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

Saturday, December 31, 2016

week ending Dec 31

  Fed Watch: Is The Fed About To Experience A Repeat of 2016? - In the most recent Summary of Economic Projections, Fed officials penciled in three 25bp rate hikes for 2017. The reality, however, could be very different. We all remember how “four” became “one” in 2016. The median dots are neither a promise nor an official forecast. As 2016 progressed, forecasts associated with a lower path of SEP “dots” evolved as the consensus view of policymakers. Will the same happen this year? I don’t think so; it is hard to see the Fed on pause for another twelve months. As a starting point, I think it best to assume the US economy is near full-employment. But the US economy was near full-employment at this time last year as well. I think the key difference between then and now is that then the after-effect of the oil price slide and dollar surge placed a drag on the US economy sufficient to ease hiring pressure. At the same time, labor force participation perked up, setting the stage for a flat unemployment rate for most of the year. Inflationary pressures eased as well; the January inflation pop proved to be short-lived: In effect, the US economy settled into a nice little equilibrium in 2016 that obviated the need for additional rate hikes. To expect a repeat scenario in 2017, one would need to assume that the US economy does not pick up speed and threaten that equilibrium by pushing past full employment. Evidence, however, piles up suggesting that the slowdown of the past year is drawing to a close. ISM manufacturing and nonmanufacturing surveys are stronger, temporary help employment is heading up again, new manufacturing orders for nondefence, nonair capital goods have flattened out, and the broader inventory overhang is easing: All of this occurs in the context of an unemployment rate that suddenly dipped toward the lower end of the Fed’s estimates of the natural rate of unemployment. And if the demographic forces reassert themselves, there is likely to be further downward pressure on the unemployment rate – job growth is well above estimates necessary to hold unemployment constant. But would a total of 75bp of hikes be necessary to hold inflation in check? That depends in part the sensitivity of inflation to greater resource utilization. Greg Ip of the Wall Street Journal noted last week:

 Relationship Between The Dollar And Inflation Expectations Has Completely Reversed Since Summer - At least since 2003 (which is when our data on TIPS begins), the dollar and breakeven inflation expectations have had a negative relationship. Said differently, when the dollar strengthens (as it has done recently) inflation expectations tend to fall and vice versa. (note: the USD index is inverted in all the charts below) A strong negative relationship has been especially true since 2010 when the correlation between the USD index and 10-year TIPS implied breakeven inflation has increased to a robust -80%. We know, of course, that in the short-term strong relationships can break down and sometimes completely reverse. This type of complete reversal is what has occurred since this summer.Since 6/30/2016, the correlation between the dollar and inflation expectations has skyrocketed to +92%. So the dollar has gone up AND inflation expectations have increased as well step for step. Ultimately, we believe that these two series will likely revert back to the more traditional relationship and the “gap” that has opened up in the first and second chart below should close.  A similar episode, granted to a much lesser degree, occurred at the beginning of 2015 and by August 2015 the dollar and inflation expectations had synced back up. To us, a similar reversion to the norm seems like the most probable outcome at the moment.

ECRI Weekly Leading Index: WLI Reaches New High - Today's release of the publicly available data from ECRI (Economic Cycle Research Institute) puts its Weekly Leading Index (WLI) at 144.0, up 0.1 from the previous week. It is currently at an all-time high, with levels not seen since 2007. Year-over-year the four-week moving average of the indicator is now at 9.52%, up from 8.93% the previous week. The WLI Growth indicator is now at 11.8, up from 11.3 the previous week and its highest since 2010. ECRI's latest feature article discusses the downside of possible repatriation tax reforms on labor productivity growth. A Q4 CEO Roundtable survey by ECRI suggests that many CEOs plan to increase hiring, but decrease capital spending if President-Elect Trump changes the repatriation tax policies. According to ECRI, this will lead to a subdued recovery in labor productivity growth based on simple math - the ratio of capital spending to hours worked = capital intensity. Read the full article here. Below is a chart of ECRI's smoothed year-over-year percent change since 2000 of their weekly leading index. The latest level is above where it was at the start of the last recession.

 How a Budget Chief Can Wreak Havoc – NY Times - Mick Mulvaney, the Republican congressman and fiscal hawk nominated by Donald Trump to head the White House Office of Management and Budget, will, if confirmed, be in charge of creating and promoting Mr. Trump’s federal budgets, a position that would put him at the center of debates within the administration and with Congress over the president’s priorities. As the O.M.B. director, Mr. Mulvaney would also have power to advance or impede federal regulation, because many proposed rules have to pass muster at O.M.B. before they are issued. Because all policies affect the budget, all policies, directly or indirectly, fall into the O.M.B.’s purview at some point. Mr. Mulvaney would thus play an important role in decisions about how to dismantle the Affordable Care Act, a Republican priority. He would also have a voice in discussions over Mr. Trump’s infrastructure plan. As a sworn enemy of government spending, it seems likely he would prefer to finance the plan by giving tax cuts to private developers rather than sending federal money to the states — a move that would create windfall profits for a few private businesses without adequately meeting public infrastructure needs.On regulatory actions over which the O.M.B. has a say, there is every reason to believe that Mr. Mulvaney, serving in a Trump administration, would water down or indefinitely delay proposed rules. During his time in Congress, he has supported regulatory rollback efforts, including legislation to strip President Obama of executive rule-making authority. The rules over which the O.M.B. has influence include energy and environmental standards, labor protections and food safety. An unanswered question is how a deficit foe like Mr. Mulvaney could actually get behind the Trump economic agenda. Mr. Trump has proposed tax cuts that would cost $6.2 trillion over 10 years, according to estimates by the nonpartisan Tax Policy Center. On top of those cuts, he has proposed vast new spending on defense and infrastructure. The combination of tax cuts and new spending would result in a huge increase in federal debt — which Mr. Trump and Mr. Mulvaney could cite as an excuse to make devastating spending cuts to other federal programs and services. Or Mr. Mulvaney could sign off on reckless budgets by pushing for rosy economic assumptions that can make it seem as if revenues will rise and deep deficits will disappear. Budget directors can also employ the “magic asterisk” (popularized by David Stockman, the budget director for President Ronald Reagan), which is used to denote unspecified budget cuts that will someday, somehow offset projected deficits.

The Congressional Budget Office has some bad news for Obamacare repealers -- The Congressional Budget Office has stepped into the Obamacare repeal fight, issuing a fierce warning to Republicans in the form of … a sternly worded blog post.  CBO, in its new blog post, says it won’t let Republicans count especially skimpy coverage as health insurance. They argue that health insurance needs to provide “financial protection against high medical costs” for CBO to count the people who buy it as covered.  This is important, because in principle you could provide insurance coverage to everyone while spending practically nothing if you were willing to make the insurance totally worthless. Imagine a government program offering everyone a government-run insurance plan with a $1 million deductible, 85 percent copays, and no coverage of preventative care. You could say that’s a health insurance plan — just a really terrible one.  Most Republican replacement plans aim to change this by repealing the Obamacare’s “essential health benefits” provision, which mandates that all insurers cover a set of 10 different types of care including maternity services and pediatric care. The House GOP’s “Better Way” plan would allow insurers to cut whatever benefits they no longer want to cover — a move that will likely benefit healthy people, who generally want less robust coverage. Most Republican plans also allow insurance plans to set annual and lifetime limits on how much they’ll pay out for medical care, a practice that the Affordable Care Act outlawed. Before the health care law, there were some “mini-med” plans that would cap annual health benefits at $5,000 — an amount you can easily blow through after a few days in the hospital.  These changes, taken together, get rid of a lot of definitions Obamacare set up for health insurance. CBO says, in this memo, that it’s not going to consider these things to be the same: It won’t count a plan that doesn’t really insure against the high cost of medical bills as health insurance. This is the key sentence: If there were no clear definition of what type of insurance product people could use their tax credit to purchase, everyone who received the tax credit would have access to some limited set of health care services, at a minimum, but not everyone would have insurance coverage that offered financial protection against a high-cost or catastrophic medical event; CBO and JCT would not count those people with limited health benefits as having coverage.

Obama Heads To The Hill To Strategize With Dems On Fighting Obamacare Repeal -- Yesterday we noted that Republicans are considering a piecemeal repeal of Obamacare even though they have no viable alternative that has been fully vetted and stands ready to replace the failed legislation (see "Republicans Consider Obamacare Repeal Without A Replacement Strategy").  And while Obama is happy to leave a path of destruction on his way out of the White House for the new administration to clean up, he's not so keen on Trump's vow to repeal his single crowning piece of legislation.  And while there's not much that Democrats can do at this point to stop a repeal by Republicans, Obama has decided to schedule a rare meeting at the Capitol next week to strategize with House and Senate Democrats and "share his perspective about the dangers posed by Congressional Republicans’ stated strategy."  Per The HillObama will hold a joint meeting with House and Senate Democrats at 9 a.m. Wednesday in the Capitol Visitor Center auditorium. The notice for the meeting says the session is expected to last "at least one hour."The White House said Obama will use the meeting to "share his perspective about the dangers posed by Congressional Republicans’ stated strategy to repeal the [Affordable Care Act] before proposing any replacement, creating chaos in the health system in the short run — and holding hostage Americans’ health care — while Republicans develop their plan."

Trump Might Be the End of the Bush-Obama Consensus - Say what you want about the Obama economy, but one aspect of it must be stated up front:  It was the “Happy Time” of crony capitalism. Maybe Obama’s was left-cronyism, whereas Bush pushed a right one, but no matter. Crony capitalism has done well since 2009.  Such is the conclusion of Regulatory Capture 101, and it’s no surprise. But this is not an article about the Obama economy. It is one about my concerns regarding the upcoming Trump one. As I write this, I have nearby Time magazine’s Person of the Year issue, filled with dark pictures of Trump and encomia for Clinton and other establishmentarians. It’s as if Time took its 1979 Man of the Year issue and autocorrected Ayatollah Khomeini with Donald Trump and earnest references to Jimmy Carter with Barack Obama.     Time blames Trump for the deep-seated divisions that surfaced and was stoked over the last year, but Trump didn’t create the divisions. If George W. Bush was an extremely divisive figure by 2008, then so became Barack H. Obama by 2016 since, after all, he simply rebranded, and then expanded, the very growth of government that causes division. In this sense, Obama simply served Bush’s third and fourth terms. He was all hope, but no change. It is happening again. What also makes our era different is that Trump will be a wealthy man entering the presidency, making him the first president since JFK to have little incentive to use the presidency to contribute to his personal wealth after leaving it. Like JFK, he will be harder to buy and therefore harder to control. Thus you can sense the shock and angst being expressed about how he might approach the empire. Why, what will become of Obama’s secret “kill list”? Will he make friends with Russia, de-escalate the Middle East, and let trade — and the peace it foments — take root?  If you are a crony, fear not. Trump’s ridiculous intentions to increase infrastructure spending (when public spending on infrastructure in 2015 equaled $32 billion a month) and to rebuild the military have crony capitalism written all over them. Such plans garner support from representatives whose re-election depends on maintaining existing public spending levels in their districts, but they don’t exactly drain the swamp.     

Cyber security takes on new urgency for groups targeted by Trump - With under a month to go until Donald Trump’s inauguration as president, activists from the grassroots to large organizations like the ACLU are working to fortify their digital platforms against potential government intrusions. Many fear that a Trump presidency will usher in an age of greater government surveillance and the suppression of civil rights. “We can’t trust Trump with the NSA,” argued John Napier Tye, who served in the U.S. State Department’s Bureau of Democracy, Human Rights, and Labor from 2011 to 2014. “There are simply not enough safeguards in place to protect Americans from our own National Security Agency.” Others point out that while Americans’ privacy has been eroded under past presidents, Trump may push the state surveillance apparatus to new limits. And this is especially concerning to historically marginalized communities, as technology and civil rights analyst Logan Koepke warned, saying, “People of color, activists, and community organizers disproportionately are targets of the surveillance state.” As Inauguration Day quickly approaches, groups have been forced to decide which aspects of cyber security to prioritize. For journalists, finding secure methods of communication and information sharing is a primary concern. While mainstream industry leaders like David Remnick and Christiane Amanpour have appealed to the need for better security in the Trump era, for those engaged in activism or leftist political coverage, the threat feels even more severe. “To prepare for life under Trump we’ll have to do more than download Signal and learn PGP,” admonished an organizer at the New Inquiry, referring to some common encryption practices among activist journalists. “We’ll have to learn how to scheme in the shadows, pass notes, and encrypt our offline communications as securely as we do our emails.” To that end, ad-hoc workshops, “cryptoparties” and online guides to digital security have multiplied across the country — and beyond — as journalists scramble to fortify their data.

Obama Quietly Signs The "Countering Disinformation And Propaganda Act" Into Law -- Late on Friday, with the US population embracing the upcoming holidays and oblivious of most news emerging from the administration, Obama quietly signed into law the 2017 National Defense Authorization Act (NDAA) which authorizes $611 billion for the military in 2017. But while the passage of the NDAA - and the funding of the US military - was hardly a surprise, the biggest news is what was buried deep inside the provisions of the Defense Authortization Act. Recall that as we reported in early June, "a bill to implement the U.S.’ very own de facto Ministry of Truth had 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.  “Surprisingly,” Portman continued, “there is currently no single U.S. governmental agency or department charged with the national level development, integration and synchronization of whole-of-government strategies to counter foreign propaganda and disinformation.”   In short, long before "fake news" became a major media topic, the US government was already planning its legally-backed crackdown on anything it would eventually label "fake news."

Under Cover of Christmas, Obama Establishes Controversial Anti-Propaganda Agency - In the final hours before the Christmas holiday weekend, U.S. President Barack Obama on Friday quietly signed the 2017 National Defense Authorization Act (NDAA) into law—and buried within the $619 billion military budget (pdf) is a controversial provision that establishes a national anti-propaganda center that critics warn could be dangerous for press freedoms.The Countering Disinformation and Propaganda Act, introduced by Republican Sen. Rob Portman of Ohio, establishes the Global Engagement Center under the State Department which coordinates efforts to "recognize, understand, expose, and counter foreign state and non-state propaganda and disinformation efforts aimed at undermining United Sates national security interests."Further, the law authorizes grants to non-governmental agencies to help "collect and store examples in print, online, and social media, disinformation, misinformation, and propaganda" directed at the U.S. and its allies, as well as "counter efforts by foreign entities to use disinformation, misinformation, and propaganda to influence the policies and social and political stability" of the U.S. and allied nations. The head of the center will be appointed by the president, which likely means the first director will be chosen by President-elect Donald Trump.

Don’t Gut America’s Voice and Turn It into Propaganda - It’s often the little things that lead up to the big moments. At present, there’s legislation that’s about to head to President Obama for signature that qualifies as one of those moments.  Embedded in the 2017 National Defense Authorization Act (NDAA) is language aimed at streamlining the bureaucracy of the United States’ government-funded international media outlets. And why not? From the Islamic State to Russia to China to Iran, our authoritarian adversaries have become exceptionally adept at advancing their agendas through pliant media outlets, propaganda, and disinformation. The United States has foreign outlets, too. But don’t be fooled by their old-fashioned names (like Voice of America and Radio Free Europe/Radio Liberty). These outfits, once feted for their success in penetrating the veil of the Iron Curtain, have evolved over last two decades to become modern, tech-savvy global media organizations. But they have been consistently hamstrung by bad governance. The presidentially appointed body that governs them, called the Broadcasting Board of Governors (BBG), is comprised of experienced and often gifted individuals, but frequently operated as a dysfunctional mess. The proposed fix, the result of a hodgepodge compromise between the Hill, the White House, and some BBG officials, is to replace the part-time BBG with a full-time CEO who would have full authority to run the show. The simplicity and likely efficiency of the new arrangement fits the pro-business zeitgeist of the new administration — except for one thing. The key to the success of U.S. broadcasting has always been its professional reporting in alignment with democratic values. For the sake of their credibility and journalistic integrity, the outlets have kept an arm’s length distance from the U.S. government. It’s a tricky balancing act, to be sure. Wisely, Voice of America’s edict has always been that “The news may be good. The news may be bad… We shall tell you the truth.”   Indeed. Without adequate checks and balances, a CEO appointed by the government would have endless trouble resisting the temptation (and pressure) to adjust the editorial line to the official U.S. position — and this in the best of times. In times like these, with the rise of post-truth “news,” a new commander-in-chief who is prone to play loose with facts, and a chief strategist who built the Breitbart media juggernaut, the result of the current reforms could be disastrous.

John Kerry just delivered the sharpest attack on Israeli settlements of any top US official -- US Secretary of State John Kerry used a high-profile speech Wednesday to deliver what was perhaps the clearest, most detailed attack on Israeli settlements ever articulated by a senior US official. The nearly 80-minute-long speech was striking in both its level of detail and its subtle yet unmistakable policy shifts. Kerry, who tried and failed to revitalize the moribund peace process, warned that Israel’s rapidly growing settler population — nearly 600,000 Jews live in East Jerusalem and the West Bank — could kill off any last chance at a two-state solution to the conflict and endanger Israel's future as a Jewish and democratic state.“If more and more settlers are moving into the middle of the Palestinian areas, it’s going to be that much harder to separate, that much harder to imagine transferring sovereignty — and that is exactly the outcome that some are accelerating,” he said.Kerry also laid into Israeli Prime Minister Benjamin Netanyahu, whose chilly relationship with the White House plunged to new depths last week after Washington abstained on a controversial UN Security Council resolution declaring that the establishment of settlements by Israel “constitutes a flagrant violation under international law.”“The Israeli prime minister publicly supports a two-state solution, but his current coalition is the most right-wing in Israeli history, with an agenda driven by its most extreme elements,” Kerry said. “The result is that policies of this government — which the prime minister himself just described as ‘more committed to settlements than any in Israel’s history’ — are leading in the opposite direction, toward one state.” Kerry also drew a direct parallel between the creation of the Jewish state in 1948 and the immense suffering of Palestinians, creating an equivalence that will almost certainly prove controversial among Israelis and many American Jews.  By specifically choosing to use the highly charged Arabic word “nakba,” which no other high-level US officials appear to have used before, Kerry essentially legitimized the Palestinian narrative of suffering in a much stronger, more emotional way than we have seen before from the US side.

Israel threatens to give Trump ‘evidence’ that Obama orchestrated UN resolution - Israel has escalated its already furious war with the outgoing US administration, claiming that it has “rather hard” evidence that Barack Obama was behind a critical UN security council resolution criticising Israeli settlement building, and threatening to hand over the material to Donald Trump.  The latest comments come a day after the US ambassador to Israel, Dan Shapiro, was summoned by Netanyahu to explain why the US did not veto the vote and instead abstained.The claims have emerged in interviews given by close Netanyahu allies to US media outlets on Monday after the Obama administration denied in categorical terms the claims originally made by Netanyahu himself.However, speaking to Fox News on Sunday, David Keyes – a Netanyahu spokesman – said Arab sources, among others, had informed Jerusalem of Obama’s alleged involvement in advancing the resolution.“We have rather iron-clad information from sources in both the Arab world and internationally that this was a deliberate push by the United States and in fact they helped create the resolution in the first place,” Keyes said.Doubling down on the claim a few hours later the controversial Israeli ambassador to Washington, Ron Dermer, went even further suggesting it had gathered evidence that it would present to the incoming Trump administration.“We will present this evidence to the new administration through the appropriate channels. If they want to share it with the American people, they are welcome to do it,” Dermer told CNN. According to Dermer, not only did the US not stand by Israel’s side during the vote, it “was behind this ganging up on Israel at the UN”.

Bibi Netanyahu Makes Trump His Chump - For those of you confused over the latest fight between President Obama and Prime Minister Bibi Netanyahu of Israel, let me make it simple: Barack Obama and John Kerry admire and want to preserve Israel as a Jewish and democratic state in the Land of Israel. I have covered this issue my entire adult life and have never met two U.S. leaders more committed to Israel as a Jewish democracy. But they are convinced — rightly — that Netanyahu is a leader who is forever dog paddling in the middle of the Rubicon, never ready to cross it. He is unwilling to make any big, hard decision to advance or preserve a two-state solution if that decision in any way risks his leadership of Israel’s right-wing coalition or forces him to confront the Jewish settlers, who relentlessly push Israel deeper and deeper into the West Bank. That is what precipitated this fight over Obama’s decision not to block a U.N. resolution last week criticizing Israeli settlements in the West Bank. The settlers’ goal is very clear, as Kerry put it on Wednesday: to strategically place settlements “in locations that make two states impossible,” so that Israel will eventually annex all of the West Bank. Netanyahu knows this will bring huge problems, but his heart is with the settlers, and his passion is with holding power — at any cost. So in any crunch, he sides with the settlers, and they keep pushing. Obama ordered the U.S. to abstain on the U.N. resolution condemning the settlements (three months after Obama forged a 10-year, $38 billion military aid package for Israel — the largest for any U.S. ally ever) in hopes of sparking a debate inside Israel and to prevent it from closing off any chance of a two-state solution.  More worrisome is the fact that President-elect Donald Trump — who could be a fresh change agent — is letting himself get totally manipulated by right-wing extremists, and I mean extreme. His ambassador-designate to Israel, David Friedman, has compared Jews who favor a two-state solution to Jews who collaborated with the Nazis. I’ve never heard such a vile slur from one Jew to another. Trump also has no idea how much he is being manipulated into helping Iran and ISIS. What is Iran’s top goal when it comes to Israel? That Israel never leaves the West Bank and that it implants Jewish settlers everywhere there. That would keep Israel in permanent conflict with Palestinians and the Muslim world, as well as many Western democracies and their college campuses. It would draw all attention away from Iran’s own human rights abuses and enable Iran and ISIS to present themselves as the leading Muslim protectors of Jerusalem — and to present America’s Sunni Arab allies as lackeys of an extremist Israel. This would create all kinds of problems for these Arab regimes. A West Bank on fire would become a recruitment tool for ISIS and Iran.

