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

Saturday, December 17, 2016

week ending Dec 17

 Fed Watch: December FOMC Preview - The Federal Reserve will nudge rates 25bp higher this week. This will not end the policy tension among FOMC members. How will that unfold in 2017? My expectation is that whereas 2016 began with excessively high expectations for rate hikes, 2017 will be the opposite. My tendency is think that the risks to the Fed’s median forecast of 50bp of rate hikes in 2017 are more weighted to the upside than the downside. Beware then of a more aggressive than expected Fed.The FOMC statement represents a compromise position. Broadly speaking, some policymakers rely on earlier paradigms calling for preemptive policy action as the economy heads toward estimates of full employment. Another group questioned those estimates given the apparent decreased sensitivity of inflation to unemployment in addition to risk management concerns at the zero lower bound.Slower growth, an uptick in the labor force participation rate, and low inflation in 2016 lent support to the latter group, keeping the Fed on the sidelines since last December. Support from the data, however, has waned.To be sure, incoming data does not entirely resolve the debate. On one hand, the unemployment rate plunged 0.3 percentage points in November to 4.6 percent: This is below the range of the longer-run central tendency (4.7 – 5.0 percent), sufficient to prompt a preemptive rate hike in December without dissent.Still, unemployment continues to decline in the absence of widespread wage or inflationary pressures. Wage growth declined in November: and the October read on inflation was tepid: Consequently, we shouldn’t be surprised by a modest downward revision to the Fed’s longer-run estimate of unemployment. Moreover, measures of underemployment remain elevated, suggesting that labor slack remains even near estimates of full employment, allowing for unemployment to dip below those estimates without much concern. These factors provide breathing room to maintain a slow pace of rate hikes of 50bp in 2017 implied by the Fed’s Summary of Economic Projections.

Fed Hikes Interest Rates for Second Time in Decade — The Federal Open Market Committee agreed unanimously Wednesday to raise the federal funds rate by 25 basis points, a move that was widely anticipated by markets. The committee's expectations for interest rates in 2017, however, were more varied. Six members expected three rate hikes next year, with another four anticipating only two. Two other members said they thought that only one additional increase would be warranted in 2017, while the remaining four members anticipated a more aggressive policy, with year-end rates between 1.625% and 2.125%. Thirteen of the seventeen members said they expect the longer-run rate to settle between 2.75% and 3%. The committee also decided to continue to reinvest principal payments on agency debt and mortgage-backed securities and to roll over its maturing Treasury securities "until normalization of the level of the federal funds rate is well under way." The FOMC's revised economic projections were generally improved over the September forecasts, with unemployment estimated down to 4.7% from 4.8% and GDP growth up from 1.8% to 1.9%. The committee also revised its estimates for personal consumption expenditure inflation to 1.5% from 1.3% — a highly-anticipated indicator that Yellen and other FOMC members have said is a major precondition for raising rates. Core inflation — that is, inflation figures that control for food and energy prices — remained at 1.7%. Federal Reserve Chair Janet Yellen said that, though unemployment remains low and inflation figures have risen closer to the 2% target rate, the committee remains convinced that accommodative economic policy is necessary. "In light of the current shortfall of inflation from 2%, the committee will carefully monitor actual and expected progress toward its inflation goal," Yellen said. "The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."

Fed Raises Key Interest Rate, Citing Strengthening Economy - NYTimes - — Citing the steady growth of the American economy, the Federal Reserve said Wednesday that it would increase its benchmark interest rate for just the second time since the 2008 financial crisis. The widely expected decision moves the Fed’s benchmark rate to a range between 0.5 percent and 0.75 percent, still a very low level by historical standards. In announcing the decision, which followed a two-day meeting of the Fed’s policy-making committee, the central bank gave little indication that the election of Donald J. Trump has altered its economic outlook. The Fed said it still expected a slow economic expansion, and it still expected to continue a slow march toward higher rates. Fed officials said they expected to raise rates three times in 2017. The Fed’s statement Wednesday said “that the labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since midyear.” The decision was taken by a unanimous vote of the 10 members of the Federal Open Market Committee, the first time in recent months the Fed has acted by consensus. The Fed is holding rates at low levels to support economic growth by encouraging borrowing and risk-taking. The committee’s statement said it judged that the economy still needed help. The Fed’s economic outlook was essentially unchanged from the last round of forecasts in September. Fed officials continued to predict the economy would expand at an annual rate of about 2 percent for the next few years. They expect little further decline in the unemployment rate, which stood at 4.6 percent in November. Inflation, meanwhile, is expected to reach 2 percent — the pace the Fed regards as healthy — and then stay there.

Fed lifts rates, sees faster pace of hikes in Trump's first year | Reuters: The U.S. Federal Reserve raised interest rates on Wednesday and signaled a faster pace of increases in 2017 as central bankers adapted to the incoming Trump administration's promises of tax cuts, spending and deregulation. The increase in the federal funds rate to a range of between 0.50 percent and 0.75 percent was widely expected. But the prospect of a brisker monetary tightening contributed to a selloff in shorter-dated U.S. Treasuries and stocks. In a news conference following the unanimous rate decision, Fed Chair Janet Yellen said Donald Trump's election had put the central bank under a "cloud of uncertainty" and already prompted some policymakers to shift their view of what's to come. "All the (Federal Open Market Committee) participants recognize that there is considerable uncertainty about how economic policies may change and what effect they may have on the economy," Yellen said. Though Trump's inauguration is still a month away, she said "some of the participants" had begun shifting their assumptions about fiscal policy. At least five of 17 Fed policymakers appeared to have boosted their interest rate outlook since September, according to the new "dot plot" of rate projections. The Fed chief was peppered with questions about the president-elect, refusing to comment on his penchant for tweeting about companies or to give advice on how any fiscal, tax or trade plan should be structured. "I am not going to offer the incoming president advice about how to conduct himself," Yellen said.

FOMC Statement: 25bps Rate Hike - FOMC Statement: Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year. Job gains have been solid in recent months and the unemployment rate has declined. Household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased since earlier this year but is still below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation have moved up considerably but still are low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments. In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.

Redacted Version of the December 2016 FOMC Statement – compares September statement to November statement

FOMC Projections and Press Conference Link - Statement here. 25 bps rate hike.  Yellen press conference video here. On the projections, GDP was mostly unchanged.  GDP projections of Federal Reserve Governors and Reserve Bank presidents (see tables)

  • 1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.
    The unemployment rate was at 4.6% in November and 4.9% in October, so the unemployment rate projections were revised down slightly.
  • 2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.
    As of October, PCE inflation was up 1.4% from October 2015.  With oil prices up year-over-year, PCE inflation has been moving up.  So inflation was revised up for 2016, but there was little change for 2017 and 2018.
  • PCE core inflation was up 1.7% in October year-over-year.  Core PCE inflation was unrevised for 2016.

Fed Now Expects Three Rate Hikes In 2017 - While the 25 bps rate hike was a given, the question on everyone's mind was how many rate hikes does the Fed envision for 2017. The answer, somewhat surprisingly, is three, an increase of one compared to the September meeting. This is median assessment of appropriate pace of policy according to the dots:

  • 2016 0.625% (range 0.625% to 0.625%); prior 0.625%
  • 2017 1.375% (range 0.875% to 2.125%); prior 1.125%
  • 2018 2.125% (range 0.875% to 3.375%); prior 1.875%
  • 2019 2.875% (range 0.875% to 3.875%); prior 2.625%

For the longer run, the Fed now expects a 3% Fed Funds rate, (range 2.500% to 3.750%); up from the prior 2.875%. A comparison of the dot plots: Furthermore, according to the FF market, the market is now fully pricing rate hikes in both August and December of 2017. The Fed's revised forecasts:

Quick FOMC Analysis --Bill Mcbride -The Fed raised the Fed Funds rate 25bp to a range of "1/2 to 3/4 percent". On the assessment of appropriate monetary policy, one FOMC member sees just one 25bp rate hike in 2017, four members see two hikes, six members see three hikes, and five see four or more. This is an increase of one additional rate hike from previous expectations.  Note: Merrill Lynch published a note after the announcement, and they are forecasting just one rate hike in 2017. By the end of 2018, 5 members see a total of five rate hikes over the next two years, and three members see six. There are outliers - one member sees just one hike over the next two years, and one member sees 11 rate hikes! Based on Fed Chair Yellen's comments, most FOMC members are waiting to see the fiscal proposals before incorporating those policies in their forecasts. Yellen said at the press conference: "all the FOMC participants recognize that there is considerable uncertainty about how economic policies may change and what effect they will have on the economy."  So right now I think the Fed is on hold.  Many analysts are thinking the next rate hike might happen in March, but that probably won't give the Fed enough time to consider the impact of various fiscal proposals.  So my guess - depending on the proposals and the incoming data - is the next rate hike might happen in June (or later in the year).

Fed Watch: Fed Turns Hawkish - The FOMC raised the target range for the federal funds rate by 25bp today, as expected. But the tone of the press conference and the summary of economic projections were more hawkish than I anticipated. The Fed is shifting gears, a shift I did not expect until more data piled up in the first quarter of 2017.  My error in analyzing this meeting was thinking that the Fed would nudge down the longer term estimate of unemployment - essentially, the natural rate of unemployment - on the basis the 4.6% unemployment rate in November. Such a downward drift happened in 2015: I expected something similar given that the pace of inflation and wage gains remains moderate. But the Fed stuck to their prior estimates, 4.8% with a central tendency of 4.7-5.0% and an overall range of 4.5-5.0%. They didn't budge.What did budge was the rate forecast, the dots. The median dot shifted up 25bp; the September median forecast of 50bp of rate hikes for 2017 is now 75bp. My interpretation is that rather than showing up in a declining estimate of the natural rate, the unemployment drop showed up as a rise in the rate forecast. This is important. It is almost as if the Fed is drawing a line in the sand with an increased confidence that they have the correct natural rate estimate. Their tolerance for further declines below that line is wearing thin.Assuming that the natural rate forecast does not change - which essentially depends on the path of wages and inflation - this means that you should anticipate that further declines in unemployment will be met with a more aggressive Fed in 2017. I don't think this will be the last increase in the median rate forecast for 2017. It is reasonable to argue that the median dot doesn't really represent the Fed's forecast for rates. But I think the shifts in the dots at a minimum reflect general changes in sentiment. Down for more dovish. Up for more hawkish. This is more hawkish.Federal Reserve Chair Janet Yellen exuded confidence in the economic outlook during the press conference. Three points were particularly notable:

  1. The Fed is obviously watching the path of fiscal policy, but it is too early to say what it meant for monetary policy. She did note, however, that fiscal stimulus was not needed to help the economy reach full employment. The implication was that fiscal policy designed to boost demand rather than productivity would be met by a faster pace of rate increases. This sets the stage for a potential conflict with the Trump Administration. 
  2. She repeatedly argued that her run a "high-pressure" economy comments from October were misinterpreted. She was recommending a research program, not a policy path. If you were expecting otherwise, time to get over it.
  3. She did not dismiss the possibility of staying on as a board member after her term as Chair ends. Another potential conflict with the Trump Administration.

Bottom Line: Sentiment on Constitution Ave. is shifting toward a modestly more hawkish stance a few months ahead of my schedule.  Policymakers finally see the light at the end of the tunnel.

Fed Revises Reverse Repo Terms: This Is How It Will Implement The Rate Hike --As expected, in addition to raising the Fed Funds rate by 25 bps, the Fed similarly noted that it would revise the mechanics behind its reverse repo operations, raising the rate it charges on reverse repos by 25 bps to 0.5%, the actual means by which the Fed will hike rates for most market participants. Here is the statement that the Fed released regarding the change in overnight reverse repos: During its meeting on December 13-14, 2016, the Federal Open Market Committee (FOMC) directed the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York (New York Fed), effective December 15, 2016, to undertake open market operations as necessary to maintain the federal funds rate in a target range of ½ to ¾ percent, including overnight reverse repurchase operations (ON RRPs) at an offering rate of 0.50 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account (SOMA) that are available for such operations and by a per-counterparty limit of $30 billion per day. First, some of the Treasury securities held outright in the SOMA are needed to conduct reverse repurchase agreements with foreign official and international accounts.1 Second, some Treasury securities are needed to support the securities lending operations conducted by the Desk. Additionally, buffers are needed to provide for possible changes in demand for these activities and for possible changes in the market value of the SOMA’s holdings of Treasury securities. Taking these factors into account, the Desk anticipates that around $2 trillion of Treasury securities will be available for ON RRP operations to fulfill the FOMC’s domestic policy directive. In the highly unlikely event that the value of bids received in an ON RRP operation exceeds the amount of available securities, the Desk will allocate awards using a single-price auction based on the stop-out rate at which the overall size limit is reached, with all bids below this rate awarded in full at the stop-out rate and all bids at this rate awarded on a pro rata basis at the stop-out rate.

The Federal Reserve Raising Interest Rates is Unwelcome and Unnecessary - AFLCIO -Wednesday’s decision by the Federal Reserve to raise interest rates is unwelcome and unnecessary. As admitted in its statement, investment remains soft, growth is only moderate and inflation expectations are little changed. Moreover, the economy confronts financial headwinds from the recent jump in long-term interest rates and an even stronger dollar. The Federal Reserve seems to be relying on old economic thinking that should have been discarded after the financial crisis. That poses a danger the economy will be slowed before full employment is reached, putting a stop to workers reclaiming their fair share. If the Federal Reserve is worried about financial market exuberance, it should use its regulatory tools and not the blunderbuss of higher interest rates. Financial markets must not be allowed to stampede the Fed into raising rates.

Trump’s Coming Confrontation with Yellen and the Federal Reserve - Ok, so the Federal Reserve, coincidentally, now that Trump has been elected, decided that the economy is at full employment and raised rates. The funny thing is, it’s true.  Sort of.  The unemployment rate (u-1) is low enough to be considered “full employment“. What that means is that the labor market is tight enough, that for the first time in Obama’s reign, workers actually got raises in 2015. By the economic policy regime which has run the Federal Reserve, and the US, since Greenspan, that can’t be allowed.  The moment employment starts causing “wage push inflation” (wage increases faster than the general rate of inflation) it must be stopped.  So, Yellen probably “should” have raised rates 6 months or so ago. She didn’t, probably because she’s Obama’s appointee, in the same way that Bernanke didn’t when he “should” have because he was Bush’s appointee, and wanted a Republican to replace Bush. Under Barack Obama, the deficit (how much the US pays on its debt) dropped, but the debt increased by $7.917 trillion (not including the 1st year, which he didn’t control.)  The deficit dropped because the Federal Reserve kept interests rates extremely low for years and years and bought up a pile of debt as well. But the debt is higher than it has been, in relative terms, since the WWII debt splurge.  And if Yellen raises rates, debt service charges will start to increase (not immediately, much of it is in longer term instruments). More to the point, higher interest rates are meant to make sure that wages increases stop, the unemployment rate increases, and that (in effect) the economy never actually recovers from the financial crisis. So Trump has a problem. He needs cheap money if he’s to have a good economy, and Yellen is ending the cheap money era right when he was elected.

Dollar Surges, Yields Soar, Euro Tumbles To 13 Year Low As Markets React To Hawkish Fed - This morning the world awakes to a landscape in which markets are frantically rushing to catch up to a suddenly hawkish Fed which not only hiked for the second time in a decade but, as per yesterday's Fed statement and Yellen press conference, realized it has been behind the curve all along, and the result has been a spike in the dollar across virtually all currency pairs with the USDJPY surging above 118.40, coupled with a jump in bond yields around the globe as bond (the US 10 Year is trading at 2.64%, the highest since September 2014) as traders dump any hint of duration. The sentiment was notable in the analyst commentary this morning:

  • “The Fed is becoming a leopard with new spots,” said Stephen Gallo, currency analyst at BMO Capital Markets in London. “The Fed has shifted its 2017 bias away from supporting growth with ultra-stimulative policies towards keeping a lid on inflation risk.”
  • “Maybe Fed officials are more concerned about the prospects for a rise in inflation next year than they are letting on, given the potential boost a fiscal stimulus could bring, which was something they didn’t have to consider last year,” Michael Hewson, a market analyst at CMC Markets in London, wrote in a note.
  • "You had the Fed come in and be a bit more hawkish that many people, including us, were expecting," said TD Securities head of global strategy Richard Kelly. "It wasn't just the move in the dots, it was the language that was used. There was an acknowledgement that if Trump gets his plans moving through congress you could see the economy pushing higher."

 Money Under Fire - Chris Martenson - One serious predicament we face is that the current leaders in the halls of monetary and political power do not appear to understand the dimensions of our situation. The mind-boggling part about it is that the situation is easy to understand.Our collective predicament is simply this: Nothing can grow forever. Sooner or later, everything must cease growing, or it will exhaust its environs and thereby destroy itself.  The Fed is busy doing everything in its considerable power to get credit (that is, debt) growing again so that we can get back to what it considers to be "normal." But the problem is or the predicament, I should more accurately say is that the recent past was not normal.  You've probably all seen this next chart.  It shows total debt in the U.S. as a percent of GDP: (Source) Somewhere right around 1980, things really changed, and debt began climbing far faster than GDP. And that, right there, is the long and the short of why any attempt to continue the behavior that got us to this point is certain to fail. It is simply not possible to grow your debts faster than your income forever. However, that's been the practice since 1980, and every current politician and Federal Reserve official developed their opinions about 'how the world works' during the 33-year period between 1980 and 2013. Put bluntly, they want to get us back on that same track, and as soon as possible. The reason?  Because every major power center, be that in D.C. or on Wall Street, tuned their thinking, systems, and sense of entitlement during that period. And, frankly, a huge number of financial firms and political careers will melt away if/when that credit expansion finally stops.And stop it will; that's just a mathematical certainty. It's now extremely doubtful that the Fed or D.C. will willingly cease the current Herculean efforts towards reviving this flawed practice of borrowing too much, too fast. So we have to expect that it will be some form of financial accident that finally breaks the stranglehold of failed thinking that infects current leadership.

Interest Rate Signals --I see a lot of talk about the inflationary effects of some policies Trump may propose, and of course interest rates have risen surprisingly since the election.  But I noticed an interesting pattern. The rise in inflation expectations began in September, and has been pretty stable.  The rise in real rates shot up after the election, and now has started to retrace a little bit. Also, the rise in inflation expectations seems to correspond to a rise in food and energy inflation, but at the same time, core inflation outside of shelter has been falling.  It's heading back to 1%.  So, does the rise in CPI signal a coming rise in core CPI?  The TIPS market seems to think so. I'm still unsure.  Will the rate hike be more contractionary than it is expected to be, leading to an eventual reversal in inflation expectations?  Or, is this a de facto monetary loosening through a sort of fiscal expectations channel, and now rate hikes will be less contractionary than they would have been.  I will be very curious to watch rate movements after the hike.  In the meantime, my indecisiveness may be costing me some trading gains.  Not sure what to think here.  I think because of the zero lower bound, we are later in the rate hike cycle than it looks, and in a position where raising rates into falling core inflation is ill-advised.  But, the Trump effect is muddying the waters. In the meantime, low tier housing appears to be accelerating while high tier housing continues to moderately rise.  There are reports of high tier contraction in the Closed Access cities, and I don't really see any sign of expanding mortgage financing in the broader numbers, so while the high tier price trends seem ok, I don't see where the fuel for low tier pricing is coming from, especially since we seem to have come to a transition point between investor buying and owner-occupier buying. A lot of mixed signals.  Still seems dicey to me, but I'm afraid I'm just watching opportunities pass me by.

The Trump Shock and Interest Rates - Beckworth - I have a new piece in The Hill where I argue markets are increasingly seeing the Trump shock as an inflection point for the U.S. economy: It seems the U.S. economy is finally poised for robust economic growth, something that has been missing for the past eight years. Such strong economic growth is expected to cause the demand for credit to increase and the supply of savings to decline.  Together, these forces are naturally pushing interest rates higher. The Fed’s interest rate hike today is simply piggybacking on this new reality. Here are some charts that document this upbeat economic outlook as seen from the treasury market. The first one shows the treasury market's implicit inflation forecast (or "breakeven inflation") and real interest rate at the 10-year horizon. These come from TIPs and have their flaws, but they provide a good first approximation to knowing what the bond market is thinking. In this case, both the real interest rate and expected inflation rate are rising. This implies the market expects both higher real economic growth and higher inflation. The two may be related--the higher expected inflation may be a reflection of higher expected nominal demand growth causing real growth. The higher real growth expectations are also probably being fueled by Trump's supply-side reforms.The next figure shows the New York Fed's decomposition of the 10-year treasury into the term premium and a 'risk-neutral' nominal interest rate. Both have gone up since Trump's election. The term premium going up can be seen as investors being less risk averse and therefore demanding higher compensation for holding longer-term safe asset-bonds. The risk-neutral part can be seen as a product of the real interest rate and the expected inflation. And, as we saw in the first figure above, they are both growing:   These figures, as well as the surge in the stock market, indicate the markets see more robust growth ahead. Given the timing of these surges, the figures seem to attribute the improved economic outlook largely to the Trump shock.

 Key Measures Show Inflation close to 2% in November -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.2% annualized rate) in November. The 16% trimmed-mean Consumer Price Index also rose 0.2% (1.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.  Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.4% annualized rate) in November. The CPI less food and energy rose 0.2% (1.8% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed released the median CPI details for November here. Motor fuel was up 36% annualized in November.

China Dumps Treasuries: Foreign Central Banks Liquidate A Record $403 Billion In US Paper -- One month ago, when we last looked at the Fed's update of Treasuries held in custody, we noted something troubling: the number had continued to drop sharply, declining by another $14 billion in one week, and pushing the total amount of custodial paper to $2.788 trillion, the lowest since 2012. One month later, we refresh this chart and find that in last week's update, there is finally some good news: foreign central banks finally bought some US paper held in the Fed's custody account, which following months of liquidation, rose over the past two weeks by $23 billion, the biggest two-week advance since November of 2016, pushing the total amount of custodial paper to $2.816 trillion, the highest since early October.That was the good news, and we use the term loosely in as much as the custody account can be used as a proxy of foreign buying, which according to most rates watchers, it can.The bad news came out with the release of latest monthly Treasury International Capital datafor the month of October, which showed that the troubling trend presented one month ago, has accelerated to an unprecedented degree.Recall that in mid-November, we reported that in the latest 12 months we observed a record $375 billion in Treasury selling by foreign central banks in the period August 2015-September 2016, something unprecedented in size.Fast forward to today when in the latest monthly update for the month of October, we find that what until a month ago was "merely" a record $375 billion in offshore central bank sales in the LTM period ending  September 30 has, one month later, risen to a new all time high $403 billion in Treasuries sold in the past 12 months.As the chart below shows, there has never been such an aggressive selling of US Treasuries over a 12 month period in history.

How High Can Interest Rates Go Before National Debt Is Unsustainable - It is a question we are all asking ourselves as the national debt approaches $20 trillion with Donald Trump about to occupy the White House and planning a $1 trillion infrastructure program. Interest rates are climbing all across the yield curve having just been exacerbated by Thursday's overnight funds rate hike by the Federal Reserve Board. How high can interest rates go before the debt is unsustainable? More precisely, how high before interest expense plus mandatory spending take up the entire federal budget?Or even scarier, how high can interest rates theoretically go before interest expense eats up all tax receipts entirely? I will be making some assumptions in these calculations. First, I will be keeping the deficit constant. Second, I will be keeping tax receipts constant for simplicity. The results will be an imprecise number, but we will still get a ballpark. At the point where interest expense takes up all discretionary spending, the Fed will have come up against a brick wall and will have to sacrifice the dollar in order to keep Washington solvent. That means take purchasing power from citizens and giving it to Washington, essentially appropriating value from the currency at the expense of consumers. Alternatively it can bankrupt Washington and keep the dollar intact. We'll go through each maturity separately, but in order to get a decent handle on the U.S. government bond market with a single proxy indicator, those interested can track the iShares 7-10 Year Treasury Bond ETF (IEF).

US Budget Deficit Doubles As November Spending Hits All Time Monthly High --While it is unclear if the recent increase in government spending and the resulting increase in the budget deficit, has been a factor in the recent string of better than expected US economic data, at 2pm on Monday the US Treasury announced that in November, the government's budget deficit rose to $136.7 billion, nearly double the $64.5 bilion deficit reported in the same month of 2015, which however was largely a function of a calendar quirk.mNot only was November total more than double the amount reported a year ago, but the $136.7 billion deficit, was also the highest going back all the way to February of 2016, when it jumped by $192.6 billion. February is traditionally the most spending-intensive month for the US government.  Why the spike? Two reasons: in November, total receipts were down about 2% from the same month a year earlier. Meanwhile, total federal outlays rose roughly 25% compared with November 2015, when some scheduled benefit payments had been recorded instead in October 2015 because Nov. 1 fell on a Sunday. However, even when adjusting for the "quirk", the trend was concerning: the Treasury said that adjusting for that timing shift, spending rose about 6% last month from a year earlier and the monthly deficit widened by roughly 21% on the year. This was the highest monthly outlay reported for the month of November in US Treasury history.

 How Donald Trump May Actually Widen the U.S. Trade Deficit - Donald Trump says his platform for reviving economic growth is designed to slash the nation’s trade deficit, restoring the country’s exports to past glory. Instead, he could be about to expand the U.S. trade deficit to levels not seen since the financial crisis. That could fan flames of trade conflict in an increasingly protectionist world. Mr. Trump’s plans to boost government spending on infrastructure and cut taxes have spurred a rise in the dollar. If the president-elect delivers on his promised policies, argues William Cline, a senior fellow at the Peterson Institute for International Economics, the dollar’s likely to strengthen further. “The consequence could then be considerably wider trade deficits,” says Mr. Cline in his latest assessment of exchange rates. Mr. Cline, whose currency assessments are widely respected, says that could “add fuel to the fire of trade conflict.”Over the past two years, the dollar’s value has swelled as growth prospects improved, the Federal Reserve prepared to exit from its era of ultralow rates, and the outlook for other major economies soured. By October, those factors drove the greenback to a level Mr. Cline estimates was around 8% over what market dynamics suggest is fair value.  Investors are betting on Mr. Trump’s vows to ramp up infrastructure spending and cut taxes for both households and companies. Those policies, many economists believe, will widen the government’s spending deficits and pressure the Fed to raise rates at a much faster clip than currently indicated by central bank officials. Those assumptions are encouraging investors to buy the dollar up. The closer Mr. Trump’s plans come to fruition, the stronger the pressure on the greenback. But a strong dollar, besides making U.S. exports less internationally competitive, could also push the U.S. trade deficit up to 4% of gross domestic product, Mr. Cline calculates. (And that’s despite one of the largest contributors to the trade deficit in the past—oil imports—being progressively offset in recent years as the U.S. ramped up domestic shale-oil production.)

Will Trump face fiscal reality? -- Presidential candidates often say vague and contradictory things on the campaign trail to give themselves room to maneuver once in office. But even in this context, Donald Trump stands out. His statements during the campaign were so devoid of factual support and inconsistent that it is impossible to know for sure what he will do as president. . While politicians would like to be all things to all people, there’s only so much money to go around. Budgets can be disciplining devices, forcing policymakers to confront the reality of limited resources and thus to separate what they consider to be truly important from other, lesser priorities. During the campaign, Trump often railed against the run-up in debt that occurred during the Obama presidency, suggesting that it was an indicator of national decline that he would reverse if elected. And he has frequently said that his skills as a businessman and negotiator would bring discipline to the sprawling enterprise that is the federal government. But other key commitments featured prominently in Trump’s general election campaign point to large increases in federal deficits in the years ahead. He has promised a tax cut that could add $2.6 to $3.9 trillion to the federal debt over the next decade. He also has proposed to reverse cuts in defense spending that could add another $0.5 trillion to the debt over 10 years, and to increase spending on infrastructure that some suggest could cost $1 trillion over the same period (although the Trump campaign says it can be done through less costly public-private partnerships). At the same time, Trump has said that he will oppose any significant changes to Social Security and Medicare — by far the largest spending programs on the domestic side of the federal budget.

Trumpxuberance… Until It’s Not --Kunstler - Poor Trump’s mammoth ego has led him by the snout into a deadfall trap. The Trumpublican voters and cheerleaders expect another Morning in America miracle. Sorry, been there, done that, that was then, this is now. Conditions were quite different in 1981. For one thing, a brutal decade after the 1970 all-time US oil production peak, the Alaska North Slope fields came into full flow, along with the North Sea and Siberian fields.The Alaska bonanza did not boost US production back to 1970 levels, but it did take the leverage away from OPEC, and it stuffed the elevated price-per-barrel back down to levels that an industrial economy could tolerate. The rest of the Reagan miracle was accomplished with debt. The case was similar for Mrs. Thatcher over in the UK. She was not an economic magician, just the beneficiary of a brief oil boom that made Britain a net energy exporter for two decades, providing an illusion of permanent prosperity and cover for the financialization of the economy. Now, with the North Sea oil playing out, all that’s left is the banking necromancy in Threadneedle Street. Reagan also came in at the height of Fed Chair Paul Volker’s war on inflation, when the interest rate on the ten-year US treasury bond topped at 15 percent in September of 1981. Imagine paying 18 percent interest rates on your mortgage! How was that a good thing? Well, it wasn’t, not at all, it was a very bad thing for a while — but for Lucky Ronnie Reagan it meant interest rates had nowhere to go but down. And because bond prices correlate opposite to rates, the value of bonds had nowhere to go but up, which they did for 30-odd years until right now. And all that time, the world bond market couldn’t get enough of them — also till now, when big holders like China and Saudi Arabia are puking them back out.

Bill Black: After 30 Years of Throwing Working People Under the Bus, Democratic Party’s “Centrist” Leaders Remain Clueless About Voter Revenge --On December 10, 2016, a New York Times article entitled “Democrats Have a New Message: It’s the Economy First” that unintentionally revealed that the Party’s “centrist” leadership and the paper remain clueless about how to improve the economy and why the “centrist” leadership needs to end its long war against the working class. This is how the paper explained the five “centrist” leaders’ framing of the problem.It was a blunt, plain-spoken set of senators who gathered last Monday at the Washington home of Senator Heidi Heitkamp, Democrat of North Dakota, dining on Chinese food as they vented frustration about the missteps of the Democratic Party. To this decidedly centrist group, the 2016 election was nothing short of a fiasco: final proof that its national party had grown indifferent to the rural, more conservative areas represented by Democrats like Joe Manchin of West Virginia, Claire McCaskill of Missouri, Joe Donnelly of Indiana and Jon Tester of Montana, who attended the dinner. All face difficult re-election races in 2018. This non-centrist group was a gathering of five New Democrats. President Obama self-identified himself as a New Democrat. The Clintons and Al Gore are leaders of the New Democrats. The leadership of the Democratic National Committee was, and remains, New Democrats. On economic issues such as austerity, jobs, and full employment, the New Democrats are far more extreme than the (stated) views of Donald Trump. The New Democrats are infamous for their close ties with Wall Street. This means that the paper’s description of the Chinese nosh is as clueless as the five New Democrats kvetching about policy “missteps” that they championed for decades. The kvetching may have been “blunt,” but it was also dishonest. What was really going on was an extended cry of pain about the five senators’ fear of losing their jobs.

Disagreeing With Paul Krugman: His Friends Probably Do Vote Against the Interest of the Working Class (White and Other) -Dean Baker - Paul Krugman told readers that intellectual types like him tend to vote for progressive taxes and other measures that benefit white working class people. This is only partly true. People with college and advanced degrees tend to be strong supporters of recent trade deals [I'm including China's entry to the WTO] that have been a major factor in the loss of manufacturing jobs in the last quarter century, putting downward pressure on the pay of workers without college degrees. They also tend to support stronger and longer patent and copyright protections (partly in trade deals), which also redistribute income upward. Educated people also tended to support the deregulation of the financial sector, which has led to some of the largest fortunes in the country. They also overwhelmingly supported the 2008 bailout which threw a lifeline to the Wall Street banks at a time when the market was going to condemn them to the dustbin of history. His crew has also been at best lukewarm on defending unions. However they don't seem to like free trade in professional services that would, for example, allow more foreign doctors to practice in the United States, bringing their pay in line with doctors in Europe and Canada. The lower pay for doctors alone could save us close to $100 billion a year in health care expenses. None of this means that the plutocrats standing alongside Trump are somehow better for working class people. They have made it pretty clear that they intend to use his presidency to take everything they can from the rest of the country. But Krugman is engaging in some serious fanciful thinking if he thinks that intellectual types have in general been acting in the interests of the working class. (And, I suspect many do ridicule the behavior and lifestyles of the working class.)

A lot of Trump voters will be hurt by a lot of Trump’s policies -- Jared Bernstein - Over at WaPo on jobs and tax cuts. And here’s a new CBPP piece showing who, by income class, benefits from repealing Obamacare. Republican plans to repeal the Affordable Care Act (ACA) would provide large, lopsided tax cuts to households with annual incomes over $1 million, just-released data from the Urban-Brookings Tax Policy Center (TPC) show. TPC also finds ACA repeal would significantly raise taxes on about 7 million low- and moderate-income families due to the loss of their premium tax credits to buy health coverage through the marketplace. These tax increases would compound the harm to lowand moderate-income families from repealing the ACA’s other coverage provisions — cost-sharing assistance and the Medicaid expansion — and would add tens of millions of people to the ranks of the uninsured.  The standard response–and I’m not saying at all that this is wrong–is that none of this matters and I’m making the pointy-headed mistake of bringing facts to a fantasy show. But as I’ve written in many places under the rubric of finding the path back to Factville, we in the policy community must track these outcomes and the media must report on them. I cannot speak to their impact, but I can tell you that said impact will be a function of their exposure.

Soft Coup Attempt Imminent? Furious Trump Slams "Secret" CIA Report Russia Helped Him Win -- Overnight the media propaganda wars escalated after the late Friday release of an article by the Washington Post (which recently admitted to promoted fake news itself in an attempt to smear other so-called "fake news" sites) according to which a secret CIA assessment found that Russia sought to tip last month’s U.S. presidential election in Donald Trump’s favor, a conclusion that drew an extraordinary rebuke from the president-elect’s camp. “These are the same people that said Saddam Hussein had weapons of mass destruction,” Trump’s transition team said, launching a broadside against the spy agency. “The election ended a long time ago in one of the biggest Electoral College victories in history. It’s now time to move on and ‘Make America Great Again.’ ” The Washington Post report comes after outgoing President Barack Obama ordered a review of all cyberattacks that took place during the 2016 election cycle, amid growing calls from Congress for more information on the extent of Russian interference in the campaign. The newspaper cited officials briefed on the matter as saying that individuals with connections to Moscow provided WikiLeaks with email hacked from the Democratic National Committee, Democratic nominee Hillary Clinton’s campaign chief and others.

 Anonymous Leaks to the WashPost About the CIA’s Russia Beliefs Are No Substitute for Evidence – Greenwald - The Washington Post late Friday night published an explosive story that, in many ways, is classic American journalism of the worst sort: The key claims are based exclusively on the unverified assertions of anonymous officials, who in turn are disseminating their own claims about what the CIA purportedly believes, all based on evidence that remains completely secret. These unnamed sources told the Post that “the CIA has concluded in a secret assessment that Russia intervened in the 2016 election to help Donald Trump win the presidency, rather than just to undermine confidence in the U.S. electoral system.” The anonymous officials also claim that “intelligence agencies have identified individuals with connections to the Russian government who provided WikiLeaks with thousands of hacked emails” from both the DNC and John Podesta’s email account. Critically, none of the actual evidence for these claims is disclosed; indeed, the CIA’s “secret assessment” itself remains concealed.  A second leak from last night, this one given to the New York Times, cites other anonymous officials as asserting that “the Russians hacked the Republican National Committee’s computer systems in addition to their attacks on Democratic organizations, but did not release whatever information they gleaned from the Republican networks.” But that NYT story says that “it is also far from clear that Russia’s original intent was to support Mr. Trump, and many intelligence officials — and former officials in Mrs. Clinton’s campaign — believe that the primary motive of the Russians was to simply disrupt the campaign and undercut confidence in the integrity of the vote.” Deep down in its article, the Post notes — rather critically — that “there were minor disagreements among intelligence officials about the agency’s assessment, in part because some questions remain unanswered.” Most importantly, the Post adds that “intelligence agencies do not have specific intelligence showing officials in the Kremlin ‘directing’ the identified individuals to pass the Democratic emails to WikiLeaks.” But the purpose of both anonymous leaks is to finger the Russian government for these hacks, acting with the motive to defeat Hillary Clinton. Needless to say, Democrats — still eager to make sense of their election loss and to find causes for it other than themselves — immediately declared these anonymous claims about what the CIA believes to be true, and, with a somewhat sweet, religious-type faith, treated these anonymous assertions as proof of what they wanted to believe all along: that Vladimir Putin was rooting for Donald Trump to win and Hillary Clinton to lose and used nefarious means to ensure that outcome.

Top GOP leader: Senate to probe reports of Russia hacking | McClatchy DC: The top Senate Republican said Monday that Congress will investigate a CIA assessment that Russia interfered in the November election on behalf of Donald Trump, an intelligence conclusion that the incoming commander in chief has called "ridiculous." Majority Leader Mitch McConnell told reporters that an inquiry would be conducted by the Senate intelligence panel. Two key Senate Republicans — John McCain of Arizona and Lindsey Graham of South Carolina, a leading Trump critic — have joined with two Democrats in seeking a bipartisan investigation into the Kremlin's activities during the election. "Obviously any foreign breach of our cybersecurity measures is disturbing, and I strongly condemn any such efforts," McConnell said. Unlike Trump, who has expressed admiration for Russian leader Vladimir Putin, McConnell said flatly, "The Russians are not our friends." The CIA recently concluded with "high confidence" that Russia sought to influence the U.S. election on behalf of Trump, raising red flags among lawmakers concerned about the sanctity of the U.S. voting system and potentially straining relations at the start of Trump's administration.

McConnell backs congressional investigation into Russian interference - POLITICO: Senate Majority Leader Mitch McConnell (R-Ky.) backed calls for a congressional probe into Russian interference in the U.S. election — throwing his support behind a growing call from Senate Republicans to investigate the issue. But McConnell dismissed calls for a select committee specifically designated for the effort, instead indicating that the main responsibility to probe Russian meddling into the election lies with the Senate Intelligence Committee and its chairman, Sen. Richard Burr (R-N.C.). Story Continued Below “Obviously, any foreign breach of our cybersecurity measures is disturbing, and I strongly condemn any such efforts,” McConnell told reporters at a news conference at the Capitol on Monday. "The Senate Intelligence Committee ... is more than capable of conducting a complete review of this matter." The Senate Armed Services Committee will also play a role, with Chairman John McCain (R-Ariz.) directing a review on the threats posed by cyberattacks, McConnell noted. The broader Senate review, he stressed, will be done on a "bipartisan basis." "It defies belief that somehow Republicans in the Senate are reluctant to either review Russian tactics or ignore them," McConnell said, adding later: "The Russians are not our friends." The majority leader's comments follow an extraordinary statement Sunday from a bipartisan group of four influential senators — including McCain — who called for an investigation into Russian influence into the Nov. 8 election, warning that reports of meddling from Vladimir Putin's government should "alarm every American." And during a television appearance on Sunday, McCain said he wants a select committee to investigate the issue.McConnell's counterpart in the House, Speaker Paul Ryan (R-Wis.), said in a statement Monday that he supported the House Intelligence Committee's ongoing probe into cyberthreats from foreign entities. He had declined to explicitly say one day earlier that he backed a congressional investigation into the matter.

Senate Quietly Passes The "Countering Disinformation And Propaganda Act" - While we wait to see if and when the Senate will pass (and president will sign) Bill  "H.R. 6393, Intelligence Authorization Act for Fiscal Year 2017", which was passed by the House at the end of November with an overwhelming majority and which seeks to crack down on websites suspected of conducting Russian propaganda and calling for the US government to "counter active measures by Russia to exert covert influence … carried out in  coordination with, or at the behest of, political leaders or the security services of the Russian Federation and the role of the Russian Federation has been hidden or not acknowledged publicly,” another, perhaps even more dangerous and limiting to civil rights and freedom of speech bill passed on December 8. Recall that as we reported in early June, "a bill to implement the U.S.’ very own de facto Ministry of Truth has been quietly introduced in Congress. As with any legislation attempting to dodge the public spotlight the Countering Foreign Propaganda and Disinformation Act of 2016 marks a further curtailment of press freedom and another avenue to stultify avenues of accurate information. Introduced by Congressmen Adam Kinzinger and Ted Lieu, H.R. 5181 seeks a “whole-government approach without the bureaucratic restrictions” to counter “foreign disinformation and manipulation,” which they believe threaten the world’s “security and stability.” Also called the Countering Information Warfare Act of 2016 (S. 2692), when introduced in March by Sen. Rob Portman, the legislation represents a dramatic return to Cold War-era government propaganda battles. “These countries spend vast sums of money on advanced broadcast and digital media capabilities, targeted campaigns, funding of foreign political movements, and other efforts to influence key audiences and populations,” Portman explained, adding that while the U.S. spends a relatively small amount on its Voice of America, the Kremlin provides enormous funding for its news organization, RT

FBI Disagrees With CIA On Russian Influence In Election - The FBI did not corroborate the CIA’s claim that Russia had a hand in the election of President-elect Donald Trump in a meeting with lawmakers last week.A senior FBI counterintelligence official met with Republican and Democrat members of the House Permanent Select Committee on Intelligence in order to give the bureau’s view of a recent CIA report. The official did not concur with the CIA, frustrating Democrats.The CIA believes Russia “quite” clearly intended to send Trump to the White House. The claim is a bold one, and concerned Democrats and some Republicans who are worried about Trump’s desire to mend relations with an increasingly aggressive Russia. The CIA report was “direct, bald and unqualified,” one of the officials at the meeting told The Washington Post Saturday.The FBI official was much less convinced of the claims, providing “fuzzy” and “ambiguous” remarks.The different conclusions reached by the two intelligence agencies is a reflection of their different institutional styles. CIA officials often use past behavior and analysis based on gathered intelligence to advise leaders, whereas the FBI comes from a more legalistic background which relies on hard evidence to make a case.

Trump State Nominee John Bolton Suggests Russian Hack Was "False Flag" By Obama Administration - With the unconfirmed topic of Russian hacking of the US presidential election (coupled with the ongoing crackdown against Russian propaganda "fake news") dominating front pages of US media, overnight the former neocon ambassador to the United Nations, John Bolton, who has been floated for the possible second highest role in Donald Trump’s State Department supporting Rex Tillerson, poured fuel on the fire with questions about Russian interference in the U.S. presidential election, going so far as to suggest that the DNC hack was a false flag operation by the current administration. “It is not at all clear to me, just viewing this from the outside, that this hacking into the DNC and the RNC was not a false flag operation,” he told Fox News’ Eric Shawn on Sunday.  Asked about the use of the phrase “false flag” and whether he was accusing the US government of involvement, Bolton said, “We just don’t know.”

 Don't Be So Sure Russia Hacked the Clinton Emails – - On October 7, James Clapper, the U.S. director of national intelligence, issued a statement: “The U.S. Intelligence community is confident that the Russian government directed the recent compromises of emails from U.S. persons and institutions, including from U.S. political organizations.” Notably, however, the FBI declined to join the chorus, according to reports by the New York Times and CNBC. A week later, Vice President Joe Biden said on NBC’s Meet the Press that "we're sending a message" to Putin and "it will be at the time of our choosing, and under the circumstances that will have the greatest impact." When asked if the American public would know a message was sent, Biden replied, "Hope not."  Meanwhile, the CIA was asked, according to an NBC report on October 14, “to deliver options to the White House for a wide-ranging ‘clandestine’ cyber operation designed to harass and ‘embarrass’ the Kremlin leadership.” But as both sides begin arming their cyberweapons, it is critical for the public to be confident that the evidence is really there, and to understand the potential consequences of a tit-for-tat cyberwar escalating into a real war.. “It’s highly likely that any war that began as a cyberwar,” Richard Clarke, the former White House cyber czar, told me last year, “would ultimately end up being a conventional war, where the United States was engaged with bombers and missiles.” The problem with attempting to draw a straight line from the Kremlin to the Clinton campaign is the number of variables that get in the way. For one, there is little doubt about Russian cyber fingerprints in various U.S. campaign activities. Moscow, like Washington, has long spied on such matters. The United States, for example, inserted malware in the recent Mexican election campaign. The question isn’t whether Russia spied on the U.S. presidential election, it’s whether it released the election emails.Then there’s the role of Guccifer 2.0, the person or persons supplying WikiLeaks and other organizations with many of the pilfered emails. Is this a Russian agent? A free agent? A cybercriminal? A combination, or some other entity? No one knows. There is also the problem of groupthink that led to the war in Iraq. For example, just as the National Security Agency, the Central Intelligence Agency and the rest of the intelligence establishment are convinced Putin is behind the attacks, they also believed it was a slam-dunk that Saddam Hussein had a trove of weapons of mass destruction.

WikiLeaks operative claims Russia did NOT provide Hillary Clinton emails | Daily Mail Online: A Wikileaks envoy today claims he personally received Clinton campaign emails in Washington D.C. after they were leaked by 'disgusted' whisteblowers - and not hacked by Russia.Craig Murray, former British ambassador to Uzbekistan and a close associate of Wikileaks founder Julian Assange, told that he flew to Washington, D.C. for a clandestine hand-off with one of the email sources in September.'Neither of [the leaks] came from the Russians,' said Murray in an interview with on Tuesday. 'The source had legal access to the information. The documents came from inside leaks, not hacks.'His account contradicts directly the version of how thousands of Democratic emails were published before the election being advanced by U.S. intelligence.Murray is a controversial figure who was removed from his post as a British ambassador amid allegations of misconduct. He was cleared of those but left the diplomatic service in acrimony. His links to Wikileaks are well known and while his account is likely to be seen as both unprovable and possibly biased, it is also the first intervention by Wikileaks since reports surfaced last week that the CIA believed Russia hacked the Clinton emails to help hand the election to Donald Trump. Murray's claims about the origins of the Clinton campaign emails comes as U.S. intelligence officials are increasingly confident that Russian hackers infiltrated both the Democratic National Committee and the email account of top Clinton aide John Podesta. In Podesta's case, his account appeared to have been compromised through a basic 'phishing' scheme, the New York Times reported on Wednesday.

Here’s Why Russia Wasn’t Behind the WikiLeaks Emails Leak -- Pam Martens --The Washington Post continues to double-down on its Red-baiting hysteria, reporting over the weekend as follows: “Intelligence agencies have identified individuals with connections to the Russian government who provided WikiLeaks with thousands of hacked emails from the Democratic National Committee and others, including Hillary Clinton’s campaign chairman, according to U.S. officials.” The objective, according to the Post’s perpetually anonymous sources, was this: “Those officials described the individuals as actors known to the intelligence community and part of a wider Russian operation to boost Trump and hurt Clinton’s chances.” One aspect of the manner in which WikiLeaks released a specific subset of emails is almost certain proof that a sophisticated state-supported intelligence operation was not behind the alleged hack of the emails. The emails WikiLeaks released from Podesta’s email account didn’t just pertain to his work as Campaign Chairman for Hillary Clinton in 2016; they also reached back to 2008 when he was Co-Chairman of President Obama’s Transition Team. If Russia had really wanted to interfere in the U.S. elections and tilt the playing field against Clinton, who was promising an Obama third term and with Obama traveling around the country campaigning for her, it would have scooped up all of the emails from 2008 in which Citigroup executive, Michael Froman, is caught heading up the decisions on who is going to be in President Obama’s cabinet and subcabinet. A sophisticated state-sponsored agent would have put these emails in timeline order, handed the emails as a cohesive group to Glenn Greenwald at The Intercept or Matt Taibbi at Rolling Stone and watched as all hell broke loose.  Instead, what actually happened was that the Michael Froman emails were released in dribbles from October 7 through November 8, mixed in with giant piles of unrelated Podesta emails, so that the full impact of what Froman had done wasn’t readily discernible.

Exclusive: Top U.S. spy agency has not embraced CIA assessment on Russia hacking - sources | Reuters: The overseers of the U.S. intelligence community have not embraced a CIA assessment that Russian cyber attacks were aimed at helping Republican President-elect Donald Trump win the 2016 election, three American officials said on Monday. While the Office of the Director of National Intelligence (ODNI) does not dispute the CIA's analysis of Russian hacking operations, it has not endorsed their assessment because of a lack of conclusive evidence that Moscow intended to boost Trump over Democratic opponent Hillary Clinton, said the officials, who declined to be named. The position of the ODNI, which oversees the 17 agency-strong U.S. intelligence community, could give Trump fresh ammunition to dispute the CIA assessment, which he rejected as "ridiculous" in weekend remarks, and press his assertion that no evidence implicates Russia in the cyber attacks. Trump's rejection of the CIA's judgment marks the latest in a string of disputes over Russia's international conduct that have erupted between the president-elect and the intelligence community he will soon command. An ODNI spokesman declined to comment on the issue. "ODNI is not arguing that the agency (CIA) is wrong, only that they can't prove intent," said one of the three U.S. officials. "Of course they can't, absent agents in on the decision-making in Moscow." The Federal Bureau of Investigation, whose evidentiary standards require it to make cases that can stand up in court, declined to accept the CIA's analysis - a deductive assessment of the available intelligence - for the same reason, the three officials said.

Who Enabled Russian “Interference” With Election? (Facts, Yes, Facts) -- I ask: “Who Assisted With Russian “Interference” With Election?,” because even if the DNC was hacked at the instigation of some Russian government agency, that doesn’t equal interference in the 2016 presidential election. Russian hackers can’t vote in the United States, with the possible exception of Chicago, so the initial hack had no impact on the election. Following the alleged Russian hack, the files were transferred to Wikileaks. At the time Julian Assange, editorin-chief of Wikileaks was residing in the Embassy of Ecuador, London. Julian and friends can’t vote in the United States either, again excepting for Chicago. Up to this point, there is exactly zero impact on the 2016 US presidential election. In any event, with great fanfare and general disappointment with each release, Wikileaks trickled out the Podesta emails. John Podesta was Clinton’s campaign manager.  So, where did the Russian “interference” come from?  If you run this query: (%22Clinton%22AND%22Wikileaks%22)&begin_date=20160901 &end_date=20161107&api-key=   with your own New York Times article API key, you will get (in part): {“response”:{“meta”:{“hits”:252,”time”:56,”offset”:0}, In English: Between September 1, 2016 and November 7, 2016, both “Clinton” and “Wikileaks” occurred in 252 separate articles appearing in the New York Times. Over 68 days there were more than 4.5 articles per day in the New York Times on Hillary Clinton and Wikileaks. […]  Between September 1, 2016 and November 7, 2016, both “Clinton” and “Wikileaks” occurred in 123 separate times in The Guardian. Over 68 days there were approximately 1.8 articles per day in The Guardian on Hillary Clinton and Wikileaks.

Clinton campaign backs call for intelligence briefing before Electoral College vote - POLITICO: Hillary Clinton’s top political adviser John Podesta said the campaign is supporting an effort by members of the Electoral College to request an intelligence briefing on foreign intervention in the presidential election. “The bipartisan electors' letter raises very grave issues involving our national security,” Podesta said in a statement Monday. “Electors have a solemn responsibility under the Constitution and we support their efforts to have their questions addressed.” “Each day that month, our campaign decried the interference of Russia in our campaign and its evident goal of hurting our campaign to aid Donald Trump,” he said. “Despite our protestations, this matter did not receive the attention it deserved by the media in the campaign. We now know that the CIA has determined Russia's interference in our elections was for the purpose of electing Donald Trump. This should distress every American.” Podesta's statement is the first public statement from the Clinton campaign raising questions about the legitimacy of Donald Trump's victory. It follows an open letter from 10 presidential electors — including Democratic Leader Nancy Pelosi’s daughter Christine — requesting an intelligence briefing ahead of the Dec. 19 vote of the Electoral College.

Records: Too many votes in 37% of Detroit’s precincts -- Voting machines in more than one-third of all Detroit precincts registered more votes than they should have during last month’s presidential election, according to Wayne County records prepared at the request of The Detroit News. Detailed reports from the office of Wayne County Clerk Cathy Garrett show optical scanners at 248 of the city’s 662 precincts, or 37 percent, tabulated more ballots than the number of voters tallied by workers in the poll books. Voting irregularities in Detroit have spurred plans for an audit by Michigan Secretary of State Ruth Johnson’s office, Elections Director Chris Thomas said Monday.The Detroit precincts are among those that couldn’t be counted during a statewide presidential recount that began last week and ended Friday following a decision by the Michigan Supreme Court. Democrat Hillary Clinton overwhelmingly prevailed in Detroit and Wayne County. But Republican President-elect Donald Trump won Michigan by 10,704 votes or 47.5 percent to 47.3 percent. Overall, state records show 10.6 percent of the precincts in the 22 counties that began the retabulation process couldn’t be recounted because of state law that bars recounts for unbalanced precincts or ones with broken seals. The problems were the worst in Detroit, where discrepancies meant officials couldn’t recount votes in 392 precincts, or nearly 60 percent. And two-thirds of those precincts had too many votes. “There’s always going to be small problems to some degree, but we didn’t expect the degree of problem we saw in Detroit. This isn’t normal,” said Krista Haroutunian, chairwoman of the Wayne County Board of Canvassers.

Jill Stein’s Recount Bid Is Over -- The recount effort by Green Party presidential candidate Jill Stein in three crucial U.S. states came to an end on Monday, after weeks of legal wrangling yielded only one electoral review in Wisconsin. A U.S. judge in Pennsylvania rejected Stein’s request for a recount and an examination of that state’s voting machines for evidence of hacking in the Nov. 8 election won by Republican Donald Trump. Meanwhile, Wisconsin election officials said on Monday they had completed their 10-day recount with only small changes to the vote total. Stein, who finished fourth in the election, challenged the results in those two states as well as Michigan, where the state’s top court on Friday denied Stein’s last-ditch appeal to keep a recount going. All of those traditionally Democratic strongholds supported Trump over Democrat Hillary Clinton. Even if all three recounts had taken place, they were always unlikely to change the outcome. Stein argued that the use in many Pennsylvania districts of electronic voting machines with no paper trail left the system vulnerable to hacking. In a 31-page opinion, U.S. District Judge Paul Diamond in Philadelphia said it “borders on the irrational” to suspect hacking occurred in Pennsylvania. He also emphasized that the deadline to certify the state’s electoral votes is Tuesday, making it impossible to hold a recount in time.

Here's How Trump Could Still Actually 'Lose' The Presidential Election - On Wednesday night, controversial filmmaker Michael Moore made yet another mind-numbing prediction: He strongly suggested to late-night talk show host Seth Meyers that the Electoral College would deny President-elect Donald Trump a victory prior to his January 20th, 2017 inauguration. Moore previously stunned everyone by predicting Trump’s victory at a time when the analytics — and the political-media establishment — all favored Hillary Clinton. There is a mechanism for what Moore is suggesting, however unlikely, and it exists within the Electoral College itself in the form of a decentralized, existential bunch of wonks. And, historically speaking, they have never actually asserted their power and changed a presidential election. They’re called ‘faithless electors,’ people nominated to represent the will of the people but who may, constitutionally speaking, revoke their duties. So far, there are seven ‘faithless electors’ who have defected from voting for Trump in the Electoral College. Count ‘em, seven — out of 270. That’s not a lot, obviously, but the mind balks at how quickly momentum could swing against a candidate that garnered over 2.5 million fewer votes than his challenger in the popular vote. As of Thursday evening, the first Republican ‘faithless elector’ declared he would not vote Trump and that the presidency “is not a done deal.”

  • Here are three reasons why I believe Trump could, incredibly, still lose this election: Trump has revealed himself to be fully in support of the establishment.
  • Hillary won the popular vote by over 2.5 million. This is fact. The number is actually growing. It’s historic; it’s actually disgusting if one is prone to be disgusted by electoral politics. Will this alone — or in conjunction with reason one — cause Trump to lose? No. Of course not! That’s why there’s one more, important, reason.
  • Elections can be stolen. This happens. It happens more than you think. Usually, it happens before the popular vote – you know, when the votes are actually coming in, in the form of vote flipping and “magic fractions.” The 2000 election was stolen for Bush, the 2004 election was stolen again for Bush, and the Obama elections probably would have been stolen except that he won by such huge margins it would have been obvious. And many, many elections have been rigged or gerrymandered in some way.

Harvard Professor Says He's Rallied Nearly Enough GOP Electors To Block Trump -  Harvard University law professor Larry Lessig, who has been providing free legal counsel to "faithless electors" from the GOP considering voting against Trump, claims that 20 GOP Electoral College voters have contacted him and are seriously considering flipping their vote.  Of course, with 306 Electoral College votes assigned to Trump, it would only take 37 faithless GOP electors to block his presidency and push the election to Congress to decide.  Per Politico: Lessig’s anti-Trump group, “Electors Trust,” has been offering pro bono legal counsel to Republican presidential electors considering ditching Trump and has been acting as a clearinghouse for electors to privately communicate their intentions. “Obviously, whether an elector ultimately votes his or her conscience will depend in part upon whether there are enough doing the same. We now believe there are more than half the number needed to change the result seriously considering making that vote,” Lessig said. Meanwhile, the list of Democrat electors demanding an intelligence briefing on Russian interference in the election prior to casting their vote continues to grow.  As of last night we noted that 40 democrats had signed the petition and, as of this morning, the list has grown to 55.  Not surprisingly, the list is loaded with disaffected Hillary supporters from Democratic strongholds like California and Virginia. 

"Bullet In The Mouth" - Trump Electors Flooded With Death Threats --Electors around the country are being harassed with a barrage of emails, phone calls, letters and even death threats, in an effort to block Donald Trump from being voted in as president by the Electoral College on Monday.  Of course, with the mainstream media and democrats pushing the dangerous narrative that Putin basically usurped our democracy, it's no wonder that disaffected Hillary snowflakes are growing more "triggered" with each passing day.According to a report from the New York Post, one Republican elector in Michigan has even received death threats after he refused to change his vote. For Michael Banerian, a senior at Oakland University in Michigan and a Republican elector, the harassment comes with a dark side. He said he’s been getting death threats via email, snail mail, Twitter and Facebook. “Somebody threatened to put a bullet in the back of my mouth,” Banerian, 22, told The Post on Wednesday. Republican electors from all over the country are being inundated with emails, phone calls and letters on a daily basis, from angry democrats, urging them to switch their votes.  One Republican elector in Arizona estimated that she had received 50,000 emails since election day. The bullying is overwhelming Sharon Geise’s tech devices, but not her resolve to support Trump.The Mesa, Arizona, grandmother woke up Wednesday morning to more than 1,500 emails demanding she not carry out her legal duty to vote for the president-elect.“They just keep coming and coming,” Geise told The Post, estimating she’s received more than 50,000 emails since the election. “They’re overpowering my iPad.”  Her answer: mass delete.  Despite the avalanche, she said, her decision to back Trump is stronger than ever. “Obviously their minds are made up and they’re not going to change. I’m not either,” the soft-spoken Geise said.

 Clinton Investigation Back On: FBI Agents In NY Ordered To Continue Foundation Probe --After the election, many speculated that the probe of the Clinton Foundation would be laid to rest.  But now, according to an exclusive report from the Daily Caller, senior officials at FBI headquarters in Washington DC have apparently instructed agents in the New York field office to continue their investigation of the Clinton Foundation.  According to the source, the instructions were passed on to the NYC field office last week and involves operations in at least five cities, including: New York, Little Rock, Washington, D.C., Los Angeles and Miami.Officials at FBI headquarters instructed its New York field office to continue its corruption investigation into the Clinton Foundation following the election of Republican candidate Donald Trump, according to a former senior law enforcement official.The instructions ordered agents to “go forward” with their ongoing inquiry into the Clinton Foundation which is focusing on issues of corruption and money laundering, according to the source.“There were no instructions to shut it down, to discontinue or to stand down on the investigation, but to continue its work,” the former official told the Daily Caller News Foundation in an interview.

Report: House Intelligence Committee Abruptly Cancels Briefing After CIA Declined to Attend -- The current hysteria over Russian interference doesn't infer that they hacked the voting itself, but instead made available true information about the Hillary Clinton campaign, by way of Wikileaks, which then swayed public opinion to vote in favor of Trump. In other words, Podesta, Clinton and their media shills are still corrupt bastards, beholden to Saudi Arabia and China -- but had the American people never learned about it via the Wikileaks, well then, they might've voted for her instead of Trump. In a nut shell, that's the democrat argument for fomenting war against Russia and to overturn the will of the people. Again, no one is questioning the validity of the votes, but the souls of men and how they felt after reading the Wikileaks.  Fox News is reporting the House Committee has abruptly canceled a briefing scheduled for tomorrow -- due to the CIA not making anyone available to attend. As of now, the CIA is refusing to comment on the matter, until their full assessment of the situation is made available to President Obama before 1/20/17.

FBI Said To Back CIA Assessment That Russia Intervened To Help Trump Win: WaPo-- Either the WaPo has pulled off another "fake news" stunt, or Obama may be this close from declaring "cyber war" on Putin. Moments ago, the Jeff Bezos newspaper, whose main mission over the past month has been to pin Clinton's presidential failure first on Russia and then on Vladimir Putin, reported that FBI Director James B. Comey and Director of National Intelligence James R. Clapper Jr. have backed a CIA assessment that Russia intervened in the 2016 election in part to help Donald Trump win the presidency, "according to U.S. officials." If accurate, this would represent a U-turn to the FBI's official position, and would suggest that all three agencies are in agreement on Russian intentions, "contrary to suggestions by some lawmakers that the FBI disagreed with the CIA." Actually, not just some lawmakers: as Reuters reported earlier this week, the Office of the Director of National Intelligence (ODNI), America's top Spy Agency, sided with the FBI which is why today's report is surprising.Still, things may have changed. “Earlier this week, I met separately with (Director) FBI James Comey and DNI Jim Clapper, and there is strong consensus among us on the scope, nature, and intent of Russian interference in our presidential election,” CIA Director John Brennan said in a message to the agency’s workforce, according to U.S. officials who have seen the message.“The three of us also agree that our organizations, along with others, need to focus on completing the thorough review of this issue that has been directed by President Obama and which is being led by the DNI,” Brennan’s message read.

Obama turns down temperature on Trump fight | TheHill: President Obama on Friday sought to cool rising tensions with President-elect Donald Trump over allegations of Russian interference in the U.S. presidential election. Obama expressed hope that Trump would show greater concern about the hacking allegations against Moscow, saying it “shouldn’t be a partisan issue.” But the president avoided strident criticism of his one-time political rival during his end-of-year news conference. He downplayed the growing rift between the White House and the Trump team over the hacks and pledged his continued cooperation with the president-elect’s transition team. ADVERTISEMENT“There are still feelings that are raw out there,” the president admitted. But he voiced confidence that Trump and his team will have a change in perspective once he takes the oath of office, saying “there is a sobering process when you walk into the Oval Office.” Obama described his post-election conversations with Trump as “cordial,” adding that he has “made some pretty specific suggestions about how to ensure that regardless of our obvious deep disagreements about policy, maybe I can transmit some thoughts about maintaining the effectiveness, integrity, cohesion of the office, our various democratic institutions.” “He has listened,” Obama said. The president’s tone stood in contrast to the squabbling between his aides and Trump that broke out this week over bombshell U.S. intelligence assessments claiming Russia hacked Democratic Party groups in part to help the Republican win. Trump and his allies have dismissed those allegations, calling them an effort to delegitimize his victory on Election Day.

Trump Picks Exxon CEO Rex Tillerson As Secretary Of State -- In a move that is certain to infuriate those who see Trump as nothing more than a puppet of the Kremlin, moments ago NBC reported that Rex Tillerson, CEO of Exxon Mobil and late entrant into the SecState race after his first meeting with the president elect this past Tuesday at the Trump Tower, has been picked by Trump to serve as his next Secretary of State.A quick biographical sketch of Tillerson courtesy of the WSJ: The son of a local Boy Scouts administrator, Mr. Tillerson was born in Wichita Falls, Texas. He attended the University of Texas, where he studied civil engineering, was a drummer in the Longhorn band and participated in a community service-oriented fraternity. He joined Exxon in 1975 and has spent his entire career at the company. For most of his adult life, he has also been closely involved with the Boy Scouts of America, even occasionally incorporating the Scout Law and Scout Oath into his speeches.  Mr. Tillerson played an instrumental role in leading the organization to change its policy to allow gay youth to participate in 2013, Mr. Hamre said. Former Defense Secretary Robert Gates subsequently moved to lift the organization’s ban on gay adult leaders as Boy Scouts president in 2015.  […]However it is not his Boy Scout exploits that will be the key talking point for pundits in the coming days, but rather his close relationship with Russian president Vladimir Putin. According to the WSJ, few U.S. citizens are closer to Mr. Putin than Mr. Tillerson, who has known Mr. Putin since he represented Exxon’s interests in Russia during the regime of Boris Yeltsin. “He has had more interactive time with Vladimir Putin than probably any other American with the exception of Henry Kissinger,” said John Hamre, a former deputy defense secretary during the Clinton administration and president of the Center for Strategic and International Studies, a Washington think tank where Mr. Tillerson is a board member.

Trump Picks Exxon CEO for Secretary of State Despite Close Ties to Putin - Steve Horn - ExxonMobil CEO Rex Tillerson—who has close personal and company ties to Russia and President Vladimir Putin—is President-elect Donald Trump's top pick to become the next secretary of state, with the decision likely coming next week according to NBC News .  The news comes amid reports that Congressional members and senior U.S. Central Intelligence Agency (CIA) officials say they have intelligence showing Russia attempted to tip the balance of the November U.S. presidential election in favor of Trump by hacking into email systems and giving those emails to Wikileaks. And President Barack Obama has called for a complete investigation on the matter before he leaves the White House on Jan. 20.  Though the evidence presented to the U.S. public so far lacks smoking gun documentation , many are alarmed that a geopolitical adversary may have interfered with the U.S. electoral process. Trump, though—who has signaled a potential sea change in the U.S.-Russia geopolitical relationship—is not among them , as indicated in his choice of Tillerson for top U.S. diplomat.  "If the goal is to drain the swamp in DC, Tillerson might not be your man; Exxon's business plan continues to require raising the level of the ocean to the point where Foggy Bottom will be well underwater," said founder Bill McKibben in a press release . "But this is certainly a good way to make clear exactly who'll be running the government in a Trump administration—just cut out the middleman and hand it directly to the fossil fuel industry."

 Kremlin Praises Trump's Pick Of Exxon CEO Tillerson As Secretary of State - After it emerged on Saturday that Trump had tipped Exxon CEO Rex Tillerson for the role of America's top diplomat, Trump was quick to shower the 64-year-old CEO with praise. In an interview with Fox News, Trump praised Mr Tillerson, saying: "He's a world-class player. He's in charge of an oil company that's pretty much double the size of its next nearest competitor." Trump added that Tillerson knows many of the players and he knows them well. He does massive deals in Russia." On the other hand, as we cautioned, Tillerson's background of close proximity to Russia, and bogeyman du jour Vladimir Putin, would likely present a challenge to his confirmation. Recall that as Exxon CEO Tillerson struck a deal in 2011 giving Exxon access to prized Arctic resources in Russia as well as allowing Russia’s state oil company, OAO Rosneft, to invest in Exxon concessions all over the world. The following year, the Kremlin bestowed the country’s Order of Friendship decoration on Tillerson. As the WSJ reported, "the deal would have been transformative for Exxon." Putin at the time called it one of the most important involving Russia and the U.S., forecasting that the partnership could eventually spend $500 billion. But it was subsequently blocked by sanctions on Russia that the U.S. and its allies imposed two years ago after the country’s invasion of Crimea and conflicts with Ukraine.

Trump to tap Tillerson for secretary of state - President-Elect Donald Trump officially picked ExxonMobil CEO Rex Tillerson as his choice to be secretary of state on Tuesday morning, setting up a contentious confirmation battle over the nation's top diplomat. Tillerson is likely to face extensive questions on Capitol Hill, as a number of prominent Republicans have already voiced concerns about his close ties to Russia and its strongman president, Vladimir Putin. He has no formal government experience, but spent years running ExxonMobil's extensive international operations. Should Tillerson not win confirmation, it would be an early setback for Trump's presiden: President-Elect Donald Trump officially picked ExxonMobil CEO Rex Tillerson as his choice to be secretary of state on Tuesday morning, setting up a contentious confirmation battle over the nation's top diplomat. Tillerson is likely to face extensive questions on Capitol Hill, as a number of prominent Republicans have already voiced concerns about his close ties to Russia and its strongman president, Vladimir Putin. He has no formal government experience, but spent years running ExxonMobil's extensive international operations. Should Tillerson not win confirmation, it would be an early setback for Trump's presidency. A Cabinet nominee hasn't been rejected by the Senate since 1989, and Trump will need Republicans to coalesce around Tillerson. Yet Trump seemed undeterred by the pushback, trusting his gut and choosing another nominee with significant business experience. "Rex Tillerson’s career is the embodiment of the American dream. Through hard work, dedication and smart deal making, Rex rose through the ranks to become CEO of ExxonMobil, one of the world’s largest and most respected companies," said Trump in a statement. "His tenacity, broad experience and deep understanding of geopolitics make him an excellent choice for Secretary of State. He will promote regional stability and focus on the core national security interests of the United States."

Trump Lines Up Establishment Republicans to Vouch for Rex Tillerson — After waging an 18-month assault on the Republican establishment, President-elect Donald J. Trump changed course on Tuesday and enlisted the party’s high priests of foreign policy to help him win the confirmation of Rex W. Tillerson as secretary of state. Several former Republican secretaries of defense and state sought to dismiss bipartisan concerns about Mr. Tillerson, the Exxon Mobil chief executive, over his two-decade relationship with President Vladimir V. Putin of Russia. At the center of the debate are questions about Mr. Tillerson’s vocal opposition to American sanctions imposed on Russia as he pursued oil and gas deals in that country. Their mobilization showed how much Mr. Tillerson’s nomination is already a Congressional proxy fight over Mr. Trump’s embrace of Russia and Mr. Putin. Democrats issued blunt denunciations of the idea that a globe-trotting energy executive could adequately represent the national interests of the United States. So did several leading Republicans, whose party orthodoxy has been anti-Kremlin for decades. “I have serious concerns about his nomination,” said Senator Marco Rubio, Republican of Florida. Senator Ben Cardin, Democrat of Maryland, declared himself “deeply troubled” by Mr. Tillerson’s opposition to sanctions imposed by the United States on Russia after its intervention in Ukraine in 2014. Democrats and liberal activists also expressed deep concern about the fate of human rights and climate change under a State Department led by Mr. Tillerson, a 40-year veteran of the country’s largest oil company. At the other end of the political spectrum, social conservatives condemned him for playing a role in reversing the Boy Scouts’ longstanding policy of excluding gay people, an issue that became a cultural flashpoint for the religious right.

Rex Tillerson is an able executive. But what about his ties to Russia? – WaPo Editorial - THE NATURE of Donald Trump’s relationship with Russia is the most obscure and disturbing aspect of his coming presidency. Mr. Trump’s unwavering defense of Vladi­mir Putin’s regime against all criticism, and his breezy dismissals of a CIA finding that Moscow sought to tip the presidential election in his favor, raise critical questions. Does the president-elect merely happen to believe that he should begin by trying to cooperate with Mr. Putin, or is he driven by undisclosed personal or financial interests? Apart from the election controversy, does Mr. Trump accept the overwhelming evidence that Mr. Putin’s Kremlin is bent on disrupting and diminishing Western democracies, and the United States in particular, and will he resist that project? The uncertainty Mr. Trump has raised around these questions, including among a number of congressional Republicans, inevitably shadows his possible nomination of ExxonMobil chief executive Rex Tillerson as secretary of state. Mr. Tillerson is evidently an able and seasoned executive who has managed one of the world’s largest companies and, in doing so, has gotten to know issues and leaders around the world. But one of those leaders is Mr. Putin, with whom Mr. Tillerson has cut enough deals over the course of two decades to be awarded Russia’s Order of Friendship. He has been a staunch opponent of sanctions against Russia, which his company once estimated had cost it $1 billion. Mr. Tillerson might be considered a logical and qualified pick for a president seeking to rebuild constructive relations with Moscow. Or his nomination could augur a sellout by Mr. Trump of vital U.S. interests in Europe, the Middle East and elsewhere. Given the opacity of Mr. Trump’s ties to Russia, a consequence of his continuing refusal to release his tax returns and business records, senators are right to be wary of a Tillerson nomination.

