorstep amid business defaults and bankruptcies, low industrial profits, winnowing returns on investment and the very real prospect of yet another slowdown in the real estate sector. How well Beijing manages these problems in the months ahead will, to a great extent, determine China’s economic, social and political stability for years to come.
Don’t Bet On a Crash From a Trump Trade War - President-elect Donald Trump has pledged to label China a currency manipulator, and has floated the idea of imposing large tariffs on Chinese imports. This sort of policy is considered beyond the pale in mainstream economics and media circles. It is subjected to epithets like “protectionism” and “mercantilism.” Almost everyone says it’s a bad idea.Naturally, major economics media outlets are freaking out. Jim Tankersley of the Washington Post, citing a study from Moody’s Analytics, writes that Trump’s trade war would destroy 4 million jobs, and prevent 3 million more from being created, throwing the U.S. into recession. Bob Davis of the Wall Street Journal is worried as well, as is CNN. China experts such as Michael Pettis and Bloomberg View’s own Christopher Balding think Trump’s understanding of Chinese policy is wrong. Bloomberg BusinessWeek warns that the trade war would be disastrous for aircraft maker Boeing Co. But it’s no simple matter to predict the effect of trade restrictions on economic activity. We can look at current trade flows and linkages, and calculate what would happen if this trade were to simply vanish. But that doesn’t tell us what would take its place. It’s very hard to calculate how well American industry would be able to pick up the slack if Chinese goods became more expensive. It’s wrong to assume that the jobs that currently depend on trade would be replaced by nothing at all. International economists have a pretty reliable set of tools, called gravity models, that predict the amount of trade between countries. These models show that protectionism, in general, reduces trade. But this doesn’t tell us the overall economic impact of that reduction. It might be that large trade volumes make a country only a little better off in terms of real income, so that even a large reduction in trade flows hurts the economy only a bit. The best way to predict the effect of a Trump-induced trade war would be to look at some historical parallels. The problem is that we don’t have any good recent examples to go by. For most of the post-WW II period, trade openness has gone only one direction -- up, up and up.
With TPP Dead, China Officially Launches Its Own Pacific Free-Trade Deal -- As we noted on Thursday, "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." Furthermore, as Mish Shedlock pointed out, on November 10, in the wake of Trump’s election, Beijing quickly sought to fill the void left by TPP by reviving its proposed Free Trade Area of the Asia-Pacific pact. "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, and that's exactly what happened today when at the meeting of Asia-Pacific Economic Cooperation (APEC) member states in Lima, Peru, Chinese President Xi Jinping officially called for the launch of the Free Trade Area of Asia-Pacific for "institutional guarantee of open economy."
Now I’ve heard it all, China “to lead” on free trade! - Mr Rowan Callick is making some sense today: Mei Xinyu, senior researcher at China’s Commerce Ministry, said Mr Trump’s planned withdrawal from the TPP meant China’s proposals for free-trade arrangements would gain more traction and provide better possibilities. Professor Zhou said promoting “freer” trade comprised China’s core international trade policy. “If the US does withdraw from the TPP, it means that America’s own policies will become more introverted and isolated, so this will naturally give more say to China in developing the mechanisms of international trade,” he said. “Becoming a leader in international trade may not be an entirely positive move for China, since the country also has to pay a higher cost to become the leader.” Professor Yan said Mr Trump seemed intent on destroying regional co-operation, which meant the RECP as well as the TPP was doomed. To wit: Chinese officials have warned of retaliation against the US if Washington levies tariffs on the world’s second-largest economy as President-elect Donald Trump has threatened, US Commerce Secretary Penny Pritzker has revealed. “The Chinese have said they’ll have to retaliate,” That could harm US workers and industries and hurt the US economy, she said. Mr Trump has said one of his top priorities when he takes office will be to label China a currency manipulator. He has repeatedly threatened to slap Chinese imports with hefty tariffs. Ms Pritzker also criticised Mr Trump’s promise to withdraw the US from the trans-Pacific Partnership trade deal the Obama administration struck with nearly a dozen other nations. The major cost from leading on trade does not necessarily spring from trade agreements themselves. It is more that it usually also comes with some status as a reserve currency. In that event, everybody begins to chase your currency with pegs and it rises as they export their goods to you then recycle the profits into your capital markets. Martin Wolf has more:
A Trade War Against China Might Be a Fight Trump Couldn’t Win - At the Asia Pacific Economic Cooperation summit meeting in Peru over the weekend, one of the biggest questions was whether Donald J. Trump, as the next president, would stick to his threat to erect steep trade barriers against Beijing, dragging the United States into a tit-for-tat confrontation with the world’s second-largest economy. No such war has begun, yet it seems clear that the United States has already lost. China has been steadily gaining in the global economic system. Waging war against globalization, America is making China’s case. Eswar Prasad, a former head of the Chinese division at the International Monetary Fund, argues that “over the long term China comes out a winner no matter what.” China’s economy would surely suffer if the United States were to impose a 45 percent tariff on nearly $500 billion worth of Chinese imports. The United States absorbs only 16 percent of Chinese exports, but it is China’s healthiest export market. Fears of American protectionism are already stoking capital flight from China. But China might be better placed than the United States to take the blow. And it would certainly counterpunch. An editorial in China’s Global Times, a Communist Party mouthpiece, is probably not far off in its warning that American action would mean: “A batch of Boeing orders will be replaced by Airbus. U.S. auto and iPhone sales in China will suffer a setback, and U.S. soybean and maize imports will be halted.”China has several ways to retaliate. It could bar state-owned companies from doing business with American businesses. It could limit access to essential commodities, as it did in response to a fishing dispute with Japan by stopping exports of so-called rare earth minerals essential to the electronics industry. It could soft-pedal efforts to combat the piracy of American patents and copyrights.
Hackers Program Bank ATMs to Spew Cash - WSJ: Cybercriminals who once earned millions by breaking into individual online bank accounts are now targeting the banks’ own computers, with often-dramatic results. In Taiwan and Thailand earlier this year, the criminals programmed bank ATMs to spew cash. Gang members stood in front of the machines at the appointed hour and collected millions of dollars. Earlier this month, the Federal Bureau of Investigation warned U.S. banks of the potential for similar attacks. The FBI said in a bulletin that it is “monitoring emerging reports indicating that well-resourced and organized malicious cyber actors have intentions to target the U.S. financial sector.” The FBI bulletin cited software used by a Russian gang known as Buhtrap. Computer-security specialists say Buhtrap and other gangs honed their techniques on Russian banks, then expanded to other countries. Sometimes the hackers break into the systems that process transactions on banking payment networks; other times they have hit ATM networks directly. In Taiwan, Taipei city police on July 10 received a report of currency lying on a First Commercial Bank ATM in the city’s Da’an Precinct. Reports of loose cash at other ATMs soon followed. ATMs were “abnormally spitting out bills,” police said in a written statement a few days later. By July 11, criminals had collected more than 83 million New Taiwan dollars (US$2.6 million) in cash—without using ATM cards. Twenty-two people, most from Eastern Europe, waited by ATMs to remove the money. Three suspects were later arrested and over NT$77 million recovered. A spokeswoman for First Commercial confirmed that the bank’s ATM systems were attacked in July. Investigators now believe that the criminals broke into computers at First Commercial’s London office on May 31. Once inside the network, the criminals sent a malicious software update to the company’s 41 PC1500 ATMs. After testing their system on July 9, they instructed the ATMs to empty their cash-carrying cassettes the next day.
Korea, Japan Try to Save Their Shipping Industries - It's better to merge than to fade away: the tale of global shipping. It is no big secret that the global shipping industry is currently encountering difficult conditions. The bankruptcy of Korean shipping giant Hanjin points out how overcapacity--too many ships have been built in expectation of rising shipping demand worldwide in recent years that didn't materialize--has dented the fortunes of this industry. Supply exceeds demand, and correcting the oversupply has not been a pleasant process for those involved. Given its crucial place in ensuring that goods manufactured in East Asia get to consumer markets elsewhere, however, the likes of Korea and Japan cannot simply let market forces play out and quite possibly result in the further diminution of their shipping capabilities. First up is Korea, where a bankruptcy court has approved of a mid-sized carrier picking up the remaining assets of Hanjin. Especially attractive was the idea that they would lay off fewer workers: Shipping operator Korea Line Corp. won a contest for some assets of bankrupt Hanjin Shipping Co., whose collapse in late August stranded billions of dollars in cargo at sea, disrupting supply chains world-wide. In a surprise decision, a Seoul court on Monday awarded Korea Line, a midsize bulk-shipping operator, the first right to purchase the assets of Hanjin’s Asia-U.S. route, as well as its stake in a California terminal. A judge at the Seoul Central District Court, which is handling Hanjin’s insolvency proceedings, said it chose Korea Line over Hyundai Merchant Marine Co., which had been expected to win. Hyundai Merchant was backed by senior government officials and its main creditors, which said they would promote the company as the country’s largest oceangoing carrier. Fears of another Hanjin are also playing out in Japan in the form of consolidation among the largest shipping lines. Instead of competing with each other for business tooth and nail and denting profit margins in the process, this merger is intended to decrease intra-national competition to the benefit of the wider Japan, Inc: Decades of fierce rivalry between the three main Japanese ocean carriers ended with the agreement to merge their container operations that will propel the new entity into the league of the mega-lines. In its analysis of the Japanese merger of “K” Line, MOL, and NYK Line, Alphaliner said the “J-3” will become the world’s sixth-largest container line, with the top seven lines controlling around 65 percent of the global liner capacity by 2018. The top seven are expected to widen the gap even further with the rest of the market in the coming years.
Asian Corporate-Debt Plans Run Into ‘Trump Effect’ - WSJ: —Asian companies are starting to feel the “Trump effect,” as a rise in global borrowing costs forces them to reconsider their debt-raising plans. Corporate-bond issuance in Asia has already slowed since the U.S. election, with companies from China to India pulling or postponing planned deals. The sudden stalling in debt markets could threaten a model of growth that has taken root in Asia in recent years. Firms across the region have taken advantage of low global interest rates to pile up trillions of dollars worth of debt, often denominated in greenbacks, to fuel their expansion. Asian companies have already raised $1.1 trillion in bonds so far this year, compared with $260.8 billion for all of 2008, according to Dealogic. Donald Trump’s surprise U.S. presidential election victory, and an ever-growing certainty that the Federal Reserve will raise interest rates next month, have now pushed up bond yields globally, likely making future debt raising more costly. The greenback’s rise this month means it is already becoming more expensive for companies to pay back their dollar debts in local currency terms. And while bankers and analysts say the current slowdown of Asian debt markets could prove temporary as investors digest Mr. Trump’s election, they worry sustained capital outflows could unsettle the future outlook.Higher borrowing costs for companies mean they have to spend a bigger chunk of profits on repaying debt instead of feeding projects that would stimulate growth, like building factories or infrastructure. That, in turn, could hit overall growth in Asia, home to some of the world’s most dynamic economies. Many Asian issuers are already using bond proceeds to refinance existing debt, according to a recent report by the International Monetary Fund. It expects growth in Asia to stagnate at 5.3% for 2016 and 2017, down from 5.4% in 2015.
Relentless Dollar Surge Continues: Asian Currencies Plunge To 7 Year Lows, Hitting Emerging Markets --While most global equity markets were subdued due to the US Thaksgiving holiday, the FX world was very busy overnight, marked by the relentless dollar surge on expectations of a rate hike not only in December but further in 2017, sending Asian currencies to the weakest level in 7 years: the Bloomberg-JPMorgan Asia Dollar Index reached 103.32, the lowest level since March 2009. The regional FX plunge will likely deter regional central banks from easing monetary policies as the prospects of higher U.S. rates spurred capital outflows according to Toru Nishihama, an emerging-market economist at Dai-ichi Life Research Institute who added that depreciating currencies are making it very hard for central banks to ease on concerns about inflationary pressure and acceleration of fund outflows. The dollar also pushed its way past more of last year's peaks against the euro to hit $1.0550 in early European action, with only the March 2015 high of $1.0457 standing in the way of a drive toward parity, likewise the yen skidded to an eight-month low and China's yuan to an 8-1/2 year low, while the highly sensitive Turkish lira and Indian rupee hit new historic troughs, although the USD has since given up some of the gains. The only risk to this are that the dislocations in markets outside of the U.S., particularly in emerging markets, get to a point where they start to feed back into concerns (for the Federal Reserve as it looks to raise interest rates)," he said.While so far US equity markets have ignored the jump in the DXY to a near 14 year highs, dollar gains reverberated through emerging markets. India’s rupee and Vietnam’s dong slid to records, while the Philippine peso dropped to its weakest level in eight years. In Turkey, the lira rebounded from an all-time low after the central bank unexpectedly raised interest rates, although even that move has now been faded. Copper’s surge pulled a gauge of commodities higher for a fourth day, the longest rally in a month. Rosneft PJSC approved a $17 billion bond program, the biggest ever by a Russian company as the nation’s largest oil producer refinances debt. Copper was set to close at its highest level in more than a year. As Bloomberg writes this morning, central banks worldwide are being pushed to take action in the face of the stronger dollar.