Israel’s Benjamin Netanyahu Summons U.S. Ambassador in Protest at U.N. Resolution—Israeli Prime Minister Benjamin Netanyahu summoned the U.S. ambassador on Sunday to lodge a protest over the Obama administration’s failure to block a United Nations resolution that condemned Jewish settlements in the West Bank, Israeli officials said. The Israeli foreign ministry also summoned top diplomats from 10 of the 14 countries who voted in favor of the resolution that deemed the settlements illegal and an obstacle to peace, the officials said. Israel doesn’t have diplomatic relations with some countries that voted for the U.N. Security Council  resolution on Friday, such as Malaysia, while other countries don’t have permanent representatives in the country. It was the first time in 36 years the Security Council was able to adopt a resolution condemning Israeli settlement construction in the West Bank and East Jerusalem. It was approved with 14 members in favor and the U.S. abstaining, while in the past the U.S. had used its veto power to block such resolutions. Israel expressed its consternation to U.S. ambassador Daniel Shapiro at a meeting in the prime minister’s office, insisting the resolution wouldn’t help to bring Israelis and Palestinians together for talks, according to an Israeli official. In Washington, a U.S. State Department spokesperson confirmed that Messrs. Netanyahu and Shapiro were scheduled to meet Sunday, but declined to comment further.  “Acts such as these hinder peace and [do] not promote it. That was the message,” said another Israeli official, adding that representatives of the U.K., China, Russia, France and other states had individual meetings with Israeli officials. The reprimand of diplomats follows two days of Israeli condemnations of the White House administration for allowing the U.N. resolution to pass. It underscored the deep disagreements between President Barack Obama and the Israeli leader over the Israeli-Palestinian conflict.

 China warns U.S. against allowing stopover for Taiwan's Tsai | Reuters: Taiwan President Tsai Ing-wen will pass through the United States when she visits Latin America next month, the Taiwan Foreign Ministry said on Thursday, angering China which urged the United States to block any such stopover. China is deeply suspicious of Tsai, who it thinks wants to push for the formal independence of Taiwan, a self-governing island that Beijing regards as a renegade province, ineligible for state-to-state relations. China said Tsai's intentions were clear and urged the United States not to let her in. "We hope the U.S. can abide by the 'one China' policy...and not let her pass through their border, not give any false signals to Taiwan independence forces, and through concrete actions safeguard overall U.S. China relations and peace and stability in the Taiwan strait," Hua Chunying, a Chinese Foreign Ministry spokeswoman, told a briefing in Beijing. The transit details are being closely watched as Taiwan media has speculated Tsai will seek to meet President-elect Donald Trump's transition team ahead of his January 20 inauguration. Trump angered China when he spoke to Tsai this month in a break with decades of precedent and cast doubt on his incoming administration's commitment to Beijing's "one China" policy. The United States, which switched diplomatic recognition from Taiwan to China in 1979, has acknowledged the Chinese position that there is only "one China" and that Taiwan is part of it.China's sole aircraft carrier, accompanied by several warships, sailed close to Taiwan this week, which followed on from air force exercises also close to Taiwan.

McCain: Russia Will ‘Undermine Democracy’ If Action Not Taken - - Sen. John McCain has warned President-elect Donald Trump’s team that Russia may “undermine democracy” if nothing is done about the Kremlin’s recent election meddling. In an interview with CNN aired Tuesday, McCain said more must be done about the CIA’s findings that the Kremlin interfered in the presidential election. “On the issue of the Russians, there is no doubt about it and we have to act and we have to have a policy—which this administration does not have—and address this threat to our national security,” he said. “If they’re able to undermine an election, they’re able then to undermine democracy,” he warned. Sen. Lindsey Graham echoed his concerns. “I think most of us, Democrats and Republicans, really believe that Russia is up to no good all over the world. They’re trying to break the back of democracies,” he said. While Trump has shrugged off the news of Russia’s involvement, McCain said he thinks “overwhelming evidence” would do the trick of getting Trump to change his stance on the matter. Rather than exercising caution with Russia, however, Trump has promised warmer relations with Moscow, praised Russian President Vladimir Putin, and filled his team with people who have strong Russia ties.

 Obama Set To Announce Economic Sanctions And "Covert Cyber Ops" Against Russia For "Election Hacking" - Just a week after Obama held a press conference announcing that he sent a stern warning to Vladamir Putin regarding his alleged "election hacking" efforts (see "Obama Told Putin To "Cut It Out" On Hacking"), the Washington Post is reporting that the Obama administration is close to announcing a series of economic sanctions and other measures to punish Russia for its "interference" in the 2016 presidential election.  Quoting "U.S. officials," WaPo said that an announcement from the Obama administration could come as early as this week and would likely include "covert cyber operations." According to WaPo's "sources", the delay in sanctions against Russia have come from Obama's inability to take unilateral actions under current laws.  While Obama previously signed an executive order that would allow him to freeze the assets in the United States of people overseas who have engaged in cyber acts, it only applies to actions that have threatened U.S. national security or financial stability.  Further, per a "senior administration official," use of the existing law would require (1) actual election infrastructure to be designated as 'critical infrastructure' and (2) the administration to prove that such infrastructure was actually "harmed," conditions which the National Security Council say have not been met.  The White House is still finalizing the details of the sanctions package. Holding up the announcement is an internal debate over how best to adapt a 2015 executive order that gave the president the authority to levy sanctions against foreign actors who carry out cyberattacks against the United States.

U.S. evicts Russians for spying, imposes sanctions after election hacks | Reuters: President Barack Obama on Thursday ordered the expulsion of 35 Russian suspected spies and imposed sanctions on two Russian intelligence agencies over their involvement in hacking U.S. political groups in the 2016 presidential election. The measures, taken during the last days of Obama's presidency, mark a new post-Cold War low in U.S.-Russian ties and set up a potential flashpoint between incoming President-elect Donald Trump and fellow Republicans in Congress over how to deal with Moscow. Obama, a Democrat, had promised consequences after U.S. intelligence officials blamed Russia for hacks intended to influence the 2016 election. Officials pointed the finger directly at Russian President Vladimir Putin for personally directing the efforts and primarily targeting Democrats, who put pressure on Obama to respond. "These actions follow repeated private and public warnings that we have issued to the Russian government, and are a necessary and appropriate response to efforts to harm U.S. interests in violation of established international norms of behavior," Obama said in a statement from Hawaii, where he is on vacation. "All Americans should be alarmed by Russia’s actions," he said. It was not clear whether Trump, who has repeatedly praised Putin and nominated people seen as friendly toward Moscow to senior administration posts, would seek to roll back the measures once he takes office on Jan. 20. Trump has brushed aside allegations from the CIA and other intelligence agencies that Russia was behind the cyber attacks. He said on Thursday he would meet with intelligence officials soon. “It's time for our country to move on to bigger and better things," Trump said in a statement.

Obama administration shutters Russian retreat on Eastern Shore in Maryland: Responding to what it described as a hacking campaign by the Russian government to interfere in the U.S. presidential election, the Obama administration kicked dozens of Russian officials out of the country Thursday and closed two properties — including one on Maryland's Eastern Shore — that the White House said have been used to gather intelligence. In the strongest retaliation against Russia the United States has leveled in decades, the administration sanctioned two Russian intelligence services and gave 35 government officials 72 hours to leave the country. The administration also denied access to a diplomatic retreat in Queen Anne's County that U.S. officials said has been used for "intelligence collection activities." The 45-acre site on the Corsica River near Centreville was purchased by the Soviet Union in 1972, a State Department official said. Its ownership has been widely known for decades, and Russian officials have described it as a recreational site for diplomats and their families. Satellite images show a mansion, tennis courts and a swimming pool. The administration also moved to deny Russian access to a property on Long Island, N.Y. The Obama administration offered no detail about what sort of intelligence gathering it believes occurred at the sites. The steps are part of a sweeping package designed to punish the Russian government over what the U.S. intelligence community has concluded was a concerted effort to interfere in this year's presidential election. Russian operatives are suspected of hacking into the computers of the Democratic National Committee and Hillary Clinton's campaign chairman and leaking private messages through sites including Wikileaks.

Interim DNC chair: Obama admin's response to Russia 'insufficient' | TheHill: Democratic National Committee (DNC) interim Chairwoman Donna Brazile on Thursday called the Obama administration's retaliatory measures for hacking Democratic groups "insufficient." Brazile said that although she welcomes President Obama's new measures in response to Kremlin's hacking campaign, the actions of the Russian government should be treated as "attacks on the United States by a foreign power." "We applaud President Obama for taking these actions in response to the Russian government-sponsored cyberattacks on the DNC, the Clinton campaign, and our free and fair elections. However, more must be done," Brazile said in a statement. "[T]oday’s action alone by the White House is insufficient. Now it's time for President-elect [Donald] Trump and the Republican leadership in Congress to put our national security before politics and show the American people that they are serious about protecting our democracy," she added.

Russia threatens to throw out US diplomats in retaliation for Barack Obama's sanctions --  Moscow immediately threatened to retaliate to America’s announcement that it was expelling 35 Russian diplomats - saying the US’s actions were the “death throes of political corpses”. In a development that plunged relations between Russia and the US to a level not seen since the Cold War, President Barack Obama on Thursday gave the diplomats 72 hours to leave and said he was sanctioning Russian intelligence officials believed to be involved in hacking the Democratic Party during the election. US intelligence has said it believes the hacking was designed to benefit Donald Trump. “All Americans should be alarmed by Russia’s actions,” Mr Obama said, claiming the extent of data theft and cyber attacks uncovered “could only have been directed by the highest levels of the Russian government”. In addition to expelling the 35 intelligence operatives, the President announced Russia’s FSB and GRU intelligence agencies, four GRU officers and three companies supporting its cyber operations. Within minutes of the announcement, Russia indicated that it was likely to reciprocate. President Vladimir Putin’s spokesman said Moscow regretted the sanctions and was considering retaliatory steps.Dmitry Peskov told reporters America's move signalled Mr Obama's “unpredictable and aggressive foreign policy”. “Such steps of the US administration that has three weeks left to work are aimed at two things: to further harm Russian-American ties, which are at a low point as it is, as well as, obviously, deal a blow on the foreign policy plans of the incoming administration of the President-elect,” he said.

 Putin Stunner: "We Will Not Expel Anyone; We Refuse To Sink To Obama's Level" --   Following this morning's reports that Foreign Minister Sergei Lavrov would recommend to Russian President Vladimir Putin to retaliate in kind and expel 35 American diplomats, saying that “we cannot leave such acts unanswered. Reciprocity is part of diplomatic law"  with Putin spokesman Peskov warning that "there is no doubt that Russia's adequate and mirror response will make Washington officials feel very uncomfortable as well", it was ultimately up to Putin to make a decision.Which he did moments ago, when in a stunning reversal, the Russian leader took the high road, and in a statement said that, contrary to expectations, Russia won’t expel any Americans in retaliation to US moves, in a brutal demonstration of just how irrelevant Obama's 11th hour decision is for US-Russian relations.In the statement Putin said that Russia won’t cause problems to U.S. diplomats or deport anyone, adding that Russia has the right to respond in tit-for-tat manner, but it will not engage in irresponsible diplomacy. The punchline, however, was saved for what may be Russia's final slam of the debacle that is Obama's administration saying that "It’s a pity that the current U.S. administration is finishing their work in such a manner" saying that Russia refuses "to sink to the level of this irresponsible "kitchen" diplomacy."

Something About This Russia Story Stinks   - Matt Taibbi - In an extraordinary development Thursday, the Obama administration announced a series of sanctions against Russia. Thirty-five Russian nationals will be expelled from the country. President Obama issued a terse statement seeming to blame Russia for the hack of the Democratic National Committee emails. The capital's paper of record crashes legacy media on an iceberg"These data theft and disclosure activities could only have been directed by the highest levels of the Russian government," he wrote.Russia at first pledged, darkly, to retaliate, then backed off. The Russian press today is even reporting that Vladimir Putin is inviting"the children of American diplomats" to "visit the Christmas tree in the Kremlin," as characteristically loathsome/menacing/sarcastic a Putin response as you'll find.This dramatic story puts the news media in a jackpot. Absent independent verification, reporters will have to rely upon the secret assessments of intelligence agencies to cover the story at all.  Many reporters I know are quietly freaking out about having to go through that again. We all remember the WMD fiasco.The problem with this story is that, like the Iraq-WMD mess, it takes place in the middle of a highly politicized environment during which the motives of all the relevant actors are suspect. Nothing quite adds up.If the American security agencies had smoking-gun evidence that the Russians had an organized campaign to derail the U.S. presidential election and deliver the White House to Trump, then expelling a few dozen diplomats after the election seems like an oddly weak and ill-timed response.  Republican Sens. John McCain and Lindsey Graham noted the "small price" Russia paid for its "brazen attack."  The "small price" is an eyebrow-raiser. Also, like the WMD story, there's an element of salesmanship the government is using to push the hacking narrative that should make reporters nervous. Adding to the problem is that in the last months of the campaign, and also in the time since the election, we've seen an epidemic of factually loose, clearly politically motivated reporting about Russia. Democrat-leaning pundits have been unnervingly quick to use phrases like "Russia hacked the election." This has led to widespread confusion among news audiences over whether the Russians hacked the DNC emails (a story that has at least been backed by some evidence, even if it hasn't always been great evidence), or whether Russians hacked vote tallies in critical states (a far more outlandish tale backed by no credible evidence).

Is Obama using Russia to force a wedge between Trump and his party?  -- President Barack Obama’s decision to hit back at Russia for its alleged interference in the US presidential election, by imposing new sanctions Thursday and expelling 35 suspected intelligence officers, comes at a delicate time. With just three weeks remaining in office, Obama is in what is traditionally regarded as a lame duck phase, as a snarky tweet from the Russian embassy in the UK drove home. But this is no ordinary transition. President-elect Donald Trump is urging Americans “to get on with our lives” rather than act on the intelligence community’s consensus that Russia hacked the Democratic National Committee with the intent of swaying the election in his favor.  A true reciprocal response would involve the release of hacked information about top Russian officials. Russia is a highly centralized kleptocracy, and no one in power has clean hands.  But there’s also a dangerous potential for escalation, as neither the US nor Russia has clearly defined cyberwar laws. This danger is exacerbated by the maddening fact that an unstable ignoramus is about to assume control of the US national security apparatus, and no one knows how he might use it. Trump has consistently indicated a desire to improve US-Russian relations, with the encouragement of several advisers and planned cabinet appointees who have close ties to Moscow. This puts him at odds with the longstanding position of the Republican party, which includes hawks such as Senators John McCain and Lindsey Graham, both of whom are now pressing for an investigation into Russia’s role in the election.  The Senate majority leader, Mitch McConnell, and House speaker, Paul Ryan, also support this, although CIA sources told the Washington Post that McConnell blocked any investigation prior to the election, a breathtakingly cynical move that explains why Obama is only now retaliating.Having compromised national security in order to defeat Hillary Clinton, the Republican leadership may now see Trump as expendable. After all, he chose a standard rightwing Republican, the Indiana governor, Mike Pence, as his running mate, which means McConnell and Ryan can always arrange to have Trump impeached if he becomes too much trouble.  For Obama, Russia is thus a uniquely effective wedge issue, with the potential to divide the president-elect from his party. If Trump tries to remove the new sanctions, he could face blowback from Congress; if he doesn’t, his friendly relationship with Putin could be damaged.

John McAfee: 'I Can Guarantee You, It Was Not the Russians' -- In case some of you were duped into believing this was evidence that proved Russia hacked the US elections, John McAfee would like to remind you that you're probably a high tier retard and would believe virtually anything your government told you. Crazy, but brilliant, John said “if it looks like the Russians did it, then I can guarantee you it was not the Russians.” The Joint Analysis Report from the FBI contains an appendix that lists hundreds of IP addresses that were supposedly “used by Russian civilian and military intelligence services.” While some of those IP addresses are from Russia, the majority are from all over the world, which means that the hackers constantly faked their location.  McAfee argues that the report is a “fallacy,” explaining that hackers can fake their location, their language, and any markers that could lead back to them. Any hacker who had the skills to hack into the DNC would also be able to hide their tracks, he said,. “If I was the Chinese and I wanted to make it look like the Russians did it, I would use Russian language within the code, I would use Russian techniques of breaking into the organization,” McAfee said, adding that, in the end, “there simply is no way to assign a source for any attack.”  Since the stakes are so high, thermonuclear war and all, the least the CIA and other wonderful intelligence agencies can do is provide sufficient evidence to the American people before they get annihilated under the winds of a 10,000 degree winter breeze. Or is that too much to ask? Judging by just about everything they've told us over the past 15 years, I'm inclined to believe the exact opposite is true.

Nearing exit, Obama seeks to tie Trump's hands | TheHill: President Obama has taken a number of unilateral actions in the waning days of his tenure that appear designed to box in President-elect Donald Trump. Obama's decision Thursday to sanction Russian entities for election-related hacking is just the latest obstacle he has placed in Trump's way. Days before the sanctions were unveiled, the Obama administration allowed the U.N. Security Council to condemn Israeli settlement activity — something that could have an indelible impact on the Israeli-Palestinian conflict. Obama has also permanently banned oil and gas drilling across large swaths of the Atlantic and Arctic oceans, closed off 1.6 million acres of Western land to development and scrapped the last vestiges of a registration system used largely on Muslim immigrants. Those actions, as well as Obama’s claim that he could have won a third term, seem to have irked Trump and his associates as the transition period enters its final weeks.    Trump on Wednesday morning went on the attack against Obama. “Doing my best to disregard the many inflammatory President O statements and roadblocks,” he tweeted. “Thought it was going to be a smooth transition - NOT!” Later in the day, Trump spoke on the phone with Obama and turned down the temperature on the spat, telling reporters roughly six hours after his initial comments that the transition is going “very, very smoothly.”  Yet it’s clearly not lost on Trump or his team that the president is using his power in aggressive ways.  It’s unclear how many of Obama’s late actions Trump will able to reverse upon taking office.

Giuliani: Obama trying to create problems for Trump with 11th-hour foreign policy moves - POLITICO: Former New York Mayor Rudy Giuliani dismissed the sanctions against Russia announced Thursday by President Barack Obama as “petty little actions” intended to box President-elect Donald Trump into a corner and accomplish little else. “There's a certain pettiness that I hadn't seen before. I mean, to do this after 18 months, when you could have prevented it 10 months ago,” Giuliani said Friday morning on Fox News’ “Fox & Friends.” “Petty little actions like this don't mean very much. It's almost a mockery to say this is too little too late. It should have been done 10 months ago, 11 months ago, 12 months ago. If it is really true, the response should be much stronger.” The sanctions announced Thursday by the White House target Russian intelligence services as well as businesses and individuals. The package also expels 35 Russian diplomats and closes two Russian compounds that the White House said in a statement were used for “intelligence-related purposes.” Friday morning, Giuliani scoffed at the notion of closing the compounds, telling the Fox News hosts that “if you are going to solve a murder, you arrest the murderer. Not the candy store the murderer went to before he committed the murder.”Taken together with the White House’s decision to abstain from a United Nations Security Council vote condemning Israel for settlement building, Giuliani said Obama’s last-minute foreign policy moves are “taking tremendous leverage away” from Trump, who has promised warmer relations with both the Russians and Israelis. The former mayor said he had “never seen a president try to create more problems for a future president.”

 U.S. appeals court revives Clinton email suit | Reuters: In a new legal development on the controversy over former Secretary of State Hillary Clinton's emails, an appeals court on Tuesday reversed a lower court ruling and said two U.S. government agencies should have done more to recover the emails. The ruling from Judge Stephen Williams, of the U.S. Court of Appeals for the District of Columbia Circuit, revives one of a number of legal challenges involving Clinton's handling of government emails when she was secretary of state from 2009 to 2013. Clinton, the 2016 Democratic presidential nominee, used a private email server housed at her New York home to handle State Department emails. She handed over 55,000 pages of emails to U.S. officials probing that system, but did not release about 30,000 she said were personal and not work related. The email case shadowed Clinton's loss to Republican Donald Trump in the Nov. 8 presidential election. Trump, who had repeatedly said during the bruising campaign that if elected he would prosecute Clinton, said after the election he had no interest in pursuing investigations into Clinton's email use. While the State Department and National Archives took steps to recover the emails from Clinton's tenure, they did not ask the U.S. attorney general to take enforcement action. Two conservative groups filed lawsuits to force their hand. A district judge in January ruled the suits brought by Judicial Watch and Cause of Action moot, saying State and the National Archives made a "sustained effort" to recover and preserve Clinton's records. But Williams said the two agencies should have done more, according to the ruling in the U.S. Court of Appeals for the District of Columbia Circuit. Since the agencies neither asked the attorney general for help nor showed such enforcement action could not uncover new emails, the case was not moot.

Federal Appeals Court Revives Hillary Email Case Leaving Key Decision To Trump's Attorney General -- A federal appeals court for the District of Columbia has breathed new life into the Hillary email-gate scandal which will be music to the ears of Trump's "lock her up" supporters.  The case was filed by watchdog groups Judicial Watch and Cause of Action seeking to force the State Department to instruct the Department of Justice to file a federal records suit to recover Hillary's missing emails.  A lower court had previously ruled that the State Department's efforts to recover Hillary's emails were sufficient and threw the cases out.  But D.C. Circuit Judge Stephen Williams, a Ronald Reagan appointee, had a different view.  Per The Hill:U.S. District Court Judge James Boasberg had previously ruled that state’s efforts to recover the documents — tens of thousands of which Clinton turned over voluntarily in 2014 — were sufficient and threw out the cases.But the three-judge appeals court panel on Tuesday said that State had not done enough."Even though those efforts bore some fruit, the Department has not explained why shaking the tree harder — e.g., by following the statutory mandate to seek action by the Attorney General — might not bear more still,” D.C. Circuit Judge Stephen Williams, a Ronald Reagan appointee, wrote in the court’s opinion. “It is therefore abundantly clear that, in terms of assuring government recovery of emails, appellants have not 'been given everything [they] asked for.”“Absent a showing that the requested enforcement action could not shake loose a few more emails, the case is not moot.”