Rex Tillerson: "Russian Spy" Or Diplomatic Genius?  --The news that Rex Tillerson, Exxon’s CEO, is Donald Trump’s official pick for the Secretary of State chair has sparked an outrage among Democratic and Republican legislators alike,both sides worried that his appointment would further warm relations between the U.S. and Russia. To an outsider with a limited understanding of geopolitical dynamics, this outrage would sound absurd. After all, what is wrong with good bilateral relations, especially those between two of the world’s nuclear powers? But to an insider of American – and Russian – politics, the outrage is an understandable knee-jerk reaction, brought about by years of anti-Russian sentiment across the West, after Moscow annexed the Crimea and sent troops to eastern Ukraine in support of pro-Russian insurgents, deepening the political chaos in Ukraine. On top of that, the Kremlin is now facing accusations of organizing the email hacks that, according to the Clinton campaign, cost their candidate the election. Various media are quoting some unnamed CIA officials as “believing” the hack attack was aimed to tip the scales in favor of Trump, who is little more than a Kremlin mole in Washington. There is still no proof of any of these hacks (which is different than leaking emails), or the intent behind the hacks. The Office of the Director of National Intelligence has not yet embraced the CIA assessment of the email hack, according to three other anonymous sources from the intelligence community. The reason: lack of conclusive evidence. Smack in the middle of this scandal, Trump presents Rex Tillerson as his favorite for what’s probably the second most important position in the U.S. government. Tillerson, who was awarded by Russia’s President Putin the Order of Friendship, who has already lost a billion dollars from Western sanctions against Russia, and who has been against these sanctions from the beginning.  Tillerson is considered one of few friends of Russia in the United States. This relationship is being treated as a suspicious thing—a relationship that could compromise his loyalty to his country. But Tillerson’s loyalty lied with Exxon, not with Russia—Russia was but one of many foreign relationships that Tillerson forged with Exxon’s well-being in mind. This is precisely what has prompted most to label Tillerson as an astute businessman and company executive—someone who was able to keep Exxon in the black through the crisis while many competitors suffered, all the while maintaining dividend payouts. This exemplary company record has been cited by many as a guarantee for his success as Secretary of State.

Potential Secretary of State Nominee Rex Tillerson Has an SEC Problem - ExxonMobil, Tillerson’s company, has been under formal investigation by the Securities and Exchange Commission since August for failing to accurately value its proven oil reserves.Those reserves are critical to investors for assessing the future viability of the company. Without the certainty that the company can keep crude oil flowing decades into the future, ExxonMobil stock would plummet. Rewriting the disclosures to investors with lower valuations would cost the company billions of dollars. And actually the entire oil and gas industry would be affected by a new standard rather than the current ad hoc system.  The investigation is a kind of companion piece to the “Exxon Knew” campaign, which charges that the world’s largest publicly traded oil company was aware of the catastrophic effects of climate change nearly 40 years ago, but lied to shareholders about these risks to its business model. Attorneys general in over a dozen states have opened investigations into these matters.  But the SEC probe goes further. The agency requested documents from PricewaterhouseCoopers, ExxonMobil’s auditor, looking at how the company accounts for future costs from global climate regulations. If it becomes more costly to initiate drilling because of the so-called “price of carbon,” or regulations that mandate reductions to greenhouse gas emissions, Exxon might have to shelve the projects, taking a hit to future profitability.   Public companies must account in their financial disclosures for knowable risks to investors, and climate regulations would certainly fit the bill for an oil giant.  The SEC also wants to know why ExxonMobil does not write down the value of its reserves when oil prices drop. The crash began two years ago; a barrel of oil fetched $115 in June 2014, but under $28 by February. Even with the recent announcement of OPEC production cuts, the price has barely crested $50. But ExxonMobil never factored that loss into its calculations of future reserves; by contrast, Chevron has written down $50 billion. Exxon said in October it could “de-book” about 20 percent of its reserves if prices remain low, but it hasn’t done it yet.

Bolton Is Trouble; Tillerson Isn’t - American Conservative --President-elect Trump’s State Department selections have managed to trigger opposition from two distinct and opposed camps. The neocons and anti-Russians oppose Exxon chief Rex Tillerson, the secretary of state designate, as too inclined to accommodate Putin. The disparate but occasionally united liberal, arms-control, and realist types are equally alarmed about John Bolton’s apparent selection for the number-two deputy secretary of state slot.  The problem with Bolton is simple. If you liked George W. Bush’s foreign policy, especially the Iraq War and the idea of regime change carried out by the American military on a multi-country, pan-regional scale, and you want get that kind of policy going again, the search is over: he’s definitely the guy. Most of the upper-middle-level officials who plotted the Iraq War have retreated quietly into private life, but Bolton has kept their flame alive, claiming quite recently that invading Iraq was the right thing to do, writing incendiary op-ed pieces about the desirability of bombing Iran, and seemingly (before a pro-Israel student group at the University of Chicago) encouraging Israel to launch a nuclear strike on Iran. In every realm where Trump—for all his Jacksonian bluster—has consciously sought to reassure us that he understands the radically extreme danger of nuclear-weapons use, Bolton has done the opposite. Where Trump quite courageously—before a hawkish South Carolina audience—criticized the Iraq War as an unmitigated disaster fomented by officials who consciously twisted intelligence findings, Bolton was one of the twisters, actively propagating the falsehood that Saddam had an active nuclear-weapons program. There may be literally no issue where he doesn’t take an extreme position: in 2002, as a Bush under secretary of state, he made the charge, later debunked, that Castro was engaging in advanced biological-weapons activities.

G.O.P. Resistance Builds to John Bolton as State Dept. Deputy — President-elect Donald J. Trump’s extended deliberations over assembling a team to run the State Department are reviving some of the same debates that consumed the years of war and strife in the administration of George W. Bush. And in some cases, the cast of rivals is even the same. The conflict has come to a head over choosing a deputy to serve under Rex W. Tillerson, the Exxon Mobil chief executive whom Mr. Trump selected this week to be secretary of state. Mr. Trump is weighing whether to choose John R. Bolton, a combative and strident advocate for an expansive American foreign policy who was closely aligned with Vice President Dick Cheney in the Bush administration. Mr. Bolton’s nomination as deputy secretary of state would be subject to a vote in the Senate, and it is not clear whether he would survive his confirmation hearing. Senator Bob Corker, Republican of Tennessee, chairman of the Foreign Relations Committee, has said privately that he has misgivings, according to a person who has spoken with him. And Senator Rand Paul of Kentucky, another Republican on the committee, has promised to block the nomination. “There is something to be said,” Mr. Paul said Wednesday, “for one of the top diplomats in the country being diplomatic.” Mr. Bolton, a State Department official under Mr. Bush who also served for a short time as United Nations ambassador, is also facing stiff resistance from some of the Republican Party’s best-known leaders in world affairs — some of them veterans of the Bush White House who often found themselves at odds with him during that period. They include Condoleezza Rice, the former secretary of state and national security adviser, who clashed with Mr. Cheney; Robert M. Gates, a former secretary of defense; and Stephen J. Hadley, also a former national security adviser,

Trump attack on Lockheed Martin foreshadows war on defense industry | Reuters: Donald Trump on Monday widened his attack on defense contractors, slamming Lockheed Martin Corp's F-35 fighter jet program as too expensive as aides to the president-elect said he intends to keep pushing to cut the costs of military hardware. Trump's latest Twitter broadside sent defense shares tumbling and fanned concerns that the incoming administration will reduce defense contractors' profit margins and cut broader federal spending, threatening U.S. factory jobs even as Trump promises to boost manufacturing employment. "The F-35 program and cost is out of control," Trump said on Twitter, echoing campaign promises to cut waste in federal spending. "Billions of dollars can and will be saved on military (and other) purchases after January 20th." Last week, Trump targeted Boeing with tweets for "out of control" costs on new Air Force One planes, urging the federal government to "Cancel order!" The new administration's focus is likely to be "wide-reaching and impact all of government as we look to come up with better deals," Trump transition spokesman Jason Miller said. "We're going to look for opportunities to go back through and make sure that we're not getting taken advantage of." Trump's F-35 tweet drew support from U.S. Senate Armed Services Committee Chairman John McCain, who has voiced support for the fighter jet in the past. While a president cannot cancel a program after funds have been allocated, it can purchase less.

Trump Proposes Lifetime Ban on Defense Firms Hiring DoD Contracting Officials-- President-elect Donald Trump has put forth the idea of banning the defense industry from hiring former Pentagon contracting officials, just days after creating a stir in the defense industry by saying Boeing's contract for an Air Force One replacement should be cancelled. According to a Reuters news service report, Trump told a rally in Baton Rouge, Louisiana that "I think anybody that gives out these big contracts should never ever, during their lifetime, be allowed to work for a defense company, for a company that makes that product." He added he would "check this out" before making any final decisions, but went on to slam the F-35 joint strike fighter program as "totally, totally, like, uncontrollably over budget." If such a ban were put forth, it could create a major roadblock for the Pentagon to attract acquisition talent, as many people may choose not to go into that career field and be unable to enter industry at a latter date.   The speech comes just three days after Trump sent shockwaves through the defense sector with his comments that Boeing's contract to Air Force One should be cancelled. It also comes a day after Northrop Grumman announced that retired Air Force Chief of Staff Mark Welsh would be joining its board of directors. Welsh led the Air Force when it selected Northrop's design for the B-21 bomber over competition from Boeing and Lockheed Martin, and his selection to the board just a year later triggered concerned statements from good government organizations like the Project on Government Oversight.  Notably, Trump's transition team for the Pentagon contains a number of defense industry veterans and lobbyists. The defense industry is also expecting to see a boost from the Trump administration, which has promised to plus-up defense budgets.

Trump nominates retired general John Kelly as head of homeland security - President-elect Donald Trump has chosen retired general John Kelly as Secretary of Department of Homeland Security. The pick was confirmed by Trump’s transition team Communications Director Jason Miller. @realdonaldtrump today announced his intent to nominate General John Kelly as Secretary of the Department of Homeland Security (DHS). Trump's transition team said in a statement that Kelly would "spearhead the urgent mission of stopping illegal immigration and securing our borders", streamline the Transportation Security Administration and improve ties between US intelligence and law enforcement agencies. The former US Marine Corps general, who retired earlier this year, had been rumored to be among the favorites for the role in Trump’s administration since the start of December.  Trump said Kelly’s decades of military service and “deep commitment to fighting the threat of terrorism inside our borders” makes him an obvious choice for the top position. Kelly said he was “humbled” by the nomination and will tackle terrorism by putting “a stop to political correctness that for too long has dictated our approach to national security.”

Goldman President Gary Cohn Accepts NEC Director Role --As reported last week, Trump had offered Goldman Sachs president and COO the job of his top economic advisor, as Director of the National Economic Council Director. Moments ago CNBC reported that, as expected, Cohn has accepted the role. From CNBC:Goldman Sachs executive Gary Cohn is expected to accept the directorship of the National Economic Council "at any moment," a source told CNBC on Monday. President-elect Donald Trump last week offered the key economic advisor position to Cohn, Goldman's 56-year-old president and chief operating officer, sources told NBC News. Cohn has been at Goldman for 25 years and previously worked in commodities.Cohn taking the post would add to Trump's administration another veteran of the powerful firm he bashed during his campaign. Trump Treasury secretary pick Steven Mnuchin and senior advisor Steve Bannon also worked at Goldman Sachs, which Trump repeatedly attacked on the campaign trail.He cited Goldman as evidence that corporate and financial interests have influence over politicians and criticized former opponent Sen. Ted Cruz for taking a loan from the firm.The National Economic Council, which Cohn would lead, is meant to "coordinate policy-making for domestic and international issues, to coordinate economic policy advice for the president, to ensure that policy decisions and programs are consistent with the president's economic goals, and to monitor implementation of the president's economic policy agenda," according to the office's website. While we have no reason to doubt Cohn' patriotism, we are confident that another motivating factor was the ability to sell some his $210 million or so in Goldman shares tax free, saving approximately $80 million in taxes simply for becoming officially a part of the US administration, instead of merely running the country from the shadows.

How Donald Trump’s New Top Economic Adviser Views the World - President-elect Donald Trump announced this week he had selected Goldman Sachs President Gary Cohn as director of the National Economic Council, a position that will make him one of the most influential voices on economic decisions in the White House. Mr. Cohn, a 17-year veteran of the New York bank, has spoken frequently on markets and related policy in interviews and at conferences, but his particular policy preferences aren’t as well known. Here’s a look at some recent statements on issues he could face:  On the challenges facing global policy makers, particularly at the Federal Reserve,at a conference in Naples, Fla., last month: “We have successfully globalized the world whether we like that or not, which means we have successfully globalized monetary policy. It means now that we have a global growth issue. And we’re trying to solve it with domestic policy. It‘s not going to work. The Fed used to be able to control the U.S. domestic economy because we had a domestic economy. Now the United States economy is part of a global economy. We have a globalized workforce. So when I need to go out and hire the incremental worker, I look out around the world and see where that incremental worker is available. “In many respects when you look at the Fed, they’re sitting there saying, ‘We should maybe, kind of, sort of raise interest rates because of his economic data, but if we raise interest rates here, what is that going to do the dollar? And does that have all of these other unintended consequences? And does it have an overwhelming impact on economic growth because domestic production versus imports gets changed dramatically…?’ So that was a really long-winded way of saying the Fed’s in a really tough position because they’re only one piece of a global puzzle.” On a “race to the bottom” by central bankers experimenting with negative interest rates, at a finance conference in March 2016: “I think it is absolutely horrible….I think we are using the 1980s playbook in the 2016 world. Another way to say it is we are using the analog playbook in the digital world. By that I mean, the old analog playbook was when your economy slows down or your economy falters, lower interest rates, devalue your currency and grow at the expense of another economy. And in the 1980s and prior to that, that strategy worked. It worked because each of our economies was somewhat independent from each other and we didn’t have fungibility and we didn’t have real-time transparency.

Senate Specifics on Why Goldman Sachs’ Gary Cohn Should Not Have a Role in the U.S. Government – Pam Martens - With the news that Gary Cohn, the sitting President of Goldman Sachs, will join two other Goldman Sachs alumni to make up the economic, treasury and strategy team in the Donald Trump administration, we had a fleeting vision of retired Michigan Senator Carl Levin flinging open a window in Detroit and screaming obscenities into the wind. Cohn was the Co-President of Goldman Sachs who oversaw its trading business in the leadup to the 2008 crash as it offloaded billions of dollars of toxic subprime mortgage paper onto its customers, with employees even referring to one offering as a “shitty deal” in emails, while Goldman shorted the hell out of the paper (betting against it) to make massive profits for itself. Billions of dollars of this rotten paper was sold to retirement funds for low-wage municipal workers.On Wednesday, April 13, 2011, following a two-year investigation, Senators Carl Levin and Tom Coburn, Chairman and Ranking Member of the Senate’s Permanent Subcommittee on Investigations, released a 635-page report which included specifics on the deceitful and fraudulent role that Goldman Sachs played, among others, in burning down Wall Street and the U.S. economy in the greatest collapse since the Great Depression.Goldman Sachs is referenced 2,495 times in the report; Cohn is referenced 89 times. Cohn’s role in overseeing the firm’s peddling of its subprime mortgage-backed securities is called out in the example below; (other references show how Cohn kept close tabs on the firm’s shorting of the market):“In 2006 and 2007, the head of the Mortgage Department was Daniel Sparks. Goldman Co-Presidents Gary Cohn and Jon Winkelried, as well as CFO David Viniar, had been involved in Mr. Sparks’ earlier career at Goldman, and he maintained frequent, direct contact with them regarding the Mortgage Department.”The report characterizes the actions of the denizens of Wall Street as an “economic assault” on the United States. The report came a year after the Subcommittee had conducted a series of hearings in April 2010, including taking direct testimony from Goldman Sachs officials. (See video clips below.) The report summarizes its findings about Goldman Sachs as follows:

Lawrence Kudlow in Running to Take Top Economic Adviser Post - Economic commentator Lawrence Kudlow has emerged as a leading candidate to chair the White House Council of Economic Advisers, according to people familiar with the transition, a move that would place an establishment Republican who served in the Reagan administration in charge of shaping economic analysis in the Trump White House. Mr. Kudlow was an early supporter of Donald Trump and helped craft different iterations of the campaign’s tax-cut proposals. But in the final stretch of the campaign, he signaled some reservations with Mr. Trump’s more strident critique of free trade and the Federal Reserve. People familiar with the discussions said a final decision hadn’t been made and said the transition team could still move in a different direction.  Mr. Kudlow declined to comment on any discussion he has had with the Trump transition on Thursday, but he said he was impressed by the team being assembled for the new administration. “I like what I see,” he said. “The tax-cut program will really put a booster rocket underneath this economy. The top people in the administration are all there to push that—that’s why I like them.” Mr. Kudlow started his career at the New York Federal Reserve before working in the Reagan White House as a budget official. He served as chief economist at Bear Stearns from 1987 until his resignation in 1994. For the last 15 years, he has appeared as a commentator and host on various CNBC business-news programs. He also hosts a radio program.

Kudlow for CEA?  by Jared Bernstein - A few people have asked me about the rumored pick of CNBC host Larry Kudlow to head the Council of Economic Advisers in the incoming Trump administration. I’ve been a good friend of Larry’s for 30 years and, as a CNBC commentator myself, have been on his shows (TV and radio) more than any others, I suspect. I enjoy arguing with Larry more than many of the millions of people with whom I argue about economic policy. So I’m not going to throw any shade his way. I will, instead, say a few words about how he thinks about this stuff.

  • –As hard as I’ve tried, and believe me, I’ve really tried, I’ve never been able to budge Larry one bit off of his belief in the growth effects of “supply-side” tax cuts. In fact, in almost every argument we’ve had–and if we’re talking, we’re (respectfully) disagreeing–at some point he maintains that whatever problem we’re arguing about–budgets, growth, inequality, jobs, wages–would be solved with a big tax cut on capital. At this point in time, with all the evidence my side has mustered against this case, I consider his position, one that I’m sorry to say is very widely shared in conservative DC policy circles (for obvious reasons), a matter of faith, not fact. Thus, the interaction between Larry at CEA and team Trump’s plan for a big, regressive, wasteful tax cut is a fiscal accident going out to happen.
  • –Outside of this faith-based position, Larry is not immune to data, knows his way around budget tables, and more than most, thinks about the interaction between financial markets and the real economy. However, another big source of disagreement here is his conflation of a rising stock market and actual positive economic outcomes. Extracting from bubbles, a rising stock market isn’t a problem, of course, but neither does it tell us squat about how working people are doing. And don’t give me that bunk about how everybody’s now invested in the market: 50% of the value of the market (stocks and mutual funds) is held by the top 1%; 91% is held by the top 10%.
  • –He’s become pretty dovish re monetary policy. That’s probably the one area we’ve agreed upon in recent years.  That said, he’s been bitten by the gold-bug and has at times (not for awhile, however) argued that the gold standard would stabilize the business cycle, which, like the tax cut thing, is just totally bass-ackwards.
  • –I must say, the argument against him that he’s not of the academic economist community neither moves nor surprises me at all. Look around at the Trump personnel process, people! And, channeling Dean Baker, government and Fed economists have missed a great deal in recent years, and I say that as someone who was a gov’t economist at various points in recent decades. If any group should be humble…

So, let’s see what happens, and if Larry does fill that slot, good luck, dude! And call me before you do anything rash!

Trump’s Nominees Stand to Reap Tens of Millions of Dollars in Potential Tax Deferrals -- President-elect Donald Trump’s top personnel picks stand to delay paying tens of millions of dollars in personal taxes on investment gains when they take up their posts, according to a Wall Street Journal analysis of corporate filings and other financial disclosures. The potential tax benefits are the result of a longstanding federal policy designed to let incoming appointees sell their shares and other assets, to avoid conflicts of interest in their new jobs, without racking up huge tax bills. The tens of millions of dollars in possible tax deferrals are a conservative estimate; the actual benefit is likely much greater. That is because the Journal’s analysis only includes paper gains on shares of publicly traded companies, where the appointee has recently been an officer, director or major shareholder. A number of the candidates—including Commerce Secretary appointee Wilbur Ross and Mr. Trump’s Treasury pick, Steven Mnuchin—derive large portions of their wealth from closely held investment vehicles about which there is scant financial information in the public domain, but which they’d likely need to divest.“It’s a great thing for the nominees,” says Robert Willens, a tax professor at Columbia Business School. “They get to diversify their portfolios on a tax-free basis.” He estimated that the total tax savings for the appointees likely will add up to hundreds of millions of dollars.Members of prior administrations also have reaped big deferrals—for example, President George W. Bush’s Treasury secretary, Henry Paulson, owned about $700 million of Goldman Sachs Group Inc. shares. But the high concentration of business leaders among Mr. Trump’s picks means the amounts of deferred taxes likely will be much greater than those enjoyed by members of previous presidential administrations.Mr. Trump and Vice President-elect Mike Pence won’t have to sell holdings because the conflict-of-interest rules don’t govern the president and vice president.

Donald Trump Could Double The Wealth Of Private Equity Billionaires And Change Wall Street Forever -- Donald Trump has vowed to kill one of Wall Street’s favorite tax loopholes. A closer look reveals his efforts could produce even more upside for private equity’s richest power players.  Trump's talk of killing the private equity industry's carried interest tax deduction has generated major headlines, but if it comes with broader tax reform it could create the biggest opportunity for the industry since firms like Apollo, Blackstone, Carlyle and KKR listed their shares on public stock markets. Lowering corporate and individual tax rates could give private equity firms reason to convert from tax-avoiding pass through partnerships into ordinary corporations, opening up their shares to a far broader investor base. Such a move could unwind a chronic discount attached to private equity stocks despite their master of the universe pedigree. Eventually, it could double the wealth of the industry’s billionaire class, which includes Blackstone’s Stephen Schwarzman and Jonathan Gray, Apollo’s Leon Black,Joshua Harris and Marc Rowan, KKR’s Henry Kravis and George Roberts, Carlyle’s David Rubenstein and William Conway, and Oaktree’s Howard Marks.  Currently, giants like Apollo trade as pass-through partnerships, similar to pipeline master limited partnerships and real estate investment trusts, which distribute virtually all of their earnings as passive income to shareholders. The carried interest deduction allows private equity to use this structure to avoid double taxation on winning investments. But the tax shield also relegates these firms to stock market backwaters because it saddles investors with complex K-1 tax forms. Furthermore, it keeps firms like Apollo and Blackstone off of major stock market indices such as the S&P 500 and Dow Jones Industrial Average, and outside of sector groupings. “We've avoided in the past the double taxation and that's what drove us to the [pass-through-partnership]," Apollo CEO Leon Black said at a Goldman Sachs conference last week. "But if rates come down a bunch in that doubling of taxation it may not be the worst thing in the world given that in a corporate form we're a much less complicated entity," he said.

Why Dems May Have Hard Time Stopping Mnuchin Nomination | American Banker: — Although Steven Mnuchin has close ties to Wall Street and was involved in some contentious deals, Democrats face an uphill battle making the case that those connections disqualify him to serve as Treasury secretary. Since Mnuchin's nomination, Democratic lawmakers have roundly denounced the former Wall Street banker and hedge-funder, using his banking history and former role at Goldman Sachs against him. Many have focused on a 2009 deal with the Federal Deposit Insurance Corp., where Mnuchin led a team of investors in acquiring bad mortgages from failed lender IndyMac, many of which later went into foreclosure. "After years peddling the kind of dangerous‎ mortgage-backed securities that eventually blew up the economy, Mnuchin swooped in after the crash to take a second bite out of families by aggressively — and sometimes illegally — foreclosing on their homes," said Sen. Elizabeth Warren, D-Mass., in a press release Friday. But former FDIC officials familiar with the deal say the rate of foreclosures of those loans is to be expected given the crisis, and aren't necessarily the responsibility of Mnuchin. "The fact that there were foreclosures is not surprising given how poorly performing the [IndyMac] portfolio was," said Michael Krimminger, a partner at Cleary Gottlieb Steen Hamilton LLP and a former top FDIC official who was involved in the IndyMac deal. At issue is a deal nine months after IndyMac's failure to buy its assets. Mnuchin led a group to form OneWest bank and ultimately struck an agreement with the FDIC. Within less than a year, it turned a $1.6 billion profit. OneWest was later bought by CIT, where Mnuchin served on its board. Democrats argue that the profits from that deal came at the expense of former IndyMac borrowers, who saw their homes enter foreclosure. But others say Mnuchin simply played by the rules and can't be blamed.

Trump selects Zinke as interior secretary - POLITICO: President-elect Donald Trump has offered the interior secretary position to Montana’s freshman Rep. Ryan Zinke, an ex-Navy Seal commander, according to two transition officials and someone familiar with the offer. The sources said Zinke has yet to accept and has given no indication as to which way he is leaning. But Zinke is also being discussed by prominent Washington Republicans as a possible 2018 candidate for the Montana Senate seat now held by Democrat Sen. Jon Tester. Zinke’s office declined to comment, and Trump’s transition team did not immediately respond to a request for comment. Zinke was an early Trump supporter. The Big Sky state Republican threw his weight behind the controversial nominee-turned-commander-in-chief in late May and stuck by him despite numerous Democratic attacks for doing so. He also campaigned with him, and his wife, Lola, is a member of the transition team dealing with veterans issues. The offer comes just days after multiple news outlets reported that No. 4 House Republican Cathy McMorris Rodgers (R-Wash.) was the favorite to win the position. But multiple top Trump aides weren’t sold on the Washington Republican and encouraged Trump to broaden his search. She, Zinke and Rep. Raul Labrador (R-Idaho) all interviewed for the job Monday. The Trump team called Zinke last Thursday, and asked him to come in for the interview. He was traveling by plane on Tuesday evening, but is expected to accept Trump's offer when he lands.

Trump Trumpets His Real Plans - Only if there is a superlative to the word “nightmare” can the dictionary provide a description of his bizarre selection of men and women marinated either in corporatism or militarism, with strains of racism, class cruelty and ideological rigidity. Many of Mr. Trump’s nominees lack an appreciation of the awesome responsibilities of public office.   He has appointed Elaine Chao, the wife of Senate Majority Leader Mitch McConnell, for Secretary of Transportation. Ms. Chao does not like regulation of big business, such as those for auto, aviation, railroad and pipeline safety. Next is Congressman Tom Price (R-GA) to lead the Department of Health and Human Services. Price wants to dump Obamacare, turn over control of Medicaid to the states – including Governors who dislike Medicaid – and even privatize (eg. corporatize) Medicare itself into the hands of the business sector already defrauding just that program by about $60 billion a year. Trump selected Congressman Mike Pompeo (R-KS) to be the Director of the Central Intelligence Agency (CIA). Pompeo is a cold war warrior who believes in a militaristic, interventionist CIA, especially toward Iran, taking that agency even further away from its original mission of gathering intelligence. Then come the Generals. Notwithstanding the Constitutional imperative that there should be civilian control over the military, Trump has placed two generals in charge of foreign and domestic military theatres. For Secretary of Defense, Trump chose recently retired Marine General James Mattis. This “Mad Dog” believes Barack Obama to be too weak, indecisive and without a strategic plan for the Middle East. He looks very much like he is a believer in the American Empire and the U.S. being the policeman for the world. The next general is retired Marine Gen. John Kelly, chosen to run the Department of Homeland Security.. He shares dangerous views on Iran and Islam with Gen. Mattis. Inside the White House, retired General Mike Flynn is slated to take the post as national security adviser. His public statements against Islam being an ideological, existential threat to the U.S., and his proliferation of inaccurate conspiracy theories have alienated his former colleagues in the military, including reportedly the incoming Secretary of Defense. Then there are the Trump nominees selected to run the departments whose numerous missions under existing law they want to dismantle. The proposed Secretary of Labor, Andrew Puzder, is a chain restaurateur adamantly against raising the federal minim wage of $7.25 an hour and his labor views are so extreme that a progressive group of restaurant owners organized to oppose his exploitative positions and argue for a fair minimum wage.  In another flagrant display of bureaucratic obstruction, Trump wants to appoint climate change denier Scott Pruitt to head the EPA, the same agency he, as Oklahoma Attorney General, fought tirelessly to undermine. Another magnet for Trump’s nominations are those who made big donations to his campaign. For Linda McMahon’s $7 million to pro-Trump Super PACs, she gets to head the Small Business Administration. As a highly controversial professional wrestling CEO, she worked to monopolize the professional wrestling market and stifle competition. For the Department of Education, school children and their teachers will face Betsy DeVos. From a billionaire family, she is a ferocious advocate of using taxpayer money in the form of vouchers for private schools. She makes no bones about her hatred of public schools and her desire to have commercial managers of school systems. To lead the Justice Department, Trump has selected Senator Jeff Sessions (R-AL), who is big on police surveillance, weak on civil rights enforcement, a hard-liner on immigration and very mixed on corporate crime. Add these strong-willed ideologues, coupled with Trump’s easily bruised ego, Twitter-tantrums on trivial matters and his penchant to always be the decision-making strongman, and you’ve got the making of an explosive regime with daily eruptions.

Donald Trump Meets With Silicon Valley Executives to Smooth Over Post-Election Friction — U.S. President-elect Donald Trump and some of Silicon Valley’s most powerful executives met at his Manhattan tower on Wednesday, a summit convened to smooth over frictions after both sides made no secret of their disdain for each other during the presidential campaign.The meeting was expected to focus on economic issues and skirt the numerous disagreements the tech industry has with Trump – including on immigration, the trade relationship with China and digital privacy – in favor of a focus on shared priorities, sources said.“There’s nobody like the people in this room, and anything we can do to help this go along we’re going to do that for you,” Trump told the executives gathered in a conference room on the 25th floor of Trump Tower. “You call my people, you call me, it doesn’t make any difference. We have no formal chain of command,” he said. Three of Trump’s adult children, Donald Jr., Eric and Ivanka, sat at the head of a large rectangular table as the meeting began. Their attendance may fuel further concern about potential conflicts of interests for Trump, who has said he would hand over control of his business empire to his children while he occupies the White House.Vice President-elect Mike Pence was also in attendance.  .The meeting between tech luminaries, including Apple Inc’s Tim Cook, Facebook Inc’s Sheryl Sandberg and Tesla Motors Inc’s Elon Musk, took place as Trump has alarmed some U.S. corporations with his rhetoric challenging long-established policy toward China, a main market for Silicon Valley.  Other expected participants include Alphabet Inc’s Larry Page and Eric Schmidt,’s Jeff Bezos, Microsoft Corp’s Satya Nadella, and Ginni Rometty from IBM, sources said.

Trump's Tariff Threats Already Having "Big League" Effect As Companies Halt Outsourcing Plans - Throughout the campaigning cycle, Trump sent a very clear message to businesses looking to move manufacturing operations offshore by repeatedly saying that subsequent imports would be hit with a massive 35% tariff.  Here is a December 4th tweet storm from the President-elect on the topic: The U.S. is going to substantially reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. ...... without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies ...... — Donald J. Trump (@realDonaldTrump) December 4, 2016 Therefore, it's not terribly surprising that, according to Bloomberg, Trump's messaging has already resulted in several companies postponing their plans to move overseas. Ross Baldwin, whose San Diego-based firm Tacna helps U.S. companies set up manufacturing operations in Mexico, said three new clients put their plans on hold until they see what Trump does as president. At the McAllen Economic Development Corp., which assists companies seeking to expand across the Mexican border from the Texas city, two of five companies currently considering a move have put the brakes on their plans because of Trump, said Keith Partridge, the development corporation’s chief executive officer.

Trump Is No Longer Trump - Stop thinking of Trump, as Trump alone. He was never entirely that, and he’s definitely not that any more. Trump is now Team Trump. The two most influential people in his court appear to be his son-in-law, Kushner, a fellow real-estate developer and the guy who made the key strategic decisions which lead to Trump’s victor; and Bannon. Bannon is an economic nationalist with white nationalist leanings, who identifies with the working class and wants to bring manufacturing back to America. He’s quite willing to have a trade war to do it. Priebus, the chief of staff, is also influential, but seems to be a bit of a drone. Trump’s children are influential, and it appears that Ivanka, his daughter, is the most influential of the three. She’s probably the most liberal person in the administration (even if she, strictly speaking, isn’t in the administration.) Trump has loaded up successful oligarchs and on Generals. So, for example, his shift on China policy is in alignment with what a lot of generals think (China is the real threat) and with what Bannon thinks (manufacturing jobs, economic nationalism.) His economic and labor policy will seek to both undermine labor rights and to spike the economy, which is essentially what authoritarians tend to do. But the important point is that Trump, because he has only a few fixed ideas, even more than most Presidents, will be defined by the agendas of his closest advisers. To understand Trump’s moves, you need to understand his court.

Elizabeth Warren Condemns the Wrong Man - NYTimes: Senator Elizabeth Warren, furious about President-elect Donald J. Trump’s appointments of finance industry insiders, took to Facebook a little over a week ago to fire off a message to her nearly 2.5 million followers. She took aim at an individual she described as a “hedge fund billionaire” who is “thrilled by Donald Trump’s economic team of Wall Street insiders.” The hedge fund manager she condemned was Whitney Tilson, who runs Kase Capital. Ms. Warren — the fiery Massachusetts Democrat who is known for her stern mistrust of Wall Street — called him out by saying, “Tilson knows that, despite all the stunts and rhetoric, Donald Trump isn’t going to change the economic system.” Then she added, “The next four years are going to be a bonanza for the Whitney Tilsons of the world.” There’s one rather glaring problem with Ms. Warren’s attack: Mr. Tilson happens to be one of the few financial executives who publicly fought Mr. Trump’s election and supported Hillary Clinton. A lifelong Democrat who was involved in helping to start Teach for America, Mr. Tilson also happened to be one of the rare Wall Street executives who had donated to Ms. Warren and actively sought new regulations for the industry. Recently, he gave Mrs. Clinton $1,000 so he could see Ms. Warren speak at a campaign fund-raiser. (He’s also far, far from a billionaire.)“I’ve donated money to her, attended her events, and did everything in my power to stop Donald Trump,” Mr. Tilson told me, talking about Ms. Warren and expressing dismay that he somehow became the target of her derision. “In addition, I agree with her 100 percent that large swaths of the financial industry have run amok and prey on vulnerable Americans, and thus strong regulation, including a muscular Consumer Financial Protection Bureau, is sorely needed,” he said.

Suspected of Corruption at Home, Powerful Foreigners Find Refuge in the U.S. --Wealthy politicians and businessmen suspected of corruption in their native lands are fleeing to a safe haven where their wealth and influence shields them from arrest. They have entered this country on a variety of visas, including one designed to encourage investment. Some have applied for asylum, which is intended to protect people fleeing oppression and political persecution. The increasingly popular destination for people avoiding criminal charges is no pariah nation. It’s the United States. An investigation by ProPublica, in conjunction with the Stabile Center for Investigative Journalism at Columbia University, has found that officials fleeing prosecution in Colombia, China, South Korea, Bolivia and Panama have found refuge for themselves and their wealth in this country, taking advantage of lax enforcement of U.S. laws and gaps in immigration and financial regulations. Many have concealed their assets and real-estate purchases by creating trusts and limited liability companies in the names of lawyers and relatives. American authorities are supposed to vet visa applicants to make sure they are not under active investigation on criminal charges. But the ProPublica examination shows that this requirement has been routinely ignored. One of the most prominent cases involves a former president of Panama, who was allowed to enter the United States just days after his country’s Supreme Court opened an investigation into charges that he had helped embezzle $45 million from a government school lunch program.

 White Collar Crime Will Have a Field Day Under Trump - NEP’s Bill Black appears on The Real News Network. Topic of discussion was that none of Trump’s economic picks – which now include three people from Goldman Sachs – were picked for their knowledge of economics. Video is below. You can view the transcript here.

Will Trump Target FDIC's Dodd-Frank Resolution Powers? | American Banker: — If there's one piece of the Dodd-Frank Act that most banks like — and many academics applaud — it's the provisions that allow the government to seize and unwind a failing banking company. Yet in their desire to undo the 2010 financial reform law, many in the industry fear those measures — found in Title II of the statute — will be a primary target under President-elect Donald Trump. "Title II provides a last-resort firewall that imposes losses on the failed firm's stakeholders and by law, not on taxpayers," said James Wigand, the former director of the FDIC's Office of Complex Financial Institutions. "Having that firewall is a good thing." Republicans have long objected to Title II, viewing it as formalizing "too big to fail," even though Democrats intend it to be the opposite. GOP lawmakers claim that the provisions effectively constitute a bailout by allowing the government to take over a company and put it back into the private market once its problems are fixed. Trump's team, including Treasury Secretary-designate Steven Mnuchin, have said little about what specifically they will target in Dodd-Frank, but many interpreted criticisms that the law ensures "taxpayers remain on the hook for bailing out financial firms" as a veiled reference to Title II. When it comes to "areas where populist views — the left and the right — essentially agree" topping the list is that Title II needs to go, said Karen Shaw Petrou, a managing partner at Federal Financial Analytics.’

 Dodd-Frank, the CHOICE Act and Small Banks - Critics of the Dodd-Frank Act argue that the new regulatory regime has weakened small banks (see, for example, Peirce, Robinson, and Stratmann). This criticism is echoed in the Financial CHOICE Act—proposed by House Financial Services Chair Jeb Hensarling—that would largely scrap the current oversight of large systemic intermediaries in part to reduce the regulatory burden on “community financial institutions” (those with fewer than $10 billion in assets). We share the goal of ensuring that regulation is cost effective for small banks that pose no threat to the financial system. However, we do not believe that the Dodd-Frank oversight regime of the largest, interconnected, complex intermediaries is a principal driver of the challenges facing most small banks. Instead, we note that the decline of small banks has been going on for more than 30 years, decades before the Dodd-Frank Act became law in 2010. This decline has been and remains concentrated in the very smallest institutions. Furthermore, in our view, the parts of Dodd-Frank that are seen as adding most to the costs facing small banks—while important and worthy of support—have little to do with systemic risk. A cost-benefit analysis of microprudential regulations that takes account of the special needs of the smallest banks could reasonably address these issues. Our conclusion is clear: there no reason to relax systemic oversight of large intermediaries for the purpose of easing regulatory burdens on small ones.

Fed Grants Volcker Rule Extension for Banks Unable to Divest Assets – The Federal Reserve is accepting applications for a compliance extension for banks to divest or otherwise align certain proprietary illiquid assets with the Volcker Rule. In a Monday announcement, the Fed said it would allow banks additional time to comply with the Dodd-Frank-mandated requirement that banks not engage in proprietary trading in the cases where those proprietary assets may be difficult to liquidate, divest or otherwise conform to the rule. The central bank said in a statement that it expects most banks experiencing such challenges will be granted an extension, but also said that banks must demonstrate a good-faith effort to comply."The Board expects that the illiquid funds of banking entities will generally qualify for extensions, though extensions may not be granted in certain cases--for example, where the banking entity has not demonstrated meaningful progress to conform or divest its illiquid funds, has a deficient compliance program under the Volcker Rule, or where the Board has concerns about evasion," the Fed said.Banks will have to submit details on the funds for which they are seeking compliance extensions, as well as details on what efforts have been made to date to comply with the Volcker Rule and how much additional time will be required. The Fed said it can "provide up to an additional five years to conform investments in certain legacy illiquid funds" covered in the proposal.The Volcker Rule was one of the most complex regulations to emerge from Dodd-Frank and, from banks' perspective, among the most difficult compliance exercises. The rule was finalized in December 2013 by five separate agencies: the Fed, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Securities and Exchange Commission, and the Commodity Futures Trading Commission. The agencies granted an extension for banks to comply with the Volcker rule with respect to certain covered funds last year, with the full compliance deadline currently set for July 2017. The Volcker Rule is among the most prominent targets for congressional Republicans, though President-elect Donald Trump has at times praised former Fed Chairman Paul Volcker and his eponymous rule.

Goldman Sachs CEO: Trump Not a Dangerous President - Contrary to fears in Europe, Donald Trump will not be a “dangerous” U.S. president, said Lloyd Blankfein, the president and chief executive of America’s second-largest investment bank, Goldman Sachs, in an exclusive interview with Handelsblatt. Asked whether Mr. Trump, who has proposed building a wall along the Mexican border and stopping the flow of Muslims into the United States, would be “dangerous,” the 62-year-old Mr. Blankfein sounded confident that Mr. Trump, despite his rhetoric, will be a pragmatic leader. “I don’t think so,” Mr. Blankfein, who supported Democratic presidential candidate Hillary Clinton, said in an interview earlier this month at the Hotel Adlon in Berlin. “He’s a very smart guy, a businessman…I am not pessimistic at all because he won.” As an investment bank, Goldman Sachs is in the risk-management business, Mr. Blankfein said, and Ms. Clinton, a known quantity, was a more easy choice for financiers like him. But “Mr. Trump may turn out to be a much better president than anyone else might have been in that place,’’ he added. “He’s just less of a known quantity as a politician.” While he voted for Ms. Clinton, and contributed to her 2008 campaign, Mr. Blankfein said he learned this year from Mr. Trump’s communication skills and his ability to see “things that other people didn’t see.” In the heat of the campaign, Mr. Trump also criticized Goldman Sachs as an example of Wall Street excess.Mr. Blankfein said the remarks didn’t bother him: “That was the rhetoric in the heat of the political battle; I didn’t take this personally,’’ he said. “It wasn’t specifically limited to Donald Trump; it also came from the Democratic side. When people think of finance, they think of banks, mostly investment banks, and to some extent, Goldman Sachs.’’

Still Unprosecuted for its Frauds in the Crash, Goldman Sachs to Be the Financial Brains of the Trump Era – Pam Martens - Two former Goldman Sachs bankers and the sitting President of the Wall Street firm are taking high positions in Donald Trump’s administration despite the egregious role that Goldman Sachs played in the 2008 financial collapse that cost millions of Americans their homes and their jobs. Steve Bannon, who at one time worked in Mergers and Acquisitions at Goldman, will be Trump’s Senior Counselor and Chief White House Strategist. Steve Mnuchin, who joined Goldman in 1985 and worked there for the next 17 years, has been nominated by Trump to serve as U.S. Treasury Secretary. That post also entitles Mnuchin to Chair the Financial Stability Oversight Council, a body that frequently meets in secret to deliberate if the U.S. could be looking at another 2008-style meltdown.  Yesterday, an article at Bloomberg News raised questions about Mnuchin’s qualifications to serve in one of the most important cabinet posts in government, writing that shortly after Mnuchin had made a windfall last year from the sale of OneWest Bank, problems emerged: “The U.S. Department of Housing and Urban Development opened an investigation into foreclosure practices in a division that handles loans to senior citizens. Accountants determined the unit’s books were a mess. Eventually, the bank’s new owner, CIT Group Inc., discovered a shortfall of more than $230 million.” Mnuchin, at least, was not at Goldman Sachs in the leadup to the greatest financial crash since the Great Depression. He left in 2002. The same cannot be said for Gary Cohn, the current President and Chief Operating Officer of Goldman, whom Trump has picked to lead the National Economic Council and be his chief strategist in developing his economic policy. It’s convenient that Cohn’s new position does not require Senate confirmation since exactly what he knew about Goldman selling bogus investments to its clients while the firm made billions of dollars betting the instruments would fail might be raised in Senate questioning of Cohn’s fitness to serve. In the two years leading up to the epic 2008 financial crash on Wall Street, Cohn was Co-President of Goldman. Cohn became a multi-millionaire from the business done in those years, earning $27.5 million in restricted stock and options just in the year 2006.  Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

Why Goldman Sachs Could Again Rule Wall Street - WSJ - So far, the postelection trading world seems to be rewarding everyone on Wall Street. J.P. Morgan Chase & Co., Citigroup Inc. and others are projecting double-digit increases in trading revenue for the fourth quarter, executives said at an industry conference last week. But a postelection shakeout could loom, one that is more likely to benefit firms like Goldman Sachs Group Inc. Indeed, Goldman’s postelection share-price gains have outpaced those notched by J.P. Morgan and Citigroup by more than 10 percentage points. Goldman’s shares are up nearly a third since Election Day and are within striking distance of their all-time closing high of $247.92 reached Oct. 31, 2007. One reason: the low-margin, high-volume “flow monster” model based on a steady flow of business from global corporations that has boosted Citigroup and J.P. Morgan “could be under pressure" in a new, more volatile trading world, said Mitchel Penn, a managing director in equity research at Janney Montgomery Scott. That has the potential to create new winners and losers, he added. Those likely to gain are firms more focused on hedge funds and active traders.  Opportunities in trading are shifting from a “stocked pond” where it’s easy to catch small fish to a new environment “all about trying to reel in the big ones," said Brennan Hawken, a UBS Group AG analyst. “That’s Goldman’s sport.” That would bring things full circle on Wall Street. Hedge funds once powered big-bank trading desks. They paid high fees for tailored products that let them place big bets on, say, Japanese government bonds or Texas oil. But the postcrisis period of calm made it harder to find an edge. Returns suffered and some funds curtailed their trading, which disproportionately hurt Goldman. Among the five biggest U.S. trading firms, Goldman’s share of fixed-income trading fees fell to 14% so far this year from 21% in 2010, according to data compiled by UBS. Morgan Stanley, which also skews toward hedge funds, lost two percentage points, while J.P. Morgan picked up eight and Citigroup gained two. Much of that growth has come from corporate treasurers. A spike in global trade and cross-border merger activity has sent companies in search of financial products to help manage risks. These transactions generally carry low fees, sometimes just a few thousand dollars. But big global companies can do thousands each year.

Who Will Protect the Whistleblower Under Trump’s Corporate Regime? –Pam Martens - Whistleblowers certainly haven’t enjoyed halcyon days under either Presidents Obama or George W. Bush (see related article below) but President-elect Donald Trump’s cabinet could actually produce an upsurge in corporate corruption by making whistleblowers fearful of coming forward at all. Now that Trump has announced his intention to put Big Oil in charge of the State Department; an executive opposed to the new overtime pay laws at the helm of the “Labor” Department; and the vampire squid Goldman Sachs’ alumni in charge of “anything that smells like money,” it seems safe to say this isn’t exactly the populist President the working class had in mind. In fact, it looks very much like a corporate coup d’état with three military generals thrown in to the mix as the Praetorian Guard in case the sold-out laborers grab their pitchforks.Trump’s nominee for Labor Secretary, Andy Puzder, is particularly problematic. Puzder is the CEO of CKE Restaurants, a fast food chain famous for its ads of scantily clad women. We don’t know if that’s what attracted Trump to him or if it was the book Puzder co-authored with David Newton titled: Job Creation: How It Really Works And Why Government Doesn’t Understand It.  The book carries this analysis of what it will take to jump-start the economy from the doldrums left from the Great Recession:  Puzder apparently hasn’t read the dozens of books or the official report from the Financial Crisis Inquiry Commission which places his cure of reduced regulation as the key culprit of the greatest financial crash in 2008 since the Great Depression, which then took down the rest of the U.S. economy. Attempting to deregulate our way out of an epic deregulation catastrophe only makes sense to CEOs who get filthy rich from deregulation.

 Swift Says Attacks Are 'Here to Stay': Report -- The payments messaging network Swift has told its client banks that the threat of cyberattacks "is very persistent, adaptive and sophisticated — and it is here to stay."  The warning was part of a letter Swift sent to clients last month and reported on Monday by Reuters. Cyberattacks carried out over the Swift network are said to have continued since the $81 million heist in February from the Bangladesh central bank's account at the Federal Reserve Bank of New York. Stephen Gilderdale, head of Swift's customer security program, was quoted by Reuters as saying that clients have been hit with a "meaningful" number of attacks. About a fifth of them resulted in stolen funds, while the vast majority were thwarted. Swift attributed nearly all of the intercepted attacks to its alerting mechanism and the customer security program it rolled out earlier this year.  Gilderdale did not disclose the names of the banks that have been attacked or say how much has been stolen. Arrests tied to the Bangladeshi heist may soon occur, according to the Reuters story. Citing comments by Mohammad Shah Alam of the Dhaka police, the story said that some Bangladesh central bank officials deliberately exposed its computer systems and enabled the theft.

Wells Fargo Scandal Hits Prudential as Whistle-Blowers Sue - Prudential Financial Inc. was accused of covering up fraudulent sales of life insurance policies through Wells Fargo & Co. to low-income customers, marking the latest flareup of the fake-accounts scandal plaguing the third-largest U.S. lender by assets. Many of the customers, who often had Hispanic last names, didn’t know what they had purchased and there were “a large number of similarities” between the way Wells Fargo employees opened bogus bank accounts without customers’ knowledge and the way Prudential’s “MyTerm” policies were sold by the bank, three of the insurer’s former employees said in a lawsuit filed in New Jersey state court. Three months after the Wells Fargo scandal erupted, resulting in the October departure of Chief Executive Officer John Stumpf, the San Francisco-based lender is still struggling to move past the crisis. Even as Donald Trump’s surprise election may ease pressure from Washington, an attempt to force aggrieved customers into closed-door arbitration is drawing a legislative backlash in California. Now, amid accusations of a cover-up at Prudential, alleged fake accounts are infecting another financial giant. The three employees of Prudential Insurance Co. of America’s corporate investigations division said executives ignored their reports of the abuses for fear of alienating Wells Fargo as a business partner. They said they were placed on administrative leave and escorted from the building in a “perp walk” and now have a “threat of imminent termination hanging over their heads,” according to a copy of the complaint in New Jersey state court that was confirmed by a lawyer for the plaintiffs.

Prudential to Suspend Sale of Insurance Policy Through Wells Fargo -- Prudential Financial Inc. on Monday said it would suspend distributing insurance policies through Wells Fargo & Co., following the sales-practices scandal that hit the San Francisco bank. Prudential’s decision comes as Wells Fargo continues to deal with the fallout from the sales tactics scandal this fall. Federal regulators and the Los Angeles City Attorney’s office announced in September that Wells Fargo opened as many as 2.1 million deposit and credit-card accounts without customers’ knowledge. The company was slapped with a $185 million fine for “widespread illegal” sales practices, and John Stumpf stepped down as chief executive.  Prudential said it was reviewing how Wells Fargo’s sales practices affected the sales of its MyTerm life insurance policy, which it agreed in 2014 to sell to Wells Fargo customers through self-service kiosks in Wells branches as well as through its website.  A Wells Fargo spokesman said it is working with Prudential to investigate any unauthorized or inappropriate referrals that may have occurred. The spokesman, Mark Folk, added that the bank is suspending sales and referrals of the MyTerm product until the investigation is concluded. “We take any allegations of improper sales practices seriously, and if improper conduct is found, we take action and make things right with customers,” he said in a statement. Steve Pelletier, chief operating officer of Prudential’s U.S. businesses, said that “if any Wells Fargo MyTerm customers have concerns about the way in which the product was purchased, we will reimburse the full amount of the premiums they paid and cancel the policy.”

Wells Fargo Likely Faces Regulatory Downgrade, Harming Its Prospects – WSJ -- Wells Fargo & Co. is likely to receive a regulatory downgrade that could hamper its business activity and growth, according to people familiar with the matter. The Office of the Comptroller of the Currency is considering a downgrade of Wells Fargo on a community-lending scorecard, these people said. A decision on Wells Fargo’s potential downgrade was expected by the bank as early as Thursday afternoon but was delayed by the OCC for unknown reasons, a person familiar with the matter said. The bank may have more clarity on an official decision in the next week, this person added. The expected downgrade would likely be a result of Wells Fargo’s sales-tactics scandal. The OCC may take advantage of a longstanding rule that if a bank engages in unfair and deceptive practices, then a regulator can lower the bank’s rating for purposes of the Community Reinvestment Act. News of a possible OCC downgrade of Wells Fargo was previously reported by Reuters. In the last 18 months, the OCC and other bank regulators have more aggressively lowered other banks’ ratings, including this year those of Fifth Third Bancorp and Regions Financial Corp. based on the rule, which has been around for decades, one of these people said. At least several more banks’ CRA ratings may be downgraded in the next several weeks, this person said. Comptroller of the Currency Thomas Curry recently told a gathering of housing lenders the agency would soon be releasing more CRA grades as the agency works through a huge backlog of exams, some which were done years ago.

 Calif., N.J. Investigate Wells Fargo, Prudential for Sham Insurance | American Banker: The California Department of Insurance launched an investigation Monday into allegations that Wells Fargo employees signed up consumers for Prudential Insurance policies without their authorization. California investigators are looking into possible violations of California laws that require people selling insurance to have state licenses. California will also examine Prudential Insurance's practices through a joint investigation with the New Jersey Division of Insurance. The New York Times reported Saturday that three former managers in Prudential's corporate investigations division alleged that Wells employees appeared to have signed up customers for insurance without their consent. The former Prudential employees filed a wrongful termination suit claiming they were fired in November for trying to escalate the issue internally. "Investigators with the California Department of Insurance will investigate new allegations of fraud and misconduct made by former Prudential employees regarding Wells Fargo and its employees," California Insurance Commissioner Dave Jones said in a press release. "Former Prudential employees who filed a whistleblower lawsuit allege that Wells Fargo signed up consumers for Prudential insurance policies without consumer permission much as Wells Fargo admitted its employees illegally signed up consumers for bank products without permission."

Wells Flunks Second Living Wills Test; Growth Restricted | American Banker: — The hits just keep coming for Wells Fargo. Of the five banks that failed their living will tests earlier this year — key evaluations meant to determine whether a company is capable of dismantling itself in a crisis without government intervention — only Wells Fargo failed an assessment of their revised plans, federal banking regulators said Tuesday. The failure will have immediate repercussions for the San Francisco bank, which is prohibited from expanding internationally and buying nonbank subsidiaries. "In light of the nature of the deficiencies and the resolvability risks posed by Wells Fargo's failure to remedy them, the agencies have jointly determined to impose restrictions on the growth of international and non-bank activities of Wells Fargo and its subsidiaries," the regulators said in a press release. "In particular, Wells Fargo is prohibited from establishing international bank entities or acquiring any non-bank subsidiary." It wasn't just a blow to Wells' business, but another public relations headache for a bank that has been battered by them during the past three months. The New York Times revealed Saturday that the phony account scandal that has plagued the bank since September has been expanded to possibly include false insurance sales, while Reuters said last week that Wells had received a poor "needs to improve" rating for its Community Reinvestment Act assessment. Those follow weeks of negative headlines for the bank stemming from a settlement in which the bank agreed to pay $190 million in fines and restitution after more than 5,000 employees were found to have opened up roughly 2 million fake accounts in an effort to meet sales goals.

Four Takeaways After Wells Failed Its Living Will Test — When regulators decided Tuesday to flunk Wells Fargo's resolution plan, it marked the first time a major U.S. bank has been sanctioned for not having a strategy to resolve itself in bankruptcy.   The Federal Reserve and Federal Deposit Insurance Corp. issued a series of letters in April to five banks — Bank of America, BNY Mellon, JPMorgan Chase, State Street and Wells Fargo — whose living wills were judged "not credible" by the agencies in April. Those five banks were given specific instructions on how to improve their plans and were instructed to resubmit the living wills by October 1.  But on the second try, the results of which were released Tuesday, only Wells was determined not to have made the cut — another body blow to its already battered reputation. Here are four takeaways from what the determination means for Wells, the other globally systemically important banks, the regulators and the living wills process overall.

  • Regulators Appear to Prefer a Certain Resolution Strategy. Several observers noted that Wells' failure seems to have demonstrated — even if only tacitly — that a single point of entry resolution strategy may be favored method for a bank to show that it has a credible plan for resolving itself in bankruptcy.
  • Regulators Did Not Drop the Hammer. The regulators were not as harsh as they could have been, targeting only Wells' ability to expand into foreign markets — historically not its bread and butter — and acquire nonbanks. Wells has been on a tear lately in acquisition of those kinds of firms, but some said the sanctions amount to a slap on the wrist.
  • Still, Regulators Are Generally Getting What They Want. On the whole, regulators are getting serious concessions on major issues related to structure and governance — especially considering the position the largest banks were in circa 2008.
  • Wells Had the Heaviest Lift. Regardless of today's outcome — and perhaps in part because of its use of a multiple strategy — Wells had the hardest job of any of the five GSIBs to get regulators to sign off on its living will. The regulators said as much in their April determinations, saying at the time that Wells' submission "call[s] into question the extent to which there was appropriate internal review and coordination with respect to the 2015 Plan prior to its submission."

 U.S. Regulators Sanction Wells Fargo, Declaring 'Living Will' Deficiencies –   U.S. regulators slapped Wells Fargo & Co. with new regulatory sanctions Tuesday, saying the firm failed to address alleged "deficiencies" in a plan to manage its own bankruptcy without a taxpayer bailout. Four other huge banks avoided the sanctions: J.P. Morgan Chase & Co., Bank of America Corp., Bank of New York Mellon Corp., and State Street Corp. The Federal Reserve and Federal Deposit Insurance Corp. announced the verdicts Tuesday after saying in April that the five banks didn't have adequate "living will" plans. Wells Fargo said in a statement that while it is disappointed by the regulators' decision it will work closely with the agencies to better understand their concerns. That said that it took early regulator feedback "very seriously and took several steps to address it," including creating a special office assigned to deal with the living wills process. The regulatory shortcoming, akin to failing a makeup test, is yet another blow to Wells Fargo, which is still struggling with the fallout from its sales-practices scandal. The firm, once a golden child among big banks, paid a $185 million fine in September to a separate set of federal regulators, along with a city official, over opening as many as 2.1 million accounts with unauthorized or fictitious customer information.  Since then, Wells Fargo has faced public and political criticism. Former Chief Executive John Stumpf retired abruptly after being grilled in two congressional hearings. The bank faces many state and federal investigations, including from the Justice Department and the Securities and Exchange Commission. Wells Fargo's board is also conducting its own internal investigation. The Office of the Comptroller of the Currency last month imposed further restrictions on the bank's operations over that controversy, and is looking at still further restrictions on the bank's ability to expand.

Fed Finalizes Last Major Post-Crisis Rule | American Banker — The Federal Reserve on Thursday released the final version of its total loss absorbing capacity rule, a measure meant to provide a means of recapitalizing a failed bank if a significant unforeseen shock wipes out a megabank's capital reserves. The rule, published ahead of a scheduled vote by the board, is among the most important post-crisis requirements yet to be completed, and was widely viewed as among the most likely to be finished before the new administration takes over in January. Fed Chair Janet Yellen said in her prepared remarks that the rule is a critical means of ensuring that taxpayers will never be on the hook to bail out the largest banks should they face similar circumstances as they did in 2008. "Simply put, this requirement means taxpayers will be better protected because the largest banks will be required to pre-fund the costs of their own failure," Yellen said. "Today's rule and the many other reforms we have put in place help keep our financial system strong and stable — not for its own sake — but for the sake of the workers, families and businesses who determine the long-run success of our economy." Fed Gov. Daniel Tarullo, who heads the board's supervisory committee, reiterated his position that TLAC — or something like TLAC — is a critical element to have in regulators' toolkits because there has to be some kind of contingency plan for when a bank's capital is exhausted, no matter how much capital it holds. Without such an assurance, the bank and the public will simply assume that the government will step in if things get too bad, he said. "If government authorities lack confidence in the prospects for an orderly resolution of such a firm, they will be tempted to look for direct or indirect ways to bail that firm out," Tarullo said. "And if counterparties and investors believe this will happen, then no market discipline will be brought to bear upon them."

Large Banks Declare 'Too Big to Fail' Over After New Fed Rule— With the Federal Reserve's finalization of a rule designed to quickly recapitalize a failed megabank, some large institution representatives are saying the era of "too big to fail" is effectively over. Greg Baer, president of the Clearing House Association — which represents many of the largest U.S. banks — said the rule was the "final piece of the regulatory puzzle" to ensure that taxpayer bailouts are a thing of the past. He cited previous efforts, as well as regulators' decision to approve four of five big banks resolution plans this week, as proof regulators had taken the steps they needed to. "The TLAC requirement is the culmination of a legal and balance sheet revolution that has effectively ended 'too big to fail,'" said Baer, a former executive at Bank of America and JPMorgan Chase. "As reflected in this week's living wills announcements, this rule protects taxpayers by requiring U.S. GSIBs to maintain enough loss-absorbing resources to be recapitalized during a resolution and ensure that any and all losses are borne by creditors and shareholders, and not the taxpayer." Rob Nichols, president and CEO of the American Bankers Association, was similarly emphatic that the final rule was a finale to the post-crisis regulatory regime. "Today's final rule caps the dramatic regulatory changes that have been made to reinforce our nation's policy that no bank should be too big to fail," Nichols said. "The TLAC resources — combined with higher capital and liquidity requirements, stress testing, recovery and resolution planning — ensure that the system is better prepared to withstand shocks and has a viable framework in place to handle them." But not everyone is convinced "too big to fail" is truly over. And some raise concerns with the TLAC rule itself, questioning whether it is workable in practice.

Yellen Warns on Bank Culture, Defends Dodd-Frank Progress | American Banker: Federal Reserve Chair Janet Yellen warned the incoming administration not to roll back the Dodd-Frank Act out of hand, saying that the dire consequences of the housing bubble demonstrated the importance of ensuring that the financial sector is better managed and capitalized. "This is progress, I would say, that it is very important not to roll back," Yellen said. "There may be some changes that could be made … but I would urge that it is important to keep this in place." But she also emphasized that given several egregious cases of wrongdoing by big banks recently, there clearly needs to be more done to fix institutions' culture. "There have been many ways in which there have been many compliance failures at banking organizations," Yellen said. "This is something that is important. The failings in a number of institutions certainly suggest there is room for improvement." Speaking at a press conference following the Fed's Federal Open Market Committee meeting on Wednesday, Yellen said that the central bank is in discussions with President-elect Donald Trump's team to ensure that the transition between the administrations is as smooth as possible. But she said she would ask the new administration and the Republican majorities in the House and Senate to focus their attention on areas of Dodd-Frank reform that have wide consensus: reducing the regulatory burden for community banks and a "modest" increase in the $50 billion asset threshold for banks that triggers enhanced prudential standards. She also said that the existing framework for resolution plans has gone a long way toward Republicans' stated goal of ending "too big to fail."

Repealing Durbin Fee Cap: Now Plausible, Still Hard | American Banker: For many banks, it's the most nettlesome part of the Dodd-Frank Act. And yet, even in this new era of regulatory skepticism in Washington, repealing caps on swipe fees may prove to be an impossible mission for industry lobbyists. Bankers and others close to the industry are generally optimistic about the prospects for a major rollback of regulations in the upcoming Congress. But they are adopting a much more cautious posture regarding the Durbin amendment, which caps the interchange fees that many banks can charge when their customers use debit cards, and was named after Sen. Richard Durbin, D-Ill. That's in large part because of the considerable clout of wielded by retailers, who waged an epic lobbying fight with banks to win enactment of the Durbin Amendment. "I think the chance of that being repealed is unlikely," said Don Walker, regional executive at Arvest Bank in Bentonville, Ark. "I think it should be repealed personally, but I think it will be a battle." The cap on fees applies to banks with at least $10 billion of assets. The 6-year-old law has been particularly painful for banks that are just above the cutoff and compete closely with smaller banks that are exempt from swipe-fee caps. Arvest has $17 billion of assets.

How to Ensure Agencies Consider Rules' Economic Impact -- Comprehensive regulatory reform will no doubt be high on the agenda of Congress and the incoming Trump administration. One of the most controversial reform issues is whether the courts should review the quality of the economic analysis that accompanies an agency's major regulation when deciding whether that regulation should be upheld. A high-quality economic analysis helps ensure that the regulation solves a real problem at a reasonable cost. Serious deficiencies in the analysis may signal that the agency doesn't really know whether the regulation will be effective or efficient. As I suggest in forthcoming research from the Mercatus Center on Securities and Exchange Commission regulations, judicial review could motivate agencies to improve their economic analysis substantially. As an independent agency, the SEC is not subject to executive orders that require executive branch agencies to assess the need for a new regulation, alternatives, benefits and costs before regulating.  But the SEC is required by law to conduct economic analysis when determining whether new regulations are in the public interest. Between 2005 and 2011, the D.C. Circuit Court of Appeals struck down three major SEC regulations due to shoddy economic analysis. The most extensive court examination of SEC analysis occurred in Business Roundtable vs. SEC, a 2011 case that vacated the SEC's first rulemaking under the Dodd-Frank Act. The rule would have required public companies to include information about shareholder-nominated board candidates in the proxy materials they sent to shareholders. The D.C. Circuit Court of Appeals pointed out seven distinct problems with the SEC's economic analysis. These included: failure to estimate some costs of the rule even though cost data was available; misattribution of costs that stem from the rule's encouragement of proxy contests to state laws that allow proxy contests; insufficient evidence supporting the SEC's claim that the rule would improve board performance; use of contradictory assumptions in calculating benefits and costs; and failure to consider whether the benefits and costs for mutual funds would be different from those for regular shareholder-owned companies.

AI Is the Answer to Regulatory Uncertainty | Bank Think: A change in political leadership with Donald Trump's presidential victory and GOP control of Congress has raised expectation of policy shifts that could affect the regulatory compliance process. The incoming administration is promising to work to "dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation." This scenario would have plusses and minuses. On one hand, bank stocks are on the rise because of Trump's promise to lessen regulation. On the other hand, a complete dismantling of Dodd-Frank would mean that banks would have to overhaul the compliance processes that they have spent billions of dollars to put in place over the past six years. Manually, this would be a daunting task. But yet another revamping of regulatory system would also be coinciding with the rise of cognitive computing technology. About a year and a half ago, I predicted that supercomputer IBM Watson may change everything. At the time, the financial services industry was in the early stages of adapting artificial intelligence. In those days, USAA had begun using Watson to help military families financially transition to civilian life, and UBS was using artificial technology from Sqreem Technologies to sort through wealth management customer data. I was correct, but more than I realized at the time. I am still surprised at the lightning fast speed at which Watson and other AI technologies are changing everything — a trend that will only continue.  In November, IBM announced that it was acquiring a risk management and regulatory compliance consulting firm, Promontory Financial Group, to train Watson. A better trained Watson means that banks can use IBM's regulatory compliance analytics to react to changing regulations more quickly and less expensively than in the past.

States Hurry to Boost Their Fintech Appeal in Wake of OCC Plan | American Banker — A week after the Office of the Comptroller of the Currency created a new federal charter for fintech firms, California's financial regulator is calling on other states to work together in making their licensing system more palatable to companies. State regulators have been bracing for the OCC's move, fearing a federal system could give fintech firms inappropriate advantages. Still, some have acknowledged that they could make their own system easier by creating a more unified system for companies that have to apply for a license in every single state in which they want to operate. "There is a recognition that state regulators could probably do a better job of providing a more coordinated regime," Tom Dresslar, the deputy commissioner for policy and planning in California's Department of Business Oversight, said in an interview. "There have been some preliminary discussions about how we would go about doing that." Dresslar is not alone. In an interview in September, Ray Grace, the commissioner of banks for North Carolina, said that banks should explore the possibility of creating reciprocal arrangements in which a license in one state could be automatically transferred to another state. "It's a path that we need to explore," Grace said. "Ideally, if we could work out the issues [to] give each of the participating states comfort in the manner in which the companies will be chartered and supervised, that will perhaps allow for some reciprocal participation in the examination of those companies." The OCC announced last week that it would allow fintech companies to apply for a limited-purpose national bank charter, which would provide firms with an alternative to the complex state-by-state licensing system. But states quickly registered their strong opposition to the OCC's plan, arguing that by pre-empting certain state laws it could lower consumer protection standards for companies that are admitted to the program.

  Bitcoin hits a 34-month high amid Chinese stock market volatility yuan falls --The price of bitcoin hit a fresh 2016 high on Tuesday amid a flight to safety after Chinese stock market jitters. Bitcoin traded at a high of $788.49, according to CoinDesk data, the highest level in 34 months.The previous 2016 high of $781.31 was achieved in the summer when traders prepared for a process known as "halving" – where the rewards offered to bitcoin miners fall, thus tightening the supply of the digital currency.  Experts said the rise in bitcoin on Tuesday was due to choppy Chinese stock markets which were trading lower for most of the day before closing in mildly positive territory. The Chinese yuan has also fallen against the U.S. dollar this year which has given a boost to bitcoin, according to Bobby Lee, chief executive of BTC China, one of the largest bitcoin exchanges in the world.  People are waking up to the fact that bitcoin is money in the cloud, so when you exchange from local currency like the Chinese yuan or U.S. dollar, you are exchanging this physical money to money in the cloud. What's good about money in the cloud, is it has been stable, the volatility has been down, it's a good store of value," Lee told CNBC by phone. Alternative assets like bitcoin do well when the world is unstable. It looks like the world is getting a lot more unstable,". Major financial institutions have been talking about the digital currency world for the past year, but not because of the attraction of bitcoin, but for the underlying technology called blockchain. This is a distributed ledger which records every transaction made in bitcoin and cannot be tampered with. Distributed ledger technology is something that banks feel can be used in different areas from identity checking to asset trading.

The Downside of Higher Rates for Banks | American Banker: Bankers got what they wished for when the Federal Open Market Committee raised the federal funds rate by 25 basis points this week, but industry experts are warning that there are some downsides to higher rates. For example, the rise in yields on short-term and long-term Treasury bonds can reduce the value of many banks' securities portfolios. Bond prices fall when yields rise, making the securities held in banks' portfolios less attractive to potential buyers. Another effect is that hedges on various types of assets may now come home to roost. The $33 billion-asset BOK Financial in Tulsa, Okla., announced plans on Wednesday to record a charge to cover the negative result of hedging and one analyst predicted more banks will do the same in coming weeks. Higher rates also mean that banks must eventually pay more to depositors. Mortgage-refinancing activity is expected to slow, meaning less fee income. Also, loan demand still remains pretty sluggish, and some industry experts say it will need to pick up before banks realize any meaningful benefit from rising rates, If a bank's bond portfolio declines in value, the effect can manifest in different ways on the balance sheet. Earnings can take a hit if a bank sells securities at a lower value and realizes a loss on the transaction, or if the bank takes other steps to reposition its balance sheet, such as recording a charge to cover for reduced values, said Joe Fenech, an analyst at Hovde Group. Equity levels could also fall as rates rise.

Lawmakers Push Treasury Over Pot Banking | American Banker: — Senate lawmakers are putting pressure on the Treasury Department's financial crimes unit to clarify to banks that businesses hired by marijuana growers and dispensers should not be treated like pot firms themselves. The Financial Crimes Enforcement Network issued guidance in 2014 that warned banks and credit unions about providing services to state-sanctioned marijuana businesses. Fincen said while the businesses may be legal at the state level, it is not federally legal and those businesses are a money laundering risk. The guidance ultimately said it is up to banks to determine whether they want to provide financial services to the industry. In a letter sent Thursday to Fincen Acting Director Jamal El-Hindi, ten senators said banks have been denying financial services to lawyers, chemists and even plumbers that are hired by the marijuana businesses because they are afraid of a possible Fincen enforcement action. "Most banks and credit unions have either closed accounts or simply refused to offer services to indirect and ancillary businesses that service the marijuana industry" said the letter, which was sent by Sens. Jeff Merkley, D-Ore., Ron Wyden, D-Ore., Kirsten Gillibrand, D-N.Y., Patty Murray, D-Wash., Elizabeth Warren, D-Mass., Bernie Sanders, I-Vt., Al Franken, D-Minn., Angus King, I-Maine., Lisa Murkowski, R-Ark., and Cory Booker, D-N.J. "We urge you to issue further guidance to financial institutions on their ability to provide services, specifically to indirect businesses that do nothing more than provide services to the state-sanctioned marijuana industry," the letter added.

The Case Against the Credit Union Rubber Stamp | Bank Think -- A legal battle set to play out this week between community banks and the National Credit Union Administration will determine whether the agency may continue sidestepping the legislative branch to the benefit of the tax-exempt industry it is charged with regulating.My organization, the Independent Community Bankers of America, recently sued the NCUA over its rule dramatically expanding credit union business lending limits, which were set by Congress. A judge was set to hear arguments Thursday on the NCUA's motion to dismiss the case.Our lawsuit challenges the NCUA rule issued earlier this year allowing credit unions to exclude purchased commercial loans and commercial loan participations from the 12.25% member business lending cap — as long as the borrower is not a member of the purchasing credit union. This significantly alters the NCUA's approach to commercial lending by allowing credit unions to circumvent the cap by simply purchasing loans and participations from other credit unions.Not only does the NCUA's rule expand government-sponsored advantages for credit unions and introduce new risks to the financial system, it is simply illegal based on existing law. The plain language of the Federal Credit Union Act, as amended by the Credit Union Membership Access Act, expressly limits the amount of member business loans that may be held on credit union balance sheets. The law also defines a member business loan as any commercial loan on the credit union's balance sheet, regardless of whether it was originated or purchased by the credit union.