Aghast people bash PM Modi as ATMs dispense half-printed currency notes: After the shortage of cash in banks, now the people of the country are aghast because the notes being dispensed by the ATMs are either half-printed or the colour is faded missing crucial details. The common man is very disappointed with the incident and is now bashing Prime Minister Narendra Modi over the demonetisation move. "Is this how you planned to block black money," wrote a user on Twitter. It has come to light that these half-printed notes are mostly being dispensed from the HDFC ATMs in the financial capital of the country, Mumbai. Several Tweeples are now posting the pictures of these new but half-printed notes on Twitter.Here are some of the reactions on the microblogging website:
- No, seriously. This is exactly how the Modi Govt plans to fight fake currency. These half printed notes dispensed from HDFC ATM, Mumbai! pic.twitter.com/44MitoaT4d
- 500 Rupee note which despensed frm HDFC Bnk ATM, Mumbai The notes r half printed or the colour is already gone.any justification! #Indira100 pic.twitter.com/xxv0uCU6uD
- URGENT Pls write an article BASHING Modi on #Demonitization --> This Half-printed 500 Rs note @thenewsminute @dhanyarajendran pic.twitter.com/tPQD5HxVHt
On the evening of November 8, Prime Minister Narendra Modi in an address announced that the denominations of Rs 500 and Rs 1000 will be scrapped effective from midnight. Ever since the next day, long queues were spotted outside ATMs and banks to exchange and withdraw the money. The IBA Chairman, Rajiv Rishi on Friday mentioned that banks will only exchange the old currency notes of Rs 500 and Rs 1000 for senior citizens on Saturday. While several people are lauding the move of PM Modi of demonetisation, others are just frustrated by lining up in queues for days.
FinMin Sends Unclear Signals About Ink on New Rs 2000 Notes - On November 8, Prime Minister Narendra Modi announced that the Rs 500 and Rs 1000 banknotes until then in circulation would become demonetised effective immediately and that they would be replaced by new notes. Subsequently, he also announced that a new Rs 2000 note would soon enter circulation. Ever since, it emerged that the nightmares presented by the newer Rs 500 notes not being readily available would be exacerbated by a debilitating shortage in the number of Rs 100 notes – as well as extant ATMs not being ready to dispense the Rs 2000 notes.In the avalanche of consequences, which have ranged from some daily-wage labourers having to consider begging for a livelihood to pockets of Indians celebrating the demonetisation for its targeting black-money, a few misconceptions have also tumbled through. Most of them concern the new Rs 2000 note. Since November 8, the finance ministry has passed information around the media and on social networks about what the Rs 2000 note looks like and what some of its security features are. This, however, hasn’t prevented people – including, sadly, some journalists – from spreading misinformation. One of the first suspicious bits to be passed around was that each Rs 2000 note would be embedded with a “nano GPS chip” that would be able to communicate with a satellite that, in turn, downlinked to the income tax department. The belief was that this chip would allow the government to know how many Rs 2000 notes were being carried by every person at all points of time. A video doing the rounds on Twitter on November 19 also showed a group of journalists at Aaj Tak discussing how the chip would be be able to communicate with the satellite even if it was 120 metres underground. In effect, such a chip would have to contain a powerful radio-frequency transmitter.
India Uses Helicopters, Air Force Planes To Deliver Freshly Printed Cash -- As India continues to struggle with a countrywide cash shortage as a result of the November 8 demonetization in which the government unexpectedly removed the highest denomination bills out of circulation and which has brought various mostly rural part of the cash-driven economy to a halt, the government is resorting to ever more novel solutions how to restock outlets with new, "clean" cash.As the Times of India reports, authorities have managed to cut down the transportation time of cash from printing to the main distribution centers from 21 days to six and by using all modes of transport, including helicopters and Indian Air Force planes, to move the cash quickly. The government is hopeful that the situation will improve over the next week. With availability of cash improving in urban areas, the government is concentrating on rural areas.While even tenured economists have predicted that the short-term may lead to a shock for the Indian economy, senior government sources are hopeful that the level of economic activity should climb back to normal levels by January 15. Referring to any "windfall" from the decision to demonetise 500- and 1,000-rupee notes, sources said any gains could be used for recapitalisation of banks, building infrastructure and purchasing advanced weapons systems for the armed forces."RBI may transfer higher dividend or there could be a special dividend," the sources said. There is a probability of the government getting a "windfall" as a significant portion of the notes may not come back. This will reduce the liability of RBI and increase its ability to pay higher dividend. "Even in 1978 when the government resorted to demonetisation, 20% of the notes did not come back," the sources said.They said they would not like to speculate about the number of notes that may not come back into the system.
Cash purge gives welcome boost to Indian banks | Reuters: - India's demonetisation drive is likely to cause short-term pain for the economy, but banks are expected to benefit from the move in the long run. Indian banks are enjoying a rush of new liquidity as people line up to deposit 500 rupee and 1,000 rupee notes, which ceased to be legal tender under a surprise government crackdown on November 8. There have been new bank deposits, totalling 4 trillion rupees ($58 billion), as of November 17, according to a treasurer at a public sector bank. The government expects the deposits to reach 10 trillion-12 trillion rupees, out of an estimated 17 trillion rupees in undeclared black money in circulation. "In five to six days, we have collected 400 billion rupees in deposits, which (normally) takes nearly a year to collect," said Usha Ananthasubramanian, managing director of Punjab National Bank. The wave of liquidity is lowering the banks' cost of funds, with borrowers likely to benefit. "We may decide to reduce lending rates at the beginning of December since cost of deposits will come down and inflation numbers are soft," said Rakesh Sharma, managing director of state-owned Canara Bank. On the other hand, India's largest public-sector lender, State Bank of India, has cut one-year deposit rates by 15bp to 6.9 percent. Consumer price inflation eased to 4.2 percent in October from a peak of 6.1 percent in July.
India’s Currency Exchange Gamble and the Curse of Cash - Rogoff -- On the same day that the United States was carrying out its 2016 presidential election, India’s prime minister, Narendra Modi, announced on national TV that the country’s two highest-denomination notes, the 500 and 1000 rupee (worth roughly $7.50 and $15.00) would no longer be legal tender by midnight that night, and that citizens would have until the end of the year to surrender their notes for new ones. His stated aim was to fight “black money”: cash used for tax evasion, crime, terror, and corruption. It was a bold, audacious move to radically alter the mindset of an economy where less than 2% of citizens pay income tax, and where official corruption is endemic. Is India following the playbook in The Curse of Cash? On motivation, yes, absolutely. A central theme of the book is that whereas advanced country citizens still use cash extensively (amounting to about 10% of the value of all transactions in the United States), the vast bulk of physical currency is held in the underground economy, fueling tax evasion and crime of all sorts. Moreover, most of this cash is held in the form of large denomination notes such as the US $100 that are increasingly unimportant in legal, tax-compliant transactions. Ninety-five percent of Americans never hold $100s, yet for every man, woman and child there are 34 of them. Paper currency is also a key driver of illegal immigration and corruption. The European Central Bank recently began phasing out the 500 euro mega-note over these concerns, partly because of the terrorist attacks in Paris. On implementation, however, India’s approach is radically different, in two fundamental ways. First, I argue for a very gradual phase-out, in which citizens would have up to seven years to exchange their currency, but with the exchange made less convenient over time. This is the standard approach in currency exchanges. For example this is how the European swapped out legacy national currencies (e.g the deutschmark and the French franc) during the introduction of the physical euro fifteen years ago. India has given people 50 days, and the notes are of very limited use in the meantime. The idea of taking big notes out of circulation at short notice is hardly new, it was done in Europe after World War II for example, but as a peacetime move it is extremely radical.
How India’s Cash Chaos Is Shaking Everyone From Families to Banks - Serpentine queues spilling from banks. Parents worried that they can’t provide for their families. Prime Minister Narendra Modi appealing to Indians to bear the pain for just a little while longer.These pictures continue to dominate media coverage in Asia’s third-largest economy, even two weeks after the government’s shock clampdown on cash. While supporters of the move say it will help root out tax evasion and graft in the years ahead, critics question the administration’s planning and execution.What many outside the country can’t comprehend, though, is the reason for the chaos. Surely global governments in the past have suddenly banned certain currency denominations, too, haven’t they? As most Indians gathered around for dinner Nov. 8, Modi blindsided citizens by announcing on national television that their 500 rupee and 1,000 rupee ($15) notes would be worthless come midnight. The step was essential to clamp down on "black money," he said, the local term for cash stashed away to avoid tax. In terms of the share of currency in circulation, Modi’s move was akin to sucking out from the system all U.S. dollar bills except about half of the $1 notes. The decision rattled the world’s second-most populous nation, where cash dominates day-to-day life. Strange tales were whispered around neighborhoods that night, of the wealthy rushing to purchase gold and luxury watches to extinguish unaccounted cash, while housewives stocked up on groceries. Morning dawned to even more confusion, and when banks reopened the next day people lined up to exchange their now worthless currency. Newspapers reported that sacks of torn notes turned up across the country as people destroyed and abandoned them to avoid prosecution. It’s not as if the notes would turn into paper at the stroke of midnight. They’d still retain their value, the government ruled, but only if they were deposited into bank accounts by Dec. 30. Strict caps were imposed on the exchange of physical bills into new notes, and those depositing the old notes had to submit signed declarations and come armed with identification. That doesn’t sound so tough, you may say. Try this: as many as 600 million Indians probably don’t have bank accounts, central bank data show. A disproportionate number of these live in more than 600,000 villages, earning daily wages in cash.
Demonetisation resulted in chaos and loss of trust in govt: Lawrence Summers - Describing the Indian government’s demonetisation steps as the “most sweeping changes in currency policy in the world in decades”, a top global economist today said without new measures, this is “unlikely to have lasting benefits” and that it has resulted in “chaos and loss of trust in the government”. “Like everyone else, we were surprised by the dramatic action taken by Indian Prime Minister Narendra Modi to demonetise the existing Rs 500 and Rs 1,000 currency notes. “This is by far the most sweeping change in currency policy that has occurred anywhere in the world in decades,” Lawrence ‘Larry’ Summers, a former chief economist of the World Bank and ex-economic advisor to the US President, said in a blog. In his blog written jointly with Natasha Sarin, Summers said most free societies would rather let several criminals go free than convict an innocent man. “In the same way, for the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money, is highly problematic,” the blog said.Moreover, the definition of what is illegal or corrupt is open to debate given the long-standing commercial practices in India, Summers added. He and Sarin said there are also questions of equity and efficacy. “We strongly suspect that those with the largest amount of ill-gotten gain do not hold their wealth in cash but instead, have long since converted it into foreign exchange, gold, bitcoin or some other store of value. “So it is petty fortunes, not the hugest and most problematic ones, that are being targeted,” Summers wrote. “Without new measures to combat corruption, we doubt that this currency reform will have lasting benefits.