Will Obama pardon Clinton? And if he does, will she accept? -- In dashing through his last few weeks in office, will one of Obama's final acts be to pardon Hillary Clinton for any violations of federal law she might have committed while she was secretary of State?It's an interesting and complex question. We should first note that the Obama administration's decision not to prosecute Clinton would not bind the Trump administration. Until relevant statutes of limitations have expired, she could still be prosecuted by the new administration. It is possible, in my opinion, for Clinton to be prosecuted for either her improper handling of classified information on her "home brew" email server or allegations of "pay to play" arrangements between the secretary of State and donors to the Clinton Foundation, which could constitute bribery.   The statute of limitations for most federal crimes is five years from the commission of the offense; that would apply to the two categories relevant to Clinton. Her tenure as secretary of State ended Feb. 1, 2013, so it is possible that the statute of limitations will not run until Feb. 1, 2018, more than a year after Donald Trump takes office. What looks like one question — will the president pardon Clinton? — turns out, on analysis, to be two. The first question is: Would Clinton wish to receive a pardon? That question seems to be a proverbial no-brainer. Surely, any person who had been in federal government would be eager to receive a presidential pardon, because it eliminates even the possibility of federal prosecution. That looks like all upside and no downside.  But there is a downside, and it isn't trivial. A pardon must be accepted by the person who is pardoned if it is to effectively stymie any prosecution. Furthermore, there is solid legal precedent that acceptance of a pardon is equivalent to confession of guilt.  If acceptance of a pardon by Clinton would amount to confession of guilt, would she nevertheless accept it? A multitude of factors would go into her decision. She, together with her attorneys, would have to decide how likely it is that the Trump administration would prosecute her, and, if it did decide to prosecute, how likely the administration would be able to prove she had committed crimes.

Trump says he will dissolve foundation amid NY investigation | McClatchy DC: President-elect Donald Trump said Saturday he will dissolve his charitable foundation amid efforts to eliminate any conflicts of interest before he takes office next month. The revelation comes as the New York attorney general's office investigates the foundation following media reports that foundation spending went to benefit Trump's campaign. Trump said in a statement that he has directed his counsel to take the necessary steps to implement the dissolution of the Donald J. Trump Foundation, saying that it operated "at essentially no cost for decades, with 100 percent of the money going to charity." "The foundation has done enormous good works over the years in contributing millions of dollars to countless worthy groups, including supporting veterans, law enforcement officers and children," he said in a statement. "I will be devoting so much time and energy to the presidency and solving the many problems facing our country and the world. I don't want to allow good work to be associated with a possible conflict of interest," he said. Trump said he will pursue philanthropic efforts in other ways, but didn't elaborated on how he'd do so.

TPP: How President Obama Traded Away His Legacy - Lori Wallach - Donald Trump is preparing to wipe President Barack Obama's legacy from existence. The Affordable Care Act, Dodd-Frank and protections for the environment and immigrants all are set to disappear in no part small part thanks to President Obama himself and his relentless advocacy for the Trans-Pacific Partnership (TPP) right through Election Day.  Trump's omnipresent attacks on "rigged" trade deals resonated with communities devastated by mass job offshoring. Polling shows that Americans viewed President Obama's TPP as a corporate power grab that would cost more jobs, lower wages and raise medicine prices. Trump won Wisconsin, Michigan and Pennsylvania by 23,000, 11,000 and 68,000 votes, respectively. The number of people in those states certified as having lost jobs to trade since the North American Free Trade Agreement, or NAFTA, is 78,331, 159,252 and 182,017 under just one government program that captures a fraction of trade-related job loss. Meanwhile, President Obama's closing argument for Clinton at a Michigan rally the day before the election was to "continue this journey of progress," effectively promising a third term of an Obama presidency that had spent the past two years prioritizing the implementation of a trade deal despised not only by working class Midwesterners, but the entire Democratic Party base. At the Michigan event President Obama also declared that the "trade war" Trump was threatening by renegotiating NAFTA, imposing tariffs on vehicles made in Mexico by Detroit's automakers and opposing the TPP would hurt the economy. This followed scores of Obama administration events and op-eds touting the benefits of the TPP in swing states during critical stages of the campaign, despite pleas by Democratic congressional candidates and party strategists to desist.   Was it coincidence that Clinton lost the western Wisconsin counties along the Mississippi River, which have historically always voted Democratic? Or did Agriculture Secretary Tom Vilsack's Oct. 12 event there to release a TPP-promoting report have unintended consequences? Did U.S. Trade Representative Michael Froman's prominent Oct. 19 "Philadelphia Inquirer" TPP op-ed contribute to flipping eastern Pennsylvania counties that voted twice for President Obama? Support for the TPP signaled to those whose lives have been turned upside down by the trade policies of the past 25 years that the Democratic Party did not care about them. That message was conveyed repeatedly to the administration and Clinton campaign by union officials who heard it from their angry members.

Trump to inherit more than 100 court vacancies, plans to reshape judiciary - Donald Trump is set to inherit an uncommon number of vacancies in the federal courts in addition to the open Supreme Court seat, giving the president-elect a monumental opportunity to reshape the judiciary after taking office. The estimated 103 judicial vacancies that President Obama is expected to hand over to Trump in the Jan. 20 transition of power is nearly double the 54 openings Obama found eight years ago following George W. Bush’s presidency. Confirmation of Obama’s judicial nominees slowed to a crawl after Republicans took control of the Senate in 2015. Obama White House officials blame Senate Republicans for what they characterize as an unprecedented level of obstruction in blocking the Democratic president’s court picks. The result is a multitude of openings throughout the federal circuit and district courts that will allow the new Republican president to quickly make a wide array of lifetime appointments. State gun control laws, abortion restrictions, voter laws, anti-discrimination measures and immigrant issues are all matters that are increasingly heard by federal judges and will be influenced by the new composition of the courts. Trump has vowed to choose ideologues in the mold of the late Supreme Court justice Antonin Scalia, a conservative icon — a prospect that has activists on the right giddy.

Trump’s Cabinet of Cronies, by the Numbers - Donald Trump’s adventures in swamp-draining have raised eyebrows across the country, as he stacks his Cabinet with, and gives appointments to, members of the global elite he spent more than a year bashing. But the swampiness goes beyond the public display of the Cabinet, stacked with Goldman Sachs alumni, energy billionaires, and entertainment-industry executives. There’s also all the donors making their way up and down the elevator of Trump Tower.Politico analyzed the F.E.C. filings of the nearly 200 people who have formally visited Trump in his office—easily found, since they’ve been captured by the press corps waiting outside of the Trump Tower elevators in the public lobby—and discovered that 73 of those visitors were big-time donors to the Trump campaign and the Republican Party. Collectively, they’ve donated $1.7 million directly to Trump or groups supporting him and $57.3 million to the G.O.P.—more than $800,000 each, on average.And lest one thinks that these are simply rich people groveling at the golden feet of Trump, Politico further found that 39 percent of those donors were considered for the 119 high-level government appointments Trump recently made to fill his administration (38 percent of those were eventually picked). Which is to say that despite Trump’s campaign pledge to rid politics of its favor-trading ranks, or, in his terms, to “drain the swamp,” swamp creatures abound in his looming presidential ecosystem. Carl Icahn, billionaire investment manager and anti-regulation advocate, was recently tapped to advise Trump on regulatory matters. Alumni and executives from Goldman Sachs, the banking institution Trump blamed for many of America’s ills, are scattered throughout the top echelons of the administration. Rex Tillerson, the Russia-affiliated ExxonMobil C.E.O. nominated as secretary of state, barely needs any explanation—he is, well, the C.E.O. of ExxonMobil.

 Donald Trump’s Cabinet Picks Disagree With President-Elect on Some Key Issues - WSJ: Donald Trump has assembled a cabinet and senior staff with divergent views on such issues as the deficit, trade, climate change, and Russia, posing a challenge for his administration as he tries to mold his own sweeping campaign themes into specific policies for governing. The president-elect’s pick for budget director, Rep. Mick Mulvaney (R., S.C.), has opposed raising the debt ceiling, but Mr. Trump has proposed steep tax cuts and large increases in defense and infrastructure spending that many economists believe will cause the deficit to grow. Several of his cabinet selections backed a trade deal negotiated by President Barack Obama with Asian nations, which Mr. Trump opposed and has vowed to abandon. His choice for the State Department, Rex Tillerson, has said he believes science proves climate change is being caused in part by human behavior, something Mr. Trump in the past has called a “hoax.”Former White House officials said incoming administrations often have to grapple with contrarian viewpoints. However, Mr. Trump will be surrounded by a plethora of divergent voices from the outset. Thomas Barrack, a longtime Trump friend and chairman of the inaugural committee, said the president-elect manages with an “open door” policy, where aides debate the merits of proposals while Mr. Trump “curates” the information and makes a final decision. Yet many decisions made by the federal government don’t reach the presidential level, providing vast, independent powers to the far-flung bureaucracies run by the cabinet secretaries and their deputies. Monitoring one potentially rogue agency could be challenging for any new administration, and Mr. Trump may need to keep an eye on several of them to ensure they promote policies in line with his promises and not the preferences of his appointees. Much could depend on how the president-elect can establish a chain of command, particularly given the horizontal structure of senior staff appointments he has put in place so far.

Trump’s Extreme Oligarchy by Simon Johnson - – US President-elect Donald Trump is filling his cabinet with rich people. According to the latest count, his nominees include five billionaires and six multimillionaires. This is what is known as oligarchy: direct control of the state by people with substantial private economic power. Given that the Republicans also control both houses of Congress – and will soon make many judicial appointments – there is virtually no effective constraint on the executive branch.   Hope usually dies last, but the incoming administration’s proposed economic policies are not encouraging. The organizing principle seems to be to discard pragmatism entirely and advance an extreme and discredited ideology.   The central theme of Trumponomics so far has been swift and sharp tax cuts. But Mick Mulvaney, Trump’s pick to run the Office of Management and Budget (OMB) is a prominent and articulate deficit hawk; he will have a hard time supporting measures that increase the national debt.   To some extent, tax cuts will be justified with overly optimistic projections regarding their impact on economic growth, as was done under President George W. Bush, with generally disastrous effects. But there is a limit to how much pressure can be put on the Congressional Budget Office, which is responsible for providing credible assessments of the fiscal impact of new policies.   Trump seems determined to lower income taxes for high-income Americans, as well as to reduce capital-gains tax (mostly paid by the well-off) and nearly eliminate corporate taxes (again, disproportionately benefiting the richest). To do this, his administration will seek to increase taxes on others, and now we are beginning to see what this will look like. People close to the president-elect are considering an import tariff, set at around 10%.   This tariff will undoubtedly be presented to the public as a move to make American manufacturing great again. But a tariff is just another name for a tax that increases the costs of all imported goods. This could help a few firms at the margin – and presumably Trump’s team will highlight news stories (real or fake) about a few hundred or even a few thousand jobs being “saved.”  But the cost per job will be high: all imports will become more expensive, and this increase in the price level will filter through to the cost of everything Americans buy. In effect, the oligarchs will reduce direct taxation on themselves and increase indirect taxation on everyone – much like increasing the sales tax on all goods.

‘The Wealthy Would Never Steal’ — A Credo for Trump’s Party - Donald Trump’s government has not yet taken power, but its epitaph may have already been written. The author, Lawrence Kudlow, is a noted voodoo economist and the reported leading candidate to head the administration’s Council of Economic Advisors. In a column touting the brilliance of Trump’s appointments — “Trump’s transition continues to go smoothly. Better than smoothly. Confidently. More than confidently. Transcendently” — and naturally omitting any mention of his own prospective candidacy, Kudlow dismisses any concerns of the conflicts of interest that are already rife. In a National Review column, Kudlow makes the case not only that Trump and his administration are not corrupt, but also that they cannot be corrupt, by virtue of their wealth. “Why shouldn’t the president surround himself with successful people?” reasons Kudlow, “Wealthy folks have no need to steal or engage in corruption.” In point of fact, it does not take much effort to find wealthy folks who steal and engage in corruption. Look at t Donald Trump himself, who was born into massive wealth, had no need to steal or engage in corruption, yet cheated hundreds of contractors of their money, defrauded thousands through scams, and frequently boasted of his success at corrupting politicians. Clearly, it is not impossible for already-wealthy people to steal and to engage in corruption. Kudlow’s argument is important not only for its absurdity but for what it reveals about the coming age in Washington. Trump was able to prevail in part by positioning himself to Hillary Clinton’s left on economic issues. Trump won 38 percent of voters who desire more liberal policies than President Obama delivered (and nearly a fifth of white voters without a college degree who approve of Obama’s performance as president). It was Trump’s image as an outsider — a dangerous man, perhaps, but an avowed enemy of “a failed and corrupt political establishment” and “large corporations.” In reality, Trump’s administration is a rebuke to the very notion that the public interest diverges in any way from private ones. The Labor Department will be run by a man whose interest in the field is dominated by a mania for cheap labor; the Environmental Protection Agency will be run by a virtual pass-through for fossil-fuel interests. Trump’s government will make policy by and for the rich and well-connected. As Politico reports, “the extent to which donors are stocking Trump’s administration is unparalleled in modern presidential history.” As Kudlow makes clear, Trumpism regards the fear that government might favor capital over labor or some other public interest as inherently nonsensical.

Greed Springs Eternal – Krugman -- Jonathan Chait catches Larry Kudlow praising the Orange One for choosing a cabinet of billionaires, because rich men are incorruptible — after all, they don’t need even more money. As Chait says, this is ludicrous on its face; consider, for example, Russia’s oligarchs.  What Chait doesn’t note is the special irony of seeing this argument from Kudlow, or indeed any right-wing advocate of supply-side economics. Remember, their whole worldview is based around the claim that cutting taxes on rich people will work economic miracles, because of incentives: let a plutocrat keep more of an extra dollar in income, and he’ll innovate, create jobs, lead us to an earthly paradise in order to get that extra income. To belabor what should be obvious: either the wealthy care about having more money or they don’t. If lower marginal tax rates are an incentive to produce more, the prospect of personal gain is an incentive to engage in corrupt practices. You can’t go all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates a man from temptation. Now, for what it’s worth, the reality is clearly that even the insanely wealthy generally want more. You can ask why they want it;  Gold-plated toilets don’t flush any better than the usual kind. But for such people, money is about ego, power, winning the game. Greed has no limit.  But what’s more interesting and revealing, I think, is the way people like Kudlow for whom incentives are supposedly all suddenly say something completely different when it comes to conflicts of interest.   And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never about the incentives; it was just another excuse to make the rich richer.

Republicans’ Radical New Business-Tax Proposal, Simplified (Sort Of) - Having trouble understanding the House Republicans’ tax plan? So are lawmakers, stock analysts, journalists and finance officers in corporate America. Now, there’s a new tool to help decipher the mystery.To recap for the uninitiated, the GOP proposal would transform the 35% corporate-income tax into a border-adjusted levy, imposing a 20% tax on imports and exempting exports. That’s common for the rest of the world’s value-added taxes but novel in America, and it has quickly become the most controversial and confusing piece of the broader Republican plan to rewrite U.S. tax law.Reaction has been a mix of admiration, bafflement and anger, none of it subtle. Analysts at Jefferies & Co. call border adjustment “a radical departure” for U.S. tax policy. Capital Economics described it as “equal parts genius and crazy.” Cowen & Co. said implementation could create “cliffs of insanity.”The House tax plan and its border-adjustment plan drew minimal notice when released in June. But after Donald Trump won the presidency, companies and investors began trying to calculate the effects of the tax plan—which also lowers the tax rate, allows immediate writeoffs of capital investment and denies most deductions for interest.Retailers, oil refiners and other importers are warning the plan would cost them billions of dollars and force them to raise consumer prices. The proposal’s advocates say those fears are overstated because currency adjustments would offset the tax change. A rising dollar would keep the real price of imports about the same and preserve the existing trade balance, though consumers and American owners of foreign assets could bear new costs. In the long run, companies would locate more production in the U.S. Now, if you’re so inclined—and you know you are—you can follow along at home. The Open Source Policy Center, an arm of the conservative-leaning American Enterprise Institute, has built a “Border Adjustment Calculator.”

Democrats Plotting ‘Collision Course’ With Trump’s Tax Plan - “There’s going to be opposition if these tax cuts are directed to the people at the top again,” said Representative Richard Neal, the Massachusetts Democrat who represents his party’s first line of defense as the next ranking member of the House’s tax-writing Ways and Means Committee. “We’re going to be pretty united.” Neal and others say they’ll zero in on upper-income tax breaks pitched by Trump and House leaders in an attempt to make it politically difficult for Republicans to support large parts of the emerging plans. Their initial comments suggest that the 115th Congress, which convenes Jan. 3 with a Republican-led agenda of instituting a broad tax overhaul and repealing Obamacare, will be peppered with debate over income inequality. Trump and House Speaker Paul Ryan of Wisconsin have endorsed across-the-board cuts in individual income tax rates. After Republicans took the White House and held onto majorities in Congress in November’s elections, both say they aim to achieve the most far-reaching overhaul of the U.S. tax system in a generation. Details remain to be filled in; for example, Ryan and others envision dramatic changes for corporate taxation that Trump’s economic team has yet to embrace. Trump has sought to portray his plan as a pro-growth simplification of the tax code that would benefit the middle class. In a “Contract with the American Voter” published before the election, his campaign said of his proposal: “The largest tax reductions are for the middle class.”  Democrats plan to challenge this claim. “His populist image and the reality of his policies are on a collision course,” said Representative Keith Ellison of Minnesota, a candidate for Democratic National Committee chairman. “And they’re going to crash.”

Trump tax reforms could depend on little-known 'scoring' panel | Reuters: President-elect Donald Trump's goal of overhauling the U.S. tax code in 2017 will depend partly on the work of an obscure congressional committee tasked with estimating how much future economic growth will result from tax cuts. Known as the Joint Committee on Taxation, or JCT, the nonpartisan panel assigns "dynamic scores" to major tax bills in Congress, based on economic models, to forecast a bill's ultimate impact on the federal budget. The higher a tax bill's dynamic score, the more likely it is seen as spurring growth, raising tax revenues and keeping the federal deficit in check. As Trump and Republicans in Congress plan the biggest tax reform package in a generation, the JCT has come under pressure from corporate lobbyists and other tax cut advocates who worry that too low a dynamic score could show the legislation to add billions, if not trillions of dollars to the federal deficit. "The problem is that the Joint Committee staff has adopted a whole series of assumptions that truly minimize the effects and underestimate the impact that a properly done tax reform could have," said David Burton, an economic policy fellow at the conservative Heritage Foundation think tank. A low dynamic score could force Republicans to scale back tax cuts or make the reforms temporary, severely limiting the scope of what was one of Trump's top campaign pledges. Other analysts warn that pressure for a robust dynamic score raises the danger of a politically expedient number that could help reform pass Congress but lead to higher deficits down the road.

The R’s corp tax plan - Jared Bernstein - A number of folks asked me what I thought of this part of the Republican’s tax plan–their corporate tax replacement–and that required some thought, as it’s very different than what we have. Here’s what I got, over at WaPo.  I couldn’t fit it in the piece, but I wanted to reference the more jaundiced take on the proposal–I’m pretty skeptical of some of the claims of proponents, but find a few attributes worth considering–from Senate Democrats, who summarize the replacement as follows: The key feature on the business side of the plan—a destination-based cash flow corporate income tax with “border adjustments”—is confusing, untested, leads to bizarre results, and is possibly illegal under WTO rules. Other than that, they’re OK with it… I also predict that the increased costs that this proposal implies for retailers and other major importers will kill its legislative chances. That said, given recent developments, I pretty heavily discount such predictions, by myself and anyone else.

America’s concern for the poor is about to be tested - Poor Americans are facing the gravest threat to the federal safety net in decades as President-elect Donald Trump takes office accompanied by a Republican-controlled Congress. The risks to essential benefits for tens of millions of low- and moderate-income Americans include losing coverage extended to them by the Affordable Care Act, threats to the fundamental structure of the Medicaid health-insurance program for the poor and further reduction of already squeezed funding for scores of other important programs serving the most vulnerable Americans. First, Republicans are expected to seek significant cuts in what’s known as non-defense discretionary spending, which includes many important programs for low- and moderate-income people, such as rental vouchers for low-income families, programs to fight homelessness, job training, funding for poor school districts, Head Start for young children and Pell grants to help low-income students afford college. The reason for these cuts is that, for the first time, starting next fiscal year, Republican leaders appear inclined to let the harsh “sequestration” budget cuts take full effect. That would shrink funding for this budget category to its lowest level in at least half a century, measured as a share of the economy. And even deeper cuts, as proposed by the most recent House Republican budget and the president-elect, are possible.  More broadly, congressional Republicans are likely to follow the course set in every House GOP budget since 2011, as well as the most recent final House-Senate budget, in 2015. Every one of those budgets secured the bulk of its savings from programs for low-income people. In the House GOP’s most recent budget plan, 62 percent of a stunning $6 trillion in budget cuts over 10 years would come from such programs.  Both Trump and House GOP leaders have also proposed large tax cuts that would mainly benefit the most well-off and could cost several trillion dollars over the next decade. That, in turn, would likely force further rounds of cuts in domestic programs in future years to address the resulting increase in budget deficits.

Guess Which Billionaire (From Omaha) Made More Money Than Anyone Else In The World Thanks To Trump -- Staunch Hillary Clinton supporter (and vehement anti-Trump-er) Warren Buffett had a better year than any other billionaire on earth... thanks to Donald Trump. Buffett's net worth is up around $12 billion this year - with the majority of his gains coming in the weeks since Trump was elected - sending him up the ranks to become the 2nd richest man in the world (behind Bill Gates). Fracking titan Harold Hamm is $8.4 billion richer now compared to December 31, 2015, the third biggest dollar gain of anyone in America. Shares of his oil giant Continental Resources soared 136% thanks to the rising price of crude oil. The Texas oilman has ridden oil’s boom and bust cycles for years. He gained more than $13 billion from 2010 to 2014, lost more than $13 billion by March 2016, then regained most of it in the last nine months. Today he is worth $15.3 billion, Bloomberg calculates. Amazon CEO Jeff Bezos also had a big year, adding $6.5 billion to his coffers as Amazon shares rose. And gambling tycoon Sheldon Adelson gained $5.4 billion. Still, no one could match Buffett, who would be even richer if he had not given away $2.9 billion worth of Berkshire stock in July.

Questions hang over Trump plan on infrastructure | TheHill: Doubts are growing that President-elect Donald Trump will be able to push through a massive infrastructure package in his first 100 days, as he had once promised. He faces likely pushback from conservatives, and he will also have to weigh many other competing priorities. When radio host Hugh Hewitt asked incoming White House Chief of Staff Reince Priebus about a stimulus package that could be used to rebuild the nation’s roads and bridges, Priebus said that the administration would likely focus on tax reform and ObamaCare in the first nine months of the year. In a November interview with The New York Times, Trump said that infrastructure won’t be the “core” of his first few years, but that he is interested in a large infrastructure bill.Tax reform, Obamacare and appropriations “are going to push infrastructure right out of the way,” predicted Chris Edwards, an economist at the Cato Institute. Trump’s nomination of fiscal conservative Mick Mulvaney, a Republican lawmaker from South Carolina who is a member of the hard-line Freedom Caucus, also raised eyebrows. Mulvaney has made a name for himself in Washington as an advocate for cutting spending, and would appear to be a potential voice within the administration arguing against heavy infrastructure spending. The Trump transition website states that “the Trump Administration seeks to invest $550 billion to ensure we can export our goods and move our people faster and safer,” but it does not explain how that investment would be made.