Citi, Wells Fargo Among Banks With Most Consumer Complaints in 2016 - WSJ: Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. were among the banks that received the most consumer complaints filed through a federal watchdog agency in 2016, indicating that the nation’s largest banks did worse than scores of smaller banks in keeping their customers satisfied. A new analysis of the consumer complaint database kept by the Consumer Financial Protection Bureau ranked banks by the number of complaints received so far this year, after adjusting for the size of their deposits. At the top of the list was TCF Financial Corp., a Minnesota-based regional bank that received 12.3 complaints for each $1 billion in deposit, followed by Citigroup with 8.6 complaints and Wells Fargo with 8. SunTrust Banks Inc. and Bank of America Corp. also drew a sizable portion of complaints, 7.7 and 7.2 complaints, respectively. The analysis was conducted by LendEDU, an aggregator of student loan information, based on the overall complaint data of 57 financial institutions that make up the Standard & Poor’s Banks Select Industry Index. The ranking is adjusted for the size of the banks, rather than the absolute number of complaints. When ranked by the absolute number of complaints, Wells Fargo was No.1 with 10,204, followed by Bank of America with 8,953, and Citigroup with 8,065.Some bank representatives criticized LendEDU’s methodology, saying it fails to account for different business models that could increase or cut the number of complaints. A TCF spokesman said the study “inflates the ratio of complaints for a bank like TCF which has a higher number of transaction accounts relative to peers with similar deposits.” He added the bank takes every complaint seriously and is committed to resolving any issues quickly. A Citi spokesman said the bank saw an increase in complaints due to two issues: promotional offers for which some bank customers weren’t eligible and the automatic reissuance of credit cards tied to a portfolio conversion, which it says is a standard industry practice. The volume of complaints for both issues has abated significantly, he said.

 OCC Disputes Payday Lenders' Claims on Bank Account Terminations | American Banker: Federal banking regulators are dismissing claims that they are pressuring banks to cut ties with payday lenders, arguing that the lenders' recent request for a court order against the agencies rests on erroneous speculation and bad legal arguments. In late November, one of the nation's largest payday lending firms, Advance America, asked a judge to enjoin the Federal Deposit Insurance Corp., the Federal Reserve Board and the Office of the Comptroller of the Currency from informally pressuring banks to end their business relationships with payday lenders. The request, which was joined by a payday lending trade group, followed U.S. Bancorp's recent decision to cut ties with Advance America. The Spartanburg, S.C.-based firm argued that regulatory pressure is the only logical reason that a bank would terminate a longtime, mutually beneficial business relationship without any warning or explanation. But in court papers filed Thursday, the OCC, which is U.S. Bank's primary federal regulator, flatly denied the claim that it pressured the Minneapolis-based bank. Serena Christenson, the OCC's examiner in charge of large bank supervision, stated that no one on her team pressured U.S. Bank to terminate its relationship with Advance America or with any other payday lenders. "The bank did not inform me or anyone on my team that it was taking or planning to take any action with respect to Advance America," Christenson wrote in a court declaration. Christenson added that she learned about U.S. Bank's decision from a news article in late November.

Law Firm Sues CFPB Over FOIA Request on Arbitration | American Banker: A public interest law firm filed a lawsuit Tuesday against the Consumer Financial Protection Bureau for failing to produce documents that showed how the agency decided to ban mandatory arbitration clauses. The CFPB's arbitration plan is expected to be finalized in early 2017. The controversial plan, released in May, would prohibit banks and other firms from forcing consumers into mandatory arbitration, allowing customers to file class action lawsuits. The Cause of Action Institute, a nonprofit law firm, filed a far-reaching Freedom of Information Act request in April asking for "all records by or between CFPB employees regarding the arbitration study and/or proposed ban." The firm said the CFPB withheld 1,877 pages of "responsive records," and challenged the agency's FOIA exemptions. The CFPB denied the firm's appeal last month. Cause of Action said the CFPB's own arbitration study, released in March 2015, "failed to follow rigorous scientific standards under the Information Quality Act." Many in the industry have seized upon data from the bureau's arbitration study to show that arbitration is in the public interest, and that the CFPB's findings do not align with the bureau's own proposal. The CFPB's study found that consumers received an average of $5,389 in arbitration, compared with just $32.25 from class action settlements. The disparity in payouts is being used to challenge the CFPB's arbitration plan.

How Consumers Use the CFPB's Complaint Function -- I recently posted to SSRN my new article, Calling on the CFPB for Help: Telling Stories and Consumer Protection (Law & Contemporary Problems, forthcoming 2017). In the article, I survey a random sample of consumers' narratives detailing their complaints about consumer credit and financial service providers, with the goal of assessing how people engage with the complaint function in light of how the CFPB processes complaints. In short, consumers submit complaints via the CFPB's website and by phone, the CFPB forwards the complaints to companies, and the companies are required to respond. That the CFPB does not respond to complaints in the first instance may come as a surprise to some consumers, despite the CFPB's websites’ prominent statements about where it sends complaints. Importantly, the CFPB is not the only federal or state agency that maintains a complaint function. The DOJ, FTC, and other agencies similarly take complaints from constituents, and likewise often do not respond directly to the complaining individuals. Identifying when and how people are not understanding how their complaints will be processed may provide agencies an opportunity to further help constituents and to augment how they meet their goals. In brief, I find that people mainly use the CFPB's narrative space in two ways: to express their anger and frustration about a company’s practice, or to express sadness and fear about how a company’s practice has impacted their lives, such as their ability to afford food and housing. When people write with anger and frustration, they tend to raise specific legal claims, thank the CFPB for its work generally, or ask the CFPB to investigate the company’s practices.  In contrast, when people write with sadness and fear, they are likely to plead with the CFPB for help on an individualized basis. However, the CFPB is not equipped to help people on the personalized basis that these narratives request, and such is not the goal of the complaint mechanism. But if the CFPB does not respond to people who seem to desperately seek a response, the CFPB may lose public buy-in, and these people may continue to suffer, particularly if they do not seek assistance elsewhere because they think the CFPB will help them. Similar may be true across government agencies with complaint functions.

The CFPB s Final Servicing Rule Is Still Unclear: With all that has been said about how the Consumer Financial Protection Bureau's 2016 Servicing Rule will affect current practices in the mortgage servicing industry, the unknown is what deserves focus: how will the industry absorb the rule's impact after its effective date arrives? Because the CFPB is not allowing optional early compliance with the rule, the industry may have to wait until Oct. 19, 2017, the general effective date — or April 19, 2018, for when the successor in interest and periodic statements for borrowers in bankruptcy provisions take effect — to find out. Generally, the CFPB declined to allow servicers the option to get into compliance prior to a rule's effective date. According to the bureau, offering early compliance for some provisions of the servicing rule, without requiring early compliance with all of the provisions, would be too speculative and could cause confusion to consumers and regulators alike and could lead to potentially unnecessary litigation. The CFPB's decision to prohibit optional early compliance is intended to be helpful. But, in clarifying some parts of the rule, the CFPB may have unintentionally shifted the burden to the industry to determine which provisions should be implemented early. That's because the bureau recognizes that early compliance is permitted in three instances.First, the CFPB will allow servicers to continue with current practices in the "several instances" where the new rule adopts new commentary to the current regulation that "clarifies, reinforces or does not conflict with the existing rule and commentary." Second, the CFPB will allow servicers to continue with consumer-friendly practices that are not specifically required under the current rule and do not violate the new rule. Third, for situations not covered by the above list, the CFPB recognizes that when "practices that will be mandated by the final rule are in compliance with the current rule or are not in violation of the current rule, servicers may continue those practices in compliance with the existing rule without necessarily adopting all of the specific requirements of the final rule before their effective dates."

Let's Focus on Improving CRA, Not Killing It | Bank Think: The Community Reinvestment Act will be 40 years old next year. But no one is planning an anniversary celebration as banks, regulators and community advocates ponder the impact of President-elect Trump and the GOP's control of Congress on how the law will be enforced. Some even question whether the law will survive to middle age. Not only has Trump and his party made much of the need to eliminate bank regulatory burden, but the CRA's traditional supporters are out of power and do not appear to have much influence with the incoming administration. Certainly, there is some history of Republican antipathy toward the CRA, which was enacted in 1977 by a Democratic Congress and president. When the GOP took over Congress in 1995, for the first time in 40 years, lawmakers promptly held hearings on whether the CRA should be repealed. In 1999, a Republican Congress passed the Gramm-Leach-Bliley Act, which in addition to repealing Glass-Steagall provided CRA regulatory relief for smaller banks and enacted the CRA Sunshine Rule. The rule required public disclosure of CRA-related agreements between banks and community groups — deals that Republicans questioned. Outright repeal of the CRA, however, was blocked by a Democratic president.In the 2000s, the law survived the years of President George W. Bush's administration, including when Republicans controlled the legislative branch. There are two reasons why the CRA has so far avoided the chopping block. First, the law itself is no longer a magnet for controversy. After almost 40 years, banks, regulators and community groups have largely learned to work together to serve lower-income neighborhoods and individuals. Their collaboration has been effective, efficient and profitable. But perhaps most importantly, the purpose of the CRA — to encourage banks to safely and soundly help meet the credit needs of their local communities without regard to race — is in line with a political philosophy that rejects race-based distinctions and a president-elect seeking ways to help address the needs of communities defined by their economic struggles, not their racial or ethnic compositions.

JPMorgan Traders Back Risky Property Deals as Bank Shows Caution -- Real estate developers who can’t get funding from JPMorgan Chase & Co.’s commercial bank may have another option: a JPMorgan trading desk. A group of traders in JPMorgan’s investment bank has expanded from selling commercial mortgage-backed securities to underwriting loans that are unsuitable for bonds, such as those for big construction projects, according to people with knowledge of the matter. In recent months, the desk has helped fund developments including Manhattan condominiums, a Times Square hotel and New Jersey’s troubled American Dream mega-mall. The biggest U.S. bank by assets is making the deals as traditional lenders pull back from construction loans, which carry bigger risks and juicier yields than mortgages for occupied buildings. Traders in JPMorgan’s investment bank are harnessing demand from investors and developers to take part in potentially lucrative projects, even as the company’s commercial bank -- which holds most of its real estate debt -- signals caution about riskier property financing after a six-year surge in prices. “They’re lending into a higher-risk area when we’re clearly at an inflection point in the cycle,” The mortgage-bond trading team started making the construction loans about two years ago, said the people, who asked not to be named because deals are private. The transactions have grown larger over the course of 2016, the people said, as market volatility and regulatory hurdles slow CMBS issuance. They still account for just a piece of the roughly $30 billion in property debt underwritten by the team in the past two years, the people said.

Wolf Richter: Is it Just Trump Tower? Or is the Entire New York City Housing Bubble Unwinding? -naked capitalism - Yves here. While no sane person would want to buy an apartment in Trump Tower now and be subject to inconveniences like gawkers, Secret Service cordons and the inability to have your driver drop you off and pick you up, Wolf’s piece shows that Trump Tower apartments had been languishing on the market long before Trump won.There’s been a sudden glut in the market for super-high end units, due to a perfect storm of a rash of construction combined with a crackdown on anonymous buyers using shell companies, which has choked off a lot of money laundering and foreign buying that was pretty much the same thing. But there are other signs of ill health in the New York City real estate market generally: falling rental prices at the lower end, and a remarkable rise in retail vacancies, with many in my neighborhood (Third and Madison Avenues on the Upper Eas Side) remaining empty for more than a year. One reason for shuttered storefronts (at least in my ‘hood) is that landlords tried pushing through big rental increases, apparently thinking they were entitled to catch up after years of no or modest rises in the wake of the crisis. On Third Avenue two years ago, many landlord tried doubling the rents on leases up for renewal. Many stores folded or relocated and those owners either have not found tenants or have gotten businesses in that look too misconceived to last. One was an upscale frozen food purveyor with a large space, another was a “healthy” prepared foods vendor, but there’s now tons of competition in that niche, and the staff was snooty and the offerings looked to be fattening by virtue of visibly using tons of oil. The former vendor is still open but I never see any traffic; the latter has closed.

Mnuchin's Reverse-Mortgage Woes Blemish Record of Treasury Pick -- When Donald Trump announced his choice for Treasury secretary last month, he called Steven Mnuchin a “world-class financier,” citing business successes like his profitable turnaround of a California bank. But soon after Mnuchin sold OneWest Bank last year, problems emerged that may tarnish his record there. The U.S. Department of Housing and Urban Development opened an investigation into foreclosure practices in a division that handles loans to senior citizens. Accountants determined the unit’s books were a mess. Eventually, the bank’s new owner, CIT Group Inc., discovered a shortfall of more than $230 million.“I want to express our disappointment,” CIT Chief Executive Officer Ellen Alemany told investors in July. “We have a new management team in place, and they’re making good progress in implementing practices to strengthen the controls and procedures.” The old management team had included Mnuchin. He stepped down as CIT’s vice chairman in March. When he left, less than a year into a three-year employment contract, he received about $10.9 million in severance, according to public filings -- an amount consistent with what he would have been entitled to if he had been fired. He remained on the board until this month.

Risk Transfer Alone Is Not a Viable Solution for GSEs | Bank Think: Lately, policymakers have supported using expanded risk-sharing as a way for Fannie and Freddie to raise more private capital. But using risk-sharing alone without more equity is not the best approach for ensuring the safety of the mortgage finance system. Two recent news developments have shined a brighter spotlight on the need for more private-market support of the GSEs. First, Treasury Secretary-designate Steven Mnuchin signaled in a television interview that he would support getting the two companies "out of government ownership," though it was unclear if that meant restoring them to their pre-conservatorship status or some other form. The second development was the introduction of a bill by House Reps. Ed Royce, R-Calif., and Gwen Moore, D-Wis., mandating that Fannie and Freddie dramatically increase their use of credit risk transfer programs. Credit risk transfer — or "CRT" — is a set of highly promoted tools that allow Fannie and Freddie to access private-sector capital to hedge potential losses in their guarantee book. Under CRT deals, investors typically pay upfront for specially-created debt securities that are meant to help shoulder credit losses suffered by the GSEs. They have proven especially important as the government — seemingly interested in pursuing a longer-term strategy to wind down the two companies — has restricted the GSEs from raising other kinds of capital. But policymakers and market commentators who believe that CRT can in effect replace equity capital need to understand the risks of doing so. In practice, CRT is less stable during times of market stress than equity capital, moderately expensive compared to other credit protection markets, and of insufficient size to fully replace equity support. CRT is an important tool to supplement regulatory capital, but it is not a replacement for equity — such as retained earnings, a rights offering, a mutual cooperative, an IPO or a utility model.

Flex Mod to Replace HAMP at Fannie and Freddie: Fannie Mae and Freddie Mac will replace the expiring Home Affordable Mortgage Program with a new loss mitigation option called the Flex Modification. The new program is expected to provide a 20% payment reduction for eligible borrowers, the government-sponsored enterprises said Wednesday. Fannie and Freddie said that "a high percentage" of borrowers who are at least 60 days delinquent on their mortgages would be eligible; in certain cases, those who are less than 60 days delinquent or even current on their loans could also qualify. "The Flex Modification is an adaptive program that will allow us to continue to assist struggling homeowners in a changing housing environment and simplify the process for servicers to deliver those solutions," Bill Cleary, Fannie's vice president of single-family servicing policy, said in a news release. "We believe the program is flexible to adjust for regional and even local differences in housing." The Flex Modification incorporates components of HAMP, which expires at the end of 2016, as well as the GSEs' standard and streamlined modifications and was developed at the directed of the Federal Housing Finance Agency. "By avoiding the high costs associated with foreclosures, the Flex Modification will result in significant savings for the enterprises and taxpayers. And it will provide borrowers who face permanent hardships with a sustainable modification," said Sandra Thompson, FHFA deputy director, in a statement.Servicers will be eligible for the same financial incentives they receive for completing streamlined modifications. For loans that are 120 days or less delinquent, the incentive fee is $1,600. This fee drops to $1,200 for loans that are between 121 days and 210 days delinquent and $400 for loans that are more than 210 days delinquent.

National Foreclosure Inventory Shrank by 31.5% in October: The national foreclosure inventory decreased by nearly a third in October from a year earlier, CoreLogic reported. The inventory of foreclosures included roughly 328,000, or 0.8% of all properties, representing a drop of 31.5% from October 2015, CoreLogic found in its National Foreclosure Report. Similarly, the number of completed foreclosure fell by 25% to 30,000 from 40,000 a year ago. The number of mortgages in serious delinquency nationwide also declined by 24.8% to 1 million mortgages, or 2.5% of all mortgages nationwide. This equates to the lowest level reported since August 2007. Still, these nationwide trends don't apply to all states, according to CoreLogic Chief Economist Frank Nothaft. "Alaska, North Dakota and Wyoming, three states with energy-related job loss, experienced a rise in serious delinquency rates while all other states had a decline," Nothaft said in a news release Tuesday. "Although there were large declines in foreclosure rates in New York and New Jersey, both states experienced the highest serious delinquency rates in the nation, reflecting lagging home values in most neighborhoods and an unemployment rate above the national average."

Manufactured Housing Advocates Anxiously Await Final Duty to Serve Rule: – Manufactured housing advocates are "guardedly optimistic" that the Federal Housing Finance Agency will soon issue a long-awaited final rule that they hope will expand the secondary market for what is commonly known as mobile homes. The groups are pushing for a pilot program in a final rule by the Federal Housing Finance Agency that will let the government-sponsored enterprises invest in manufactured home loans that are not backed by real estate – otherwise known as chattel loans. Roughly 70% of manufactured homes are financed with chattel loans. "We are optimistic it can do lots of good for manufactured home owners," said Doug Ryan, the Center for Economic Development's director of affordable homeownership. The pilot program is expected to be part of the GSEs' "duty to serve" rule, which details how Fannie Mae and Freddie Mac should help low- and moderate-income borrowers. "Requiring the GSEs to purchase chattel loans as part of their statutory Duty to Serve requirement is the single most important step the FHFA can take to improve access to mortgage credit for manufactured housing consumers," said Lesli Gooch, executive director of the Manufactured Housing Institute.

FHFA Opens Door for GSEs to Serve Manufactured Housing Market: — It is going take some time before it comes to fruition, but the Federal Housing Finance Agency got the ball rolling Tuesday on pushing Fannie Mae and Freddie Mac to begin purchasing manufactured housing loans. The agency finalized its rule to mandate a "duty to serve" for the government-sponsored enterprises that includes incentives to enter that market, creating a pilot program under which they receive credit for purchasing manufactured homes secured by real estate. Manufactured housing advocates welcomed the move, which they hope will increase the availability of so-called chattel loans, which industry players argue is a big problem at present. "Anything the agencies can do toward the purchase of manufactured housing loans, including chattel loans, will do a great deal to help solve that crisis," said Richard Ernst, chairman of the financial services division of the Manufactured Housing Institute. The group had hoped FHFA might move faster, but said the pilot program was a good start. "We recognize that the GSEs need time to work through risk and operational issues," said Lesli Gooch, the group's senior vice president for government affairs. The rule "accomplishes the goal of encouraging the GSEs into the chattel lending market and allows for the development of a full and robust secondary market for chattel loans in the near future."

Cheat Sheet: How FHFA Will Require GSEs to Serve Poorer Communities: — The Federal Housing Finance Agency finalized a rule Tuesday that will create a "duty to serve" for Fannie Mae and Freddie Mac to help low- and moderate- income consumers, including encouraging a secondary market for manufactured housing loans. The final rule appears largely similar to a proposal unveiled a year ago, but manufactured housing advocates have been watching to see whether the FHFA kept a pilot program that gives credit to the government-sponsored enterprises for supporting so-called chattel loans, which are manufactured homes titled as real property. The FHFA said it will issue a proposal next year asking for comment on how to create the pilot program. Manufactured housing advocates were hopeful the agency would approve the pilot program, noting that 70% of all manufactured homes are financed with chattel loans. The final rule also give the GSEs credit for supporting the preservation of affordable rental housing and affordable homeownership opportunities, such as shared equity homeownership programs. Additionally, Fannie and Freddie will receive credit for supporting housing in high-needs rural regions. The rule was mandated by the Housing and Economic Recovery Act of 2008, under which Congress charged Fannie and Freddie with creating a secondary market for underserved areas, including manufactured, rural and affordable housing for low- and moderate-income families. "We look forward to working with Fannie Mae and Freddie Mac to help meet the critical housing needs for very low-, low-, and moderate-income American families around the country in the manufactured housing, affordable housing preservation, and rural housing markets," said FHFA Director Mel Watt.

Can Consumers Without FICO Scores Be Trusted with Mortgages? - Many consumers without traditional credit scores are nevertheless creditworthy and could qualify for mortgages, according to recently released research. Millions of people considered unscoreable by conventional standards have credit profiles nearly identical to those with access to mainstream credit, the report claims.The white paper comes from VantageScore, developer of the alternative credit scoring model that competes with the FICO score. The company has been trying unsuccessfully for a decade to persuade the government-sponsored enterprises, and more recently, their regulator, the Federal Housing Finance Agency, to approve the VantageScore model for use by mortgage lenders."I made my first call on Fannie Mae in October 2006," Barrett Burns, president and CEO of VantageScore Solutions, recalled in an interview.Today, the alternative model is used by lenders, landlords, utility companies, telecomm firms and other to determine the creditworthiness of otherwise unscoreable customers. Over the years, the model has scored about 35 million consumers who typically could not have been scored by conventional methods without reducing standards.But Fannie Mae, Freddie Mac and more importantly, the FHFA, have yet to allow lenders to use the alternative credit score. In September, Fannie Mae began requiring lenders to use trended data credit reports that show borrowers' debt loads over time rather than as a snapshot. Trended data isn't currently part of the FICO Classic scores the mortgage industry uses, but FICO is considering broader inclusion of trended data in its scores.

 Fed Rate Hike? Whatever, Mortgage Rates Are Already Up - The surge in mortgage rates since the November election is expected to offset the increase to lenders' short-term funding costs following the Federal Open Markets Committee's 25-basis-point increase to the federal funds rate Wednesday.The federal funds rate doesn't directly affect the interest rates that borrowers pay on home loans, as mortgage rates are benchmarked against longer-term 10-year Treasury yields. But depository and nonbank lenders are both expected to see their short-term funding costs go up, albeit in different ways."Anything that's a warehouse line or something like that is going to go up in price," said Brent Nyitray, director of capital markets at iServe Residential Lending in Stamford, Conn.For banks, the fed rate influences their cost of funds for the deposits they use to fund mortgage originations. Likewise, the warehouse lines of credit that independent nonbanks use to fund their pipelines until loans can be sold to end investors are pegged to the London Interbank Offered Rate or the prime rate, which are influenced by the fed funds rate.But the increase in that short-term rate isn't so much a concern as long as it's offset by a rise in the long-term rates most mortgages have. The average interest rate on 30-year mortgages has gone up nearly 60 basis points since the week before the election. The rise in mortgage rates is enough to offset the increase in short-term rates, plus warehouse lines are not a big cost for mortgage lenders, said Charles Clark, director of mortgage warehouse finance at EverBank.

Lenders Fear Congress May Neuter Mortgage Interest Deduction: — The mortgage interest deduction has been a pillar of U.S. housing policy for more than a century, but Congress appears ready to consider significant changes to it that some industry players worry could effectively render it pointless. With Republican control of Congress secure and the White House soon to be in GOP hands, lawmakers are optimistic they can pass a bill that lowers tax rates and reduces a number of deductions. That includes the mortgage interest deduction, which under the current House plan would technically remain, but be effectively moot for nearly 95% of homeowners. The House Republican Blueprint, which was unveiled June 24, calls for doubling the standard deduction that tax payers receive, which would mean that most people would have no need to take the mortgage interest deduction. That is already drawing the ire of some in the mortgage industry, who argue it will reduce incentives for home ownership. "We will oppose any attempt to devalue or reduce the mortgage deduction," said Jerry Howard, the chief executive of the National Association of Home Builders. "We believe the tax code should be used to encourage homeownership." The Mortgage Bankers Association, National Association of Realtors and other groups are also alarmed about this "indirect attack" on the mortgage interest deduction. "Because it is not a direct rollback of the mortgage tax deduction, I think there will be some concern in the housing industry that it will be harder to get legislators to focus on it," said Scott Olson, executive director of the Community Home Lenders Association.

About One-Fifth of Mortgage Borrowers Were Unhappy With Their Lender - WSJ: As if house-hunting weren’t stressful enough: 21% of home buyers regretted their choice of mortgage lender, according to the findings of a recent customer-satisfaction survey. Among first-time home buyers, 27% regretted their choice of lender. The J.D. Power 2016 U.S. Primary Mortgage Origination Satisfaction Study found that unhappy mortgage customers fell into two categories. One group cited a lack of communication, unmet promises and other problems with the lender. The other group of respondents said they felt pressured to choose a particular mortgage product. The mortgage-origination process can frustrate even experienced real-estate professionals. Lisa Abrams, an agent with Re/Max Town Center in Potomac, Md., has represented buyers and sellers of more than 500 homes in her 20-year career, guiding many through the mortgage-application process. But when it came time to obtain a $600,000 jumbo loan for her home purchase in June, Ms. Abrams had such an unsatisfactory experience with her first lender that she withdrew that application and applied elsewhere. “They basically went off a checklist,” she says. “The things they asked for were absurd.” One example: Ms. Abrams was repeatedly asked to explain large deposits in her bank account after she explained numerous times that she’s a real-estate agent who gets paid intermittently on commission. In the survey, Detroit-based Quicken Loans ranked highest in customer satisfaction for mortgage originations, followed by CitiMortgage and Ditech Financial.

Foreclosure Filings Down 18% in November: Attom: The largest month-over-month decrease in foreclosure filings since November 2010 occurred last month, according to foreclosure activity data released by Attom Data Solutions. In November, foreclosure filings dropped 18% from October and 17% from a year ago to 86,561 properties, Attom reported. This represented the 14th consecutive month with a year-over-year decline. Altogether, 32 states experienced a drop in foreclosure activity. Additionally, for the 17th consecutive month the number of properties that started the foreclosure process declined year over year, this time by 19% to 35,222. Also down were the number of properties repossessed by the lender, which dropped 21% year over year to 31,806, and the number of properties scheduled for a future public foreclosure auction, which dipped 13% to 31,579. Harrisburg, Pa., had the highest foreclosure rate of any metropolitan area with a population at or above 200,000, with one in every 341 properties having a filing.

Negative Equity Level Continues to Decline: Zillow: While rising home values have driven down the share of homeowners who are underwater, the negative equity rate remains historically elevated, according to Zillow. During the third quarter, the negative equity rate dropped to 10.9%, representing roughly 5.3 million homeowners, from 13.4% a year before, Zillow reported Thursday. Additionally, 26.1% of homeowners with a mortgage have below 20% equity in their homes, including those who are underwater. The decline in the negative equity rate reflects the rise in home values. Places where there are the highest concentrations of underwater homeowners have typically not seen the same home price recovery as areas with the lowest rates. The negative equity rates in Western cities such as San Jose, Calif., San Francisco, Portland, Ore., and Denver rest below 5%. Comparatively, Zillow found that Chicago and Las Vegas have the highest levels of negative equity at 17% and 16.8%, respectively. Both of these cities still have home values that are well below peak levels. Lower negative equity levels don't just affect underwater homeowners, but could benefit the housing market overall. Homeowners who are upside-down on their mortgage can't refinance nor sell their homes in a manner other than a short sale, Zillow noted. "In addition to the individual homeowners who are underwater, negative equity affects the housing market as a whole, so this is good news not only for these owners, who are now able to either sell their home or at least regain some financial stability, but also for buyers who may find more options now," Zillow Chief Economist Svenja Gudell said in a news release. "I expect homes will gain value steadily, for solid economic reasons, and that negative equity rates will continue to fall."

Obama "Housing Recovery" Crushes "Blacks, Young Adults" As Homeownership Rates Crash --The Obama administration has a tendency to conflate the strong performance of Fed-induced "assets bubbles" with "strong economic growth."  Unfortunately, as is often the case these days, the "hard data" paints a slightly different picture than the "narrative" being pushed by Obama and his staff. Per a new report from the Pew Research Center, and as our readers are undoubtedly aware, home prices have indeed recovered to pre-recession levels with a little help from Janet Yellen and crew. That said, the Obama narrative breaks down from there as further research readily reveals that home prices have recovered despite a massive drop in overall homeownership rates.  Moreover, the folks that seem to have been hit the hardest are the ones that were the biggest supporters of Obama's "Hope & Change" agenda.  Per the table below, homeownership rates among "Young Adults" and "Blacks" are down 18% and 16%, respectively, since the peak in 2004.  And while that's definitely a big "Change," its somewhat lacking on the "Hope."But if "mainstreet" Americans didn't drive Obama's housing recovery then who did?  Perhaps the following Bloomberg headline can help answer that question: Yes, the benefits of Obama's "housing recovery" accrued to none other than his "archenemy," Wall Street, which poured $100's of millions into single-family houses on a weekly basis and $10's of billions over the past couple of years. Adding insult to injury, this massive pace of investment has re-inflated the housing price bubble, making it, once again, nearly impossible for "Young Adults" and "Blacks" to afford homes.  And, unlike in 2007 when subprime lending basically erased the need for down payments, homebuyers today are forced to "have some skin in the game" before banks will blindly give them $100,000's of dollars.

Freddie Mac Issues Warning As Mortgage Rates Soar --Blink, and you missed your chance to refi. And according to nationalized mortgage giant Freddie Mac, it's about to get worse. As shown last week, as a result of the recent spike in yields, the population of eligible refinance candidates has already plunged by more than half. As Black Knight pointed out, as of the end of November, though there are still 2M borrowers who could save $200+/month by refinancing and a cumulative $1B/month in potential savings, this is less than half of the $2.1B/ month available just four weeks ago.Since then the number has shrunk substantially as rates have continued their relentless move higher.  According to the latest Wells Fargo refi rates, a 30 Year Fixed mortgage will now cost a prospective creditor some 4.625%. This was in the mid-3%s just a few months ago.  It was not just refis: according to the latest Freddie Mac update, the 30 Year Fixed has jumped to 4.16%, from 3.94% just a month ago, and 3.5% as of early October. As Freddie notes in its latest press release, this week's mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA's Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases.Some details:

  • 30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the
  • 30-year FRM averaged 3.97 percent.
  • 15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.19 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 3.03 percent.

But more troubling was Freddie's explicit warning, that "if rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017."

Party Over on Cheap Debt - Robert Oak - The Federal Reserve raised the federal funds rate from 0.5 to 0.75 percent.  That means the party might be over on cheap interest rates, especially mortgages.  Yet according to the Wall Street Journal, markets do not always follow the Federal Funds rate as other market factors come into play: From 2004 to 2006, when the Fed raised its benchmark short-term rate 4.25 percentage points, yields on 10-year U.S. Treasury notes, corporate bonds and mortgage rates barely budged because of strong global appetite for U.S. securities.No surprise many banks issuing credit cards always announced their rate increases.  Now one can expect to pay $25 more per year for every $1000 of debt carried.  But people, don't carry credit card debt unless you have a 0% introductory rate.  Auto loans aren't that impacted either, $25,000, 6 year loan means $36 more in interest charges per year. On mortgages it is more unclear.  According to CNBC, fixed mortgages are tied to U.S. Treasuries and thus more safe from Federal Fund Rates shock increases, but anyone with an adjustable rate mortgage should consider refinancing.  Home equity loans also are impacted and their rates increase immediately, unlike adjustable rate mortgages. According to USA Today, the rising fixed mortgage rate from 3.47% to 4.13% on $200,000 is already costing people $75 more a month.  These kind of increases can be deadly to the monthly budget for most working folk, yet home prices have been soaring as of late and increasing financing costs should put a damper on overall home prices increases.Of course the interest on the national debt with now rise.  Schwab has a good summary on why that is:So how would higher interest rates affect all this? To start, higher rates would mean the federal government would have to pay more interest to Treasury security holders, and the resulting higher interest costs would add to the deficit and accumulated debt. The CBO assumes the average interest rate the government pays on debt held by the public will increase from 1.7% in 2015 to 3.5% by 2026. It also projects a sharp rise in interest rates, with the average rate on three-month Treasury bills rising from 0.5% in 2016 to 3.2% a decade later. It sees the average rate on 10-year Treasuries rising from 2.6% to 4.1%. But that’s not the only cost. When the Fed makes a profit on its Treasury holdings, it sends much of it back to the Treasury. Such profits have totaled hundreds of billions of dollars over the past decade. However, rising interest rates could push down the value of the Fed’s holdings, as bond prices fall when rates rise. That could mean Fed remittances to the Treasury will shrink.

 MBA: Mortgage Applications Decrease in Latest Weekly Survey --From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 4.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 9, 2016. The Market Composite Index, a measure of mortgage loan application volume, decreased 4.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 2 percent higher than the same week one year ago....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 October 2014, 4.28 percent, from 4.27 percent, with points decreasing to 0.36 from 0.37 (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 "2 percent higher than the same week one year ago". In general, the purchase index has held up over the last month (up and down week to week).  However, refinance activity - as would be expected with higher rates - has declined sharply.

Starter-Home Inventory Down 12% Over the Past Year: The inventory of starter homes is shrinking at an increasingly faster pace, leaving first-time homebuyers with fewer and more expensive options, according to a report from Trulia. Since 2015, the inventory of starter homes has contracted 12.1%, Trulia found in its Inventory and Price Watch. This represented the steepest decline in more than three years. But the market for starter homes isn't the only one facing a crunch: The number of trade-up homes on the market fell 12.9%. Nationally, the housing inventory decreased 9.1% year over year, and the inventory of premium homes dropped by an even more modest 5.6% from 2015. The tight supply of homes has made owning one a more expensive proposition for first-time homebuyers. The share of income needed to buy a starter home climbed 1.9 percentage points from last year, twice the increase seen for trade-up homes and four times that for premium homes. Altogether, first-time homebuyers must devote 38.5% of their income to purchase a median-priced home in the starter home segment. Luckily, relief may be on the horizon for buyers looking for these homes. "Rising rates will likely cool the fierce competition in these markets where inventory has been tightening and affordability has worsened," Trulia Chief Economist Ralph McLaughlin said in a news release Wednesday. "Tight inventory will still be a big obstacle to homeownership in many markets in 2017, but I'm cautiously optimistic that we'll see the bottom of the current housing shortage as the year progresses."

November housing permits continue positive news --This morning's housing data was a positive, even though it generally retreated from last month.

  • 1. Single family permits made another post-recession high.
  • 2. Total permits were over 1200/month for 3 months in a row, the first time that has happened in 9 years.
  • 3. With the exception of the 3 month period including June of 2015, which saw big distortions due to multifamily permits issued in NYC to be included in an incentive program, this was the highest 3 month average for permits in 9 years.

The only negative was that actual housing starts retreated, and the 3 month average was no better than run of the mill for this year.  Since I favor the less volatile permits metric, and discount the NYC distortions, on balance this month was a significant positive.
I expect positive readings to continue for the next several months as last July's post-Brexit lows in interest rates continue to show up in new housing.  The negative whipsaw from the increase in rates since the US presidential election will start later.

November 2016 Residential Building Sector Bad: The headline residential building permits and housing starts very soft - well under expectations. Our analysis shows little good news in this sector. Analyst Opinion of Residential Building The backward revisions this month were moderately up.The nature of this industry normally has large variations from month to month so the rolling averages are the best way to view this series - and it shows permits collapsing and completions surging - not good as it is showing a contracting sector. Looking at residential construction employment, the year-over-year growth of employment is slightly BELOW the growth of housing starts. This is easily explained with the poor growth in housing starts.

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is +0.1 % this month.
  • Construction completions are HIGHER than permits this month - the first time in 22 months. This broke a 22 month string where permits exceed completions.
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is +4.5 % (permits) and +9.8 % (construction completions):
  • Building permits growth decelerated 2.4 % month-over-month, and is up 0.1 % year-over-year.
  • Single family building permits is up 11.6 % year-over-year.
  • Construction completions accelerated 16.4 % month-over-month, up 24.2 % year-over-year.
  • building permits down 4.7 % month-over-month, down 6.6 % year-over-year
  • construction completions up 15.4 % month-over-month, up 25.0 % year-over-year.

Housing Starts, Permits Crash In November (Despite Soaring Homebuilder Confidence) -- Just yesterday homebuilders raged hard about how awesome everything was - sending their optimism index to its highest since the previous peak in 2005. It seems they are all talk and no action as November's data for housing starts and permits collapsed (following the trajectory of mortgage apps). Housing Starts crashed 18.7% MoM - near the biggest monthly plunge since the crisis peak in 2005. Housing Starts are down 6.9% YoY. Driven by a 43.9% collapse in Multi-family Starts MoM: look at the volatility in that time series: is that what a "stable" housing market looks like? Housing Permits plunged 4.7% MoM - the most since March - as it seems optimism talk from homesbuilders is not reflected in their actions. Once again it was multi-famly permits that collapsed the most MoM. As usual, actions speak louder than words

Comments on November Housing Starts --The housing starts report this morning was well below consensus because of the sharp decline in multi-family starts. However multi-family permits were decent in November, so multi-family starts will probably rebound in December. Meanwhile single family starts were decent, and there were upward revisions to the prior two months combined.   Just remember that multi-family can be very volatile ... no worries. This first graph shows the month to month comparison between 2015 (blue) and 2016 (red).Year-to-date starts are up 4.8% compared to the same period in 2015.  My guess was starts would increase 4% to 8% in 2016, and that looks right. Multi-family starts are down 4.1% year-to-date, and single-family starts are up 9.6% year-to-date.Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions.  The blue line is for multifamily starts and the red line is for multifamily completions.  The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has started to decline.  Completions (red line) have lagged behind - but completions have been generally catching up (more deliveries, although this has dipped lately).  Completions lag starts by about 12 months. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics). The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

NAHB: Builder Confidence increased to 70 in December - The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 70 in December, up from 63 in November. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Closes Year on a High Note Builder confidence in the market for newly-built single-family homes jumped seven points to a level of 70 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest reading since July 2005.... “Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” said NAHB Chief Economist Robert Dietz. “The rise in the HMI is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor.” All three HMI components posted healthy gains in December. The component gauging current sales conditions increased seven points to 76 while the index charting sales expectations in the next six months jumped nine points to 78. Meanwhile, the component measuring buyer traffic rose six points to 53, marking the first time this gauge has topped 50 since October 2005. Looking at the three-month moving averages for regional HMI scores, the Northeast rose six points to 51, the Midwest posted a three-point gain to 61, the South rose one point to 67 and the West registered a two-point gain to 79.

Mortgage Equity Withdrawal Positive in Q3 --The following data is calculated from the Fed's Flow of Funds data (released today) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW" - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures). For Q3 2016, the Net Equity Extraction was a positive $39 billion, or a positive 1.1% of Disposable Personal Income (DPI) .  This is only the second positive MEW since Q1 2008.This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method. Note: This data is impacted by debt cancellation and foreclosures, but much less than a few years ago.The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $86 billion in Q3.The Flow of Funds report also showed that Mortgage debt has declined by almost $1.2 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. With a slower rate of debt cancellation, MEW will likely stay positive.

Hotels: Close to Record Year for Occupancy -- From STR: US hotel results for week ending 3 DecemberThe U.S. hotel industry reported mostly negative results in the three key performance metrics during the week of 27 November through 3 December 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy fell 1.5% to 56.0%. Average daily rate (ADR) increased 0.5% to US$117.31. Revenue per available room (RevPAR) declined 1.0% to US$65.65. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.
2015 was the best year on record for hotels. So far 2016 is tracking just behind 2015, and well ahead of the median rate.    With a solid finish over the next few weeks, 2016 could be the best year on record. Year-to-date, the three best years are:
1) 2015: 66.85% average occupancy.
2) 2016: 66.84% average.
3) 2000: 66.1% average.
For hotels, the Fall business travel season is over and the occupancy rate will decline into the holiday season.

Trump’s Honeymoon Begins: Confidence in the Economy Is Booming - NYTimes: Consumers say they are more confident. Business leaders, once wary, are now expressing excitement that one of their own is headed toward the White House. And Wall Street is bordering on the ecstatic. A month after Donald J. Trump’s election, a series of pro-business cabinet nominations, along with promises to cut taxes, roll back regulations, invest in infrastructure and negotiate better trade deals, have conjured up the possibility, some executives say, of a “Field of Dreams” economy. The Standard & Poor’s 500-stock index is up 5.6 percent since the election map turned more red than blue; all the major stock indexes hit records yet again on Friday. Consumer confidence levels released on Friday showed they had jumped to a two-year high. Much of the swelling confidence, to be sure, is markedly one-sided. A new national survey by the Pew Research Center found that the leap in Republicans’ optimism about the economy’s direction has far outpaced Democrats’ sagging outlook. The recent heart-pumping stock rally, Jamie Dimon, the chief executive of JP Morgan Chase, said at an investment conference this week, is “based upon the hope, which I hope is accurate, that the Trump administration will be very good for unleashed business per se,” and may improve overall growth.

Gallup Sees "Dramatic Shift" In Americans' Confidence Post-Trump (To 9 Year Highs) - "Rarely has Gallup found such a dramatic shift in Americans' economic confidence over the past nine years as it has in the past month..." is how Gallup summarizes the post-election spike in optimism among Americans in their economic outlook survey. While current conditions dipped modestly, the number of Americans who said they believe economic conditions are 'getting better' soared post-election...Donald Trump's election last month spurred significant improvements in Republicans' economic confidence, which pushed the index into positive territory. Now, both Democrats and Republicans have positive overall views of the U.S. economy, resulting in the record high for the index.  The index's positive scores in recent weeks represent a reversal from the negative scores recorded in most weeks over the past nine years, except for a brief string of positive scores recorded in late 2014 and early 2015. But the positive shift in economic confidence is largely the result of Republicans' optimism after last month's presidential election. Until the president-elect takes office next month, it's a bit early to tell if the boost in confidence has lasting potential. Republicans could be experiencing a temporary high from Trump's victory. But on the other hand, their views of the economy could continue to improve once Trump settles into the White House, while Democrats' confidence could dwindle. Of course, much will depend on the actual course of the stock market, jobs reports and other economic indicators once Trump takes office.

Retail Sales increased 0.1% in November -On a monthly basis, retail sales increased 0.1 percent from October to November (seasonally adjusted), and sales were up 3.8 percent from November 2015. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $465.5 billion, an increase of 0.1 percent from the previous month, and 3.8 percent above November 2015. ... The September 2016 to October 2016 percent change was revised from up 0.8 percent to up 0.6 percent. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 0.1% in November. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 3.8% on a YoY basis. The increase in November was below expectations and October sales were revised down, however September sales were revised up.

Retail Sales Sees Minor Increase in November - The Census Bureau's Advance Retail Sales Report for November released this morning showed minor growth improvement over the October increase. Headline sales came in at 0.1% month-over-month to one decimal, and October number was revised downward from 0.8% to 0.6%. Today's headline number was below the consensus of 0.3%. Core sales (ex Autos) came in at 0.2% MoM, which was also below the consensus of 0.4%, and the October Core was revised downward from 0.8% to 0.6%.Here is the introduction from today's report:The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $465.5 billion, an increase of 0.1 percent (±0.5%)* from the previous month, and 3.8 percent (±0.9%) above November 2015. Total sales for the September 2016 through November 2016 period were up 3.7 percent (±0.7%) from the same period a year ago. The September 2016 to October 2016 percent change was revised from up 0.8 percent (±0.5%) to up 0.6 percent (±0.2%). Retail trade sales were virtually unchanged (±0.5%)* from October 2016, and up 3.6 percent (±0.7%) from last year. Nonstore retailers were up 11.9 percent (±1.6%) from November 2015, while health and personal care stores retailers were up 6.2 percent (±2.5%) from last year. [view full report]  The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.

 Retailers’ Discounts Run Deeper This Holiday Season - WSJ: Retailers are grappling with a discount dilemma. After a glut of merchandise led to heavy discounting during last year’s holiday shopping season, chains winnowed inventories this year in the hope that scarcity would allow them to be less promotional. It didn’t work: Discounts are even deeper this year. According to DynamicAction Inc., which analyzed $4 billion in online transactions, the number of U.S. receipts that included promotions jumped 79% in November from the same period a year earlier. For the first week of December, the number was more than double that of a year ago. “Consumers are voting for retailers that offered promotions,” said John Squire, chief executive of DynamicAction. “Even though retailers have done a good job of understanding their inventory, consumers are expecting to see a deal.” Simeon Siegel of Nomura Instinet, who tracks discounts by retailer on a weekly basis, said holiday promotions have increased this year. Of the 21 retailers Mr. Siegel tracks, only two— Ulta Salon Cosmetics & Fragrance Inc. and Gap Inc.’s Athleta—were less promotional during the first weekend of December from a year ago.Since the recession, coupons for as much as 50% off have become a fixture of retailing, and efforts to wean shoppers away from them have largely been unsuccessful. At department stores, in particular, the proliferation of promotions has caused some brands such as Michael Kors Holdings Ltd. and Coach Inc. to reduce sales to these chains. The six-week period between Thanksgiving and New Year’s is hugely important to retailers, accounting for as much as a fifth of annual sales. It is also when retailers offer the deepest discounts of the year, but the chains have been trying to figure out ways to do so without eroding profits. Last year, an inventory glut after disappointing sales hurt companies such as Macy’s Inc., Kohl’s Corp. and Nordstrom Inc. To avoid a repeat, this year retailers worked to trim inventory levels.

As Last-Minute Shoppers Go Online, Retailers Brace for Trouble  -- Last-minute online shoppers, beware: A perfect e-commerce storm could be in the making for the holidays. An unusual calendar confluence means consumers are getting a later start on their holiday shopping. The rush—amplified by likely record-breaking online sales—is setting retailers and carriers up for potential late deliveries, shopper discontent and higher costs. This year, Christmas falls on a Sunday and Hanukkah starts the day before. That places the last big brick-and-mortar shopping weekend a full week in advance, meaning last-minute shoppers are more likely to turn online in the days right before the holidays. The selling season will also be compressed, after a late start due to the presidential election. Distracted consumers and higher advertising rates prompted most retailers to launch holiday pushes closer to Thanksgiving—which fell on Nov. 24—instead of the usual Nov. 1 kickoff. Friday marks the cutoff to ship packages via ground with United Parcel Service Inc. andFedEx Corp. and ensure they arrive in time for Christmas. After that, consumers and retailers will have to pay extra to send a package via air to get it there on time. There already have been some signs of pressure on the delivery giants’ networks as consumers order online in record numbers, and carriers have a limited amount of space in their planes next week to accommodate last-minute holiday orders.

Watchdogs say that what your child tells a “smart” doll is being recorded and monitored - Parents who want to expose their children to the internet of things should beware of a possible problem: Smart toys can be so clever that they turn into spies on your home. Two internet-connected toys have been called out by international consumer protection groups for turning over data collected from conversations with children to companies without parents’ permission.  A worldwide coalition of watchdog groups filed complaints with various data privacy and consumer safety regulators for the EU, France, the Netherlands, Belgium, Ireland, Norway, and the US on Dec. 6, alleging privacy violations by toymaker Genesis Toys and voice-recognition software company Nuance Communications. Consumer advocates say parents have a right to know more about how these toys collect and use data.  Genesis Toys uses voice recognition technology from Nuance Communications in My Friend Cayla (which Walmart and Toys R Us sell for about $50) and the i-Que Intelligence Robot (sold by Amazon for about $90).  The My Friend Cayla doll asks several initial questions of its user: the child’s name, their parents’ names, their school, their hometown, and their physical location, according to Buzzfeed. By syncing with a smartphone and app, exchanges with the child are transmitted and recorded via bluetooth to Genesis. The toymaker passes on data to Nuance, ostensibly to improve its software. But consumer protection advocates worry about what else Nuance might do with the data, which they say is not clearly stated in its privacy policy.

Yahoo Says Hackers Stole Data From Over 1 Billion Users — Yahoo says it believes hackers stole data from more than one billion user accounts in August 2013, in what is thought to be the largest data breach at an email provider. The Sunnyvale, California, company was also home to what’s now most likely the second largest hack in history, one that exposed 500 million Yahoo accounts . The company disclosed that breach in September. Yahoo said it hasn’t identified the intrusion associated with this theft. Yahoo says the information stolen may include names, email addresses, phone numbers, birthdates and security questions and answers. The company says it believes bank-account information and payment-card data were not affected.The new hack revelation raises fresh questions about Verizon’s $4.8 billion proposed acquisition of Yahoo, and whether the big mobile carrier will seek to modify or abandon its bid. If the hacks cause a user backlash against Yahoo, the company’s services wouldn’t be as valuable to Verizon. The telecom giant wants Yahoo and its many users to help it build a digital ad business. In a statement, Verizon said that it will evaluate the situation as Yahoo investigates and will review the “new development before reaching any final conclusions.” Spokesman Bob Varettoni declined to answer further questions.

Consumer Price Index: Rises Yet Again on Gas and Shelter -- The Bureau of Labor Statistics released the November Consumer Price Index data this morning. The year-over-year nonseasonally adjusted Headline CPI came in at 1.69%, up fractionally from 1.64% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.11%, essentially unchanged from the previous month's 2.14%. Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.7 percent before seasonal adjustment. The shelter and gasoline indexes continued to rise in November, and were again the main reasons for the seasonally adjusted all items increase. The shelter index advanced 0.3 percent in November, while the gasoline index increased 2.7 percent. The food index was unchanged in November, as the index for food at home fell 0.1 percent, its seventh consecutive decline. The energy index increased 1.2 percent, although gasoline was the only major energy component index to increase over the month. The index for all items less food and energy rose 0.2 percent in November after rising 0.1 percent in October. The shelter index accounted for most of the increase, but the indexes for motor vehicle insurance, education, communication, and used cars and trucks also rose. The medical care index was unchanged over the month. Several indexes declined in November, including apparel, household furnishings and operations, airline fares, and new vehicles. [More…] was looking for a 0.2% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.7% for Headline and 2.2% for Core. The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

 November 2016 CPI: Year-over-Year Inflation Rate Now 1.7%: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.7 % - up slightly from than last month's 1.6 %. The year-over-year core inflation (excludes energy and food) rate was unchanged at 2.1 %, and remains slightly above the target set by the Federal Reserve. Core inflation was unchanged year-over-year, but those nasty energy prices caused the spike in the headline CPI, This is the highest rate of inflation seen in over one year.As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. The major influence on the CPI were energy prices. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.7 percent before seasonal adjustment. The shelter and gasoline indexes continued to rise in November, and were again the main reasons for the seasonally adjusted all items increase. The shelter index advanced 0.3 percent in November, while the gasoline index increased 2.7 percent. The food index was unchanged in November, as the index for food at home fell 0.1 percent, its seventh consecutive decline. The energy index increased 1.2 percent, although gasoline was the only major energy component index to increase over the month. The index for all items less food and energy rose 0.2 percent in November after rising 0.1 percent in October. The shelter index accounted for most of the increase, but the indexes for motor vehicle insurance, education, communication, and used cars and trucks also rose. The medical care index was unchanged over the month. Several indexes declined in November, including apparel, household furnishings and operations, airline fares, and new vehicles. The all items index rose 1.7 percent for the 12 months ending November; the 12-month all items increase has been rising since it was 0.8 percent in July. The index for all items less food and energy rose 2.1 percent for the 12 months ending November, and the energy index increased 1.1 percent. In contrast, the food index declined 0.4 percent over the last 12 months.

Oil comments, Trump talk -  At this point in time higher oil prices are an unambiguous negative for the US economy. The higher prices will drain low income consumer $, and while incomes for higher end consumers with oil related income will benefit, I don’t see them increasing spending as fast as the low end cuts back. Also, with the US importing more oil and at higher prices, incomes of foreign oil producers will benefit but, again, I don’t see them buying as many more US goods and services. And oil capex spending is asymmetrical, in that it collapsed a lot faster when prices fell then it will recover with prices rising. So I suspect that source of spending growth will be slow in coming, particularly with the very real risk of prices collapsing again should the Saudis so decide, etc.Seems it’s Trump’s nature to look for spending cuts for bragging rights, the largest of which would be bringing down the deficit and debt, which not long ago he said he’d pay off in 8 years. And with the multiplier far higher on these kinds of spending cuts than any of his tax proposals, odds are the macroeconomic consequences are contractionary:

 November Producer Price Index: Final Demand Increased 0.4% -  Today's release of the November Producer Price Index (PPI) for Final Demand came in at 0.4% month-over-month seasonally adjusted, up from last month's 0.0%. It is at 1.3% year-over-year, up from 0.8% YoY last month, on a non-seasonally adjusted basis. Core Final Demand (less food and energy) came in at 0.4% MoM, up from -0.2% the previous month and is up 1.5% YoY. MoM consensus forecasts were for 0.1% headline and 0.2% core. Here is the summary of the news release on Final Demand: The Producer Price Index for final demand increased 0.4 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in October and advanced 0.3 percent in September. (See table A.) On an unadjusted basis, the final demand index climbed 1.3 percent for the 12 months ended November 2016, the largest rise since moving up 1.3 percent for the 12 months ended November 2014. In November 2016, over 80 percent of the advance in the final demand index is attributable to a 0.5-percent rise in prices for final demand services. The index for final demand goods increased 0.2 percent. Prices for final demand less foods, energy, and trade services moved up 0.2 percent in November after edging down 0.1 percent in October. For the 12 months ended in November, the index for final demand less foods, energy, and trade services climbed 1.8 percent, the largest rise since advancing 1.8 percent for the 12 months ended August 2014. More… The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we support. However, the data for these series are only constructed back to November 2009 for Headline and April 2010 for Core. Since our focus is on longer term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated.

November 2016 Producer Price Final Demand Year-over-Year Inflation Is Now 1.3%: The Producer Price Index year-over-year inflation 1.3 %. This is the highest year-over-year rise seen since November 2014. At the producer level final demand - inflation has been insignificant in 2016. However from the report: On an unadjusted basis, the final demand index climbed 1.3 percent for the 12 months ended November 2016, the largest rise since moving up 1.3 percent for the 12 months ended November 2014. Is inflation grabbing hold? The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate grew from +0.7 % to +0.7 %.In the following graph, one can see the relationship between the year-over-year change in intermediate goods index and finished goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower. Econintersect has shown how pricing change moves from the PPI to the Consumer Price Index (CPI). This YoY change implies that the CPI, should continue to come in around 2.0% YoY.

PPI Comes In Hot: Core Producer Prices Have Biggest Jump Since 2014 --While retail sales came in disappointing for the month of November with October revised downward, the Fed, which is certain to hike rates, got some help guiding its decision when moments ago PPI, or the Producer Price Index for Final Demand came in far hotter than expected, rising 0.4% in November, well above the 0.1% expected, and above last month's unchanged print. On an annual basis, PPI jumped 1.3%, the largest rise since moving up 1.3% for the 12 months ended November 2014. Core PPI also jumped by 0.4%, above the 0.1% expected. On an annual basis, core PPI rose 1.6%, above the 1.3% expected, and above last month's 1.2% print. For the 12 months ended in November, the index for final demand less foods, energy, and trade services climbed 1.8 percent, the largest rise since advancing 1.8 percent for the 12 months ended August 2014. According to the BLS, over 80% of the advance in the final demand index is attributable to a 0.5-percent rise in prices for final demand services, driven by a 1.3% spike in trade. The index for final demand goods increased 0.2%. On the other hand prices for guestroom rental fell 3.3% as the substitution effect by AirBNB and the like appears to be having a deflationary impact on hotel bookings.

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

  • unadjusted sales rate of growth decelerated 1.1 % month-over-month, and down 0.1 % year-over-year
  • unadjusted sales (but inflation adjusted) down 0.1 % year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 1.4 % month-over-month, and is up 1.5 % year-over-year.

GDP Hope Fades As Business Inventory Growth Tumbles Most Since 2011 -- Business Inventories dropped 0.2% MoM in October (worse than expected). The last time we saw a bigger MoM drop was September 2011 and this casts some doubt about the exuberant hopes for Q4 GDP growth. Furniture and motor vehicles inventories dropped notably (probably a good thing given their excesses) but overall retail sales (according to this measure) rose 0.7%. The good news - America is working off its excess inventory. The bad news - this is terrible for GDP growth expectations, and wage growth hope (production cust we are already seeing).Once again - like for retail sales and industrial production earlier, the center of the problem is in motor vehicles production and inventories.

Rail Week Ending 10 December 2016: A Relatively Bad Week: Week 49 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Long term rolling averages remain in contraction - but the 4 week rolling average remains in positive territory. If coal and grain are removed from the analysis, rail over the last 6 months been declining around 5% - but this week declined 5.5 %. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years. A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 538,932 carloads and intermodal units, down 1.1 percent compared with the same week last year. Total carloads for the week ending December 10 were 259,058 carloads, down 4.3 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 279,874 containers and trailers, up 2.1 percent compared to 2015. One of the 10 carload commodity groups posted an increase compared with the same week in 2015. It was grain, up 8.4 percent to 24,618 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 25.3 percent to 10,026 carloads; miscellaneous carloads, down 13.1 percent to 9,350 carloads; and coal, down 5.4 percent to 87,929 carloads. For the first 49 weeks of 2016, U.S. railroads reported cumulative volume of 12,382,276 carloads, down 8.9 percent from the same point last year; and 12,758,495 intermodal units, down 2.4 percent from last year. Total combined U.S. traffic for the first 49 weeks of 2016 was 25,140,771 carloads and intermodal units, a decrease of 5.7 percent compared to last year.

November 2016 Import and Export Sea Container Rolling Averages Improve: This month exports trend lines accelerated further into positive territory - something positive continues to happen in international markets. However, imports decelerated but the rolling averages are in positive territory. Although this month was not as good as last month, the rolling averages improved. This data series is noisy and it is best to view the data using the 3 month rolling average. Imports and Exports remain on an improving trend line but remain well below the quanties moved in the period 2010 to 2011. Using this data to forecast the USA economy, the indications are at this point of a continued weak but improving growth of consumption. This data set is based on the Ports of LA and Long Beach which account for much (approximately 40%) of the container movement into and out of the United States - and these two ports report their data significantly earlier than other USA ports. Most of the manufactured goods move between countries in sea containers (except larger rolling items such as automobiles). This pulse point is an early indicator of the health of the economy. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month:

U.S. import, export prices edge down in November - The Bureau of Labor Statistics of the United States said on Tuesday it measured a decline in prices of foreign goods and services last month, by 0.3%, after they increased 0.4% in October. Export prices weakened 0.1%, following a rise of 0.2%. The indexes tracking values of imports and exports were down 0.1% and 0.3%, respectively, from the same month of last year, statistics showed. The yearly gauges slowed the annual decline from 0.3% and 1%, measured in the previous month. Import prices haven't increased on a 12-month basis since July 2014, and the fall peaked at 11.6% in September of last year. October's change for export prices was revised downward by 0.1 percentage points and the retreat from the same month of last year was mended to show a decline of 0.3%, compared to 0.2% in the initial estimate. The fuel imports gauge fell 3.9% in November alone, following a jump of 6.9%. The yearly increase slightly accelerated, to 2.7%

Import and Export Price Year-over-Year Deflation Moderated Again in November 2016.: Import and export prices continue to deflate year-over-year - although the year-over-year rate of deflation again moderated this month - with import prices now barely deflating. Both import and export price deflation is moderating when looking year-over-year. The month-over-month figures given in the headlines only confuse. At the current rate of moderation of deflation (trend line) - both imports and export prices should start inflating by the end of the year. What was interesting this month is that import fuel prices increased whilst total imports deflated - and export prices deflated month-over-month whilst agriculture imports deflated. Import Oil prices were up 7.2 % month-over-month, and export agricultural prices up 0.4 %. with import prices down 0.3 % month-over-month, down 0.1 % year-over-year; and export prices down 0.1 % month-over-month, down 0.3 % year-over-year.. There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships.

Industrial Production declined 0.4% in November -- From the Fed: Industrial production and Capacity Utilization Industrial production declined 0.4 percent in November after edging up 0.1 percent in October. In November, manufacturing output moved down 0.1 percent, and mining posted a gain of 1.1 percent. The index for utilities dropped 4.4 percent, as warmer-than-normal temperatures reduced the demand for heating. At 103.9 percent of its 2012 average, total industrial production in November was 0.6 percent lower than its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in November to 75.0 percent, a rate that is 5.0 percentage points below its long-run (1972–2015) average. This graph shows Capacity Utilization. This series is up 8.3 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 75.0% is 5.0% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007. The second graph shows industrial production since 1967. Industrial production declined in November to 104.2. This is 18.9% above the recession low, and is close to the pre-recession peak. This was below expectations of a 0.2% decrease.

November 2016 Industrial Production Down - Remains In Contraction: The headlines say seasonally adjusted Industrial Production (IP) declined. Headline manufacturing also declined. Our view is marginally better than the headlines but nothing to write home about. The market expected marginal decline this month in industrial production. The manufacturing surveys all predicted improvement - and instead there was decline. Manufacturing employment growth has evaporated. This sector remains slightly in a recession. Capacity utilization also is contracting year-over-year but in the New Normal - it seems meaningless.

  • Headline seasonally adjusted Industrial Production (IP) was down 0.4 % month-over-month and down 0.6 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth accelerated 0.1 % month-over-month, and is down 0.7 % year-over-year.
  • The unadjusted year-over-year rate of growth accelerated 0.1 % from last month using a three month rolling average, and is down 0.7 % year-over-year.
IP headline index has three parts - manufacturing, mining and utilities - manufacturing was down 0.1 % this month (down 0.1 % year-over-year), mining up 1.1 % (down 4.6 % year-over-year), and utilities were down 4.4 % (down 1.9 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %.

Just Released: Regional Business Surveys Point to Growth in Economic Activity - The latest editions of the New York Fed’s two regional business surveys point to improvement in business conditions and widespread optimism about the near-term outlook. The December Business Leaders Survey of regional service firms, released today, shows service sector activity steadying after declining for a number of months, and the December Empire State Manufacturing Survey, released yesterday, indicates that manufacturing activity increased for the first time since the summer. The Empire Survey’s headline index had been below zero for much of the past two years, and the Business Leaders Survey’s headline index had been in negative territory since August. Given the way that these diffusion indexes are calculated, negative readings mean that more of our survey panelists had been reporting that activity was declining than growing. (If you are unfamiliar with the survey or how the diffusion indexes are calculated, you can learn more here). But our latest surveys, conducted over the first twelve days of December, show some improvement: Among manufacturers, those seeing growth in activity outnumbered those seeing a decline by a modest margin, and among service firms, these two sides were roughly equal. These findings jibe with indications that manufacturing activity has seen a modest pickup recently at the national level. A striking finding in the December surveys is just how much more optimistic firms have become about future conditions. Service-sector panelists are more upbeat about the near-term outlook than they’ve been in almost a year, and manufacturers are more optimistic than they’ve been in nearly five years.  While the general tenor of this month’s survey results is certainly encouraging, the labor market remains a sore spot. Manufacturers report that they continue to reduce both headcounts and hours worked, and hiring remains modest among service-sector firms. Still, the surveys indicate a widespread expectation that hiring will pick up in the months ahead. All in all, this month’s regional business surveys provide some encouragement that economic activity, as well as hiring, may well pick up as we move into 2017.

Empire State Manufacturing Grew Modestly in December  - This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 9.0 shows an increase from last month's 1.5, and signals improving activity. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report.Business activity grew modestly in New York State, according to firms responding to the December 2016 Empire State Manufacturing Survey. The headline general business conditions index climbed eight points to 9.0. The new orders index rose to 11.4, and the shipments index was unchanged at 8.5. Labor market conditions remained weak, with manufacturers reporting declines in employment and hours worked. Inventories continued to fall, and delivery times shortened. The prices paid index rose seven points, pointing to a pickup in input price increases, while the prices received index showed only a slight increase in selling prices. Indexes for the six-month outlook conveyed a high degree of optimism about future conditions, with the index for future business conditions rising to its highest level in nearly five years. [source] Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Philly Fed Manufacturing Index Picks Up in December, Surprises Forecast --The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index.The latest Manufacturing Index came in at 21.5, up from last month's 7.6. The 3-month moving average came in at 12.9, up from 10.0 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook came in at 52.6, an increase over the previous month's 29.3.Today's 21.5 came in well above the 9.0 forecast at is the introduction from the survey released today:Activity picked up in December, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The indexes for general activity, shipments, and employment were all positive this month and increased from their readings last month. Manufacturers were much more optimistic about growth over the next six months. The indexes for future employment and capital spending also showed a notable rise. (Full Report) The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012, and a shallower contraction in 2013. Last year saw a contraction with an improvement in 2016. In the next chart we see the complete series, which dates from May 1960. For proof of the high volatility of the headline indicator, note that the average absolute monthly change across this data series is 7.7.

NY and Philly Fed Manufacturing Expand in December -- From the NY Fed: Empire State Manufacturing Survey Business activity grew modestly in New York State, according to firms responding to the December 2016 Empire State Manufacturing Survey. The headline general business conditions index climbed eight points to 9.0. The new orders index rose to 11.4, and the shipments index was unchanged at 8.5. ..As in November, both employment indexes remained negative in December. The index for number of employees was little changed at -12.2, a sign that employment levels continued to wane, and the average workweek index, at -7.0, pointed to a decline in hours worked. ...  Indexes for the six-month outlook strengthened, and suggested that respondents were very optimistic about future conditions. The index for future business conditions shot up twenty points to 50.2, its highest level in nearly five years, with 61 percent of respondents expecting conditions to improve in the months ahead. And from the Philly Fed: December 2016 Manufacturing Business Outlook SurveyThe index for current manufacturing activity in the region increased from a reading of 7.6 in November to 21.5 this month. Nearly 34 percent of the firms reported increases in activity this month, compared with 24 percent last month. The general activity index has remained positive for five consecutive months, and the activity index reading was the highest since November 2014 [at 12.2]...The current employment index improved 9 points [to 6.4], its first positive reading in 12 months. Firms also reported an increase in work hours this month: The average workweek index, which increased 2 points, has now been positive for two consecutive months. ...  The diffusion index for future general activity increased from a reading of 29.3 in November to 52.6 this month. The index is now at its highest reading since January 2015. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Philly, Empire Feds Smash Expectations On Soaring Optimism Despite Deterioration Labor Conditions, Inflation Spike -- There is seemingly no stopping the runaway train that is the economic momentum of the past month, as confirmed by the just released Philly and Empire Fed surveys, which printed at 21.5 and 9.0, smashing expectations of 9.1 and 4 respectively, in fact printing above the highest estimate for both reports, and well above the recent print of 7.6 and 1.5. The one blemish was the sharp drop in labor market conditions at the Empire Fed, which saw a big drop in both employment and hours worked. First, looking at the Empire Fed, which jumped from 1.5 to 9, we get the following component data:

  • Prices paid rose to 22.6 vs 15.5
  • New orders rose to 11.4 vs 3.1
  • Number of employees fell to -12.2 vs -10.9
  • Work hours rose to -7 vs -10.9
  • Inventory rose to -13.9 vs -23.6

The Philly Fed, which soared even more from 7.6 to 21.5, was even more impressive:

  • Dec. prices paid rose to 29.4 vs 27.5
  • New orders fell to 13.9 vs 18.6
  • Employment rose to 6.4 vs -2.6
  • Shipments rose to 22.0 vs 19.5
  • Delivery time rose to 7.6 vs 6.1
  • Inventories fell to 1.1 vs 13.4
  • Prices received fell to 5.8 vs 16.0
  • Unfilled orders rose to 5.7 vs 4.1
  • Average workweek rose to 9.8 vs 7.4

 Markit Manufacturing PMI: 21 Month High in December - The preliminary December US Manufacturing Purchasing Managers' Index conducted by Markit came in at 54.2, up from the 54.1 November final. Today's headline number matched the consensus. 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:U.S. manufacturers reported a strong end to 2016, with business conditions improving at the fastest pace since March 2015. At 54.2 in December, up fractionally from 54.1 in November, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index™ (PMI™ ) continued its recovery from the post-crisis low seen in May (50.7). The headline PMI signaled a robust improvement in manufacturing sector business conditions, with faster job creation and stock building offsetting slight moderations in output and new order growth since November. Moreover, the latest rise in preproduction inventories was the strongest recorded since the survey began in May 2007. Manufacturers noted that greater stock accumulation reflected stronger optimism towards the demand outlook, alongside faster-than-expected new order growth in recent months. [Press Release] Here is a snapshot of the series since mid-2012.

US Manufacturing PMI Hits 21-Month High (Despite Plunge In Industrial Production) -- After mixed PMIs from Europe overnight (German/Eurozone Services down, Manufacturing up), US Manufacturing PMI (soft survey) rose very modestly in its preliminary December print to21-month highs, which is entirely decoupled from industrial production hard data declining. However, the 54.2 level disappointed relative to 54.5 expectations, with export sales close to stagnation, which contrasted with the modest growth seen on average in the second half of 2016. Which do you believe? Soft Survey data... or hard real data...?Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said: “US manufacturing is enjoying a strong end to 2016, showing further signs of pulling out of the soft-patch seen earlier in the year and putting the sector on the starting blocks ready for a further upturn as we move into 2017. “The fourth quarter has seen the strongest PMI readings for one-and-a-half years, suggesting the goods-producing sector is growing at an annualised rate of 2-2.5%.“A buoyant domestic market, reflecting a combination of rising consumer demand and inventory building, is helping offset export woes caused by the strong dollar.“Companies are gearing up for further growth in coming months:employment is rising at the fastest rate for 18 months and purchasing activity has likewise been ramped up in preparation for higher production. Confidence among producers has clearly improved, setting the scene for a good start to 2017.“The upturn is being accompanied by rising costs, linked mainly to global commodity prices lifting higher. The combination of solid growth and rising price pressures adds to the likelihood of further Fed action in 2017,  with three more quarter point hikes anticipated next year by IHS Markit.”

Trump teases agreements with Ford, Dow Chemical to create jobs - President-elect Donald Trump Donald on Friday night teased an agreement with Ford Motor Company to keep jobs in Michigan instead of outsourcing them to Mexico, and minutes later announced a deal with another company to bring hundreds of jobs to the state. First, Trump went on a riff about an upcoming agreement with Ford, hours after a report quoted the company's CEO as refuting Trump's characterization of its Mexico plans. "Ford's made a promise to me, and hopefully at the beginning of the year, they are going to honor that promise about something they are going to do that's very big," Trump said Friday night at a rally in Grand Rapids, Mich. "They are going to do it in Michigan, not in Mexico. It's gonna be great." Trump did not include many details of the alleged agreement, and Ford has not announced any recent related decisions. But its CEO, Mark Fields, told the Associated Press on Friday that it would not change its decision to move small-car production from Michigan to Mexico. He added that new work at the Michigan plant will ensure that no jobs are actually lost by the move. Soon after his hint at the Ford deal, he called up Dow Chemical CEO Andrew Liveris to the stage. Liveris, whom Trump said will be part of his American Manufacturing Council, announced his company would bring "several hundred" new jobs to Michigan with a "state-of-the-art innovation center." "This decision is because of this man and these policies," Liveris said, pointing to Trump, who leaned in to shake his hand. "We could have waited, we could have put it anywhere in the world. Several hundred jobs on top of the thousands, we aren't waiting, we are going ahead. We are going to use hardworking American brains."

 US wants rules new cars must ‘talk’ to each other within 5 years -- The US government has proposed a rule which would require all new light vehicles in the US to be able to “talk” to each other to avoid crashes, within as little as five years. The move comes at a time when the federal government is trying to work out a framework of rules to regulate technology that does everything from helping humans drive cars, to technology that fully automates the driving process and removes devices such as steering wheels and gas pedals altogether. Individual states are working out their own regulations to govern a new universe of self-driving or partially self-driving cars as well. Tuesday’s announcement from the US Department of Transportation starts a 90 day clock for public comment on proposed rules to govern so-called “vehicle to vehicle” or V2V technologies. A further rule mandating communications between light vehicles and transport infrastructure, such as traffic lights, is also expected to be published before the Trump administration comes into office next month. US government officials say mandating that cars should be able to “talk” to each other could prevent or mitigate the effects of as many as 80 per cent of crashes that do not involve a driver impaired by drugs or alcohol. The goal of the technology is to warn motorists of unseen hazards, in conditions such as intersections, or overtaking a truck on a two-lane road for example, the officials say. Light vehicles would have to be able to “speak the same language through a standard technology”, government regulators said. Each automaker would be able to choose how such warnings are communicated to drivers, with some automakers working on technology that makes the seat or wheel vibrate to communicate danger, or uses visible or audible warnings. Officials of the DoT and the National Highway Traffic Safety Administration said all new light vehicles would be required to have the technology within four years from the finalisation of the proposed rule published on Tuesday, with finalisation expected to take about a year. Half of all new cars would have to comply with the rule within two years of adoption of a final rule.