Most sweeping change in currency policy in decades - Sarin and Summers - Like everyone else, we were surprised by the dramatic action taken by Indian Prime Minister Narendra Modi to demonetize the existing 500 and 1000 rupee notes. This is by far the most sweeping change in currency policy that has occurred anywhere in the world in decades. First, it impacts notes that are in widespread use, being valued at 7.34 and 14.68 dollars respectively. While it might be argued that since India is much poorer than the United States $15 in India is equivalent to $100 in the United States, the reality is that most Americans in the top 1 percent of the income distribution do not handle $100 bills on even a weekly basis whereas 500 rupee notes are very widely used in India. Second, and more fundamental, actions like those taken by the ECB or those proposed for the US end the creation of new high denomination notes. They do not contemplate declaring what has been legal tender to no longer be legal tender essentially overnight It is the imminent prospect of notes currently held becoming worthless that has created such alarm and disruption in India. Small and medium-sized merchants have seen their shops (which transact mostly in cash) deserted and ordinary Indian citizens have spent the last week in line outside banks hoping to be able to exchange their cash holdings for legal tender. We recognize that many of those who hold large quantities of cash in India have come by their wealth in corrupt or illegal ways. So, the temptation to expropriate is understandable. After all, as the argument goes, anyone who came by their wealth legally has nothing to fear from coming forward and exchanging old notes for new ones. Most free societies would rather let several criminals go free than convict an innocent man. In the same way, for the government to expropriate from even a few innocent victims who, for one reason or another, do not manage to convert their money is highly problematic. Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time.
Potential gold-import ban by India could be biggest bombshell since Nixon - Back in August 1971, President Nixon shocked the world by taking the dollar off the gold standard. The dollar had been on gold standard since Bretton Woods Agreement of 1944. The biggest bombshell for gold investors in 45 years since Nixon announcement may be ahead. That bombshell is a potential ban on import of gold into India. If this happens, there is a high probability of a one-day drop in gold that could reach $200. A prerequisite to understanding this potential development is to understand what has happened in India recently. Please carefully read India, not Trump, is the real reason behind the crash in gold prices . Before explaining the enormity of such a ban, let us start by looking at the charts. Start out by looking at a chart of gold futures GCZ6, -1.58% on the election night. The chart shows how Modi selling overcame Trump buying. A subsequent budding rally was killed by a rising dollar. The chart also shows the level to which gold might fall if India bans gold imports, as well as strong support at the last major low in gold. However, on any major down move, the support shown is highly likely to be broken. The reason is that less-experienced traders will have their stops right below the support. Hunt-and-destroy algorithms used by professionals will simply gun for the stops driving the price lower. On average, India imports about 700 tons of gold each year. This is an enormous quantity. An abrupt reduction in demand of this magnitude, if there is a ban on Indian imports, will be a major shock to the gold market.
India’s Money Launderers Soil Modi’s ‘Spring Cleaning’ of Cash WSJ - Unable to spend or deposit their sackfuls of large bank notes amid India’s crackdown on hoarding cash, business owners across the country are paying employees months of salary in advance, ringing up bogus sales and even buying gold they can smuggle overseas to get rid of stashed money or conceal its source.Such illegal workarounds are threatening to undercut Prime Minister Narendra Modi’s move this month to cancel India’s highest-denomination rupee bills, which was meant to punish tax evaders and other criminals and bring more of the nation’s $2 trillion economy out of the shadows.If Mr. Modi’s unprecedented social-engineering project fails to net too many of the biggest tax cheats, he risks further incurring the wrath of Indians already frustrated with the pain and economic dislocation the experiment has brought about in its first two weeks. Tax officials in India have for decades played testy games of cat-and-mouse with rich individuals and businessmen who accumulate wealth off the books and store it as real estate, jewelry, financial assets and cash stuffed in wardrobes. Only about 20 million individuals and families, or around 1.6% of the country’s population, paid any income tax in 2013. Government revenue from personal and corporate income tax is less than 6% of the size of the economy in India. In advanced nations, the average is around 12%. Requiring Indians to exchange their big bills at banks for newly created ones—or suffer a quiet, potentially catastrophic financial loss—was Mr. Modi’s way of forcing hidden riches to the surface. There, authorities would be watching, ready to examine large cash deposits. Millions of Indians have heeded the call. Since Mr. Modi’s Nov. 8 announcement more than $80 billion in old bills has been exchanged or deposited. That is around 40% of the value of all large rupee bills in circulation. The deadline for turning in canceled bills is Dec. 30. Others are discreetly jettisoning their cash stockpiles in more-inventive ways. In Kolkata, a longtime hub for illicit financial activity, a lively trade has sprung up for converting voided bills into new bank notes, gold or checks, each for a different price. Tax officials say some people are buying gold with old notes and smuggling it out of the country, where it can be resold for hard currency. Recently, a man was caught trying to bring 2.5 kilograms of gold, worth nearly $100,000, on a Mumbai-to-Dubai flight. Usually in India, the gold-smuggling goes in the other direction.
India Panics: Rupee Crashes To Record Low As Modi Cuts Off Banknote Exchange 6 Weeks Early -- It appears the social unrest, economic collapse, and currency crisis sparked by Indian PM Modi's decision to demonetize "corrupt" high-denomination bank-notes was not enough. As the Rupee crashed to a record low overnight, officials just announced a suspension of the exchange of 'old notes' as of tomorrow (instead of the original Dec 30th deadline) to, in their words, "encourage people to deposit old notes in their bank accounts." With 60% of banknotes still un-exchanged, we suspect 'panic' will be the operative word in India for the next 36 hours.Those with old notes will still be allowed to deposit them into their bank accounts until Dec. 31, but not permitted to do outright exchanges. As Bloomberg reports, the Indian government had observed a declining trend in exchange of old notes over the counter, according to a statement from the state-run Press Information Bureau.And so the decision to end OTC exchange of notes was to encourage people to deposit old notes in their bank accounts. Government allows certain exemptions for use of old notes until Dec. 15, with only 500 rupee denomination currency notes accepted for such transaction:
- Old 500-rupee notes can be used for payment of school fees with limit; utility dues; payment of road toll fees
- Foreigners permitted to exchange foreign currency up to 5,000 rupees/week
Furthermore, as CNBC reports, the Indian government is set to impose a 45% tax (haircut) on any suspicious deposits.This is a major problem as only 40% of banknotes have been exchanged according to local reports.
When Money Dies - India's Demonetization Is A "Massive Man-Made Disaster" --In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days. Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this photograph. Beware finger-wagging politicians, as we always point out. Modi now plans toimpose income tax penalties on large bank deposits; the State’s rapaciousness knows no bounds and evidently the mere possession of some arbitrary amount of money considered “too large” now means one is deemed a criminal a priori in India. It goes without saying that the concept of property rights is alien to Modi. [PT] Now, two weeks later, the situation is getting much worse, and more desperate. It is obvious that Modi single-handedly took the decision to ban the banknotes, with most people in his cabinet and virtually all in the central bank oblivious to his plan.There is virtually no visible opposition to the enforced ban, for any politician who opposes the ban risks having his own misdeeds — and they are all corrupt — brought to the public space by Modi. A true demagogue, Modi, has already convinced the gullible, salaried middle class that anyone who opposes the ban is hiding corrupt money and is anti-national.With every passing day, it has not only become clearer that the ban was of no use to eradicate hidden cash, but has also inflicted deep, wide and irreparable damage to the society. The economy is rapidly moving toward stagnation. The lives of literally hundreds of millions are in deep chaos. This event may well go down in the history books as one of the worst man-made crises ever.
Pakistan's Regional Economic Integration: CAREC or SAARC or Both? - Riaz Haq -Pakistan sits between two economically very dynamic regions: Central Asia (and Western China) and South Asia. Which region is better suited for its economic connectivity and integration? Should Islamabad focus on CAREC (Central Asia Regional Economic Cooperation) rather than SAARC (South Asian Association of Regional Cooperation)? Ideally, Pakistan should be a major player in both vibrant regions. However, Indian Prime Minister Narendra Modi's policy of attempting to isolate Pakistan has essentially forced it to choose. First, Mr. Modi decided to boycott this year's SAARC summit that was scheduled to take place in Islamabad, Pakistan. Then, he unsuccessfully attempted to hijack the BRICS summit in India to use it as a political platform to attack and isolate Pakistan. The signal to Pakistan was unmistakable: Forget about SAARC. CAREC is a growing group of nations that is currently made up of 11 nations, including China and a list STANs. The current membership includes Afghanistan (joined CAREC in 2005), Azerbaijan (2003), People's Republic of China (1997), Georgia (2016), Kazakhstan (1997), Kyrgyz Republic (1997), Mongolia (2003, Pakistan (2010), Tajikistan (1998), Turkmenistan (2010) and Uzbekistan (1997).
Nigerian recession deepens in Q3, oil output falls | Reuters: Nigeria's recession deepened in the third quarter and oil production fell, the National Bureau of Statistics (NBS) said on Monday, as a dollar shortage kept Africa's biggest economy in a stranglehold. Gross domestic product contracted by 2.24 percent year-on-year, the NBS said. That was even worse than the 2.06 decline in the second quarter, when Nigeria fell into recession for the first time in 25 years. The data came on the eve of an interest rate decision, with analysts expecting the central bank to hold benchmark rates at 14 percent. Inflation hit 18.3 percent in October, the highest in more than 11 years. Prices have been pushed up by the dollar scarcity in a country dependent on imports, which has been exacerbated by currency restrictions imposed by the central bank last year in an effort to defend the naira. Oil sales are the OPEC member's main source of dollars to fund imports. "The ramp up in fiscal spending has been slower than anticipated, and the policy response in general remains weak," said Cobus de Hart, economist at NKC Economists. The NBS said oil production fell to 1.63 million barrels per day, down from 1.69 million in the second quarter. "We were expecting a more shallow contraction," Standard Chartered Africa chief economist Razia Khan said. "Much of it seems to have been driven by the outsized contraction in the oil sector once again, with much lower levels of oil production than we had expected."
Globalisation’s Last Gasp -- Eichengreen - Does Donald Trump’s election as United States president mean that globalisation is dead, or are reports of the process’ demise greatly exaggerated? If globalisation is only partly incapacitated, not terminally ill, should we worry? How much will slower trade growth, now in the offing, matter for the global economy? World trade growth would be slowing down, even without Trump in office. Its growth was already flat in the first quarter of 2016, and it fell by nearly 1% in the second quarter. This continues a prior trend: since 2010, global trade has grown at an annual rate of barely 2%. Together with the fact that worldwide production of goods and services has been rising by more than 3%, this means that the trade-to-GDP ratio has been falling, in contrast to its steady upward march in earlier years. This disturbing trajectory, argue the mavens of globalisation, reflects the resurgent protectionism manifest in popular opposition to the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), and now in Trump’s electoral victory. It means that the benefits of openness and specialization are being squandered. So far, slower trade growth has been the result of slower GDP growth, not the other way around. This is particularly evident in the case of investment spending, which has fallen sharply since the global financial crisis. Investment spending is trade-intensive, because countries rely disproportionately on a relatively small handful of producers, like Germany, for technologically sophisticated capital goods. In addition, slower trade growth reflects China’s economic deceleration. Until 2011 China was growing at double-digit rates, and Chinese exports and imports were growing even faster. China’s growth has now slowed by a third, leading to slower growth of Chinese trade. China’s growth miracle, benefiting a fifth of the earth’s population, is the most important economic event of the last quarter-century. But it can happen only once. And now that the phase of catch-up growth is over for China, this engine of global trade will slow.
Obama tries to calm the world’s fears over Trump, trade - The Asia-Pacific Economic Cooperation summit in Lima, Peru, closed out on Sunday with leaders taking what appeared to be a veiled shot at President-elect Donald Trump, pledging in a leaders’ statement to “resist all forms of protectionism” and roll back any protectionist or trade-distorting measures. In his own remarks at the close of the summit, President Barack Obama said that the 11 other nations involved in the TPP “made very clear … they want to move forward with TPP” — with the U.S. on board, if possible. Obama’s comments came at the end of his final international trip as president, a journey that did not see him celebrating the signing of his signature trade deal as he once wished but working instead to reassure the world that Trump and his campaign pledges to dismantle U.S. trade policy should not be taken as a guarantee of how he would govern. “My message to you, though, and the message I delivered in Europe is, don’t just assume the worst,” Obama said Saturday at a town hall event in Lima, referring to earlier stops in Germany and Greece. “Wait until the administration is in place, it's actually putting its policies together, and then you can make your judgments as to whether or not it's consistent with the international community's interest in living in peace and prosperity together.” “There are going to be tensions that arise, probably around trade more than anything else,” Obama added, “because the president-elect campaigned on looking at every trade policy and potentially reversing some of those policies. But once they look at how it’s working, I think they'll determine that it's actually good both for the United States and our trading partners.”