From the WWE to the White House: The Anti-Worker History of Trump’s SBA Pick - This month, President-elect Donald Trump continued his trend of appointing wealthy businessmen and women with little government experience to government posts by nominating former World Wrestling Entertainment (WWE) chief executive Linda McMahon to head the Small Business Administration (SBA). Most news reports on her appointment have focused on her net worth and the fact that she donated $7 million to Trump’s campaign. Few have talked about the WWE’s questionable labor record under McMahon. Under the stewardship of McMahon and her husband, Vince, the WWE racked up a long list of controversies when it comes to its handling of the business’ lifeblood—the wrestlers themselves. From longtime allegations of encouragement of drug abuse and unsafe work practices to the WWE’s refusal to treat wrestlers as proper full-time workers, McMahon’s record on workers’ rights is spotty at best. With McMahon now likely to head a government department responsible for training and educating small businesses and entrepreneurs, her nomination raises questions about whether she will encourage or impart some of these dubious practices to employers at the expense of workers. Wrestlers contracted to the McMahon’s WWE have a habit of dying young. To some extent, this is a product of their chosen profession. The physical pressures McMahon’s former company places on wrestlers are coupled with drug-related hazards. . McMahon herself claimed that the high death rate among wrestlers could be simply chalked up to their “personal habits.” Contrary to her claims, however, some wrestlers, have developed substance abuse issues to deal with the pain of injuries and the mental stress of a never-ending schedule. Others ravaged their bodies through steroid abuse, pervasive throughout the industry particularly in its early years, and a necessity for the creation of the hyper-muscled physiques the industry has long favored.

America’s Biggest Labor Group Has a Fascinating Relationship With Trump’s New Anti-China Staffer -- On Wednesday, President-elect Donald Trump appointed economics professor and outspoken China critic Peter Navarro to a new White House position that will oversee trade and industrial policy. Navarro, a Trump campaign adviser, advocates a more adversarial approach to China, including a controversial 40-plus percent tariff on Chinese imports. He's also the author of numerous books about what he sees as China's existential threat to global order, including The Coming China Wars (one of Trump's favorite China books.) Navarro's appointment was met with something akin to optimism by the country's biggest labor organization. In a statement to Mother Jones Thursday, AFL-CIO spokesman Josh Goldstein said Navarro "has raised some important critiques of American trade policy and we look forward to working with him to translate that into real policies that benefit America's workers." The 12.5 million-member federation of labor unions opposed Trump during the campaign, painting him as a fraud. "Look at what he does, not what he says," warned AFL-CIO President Richard Trumka in June, labeling Trump the "king" of outsourced labor.  Navarro's relationship with the AFL-CIO is a bit complicated. During the campaign, he routinely claimed that union workers in states like Ohio would line up behind the Republican real estate mogul, despite opposition from top brass at the labor group. "Donald Trump is going to run the table with organized labor and with non-union labor," he told MSNBC's Chris Matthews in June, arguing that union leaders had contradicted themselves by supporting Clinton. "AFL-CIO opposed [China's] World Trade Organization entry," he said. "AFL-CIO opposed the South Korea trade deal. Hillary Clinton supported all those."  But it wasn't long ago when the AFL-CIO leadership was very much behind Navarro's work. In 2012, the union group sponsored several screenings of Navarro's film Death by China in towns across Ohio. The film is a polemic documentary, narrated by Martin Sheen of The West Wing, that traces the loss of American manufacturing jobs to the rise of China. In particular, Navarro points to China's admission to the World Trade Organization in 2001 and to what he sees as dangerous concessions that US officials have made to a dictatorial, unaccountable country waging a trade war with America.

 Trump rewards big donors with jobs and access - More than a third of the almost 200 people who have met with President-elect Donald Trump since his election last month, including those interviewing for administration jobs, gave large amounts of money to support his campaign and other Republicans this election cycle. Together the 73 donors contributed $1.7 million to Trump and groups supporting him, according to a POLITICO analysis of Federal Election Commission records, and $57.3 million to the rest of the party, averaging more than $800,000 per donor. Donors also represent 39 percent of the 119 people Trump reportedly considered for high-level government posts, and 38 percent of those he eventually picked, according to the analysis, which counted candidates named by the transition and in news reports. While campaign donors are often tapped to fill comfy diplomatic posts across the globe, the extent to which donors are stocking Trump’s administration is unparalleled in modern presidential history, due in part to the Supreme Court decisions that loosened restrictions on campaign contributions, according to three longtime campaign experts. The access and appointments are especially striking given Trump’s regular boasting during his campaign that his personal fortune and largely self-funded presidential bid meant that he would not be beholden to big donors, as many of his rivals would.“If the people who are counseling the president-elect are the donor class — who, as Trump told us, give because they want something in return, those are his words — you will not get the policies his voters were hoping for,” “The risk here is disillusionment by the voters who voted for change and are going to end up with a plutocracy,” Potter said.

Trump’s Transition Team Is Stacked With Privatization Enthusiasts - David Dayen - The traditional media has yearned of late to deem Donald Trump’s White House staff and cabinet a “team of rivals,” with wide disagreements on economic policy. I don’t really see it; despite a few variances here and there, by and large Trump’s advisers all fall in a comfortably snug ideological range, with dedication to doctrinaire conservative economic beliefs about tax cuts and deregulation. And another area of consensus sticks out: the idea that government should outsource public functions to private industry. In the Public Interest, a research organization monitoring privatization, has compiled a list of 32 different members of the Trump transition team or formal nominees for top agencies who have either close ties to privatization groups, or demonstrated support for the philosophy. If these officials get their way—and there’s no reason to think they won’t—America’s schools, roads, air-traffic-control systems, prisons, immigrant-detention centers, and critical social-insurance programs will soon fall into private hands.   “Donald Trump ran on improving the lives of working families, yet he’s surrounding himself with people that want to line the pockets of corporations and the politically connected,”  The list includes Vice President-elect Mike Pence, a leader of ultimately unsuccessful efforts to privatize Social Security during the Bush administration, along with high-profile cabinet picks like education secretary nominee Betsy DeVos (a known advocate of steering public money to private charter schools), health and human services selection Tom Price (whose relentless advocacy for the privatization of Medicare is well-documented), and defense secretary James Mattis (recipient of almost $1 million in compensation as a board member of major defense contractor General Dynamics).  One lesser-known connection is between attorney general nominee Jeff Sessions and the private-prison industry. In October, a couple months after the Justice Department announced that they would phase out the use of private contractors in federal correctional facilities, Geo Group, one of the two dominant private-prison operators, hired two former Sessions aides as lobbyists. Sessions is expected to reverse the privatization phase-out (which wasn’t much of a phase-out at all, actually, as Obama’s Bureau of Prisons renewed a private-prison contract just last month).

Trump Considers Moving VA Toward Privatization - President-elect Donald Trump is considering moving the Department of Veterans Affairs toward privatization, a transition team official said Wednesday, a policy decision major veterans’ groups have said they would oppose. Mr. Trump is considering changing the department to allow some veterans to bypass the VA heath-care system completely and get care exclusively from private-sector hospitals and clinics, the official said. It is an option that could give veterans full choice over their health care, but which many veterans groups argue is the first step toward privatization and one that will reduce the quality of health care over the long term. “It’s one of the options on the table,” the transition official said Wednesday. ”Definitely an option on the table to have a system where potentially vets can choose either or, or all private.” The possible reform plan was floated after Mr. Trump pulled aside a pool of reporters and instructed the official to give some details about changes he is considering at the VA, and that were apparently discussed during private meetings in Florida on Wednesday. Veterans groups, and the department itself, say a private-sector care program without adequate VA oversight or coordination leaves former members of the military navigating a private system that isn’t necessarily equipped to handle the unique problems veterans face, including post-traumatic stress and injuries sustained on the battlefield.

Trump Picks Former Bush Aide As Counterterrorism, Cybersecurity Advisor  -- President elect Donald Trump announced Tuesday that Tom Bossert, former national security aide to President George W. Bush, will join the Trump administration as Assistant to the President for Homeland Security and Counterterrorism. That role will be expanded under the Trump administration, according to a news release announcing the appointment, to give Bossert an "independent status alongside the National Security Advisor."Bossert, who served as Bush's Deputy Homeland Security Advisor, is currently a fellow at the Atlantic Council’s Cyber Statecraft Initiative, “has a handle on the complexity of homeland security, counterterrorism, and cybersecurity challenges,” Trump said in a statement adding that "he will be an invaluable asset to our Administration.” Bossert will focus on protecting the country from counterterrorism threats while retired Gen. Michael Flynn, the incoming National Security Advisor, will focus on "international security challenges.""Tom brings enormous depth and breadth of knowledge and experience to protecting the homeland to our senior White House team,” Trump said in the statement.The elevation of Bossert gives the Trump national security staff more executive branch experience. While Flynn has no White House experience, incoming-deputy national security adviser K.T. McFarland has worked in three administrations. The two men met at Trump's Florida estate last week as Trump continues to fill out his staff. While the administration began rolling out Cabinet picks in the early portion of the transition, most of the more recent appointments have been Trump's White House staff.

Poll Finds More Americans Now View Donald Trump Positively - WSJ: Donald Trump is enjoying a postelection increase in goodwill and economic optimism as he prepares to take office, but the nation remains more divided than is typical at the dawn of a new presidency, a new Wall Street Journal/NBC News poll finds. Mr. Trump, who had been the most unpopular presidential candidate in modern political history, is now viewed positively by 41% of voters, up from 29% in mid-October and higher than at any point in the campaign. The poll also found a marked upswing in optimism about the economy and the direction of the country. But those improvements are due almost entirely to a mood shift among Republicans, and the poll found a deep split between Americans who are excited about his victory and those who are scared by it. With 47% viewing Mr. Trump unfavorably, more see him in a negative light than a positive one, and more than four in 10 Americans are worried that he lacks the temperament to be president.It is a mixed picture that shows Mr. Trump gaining ground after his upset victory but in a weaker position than most newly elected presidents. “Usually, elections settle arguments and the nation comes together, at least in the short term,” said Fred Yang, a Democratic pollster who conducted the survey—the first Journal/NBC poll since Election Day—with Republican Bill McInturff. “Today, hard feelings persist on both sides of the partisan divide. It is as if the campaign has never ended.” Still, Mr. McInturff said, “the Trump presidency in its beginning stages has unleashed in multiple measures a surge in economic enthusiasm and confidence.”

 The Fed has given Trump cover to unwind a key Wall Street rule - The prospect of deregulation following the election of Donald Trump — and specifically some kind of softening of the Volcker rule — is being discussed far and wide. Now it seems the Federal Reserve has provided some cover for Trump's nominees to go soft on the rule. The Fed released a staff paper on December 22 focused on the Volcker rule, which bans proprietary trading, and its effect on market liquidity. In short, the staff paper found that the rule had had a negative effect on corporate bond liquidity, or the ease with which buyers can find sellers and vice versa:"Our main finding is that the Volcker rule has a deleterious effect on corporate bond liquidity and dealers subject to the rule become less willing to provide liquidity during stress times. While dealers not affected by the Volcker rule have stepped in to provide liquidity, we find that the net effect is a less liquid corporate bond market."It's important to note that bond market liquidity has been a hot topic on Wall Street for some time, with dealers and investors often complaining that postcrisis regulations have made it harder to transact in the bond market. The Fed, meanwhile, has appeared sanguine about the effect of regulation on bond liquidity. According to Isaac Boltansky at the research firm Compass Point, the paper could be used as "political cover" for Trump and his team as they look to peel away some of the postcrisis financial regulation on Wall Street: "In practical terms, our view is that this paper will provide political cover for President-elect Trump's nominees to de-emphasize enforcement of the Volcker rule in the near term and could ultimately serve as cannon fodder in the impending battle over legislatively repealing the rule.”

SEC’s Use of In-House Courts Unconstitutional, Appeals Court Rules - WSJ: A federal appeals court dealt a strong blow to Wall Street’s top cop this week, deciding that the Securities and Exchange Commission’s in-house courts don’t meet constitutional requirements. A three-judge panel of the U.S. Court of Appeals for the 10th Circuit, based in Denver, ruled 2-1 that the SEC’s process for hiring administrative-law judges violates a clause of the U.S. Constitution that governs presidential and other appointments. The 10th Circuit’s decision, issued Tuesday, diverges from an August ruling by the U.S. Court of Appeals for the District of Columbia Circuit, which upheld the SEC’s use of its in-house courts to air claims against people accused of violating securities laws. The SEC’s five administrative-law judges are a cornerstone of the agency’s enforcement efforts, handling most routine cases. “This is the first time that an appellate court has accepted the argument that challenges the constitutionality of the administrative-law judge system,” “It sets up a conflict with other courts of appeals on a very important issue and it would appear ripe for a U.S. Supreme Court review to resolve that conflict.” In 2015, The Wall Street Journal published a series of articles showing that the SEC was sending more cases to its in-house judges and enjoying a higher success rate there than in federal courts. The Journal also explored the constitutional questions that some lawyers raised about the system. The SEC’s move to expand the types of cases it sent to in-house judges, an authority it gained in the 2010 Dodd-Frank Act, provoked a flurry of legal challenges. Critics have objected to the fact that the administrative-law judges aren’t appointed by the agency’s commissioners, but are hired instead through its office of in-house judges. The appellants say the arrangement violates the Constitution’s appointments clause, which is designed to uphold checks and balances. Several lower courts have found the appellants’ argument persuasive and have said the SEC’s use of the courts, including for insider-trading cases, was “likely unconstitutional.” The D.C. Circuit’s ruling, however, concluded the judges, sometimes known as ALJs, didn’t need to be appointed directly by the commission because their decisions aren’t final and are subject to the review of SEC commissioners.

Global Debt Sales Hit A Record $6.6 Trillion In 2016 -  Earlier in 2016, the US Investment Grade bond market passed an key milestone when some time around August, the total amount of high grade debt outstanding hit $6 trillion, tripling from $2 trillion at the time of the financial crisis. Most, if not all, of the new funding was used to buyback stock. And now, as we come to the end of 2016, another $6 trillion number makes a dramatic appearance, this time in a slightly different metric: according to Dealogic, global debt sales hit a record in 2016, led by corporations rushing to load up on cheap borrowing costs, now threatened by Trump’s vague policies to boost the US economy. As the FT reported, courtesy of record low rates throughout most of 2016, overall debt issuance in the year rose to just over $6.6 trillion, breaking the previous annual record set in 2006.Corporates “took advantage of low rates,” said Monica Erickson, portfolio manager with DoubleLine Capital. “The cost of capital is low so it makes sense for them to come to market.”Companies accounted for more than half of the $6.62 trillion of debt issued, underlining the extent to which negative interest-rate policies adopted by the European Central Bank and the Bank of Japan encouraged the corporate world to increase its leverage. The problem: rates are now rising rapidly.Corporate bond sales - both investment grade and junk - climbed 8% year on year to $3.6tn, led by blockbuster $10bn-plus deals to finance large mergers and acquisitions.

 Eight Years After an Epic Banking Crash, America’s Biggest Threat Is Still Its Banks - Pam Martens - In 1934 the U.S. had 14,146 commercial banks holding insured deposits. By 1985, that number had barely budged, standing at 14,417. Then came the Bill Clinton administration in the 1990s and its reckless and unprecedented banking deregulation which allowed the giant Wall Street banks to swallow up, or drive out of business, thousands of banks across America. According to the Federal Deposit Insurance Corporation (FDIC), as of December 22 of this year, there are only 5,927 FDIC insured banks left in the U.S., a stunning decline of 59 percent from 1985.  But those numbers are just the tip of the iceberg. Banking concentration in the U.S. has reached an unprecedented crisis level when it comes to deposits. Out of the dramatically shrunken base of 5,927 FDIC insured banks which were holding a total of $11.2 trillion in total deposits (insured and uninsured deposits) as of September 30, 2016, just four banks hold 44.6 percent of all deposits. Those four banks are JPMorgan Chase Bank N.A. with $1.486 trillion in total deposits; Bank of America N.A. with $1.3 trillion in total deposits; Wells Fargo Bank N.A. with $1.3 trillion in total deposits; and Citibank N.A. with total deposits of $947.8 billion. (Deposit figures are as of September 30, 2016. The source is the FDIC.) Each of those four banks also have an outsized presence on Wall Street; each of them received taxpayer bailouts during the 2008 crash; each received secret, below-market interest rate loans from the Federal Reserve during the crisis; and three of them (JPMorgan Chase, Bank of America and Citibank) are currently holding tens of trillions of dollars in derivatives within the insured banking subsidiary – meaning there would be a forced taxpayer bailout if the derivatives blew up the bank. Here’s why these behemoth banks pose such a threat to the safety and soundness of the U.S. banking system. The FDIC’s Deposit Insurance Fund (DIF) as of September 30, 2016 stood at $80.7 billion (that’s billion with a “b”) to insure a total of $6.8 trillion of DIF-insured deposits. That’s a slim reserve ratio of 1.18 percent in a banking system that required $16 trillion of secret Federal Reserve loans to resuscitate itself from 2007 to 2010. Citigroup, parent of Citibank, alone received $2.5 trillion in cumulative revolving loans of the $16 trillion loaned by the Fed.  It has more derivatives today than it did at the peak of the crisis in 2008.

Wells Scandal Ups Ante on Compliance Officer Accountability | Bank Think – The Office of the Comptroller of the Currency has requested that large and regional banks disclose their sales and incentive compensation practices. It's likely the OCC's so-called horizontal sweep will identify other banks with similar violations. In fact, the regulator may already have a pipeline of firms it is investigating for similar violations.The episode has sparked public outrage toward Wells that may seep into the industry at large, and the OCC's scrutiny may unveil additional banks engaged in potentially fraudulent activity. But in addition to all that, the scandal reflects increased accountability of individuals who violate regulations, particularly compliance officers who are responsible for a bank's adherence to consumer regulations.Already, we've seen the chief executive of Wells Fargo resign. We may see more naming of names as regulators around the world are zeroing in on individual accountability.Banks don't break laws – it's the people who work for them who violate the rules. A prime example of this shift toward individual accountability is Deputy Attorney General Sally Yates' 2015 memo. The so-called Yates memo states that corporations must identify all individuals involved in or responsible for the misconduct at issue – regardless of their position, status or seniority to receive credit for cooperating in an investigation. While the memo was not written specifically about banking institutions, it certainly applies to fraud investigations like the Wells Fargo case. In the end, scandals like the Wells Fargo one raise questions about the role of bank risk and compliance officers. With sales incentives having driven five years of phony accounts, and the bank having quietly fired 5,300 employees, observers have inevitably asked, "Why didn't the risk and compliance officers stop this?"

Shhh! Don’t Tell this Bank Regulator We’ve Got a Derivatives Problem- Pam Martens (w/ table, graphic) Each quarter the Office of the Comptroller of the Currency (OCC) releases a detailed report showing the exposure to derivatives at U.S. banks. The most recent report for the quarter ending June 30, 2016 indicates that U.S. bank holding companies have a total notional amount (face amount) of derivatives of $252.6 trillion. Of that total, just five Wall Street banks hold $230 trillion or 91 percent, underscoring how massively concentrated this high risk game has become. Those five banks are: Citigroup, JPMorgan Chase, Goldman Sachs Group, Bank of America and Morgan Stanley. There are numerous U.S. units of foreign banks on the derivatives list of bank holding companies but one name is conspicuously missing: the German giant, Deutsche Bank. Without knowing how much potential exposure U.S. banks have to Deutsche Bank in the derivatives arena, the U.S. public is left completely in the dark on just how dangerously exposed our banks are, once again, to the potential failure of a systemically interconnected counterparty.  The OCC is the dominant regulator of national banks. According to its 2015 Annual Report, it has 3,959 employees and a budget of $1.09 billion. It has bank examiners stationed at the major Wall Street banks. According to its Annual Report, its regulatory model “makes it possible for examiners, bank managers, and the board of directors to identify changes in the bank’s risk profile at an early stage, which in turn provides additional time, if necessary, to develop and implement strategies for mitigating that risk.”That statement would clearly be more reassuring to Americans had not the largest bank in the U.S. in 2008, Citigroup, blown itself up while lying to the public and its shareholders about its exposure to subprime debt and holding more than $1 trillion in assets off its balance sheet. The OCC’s reassurance would also be more believable had JPMorgan Chase not lost more than $6.2 billion of its depositors’ money gambling in high risk derivatives in London in 2012 – just four years after the biggest financial crash since the Great Depression and just two years after the Dodd-Frank financial reform legislation was supposed to have restored sanity to the U.S. banking system. The OCC urgently needs to defog its lenses and defang the derivative entanglements at the biggest Wall Street banks.

OCC Finalizes Rule Banning Industrial, Commercial Metal Dealing - The OCC today finalized a rule prohibiting national banks from dealing or investing in industrial and commercial metals. The rule was issued following the federal regulatory agencies’ review of bank activities, as required by Dodd Frank Act Section 620. Under the final rule, banks will no longer be permitted to deal or invest in metals and alloys in forms primarily suited for industrial or commercial purposes, such as copper cathodes, aluminum T-bars and gold jewelry. The rule — which exempts the buying and selling of exchange, coin and bullion — principally targets bank involvement in the copper market, which was permitted under an OCC interpretive letter issued two decades ago. The final rule takes effect April 1, and includes a divestiture period for institutions that had previously acquired industrial or commercial metal through dealing or investing. Banks will have one year to dispose of those metals, and the OCC may grant up to four separate one-year extensions to allow banks additional time to do so. In a comment letter on the proposal, the ABA Securities Association called for additional clarity on the permissibility of other common financing activities. While the OCC did not adopt ABASA’s suggested changes to the proposed rule text, the agency indicated a willingness to use a “facts and circumstances” analysis when evaluating certain transactions or financial arrangements. For more information, contact ABA’s Jason Shafer

Time to Adjust the Regulatory Diet: Fewer Rules, More Principles | Bank Think: The proliferation of a rules-based system of bank regulation in the United States is proving that it may be ineffective in a modern-day economy. It missed the last crisis, creates a climate that rewards loopholes, and limits product innovation and development. Given the change in administrations, Congress and the regulators should consider recalibrating the balance between principles- and rules-based approaches. A foundation of solid rules supplemented by a general code of conduct focused on running a safe and sound institution is a better fit for the future deployment of financial products and services. Over the last 150 years, whether intentionally or not, bank regulation has slowly evolved from one that was largely principles-based to a more rules-based system. In 1863, Congress established a national banking system, the Office of the Comptroller of the Currency and a national currency, all in just 18 pages. The Dodd-Frank Act needed 800 pages in 2010 to adjust banking and securities regulation. A strong banking industry no doubt requires rules that impose strong oversight on entry into and continued participation in a federally insured system. Vigorous enforcement of illegal or inappropriate conduct and the discretion to determine which institutions live or die completes that oversight picture. In between such cradle-to-grave regulation, the regulatory system can be more effective to the extent that it enforces the use of good judgment and real-time data to measure and control risks. A principles-based regulatory system would be akin to situational ethics for financial institutions. The facts and circumstances of a financial problem give rise to a particularized regulatory response – all focused on the goal of safety and soundness and protection of the Deposit Insurance Fund and customers. It requires sound regulatory judgment, solid expertise and the authority and willingness to make difficult decisions about what will keep both a bank and the system safe, sound and profitable.