 Amazon's Bezos Will Attend Trump's Tech Roundtable, Elon Musk "Too Busy" -- Despite the public spat between Amazon boss (and Washington Post owner) Jeff Bezos and the president-elect, the tech heavyweight has agreed to attend Trump's meeting of tech-industry executives this week. The roundtable is a who's who of anti-Trumpers including Apple's Tim Cook and Google's Eric Schmidt but there is one notable absence: Tesla's Elon Musk is unable to attend because he is too busy with work. Yesterday, Recode broke the news of the names of the attendees at a meeting of the top tech leaders with Donald Trump that is set to take place Wednesday in New York. Invited by the President-elect's tech whisperer Peter Thiel, sources said they would include Facebook COO Sheryl Sandberg, Apple CEO Tim Cook, Microsoft CEO Satya Nadella, Google CEO Larry Page, along with other big names from Intel, Oracle, Cisco, IBM and more. And now, as Yahoo reports, Amazon CEO Jeff Bezos plans to attend President-elect Donald Trump’s meeting of tech-industry executives this Wednesday in New York, according to a source with knowledge of the situation. Previous reports indicate the meeting on Wednesday will take place at Trump Tower in Manhattan, and the press are currently not invited to attend.

Forget AT&T. The Real Monopolies Are Google and Facebook. – NYTimes The proposed merger of AT&T and Time Warner has drawn censure from both sides of the political aisle, as well as a Senate hearing that looked into the potential for the combined company to become a monopoly. But if we are going to examine media monopolies, we should look first at Silicon Valley, not the fading phone business. Mark Cuban, the internet entrepreneur, said at the meeting of the Senate Judiciary Antitrust Subcommittee last week that the truly dominant companies in media distribution these days were Facebook, Google, Apple and Amazon. Look at the numbers. Alphabet (the parent company of Google) and Facebook are among the 10 largest companies in the world. Alphabet alone has a market capitalization of around $550 billion. AT&T and Time Warner combined would be about $300 billion. Alphabet has an 83 percent share of the mobile search market in the United States and just under 63 percent of the US mobile phone operating systems market. AT&T has a 32 percent market share in mobile phones and 26 percent in pay TV. The combined AT&T-Time Warner will have $8 billion in cash but $171 billion of net debt, according to the research company MoffettNathanson. Compare that to Alphabet’s balance sheet, with total cash of $76 billion and total debt of about $3.94 billion. In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook, according to Brian Nowak, an analyst with Morgan Stanley. Google and Facebook can achieve huge net profit margins because they dominate the content made available on the web while making very little of it themselves. Instead, they both have built their advertising businesses as “free riders” on content made by others, some of it from Time Warner. The rise of these digital giants is directly connected to the fall of the creative industries of our country.

 Corporate Welfare Won’t Create Jobs - The recent deal to keep some 800 workers employed at a Carrier plant in Indiana rather than see those jobs shipped to Mexico proved great news for the workers and a public relations bonanza for President-elect Donald J. Trump. What it didn’t prove — even though the incoming president used the occasion to promote his proposal for a huge tax giveaway to corporations — is that cutting corporate taxes will save or create many American jobs. It won’t. Carrier’s parent company, United Technologies, never mentioned taxes as the reason for the offshoring move. Instead, it cited its “existing infrastructure” and “strong supplier base” in Mexico. More revealing, United Technologies says it can save $65 million a year by moving operations to low-wage Mexico.Nevertheless, The Wall Street Journal reported that company officials had discussed the issue of corporate taxes late in the negotiations. And in announcing the deal, Mr. Trump told other chief executives that, under his administration, they would have no reason to abandon the United States because “your taxes are going to be at the very, very low end.” Companies like United Technologies are delighted to receive handouts like Mr. Trump’s proposed tax giveaway that independent analysts say will cost about $6.2 trillion in lost federal revenues over a decade, and which mostly benefits large corporations and the wealthy. But lowering corporate taxes won’t prompt firms to create American jobs. Instead, we need to close a major tax loophole that actually creates an incentive for multinationals to shift jobs offshore, even as it substantially lowers taxes for them. That loophole, known as deferral, lets corporations avoid paying any United States taxes on their offshore profits until they are brought back here. That’s why, according to a recent survey by tax researchers, Fortune 500 companies are holding nearly $2.5 trillion in profits that are booked offshore, mostly in tax havens, on which no United States taxes have been paid.

NFIB: Small Business Survey: "Small Business Optimism Soars Post Election" - The latest issue of the NFIB Small Business Economic Trends came out this morning. The headline number for November came in at 98.4, up 3.5 from the previous month's 94.9. The index is at the 43rd percentile in this series. Today's number came in above the forecast of 96.7.Here is an excerpt from the opening summary of the news release.Small business optimism remained flat leading up to Election Day and then rocketed higher as business owners expected much better conditions under new leadership in Washington, according to a special edition of the monthly NFIB Index of Small Business Optimism, released today.“What a difference a day makes,” said Juanita Duggan, President and CEO of the National Federation of Independent Business (NFIB). “Before Election Day small business owners’ optimism was flat, and after Election Day it soared.”The NFIB Index of Small Business Optimism is one of the oldest and most widely respected economic research reports in the country. It is a survey asking small business owners a battery of questions related to their expectations for the future and their plans to hire, build inventory, borrow, and expand. The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings following the Great Recession that ended in June 2009.

So You Say the Unemployment Rate Is 'Fictitious' ... - Justin Fox - Last year, Gary Cohn, the president and chief operating officer of Goldman Sachs Group Inc. whom President-elect Donald Trump has chosen to be his top economic policy adviser, declared that the official U.S. unemployment rate -- 5.5 percent at the time he spoke -- was "very, very fictitious." Cohn was speaking at the Jack Welch College of Business at Sacred Heart University in Connecticut. Welch, the former General Electric Co. chief executive officer, is the fellow who made the infamous -- and unsubstantiated -- accusation in 2012 that "the Chicago guys" were messing with the unemployment numbers to help Barack Obama get re-elected. Cohn was suggesting something less sinister -- that the unemployment rate was "only that low because the participation rate has gone downward." Explained Cohn: The participation rate really measures people out in the U.S. population that are looking for jobs. There are so many people who are frustrated looking for jobs that they’ve just stopped. If the participation rate normalized -- this is a fun fact -- if it normalized to Day 1 of the Obama administration, we’d still be at an 11 percent plus unemployment rate. I tried replicating that calculation using the most recent employment numbers that would have been available when Cohn spoke, those of March 2015, and came up with a 9.7 percent unemployment rate (it would be 9 percent now). The adjusted rate had last been above 11 percent in October 2013. So Cohn’s number was out of date, although not wildly far off. Is this really a better way of calculating the unemployment rate, though? Not exactly! The denominator used in calculating the labor-force participation rate is the entire civilian, non-institutional population age 16 and older. So as the giant baby boom generation drifts into retirement -- the first baby boomers began turning 65 in 2011 -- that puts serious downward pressure on labor-force participation regardless of how the economy is doing. You can see evidence of this effect if you compare the trajectory of the overall labor-force participation rate with the prime-age rate, which covers those age 25 through 54.

 Weekly Initial Unemployment Claims decrease to 254,000 –=-The DOL reported:In the week ending December 10, the advance figure for seasonally adjusted initial claims was 254,000, a decrease of 4,000 from the previous week's unrevised level of 258,000. The 4-week moving average was 257,750, an increase of 5,250 from the previous week's unrevised average of 252,500.There were no special factors impacting this week's initial claims. This marks 93 consecutive weeks of initial claims below 300,000, the longest streak since 1970. The previous week was unrevised.  The following graph shows the 4-week moving average of weekly claims since 1971.

BLS: Unemployment Rates Lower in 18 states, Stable in 32 states in November - - From the BLS: Regional and State Employment and Unemployment Summary Unemployment rates were significantly lower in November in 18 states and stable in 32 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Nine states had notable jobless rate decreases from a year earlier, 2 states had increases, and 39 states and the District had no significant change. The national unemployment rate was 4.6 percent in November, down from 4.9 percent in October, and 0.4 percentage point lower than in November 2015. New Hampshire and South Dakota had the lowest unemployment rates in November, 2.7 percent each. Alaska and New Mexico had the highest jobless rates, 6.8 percent and 6.7 percent, respectively. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska, at 6.8%, had the highest state unemployment rate.  Note that the lowest recorded unemployment rate in Alaska was 6.3%, so this is pretty close to the all time low.

Uber, Gig Economy: “The Brutality of the System Is Being Lost on Those Who Actually Use These Apps” -- Yves Smith -- Izabella Kaminska has been an Uber skeptic for some time (see Why Uber’s capital costs will creep ever higher and The taxi unicorn’s new clothes). In this video, she signs up as a gig economy worker and uses her experience to explore what she argues is a new form of feudalism. I particularly like her reference to Snow Crash.

The ridiculously invasive virtual interview process applicants are subjected to at Amazon -- When Shivan Kaul Sahib, a senior at McGill University in Montreal, was applying for a job as a software engineer at Amazon, the company asked him to take a test to measure his skills, which would be administered remotely through online proctor ProctorU. Sahib, who has worked as an intern at Salesforce and Ericsson, says he had never encountered a virtual proctor in any of his previous interviews with tech companies. When he logged on to take Amazon’s test, he was surprised that the proctor took over his computer. He detailed the experience in a blog post: “As preamble, the proctor made me download some software, one of which spun up a UI for chatting with the proctor and giving them access to my machine so they can take control of my entire computer, including mouse. The proctor then proceeded to shut down all my running applications for me (I never realized what an unnerving experience it is to see your mouse move on your screen under someone else’s bidding). Then, my system settings were messed around with to make sure I can’t take screenshots. Of course, my camera and microphone are taken control of as well.” Things got more “big brother” from there. The proctor, noticing papers on Sahib’s desk, asked him to clean it. When Sahib said that his desk would take a long time to clean and it would be easier to take the test sitting on his bed, the proctor asked him to use his computer video camera to show him the sheets (to make sure he hadn’t hidden written material on or underneath them).

So Much For That... Real Wage Growth Slumps To Lowest In 30 Months -- Remember when everyone was excited about wage growth re-appearing and escape velocity, and textbook wage inflation appearing thanks to tight labor markets... well that's all gone!  Average weekly earnings grew at just 0.5% YoY in November - the slowest pace of wage growth since July 2014. In fact real average weekly earnings decline 0.4% in November MoM (despite the post-Trump exuberance).  Probably time for calls for $20 minimum wage.. or how about $30?

 Trump Homeland Security Adviser Helped Contractors Profit Off Harsh Deportation Policies - Lora Ries, a longtime lobbyist for a variety of homeland security contractors, is one of the latest hires by the Trump transition to remake the Department of Homeland Security. Her selection is the latest evidence that Trump is preparing to fulfill his pledge to step up deportations. Ries began her career in government, serving as an official with the U.S. Immigration and Customs Enforcement (ICE) and as a Republican counsel to the House Subcommittee on Immigration and Border Security. But for much of the last decade, Ries has moved through the revolving door as a lobbyist for the contractors profiting from harsh immigration policies. Her current employer is CSRA International, a massive federal information technology contractor that, among other things, sells the GangNet software that underpins gang databases maintained by 13 states, ICE, the FBI and ATF.  Disclosure documents show that in 2008, Ries lobbied on behalf of USIS, a company that provided background checks for the federal government, on its work for the controversial Secure Communities program. Secure Communities, developed in 2008 under President George Bush as a partnership between federal and local law enforcement, compelled local police to share arrestees’ fingerprints with federal immigration officials, a move designed to initiative deportation proceedings. The program was criticized for its role in deputizing local police as immigration officials, and for driving undocumented communities underground for fear that even reporting a crime to the police could lead to being turned over to ICE.  The role of private contractors such as USIS in spearheading the program has received little scrutiny. LinkedIn pages for several former analysts for the firm working on the program provide some clues. One analyst employed by USIS to work on Secure Communities said he “analyzed the immigration status and criminal history of all non-US citizens arrested in the jurisdictions that participated in this program” and “helped prioritize the removal of those individuals who posed the greatest risk to public safety.”

 Investment in Early Childhood Education Yields Substantial Gains for the Economy - Yves Smith -  It says a lot for the state of policy thinking that the justification for educating children from disadvantaged families is that “it’s good for the economy” as opposed to “it reduces inequality” or (heavens!) “it increases social stability by increasing the perception of fairness and legitimacy of the leadership class.” Bear in mind that the question of whether classes that focus on giving low-income kids a better chance, like Head Start, actually pay off has been contested. The nay-sayers argument goes that even though Head Start students show better educational results, they fade over time. That makes sense: if you send kids to a good school when they are young, and then to crap schools later, the lack of access to good education and a supportive peer group when they are learning more advanced material means they are unlikely to be able to continue to excel. But there are other potential gains from early and more extensive pre-elementary education. Nobel prize winner James Heckman found that students that got GEDs (as in passed a high school equivalency test rather than getting a diploma_ did less well in terms of lifetime earnings and job stability than high school graduates. His belief that part of the value of school is socialization (which includes learning to comply, like show up to classes on time, get papers completed on schedule).  One of the advantages of the sort of longer-lived pre-elementary education touted in this study is likely to be softening class markers, such as accents. A colleague recently met with some field officials from a Federal regulator. They were smart and feisty, but he also noticed that many has very heavy outer borough accents. He said even though they were likely more capable technically than lawyers at firms like Kirkland & Ellis (not even terribly white shoe), their accents would have kept them from getting in the door. So one of the benefits of these early programs may be, effectively, to teach young children what amounts to a middle/upper middle class dialect that they can hopefully access later in life.  Having said all of that, another benefit of more extensive early education is that mothers can work more regularly. Higher household incomes (and less parental stress) also improve economic and educational results.  Originally published at the Institute for New Economic Thinking website:

Baltimore schools face $129M budget deficit | WTOP: (AP) — Struggling with declining enrollment and increasing operating costs, officials say the Baltimore school system is facing a $129 million deficit in next fiscal year’s budget — more than double the gap it closed last year. The Baltimore Sun ( reports city schools CEO Sonja Santelises announced the deficit Wednesday. She said she is not prepared to announce any staff cuts or budget cuts. Officials have employed those cost-saving measures in each of the past two years. Santelises says she hopes to work with state and local lawmakers and school communities on ways to close the gap. The deficit represents more than 10 percent of Baltimore City Public Schools’ $1.2 billion budget. Santelises’ announcement comes just six months before the system needs to set a spending plan to begin July 1.

LAUSD notifies county and state of $1.46 billion deficit - By the end of Thursday, LA Unified will be letting the state and county governments know that the district may not be able to meet its financial obligations in upcoming years because it faces a cumulative deficit of $1.46 billion through the 2018-2019 school year. Chief Financial Officer Megan Reilly gave the unsettling news to the school board on Tuesday and said the district will be notifying the Los Angeles County Office of Education by the Dec. 15 deadline that the district’s financial condition is “qualified.” “Qualified means that we may not meet our financial obligations in the subsequent two years,” Reilly said. “That’s what we are suggesting that the board adopt.” The board agreed by consent. The good news is that the district won’t be labeled “negative.” Reilly said, “We are not yet at the point to say we will not make our obligations.” Because the district is so large — the biggest in the state and the second-largest in the nation — the budget must be estimated over the next three years, and they must state the solvency of the district. “We start off with a $1.4 billion deficit across three years,” Reilly said when presenting the 2016-2017 First Interim Financial Report. The district is going through a realignment plan with the California Department of Education to offset some of the shortfalls and stave off enrollment losses. But even in the best-case scenario with increases in Local Control Funding Formula and state lottery revenue, they still expect a $252 million deficit by 2018-2019.

Betsy DeVos and the Plan to Break Public Schools -- Among the points that can be made in favor of Betsy DeVos, Donald Trump’s billionaire nominee for the position of Secretary of Education, are the following: She has no known ties to President Vladimir Putin, unlike Trump’s nominee to head the State Department, Rex Tillerson, who was decorated with Russia’s Order of Friendship medal a few years ago. She hasn’t demonstrated any outward propensity for propagating dark, radical-right-leaning conspiracy theories, unlike Michael T. Flynn, Trump’s designated national-security adviser. She has not actively called for the dismantling of the department she is slated to head, as have Rick Perry, Trump’s nominee for Energy Secretary, and Scott Pruitt, the nominee to head the Environmental Protection Agency.That the absence of such characteristics should bear noting only underlines the dystopian scope of Trump’s quest to complete his cabinet of cronies. On the other hand, DeVos has never taught in a public school, nor administered one, nor sent her children to one. She is a graduate of Holland Christian High School, a private school in her home town of Holland, Michigan, which characterizes its mission thus: “to equip minds and nurture hearts to transform the world for Jesus Christ.”  How might DeVos seek to transform the educational landscape of the United States in her position at the head of a department that has a role in overseeing the schooling of more than fifty million American children? As it happens, she does have a long track record in the field. Since the early nineteen-nineties, she and her husband, Dick DeVos, have been very active in supporting the charter-school movement. They worked to pass Michigan’s first charter-school bill, in 1993, which opened the door in their state for public money to be funnelled to quasi-independent educational institutions, sometimes targeted toward specific demographic groups, which operate outside of the strictures that govern more traditional public schools.

We can’t meaningfully integrate schools without desegregating neighborhoods --A bill introduced in the New York City Council proposes to establish “an office of school diversity within the human rights commission dedicated to studying the prevalence and causes of racial segregation in public schools and developing recommendations for remedying such segregation.”But it is not reasonable, indeed it is misleading, to study school segregation in New York City without simultaneously studying residential segregation. The two cannot be separated. School segregation is primarily a problem of neighborhoods, not schools. Schools are segregated because the neighborhoods in which they are located are segregated. Some school segregation can be ameliorated by adjusting school attendance boundaries or controlling school choice, but these devices are limited and mostly inapplicable to elementary school children, for whom long travel to school is neither feasible nor desirable. We have adopted a national myth that neighborhoods are segregated “de facto;” i.e., because of income differences, individual preferences, a history of private discrimination, etc. In fact, neighborhoods in NYC are segregated primarily because of a 20th century history of deliberate public policy to separate the races residentially, implemented by the city, state, and federal governments. Just a few examples:

U.S. Kids Keep Getting Dumber; Ranked 31st Of 35 Developed Nations In Math, New Study Reveals --The U.S. Department of Education has just released it's latest ranking of international education systems (Program for International Student Assessment - "PISA") and performance of U.S. students just continues to deteriorate on both absolute and relative terms. Perhaps it's time to have a real conversation about the complete failure of "Common Core"and the idiocy of allowing teachers' unions to hold our children hostage while hiding behind ridiculous contracts that grant tenure after 6 months and make it impossible to fire underperformers.  Just a thought for the incoming Trump administration. The Washington Post’s Valerie Strauss summed up the problems nicely:There are many reasons children aren’t learning anything during the long hours they spend in government schools. Sometimes, their teachers don’t show up to work because they’re out on the teachers union picket line demanding taxpayers pick up the tab for their plastic surgery. Other times, students are forced to sit in classes led by totally unqualified teachers who will never leave because they’re protected by tenure.For every disgraceful teacher, though, there are tons of good ones who are doing their best. The problem often isn’t teachers’ incompetence, it’s that they’re forced to instruct kids using rubbish. Look at the Common Core State Standards, which were adopted initially by 46 states because their federal education funding depended on it. The math is backwards, confusing, and, as the National Review so suitably dubbed it, “dumb.” The reading standards fill students’ minds with filth in the form of raunchy books and with yawn-inducing “informational texts.” Our schools no longer teach reading, writing, and arithmetic. Rather than be taught how to think and problem-solve, children are thought what to think and how to feel. All these money-making and money-spending schemes tend to sound nice, of course, but they inevitably fall flat.Now the math, the U.S. ranked 40th in the world and 31st out of the 35 developed countries that provide data to the study...somewhat less than ideal.

Oxford University Joins The List Of Liberal Institutions Urging "Gender Neutral Pronouns" - The University of Oxford has joined many other bastions of liberalism in the U.S. who, in an effort to endlessly cater to our overly sensitive millennials, have urged students to ditch gender-based pronouns like "he" and "she" for the gender-neutral alternative "ze."  Per EAG News, Oxford's behavior code states that inadvertently using the wrong pronoun for someone is technically "considered an offense" while British gay rights activist Peter Tatchell said that giving people the gender-neutral "ze" option is just a "thoughtful, considerate move."The university’s behavior code states that using the wrong pronoun for a transgender person is considered an offense, and a new leaflet distributed by the student union supposedly aims to cut down on hurt feelings and discrimination by encouraging students to use “ze” instead, the Independent reports.British gay rights activist Peter Tatchell applauded the move.“It is a positive thing to not always emphasize gender divisions and barriers,” he told the Daily Mail.“It is good to have gender-neutral pronouns for those who want them but it shouldn’t be compulsory,” Tatchell said. “This issue isn’t about being politically correct or censoring anyone. It’s about acknowledging the fact of changing gender identities and respecting people’s right to not define themselves as male or female.”“Giving people the ‘ze’ option is a thoughtful, considerate move,” he said. Meanwhile, a leaflet distributed on campus warned students to "veer away" from the completely ridiculous notion that there are "only two genders"...after all using such binary language as "boys and girls" tends to "subtly reinforce that gender is a significant difference about behavior patterns."

Some colleges are refusing to call themselves 'sanctuary' campuses because states could cut their funding -- Students at more than 100 universities around the country have written letters, signed petitions, and protested to demand that their schools commit to protecting undocumented students who risk losing the Deferred Action for Childhood Arrivals status that shields them from deportation under the Trump administration.  In response, administrators on more than 20 campuses have committed to naming themselves “sanctuary campuses.” The term doesn’t have a specific legal definition. Instead, it echoes the policies of “sanctuary cities” like Los Angeles, New York, and San Francisco, which have policies that limit cooperation between local authorities and federal immigration officers.   Even President-elect Donald Trump’s alma mater, the University of Pennsylvania, called itself a sanctuary and promised to only allow federal immigration authorities on campus if they have a warrant. Penn administrators also said they will not share information about students’ immigration status unless required by law or subpoena   But not all colleges are going along with the trend.  Officials in Texas and Georgia, for instance, have already threatened to cut funding to schools that designate themselves as sanctuaries—meaning that schools there have to take that threat into consideration. This mirrors the threat by Trump to defund these sanctuary cities in his first 100 days in office.  Some schools–including Rice University, Washington State University, and Princeton University, among others–have affirmed their commitment to undocumented students by taking steps like promising to support DACA or refusing to release private information, including immigration status, unless required to by law or subpoena, but have stopped short of officially declaring themselves sanctuaries, likely in an effort to protect themselves legally and financially.

A College Comes With a Side of Economic Stimulus - Noah Smith - There are relatively few sure-fire ways for the government to boost long-term productivity growth. Expanding higher education might be one of them. Economists have two different views on the value of college. The first is called the signaling model. Basically, this is the idea that college is about making young people jump through hoops, to prove that they have what it takes to succeed as employees. College reveals how smart you are, how hard-working and motivated you can be, and how willing you are to do what professors ask of you. Those who can’t hack it drop out, the theory goes, leaving those who make it to graduation to collect higher paychecks. It’s very popular idea among economists, though I’m very skeptical of this theory -- why not just have young people do one-year internships instead?The second model of college is more pedestrian -- it’s the idea that higher education actually teaches people useful things. This idea is called the human-capital model. Actually, human capital doesn’t only include the skills students learn in classes. Greater autonomy, time-management skills and exposure to new ways of thinking are all part of the equation. And the most important factor of all could be social capital -- the value of the human networks one builds at college.  Both of these theories can be true at once, and each is probably a piece of the puzzle. Evidence, for example, shows that human-capital gains are substantial. Laws that forced young people to go to public school had a positive effect on their earnings years later. Growing up near a college has a similar effect, especially for children of less-educated parents. That implies a pretty straightforward policy -- put more colleges, and bigger colleges, next to more kids. Education isn’t the only way that universities can improve economic growth. They also produce research. New technologies have several paths from the laboratory to the world of industry. They can be cross-licensed to companies. They can be written in research papers that are then read by private-sector inventors. And they can influence students, who go out into the world and create companies based on those ideas.

Job Market for Doctoral Recipients Remains in Doldrums -- People awarded doctoral degrees at American universities last year continued to face less-certain futures than those who earned such degrees before the economy took a nosedive in late 2008, according to new federal survey data. The survey of 2015 doctorate recipients found that 38 percent of those responding to a question about their future plans reported having no definite commitment for employment or postdoctoral study. While a slight improvement over the previous year, when 38.6 percent of respondents said they had no such commitments, that figure remains substantially higher than it was before the Great Recession. In 2008, before the nation’s economic woes began to be widely felt, fewer than 31 percent reported having no job or postsecondary study lined up. Despite the weak job market, the number of doctorates awarded by American institutions rose for the fifth straight year, reaching an all-time high of more than 55,000. Among the fields with the fastest growth were political science, sociology, and education. The share of 2015 doctorate recipients who were U.S. citizens or permanent residents stood at about 64 percent, nearly a percentage point higher than the year before. The data come from the Survey of Earned Doctorates, an annual census sponsored by six federal agencies: the National Science Foundation, the National Institutes of Health, the U.S. Department of Education, the U.S. Department of Agriculture, the National Endowment for the Humanities, and the National Aeronautics and Space Administration.

Brace Yourself: Our Latest Look at Student Debt - College Tuition and Fees constitute one of the biggest threats to our economic outlook. Here is a chart of data from the relevant Consumer Price Index sub-component reaching back to 1978, the earliest year Uncle Sam provides a breakout for College Tuition and Fees. As an interesting sidebar, we've thrown in the increase in the cost of purchasing a new car as well as the more substantial increase for the broader category of medical care, both of which pale in comparison. During the decade of the 1990's, when real out-of-pocket funding declined 25%, tuition and fees rose 92%, which sounds substantial ... until you compare it to the 1404% across the complete data series. For early boomers paying for college was sort of like buying a car. But in recent decades, it has become more like buying house, for which the strategy of a minimum down payment is commonplace for first-time buyers. The annual stair-step rise in college costs seen above is probably the most dramatic visualization of inflation data we routinely produce. The only chart we have that rivals it is our quarterly snapshot, updated earlier today, of federal loans to students from the Federal Reserve's Z.1 Financial Accounts of the United States (formerly known as the Flow of Funds accounts). Sadly, the chart above doesn't illustrate all the student loans outstanding. We don't have a data source for private loans for college expenses, but the New York Fed estimates total student loan debt to be in the neighborhood of $1.2 Trillion. An excellent source economic analysis of the impact of tuition debt for the larger economy is the New York Fed, whose economists keep a close watch on this topic. See this slide set (PDF format) posted last year: Student Loan Borrowing and Repayment Trends, 2015.

House Passes Bill To "Microchip Citizens With 'Mental Disabilities'" - Who's Next? -- We’ve all been warned that it is coming, but as's Mac Slavo notes, what is disturbing is that while technology surrounds us and *some* have concerns about privacy, most shrug at the massive amounts of data they are collecting about our lives, and the incredible level of control the system now has over each individual.  This bill passed, clinging to the broadest base of “good intentions” that it could muster, i.e. caring for those with disabilities and decline with age. But in reality, it is a nose under the tent for a system that needs the ability to microchip dissenters, and to force cooperation on the part of the general population. In effect, everyone is now under their thumb with this, because anyone could doesn’t go along with the mass conditioning will be labeled ‘mentally –––’ and branded with a track-and-control chip. Game over.At the first sign of suspicious behavior, or troubling social media profile, or a misunderstanding during an encounter, police and medical personnel – among others – will have the authority to declare someone ‘mentally disabled’ (or incapacitated, or temporarily insane, or unsound of mind, or whatever label is handy) just because they express discontent, anger or outage at the state of the world and political affairs. “Fake news” journalists can be shut down, and “conspiracy minded” individuals controlled… and of course, it will be abused. The tactics used against parents by CPS will be forged together with the creepy total surveillance of the fusion centers, etc. Potentially a very nasty police state. This power will expand, and try again if it is slowed down or rejected. Whether it takes the form of an implanted chip, or a tracking number that is tied to each person, they will stop at nothing short of mark in everyone with identity tied to bank accounts, etc. They will insist you be on the grid in every way… and with this bill, they just got one step closer to controlling the future. All this has been foretold, and yet it is beyond anything anyone could have imagined.

Detroit braces for hefty pension, debt payments: Bracing for hefty pension and debt payments that each will exceed $100 million a year for several years, the city of Detroit is preparing a first-of-its-kind 10-year financial report that will include potential revenue from the Pistons' expected move to Detroit and other downtown projects. The report, expected by February, will be crucial to the city maintaining its post-bankruptcy financial health, and fulfilling its goal to get out from state oversight by 2018, Detroit Chief Financial Officer John Hill said. Details in the report about how Detroit grapples with ballooning pension and debt payments beginning in 2024 will be pivotal. Pension payments could start at $167 million in 2024 and increase by 2% each year for the next 20 years. About the same time, in 2025, Detroit begins a six-year stretch of annual debt service payments of between $101 million and $117 million, according to recent data. It's the kind of daunting financial challenge that Detroit — in the years before it declared bankruptcy — could have left unaddressed until the situation escalated into a crisis. Already the city has socked away $30 million to offset the payments, a nest egg that could grow with future city surpluses.

Ratings Agency Isn't Buying City of Dallas' Proposed Pension Fix - Late Friday, Moody's Investors Service announced that, for the third time in less than two years, it was downgrading the city of Dallas general obligation bonds. In layman's terms, that means that the city's credit rating — its ability to borrow money through the sale of bonds — has taken another hit. This unwelcome news comes despite the city's new plan to battle its $3 billion-plus pension shortfall through increased city payments and cuts to benefits for pension members.According to Moody's the downgrade directly stems from the city's ongoing battle to fix the Dallas Police and Fire Pension System. Because of nearly $500 million in recent cash withdrawals by pensioners enrolled in the city's Deferred Retirement Option Program (DROP), the ratings agency says, the system's overall liquidity is under threat.Rather than taking the city at its word, Moody's questions whether the fixes will even happen at all.  As a consequence, the city's credit rating has dipped from Aa3, Moody's fourth highest tier, to A1, the company's fifth highest. Just last year, Moody's rated the city of Dallas as an Aa1 credit risk, the service's second highest ranking. Friday's drop also means that Dallas' credit comes with an "upper medium grade" from Moody's, rather than a high grade.

Dallas Police Resignations Soar As "Insolvent" Pension System Implodes - A few days ago we noted that the Dallas Police and Fire Pension System (DPFP) took the unprecedented step of halting withdrawals from their DROP fund after a "run on the bank" pushed to the entire pension system, and the City of Dallas, to the brink of liquidity crisis (see "In Unprecedented Move, Dallas Pension System Suspends Withdrawals").  Now, a local CBS affiliate in Dallas is reporting that the pension crisis is driving a massive surge in police resignations.   Interim Dallas Police Chief David Pughes told city council members Monday that 99 officers have left the department since October 1.City councilman Philip Kingston is among those who blame the situation on the cash-starved police and fire pension fund.“It’s concerning, but it’s not very surprising with the turmoil surrounding the pension system,” said Kingston.In a statement, Mayor Mike Rawlings said, “This is why we are working so hard to address our pension crisis.”The Dallas Police Association said in any given year, about 180 officers leave the department — either to retire or work at higher-paying departments.About half the number have left in a two and a half month period.Of course, not surprisingly, the majority of the resignations came from older, tenured officers who had the most to lose.“I think most of those 99 were tenured officers, so those are our most experienced officers, the majority investigative detectives who solve crimes everyday,” said Mata.Councilman Kingston acknowledges the department’s challenge. “I think Chief Pughes is going to have to be creative. There’s nothing we can do to fix that in the short term. He has the number of officers he has and he has got to get results using those officers.”

Growing pension cost contributing to projected $12.2 million budget shortfall in Santa Barbara County - Santa Barbara County is facing a projected $12.2 million budget shortfall for the coming fiscal year, which is expected to grow to more than $45 million over the next five years. Despite having experienced modest revenue growth during the last several years, the county faces significant salary and benefit cost increases in the coming years, largely due to growing pension costs. How the county plans to deal with the looming financial challenges will be discussed when the Board of Supervisors meets Tuesday. Options could include finding additional funding and/or reducing service levels to balance the budget and resulting structural imbalances the deficit will create. "These costs increases are expected to significantly impact county departments and will likely necessitate service-level reductions over the five-year period absent new revenue," County Executive Officer Mona Miyasato wrote in a staff report to the supervisors. In response to the financial challenge, county staff is developing a phased budget rebalancing process to create immediate actions to address the 2017-18 fiscal year budget and longer-term strategies to achieve structural balance in the coming years, according to Miyasato. In October, the Santa Barbara County Employee Retirement System board voted to lower the assumed rate of return by 50 basis points, which will significantly increase county pension costs that had largely stabilized in the past two years.

Shocker! DWP’s Pension Plan is $4.8 Billion Underfunded … Ratepayers Will Pay the Bill!: The LA Department of Water and Power’s pension plan and its plan to cover Other Post-Employment Benefits (“OPEB”) have unfunded liabilities of almost $4.8 billion, an obligation that the Ratepayers will be required to fund. The Department of Water and Power pension plan is only 84% funded as assets of $10.3 billion are about $2 billion short of its future obligations of $12.3 billion. At the same time, the OPEB obligations are only 75% funded as assets of $1.75 billion are about $600 million less that its future obligations of $2.3 billion. Combined, DWP retirement obligations are only 83% funded, representing an unfunded liability of $2.5 billion. That’s the good news. When DWP finishes cooking the books and marks the assets to their true market value and assumes a more realistic investment rate assumption of 6.25%, the unfunded liability soars to $4.8 billion, representing an unhealthy funded ratio of 71%. DWP’s retirement plans are also very expensive to maintain. This year, the Department is expected to contribute $550 million to the two plans, an amount equal to over 12.5% of Department revenues and equal to almost 60% of its payroll. The City, on the other hand, contributes less than 30% of civilian workers’ salaries to the Los Angeles City Employees’ Retirement System. During the last year, the unfunded liability increased by 50% ($1.6 billion) to $4.8 billion, in large part because the return on invested assets was less than 1% (0.82%), a considerable shortfall from the overly optimistic investment rate assumption of 7.5%. At the same time, the annual contribution will increase to 60% of projected payroll, up from less than 50% the previous year.

New analysis says each household in Illinois owes $84,000 for pensions -  Every household in Illinois is now responsible for $84,000 in pension debt, according to a new analysis coming out of Stanford University. The numbers are up from $77,000 per household a year ago. The Stanford Institute for Economic Policy Research calculates these numbers by tracking state and local pension debt. They measure what states owe based on debt minus what they have on hand and what they expect to get in investments. Illinois and its municipal governments owe so much in pension debt that every home in the state would have to pay more than $84,000 just to break even. That’s more than $400 billion in debt between state and local pensions, and it’s more than every other state in the country except Alaska and California. “There is a huge impact today, and it will get much worse in the future,” Stanford public policy professor Joe Nation said. Nation bases his pension tracker debt totals on the estimated return of investment in U.S. Treasury bonds, or about a 2.75 percent return, compared with the more commonly used and generous estimate of roughly 7 percent. Nation also said this debt is crowding out public services.

 The State of American Retirement: How 401(k)s have failed most American workers -- Today, many Americans rely on savings in 401(k)-type accounts to supplement Social Security in retirement. This is a pronounced shift from a few decades ago, when many retirees could count on predictable, constant streams of income from traditional pensions (see “Types of retirement plans,” below). This chartbook assesses the impact of the shift from pensions to individual savings by examining disparities in retirement preparedness and outcomes by income, race, ethnicity, education, gender, and marital status. The first section of the chartbook looks at retirement-plan participation and retirement account savings of working-age families. The charts in this section focus on families headed by someone age 32–61, a 30-year period before the Social Security early eligibility age of 62 when most families should be accumulating pension benefits and retirement savings. The second section looks at income sources for seniors. Since many workers transition to retirement between Social Security’s early eligibility age and the program’s normal retirement age (currently 66, formerly 65), the charts in the second section focus on retirement outcomes of people age 65 and older.

Top House Republican Unveils Plan To Gut Social Security ― President-elect Donald Trump distinguished himself on the campaign trail as the rare Republican candidate promising not to cut Social Security and Medicare. But Republicans in Congress have other plans for the two popular social insurance programs ― and they are wasting no time rolling them out. Rep. Sam Johnson (R-Texas), chairman of the House Ways and Means Committee’s Subcommittee on Social Security, released a plan Thursday to reform Social Security that would drastically reduce benefits. The bill would make the program less of a universal earned benefit and more of a means-tested safety net that aims only to provide basic support to the poorest retirees and disabled workers. In order to close Social Security’s long-term funding gap, Johnson would make Social Security’s benefit formula less generous for all but the lowest earners, rapidly raise the retirement age and reduce the annual cost-of-living adjustment, among other changes designed to save money. Johnson also proposes changes that would cost the program money, like an increased minimum benefit for the poorest retirees ― provided they have a long history of covered employment ― and the elimination of income taxes on Social Security. Under Johnson’s plan, a middle-class 65-year-old claiming benefits in 2030 ― one with average annual earnings of about $49,000 over 30 years of covered employment ― would experience a 17 percent benefit cut relative to what the program currently promises them, according to the Social Security Administration’s chief actuary. A 65-year-old with the same earnings history claiming benefits in 2050 would experience a 28 percent benefit cut compared to current law. “For years I’ve talked about the need to fix Social Security so that our children and grandchildren can count on it to be there for them just like it’s there for today’s seniors and individuals with disabilities,” Johnson said in a statement introducing the bill. “My commonsense plan is the start of a fact-based conversation about how we do just that. I urge my colleagues to also put pen to paper and offer their ideas about how they would save Social Security for generations to come.”

Here's a First Draft of the GOP's Plan to Overhaul Social Security --  A senior Republican House chairman has begun circulating a proposal that would make major cuts and changes to the Social Security system in the coming decades, a move to contravene in President-elect Donald Trump’s repeated vow to leave the retirement program for 61 million retirees and their families unscathed. The comprehensive proposal -- already generating Democratic outrage – would put in place a series of highly controversial measures long debated by the two parties. Those measures include gradually raising the retirement age for receiving full benefits from 67 to 69 and adopting a less generous cost of living index than the current one. The proposal would also inaugurate means testing by changing the benefits formula to reduce payments to wealthier retirees. It would also eliminate the annual COLA adjustments for wealthier individuals and their families.The plan – drafted by veteran Rep. Sam Johnson (R-TX), chair of the House Ways and Means subcommittee on Social Security -- includes some measures that might attract Democratic interest. One would increase retirement benefits for lower-income workers and another would increase the minimum benefit for low-income earners who worked full careers.However, Johnson’s call late last week for the start of a “fact-based conversation” about ways to fix Social Security and assure its long-term solvency drew immediate fire from House Democratic Leader Nancy Pelosi of California, who warned that Johnson’s approach, if adopted, would cut current benefits by a third or more. “Slashing Social Security and ending Medicare are absolutely not what the American people voted for in November,” Pelosi said in a statement. “Democrats will not stand by while Republicans dismantle the promise of a healthy and dignified retirement for working people in America.”

What’s The Story With Obamacare? - States, patients, and voters are wrestling with the pros and cons of dramatic changes in public health insurance coverage, including extending, maintaining, or rolling back Medicaid expansion under the Affordable Care Act (Obamacare) — an often emotional topic of debate. The stories that are told about the effectiveness—or lack thereof—of coverage in improving health and health care usually relate compelling personal experiences, putting a human face on an otherwise abstract argument. A key question in the Medicaid debate is whether expanded coverage reduces the use of the Emergency Department (ED) — getting people into the doctor’s office earlier, improving health, and reducing health care spending. Solid evidence is very hard to come by, but we had an opportunity to evaluate the impact of expanding Medicaid using scientifically rigorous methods rarely available in answering public policy questions. In 2008, Oregon used a lottery to allocate a limited number of Medicaid slots — generating, in essence, a randomized controlled trial of Medicaid. This let us gauge the effects of the program itself, isolated from the usual confounding factors, and allowed us to collect thousands of stories—otherwise known as data!—about people’s experiences on and off of Medicaid. We found that, contrary to many people’s expectations, Medicaid increased use of the ED by 40 percent. New research tells us that this increase persisted for at least two years, and that Medicaid did not make patients more likely to substitute a visit to the doctor for one to the ED. In addition to this evidence, gleaned from a randomized evaluation of the experiences of tens of thousands of uninsured and newly insured Oregonians, we also conducted hundreds of interviews to learn how people felt that having Medicaid—or not—affected their lives. These individual narratives were invaluable for deepening our understanding of the experiences of those in study. But they also underscored how easy it is, in the absence of solid evidence, to find an anecdote to match any “answer.”

Obamacare subsidies to jump $10 billion in 2017 - CBS News: - Taxpayers will fork over nearly $10 billion more next year to cover double-digit premium hikes for subsidized health insurance under President Barack Obama’s Affordable Care Act, according to a study being released Thursday. The analysis from the Center for Health and Economy comes as the Republican-led Congress is preparing to repeal “Obamacare” and replace it with a GOP alternative whose details have yet to be worked out. With incoming President Donald Trump likely to sign such legislation, historic coverage gains under the 2010 health law are at stake. The study estimates that the cost of premium subsidies under the ACA will increase by $9.8 billion next year, rising from $32.8 billion currently to $42.6 billion. The average monthly subsidy will increase by $76, or 26 percent, from $291 currently to $367 in 2017.Currently more than eight in 10 consumers buying private health insurance through and state markets receive tax credits from the government to help pay their premiums. Those subsidies are designed to rise along with premiums, shielding consumers from sudden increases. But the bill ultimately gets passed on to taxpayers.

Want to Get Rid of Obamacare? Be Careful What You Wish For - With Donald J. Trump’s choice of Tom Price to head the Department of Health and Human Services, it’s clear that Republicans have a good chance of fulfilling their pledge to repeal Obamacare. In January, Republican majorities passed a measure similar to the one now proposed, which President Obama promptly vetoed. But with control of the presidency, they can prevail. The prospect portends one of the biggest political backlashes in recent history. On Monday, a search of The New York Times archives since 1981 turned up 344 articles containing the phrase “Be careful what you wish for.” As the repeal effort gathers steam, expect that number to grow sharply. Opponents of the Affordable Care Act have denounced it bitterly for more than six years, so it is not surprising that, despite the program’s successes, public opinion about it would be divided. Even so, a repeal would unleash the awesome power of loss aversion, among the more deeply rooted human tendencies known to behavioral scientists. Their consistent finding: The amount of effort people will expend to resist being stripped of something they already possess is significantly larger than the effort they will devote to acquiring something they don’t already have. When the possession in question is an insignificant material object, such as a coffee mug, people must be offered roughly twice as much to part with it as they would have been willing to pay to acquire it initially. If the possession relates to health or safety, that ratio becomes drastically larger. In one experiment, subjects who were asked to imagine having been exposed to a rare fatal disease — there was a 1 in 1,000 chance they had caught it — were willing to pay only $2,000 for the only available dose of the antidote. The same subjects said that, under the same conditions, they would pay roughly 250 times as much to avoid any exposure to the disease if there was no available antidote.

 Ex-pharma execs charged by feds for fixing generic drug prices - The Justice Department charged former executives of a pharmaceutical firm with fixing generic drug prices, rigging bids, and conspiring to divvy up customers, according to court documents unsealed Wednesday.The charges, filed against two ex-Heritage Pharmaceuticals execs earlier this week in the US District Court of Eastern Pennsylvania, mark the first time the DOJ has ever gone after a generic drug maker. It likely won’t be the last.The charges are the first fruits of an ongoing and sweeping investigation into generic drug price-fixing by the Department. Sources familiar with the matter tell Bloomberg that the investigation now involves about two dozen drugs and more than a dozen pharmaceutical companies, including Impax, Teva, and Mylan, the infamous maker of EpiPens. The DOJ’s announcement of the charges hinted that more may be coming, including yet-to-be-named co-conspirators of the former Heritage executives.Those defendants are Jeffrey Glazer, the former CEO of Heritage, and Jason Malek, the company’s ex-president. Both were fired in August for allegedly setting up dummy corporations that brazenly siphoned off tens of millions of dollars from the company in the course of seven years, according to a civil lawsuit (PDF) filed by the company last month. In the two criminal cases filed this week, the DOJ alleges that Glazer (PDF) and Malek (PDF) conspired to fix the price, rig bids, and divvy up customers of the antibiotic doxycycline hyclate between 2013 and 2015. The pair also allegedly fixed the price and divvied up customers of the diabetes drug glyburide between 2014 and 2015.

Rare and Deadly ​Superbug Mysteriously Appears on U.S. Pig Farms - Not all bacteria are created equal. The first-time discovery of a long-dreaded superbug on U.S. pig farms, announced Monday , really stands out. And not in a good way.  What they found on pig farms was a kind of CRE bacteria, for carbapenem-resistant Enterobacteriaceae. CRE is one of the nastier superbugs . Infections with these germs are very difficult to treat and can be deadly—the death rate from patients with CRE bloodstream infections is up to 50 percent.  The Centers for Disease Control and Prevention (CDC) said these bacteria already cause 9,300 infections and 600 deaths each year. To date, CRE infections occur mostly among patients in hospitals and nursing homes; people on breathing machines or with tubing inserted into their veins or bladders are at higher risk, as are people taking long courses of certain antibiotics. But newer, more resistant kinds of CRE seem to be causing more problems outside hospitals, in communities and among healthier people.  Tom Frieden, head of the CDC, refers to CRE as "nightmare bacteria." Why nightmarish? Because CRE carry genes rendering them resistant to multiple antibiotics—not only to carbapenems, which have been a "last resort" treatment for these kind of infections—but also to other broad spectrum antibiotics, like cephalosporins. CRE have been found on farms before. Monday's report stands out because the carbapenem resistance gene, called bla IMP-27, found on these farms is carried by a plasmid.   Previous isolates of CRE found outside of hospitals have been less alarming, because they haven't carried this transmittable plasmid.  What happens when—when, not if—the same plasmid collects resistance genes to both colistin and carbapenems? That's the Nightmare on Main Street scenario that many experts fear and perhaps even expect in our future. Infections caused by gram negative bacteria carrying that super-plasmid would be virtually untreatable. As it spreads into the human population, one could reasonably expect a big increase in costs, hospitalizations and deaths.

 New viral threat to bees discovered - A newly discovered virus called Moku poses a threat to bee colonies. The virus is spread by an invasive species of wasp and the potential is for the virus to threaten bee colonies worldwide. The virus is transferred by the wasp western yellowjacket (Vespula pensylvanica) and it presents a risk to all types of bees, although honeybees appear to be at a greater risk. Honeybees are similarly at risk to the more established deformed wing virus (which is spread by the mite Varroa destructor.) The virus has been named Moku, which relates to the Hawaiian Island where it was first detected. The virus was identified through different tests conducted at different research centers. The data was collated by the Platforms & Pipelines Group at the Earlham Institute, led by Dr. Purnima Pachori. The most complex aspect involved prizing out the genetic material and to separate the viral material from that of the host organism. This was helped through the application of next generation gene sequencing techniques. The virus is a member of the family Iflavirus. This is a family of positive sense RNA insect-infecting viruses. For the analysis isolates from several different wasps were studied. It was found that the variation between strains of Moku across the wasp samples studied was small (only a 98 percent sequence difference). This provides an additional indication about the likely future spread of the virus.

Many GMO studies have financial conflicts of interest - Financial conflicts of interest were found in 40 percent of published research articles on the genetically modified crops, also known as GMO crops, French researchers said this week. The findings in the December 15 edition of the US journal PLOS ONE focused on hundreds of research articles published in international scientific journals. "We found that ties between researchers and the GM crop industry were common, with 40 percent of the articles considered displaying conflicts of interest," said the study. Researchers also found that studies that had a conflict of interest were far more likely to be favorable to GM crop companies than studies that were free of financial interference. The study focused on articles about the efficacy and durability of crops that are modified to be pest resistant with a toxin called Bacillus thuringiensis. Thomas Guillemaud, director of research at France's National Institute for Agricultural Research (INRA), told AFP that the team originally looked at 672 studies before narrowing down to the pool to 579 that showed clearly whether there was or was not a financial conflict of interest."Of this total, 404 were American studies and 83 were Chinese," he said.To determine whether there was a conflict, researchers examined the way the studies were financed.Conflicts of interest were defined as studies in which at least one author declared an affiliation to one of the biotech or seed companies, or received funding or payment from them.

DuPont to Pay $50 Million for Mercury Pollution, Largest Settlement in Virginia History -- Chemical company Dupont Co. will pay Virginia a stunning $50 million to clean up decades of mercury pollution. The proposed settlement is the largest natural resource settlement in the state's history and the eighth largest in the nation, state and federal officials said.   "[The settlement] ranks 8th in all of time of natural resource damage settlements across the country ... and that includes such big cases like Deep Water Horizon and Exxon Valdez," Paul Phifer with the U.S. Fish and Wildlife Services said, according to the Associated Press .  The case dates back several decades when a former DuPont factory outside the city of Waynesboro leaked mercury—a chemical used for the plant's rayon production—into the South River from 1929 to 1950 . The pollution was finally discovered in the 1970s and DuPont has worked with federal and state officials on cleanup solutions over the years.  Still, the mercury remains persistent and has been difficult to remove. The South River is one of the area's leading tributaries so any contamination eventually flows into the Shenandoah River. According to the Shenandoah Riverkeeper , the South River Science Team found that South River and South Fork Shenandoah River fish continue to have elevated mercury concentrations some 60 years later after the DuPont plant ceased production.  Fish consumption advisories in affected areas are in place to this day .

Flint Residents Face More Trauma With City Relying On Dirty River - Officials in Flint, Michigan switched the city’s water supply from Lake Huron to the notoriously polluted Flint River. The change has wracked residents with more trauma on top of what they were already experiencing as a result of lead poisoning in their water system. But one former Flint resident remembers how the Flint River was widely regarded as “dirty” during her childhood. Back in August, Michigan Attorney General Bill Schuette told the U.S. District Court for the Eastern District of Michigan that the existing method of “delivery,” where “Flint residents must find a way to retrieve their own drinking water, and can use water filters that may or may not be installed and maintained correctly” was “good enough.” The state of Michigan fought against Concerned Pastors For Social Action and other groups to prevent the district court from forcing them to deliver bottled water to residents. They cited the “cost of monthly delivery of bottled water to 100 percent of the Flint households” to justify their claim that a court order to provide water to residents was “unreasonable and overbroad.” Judge David M. Lawson found this argument was based on a “demonstrably false premise.” In his scathing ruling, Judge Lawson wrote: The State defendants argue that the scope of the Court’s door-to-door delivery has no known precedent. Perhaps, but there also is no precedent for the systemic infrastructure damage to a water delivery system caused by a public official’s decision to switch to a water source that is corrosive and the failure to “install and operate optimal corrosion control treatment.While state negligence is the primary focus in the aftermath of the water crisis, and rightfully so, the contamination of the 78-mile-long Flint river presents a similarly pressing issue.

After years of drama, farmers score a big win in California water battle --The California water bill now ready for the president's signature dramatically shifts 25 years of federal policy and culminates a long and fractious campaign born in the drought-stricken San Joaquin Valley. A rough five years in the making, the $558 million bill approved by the Senate early Saturday morning steers more water to farmers, eases dam construction, and funds desalination and recycling projects. Its rocky road to the White House also proved a costly master class in political persistence and adroit maneuvering. “I believe these provisions are both necessary, and will help our state,” said Democratic Sen. Dianne Feinstein. Feinstein and House Majority Leader Kevin McCarthy of Bakersfield, and their staffs, crafted the final water package, which the Senate approved on a 78-21 vote. They also made the hard-ball tactical choice to fold it into a widely popular infrastructure bill, which eased Senate passage while it left retiring Democratic Sen. Barbara Boxer fuming.“I think it is absolutely a horrible process, a horrible rider,” Boxer said during floor debate Friday. “It’s going to result in pain and suffering among our fishing families.”Boxer cited, in particular, California’s salmon industry, whose members fear the diversion of water will deplete rivers critical to salmon reproduction.  Boxer’s post-midnight vote against the Water Infrastructure Improvements for the Nation Act, which included the approximately 98-page California bill, was likely to be the last of her 33-year congressional career. It was a sour ending for her long-time Senate partnership with Feinstein, with whom she’s amicably served since 1993.

Mohawks become first tribe to take down a federal dam  - A century after the first commercial dam was built on the St. Regis River, blocking the spawning runs of salmon and sturgeon, the stream once central to the traditional culture of New York's Mohawk Tribe is flowing freely once again. The removal of the 11-foot-high Hogansburg Dam this fall is the latest in the tribe's decades-long struggle to restore territory defiled by industrial pollution, beginning in the 1980s with PCBs and heavy metals from nearby General Motors, Alcoa and Reynolds Metal plants, a cleanup under federal oversight that's nearly complete. The St. Regis River project is the first removal of an operating hydroelectric dam in New York state and the nation's first decommissioning of a federally licensed dam by a Native American tribe, federal officials say. Paired with the recent success of North Dakota's Standing Rock Sioux in rerouting a pipeline they feared could threaten their water supply, the dam's removal underscores longstanding concern over the health of tribal lands. "We look at this not only as reclaiming the resources and our land, but also taking back this scar on our landscape that's a constant reminder of those days of exploitation," said Tony David, water resources manager for the St. Regis Mohawk Reservation, which the Mohawks call Akwesasne. The former industrial site will become a focal point in the Mohawks' cultural restoration program, funded by a $19 million settlement in 2013 with GM, Alcoa and Reynolds for pollution of tribal fishing and hunting grounds along the St. Lawrence River. The program partners young apprentices with tribal elders to preserve the Mohawk language and pass on traditional practices such as hunting, fishing, trapping, basket-making, horticulture and medicine.

Indigenous peoples of the world’s coastlines are losing their fisheries — and their way of life - According to some estimates, people consumed about 102 million tons of seafood last year. A new study released Friday by the Nippon Foundation-Nereus Program, based at the University of British Columbia, shows that indigenous people who live on the world’s coasts consume 15 times more seafood per capita than people in other parts of the world, about 2.3 million tons, or about 2 percent of the global catch, the study said. They don’t simply catch and eat fish and other seafood. It’s the heart of communities, the center of culture and religion, a gift from the heavens. Seafood is crucial to the cultures of coastal indigenous people in the Americas, Asia, Africa and the Arctic, among other places, and overfishing and the ocean-wide movement of fish due to climate change could wipe those resources out. On the coast of Africa at the equator, huge commercial ships are starting to encroach on native fishing areas as ocean stocks diminish. In places such as Madagascar, the stocks of community fisheries have been nearly lost. “These big industrial fisheries are chasing the fish. In West Africa, larger vessels are moving closer and closer to shore,” “What you’ve seen is as people have less access to their traditional fishing ground,” Cisneros-Montemayor said, “people have turned to eating more food in the stores. People are wondering about the effects on their health. There’s an elevation in cases of diabetes.” Coastal communities greatly rely on fishing, but no one knew exactly how much indigenous people on the coast need fish.

The damming problem of reconnecting Europe’s rivers --Rivers are some of the world’s richest ecosystems and yet they are also some of the most threatened. Despite billion-dollar restoration programmes being implemented worldwide, one of the biggest problems rivers face is actually manmade: dams.  Chances are that much of the water you drink, the electricity you use, and the food you eat would not be possible without dams. Dams help us abstract water for domestic and industrial use; facilitate navigation for commerce and trade; provide fishing and leisure opportunities; and may also help prevent the spread of aquatic invasive species. Hydroelectric dams are also essential for meeting Europe’s 20% renewable energy target by 2020, while climate change is putting additional pressure on surface water resources that may also require new dams. Dams provide a lot of benefits to society, certainly, but not so much to the actual waterways. We have been building dams all over the place for the last 5,000 years, relentlessly and unstoppably. These days we are building them taller and larger than ever before. The world’s current biggest dam, the hydroelectric Three Gorges Dam which spans the Yangtze river in China holds back a reservoir stretching 600km in length. And a new structure planned for the vast River Congo’s Inga waterfalls in Africa could surpass this, with the ability to generate twice as much hydroelectricity as its Chinese counterpart. Our water reservoirs are now so vast, and have displaced so much water, that it has been suggested they have tilted the Earth’s axis, slowed its rotation, and become a major source of greenhouse gas emissions. But dams don’t last forever. Many, such as the diversion dams that fed the iron foundries of pre-industrial Europe, or the tailings dams that store mining waste, date from a bygone era and are no longer in use. They eventually clog-up with sediments, come to the end of their working life, and begin to crumble – sometimes catastrophically, endangering people and livelihoods.

Aimed at Refugees, Fences Are Threatening European Wildlife – The Dinaric Mountains of southeastern Europe are home to three of the continent’s largest carnivores – the Eurasian brown bear, the Eurasian wolf, and the Eurasian lynx. They roam widely through woodlands of ash, oak, beech, and pine that run the length of the range from Greece to the Alps. The jagged cliffs and sheer-sided canyons, cut by some of the last free-flowing rivers on the continent, offer near-ideal habitat for these animals.  This Balkan region, already threatened by the construction of highways and dams, is now being carved into increasingly constricted and less hospitable chunks by a new threat: border fencing. In the summer of 2015, as a flood of refugees from the Middle East and Africa streamed into Europe, Hungary closed its border. That left Slovenia as the main refugee conduit into Western Europe. Alarmed at the massive tide of migrants, Slovenia began building a razor-wire security fence along its 670-kilometer (416-mile) border with Croatia, giving little if any consideration of the environmental impacts on the wildlife.  Those effects are now being felt by the region’s migratory wild animals. The Croatian-Slovenian border area is currently home to scores of bears that, according to DNA testing and satellite tracking, have long roamed freely between the two countries and beyond. Of the 10 or 11 wolf packs found in Slovenia, five traditionally have regularly moved across the Slovenian-Croatian boundary where the fence is now being erected. The threatened lynx also counts as homeland this area that was for centuries a borderless frontier of valleys, hills, and farmland. On his most recent trip into the mountains along the Slovenian-Croatian border, biologist Djuro Huber counted 11 dead roe deer, all caught up in the fencing. The deer stumble into the barriers while foraging. In a desperate bid to escape, they drive themselves further into the razor wire, entangling themselves and eventually dying of blood loss. “Certainly many more died, but the border officials try to remove them before [they are] photographed,” says Huber of the University of Zagreb in Croatia. “But it is what we don’t see that troubles me the most.” 

Surprising Number of Species Going Extinct in Their Usual Homes, Study Says-- Hundreds of species around the world—plants, animals, marine life—are experiencing local extinctions due to climate change, according to a new study. Researchers say it's likely to be just the beginning. As the climate warms, these species, which range from types of chipmunks to grasses to sea snails, are no longer showing up in the places they used to call home. The phenomenon isn't isolated to one particular geographical region or temperature zone, the study found. Of the 976 species analyzed in the study, which was published Thursday in the journal PLoS Biology, nearly 50 percent have already become extinct along the "warm edge" of their range. It's a reflection of a known process, by which species are moving poleward and to higher altitudes to escape changes to their habitats as the climate warms. The study's author, John J. Wiens, said local extinctions are inherent in range shifts. The species being impacted can't exactly say, "'Oh, it's too hot here, I'm heading north,'" said Wiens, who is an ecologist and evolutionary biologist at the University of Arizona. The species have three choices: Adapt to the changing temperature, emigrate or die.. "The overall striking pattern is how similar it is," he said, pointing out that it's not just 50 percent of tropical amphibians, or 50 percent of temperate marine species that are going locally extinct. "It's about 50 percent all over the world and for all these different groups of organisms."

Unhealthy forests affect distant ecosystems - – Ecologists have demonstrated, once again, the global importance of healthy forests. Fell enough woodland in North America, and the consequences make themselves felt in the forests of Siberia. And clear the tropical rainforest in the Amazon, and the Siberian conifers experience even greater cold and drought. This “teleconnection” confirms that activities in one region can disturb the climate equilibrium in another.The research – based entirely on sophisticated computer models – is another reminder that the loss of forests from drought, heat, insect infestation or exploitation matters not just to the local citizens, but to ecosystems far beyond a nation’s shores. “When trees die in one place, it can be good or bad for plants elsewhere because it causes changes in one place that can ricochet to shift climate in another place. The atmosphere provides the connection,” says Elizabeth Garcia of the University of Washington in the US. Forest destruction has a cooling effect because without trees the bare earth reflects more and absorbs less sunlight. Loss of vegetation makes the air more arid. And this seems enough to shift large-scale atmospheric waves and affect precipitation patterns. Trees in western North America have begun to feel the impact of drought and infestation. Trees in the Amazon have been clear-felled or burned to make way for farmland. So the scientists modelled the consequences of even greater destruction.

The violent costs of the global palm oil boom- Just after nine o’clock on a Tuesday morning in June, an environmental activist named Bill Kayong was shot and killed while sitting in his pickup truck, waiting for a traffic light to change in the Malaysian city of Miri, on the island of Borneo. Kayong had been working with a group of villagers who were trying to reclaim land that the local government had transferred to a Malaysian palm-oil company. A few days after the murder, the police identified Stephen Lee Chee Kiang, a director and major shareholder of the company, Tung Huat Niah Plantation, as a suspect in the crime, but Kiang flew to Australia before he could be questioned by authorities. (Three other individuals were eventually charged in the case.) Around the world, environmental and human-rights activists added Kayong’s death to the tally of violent incidents connected to the production of palm oil, which has quietly become one of the most indispensable substances on Earth. The World Wildlife Fund says that half of the items currently on American grocery-store shelves contain some form of palm oil. (“You’re soaking in it,” went the old tagline of the palm-oil-based dish detergent Palmolive.) The move away from trans fats in processed foods was a particular boon for the industry—semi-solid at room temperature, palm oil emerged as an ideal swap-in for the partially hydrogenated oils formerly used to enhance the texture, flavor, and shelf life of products like cookies and crackers. Since 2002, when a report from the National Academy of Sciences found a link between trans fats and heart disease, palm-oil imports to the U.S. have risen four hundred and forty-six per cent, and have topped a million metric tons in recent years. In addition to its widespread use in processed foods, the oil palm plant, Elaeis guineensis, lurks in one form or another in many cosmetics and personal-care products, such as shampoos, soaps, and lipsticks. It’s also used in animal feeds and industrial materials, and, increasingly, as a biofuel.

Cows and rice paddies boost methane emissions: study | Reuters: Global methane emissions from agriculture and other sources have surged in recent years, threatening efforts to slow climate change, an international study has found. Researchers led by French Laboratoire des Sciences du Climat et de l'Environnement (LSCE) reported that methane concentrations in the air began to surge around 2007 and grew precipitously in 2014 and 2015. In that two-year period methane concentrations shot up by 10 or more parts per billion (ppb) annually, compared with an average annual increase of only 0.5 ppb during the early 2000s, according to the study released by the Global Carbon Project, which groups climate researchers. Marielle Saunois, lead author of the study and assistant professor at Université de Versailles Saint Quentin, said that the increase in methane emissions could threaten efforts to limit global warming. "We should do more about methane emissions. If we want to stay below a 2 degrees (Celsius) temperature increase, we should not follow this track and need to make a rapid turnaround," she said in a statement. Methane is much less prevalent in the atmosphere than carbon dioxide (CO2) -- the main man-made greenhouse gas -- but is more potent because it traps 28 times more heat. The report did not say to what extent methane contributes to global warming.

Rapid rise in methane emissions in 10 years surprises scientists -  Emissions of the powerful greenhouse gas methane have surged in the past decade, threatening to thwart global attempts to combat climate change.Scientists have been surprised by the surge, which began just over 10 years ago in 2007 and then was boosted even further in 2014 and 2015. Concentrations of methane in the atmosphere over those two years alone rose by more than 20 parts per billion, bringing the total to 1,830ppb. This is a cause for alarm among global warming scientists because emissions of the gas warm the planet by more than 20 times as much as similar volumes of carbon dioxide.In the meantime, emissions of carbon dioxide – the main component of manmade greenhouse gases in the atmosphere – have been levelling off. The new research, published in the peer-review journal Environmental Research Letters, suggests that the world’s attempts to control greenhouse gases have failed to take account of the startling rises in methane. The authors of the 2016 Global Methane Budget report found that in the early years of this century, concentrations of methane rose by only about 0.5ppb each year, compared with 10ppb in 2014 and 2015.The scientists speculate that agriculture may be the main source of the additional methane that has been recorded. However, they cannot be sure of all the sources, owing to a lack of monitoring.At least a third of methane comes from the exploitation of fossil fuels, including fracking and oil drilling and some coal mining, where methane is viewed as a waste gas and is frequently allowed to escape or, in some cases, flared off, which is less harmful. Unlike carbon dioxide emissions, however, which have been tracked in various ways since the 1950s, emissions of methane are poorly understood and could represent a threat that scientists have still not accounted for.

Surge in methane emissions threatens efforts to slow climate change - Global concentrations of methane, a powerful greenhouse gas and cause of climate change, are now growing faster in the atmosphere than at any other time in the past two decades.   That is the message of a team of international scientists in an editorial to be published 12 December in the journal Environmental Research Letters. The group reports that methane concentrations in the air began to surge around 2007 and grew precipitously in 2014 and 2015. In that two-year period, concentrations shot up by 10 or more parts per billion annually. It's a stark contrast from the early 2000s when methane concentrations crept up by just 0.5 parts per billion on average each year. The reason for the spike is unclear but may come from emissions from agricultural sources and mainly around the tropics - potentially from farm sites like rice paddies and cattle pastures. The findings could give new global attention to methane - which is much less prevalent in the atmosphere than carbon dioxide but is a more potent greenhouse gas, trapping 28 times more heat. And while research shows that the growth of carbon dioxide emissions has flattened out in recent years, methane emissions seem to be soaring."The leveling off we've seen in the last three years for carbon dioxide emissions is strikingly different from the recent rapid increase in methane," says Robert Jackson, a co-author of the paper and a Professor in Earth System Science at Stanford University. The results for methane "are worrisome but provide an immediate opportunity for mitigation that complements efforts for carbon dioxide." The authors of the new editorial previously helped to produce the 2016 Global Methane Budget. This report provided a comprehensive look at how methane had flowed in and out of the atmosphere from 2000 to 2012 because of human activities and other sources. It found, for example, that human emissions of the gas seemed to have increased after 2007, although it's not clear by how much. The methane budget is published every two to three years by the Global Carbon Project, a research project of Future Earth.

Methane Emissions Soar, Agriculture Likely to Blame -- One year ago today, with huge relief, scarcely able to believe their achievement, world leaders finally agreed to reduce emissions of carbon dioxide.  But a bare 12 months later comes sobering news: Atmospheric concentrations of another gas, methane , are growing faster than at any time in the last 20 years, putting further pressure on the historic Paris agreement to deliver substantial cuts in emissions very soon.  Some scientists say the world now needs to change course and do more about methane to have a chance of keeping average global temperatures from rising by more than 2 C.  And one seasoned Arctic watcher said the changes there in the last decade are altering a system which has remained intact since the Ice Age.  Methane is the second major greenhouse gas, with agriculture accounting for 40 percent of emissions. Over a century it is 34 times more powerful as a greenhouse gas than carbon dioxide (though far less abundant), but over 20 years methane is 84 times more potent than CO2 .   In an editorial in the journal Environmental Research Letters , an international team of scientists reports that methane concentrations in the air began to surge around 2007 and grew steeply in 2014 and 2015. In those two years concentrations rose by 10 or more parts per billion annually. In the early 2000s they had been rising by an annual average of 0.5 ppb.  The scientists say the reason for the spike is unclear, but they think it may be the consequence of emissions from agricultural sources and mainly around the tropics—possibly from farm sites like rice paddies and cattle pastures.  They say research shows that the growth of CO2 emissions has flattened out in recent years, just as methane 's seem to be soaring.  Peter Wadhams, emeritus professor of ocean physics at Cambridge University, said scientists are now seeing large plumes of methane escaping from the shallow seas north of Siberia. These emissions and those from the thawing tundra, are contributing to the sudden rise in methane concentrations.

Methane surge needs 'urgent attention' - BBC News: Scientists say they are concerned at the rate at which methane in the atmosphere is now rising. After a period of relative stagnation in the 2000s, the concentration of the gas has surged. Methane (CH4) is a smaller component than carbon dioxide (CO2) but drives a more potent greenhouse effect. Researchers warn that efforts to tackle climate change will be undermined unless CH4 is also brought under tighter control. "CO2 is still the dominant target for mitigation, for good reason. But we run the risk if we lose sight of methane of offsetting the gains we might make in bringing down levels of carbon dioxide," said Robert Jackson from Stanford University, US. Prof Jackson was speaking ahead of this week's American Geophysical Union (AGU) meeting in San Francisco where methane trends will be a major point of discussion.  With colleagues who are part of an initiative called the Global Carbon Project, he has also just authored an editorial in the journal Environmental Research Letters (ERL)). This paper makes a clarion call to the scientific community to address the knowledge deficit that surrounds CH4.Quite why methane has suddenly spiked is not obvious. After barely moving between 2000 and 2006, the concentration in the atmosphere ticked upwards from 2007, and then jumped sharply in 2014 and 2015. In those final two years, methane rose rapidly by 10 or more parts per billion (ppb) annually. It is now just above 1,830ppb. By contrast, global CO2 emissions have flattened somewhat of late, giving hope that the rise in its atmospheric concentration (currently just above 400 parts per million) might also slow. "Methane has many sources, but the culprit behind the steep rise is probably agriculture," Prof Jackson told BBC News.

Fake News Blaming Cattle for Methane Rise – Kay McDonald - This week, the headlines have been telling us that a new scientific report suggests that an unexplained hike in global methane levels is likely caused by agriculture, specifically rice paddies and cattle. The source that I used in my news thread yesterday was from EurekAlert: Global concentrations of methane, a powerful greenhouse gas and cause of climate change, are now growing faster in the atmosphere than at any other time in the past two decades. That is the message of a team of international scientists in an editorial to be published 12 December in the journal Environmental Research Letters. The group reports that methane concentrations in the air began to surge around 2007 and grew precipitously in 2014 and 2015. In that two-year period, concentrations shot up by 10 or more parts per billion annually. It's a stark contrast from the early 2000s when methane concentrations crept up by just 0.5 parts per billion on average each year. The reason for the spike is unclear but may come from emissions from agricultural sources and mainly around the tropics - potentially from farm sites like rice paddies and cattle pastures. So, the problem the scientists are reporting is that there was a two year time period when methane emissions shot up by 10 or more parts per billion annually, beginning to surge in 2007 at a rate which continued upwards through 2014 and 2015. The reported conclusion (if you can call it a conclusion)?  Cattle and rice farming, perhaps in the tropics "may be" the reason. Although... from the same study... "Why this change happened is still not well understood," says Marielle Saunois, lead author of the new paper… So we've got a story, folks, which is being echoed across main stream media sources and social media, reported from a trusted scientific study that says methane began a rapid rate of increase in 2007. How much did the cattle population go up in 2007, then, is the question, if it was "likely because of cattle"? How much did the ruminant population expand in 2007? 2008?  There's one thing that did change rapidly beginning in 2007, and that was the advent of fracking. I don't want to jump to any conclusions, because I didn't do the research. I'm just stating the obvious. But the study did not think that this spike in methane is caused by the oil and gas industry. Another obvious situation is that we don't know how much Arctic methane is being released from warmer temperatures, as we've been warned so many times could be a tipping point situation. Yet, the scientists and all of the media conclude, that the study's rapid methane increase is probably caused by cattle and rice paddies, and then they put up a picture of cattle to go with the story.

National Geographic Nature Photographer of the Year 2016 contest winners

Record low volume highlights exceptional year for Arctic sea ice - Sea ice is a feature of Earth’s northern and southern extremities. Being at opposite ends of the planet, Arctic sea ice hits its lowest extent around mid-September while Antarctic sea ice reaches its highest point for the year.In 2016, Arctic sea ice clocked the second smallest winter maximum on record, after a colder than normal summer kept sea ice fractionally above the previous record set in 2012.After the September low, ice began to build up again in the Arctic; rapidly at first, compared to other years, then slowing during October and November as the region experienced a spell of exceptionally high temperatures. Some places were up to 20C warmer than usual for the time of year, prompting a flurry of media coverage. Sea ice extent even stopped growing and started shrinking in the Barents Sea for a brief period in November, an occurrence NSIDC described an “almost unprecedented” in the satellite record.You can see how Arctic sea ice extent in 2016 (blue line) stacks up against other years in the chart below. November 2016 averaged out at 9.1m square kilometres (sq km), 800,000 sq km smaller than the previous record set in 2006 and smaller than in 2012 (purple line), which holds the record for the lowest summer minimum in September. As of 5 December, Arctic sea ice extent has broken records on 52% of days this year, says Zack Labe, a PhD student at the University of California. This makes 2016 the first year to experience record low sea ice over most of the year. You can see this in the chart below, which compares daily sea ice extent in 2016 to the previous record for the same day. Where the line is above zero (blue) the 2016 extent isn’t record-breaking. Where the line drops below zero (red), 2016 set a new record.