The Donald Trump Trade Effect: Watch the Peso, Not Ford - Though not yet president, Donald Trump has already notched his first victory in his campaign to stop foreigners from stealing American jobs. On Thursday Mr. Trump disclosed that Ford Motor Co. was keeping production of an SUV in Kentucky instead of moving it to Mexico. But a different announcement the same day will likely matter more for U.S. trade, and not in the direction Mr. Trump wants. Mexico’s central bank raised short-term interest rates half a percentage point in response to the peso’s 11% plunge since Mr. Trump was elected. The Bank of Mexico is worried that the depreciation will push up inflation, and by raising rates it will restrain spending and contain those price pressures. The combination of a weaker peso and higher Mexican interest rates will together quell Mexican demand for imports from the U.S. and, depending on how exports respond, likely widen the U.S. trade deficit with Mexico. This, of course, is the opposite of what Mr. Trump intends. On the campaign trail, he cited the elevated U.S. trade deficit as proof of how foreigners were cheating the U.S. through badly negotiated deals like the North American Free Trade Agreement. But as I noted in a column a month ago, Mr. Trump’s fiscal and trade policies are in conflict. His plans to slash taxes and boost infrastructure spending will inflate the budget deficit and stimulate an economy already close to full employment. To prevent an outbreak of inflation, the Federal Reserve will raise interest rates more quickly, pushing the dollar higher. The combination of a stronger dollar and stronger domestic demand will curb exports and suck in imports, causing the trade deficit to widen.This will be true even if an eventual corporate tax-rate cut boosts business investment. When investment rises but savings fall (because of a larger budget deficit), then the current-account deficit, which comprises both trade and investment income, must expand, all else equal. It’s too soon to know just how much Mr. Trump and Congress will cut taxes, if at all, or raise spending. Still, the markets are laying their bets. Since the election, U.S. bond yields have jumped and the dollar is up 3.4% against a basket of other countries’ currencies, especially against emerging markets. China’s yuan has dipped to an eight-year low.
Mexico Economy Rebounds In Third Quarter: -- this post authored by Jesus Canas Mexico’s gross domestic product (GDP) grew an annualized 4.0 percent in the third quarter after contracting 0.7 percent in the second quarter, according to the government’s advance estimate. More recent data on employment, retail sales and exports also improved, but industrial production fell. Inflation ticked up in September, and the peso held steady in October. The consensus 2016 GDP growth forecast was unchanged in October at 2.1 percent. Mexico economic growth was back in positive territory in the third quarter (Chart 1). Service-related activities (including trade, transportation and business services) rose 6 percent, while goods-producing industries (including manufacturing, construction, utilities and mining) fell 0.4 percent. Agricultural output expanded 4.8 percent in the quarter.Exports rose 7 percent in September after falling 2.8 percent in August. The three-month moving averages of total exports and manufacturing exports finally turned up after declining throughout 2015 and into the first quarter of 2016 (Chart 2). Oil exports turned around earlier this year after a long decline, but the reversal was driven by rising oil prices, not higher volume. Oil exports were down 30 percent in the first nine months of 2016 compared with the same period a year ago, and they remain at low levels. Manufacturing exports have fallen 3.8 percent this year through September relative to the same period in 2015.Mexico’s industrial production (IP) ticked down 0.4 percent in August after growing 0.1 percent in July. Manufacturing production, meanwhile has been rising in recent months. U.S. IP was flat in September after falling 0.5 percent in August. Based on the three-month moving average, Mexico’s IP shows signs of deceleration (Chart 3). Total IP, which includes manufacturing, construction, oil and gas extraction, and utilities, has been growing more slowly than manufacturing IP since early 2014.
Mexico Seeks Trump Talks to Modernize Nafta, Pena Nieto Says - Mexico is willing to hold talks with U.S. President-elect Donald Trump to modernize the North American Free Trade Agreement, President Enrique Pena Nieto said. Mexico will seek dialogue with the U.S. on its trade relationship following comments made by Trump during his campaign, Pena Nieto said. Speaking at the Asia-Pacific Economic Cooperation summit in Lima on Saturday, he defended the deal, saying that for every dollar that Mexico exports, North American materials account for 40 cents. Globalization generates more benefits than harm, he said. “We’re at the stage of prioritizing dialogue as the path through which we may able to establish a new agenda for bilateral relations,” Pena Nieto said. “More than talking about renegotiating Nafta, it’s modernizing Nafta. Let’s modernize Nafta so it becomes a more powerful, modern vehicle.” The bill to establish the trade deal with Mexico and Canada was approved by the U.S. Senate in 1993 in a bipartisan vote, and signed by then-President Bill Clinton. It went into effect in 1994. Trump frequently criticized Nafta during the election, describing it as the worst deal ever and blaming it for U.S. job losses. The Mexican peso dropped as much as 12 percent to record levels following Trump’s election. Trump said during the campaign he will seek to renegotiate or scrap Nafta, boost tariffs, and build a wall along that U.S.-Mexico border that Mexico would be forced to pay for.
The Latest: Mexico seeks to push ahead on TPP without US - Mexico isn’t throwing in the towel on free trade despite Donald Trump’s threats to break up NAFTA and abandon other multilateral trade deals. Mexican Finance Minister Idelfonso Fajardo said Friday that he met with officials from five other signatories to the Trans-Pacific Partnership — Australia, Malaysia, New Zealand, Japan and Singapore — on the sidelines of the APEC summit in Lima, Peru. He says they agreed to forge ahead with the agreement regardless of what the new U.S. administration decides.It’s unclear if they’ll succeed. Under terms of the TPP agreement signed this year in New Zealand, the vast free trade agreement can only be implemented if it is ratified by at least six countries that account for 85 percent of the combined gross domestic production of the 12 TPP nations.Officials from 21 nations have endorsed a report on the creation of vast free trade area encompassing Pacific Rim nations, including China and the U.S. The feasibility study into the so-called Free Trade Area of the Asia-Pacific had been ordered at the summit in Beijing two years ago. Its findings haven’t yet been made public but were debated this week in Peru by trade officials from the Asia-Pacific Economic Cooperation forum and will be presented to leaders of the member nations on Saturday. Ministers in a statement Friday also rejected rising protectionism, which they said is holding back global economic growth.
The TPP is dead, long live the TPP -- The election of Donald Trump as the next President of the United States seems to have sealed the fate of the Trans-Pacific Partnership. The President-elect has promised to withdraw the United States from this 12-nation trade deal in his first day in office, and the Congressional Republican leadership will not bring TPP to a vote in the lame-duck session. The priority for establishment Republicans is to repair relations with Trump, not to alienate him on a defining issue of his candidacy -- trade-bashing -- which so powerfully mobilized the Republican base. TPP's death certificate appears ready to be stamped and mailed. To be sure, TPP's only future is a renegotiation. But a renegotiation that during the Trump presidency will most likely not include the United States. The day the United States withdraws from TPP, the remaining 11 members need only change one clause to give the TPP a new lease on life. They could simply amend the enactment rules so that U.S. participation is no longer required for implementation of the trade deal. Obviously, the original TPP is a carefully calibrated package, and TPP parties agreed to many politically sensitive concessions with the calculus that they would be compensated by improved access to the vast American market. But the trading world changed with the American election, and those gains are no longer on the table as of November 9th. We should not jump to the conclusion, however, that a TPP without the United States is without value for the remaining members. In fact, a relaunched TPP could be the best vehicle for these countries to adapt to the new -- and harsher -- reality of international trade in a world increasingly consumed by populism. Especially, considering that Trump may feel compelled in the early stages of his tenure to deliver on the disruptive elements of his trade agenda: withdrawing from TPP, threatening to terminate NAFTA to force a renegotiation, naming China a currency manipulator, and possibly imposing punitive tariffs on Chinese imports.
Canadian Bank Starts Charging Negative 0.75% Rate On Most Foreign Cash Balances - Despite speculation over the past year that Canada may join Japan and Europe in the NIRP club and launch negative interest rates, so far the BOC has stood its ground. However, starting on December 22, for the broker dealer clients of one of Canada's most reputable financial institutions, BMO Nesbitt Burns, it will be as if the Canadian bank has cut its deposit rate on most currencies, to match the deposit rate of Switzerland. In an internal letter sent today from management, the bank explains that its current policy with respect to cash balances of foreign currencies held in client accounts – excluding U.S. dollars – has been that it "does not pay or charge clients interest on these balances." As a result, the bank writes, clients have traditionally tended not to hold non-U.S. dollar foreign currencies in a BMO Nesbitt Burns account for any extended period. However, the notice continues, "given the current global interest rate environment, which has extended much longer than anticipated,we have seen an increase in foreign currency cash reserves across accounts; indicating clients are, in fact, moving these funds into their BMO Nesbitt Burns account in order to avoid negative interest charges on cash holdings in other accounts they maintain." Welcome to the age of connected monetary vessels, where globally fungible money allows savers to bypass their own domestic "financial repression" and negative interest rates, by shifting their funds to offshore bank accounts. Or at least it did for clients using BMO Nesbitt Burns as a custodian of offshore money. Because as the bank adds, it has become necessary for the bank to update its current policy and selectively implement negative rates to avoid precisely this global interconnection. To wit: Effective December 22, 2016, we will begin charging clients a market-rate negative interest charge of 75 basis points on cash balances of all foreign currencies held in their account(s), excluding U.S. dollars. Interest is calculated on the average daily balance during the interest period. The first negative interest charge will cover the period of December 22, 2016 to January 21, 2017, and will be charged to all applicable client accounts on January 23, 2017.
The Peak & Decline Of International Reserves Warns Of Massive Asset Deflation Ahead - The world is sitting at the edge of a massive deflationary cliff. Even though Central Banks are desperately trying to keep the world's financial assets from plunging down into the great depression below, signs suggest they are losing the battle.One critical sign is the peak and decline of International Reserves. Hugo Salinas Price has been keeping an eye on International Reserves for quite some time. In his recent article, A Reversal In The Trend Of International Reserves, he stated the following:International Reserves peaked on August 1, 2014, at $12.032 Trillion dollars, and as of October 28, 2016 they stood at $11.066 Trillion dollars.International Reserves stood at about $10 Trillion in 2011, but the rate of growth slacked off; the weekly increases in Reserves (which Bloomberg used to publish every Friday) stalled and became smaller, week by week. As mid-2014 came around, the increases were quite small. It was clear that the trend was for ever-smaller increases, and that could only mean that finally there would be no increase, which would be immediately followed by decreases in the total of International Reserves held by Central Banks. That is exactly what took place. Here is a chart of International Reserves from Hugo Salinas Price's article:
Big Western Companies Are Pumping Cash Into Russia - Even before the U.S. presidential election raised hopes of warmer ties with the Kremlin, some big Western companies were betting Russia’s economy will soon come out of the deep freeze. Big retailers like Sweden’s Ikea Group and France’s Leroy Merlin SA have begun pumping billions of dollars in new stores and factories, counting on Russia’s consumers to start emerging from hibernation after two years of recession. Ikea is putting $1.6 billion into new stores over the next five years or so. Leroy Merlin in September announced a 2-billion-euro plan to more than double the number of outlets in Russia over the same period. Pfizer Inc. is building a new drug factory, while Mars Inc. is expanding plants for chewing gum and pet food. Foreign investment all but ground to a halt as the country sunk into recession and conflict with the West over the last two years. Companies including General Motors Co. slashed local operations. For many of those who stayed, now is the time to reopen their wallets to get a jump on rivals. The ruble’s plunge, though it decimated the value of local earnings in dollars and euros, has driven production costs in Russia down sharply. By some estimates, they’re now lower than those in China. “The last 2-3 years have been a disaster,” said Frank Schauff, head of the Association of European Businesses in Moscow. “Now, the situation is changing as the ruble exchange rate has stabilized and the Russian economy is forecast to return to growth soon.” The government said its annual meeting of foreign investors in September drew the most top executives in a decade. Foreign direct investment surged to $8.3 billion in the first nine months of this year, more than the $5.9 billion reported for all of 2015, according to central bank data.