Faster ACH Payments Strain Bank Anti-Fraud Systems | American Banker: Faster ACH payments are taxing banks' ability to check for fraud and criminals are taking notice. As of September, credit-based ACH payments are now being settled within the same day. These are transactions where one person or entity is pushing money from their bank account to another person or organization, using the automated clearinghouse. Examples include direct deposit, payroll, person-to-person and vendor payments. Where before banks had two to five days to analyze suspicious transactions, now in some cases they have only two hours. Banks haven't quite caught up with the shorter time frame for checking red flags, some say, and fraudsters have jumped on this opportunity. "Recently we've seen more evidence of incidences of ACH fraud than we have in the past," said Andrew Davies, a vice president at Fiserv who helps financial institutions worldwide spot potentially illegal transactions. Davies has seen recent cases of malicious software tampering with ACH files to perpetrate fraud. For instance, hackers are manipulating payroll files and adding themselves as fake employees to collect money. Some of the cases have been in the U.S. Some banks' systems don't sufficiently scrutinize ACH files. "A lot of their fraud filters will not necessarily have the wherewithal to break out all the transactions, look at history of the accounts on the incoming and outgoing side, look at the batches within the file, and then look at the behavior associated with the overall file from an ACH perspective," Davies said. Money lost this way will be difficult to recover.

Blockchain Promises Cost Cuts, But What About Revenue? | American Banker: At this point, it is widely perceived that blockchain technology has the ability to help banks cut costs, but the next frontier could be in figuring out how — or perhaps if — the technology will make banks money. The revenue potential is not a priority right now, but observers say that given the amount of time and effort some banks have put into exploring the technology, it ought to be. That's because technology that makes money is often more appealing than things that trim costs. "There is a lack of forcing mechanism behind" the blockchain race, Jeff Penny, a senior adviser at McKinsey, said at a recent industry gathering hosted by Broadridge Financial. "This discussion is largely motivated by interests in improving efficiencies and understanding new technologies … but there's no one telling us we have to be here. The closest thing we have to an imperative is the need to cut costs in bank income statements today." Although the potential to cut costs is appealing, innovation is often driven by the desire to gain an edge, Penny said. "There is a battle amongst technology providers to create a winning solution, but we're essentially taking processes that don't give rise to competitive advantage and we're trying to find ways to reduce costs associated with the way of doing them, and then doing them the same way as everyone else, which completely eliminates the source of differentiation," he said. "One of the great motivators we usually have for innovation in this business is differentiation."Such an edge could fix some of the fatigue currently plaguing blockchain implementation. Despite banks' excitement about blockchain, which began in 2013 and grew louder this year with unending cycles of proof-of-concept announcements, or PoCs, bitcoin remains the only blockchain platform that is in widespread production, said Ajit Tripathi, a director at PwC's blockchain practice. Financial institutions are asking whether investments in innovation will ever bring cost reduction or business growth to the institutions investing in these experiments.

The world’s largest hedge fund is building an AI engine to manage the company - Bridgewater Associates, the world's largest hedge fund, is building an artificial intelligence engine to automate the management of the company, according to a report in the Wall Street Journal.  Ray Dalio, Bridgewater's founder, wants the AI system to handle everything from the day-to-day management of investments down to organising staff's days and even hiring and firing, according to the report.  Bridgewater, which has $160 billion (£130 billion) under management, already has algorithms that inform the strategy of its "Pure Alpha" fund, measuring hundreds of economic data points. But the new AI system, referred to as the "Book of the Future" by Dalio and the Principles Operating System officially, would apply data science principles to management, picking up on internal data points such as personality tests and internal polls in meetings. Bridgewater has a number of internal apps employees can use for things like grading colleagues.  The project is being run by David Ferrucci, according to the Journal. Ferrucci was one of the leading developers on IBM's Watson project, one of the most advanced AI systems in the world that is better at detecting cancer in patients than human doctors. Dalio hopes that the Principles Operating System will make three-quarters of management decisions within five years. One employee told the Journal that the project is "like trying to make Ray’s brain into a computer." Dalio runs Bridgewater according to what he called the "Principles," a set of rules that employees have to follow.Dalio told Business Insider during a recent interview:"Imagine what it would be like to have a GPS-like device that converts high-quality decision-making principles into formulas. It then processes data representing what is happening in the world and spits out recommended decisions. This is how our economic and investment thinking works. We are now doing the same things for management."  Artificial intelligence has become one of the hottest areas of technology in the last few years, led by cutting edge development projects such as Google's DeepMind.

A Whole Lot of Hurt in Auto Lending May Be Coming | Bank Think: Subprime loans were the fastest-growing segment of the loan market, comprising a significant portion of new originations. An active securitization market fueled the rapid growth. Small nonbank lenders formed to take advantage of the profits to be made at the riskier edges of the market. Delinquencies rose. Lenders went deeper down the credit scale, targeting sub-subprime borrowers. Regulators issued warnings regarding rising delinquencies. It all sounds like the lead-up to the 2007 subprime mortgage crisis, right? It's actually the state of the auto loan market in 2016. The similarities are there for all but the (willfully) blind to see. So where does this road lead? To start, there are significant differences between today's subprime auto loans and subprime mortgages of the past. The auto loan securitization market is just a small fraction of the size of the subprime residential mortgage-backed securities (RMBS) market at its peak; thus, the auto loan securitization market's potential to disrupt the economy should be that much less significant. Moreover, this time around, large banks are generally not making the riskiest loans or taking the other side of big downside bets. Further, the success of the auto loan securitization model is not premised on faulty assumptions of ever-rising collateral values and the ability of borrowers to refinance out of burdensome terms, as was the case when scores of adjustable-rate mortgages were set to readjust at the time of the housing market crash. There is also no government-sponsored buyer or guarantor in the market on the verge of collapse. Finally, auto loans are of much shorter duration and, in fact, delinquency rates may merely be normalizing, following a low-delinquency period.Despite the differences, investors in subprime auto loans may not be in the clear. Asset-backed securities investors keep investing, relying on overcollateralization and subordination. However, similar credit enhancements were common in pre-crisis RMBS and investors have still sued and recovered significant claimed losses. Overextended borrowers once chose their cars over their homes, despite the prospect of rebounding home values. This time around, borrowers facing interest rates that exceed 20% may be more inclined to walk away from depreciating vehicles if they find themselves underwater and sinking deeper. Mechanisms that aid repossession of vehicles upon default provide some assurance of recoupment, but recovery of a continually depreciating asset is a doomed make-whole strategy.

Exclusive: FBI probes FDIC hack linked to China's military - sources | Reuters: The FBI is investigating how hackers infiltrated computers at the Federal Deposit Insurance Corporation for several years beginning in 2010 in a breach senior FDIC officials believe was sponsored by China's military, people with knowledge of the matter said. The security breach, in which hackers gained access to dozens of computers including the workstation for former FDIC Chairwoman Sheila Bair, has also been the target of a probe by a congressional committee. The FDIC is one of three federal agencies that regulate commercial banks in the United States. It oversees confidential plans for how big banks would handle bankruptcy and has access to records on millions of individual American deposits. Last month, the banking regulator allowed congressional staff to view internal communications between senior FDIC officials related to the hacking, two people who took part in the review said. In the exchanges, the officials referred to the attacks as having been carried out by Chinese military-sponsored hackers, they said. The staff was not allowed to keep copies of the exchanges, which did not explain why the FDIC officials believe the Chinese military was behind the breach. Reuters was not able to review those records, and could not determine how long the FBI probe has been open, though it was described as still active. A third person with knowledge of the matter confirmed the FBI had opened a probe. FDIC spokeswoman Barbara Hagenbaugh declined to comment on the previously unreported FBI investigation, or the hack's suspected sponsorship by the Chinese military, but said the regulator took "immediate steps" to root out the hackers when it became aware of the security breach.After FDIC staff discovered the hack in 2010, it persisted into the next year and possibly later, with staff working at least through 2012 to verify the hackers were expunged, according to a 2013 internal probe conducted by the FDIC's inspector general, an internal watchdog.

Did Big Media Run Fake Headlines on the Deutsche Bank “Settlement”? - Pam Martens - Typically, it takes two to settle bank fraud charges – the bank committing the fraud and the law enforcement agency bringing the charges. But in the case of the announcement late last Thursday evening that Deutsche Bank and the U.S. Justice Department had reached an agreement to settle claims against the bank for allegedly swindling investors in the sale of toxic residential mortgage backed securities, all that could be heard was the sound of one hand clapping in a press release issued by the defendant, Deutsche Bank. Nowhere to be found was a statement of particulars on what the bank was admitting to or a man behind a podium bearing the seal of the U.S. Justice Department in a press briefing room, as typically occurs in a real settlement. The lack of substantive details to this “settlement” and no confirmation from the Justice Department that an agreement actually existed did not hamper expensive media real estate from running with the story. The New York Times plopped the story on the front page of its business section on Friday, December 23 – the last trading day before Christmas – under the decidedly declarative headline: “Deutsche Bank to Settle U.S. Inquiry Into Mortgages for $7.2 Billion.” The Times article said the bank’s statement “came ahead of a formal announcement in the case.” It’s now a week later and as of this writing there is still no formal announcement from the Justice Department.  The timeline for this potentially fake news spreading like wildfire at major media outlets went like this: At 7:56 p.m. on Thursday evening, December 22, Reuters ran this headline: “U.S. sues Barclays, ex-executives for mortgage securities fraud.” This headline was based on very material evidence. The U.S. Justice Department had just filed a 198-page lawsuit against Barclays in the U.S. District Court for the Eastern District of New York replete with allegations of breathtaking securities fraud.  Just 37 minutes after this Justice Department fireball was dropped on Barclays and its red-faced legal team, Reuters was running this headline: “Deutsche Bank says it has reached settlement with U.S. DoJ on mortgages case.” The headline correctly indicates that Reuters is getting its information strictly on the basis of what the bank “says.” Deutsche Bank’s legal team had simply released a 255-word press release to garner major headlines across big media’s digital and print platforms. In actuality, it was the Seinfeld version of a settlement agreement – it was about nothing concrete. The first clue should have been the words that ran above the title of the Deutsche Bank press release: “Ad-hoc.” Indeed, Deutsche Bank notes in the second paragraph of its 255-word missive that “The settlement is subject to the negotiation of definitive documentation, and there can be no assurance that the U.S. Department of Justice and the bank will agree on the final documentation.”

Fidelity National Unit Said to Near Settlement Over Robo-Signing -- A Fidelity National Financial Inc. subsidiary is in final talks to pay as much as $65 million to resolve U.S. government accusations that it contributed to improper and fraudulent foreclosures after the 2008 credit crisis, according to a person familiar with the deal. Federal banking regulators agreed that a $65 million penalty could settle the case involving so-called robo-signing of foreclosure papers tied to the firm formerly known asLender Processing Services Inc., according to the person, who requested anonymity because the negotiations aren’t public. Fidelity National acquired the company during the lengthy settlement talks with the Federal Reserve and other agencies, and it has been divided among subsidiaries including ServiceLink Holdings and Black Knight Financial Services. LPS, which provided technology and services to lenders such as Wells Fargo & Co. and JPMorgan Chase & Co., faced accusations that it filed fraudulent legal documents used in the repossession of homes. For more than five years, LPS has been ensnared by a 2011 order from the Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. requiring changes to how it deals with loan defaults and the hiring of an outside firm to examine its work from 2008 through 2010. Fidelity National’s ServiceLink subsidiary is primarily on the hook for the new settlement, according to company disclosures. The expected accord and fine would free that LPS successor from the 2011 order. Black Knight, which absorbed much of LPS’s old business and is spinning off from Fidelity National, is shielded from the fine through an agreement with ServiceLink. ServiceLink has been negotiating with regulators over a probable penalty, but the sides hadn’t yet agreed on an amount, the company said in a regulatory filing last month. ServiceLink had recently beefed up its loss contingencies to $60 million, it said in the quarterly earnings report. Wells Fargo paid $70 million in a similar agreement this year. Fidelity National, the biggest U.S. title insurer, declined to comment on the settlement discussions. Spokesmen for the three bank regulators also declined to comment.

DOJ Criticizes Ruling on CFPBs Constitutionality – The Department of Justice is criticizing an appeals court ruling striking down the Consumer Financial Protection Bureau's single-director structure, saying the decision overstepped Supreme Court precedent. The CFPB has appealed the ruling. In an amicus filing before the U.S. Court of Appeals for the D.C. Circuit Thursday, the Justice Department supported the bureau's petition for an en banc rehearing of PHH v. CFPB. Among other things, the DOJ said the court likely should not have even considered the issue of the CFPB structure's constitutionality. (The court had invited the Justice Department to submit the brief.) At issue is PHH's legal challenge of the CFPB's $109 million fine over what the bureau said amounted to a kickback scheme. PHH had argued that the CFPB could not make new interpretations of the law at the center of the alleged violations because the agency's director could not be fired by a sitting U.S. president except for cause. The single-director structure for an independent agency vests an unconstitutionally large amount of power outside of the president's direct control, PHH claimed. The D.C. Circuit agreed, effectively nullifying the CFPB's independent status by allowing the president to remove the director for any reason. But in its brief, the Justice Department argued that the court's October ruling articulated a constitutionality test regarding the validity of independent agencies that little resembles Supreme Court precedent. "The panel's opinion was ... premised on its view that an agency with a single head poses a greater threat to individual liberty than an agency headed by a multi-member body that exercises the same powers," the department's brief said. "If they do not constitute such an impediment [to the President], the Supreme Court has not suggested that a court should then undertake an additional inquiry into whether a single-headed agency threatens individual liberty to a greater extent than a multi-headed agency."

ABA Opposes CFPB’s Subjective Rating System for Bank Handling of Complaints - The Consumer Financial Protection Bureau’s proposed addition to its consumer complaint database would further erode consumer privacy and foster the spread of unverified information, ABA and the Consumer Bankers Association told the Office of Management and Budget in a joint comment letter today. The groups urged OMB to reject the CFPB’s request to replace the function of the database that allows a customer to dispute the company’s response to the complaint with a “short survey” — and option to provide a narrative — that would allow the customer to provide feedback on the company’s handling of the complaint. The associations said that the subjective rating system and narrative option would be based on complainants’ view of the relief to which they believed they were due, furthering the dissemination of unreliable and potentially false information into the market. For more information, contact ABA’s Jonathan Thessin.

 The Rocky Road Ahead for the CFPB in 2017 | American Banker: The Consumer Financial Protection Bureau faces a precarious and uncertain future in 2017 with all eyes focused on two questions: whether President-elect Donald Trump will attempt to fire agency director Richard Cordray and if Congress can successfully restructure the agency by changing its leadership and funding. One key question is whether President-elect Donald Trump will seek to fire CFPB Director Richard Cordray or if he will let him serve out his term until 2018.

What the CFPB 'Commission' Debate Is Really About -- The financial services industry is pushing hard for Congress to change the single director Consumer Financial Protection Bureau into a multimember commission under the guise of "good government." Let there be no mistake what this is really about: the proposal for a commission structure is a backdoor attack on the very existence of the CFPB as an agency. The financial services industry doesn't have the courage to attack the CFPB, an immensely popular agency, directly. So instead, the strategy is to try to render it ineffective by changing it from a single-director structure to a five-member commission. Commission proponents make three principal arguments. All are specious. First, commission proponents argue that a multimember commission is more accountable than a single director. This is illogical. With a multimember commission, accountability is diffuse; it's easy for commission members to point fingers at each other and mutter about necessary compromise. With a single director, it's clear where the buck stops.Second, commission proponents argue that a commission will be less likely to undertake arbitrary actions or abuse its power because commission structures encourage dealmaking and compromise. This ignores the reality of bipartisan commissions. These commissions operate according to majority rule, and the partisan majority (especially in the current environment) will simply ignore and roll the minority. Minority commissioners are not a meaningful check on partisan majorities abusing power or acting in an arbitrary manner. The real check on agency overreach is the courts. Third, commission proponents argue that a commission furthers policy stability. A commission with staggered terms might add marginally to policy stability, but the biggest assurance of policy stability is the Administrative Procedures Act. The APA bars rulemakings from being issued or repealed willy-nilly. They must go through a formal notice-and-comment process and be supported by substantial evidence. An agency cannot simply repeal or change an existing rule because it doesn't like it politically. The APA's adjudication provisions, the principle of binding precedent and judicial review of adjudication similarly adds policy stability on enforcement actions.

 States Likely to Fill Enforcement Void If CFPB Dials Back - State mortgage regulators and attorneys general are likely to step up enforcement of lending rules if the Consumer Financial Protection Bureau takes a less activist stance in the Trump administration. During its brief five year history, the agency has been out in front when it comes to enforcing mortgage regulations. For example, it took an enforcement action against three reverse mortgage lenders earlier this month, and took the lead in crafting regulations that implemented new mortgage disclosures. Yet there are some that speculate that if President-elect Donald Trump and Republican lawmakers have their way, the CFPB will eventually be forced to dial back its activities. "If we assume that the bureau is going to take a step back once new leadership is in place and enforce less aggressively in some areas, it's very reasonable to conclude that the states will move back to the forefront," said Ben Olson, a partner at BuckleySandler and a former CFPB deputy assistant director. How soon that could happen is unclear. Many anticipate that Trump may seek to fire CFPB Director Richard Cordray soon after the president-elect takes office, a move that will spark a legal battle, while Republicans in Congress will seek to restructure the agency’s leadership. While the political process plays itself out, lenders are less likely to cut a deal with the CFPB, according to Brian Gardner, an analyst at Keefe, Bruyette & Woods. Instead they may dig in and fight more aggressively than they did in the past. "But that doesn't mean that the litigation risk has gone away and the risk of an enforcement action has gone away. States can step into that breach," he said.

 Why GSE Recapitalization Talk Is Premature: The notion that the Trump administration should recapitalize government-sponsored enterprises Fannie Mae and Freddie Mac as a predicate to reforming them, risks the political overcorrection that proponents of this idea claim to want to avoid, while ignoring the critically-needed reforms necessary to ensure a stable housing finance system through all economic cycles. First, proponents of "recap and release" misread the political risks and the depth of interest that key representatives and senators have in determining the long-term future of the GSEs.  In early 2016, the largest housing groups (National Association of Realtors, National Association of Home Builders, American Bankers Association, Mortgage Bankers Association and National Housing Conference) united in a joint letter to voice our collective view that "[P]olicymakers need to continue to focus on the paramount objective of fixing the structural flaws that led to the breakdown of the housing finance system — the only outcome that will protect taxpayers, reserve access to credit, and ensure a stable housing finance system." Moreover, recapitalization-before-reform could create an overreaction in response that could end up being harmful to these two companies and the housing finance system that relies on them. Any isolated move to modify the preferred stock purchase agreement and the net worth sweep might create a similar response to what we saw when the Federal Housing Finance Agency attempted to modify the pay of the CEOs of the GSEs. In that instance, Congress moved swiftly to pass an overwhelmingly bipartisan bill which established pay caps for the two CEOs.

Home Loan Banks Given Flexibility on Advance Collateral: The Federal Housing Finance Agency is making it easier for Federal Home Loan banks to expand the kinds of collateral they can accept for advances. Under a final rule issued before the holidays, the agency said it intends to eliminate the need for Home Loan banks to seek regulatory approval to accept new types of advance collateral. The FHFA has decided that it has approved most kinds of collateral already used by the banks. Therefore, the adoption of approved collateral by another Home Loan bank would "likely not present any material risks" to the Federal Home Loan Bank System. "The language in the final rule is unqualified, meaning that all types of new collateral are excluded from the term 'new business activity' and thus would not trigger the requirement to file an NBA notice," the agency said in the rule, which was published Dec. 19 in the Federal Register. The final rule goes into effect Jan. 18. The exemption for advance collateral does not apply to the Home Loan banks' mortgage purchase programs, however. Modifications to an existing mortgage program or product could "present new material risks" to the system and requires submission of a new business activity notice, according to the final rule. In separate regulation, the FHFA is making it easier for Home Loan banks participating in mortgage purchase programs to transfer mortgage servicing rights to special servicers. The final "Acquired Mortgage Assets" rule allows the Federal Home Loan banks to transfer mortgage servicing rights to non-Home Loan Bank System members such as servicers Ocwen Financial, Nationstar Mortgage Holdings and Walter Investment Management.

Freddie Mac: Mortgage Serious Delinquency rate unchanged in November - Freddie Mac reported that the Single-Family serious delinquency rate in November was at 1.03%, unchanged from 1.03% in October.  Freddie's rate is down from 1.36% in November 2015.  Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".   Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. 
The Freddie Mac serious delinquency rate has fallen 0.33 percentage points over the last year, and at that rate of improvement, the serious delinquency rate could be below 1% in December or January.

Fannie Mae: Mortgage Serious Delinquency rate increased in November --Fannie Mae reported today that the Single-Family Serious Delinquency rate increased to 1.23% in November, up from 1.21% in October. The serious delinquency rate is down from 1.58% in November 2015. These are mortgage loans that are "three monthly payments or more past due or in foreclosure".   The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. Although the rate is generally declining, the "normal" serious delinquency rate is under 1%.   The Fannie Mae serious delinquency rate has fallen 0.35 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% for about 8 more months.