Climate Change Is Mauling the Arctic Worse Than We Even Thought -Temperatures in the Arctic this year were the highest since records started more than a century ago, and are driving a decline in sea ice cover, snowpack melt, ocean acidification, and other environmental catastrophes that will accelerate the decline of the Arctic’s fragile ecosystem — with potentially dire consequences for the rest of the earth. On Tuesday, the National Oceanic and Atmospheric Administration’s Arctic Research program released its annual Arctic Report Card — and it paints a bleak picture. “Rarely have we seen the Arctic show a clearer, stronger or more pronounced signal of persistent warming and its cascading effects on the environment than this year,” said Jeremy Mathis, director of NOAA’s Arctic Research Program. On the Arctic’s overall health, “I would give it a F,” Mathis told Foreign Policy. “And I would give our response to the changes we’re seeing in the Arctic a D+.” Unfortunately for the rest of the world, the Arctic’s environmental health has a major impact on the rest of the globe, he added. “What happens in the Arctic doesn’t stay in the Arctic,” Mathis told FP. The Arctic in many ways acts as a global air conditioner — one that is slowly breaking down. In the past, the snow- and ice-covered polar region reflected a lot of sunlight back into space. The region stayed chilly, and helped circulate cooler air through the world’s oceans and jetstreams, regulating to a degree global climate. But rising temperatures thanks to ever-higher atmospheric concentrations of greenhouse gases are melting the snow and ice, making for a darker surface that absorbs more sunlight than it used to. That compounds the region’s warming and ensures that the earth as a whole absorbs more heat energy as the reflective ice layers recede. Additionally, as the region thaws, it could release billions of tons of carbon trapped in the permafrost; NOAA’s report says that permafrost soils contain about twice as much carbon as is currently in the atmosphere. “If all of that were to be broken down and released into the atmosphere, it could triple the amount of carbon dioxide in the atmosphere,” Mathis told FP.

NOAA: 'Arctic Is Warming at Least Twice as Fast as the Rest of the Planet' - The Arctic broke multiple climate records and saw its highest temperatures ever recorded this year, according to the National Oceanic and Atmospheric Administration's (NOAA) annual Arctic Report Card released Tuesday.  Map: Temperatures across the Arctic from October 2015-September 2016 compared to the 1981-2010 average. Graph: Yearly temperatures since 1900 compared to the 1981-2010 average for the Arctic (orange line) and the globe (gray). NOAA  The report shows surface air temperature in September at the highest level since 1900 "by far" and the region set new monthly record highs in January, February, October and November. "The Arctic as a whole is warming at least twice as fast as the rest of the planet," report author and NOAA climate scientist Jeremy Mathis told NPR.  Watch the video from NOAA on the annual Arctic Report Card below:   Report Card Highlights

  • The average surface air temperature for the year ending September 2016 is by far the highest since 1900 and new monthly record highs were recorded for January, February, October and November 2016.
  • After only modest changes from 2013-2015, minimum sea ice extent at the end of summer 2016 tied with 2007 for the second lowest in the satellite record, which started in 1979.
  • Spring snow cover extent in the North American Arctic was the lowest in the satellite record, which started in 1967.
  • In 37 years of Greenland ice sheet observations, only one year had earlier onset of spring melting than 2016.
  • The Arctic Ocean is especially prone to ocean acidification, due to water temperatures that are colder than those further south. The short Arctic food chain leaves Arctic marine ecosystems vulnerable to ocean acidification events.
  • Thawing permafrost releases carbon into the atmosphere, whereas greening tundra absorbs atmospheric carbon. Overall, tundra is presently releasing net carbon into the atmosphere.
  • Small Arctic mammals, such as shrews, and their parasites, serve as indicators for present and historical environmental variability. Newly acquired parasites indicate northward sifts of sub-Arctic species and increases in Arctic biodiversity.

Climate shenanigans at the ends of the Earth: why has sea ice gone haywire? - There is no doubt that 2016 has been a record-breaking year for Earth’s climate. We will have to wait another couple of months for the final tally, but 2016 will be the hottest year in recorded history globally. Average temperatures are well above 1℃ warmer than a century ago.Global average temperatures, and “global warming”, often give the impression of a gradual change in Earth’s climate occurring uniformly across the planet. This is far from the truth – particularly at the ends of the Earth. The Arctic and Antarctic are behaving very differently from the global picture. One particular polar change that has caught the attention of scientists and the media this year has been the state of sea ice. The seasonal growth and decay of sea ice over the Arctic and Southern oceans is one of the most visible changes on Earth. But in the past few months its seasonal progression has stalled, plunging Earth’s sea ice cover off the charts to the lowest levels on record for November. Explaining what has caused this unexpectedly dramatic downturn in sea ice is a tale of two poles.  On average, the Arctic is warming at around twice the global average rate. This is due to several environmental processes in the Arctic that amplify the warming caused by rising atmospheric greenhouse gas levels.  One of these amplifiers is the sea ice itself.  Just as a black car parked in the sun will warm up faster than a white one, so the dark surface absorbs more heat from the sun than ice. This extra heat promotes more ice loss, and so the cycle goes. This can explain the marked long-term decline of Arctic sea ice. But it can’t explain why the past month has seen such a sudden and dramatic change. For this we need to look to the weather.  Arctic climate is characterised by very large natural swings – so much so that in the past few weeks some regions of the Arctic have been a whopping 20℃ warmer than expected for this time of year. It’s a different story when we look at the ocean-dominated southern hemisphere.  Antarctic climate records point to a delay in some of the effects of “global warming”.  Unlike the dramatic declines in Arctic sea ice over recent decades, the sea ice that surrounds Antarctica has been increasing slightly over the past three-and-a-half decades and 2014 set records for the most extensive Antarctic sea ice on record. So the decline in Antarctic sea ice since August this year to record low levels has come as somewhat of a surprise.

Donald Trump: 'Nobody Really Knows' If Climate Change Is Real (It Is) | The Huffington Post: ― President-elect Donald Trump said in an interview airing Sunday that “nobody really knows” the facts about climate change, even though there’s widespread scientific consensus on the issue. “It’s not something that’s hard and fast,” Trump said on “Fox News Sunday.” “I do know this: other countries are eating our lunch.” Trump said he’s “studying” the Paris agreement, a joint effort by nearly 200 countries to reduce greenhouse gas emissions. “I don’t want that agreement to put us at a competitive disadvantage with other countries,” Trump said. Trump met this week with Leonardo DiCaprio to discuss global warming, but also named Oklahoma Attorney General Scott Pruitt, a defender of fossil fuel interests, to head the Environmental Protection Agency. Back in 2012, Trump tweeted that global warming “was created by and for the Chinese in order to make U.S. manufacturing non-competitive.”

Bank of America CEO on climate change: ‘We believe in the science’ - Bank of America chief executive Brian Moynihan said in a public television interview this week that climate change exists and is a threat the Charlotte-based company continues working to combat. “We believe in the science at Bank of America,” Moynihan told PBS’s Charlie Rose in a segment broadcast Thursday, according to a transcript. “We believe we have to get off fossil fuels.” Rose brought up the politically thorny issue in the wide-ranging interview, noting that Republican President-elect Donald Trump has sent mixed signals on the topic. Trump, who in 2012 accused the Chinese of manufacturing the concept of global warming, signaled he might be moderating his views by meeting Monday with former Vice President Al Gore to discuss climate change. Trump later disappointed environmental activists by confirming Thursday plans to nominate Oklahoma’s attorney general, a global warming skeptic, to head the Environmental Protection Agency. “Mr. Trump is really harder for us to figure out,” Moynihan said. Moynihan cited Bank of America’s actions to address climate change, such as a $125 billion program to finance low-carbon initiatives, as well as occupying buildings certified as environmentally friendly. Bank of America will “continue to drive” its environmental program, Moynihan said, noting it stretches back to retired Bank of America CEO Hugh McColl Jr. “We don’t change how we run Bank of America through election cycles,” Moynihan said.

Scott Pruitt’s nomination as a teachable moment -- I am not a climate-skeptic, let alone a denier; I accept the possibility of human-induced climate-change, but I’m far from an alarmist. Like most people, my interest is in the truth — in the science associated with the issue — and for that reason I’d like to see a debate about climate science in the media. That’s why I was delighted with President-elect Trump’s nomination of Scott Pruitt to head the Environmental Protection Agency.  The idea that human activity is causing climate change is based on science, but as a layman I must say that what I hear about climate science does not inspire confidence. As far as I can tell, what there is of climate science is based on the observation that carbon dioxide can trap heat in the atmosphere that would otherwise escape into space, and that various “feedback effects” increase that impact. That seems to be a generally accepted idea, but it tells us very little about whether human activity actually causes changes in such climate-related phenomena as storms, atmospheric warming and sea levels. To get to that point, we have to have a model of how the Earth’s atmosphere works, and that is where the credibility of the science that the media reports begins to break down. It’s hard to believe that we know enough about the effects of things like clouds, oceans, vegetation, future economic growth, and a myriad other factors that affect climate, to build a credible model that connects  carbon dioxide emissions with climate outcomes.

Trump Tabs Another Climate Denier, This Time for Interior - U.S. Rep. Cathy McMorris Rodgers, a sixth-term Republican from Washington State who is a climate change denier and an ardent opponent of regulations for greenhouse gas emissions, has been nominated by President-elect Donald Trump for Secretary of Interior. If McMorris Rodgers is confirmed by the U.S. Senate, she would govern the management of more than 500 million acres of federal public lands, including more than 400 national parks.Perhaps most critically, she would oversee the development of many of America’s fossil fuels and renewables resources, including all of its offshore oil, gas and wind development. Federal land is the source of more than 20 percent of all the oil and gas and 40 percent of the coal produced in the U.S.  McMorris Rodgers would have the power to reverse Obama administration efforts to protect federally managed waters from oil and gas development as well as end the research into how coal mining affects the climate. Earlier this year, the Obama administration placed a three-year moratorium on federal coal leasing, and closed the entire East Coast and parts of the Arctic Ocean to offshore oil drilling.  

Exxon's Rex Tillerson, leading climate villain, to be named secretary of state -- If it weren't real, it might read like a dark climate change comedy.  President-elect Donald J Trump is expected to turn to the leader of America's largest oil company, and the main villain in a new wave of climate change activism, to lead the State Department: ExxonMobil Corp. CEO Rex Tillerson. Multiple news organizations reported the pick on Saturday. Tillerson has worked at Exxon for his entire career, which is important since Exxon is currently under investigation for misleading its investors and the American public about the threat of global warming since the 1970s. The investigations and environmental activism surrounding it are known by the hashtag #ExxonKnew. Attorneys general in Massachusetts, New York and the U.S. Virgin Islands are leading probes into the company for working to deceive the American public and delay climate action. The climate investigations are similar to the successful prosecution of the tobacco industry in the 1990s for knowing about the dangers of its products and mounting public relations campaigns to convince the public otherwise. Environmental groups were quick to criticize Tillerson. After all, the State Department is tasked with leading America's diplomacy on climate change.  “This is unfathomable. We can’t let Trump put the world’s largest oil company in charge of our international climate policy," said Mary Boeve, the executive director of

Rex Tillerson’s view of climate change: It’s just an ‘engineering problem’ - Last week, when Trump named Oklahoma attorney general Scott Pruitt to head his Environmental Protection Agency, critics instantly seized on Pruitt’s views about climate change. He had co-authored an article for the National Review incorrectly stating that the “debate is far from settled. Scientists continue to disagree about the degree and extent of global warming and its connection to the actions of mankind.” (Actually, scientists have concluded that it is “extremely likely” that global warming is mostly driven by humans.) In comparison with this statement, ExxonMobil Chief Executive Rex Tillerson — just tapped to be Trump’s secretary of state, and hence perhaps the future lead player in U.S. international climate negotiations — has tended to articulate a more nuanced position on climate change. It’s one that, at least in the context of how Trump’s administration is shaping up on energy and environmental policy, could almost be called moderate. Consider some of Tillerson’s remarks in 2012 at an event sponsored by the Council on Foreign Relations. There, Tillerson discussed what he said were problems with climate change models — “we cannot model clouds,” he said — and suggested humanity has bigger problems. But also bluntly acknowledged, “I’m not disputing that increasing CO2 emissions in the atmosphere is going to have an impact. It’ll have a warming impact.”Where Tillerson gets into more contested territory, though, is his assessment of the scale of the risks and how to respond to them. He suggested at that 2012 event that the impacts of things like sea-level rise would probably be “manageable” — something that very much remains to be seen. He mentioned the possibility of “sea level rising four inches, six inches,” which is nowhere near the worst case scenario.Most prominent of all, perhaps, was Tillerson’s technological optimism about humans finding a way to solve the problem: And as human beings as a — as a — as a species, that’s why we’re all still here. We have spent our entire existence adapting, OK? So we will adapt to this. Changes to weather patterns that move crop production areas around — we’ll adapt to that. It’s an engineering problem, and it has engineering solutions.

Watch Trump's environmental picks: Our view. (USA Today) - During the campaign, Donald Trump described human-caused climate change as a scam and a hoax, and he vowed to take the United States out of the Paris accord, a global effort to curb greenhouse gas emissions and the warming they cause. Since the election, the president-elect has changed his tune, telling Fox News Sunday that he is "open-minded" about the Paris agreement, and that he had "good meetings" recently with climate activists Al Gore and Leonardo DiCaprio. Those are encouraging words for the two-thirds of Americans rightfully worried about global warming. But there seems to be a disconnect between those words and Trump's actions in putting forth a slate of climate change skeptics for key administration jobs:

  • Most troubling among them is Scott Pruitt, Oklahoma attorney general and fossil fuel industry ally, to lead the Environmental Protection Agency. Pruitt has sued the EPA — unsuccessfully more often than not — to block federal efforts to limit the poisons flowing from power plants, reduce smog, protect waterways, and cut climate-harmful methane. Sierra Club Executive Director Michael Brune compares putting Pruitt at the EPA to "putting an arsonist in charge of fighting fires."
  • Trump's architect for EPA transition is Myron Ebell, director of a Washington think tank funded by coal and oil interests and a noted global warming skeptic. Ebell has accused climate scientists of "manipulating and falsifying the data" on climate change.
  • The president-elect's consideration for secretary of the Interior is Rep. Cathy McMorris Rodgers, R-Wash. A strong opponent of greenhouse gas regulations, she once said that Gore "deserves an 'F' in science and an 'A' in creative writing." If approved as Interior secretary, Rodgers would oversee energy policy on a half-a-billion acres of public land.
  • The leading contender for secretary of State is Rex Tillerson, chief executive of energy giant ExxonMobil. Tillerson, to his credit, acknowledges that climate change is a threat and supports a carbon tax. But given his background, it's hard to imagine Tillerson promoting a transition from fossil fuels to renewable energy sources.
  • Thomas Pyle, a former Koch Industries lobbyist who is handling Trump transition at the Energy Department, authored a wish list for rolling back Obama administration climate initiatives. The document, obtained by the Center for Media and Democracy watchdog group, describes a Trump administration pulling out of the Paris accord; increasing oil, gas and coal production on federal lands; canceling President Obama's Clean Power Plan to limit industrial greenhouse gas emissions; and scaling back vehicle emission standards.

Trump's Interior Nominee Was for Climate Action Before He Was Against It - On Friday the Wall Street Journal reported that Donald Trump was set to appoint Rep. Cathy McMorris Rodgers (R-Wash.) to head the Department of the Interior. But Trump being Trump, by Tuesday he'd evidently had a change of heart, and instead of the chair of the House Republican Conference, he settled on a new name—Montana Rep. Ryan Zinke (R), an ex-Navy SEAL who was one of Trump's biggest supporters during the campaign. The choice of Zinke, who once referred to Hillary Clinton as "the anti-christ," makes some sense. He is a geologist, and as the at-large representative for a rural Western state, his work has focused in large part on public lands, natural resources, and tribal issues—the primary responsibilities of the Interior Department. But Zinke has also demonstrated a pointed skepticism about climate change. It wasn't always that way. In 2010, as a member of the Montana Legislature, he signed on to a letter calling global warming "a threat multiplier for instability in the most volatile regions of the world" and arguing that "the clean energy and climate challenge is America's new space race." The letter warned of the "catastrophic" costs and "unprecedented economic consequences" associated with failing to act on climate change and asked President Barack Obama and then-Speaker of the House Nancy Pelosi to push through sweeping climate and clean-energy legislation. That was then. But Zinke rose through the ranks of Montana Republicans with big support from the less clean corners of the energy industry and has been singing a different tune ever since. By the summer of 2014, when he was running for his first term in Congress, he said he'd seen no evidence that rising CO2 levels affected the climate. "It's not a hoax, but it's not proven science either," he said at one debate. By 2015, he'd fully reversed himself, reportedly telling a reporter from PBS that climate change did not present a national security threat—nor was it even man-made.

Rick Perry, Ex-Governor of Texas, Is Trump’s Pick as Energy Secretary - NYTimes: — President-elect Donald J. Trump plans to name former Gov. Rick Perry of Texas to lead the Energy Department, elevating a man who once could not remember the name of the agency he wanted to eliminate to the cabinet post, secretary of energy, that will run it. “Oops,” Mr. Perry famously said in 2011 as he racked his brain during a nationally televised presidential debate, trying to remember the name of the Energy Department — the third cabinet agency he intended to dismantle, after the Commerce and Education Departments. While Texas is rich in energy resources and Mr. Perry is an enthusiastic supporter of extracting them, it is not clear how that experience would translate into leading a department far more devoted to national security and basic science than fossil fuels. Despite its name, the Energy Department plays the leading role in designing nuclear weapons, thwarting their proliferation, and ensuring the safety and reliability of the nation’s aging nuclear arsenal through a constellation of laboratories considered the crown jewels of government science. “The Rick Perry choice is so perplexing,” said former Senator Byron L. Dorgan, Democrat of North Dakota, who for years led the committee that oversees the Energy Department’s budget.“I think very few people understand that the Energy Department, to a very substantial degree, is dealing with nuclear weapons,” he added. “And Rick Perry suggested the agency should be abolished. That suggests he thinks it doesn’t have value.”About 60 percent of the Energy Department’s budget is devoted to managing the National Nuclear Security Administration, which defines its mission as enhancing national security through the military application of nuclear science. Under President Obama, the Energy Department helped secure an agreement with Iran to dismantle its nuclear weapons program and took on a higher-profile role in efforts to combat global warming, particularly through scientific research. It also established the Advanced Research Projects Agency-Energy to support breakthrough research on clean energy technology. To that end, the last two energy secretaries, Ernest J. Moniz of the Massachusetts Institute of Technology and Steven Chu of Stanford, brought to the office their doctorates in physics, their academic credentials and, in Dr. Chu’s case, a Nobel Prize. Mr. Perry, 66, would bring a different set of credentials: governor of Texas from 2000 to 2015 and, before that, a stint as the Texas agriculture commissioner. He holds a bachelor’s degree in animal science from Texas A&M University.

 Report: Rick Perry Picked to Lead Agency He Couldn't Remember the Name Of - While seeking the 2012 Republican nomination, Governor Rick Perry famously proposed abolishing the Department of Energy before forgetting what it was called on live TV, naming it as “Oops” during the GOP debates. As luck would have it, however, Perry will be nominated as Secretary of Oops under President Donald Trump, CBS News reports. Having a climate change skeptic like Perry as head of the Energy Department might sound bad, but the reality is arguably worse. Earlier this month, Trump’s transition team circulated a 74-item questionnaire at the department asking, among other things, which employees attended climate change conferences and when they were held. Democratic lawmakers immediately voiced concerns that such information would be used for retaliation under the new administration, a task that Perry—who has called global warming a “hysteria” supported by “doctored data”—seems well-suited to perform.  In addition, the agency subsidizes green energy projects with loans that Trump has called wasted tax dollars “on unproven technologies and risky companies.” While Trump can’t end the program without an act of Congress, Perry would be able to block the approval of any new loans as Energy Secretary. Perhaps most troubling, however, is that one of the agency’s primary responsibilities is handling radioactive materials. Maintaining America’s nuclear arsenal, disposing of radioactive waste, and producing nuclear reactors would all fall under Perry. The man currently holding the position is a former nuclear physicist. The man next in line for the job was last seen Dancing With the Stars. May God help us all.

Rick Perry, a Very Different Kind of Energy Secretary - MIT Technology Review - Donald Trump wants Rick Perry to become his secretary of energy. So what qualifies the ex-governor of Texas for a job that’s recently been filled by prominent academics?  The department has a wide-ranging remit, tasked with maintaining the U.S. nuclear weapons arsenal, dealing with nuclear waste cleanup, and handling a wide range of energy research programs. No surprise, then, that the position has most recently been held by intellectual heavyweights—the Stanford University physicist and Nobel Prize winner Steven Chu from 2009 to 2013, and, most recently,  the former MIT nuclear physicist Ernest Moniz. Before that, under George W. Bush’s presidency, the position was held by Samuel Bodman, who had a PhD in chemical engineering from MIT.  Bloomberg reports that Jay Martin Cohen, who studied marine engineering at MIT and served as a rear admiral in the U.S. Navy, is slated to be Perry’s undersecretary for nuclear security. So that’s that covered. But Perry’s stance on the environment and energy research is unclear. While he doesn’t have a history of working in the oil industry, unlike many Texan governors of the past, his policies havecertainly supported the extraction of fossil fuels. His views on climate change run counter to the accepted scientific consensus. During his 2011 presidential bid, he said that he believes “the issue of global warming has been politicized,”  The climate, he said, has “been changing ever since the earth was born.” Interestingly enough, as governor of Texas Perry presided over a huge boom in wind power. While George W. Bush signed a law to deregulate the state’s power market, which opened the floodgates for the surge in renewables, it was Perry who oversaw construction of the infrastructure that now helps turbines provide almost 18,000 megawatts of wind capacity.The state’s success with renewables is largely due to a huge $7 billion grid investment. Without that, Texas wouldn’t be able to utilize anywhere near the energy its turbines crank out. In fact, infrastructure seems to be something that Perry really can get behind: in 2001, he proposed the Trans-Texas Corridor—a $145 billion mesh of road, rail, and data cables that would run from Oklahoma to Mexico. He wanted it to be partially financed and wholly run by private contractors, though, and it never got a green light.

Trump Picks Dow Chemical Chief to Head American Manufacturing Council - In the midst of three pending mega-mergers between agrichemical corporations, Donald Trump 's recent pick of Dow Chemical CEO Andrew Liveris to head the American Manufacturing Council signals yet more serious potential conflicts of interest in top government posts that could damage American farmers, the health of the public and the environment. The council serves as a liaison between the U.S. manufacturing industry and the federal government.   Tuesday, shareholders of agrichemical giant Monsanto approved a proposed takeover of the company by Bayer. Meanwhile, Liveris' company, Dow Chemical, is in the midst of negotiating a merger with DuPont.   "Andrew Liveris should be disqualified for the position due to his likely conflicts of interests. Serving as head of the American Manufacturing Council could allow Liveris to use a government post to benefit Dow Chemical and to line his own pockets," said Friends of the Earth Food Futures campaigner Tiffany Finck-Haynes.  The final decision on the mergers will fall to the Department of Justice, where Trump named Jeff Sessions as potential Attorney General. Sessions, who has received campaign contributions from Monsanto and Bayer, will head the agency investigating the economic impact and antitrust implications of the proposed mergers.  "Donald Trump's picks demonstrates that he is willing to allow corporate interests to control the food that's grown in our country and determine what's on our plates," said Finck-Haynes. "Despite his promise to 'drain the swamp,' his actions prove he is more concerned with advancing corporate interests than protecting the American people, workers and farmers."

Scientists and environmentalists are bracing for a clash with Trump - Since the election of Donald Trump, few groups have mobilized more quickly to try to influence his future decisions and appointments than scientists and environmentalists, constituencies that fear they could be marginalized once he takes the helm of the federal government in January.Petitions and open letters have poured out in the past couple of weeks, including a call by nearly two dozen Nobel laureates that Trump defend “scientific integrity and independence” and a petition by more than 11,000 female scientists demanding that he respect inclusiveness and the scientific process. The effortsunderscore how these individuals could be at the front lines of an oncoming political clash.The two groups have different missions and interests — many scientists receive federal funding and work in academic institutions, while many national environmental groups rely on an independent financial donor base and concentrate their work on directly lobbying elected and appointed officials on policy matters. But many fields of science have implications for conservation, climate change and other environmental issues that have been politicized, and scientists have become more vocal about their findings’ policy implications. Both groups have expressed concern about the next administration’s direction.Physicist Neal Lane, who served as President Bill Clinton’s science adviser and is a professor emeritus at Rice University, said the scientific community as a whole is worried about threatened funding cuts, where he thinks “climate-related science and technology research and development is likely to be particularly attacked.”An even deeper problem than funding cuts, though, he said, involves the “integrity” of scientific information. “We saw it in the George W. Bush administration, and that was the federal government’s disregard for the integrity of science. The publicizing of demonstrably false information by several federal agencies,” Lane said. “I don’t want to prejudge anybody, but there’s at least a danger that this issue of integrity of scientific knowledge and information and the importance of accuracy in reporting to the public, that may not be fully respected or understood.”

Trump team memo asks Energy Department about cost of carbon - On Friday morning, Bloomberg reported that it had seen a copy of a questionnaire sent by the Trump transition team to the Department of Energy (DOE). The questionnaire includes 75 questions directed at the DOE and the Energy Information Agency (EIA), as well as any labs underneath the DOE’s purview. The New York Times then obtained and published a copy of the document. Although the questions are broad in nature, they seem to set the department up for budget and staffing cuts. They also appear to favor nuclear power and fossil fuel. Questions that address cuts to the DOE’s mission include: “Which Assistant Secretary positions are rooted in statute and which exist at the discretion and delegation of the Secretary?”, as well as “If the DOE’s topline budget in accounts other than the 050 account were required to be reduced 10% over the next four fiscal years (from the FY17 request and starting in FY18), does the Department have any recommendations as to where those reductions should be made?” A 050 account indicates national defense spending. With respect to renewables and research, the questionnaire asks the DOE to provide a complete list of the projects shouldered by the Advanced Research Projects Agency-Energy (ARPA-E), which funds early-stage energy technology that would otherwise not be funded on the private market. ARPA-E opened its doors in 2009 under President Obama and works on battery research, biofuel production, and wind turbine projects. Efforts to modernize the US’ aging and inefficient grids also seemed to get a critical eye. “What is the goal of the grid modernization effort?” the questionnaire asks. “Is there some terminal point to this effort? Is its genesis statutory or something else?” Just one question is reserved for wind energy, which is quickly becoming cheaper than fossil fuels in some parts of the nation: “What is the Department’s role with respect to the development of offshore wind?” The questionnaire also asks about funding for nuclear fusion projects, funding for the Office of Civilian Radioactive Waste Management, and resuming the Yucca Mountain project.

Climate Change Conversations Are Targeted in Questionnaire to Energy Department - — President-elect Donald J. Trump’s transition team has circulated an unusual 74-point questionnaire at the Department of Energy that requests the names of all employees and contractors who have attended climate change policy conferences, as well as emails and documents associated with the conferences. In question after question, the document peppers Energy Department managers with pointed queries about climate science research, clean energy programs and the employees who work for those programs. More broadly, the questionnaire hints at a significant shift of emphasis at the agency toward nuclear power, and a push to commercialize the research of the Energy Department’s laboratories, long considered the crown jewels of federal science. Energy Department employees, who shared the questionnaire with The New York Times and spoke on the condition of anonymity because they were not authorized to discuss the matter publicly, described the questionnaire as worrying. Mr. Trump has just tapped Scott Pruitt, the attorney general of Oklahoma and a climate change denialist, to head the Environmental Protection Agency, and the president-elect has made it clear he intends to roll back eight years of regulatory efforts by President Obama that aimed to control planet-warming emissions. The questionnaire “suggests the Trump administration plans a witch hunt for civil servants who’ve simply been doing their jobs,” Robert Weissman, president of the watchdog group Public Citizen, said in a statement. “Democrats and Republicans alike should unite to condemn any action that intimidates, threatens or retaliates against civil servants for lawfully doing their jobs.”Michael McKenna, a former Energy Department official in George W. Bush’s administration who initially led Mr. Trump’s Energy Department transition, saw nothing amiss. “If meetings happened and important stuff was decided, voters have a right to know,” said Mr. McKenna, who stepped down after Mr. Trump banned working lobbyists from the transition. “It’s not a matter of national security. The transition is not asking about nuclear weapons. They are asking about meetings about modeling for God’s sake.”

Scientists Frantically Copying Critical Climate Data as Energy Dept. Refuses to Release Names -  The Department of Energy has refused to respond to the Trump transition team's chilling 74-question document seeking the names of anyone who has worked on climate change in the department. Climate scientists are also acting feverishly to preserve data after a senior Trump campaign adviser suggested eliminating all funding for NASA's climate research programs.  Scientists are rushing to copy decades of critical climate information that could be altered or destroyed under a hostile Trump Administration.  Two university professors are calling for a hackathon in collaboration with the Internet Archive's End of Term 2016 project, which will archive federal online pages and data that could disappear after Jan. 20, 2017. Separately, the ad-hoc Climate Mirror project seeks to store key datasets and keep them publicly available. The Climate Science Legal Defense Fund (CSLDF) has published a 16-page guide for government researchers whose work may be suppressed. "You just don't know what's coming," Adam Campbell, who studies the imperiled Ross Ice Shelf of Antarctica, told the Washington Post. Sentiment is shared at the DOE, which is why they are refusing to share names with Trump's transition team. "We are going to respect the professional and scientific integrity and independence of our employees at our labs and across our department," Energy Department spokesman Eben Burnham-Snyder said in an email to The Washington Post. "We will be forthcoming with all publicly available information with the transition team. We will not be providing any individual names to the transition team."  The gravest danger to these federal employees may be that they will lose their jobs in an anti-climate purge.

Why Scientists Are Scared of Trump: A Pocket Guide - The New Yorker: Next week, the American Geophysical Union will hold its annual conference in San Francisco. The A.G.U. meeting is one of the world’s première scientific gatherings—last fall, some twenty-four thousand experts in fields ranging from astronomy to volcanology attended. This year, in addition to the usual papers and journals, a new publication will be available to participants. It’s called “Handling Political Harassment and Legal Intimidation: A Pocket Guide for Scientists.”The guide is the creation of a group called the Climate Science Legal Defense Fund. One of the group’s founders, Joshua Wolfe, and its executive director, Lauren Kurtz, made the decision to write it on the day after the election. “There is a lot of fear among scientists that they will become targets of people who are interested in science as politics, rather than progress,” Wolfe told me in an e-mail.With each passing day, that fear appears to be more well founded. The one quality that all of Trump’s picks for his cabinet and his transition team seem to share is an expertise in the dark art of disinformation.For climate scientists, the dangers of hewing to reality have been apparent for years. This is why the Climate Science Legal Defense Fund was founded in the first place, in 2011. As Marshall Shepherd, the director of the University of Georgia’s atmospheric-sciences program, tweeted recently, “Lots of concern about Fake News. As a scientist that works in meteorology & climatology, welcome to our world, dealt with this for awhile.” But this doesn’t make the situation any easier to deal with. The pocket guide’s advice for scientists who think that they are being harassed? “When in doubt, call a lawyer.”

U.S. Energy Department balks at Trump request for names on climate change | Reuters: The U.S. Energy Department said on Tuesday it will not comply with a request from President-elect Donald Trump's Energy Department transition team for the names of people who have worked on climate change and the professional society memberships of lab workers. The Energy Department's response could signal a rocky transition for the president-elect's energy team and potential friction between the new leadership and the staffers who remain in place. The memo sent to the Energy Department on Tuesday and reviewed by Reuters last week contains 74 questions, including a request for a list of all department employees and contractors who attended the annual global climate talks hosted by the United Nations within the last five years. Energy Department spokesman Eben Burnham-Snyder said Tuesday the department will not comply. "Our career workforce, including our contractors and employees at our labs, comprise the backbone of (the Energy Department) and the important work our department does to benefit the American people," Burnham-Snyder said. "We are going to respect the professional and scientific integrity and independence of our employees at our labs and across our department," he added. "We will be forthcoming with all publicly available information with the transition team. We will not be providing any individual names to the transition team." He added that the request "left many in our workforce unsettled." Andrew Rosenberg, an official at the Union of Concerned Scientists, said the Energy Department "made the right choice in refusing this absurd and dangerous request. Federal agencies need the best available science to respond to the growing risk of climate change."

 Trump transition says request for names of climate scientists was ‘not authorized’ -- The Trump transition team appeared to back away from a controversial questionnaire sent to the Energy Department last week that asked for the names of department staffers who had worked on several climate-change initiatives under President Obama.“The questionnaire was not authorized or part of our standard protocol,” Trump’s transition team said in a statement to The Washington Post. “The person who sent it has been properly counseled.”The disavowal marked one of the earliest apparent instances of the Trump transition team changing course and seeming to acknowledge a mistake, although even that is unclear. Also Wednesday, Trump transition adviser Anthony Scaramucci had appeared to defend the inquiry on CNN’s “New Day” with Chris Cuomo, saying, “This is an intellectual-curiosity expedition.”

Exclusive: If Trump skews science, researchers must raise the alarm - Obama official | Reuters: Scientists must confront climate change deniers and speak up if U.S. President-elect Donald Trump tries to sideline climate research, Interior Secretary Sally Jewell is due to say on Wednesday. "If you see science being ignored or compromised, speak up," Jewell will tell a meeting of earth and space scientists in San Francisco, according to a draft of the speech seen by Reuters. Trump has called climate change a hoax and sought to fill his cabinet with oil industry allies like Texas Governor Rick Perry, the Energy Department nominee. Last week, the Trump team asked the U.S. Department of Energy to supply names of officials who took part in international climate talks - a request that the agency has rejected. The scientific fact of climate change cannot be ignored no matter who is in the White House, Jewell will say. And she will urge climate experts to publicly defend their work. "Think about where to raise your voice and then do it," Jewell will tell a meeting of the American Geophysical Union (AGU) - a global association of researchers. "The American people must be able to trust science." As President Barack Obama's top steward for public lands, Jewell has helped manage terrain that holds vast reserves of oil, gas and coal. But over nearly four years in office, Jewell has also warned that burning fossil fuels will irreparably harm the planet.

This is not normal – climate researchers take to the streets to protect science -- Desperate times call for desperate measures, and for scientists, these are desperate measures. Tuesday in San Francisco’s Jessie Square, approximately 500 people gathered for a ‘rally to stand up for science.’ Many of the attendees were scientists who had migrated to the rally from the nearby Moscone Center, where some 26,000 Earth scientists are attending the annual American Geophysical Union (AGU) conference this week.This was an unusual activity for scientists to participate in; after all, they’re often accused of remaining isolated in the ivory towers of academia. Scientists generally prefer to focus on their scientific research, use their findings to inform the public and policymakers, and leave it to us to decide what actions we should take in response. In fact, one of the keynote speakers at the rally, Harvard science historian Naomi Oreskes made that exact point:We don’t want to be here. We want to be doing the work we were trained and educated to do, which is science ... but we are at a moment in history where we have to stand up. As Georgia Tech climate scientist Kim Cobb noted, with the appointments made thus far by the incoming Trump administration, science is under attack and scientists feel compelled to protect their research, and their ability to keep doing it. Cobb also called on more of her scientific colleagues to step outside their comfort zones and engage in activism: (video)

Jerry Brown strikes defiant tone: ‘California will launch its own damn satellite’ - Gov. Jerry Brown, rallying a room of scientists Wednesday with his most heated rhetoric yet on the topic, suggested California would defy the federal government should President-elect Donald Trump impede the state’s efforts to thwart climate change. “We’ve got the scientists, we’ve got the lawyers and we’re ready to fight. We’re ready to defend,” he said to boisterous applause at the American Geophysical Union conference in San Francisco. Brown struck a more forceful tone than he has since the election, suggesting the energy and enthusiasm in the room for him would be needed in the “battles ahead.” “Keep it up,” Brown implored the gathering. “Don’t flag. We’ve got a lot of work to do.” At one point, Brown warned against proposed budget cuts under the new presidential administration that could effectively eliminate earth-observing satellite programs. He reminded the scientists that he earned his nickname, Governor Moonbeam, in his first governorship for proposing that the state launch its own communications satellite, and even had an ex-astronaut on his payroll as a space adviser. “I didn’t get that moniker for nothing,” Brown said. “And, if Trump turns off the satellites, California will launch its own damn satellite,” he added. “We’re going to collect that data.”

Bill Gates Leads New Fund as Fears of U.S. Retreat on Climate Grow -- President-elect Donald J. Trump has bred fears that the United States will take a back seat in global efforts to tackle climate change. Could a billion-dollar investment fund led by Bill Gates and his fellow technology titans fill the void? Mr. Gates, the billionaire co-founder of Microsoft, announced on Monday the start of a fund to invest in transformative energy research and development to reduce the emissions that cause climate change. The work would supplement and build on basic research already underway at government labs that may be threatened by the incoming administration. Despite Mr. Trump’s expressed skepticism about climate change and his appointment of fossil fuel advocates to his cabinet, Mr. Gates said he expected the president-elect to recognize that government funding of basic research would eventually be good for business, jobs, infrastructure and other economic elements that Mr. Trump campaigned on. “It’s a good deal,” Mr. Gates said. Mr. Gates’s new investment fund, Breakthrough Energy Ventures, is intended to capitalize on the government-backed research through partnerships with the University of California system and other institutions. Advertisement Continue reading the main story

Bill Gates Among Rich Individuals Backing $1 Billion Energy Fund - Bill Gates and more than a dozen of the world’s wealthiest individuals revealed a new $1 billion investment fund late Sunday to foster major advances in clean energy production. Dubbed Breakthrough Energy Ventures, the 20-year fund is backed by a mix of technology luminaries and heavyweights from the energy industry. The goal is to pump money into risky, long-term energy technology that could dramatically reduce greenhouse gas emissions, according to a statement. The investments will likely go into areas such as electricity generation and storage, agriculture and transportation. Investors include Jeff Bezos, founder and chief executive officer of Inc., Richard Branson, the founder of Virgin Group Ltd., Jack Ma, the executive chairman of Alibaba Group Holding Ltd., John Arnold, a billionaire natural gas trader, and Prince Alwaleed Bin Talal, the founder of Kingdom Holding. Last year, a number of these investors joined Gates in announcing the Breakthrough Energy Coalition -- a group of wealthy investors who pledged to aim a large portion of their fortunes toward energy technology. The arrival of the fund marks a more concrete step by this group toward their stated goals. "I am honored to work along with these investors to build on the powerful foundation of public investment in basic research,” Gates said in a statement. “Our goal is to build companies that will help deliver the next generation of reliable, affordable, and emissions-free energy to the world."

Brazil set for 'environmental civil war', warns minister -- Brazil’s government is divided on a bill to tear up federal environmental regulations and hand responsibility to states. Promoted by the rural lobby, the proposal would exempt farming and forestry – responsible for nearly 70% of the country’s greenhouse gas emissions – from current licensing laws. Eliseu Padilha, chief of staff to president Michel Temer, is understood to support the bill, which was presented to the parliamentary finance committee on Wednesday. But environment minister Jose Sarney Filho warned in a letter to the presidency it would spark “environmental civil war” (guerra ambiental entre os estados), with states competing to offer the weakest restrictions on development. That could undermine the country’s climate commitments, which depend on halting deforestation. In 2016, the latest data shows, the area of forest cleared increased 29% to the highest level in eight years. More than 250 NGOs have signed an open letter opposing the bill, which they said had been produced without adequate consultation. “This project hasn’t been debated in any instance. If it gets passed, the risk of new environmental disasters will be significantly increased and Brazil’s ecological balance will be in jeopardy,”

Wind Energy: Final wind-energy rule permits thousands of eagle deaths — The Obama administration has finalized a rule to let wind-energy companies operate high-speed turbines for up to 30 years — even if that means killing or injuring thousands of federally protected bald and golden eagles.Under a rule announced Wednesday, wind companies and other power providers face no penalty if they kill or injure up to 4,200 bald eagles. That's nearly four times the current limit. The standards are tougher for the more rare golden eagle. Fish and Wildlife Service Director Dan Ashe says the new rule will conserve eagles while also spurring development of a pollution-free energy source intended to ease global warming, a cornerstone of the Obama energy plan.

Donald Trump, in Louisiana, Says He Will End Energy Regulations - The New York Times: — President-elect Donald J. Trump promised on Friday that his administration would strip away “job-killing restrictions” on energy production and encourage the construction of refineries in the United States, as he campaigned for Republican candidates in a state heavily dependent on the oil and gas industry. “We will cancel the job-killing restrictions on the production of American energy,” Mr. Trump said in an airplane hangar in Baton Rouge, the day before Louisiana voters go to the polls to vote for Senate and House candidates. “We haven’t had refineries built in decades, right? We’re going to have refineries built again.” His comments came a day after he had announced his selection of Scott Pruitt, Oklahoma’s attorney general, as administrator of the Environmental Protection Agency. Mr. Pruitt is a staunch ally of the energy industry who has teamed up with companies to undercut the Obama administration’s climate regulations. Mr. Trump pledged to enact a “massive” tax cut for the middle class, roll back Obama-era regulations, pass a $1 trillion infrastructure program and build a wall on the southern border to prioritize American people and jobs. “We’re going to rebuild our country with American hands by American workers,” Mr. Trump said, adding that his administration would be guided by “two simple rules: Buy American, and hire American.”

Canada agrees on national carbon price, but tensions remain | Reuters: The Canadian government on Friday reached a deal with eight of the 10 provinces to introduce a landmark national carbon price, which Prime Minister Justin Trudeau says will help Canada meet its international climate change obligations. The agreement was only struck after hours of heated talks and energy-producing Saskatchewan did not sign up, saying the measure would make firms uncompetitive at a time when incoming U.S. President Donald Trump looks set to adopt policies cutting energy costs. In a sign of the tension that remained after the negotiations, Trudeau and Saskatchewan Premier Brad Wall exchanged barbed comments at the closing news conference. The carbon price is part of a framework that aims to help Canada attain its Paris goal of reducing emissions by 30 percent from 2005 levels by 2030. The measures include boosting the use of renewable energy and investing in clean technologies. "(This) will both protect our economy and protect the environment at the same time," Trudeau told reporters. Under his plan, carbon pollution would cost C$10 ($7.60) a tonne in 2018, rising by C$10 a year until it reaches C$50 in 2022. The provinces can either implement a carbon tax or a cap-and-trade market. Trudeau is broadly aligned politically with President Barack Obama, who has pushed hard to cut emissions of greenhouse gases. U.S. Vice President Joe Biden told the meeting he doubted Trump could undo much of the administration's policies since many of them had taken firm hold.

 Ethanol spills on the rise in the Midwest - An ethanol spill occurs every two days on average in the Midwest, the worst of which result in contamination of water supplies, major fish kills, loss of life and millions of dollars of damage. The Midwest Center for Investigative Reporting found that as production and transportation of ethanol has risen dramatically in the region over the past three decades, so have ethanol spills. “As more and more ethanol is being transported, more and more accidents are going to occur,” said Mark Clapp, an instructor at the Illinois Fire Service Institute in Champaign, Illinois. “The potentials for different kinds of accidents are getting higher and higher.” In 1985, the Midwest experienced 36 spills. By 2015, the number was up to 173, reaching as high as 211 in 2013, according to the U.S. Department of Transportation Hazardous Materials Incident database. Illinois has reported 1,101 ethanol incidents since 1985, making the state second to California in total number of spills. In 1985, Illinois reported 7 spills, opposed to 97 in 2013. Between 1985 and 2015, 1.3 million liquid gallons of ethanol have been spilled nationwide. At more than 760,000 liquid gallons – the Midwest region accounts for almost 60 percent of this total. Illinois ranks the highest – with more than 264,000 liquid gallons of ethanol released between 1985 and 2015. Ohio ranks second at over 118,000 liquid gallons and Iowa ranks third with more than 88,200 liquid gallons released.The Midwest Center for Investigative Reporting focused on spills involving fuel ethanol containing 5 percent or less gasoline, not the type of ethanol that can be used in standard or flex fuel cars. The vast majority of ethanol is transported in this potent form from producers to fuel blending terminals, where it will be further diluted with gasoline and sold for its common use.

New Delhi’s Air Pollution Rises Again - - WSJ: Air pollution in New Delhi spiked again last week, covering the city in a thick, toxic smog that resulted in reduced visibility, as harsh winter days approach. The Indian capital’s air quality has been at hazardous levels for much of the past week, according to measurements taken by the U.S. embassy. Real-time air quality data from India’s Central Pollution Control Board show that the concentration of PM2.5, tiny particles that can lodge into lungs and cause diseases crossed the 500 mark in central Delhi on Dec. 7– nearly 20 times that of safe limits set by the World Health Organization. The WHO says anything above 25 is harmful to health. The city’s pollution is caused by emissions from cars and coal-based power plants, the burning of crop stubble and trash and swirling dust from construction sites and roads. The Supreme Court on Dec. 2 approved a government plan for emergency measures that will kick into action when pollution rises to a P.2.5 level of 300 or more and stays there for 48 hours. When the limit is hit, trucks will be banned from entering the city, construction activities will be stopped and Delhi’s odd-and-even car-rationing program will resume, among other measures. The Supreme Court last month banned the sale of firecrackers in Delhi, which contributed to dangerously high pollution levels during the festival of Diwali in November. Schools were closed as the city recorded it’s second lowest visibility in nearly 10 years. Officials at the Central Pollution Control Board said November’s pollution was concentrated in Delhi due to slower winds, which weren’t blowing in the usual direction.

Despite Climate Change Vow, China Pushes to Dig More Coal - NYTimes: America’s uncertain stance toward global warming under the coming administration of Donald J. Trump has given China a leading role in the fight against climate change. It has called on the United States to recognize established science and to work with other countries to reduce dependence on dirty fuels like coal and oil. But there is a problem: Even as it does so, China is scrambling to mine and burn more coal. A lack of stockpiles and worries about electricity blackouts are spurring Chinese officials to reverse curbs that once helped reduce coal production. Mines are reopening. Miners are being lured back with fatter paychecks. China’s response to coal scarcity shows how hard it will be to wean the country off coal. That makes it harder for China and the world to meet emissions targets, as Chinese coal is the world’s largest single source of carbon emissions from human activities. Among China watchers, the turnabout also has contributed to questions about the fate of China’s current crop of economic planners. Here in Jincheng, a smoggy city in China’s coal country, the about-face has led to a steady hum of activity. On a recent afternoon, other trains stopped to make way for two electric locomotives, their horns blowing, pulling more than 50 empty coal hopper cars ready to be filled. Large coal-carrying trucks now form half-mile lines.The revival of coal production shows the flaws in the country’s half-finished evolution from central planning to the free market. China’s coal problems stem from a series of official decisions that ramped up activity from energy-intensive industries even as they curbed mining output. Speculators in China’s volatile financial markets, already prone to producing bubbles, ran up the price of coal. Weather and other setbacks haven’t helped. Coal still produces almost three-quarters of China’s electricity, despite ambitious hydroelectric dam projects and the world’s largest program to install solar panels and build wind turbines. Coal use in China also produces more emissions than all the oil, coal and gas consumed in the United States.

Why Coal Is Not Our Future - Australian Prime Minister, Malcolm Turnbull, has repeatedly asserted that coal will remain in use for electricity generation for ‘many, many decades to come’. He argues that moving to renewable energy would reduce production and use of coal resulting in unacceptable loss of mining and transport jobs, particularly in rural areas. However, the threat of larger job losses did not stop his predecessor from withdrawing subsidies for the car industry, resulting in its closure nationwide - action supported by the present Prime Minister. In declaring coal Australia’s present and future energy source, Turnbull has chosen to ignore the dangers of coal production and use to public health or, more accurately, public death. Clear evidence shows that coal mining in Australia not only causes respiratory problems through inhalation of airborne particles but that this results in the incurable ‘black lung disease resulting in a slow and painful death. Its combustion in power stations results in emissions which increase the incidence and severity of health problems among populations living up to 100 km away. As the Prime Minister knows, coal has to compete with renewable clean energy sources, particularly solar and wind. It’s a no brainer of course. Coal has to be purchased at a price which sustains production, while sunlight and wind are free. At present coal can compete because neither solar or wind can do what coal does – reliably produce electricity 24/7. What clean energy sources can do and are increasingly doing, is make inroads into the amount of electricity generated by coal or other fossil fuels, thus reducing the amount of coal burned for this purpose.

Scientists drill into volcano to obtain energy: In an impressive technological feat, scientists and engineers have succeeded in drilling a borehole into a volcano in Iceland with the aim of using the intense heat as an energy source. The volcano is located in the south-west of Iceland and once the drilling is complete it will be, by far, the world's hottest borehole. A borehole is a narrow shaft bored in the ground. Such holes are typically used for the extraction of water, other liquids (like petroleum), gasses; or for geological exploration.  The new borehole is being drilled on the Reykjanes peninsula, where a large rig has been built on the black larva. The volcano is said to be 'safe', having last erupted some 700 years ago. The peninsula, inhabited by around 22,000 people, is marked by active volcanism under its surface. There are many hot springs and sulfur springs in the southern half of the peninsula. The drilling is operated by the Icelandic energy company HS Orka. The aim of the Iceland Deep Drilling Project (IDDP) is to draw steam upward from the deep well to the surface. This will, in theory, provide an important and readily usable source of energy. The steam will be captured using established geothermal technology methods which turn steam into electricity. At the depth there is supercritical steam, which is similar to that produced by a pressure cooker or laboratory autoclave.

Will Gov. Kasich Save Ohio's Clean Energy Economy? --In the final hours of Ohio's lame-duck session, lawmakers passed House Bill 554 late Thursday night, which will freeze clean energy mandates for another two years if Gov. John Kasich signs the bill. More than 25,000 jobs could be at risk .  The state's original Renewable Portfolio Standard (RPS), SB 221 , was passed in 2008. It set a target for the state to get 25 percent of its electricity from "advanced energy sources" by 2025, with a requirement that at least half (12.5 percent or more) would be generated from "renewable energy resources," including one-half of one percent from solar and 50 percent of the energy to be generated within the state.  A two-year freeze was enacted when Gov. Kasich signed SB 310 on June 13, 2014. HB 554 now seeks to extend that freeze, making renewable energy targets voluntary for utilities. Ohio is the only state in the nation that has frozen its RPS. To date, 38 states have adopted RPS targets. "Ohio's renewable energy and energy efficiency standards have been frozen for the past two years, costing the state its place as a national leader in the clean energy economy by hampering energy innovation, investment, and jobs," said Dick Munson, director of Midwest Clean Energy. "Before the freeze, these standards saved families money and brought huge investments into the state, supporting more than 25,000 jobs, saving Ohioans over $1 billion on their electricity bills, and slashing the Buckeye State's air pollution."  A 2015 survey by Environmental Entrepreneurs (E2), a national, nonpartisan group of business owners and investors, showed that job growth in the clean energy sector in Ohio slowed to just 1.5 percent following implementation of the freeze in 2014. Moreover, those firms that did grow had to find business out of state.  "Investments in renewable energy in Ohio have dried up," stated the E2 report . "Solar development has ground to a halt, with new solar resources dropping below 100 kW per month when industry averages for the six months prior stood at 1 MW or more per month."  The question now is whether Gov. Kasich will sign or veto HB 554.

Ohio advocates hope Kasich follows through on promise to veto clean energy freeze | Midwest Energy News: Ohio lawmakers have passed a bill to weaken the state’s clean energy standards and make compliance with their requirements voluntary until 2019. After House concurrence this morning on Senate amendments made Thursday night, which reduce the voluntary time period from three years to two, that leaves the fate of Ohio’s renewable energy and energy efficiency standards in the hands of Republican Gov. John Kasich, who has opposed efforts to extend the state’s clean energy “freeze.” Ohio’s renewable energy and energy efficiency standards have been frozen at their 2014 targets for the past two years. If Kasich vetoes the bill, then current law says the standards will resume and be fully enforceable next year. “A hallmark of lame duck is a flood of bills, including bills inside of bills, and we will closely examine everything we receive,” said Kasich’s press secretary, Emmalee Kalmbach. HB 554 would prohibit any enforcement on the standards for two more years, “which in my mind is just another extension of the freeze for two years,” said Frank LaRose (R-Hudson). Clean energy advocates agree. “Today after a two-year freeze on money-saving energy efficiency and job-creating renewable energy, the Ohio Senate decided to kick the can down the road some more,” said J.R. Tolbert at Advanced Energy Economy, shortly after the Senate’s 18-13 vote. “We are encouraged by the Governor’s repeated promise to veto a freeze extension that is bad for business and bad for Ohio.”

Dozens Rally at Wayne National Forest to Protest BLM Online Oil and Gas Lease Auction: Native American water protectors joined dozens of Ohio activists Saturday to protest a Bureau of Land Management plan to auction off oil and gas leases in the Wayne National Forest.BLM on Dec. 13 will auction off 1,600 acres of Ohio’s only national forest to private energy companies for oil and gas fracking and drilling that threaten to fragment wildlife habitat and contaminate groundwater and Ohio River and its tributaries with pollution. Protesters gathered at the entrance to the forest for a peaceful “Save the Wayne” rally in which they shared information about the destructive effects of fracking and related infrastructure construction. "The Wayne lives and breathes. The water in and around it means life. It is a special place, a national forest, there for the enjoyment of everyone, even creatures. It should not be leased or sold to the highest bidder for virtually what amounts to its destruction,” said Kimberly Dawley of #SavetheWayne. “We are inspired by everyone we see around the country who are speaking out about these issues, particularly at Standing Rock, and are following in their footsteps." Many of the publicly owned lease parcels are near the Ohio River and its tributaries, which will be at risk of contamination from increased transport of fracking chemicals and wastewater via trucks and pipelines, and runoff pollution from new roads and well pads. Increased injection of fracking wastewaters underground also poses a risk to groundwater in a state with some of the weakest safeguards against toxic wastewater injection.

Portions of Ohio's only national forest up for lease --Roughly 719 acres of Wayne National Forest, the only national forest in Ohio, went up for lease Tuesday.The properties, which represent less than 0.3 percent of the forest, would be leased by companies that do hydraulic fracturing, or fracking, to tap underground natural gas. The U.S. Bureau of Land Management (BLM) listed 17 parcels for lease. Up until Monday, it had advertised auctioning off the leasing rights for about twice as much land, according to Davida Carnahan, a spokesperson for the bureau, which is managing the leasing for the U.S. Forest Service.On Tuesday morning, the bureau released information that it had withdrawn 16 parcels, another 881 acres, in order to "resolve questions of ownership and existing rights for minerals."Once questions are resolved, the federal government could again decide to offer the properties for lease, according to the document.Environmental groups have challenged the leasing of the public lands. Some pledged to continue the fight Tuesday. "This is Ohio's only national forest," Ohio Environmental Council Executive Director Heather Taylor-Miesle said in a prepared statement. "We need to do all we can to protect it."

Federal Government Auctions Oil And Gas Leases In Wayne National Forest - Mineral rights in parts of the Wayne National Forest in Southeastern Ohio went up for auction, held by the Bureau of Land Management, Tuesday morning. It covers the first 680 acres out of a possible 40,000 in the park that could be opened to drilling.Almost all of the land is in Monroe County, where hydraulic fracturing, or fracking, for natural gas is already widespread. There are 493 active wells in the national forest, but according to the BLM, none are fracked wells. Nathan Johnson is a lawyer at the Columbus-based advocacy organization Ohio Environmental Council. The group plans to fight development in Wayne National Forest in the courts every step of the way. A Bureau of Land Management report says with mitigation efforts, drilling in the national forest will have minimal negative impacts. The BLM estimates that development would likely be limited to 10 drilling sites in the affected part of the park, with multiple wells drilled at each site. About 40 percent of the mineral rights under the national forest are privately owned. The rest is owned by the federal government. And Shawn Bennett from the industry group the Ohio Oil and Gas Association said the auction is a kind of housekeeping by the federal government. The auction would open up the affected parts of the park to exploration, any drilling or construction would require separate permits from both federal and state governments.

Gas companies spend $1.7 million for exploration rights to Wayne National Forest in SE Ohio | -- Fossil fuel development companies on Tuesday bid more than $1.7 million for the rights to explore 759 acres of land in the Wayne National Forest for potentially rich deposits of oil and gas held deep underground. The 19 parcels of about 40 acres each in Southeast Ohio attracted bids of up to $5,800 an acre from 22 separate bidders, according to officials at the U.S. Bureau of Land Management. The companies were from Texas, Pennsylvania, West Virginia, Colorado, and Oklahoma. None were headquartered in Ohio. The auction of mineral rights in Ohio's only national forest had sparked controversy, pitting energy industry officials against environmental groups, who fear the anticipated hydraulic fracturing, or fracking, operations will pollute the groundwater and poison the wildlife habitat of the area. Environmental groups had filed formal protests in an attempt to block the auction, but were unsuccessful. Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, said the auction provided the opportunity for property owners in the Appalachian foothills to cash in on the riches that lie beneath their land. An additional 38,000 acres could become available at later dates, beginning at a second auction scheduled for March. The winning bidders have up to 10 years to obtain the drilling rights and extract the fossil fuels from the parcels. Their contract with the BLM requires them to pay royalties of at least 12.5 percent of the value of the oil or gas removed from the site. Nathan Johnson of the Ohio Environmental Council said he won't wait for the drilling applications to be filed before lodging formal protests with the BLM. "It's clear the agency made the wrong decision and is violating environmental laws," Johnson said. "They keep ignoring key data on how large these well pads and pipelines are going to be. All of their analyses are tied to deflated impact estimates on wildlife. We want to make sure the forest remains protected, and we will pursue every avenue to make sure that happens."

700+ Acres of Ohio's Only National Forest Sold for Fracking - Despite heavy opposition from public health and environmental groups, the U.S. Bureau of Land Management (BLM) has leased 759 acres of Ohio's only national forest for fracking.  According to the Associated Press , oil and gas companies from Texas, Pennsylvania, West Virginia, Colorado and Oklahoma forked over $1.7 million for the right to explore parts of Wayne National Forest for drilling operations. Lessees still need to obtain a permit before any drilling can start. The online auction took place on Dec. 13 with the minimum acceptable bid for as little as $2 per acre. The Columbus Dispatch reported that offers made by the 22 registered bidders ranged from the $2 minimum to a high of $5,806.12 per acre.  Opponents of the federal auction, cited concerns over public health impacts and effects on air and water quality, and submitted more than 17,000 comments to the BLM during its 30-day comment period. "Public lands are for the people, not for the benefit of Big Oil and Gas," Lena Moffitt, director of the Sierra Club's Beyond Dirty Fuels campaign, said in a statement last month. "Drilling for oil and gas means more fracking, and fracking means poisoning our air and water, and threatening the health of our communities and our environment. At a time when clean energy like solar and wind is proving to be safest, healthiest and most cost-effective way to power our country, it's high time we recognized that we need to leave dirty fuels like coal, oil and gas in the ground." The BLM reportedly received 100 "valid" complaints but they were a ll denied by the agency on Monday and the auction moved forward.

Eastern Ohio Sets Record For Shale Production - Ohio shale drillers set new natural gas production records of 360 billion cubic feet from July 1 to Sept. 30, but industry leaders fear a new U.S. Environmental Protection Agency finding regarding fracking could endanger the future.  Last year, the EPA stated that, despite an average of 9,100 gallons worth of chemicals used for each fracking job, the process does not create “widespread, systemic impacts on drinking water resources.” On Tuesday, however, EPA officials said they “identified cases of impacts on drinking water at each stage in the hydraulic fracturing water cycle.” “It is beyond absurd for the administration to reverse course on its way out the door,” said Erik Milito, who serves as upstream director for the Washington, D.C.-based American Petroleum Institute. “The agency has walked away from nearly a thousand sources of information from published papers, technical reports and peer-reviewed scientific reports demonstrating that industry practices, industry trends and regulatory programs protect water resources at every step of the hydraulic fracturing process.” As the fracking debate continues, Ohio drillers are smashing shale production records. From July 1 through Sept. 30, records provided by the state Department of Natural Resources show companies drew 360 billion cubic feet of natural gas during the period, which is up from the prior three-month record of 334 billion cubic feet set from April 1 to June 30.  Milito and other industry leaders believe fracking helps consumers save an average of $1,337 per household every year, helps curb carbon dioxide emissions because of natural gas replacing coal for electricity generation and supports millions of jobs. “Fortunately, the science and data clearly demonstrate that hydraulic fracturing does not lead to widespread, systemic impacts to drinking water resources. Unfortunately, consumers have witnessed five years and millions of dollars expended only to see conclusion based in science changed to a conclusion based in political ambiguity,” he said.

US natural gas storage whipsaws prices -- again. -  - The CME/NYMEX Henry Hub January contract settled yesterday at $3.54/MMBtu, about 30.8 cents (~10%) above where the December contract expired ($3.232) and 77.6 cents (28%) higher than where November settled ($2.764). The natural gas winter withdrawal season is officially underway—it’s a lot colder and gas demand has spiked. But this week also marks another key bullish threshold: as today’s Energy Information Administration (EIA) storage report will likely show, the U.S. natural gas inventory has fallen below the prior year’s levels for the first time in two years (since early December 2014). That’s in sharp contrast to where the inventory started the injection season in April—more than 1,000 Bcf higher compared to April 2015. Moreover, we expect the emerging deficit to grow substantially over the next several weeks. Today we look at the supply-demand fundamentals driving this shift and what it means for the winter gas market. Our NATGAS Billboard outlook projects that EIA will report a (139)-Bcf withdrawal for last week, which would put the overall U.S. inventory at 3,814 Bcf as of December 9 (2016). That is 32 Bcf below the inventory level in the same week last year, but still 172 Bcf higher than the five-year average for the same week. This marks the first year-on-year deficit in storage since the week of December 5, 2014. By late December, we also expect the inventory to dip below the five-year average, based on the latest weather forecasts—that hasn’t happened since late-May 2015. As we’ve noted previously here in the RBN blogosphere, the U.S. natural gas inventory—as reported by the EIA each week—is regarded as an ever-present bellwether for price direction in the natural gas market. Gas market participants and analysts train their eyes on weather forecasts—and the constant daily, or even intraday, revisions to the forecasts—along with natural gas flow data (see Sooner or Later for more on flow data analysis) and other fundamental factors to see how they might change the storage picture. Market trackers then await the weekly release of the EIA storage report (a benchmark for storage activity in the prior week) for what it says about the cumulative impact of the supply/demand balance on market economics. In the minutes and hours immediately following the EIA release each Thursday at 9:30 a.m. Central Time, the market frequently reacts to the reported withdrawal/injection volume, especially if it differs significantly from industry expectations.

Study shows hydraulic fracturing fluids affect water chemistry from gas wells -- Pressure, temperature and fluid composition play an important role in the amount of metals and other chemicals found in wastewaters from hydraulically fractured gas reservoirs, according to Penn State researchers. “We hope that this work will develop new ways for studying the processes that occur during hydraulic fracturing in a more controlled lab setting,” said Travis Tasker, a doctoral candidate in environmental engineering at Penn State and principle investigator on the study. “This could also have implications for managing the wastewater that returns to the surface or understanding downhole mineral transformations that could form precipitates, clog pores and reduce a well’s gas productivity.” Many gas formations, such as the Marcellus shale, exist several thousand feet below the surface in higher pressure and temperature environments.  After the fracturing occurs, the chemical additives, along with metals associated with the shale itself, flow back to the surface in wastewaters at high concentrations. Since many of the chemicals used for natural gas extraction have acute or chronic health effects in humans, the transport, degradation and transformation of these additives is important to understand when considering the management and disposal of the wastewater that returns to the surface. “The overall goal of our project was to understand how the additives in hydraulic fracturing fluids affect metal mobilization from shale, and how they may be transformed or degraded after being subjected to the high pressures and temperatures during hydraulic fracturing,” Tasker said. We were able to show that fluids with acids, oxidizers and high salinity increased the amount of metals mobilized from shale following hydraulic fracturing,”  The study also determined that many of the additives used in the synthetic fracturing fluids degraded in the high pressure and temperature conditions or absorbed to the shale itself. However, surfactants, a common additive in many household detergents, degraded only minimally under all the tested pH, pressure, shale and temperature conditions. “This suggests that while many hydraulic fracturing additives are degraded downhole, additives such as surfactants or potentially other hydrophilic compounds could return to the surface where they would have to be treated appropriately,”

Fracking can damage drinking water, EPA report says | - A long-awaited U.S. Environmental Protection Agency study has concluded that hydraulic fracturing, a technique for oil and gas extraction commonly called fracking and used widely in Ohio, can damage groundwater. The final version of the report -- which has been in the works for five years -- reverses earlier drafts that said there was no evidence fracking "systemically contaminates water." Tuesday's report said water problems usually happened near oil and gas production wells, and ranged "in severity from temporary changes in water quality to contamination that made drinking water wells unusable." But EPA said data gaps kept the agency from being able to calculate how often fracking affects drinking water, or how severe problems usually are. It said problems most often arose when:

  • Water was used for hydraulic fracturing in areas with low water availability
  • Chemicals, fluids and gasses were spilled or leaked into groundwater from wells with "inadequate mechanical integrity"
  • Fluids used in hydraulic fracturing were injected directly into groundwater
  • Inadequately treated fracking wastewater was discharged into surface water
  • Fracking wastewater stored or disposed of in unlined pits seeped into groundwater.

To reach its conclusions, EPA says it conducted its own research, reviewed over 1,200 cited scientific sources and gathered input from "engaged stakeholders." EPA Science Advisor Thomas Burke said the assessment would provide the "scientific foundation for local decision makers, industry and communities that are looking to protect public health and drinking water resources and make more informed decisions about hydraulic fracturing activities."

Reversing Course, E.P.A. Says Fracking Can Contaminate Drinking Water - NYTimes: The Environmental Protection Agency has concluded that hydraulic fracturing, the oil and gas extraction technique also known as fracking, has contaminated drinking water in some circumstances, according to the final version of a comprehensive study first issued in 2015. The new version is far more worrying than the first, which found “no evidence that fracking systemically contaminates water” supplies. In a significant change, that conclusion was deleted from the final study. “E.P.A. scientists chose not to include that sentence. The scientists concluded it could not be quantitatively supported,” said Thomas A. Burke, the E.P.A.’s science adviser, and deputy assistant administrator of the agency’s Office of Research and Development. The report, the largest and most comprehensive of its kind to date on the effects of fracking on water supply, comes as President-elect Donald J. Trump has vowed to expand fracking and roll back existing regulations on the process.Now that team must contend with scientific findings that urge caution in an energy sector that Mr. Trump wants to untether. Mr. Burke said that the new report found evidence that fracking has contributed to drinking water contamination in all stages of the process: acquiring water to be used for fracking, mixing the water with chemical additives to make fracking fluids, injecting the chemical fluids underground, collecting the wastewater that flows out of fracking wells after injections, and storing the used wastewater. Still, Mr. Burke said that the report remained “full of gaps and holes,” and that the issue required far more study. He declined to offer policy recommendations based on the study, saying that it will “give a lot of information to help communities and decision makers do better in protecting water supplies.”

Final EPA Study Confirms Fracking Contaminates Drinking Water - The U.S. Environmental Protection Agency (EPA) has released its widely anticipated final report on hydraulic fracturing, or fracking , confirming that the controversial drilling process indeed impacts drinking water "under some circumstances." Notably, the report also removes the EPA's misleading line that fracking has not led to "widespread, systemic impacts on drinking water resources."  "The report, done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances," the agency stated in a media advisory.  This conclusion is a major reversal from the EPA's June 2015 pro-fracking draft report . That specific "widespread, systemic" line baffled many experts , scientists and landowners who— despite the egregious headlines —saw clear evidence of fracking-related contamination in water samples. Conversely, the EPA's top line encouraged Big Oil and Gas to push for more drilling around the globe.  But as it turns out, a damning exposé from Marketplace and APM Reports revealed last month that top EPA officials made critical, last-minute alterations to the agency's draft report and corresponding press materials to soft-pedal clear evidence of fracking's ill effects on the environment and public health.

Fracking Can Contaminate Drinking Water, Has Made Some Water Supplies “Unusable,” Long-Awaited EPA Study Concludes -  -The Environmental Protection Agency announced today that it had completed its scientific report on whether fracking puts America's drinking water supplies at risk. The EPA's conclusions were clear: fracking can harm water. And it's not the the hydraulic fracturing process itself that poses risks — problems have emerged at every stage of the water cycle associated with fracking, at times making people's drinking water supplies “unusable.” “The report, done at the request of Congress, provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances,” the EPA wrote in a press release announcing the study's final conclusions. “As part of the report, EPA identified conditions under which impacts from hydraulic fracturing activities can be more frequent or severe.” “EPA identified cases of impacts on drinking water at each stage in the hydraulic fracturing water cycle,” the EPA statement added. “Impacts cited in the report generally occurred near hydraulically fractured oil and gas production wells and ranged in severity, from temporary changes in water quality, to contamination that made private drinking water wells unusable.” EPA honed in on six areas where impacts can be either more likely or more severe, including the use of water in areas with “limited or declining” underground water supplies, spills of chemicals or wastewater, fracking wells with “poor mechanical integrity” (like wells where the steel and cement casings are weak or missing), fracking directly into aquifers, discharging inadequately treated wastewater into rivers and streams, and the use of unlined pits to store wastewater. The agency dropped entirely a highly controversial claim that they had found “no evidence” of “widespread, systemic impacts” on America's drinking water supplies from fracking, language which a recent Marketplace investigation found had been inserted at the last minute into study and press release drafts. That language was heavily criticized by the EPA's Scientific Advisory Board – a mix of experts representing industry, federal agencies, and academia – which found thatEPA's research “did not support” that conclusion (four of the 30 SAB members dissented from that critique).

EPA Concludes: Fracking Harms Drinking Water -- naked capitalism by Jerri-lynn Scofield - The Environmental Protection Agency (EPA) yesterday finally released the final version of a long-anticipated report–initially requested by Congress in 2010- on the impact of fracking on drinking water supplies. In this latest, final report, the EPA walked back earlier findings from a preliminary report issued last year, when the agency concluded that hydraulic fracturing– more widely known as fracking– was not having  “widespread, systematic impacts on drinking water.” The New York Times  described  yesterday’s report as “the largest and most comprehensive of its kind to date on the effects of fracking on water supply while the Wall Street Journal noted, “EPA’s initial draft misled the public about the pollution risks of unconventional oil and gas development,”  That EPA report: : provides scientific evidence that hydraulic fracturing activities can impact drinking water resources in the United States under some circumstances. As part of the report, EPA identified conditions under which impacts from hydraulic fracturing activities can be more frequent or severe. The report also identifies uncertainties and data gaps. These uncertainties and data gaps limited EPA’s ability to fully assess impacts to drinking water resources both locally and nationally. These final conclusions are based upon review of over 1,200 cited scientific sources; feedback from an independent peer review conducted by EPA’s Science Advisory Board; input from engaged stakeholders; and new research conducted as part of the study. To summarize, as per DeSmogBlog: The EPA’s conclusions were clear: fracking can harm water. And it’s not the the hydraulic fracturing process itself that poses risks — problems have emerged at every stage of the water cycle associated with fracking, at times making people’s drinking water supplies “unusable.” The EPA press release issues to accompany release of the final report  provides further specifics: The report is organized around activities in the hydraulic fracturing water cycle and their potential to impact drinking water resources. The stages include: (1) acquiring water to be used for hydraulic fracturing (Water Acquisition), (2) mixing the water with chemical additives to make hydraulic fracturing fluids (Chemical Mixing), (3) injecting hydraulic fracturing fluids into the production well to create and grow fractures in the targeted production zone (Well Injection), (4) collecting the wastewater that returns through the well after injection (Produced Water Handling), and (5) managing the wastewater through disposal or reuse methods (Wastewater Disposal and Reuse). EPA identified cases of impacts on drinking water at each stage in the hydraulic fracturing water cycle. Impacts cited in the report generally occurred near hydraulically fractured oil and gas production wells and ranged in severity, from temporary changes in water quality, to contamination that made private drinking water wells unusable.