Government Purge in the Russian Federation? Putin Orders Arrest of Minister of Economy on Corruption Charges | Defend Democracy Press: While the word was focused in rapt attention on the outcome of the US Presidential election, Vladimir Putin did something quite amazing – he arrested Alexei Uliukaev, Minister of the Economy of the Medvedev government, on charges of extortion and corruption. Uliukaev, whose telephone had been tapped by the Russian Security Services since this summer, was arrested in the middle of the night in possession of 2 million US dollars. Putin officially fired him the next morning. Russian official sources say that Uliukaev extorted a $2 million bribe for an assessment that led to the acquisition by Rosneft (a state run Russian oil giant) of a 50% stake in Bashneft (another oil giant). Apparently, Uliukaev tried to threaten Igor Sechin, the President of Rosneft and a person considered close to Vladimir Putin and the Russian security and intelligence services. Yes, you read that right: according to the official version, a state-owned company gave a bribe to a member of the government. Does that make sense to you? How about a senior member of the government who had his telephone tapped and who has been under close surveillance by the Federal Security Service for over a year – does that make sense to you? This makes no sense at all and the Russian authorities fully realize that. But that is the official version. So what is going on here? Do you think that there is a message from Putin here? Of course there is!
Moscow Angry After Swiss Fighter Jets Shadow Russian Government Plane -- While relations between Russia and the US may finally be on the mend following a phone call between Putin and Trump, in which the Russian leader expressed hope for a reset and renormalization of the current "unsatisfactory" bilateral relations between the two countries, treatment of Russia in Europe remains on the downswing. The latest example of this took place on Friday when military aircraft with Swiss fighter jets shadowed a Russian government aircraft over the European country, Russian Foreign Ministry spokeswoman Maria Zakharova said Saturday.As a result, Moscow asked the Swiss government for an explanation for the deployment of fighter jets to meet a Russian special flight airplane carrying journalists, and Alexander Fomin, the director of the Russian Federal Service for Military-Technical Cooperation to a summit of the Asia-Pacific Economic Cooperation (APEC) in Peru, saying it is particularly concerned by how perilously close the warplanes shadowed it. In a broadcast on the Rossia 24 TV channel, Russian Foreign Ministry spokeswoman Maria Zakharova issued the following statement: "I will stress one more time that a rather close distance, to which these fighter jets had approached [the Russian plane], has caused serious concerns of the passengers of the Russian aircraft. We have not left unnoticed the media reports on the issue and our embassy in Switzerland has already requested explanations of the Swiss side. We are expecting the explanations and will respond in an appropriate manner after we will receive them."
Russia Deploys Nuclear Missiles In Retaliation To NATO "Threats" - While the detente between Russia and US president-elect Donald Trump could not have come at a more tense time, the Kremlin appears to be accelerating its head-on collision course with NATO, and as a highly placed defense official said on Monday, Moscow will deploy S-400 surface-to-air missiles and nuclear-capable Iskander systems in the exclave of Kaliningrad in retaliation for NATO deployments, confirming previous media reports of Russian intentions to once again blanket central Europe with potential nuclear ICBM coverage. While Russia has previously said it periodically sends Iskanders to Kaliningrad, until now it has always said these were routine drills. Moscow has not linked the moves explicitly with what it says is a NATO military build-up on Russia's western borders. However, perhaps sensing that the Kremlin has a supportive voice in the White House, and thus negotiating leverage, Putin has decided to tip his cards diplomatically and alrt the world that Russia will escalate in what it sees a tit-for-tate game theoretical regime. According to Reuters, after the election of Donald Trump, who has said he wants closer ties with the Kremlin and has questioned the cost of protecting NATO allies, some analysts predict an emboldened Moscow could become more assertive in eastern Europe. With recent military overtures in Syria and now Europe, this appears to be taking place.
Russia Is Reviving Soviet Era ICBM-Carrying "Nuclear Trains" --Russia has conducted successful intercontinental ballistic missile tests intended for its Barguzin "nuclear-train" program. The tests for Russia's "railway-based combat rocket system" took place on Plesetsk cosmodrone two weeks ago, Interfax reports and were "fully successful" according to a military source, which would "pave the way for further flight tests." The tests were held to test the missiles' launch readiness, Russian press added. The mobile weapons platform, made up of several train carriages designed to conceal the launchers of six Yars or Yars-M thermonuclear ICBMs and their command units, are expected to enter service between 2018 and 2020. After first announcing the return of the nuclear trains, which had previously been banned, in 2014 Russia’s military then confirmed the trains are expected to be put into service in 2019. The nuclear trains, dubbed Berguzin after the strong eastern wind that blows over the Lake Baikal, aim to counter US’s Conventional Prompt Global Strike project, which would give the Pentagon the capability of launching attacks and precision strikes at any target in the world in one hour.
U.S., Russia request Czechs extradite arrested Russian hacker | Reuters: The United States and Russia have both requested the extradition of a Russian arrested in Prague and indicted in the U.S. for hacking computers of social media companies, the Czech justice ministry said on Wednesday. The ministry will review the requests for the extradition of Yevgeniy Nikulin, who a U.S. federal grand jury said had hacked into the U.S.-based social media companies LinkedIn, Dropbox and Formspring. The requests will then be referred to a Prague court, a spokeswoman said. If the court determines both requests are valid, the justice minister would make the extradition decision, she added. Czech police detained Nikulin in October in Prague, where he remains in custody. His arrest was carried out in cooperation with the U.S. Federal Bureau of Investigation. A federal grand jury in Oakland, California, indicted him on Oct. 21. LinkedIn Corp has said the arrest was related to a 2012 breach at the social networking company that might have compromised the credentials of 100 million users, prompting it to launch a massive password reset operation. Russia's foreign ministry has criticized the arrest, saying it showed Washington was mounting a global manhunt against Russian citizens. The U.S. government had accused Russia of a campaign of cyber attacks against Democratic Party organizations before the Nov. 8 presidential election. Russian President Vladimir Putin has said a hacking scandal would not be in Russia's interests.
Loud calls in Parliament for ending EU membership talks with Turkey - With relations between the EU and Turkey already deeply strained, a broad coalition of members of the European Parliament Tuesday called for ending EU membership talks with Ankara as punishment for a trampling of democratic freedoms and human rights by Turkish President Recep Tayyip Erdoğan following a failed coup attempt last July. The fraying of ties comes at a particularly sensitive time for Brussels, with the EU relying on Turkey to keep up its end of an agreement on the return of migrants who have sought refuge in Europe. While an unraveling of that deal could create acute political problems in capitals across the Continent, many members of Parliament called for ending the arrangement, saying Erdoğan was using it as a tool of “blackmail.” Leaders of the biggest factions in the Parliament also called for ending the discussions with Turkey about EU membership. “Continuing the illusion of accession talks with a regime that becomes more and more authoritarian,” said Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe. “We are losing credibility.” Syed Kamall, president of the European Conservatives and Reformists Group, said it was time for the EU to recognize reality. “The EU continues to pretend that it’s business as usual with Turkey,” Kamall said. “But we can all see the current relationship is not working.” He added: “Let us build a new relationship based not necessarily on EU membership but on cooperation.”
Erdogan warns Europe that Turkey could open migrant gates | Reuters: Turkish President Tayyip Erdogan threatened on Friday to unleash a new wave of migrants on Europe after lawmakers there voted for a temporary halt to Turkey's EU membership negotiations, but behind the fighting talk, neither side wants a collapse in ties. Europe's deteriorating relations with Turkey, a buffer against the conflicts in Syria and Iraq, are endangering a deal which has helped to significantly reduce a migrant influx which saw more than 1.3 million people arrive in Europe last year. "You clamored when 50,000 refugees came to Kapikule, and started wondering what would happen if the border gates were opened," Erdogan said in a speech in Istanbul, referring to a Bulgarian border checkpoint where migrants massed last year. "If you go any further, these border gates will be opened. Neither I nor my people will be affected by these empty threats," he told a women's conference, dismissing Thursday's vote in the European Parliament in Strasbourg. "Don't forget, the West needs Turkey." The agreement struck in March with Ankara, under which it helps control migration in return for the promise of accelerated EU membership talks and aid, has reduced the influx via Turkey to a trickle. But its neighbors are still struggling to cope. Clashes broke out at a migrant camp on the Greek island of Lesbos after a fire killed a woman and a 6-year old child late on Thursday, while Bulgaria said it would extradite hundreds of asylum seekers to their native Afghanistan next month after they clashed with riot police.
Erdogan threatens to let 3m refugees into Europe - Turkey’s president Recep Tayyip Erdogan ramped up his dispute with Brussels warning he would allow 3m refugees into Europe at a time of mounting political anxiety over the advance of rightwing populists in Austria, Germany and France. As tension escalates with Mr Erdogan over his clampdown on opponents after a failed military coup in July, officials in Brussels are examining the allocation of €600m in annual financial aid to Ankara as a result of the purge. Money has already been diverted from infrastructure projects towards judcial reform and human rights initiatives but officials warned that Turkey could expect a “pretty tough conversation” in a looming review of the aid scheme for countries in membership talks with the EU. The Turkish leader lashed out at Brussels one day after the European Parliament called for a pause in Turkey’s EU accession talks in protest at Ankara’s “repressive” and “disproportionate” response to a violent coup attempt earlier this year.Mr Erdogan has previously warned that he could put refugees “on buses” to Europe but his latest threats come one week ahead of Austria’s presidential election in which far-right candidate Norbert Hofer is marginally ahead.Austria is the only EU member state to call for a halt to talks with Turkey but the parliament’s vote reflects a hardening of attitudes to the country around the EU. Although member states are reluctant to break off the talks, a senior diplomat said the options available to Brussels included a review of aid allocations to the country.
Trump’s NATO Spending Demand Would Break Denmark’s Welfare State -- Meeting Donald Trump’s demands on defense spending could allow NATO-member Denmark to buy a dozen F-35 fighter jets and four frigates. It could also damage the cherished welfare state. During his presidential campaign, the victorious Republican candidate raised alarma mong allies by suggesting that the U.S. would think twice about defending a North Atlantic Treaty Organization member that failed to live up to the group’s commitment to spend 2 percent of gross domestic product on defense. This is a long-standing source of frustration for the U.S., since only a handful of NATO’s 28 members regularly meet the target. But Trump is the first to have raised existential questions about the alliance since Russia’s illegal annexation of Crimea. According to the Stockholm International Peace Research Institute, Denmark last met the NATO spending target in the final years of the Cold War, when Soviet forces were stationed across the Baltic Sea. Since then, the ratio of Danish spending has dropped consistently and totaled 23.2 billion kroner ($3.31 billion), or 1.2 percent of GDP, in 2015. Helge Pedersen, a Copenhagen-based chief economist at Nordea Bank AB, estimates that meeting the 2 percent mark again would require about 15 billion kroner in extra defense spending. That’s how much Denmark spends each year on supporting its universities, or five years of child support for its families.
Trump Election Boosts European Populists – SPIEGEL - It is the seventh day after Donald Trump's triumph, an election upset that set off a political earthquake around the world, and time for a visit with those far away from Washington who think like him. Members of France's Front National (FN) are meeting at the five-star Hotel Napoléon in Paris, not far from the Champs-Élysées. The topics of discussion this evening include disadvantaged youth in the outer districts of the capital, known as the banlieues, and radical Islamists who are recruiting new members there. The mood is explosive in the banlieues, warns the speaker, a resolute blonde woman, who goes on to say it is a ticking time bomb that could go off at any moment. "I am the only one who can defuse this bomb," she adds. Her words are met with cheers and applause. Marine Le Pen has struck the right note, once again. Here, in the stuffy conference room at the Hotel Napoléon, people want to hear what they have long believed: That Islam constitutes a threat and that France's very future is on the line. Marine, the daughter of Front National co-founder Jean-Marie Le Pen, has been the head of her party for almost six years. The Frenchwoman will soon enter the presidential election campaign under the slogan "Marine 2017." Within a few years, she has managed to garner the support of like-minded individuals, and not just in her native France. Le Pen also chairs the Europe of Nations and Freedom (ENF) group in the European Parliament. ENF brings together elected representatives from nine countries, people who share an unmistakable common goal. "We want to destroy this EU," says Le Pen.