 House Flipping Makes a Comeback as Home Prices Rise - WSJ: House flipping, a potent symbol of the real-estate market’s excess in the run-up to the financial crisis, is once again becoming hot, fueled by a combination of skyrocketing home prices, venture-backed startups and Wall Street cash. After nearly being felled by real-estate forays almost a decade ago, a number of banks are now arranging financing vehicles for house flippers, who aim to make a profit by buying and selling homes in a matter of months. The sector is small—participants say roughly several hundred million dollars in financing deals have been made in recent months—but is expected to keep growing. In recent months, big banks, including Wells Fargo & Co., Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. have started extending credit lines to companies that specialize in lending to home flippers. Earlier this month, J.P. Morgan agreed to lend an estimated $60 million to 5 Arch Funding, an Irvine, Calif., company that offers financing to flippers, according to people familiar with the deal. The number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. About a third of the deals in the third quarter were financed with debt, a percentage not seen in eight years. Trying to win business, big banks in the past few weeks have flown executives to Southern California—where much of the house-flipping activity is occurring—to organize funding deals, say people familiar with the meetings. Investors are making an average profit of about $61,000 on each flip, up from about $19,000 at the bottom of the market in 2009, according to housing-research firm ATTOM Data Solutions

Freddie Mac: Mortgage rates climb for ninth straight week - Mortgage interest rates remained at a two-year high this week, climbing again for the ninth straight week after the election. But thanks to incredibly low interest rates seen earlier this year, 2016 will finish with the lowest annual average for the 30-year, fixed-rate mortgage on record, according to new data published Thursday by Freddie Mac. Per Freddie Mac’s latest Primary Mortgage Market Survey, the average interest rate for the 30-year, fixed-rate mortgage for the week ending Dec. 29, 2016 was 4.32%, up slightly from last week’s average of 4.3%. A year ago, the 30-year, fixed-rate mortgage averaged 4.01%. The last week’s increase, albeit a small one, represents a continuation of a nine-week run of increasing interest rates since the election. Despite the nine straight weeks of increases, the annual average for the 30-year, fixed-rate mortgage for 2016 is 3.65%, which is the lowest annual average ever recorded in the Freddie Mac survey, stretching back to 1971. “On a short week following the Christmas holiday, the 10-year Treasury yield was relatively unchanged,” Freddie Mac Chief Economist Sean Becketti noted. “The 30-year mortgage rate rose 2 basis points to 4.32%, closing the year with nine consecutive weeks of increases,” Becketti added. “As mortgage rates continue to increase, home sales and affordability will continue to be a concern for housing in 2017.” Additionally, Freddie Mac’s report also showed that the 15-year, fixed-rate mortgage averaged 3.55% this week, up from last week when it averaged 3.52%. Last year at this time, the 15-year FRM averaged 3.24%. Freddie Mac’s report also showed that the 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.3% this week, down slightly from last week’s average of 3.32%. A year ago, the 5-year ARM averaged 3.08%.

Rising Rates Will Lead Buyers to Cheaper Homes: Redfin: Many real estate agents expected rising interest rates to affect the type of home prospective purchasers were shopping for, according to the results of a survey by Redfin. Nearly 50% of those surveyed said that a rate increase to 5% in the next year would cause buyers to look for a lower priced property, Redfin reported Wednesday. A similar question posed earlier in December to homebuyers found that 2.6% of them would cancel their search altogether if rates went above 4%. But the impact of higher rates may not just be on the buyer side of the equation. Among the agents that responded, 16% said that potential sellers with locked-in low rates would hold on to their current home to keep their cheaper mortgage. Additionally, 45% of agents surveyed said that sellers will still move, but will rent their previous home rather than sell it. That latter group of homeowners though is contributing to supply issues that have been keeping many, particularly millennials, out of the purchase market. "For some homeowners looking to move, it can be a wise decision to take advantage of the combination of rising rents and low mortgage rates by renting their current homes," Redfin chief economist Nela Richardson said in a news release. "For this reason, we have a group of move-up buyers that are not making their starter homes available to the next generation of homebuyers, which is historically how more affordable inventory is added to the market. This is a double-whammy for the inventory crunch since not only are there fewer homes for sale but the ones that do get listed are mostly in a higher price range." Still, there were signs of optimism: 44% of agents said now is a good time to buy, which is the highest level reported all year and just one percentage point down from a year ago.

"Mortgage Rates Slightly Lower to End 2016" - From Matthew Graham at Mortgage News Daily: Mortgage Rates Slightly Lower to End 2016 Mortgage rates moved lower for a 3rd consecutive day to end 2016, bringing them to the lowest levels in more than 3 weeks for many lenders. December 8th was the last time rates were lower. As of yesterday, 4.25% regained the status of the "most prevalent" conventional 30yr fixed quote on top tier scenarios. Quite a few lenders remain at 4.375% and a scant few are down to 4.125%.
While this is all good news in the context of the past few weeks, 2016 nonetheless ends with one of the worst 2-month losing streaks in the history of mortgage rates. Specifically, the 5 weeks following the election were the worst 5 weeks on record, going back to the Spring of 1987.
Here is a table from Mortgage News Daily: Home Loan Rates  View More Refinance Rates

Home Prices Increase 5.6% in October: Black Knight: Home prices rose 5.6% year over year in October, Black Knight Financial Services reported. This represented the 54th consecutive year-over-year increase, Black Knight said in its Home Price Index report released Monday. The HPI, which came to $266,000, also increased 0.2% from the month before. Florida metropolitan areas led the rest of the country in terms of home price appreciation, with eight Florida cities making the top 10 nationwide in terms of home price growth. These cities included Daytona Beach, Punta Gorda, Lakeland, Homosassa Springs, Ocala, Palm Bay and Orlando. The other cities to make the top 10 were New York and Seattle. Additionally, New York led all other states in terms of price appreciation, followed by Florida and Washington.

 Case-Shiller: National House Price Index increased 5.6% year-over-year in October -- S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3 month average of August, September and October prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: The S&P CoreLogic Case-Shiller National Index Extends New High as Price Gains Continues The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.6% annual gain in October, up from 5.4% last month. The 10-City Composite posted a 4.3% annual increase, up from 4.2% the previous month. The 20-City Composite reported a year-over-year gain of 5.1%, up from 5.0% in September.  Seattle, Portland, and Denver reported the highest year-over-year gains among the 20 cities over each of the last nine months. In October, Seattle led the way with a 10.7% year-over-year price increase, followed by Portland with 10.3%, and Denver with an 8.3% increase. 10 cities reported greater price increases in the year ending October 2016 versus the year ending September 2016.  Before seasonal adjustment, the National Index posted a month-over-month gain of 0.2% in October. The 10-City Composite remains unchanged and the 20-City Composite posted a 0.1% increase in October. After seasonal adjustment, the National Index recorded a 0.9% month-overmonth increase, while both the 10-City and 20-City Composites each reported a 0.6% month-overmonth increase. 13 of 20 cities reported increases in September before seasonal adjustment; after seasonal adjustment, all 20 cities saw prices rise.  The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 10.0% from the peak, and up 0.6% in October (SA). The Composite 20 index is off 7.8% from the peak, and up 0.6% (SA) in October. The National index is at the previous peak (SA), and up 0.85% (SA) in October. The National index is up 35.1% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 4.3% compared to October 2015. The Composite 20 SA is up 5.1% year-over-year. The National index SA is up 5.6% year-over-year. Note: According to the data, prices increased in all 20 cities month-over-month seasonally adjusted.

Home Prices Rose 5.1% Year-over-Year, Gains Continue in October - With today's release of the October S&P/Case-Shiller Home Price Index we learned that seasonally adjusted home prices for the benchmark 20-city index were up 0.6% month over month. The seasonally adjusted year-over-year change has hovered between 4.4% and 5.4% for the last twenty-three months. Today's S&P/Case-Shiller National Home Price Index (not seasonally adjusted) reached another new high. The adjacent column chart illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was up 0.6% from the previous month. The nonseasonally adjusted index was up 5.1% year-over-year. had forecast a 0.5% MoM seasonally adjusted increase and 5.1% YoY nonseasonally adjusted for the 20-city series. Here is an excerpt of the analysis from today's Standard & Poor's press release. “Home prices and the economy are both enjoying robust numbers,” says David M. Blitzer, Managing Director & Chairman of the Index Committee at S&P Dow Jones Indices. “However, mortgage interest rates rose in November and are expected to rise further as home prices continue to outpace gains in wages and personal income. Affordability measures based on median incomes, home prices and mortgage rates show declines of 20-30% since home prices bottomed in 2012. With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.” [Link to source] The chart below is an overlay of the Case-Shiller 10- and 20-City Composite Indexes along with the national index since 1987, the first year that the 10-City Composite was tracked. Note that the 20-City, which is probably the most closely watched of the three, dates from 2000. We've used the seasonally adjusted data for this illustration.

Real Prices and Price-to-Rent Ratio in October -- It has been more than ten years since the bubble peak. In the Case-Shiller release this morning, the National Index, not seasonally adjusted (NSA) was reported as being at a new nominal high. The seasonally adjusted (SA) index was reported as being at the previous the bubble peak. However, in real terms, the National index (SA) is still about 15.3% below the bubble peak. The year-over-year increase in prices is mostly moving sideways now around 5%. In October, the index was up 5.6% YoY. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $277,000 today adjusted for inflation (38%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation). The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through October) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is at the bubble peak, and the Case-Shiller Composite 20 Index (SA) is back to July 2005 levels, and the CoreLogic index (NSA) is back to August 2005. The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to March 2004 levels, the Composite 20 index is back to November 2003, and the CoreLogic index back to February 2004. In real terms, house prices are back to late 2003 / early 2004 levels. This graph shows the price to rent ratio (January 1998 = 1.0). On a price-to-rent basis, the Case-Shiller National index is back to September 2003 levels, the Composite 20 index is back to April 2003 levels, and the CoreLogic index is back to July 2003. In real terms, and as a price-to-rent ratio, prices are back to late 2003 - and the price-to-rent ratio maybe moving a little more sideways now.

Zillow Forecast on Case-Shiller Index: "Expect a (Very) Modest Slowdown" in November -- The Case-Shiller house price indexes for October were released this morning. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: November Case-Shiller Forecast: Expect a (Very) Modest Slowdown After several months in a row of accelerating growth in U.S. home prices, the pace of appreciation is expected to slow somewhat in November, according to Zillow’s November Case-Shiller forecast. The November Case-Shiller national index is expected to grow 5.6 percent year-over-year and 0.7 percent month-to-month (seasonally adjusted), on par with the pace of annual growth and down slightly from the 0.9 percent monthly appreciation recorded in October. We expect the 10-city index to grow 4.1 percent year-over-year and 0.4 percent (SA) from October, and the 20-city index is expected to grow 5 percent annually and 0.5 percent (SA) from October. Both annual and seasonally adjusted monthly appreciation forecasted for November for the 10- and 20-city indices would be slower than that recorded in October. Zillow’s November Case-Shiller forecast is shown in the table below. These forecasts are based on today’s October Case-Shiller data release and the November 2016 Zillow Home Value Index. The November S&P CoreLogic Case-Shiller Indices will not be officially released until Tuesday, January 31. The year-over-year change for the 10-city and 20-city indexes will probably be slightly lower in the November report compared to the October report.  The change for the National index will probably be about the same.

NAR: Pending Home Sales Index decreased 2.5% in November, down 0.4% year-over-year -- From the NAR: Pending Home Sales Backpedal in November The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 2.5 percent to 107.3 in November from 110.0 in October. After last month's decrease in activity, the index is now 0.4 percent below last November (107.7) and is at its lowest reading since January (105.4). The PHSI in the Northeast nudged forward 0.6 percent to 97.5 in November, and is now 5.7 percent above a year ago. In the Midwest the index declined 2.5 percent to 103.5 in November, and is now 2.4 percent lower than November 2015. Pending home sales in the South decreased 1.2 percent to an index of 118.7 in November and are now 1.3 percent lower than last November. The index in the West fell 6.7 percent in November to 101.0, and is now 1.0 percent below a year ago. This was below expectations of a 0.5% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in December and January.

Is A Housing Slowdown Coming? -- From Reuters: Contracts to buy previously owned U.S. homes fell in November to their lowest level in nearly a year, a sign rising interest rates could be weighing on the housing market, the National Association of Realtors said on Wednesday. The group said its pending home sales index, based on contracts signed in November, dropped 2.5 percent to 107.3.  “The brisk upswing in mortgage rates and not enough inventory dispirited some would-be buyers," the NAR said in a statement accompanying the figures.  Consider that above with the following interest rate information: Since the election, 15 and 30-year mortgage rates have increased over 50 basis points. That means that means the XHBs may be a possible short:

How Americans Spent Their Money In The Last 75 Years (In 1 Simple Chart) --Consumer spending makes up a large percentage of the United States economy. We all have bills to pay and mouths to feed, but where do Americans spend their money? Here is a breakdown of how Americans spent their money in the last 75 years...  In the chart above, spending is broken into 12 categories: Reading, alcohol, tobacco, education, personal care, miscellaneous, recreation & entertainment, healthcare, clothing, food, transportation and housing. Each category is further broken down into spending by year, from 1941 to 2014, and each category is given a unique color. The data were collected from the Bureau of Labor Statistics. The data is adjusted for inflation and measures median spending of all Americans. Unsurprisingly, housing expenses have almost always been the largest area of spending in America for over 70 years. The only exception is 1941, when spending on food averaged $8,311, whereas spending on housing came to $7,537. However, in 1941 the government included alcohol in the food spending category, which inflates the food spending data for that year. In the other years, alcohol was given its own category. In every other year measured, spending on housing outpaced every other category.Another interesting trend is the downward slope of spending on clothing. Americans spent the most on clothing in 1961 for an average of $4,157. In every year measured since 1961, spending on clothing fell, even when accounting for inflation.At the same time, Americans began spending more on education, transportation and healthcare. Spending on education has increased far more than any other category, jumping from $242 in 1941 to $1,236 in 2014. Education spending increased at a particularly fast rate between 1984 and 1994 and onward. While spending on healthcare increased between 1941 and 2014, overall spending dipped between 1973 and 1984, but then began rising rapidly thereafter.Between 1941 and 2014 Americans spent money on most of the same things, with a few changes. Housing has persisted as a large area of spending for Americans, as has the food category. However, spending on food and clothing has fallen when adjusting for inflation while spending on education and healthcare has risen quickly.

Fed Survey: Noncash Payments Total $178 Trillion - More than 144 billion noncash payments — those made with debit or credit cards, ACH and checks — were made in the U.S. between 2012 and 2015, totaling nearly $178 trillion, the Federal Reserve reported today in its triennial payments study.   Debit cards saw the largest increase in number of transactions among the payment types surveyed, growing from 56.5 billion in 2012 to 69.5 billion in 2015. The total value of debit card transactions rose $0.46 trillion in that timeframe to total $2.56 trillion. Credit card payments also continued to grow, reaching 33.8 billion (an increase of 8 percent since 2012) with a total value of $3.16 trillion. ACH payments continued to grow at an annual rate of 4.9 percent, while prepaid debit card growth slowed to an annual rate of 2.3 percent between 2012 and 2015. The number of check payments also continued to decline, falling at an annual rate of 4.4 percent. The study noted, however, that the rate of decline during this period was slower than in previous surveys. The study also reflected the U.S.’ ongoing transition to chip card technology, which began in 2015. The number of general-purpose card payments made using chip cards increased to 1.5 billion in 2015, up from 41 million 2012, though that number reflects just 2 percent of all general-purpose payments made. The U.S. also continues to see comparatively higher rates of counterfeiting fraud (one of the fraud types that chip cards can help prevent) than in countries where chip cards have been in place for years, the study found.

Real Median Household Income: Slow Growth in 2016 - The Sentier Research median household income data for November, released this morning, came in at $58,221. The nominal median was up $292 month-over-month and $1,397 year-over-year. In percentages, the October number is up 0.5% MoM and 2.5% YoY. Adjusted for inflation, the latest income was up $176 MoM but only $432 YoY. The real numbers equate to changes of 0.3% MoM and 0.7% YoY. In real dollar terms, the median annual income is 1.0% lower (-$605) than its interim high in January 2008 but well off its low in August 2011. The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

Inflation expectations - CPI rent inflation has spent 2016 slowly climbing from 3% toward 4%.  In the meantime, Zillow's rent measure has cooled off. Is this a signal that CPI rent inflation might cool off as well?  CPI core inflation outside of rent is already on its way down to 1%.  If rent inflation joins it, then core inflation would start moving down away from the Fed's target levels. This certainly isn't due to overbuilding.  Housing starts have leveled off in the past year at levels typical of recessions.  This seems like a potential sign of declining demand.  On the other hand, inflation expectations have been rising since August.  Will inflation expectations turn back down as a result of the recent rate hike?  That's my expectation.  The question is how much will economic activity turn down?  How much will this effect homebuilding?  How quickly would the Fed reverse course if, say, 10 year treasuries fall back toward 2%? I am fairly sanguine about the potential for a deep contraction now, but on the other hand, the answer to that last question plainly seems to be, "not very", in which case I do worry that the downsides here are bad. I think the long term play these days is to be long on homebuilding with a long bond position as a hedge.  But, I wish there was better visibility about the short term.  A post-inauguration announcement about weakening some of the more damaging aspects of Dodd-Frank would be great.  In some ways, the direction it looks like things are going is somewhat positive - better than I had expected.  But, it's not so great that tactical positions are so dependent on political developments, even if that is necessary to a certain extent.

Consumer Confidence Increases in December --  The latest Conference Board Consumer Confidence Index was released this morning based on data collected through December 15. The headline number of 113.7 was an increase from the final reading of 109.4 for November, an upward revision from 107.1. Today's number was above the consensus of 109.0.  Here is an excerpt from the Conference Board press release. “Consumer Confidence improved further in December, due solely to increasing Expectations which hit a 13-year high (Dec. 2003, 107.4),” said Lynn Franco, Director of Economic Indicators at The Conference Board. “The post-election surge in optimism for the economy, jobs and income prospects, as well as for stock prices which reached a 13-year high, was most pronounced among older consumers. Consumers’ assessment of current conditions, which declined, still suggests that economic growth continued through the final months of 2016. Looking ahead to 2017, consumers’ continued optimism will depend on whether or not their expectations are realized.”  The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end we have highlighted recessions and included GDP. The regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator. Statisticians may assign little significance to a regression through this sort of data. But the slope resembles the regression trend for real GDP shown below, and it is a more revealing gauge of relative confidence than the 1985 level of 100 that the Conference Board cites as a point of reference.

Post-Election Consumer and Business Confidence Increase -  The following is from the Conference Board: Consumers’ assessment of current conditions declined in December. Those saying business conditions are “good” decreased slightly from 29.7 percent to 29.2 percent, while those saying business conditions are “bad” increased from 15.2 percent to 17.3 percent. Consumers’ appraisal of the labor market was less positive than last month. Those stating jobs are “plentiful” declined from 27.8 percent to 26.9 percent, while those claiming jobs are “hard to get” increased from 21.2 percent to 22.5 percent.  Consumers’ short-term outlook improved considerably in December. Those expecting business conditions to improve over the next six months increased from 16.4 percent to 23.6 percent, while those expecting business conditions to worsen declined from 9.9 percent to 8.7 percent. Consumers’ outlook for the labor market also improved markedly. The following chart and commentary is from the National Federation of Independent Business: The Index of Small Business Optimism rose 3.5 points to 98.4, a substantial gain to just above the 42-year average of 98. Eight of the 10 Index components posted a gain, one declined and one was unchanged.  Expectations for real sales gains and outlook for business conditions accounted for 69 percent of the gain. The two employment components added 20 percent of the gain. The remaining six components were little changed.   Analysis: For the consumer, this will probably lead to increased retail sales and personal consumption expenditures -- a confident consumer is more likely to increase expenditures.  This could lead to upside surprises in holiday sales and could also translate into an increase in auto and light truck purchases (these types of expenditures require financing which consumers don't take out unless they believe they can afford the payments over an extended time horizon).   As for business, an increase in confidence naturally leads to increased risk-taking.  I still think business will be a bit conservative; they may need to see more action from Congressional Republicans before making major changes.  I think the real issue here will be tax reform, especially a lowering of corporate and personal tax rates.

 Mall Fights Across the U.S. Send Post-Holiday Shoppers Scrambling For the Exits —Fights broke out at malls around the country Monday night sending shoppers, who were looking for post-holiday deals, scrambling for the exits.No one was seriously injured in the mall melees, which, during the panic, also prompted numerous false reports of gunfire.Police in Ohio told that officers used pepper spray to disperse a large crowd following a fight at an upscale shopping mall in Beachwood, just outside of Cleveland.A report of shots fired was later determined to be unfounded.One male juvenile was arrested for allegedly trying to hit an officer during the incident, which police said appeared to have been “loosely organized on social media.” There were similar disturbances at malls around the country including in New York, New Jersey and North Carolina, where chaos erupted at a mall in Fayetteville and emergency medical personnel were called in to assist someone who had a medical episode while fleeing.In Memphis, Tennessee, police arrested several people following fights at two malls there. No one was injured and no gunshots were fired, despite reports indicating otherwise.“Somebody yelled ‘gun!’ and youths stampeded through the mall,” Deputy Chief Terry Landrum told The Commercial Appeal.Police in Aurora, Colorado, near Denver, evacuated a mall due to multiple skirmishes.The trouble reportedly began during an arrest when an unruly crowd surrounded the scene.Aurora police spokesman Sgt. Chris Amsler said that as the suspect was being taking into custody, the crowd, which mushroomed in size to about 500 people, advanced on the officer and fights broke out. Five juveniles were arrested. No one was hurt.In Aurora, Illinois, outside of Chicago, a mall there was temporarily shut down due to a large disturbance. Videos posted on Twitter showed mall security trying to get the situation under control.There was no official word on whether any of the fights, which were also reported in Arizona, Texas, Indiana and Connecticut, were connected. 