The economic benefits of fracking - The new NBER paper by Erik Gilje, Robert Ready, and Nikolai Roussanov shows some truly impressive economic benefits: We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns on major news announcement days allows us to link aggregate stock price fluctuations to shale technology innovations. We exploit cross-sectional variation in industry portfolio returns on days of major shale oil-related news announcements to construct a shale mimicking portfolio. This portfolio can explain a significant amount of variation in aggregate stock market returns, but only during the time period of shale oil development, which begins in 2012. Our estimates imply that $3.5 trillion of the increase in aggregate U.S. equity market capitalization since 2012 can be explained by this mimicking portfolio. Similar portfolios based on major monetary policy announcements do not explain the positive market returns over this period. We also show that exposure to shale oil technology has significant explanatory power for the cross-section of employment growth rates of U.S. industries over this period. Do note that $3.5 trillion figure is not a measure of social value.  It does not count the losses to coal companies for instance, nor does it measure the consumer surplus or the “greener energy” benefits from fracking, among other factors.

Exporting more liquefied natural gas in America’s national interest -- There should be no doubt anymore that exporting liquefied natural gas (LNG) is in America’s national interest. But the time to stop talking about our good fortune and start taking action to head off competition from other gas-exporting countries is running short. With the U.S. now the number one natural gas producer in the world, thanks to the shale revolution, LNG exports are undergirding domestic gas production, enabling producers to actually increase gas output, which strengthens the economy and protects the jobs of gas-field workers. Importantly, ramping up LNG exports promises to boost the energy security of central and eastern European countries, since they no longer will have to rely so heavily on Russia for natural gas to run their industries and heat their homes, weakening Russia’s near-monopoly grip on the production and delivery of a critically important fuel. And U.S. shipments of LNG will help the environment by enabling countries like China, Japan and India to switch from dirty coal to natural gas in electricity production, thereby reducing air pollution and global warming emissions.The U.S. is expected to become a top global LNG producer, behind only Qatar in the Middle East, by 2020. But this hinges on how quickly federal regulators approve the growing list of proposed LNG export projects. The window of opportunity is closing. Four U.S. export terminals are under construction, but 30 applications for additional terminals are pending before the Department of Energy. Some have been pending for several years. The Energy Department must determine whether each export application is within the country’s national interest, due to a decades-old statute written when domestically-produced natural gas was scarce. Before an LNG export application can even be submitted to FERC, the applicant must file 13 “resource reports” that are then reviewed by 20 separate federal and state agencies, a process that can take several years. Talk about bureaucracy!

Shale Revolution That Shocked US Markets Heads to Japan  -- The U.S. shale revolution that turned North American energy markets upside down is finally headed to the world’s largest consumer of liquefied natural gas: Japan. Jera Co., a joint venture between Tokyo Electric Power Co. Holdings Inc. and Chubu Electric Power Co., will get its first LNG cargo produced from the formations in early January, spokesman Atsuo Sawaki said. It would be the first supply to reach the Asian nation from Cheniere Energy Inc.’s Sabine Pass terminal. The shipment brings to fruition a contract signed more than two years ago. While U.S. exports are still relatively small, they are having an impact because the contracts are tied to U.S. natural gas prices instead of crude oil that most of the LNG coming to Japan is linked to. They also allow for switching of cargo destinations -- a key concern for importers such as Japan that are pressuring producers for more flexibility. “The first U.S. cargo marks a turning point,” Kerry Anne Shanks, an analyst at Wood Mackenzie Ltd., said by e-mail. “Japan’s LNG imports are almost exclusively priced on an oil-index price. U.S. LNG provides much needed index diversification of Japan’s LNG price.” About 70,000 metric tons of LNG produced at the Sabine Pass terminal was loaded onto the Oak Spirit vessel on Dec. 7, according to Sawaki. Jera has a short-term deal with Cheniere to receive as much as 700,000 tons of LNG from July 2016 to January 2018. Japanese companies have contracted about 14 million tons of LNG on long-term contracts that begin between 2017 and 2022 from U.S. projects in the lower 48 states, according to a November presentation by the Japan Oil, Gas and Metals National Corp. Japan, China and South Korea, which account for more than half of the global LNG trade, will be oversupplied by about 20 billion cubic meters in 2017 to 2018, the International Energy Agency said in a report earlier this year.

 What could $65/b WTI mean for oil production in the Permian? -  Clearly, the alleged deal between OPEC members and other cooperative nations has generated a fair amount of optimism among market participants.  Nonetheless, as prices are expected to rise, there is upside potential for production and internal rates of return (IRR), particularly in premier basins like the Permian. To no surprise, the Delaware and Midland basins in the Permian are generating some of the best returns in the country. Platts Bentek’s Well Economics Analyzer estimates that the IRR for a typical well in the Permian Delaware is currently 37% and is generating the best returns in North America. Let’s assume the stars align and OPEC along with cooperating countries are compliant with supply cuts and prices reach $65/b; what does this mean for IRRs in the Permian? If this scenario were to play out, returns in the Permian Delaware would increase 14 percentage points to 51% IRR, holding regional price differentials constant. Well economics in the Delaware surpass those of competing plays with a robust oil initial production (IP) rate of 575 b/d, $6.0 million estimated drilling and completion (D&C) cost and a production mix that is heavily weighted towards oil at 76%. In the neighboring Midland basin, the second most profitable play in North America, returns are currently 34% and would jump to 48% at $65/b WTI. Oil IP rates in the Midland are roughly 100 b/d below those in the Delaware. However, on average, the play enjoys a D&C cost of $5.5 million, half a million dollars less than the Delaware and also reaps the financial benefit associated with proximity to refining centers along the Gulf Coast. So what does $65/b WTI mean for production in the Permian? Platts Bentek estimates total Permian crude production will average a little less than 2 million b/d in 2016. However, given $65/b crude prices, production has the ability to increase 120,000 b/d in 2017. From a strictly quantitative standpoint, this estimate is more than reasonable. However, in reality, this estimate is rather conservative given accelerating efficiency gains and a vast inventory of drilled but uncompleted wells.

OPEC Threatened by a Tiny Oklahoma Town  - For OPEC, there are few enemies more fearsome than the tiny Oklahoma town of Cushing. With oil inventories at Cushing creeping near an all-time high, U.S. benchmark futures prices are struggling to advance despite the promised production cuts agreed to by OPEC, Russia and other producers. And the storage tanks are likely to stay full as refiners park crude in Oklahoma to lower their tax bills. Cushing, which prides itself as the “pipeline crossroads of the world,” is the delivery point for the West Texas Intermediate crude contract. With tanks that can hold 77 million barrels of crude, enough to supply France for two months, it’s the biggest storage hub in the U.S. The last high point there came in May. Now, after a brief hiatus, the tanks are filling up once again. For the OPEC-led efforts to boost prices, that’s a major problem.  “Part of what OPEC, and in particular the Saudis want to do, is drain the swamp,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “To do that they will reduce deliveries to the U.S. That will eventually be felt at Cushing, but not in a long time.”  Stockpiles rose by 1.22 million barrels last week, following a 3.78 million jump the previous week that was the biggest since 2008. The inflows have pushed up stocks to 66.5 million barrels, within a whisker of the all-time record of 68.3 million set in May. With the promise of production cuts sending forward prices up, that’s encouraging traders and refiners to hold onto inventories, the last thing the Organization of Petroleum Exporting Countries wants to see.

 Shake, Rattle and Roll - Oklahoma Earthquakes and Risks to the Crude Oil Hub at Cushing - In 2015, Sooners held on tight as Oklahoma was rocked by 890 earthquakes with a magnitude of 3 or higher—up sharply from only 43 earthquakes in 2010 and an average of less than two earthquakes per year in the previous quarter-century. Oklahomans have experienced hundreds of earthquakes this year too, including a record-breaking 5.8 event on September 3 and, on November 6, a 5.0 quake very near Cushing, OK, which serves as the delivery point for the CME/NYMEX Light Sweet Crude contract and which has earned the nickname “Pipeline Crossroads of the World”. Today we look at the latest quake near Cushing and other recent pipeline disruptions to assess the resilience of critical crude-delivery systems. Around 8 p.m. Central Standard Time on November 6, a “moment-magnitude scale” (MMS) 5.0 earthquake struck less than two miles west of Cushing. (The MMS, an updated version of the old Richter scale, has been used by seismologists—including the U.S. Geological Survey­­—as the standard for 14 years now. Who knew?) In the following hours, several pipelines were shut down to determine if the quake caused any damage. Genscape data showed that nearly 3.6 MMb/d of Cushing-connected pipeline capacity was taken offline following the quake, with the majority of the pipelines coming back online within the next three hours. (Figure 1 shows hour-by-hour flows on Cushing-area pipes the day of the event.) No damage to pipelines or storage terminals was reported, so business returned to normal relatively quickly. Even though there was some minor damage to buildings in Cushing, the overall impact of the event turned out to be minimal, all things considered. But what would happen if there was a more severe quake, infrastructure actually was damaged and pipeline outages were more extensive?

 CLR Reports Record STACK Meramec Well -- December 13, 2016 -- From company press release, headline: Angus Trust 1-4-33XH Flows at 4,642 Barrels of Oil Equivalent (45% Oil) in 24-Hour Initial Production Test; Located Immediately North of Boden 1-15-10XH Company Raises Expected 2016 Production Exit Rate to 213,000 to 218,000 Barrels of Oil Equivalent per Day  Story:  Continental Resources, Inc. today announced a new company record well in the over-pressured oil window of the Oklahoma STACK play.  The Angus Trust 1-4-33XH produced 4,642 barrels of oil equivalent (boe) per day in a 24-hour test, comprised of 2,088 barrels of oil (bo) and 15.3 million cubic feet (MMcf) of natural gas. During this initial production test, the Angus Trust flowed at 5,200 psi (pounds per square inch). Continental has a 78% working interest in the well. The Angus Trust well is located immediately north of Continental's Boden 1-15-10XH in south central Blaine County. The Boden produced an initial 24-hour test rate of 3,508 Boe, 28% oil, at a flowing casing pressure of more than 5,000 psi. The Boden was Continental's first completion in the condensate window of the over-pressured STACK. In just over a year, the Boden has produced 591,000 Boe, 26% oil.The Boden is currently producing 1,815 Boe per day, 22% oil, at a flowing casing pressure of 2,900 psi. To compare this record IP in the Meramec with the record IP in the Bakken, see FAQ #9From the Whiting 1Q15 transcript: The Flatland Federal 11-4TFH well produced at an initial rate of 7,800 BOEs per day during a 24-hour test of the Three Forks formation, making this the very best well in the basin. The Flatland Federal 11-4HR well produced at an initial rate of 7,100 BOEs per day during a 24-hour test of the Middle Bakken formation.

Oil Pipeline: Judge hears landowners' challenge to Dakota Access pipeline (AP) — A group of Iowa landowners forced to allow a Texas oil company to put a crude oil pipeline under their farmland is asking the state courts to throw out what they consider "illegal easements" through their land and some say if they win they want the pipeline dug up and removed. A district court judge in Des Moines heard arguments Thursday in the lawsuit challenging the Dakota Access pipeline. About a dozen landowners seek to overturn the project permit approved by the Iowa Utilities Board and they claim it was illegal for the board to take farmland when the pipeline provides no public service to Iowans. The pipeline attorney argued the project is completed making the case moot. He says Iowa law gives the utilities board authority to issue pipeline permits. Any decision is likely to be appealed.

Iowans Make U-Turn Against Trump In Dakota Access Pipeline Fight - Iowans who voted for Donald Trump will soon be fighting against him, as anti-establishment Iowans come to see his “true colors” on property rights, climate change and native sovereignty, environmentalist Ed Fallon, who has been leading the fight against the Dakota Access Pipeline in Iowa, told teleSUR.Trump’s Cabinet appointments so far represent “the antithesis” of what a coalition of anti-pipeline activists have been rallying for, Fallon said after a march and rally on Thursday brought in over 200 protesters. “The amount of heat generated at this very cold rally was amazing,” he said, pointing out the weather was at 7 degrees Fahrenheit.Fallon’s group, Bold Iowa, joined a coalition to show their opposition to the pipeline company’s seizure of rancher and farmer land at a court hearing in Polk County. The case has 14 plaintiffs, including landowners and environmentalists like the local chapter of the Sierra Club, and could be “historically significant” to eminent domain law across the state, said Fallon. The judge has a month to reach a decision.Besides suing to prevent the pipeline from deteriorating their land, the farmers are challenging eminent domain law at-large to protect all lands from for-profit seizure, arguing against the claim that the pipeline is a public utility.The pipeline, whose construction is near completed, runs through North Dakota, South Dakota, Iowa and Illinois and would transport over half a million barrels of crude oil a day. The Army Corps of Engineers denied easements earlier this month that would allow the company, Energy Transfer Partners, to drill below Lake Oahe, where thousands of Native Americans and allies from around the world camp to resist environmental and cultural damage. A more comprehensive Environmental Impact Assessment will be conducted in North Dakota, but not in Iowa — though Fallon pointed out that the Missouri River does not end at the state border.

Pipeline spills 176,000 gallons of crude into creek about 150 miles from Dakota Access protest camp - A pipeline leak has spilled tens of thousands of gallons of crude oil into a North Dakota creek roughly two and a half hours from Cannon Ball, where protesters are camped out in opposition to the Dakota Access pipeline. North Dakota officials estimate more than 176,000 gallons of crude oil leaked from the Belle Fourche Pipeline into the Ash Coulee Creek. State environmental scientist Bill Suess says a landowner discovered the spill on Dec. 5 near the city of Belfield, which is roughly 150 miles from the epicenter of the Dakota Access pipeline protest camps. The leak was contained within hours of the its discovery, Wendy Owen, a spokeswoman for Casper, Wyoming-based True Cos., which operates the Belle Fourche pipeline, told CNBC.It's not yet clear why electronic monitoring equipment didn't detect the leak, Owen told the Asssociated Press.Owen said the pipeline was shut down immediately after the leak was discovered. The pipeline is buried on a hill near Ash Coulee creek, and the "hillside sloughed," which may have ruptured the line, she said."That is our number one theory, but nothing is definitive," Owen said. "We have several working theories and the investigation is ongoing." Last week, the Army Corp of Engineers said it would deny Dallas-based Energy Transfer Partners the easement it needs to complete the final stretch of the $3.7 billion Dakota Access pipeline. United States Assistant Secretary of the Army Jo-Ellen Darcy said the best path forward was to explore alternative routes for the pipeline, something Energy Transfer Partners says it will not do.

  North Dakota Pipeline Spill Estimated at 176,000 Gallons -  A pipeline just two and half hours' drive from the Indigenous water protectors' ongoing stand against the Dakota Access Pipeline has leaked more than 170,000 gallons of crude oil into a tributary of the Little Missouri River and into a hillside, according to reports late Monday.  Monitoring equipment failed to detect the leak and it is unknown how long the spill near Belfield, North Dakota had gone on before a local landowner discovered it on Dec. 5.  At least two cows have been confirmed dead near the site of the spill, reports the Pioneer Press.  The Belle Fourche pipeline is operated by the Wyoming-based True Companies, which is the same company behind the 2015 pipeline rupture in Montana that sent more than 40,000 gallons of crude into the Yellowstone River. Indeed, at that time it was reported that the operator had a "checkered environmental history," with 30 recorded pipeline leaks and multiple federal fines on its record.  Bill Seuss, an environmental scientist with the North Dakota Health Department, told the Associated Press that the investigation into the cause of the most recent spill is ongoing and cleanup efforts may last into the spring.  Energy Transfer Partners, the company behind the controversial Dakota Access Pipeline, has repeatedly insisted that the pipeline is "safe," but water protectors have argued that it is not a question of if it will leak, but when .  "But it will be safe THIS time, right?" wrote Honor the Earth national campaigns director Tara Houska on Facebook, sharing a report of the latest spill.

Dakota Access protesters say major oil spill validates their concerns   - Opponents of the Dakota Access Pipeline say a major oil spill in North Dakota "validates" their months-long struggle to stop pipeline construction near an important waterway.The oil spill occurred just 150 miles outside the Dakota Access protest camps near Lake Oahe on the Standing Rock Sioux reservation.   State officials estimate that the Belle Fourche Pipeline in western North Dakota spewed more than 176,000 gallons of crude oil into a creek after electronic monitoring equipment failed to detect the leak.Dakota Access protesters — who call themselves water protectors — have argued for months that plans to run the new pipeline beneath Lake Oahe, a large Missouri River reservoir, would jeopardize the region's water supplies and threaten sacred sites.The Belle Fourche spill "is proof that we're right," Allison Renville, an activist and member of the Sisseton Wahpeton Oyate Sioux tribe, told NBC News this week. "It validates our struggle," she said. Tara Houska, a Native American environmental activist who has stayed at the protest camps since August, said the recent oil spill "gives further credence to our position that pipelines are not safe," NBC News reported.

Pipeline spill cleanup still ongoing in Billings County -- A pipeline spill last week in Billings County released around 4,200 barrels or 176,000 gallons of crude oil from the Belle Fourche Pipeline, approximately 16 miles northwest of Belfield.  Reuters reported that Bill Seuss, program manager for the North Dakota Department of Health, said approximately 3,100 barrels of the 4,200 spilled slid into Ash Coulee Creek, which feeds into the Missouri River. Approximately 5.4 miles of the creek have been impacted. Seuss said more than 100 people are working to clean up the spill, reported CNN.  Seuss told Reuters that cleanup has been difficult due to the extreme cold, but temperatures also slowed the movement of oil down the creek since the water is frozen. The Pipeline and Hazardous Materials Safety Administration (PHMSA) continues to investigate the incident. The company is working with a remediation company out of Alberta that specializes in cold weather cleanup. The Belle Fourche Pipeline is 6 inches in diameter and carries approximately 1,000 barrels of oil per hour, 24,000 barrels per day, according to Wendy Owen, spokesperson for True Companies, the company that owns the pipeline. True Companies is based out of Casper, Wyoming. Owen said cause of the leak is unknown, and monitoring equipment did not detect the leak, likely because of intermittent flow. The pipeline is located in very rough terrain in the Badlands of North Dakota, and Owen said the remote area and the topography itself makes access points difficult, reported Forum News Service reporter Amy Dalrymple on Monday. Seuss said the pipeline is located in a hill that is slumping, which may have caused the leak. Dalrymple noted that it’s unknown how long the Belle Fourche Pipeline was leaking before the landowner had discovered it, despite reports by Kevin Connors, pipelines program supervisor for the North Dakota Oil and Gas Division, that the pipeline had gauges and meters to monitor for leaks. Connors also said the company does aerial inspections of the pipelines once a month.

Leaked Audio: 'Election Night Changed Everything,' Dakota Access Pipeline 'Is Going Through' – Steve Horn - Shaun King, a writer for the New York Daily News, has uploaded what appears to be a recorded audio file of Energy Transfer Partners' Chief Operating Officer saying that "election night changed everything" for the company as it relates to its embattled Dakota Access Pipeline .King stated on social media and on the SoundCloud page on which he posted the file that a source sent him the file on Dec. 13, hours after Matthew Ramsey —COO of Energy Transfer Partners—gave his speech. The source who gave King the audio, he explains on SoundCloud, "claimed to be in a corporate meeting at Energy Transfer Partners" and told him that the person speaking was Matthew Ramsey, the COO of Energy Transfer Partners. King also wrote that the recording was made during a mandatory company meeting.   Listen below:  […] "I've got to tell you, election night changed everything," Matthew Ramsey , COO of Energy Transfer Partners, apparently said in the 10-minute clip, the authenticity of which DeSmog could not independently verify. "We now are going into a transition where we are going to have a new President of the United States who gets it. He understands what we're doing here and we fully expect that as soon as he gets inaugurated his team is going to move to get the final approvals done and we'll begin to put [Dakota Access] across Lake Oahe."  Dakota Access has yet to receive the easement permit it needs from the U.S. Army Corps of Engineers in order to cross Lake Oahe, which the company has publicly decried . Ramsey said in the clip, one in which the voice sounds similar to his voice heard in a Nov. 21 company conference call , that it will take about 65 days to cross the lake once they get the permit.

Lawyers for Standing Rock protesters are pleading for more help -- Trials for Dakota Access Pipeline protesters begin next week, but there aren’t enough attorneys to take their cases. The Morton County Sheriff’s Department lists 264 people who have no lawyer at all, and the 265 people who have been assigned public defense attorneys aren’t receiving adequate counsel. In order to fix the problem, advocates from North Dakota and Minnesota are now trying to convince the North Dakota Supreme Court to give the green light to lawyers from other states — who have no license to practice in North Dakota — to come in and help. A group of 10 legal organizations, including the American Civil Liberties Union (ACLU), and lawyers from both states filed an official petition to the the court on Wednesday. There have been mass arrests of DAPL protesters since August, when thousands of protesters set up camps on the Standing Rock reservation. The protesters, who call themselves Water Protectors, faced persistent, militarized policing by the Morton County Sheriff’s Department over the past few months. More than 550 people were detained for trumped up misdemeanor charges — including disorderly conduct, inciting a riot, and trespassing — and felony charges for reckless endangerment and conspiracy charges. Some people were arrested more than once. Demonstrators are adamant that the vast majority of them were peaceful, fighting for sacred land and safe water. But they will soon appear in court with insufficient legal representation.

Not Just North Dakota: Here Are 10 More States Where Activists Are Fighting Pipeline Projects – With the Dakota Access Pipeline nearly 90% complete, developers are focusing their attention elsewhere. Meanwhile, protests against additional pipelines throughout the country have yet to receive a tenth of the airtime.  “If you draw a line from Chicago to the Gulf Coast — Houston, Port Arthur, Baton Rouge — that line goes through Patoka, Illinois,” John Moody, a spokesman for the Association of Oil Pipelines told the Chicago Sun Times. “Then start in Cushing, Oklahoma, and draw a line across to Cleveland and Detroit and central Ohio, and that line goes through Patoka. Patoka is a crossroads for energy delivery.”   Beyond North Dakota, here are 10 states that have also been battling pipeline projects.

  • 1. Ohio. Construction of the 255-mile Nexus Gas Transmission project, a partnership between Houston-based Spectra Energy and Detroit’s DTE Energy, is expected to begin by early 2017.
  • 2. Iowa. The Dakota Access Pipeline project faced resistance in Iowa long before it reached Standing Rock. In July 2015, landowners in its path urged the Iowa Utilities Board to reject permits needed for the project to proceed.
  • 3. Texas. Standing Rock's success this December reinvigorated a more than two-year battle to half construction of the Trans-Pecos pipeline, a 148-mile joint venture with Mexico's federal electricity commission, the Comisión Federal de Electricidad.
  • 4. Louisiana. The company behind the Dakota Access Pipeline is currently planning a 162-mile pipeline that would cut through the Atchafalaya Basin and 11 Louisiana parishes. But resistance to the Bayou Bridge Pipeline has already spread worldwide.
  • 5. Florida. The Sierra Club, Chattahoochee Riverkeeper and Flint Riverkeepers filed a motion in late October to expedite review of the Southeast Market Pipelines Project, which includes the $3.2 billion Sabal Trail gas pipeline. Protests have continued for the past month and 16 demonstrators have been arrested thus far.
  • 6. Alabama. On November 15, outside the Army Corps of Engineers building, Huntsville protesters gathered in solidarity with the thousands at Standing Rock. The Sabal Trail pipeline is set to cross three states and cover 500-plus miles (86 in Alabama, 162 in Georgia, 268 in Florida).
  • 7. Arkansas. Diamond Pipeline is a planned 440-mile oil pipeline by Plains All American Pipeline and Valero Energy Corp across 14 counties and five rivers in Arkansas. The project is set to begin by the end of 2016.
  • 8. North Carolina. A nearly 600-mile proposed pipeline drew protests in three cities on November 19. In Pembroke, Fayetteville and Nashville, hundreds marched in opposition to the Atlantic Coast Pipeline which awaits a review by the Federal Energy Regulatory Commission. Dominion Power and Duke Energy's $5 billion project would carry natural gas to North Carolina from fracking operations in West Virginia, Ohio and Pennsylvania.
  • 9. Pennsylvania. Sunoco Logistics pushed back the timeline for its Mariner East 2 natural gas liquids pipeline on November 12. The $2.5 billion project has not yet received the necessary approvals, even months after charging Huntingdon County residents who objected to the pipeline being built on their property.
  • 10. New York. The National Fuel Gas Supply Corp. awaits approval from the Federal Energy Regulatory Commission to begin its proposed $410 million Northern Access Project in Western New York. Meanwhile, 50 miles outside of NYC, Spectra Energy’s pipeline expansion project continues to face controversy.

 Veterans at Standing Rock Ready to Take Clean Water Fight to Flint - The veterans who deployed to the Standing Rock Sioux Tribe reservation in North Dakota to support the water protectors in their battle against the Dakota Access Pipeline are now looking to take their successful mobilization to another community fighting for clean water: Flint, Michigan. "We don't know when we are going to be there but we will be heading to Flint," U.S. Army veteran Wes Clark Jr., one of the organizers of the veteran action in Standing Rock, told MLive earlier this week. "This problem is all over the county. It's got to be more than veterans. People have been treated wrong in this county for a long time." Since the U.S. Army Corps of Engineers announced Sunday that it would not allow the Dakota Access Pipeline an easement to tunnel under the Missouri River, many have speculated that the arrival of the thousands of veterans that weekend may have spurred the government agency into action. Activists hope that veterans—who also played a role in several 20th century leftist protest movements—will bring similar success to the embattled community of Flint, which still does not have access to clean drinking water. "I feel that by the veterans coming out and leading up to it all the media attention," said Flint resident Arthur Woodson, a veteran who traveled to Standing Rock, to MLive. "All the media attention that was there brought more attention to Standing Rock. The government had a change of heart." Flint-based community activist and founder Jay Ponti told MLive that he hoped the veterans would bring that same media attention to Flint, which has seen waning coverage as the national media has focused on the presidential election. "Our people are suffering. They are suffering in Standing Rock. They are suffering in Flint. They are suffering in Louisiana," Ponti said.

 Native Waters, Native Warriors: From Standing Rock to Honduras - Around the globe, land has become gold-standard currency. As a result, Indigenous and other land-based peoples face threats to the natural commons on which they live, produce food and sustain community, culture and cosmovision. In some places, organized Indigenous movements have stood up and fought off extraction and corporate development, winning protection of waters, forests, territories and more. In most places, the resistance has been met with assassination and violent repression by state security forces and corporate-financed hit squads. Two of the fiercest Native battles in the Americas today are closely connected. They are led by the Standing Rock Sioux in North Dakota and by the Lenca people in Honduras, organized through the Civic Council of Popular and Indigenous Organizations of Honduras (COPINH). Both are hard at work defending their territories and waters from further theft and desecration: At Standing Rock they are struggling against an oil pipeline being laid under their ancestral Missouri River, which they use for ceremony, drinking water and sustaining other life; on Lenca lands they are resisting the damming of their ancestral Gualcarque and other rivers. In both cases, the movements face enormous stakes. And they both know that, as Howard Zinn said, "The power of the people on top depends on the obedience of the people below." So they are challenging the power on top with shared strategies of mass mobilization and direct action. They both have the capacity to inspire the world, as seen by an outpouring of active solidarity with their uprisings from around the globe. Each is enduring tremendous assault. Standing Rock Water Protectors have suffered dog attacks, water cannons in sub-freezing temperatures, rubber bullets and tear gas. COPINH founder and leader Berta Cáceres was slain this past March by the Honduran government and an internationally financed dam company, with at least implicit backing from the US government, which funds the Honduran military. More than 90 additional COPINH members have been killed, and another 90 or so permanently injured, over the group's 23-year history, according to Lenca Indigenous coordinator Tomás Gomez. Gomez himself has survived three assassination attempts and been beaten by soldiers twice since March

Trump's Pick for Energy Secretary Sits on Board of Dakota Access Pipeline Company - Steve Horn - Former Texas Republican Gov. Rick Perry , a board member of Energy Transfer Partners—owner of the Dakota Access Pipeline (DAPL) —has been named U.S. Secretary of Energy by President-elect Donald Trump .  Perry, the former chairman of the Interstate Oil and Gas Compact Commission (IOGCC) , ran for president as part of the Republican Party primaries in 2015, but his campaign ended quickly . He announced his run for the Oval Office in 2015 while facing felony charges for official state corruption in Texas.  As reported by DeSmog at the time, at a 2015 town hall meeting in Iowa during his short-lived presidential run, Perry was asked by someone in the audience about his Energy Transfer Partners board position. Perry said that he thought his ties to DAPL were "irrelevant, frankly" in response to the question.  "All of our sources of energy in this country will be important," Perry said at the town hall. "If America is going to be energy secure, we're going to have to have infrastructure. I happen to think it's important for us as a country to have these sources of energy."  One of Perry's donors for his short-lived presidential run was Kelcy Warren, CEO of Energy Transfer Partners, who also served as a major donor to Trump's presidential campaign. Warren also sat on the advisory board for Perry's 2015 run for president.   Ironically, the U.S. Department of Energy ( DOE ) Perry will now head up is an agency he said he would get rid of during his run for the presidency during the 2012 election cycle. In a 2011 GOP primary debates, in a now unforgettable gaffe, Perry actually forgot the name of it when he proclaimed he'd throw it by the wayside. Perry, a vocal supporter of slashing regulations as applied to the oil and gas industry, is also a climate change denier .

U.S. oil industry cheers Trump energy pick, seeks gas export boost | Reuters - The U.S. oil and gas industry on Wednesday welcomed President-elect Donald Trump's choice of former Texas Governor Rick Perry to head the U.S. Department of Energy, and wasted no time making its first specific request of him: to support increased exports of America's natural gas overseas. Trump named Perry as his pick for the top U.S. energy job on Wednesday morning, handing the portfolio to a climate change skeptic with close ties to the oil and gas industry, and who previously proposed abolishing the department. The choice adds to a list of drilling proponents who have been tapped for top jobs in Trump's administration, worrying environmental groups but fitting neatly with Trump's promise to revive oil and gas drilling and coal mining as president by cutting back on federal regulation. Jack Gerard, president of the Washington-based American Petroleum Institute representing oil and natural gas companies, said he welcomed Perry's nomination, and called on him to make increasing exports of U.S. natural gas a "top priority." "As the former governor of Texas, Rick Perry knows the important impact that energy production has on our nation's economy. In his new role at the Energy Department, he has the opportunity to encourage increased exports of domestically produced natural gas," he said in a statement. Natural gas companies are eager to access foreign markets for their supply after a decade-long drilling boom that triggered a domestic glut and depressed prices. The oil industry successfully lobbied for an end to a decades-old crude oil export ban in December 2015 following a slump in prices, a move meant to help American companies weather lower prices at home. There is no ban on natural gas exports, but U.S. law requires American companies to obtain authorization from the Energy Department before being able to ship it overseas, and there are tough permitting requirements for building the specialized facilities that make shipping gas possible.

Fossil Fuel Allies May Run DOE and DOI --Rep. Cathy McMorris Rodgers, R-WA, will likely be offered the top job at Interior, outlets reported Friday. McMorris Rodgers has opposed action on climate change and has voted in favor of expanded offshore drilling and legislation, making it easier to drill within tribal territories.  Meanwhile, former Texas Gov. Rick Perry, who once forgot the name of the Department of Energy while attempting to say he'd abolish it during a presidential debate, is the leading contender to head the agency.  Perry is also opposed to climate action, has taken more than $12 million in donations from the oil and gas industry and sits on the board of the Dakota Access Pipeline parent company Energy Transfer Partners.

Trump nominees back claims to boost oil, natural gas -  With less than six weeks before his inauguration, President-elect Donald Trump has shown he is serious about his campaign pledge to bolster US oil and natural gas and gut federal regulation of the industry with his expected picks for at least three key posts in his administration. The picks, which will all likely face resistance even in the Republican-controlled Senate, indicate that Trump's early priorities will be focused on attempting to dismantle President Barack Obama efforts to combat climate change and to ease federal reach over oil and gas operations. "Trump's cabinet represents a who's who of climate deniers and fossil fuel hacks," said Sierra Club Director Michael Brune in a statement Saturday.To head the Environmental Protection Agency, Trump has appointed Oklahoma Attorney General Scott Pruitt who has sought to undo much of the agency's most substantial, and most oil and gas industry-criticized, work under the Obama administration. To lead the Interior Department, the agency which manages the federal lands and waters the incoming administration is expected to open to more drilling, Trump has chosen Republican Washington Representative Cathy McMorris Rodgers, who has voted against expanded federal oversight of the fossil fuel industry.To head the State Department, Trump is expected to nominate Rex Tillerson, who has been chairman and chief executive of ExxonMobil since January 2006.And while Trump has reportedly yet to decide on whom he wants to head the Department of Energy, a list of 74 questions Trump's transition team recently sent to the agency may indicate that the new administration has plans for DOE's core mission on science and technology. "How does [DOE's Energy Information Administration] ensure quality in its data and analyses?" asks one question. "Where does EIA think most improvement is needed in its data and analyses?" asks another.

Tillerson to push energy security, fight sanctions as top US diplomat - ExxonMobil CEO Rex Tillerson's nomination to secretary of state signals a potential shift in US diplomacy away from isolating countries through sanctions to one that puts US energy security front and center, analysts said Tuesday. Tillerson is expected to draw on personal relationships in geopolitical hot spots around the world with an aim toward lifting trade barriers and bringing countries into energy markets. He could influence Arctic drilling in Russia, the Iran nuclear deal, Saudi relations and other areas important to the oil industry. The nomination will have to overcome strong resistance in Congress, especially against Tillerson's close ties to Russian President Vladimir Putin and ExxonMobil's interest in rolling back US sanctions there that have cost it $1 billion. If confirmed, Tillerson could then face the challenge of implementing President-elect Donald Trump's foreign policy goals that may be unrealistic, said Richard Nephew, former principal deputy sanctions coordinator at the State Department in the Obama administration. That could include forcing Iran to accept radical cuts in its nuclear program or antagonizing China about Taiwan while expecting it to change its trade practices with the US. "The problem is going to be having to support and promote policies from Trump that are potentially dramatically inconsistent with those countries' own interests," Nephew said. "I don't care how good a diplomat you are, you're not going to be able to do those because your mission is unachievable."

Global Deals That Made Exxon’s CEO Now Pose Big Test – WSJ -Rex Tillerson rose to the top of Exxon Mobil Corp. partly by negotiating a deal with Russia’s Vladimir Putin to kick-start an oil project on the Pacific Ocean island of Sakhalin, which had been tied up in bureaucratic knots for years.He also led Exxon into Iraq’s semiautonomous Kurdistan region against the wishes of Baghdad and the State Department, and kept pumping oil in Chad after international oil profits were being used to support the autocratic government’s military operations.In many ways, Mr. Tillerson’s record since becoming chief executive in 2006 makes him the international energy equivalent of President-elect Donald Trump’s claim to fame in real estate: a shrewd, opportunistic businessman who amassed daring investments and valuable assets around the world. Those same qualifications will also pose a test for Mr. Tillerson’s nomination by the president-elect as secretary of state. The Exxon CEO’s dealings outside the U.S., particularly in Russia, will be a feature of his confirmation review, testing whether Mr.Trump’s affection for corporate chieftains as cabinet chiefs will fly in the world of international diplomacy. Mr. Trump has praised Mr. Tillerson, 64 years old, for having “relationships with leaders all over the world [that are] second to none.” Other prominent supporters acclaim his wide knowledge of the world and note his experience outside corporate America, including as president of the Boy Scouts of America. “It’s a mistake to pigeonhole him as another CEO with a very narrow background,” said former Defense Secretary Robert Gates in an interview. Mr. Gates, a principal in a consulting firm that has Exxon as a client, said he recommended Mr. Trump consider Mr. Tillerson for the job.

Trump taps Montana congressman for Interior secretary - President-elect Donald Trump is planning to name Montana’s Rep. Ryan Zinke (R) to lead the Interior Department.Zinke was offered the Interior secretary position Tuesday, a source close to Trump’s transition efforts confirmed to The Hill. A transition official told CNN that Zinke had accepted the offer. Zinke’s office and Trump’s transition team did not return requests for comment. On Twitter, a spokeswoman in Zinke’s congressional office retweeted an early report on his selection for the post. If the Senate confirms him, Zinke would be in charge of a department with some 70,000 employees and a wide range of responsibilities, from managing huge swaths of federal land in the West to enforcing treaties with American Indian tribes and studying the nation’s geography.  Zinke, a freshman lawmaker, has been a critic of numerous Obama administration environmental initiatives, including a moratorium on new leases for coal mining on federal land that accompanied a review of the coal leasing program. Montana is among the leading states for coal mining on public lands. He has slammed the Obama administration's policies cracking down on greenhouse gas emissions from power plants and oil and gas wells, and has pushed for Indian tribes to get more leeway in how they permit drilling on their land. An avid hunter and fisherman, Zinke bucks many of his GOP colleagues in his strong support for the Land and Water Conservation Fund, a program that uses fees from offshore oil and gas drilling to improve parks and public recreation.  He resigned his position in the committee writing the GOP platform earlier this year due to a provision in the platform advocating for transferring federal land to states.  The League of Conservation Voters gives him a 3 percent on its scorecard, which is meant to measure lawmakers’ environmental friendliness.

 Trump Agenda: EPA, State Picks Aligned With Fossil Fuels Industry - naked capitalism by Jerri-lynn Scofield -  Jerri-Lynn here: In this Real News Network interview, DeSmogBlog’s Steve Horn discusses the fossil-fuel friendly history of President-elect Trump’s choices for Environmental Protection Agency (EPA) administrator and Secretary of State. Note that although the interview aired before the formal announcement of President-elect Trump’s selection of ExxonMobil CEO Rex Tillerson as his nominee for Secretary of State, Horn anticipated that Trump would make that choice, and described some implications of that decision.  This post reiterates some points that were also made in this December 8 post, Trump EPA Pick: Scott Pruitt as EPA Head Signals Agency Will Ignore Climate Change, which also discussed Pruitt’s legal efforts as Oklahoma’s  Attorney General to thwart the Clean Power Plan and the EPA’s methane emissions caps.  Interested readers might also want to look at Horn’s original article for DeSmogBlog, The Billionaire Energy Investor Who Vetted Trump’s EPA Pick Has Long List of EPA Violations, which sparked this Real News network interview. I should also mention that I quibble with Horn’s throwaway comment about possible Russian intervention in the US election– but not enough to prevent me from crossposting this interview, which contains sufficient useful information not so well collected elsewhere to offset my concern about Horn giving excessive credence to that claim.

Gov. Brown asks President Obama to permanently ban new drilling off California's coast -- Seeking swift action before the arrival of a new president, Gov. Jerry Brown urged President Obama on Tuesday to make permanent the existing ban on new oil and gas drilling along the California coast. "Now is the time to make permanent the protection of our ocean waters and beaches," wrote Brown in the letter released by his office. The governor later participated in a San Diego event to mark California joining a regional effort to combat ocean acidification. Brown's letter comes almost two weeks after a similar request by legislative Democrats. Whether Obama could act in a way that could not be revisited by President-elect Donald Trump next year remains unclear, though a growing chorus of Democrats and environmental activists are urging an attempt by the president before he leaves office. The governor also raised the issue of climate change in his letter to Obama. Clearly, large new oil and gas reserves would be inconsistent with our overriding imperative to reduce reliance on fossil fuels and combat the devastating impacts of climate change," Brown wrote.

Five people could block Trump’s pipeline promises -  Donald Trump has said he’ll speed up approvals for energy infrastructure projects when he gets to the White House. Standing at least partly in the way: An obscure panel of technocrats he’ll have little sway over. The Federal Energy Regulatory Commission, or FERC, is charged by law with approving new natural gas pipelines, an industry priority as gas unseats coal for power generation. While Trump can make some changes within the agency, his ability to quicken approvals is offset by the longstanding laws that drive the commission and its current makeup, with three Democrat-appointed members on a five-person board. "Short of, literally, an act of Congress," making any big changes in how FERC operates is "wishful thinking," said Christi Tezak, managing director of ClearView Energy Partners, a Washington-based industry consultant, in a telephone interview. Commissioners serve 5-year terms. The earliest any of the Democrats’ terms will end is seven months away. Beyond that, FERC operates under economic and environmental laws that carry specific approval guidelines that have been tough to overcome, even as pipeline opponents grow increasingly sophisticated in using them to their advantage. Last year, a deeply-divided Senate didn’t even bother to take up a House-passed measure that would automatically approve pipeline applications still pending after a year. With an even slimmer majority post-election, Republicans may find it equally as difficult to pass similar legislation next year.

Battle over drilling in Arctic refuge expected to heat up in next Congress -- in the fierce partisan politics that dominate Congress, Alaska Republican Sen. Lisa Murkowski and Washington Democratic Sen. Maria Cantwell have displayed a rare ability to find common ground. For more than a year, they labored to piece together an energy bill that sailed through the Senate before foundering in the final days of this session. Next year, though, the two will be on opposite sides of a great policy divide, as Congress again considers whether to open the coastal plain of the Arctic National Wildlife Refuge (ANWR) to oil exploration or continue to protect an area conservationists view as a crown jewel of America's public lands. The old fight is back, and fresh, because of the presidential election victory of Donald Trump, who will preside over a Republican-controlled Congress. In his campaign, Trump advocated boosting U.S. oil production as he spurned the science linking climate change to fossil fuel combustion, all of this whipping up hopes among his industry supporters. He would be expected to embrace any legislation to drill in the refuge that makes it through Congress. And, his executive choices such as Oklahoma Attorney General Scott Pruitt an ally of the fossil fuel industry nominated to lead the Environmental Protection Agency will try to pare back federal regulations to speed energy development. For Alaska politicians, the decadeslong quest to open the 1.5 million-acre coastal plain to drilling has been as elusive as finding the Holy Grail. It now takes on new urgency as the state economy is shaken by low oil prices and a steep decline in crude flowing through the Trans-Alaska Pipeline.

Tell Me Again How Oil Extraction Is the Panacea for Employment Growth? The top chart shows the total number of employees in the oil extraction area. Yes, it increased from 120,000-200,000 between 2005 and 2015. That's a whopping 80,000. But as the bottom chart shows, the total number of oil jobs is still less than 1% of all payroll jobs. Let's assume a 4-1 multiplier effect -- for every 1 oil extraction job created, 4 additional jobs are created. That would only be a total of 320,000 jobs -- about 2-3 months of job gains at the current pace of creation. There's just not much here from an employment perspective.

Expected Jan month-on-month gain in US shale oil output first since Apr 2015: EIA --US shale oil production should rise overall by 2,000 b/d to 4.542 million b/d in January -- the first month-on-month projected overall increase since April 2015, the US Energy Information Administration said Monday. Even so, crude production in two of the bigger domestic oil plays, the Bakken in North Dakota and Montana and the Eagle Ford Shale in south Texas -- should continue to drop overall as rig counts in those plays remain low relative to two years or even one year ago, EIA said in its monthly Drilling Productivity Report. Even so, the decreases in those plays, particularly the Eagle Ford, are slowing. There, for example, January production is pegged to fall 23,000 b/d to 980,000 b/d. That is less than the 33,000 b/d drop predicted for December, 35,000 b/d in November, 46,000 b/d for October and 53,000 b/d for September. Likewise, the Bakken is forecasted to decrease just 13,000 b/d for next month to 905,000 b/d, below the 14,000 b/d output drop predicted for December, 21,000 b/d for November and 28,000 b/d in October. Positive oil output forecasts for the Permian Basin continued for January, the fifth month of predicted increases for that region which is the most active in the US. There, EIA forecasts production to jump by 37,000 b/d next month to 2.126 million b/d. US shale production has been decreasing for about 20 months during a two-year industry downturn that has seen severe drilling cutbacks and has affected energy companies along the value chain. The number of drilling rigs globally has dropped worldwide, although the impact was most severe in the US where shale output was frenzied in mid-2014. That was when oil prices that were over $100/b began to drop and reached half that figure by year-end.

U.S. Shale Set To Kill Oil Price Rally -  The resurgence of U.S. shale will undermine the OPEC-fueled price rally, capping oil prices at roughly $50 per barrel through 2017. That is the conclusion from the EIA’s latest Short-Term Energy Outlook, which forecasts WTI to average $50.66 per barrel and Brent to average just $51.66 per barrel next year. The agency also cast doubt on OPEC’s ability to follow through on its deal. “The extent to which the announced plans will be carried out and actually reduce supply below levels that would have occurred in their absence remains uncertain.” But even if they do, any price rally above $50 per barrel will merely spark a revival in U.S. shale drilling, which will “encourage a return to supply growth in U.S. tight oil more quickly than currently expected.” In other words, the OPEC deal won’t fuel the sustained rally that oil bulls have hoped for. In fact, the oil bust could persist for another year, according to the EIA. Rising U.S. oil production next year will postpone the projected withdrawals in oil inventories, pushing drawdowns off until 2018. In fact, the EIA actually projects inventories to climb once again, rising by 0.8 million barrels per day (mb/d) in the first half of 2017. For the entire year, inventories could build at an average rate of 0.4 mb/d. In other words, the EIA does not expect the global supply/demand equation to come into balance until the end of next year, a much more pessimistic prediction than the markets have come to expect, especially following the OPEC agreement. One prevailing theory about the state of the oil market before the OPEC deal came from the IEA, which forecast a convergence of supply and demand by the middle of 2017. The OPEC deal was supposed to accelerate that adjustment, tightening the market and moving up the “balance” to early 2017.

 Why the Peak Oil Movement Failed - John Michael Greer - The standard model of the future accepted through most of the peak oil scene started from a set of inescapable facts and an unexamined assumption, and the combination of those things produced consistently false predictions. The inescapable facts were that the Earth is finite, that it contains a finite supply of petroleum, and that various lines of evidence showed conclusively that global production of conventional petroleum was approaching its peak for hard geological reasons, and could no longer keep increasing thereafter. The unexamined assumption was that geological realities rather than economic forces would govern how fast the remaining reserves of conventional petroleum would be extracted. On that basis, most people in the peak oil movement assumed that as production peaked and began to decline, the price of petroleum would rise rapidly, placing an increasingly obvious burden on the global economy. The optimists in the movement argued that this, in turn, would force nations around the world to recognize what was going on and make the transition to other energy sources, and to the massive conservation programs that would be needed to deal with the gap between the cheap abundant energy that petroleum used to provide and the more expensive and less abundant energy available from other sources. The pessimists, for their part, argued that it was already too late for such a transition, and that industrial civilization would come apart at the seams.  As it turned out, though, the unexamined assumption was wrong. Geological realities imposed, and continue to impose, upper limits on global petroleum production, but economic forces have determined how much less than those upper limits would actually be produced. What happened, as a result, is that when oil prices spiked in 2007 and 2008, and then again in 2014 and 2015, consumers cut back on their use of petroleum products, while producers hurried to bring marginal petroleum sources such as tar sands and oil shales into production to take advantage of the high prices. Both those steps drove prices back down. Low prices, in turn, encouraged consumers to use more petroleum products, and forced producers to shut down marginal sources that couldn’t turn a profit when oil was less than $80 a barrel; both these steps, in turn, sent prices back up.

What if the Fracking Boom Is Just a Bubble? - Post Carbon Institute has released two reports authored by Earth scientist J. David Hughes assessing the U.S. Energy Information Administration's (EIA) most recent projections for domestic tight ("shale") oil and shale gas production. The reports 2016 Tight Oil Reality Check and 2016 Shale Gas Reality Check evaluate the EIA's increasingly optimistic projections in light of actual production data (through June 2016) and the agency's own previous estimates. The reports raise critical questions about the veracity and volatility of the EIA's estimates, questions that are especially important as the Trump Administration sets its domestic energy policy. "The EIA kindly provided the play level projections that make up its Annual Energy Outlook reference case forecasts," said Earth scientist and the reports' author J. David Hughes. "This allowed a comparison to the administration's previous projections and my own forecasts, which were based on an analysis of well productivity by subarea within each play and other fundamentals such as the number of available drilling locations and decline rates. I was also able to assess the EIA's most recent projections in light of actual production data from the field. Simply put, when looked at on a play-level, the EIA's forecasts are highly unlikely to be realized."  The Annual Energy Outlook (AEO) published yearly by the U.S. Energy Information Administration is taken by media, policymakers, investors and general public at face value. Yet the EIA's projections for future energy prices and production are very often wrong (like when it revised its own estimate for the Monterey shale downward by 96 percent after just three years) and tend to show a consistent optimism bias.

Mexico eyes USWC gasoline cargoes again as differentials plunge -   Los Angeles gasoline differentials trended to their lowest levels since February early Wednesday as stocks hit a nearly four-month high, although the trend could be short-lived with five empty cargoes soon arriving from Mexico to the West Coast. Energy Information Administration data released Wednesday showed inventory up 48,000 barrels week on week to 29.24 million barrels for the week ended December 9. It was the 1.79 million barrels higher than the same week last year and highest weekly level since 29.88 million barrels for August 26. "It is winter, that time of year when gasoline stocks are high," one market source said. "That's why they're shipping out gasoline." Market sources said Los Angeles CARBOB was talked down 1.75 cents to NYMEX January RBOB futures minus 17.50 cents/gal early Wednesday in quiet trading, the lowest level since minus 26 cents/gal on February 23. Los Angeles suboctane dropped from a 2-cent discount to a 4.50-cent discount to the California-specific CARBOB grade.Suboctane is an export grade not allowed for road use in California. It is sent to neighboring states, but mostly Mexico. Platts trade flow software, cFlow, showed five ships heading up empty from Mexico to the West Coast for loading, mostly likely with gasoline. Only one or two have been typically seen on the route in recent months. "There's a reason Mexico is buying a lot of gasoline now. Because it's cheap," the source said. "PBF Torrance is back in the mix. They're a big producer of suboctane gasoline." The 151,300 b/d Torrance plant near Los Angeles has experience a power outage in October and fire in November that kept it from full rates until recently. The Los Angeles CARBOB differential reached plus 39.75 cents/gal on October 28 and has been slowly declining since then.

How to make mine operators pay for the mess they make -   Operators of resource extraction industries are typically required to post bonds, or contribute to an "orphan well fund" or a "mine financial security program." If an company walks away from a toxic waste site once operations have ended, the funds from the security program can be used to pay for site clean-up.  The only problem is that the amounts in these clean-up funds are typically tiny relative to the potential costs of site clean-up. This point has been raised by the Pembina Institute, in their report on How Albertans Could End Up Playing for Oil Site Mine Reclamation. It's been raised in an expert panel report on Environmental and Health Impacts of the Oil Sands Industry, commissioned by the Royal Society of Canada. It has been noted by the Auditor General of Alberta and the BC Auditor General. The risks associated with future toxic waste from the oil sands are, in some ways, more worrying than the much more widely known global warming ones.  Humans could possibly adapt to a warmer climate. But the arsenic-laced water around the NWT's Giant Mine? That's unequivocally, inevitably lethal. The issue is more pressing than ever this year, given the federal government's decision to approve the Trans Mountain Pipeline, and their announcement that they will be welcoming more foreign investment (if it's hard to stop a Canadian operator from walking away from a toxic waste site, how will it be possible to stop a foreign one?).  Why hasn't more attention been paid to the environmental risks of resource extraction? My theory is that the human brain is just not very good at processing low-probability, ultra-high-cost events. We can't differentiate, at an emotional level, between someone defecating on our driveway, and someone contaminating the entire Athabaska watershed. We just can't grasp - or don't want to grasp - the enormity of the environmental disaster the oil sands could create.  The Sydney Tar Ponds show how expensive that clean-up can be. Although the Sydney site totalled just over 100 hectares, the 2004-14 clean-up operations cost federal and Nova Scotia taxpayers $400 million – about $4 million per hectare. Alberta’s oil sands are hundreds of times bigger than the Sydney Tar Ponds. To pre-commit companies to paying for the eventual costs of reclaiming oil sands sites, the Alberta government has created a “Mine Financial Security Program”. Companies wishing to mine the oil sands must post a base amount of security for each project. In theory, they could be required to post additional securities. In practice that never happens.

 Analysis: Iran emerges as high sulfur gasoil supplier for ARA refining hub - Northwest Europe has opened its doors to the first shipments of Iranian gasoil after a 10-year hiatus, and these nascent flows are adding to the desulfurization opportunities within the Amsterdam-Rotterdam-Antwerp refining hub. The specifications of the recent fixtures put Iranian gasoil as a prime candidate for desulfurization and blending within the ARA hub, market sources said. So far this year, the HSGO shipments have been straight run 0.7-0.9% gasoil from Bandar Mahshahr, middle distillates traders and sources close to the parties involved said. In aggregate, high sulfur gasoil exports from Iran have amounted to approximately 100,000 mt each month, booked for the West of Suez, the Mediterranean, Northwest Europe and West Africa, a source with knowledge of the matter said.The latest fixture to Northwest Europe was on board the Glorious, a 60,000 mt cargo, which discharged into Amsterdam on November 26, having left Bandar Mahshahr, Iran, on November 12, S&P Global trade flow software CFlow showed. The Mahshahr Oil Terminal is used to store products from the Abadan Refinery to the west. This vessel was laden with 0.7% sulfur gasoil, sources said. The identity of the charterer remains unclear. Among the other Iranian ports, Bandar Abbas exports 6-7 cargoes of 5,000 ppm (0.5%) gasoil each month, National Iranian Oil Company said, while port Lavan Island supplies one cargo on average of maximum 500 ppm gasoil.

Almost 12,000 Jobs at Risk on Norwegian Continental Shelf in 2017 - Almost 12,000 jobs are at risk on the Norwegian Continental Shelf in 2017, with several rigs finding themselves out of contract next summer, according to media reports. Norwegian daily newspaper Stavanger Aftenblad stated that three out of four rigs on the Norwegian shelf will be without a contract by the middle of next year, which could see up to 11,400 jobs lost, according to a number of reports.  Earlier this month Scottish National Party MSP Gillian Martin said that more investment was needed if the oil and gas sector wants to avoid the risk of losing key workers in the North Sea.   The developments follow a prediction by the Aberdeen & Grampian Chamber of Commerce's latest Oil and Gas Survey, which stated that further job cuts were likely to come in the near future, but insisted that the crisis could be reaching a turning point. More oil and gas contractors had reduced both their permanent and contract staff than at any other point in the history of the AGCC’s Survey,  As the industry has worked to drive down costs and adapt to the new low oil price landscape, the survey also reveals that 43 percent of respondents have reduced pay in the past year, including 15 percent who cut it by an average of 10 percent. In addition, 40 percent of all firms - compared to 25 percent in the previous survey - reported making significant changes to terms and conditions. This is not only salary and bonus payment reductions, but also in changes to shift pattern and working hours, pension contributions, medical plans and benefits packages. The total number of layoffs since the onset of the industry downturn is more than 350,000 globally, according to a report by Houston-based consulting firm Graves & Co. The report, which includes layoff numbers as of noon May 6, details 351,410 layoffs.

WoodMac: Oil Exploration Spending May Drop Further Next Year | Rigzone - Global spending on oil and gas exploration in 2017 could fall below this year's $40 billion, but lower costs mean profitability will increase, consultancy Wood Mackenzie said in a report on Friday. Faced with a 30-month-long oil price downturn, oil companies including Exxon Mobil and Royal Dutch Shell have slashed spending budgets in recent years, with exploration bearing the brunt. According to Wood Mackenzie, the share of exploration in overall oil and gas production investment will dip to a new low of 8 percent in 2017. "Overall investment will at best match 2016 year's spend of around $40 billion, and may yet fall further," said Andrew Latham, vice president of exploration at Wood Mackenzie. That compared with a 2014 peak of $95 billion. Lower costs of drilling rigs, simpler wells designs and cheaper seismic imaging mean well counts may nevertheless hold up close to 2016 numbers while returns improve. "After a decade in the doldrums, the majors' returns from conventional exploration improved to nearly 10 percent in 2015. The rest of the industry is heading in the same direction. Fewer, better wells promise a brighter future for explorers," Latham said. The rate of discoveries is not expected to fall next year and to average around 25 million barrels of oil equivalent per well.

Chile offers to resume gas exports to Argentina in 2017 - Chile could resume exports of natural gas to its neighbor Argentina next year, the countries' energy ministers said Thursday. Argentina's state energy firm ENARSA is currently studying a proposal from Chile's ENAP to pump 3 million cu m/d of gas across the Andes between mid-May and the end of August, which is the Southern hemisphere winter, on "very similar terms" to those for gas exports this winter. "It will depend whether we can come to an agreement on the prices and what the conditions should be," said Argentina's Energy and Mines Minister Juan Jose Aranguren, following a meeting with Chilean counterpart Andres Rebolledo in Buenos Aires. "We see no inconvenience of repeating the process in 2017 as long as it benefits the buyer as much as the seller," Aranguren added.

African Energy Economist: Subsidizing Nigerian inefficiency - Fuel subsidies in Nigeria remain a thorny issue. State support for gasoline and diesel prices, both directly at the pump and through subsidies for fuel imports, places a huge burden on the national finances. A government report calculated that $8 billion out of total federal state expenditure of $22 billion in 2013 was spent on fuel subsidies. Much of that subsidized fuel does not even benefit Nigerians, as it is smuggled across the border into neighboring states where prices are higher. The lower price of oil this year means that the current bill is likely to be much less, but the government’s ability to continue paying out is also greatly reduced. Nigeria is entering what will be its first recession in 25 years and remains as reliant on hydrocarbon revenues as ever. Successive governments have sought to increase fuel prices, often very clumsily, but have been forced to backtrack by national strikes. On some occasions, prices have more than doubled overnight. It is almost as if the government were actually trying to fail. The popular view is that cheap fuel is one of the very few things that the bulk of the population can expect from their government. Raising prices would also stoke inflation. Many politicians are so keen to secure popular support and depress inflation that they want to increase subsidies. On November 30, the House of Representatives voted for a maximum gasoline price of N70 ($0.29) a liter. . The population needs to have some expectation that the state can manage its finances for their benefit. In the long term, a massive cultural change is needed. The population needs to have some expectation that the state can manage its finances for their benefit. In addition, the view needs to change that wealth can only be secured by tapping the oil industry, whether by working in the sector, working in government or in the countless forms of petro-crime that permeate Nigerian society. More immediately, the government can also help to address the fuel import situation. Nigeria has four state-owned refineries that have either been out of use or operating at reduced capacity for the past 15 years. At the same time, vast amounts of money are made by importing refined petroleum products, including through scams such as round tripping, which involves physically importing the same consignment of fuel more than once. As a result, there are vested interests in keeping the refineries out of action.

Shell starts oil production from Malaysia's Malikai deepwater platform - Oil | Platts News Article & Story: Shell has started oil production from the Malikai Tension-Leg Platform, located 100 km offshore Malaysia's Sabah state, the company said Wednesday. Malikai will be Malaysia's fourth deepwater project after the Kikeh, Siakap-North Petai, and Gumusut Kakap fields, and is expected to have a peak production of 60,000 b/d. The project start-up has arrived at a time when oil producers are coordinating efforts to reduce global supply. Malaysia is targeting an output cut of 20,000 b/d from its estimated production of 700,000 b/d over the period January-June 2017.With this decision, Malaysia became one of 11 non-OPEC oil producers to agree an output cut, following OPEC's announcement in late November to freeze the group's supply at 32.5 million b/d with the aim of speeding the market's rebalancing and boosting producer coffers. Malikai is Shell's first TLP facility in Malaysia and second deepwater project in the country, following the start-up of the Gumusut-Kakap platform in 2014. Shell's deepwater business currently produces 600,000 b/d of oil equivalent globally, with another two Shell-operated projects under construction or pre-production commissioning, Coulomb Phase 2 and Appomattox in the US Gulf of Mexico. "Deepwater production is expected to increase to more than 900,000 boe/d by the early 2020s from already discovered, established reservoirs," Shell said.

India data: Nov oil products demand rose 12% on year to 4.3 Mil b/d - Oil | Platts News Article & Story: India's demand for oil products in November rose 12% year on year to 16.6 million mt, or 4.35 million b/d, latest provisional data from the Petroleum Planning and Analysis Cell showed. The higher growth in November was the second straight month of positive growth, after a negative growth in September when demand fell 0.8% year on year to hit a two-year low of 14.6 million mt, or 3.82 million b/d. In October, demand for oil products rose 6.6% year on year to 16.5 million mt, as demand for transport fuel rose after the rainy season ended in September. "Half of the November 2016 demand growth was due to higher petrol/diesel sales, which had been elevated as fuel stations continued accepting old high-denomination currencies," said a Credit Suisse report Wednesday.On November 8, India scrapped its Rupees 1,000 and Rupees 500 currency notes with immediate effect nationwide, except at fuel stations where the notes were allowed to be used for a slightly longer period. The rise in demand for transport fuels was the main reason for the increase in November, with diesel consumption rising 10.5% year on year to 6.75 million mt and gasoline consumption rising 14.3% to 2 million mt. LPG demand continued to be strong in November, rising 16.5% year on year, reflecting the government's thrust on providing new household connections for the economically challenged sections. Focus on the reduction in government subsidy on kerosene led to a cut in kerosene demand by around 32% year on year in November. The Credit Suisse report forecasts LPG demand to sustain more than 10% growth over the near term, due to the government action on increasing LPG penetration in rural households.

Offshore oil regulator hires former oil firm boss as head of safety and integrity -  Environmentalists have criticised the offshore oil regulator for appointing a recent head of the Australian arm of a major oil company to a senior position, saying the move is “like putting the fox in charge of the henhouse”.Derrick O’Keeffe spent the past four years as country manager in Australia for Murphy Oil, which under his watch entered into a joint-venture with Santos to explore for oil in the Great Australian Bight.This week the National offshore petroleum safety and environmental management authority (Nopsema) announced he had been appointed to the position of Head of Division, Safety and Integrity, which reports directly to the chief executive.The role includes the assessment of safety cases and well operations management plans, such as those that Nopsema controversially approved for BP to drill for oil in the Great Australian Bight. O’Keeffe’s LinkedIn profile boasts of expanding Murphy Oil’s number of offshore oil permits from three to 10.  Murphy Oil has had its environmental plans approved by Nopsema to explore for oil in the Great Australian Bight, and is expected to submit drilling safety cases and well operation management plans to Nopsema in the near future, which would now be assessed by O’Keeffe.“When the company he worked for has an active permit, putting an oil advocate in charge of regulating oil spill risk is like putting the fox in charge of the henhouse,” said Greenpeace campaigner Jonathan Moylan.

Japan's oil and LNG price evolution: On the path to transparency (10 pp pdf) In this special report, Platts looks at the ongoing changes in Japan's refining sector, potential development of new spot oil products price benchmarks, and the possible development of a spot LNG price benchmark.

Japan's average price for LNG spot cargoes contracted in Nov jumps 15% on month -  The average price Japanese buyers paid for spot cargoes contracted in November jumped 15% month on month to $7.0/MMBtu, the highest since January this year, the Ministry of Economy, Trade and Industry showed Friday. METI gathers data from utilities and other LNG buyers in Japan to publish a simple average of contract prices, but the delivery months of the cargoes are not disclosed. Platts JKM averaged $7.181/MMBtu in November, reflecting spot deals concluded for December and January deliveries to Japan and South Korea. The ministry also said the average price of cargoes delivered into Japan in November was $5.9/MMBtu, up 3.5% from the previous month. Meanwhile, the Platts JKM for November delivery averaged $5.977/MMBtu. The November JKM was assessed from September 16 to October 14, during which prices rose, thanks to firm demand from end-users.

Asia spot LNG: Feb JKM starts at $9.20/MMBtu amid limited supply - The Platts JKM for cargo delivery in February, the new front month, kicked off at $9.20/MMBtu Friday as the market continued to be supported by limited supply. The January JKM ended its assessment period on Thursday at $9.10/MMBtu up 10 cents/MMBtu from Friday last week. A couple of tenders were in focus this week as market participants sought price indications for future trades.Kogas bought most cargoes that were offered into the tender and most of them were January delivery, said traders. They added that Kogas awarded those cargoes in the low to mid $9s/MMBtu. In another tender, Russia's Sakhalin LNG tender offering February and March cargoes closed December 13. It was heard awarded both cargoes to two Japanese utilities, with the February cargo heard awarded at $9.30/MMBtu to Tohoku Electric and the March cargo awarded at $8.10/MMBtu to $8.20/MMBtu to another Japanese buyer. Tohoku Electric lost the 1 GW coal-fired unit at its Haramachi power plant which was shut Sunday on suspicion of a steam leak inside the boiler. Prospects of supply became more clear toward the end of the week as Gorgon Train 2 restarted operations after a temporary halt. Gorgon LNG Train 1 went also offline at the beginning of December and no updates have been heard. South Korea's Kogas closed its tender for December 15 to February 20 delivery. The Korean utility was initially looking for two cargoes, but was heard to have awarded somewhere between six and ten cargoes in the end.

Japan refiners receive notice of crude supply cuts after OPEC deal: PAJ chief - Japanese refiners have received notices of crude supply cuts from "some producers" for January loading, following OPEC's November 30 decision to cut production, Petroleum Association of Japan President Yasushi Kimura said Thursday. "It is true that we have received notices from some producers about reducing crude loadings from January," Kimura told a press conference in Tokyo. But Kimura added that Japanese refiners were not under immediate pressure to seek alternative crudes. Kimura is also chairman of JX Holdings, the parent of largest Japanese refiner JX Nippon Oil & Energy.

 Shell, Iran agree on future oil and gas development | Reuters: Royal Dutch Shell signed a provisional agreement on Wednesday to develop Iranian oil and gas fields, an Iranian official said, the first deal by the world's second biggest listed oil firm in Iran since sanctions were lifted. The Anglo-Dutch company confirmed it had signed a memorandum of understanding with National Iranian Oil Company (NIOC) on Wednesday "to further explore areas of potential cooperation", declining to give further details. Analysts said the agreement underscored major oil companies' willingness to keep doing business with Iran despite the risk that U.S. President-elect Donald Trump could scrap the nuclear deal that ended the sanctions earlier this year. Earlier on Wednesday, an Iranian Oil Ministry official said Shell would sign three memoranda of understanding (MoUs) in Tehran to develop the South Azadegan, Yadavaran oil fields and the Kish gas field. The South Azadegan and Yadavaran fields both straddle Iran's border with Iraq. A Shell spokesman said after the signing that, "details of specific opportunities are confidential". Total, which last month signed the first deal by a Western energy firm since sanctions were lifted, will start talks about new oil and gas projects but will not be signing any deals on Wednesday, the Iranian official said.

Glencore and Qatar take 19.5% stake in Rosneft - FT -Russian banks will help finance the €10.2bn purchase of shares in state oil company Rosneft by Glencore and the Qatar Investment Authority that was signed on Saturday, the trading house said. The deal, which was unveiled by Rosneft chief executive Igor Sechin and president Vladimir Putin live on state TV on Wednesday evening, is the largest foreign direct investment into Russia since the US and EU imposed sanctions on the country over its actions in Ukraine in 2014. The revelation that Russian banks are playing a key role in financing the deal highlights the difficulty Rosneft had attracting foreign investors amid weak oil prices and western sanctions against it. Mr Sechin, who Rosneft insiders say has been working nonstop to secure the deal in recent weeks, said it was “unprecedented in its complexity”. “Under extremely unfavourable external circumstances a major effort was undertaken to search for interested strategic investors, taking into account the long-term interests of the Russian oil and gas sector and of the government in general,” Mr Sechin said in the statement. Under the structure of the deal, Qatar will invest €2.5bn and Glencore €300m for equal stakes in the a special purpose vehicle that is buying a 19.5 per cent stake in Rosneft from its government-owned parent company Rosneftegaz. Italy’s Intesa Sanpaolo will provide the “bulk” of the debt financing for the remainder of the €10.2bn deal, according to Rosneft, but Russian banks will also be “providing financing and credit support”, Glencore said.

 Glencore and Qatar buy $11.3bn stake in Russia's largest oil company - BBC News: The Kremlin has announced that commodities trader Glencore and Qatar's sovereign wealth fund are together buying a 19.5% stake in Rosneft, Russia's largest oil company. "It is the largest privatisation deal, the largest sale and acquisition in the global oil and gas sector in 2016," President Vladimir Putin said. The surprise move sees Glencore and Qatar paying $11.3bn for the stake in Rosneft, where BP already owns 19.75%. Moscow will keep the controlling stake. The long-planned sale is part of the Russian government's efforts to sell some state assets to help balance the budget amid a two-year recession caused by a drop in global oil prices and Western sanctions. A deadline for the sale was missed, and speculation grew that Rosneft was struggling to find a buyer. The deal also marks a turnaround for London-listed Glencore, which had seen a collapse in its share price amid a plan to sell assets and cut its huge debts. Glencore's shares have rebounded this year. The Qatar Investment Authority is one of the biggest investors in Glencore.Russia, although not a member of Opec, has agreed to cut its output in line with the cartel, and will attend a meeting with its member countries on Saturday to discuss specific details. Mr Sechin said that Glencore and the Qatari fund will form a consortium and have equal stakes. He added that Rosneft had conducted talks with more than 30 potential bidders before striking the deal.

Iraqi Kurds May Reject Oil Cuts, Putting Baghdad In Difficult Position - Authorities of the Kurdistan Regional Government (KRG) in northern Iraq have announced that they will most likely not take part in the recently agreed oil output reduction deal made by OPEC, making the Iraqi central government’s ability to meet the cartel’s production cut requirements difficult. Iraq is OPEC’s second-biggest producer, and had heavily lobbied for an exemption from the production freeze, along with its neighbor, Iran. On November 30th, OPEC reached a deal among all 14 member countries to curtail oil production for the first time since 2008. In accordance with this deal, the cartel has agreed to cut its oil production from 33.8 million barrels a day (b/d) to 32.5 million b/d in an effort to prop up prices. Iran succeeded in getting a bump to 3.797 million bpd, but Iraq was asked to cut down to 4.35 million bpd, down from 4.561 million bpd in October, based on secondary sources. Late last month, just days after OPEC decided on the cut, Iraq released detailed data about the crude oil output at each of its 26 oilfields, along with detailed export figures, all of which was meant to serve as evidence that OPEC’s external-source output estimates do not reflect reality. The Iraqi data also included total output from fields in Iraqi Kurdistan.According to these figures, in September, the country pumped 4.7 million bpd, compared to 4.47 million bpd based on OPEC’s secondary sources for that month. To make good on the OPEC deal, Iraq must reduce crude output by 210,000 barrels a day from October levels. Kurdistan controls about 600,000 barrels a day of oil production, or approximately 12 percent of Iraq’s total output. Based on a statement by KRG Minister for Natural Resources, Ashti Hawrami, while the Kurds are signaling that they may not take part in the cut, they have also not definitively ruled out cooperation.

Oil-Producing Countries Agree to Cut Output Along With OPEC —Oil-producing nations struck a deal Saturday to cut output along with the Organization of the Petroleum Exporting Countries, a pact designed to reduce a global oversupply of crude, lift prices and lend support to economies hurt by a two-year market slump.The agreement would remove 558,000 barrels a day of crude oil from the market. That would come on top of 1.2 million barrels a day in cuts already agreed to by OPEC, amounting to a total of almost 2% of global oil supply. The non-OPEC cuts, if carried out as described over the first half of 2017, would represent an unprecedented level of cooperation among oil-producing countries that have been groping for ways to lift oil prices out of a two-year funk. “This is truly a historic event,” Russian Energy Minister Alexander Novak said. ”It is the first time that so many oil-producing countries from different parts of the world have gathered in one room to accomplish what we have done.” The bulk of the cuts -- 300,000 barrels a day—have been pledged by Russia, which produces more crude oil than any other country. Other output reductions are promised by 10 other countries, including Oman, Azerbaijan and Sudan. Big questions remain going forward. OPEC members themselves have a spotty record of enforcing their own agreements, and there is no legally binding way to deter producers inside or outside the cartel from cheating on their pledges. For now, it also remains unknown how much of the cuts promised Saturday would have happened anyway through natural decline rates that were expected. Neither OPEC nor its non-OPEC allies provided a detailed list of production cuts. Saudi Energy Minister Khalid al-Falih said countries could count such natural declines toward the production cut. “This agreement leaves for countries to decide how to implement,” he said.