Marine Le Pen Takes "Huge Lead" In French Presidential Election Poll Just Days After Being Written Off -- The pollsters have done it again. Just four days after the Independent reported that pollsters says Marine Le Pen has "next to no chance" of winning the French presidency... Pollsters say Marine Le Pen has next to no chance of winning the French presidency https://t.co/b6pi8zjmdY — The Independent (@Independent) November 16, 2016 ... earlier today we learned that contrary to previous polls, the leader of National Front leader Marine - the person who surge in the past few years has been equated to the populist revolt that has taken place in the UK and US - has taken a commanding lead in the latest French presidential election poll. As the Independent writes in "Marine Le Pen takes huge lead over nearest rival in new French presidential election poll", according to the latest, Nov. 20, Ipsos poll, Le Pen had 29% of the vote when pitted against Nicolas Sarkozy, who was eight points behind, and held a 15-point lead over the Parti de Gauche’s Jean-Luc Mélenchon in the poll released by Ipsos, which analysed five scenarios with different frontrunners.
Sarkozy Eliminated In First Round Of French Presidential Primary - Less than four months after he announced (what he hoped would be) his triumphal return to politics, the hopes of former French president Nicolas Sarkozy have imploded, as a result of a poor showing in today's first presidential primary in France in which the conservatives will pick their candidate for president. As the Tribune de Geneve writes, "ever since 2012, Sarkozy only dreamed of only one thing: his revenge. To be re-elected president in 2017. But tonight, it is the voters of right and center that have eliminated Nicolas Sarkozy." Citing early exit polls, the publication writes that the former president did not succeed in convincing his "political family" that he was the man that France needs to bring change. The first exit polls show Sarkozy in third spot, with only 24% of the vote in today's French primary, behind both Juppe and Fillon. Sarkozy finds himself far behind Alain Juppé and François Fillon: the two former prime ministers lead the way. While we have to wait for the official announcement for the official results, TdG notes that the second round of the primary, due next week, "looks exciting because the dynamics initiated by François Fillon undermine the confidence in Alain Juppé who has been favorite for a year."
In Upset, François Fillon Beats Sarkozy, Leads Conservative Party Runoff Vote for French President - Yves Smith - Hopefully, French readers will chime in to add to English language media reports of the stunning win by former French prime minister François Fillon, who mere weeks ago had been the number three candidate in the Conservative party runoff for President. But a sparkling debate performance, unforced errors by his opponents, and a distinctive message delivered a fatal blow to former President Nicholas Sarkozy, who said he is retiring from public life. Fillon received 44.1% of the vote in the open runoff election, versus 28.6% for former prime minister Alain Juppé, who had been leading in polls, and 20.6% for Sarkozy. The election battle in France expected to be right versus further right. President François Hollande is scoring abysmally in polls, and so the election in 2017 is expected to pit the Conservative winner against Le Front Nationale’s Marine Le Pen. Even though pundits expect the Conservatives to beat Le Pen, one wonders why voters would back failed neoliberal policies. For instance, Fillion is running on neo-Thatchertie positions that he calls “pro-business,” such as increasing the work week from 35 to 39 hours and weakening labor rights. He also favors curbing the parental rights of gay couples, cracking down on “political Islam,” and improving relations with Russia. As the Financial Times blandly noted: The unexpected outcome of the primaries has reinforced the sense of upheaval in the French political mainstream — shaken by the anti-elite uprising behind Donald Trump’s election as US president and the UK’s vote to leave the EU as well as the electoral gains of Ms Le Pen’s National Front. Among other things, this upset shows yet again that pundits and pollsters are no longer able to read the public’s mood. And next May is a long way away. Admittedly, events in the interim could work against Le Pen just as readily as they could favor her. However, the sunny elite belief that her threat will be beaten back is starting to look like overconfidence.
Italy’s Government on Verge of collapse: Next Trumpian Domino to Fall? -- Italy’s government is on the verge of collapse. Prime minister Matteo Renzi reiterated his position just yesterday, he will not hang on if a referendum he seeks does not pass. Polls show the referendum will fail. Then again, polls have not been remarkably accurate recently, to say the least. On the other hand, this poll shows a strong preference to what is labeled “populism”. Finally, there is always a chance Renzi will not resign and he is only attempting to manipulate the vote. Let’s sort this all out. Please consider Renzi Rules Out Leading Technocratic Government After Referendum. Italian prime minister Matteo Renzi has ruled out leading a caretaker government if he is defeated in a key constitutional referendum next month, removing some of the uncertainty surrounding his political future after the vote. Mr Renzi had said early in the campaign that he would resign if he lost but has faced pressure from some lawmakers in his Democratic Party to stay on regardless of the outcome on December 4. In a radio interview with Rtl 102.5 on Thursday, he decisively rejected the notion.“If the citizens vote no and want a decrepit system that does not work, I will not be the one to deal with other parties for a caretaker government – a little government, ” Mr Renzi said.
Italy Polls Get Worse for Renzi as Referendum Nears.- Opinion polls are making increasingly grim reading for Italian Prime Minister Matteo Renzi less than three weeks ahead of a referendum on constitutional reform on which he has staked his political future. Of 32 polls published by 11 different pollsters since Oct. 21, every one has the ‘No’ camp ahead, and generally by a widening margin. In three polls published on Monday the lead for ‘No’ ranged from five points, according to IPR Marketing, to seven points, according to Tecne, with EMG Acqua in the middle at 6 points. These results exclude undecided voters, which are estimated at 25.9 percent by EMG Acqua and 16.5 percent by Tecne. The most worrying aspect for Renzi is that as the number of undecided voters declines, the lead for ‘No’ appears to be rising. Bookmakers also hold out little hope for the 41-year-old premier, with Ladbrokes estimating a roughly 75 percent probability of a win for ‘No.’ However, most pollsters continue to say the outcome of the Dec. 4. ballot remains uncertain. They point out that opinion polls already proved notoriously wrong in the June referendum in which Britons chose to leave the European Union and most recently when Americans elected republican Donald Trump to the presidency on Nov. 8.
Political populism: Is Italy next? -If the Italian prime minister loses a high-stakes referendum on his flagship constitutional reform set for December 4, it could bring his tenure in office — and his entire political project — to an abrupt and premature end. “Renzi went for broke, and if he wins, the coast will be clear. But if he loses, it will be devastating,” said Paolo Donzelli, a 53-year-old Florentine car salesman seated at one of the large round tables set up at the conference. “This is the showdown, the big political battle. And then, as they say in Florence, they will count the dead.” “It could be another watershed moment for Europe so there is huge interest and attention,” says Andrea Montanino, director of the global business and economics programme at the Atlantic Council. “Renzi is considered an anchor in a very complex picture.” Mr Renzi is now scrambling to save his political skin. His first mistake, which the prime minister has acknowledged, was excessively personalising the referendum by vowing to resign and leave politics if he lost. “The electorate is scared and doesn’t see solutions. They will use the vote to hit those who are in power and the paradox here is that Renzi is now seen as the quintessence of the establishment,” says Giovanni Orsina, a professor of politics at Luiss University in Rome. “Renzi is like the poker player who keeps upping the ante even if his cards are bad. He’s a prisoner of his own bluff.”
Beppe Grillo: "The Amateurs Are Conquering The World Because The 'Experts' Destroyed It" -- Despite Italian Prime Minister Mateo Renzi's solemn denials that he will resign when, not if, the Italian constitutional referendum fails on December 4, it is now obvious that the Italian government is on the verge of collapse. And in yet another U-turn Renzi admitted as much himself, when according to La Repubblica, he told his entourage this weekend that the government would fall if he loses Dec. 4 constitutional referendum. “It’s very simple: if I lose the referendum this government falls. At that point we’ll see who is capable of reaching an agreement for another administration,” Renzi was quoted as saying. Well, one person who may or may not be capable, but is certainly waiting for his opportunity is Beppe Grillo, leader of Italy’s Five Star Movement, who has launched an assault against the government in Rome. The battle, which he says he will soon win, is taking place in Brussels, the city where he marched against Chinese steel dumping and in favour of the European steel industry. Perhaps the most notable point brought up by Grillo is his answer whether he would govern Italy if given the opportunity, after the failure of Renzi. This is what he said: We want to govern, but we don’t want to simply change the power by replacing it with our own. We want a change within civilisation, a change of world vision. We’re talking about dematerialised industry, an end to working for money, the start of working for other payment, a universal citizens revenue. If our society is founded on work, what will happen if work disappears? What will we do with millions of people in flux? We have to organise and manage all that. From our side, we want to give the tools to the citizens. We have an operating system called Rousseau, to which every Italian citizen can subscribe for free. There they can vote in regional and local elections and check what their local MPs are proposing. Absolutely any citizen can even suggest laws in their own name. This is something never before directly seen in democracy and neither Tsipras nor Podemos have done it.
Italy’s Bank Rescues Founder, With Small Savers and Prime Minister Renzi as Casualties - As with all major crises, Italy’s current predicament is a multi-headed hydra. It’s a banking crisis, an economic crisis, a debt crisis, and a political crisis all rolled into one, and all coming to a head at the same time.Italy’s economy has been in reverse ever since it joined the euro 17 years ago. Since 2007, its GDP has shrunk by a staggering 10%. In the meantime its public debt has continued to grow, reaching 135% of GDP today, the highest level of any Eurozone country with the exception of Greece. And now the yield on Italy’s 10-year bond is on the rise, hitting 2.09% on Friday in a NIRP world, its highest point in over 13 months.Investors are worried about two things: the very real prospect of a government defeat in the upcoming referendum on constitutional reforms (a subject I covered last week) and Italy’s blossoming banking crisis.The government’s solution to that crisis has been to create two woefully underfunded, deeply opaque bad banks — Atlante I and Atlante II — whose job it’s been to hoover up the worst of the toxic debt off the banks’ balance sheets. Atlante I and II don’t have enough firepower to steady even Italy’s smallish regional banks, like Veneto Banca, which keep coming back for more handouts, let alone the likes of Monte dei Paschi or Uncredit, each of which has tens of billions of euros of nonperforming loans (NPLs) festering on their books.Two weeks ago when Giuseppe Guzzetti, a senior Italian banker who helped create the two bad banks, admitted that after six months of frenzied activity Atlante II is already “out of breath.” Meanwhile, JP Morgan Chase’s last-ditch rescue of Monte dei Paschi continues to flounder, as shareholders who have already lost €8 billion in two previous capital expansions seem strangely reluctant to provide the bank with another €5 billion in fresh capital. That has left MPS and its handsomely compensated rescuers little choice but to unveil Plan Y this week, which essentially involves offering holders of the bank’s subordinate bonds a debt-for-equity swap.
Gov't spokesman calls on IMF to 'stop sitting on fence' - ekathimerini.com: Government spokesman Dimitris Tzanakopoulos on Monday called on the International Monetary Fund to "stop sitting on the fence and decide whether it is in or out of the program," referring to Greece's third international bailout.Tzanakopoulos's comments to Skai television came as negotiations between government officials and envoys representing Greece's creditors stall on the thorny issues of labor laws with the Fund assuming a typically tough stance."The IMF is insisting on reforms that will not help the competitiveness of the economy," Tzanakopoulos said.As for the insistence of German Finance Minister Wolfgang Schaeuble on austerity and against debt relief, Tzanakopoulos said Schaeuble's positions "have been known since 2010 but the situation has changed."He reiterated that Athens remains focused on completing the second bailout review without delay.Regulating labor laws remains one of the government's priorities, he said, noting that the labor market "turned into a jungle during the years of the memorandum."Restoring collective labor contracts remains the key aim, he said, indicating that the government is not planning to make major concessions to creditors.