A Battle Over American-Made Products Is Looming and Republicans Are in the Middle of It - Yves here. We warned that Trump would be forgiven a great deal if he increased wages and reduced un- and underemployment. But as his economic plans begin to crystalize, many of his big priorities are near and dear to Republicans, namely, cutting taxes and getting rid of Obamacare (although Trump has also said he’d like to keep some Obamacare features….but the ones he’d like to preserve necessitate keeping the program largely intact). And one of Trump’s big job boosting ideas, infrastructure spending, is now looking more like pork to the rich. Rather than government-funded expenditures, Trump is advocating public-private partnerships that would get special tax incentives to lower not just the cost of borrowing but even the cost of equity investment. Aside from the fact that public-private partnerships are an exercise in looting, this program is unlikely to do much on the jobs front. First, the infrastructure spending won’t lead to an increase in fiscal spending, so it will not act as an economic stimulus. Second, to the extent it does create jobs, investment dollars will go to places where the projects pencil out as providing attractive user fees. That means they will be in places with moderate to high population density….and not in the smaller communities that are struggling from the loss of factory jobs. So how does Trump plan to deliver on his campaign promise? He appears to be relying entirely on cutting the trade deficit and using immigration “reform” to reduce competition for low-wage jobs. (He may also believe that tax cuts aimed at the rich and deregulation will produce growth, but those were never very productive approaches, and the marginal return from going further down that path won’t be great). The post below discusses how Trump will encounter resistance from Republicans on his plans to stop sending as much demand as we do overseas, which has the effect of exporting jobs. One would think that “Buying American” would be an uncontroversial idea. Think again.

China Tripled Pace of Investment in U.S. in 2016, but Hurdles Loom -  Chinese investment in the U.S. tripled to $45.6 billion this past year from 2015, according to tabulation by Rhodium Group, a New York consulting firm, but don’t expect as large a jump in 2017. “While the economic fundamentals and deal pipeline suggest that 2017 will be another boom year for Chinese investment in the U.S., the political realities on both sides pose a major downside risk to both pending transactions and new deal flow in coming months,” Rhodium wrote in a short report released on Thursday.  In other words, the election of China-hawk Donald Trump, who Rhodium diplomatically says may take a “more confrontational approach” to China, may put a damper on Chinese investment. That’s especially true in high-tech areas. Under President Barack Obama, the U.S. had become increasingly sensitive to Chinese purchases of semiconductor firms.  In December, the Committee on Foreign Investment in the U.S., a secretive multi- agency panel that reviews foreign acquisitions to see if they pose national security risks, rejected the proposed sale of Aixtron SE of Germany – which has a U.S. subsidiary — to Grand Chip Investment, the German unit of China’s Fujian Grand Chip Investment. CFIUS also forced the withdrawal of two other Chinese acquisition targets in the U.S. over the last two years. Apart from political uncertainty, China’s currency is devaluing, making investment in the U.S. more expensive, and spooking Chinese regulators, who may further tighten regulations against taking yuan out of the country. “Uncertainty about implementation of new [currency] rules could impact pending transactions as well as the pace of newly announced investments in coming months,” Rhodium reports.

International Trade in Goods - Trade looks to be a major negative that will be holding down fourth-quarter GDP. The advance trade deficit in goods widened sharply for a second straight month in November, to $65.3 billion following a revised $61.9 billion deficit in October that was nearly $5 billion higher than the last month of the third quarter, September. Exports have been very weak so far this fourth quarter, down 1.0 percent in November following October's 2.5 percent shortfall. Food exports have been especially soft as have vehicle exports, and capital goods exports fell very sharply in the latest report. Widening the gap have been sharp increases in imports, up 1.2 percent on top of October's upward revised 1.5 percent increase. Imports of industrial supplies posted a very sharp increase in November as did food imports. Most other readings on the import side are narrowly mixed.

Soaring Dollar Hits US Trade, Sends Goods Trade Deficit To Highest Since March 2015 --Who could have possibly thought that a soaring dollar would have an adverse impact on the US trade deficit, and thus, the US economy. Well, not the Fed, if only for now, because just as the Fed hiked rates only for the second time in a decade, the US advance goods trade deficit soared from $61.9 billion to $65.3 billion, far higher than the consensus print of $61.6 billion. This was the highest advance trade gap since March of 2015 when the dollar was likewise soaring.The reason for the far greater than expected deficit: exports of goods fell 1.0%, while imports of goods rose 1.2%. mExports of Goods were down 0.99% in November, according to the advance estimate. Most of this $1.2 billion decline came from a $1.8 billion drop in exports of capital goods, which was offset by a $1.2 billion rise in exports of industrial supplies. Imports of Goods were up 1.19% in November, according to the advance estimate. This $2.2 billion rise was largely a result of a $2.0 billion rise in industrial supplies imports.

2 Takes on Why China 'Wins' a Trade War with America --The premise of Donald Trump's China-bashing rhetoric is that the United States still holds all the good [trump?] cards in the global economy. As such, it can pretty much do as it pleases to serve its own interests. Because of lackluster leadership by others, however, the United States has allowed others to take advantage of it time and again. So, Trump proposes to slap tariffs of up to 40-some percent on Chinese made products to level the playing field. [1] But what if the premise is wrong? Winter Nie of the famed IMD business school not only argues that China holds the better cards--it has more export markets aside from the United States to approach, but American firms that have invested in PRC-based supply chains will be hurt more than the other way around:  A trade war would be problematic, but it would not be a disaster for China, mainly because the U.S. needs China more than vice versa. Twenty years ago, the situation might have been different. China was dramatically underdeveloped, and it wanted access to Western technology and manufacturing techniques. China has most of what it needs now, and what it doesn’t have it can easily obtain from vendors outside the U.S. While the American market looked enticing a few decades ago, it is relatively mature, and today the newer emerging market countries have become much more interesting to Beijing. Although a good deal of American high tech equipment is manufactured in China, the lion’s share of the profits go to the American companies that designed the equipment. If that were to stop, American companies would be hurt more than Chinese manufacturers. What's more, market access to 1.4 billion Chinese consumers makes it crucial for American firms to have access to: The fastest growing markets for the best items China produces, like laptop computers and cell phones, are in developing regions such as India, Latin America, and Africa. In contrast, China itself is a market that the U.S. can hardly ignore. By the end of 2015, Chinese consumers bought 131 million iPhones. The total sales to U.S. customers during the same period stood at only 110 million. And iPhones are only a small part of U.S. exports. Boeing, which employs 150,000 workers in the U.S., estimates that China will buy some 6,810 airplanes over the next 20 years, and that market alone will be worth more than $1 trillion.

Wholesale and Retail Inventories Rise --Census bureau reports show wholesale and retail inventories jumped in November. Wholesale inventories for November, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $594.5 billion, up 0.9 percent from October 2016, and were up 1.2 percent from November 2015. The September 2016 to October 2016 percentage change was revised from down 0.4 percent to down 0.1 percent. Retail inventories for November, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $609.6 billion, up 1.0 percent from October 2016, and were up 4.1 percent from November 2015. The September 2016 to October 2016 percentage change was unrevised at down 0.4 percent. This report will add a few ticks to 4th quarter GDP estimates. However, inventory-to-sales ratios are already way too high in my estimation

Vehicle Sales Forecast: Sales Over 17 Million SAAR Again in December, On Track for Record Year in 2016 --The automakers will report December vehicle sales on Wednesday, January 4th. Note: There were 27 selling days in December 2016, down from 28 in December 2015. From WardsAuto: December Light-Vehicle Sales to Push U.S. Market to New RecordDecember U.S. light-vehicle sales are forecast to finish strong enough for 2016 to top 2015’s record 17.396 million units. However, actual volume largely will be determined by results in the final third of the month, because a major portion of December’s deliveries typically occur after Christmas. The forecast 17.7 million-unit seasonally adjusted annual rate is below November’s 17.8 million, but above December 2015’s 17.4 million.... Despite the drop in December’s volume, total 2016 sales will end at 17.41 million units, barely edging out the all-time high set last year. Here is a table (source: BEA) showing the 5 top years for light vehicle sales through November, and the top 5 full years. 2016 will probably finish in the top 3, and could be the best year ever - just beating last year.

Trucking Data Again Mixed In November 2016: Truck shipments declined or improved in November - depending on the data source. Trucking, like rail, may be in contraction - but year-over-year growth is likely trending up. This month it is agreed between the data sources that trucking sector is in contraction year-over-year. It was not agreed whether November was better than October. I tend to believe the CASS index which shows a moderate decline month-over-month as it is more consistent with the rail data. The ATA data defies logic - and is likely a result of seasonal adjustment issues. It is also interesting that the current trucking employment pattern resembles the period before the 2001 recession. This situation is mirroring the trends in wholesale trade and manufacturing - which all remain in contraction. Prior to the New Normal, this would have indicated a recession - in 2016 it seems only to be indicating very weak near term economic conditions. The American Trucking Associations' (ATA) trucking index decreased 0.3 % in October following a 6.3 % decline in September. From ATA Chief Economist Bob Costello: 2016 has been an interesting year for truck tonnage, with monthly gains and decreases as large as I can remember, which suggests seasonality is different this year. November's substantial increase continued with the seesaw pattern that has persisted for much of the year. While I think the November gain overstates the strength in the freight market, I do believe we are seeing some improvement that will continue into 2017. Retail sales are good, the housing market is solid, and the inventory overhang throughout the supply chain is coming down, all of which will help support truck freight volumes in 2017,

Rail Week Ending 24 December 2016: An Unbelievably Good Week: Week 51 of 2016 shows same week total rail traffic (from same week one year ago) improved a lot according to the Association of American Railroads (AAR) traffic data. If coal and grain are removed from the analysis, rail over the last 6 months been declining around 5% - but this week improved 18.5%. So this week's data is an outlier caused by week 51 last year ending in the week between Christmas and New Years (a low volume period) - and this year week 51's cutoff was before Christmas. It is too risky to try to logically analyze the data this week. The contraction in rail counts began over one year ago, and now rail movements are being compared against weaker 2015 data - and this is the cause periodic acceleration in the short term rolling averages. Still, rail is weak to very week compared to previous years. For this week, total U.S. weekly rail traffic was 496,633 carloads and intermodal units, up 27 percent compared with the same week last year. Total carloads for the week ending December 24 were 243,917 carloads, up 17.9 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 252,716 containers and trailers, up 37.2 percent compared to 2015. Nine of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included miscellaneous carloads, up 30.6 percent to 8,186 carloads; motor vehicles and parts, up 24.6 percent to 16,491 carloads; and grain, up 24 percent to 22,582 carloads. One commodity group posted a decrease compared with the same week in 2015: petroleum and petroleum products, down 5.4 percent to 9,972 carloads. For the first 51 weeks of 2016, U.S. railroads reported cumulative volume of 12,880,893 carloads, down 8.4 percent from the same point last year; and 13,280,460 intermodal units, down 1.8 percent from last year. Total combined U.S. traffic for the first 51 weeks of 2016 was 26,161,353 carloads and intermodal units, a decrease of 5.1 percent compared to last year.

Richmond Fed Manufacturing: Activity Strengthens in December -Today the Richmond Fed Manufacturing Composite Index increased 4 points to 8 from last month's 4. had forecast 5. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 2.7, indicates expansion. The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series. Here is the latest Richmond Fed manufacturing overview. Fifth District manufacturing activity expanded in December. The volume of new orders picked up compared to last month and shipments increased. Manufacturing employment softened, while wage increases were more widespread across firms. Prices of raw materials rose more quickly in December, while prices of finished goods rose at a somewhat slower rate. Manufacturers were optimistic about future business conditions. Firms expected robust growth in shipments and in the volume of new orders. Additionally, survey participants looked for backlogs to build more quickly in the months ahead and anticipated increased capacity utilization. Expectations were for slightly longer vendor lead times. Producers anticipated an increase in hiring along with broader wage gains during the next six months, while they planned for longer workweeks. For the six months ahead, producers expected faster growth in prices paid and prices received. Link to Report Here is a somewhat closer look at the index since the turn of the century.

Richmond Fed Manufacturing Survey Improves In December 2016. - Of the four regional Federal Reserve surveys released to date, all are in expansion. For the second month, the regional Fed surveys seem to be saying uniformly that growth is expanding. The Richmond Fed subcategories were strong. Fifth District manufacturing activity expanded in December. The volume of new orders picked up compared to last month and shipments increased. Manufacturing employment softened, while wage increases were more widespread across firms. Prices of raw materials rose more quickly in December, while prices of finished goods rose at a somewhat slower rate.Manufacturers were optimistic about future business conditions. Firms expected robust growth in shipments and in the volume of new orders. Additionally, survey participants looked for backlogs to build more quickly in the months ahead and anticipated increased capacity utilization. Expectations were for slightly longer vendor lead times.Producers anticipated an increase in hiring along with broader wage gains during the next six months, while they planned for longer workweeks. For the six months ahead, producers expected faster growth in prices paid and prices received.Overall manufacturing conditions strengthened this month. The composite index for manufacturing moved to a reading of eight from last month's reading of 4. The index for shipments advanced 11 points to end at 12, and the new orders indicator added five points also ending at a reading of 12. Manufacturing employment softened this month; the December index settled at −1.Backlogs rose at a faster pace this month; the index jumped up 20 points, ending at 8. Additionally, capacity utilization grew at a faster pace, moving the index up 11 points to a reading of 10. Vendor lead time lengthened this month, moving the index up five points to 9. More firms reported a building up of finished goods inventories in December; however, the indicator ended seven points lower than a month ago at 11. The raw materials inventories index added two points to end at 25.

Dallas Fed Manufacturing Outlook: Activity Picks Up in December -  This morning the Dallas Fed released its Texas Manufacturing Outlook Survey (TMOS) for December. The latest general business activity index increased 5 points, coming in at 15.5, up from 10.2 in October.  Here is an excerpt from the latest report: Texas factory activity increased for the sixth consecutive month in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose five points to 13.8, suggesting faster output growth this month. Most other measures of current manufacturing activity indicated expansion, although demand growth remained slightly negative. The new orders index climbed nine points to 7.3, posting its first positive reading in four months. However, the growth rate of orders index stayed slightly negative, edging down to -3.4. The capacity utilization index shot up 10 points to 13.8, its highest reading in more than two years. The shipments index rebounded from a dip into negative territory last month, climbing seven points to 4.7. Perceptions of broader business conditions improved again this month. The general business activity index posted a second consecutive positive reading and moved up to 15.5. The company outlook index posted a similar gain, increasing six points to a reading of 17.4. Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator.

December 2016 Texas Manufacturing Survey Continues to Expand But Key Internals Bad -- Of the five Federal Reserve districts which have released their December manufacturing surveys - all are in expansion. A complete summary follows. One must assume with surveys that change in values is relative to the previous month. This survey remained in positive territory but new orders and unfilled orders remain in contraction - and trend lines are down. This really is not that positive of a report.Texas factory activity increased for the sixth consecutive month in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose five points to 13.8, suggesting faster output growth this month.Most other measures of current manufacturing activity indicated expansion, although demand growth remained slightly negative. The new orders index climbed nine points to 7.3, posting its first positive reading in four months. However, the growth rate of orders index stayed slightly negative, edging down to -3.4. The capacity utilization index shot up 10 points to 13.8, its highest reading in more than two years. The shipments index rebounded from a dip into negative territory last month, climbing seven points to 4.7.Perceptions of broader business conditions improved again this month. The general business activity index posted a second consecutive positive reading and moved up to 15.5. The company outlook index posted a similar gain, increasing six points to a reading of 17.4.Labor market measures indicated slight employment declines and modestly longer workweeks. The employment index dipped to -2.9 after three months in positive territory. Seventeen percent of firms noted net hiring, compared with 20 percent noting net layoffs. The hours worked index came in at 2.7, largely unchanged from last month's reading and indicative of a slight increase in workweek length.Prices and wages rose in December. Input cost increases accelerated markedly, with the raw materials prices index rising 10 points to 28.1. The finished goods prices index also rose notably, climbing from 8 to 14.7 and reaching its highest level since early  2012. Wages and benefits continued to rise, with the index edging up to 18.7.

Regional Fed Manufacturing Overview: Second Consecutive Positive Reading -  Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. Regional manufacturing surveys are a measure of local economic health and are used as a representative for the larger national manufacturing health. They have been used as a signal for business uncertainty and economic activity as a whole. Manufacturing makes up 12% of the country's GDP. The other 6 Federal Reserve Districts do not publish manufacturing data. For these, the Federal Reserve’s Beige Book offers a short summary of each districts’ manufacturing health. The Chicago Fed published their Midwest Manufacturing Index from July 1996 through December of 2013. According to their website, "The Chicago Fed Midwest Manufacturing Index (CFMMI) is undergoing a process of data and methodology revision. In December 2013, the monthly release of the CFMMI was suspended pending the release of updated benchmark data from the U.S. Census Bureau and a period of model verification. Significant revisions in the history of the CFMMI are anticipated."  Here is a three-month moving average overlay of each of the five indicators since 2001 (for those with data). The latest average of the five for December is 6.18, up from last month's 2.19 and in positive territory for the second consecutive month.

Chicago PMI decreases in December --Chicago PMI: December Chicago Business Barometer Down 3.0 Points to 54.6 - The MNI Chicago Business Barometer fell 3.0 points to 54.6 in December from 57.6 in November, led by declines in both New Orders and Order Backlogs.After a disappointing start to the fourth quarter, the latest results suggest economic conditions have improved somewhat, with the Barometer averaging 54.3 in Q4, the highest in two years.The December decline was led by a slowdown in New Orders, which fell 6.7 points to 56.5, giving up most of the November gain that had left it running at the fastest pace since June. “The Chicago Business Barometer ended 2016 in a much healthier position than a year ago when it slipped into contraction. This is largely owed to stronger outturns in the second half of the year and is testament to the resilience of the US economy. “Most respondents to our survey remain upbeat about the fate of their business as we head into 2017, buoyed by fresh hope of better things to come under the new administration. Hopefully, 2017 can build on the momentum generated in the latter stages of 2016.” said Jamie Satchithanantham, economist at MNI Indicators. This was below the consensus forecast of 57.0.

Chicago PMI Fell in December - The Chicago Business Barometer, also known as the Chicago Purchasing Manager's Index, is similar to the national ISM Manufacturing indicator but at a regional level and is seen by many as an indicator of the larger US economy. It is a composite diffusion indicator, made up of production, new orders, order backlogs, employment, and supplier deliveries compiled through surveys. Values above 50.0 indicate expanding manufacturing activity. The latest report for Chicago PMI came in at 54.6, a 3.0 point decrease from last month's 57.6. Here is an excerpt from the press release: “The Chicago Business Barometer ended 2016 in a much healthier position than a year ago when it slipped into contraction. This is largely owed to stronger outturns in the second half of the year and is testament to the resilience of the US economy. “Most respondents to our survey remain upbeat about the fate of their business as we head into 2017, buoyed by fresh hope of better things to come under the new administration. Hopefully, 2017 can build on the momentum generated in the latter stages of 2016.” . [Source] Let's take a look at the Chicago PMI since its inception.

Global economic forces conspire to stymie U.S. manufacturing – Brookings - President-elect Trump promises to bring manufacturing jobs back. In thinking about policies that might accomplish this, it is important to keep three economic trends in mind. First, job loss in manufacturing derives primarily from technological change, not from trade. Manufacturing’s share of U.S. production is quite stable, but its share of employment has declined at a steady rate because productivity growth in manufacturing is higher than in services. This trend can be observed in all of the advanced economies, including ones such as Germany that have large trade surpluses. Manufacturing’s share of employment in Germany declined by 15.5 percentage points during 1973-2010, very similar to the U.S.’s 14.7 percentage point decline. If the U.S. were to run a trade surplus, as Germany does, there is likely to be a one-time gain in manufacturing employment, but then the trend decline will continue. In the event of a surplus, we would consume less of our GDP (and consumption is mostly services) and export more (U.S. exports are mostly manufactures). Hence, there would be a one-time shift of capital and labor from services to manufacturing. Then, the trend decline of manufacturing employment would continue as long as productivity growth in manufactures is faster than that in services. If we are going to have continuing productivity growth through technological advance, then we need policies to help workers retrain and adjust to changing labor market demands. Trying to lock the old jobs in place is not going to generate prosperity. Second, the broadest measure of the trade balance, the current account, is equal to savings minus investment. Countries with a trade deficit, like the U.S., are borrowing from the rest of the world to support investment.

Manufacturers With No Employees Are on the Rise, and Thriving - A tiny segment of U.S. manufacturing appears to be thriving—the one with no employees. A mix of technology, economic necessity and adventure is leading more Americans to found companies that plan to stay very small. That entrepreneurial spark also highlights challenges facing the economy, from difficulty re-entering the job market to the diminishing role of fast-growing young firms. The number of businesses classified as manufacturers with no employees has been rising steadily since the depths of the recession. The tiny operations often make food, craft beer, toiletries or other niche products. Their growth stands out in a sector that has been shedding workers for decades. U.S. food manufacturers with no employee but the owner nearly doubled from 2004 to 2014. One-worker beverage and tobacco makers expanded 150%. Such chemical manufacturers—a category that includes makers of soap and perfume—grew almost 70%. In all, there were more than 350,000 manufacturing establishments with no employee other than the owner in 2014, up almost 17% from 2004, according to the most recent Commerce Department data. By comparison, there were 292,543 establishments with other employees, down 12%. The shift creates a challenge for building back the number of jobs in the U.S. manufacturing sector.  William Dunkelberg, chief economist for the National Federation of Independent Business, said tech platforms are certainly making many small businesses viable. With a good website and social media presence, a company doesn’t need, say, a director of marketing. But other factors hold them back.

Trump Seeks Credit for 5,000 Sprint Jobs SoftBank Touted Earlier - U.S. President-elect Donald Trump sought credit for Sprint Inc.’s commitment to create or bring back 5,000 jobs that the carrier says are part of broader U.S. hiring plans previously announced by Japan-based parent SoftBank Group Corp. Trump said SoftBank Chairman Masayoshi Son was among those behind the move to add workers. The Japanese billionaire, who Trump calls “Masa,” said earlier this month that he intends to invest $50 billion in the U.S. using a previously announced technology fund, creating 50,000 jobs.“Because of what’s happening and the spirit and the hope I was just called by the head people at Sprint and they’re going to be bringing 5,000 jobs back to the United States,” Trump told reporters Wednesday outside his Florida resort, Mar-a-Lago. “Masa and some other people were very much involved with that.”The 5,000 jobs in Sprint’s plans are part of Son’s overall 50,000-job commitment, though they’ll be funded by Sprint and not SoftBank, the U.S. carrier said.The employment will be in customer care, sales and other functions, Sprint said in a statement Wednesday. The company is still determining the location of the positions, which will be filled by the end of March 2018, Overland Park, Kansas-based Sprint said. Sprint had about 30,000 employees as of the end of March, down from 38,000 in 2013, when Son acquired the company. Trump disputed the notion that the jobs had already been announced, telling reporters later Wednesday that “I just spoke with the head person. He said because of me they’re doing 5,000 jobs in this country.” He referred reporters to his spokeswoman, Hope Hicks, for details. She didn’t respond to a request for comment, and Sprint didn’t respond to follow-up questions.