OPEC, non-OPEC agree first global oil pact since 2001 | Reuters: OPEC and non-OPEC producers on Saturday reached their first deal since 2001 to curtail oil output jointly and ease a global glut after more than two years of low prices that overstretched many budgets and spurred unrest in some countries. With the deal finally signed after almost a year of arguing within the Organization of the Petroleum Exporting Countries and mistrust in the willingness of non-OPEC Russia to play ball, the market's focus will now switch to compliance with the agreement. OPEC has a long history of cheating on output quotas. The fact that Nigeria and Libya were exempt from the deal due to production-denting civil strife will further pressure OPEC leader Saudi Arabia to shoulder the bulk of supply reductions. Russia, which 15 years ago failed to deliver on promises to cut in tandem with OPEC, is expected to perform real output reductions this time. But analysts question whether many other non-OPEC producers are attempting to present a natural decline in output as their contribution to the deal. Last week, OPEC agreed to slash output by 1.2 million barrels per day from Jan. 1, with top exporter Saudi Arabia cutting as much as 486,000 bpd. Falih said on Saturday that Riyadh may cut even deeper. On Saturday, producers from outside the 13-country group agreed to reduce output by 558,000 bpd, short of the initial target of 600,000 bpd but still the largest contribution by non-OPEC ever. Of that, Russia will cut 300,000 bpd, Novak said. He added it would be gradual and by the end of March Russia would be producing 200,000 bpd less than its October 2016 level of 11.247 million bpd - Russia's highest production estimate so far. Russian output would fall to 10.947 million bpd after six months, Novak said.

Russia is now joining OPEC’s big push to lift crude oil prices worldwide - Vox Some of the world’s biggest oil producers are trying to see if they can hike global crude oil prices by artificially throttling production. So far, they’ve been stunningly successful — with “so far” being the key term here. On Monday, the price of Brent crude rose to $55 per barrel, the highest level since mid-2015. The reason? Russia and other countries just agreed to voluntarily cut their oil output, following a landmark deal in November by the Organization of Petroleum Exporting Countries (OPEC) — which includes Saudi Arabia, Iraq, and Iran — to limit its production: Both OPEC and non-OPEC oil producers are hoping they’ll benefit from a coordinated production cut — that they’ll gain more revenue from higher prices than they lose in foregone output. One big question, however, is whether they can actually enforce this agreement. It’s also unclear how US fracking companies will respond to this move; we might see a big resumption in US drilling that causes prices to slump yet again. Ever since mid-2014, the world has been pumping out far more oil than anyone needs, due in part to the surprisingly resilient fracking boom in the United States and in part to slower-than-expected demand in places like China. For much of that time, OPEC sat by and did nothing as prices fell. The cartel’s most important member, Saudi Arabia, actually thought it would be better to flood the global market with cheap crude in order to drive prices down and put all those high-cost US shale companies out of business. As a result, oil prices plummeted, at one point falling below $40 per barrel. Two years later, however, Saudi officials are switching course. The country has been hurt badly by the slump in oil revenues and resulting budget hole — the government has had to burn through more than $100 billion worth of foreign exchange reserves and cut social services and public salaries, threatening stability in the kingdom. Meanwhile, it’s partly achieved its goals: US production has fallen from 9.6 million barrels per day in 2015 down to 8.6 million barrels per day this year amid the price crash.

Non-OPEC Nations Agree To Cut Oil Production But Many Questions Remain --Non-OPEC oil-producing nations struck a deal in Vienna on Saturday to cut crude output by 600,000 barrels a day, joining a pact meant to reduce a global oversupply of crude, lift prices and lend support to economies hurt by a two-year market slump. The pact, the first between the two sides in 15 years, comes two weeks after OPEC agreed to reduce its own production by 1.2 million barrels a day. If complied with, and that is a big "if" since many of the non-OPEC nations had previously expressly stated they would not actually cut but rather let oil production decline naturally, the deal would amount to a reduction of almost 2% in global oil supply and, as the WSJ notes,"would represent an unprecedented level of cooperation among oil-producing countries." Prior to today's announcement, Russia had already announced it plans to reduce production by 300,000 barrels a day next year, down from a 30-year high last month of 11.2 million barrels a day. In a surprise move, Kazakhstan pledged a modest output cut after coming under strong diplomatic pressure, delegates said, Bloomberg noted. The International Energy Agency expected the Asian nation to boost production in 2017 by 160,000 barrels a day after a giant oilfield started pumping. Still, despite the trumpeted headline, there was little detail and it remains unclear whether the non-OPEC cuts include natural declines from countries such as Mexico, or consist entirely of genuine production cuts.  The breakdown in proposed reduction by non-OPEC country is as follows:

  • Azerbaijan to cut 35,000 barrels a day
  • Bahrain to cut 12,000 barrels a day
  • Bolivia to cut 4,000 barrels a day
  • Brunei to cut 7,000 barrels a day
  • Equatorial Guinea to cut 12,000 barrels a day
  • Kazakhstan to cut 50,000 barrels a day
  • Malaysia to cut 35,000 barrels a day
  • Mexico to cut 100,000 barrels a day
  • Oman to cut 45,000 barrels a day
  • Russia to cut 300,000 barrels a day
  • Sudan to cut 4,000 barrels a day
  • South Sudan to cut 8,000 barrels a day

Indonesia, which until recently was an OPEC member (having returned in 2015) but mysteriously was suspended from the cartel during the November Vienna meeting, did not figure in the negotiations. As the WSJ notes, representatives from a number of countries met Saturday morning for a breakfast and then headed to OPEC’s headquarters in central Vienna where they hashed out an agreement.

Analysis: OPEC's global producer pact could signal oil market metamorphosis - OPEC managed to secure the support of 11 other oil nations in a joint output cut pact Saturday, highlighting a show of strength and unity across global producers that could mark a new era in cooperation aimed at bringing stability back to global oil markets. The deal may only amount to an extra 258,000 b/d to the 1.5 million b/d in cuts agreed between OPEC and Russia on November 30 in Vienna, a relatively small step, but in terms of symbolic importance and psychological shift it represents a huge leap forward. OPEC had tentatively signed off on a deal to cut production by 1.2 million b/d from October levels to around 32.5 million b/d from the start of January along with a commitment from Russia to slash output by 300,000 b/d. Russia said Saturday it would gradually reduce output, snipping 50,000-100,000 b/d in the first quarter and towards a 200,000 cut b/d by end-March. OPEC and Russia also got firm commitments on Saturday from other oil producers to share the burden and send a meaningful signal to the markets. The other key non-OPEC producers on board include Mexico, which has agreed to trim output by 100,000 b/d from its 2.1 million b/d along with Kazakhstan, which will lop off 20,000 b/d from its 1.7 million b/d output, Oman which will cut 45,000 b/d from production of around 1 million b/d and Azerbaijan which will reduce output by 35,000 b/d from its 800,000 b/d. Malaysia has also agreed to cut 20,000 b/d from its estimated production of 700,000 b/d. The remainder of the reduction comes from Bahrain, Brunei, Equatorial Guinea, Sudan and South Sudan.

Oil Surges as Saudis Eye Deeper Cuts While Non-OPEC Joins Deal --  Oil jumped to the highest since July 2015 after Saudi Arabia signaled it’s ready to cut output more than earlier agreed while non-OPEC countries including Russia pledged to pump less next year, strengthening the coordinated commitment by the world’s largest producers to tighten supply. Futures rose as much as 5.8 percent in New York and 6.6 percent in London. Saudi Energy Minister Khalid Al-Falih said Saturday the biggest exporter will “cut substantially to be below” the target agreed last month with members of the Organization of Petroleum Exporting Countries. Al-Falih’s comments followed a deal by non-OPEC countries to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years. Oil has gained almost 20 percent since OPEC announced Nov. 30 it will cut production for the first time in eight years. Saudi Arabia, which led OPEC’s decision in 2014 to pump at will, is leading efforts to take back control of the oil market. The OPEC and non-OPEC plan encompasses countries that pump 60 percent of the world’s oil, but excludes major producers such as the U.S., China, Canada, Norway and Brazil. West Texas Intermediate for January delivery rose as much as $3.01 to $54.51 a barrel on the New York Mercantile Exchange, the highest intraday level since July 6, 2015. The contract was trading at $53.84 at 10:20 a.m. in Hong Kong. Prices gained 3.5 percent over the previous two sessions to close at $51.50 a barrel on Friday. Brent for February settlement jumped as much as $3.56 to $57.89 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.93 premium to February WTI.

Saudi "Shock And Awe" Sparks Buying Panic In Crude - WTI At 17-Month Highs -- Despite Saudi Arabia pumping record amounts of crude, the energy complex has spiked 6% higher tonight after two major headlines. First, Russia and other non-OPEC nations agreed to join the OPEC pledge to reduce production; and then, in what some are calling their "whatever it takes" moment, Saudi Arabia surprised the market by saying it will cut more than previously agreed. Saudi Arabia will “cut substantially” below the target agreed last month with OPEC members, Energy Minister Khalid Al-Falih says.Al-Falih’s comments follow a deal by non-OPEC countries to join forces with the group and trim output by 558k b/d next year, the first pact between the rivals in 15 years.“This is a very powerful message that producers want to balance the market higher,” says Chris Weston, chief market strategist in Melbourne at IG Ltd. “As a statement of intent, this is about as bullish as it gets”Oil spiked up to its highest since July 2015... and perhaps most worrying for those inflation-watchers, is up 55% YoY... "This is shock and awe by Saudi Arabia," said Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London. "It shows the commitment of Riyadh to rebalance the market and should end concerns about OPEC delivering the deal." The question is - what happens next? How long can the Saudis keep jaw-boning the market higher in true central bank-inspired 'forward guidance' before 'investors' get wise to them not actually cutting production?

Oil hits highest since mid-2015 on non-OPEC cut agreement | Reuters: Oil rose to an 18-month high on Monday after OPEC and some of its rivals reached their first deal since 2001 to jointly reduce output to tackle global oversupply, though prices slipped late in the day. On Saturday, producers from outside the Organization of the Petroleum Exporting Countries, led by Russia, agreed to reduce output by 558,000 barrels per day, short of the target of 600,000 bpd but still the largest non-OPEC contribution ever. That followed OPEC's Nov. 30 deal to cut output by 1.2 million bpd for six months from Jan. 1. Top exporter Saudi Arabia will cut around 486,000 bpd to reduce the supply glut that has dogged markets for two years. Crude futures have rallied sharply, with U.S. oil futures gaining 23 percent since the middle of November as optimism that an agreement would be reached started to grow. There is some concern amongst analysts that the big move in crude is not sustainable, and that the market may have overshot given the expectation that various producers would not comply with the cuts they agreed upon. "Right now the market is kind of feeding on itself," "The market could push another $1 to $2 up to $55, and Brent could go to about $60, but at that point there are some concerns that are going to start to cap the rally." On Monday, U.S. crude futures settled up $1.33 at $52.83 a barrel, a 2.6 percent gain, though that was sharply off the day's highs. Prices continued to fall following settlement, with crude up just 98 cents to $52.48 at 3:22 p.m. ET. Brent crude futures settled up $1.36 at $55.69 per barrel, a 2.5 percent rise, after hitting a session peak of $57.89, highest since July 2015. "Overnight we had a knee-jerk rally to the highs, but the market is going to try to analyse" the non-OPEC agreement going forward, said Andrew Lebow, managing partner at Commodity Research Group. For the deal to be effective, all parties must stick to their word. Higher prices also raise the chances of other producers boosting output, particularly U.S. shale operators, where rig counts have grown steadily in recent months.

OPEC Jump Starts Oil Bull Market - The EIA released its latest Short-Term Energy Outlook, which contained some bearish predictions for oil prices.
• The agency projects WTI to average $51 per barrel and Brent to average $52 per barrel over the course of 2017, figures that are only slightly up from the previous month. The small upward revision is surprising given that the latest estimate incorporates the OPEC deal.
• But the EIA remains unimpressed by the OPEC agreement. The agency kept its price projections relatively flat, citing the possibility of OPEC cheating, as well as a possible strong response of U.S. shale.
• It should be noted, however, that the EIA figures do not reflect the non-OPEC agreement this past weekend (more on that below).
Oil prices skyrocketed yet again at the start of this week on news that non-OPEC countries agreed to cut production. Russia agreed to cut 300,000 barrels per day as expected, and a handful of other non-OPEC countries all chipped in an additional 258,000 bpd in reductions:
• Mexico -100,000 bpd
• Azerbaijan -35,000 bpd
• Oman -40,000 bpd
• Kazakhstan -20,000 bpd
• Malaysia -20,000 bpd
• And the remainder will come from Bahrain, Brunei, Equatorial Guinea, Sudan and South Sudan.
WTI and Brent surged more than 3 percent on Monday, taking prices up to $53 and $56 per barrel, respectively. Those prices are the highest in a year and a half.Saudi energy minister Khalid al-Falih said over the weekend that his country would be prepared to take production below its promised 10 million barrels per day in an effort to cut into global supplies and ensure that the deal works. "I can tell you with absolute certainty that effective Jan. 1 we’re going to cut and cut substantially to be below the level that we have committed to on Nov. 30," he told reporters after meeting with non-OPEC countries. The comments indicate a level of seriousness on behalf of Saudi Arabia not seen in more than two years – for Saudi Arabia to go beyond what it promised in Vienna is hugely positive for crude oil prices. It also suggests that despite fears over non-compliance and cheating, OPEC might actually deliver. The liquidation of short bets following the OPEC deal continues. Reuters reports that hedge funds and other money managers have established the most bullish position on record, adding 94 million barrels of long positions and cutting WTI and Brent futures and options short positions by 134 million barrels. The net-long position stood at 728 million barrels, according to the most recent data, the most bullish on record. It is not a coincidence that this has occurred at a time when oil prices have rallied more than 20 percent.

Will Russia back up leading role in OPEC, non-OPEC oil output deal with compliance? - Platts podcast - Russia is playing a key role in the agreement between OPEC and non-OPEC countries to remove up to 1.8 million b/d of crude oil from the market to accelerate rebalancing. With the first visible results of the efforts likely to be seen in February or so, Nadia Rodova, managing editor at S&P Global Platts bureau in Moscow, Rosemary Griffin and Nastassia Astrasheuskaya, Moscow-based editors for oil news, discuss how Russia may comply with its obligations, a move crucial for maintaining its new role on the global oil market.

 Oil demand to outstrip supply next year on Opec cuts – IEA -- The global oil market will move into deficit as soon as the first half of 2017 if Opec and countries outside the cartel successfully execute the global supply pact agreed in recent days. The International Energy Agency, the Paris-based global energy advisory body, said in its monthly report that the planned output cuts could lead to demand outstripping supply by as much as 600,000 barrels a day. “If Opec promptly and fully sticks to its production target, assessed at 32.7m b/d, and non-OPEC producers deliver the agreed cuts of 558,000 b/d outlined on 10 December, then the market is likely to move into deficit in the first half of 2017 by an estimated 0.6 mb/d.” The IEA’s closely watched monthly report is the first major assessment of the oil market’s supply demand balance since Opec first agreed to reduce production on November 30. Previously the agency had forecast the oil market would not move into deficit until the second half of 2017 at the earliest, with the prospect of the market remaining in surplus for a fourth straight year. The biggest global supply glut in a generation has seen oil prices half since mid-2014, but low prices have this year spurred major producers to action. The IEA said that it was not forecasting how much Opec and non-Opec countries would actually cut by, but basing its assessment on the supply targets announced. Many analysts think full compliance with the proposed curbs is unlikely, though Opec kingpin Saudi Arabia has suggested it could cut output further if necessary, signalling it is serious about speeding the drawdown in near record inventories build up in the last three years.

OPEC deal to push oil market into deficit by mid-2017: IEA -  The global oil market will move into deficit during the first half of 2017, with demand potentially outstripping supply by some 600,000 b/d, if OPEC and non-OPEC producers manage to stick to the historic output cut deal struck in recent weeks, the International Energy Agency said Tuesday. The "assumption" is based on OPEC fully committing to its new effective production target of 32.7 million b/d and key non-OPEC producers delivering agreed cuts of 558,000 b/d, the IEA said in its latest monthly oil market report. The Paris-based agency had previously predicted that global oil markets would only rebalance by the end of 2017, warning that the global oil supply glut would continue to drag on prices next year without a deal by OPEC to curb output.But OPEC's November 30 deal to cut crude output by 1.2 million b/d from January 1 and the December 10 pledge by a Russian-led group of non-OPEC producers to cut 558,000 b/d mark a "dramatic" change, the IEA said.Global oil stocks could draw by 600,000 b/d during the first half of 2017 as a result of the moves and a slightly stronger demand outlook, the IEA said citing a "provisional view."The IEA noted, however, that the pledged output cuts during the first half of 2017 may not play out as planned due to "contractual and logistical reasons." "Clearly, the next few weeks will be crucial in determining if the production cuts are being implemented and whether the recent increase in oil prices will last," the IEA said.
Noting that the OPEC cuts are planned to last for six months and that OPEC's output policy will be reviewed at the group's next OPEC ministerial meeting at the end of May, the IEA also cautioned that high-cost oil producers should not bank on a firmer oil price scenario much beyond 2017.

Oil Tumbles After Big Surprise Crude, Gasoline Build --After two weeks of huge builds at Cushing (most since 2008), expectations were for a 3rd big weekly build at Cushing (and draw in overall crude). Oil prices kneejerked lower as API reported a major build in overall crude inventories (4.68mm build vs expectations of a 1.5mm draw). While Cushing saw a smaller than expected build, Gasoline inventories also soared most since January. API:

  • Crude +4.68mm (-1.5mm exp)
  • Cushing +632k (+3.2mm exp)
  • Gasoline +3.905mm - biggest since Jan
  • Distillates +233k

Biggest gasoline build in 11 months and a big surprise crude build...

 OPEC Pumped at Record High as Cartel Agreed Output Cut - OPEC pumped at record levels in November, a top energy watchdog said Tuesday, posing a challenge to the cartel’s plans to slash oil output to support prices. The International Energy Agency also said oil markets could fall into a deficit in the first half of next year if the Organization of the Petroleum Exporting Countries and its allies acted on their pledge to reduce supplies. OPEC agreed Nov. 30 to cut output by 1.2 million barrels a day starting in January, a decision followed by a deal by other producers such as Russia to reduce their supplies by 558,000 barrels a day, at the very moment that many countries were pumping full out.As “OPEC was deciding to cut production, its crude output in November was 34.2 million barrels a day, a record high, and 300,000 barrels a day higher than in October,” the IEA said in its closely watched monthly report. The agency advises major industrialized nations on their energy policies. The increase was partly driven by the group’s kingpin Saudi Arabia, which pumped at a record 10.63 million barrels a day in November, up 70,000 barrels a day from the previous month.OPEC would now have to cut 1.7 million barrels a day to reach its ceiling of 32.5 million barrels a day, much more than the 1.2 million barrels a day initially envisioned. Saudi Arabia would also have to reduce its output by 572,000 barrels a day instead of 486,000 barrels a day. Among the other countries producing more oil, Angola increased output by 160,000 barrels a day to 1.67 million barrels a day following the return of a shut oil field. Libya added 70,000 barrels a day to 580,000 barrels a day after blocked oil ports reopened. As a result, global oil supplies in November edged up to a record high 98.2 million barrels a day, as a drop in non-OPEC output was more than offset by higher OPEC production, the Paris-based agency said.

Exclusive: Cost of pump-at-will oil policy spurred Saudi OPEC U-turn: (Reuters) - Saudi Arabia has long said it could produce as much as 12 million barrels per day (bpd) of oil if needed, but that pump-at-will claim - which would require huge capital spending to access spare capacity - has never been tested. Sources say the kingdom may have stretched its current limits by extracting a record of around 10.7 million bpd this year, which could be one reason why Riyadh pushed so hard for a global deal to cut production. Riyadh, the world's top oil exporter, felt the burn of cheap oil this year when crude was trading below $50 a barrel, as the reality of its costly war in Yemen and the task of shaking up its economy to create thousands of jobs began to sink in. With tight resources, Saudi Arabia found itself weighing the prospect of investing billions of dollars to raise oil output further if it wanted to gain more market share under a strategy adopted in 2014. Instead, cutting production amid a global glut and low prices to take the pressure off its oilfields, secure better reservoir management and save itself unnecessary expenses, seemed the perfect deal. "You invest in raising your production when prices are high, not when they are low," a Saudi-based industry source said. "Choices are tougher now. The question is, would the Saudi government with its tight budget put huge investment in raising production or put it somewhere else where it's needed more?" Oil rose as much as 6.5 percent on Monday to an 18-month high after OPEC and some of its rivals reached their first deal since 2001 to reduce output jointly. On Thursday, oil was trading above $54 a barrel.

WTI Tumbles To $51 Handle After OPEC Warns Glut May Continue Longer Than Expected --On the heels of last night's big crude build, OPEC's overnight report stating that supply cuts won’t re-balance the market until the second half of 2017 has sparked further losses in oil prices, almost erasing the entire OPEC/NOPEC/Saudi cut ramp. As Bloomberg reports, OPEC said its agreement to cut production, while speeding up the re-balancing of the global oil market, won’t result in demand exceeding supply until the second half of next year.The Dec. 10 agreement between the Organization of Petroleum Exporting Countries and non-members such as Russia and Kazakhstan “will accelerate the reduction of global inventories and bring forward the re-balancing of the oil market to the second half of 2017,” OPEC said in its monthly report Wednesday.It’s a more pessimistic outlook than that published Tuesday by the International Energy Agency, which indicated a supply deficit in the first half.Despite a commitment from those countries to lower their output in the first half by 600,000 barrels a day, the organization slightly increased forecasts for supplies from outside OPEC in 2017. It estimates that production in Russia, which pledged half of the non-OPEC cut, and in Kazakhstan, which also agreed to cut, will remain steady for the six months covered by the deal.
And the result is further downside on oil - almost erasing the entire OPEC/NOPEC rally...

Somebody Has To Go Out of Business in the Oil Market (Video) -- Economic theory suggests that ultimately somebody still needs to go out of business in the oil industry, and after 2 plus years of massive declines in prices we seem to be right back where we started with this oversupply crisis in the oil market. US Oil Production seems to have bottomed at 8.4 Million Barrels per day and is rising again, and headed for moving back above 9 Million Barrels per day in 2017. The Trump administration seems to be bullish for more US Oil Production, and I am not sure that is good longer term for the overall price in the market.

Oil Jumps On Surprise Crude Draw Despite Surge In Production  --After API's surprising large gasoline, crude build overnight, prices have been under pressure (not helped by OPEC comments).However, DOE just reported a much bigger than expected draw in crude (complete opposite of API). Cushing saw a bigger than expected build andcrude production surged. This is the 3rd biggest weekly surge in production since the peak in May 2015. Gasoline demand continues to slide. DOE:

  • Crude  -2.56mm (-1.5mm exp)
  • Cushing  +1.223mm (+1.0mm exp)
  • Gasoline +497k (+2.0mm exp)
  • Distillates -762k (+1.0mm exp)

4th weekly crude draw in a row but Cushing continues to see big builds...

US drillers pumped like crazy last week, and that's a 'major concern' for OPEC -- U.S. crude oil production surged by about 100,000 barrels a day last week, providing further evidence that American drillers are responding quickly to the higher prices that OPEC created by agreeing to curtail their own production. The Organization of Petroleum Exporting Countries reached an agreement to cut production by 1.2 million barrels a day last month and got commitments from some nonmembers to 558,000 barrels a day in reductions this past weekend. Hopes for output limits had boosted prices ahead of the agreements. American drillers were not among the nonmembers who agreed to cut. In the lower 48 states, they drove production to nearly 8.8 million barrels a day in the week through Dec. 9, according to the U.S. Energy Information Administration. That is up from about 8.7 million barrels a day the week prior. To be sure, the weekly production figures are preliminary, and big jumps are not too rare. But a steadily rising four-week average for U.S. oil output points to an overall recovery. At 8.72 million barrels a day, the average was at its highest level since June. Analysts warn that OPEC's bid to balance an oversupplied market by cutting production could backfire if it causes oil prices to rise too much. Those higher prices could cause U.S. drillers sidelined by low oil prices to start pumping more oil. The weekly jump in U.S. output is a "major concern" for OPEC members, "This is exactly what several of them had been worried about. This deal gave new life to the shale industry," he told CNBC. "OPEC's going to have its hands full with them for a time." Recent hedging activity has allowed drillers to lock in prices for future deliveries of oil at $55 a barrel, a price that makes more of their acreage profitable, The production surge follows an increase in the U.S. oil rig count of 21 rigs — the biggest one-week jump since a recovery in drilling activity began in June. Drillers have added a net 182 rigs since the count bottomed out at 316 rigs in May, according to data provided by oilfield services firm Baker Hughes.

Oil prices turn higher after drop to lowest levels in a week - Oil prices reversed course to trade higher Thursday, buoyed by renewed confidence surrounding the recent oil-producer pact to cut. Prices turned up after a report from Bloomberg said Kuwait is telling customers to expect less oil, Phil Flynn, senior market analyst at Price Futures Group, told MarketWatch. State-run Kuwait Petroleum Corp. has told customers that it will implement cuts on vessel loadings starting Jan. 1, according to Bloomberg, following the recent agreement among major oil producers to curb output at the start of the year. “Despite skepticism surrounding the historic OPEC/non-OPEC accord, there are signs early on that OPEC compliance may start at a record high,” said Flynn. Tyler Richey, co-editor at The 7:00’s report, meanwhile, linked oil’s turnaround to the day’s expiration of crude-oil options. January West Texas Intermediate crude rose 34 cents, or 0.7%, to $51.38 a barrel on the New York Mercantile Exchange. February Brent crude tacked on 49 cents, or 0.9%, to $54.39 a barrel on the ICE Futures exchange in London. Prices had been set to finish at their lowest levels in a week as the Federal Reserve’s decision to raise interest rates for the first time in 12 months strengthened the dollar and energy traders fretted over recent data showing that the Organization of the Petroleum Exporting Countries’ output has continued to hit record highs.The Fed “not only raised interest rates but increased their outlook for rate hikes in the new year,” said Flynn. Fed Chairwoman “Janet Yellen and her band of Fed elves decided to send a message that the economy was strong enough to get three rate hikes in the new year.” “That caused a big drop across the commodity complex such as gold and silver and ultimately, oil,” he said

Oil complex little changed as US Dollar Index hits 14-year high -  Oil futures were nearly unchanged Thursday after technical support helped lift prices from session lows, as the complex came under pressure from the US dollar rallying to a 14-year high against a basket of major currencies. NYMEX January crude settled down 14 cents to $50.90/b. ICE February Brent settled 12 cents higher at $54.02/b. NYMEX January ULSD settled 15 points lower at $1.6420/gal. NYMEX January RBOB settled 90 points higher at $1.5421/gal. The US Dollar Index jumped Wednesday afternoon when the Federal Reserve said it would raise interest rates for only the second time since 2006.That move was widely anticipated, but what seemed to catch the market by surprise was Fed projections suggesting three rate increases next year, up from two in September, Confluence Investment Management said in a note. "Adding to the hawkish tone was a warning of sorts from Chair [Janet] Yellen who, in the press conference, downplayed the need for fiscal stimulus, a key element of the Trump platform," Confluence said. The US dollar index reached 103.56 Thursday, its highest level since December 2002. A stronger dollar makes crude and fuel imports more expensive for holders of other currencies, putting downward pressure on oil prices. NYMEX January crude fell as low as $49.95/b, while ICE February Brent sunk to $53.15/b at one point, which could have invited some buying interest from traders. "From now until the end of the year, without a lot on the agenda, I don't think prices will move too far from here,"

 Kuwait committed to OPEC cuts despite restart for neutral zone: oil minister - Oil | Platts News Article & Story: Kuwait is committed to cutting output by 131,000 b/d in January in line with its commitments under OPEC's output reduction deal, oil minister Essam al-Marzouq said Thursday. That was despite Kuwait's state-owned oil company making preparations to restart around 500,000 b/d of production from the Partitioned Neutral Zone (PNZ) shared with Saudi Arabia, which has been closed for nearly two years. "We started the primary heating and cleaning of operational equipment, pending a final decision from Kuwait's leadership," Marzouqi said, according to comments reported by state-run Kuna news agency. "Any increase in production from certain areas will be balanced by equal reductions in other regions", the minister said.The two countries agreed to restart production from the 300,000 b/d offshore Khafji oil field at the end of March. Some analysts had said resuming production from the neutral zone, which has a combined output of 500,000 b/d, could temper the increased oil prices seen after OPEC reached its output reduction deal at the end of November. "One thing to consider is that one of the reasons why Saudi and Kuwaiti output ramped up so high is they were compensating for the loss of the neutral zone. So, its return may represent a smaller net addition than the gross addition of 200,000 b/d or so", said Michael Cohen, an analyst with Barclays Capital before the announcement from the minister. That followed a December 8 visit by Saudi King Salman bin Abdul Aziz to Kuwait, which was widely thought to have smoothed over the political differences between the neighbors which had caused the fields to be closed.

Aramco Keeps Building Oil Rigs Even as Saudis Agree to Pump Less  - Saudi Arabian Oil Co. signed contracts with U.S. companies to build dozens of oil rigs over 10 years as the kingdom builds for the long-term future of its most prized industry even while coordinating with other producers to cut output for six months to stabilize crude. The Saudi state producer known as Saudi Aramco signed a contract with Nabors Industries Ltd. to form an equally shared joint venture to build 50 onshore rigs over a decade, its Chief Executive Officer Amin Nasser said at an energy event in the eastern city of Dhahran. Saudi Aramco also signed a deal for a similar venture with Rowan construct 20 offshore rigs over 10 years, he said.  Saudi Arabia was the main driver behind the agreement it reached with fellow OPEC members and with other producers including Russia to reduce oil production for six months from January 1 to eliminate a global glut and shore up prices. The world’s biggest oil exporter agreed to trim its output by 486,000 barrels a day to a level of 10.058 million barrels a day. Saudi Energy Minister Khalid al-Falih indicated Saturday that the country was willing to cut further and pump less than a symbolically important 10 million barrels a day. Saudi Aramco pumps all of Saudi Arabia’s crude oil. The government plans to transform Aramco from an oil and gas company into an industrial conglomerate as part of efforts to prepare the kingdom’s economy for a post-oil era, Deputy Crown Prince Mohammed bin Salman told Bloomberg in March. The plan includes selling a stake in the company and transforming its ownership to the nation’s sovereign wealth fund.

 The Oil Mystery Behind Saudi Arabia's Production Cut -- Saudi Arabia surprised the world by helping to engineer an unexpectedly strong agreement from OPEC members to cut production by 1.2 million barrels per day, followed by additional cuts from non-OPEC members. While the two agreements incorporate cuts from a wide range of oil producers, Saudi Arabia will do much of the heavy lifting, cutting nearly 500,000 barrels per day and even promising to go further than that should the markets warrant steeper reductions.Depending on one’s perspective, Saudi Arabia demonstrated its diplomatic prowess and made OPEC relevant again, succeeding in talking up oil prices without sacrificing much. After all, Saudi Arabia often lowers production in winter months. Other analysts look at it a different way – Riyadh was actually pretty desperate for higher oil prices, given the toll that the two-year bust has taken on the country’s economy. That led Saudi Arabia to shoulder most of the burden of adjustment, achieving only small concessions from other OPEC members, most notably Iran. Riyadh was the big loser of the deal, the thinking goes, but ultimately had no choice as the government needed higher oil prices. There are arguments to made for both sides, but then there is a third possibility: Saudi Arabia was motivated to pullback because it was actually leaning on its oilfields too hard this year when it pushed output up to 10.7 million barrels per day, an output level that might have strained the reservoirs of some of its largest fields. Producing too aggressively can ultimately damage the long-term recovery of oil reserves. Reuters reports in an exclusive report that Saudi Aramco could have been pushing its oil fields to the limit this year, and had little choice to but to climb down from record high output levels. Saudi Arabia has long maintained that it could ratchet production up to 12 mb/d or more if it wanted to, but such a massive rate of production has never actually been proven or even tested. Reuters raises the possibility that Saudi Arabia might not actually have the ability to go that high. A source told the news organization that Saudi Aramco might only be able to produce at 11.4 mb/d, and going beyond that level would require billions of dollars in new investment in several years of development.

What OPEC Cut? Iraq Is Boosting Its January Oil Exports By 7% – In an "unexpected" twist, the WSJ reports that instead of cutting its crude production by 4% as it "promised" it would do in the Vienna November 30 meeting, Iraq instead plans to increase crude-oil exports in January, according to government records, immediately raising questions about its commitment to the OPEC’s landmark production agreement. The WSJ reports that Iraq’s national oil company, the State Organization for Marketing of Oil, or SOMO, had plans as of December 8, nine days after agreeing to cut production, to instead increase deliveries of its Basra oil grades by about 7% to 3.53 million barrels a day compared with October levels, according to a detailed oil-shipment program viewed by The Wall Street Journal. Those oil shipments represent about 85% of Iraq’s exports. The list of planned tanker loadings has been circulated among potential buyers so they can gauge its availability. When asked by the WSJ to explain this curious discrepancy, SOMO chief Falah al-Amri declined to comment about the company’s January export levels. Iraq’s oil minister, Jabbar Ali al-Luaibi, has said he would instruct SOMO to act on the OPEC output-cut agreement. As a reminder, Iraq agreed to cut its output by 210,000 barrels a day from October levels of 4.561 million barrels a day. The country’s oil officials were among the most reluctant to go along, disputing OPEC’s statistics and threatening to pull out of the agreement until the last minute because it needs the oil revenue to fight its war against Islamic State. Iraq says it has increased its output to 4.8 million barrels a day in 2016, from less than 3 million barrels a day a few years ago, using Western and Chinese oil companies to tap into its deep crude reserves. Realizing that the oil cut charade was in jeopardy, on Wednesday, several hours after a Wall Street Journal article on Iraq’s oil-export plans, OPEC Secretary General Mohammad Barkindo said he planned to ask members in writing on Thursday to announce their future oil-export programs. While OPEC asks members to disclose their production, it would be unprecedented for the cartel to ask countries to announce the levels they export.

OilPrice Intelligence Report: Oil Rises As Markets Regain Faith In OPEC Deal - Oil prices are ending the week largely where they started, with the strong gains from the non-OPEC deal having worn off as the week progressed. The non-OPEC deal strengthened credibility in the collective cuts from OPEC, with an expected 1.8 million barrels per day slated to be pulled off the market in early 2017. However, on Wednesday, the U.S. Federal Reserve poured cold water on the party with its interest rate hike – the strong dollar did a number on commodity prices. Oil prices closed the week in the green as markets regained faith in OPEC’s compliance to the deal.   A key oil export terminal as well as a pipeline in Libya are about to come back online, bringing disrupted oil production back onto the market. Libya has already doubled production from 300,000 to 600,000 bpd since September. Now more capacity is about to come online as the political situation improves. Separately, the Nigerian government signed a deal with ExxonMobil, Royal Dutch Shell, Eni and Chevron to resolve a dispute over back payments of $5 billion on joint ventures. The deal could pave the way to more investment and lead to a resurgence in Nigeria’s output, which is down to 1.8 mb/d from a peak last year of 2.2 mb/d. If the two OPEC countries, Libya and Nigeria, restore capacity, it could threaten the efficacy of the OPEC deal.   In its latest Oil Market Report, the IEA said that global oil demand growth will slow to just 1.3 mb/d next year, down from 1.4 mb/d this year and 1.9 mb/d in 2015. The growth rate will be the smallest since 2014 and it poses a threat to a market on the mend. Other analysts put the 2017 growth rate much lower – Citigroup thinks demand will only expand by an unimpressive 1.1 mb/d.   Goldman Sachs issued a revised oil price forecast for 2017 to reflect the effects of the non-OPEC agreement and greater confidence in the compliance of OPEC members to their historic deal. The investment banks expects WTI to average $57.50 in the second quarter of next year, up from its previous estimate of $55. Brent will average $59 instead of $56.50. Goldman is assuming an 84 percent compliance rate from OPEC, which will lead to cuts of 1.6 mb/d from the cartel instead of the announced 1.8 mb/d. While U.S. oil inventories are slowly coming down, they remain near record highs at the key oil hub of Cushing, OK. Part of that is a seasonal phenomenon as Gulf Coast refiners put extra product in storage in Cushing for tax reasons. But also refiners process less in winter months. Another reasons is that production is booming in Texas, keeping pressure on storage tanks. The inventories are pushing the market into a deeper contango than what has been seen in recent weeks, and also putting pressure on the WTI-Brent differential.

The U.S. Oil Rig Count Continues Its Rapid Climb  - Oilfield services provider Baker Hughes reported a 13-rig increase this week to the number of oil and gas rigs active in the United States, bringing the total number of active oil and gas rigs to 637, just 72 shy of the count this time last year. Last week, the number of oil and gas rigs in operation jumped by 27, with oil rigs accounting for 21 of the 27. Last week’s data revealed that the U.S. had put more oil rigs into play than in any time since July 2015.  The big winner this week was oil yet again, accounting for 12 of the 13 new rigs.While oil-dependent OPEC members find themselves in a precarious position over the balance between not enough and too much with regards to oil prices, the United States has steadily increased the number of active drilling rigs, most notably since the OPEC agreement on November 30 that saw OPEC agree to cut back production to 32.5 million bpd. When it comes to U.S. oil, there is no hotter basin right now than the Permian. Since September 23rd, the Permian Basin has put online 57 oil rigs—a figure that represents more new oil rigs than all the other basins combined. Still, the number of active oil rigs in the Permian, while gaining momentum, is still a far cry from the 550+ oil rigs seen in that basin during most of 2014. WTI was trading up 1.55 percent at $51.69 half hour before the data release, with Brent at $55.05, up 1.91 percent. Oil prices were largely unchanged moments after the release, with unsettled markets still working through how much trust to place on OPEC member promises and non-OPEC collaborations, along with API and EIA data regarding inventory that has come under increased scrutiny as of late.

Goldman Sachs raises 2017 oil price forecast on compliance rethink -  Goldman Sachs raised Friday its oil price forecasts for 2017 after reassessing the likelihood that key global oil producers, led by Saudi Arabia, will stick to output cut pledges under OPEC's efforts to clear the oil market glut. The bank raised its Q2 2017 WTI price forecast to $57.5/b from $55/b and said it sees strong compliance with the announced output cuts pushing average WTI prices to $55/b in the second half of the year, $5/b above previous estimates. The WTI forecast for Q1 2017 was unchanged at $55/b. After analyzing Saudi Arabia's fiscal revenue outlook for 2017, the bank said it sees the motivation for an average 84% compliance with the announced collective OPEC and non-OPEC production cuts which it estimates at a total 1.6 million b/d. "Ultimately, our work on Saudi Arabia's fiscal balance suggests that the kingdom has a strong incentive to cut production to achieve a normalization of inventories, even if it requires a larger unilateral cut, consistent with comments last weekend by the energy minister," Goldman said in a note.Saudi energy minister Khalid al-Falih on Saturday said his country was prepared to slash production below 10 million b/d, after having previously agreed to cut down to 10.058 million b/d. Goldman said it has raised its Brent oil price forecast from $56.5/b to $59/b in the second quarter of next year and expects Brent to average $57.4/b in 2017, a $3.4/b increase from previous estimates. The update comes just five days after Goldman had stuck with its oil price forecasts despite additional output cut pledges by non-OPEC producers over the weekend. At the time, the bank expected compliance with the targets to be low, with an average 1 million b/d impact on global oil production in the first half of 2017. Bank of America and Barclays on Monday also maintained their oil price forecasts citing concerns over compliance and the potential for a rebound in US tight oil production in the second half of the year. Goldman warned Friday that returning crude volumes from Libya and Nigeria in addition to greater dollar strength could also limit the near-term upside for oil prices.

Oil rises on Goldman forecast, signs producers complying with cuts | Reuters: Oil rose on Friday, edging closer to new 17-month highs, after Goldman Sachs boosted its price forecast for 2017 and producers showed signs of adhering to a global deal to reduce output. Brent futures rose $1.19, or 2.2 percent, to settle at $55.21 a barrel, while U.S. West Texas Intermediate crude rose $1, or 2 percent, to settle at $51.90 per barrel. That put both contracts on track to rise for a fourth week in the last five, with Brent up around 23 percent during that time and U.S. crude up about 20 percent. The premium of the Brent front-month over the same U.S. contract closed at $2.26 a barrel, its highest since the end of August. "We're up today because Goldman Sachs bumped up its oil estimates and the Russians said their oil companies would reduce output," said Phil Davis, managing partner of venture capital fund PSW Investments in Woodland Park, New Jersey. The Organization of the Petroleum Exporting Countries agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1, its first such deal since 2008. Russia and other non-OPEC producers plan to cut about half as much. Those deals, clinched over the past two weeks, have boosted expectations that a two-year supply overhang will clear soon and prices remain near highs last seen in July 2015. Russia said on Friday that all of the country's oil companies, including top producer Rosneft, had agreed to reduce output. Other oil producers including Kuwait and Saudi Arabia have notified customers that they will cut from January.

Sovereign funds pulled cash from world markets for third year running (Reuters) - Sovereign investors are set to pull their petrodollars from global stock and bond markets for the third year running in 2016, a process that is unlikely to be reversed next year despite the rebound in oil prices.Sovereign wealth funds (SWFs) redeemed $38 billion from third-party asset managers in the first three quarters of 2016, data from research firm eVestment showed, extending their selling into a ninth consecutive quarter.This followed redemptions of $44 billion in 2015 and $10.7 billion in 2014, as low oil prices forced countries reliant on oil exports, such as Russia, Saudi Arabia and Norway, to raid their savings.Years of oil windfalls brought money into financial markets, boosting asset prices through so-called petrodollar recycling.But SWF flows turned negative in 2014 for the first time in 18 years after oil prices plunged from around $115 a barrel in the summer of 2014 to a low of $27 a barrel in January 2016. ( has now risen to around $57 a barrel thanks to a deal between producers to cut output.But Peter Laurelli, global head of research at eVestment, which collates data from 4,400 firms managing money on behalf of institutional investors, did not think this would be enough to trigger an immediate turnaround in flows."Oil prices have stabilised at half of what they were, so we need to see a meaningful rise before that filters back," he said.

Mosul Dam collapse 'will be worse than a nuclear bomb' - News from Al Jazeera: As Iraqi forces continue their military operation to take Mosul from the Islamic State of Iraq and the Levant (ISIL, also known as ISIS), another equally important battle to save the Mosul Dam, located 60km north of Mosul, is under way.After six months of frantic security and logistical preparations, an Italian company has kicked off the repair works to beef up the dam, under the protection of five hundred Italian soldiers and Kurdish Peshmerga forces.The Italian company,TREVI, will have about 18 months to prevent the foundations of the dam from plunging deeper underground, averting an impending catastrophe. Experts warn that if the dam collapses, up to 11.11 billion cubic-metres of water known as Lake Dahuk, will submerge Mosul and create an inundation that will affect the lives of millions of people living along the banks of the Tigris river. "I don't know if it's a race against time, but we have the know-how and the technology to make the dam safe for the time-being," said a company source.Under a $300m contract, funded by the World Bank, the Italian company is doing maintenance and repair works, in addition to consolidating the foundations of the dam with injections of a cement mix, in a process called grouting. The engineering company is also training local staff to use its technology. But scientists say the repairs are just a temporary solution and that the Iraqi population should get ready to evacuate the Tigris' banks. "No matter how much grouting and maintenance the company will do, it may expand the life span of the dam, but it is just going to delay the disaster," said Nadhir al-Ansari, professor of water resources and environmental engineering at Lulea University in Sweden and a published expert on the Mosul Dam.

Obama Halts Some Arms Sales To Saudi Arabia, Following Alleged "War Crimes" In Yemen --Whether it is retaliation for dumping Treasuries, blackmail to keep to OPEC production quotas, or - more likely - being implicated in war crimes for supporting a Saudi-led air campaign in Yemen that has killed thousands of civilians, President Obama has decided that after shipping billions in weapons to Saudi Arabia, Reuters reports it will halt a planned arms sale to The Kingdom. As we detailed previously, citing government documents and the accounts of current and former officials, Reuters reveals that while the Obama administration and the Pentagon rail against Russian bombing in Syria, State Department officials have been skeptical - in private of course - of the Saudi military's ability to target Houthi militants without killing civilians and destroying "critical infrastructure" needed for Yemen to recover. The findings emerge days after an air strike on a wake in Yemen on Saturday that killed more than 140 people renewed focus on the heavy civilian toll of the conflict. The Saudi-led coalition denied responsibility, but the attack drew the strongest rebuke yet from Washington, which said it would review its support for the campaign to "better align with U.S. principles, values and interests." What Reuters' report reveals is that instead of Russia being the war criminal, as the US has now alleged, the real aggressor would be Saudi Arabia, and the US - whose actions have enabled Saudi war crimes - would be a "co-belligerent" participant. Of course there is also the fact that the Saudis have been dumping Treasuries... Saudi Arabia also continued to sell its TSY holdings, and in August its stated holdings (which again have to be adjusted for MTM), dropped from $93Bn to $89Bn, the lowest since the summer of 2014. This was the 8th consecutive month of Treasury sales by the Kingdom, which held $124 billion in TSYs in January, and has since sold nearly 30% of its US paper holdings.

Thousands flee Aleppo onslaught as battle reaches climax | Reuters: Thousands of people fled the front lines of fighting in Aleppo on Tuesday as the Syrian military hammered the final pocket of rebel resistance and Russia rejected an immediate ceasefire. The rout of rebels from their ever-shrinking territory in Aleppo sparked a mass flight of civilians and insurgents in bitter weather, a crisis the United Nations said was a "complete meltdown of humanity" with civilians being shot dead. The U.N. human rights office said it had reports of abuses, including that the army and allied Iraqi militiamen summarily killed at least 82 civilians in captured districts of the city, once a flourishing economic center with renowned ancient sites. "The reports we had are of people being shot in the street trying to flee and shot in their homes," said Rupert Colville, spokesman for the U.N. office. "There could be many more." Behind those fleeing was a wasteland of flattened buildings, concrete rubble and bullet-pocked walls, where tens of thousands had lived until recent days under intense bombardment even after medical and rescue services had collapsed. Colville said the rebel-held area was "a hellish corner" of less than a square kilometer, adding its capture was imminent. The Syrian army and its allies are in the "last moments before declaring victory" in Aleppo, a Syrian military source said, after rebel defences collapsed, leaving insurgents in a tiny, heavily bombarded pocket of ground.

There is more than one truth to tell in the awful story of Aleppo - Western politicians, “experts” and journalists are going to have to reboot their stories over the next few days now that Bashar al-Assad’s army has retaken control of eastern Aleppo. We’re going to find out if the 250,000 civilians “trapped” in the city were indeed that numerous. We’re going to hear far more about why they were not able to leave when the Syrian government and Russian air force staged their ferocious bombardment of the eastern part of the city.  And we’re going to learn a lot more about the “rebels” whom we in the West – the US, Britain and our head-chopping mates in the Gulf – have been supporting. They did, after all, include al-Qaeda (alias Jabhat al-Nusra, alias Jabhat Fateh al-Sham), the “folk” – as George W Bush called them – who committed the crimes against humanity in New York, Washington and Pennsylvania on 11 September 2001. Remember the War on Terror? Remember the “pure evil” of al-Qaeda. Remember all the warnings from our beloved security services in the UK about how al-Qaeda can still strike terror in London? Not when the rebels, including al-Qaeda, were bravely defending east Aleppo, we didn’t – because a powerful tale of heroism, democracy and suffering was being woven for us, a narrative of good guys versus bad guys as explosive and dishonest as “weapons of mass destruction”. Back in the days of Saddam Hussein – when a few of us argued that the illegal invasion of Iraq would lead to catastrophe and untold suffering, and that Tony Blair and George Bush were taking us down the path to perdition – it was incumbent upon us, always, to profess our repugnance of Saddam and his regime. We had to remind readers, constantly, that Saddam was one of the Triple Pillars of the Axis of Evil.  So here goes the usual mantra again, which we must repeat ad nauseam to avoid the usual hate mail and abuse that will today be cast at anyone veering away from the approved and deeply flawed version of the Syrian tragedy.

Battle for Aleppo: The final goodbyes from a city under siege - As the battle for Aleppo heads towards a conclusion, people trapped in a small area of east Aleppo still held by the rebels have been sending harrowing messages with their final goodbyes.  As the bombing by Syrian government forces intensified, the calls for help from those trapped in rebel-territory have grown more desperate.  Lina, an activist tweeting last night, makes this desperate plea: "Humans all over the world, don't sleep! You can do something, protest now! Stop the genocide". She posted this powerful farewell video message: Others appear to have given up hope, posting messages as bombs fall around them.  One man says it is the last video he will post. "We are tired of talking, we are tired of speeches. No one listens, no one responds. Here comes the barrel bomb. This is the video's ending."  As he signs off, a bomb explodes nearby. And waking up on Tuesday morning, still alive, Monther Etaky writes: "I still here [sic], facing the genocide with my special friends without any comments from the world."  Bana Alabed, the seven-year-old girl who has been tweeting from an account managed by her mother, wrote a heart-breaking message on Tuesday morning.  "I am talking to the world now live from East #Aleppo. This is my last moment to either live or die.  Earlier, she tweeted "Final message. People are dying since last night. I am very surprised I am tweeting right now and still alive." And a few hours later: "My dad is injured now. I am crying."  "It's hell", says a tweet by the White Helmets - a Syrian volunteer group which has been working in East Aleppo - in a harrowing message from late on Monday. "...All streets & destroyed buildings are full with dead bodies". Descriptions of the situation in Aleppo all paint Armageddon-like scenes. Abdul Kafi Alhamado, an English teacher inside one of the remaining rebel-held areas of Aleppo said it felt like "Doomsday" as government forces advanced."Bombs are everywhere. People are running, they don't know where, just running. People are injured in the streets. No-one can go to help them," he told BBC News."Some people are under the rubble, no-one can help them. They just leave them under the rubble until they die - these houses as their graves," he said.

Dramatic Drone Footage Shows East Aleppo Devastation As Air Strikes, Shelling Return --Drone footage has revealed extreme devastation in eastern Aleppo, once Syria's largest city and thriving economic center with its renowned ancient sites, with crumbling homes and deserted streets replacing a once-lively area of the city. The video from Ruptly provides an up-close look at the destruction left behind by the militants in Aleppo neighborhoods after they were pushed out by the Syrian Army in heavy clashes. Collapsed buildings and piles of rubble dominate the landscape, with just a few lone vehicles cruising the empty streets. Buildings that were once home to dozens of apartments have been left windowless and deserted. Meanwhile, air strikes and shelling returned to Aleppo following yesterday's apparent victory of the Syrian regime over the rebel-held territory, stalling the planned evacuation of rebel districts in Aleppo, according to Reuters adds. A ceasefire brokered on Tuesday by Russia, Assad's most powerful ally, and Turkey was intended to end years of fighting in the city, giving the Syrian leader his biggest victory in more than five years of war. But air strikes, shelling and gunfire erupted on Wednesday morning and a monitoring group said the truce appeared to have collapsed.

 Fall of Aleppo: "Call the world and tell them to stop the massacre": I escaped Aleppo three months ago. Now, all I feel is sadness and confusion. I'm sitting here safely in Turkey doing nothing while my friends and family are still stranded in Aleppo. They're updating us with what is going on and all I can see is that it's clear they are going to die. They're counting down the hours until they are executed. There are 70,000 people trapped there with no medicine and no food. I feel so guilty that I escaped and they didn't. Our call to the rest of the world is please create a safe road for them to leave. They were told they could leave via western Aleppo but are frightened that the men and boys will be detained or forcibly recruited by the regime. As I write, they are being executed. We just heard that a hospital has been taken and all the doctors and staff were executed. The situation before I left was desperate — checkpoints had sprung up around the city. I’d been told my home was too dangerous to stay in so my mum and I were staying at our relatives’ house — it was empty because they had already fled to Turkey. I was told that apart from going to pick up my university documents and my passport, I must not leave the house. I had lived in Aleppo my whole life but suddenly it no longer felt like home.In west Aleppo, even during most of the war, life was relatively normal. Yes, there would be power cuts or shortages in water but never for long. I would still get up early every day to continue my biotechnology engineering degree. At my university itself though, it felt like there was a revolution inside reflecting that of the outside: there were security guards all over the place, checking your names against the list of those suspected of being involved in activities against the regime. There was always a fear my name was on it, but luckily they waved me through. But when my brother went to work in a field hospital in east Aleppo, things started to change. It wasn’t safe anymore. The government began to tail him and tried to arrest him. He was put on a wanted list. That meant the whole family was in danger: any of us could have been taken by the regime. Then it became too dangerous for us to stay so we decided to flee to Turkey.

Islamic State Fighters Take Control of Syrian Oil Fields | Rigzone- Islamic State fighters have taken control of the Jahar and Jazl oil fields, as well as the al-Mohr area and the al-Mohr company, according to a report from the Syrian Observatory for Human Rights (SOHR). The development follows news from SOHR on Dec. 8 that unidentified warplanes had bombed areas within the al-Omar oilfield in the countryside of Deir Ezzor, which resulted in the outbreak of fire in the field. Syria’s latest oil and gas field clashes follow a spate of attacks throughout the last few years. As of July 2014, Syria’s oil sector was said to have lost around $23.5 billion due to damage to facilities and pipelines, looting and production delays, with Islamist militants and other rebel groups in control of most of Syria’s oil producing regions. IS’ approach in the country, which has revolved around isolating and controlling energy facilities in order to generate revenue, has differed from its strategy in places like Libya, where it has tried to ensure the country remains a failed state and consequently vulnerable to further exploitation, Ruth Lux, a senior consultant within JLT’s credit, political & security risk division consulting team, told Rigzone. The Syrian civil war began in early 2011 as part of the Arab Spring protests, which originated in Tunisia in December 2010 and quickly spread to neighbouring countries such as Egypt, Libya and Yemen. Following the war, Syria’s production figures dipped consecutively, every year, from 2011 to record lows in 2015, according to BP’s latest statistical review of world energy. The country's oil output hit 27,000 barrels per day last year, down from 2010 pre-war levels of 385,000 barrels per day, and its gas production stood at 4.3 billion cubic meters in 2015, compared to 8 billion cubic meters in 2010.

Congresswoman Says US Is Arming ISIS, Introduces Bill To Stop It -- Democratic Congresswoman Tulsi Gabbard has broken free of the corporate media’s narrative by accusing the United States of funding and arming terror groups al-Qaeda and ISIS. “If you or I gave money, weapons or support to al-Qaeda or ISIS, we would be thrown in jail,” Gabbard tweeted on Saturday. Most importantly, however, is her introduction of the “Stop Arming Terrorists Act,” which she presented last Thursday. In her presentation of the bill, Gabbard cited prominent publications such as the New York Times and the Wall Street Journal to show that the rebels the U.S. is supporting in Syria are aligned with al-Nusra (which is essentially al-Qaeda in Syria).  She is co-sponsoring the bill with Rep. Thomas Massie, who says the bill “would prohibit the U.S. government from using American taxpayer dollars to provide funding, weapons, training, and intelligence support to terrorist groups like al-Qaeda and ISIS, or to countries who are providing direct or indirect support to those same groups.” These concerns are not conjectures — they can be verified by none other than suspected war criminal Tony Blair. A think tank founded by the former U.K. Prime Minister released a report in 2015 that concluded it was ultimately pointless to make a distinction between the various rebel groups on the ground since the majority of these groups share ISIS’s core belief system (and would impose Sharia law if they came into power).

Iran Warns Of "World War, The Destruction Of Israel", If Trump Tears Up Nuclear Pact --Ten days ago, we reported that as a result of Obama's vow to extend the Iran Sanctions Act for another 10 years, Iran threatened to retaliate, saying it violated last year's deal with six major powers that curbed its nuclear program.While US officials said the ISA's renewal would not infringe on Obama's landmark nuclear agreement (which may or may not be voided by Trump), and under which Iran agreed to limit its sensitive atomic activity in return for the lifting of international financial sanctions that harmed its oil-based economy, senior Iranian officials took odds with that view.. To be sure, that was merely jawboning by Iran, which has far less leverage and far more to lose if it antagonizes Washington and provokes the US into reimposing sanctions upon the Gulf nation, amounting to the tune of over 1 million barrels per day in foregone oil exports that would be taken offline, should the US impose similar sanctions as those which took the country's crude export production largely offline in the 2013-2015 timeframe. It is also the lesser of Iran's worries: a far bigger concern is whether Trump will tear up Obama's landmark nuclear agreement. This was confirmed today when the Iranian defense minister warned that Donald Trump could trigger a world war and the 'destruction' of Israel and small Gulf Arab states if he provokes the Middle Eastern power.  The warning comes as Trump is signalling he may follow through with his campaign promise to pull out of the nuclear pact.  This has led to panic among US allies in the Gulf, Iranian Defense Minister Hossein Dehghan has claimed quoted by the Mail."Even though a businessman, the assistants that ... (Trump) has chosen may map a different path for him, and this has led to unease, particularly among Persian Gulf countries,' Dehghan told a security conference in Tehran, according to Iran's Mehr news agency.'Considering Trump's character and that he measures the cost of everything in dollars, it does not seem likely that he would take strong action against our country,' he said.

Trump’s Foreign-Policy Appointees Are Set to Provoke War With Iran -- The trio of generals who have so far joined Donald Trump’s national security team—Mike Flynn as national security adviser, James Mattis as secretary of defense, and John Kelly as secretary of homeland security—along with Representative Mike Pompeo as director of the CIA, have unnerved official Washington and leaders around the world. From North Korea to the South China Sea, from the Mexican border to Syria, they’re a cohort likely both to facilitate and to encourage Trump’s instinct for confrontation and bellicosity, and their out-of-the-mainstream approach, even extremism, in military and intelligence affairs is unprecedented in recent US history. And it’s likely that the first target of Trump’s generals and the CIA will be Iran. “Ingredients are falling, tragically, into place for a possible war with Iran,” wrote Paul Pillar, a former CIA analyst who retired in 2005 as chief of the National Intelligence Council’s Near East section, in The National Interest.  Just as the administration of George W. Bush came into office fixated on Iraq—which was the subject of the very first meeting of W.’s National Security Council on January 21, 2001—the Trump administration is likely to direct its fire against Iran. At the very least, its animosity toward Iran could lead to an escalating military confrontation and an aggressive push for regime change, while at worst it could trigger a shooting war between the two countries that could dwarf the wars in Iraq and Afghanistan in both scope and intensity.

Iran Lashes Out At US, Will Build Nuclear-Powered Boats In Retaliation To US Deal "Violation" -- Until now, Iran's angry outbursts in response to alleged breaches of Obama's nuclear deal as well as extensions of the Iran sanctions, have been relegated to verbal outbursts, culminating most recently with the threat by Iran's defense minister Denghan that should Trump end Obama's landmark arrangement with Iran, it would result in a war which "would mean the destruction of the Zionist regime (Israel) ... and will engulf the whole region and could lead to a world war."Overnight, however, Iran moved beyond the merely verbal and in its first concrete response to last month's decision by the US Congress to extend legislation making it easier for Washington to reimpose sanctions on Tehran, Iran's President Hassan Rouhani ordered scientists from the national nuclear agency, and specifically Ali Akbar Salehi, the head of the Atomic Energy Organization of Iran, to prepare a project for development of both reactors for maritime use and fuel production for this purpose in three months."The United States has not fully delivered its commitments in the Joint Comprehensive Plan of Action (the nuclear deal)," Rouhani wrote in a letter published by state news agency IRNA. "With regards to recent (U.S. congress) legislation to extend the Iran Sanctions Act, I order the Atomic Energy Organization of Iran to ... plan the design and construction of a nuclear propeller to be used in marine transportation to be used in marine transportation."Rouhani described the technology as a "nuclear propeller to be used in marine transportation," but did not say whether that meant just ships or possibly also submarines. Iran said in 2012 that it was working on its first nuclear-powered sub.

Netanyahu says Israel 'mightier' as first F-35 fighter jets arrive | Reuters: Israel on Monday became the first country after the United States to receive the U.S.-built F-35 stealth jet which will increase its ability to attack distant targets, including Iran. The much-hyped arrival of the first two fighter jets was overshadowed by U.S. President-elect Donald Trump's tweet that Lockheed Martin's whole F-35 project was too expensive, and the delivery was delayed for hours by bad weather preventing their take-off from Italy. The squadron is expected to be the first operational outside the United States. The planes are the first of 50, costing around $100 million each. "Our long arm has now become longer and mightier," said Prime Minister Benjamin Netanyahu at the Nevatim air base in the southern Negev desert. U.S. Defense Secretary Ash Carter, also attending the ceremony which was delayed until after dark, said the planes were critical to maintaining Israel's military edge in the region. A U.S. squadron of the planes, which have suffered delays and cost overruns, became operational in August. The F-35 program is the Pentagon's largest weapons project.

 Don't Tell The Saudis, But China Just Ramped Crude Output By Most In 3 Years --China’s oil output is rebounding. Production in the world’s second-biggest buyer rose from a seven-year low last month as OPEC (and NOPEC) negotiated with each other over an output cut deal. As Bloomberg data shows, November saw the biggest rise in Chinese crude production since October 2013. Chart: Bloomberg  And refining is soaring...  Chart: Bloomberg  All ready to be exported?   Did someone forget to invite China to the 'deal' talks?

China Halts Trading in Key Bond Futures as Panicky Investors Sell Securities - WSJ—Chinese bond yields soared and authorities halted trading in some futures contracts for the first time on Thursday, as a global bond-market selloff worsened a day after the Federal Reserve signaled a quicker pace of interest-rate increases next year. The Chinese 10-year government bond yield, which rises when prices fall, hit a 16-month high of 3.4%, extending selling that began in late November and accelerated this week amid slowing growth, outflows of capital and concerns over asset bubbles. In early trading, the 10-year and five-year government-bond futures recorded their biggest ever drops in price, falling by 2% and 1.2%, respectively, leading exchange authorities to suspend the securities. Trading resumed only after China’s central bank injected about $22 billion into the short-term money market. Later in the global day, the selling sent the yield on the 10-year U.S. Treasury note to 2.639%, before settling at 2.580%, compared with 2.523% the day before. It marks the yield’s highest close since September 2014. The Fed raised its benchmark policy rate by a quarter of a percentage point on Wednesday, as investors had expected. But the central bank also forecast three more rate increases in 2017, a surprise for investors. “The market was not expecting a change,” said Mike Amey, a portfolio manager at Pacific Investment Management Co. “You can see that in the reaction in the market.” Prices of short-dated bonds, which are particularly sensitive to changes in monetary policy, also weakened. The yield on the two-year Treasury note rose 0.023 percentage point to 1.261%. In Europe, the yield on 10-year German government bonds rose 0.062 percentage point, to 0.363%, while the yield on equivalent Australian debt jumped almost 0.2 percentage point, to 2.903%. U.K. government bonds were among the hardest hit. The yield on the 10-year note declined slightly after the Bank of England said it would keep interest rates and its bond-buying program steady Thursday, but remained up 0.1 percentage point, at 1.352%

China's 10-Year Sovereign Bond Yield Surges by Most on Record --A record bull run in China’s bond market is being brought to an abrupt halt.The 10-year sovereign yield surged a record 22 basis points on Thursday as a plunging yuan and hawkish comments from the Federal Reserve damped expectations of monetary easing in China. These factors are converging with other negatives -- including recent data showing accelerating inflation, quickening capital outflows and tighter liquidity. Here are five charts showing why the reversal of a rally that began in 2014 has been so drastic.

  • 1. Tightening Money Markets. The People’s Bank of China has been steering money-market rates higher to spur deleveraging and reduce depreciation pressure on the yuan. Bond yields are tracking rates upward, with the 10-year yield jumping to a 16-month high of 3.45 percent on Thursday.
  • 2. Global Slump. China’s bond selloff is part of a global trend. With U.S. Treasuries declining amid expectations of more Federal Reserve tightening after Wednesday’s interest-rate increase, the gap between the U.S. and Chinese 10-year yields narrowed to the least in five years last month. This adds to depreciation pressure on the yuan and reduces the appeal of Chinese bonds to foreign investors.
  • 3. Quickening Outflows. While the PBOC has been using new lending tools to add funds to the financial system, rising capital outflows have exacerbated the pressure. In the eight months through November, the outstanding balance in the monetary authority’s Medium-term Lending Facility has increased by 1.4 trillion yuan ($203 billion), while the PBOC’s yuan positions, a gauge of capital flows, have dropped by 1.6 trillion yuan.
  • 4. Bank Deleveraging. The ratio of total assets to deposits of Chinese banks has increased over the years as growth in the former accelerated amid a boom in interbank and shadow-banking activities. Now, with rising money-market rates making it more expensive for lenders to fund their assets, they are selling bond holdings and deleveraging balance sheets. 5. Inflation Picks Up Both domestically and globally, inflation expectations are picking up. In China, consumer and producer prices increased faster than projected last month, reducing demand for debt and adding to expectations the PBOC will tighten monetary conditions.

 China Devalues Yuan To Weakest Fix Since May 2008 - Following last night's bond bloodbath, The Fed fallout continues in China as The PBOC has devalued the official Yuan fix the most since Brexit to its weakest level since May 2008,breaking above 6.95/USD. Since the "one-off" devaluation in Aug 2015, the Chinese currency has now weakened almost 14% against the dollar.While the broad Renminbi basket has been "stable" against China's global trading partners for 3 months...It appears the devaluation pressure has been focused back against the US Dollar... And bear in mind that the "stability" we described above came at the grand cost of a stunning quarter of a trillion in reserves 'defending' the outflow pressure in 2016... For now the China bond market has stabilized a little (by which we mean it is not collapsing). At some point this butterfly's wings of turmoil will ripple across the world's liquidity markets and punch all those with a plan in US banking stocks in the face... the question is, when?

Trump Reignites China Diplomatic Spat, Says Not Bound By "One China" Policy --While the domestic US audience was focused on what Trump would say about the latest scandal of alleged Russian intervention in the US presidential elections, which as a reminder, he called "ridiculous" and suggested that democrats are behind the report, China was more curious by Trump's foreign policy thoughts, which may have sparked yet another diplomatic spat, because one week after Trump snubbed America's long-running "One China" policy, today the President-elect questioned whether the United States had to be bound by its long-standing position that Taiwan is part of "one China" and brushed aside Beijing's concerns about his decision to accept a phone call from Taiwan's president. "I fully understand the 'one China' policy, but I don't know why we have to be bound by a 'one China' policy unless we make a deal with China having to do with other things, including trade," Trump said. Trump's decision to accept a congratulatory telephone call from Taiwan President Tsai Ing-wen on Dec. 2 prompted a diplomatic protest from Beijing, which considers Taiwan a renegade province.

‘I don’t know why we have to be bound by a one-China policy’: Trump questions decades-long stance South China Morning Post - US president-elect Donald Trump has questioned whether Washington should continue its one-China policy if Beijing does not make concessions on trade and other issues.  “I don’t know why we have to be bound by a one-China policy unless we make a deal with China having to do with other things, including trade,” Trump said on Fox News Sunday in response to a question on his taking a phone call from Taiwan President Tsai Ing-wen. The one-China policy recognises that Taiwan is part of China, but the US has remained ambiguous on the issue.Despite breaking decades of US diplomatic tradition by taking the call, Trump admitted that he only heard it was coming an hour or two in advance, rejecting claims by some of his aides that he had planned the move for weeks.“I don’t know why we have to be bound by a one-China policy unless we make a deal with China having to do with other things, including trade”  Besides trade, Trump said China was not cooperating with the US on its handling of the yuan, on North Korea, and tensions in the South China Sea. Trump’s comments come amid uncertainty over his pick for secretary of state – Washington’s top diplomat – with relatively unknown ExxonMobil CEO Rex Tillerson seemingly topping the list after a search that included interviews with one-time Republican presidential hopeful Mitt Romney, former New York mayor Rudy Giuliani and ex-CIA director David Petraeus.

China Warns Trump Against Using Taiwan for Leverage on Trade -- China warned Donald Trump against using the One-China policy regarding Taiwan as a bargaining chip in trade talks, a swift response that indicates Beijing is losing patience with the U.S. president-elect as he breaks with decades of diplomatic protocol. “Adherence to the One-China policy is the political bedrock for the development of the China-U.S. relationship,” Foreign Ministry spokesman Geng Shuang told reporters in Beijing at a regular briefing on Monday. “If it is compromised or disrupted, the sound and steady growth of the China-U.S. relationship as well as bilateral cooperation in major fields would be out of the question.” Trump said in an interview broadcast on Sunday that his support for the policy --- which has underpinned U.S. behavior toward Taiwan since the 1970s -- will hinge on cutting a better deal on trade. He has repeated his accusations against China since election day, telling a crowd in Iowa last week that China would soon have to “play by the rules.” Policy makers in Beijing initially had a more subdued response after Trump departed from diplomatic convention earlier this month and spoke by phone with Taiwan’s president. Now things are getting more serious: the official Xinhua News Agency warned that world peace hinges on close and friendly ties between the U.S. and China. “For China, there is no balancing of trade and Taiwan,” said Wang Tao, head of China economic research at UBS AG in Hong Kong. “Taiwan is considered the utmost core interest of China, not for bargaining.”

China Hits Back: Warns Trump "Nothing To Discuss" If "One China" Policy Ends --On Sunday morning, Trump reignited the diplomatic spat with China when during an interview with Chris Wallace on Fox News Sunday the President-elect said that his support for the "One China" policy which has underpinned U.S. behavior toward Taiwan since the 1970s,  will hinge on cutting a better deal on trade, in other words it will be a "barter chip" to extract future concessions from Beijing. "I fully understand the 'one China' policy, but I don't know why we have to be bound by a 'one China' policy unless we make a deal with China having to do with other things, including trade." As the FT noted, Trump's remarks dramatically raised the stakes with Beijing just a week after he broke diplomatic precedent by accepting a phone call from Taiwan’s leader, Tsai Ying-wen. Both incidents have tested the Chinese government’s diplomatic patience.Predictably, overnight China responded and expressed "serious concern" on Monday after U.S. President-elect Donald Trump said the United States did not necessarily have to stick to its long-held stance that Taiwan is part of "one China", calling it the basis for relations. Beijing warned Donald Trump that the two countries will have “nothing to discuss” if the US president-elect’s incoming administration decides to discard the four-decade old “One China” policy.“Adherence to the One China policy is the political bedrock for development of [bilateral] relations,” Geng Shuang, a foreign ministry spokesman, said on Monday. If it is compromised or disrupted, the sound and steady growth of the China-U.S. relationship as well as bilateral cooperation in major fields would be out of the question.”

Trump to U.S. businesses in China: drop dead | Reuters: - U.S. President-elect Donald Trump's precedent-breaking call with Taiwan's president on Dec. 2, followed by ominous tweets about Chinese policy and American firms' overseas production, has policy wonks scratching their heads. But one message is clear. Trump is indifferent to any potential backlash against U.S. investments in China, and may even welcome it. It is unclear what led Trump to ditch nearly 40 years of diplomatic protocol and take a congratulatory telephone call from Taiwan's Tsai Ing-wen. Beijing, which sees political reunification with the island as a historical necessity, lodged a diplomatic protest but otherwise seems keen to let the issue blow over. State media wrote off the call as a gaffe resulting from the transition team's lack of foreign policy experience. "American business operating in Asia needs certainty and stability," the American Chamber of Commerce in China noted, with some understatement. Good luck with that while loose cannon Trump keeps firing. After defending his Taiwan call he went on to lay into China's business policy and territorial claims in the South China Sea, making it much harder for Beijing to brush the incident off. As worrisome for U.S. firms, Trump also tweeted a plan to apply a 35 percent tax to products imported by U.S. firms from factories they have moved overseas. That would hammer companies who have spent decades building supply chains and facilities in China, like Apple, for example. A recent Rhodium Group study shows the stock of U.S. direct investment in China reached $228 billion from 1990 through 2015. The nightmare for any foreign firm in China is an angry mob besieging its factory or flagship store. Pressing the Taiwan button is the best way to rally such a mob, who will call on Beijing for backup.

The Trump China Showdown Aligns With Reality - Trump received a phone call from the Taiwanese president.  That was a violation of the One China policy, where in order to have diplomatic relations with China, one cannot have formal relations with China.It is quite clear that Trump did this deliberately, it was not a gaffe, but planned.China stated this was unacceptable, but was willing to pretend it was a gaffe.Trump doubled down, accusing China of currency manipulation hurting the US (not true right now, but massive in the past); of not helping enough with North Korea, and of unacceptable behaviour in the South China Sea, where it has been building islands in order to seize control of the sea. He said he sees no reason to abide by One China if the US isn’t getting something in return. China’s official response is that there will be negotiations over anything without One China first. A Chinese tabloid which is party associated said that if the US rescinded One China, China should invade Taiwan and arm American enemies. And here we are.  Now, I want you to turn your attention to Russia.  Yes, Russia. See, the problem with NATO expansion and overthrowing the Ukrainian government and the color revolutions and sanctions against Russia and all that stuff, is that it was forcing Russia into China’s camp. Russia does not want to be China’s ally. Russians (at least in the past, not so sure any more) would far rather have allied with Europe and the US, but Europe and the US would simply not allow it.  Running on crazed fumes from the Cold War, they feared Russia, who is no longer a threat to take first sport, rather than China, which was.Note that Trump has also expressed great skepticism about NATO. He puts it in money terms “why should we pay for Europe’s defense”, but the end is the same, a NATO pointed at Russia doesn’t make sense to Trump or his advisors. And Trump’s plans for the US involve a change in trade, anyway. People are scared of a trade war, and they should be.  What  Trump is saying, right now, on the meta-level most people are too stupid to get, is that China is going to have to make a deal which helps American manufacturing, and everything is on the table to get that. Everything.