Cyprus Wins Victory for Sovereignity, Backed by Greek Principle and Russian Arms - John Helmer: In the dark of Monday night before light broke on Tuesday, Cyprus, the small Mediterranean island invaded and occupied for 42 years by Turkish troops with US and UK backing, began a revolution its president, Nicos Anastasiades (lead image, 4), doesn’t want.The collapse of negotiations between the Greek Cypriot and Turkish Cypriot communities, arranged by United Nations (UN) officials at the Swiss resort of Mont Pèlerin, was confirmed by a UN communique issued at 1:30 in the morning. “They have not been able to achieve the necessary further convergences on criteria for territorial adjustment that would have paved the way for the last phase of the talks,” the bulletin announced. “The two sides have decided to return to Cyprus and reflect on the way forward.”“The Americans, the Turks, the European Union, and the British were sure there’s no deal Anastasiades could not be persuaded to accept,” said a senior Cyprus official, now retired, “so long as there’s a large enough percentage in it for himself. Anastasiades’s weakness is his personal corruption. This time, though, the Turks raised their bid too high. The Americans lost their cards in their election on November 8. The British aren’t players in Europe now. And for the first time there was a display of Greek and Russian power which has changed the game entirely. Greece first, then Russia have cut the legs off the negotiating table – Anastasiades’s legs too.”Anastasiades’s spokesman, Nicos Christodoulides, told the Cyprus press: “we are not at all happy about the outcome of the talks… I sincerely regret that as a result of the Turkish attitude has not been possible to complete a very promising process that until now, through a very productive negotiation, has led to very positive developments for the whole people of Cyprus.”Publicly, the stumbling block had been the insistence of the Turkish Cypriot leader, Mustafa Akinci and Turkish President Recep Tayyip Erdogan, on a formula cutting the number of Greek Cypriots who would be allowed to return to their homes, preventing the revival of Greek-Cypriot towns in the occupied northern sector of the island; and restricting Greek-Cypriot access to invest in the coast line and the gas-rich offshore seabed.
The Plague of Long-Term Unemployment in Europe - There's plenty of legitimate reason for concern about the extent to which the US labor market is producing high quality jobs. But every now and again, Americans might want to glance to the east and contemplate Europe's unemployment issues. Here's the unemployment rate in Europe (from Eurostat), with the red line showing the unemployment rate in the 19 countries of euro-zone, and the blue line showing the unemployment rate across all 28 countries of the EU. In the euro-zone, the average unemployment rate has been above 9% since 2000, with the exception of a dip just before the Great Recession hit, and it's been in the range of 10% or higher for almost all of the last seven years. But in at least two ways, Europe's problem is worse than this figure suggests. One is that the averages don't take into account the stress in countries with higher-than-average unemployment: for example, unemployment in France in September 2016 was 10.2%; in Italy, 11.7%; in Spain, 19.3%; and in Greece, 23.2%. Another dimension is that Europe's overall unemployment rate doesn't show what share of that unemployment is long-term, rather than short-term and transition. A new VoxEU.org e-book, Long-Term Unemployment After the Great Recession: Causes and Remedies, edited by Samuel Bentolila and Marcel Jansen, offers a series of short and readable essays with some overall perspectives and close-up looks at long-term unemployment in eight countries: Denmark, France, Germany, Italy, Netherlands, Poland, Spain, and the UK. In the "Introduction" by Bentolila and Jansen, they point out that if you counted as unemployed only those who have been out of work and looking for a job for more than a year, the unemployment rate across the 28 countries would still have been nearly 5% in 2015. Moreover, in many countries the long-term unemployed are 40%, 50%, and more of the total unemployed. Here's a figure: As the figure shows, the long-term unemployed (more than a year) in the US economy is less than 20% of its the total number of our much lower unemployment rate
Banks Whine About Tougher EU Regulations to Reduce Too Big to Fail Risk - Yves Smith - The Financial Times’ lead story, EU to retaliate against US bank capital rules, depicts banks as victims of a regulatory one-upsmanship. Amusingly, the article does its best to undeplay that the US rules were intended to improve bank safety and the so-called “retaliatory” measures would also have that effect. In reality, the US rules, which were created as part of Dodd-Frank implementation, seek to address what has become a major impediment to solving the Too Big to Fail problem: that banks live internationally but die nationally. Bankruptcy and bank resolution take place in particular legal jurisdictions. But rather than require banks to have operations in each country that complied with local rules that were then part of a holding company structure, banks were permitted to operate under a “home-host” system. As far as safety and capital adequacy were concerned, the bank would be regulated by its home country regulators. That meant it could keep all its regulatory capital there. The regulators in the “host” countries could call the regulators in the home country and ask them to make the mother ship send capital to the operations in their country if they thought it was too risky. But that was a rare event. The Financial Times story curiously neglects to mention that the new US rules are meant to deal with “too big to fail” banks, and apply only to banks with $50 billion or more in US non-branch, non agency assets. The foreign bank must form an “intermediate holding company” for these operations which is subject to US “enhanced prudential standards,” which included stress testing, the US version of Basel III, and liquidity and risk management requirements. And the various exams and requirements of the intermediate holding company assume no parent company support. These rules were announced in 2014 and foreign banks were required to have formed their intermediate holding company operations and moved the relevant entities, such as a US bank holding company and broker-dealer units, into it, and start complying with most enhanced prudential standards by July 1, 2016. So it seems a bit odd for the EU to be “retaliating” now to rules announced over two years ago that have been in effect for months.
As Investors Dump Treasuries, German Bonds Are Panic-Bid To Record Low Yields - 2Y German bond yields are collapsing, hitting record lows at -72bps this morning as Commerzbank reports a collateral squeeze into year-end. Since the election, the spread between 2Y UST and 2Y GER has exploded by over 50bps, spiking Treasuries to their 'cheapest' to Bunds since 2005... Bloomberg reports that Commerzbank says in note that the demand for German collateral ahead of year-end continues to rise, reflected in repo funding levels reaching new lows; 3- month GC moves below -70bps, with little on the offer side And so as investors dump US Treasuries en masse, they are piling into Bunds... Sending the spread to 2005 highs (in absolute terms)... Notice that the 181bps spread this time is at a drastically lower overall yield than in 2005 making UST even 'cheaper'.
Merkel 'not happy' over crumbling Pacific trade pact | Fox News: German Chancellor Angela Merkel said Wednesday that she wasn’t happy about the possible demise of the Trans-Pacific Partnership, which President-elect Donald Trump vowed to pull out of in his first day in office. Merkel didn’t directly mention Trump in the speech to the German Parliament, but called for nations to take a multilateral approach to solving global issues. Merkel said: "I will tell you honestly: I am not happy that the trans-Pacific agreement now will probably not become reality. I don't know who will benefit from that." She added: "I know only one thing: there will be other trade agreements, and they won't have the standards that this agreement and the hoped-for TTIP agreement have." Trump’s video message Monday came after President Obama and other leaders of the Asia-Pacific Economic Cooperation group called for fighting the backlash against trade highlighted by Trump’s victory and Britain’s vote to leave the European Union. Trump had previously described the 12-nation pact as a “potential disaster for our country.” he has also said he wants to renegotiate the North American Free Trade Agreement with Canada and Mexico, something Canadian Prime Minister Justin Trudeau had said he would be willing to work with Trump on. Predictions Map See the Fox News 2016 battleground prediction map and make your own election projections. See Predictions Map → The TPP, signed this year in New Zealand, would take effect after it is ratified by six countries that account for 85 percent of the combined gross domestic product of its member nations. The United States is 60 percent of the combined GDP of that group and Japan less than 20 percent, so those conditions cannot be met without U.S. participation.
Angela Merkel wants to be liberal Europe's answer to Donald Trump | Coffee House: So, Angela Merkel has ignored the Spectator’s advice and has decided to run for a fourth term as German Chancellor in next year’s federal elections. If she wins and serves a full term, she’ll overtake Helmut Kohl as the longest serving German Chancellor since Bismarck. What does Merkel’s bid for four more years mean for Germany – and Britain? And after this year’s dreadful regional election results, how on earth has she survived to fight another day? Last month Merkel looked like a busted flush, an electoral liability. Her decision to open Germany’s borders to over a million fleeing refugees led to a surge in support for Alternative fur Deutschland, Germany’s fledgling anti-immigration party. There was even talk that the CSU, the CDU’s Bavarian sister party, might field a rival candidate for the Chancellorship if she ran again. So why does she now look like a much better bet than she did a month ago? The answer to that question is Donald Trump. Trump has transformed the political landscape in Germany, even more than he has in Britain. While some Brexiteers have seen his triumph as validation of the Brexit vote, in Germany the only politician who stands to gain from his shock victory is that arch-europhile, Angela Merkel.If Hillary had won, the CDU might have been emboldened to get behind a rival candidate – Merkel’s charismatic defence minister, Ursula von der Leyen, for instance. However with Trump on his way into the White House any fresh face now seems far too risky. Domestically, Merkel remains damaged by the immigration crisis, but in the international arena there’s no German politician who can hope to match her, and Trump’s election has moved foreign affairs to the top of the agenda. For the Germans, with their history of division and dictatorship, a wild card in the White House is far more alarming than it is in Britain. Safety first will be the watchword in next year’s German elections, the perfect mantra for Merkel’s re-election campaign.
One in three child migrants missing after Calais Jungle closure: charity | Reuters: - Nearly one in three migrant children tracked by a refugee charity have gone missing since the "Jungle" camp in the northern French town of Calais was dismantled in October, the organization said on Wednesday. Refugee Youth Service said it could not locate a third of the 179 child migrants it had been tracking since authorities bulldozed the Jungle, home to up to 10,000 people fleeing war or poverty in the Middle East and Africa. The fate of children staying in the squalid camp where migrants converged in the hope of making it across to Britain, has been a political problem for the British government. Religious leaders, refugee rights campaign groups and opposition parties have accused Britain of dragging its heels in helping to deal with unaccompanied children. Refugee Youth Service, which has worked in the Calais camp since November last year, said a lack of information and widespread misunderstanding about what will happen to them had led to many children disappearing. "These are some of the most vulnerable children in the world, they have been let down time and time again," said the charity's co-founder Ben Teuten said in a statement. "When they disappear we are extremely concerned that they will be preyed upon by traffickers and are unlikely to seek state support due to their treatment to date."
Pay to stay in Europe - Britons who want to live and work in Europe after Brexit would have to pay for individual EU citizenship under proposals backed by the chief negotiator in the European Parliament. The plans would mean British citizens sending an annual fee to Brussels to retain many of the benefits of EU membership. Guy Verhofstadt, who was appointed lead Brexit negotiator at the European parliament in September, told The Times that he supported the idea in principle. An advocate of a “United States of Europe”, the former Belgian prime minister has vowed to fight for the “rights of the 48 per cent” of British voters who voted for Remain. “Many say ‘We don’t want to cut our links’,” he said. “I like the idea that people who are European citizens and saying they want to keep it have the possibility of doing so. As a principle I like it.” MEPs will vote on the proposals, which have been submitted to the European Parliament, by the end of the year. The plans must be approved by all EU nations to become part of any post-Brexit deal with Britain and are likely to meet resistance from countries opposed to offering concessions to the UK. Last night pro-Brexit MPs accused Mr Verhofstadt of mischief making. Andrew Bridgen, Tory MP for North West Leicestershire, said: “It’s an attempt to create two classes of UK citizen and to subvert the referendum vote. The truth is that Brussels will try every trick in the book to stop us leaving.”