China Flies Nuclear Bomber Above South China Sea In Response To "Ignorant Child" Trump - As reported earlier, China lobbed its diplomatic reaction to Trump's Sunday interview, in which the President-elect hinted he would use the "One China" policy as a bargaining chip in negotiations with China to extract futures trade concessions. China responded and expressed "serious concern", warning Donald Trump that the two countries will have “nothing to discuss” if the US president-elect’s incoming administration decides to discard the four-decade old “One China” policy. “Adherence to the One China policy is the political bedrock for development of [bilateral] relations,” Geng Shuang, a foreign ministry spokesman, said on Monday. If it is compromised or disrupted, the sound and steady growth of the China-U.S. relationship as well as bilateral cooperation in major fields would be out of the question.”“We urge the new [US] leadership to recognise the sensitivity of the Taiwan question and to deal with it in a prudent manner,” Geng added. “Upholding the One China policy was America’s promise and we want them to fulfil this promise.”As China's CCTV tweeted, a sampling of the Chinese popular reaction to Trump's comments was less than enthusiastic.However, realizing that for Trump it may need to escalate beyond mere words, shortly prior to today's latest escalation, China flew a long-range nuclear-capable bomber outside China for the first time since President-elect Donald Trump spoke with the president of Taiwan, two US officials told Fox News. The dramatic show of force was meant to send a message to the new administration, according to the officials. It marks the second time Beijing flew bombers in the region since Trump was elected.

As China Fortifies Its Little Islands, PACOM Moves F-22s to Darwin -  China is fortifying its little islands:BEIJING’s controversial artificial islands in the disputed South China Sea are now bristling with fortified gun towers, new satellite photographs reveal.This is despite repeated assurances from Beijing that it would not militarise these outposts.The Asia Maritime Transparency Initiative (AMTI) first highlighted mysterious hexagonal-shaped structures under construction at the Spratly Island’s Fiery Cross, Mischief and Subi Reefs in August.A fresh batch of satellite photos taken in November show these are being completed as point-defence fortifications housing radar-guided anti-aircraft and antimissile guns.This means all seven of China’s artificial islands in the South China Sea are now armed.  And the US is fortifying it’s little island, via Domainfax:The US will begin flying its deadliest fighter plane, the F-22 Raptor, out of northern Australia next year, the most senior American commander in the Pacific has revealed as he warned  of a need to show strength to deter aggression in the region.During a visit to Sydney on Wednesday, the commander of the US Pacific Command, Admiral Harry Harris, vowed the US would remain a major player in the region, saying its “enduring interests” would not “change on January 20th” – referring to the day of Donald Trump’s inauguration as President.United States Pacific Command Admiral Harry Harris issues a firm warning to “an increasingly assertive China” amid territorial disputes in the South China Sea.Admiral Harris revealed that he had signed a 2017 agreement for Australia to host US military assets including the Raptors, which are feared and revered as the best fighter planes in the world, and will send a strong signal about US military presence in the region. The greater presence of US air power out of Australia follows on from the rotation of US marines as a way to bolster the alliance and the American footprint at the southern edge of Asia – akin to a stationary aircraft carrier. Strategic analysts widely see northern Australia as vital territory because it is mostly out of range of China’s ballistic missiles and is at the fulcrum of the Pacific and Indian oceans.

China's Navy seizes American underwater drone in South China Sea -- A Chinese warship has seized an underwater drone deployed by a U.S. oceanographic vessel in the South China Sea, triggering a formal diplomatic protest and a demand for its return, U.S. officials told Reuters on Friday. The drone was taken on Dec. 15, the first seizure of its kind in recent memory, about 50 nautical miles northwest of Subic Bay off the Philippines just as the USNS Bowditch was about to retrieve the unmanned underwater vehicle (UUV), officials said. "The UUV was lawfully conducting a military survey in the waters of the South China Sea," one official said, speaking on condition of anonymity. "It's a sovereign immune vessel, clearly marked in English not to be removed from the water - that it was U.S. property," the official said. The Pentagon confirmed the incident at a news briefing and said the drone used commercially available technology and sold for about $150,000.

 China challenges EU and US over market economy status  -  China has launched a legal challenge against the EU and US over their reluctance to treat it as a “market economy” under World Trade Organisation rules. Beijing is unhappy with a provision that allows trading partners to use a special formula and prices in third countries to calculate punitive tariffs for non-market economies in anti-dumping cases. It is pushing for the provision to expire with Sunday’s 15th anniversary of its WTO membership. But the EU, US, Japan and other WTO members have resisted the move, prompting China on Monday to take the first step in launching a case with the global trade regulator. In a statement, China’s commerce ministry said it had requested consultations with both the EU and US and would seek to have a WTO panel rule.“China has communicated through many channels for the third-country comparison to expire. What’s very regrettable is that EU and US have not acted to allow it to expire. It has had a severe impact on Chinese exports,” it said. “China is protecting its lawful rights and acting appropriately to maintain the WTO rules.”In the EU, fears of an onslaught of cheap Chinese goods prompted the European Commission to recommend a fundamental shift in how it conducts anti-dumping cases. Under EU rules, Brussels imposed a 21 per cent tariff on the same steel products that were hit with a 266 per cent US tariff in 2015.In a sign of the commercial stakes, the US on Friday imposed punitive anti-dumping tariffs on Chinese-made washing machines, imports of which into the US were worth more than $1.1bn last year. It also announced the launch of an anti-dumping investigation into plywood imports from China, which were also worth more than $1bn last year.Those US cases and the fight over Beijing’s market economy status point to the trade battles already being fought with China even as Donald Trump, the incoming president, promises to get tough with Beijing over trade and other issues.  “One of the most important relations we must improve . . . is our relationship with China,” Mr Trump said last week. “China is responsible for almost half of America’s trade deficit [and] they haven’t played by the rules.” “They have acted like a non-market economy in so many respects with their state-owned companies, with subsidies, with dumping . . . there are more dumping cases brought against China than against all the other countries combined,” said Sandy Levin, the top Democrat on the House ways and means committee. A US official said it would continue to fight any attempt to grant China market economy status at the WTO, pointing to “serious imbalances in China’s state-directed economy”. “China has not made the reforms necessary to operate on market principles,” the official said. “The United States is prepared to defend its right at the WTO to protect American workers and firms from the damaging effects of persistent distortions in the Chinese economy.”

Uncertainty in Asia over Trump’s top diplomat pick | South China Morning Post: Beijing on Tuesday called for the United States to further develop Sino-US relations after president-elect Donald Trump tapped ­ExxonMobil chief Rex Tillerson as his secretary of state. The announcement by Trump to pick Tillerson, an oilman with strong links to Russia, is seen by ­observers as a sign that relations between Washington and Moscow may get closer. But it’s unclear how ties with China and the rest of Asia will shape up because he has not spent much time in the region. At a daily briefing in Beijing, Ministry of Foreign Affairs spokesman Geng Shuang said China was willing to improve Sino-US relations regardless of who became the US secretary of state. “We hope that organisations responsible for diplomacy between the two nations can step up communications and deepen ­cooperation and to play a ­constructive role to the healthy development of Sino-US relationship,” he said. Tillerson’s experience in diplomacy stems from making deals with foreign countries for the world’s largest energy company, although questions have been raised by US politicians about the oil executive’s relationship with Russia. In a statement, Trump said Tillerson will be “a forceful and clear-eyed advocate for America’s vital national interests, and help reverse years of misguided foreign policies and actions that have weakened America’s security and standing in the world”. Trump picked Tillerson after the Texan was backed by several Republican figures, including ­former secretary of states James Baker and Condoleezza Rice and ex-defence chief Robert Gates, a transition aid said. The announcement came as Sino-US ties appear in limbo following Trump’s phone call with Taiwanese President Tsai Ing-wen, and his questioning of the one-China policy. Pang Zhongying, an international relations professor at Renmin University of China, said the naming of Tillerson as secretary of state has added to existing uncertainty about US diplomacy. There are concerns that the Trump administration may get closer to Russia, but the impact of such a development to the region is yet to be known.

Korea’s Park Impeached as Voters Vent Anger Over Corruption -- Undone by an influence-peddling scandal, South Korea’s President Park Geun-hye was impeached by parliament on Friday amid a wave of anger that could overturn the nation’s politics and increase pressure on some of Asia’s biggest companies to reform. With hundreds of police forming a wall to hold back thousands of demonstrators outside the National Assembly in Seoul, lawmakers voted 234 to 56 in favor of impeachment, easily meeting the requirement for a two-thirds majority as dozens from Park’s own party voted against her. Protesters singing the Christmas carol “ Feliz Navidad,” with the lyrics changed to "not Park Geun-hye," broke into cheers in a carnival atmosphere. The result means Park is suspended from power and the interim leadership passes to Prime Minister Hwang Kyo-ahn. The Constitutional Court now needs to ratify parliament’s decision, a process that may take as long as six months. If the judges concur, a national election would be held about two months later. The fall of South Korea’s first female leader -- and daughter of former dictator Park Chung-hee -- marks another sign of the anti-establishment anger that fueled Brexit, brought Donald Trump to power and toppled Italian leader Matteo Renzi. Protesters have likened Park’s allies to collaborators under dictators and called conglomerate heads “accomplices,” while a mayor who compares himself to Bernie Sanders has surged in opinion polls for the next president.

 BOJ boosts bond buys to hold down Japan's long rates- Nikkei Asian Review: -- The Bank of Japan increased purchases of Japanese government bonds Wednesday for the first time since adopting its new monetary policy framework in September, seeking to counteract market forces that have pushed long-term interest rates higher in recent weeks. The central bank bought 320 billion yen ($2.77 billion) in bonds with maturities exceeding 10 years, up from the originally planned 300 billion yen. "We took into consideration the recent sharp rise in yields on ultralong JGBs and concern about further yield movements," an official from the bank's Financial Markets Department said. Donald Trump's election as the next U.S. president has helped send bond prices plunging and rates soaring. The yield on 20-year JGBs jumped 14 basis points over the week through Tuesday to a 10-month high. Benchmark 10-year JGBs have been affected as well, with yields reaching 0.08% at one point Tuesday, further from the BOJ's target of roughly zero under the new yield curve control policy. With markets still uncertain how far the U.S.-led rise in rates will go, investors are shying away from buying. Trading volumes for ultralong debt have fallen, a trend that could accelerate the yield surge. The BOJ's move has had the intended effect so far. Yields on 20-, 30- and 40-year JGBs fell after the announcement Wednesday morning as bargain hunters found it easier to jump in. The benchmark 10-year yield dipped by 2.5 basis points to 0.05%, while the yield on 20-year notes dropped 4.5 basis points to 0.595%.

Japan to issue ¥1.8 trillion in bonds to make up for tax shortfall | The Japan Times: The government will issue an additional ¥1.8 trillion ($15.2 billion) in bonds this fiscal year to make up for a shortfall in tax revenue and to help pay for a third extra budget, according to government sources. Reflecting sluggish corporate tax revenue, the government will cut its fiscal 2016 tax revenue estimate by ¥1.7 trillion to ¥55.9 trillion, the sources said. For the first time since fiscal 2009, the government has slashed its tax revenue estimate and been compelled to issue additional deficit-covering bonds in the middle of a fiscal year. The government had already increased its reliance on debt as it issued ¥2.75 trillion of bonds to pay for the second supplementary budget. The further bond issuance will bring the total debt issuance this fiscal year to about ¥39 trillion. The government had expected to cut its tax revenue projection by ¥1.9 trillion, but now projects a smaller decline because the yen’s sharp depreciation since the U.S. presidential election in November is likely to bolster corporate earnings. As for the fiscal 2017 budget, the government is making arrangements to compile a record-high general-account budget totaling between ¥97 trillion to ¥97.5 trillion. The government aims to limit new government bond issuance to ¥34 trillion, similar to the amount initially planned for the current fiscal year, as it projects tax revenue to exceed the ¥57.60 trillion initially estimated for this year. The government expects tax revenue to increase as it projects the economy will expand a nominal 2.5 percent in fiscal 2017.

Study Shows Risks Of Including Corporate Sovereignty In The 'Other' Huge Asian Trade Deal, RCEP -- As we've noted, TPP is unlikely to come back from the dead, despite what some seem to think or hope. For example, the Japanese government has decided to go ahead and ratify TPP anyway. That seems foolish, since it has just thrown away most of its bargaining counters for other trade negotiations, in what amounts to an act of political seppuku. As Sean Flynn points out, Japan has form here, since it also ratified the infamous Anti-Counterfeiting Trade Agreement (ACTA), just as pointlessly.  One of the most important trade deals still under active discussion is the Regional Comprehensive Economic Partnership (RCEP). Techdirt first wrote about this 18 months ago, while recently we noted that many of its provisions are even worse than those in TPP. One aspect of RCEP that has received little attention so far is the corporate sovereignty chapter. The Transnational Institute (TNI) has put together a useful document looking at what it calls the "hidden costs" of including investor-state dispute settlement (ISDS) in RCEP. It provides an excellent summary of corporate sovereignty activity in Asia that complements a 2014 study from Friends of the Earth Europe, which looked at the same "hidden costs" of ISDS in Europe. Here are a few of the main findings for RCEP nations (pdf):   50 investment arbitration cases already filed against 11 RCEP (Regional Comprehensive Economic Partnership) countries since 1994, over 50% of which have been filed after 2010.  India alone has been the target of 40% of the cases filed against RCEP countries. Foreign investors have claimed at least 31 billion USD from RCEP countries. Given the secrecy surrounding investor-state dispute settlement (ISDS) proceedings, this could be much more. This amount is 7 billion USD less than India's entire health budget for 2015. Of the 31 billion USD claimed by investors, 81% has been claimed from just four countries, India, South Korea, Australia and Vietnam.   The largest known amount paid to a foreign Investor by an RCEP country is 337 million USD as part of the settlement in the Cemex versus Indonesia case.   36% of cases against RCEP countries concern environmentally relevant sectors. RCEP countries have been sued for measures taken to protect public health, adjust corporate taxes, promote industrialisation, and review contracts acquired through allegations of corruption, among others.

Inside India’s Unprecedented Assault on Cash - WSJ - Early last month, Prime Minister Narendra Modi summoned his cabinet to a room in India’s capital, told them to leave their cellphones outside and delivered a shocker: He was about to go on national television to declare that almost 90% of the country’s paper money would no longer be legal tender. The move, prepared in secret by Mr. Modi and his advisers, kicked off a radical experiment in government control and instantly put India at the forefront of a nascent global campaign against cash.  Aiming to cut back tax dodging, terrorism and government corruption, he made India’s largest bank note and one of its most commonly used ones—the functional equivalents of America’s $10 and $20 bills—unusable overnight. Indians can deposit the discontinued bills in a bank before the end of the year to preserve their value. New bills are being rolled out, but so far they amount to only about a quarter of the $230 billion in cash that was voided. For a country where few families pay any income tax and even large transactions are often completed in cash, the disruption has been significant—posing new risks for the world’s fastest-growing big economy and Mr. Modi’s popularity.Home sales have flatlined in the month since the Nov. 8 announcement. Daily uproar by opposition parties has brought Parliament to a standstill. Tourists have been stuck mid-voyage, unable to tip or buy souvenirs. And there have been long, sometimes tense lines at banks and ATMs. The lives of the poor, in particular—many of whom depend on irregular, off-the-books employment paid in cash—have been upended. In the gritty western city of Morbi, a major hub for makers of kitchen and bathroom tiles, production is down 30%, said Nilesh Jetpariya, president of the local ceramic-industry association. Short on cash to pay laborers and truckers, around a third of the city’s 650 tile factories are shut.

Modi’s Note Ban May Spell Catastrophe for the BJP - One of the most basic equations in economic theory – MV=PT – seems to have been forgotten. In layman terms, the equation states that the money supply in an economy (M) multiplied by the number of times it changes hands in a year (V) equals the average price level (P) multiplied by the number of transactions (T) that take place during the year.  But Keynes never envisaged the possibility that a government would, of its own volition, bring the circulation of money to a near halt and force V down close to zero.   That is precisely what the demonetisation is doing. For an already tottering economy, this is a disaster. For the political future of the BJP, it is a self-inflicted goal that may well cost it the match. I got some idea of how much V had fallen after demonetisation when a sweet shop owner told me that on the day after demonetization, his sale had fallen from Rs 30,000-40,000 per day to a mere Rs 700. A bookshop owner in Connaught Place told a friend that his sales had fallen from Rs 20,000-30,000 a day to Rs 12,000 in the past month. A high-end optician in Khan Market, New Delhi told me that his sales had fallen by 25% in the past month. Automobile sales, which had been rising at 11% a year in the first half of the year, fell by 38% for Mahindra & Mahindra, 28% for Tata Motors, 20% for Hyundai and 22% for Renault in November. There is not a single retailer who does not have a similar story to tell. If this is the condition of demand in the urban areas, where more people have bank accounts and use credit cards, it is not hard to imagine what the situation is in rural areas where where moneylenders still meet four-fifths of the demand for credit, and nearly all the transactions are done in cash. Two-wheeler sales have fallen by 35-40% because 65% of all the sales are done in cash and tractor purchases have fallen by a whopping 63% because only farmers and a few construction companies buy them. The worst affected sector is construction. After being starved for funds for nine years, the construction industry has been pushed further down by demonetisation. The immediate impact has been on employment, for not only is it India’s second largest employer – providing jobs to 45 million people – but since employment in agriculture stopped growing a decade and a half ago, it has also been the principal creator of new jobs. But the bulk of its workers are migrants from other states who are paid by the day, or at best by the week, and they ask for their wages in cash. Therefore, in order to pay them, their employers need to maintain large daily stocks of cash. Those were the cash reserves that Modi made worthless overnight. What is worse, even their current overdraft facilities, and their bank deposits, are not available to them because the government has put a Rs 24,000 a day limit on all withdrawals.

Double Standards: Secrecy for Demonetisation, But a Long Rope for Swiss Bank Accounts  -- In late September 2016, Switzerland became the latest country to ratify the Joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters as amended. Its ratification will take effect as per procedure in the convention on January 1, 2017.  The convention is multilateral and is stated to have been developed to ensure mutual assistance in tax matters and in particular effective exchange of information to enable countries to maintain sovereignty over the application and enforcement of their tax laws. Before that, Panama had acceded to the convention, in the face of mounting world pressure following the Swiss HSBC leaks and the Panama leaks Yet India has signed a joint declaration with Switzerland on November 22, 2016, for the implementation of automatic exchange of information, agreeing to the release of financial information by Switzerland only from September 2019 onwards, on an automatic basis and that too only of accounts held by Indians in Switzerland for 2018 and subsequent years. This is as per the press communiqué of the Central Board of Direct Taxes, whose chairman signed the declaration on behalf of India. Thus there is ample amount of time for black marketeers stashing their money in Swiss accounts to move it.  This is nothing but a highly questionable lukewarm approach on the part of the Indian government, which has given no time or consideration to the common person and banking organisations in the ongoing demonetisation process that is ostensibly meant to check black money, and yet has given so much time and such a long rope to those who intend on evading taxes to move their accounts to other jurisdictions that have not signed or not yet ratified the amended OECD convention.

India’s cash bonfire is too much, too soon - Kenneth Rogoff -- What lessons can be learned from India’s disastrous and still continuing demonetisation? Just over a month ago, on the same day as the US presidential election, the country’s prime minister, Narendra Modi, announced perhaps the most radical macroeconomic experiment the developing world has seen in decades. He told the country’s 1.3bn population that, from midnight, the two largest bills, the Rs500 and Rs1,000 (roughly $7.50 and $15), would no longer be legal tender and that they would have 50 days to convert their old notes into new ones.  At a stroke, Mr Modi decommissioned 86 per cent of India’s currency supply in an economy where 90 per cent of transactions are in cash. The rationale, the Indian people were told, was to fight rampant corruption, tax evasion and crime, as well as to deal with a surge in counterfeit notes being used to finance terrorist activities.  These are laudable goals, but, as events have unfolded, it is now clear that the design and execution of the Indian exchange has been deeply flawed. Most fundamentally, the Reserve Bank of India simply had not printed nearly enough new notes to replace the old ones. It will take months to fill in the gap. In the meantime, commerce is crippled in huge swaths of the economy where wages and suppliers are typically paid in cash, and where the vast majority of people do not have access to electronic payments. While there may still be significant long-term benefits to Mr Modi’s radical policy, the short-term results have been catastrophic, probably knocking 1-2 per cent off growth in gross domestic product, with those on lower and middle incomes and the poor bearing a particularly heavy burden. For advanced economies, the idea of recalibrating the use of cash is an entirely reasonable one. While paper currency has many virtues that will continue into the distant future (including privacy as well as robustness to electrical outages), the vast bulk is held in large denomination notes such as the US $100 and the €500 that have little significance in most retail transactions. A broad array of evidence suggests that high-denomination notes (there are 34 $100 bills for every man, woman and child in the US) mainly serve to facilitate tax evasion and crime.

Going cashless in rural Bengal: Watch how this village is forced to barter food: Over a month ago, Prime Minister Narendra Modi announced the scrapping of Rs 500 and Rs 1,000 notes in an attempt to rid the economy of black money. Since then, there have been enormous queues outside banks and at ATMs. It wasn’t long before the government claimed that the attack on black money was only aim of demonetisation: it also aimed to get India to go cashless and do all its transactions digitally. While digital transactions shot to popularity in cities, it’s been rather different in rural areas. West Bengal’s Brindabanpur village, for instance, has gone cashless due to the cash crunch in the banks. With no access to the infrastructure required for digital transaction, agricultural labourers and farmers have had resort to a rather-more basic way to conduct transactions – the barter system. This video by BBC India shows how the locals are unable to meet their everyday needs through bartering. Not everyone is impressed by this display of ingenuity. “Currency was invented as a means to abolish barter,”noted a Facebook user.

Headed home: Many workers abandon building sites after black money crackdown - Hundreds of thousands of construction workers have returned home since Prime Minister Narendra Modi abolished high-denomination banknotes, leaving some building sites across the country facing costly delays. A month after Modi’s shock move to take away 86% of cash in circulation to crush the shadow economy, the growing labour shortage threatens to slow a recovery in India’s construction industry, which accounts for 8% of gross domestic product and employs 40 million people. Work at SARE Homes’ residential projects, spanning six cities, has slowed dramatically as migrant workers, who are out of cash and have no bank accounts to draw from, have little choice but to return to their villages. “Construction work at all projects has slowed down in a big way,” managing director Vineet Relia told Reuters.Property enquiries, meanwhile, have slumped by 80% around the capital since the cash crackdown, according to property portal 99acres. Getamber Anand, president of Indian builders’ association CREDAI, said projects nationwide had been hit, and estimated that roughly half of the migrant workforce, numbering in the low millions, had left for home. Road developers have also reported a slowdown as they struggle to find sufficient labour. The exodus shows little sign of reversing, risking damage to construction activity and the wider economy into 2017, despite Modi’s assurances that hardships from his radical “demonetisation” should be over by the end of the year. The disruption to building raises doubts about the Reserve Bank of India’s view that the impact on the economy would be transitory. The central bank held interest rates on Wednesday despite calls for action. '

Re-monetisation Debacle: Why Didn’t the RBI Print the New Notes At Foreign Printing Presses? - Why didn’t the government or the Reserve Bank of India consider printing the new Rs 500 and Rs 2,000 notes at foreign printing presses as a means of overcoming the current shortage of new notes?  Ever since the demonetisation of Rs 500 and Rs 1000 notes was announced on November 8, the printing of new notes and increased circulation of old notes (Rs 100, Rs 50 and Rs 10) has severely lagged behind demand.   Approximately 19 billion notes have been released back into circulation since November 10, which is when banks re-opened after demonetisation was announced.A rough breakdown of the 19 billion notes released are as follows: eight billion of the notes are of Rs 100 denomination, 1.8 billion of the notes are Rs 50 denomination and the number of Rs 20 and Rs 10 notes released are 3.1 billion and 5.7 billion respectively.The total value of the notes released is a little under Rs 4 lakh crore. To put that into context, with demonetisation, roughly Rs 14 lakh crore (~15 billion Rs 500 notes and ~6.7 billion Rs 1000 notes) was taken out of the system. The RBI’s figure of 19 billion notes, however, do not include the new Rs 500 and Rs 2,000 notes that have been printed and released into the system.  How many of the new 500 and 2,000 rupee notes have been printed? Sources with second-hand knowledge of the matter told The Wire that the number of new Rs 2,000 notes that have been printed ranges between 1.5 billion-2.2 billion, and that the number of new Rs 500 notes is minuscule in comparison (between 250-400 million notes). Other media reports put the number of new Rs 500 notes printed at higher quantities. Nevertheless, the number of new Rs 500 notes clearly falls short of the 15 billion 500 rupee notes that used to be legal tender. Multiple calculations put forth over the last three weeks say it’s simple mathematics: former finance minister P. Chidambaram and economist Saumitra Chaudhuri have similar calculations. The bottom line – it will take six-to-seven months for re-monetisation to be complete.

Mobile-Payment Firms Benefit From India’s Cash Crunch - WSJ: Indian mobile-payment firms say the government’s move to shrink the country’s massive informal cash economy has given them an unexpected record windfall. “If we continue at this pace, within a month or two we will have made more progress than since our inception” in 2009, said MobiKwik founder Bipin Preet Singh. “The government is creating large-scale awareness and basically doing advertising for us,” he said. MobiKwik is recording transactions at 18 times normal levels since the government’s move, the company said. In a surprise announcement in early November, Prime Minister Narendra Modi said India would replace its largest-denomination bank notes with newly designed ones, triggering a cash crunch. A July report from The Boston Consulting Group and Alphabet Inc.’s Google said there are between 80 and 85 million active users of mobile wallets in India, which amounts to just 7% of the population. Still, some are hopeful that the government’s move will give a lasting boost to the sector that would have taken years otherwise. India’s largest mobile-payment company, Paytm, says it has added some 14 million new users since the government’s announcement, and continues to add about 500,000 new accounts a day, up from 100,000 a day in October. Bhagwat Singh, who at his small stand in a Mumbai suburb sells single cigarettes and betel leaves chewed like tobacco, signed up for Paytm soon after Mr. Modi’s announcement as both his customers and he had run out of change. Now close to a third of his sales are happening through his digital wallet, a sudden transformation for a low-tech tiny entrepreneur who didn’t even use his phone to send text messages or email before. “I was not expecting this much [in digital sales] but it has come,” said Mr. Singh.

Why are Indians being arrested for sitting during the national anthem? -- Twelve people were arrested on Monday evening at a cinema in India, after they remained seated while the national anthem played. The cinemagoers, who were attending an international film festival in the city of Trivandrum in Kerala, were later freed but they face charges of "failure to obey an order issued by a public servant, thereby causing obstruction or annoyance to others". And at a cinema in Chennai on Sunday, eight people who did not stand for the anthem were assaulted and abused, police said. The eight were later charged with showing disrespect to the anthem. The arrests and reports of assault follow last month's Supreme Court ruling that the national anthem be played before every film and that audiences stand while it is played - and they make it clear that authorities are taking the ruling seriously. "If we did not sit on chairs, I thought we would lose the seats," one detainee told the Indian Express. The controversial ruling - cheered by the ruling Hindu nationalist BJP - comes at a time of routine demands on Indians to display patriotism, and this is not the first time people have been targeted for not respecting the national song. In October, a disabled man who had been carried from his wheelchair to a seat, described how he was assaulted by other members of the audience for not standing for the anthem.

Foxconn Fires 25% Of India Workers As Demonetization Destroys Sales -- While piecemeal anecdotes and surveys have already exposed the devastation that PM Modi's demonetization plan has had on the Indian economy, tonight we see the first hard evidence as Foxconn has asked 25% of its workforce to leave after the cash ban caused sales to collapse by 50% forcing the company to slash production by half. mAmid social unrest and loss of faith in the nation's currency, India's economy has ground to a halt with its Composite PMI crashing by a record in the last month as demonetization strikes. And now, as The Economic Times reports, the government’s move to ban Rs 500 and Rs 1,000 notes from November 9 has had a domino effect on the mobile phone industry, where a large majority of mobile phones are bought for less than Rs 5,000 and most of the transactions happen through cash.Consumer purchase power has been reduced dramatically – mobile phone monthly sales halved to Rs 175-200 crore post demonetisation – and sales revival is not looking up, as was perceived earlier, industry insiders said.Leading local players including Intex, Lava and Karbonn are planning to lay off or bench 10-40% of their workforce, as they cut production to control inventory pile-ups in retail channels with consumers delaying cash purchases after Nov 8 demonetisation sucked out cash from the market.Lava is shutting down its plant – which employs around 5000 people -for a week starting December 12, while others could soon follow, industry insiders said.Foxconn – which makes devices for China’s Xiaomi, Oppo and Gionee, besides Infocus and Nokia – along with Lava, Intex, Karbonn and Micromax account for around 50% of the handsets assembled in India, say experts. “The four plants in Sri City (Andhra Pradesh) are operating at 1.2 million capacity a month, down from 2.5 million that it has,” a senior industry executive aware of Foxconn’s manufacturing details said, asking not to be named. The company has put about 1,700 of its workforce on the bench, or on forced leave for two weeks during which they will get paid but the number of days would be cut from their earned leaves. Benching may continue if production – directly related to consumer demand – does not come to the 2 million a month levels by January, the person added.

India's War Budget to Be World's 3rd Biggest Despite High Poverty - Riaz Haq - In 2016, India surpassed Saudi Arabia and Russia to claim the 4th spot among the top five defense spenders globally for the first time, according to Jane's Defense.  India, a country with 33% of the world's poor, is projected to surpass the United Kingdom to rise to the 3rd spot for defense spending by 2018. India's military spending has grown rapidly from $38.17 billion in 2010 to $50.7 billion in 2016. It is projected to rise further to $56.5 billion in 2018 and $64.07 billion in 2020, according to Jane's.  For comparison, India's south Asian neighbor Pakistan's defense budget for 2016 is only $8 billion. India's rapid rise to the list of world's top defense spenders stands in sharp contrast to the reality that it remains home to the world's largest population of poor, hungry and illiterate citizens. India also leads the world for lack of hygiene, disease burdens and open defecation. Prime Minister Narendra Modi's rule has seen dramatic growth of wealth inequality in India. Top 1% of Indians now own 58.4% of India's wealth, up from 49% in 2014 when Mr. Modi was elected Prime Minister, according to Credit Suisse Global Wealth Report 2016. Median wealth data compiled by Credit Suisse for 2016 shows that average Pakistani adult is 20% richer than an average Indian adult and the median wealth of a Pakistani adult is 120% higher than that of his or her Indian counterpart, according to Credit Suisse Wealth Report 2016. Average household wealth in Pakistan has grown 2.1% while it has declined 0.8% in India since the end of last year. CS Wealth Report 2016 indicates that 50% of Pakistanis own more than $1,180 per adult which is 120% more than the $608 per adult owned by 50% of Indians.

 Nigeria cuts size of domestic bond auction as yields rise (Reuters) - Nigeria sold far fewer bonds than it offered on Wednesday, as investors worried about rising inflation demanded higher yields from a government looking to spend its way out of recession. Africa's largest economy raised 69.2 billion naira ($227 mln) in bonds maturing in five, 10 and 20 years' time, less than the 95 billion naira it had wanted. Investors were demanding yields of up to 18 percent for the notes, far above the mid-point at which the Debt Management Office (DMO) wanted to issue them, to compensate for inflation which hit more than 11-year high of 18.5 percent on Thursday. "Many investors are not willing to lock up their funds at present levels," one trader told Reuters. Investors worried about rising inflation, with oil receipts and foreign inflows declining, are pushing up Nigerian bond yields, which could increase the cost of servicing local debt for the government, analysts say. The DMO paid 16.43 percent to auction 41 billion naira, maturing in 2036 debt and fetched 25 billion naira due in 2026 debt at 16.24 percent. It issued 3.2 billion naira of 2021 debt at 15.99 percent. It paid around 15 percent for these notes at its previous auction last month. On Tuesday, the government found unrecorded debts of 2.2 trillion naira left over from the previous administration, which turned up after an audit aimed at improving transparency. The government expects the 2017 deficit to widen to 2.36 trillion naira as the government tries to drag the economy out of recession with a budget that foresees record spending. More than half of the deficit will be funded through domestic borrowing.

Niger Feels Ripple Effect of Boko Haram as Fears of Food Shortage Spread - Only 2 years old, Fatouma Ouseini lay in a hospital room, undernourished and listless from fever. She is among the nearly half a million children expected to endure the food crisis that has plagued the Lake Chad region in the past year, aid groups say, a disaster brought on by Boko Haram’s relentless campaign of killing, kidnappings and looting of entire villages. Fatouma and her family fled from just across the border in northeastern Nigeria, the epicenter of the war with Boko Haram, where scattered areas have teetered on the brink of famine for most of this year, according to the United Nations. Now, some aid workers fear that similar conditions could spill over to bordering areas like here in Niger, putting even more children at risk. More than 70,000 people fled their homes along the border between Niger and Nigeria in the first half of this year after militant attacks increased. Many have resettled in Diffa, living in labyrinth-like neighborhoods of mud-brick homes, competing with longtime residents for food and water. Children like Fatouma are so common that the town’s small hospital has dedicated an entire wing to treating malnutrition and the illnesses that stem from it. Even in normal times, northeast Nigeria and areas along the borders of Niger, Cameroon and Chad often suffer from a lack of food. It is home to some of the poorest people and highest birthrates on the planet, and their fate often lies with the quality of the year’s crop. But farming is all the more difficult now. Some farmers have shifted to only crops that grow close to the ground so militants cannot hide in fields. Some farmers are able to sleep in encampments for safety at night, returning periodically to check on crops. Elsewhere, the presence of militants has prevented farmers from going to their fields. In some areas, farmers have missed the last three harvest seasons. Boko Haram has routinely stolen herds of cattle and raided markets to feed its ranks. Fighters sometimes even send suicide bombers to blow up shoppers, killing scores of civilians. On Friday, two young girl suicide bombers killed nearly 60 people and wounded dozens more in two attacks on markets in rural northeastern Nigeria.

 Venezuela Yanks Bills From Circulation - WSJ Venezuela is taking nearly half the country’s bank notes out of circulation beginning Wednesday, threatening to ruin the holiday season for Venezuelans already suffering from dire cash shortages, hyperinflation and an economic meltdown. The country’s largest bill, worth 100 bolivars or just 3 U.S. cents on the black market, is to become illegal, in a move designed to combat contraband along Venezuela’s borders, the government said. President Nicolás Maduro said outlawing the notes would destroy what he claims are Colombian smuggling mafias that hoard bolivars to buy price-controlled food and gasoline in Venezuela, which is then resold at a markup. Mr. Maduro said Monday night he was closing the Colombian border until Thursday night to prevent stacks of bolivars from making it back to the country. Buying a kilogram of tomatoes already requires a stack of at least 32 100-bolivar bills in Venezuela, where banks and credit-card terminals are scarce outside state capitals and ATMs give out a maximum of $2 a day in the national currency, the bolivar. Now it will take at least twice that many.Venezuelans have just two days to deposit into banks the more than six billion targeted bills currently in circulation. Anyone wanting to exchange the worthless bills after that will have 10 days to submit them at the central bank after being questioned by the secret police, Mr. Maduro said in an unexpected announcement on Sunday. For people in rural areas, such as the fishing village of Macuro in the east, the withdrawal of the basic means of payment means nothing short of disaster ahead of Christmas. “I have no idea how I will buy presents,” said José Kelly, a fisherman, noting he is three hours away by boat from the closest bank or debit-card terminal. “It’s all cash here, all in 100-bolivar notes.” “Fraudsters and mafiosos, the fruit of your racket will stay worthless abroad,” Mr. Maduro told supporters waving Cuban and Venezuelan flags. The communist island, Venezuela’s closest ally, pulled off its own currency exchange in two days in 1961.

Maduro Stunner: Venezuela Eliminates Half Its Paper Money After Pulling Largest Bill From Circulation --Having observed the economic chaos to emerge as a result of India's shocking Nov. 8 demonetization announcement, and perhaps confident it can do better, today president Nicolas Maduro of Venezuela, Latin America's most distressed economy, mired in an economic crisis and facing hyperinflation, likewise shocked the nation when he announced on state TV that just like India, Venezuela would pull its highest denominated, 100-bolivar bill (which is worth about two U.S. cents on the black market), from circulation over the next 72 hours, ahead of the introduction of new, higher-value notes, as large as 20,000."I have decided to take out of circulation bills of 100 bolivars in the next 72 hours,"Maduro said. "We must keep beating the mafias."To this we would add "and cue economic chaos", but since this is Venezuela, that's a given.The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela, and lead the largely-cash based economy to a state of paralysis. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.Critics immediately slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. Indeed, if India is any example, Venezuela - whose economy is far worse than that of India, the world's fastest growing emerging market - may have just signed its own economic death warrant.According to central bank data, in November there were more than six billion 100-bolivar bills in circulation, 48 percent of all bills and coins. In other words, Venezuela just eliminated half the paper cash in circulation.

Some Poor Venezuelan Parents Give Away Children Amid Deep Crisis - NBC News: — Struggling to feed herself and her seven children, Venezuelan mother Zulay Pulgar asked a neighbor in October to take over care of her six-year-old daughter, a victim of a pummeling economic crisis. The family lives on Pulgar's father's pension, worth $6 a month at the black market rate, in a country where prices for many basic goods are surpassing those in the United States. "It's better that she has another family than go into prostitution, drugs or die of hunger," the 43-year-old unemployed mother said, sitting outside her dilapidated home with her five-year-old son, father and unemployed husband.  With average wages less than the equivalent of $50 a month at black market rates, three local councils and four national welfare groups all confirmed an increase in parents handing children over to the state, charities or friends and family. The government does not release data on the number of parents giving away their children and welfare groups struggle to compile statistics given the ad hoc manner in which parents give away children and local councils collate figures. Still, the trend highlights Venezuela's fraying social fabric and the heavy toll that a deep recession and soaring inflation are taking on the country with the world's largest oil reserves.

Mexican Central Bank Hikes Overnight Rate To 5.75%, More Than Expected: Peso Spikes -- While the US secular stagnation theme was all the rage, until some time in October, the rest of the world couldn't cut rate fast enough. However, now that things are flipped courtesy of a suddenly hawkish Fed which as per yesterday's FOMC announcement realized it is behind the curve on both inflation, and the potential Trump Fiscal Stimulus, everything has flipped, and shortly after every Arab Gulf nation hiked rates overnight in sympathy with the Fed to keep their pegged currencies level, moments ago Banco de Mexico surprised market watchers who had expected a mere 25 bps hike from 5.25% to 5.50% in the overnight rate, by doubling the tightening, and setting the overnight rate at 5.75%.  The immediate result has been a spike in the Mexican Peso, which is trying to offset all the losses suffered after the Fed announcement.Keep an eye on the currency, however, because if history serves, the last time Mexico hiked the kneejerk reaction was quickly faded and the peso ended weaker on the day.

Bond Rout Deepens After Fed Signals on Interest Rates: The global bond market rout is deepening Thursday after the Federal Reserve's latest signal about a quicker pace of interest-rate increases next year provided a fresh catalyst for investors to sell government bonds. The selling sent the yield on the benchmark 10-year Treasury note to as high as 2.639% earlier Thursday, the highest intraday level since September 2014. The yield was recently at 2.584% as selling eased, compared with 2.523% Wednesday. Yields rise as bond prices fall. Government bond yields from Asia and Europe also climbed. China's 10-year and five-year Treasury bond futures recorded their biggest-ever declines in early trading, dropping by 2% and 1.2% respectively, prompting exchange authorities there to suspend trading of the securities. The latest episode deepened a big shift in the bond market that has sent yields climbing after falling to their record lows following the Brexit vote this summer. Investors had piled into government bonds, especially long-term debt, as they expected a prolonged period of soft global growth, low inflation and ultraloose monetary stimulus from major central banks in Japan and Europe. But global data over the past few months have shown an improved economic outlook and a tick-up in inflation pressure, causing investors to lighten up on bonds. That narrative has been gaining traction after the U.S. election on Nov. 8, as expectations have been growing that expansive fiscal policy, lower taxes and lighter regulation proposed by U.S. President-elect Donald Trump would lead to stronger growth and higher inflation.

 How should we compensate the losers from globalisation? -  The rise in political “populism” in 2016 has forced macro-economists profoundly to re-assess their attitude towards the basic causes of the new politics, which are usually identified to be globalisation and technology. The consensus on the appropriate policy response to these major issues – particularly the former – seems to be changing dramatically and, as Gavin Kelly persuasively argues, probably not before time. Unless economists can develop a rational response to these revolutionary changes, political impatience will take matters completely out of their hands, and the outcome could be catastrophic. Unfortunately, while the nature of the problem is coming into sharper focus, the nature of a solution that makes economic sense while also being politically feasible remains embryonic at best (see Danny Leipziger). Until very recently, the mainstream attitude of economists towards globalisation was straightforward. Free trade was overwhelmingly believed to increase productivity and overall economic welfare, both in developed economies and emerging economies. Therefore, it was argued that barriers to trade and international capital movements should be reduced as rapidly as possible, wherever they existed. While it was recognised that there could be losers from free trade in the developed economies, these losers were thought to be few and temporary, compared to the gainers, who were many and permanent. The political upheavals of 2016 have forced economists to reconsider. The final shape of what is now called “populism” is not yet entirely clear. It does not seem to fit easily on the traditional right/left, or liberal/conservative, spectrum. This is why two of the most obvious benefits of the political revolution, Theresa May and Donald Trump, are hard to categorize in this regard [1].

 A big change to U.S. broadcasting is coming — and it’s one Putin might admire - Editorial Board, WaPo.  FOR YEARS, members of Congress have fumed about what they regard as ineffective U.S. public diplomacy, including the failure of broadcasting operations such as the Voice of America and Radio Free Europe/Radio Liberty to match the reach and apparent influence of networks such as Russia’s RT and Qatar’s al Jazeera. A frequent and arguably fair focus of criticism has been the Broadcasting Board of Governors, the body created to supervise government-funded media outlets while serving as a firewall between them and the political administration of the day. A radical change to that system is now coming — and it looks like one that Vladi­mir Putin and Qatar’s emir might well admire. An amendment quietly inserted into the annual National Defense Authorization Act by Republican House leaders would abolish the broadcasting board and place VOA, RFE/RL and other international news and information operations under the direct control of a chief executive appointed by the president. The new executive would hire and fire senior media personnel and manage their budgets. With a confirming vote by the GOP-controlled Senate, President-elect Donald Trump will be able to install the editor of Breitbart News or another propagandist of his choice to direct how the United States is presented to the world by VOA, or how Russia is covered by RL. If Congress’s intention was for U.S. broadcasting to rival the Kremlin’s, it may well get its wish. The damage to U.S. interests could be considerable. The unique attraction for global audiences of RFE/RL, Radio Free Asia and other outlets is not their skill at presenting the U.S. government line, but their journalistic independence. They were created to be “surrogate media,” news organizations that offered accurate and independent coverage of events in countries where citizens could not depend on their own, state-run media. RFE’s coverage of Communist Europe was vital to the growth of the independent political movements that eventually brought down the system. Radio Free Asia strives to serve the same purpose in China, as does Radio y Televisión Martí in Cuba.

Merkel, Hollande back extending sanctions on Russia over Ukraine | Reuters: The leaders of France and Germany, speaking two days before an EU summit which will discuss the conflict in eastern Ukraine, said they want to extend sanctions against Russia due to a lack of progress in implementing a ceasefire deal. The conflict between Ukrainian forces and Russian-backed separatists has claimed nearly 10,000 lives since it erupted in 2014. Germany and France have tried to convince both sides to implement a peace deal agreed in Minsk last year but with little success so far. EU leaders will on Thursday discuss extending sanctions, which include restricting access to international financing and curbs on defence and energy cooperation with Russia. Merkel, speaking with Hollande who was visiting a Franco-German conference on the digital economy in Berlin, said implementation of the ceasefire deal was "very sluggish". "It will be necessary to extend the sanctions against Russia again - although we would have wished for better progress in the implementation of this process," she said. Hollande agreed. "We must continue to apply the terms of the Minsk agreement and when they are not carried out, we must continue with sanctions," he said. The sanctions were extended several times and are due to expire at the end of January. Kiev and the West accuse Russia of stoking the separatist movement and aiding the rebels. The Kremlin denies these charges and accuses Ukraine of perpetuating the violence and violating the Minsk deal.

Socio-Economic Determinants of the Italian Referendum Vote -- On Sunday 4 December, Italy held a constitutional referendum in which almost 60% of the voters decided against a reform proposed by the government. The vote triggered the resignation of Prime Minister Matteo Renzi and opened a phase of political transition that will lead to new elections. In light of the new elections ahead, it is important to understand the factors driving this vote. To investigate this, I run a regression analysis of the share of votes for NO at the province level on various socio-economic characteristics. Then I compare these findings with the drivers of the vote for the Democratic Party (Matteo Renzi’s party) in 2014 and with the drivers of the Brexit vote, which have been explored by my colleague Zsolt Darvas. I find that the Italian NO vote was positively correlated with “economic malaise”, that is to say unemployment and relative economic backwardness. Provinces with a higher share of young people tended to record a relatively higher share of NO votes, and this appears to be linked to the incidence of youth unemployment at the province level. Contrary to the case of Brexit, the outcome of the Italian vote at the province level does not appear to be driven by uneducated voters. Moreover, despite the strong anti-immigration rhetoric of one of the main parties that campaigned actively for NO (the Northern League), I find that the provinces with a higher share of foreign residents voted relatively less in favour of NO. These two elements suggest that it would be reductive to just interpret this vote as the latest example of a populist electoral victory, and that deeper factors must be considered – especially those of an economic nature. Unemployment does not appear to be significantly correlated with the share of votes gathered by the Democratic Party in 2014. The fact that two years later unemployment became an important driver of NO vote may indicate that some voters possibly felt let down by a government who had at the core of its agenda the improvement of labour market conditions.

Monte Paschi "Scrambles" With Last Minute Capital Increase To Avoid Nationalization --Having picked a new prime minister to replace Matteo Renzi, when as reported this morningItalian president Sergio Mattarella asked Foreign Minister Paolo Gentiloni, a loyalist from Renzi's Democratic Party, to form a new government, the chaos surrounding Italy's political future appears to be subsiding, which as we said this morning, is welcome news for the future of Monte Paschi, as Italy's third largest bank may once again avoid a state bailout should enough private investors turn up and inject funds into the failing financial institution, the world's oldest. So it comes as no surprise that, facing a third nationalization in just a few years, Bloomberg reports that Banca Monte dei Paschi di Siena plans to step up efforts to win investors for a debt-for-equity swap in the coming days, and will once again press ahead with a €5 billion capital raise to avoid a state rescue that would impose losses on bondholders and shareholders, an outcome the ECB suggested on Friday would be unavoidable absent a private sector rescue.Bloomberg adds that the bank's board is meeting Sunday to review a fresh offer for note holders that would allow more retail investors to participate after money managers already swapped €1.02b, although it remains unclear why more investors would take on the bank's offer. Meanwhile, Reuters writes that Monte Paschi was "scrambling on Sunday to thrash out a last-ditch plan to raise €5 billion on the market by year-end after the European Central Bank refused to give it more time to recapitalize." Rome is ready to intervene with an emergency decree to rescue the bank if needed, a government source said on Friday. Such an intervention would impose losses on bondholders as per European bail-in regulations.As Bloomberg has now confirmed, the eleventh-hour private solution being drawn up by the bank, advised by JPMorgan and Mediobanca, involves reopening a debt-to-equity swap offer to 40,000 retail investors holding 2.1 billion euros of the bank's subordinated bonds, but this needs the approval of market watchdog Consob.

Italy’s Monte dei Paschi to Reopen Debt-to-Equity Swap Offer - WSJ: Troubled lender Banca Monte dei Paschi di Siena SpA said late Sunday it will reopen a debt-to-equity swap offer, as part of a last resort attempt to complete a €5 billion recapitalization to stay afloat and avoid being bailed out by the Italian government. The bank is racing against time to complete its capital raise by the end of the year, after the European Central Bank, which supervises large eurozone lenders, rejected MPS’ request for more time to complete its plan. The ECB had granted MPS until the end of the year to raise the additional capital it needs as part of a major overhaul at the bank, which includes the sale of €28 billion worth of bad loans. The bank had already offered its bondholders to swap €4.3 billion worth of subordinated, or riskier bonds, into shares. However, the bank raked in only €1 billion in fresh capital from the previous conversion offer. Now it said it would open it again, after receiving regulatory authorizations, targeting investors “who had shown interest,” it said in a statement. MPS plans have been complicated by a government crisis—and the uncertainty it unleashed—prompted by the Italian’s rejection of constitutional reforms in a referendum a week ago.On Sunday, Italy’s President Sergio Mattarella asked departing Foreign Affairs Minister Paolo Gentiloni to form a new government in a bid to quickly end a political crisis triggered by a ’no vote’ in last week’s constitutional referendum.

Paolo Gentiloni, Renzi's 'dull' foreign minister, becomes Italy's new prime minister (AFP) - Paolo Gentiloni, the man named Sunday as Italy's new prime minister, is a trusted ally of his predecessor Matteo Renzi, to whom he owes his rise to the summit of national politics. Even before he was named, opponents were suggesting the silver-haired foreign minister had been hand-picked by Renzi as a stand-in leader who is dull enough not to pose any threat to the outgoing premier's comeback hopes. Renzi, who resigned last week after a crushing referendum defeat, remains leader of his Democratic Party (PD) and has made it clear he plans to fight the next election as its candidate to head a new government. Aged 62, Gentiloni is a former student radical who comes from a well-to-do Roman family with aristocratic roots. He has long been associated with the Green wing of Italy's left but has steadily moved towards the centre ground over the course of a long, unspectacular career. He was made foreign minister in October 2014, having been plucked from obscurity to replace Federica Mogherini following her appointment as the European Union's foreign policy chief. It was an appointment that raised eyebrows at the time. The man chosen by Renzi was virtually unknown to the public. He had no experience in foreign affairs and his ministerial career had been limited to a stint as communications minister in Romano Prodi's 2006-08 government.

Italy poses a huge threat to the euro and union - Wolfgang Münchau, FT - Chronic inability to separate the probable from the desirable has been the tragedy of 2016.  Wishful thinking is becoming a threat to the survival of liberalism itself. This tendency is especially evident in the discussion about Italy’s future in the eurozone. The complacent now say that Italy is good at muddling through; that the establishment can always stitch up the electoral system to prevent a victory by an extremist party. In any case, the Italian constitution does not allow for a referendum on leaving the euro. So it cannot happen.  Really? I don’t think so. Start with the discrepancy in economic performance between Germany and Italy.   One metric is the imbalances within Target 2, the eurozone’s payment system. At the end of November these reached higher levels than during the height of the eurozone crisis in 2012. Germany’s surplus is at €754bn, while Italy’s deficit is at €359bn. A part of the imbalances relates to the European Central Bank’s programme of quantitative easing, and is thus harmless. But the bulk is due to what might be described as a silent bank run. Lack of sustainability does not necessarily imply exit. It is possible, in theory, that the political will overrides the economic needs for ever. Or that the unsustainable could be rendered sustainable. For that to happen, at least one of five conditions would have to be fulfilled. First, Italy and Germany could converge. To do this, Italy would need to undertake economic reforms to clean up the justice system and the public administration, cut taxes and invest in productivity-increasing technologies. Germany would need to run a higher fiscal deficit. Second, the northern European states accept large fiscal transfers to the south. Third, the EU creates a federal political authority with powers to raise taxes in order to transfer income from high to low-income earners. Fourth, the ECB finds a way to bankroll Italian public and private debt indefinitely. Or fifth, Italy’s government will forever continue to support euro membership.

 Italy's Largest Bank Laying Off 14,000, Raising €13 Billion In Business Overhaul- UniCredit announced on Tuesday a major restructuring plan to raise €13 billion in capital to return the Italian bank to profitability, hoping that a balance-sheet cleanup and cost cuts will persuade investors that Italy’s biggest bank can restore profitability even without much revenue growth. As part of the three-year strategy, the bank plans to shed an additional 6,500 jobs, bringing the total to 14,000, as it aims for 1.7 billion euros of annual cost savings. The bank is targeting 4.7 billion euros of net profit in 2019 with a return on tangible equity above 9%, Milan-based UniCredit laid out in a presentation this morning. UniCredit's new CEO Jean Pierre Mustier, a 55-year-old Frenchman, in July took the helm of a lender burdened by a mounting pile of bad loans, record-low interest rates and Italy’s longest recession since World War II. According to Bloomberg, the bank had the slimmest capital buffer among those deemed important to the financial system in the latest European stress tests.

Italy prepared to pump 15 billion euros into ailing banks: sources | Reuters: Italy's government is ready to pump 15 billion euros into Monte dei Paschi di Siena (BMPS.MI) and other ailing banks, sources said, as the country's third-largest lender pushes ahead with a private rescue plan that is widely expected to fail. The world's oldest bank has until Dec. 31 to raise 5 billion euros ($5.2 billion) in equity or face being wound down by the European Central Bank, potentially triggering a wider banking and political crisis in Italy. If needed, the government will pump 15 billion euros into the Siena-based lender and several other smaller banks to prevent that, two sources close to the matter said on Thursday. One source said unlisted regional banks Banca Popolare di Vicenza and Veneto Banca, which were rescued this year by a state-backed fund, would also get support from the state. The government would make the 15 billion euros available in a decree on Dec. 22, La Repubblica newspaper said on Thursday, adding that Banca Carige could also benefit. Italy's banking sector is saddled with 356 billion euros of bad loans, around a third of the euro zone's total and a legacy of the 2008-2009 global financial crisis when, unlike Spain or Ireland, Italy did not act to help its banks.

   So Who Gets to Pay for Italy’s Banking Crisis - Since rumors of yet another publicly funded bailout emerged early last week, bank shares have taken off, not only in Italy but across most European markets. Shares of Unicredit, Italy’s only “systemically important financial institution,” has surged 20%, while Italy’s second largest bank, Intesa Sanpaolo, is up 10%.Once again, just the slightest hint of future government and/or central bank intervention is enough to steady the nerves of today’s welfare-addled investors. For now.Monte dei Paschi di Siena (MPS), which has already raised capital twice, will have one last chance this week to raise the capital it needs (min: $5 billion) from private investors. Given its abject failure to raise more than €1 billion of new capital over the last six months, despite the assistance of one of the world’s biggest, best connected mega-banks, JP Morgan Chase, it’s a mighty big call. If it does fall short, it will have one last lifeline at its disposal, Plan Z: a full-blown taxpayer-funded bailout, potentially including a bail-in of subordinated bondholders.The idea of bailing in subordinated bondholders is a touchy subject in Italy, since they include thousands of retail investors to whom the banks “mis-sold” complex financial instruments as safe investments during the lean years of Europe’s sovereign debt crisis. The last time subordinated bondholders were bailed in at a handful of regional banks at the tail end of last year, one retired investor took his own life after losing all his life savings. However, as Reuters’ financial editor, George Hay, points out, the political impact may be overstated:Over 85% of Italian bail-in instruments are held by the wealthiest 10% of domestic households, according to the Centre for European Policy Studies. If bonds were mis-sold, compensation could be added as needed – as happened in the case of Spanish lender Bankia.Alas, since Bankia’s taxpayer funded rescue in 2012, the Spanish government, with the funds of Spanish taxpayers, has refunded not only the bank’s retail bondholders but also many of its duped shareholders.

ECB's Coeure - deflation risks largely disappeared but stimulus needed | Reuters: The threat of deflation in the euro zone has largely disappeared but the bloc still need stimulus to lift inflation back towards the European Central Bank's target of close to 2 percent, ECB Executive Board Member Benoit Coeure said on Monday. Responding to questions on Twitter, Coeure also said "helicopter money", a concept that typically refers to distributing central bank cash directly to citizens, was likely to blur the line between the ECB's monetary policy and governments' fiscal policy.

ECB sees no need to enhance measures to fight asset bubbles | Reuters: The European Central Bank will not ask euro zone countries to beef up measures to curb asset bubbles, it said on Thursday, even as it warned about rising property prices and household debt in some countries. With ECB rates deep in negative territory and borrowing costs at record lows, property prices have soared in parts of Europe, raising concerns that super easy monetary policy is inflating bubbles and potentially sowing the seeds of a new crisis. "Cyclical systemic risks remain contained in most of the countries covered by ECB Banking Supervision and in the euro area as a whole, with the financial cycle slowly picking up," the ECB said on Thursday, arguing that no broad-based increase in countercyclical capital buffers is warranted. Such buffers are implemented to cool booms by curbing credit or to force lenders to build capital buffers in good times and to prepare for potential stress. The EU's financial risk watchdog, headed by ECB President Mario Draghi, warned eight countries last month over asset bubble concerns but most have already started to strengthen their prudential policies, the ECB said. Non-EU member Norway increased its countercyclical buffer on Thursday as property prices there continue to soar despite relatively modest growth. "Most countries have already started to strengthen macroprudential policies in the real estate sector, but additional targeted macroprudential measures should be deployed," the ECB said.

Panic Bid For Collateral Sends German 2Y Yield To New Record Low --Another day, another mad dash for German 2Y Bunds in a continent deprived of collateral.As we noted yesterday, when 2Y Bunds dropped to a fresh all time low, the ECB had failed in its bid to fix the European repo market by expanding the eligible universe of collateral to include €50 billion in cash at its meeting one week ago.Today, it's more of the same, and as longer yields continue to rise around the globe, and Germany as well, the short-end is a different story, with the panic bid for the German short end hiting record levels, and moments ago pushing the yield on the 2Y to a new all time low of -0.78%.At this point it is safe to say that some is very structurally broken with the European bond market, but what is scarier is that the ECB thought its stopgap measure unveiled last week would fix it. That it failed to do that merely shows that even the ECB has virtually no understanding of what is going on in Europe's bond market.

 Europe "Infuriated" By Greek Decision To Give Impoverished Pensioners A Christmas Bonus - On Wednesday, Greek yields surged when it emerged that diplomatic relations between Greece and the Eurogroup had broken down once again, after European finance ministers suspended negotiations over granting short-term debt relief to Greece as a result of pledges by embattled Greek PM Tsipras unexpectedly said he would grant low-income pensioners a pre-Christmas payoff by spending €600 million to the nation's 1 million low-income pensioners, to replace a Christmas bonus scrapped by the Greek bailout supervisors. Assuming that the threat of not granting Greece some theoretical debt concession (which would reduce Greek debt by 20% some time in 2060) would be sufficient, the bureaucrats gave the Greek government a few hours to come to their senses and to eliminate the promise to pensioners.That did not happen and instead on Thursday, Greek lawmakers backed the decision to allocate €617 million - a surplus from savings - in a bonus to pensioners as Greece snubbed its international lenders and legislated plans to give pensioners a one-off Christmas bonus despite the clear warning from creditors in what has become the latest standoff over the country's third bailout. "(Greek) people have to see that sacrifices of now six, seven years are at last starting to pay off," said Greek Finance Minister Euclid Tsakalotos in a visit to Brussels. But jaded by those sacrifices and almost a dozen pension cuts which has pushed almost half of the country's elderly into poverty, about 5,000 pensioners marched peacefully through the streets of Athens on Thursday night. "We came here to send a message. No more!," protesting pensioner Efstratios Bozos told Reuters.

Greece and Creditors in Showdown Again  -  Yves Smith - Sadly, we’ve seen this movie before. The creditors have the means to crush Greece and have no compunctions about inflicting pain. Greece had struck a deal with its creditors, which in this iteration includes the European Stability Mechanism (ESM). The agreement on December 5 included an interest rate reduction on the country’s over €300 billion of borrowings. Three days later, prime minister Alex Tsipras announced that he would give a special Christmas bonus to the poorest pensioners, those receiving less than €800 a month, and would not put through a scheduled increase in the VAT for the outermost Greek islands that had been hard hit by dealing with migrants from the Middle East. The ESM reacted harshly, saying the debt relief agreement was off. From the BBC:Earlier, eurozone lenders suspended their recently agreed short-term debt-relief plan for Greece. They said they had not been asked to approve the bonuses plan.The European Stability Mechanism (ESM), the body that helps eurozone governments in trouble, said it would now be scrutinising the proposed handout.“Following recent proposals by the Greek government to spend additional fiscal resources for pensions and VAT, our governing bodies have put their decisions temporarily on hold,” a spokesman for the ESM said.  The Guardian gives Tsipras’ rationale for the extra, unapproved spending: he was ahead of targets and by his calculation, had extra cash in the till:The prime minister, Alexis Tsipras, was taken by surprise on Wednesday when the European Stability Mechanism announced it would not honour an accord to ease the burden of Greece’s debt pile. The decision, taken in direct retribution for a series of surprise social welfare measures unveiled by the leader, is likely to put Athens on a war footing with lenders amid mounting signs of the Greek crisis flaring again…The announcement followed a statement by the Euro group of finance ministers, representing members of the single currency, which also suggested that Athens had acted out of line. Earlier on Wednesday Germany – the single biggest contribu tor to the three bailouts Greece has received since 2010 – said the benefits were incompatible with programme targets…Despite the outcry he has categorically refused to rescind the special pension supplement, saying the €617m required for the bonus will be drawn from the budget surplus his government has managed to achieve.

Former Icelandic minister claims US sent 'planeload of FBI agents to frame Julian Assange' during mission to the country in 2011 -  A former Icelandic minister has claimed that the FBI attempted to frame Julian Assange during a mission to Iceland. Ogmundur Jonasson, who currently serves as a member of the Icelandic Parliament, said US authorities told him in June 2011 that hackers were trying to destroy software systems in the country. The authorities said there was an 'imminent attack' on Iceland's government databases and that the FBI would send agents to investigate... Jonasson said it was only when a 'planeload' of FBI agents arrived in August that he realized the true reason for their visit. The former minister claims the FBI was seeking Iceland's 'cooperation in what I understood as an operation set up to frame Julian Assange and WikiLeaks'. Jonasson said he immediately told the FBI agents to leave the country.

Iceland Interior Minister Reveals Plot By Obama Administration "To Frame Julian Assange" --Back in October we noted a scheme, linked to the Hillary Clinton campaign, to tie Julian Assange and WikiLeaks to a pedophilia ring (see "Hillary Clinton Linked To Mysterious Front Associated with Julian Assange Pedophile Smear").  Of course, the scheme was revealed amid daily dumps by WikiLeaks of John Podesta's emails leaving the Clintons, and their many "friends in high places", scrambling for anyway possible to shut Assange down.  Therefore, it should probably come as no surprise that the former Interior Minister of Iceland, Ogmundur Jonasson, has now come forward to reveal details of a 2011 plot by the Obama administration to frame Julian Assange.  According to a report from RT, the U.S. first contacted Icelandic authorities in June 2011 to offer "help" in fending off hackers that the U.S. said were looking to destroy software systems in the country.  Jonasson was initially "suspicious" of the U.S. offer to help, suspicions which he said were confirmed later in the summer of 2011 when a "planeload of FBI agents" showed up in Iceland seeking support in an effort to "frame Julian Assange and Wikileaks."In June 2011, Obama administration implied to Iceland's authorities they had knowledge of hackers wanting to destroy software systems in the country, and offered help, then-Interior Minister Ogmundur Jonasson, said in an interview with the Katoikos publication. However, Jonasson said he instantly became “suspicious” of the US good intentions, “well aware that a helping hand might easily become a manipulating hand.”

 Urgent Brexit deal needed to avert banking job losses, peers to warn - Tens of thousands of banking jobs could be lost to continental Europe from next year if ministers do not agree a transitional deal on single market access with the EU, a Lords report on financial services after Brexit is expected to warn. Peers on the committee, due to report on Thursday, have been struck by the urgent need for financial institutions to make decisions on their location because they cannot wait until the end of Brexit negotiations in 2019 to find out if they can trade in the single market from London. The committee has been given a range of estimates of the likely job losses across the financial services sector including a claim from Ernst and Young, commissioned by the London Stock Exchange, that 200,000 UK jobs are at stake. The Brexit committee, one of several that has begun looking at the impact of the UK’s planned departure from the EU, has been warned that big banks will start making decisions next year, partly because the relevant financial arrangements take a year to unwind. Banks believe they need clarity on the UK’s trading relationship with the European Union long before the end of article 50 negotiations are due to be completed by the spring of 2019. They fear it could be necessary to relocate from London as soon as possible without transitional arrangements to ensure access to the single market post-Brexit. It is already becoming clear that a dividing line is developing between those ministers who think the complexity of the negotiations mean it is not possible to negotiate a new trading relationship with the EU by autumn 2018, requiring a transitional agreement, and those who think it is feasible simply to leave the EU and then trade with the EU on World Trade Organization terms.

Brexit plan will not be published before February, says David Davis - Britain will not have a Brexit plan until February but should be able to complete talks within 18 months and then go through a transitional phase of leaving the EU if necessary, David Davis has said. The Brexit secretary gave the clearest indications so far of the government’s thinking on how to leave the bloc, including that it will refuse to allow the EU any control over the UK’s immigration policy, as he appeared before the House of Commons committee on exiting the European Union. He said triggering article 50 before the end of March would set Britain on a straight path towards Brexit that would be “very, very difficult to revoke” but he also acknowledged the possibility of reversing the decision. Government lawyers have argued that the article 50 process is irreversible and the UK would be legally bound to leave after that point. However, Davis suggested it could be feasible, though the chance is remote. “There is a viewpoint, I think, which is only really fading, among some Europeans, that we can’t really mean this, that we can be persuaded to change our minds,” he said. “One of the virtues of the article 50 process [once it is started], it’s very difficult seeing it being revoked. We don’t intend to revoke it.” He added: “It may not be revocable – I don’t know.” After Theresa May relented to Labour and backbench Tory pressure to publish a plan for Brexit, Davis said it would be released as soon as possible but there were “quite a few decisions still to be made” about the way Downing Street wants to leave the EU, including the impact on business sectors, justice and home affairs. “It certainly won’t be next month,” he told MPs.

Brexit deadline not feasible, say insiders - There is little chance negotiations on Britain’s exit from the European Union will be finished by October 2018, as suggested by the European Commission’s lead Brexit negotiator Michel Barnier, according to policy insiders. Barnier said such a deadline would give Brussels enough time to approve a deal before March 2019, two years after British Prime Minister Theresa May said she would officially start exit talks. But more than four-fifths of the 50 leading policymakers and influencers who took part in the POLITICO Transatlantic Caucus — including ambassadors, business leaders and politicians from across the Continent and the U.S. — said the negotiations were “too complex” to be finished so quickly. All participants took part on condition of anonymity. One said “it will take the full two years” to strike a deal whereas others said agreeing a framework for a future relationship between the EU and the U.K. will go beyond the two-year timeframe. “The details are simply too complicated and fraught politically to resolve both the divorce and the new relationship within the two-year period provided under Article 50,” said one respondent. Some respondents said uncertainty about British plans and demands make it likely more time will be needed. “Nothing is going according to any plan,” one of the Caucus participants said. Most people said a transitional agreement of some sort will be needed to bridge the gap between the U.K.’s exit and the start of any new agreement. Half of the respondents believed EU law will continue to apply after Brexit — but only for a limited time. Another 42 percent said a transitional arrangement will apply until the U.K. can agree a trade deal with the EU. Most respondents believed that such a deal “seems to be the most pragmatic way” of handling the situation, despite being “far from ideal,” but added such an arrangement cannot be permanent.

Brexit trade deal could take 10 years, says UK's ambassador - BBC News: A post-Brexit UK-EU trade deal might take 10 years to finalise and still fail, Britain's ambassador to the EU has privately told the government. The BBC understands Sir Ivan Rogers warned ministers that the European consensus was that a deal might not be done until the early to mid-2020s. He also cautioned that an agreement could be rejected ultimately by other EU members' national parliaments. In October, Sir Ivan, who conducted David Cameron's negotiation over the UK's relationship with the EU, advised ministers that the view of the 27 other countries was that a free trade agreement could take as long as a decade. He said that even once concluded, the deal might not survive the process of ratification, which involves every country having to approve the deal in its own parliament. It is also understood he suggested that the expectation among European leaders was that a free trade deal, rather than continued membership of the single market, was the likely option for the UK after Brexit. Sir Ivan's private advice contrasts with ministers publicly insisting a deal can be done in the two years allowed by the triggering of Article 50 - the formal start of the process of leaving the EU.

How the Brexit divorce will play out - Politico - At the European Council Thursday, Britain and the other 27 EU member countries will start to put the fights and angry recriminations of June’s Brexit referendum to one side and finally begin the formal stages of separation. Over dinner, the Continent’s leaders will meet without Theresa May to begin building their case against the unfaithful, departing partner. In the statement to be published after the dinner Thursday night, the EU 27 will announce plans for an EU Council — probably an extraordinary one after the March summit — within weeks of Britain formally triggering Article 50 early next year, diplomatic sources told POLITICO. The move is designed — in part — to head off complaints about member countries being sidelined from the negotiations with Britain. At the summit next year, the European Commission will be confirmed as the bloc’s lead negotiator — the nightmare federalist divorce lawyer tasked with getting the best deal for EU capitals who are fearful of being picked off and weakened as a bloc by the U.K. According to two senior sources in Brussels, the EU 27 will ram home their message of unity in the statement at the end of this week’s dinner. According to diplomats who spoke to POLITICO, the message will be simple: We are ready, it’s time you got on with it.

The in-betweeners - Frances Coppola --  How effective is monetary policy? Highly effective, according to the Governor of the Bank of England. In a speech earlier this week, Mark Carney robustly defended the Bank of England's record... Well, lots of us might agree that monetary policy did help to offset the damaging effects of bank and household deleveraging in the aftermath of the worst financial crisis since the 1930s. ... But the most persistent criticism of monetary policy is that it has, in the words of HSBC's Stephen King, "unfortunate distributional effects". It benefits the holders of financial assets - primarily the rich - at the expense of those dependent on interest income, who are believed to be much poorer, though not necessarily the poorest. Carney is having none of it. He rejected the distributional criticism of monetary policy... He points to these two charts as evidence that the poor have done better than the rich from monetary policy...It is all very well crowing that the poorest have been supported. They have, to some extent, though perhaps not quite as much as you claim. But it is painfully evident that the "in-betweeners" have had much less support. Relative to the rich, they have lost out both in wealth and in income. And relative to the poor, they have lost out too: they no longer qualify for many benefits and other public support, and they are seeing public money going to people not much poorer than them while they are left to struggle on their own. These are people who see themselves as having done everything right: they have worked hard, saved and paid into the system. Now, they think the system has abandoned them. And with reason.

Amazon Warehouse Workers Have Resorted To Sleeping In Tents - Amazon factory workers in Britain are sleeping in tents close to one of the company’s largest UK warehouses because they can’t afford the commute to work, Scottish newspaper The Courier has reported. Amazon maintains one of its giant packaging warehouses, known as fulfilment centers, near the town of Dunfermline in Scotland. Over the weekend, The Courier said it had seen at least three tents in woodland close to the Dunfermline warehouse, and spoke to one Amazon worker who was staying in a tent. According to the newspaper, the worker, who wished to remain anonymous, said that they couldn’t afford to pay to travel to work and back from their home in Perth—around a 60 mile round trip. While Amazon pays its Scottish staff above the minimum wage in Britain, workers can be pushed to work up to 60 hours a week. The company provides a bus transport for workers, but this can cost up to £10 a day, more than an Amazon worker’s initial hourly pay of £7.35 ($9.30). The facility, one of 12 in the UK, hosts 1,500 permanent staff, but the increase in order demand around the Christmas and New Year period sees more than 3,000 extra staff hired. The incident throws light on the hidden supply chains and unseen labor of online shopping, especially during busy periods. "The intensity of the work means that people are just working, eating and sleeping," Scottish Liberal Democrat leader Willie Rennie, who has previously been critical of Amazon’s operations in Scotland, told Motherboard “The wages are too low which means people are driven to live like this to make work pay. The intensity of the work means that people are just working, eating and sleeping,” he said. Motherboard asked Rennie whether workers resorting to sleeping in tents was a case of low pay or too many working hours. He replied, “It is a bit of both. It's long hours, low pay and intense work. Pickers are expected to walk a half marathon a day. They work until they drop.”

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