Brexit Britain faces threat of higher EU barriers - FT- Europe’s financial rules are shifting under the feet of Brexit negotiators, as the EU moves to harden its regulatory regime in ways that could shut out the City of London after the UK leaves the union. Brussels will on Wednesday release its first batch of financial proposals since Britain’s EU referendum, giving an insight into how the bloc’s regulatory landscape may evolve without the UK. All the signs point towards more fragmentation in the oversight of global financial activities, as the EU and other jurisdictions strengthen their external frontiers and increase the sunk costs for foreign companies operating in their market. For Brexit Britain, that means the risk of higher entry barriers to overcome. “It is all becoming very hard indeed,” said Simon Gleeson, a financial services lawyer at Clifford Chance. One example of a more protectionist policy drift will come when the European Commission proposes tit-for-tat bank measures against the US, which would force foreign lenders to have additional capital in the EU so their subsidiaries can better withstand a crisis. Seen in pure Brexit terms, if non-EU banks need to create a separately capitalised holding company in the eurozone, London could look a less attractive headquarters for European operations.Separately, officials are re-evaluating how Brussels grants EU market access to overseas financial companies, potentially making it harder for the City to use the bloc’s “equivalence” arrangements as a Brexit fallback option.Charles Grant, director of the Centre for European Reform, said commission officials insist “not entirely convincingly” that this tightening is unrelated to Brexit. But “France is driving this hard line on financial services and nobody is resisting”, he said. A third leg to the consolidation could come through more explicit “location” policies, restricting where EU-related financial activities can take place. Next week, for instance, the commission will issue proposals on the recovery and resolution of clearing houses. This includes no additional territorial restrictions affecting the lucrative clearing of euro trades in London. But France, Germany and many MEPs support the relocation of euro clearing to the eurozone; proposed amendments to this effect are likely as the legislation is debated.
Europeans round on top Brexit ministers - Boris Johnson and David Davis, the cabinet ministers leading Brexit, have been accused of “unbelievable arrogance” and having no idea what leaving the European Union means. The attack by Manfred Weber, one of Germany’s most senior politicians and an ally of Angela Merkel, followed a bad-tempered meeting in Strasbourg with Mr Davis, secretary of state for exiting the EU. It came as European ambassadors told The Times that Mr Johnson’s pronouncements and jokes about Brexit, both in public and private, were causing damage. “This is no longer amusing. It is serious stuff,” one said. British Influence, a research group that has met all 27 European ambassadors in London, summarised their view of Mr Johnson as “mercurial” with a “wit that does not always travel well across the Channel”. Mr Weber, who leads the biggest bloc of MEPs in the European parliament, rounded on Mr Johnson yesterday for having in September supported Turkey’s aspirations to join the EU despite Britain having voted to leave. “It is unbelievable, frankly speaking. It is a provocation,” said Mr Weber, who is calling for Turkey’s EU membership bid to be suspended . “He . . . in the Brexit campaign, had leaflets showing Turkey, Syria and Iraq as possible members of the EU, making people afraid of the possible new migration waves . . . Then a few weeks afterwards he is travelling to [President] Erdogan and offering support for becoming a member of the EU. It is a purely arrogant provocation from Johnson when he is telling us what we have to do. I cannot respect any more what he is doing.”
The folly of triggering Article 50 -- Immediately after the Brexit vote, all the analysis I saw argued that Article 50 would not be triggered for some time. They all made a simple mistake: they were thinking rationally about what would be best for the UK. Rick has an excellent analogy that elaborates on one that I and others have used, and it really would be best if you read his blog rather than for me just to repeat it. The conclusion, which this earlier analysis I mentioned had also come to, is that triggering Article 50 without any kind of idea about what any agreement would look like puts the UK in a very weak negotiating position. This is why the EU were pressing for Article 50 to be triggered as soon as possible. Their real fear is that the prospect but not the actuality of the UK leaving would hang over them for years, and that was the UK’s strongest card. Before playing this card the UK could at least get a clear idea of what the EU might be prepared to offer, and possibly get some commitments that sketch the broad outlines of any deal. Once Article 50 is triggered, the UK will be far more desperate for a deal than the EU. It would only be a slight exaggeration to say it allows the EU to dictate terms. Triggering Article 50 was our best card, yet it is a card that Theresa May is determined to throw away. Just to emphasise the point, this has absolutely nothing to do with whether you voted to Remain or Leave. Anyone who actually wants a good deal from the EU when we leave should realise that the UK’s negotiating position becomes instantly weaker once Article 50 is triggered. I do not know whether those who have successfully pushed for triggering Article 50 so soon simply live in a deluded state where they think that the UK will be in the stronger negotiating position, or whether they are desperately afraid that if it is not done soon people will go off the whole idea of leaving. But whichever it is, it is an act of folly, whether you want to leave or not. It substantially increases the likelihood of getting a bad deal.
The Scottish parliament may have the legal right to block Article 50 entirely -- Not many people are familiar with section 2 of the Scotland Act of 2016, but it could give First Minister Nicola Sturgeon and her government in Edinburgh the legal power to block the UK from triggering Article 50. Conservative MP Anna Soubry — in a wonderfully honest interview in The Guardian yesterday — mentioned it in passing: The government is appealing against the high court ruling, but at the supreme court hearing, the Scottish government will argue that the consent of Holyrood is also required to trigger article 50. Soubry thinks it has a strong case. “Yes. I’m reliably informed that the Scotland Act 2016 section 2 says that you cannot interfere with devolved Scottish matters, they must be determined by the Scottish parliament.” Here is what the Scotland Act actually says: "... it is recognised that the Parliament of the United Kingdom will not normally legislate with regard to devolved matters without the consent of the Scottish Parliament.” Of course, Scotland is hardcore pro-Remain territory. Sturgeon and the SNP wants to keep Scotland in the EU. Given a chance, there is no way the Scottish parliament would vote for Brexit. So does Brexit breach the "normal" requirement that would give Edinburgh the legal power to withhold its consent for Brexit? Experts' opinions are mixed. The House of Lords has received legal advice indicating that the UK government in Westminster would have to get a vote from the Scottish parliament in order to execute a Brexit: "We asked Sir David [Edward] whether he thought the Scottish Parliament would have to give its consent to measures extinguishing the application of EU law in Scotland. He noted that such measures would entail amendment of section 29 of the Scotland Act 1998 [reaffirmed in the Scotland Act 2016], which binds the Scottish Parliament to act in a manner compatible with EU law, and he therefore believed that the Scottish Parliament’s consent would be required."
Almost a third of City firms could leave the country if Britain loses its financial passport — More than 30% of City workers think that their employer could move operations out of the UK once Brexit is completed, according to new report by Morgan McKinley. The City recruitment consultancy surveyed roughly 5,000 people working within financial services and other service based professions, and found that 15% believe their employer definitely intends to move some or all operations out of the UK post-Brexit, while 16% think it is a possibility. 21% of those asked were "not sure" while 48% think that their firm will stay put, as the chart below illustrates:"Recently, there has been a lot of concern around the threat of the UK losing passporting rights, with emphasis placed on the continued importance of freedom of movement for EU nationals. With this becoming a fundamental topic of the pending negotiations, when we surveyed if employers had any intention of relocating their business abroad (either in parts or in its entirety), almost half (48%) said no, whilst 31% said yes that was going to be the case or at least, there was a strong possibility that it may happen," Morgan McKinley's report says. Of the 5,000 or so people surveyed by Morgan McKinley, 39% worked in banking or financial services, 36% worked in professional services, and 25% worked in commerce and industry. A recent report from market insight firm Mlex, showed the enormous scale of passporting rights. 13,500 companies use financial passporting in some form in relation to the UK, Mlex found. All types of businesses from newspapers to removals companies, all the way to a body that represents acupuncturists work under financial passporting rights.
Sir John Major says there is a ‘perfectly credible’ case for a second referendum - There is a “perfectly credible” case for a second Brexit referendum and those who voted to remain in the EU should not be dictated to by the “tyranny of the majority”, Sir John Major has said. The former Conservative prime minister told guests at a private dinner that the 48 per cent of people who voted for Remain should have their say on the terms of Theresa May's negotiations. In his first intervention since the vote in June, Sir John said he accepted the UK would not remain a full member of the EU but hoped Britain could stay as close as possible to the single market. He also insisted that Parliament should make the final decision on any new deal with the remaining members of the EU, according to the Times. He told the audience: "I hear the argument that the 48 per cent of people who voted to stay should have no say in what happens. "I find that very difficult to accept. The tyranny of the majority has never applied in a democracy and it should not apply in this particular democracy."
NHS 'will run out of cash by 2020' say MPs as damning report declare service 'not sustainable' - Mirror Online: The NHS faces "complete financial collapse" in less than five years, it was claimed yesterday after a damning report into the financial health of the service. A desperate lack of funds which is now directly impacting on services and patient care has left the health service “not sustainable”, the Government’s own auditors warn today. Labour's Frank Field called for an extra penny to be added to National Insurance contributions to pay for the shortfall. He said: "Britain’s health and social care services are staring into the abyss. The path they are on now leads only to a complete financial collapse by 2020. “An immediate penny increase in National Insurance contributions – a move which goes with the grain of voters’ wishes – would see the NHS through this five-year period of intensive care.” The damning report by the National Audit Office (NAO) said more than two-thirds of NHS trusts overspent last year with a combined deficits of almost £2.5billion - up 1285% on 2014/15. The report shows panicking officials at the Department of Health have been forced to prop up trusts with huge loans and by plugging holes in day-to-day spending with almost £1billion earmarked for capital investment in new hospitals and equipment. And the auditors are clear there is now a dangerous knock-on effect for paitent care.
British taxpayers face 27 billion pound loss from bank bailout | Reuters: The British government said on Wednesday it faces an almost 27 billion pound loss from rescuing failed banks during the 2007-2009 financial crisis after a slump in the lenders' value since Britain's vote to leave European Union. The Office for Budget Responsibility, Britain's independent budget watchdog, said it has increased its forecast for potential taxpayer losses by more than 9 billion pounds since March. Britain's government spent more than 136.6 billion pounds rescuing some of Britain's biggest high street lenders, including Royal Bank of Scotland, Lloyds Banking Group and Northern Rock, at the height of the financial crisis. But the government has so far only managed to recoup just over half of that money and the additional interest on the debt used to buy the holdings keeps increasing, threatening a bigger overall loss. The bleak analysis calls into question statements made by former finance minister George Osborne last year that the British government would make a profit of more than 14 billion pounds from its bailout of banks during the crisis.This is the second time this year the budget watchdog has recalculated the value of the remaining stakes as turmoil in financial markets has hammered bank shares. Shares in RBS and Lloyds have fallen by about a fifth since the June 23 vote to leave the EU. The increase in the forecast overall loss from the stake sales will not affect the budget deficit and only counts towards reducing the burden of public debt once the shares are sold.
Britain has passed the 'most extreme surveillance law ever passed in a democracy - The UK has just passed a massive expansion in surveillance powers, which critics have called "terrifying" and "dangerous". The new law, dubbed the "snoopers' charter", was introduced by then-home secretary Theresa May in 2012, and took two attempts to get passed into law following breakdowns in the previous coalition government.Four years and a general election later -- May is now prime minister -- the bill was finalized and passed on Wednesday by both parliamentary houses.But civil liberties groups have long criticized the bill, with some arguing that the law will let the UK government "document everything we do online".It's no wonder, because it basically does.The law will force internet providers to record every internet customer's top-level web history in real-time for up to a year, which can be accessed by numerous government departments; force companies to decrypt data on demand -- though the government has never been that clear on exactly how it forces foreign firms to do that that; and even disclose any new security features in products before they launch. Not only that, the law also gives the intelligence agencies the power to hack into computers and devices of citizens (known as equipment interference), although some protected professions -- such as journalists and medical staff -- are layered with marginally better protections. In other words, it's the "most extreme surveillance law ever passed in a democracy," according to Jim Killock, director of the Open Rights Group.
Nigel Farage would be great UK ambassador to US, says Donald Trump - The US president-elect, Donald Trump, has suggested that the Ukip leader, Nigel Farage, should be the UK’s ambassador to the US. “Many people would like to see [@Nigel_Farage] represent Great Britain as their Ambassador to the United States,” Trump tweeted on Monday evening. “He would do a great job!” In a brief call with BBC Breakfast, Farage said he had been awake since 2am UK time when the tweet was first posted. The Ukip leader said he was flattered by the tweet, calling it “a bolt from the blue” and said he did not see himself as a typical diplomatic figure “but this is not the normal course of events”. But a Downing Street spokesman said: “There is no vacancy. We already have an excellent ambassador to the US.”Farage said he had not been expecting Trump’s tweet, but said it was a signal that Downing Street needed to change its thinking about him. “I can still scarcely believe that he did that though speaking to a couple of his longtime friends perhaps I am a little less surprised,” he wrote in an piece on Tuesday morning for rightwing site Breitbart. “They all say the same thing: that Trump is a very loyal man and supports those that stand by him.”
No comments:
Post a Comment