Wolf Richter: New Census Data Shows Why the Job Market is Still “Terrible” (as Trump said) - When Donald Trump campaigned on how “terrible” the jobs situation was, while the Obama Administration touted the jobs growth since the employment bottom of the Great Recession in 2010, it sounded like they were talking about two entirely different economies at different ends of the world. But they weren’t. Statistically speaking, they were both right. Since 2011, the US economy created 14.6 million “nonfarm payrolls” as defined by the Bureau of Labor Statistics – whether or not they’re low-wage or less than full-time jobs. But for individuals, this job market, statistically speaking, looks almost as tough as it was during the Great Recession. Obviously, a lot of people have found jobs, and some of them have found good jobs since then, and there are a ton of “job openings.” But the Census Bureau just told us why the job market is still, to use Trump’s term, “terrible” when it released its population estimates for 2016, just before clocking out for the holidays. According to this report: From the beginning of 2010 – in terms of jobs, the darkest days of the Great Recession – through December 2016, the US “resident population” (not counting overseas-stationed military personnel) grew by 16 million people. But since the beginning of 2010 through November 2016, nonfarm payrolls grew by only 13.8 million. Note that in 2010, nonfarm payrolls declined by 900,000, after having plunged by over 5 million in 2009. The first year with growth in nonfarm payrolls was 2011. The chart below shows this peculiar relationship between the “resident population” of the US (top green line) and nonfarm payrolls (bottom blue line). Both rose. But the bottom line (nonfarm payrolls) didn’t rise nearly enough. The difference between the two is the number of people that are not on nonfarm payrolls. They might be students, unemployed, retirees, or working in a job that the “nonfarm payrolls” do not capture (more on that in a moment). This is reflected by the red line, whose slope should head down in an economy where jobs grow faster than the population:

Almost all the US jobs created since 2005 are temporary - The conventional full-time job is disappearing.  Survey research conducted by economists Lawrence Katz of Harvard University and Alan Krueger at Princeton University shows that from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as “alternative work” jumped from 10.7% to 15.8%. Alternative work is characterized by being temporary or unsteady—such as work as an independent contractor or through a temporary help agency. “We find that 94% of net job growth in the past decade was in the alternative work category,” said Krueger. “And over 60% was due to the [the rise] of independent contractors, freelancers and contract company workers.” In other words, nearly all of the 10 million jobs created between 2005 and 2015 were not traditional nine-to-five employment.  Krueger, a former chairman of the White House Council of Economic Advisers, was surprised by the finding. The survey’s original goal was to quantify the size of the gig economy (0.5% and growing). The researchers were caught off guard by the tremendous growth of alternative work. There had been almost no change from 1995 to 2005. Katz and Krueger found that each of the common types of alternative work increased from 2005 to 2015—with the largest changes in the number of independent contractors and workers provided by contract firms, such as janitors that work full-time at a particular office, but are paid by a janitorial services firm. The decline of conventional full-time work has impacted every demographic. Whether this change is good or bad depends on what kinds of jobs people want. “Workers seeking full-time, steady work have lost,” said Krueger. “While many of those who value flexibility and have a spouse with a steady job have probably gained.”

 Weekly Initial Unemployment Claims decrease to 265,000 --The DOL reported: In the week ending December 24, the advance figure for seasonally adjusted initial claims was 265,000, a decrease of 10,000 from the previous week's unrevised level of 275,000. The 4-week moving average was 263,000, a decrease of 750 from the previous week's unrevised average of 263,750. There were no special factors impacting this week's initial claims. This marks 95 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.

The Devastating Transformation Of Work In The US - Two of the best-known labor economists in the US,  Lawrence F. Katz and Alan B. Krueger, recently published a study of the rise of so-called alternative work arrangements. Here is what they found:The percentage of workers engaged in alternative work arrangements – defined as temporary help agency workers, on-call workers, contract workers, and independent contractors or freelancers – rose from 10.1 percent [of all employed workers] in February 2005 to 15.8 percent in late 2015.That is a huge jump, especially since the percentage of workers with alternative work arrangements barely budged over the period February 1995 to February 2005; it was only 9.3 in 1995.But their most startling finding is the following: A striking implication of these estimates is that all of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements. Total employment according to the CPS increased by 9.1 million (6.5 percent) over the decade, from 140.4 million in February 2005 to 149.4 in November 2015. The increase in the share of workers in alternative work arrangements from 10.1 percent in 2005 to 15.8 percent in 2015 implies that the number of workers employed in alternative arrangement increased by 9.4 million (66.5 percent), from 14.2 million in February 2005 to 23.6 million in November 2015. Thus, these figures imply that employment in traditional jobs (standard employment arrangements) slightly declined by 0.4 million (0.3 percent) from 126.2 million in February 2005 to 125.8 million in November 2015. Take a moment to let that sink in—and think about what that tells us about the operation of the US economy and the future for working people.  Employment in so-called traditional jobs is actually shrinking. The only types of jobs that have been growing in net terms are ones in which workers have little or no security and minimal social benefits.

 Fear of Trump Triggers Deep Spending Cuts by Nation's Second Largest Union - In a clear sign that labor unions are bracing for lean times under Donald Trump, the massive Service Employees International Union is planning for a 30 percent budget cut over the next year, according to an internal memo reviewed by Bloomberg Businessweek. “Because the far right will control all three branches of the federal government, we will face serious threats to the ability of working people to join together in unions,” SEIU President Mary Kay Henry wrote in an internal memo dated Dec. 14. “These threats require us to make tough decisions that allow us to resist these attacks and to fight forward despite dramatically reduced resources.” After citing the need to “dramatically re-think” how to implement the union’s strategy, Henry’s all-staff letter announces that SEIU “must plan for a 30% reduction” in the international union's budget by Jan. 1, 2018, including a 10 percent cut effective at the start of 2017. SEIU, which represents nearly 2 million government, health-care, and building-services workers and wields an annual budget of $300 million, is the nation’s second-largest union and arguably the most politically significant. In the past few years, SEIU has mounted organized labor’s most effective political intervention with the “Fight for $15,” a campaign that’s dragged Democrats—from city council members to presidential candidates—further left on the minimum wage. At the same time, it cultivated close ties with President Obama, played a key role in passing Obamacare, and worked hard to elect Hillary Clinton.

Refugee Admissions Surge 86% YoY As Obama Rushes Arrivals Ahead Of Trump Inauguration - In the first 84 days of the 2017 fiscal year (October 1, 2016 - December 23, 2016), the Obama administration has accepted 25,584 refugees into the United States, according to data provided by the State Department.  Per Breitbart, compared to the same period in FY2016, that represents an 86% increase year-over-year.  And while we were expecting a large increase in refugee admittances in 2017 (see "Hillbama Administration Plans To Admit At Least 110,000 Refugees In 2017"), the ~30% increase that Secretary John Kerry estimated back in September is looking like a fairly modest increase now compared to actual numbers.  And while the new Trump administration will likely slow the rate of the new arrivals after taking office next month, the current Obama run-rate puts us on track to blow through the 20-year record high set back in 1999. As we've noted before, per data from the U.S. State Department, the overwhelming majority of refugees admitted into the U.S. over the past couple of months are coming from Syria, Iraq and Somalia...

 The sharp rise in non-Latin American migrants trying to cross into the U.S. from Mexico - One morning in January, five men from Nepal showed up at the Casa del Migrante in Tijuana, looking for a bed for the night. This border city has been a gateway to generations of migrants fleeing poverty and violence in Mexico and Central America, people dreaming of a better life in the United States. But Nepal was 8,000 miles away. What were they doing here? Within months, Tijuana would be teeming with migrants from across the globe — from Haiti, India, Bangladesh and various parts of Africa — all hoping to reach the U.S. In a surge Mexican officials are calling unprecedented, some 15,000 migrants from outside Latin America passed through Baja California this year — nearly five times the number seen in 2015. More than a third of the detainees being held in California immigration holding centers in September were from outside Latin America, U.S. officials say. As they traverse a circuitous and dangerous path up the spine of South America, Central America and Mexico, they have strained resources along the route and presented new challenges for securing America’s southern border.They have opened a dramatic new chapter in the long story of immigration to the New World. While earlier generations arrived on ocean liners from Europe or on small boats from across the Caribbean, these would-be Americans are tapping networks long used to funnel drugs and migrants overland into the U.S. from Latin America. Unlike the millions who have traveled over the years from Mexico and Central America, many of those now arriving at America’s southern border are flying across oceans and launching their journeys from deep in South America, across terrain of unimaginable difficulty. Many say they attempted their trips — by foot, bus, boat and donkey across up to 10 international borders — because they felt unwelcome in Europe and hoped for better luck in the U.S.

 Forget the wall. Trumps’ big immigration war may focus on visas - Bizhan Tabatabian, a 48-year-old systems engineer at University of California, San Francisco didn’t vote for Trump and he says he doesn’t even like the real estate mogul; he changes positions too often. But Tabatabian hopes Trump keeps one particular promise and that’s to protect American workers who are losing their jobs to outsourcing. Tabatabian learned earlier this year that he and about 100 colleagues would be out of work as of February as the school takes steps to reduce costs and outsource their jobs.  What gives Tabatabian a bit of hope is Trump’s campaign pledge to protect the jobs of American workers. In announcing his priorities for the first 100 days, Trump vowed to direct the Department of Labor to “investigate all abuses of visa programs that undercut the American worker.”  It was the first promise Trump made on immigration after the election – not building a border wall or deporting millions of immigrants living in the country illegally. While it doesn’t generate the same headlines as building a massive wall, the visa issue is almost as explosive. Critics of offshoring say a U.S. visa program that lets in foreign workers is often the first step to moving American jobs overseas. The H-1B visa program issues work permits to as many as 85,000 foreign workers a year with “highly specialized knowledge” to fill jobs when qualified Americans can’t be found. Tech giants such as Facebook and other corporate entities like Bank of America and Caterpillar have long argued that the 85,000 annual cap is still too few and that they need to bring in more foreign tech workers because they can’t find enough highly-skilled American workers. But critics of the program say H-1B visas are increasingly being abused and that American workers are being laid off as U.S. companies send work to outsourcing companies that employ thousands of H-1B workers. The possibility that a Trump administration might target the H-1B visa program worries employers who depend on it.  But others say the increasing dominance of the program by outsourcing firms shows its rife with abuse. Their allegation is that firms use the program to bring in workers who get trained on how the work is done, then return to their home country to train workers to do the work there.

Fix Immigration. It’s What Voters Want. - The New York Times: Donald J. Trump smashed many orthodoxies on his way to victory, but immigration was the defining issue separating him from his primary opponents and Hillary Clinton. President-elect Trump now has a clear mandate not only to stop illegal immigration, but also to finally cut the generation-long influx of low-skilled immigrants that undermines American workers. Yet many powerful industries benefit from such immigration. They’re arguing that immigration controls are creating a low-skilled labor shortage. “We’re pretty much begging for workers,” Tom Nassif, the chief executive of Western Growers, a trade organization that represents farmers, said on CNN. A fast-food chain founder warned, “Our industry can’t survive without Mexican workers.” These same industries contend that stricter immigration enforcement will further shrink the pool of workers and raise their wages. They argue that closing our borders to inexpensive foreign labor will force employers to add benefits and improve workplace conditions to attract and keep workers already here. I have an answer to these charges: Exactly. Higher wages, better benefits and more security for American workers are features, not bugs, of sound immigration reform. For too long, our immigration policy has skewed toward the interests of the wealthy and powerful: Employers get cheaper labor, and professionals get cheaper personal services like housekeeping. We now need an immigration policy that focuses less on the most powerful and more on everyone else.

In American Towns, Private Profits From Public Works - NYT — Nicole Adamczyk’s drinking water used to slosh through a snarl of pipes dating from the Coolidge administration — a rusty, rickety symbol of the nation’s failing infrastructure. So, in 2012, this blue-collar port city cut a deal with a Wall Street investment firm to manage its municipal waterworks. Four years later, many of those crusty brown pipes have been replaced by shiny cobalt-blue ones, reflecting a broader infrastructure overhaul in Bayonne. But Ms. Adamczyk’s water and sewer bill has jumped so much that she is thinking about moving out of town. Even as Wall Street deals like the one with Bayonne help financially desperate municipalities to make much-needed repairs, they can come with a hefty price tag — not just to pay for new pipes, but also to help the investors earn a nice return, a New York Times analysis has found. Often, these contracts guarantee a specific amount of revenue, The Times found, which can send water bills soaring. Water rates in Bayonne have risen nearly 28 percent since Kohlberg Kravis Roberts — one of Wall Street’s most storied private equity firms — teamed up with another company to manage the city’s water system, the Times analysis shows. City officials also promised residents a four-year rate freeze that never materialized. In one measure of residents’ distress, people are falling so far behind on their bills that the city is placing more liens against their homes, which can eventually lead to foreclosures.

Study: Illinois' Fiscal Mess Will Take a Decade to Fix - It’s no secret that Illinois is in a perilous fiscal situation, with a massive budget deficit and an ever-expanding backlog of unpaid bills. But just how bad is it, and how difficult is the solution?A new study aims to answer those questions definitively, and here’s a hint: the answers are not pretty. But the silver lining? All is not lost – yet.This study pegs the current budget deficit at $11 billion across all funds, and concludes that it’s only going to get worse if lawmakers don’t come together and make big changes. How bad will it get? According to the study from the nonpartisan Institute of Government and Public Affairs at the University of Illinois, the deficit will be around $13 billion next year, $15 billion by 2022 and $22 billion by 2027 – that represents more than a third of all of the money the state brings in every year.They prescribe as their way out:

  • • Raising the personal income tax rate to 5 percent from 3.75 percent, and the corporate rate to 7 percent
  • • Broadening the sales tax base to include taxes on more services
  • • Cutting 2 percent out of the budget every year
  • • Stimulating economic growth to grow the tax base

While the solutions aren’t surprising, the amount of time it will take to dig out certainly is notable.“We believe this would have to be maintained for about a decade to bring the budget back into balance,” said the IGPA’s David Merriman. “If those combination of things were done or similar things were done, it would restore a lot of confidence in the economy and it would be a feasible plan.”

61 Shot, 12 Dead As Bloodiest Christmas In Years Rocks Chicago -- The colder weather in the Midwest was supposed to bring with it a reprieve for the police and residents of Chicago from the historic levels of violence that have devastated that city this year.  Unfortunately, while the colder weather came the violence never subsided. According to the Chicago Tribune, 61 people were shot over the long Christmas weekend and as many as 12 of those people have since died from their wounds, a level of holiday violence not seen in Chicago for years.  Meanwhile, per the Chicago Police Department, as much as 90% of those wounded over the weekend "had gang affiliations, criminal histories and were pre-identified by the department's strategic subject algorithm as being a potential suspect or victim of gun violence."The city has seen eight multiple-victim shootings, including two double homicides. One was an attack in the East Chatham neighborhood that left two dead and five others wounded, and an attack in the Austin neighborhood left two dead. Much of the violence happened in areas "with historical gang conflicts on the south and west side of Chicago," said Anthony Guglielmi, a spokesman for the Chicago Police Department. He also referenced the department's "strategic subject list," which is generated daily from a computerized algorithm and assigns a score from 1 to 500 based on such factors as a person's arrests and the activities of his associates. Those people with a score in the upper 200s or higher are considered in danger of being shot or of shooting someone else."Ninety percent of those fatally wounded had gang affiliations, criminal histories and were pre-identified by the department's strategic subject algorithm as being a potential suspect or victim of gun violence," Guglielmi said Monday. While one might expect violence to subside as people gather with family to celebrate Christmas, per data from HeyJackAss!, the number of fatal shootings actually surged on Christmas day.  Meanwhile, the annual total of murders in Chicago for 2016 is creeping ever closer to the 800 mark.

Bad news for homeowners: Chicago teachers' pension liability may be much larger than expected | Chicago City Wire: The Chicago Teachers' Pension Fund (CTPF) may be considerably less funded than its trustees claim; as a result, Chicago homeowners’ properties could face significant drops in value. In 2015, the situation was so dire that the law firm of Jones Day recommended that the mayor use bankruptcy as a “tool” to escape the Chicago Public School’s pension liabilities. According to public reports by the Chicago Teachers Union and the state of Illinois, the fund’s nearly $9 billion in unfunded liabilities equates to approximately $7,500 of unseen debt for each of Chicago’s 1.2 million households. This invisible liability does not show up on a title, but it has a significant impact on a property’s value. The $7,500-per-household figure considers only unfunded teachers pensions, without including the myriad other pensions supported by Chicago and Cook County property tax payments, all of which are also unfunded to varying degrees.

Black family brutalized by Texas police when trying to report a man assaulting their child --In Fort Worth, Texas, yesterday, a 46-year-old mother, Jacqueline Craig, reported to the Fort Worth Police Department that a fully grown, bearded white man in her neighborhood put his hands on her 7-year-old son and choked him. Her teenage daughters were with her while she was making the report and had sense enough to record her making the report on Facebook Live.  It's good that the exchange was filmed, because what unfolded, and what this racist officer said, would not be believed had it not been captured on film. As Jacqueline calmly and reasonably explains to the officer what this man did to her 7-year-old son, she tells him that the man said he confronted her son because the boy threw a piece of paper on the ground. As she proceeds to tell the officer that the man then choked her son, the officer actually asks her, "why don't you teach your son not to litter?" — then proceeds to basically tell the mother that the man had every right to choke her son. As any rational human being would, the mother gets upset. She's holding it together, but she's stumped. And I get it — because when I saw this officer, in response to her saying her 7-year-old son was choked, ask her why she didn't teach her son not to litter, my blood started boiling. When I first saw the video, I didn't know what was about to unfold and I thought I had seen the worst. I was already so angry I was almost shaking.  I have a 7-year-old. If a man choked my 7-year-old, police might be filing a police report for murder. And to hear this cop basically say that black lives don't matter, and that it was all because she hadn't taught him right, infuriated me. Jacqueline then told the officer that his words upset her. He then responds and basically says that if she doesn't shut up, he'll be upset. Jacqueline's teenage daughter then steps in front of her to calm her down and separate her from the officer. Then, in that moment, everything took a terrible turn for the worse. The officer then starts grabbing and slamming everybody to the ground. He grabs the teenage daughters and handcuffs them. He grabs the mother, wrestles her to the ground, and arrests her as well.

America Has Unofficially Declared War On The Homeless --Police departments across the country have been ramping up raids on the homeless,stealing coats, blankets, and other personal items and leaving those on the street with no protection from the cold and rain. The Homelessness San Diego Facebook page recently posted a video of city workers conducting an “encampment sweep” that was recorded by homeless advocate Michael McConnell.According to CW6, “the city says it routinely posts clean-up notices downtown as part of its regular weekly abatement schedule.” The Denver Police Department released a statement last Thursday evening defending police officers caught on video taking blankets, sleeping bags, and tents from homeless people and issuing some citations. Freezing temperatures didn’t stop the cold-hearted cops from confiscating the items “as evidence of the violations.” The video taken by a bystander went viral after being shared by the ACLU of Colorado’s Facebook page. It was swiftly followed up by an open letter to Denver Mayor Michael Hancock, Denver City Council, and city officials. The letter, which expresses horror at the willingness of the local government officials to endanger the lives of the homeless, “demands that the City immediately (1) direct its police officers to cease confiscation of blankets and other survival gear possessed by people experiencing homelessness, (2) suspend enforcement of the Denver Urban Camping Ban through the winter months, and (3) end the coordinated sweeps of people experiencing homelessness, whether they are conducted through police, public works, private security, all of the above, or any other means.”  Los Angeles deployed an entire task force to crack down on homeless people, imposing their own “encampment sweeps” in September. The ironically named “Homeless Outreach and Proactive Engagement” teams are supposed to help reduce the number of people living on the street, but they appear to be doing nothing more than turning those who are less fortunate into criminals.

Unhappy Holidays: Houston Police Force Homeless People To Throw Away Food -- Local activists attempting to hand out food and gifts were shocked on Thursday afternoon when Houston police forced the homeless to throw away the donations. Around 1 pm on Thursday,  several individuals met in downtown Houston to distribute plates of hot food, blankets, and other supplies to the city’s growing homeless population. Soon after, Houston police arrived on the scene of two different intersections where the homeless advocates were giving out gifts and food. According to witness testimony posted on Facebook, the police instructed the homeless to throw away everything they had been given. Not only were the police called, but they brought a large waste management truck and are forcing the homeless to throw away their food, pillows and other items,” reads one post. A video from an ABC13 social media correspondent shows the police and trash vehicle parked under a freeway while a man narrates the situation. “Covers, Blankets, different things like that, pillows. They are throwing all of that away,” he says. Shere Dore, a local activist who works with several organizations, including Food Not Bombs Houston, was involved in the food sharing and says the throwing away of the gifts was uncalled for. “I’m highly disturbed because lots of these items were not only given to the homeless by the community, but some of the blankets and jackets were literally purchased by homeless advocates like myself,” Dore told Anti-Media. “HPD and the City of Houston are taking our cash and throwing it in the trash. At what point will our police stand up and say that this is wrong to do to people?“ Only moments before throwing away the gifts, the Houston police stopped Dore and a fellow advocate. Dore said her friend was taking photos of the police vehicle when the officer began questioning them, claiming someone had called and complained about people feeding the homeless. In a video posted on Facebook, Dore tells the officer she will feed the homeless whether it is legal or not.

More than one-third of schoolchildren are homeless in shadow of Silicon Valley - Every night for the past year or so, Adriana and Omar Chavez and their three daughters have slept in an RV parked in East Palo Alto, a downtrodden community in Silicon Valley. In most places, the Chavez family would be an exception. But in the school district that includes East Palo Alto, located amid the extraordinary wealth generated by the tech industry, their plight is not uncommon. Remarkably, slightly more than one-third of students – or 1,147 children – are defined as homeless here, mostly sharing homes with other families because their parents cannot afford one of their own, and also living in RVs and shelters. The district is being squeezed from every side: teachers, administrative staff and even principals have housing woes of their own. The circumstances of the crisis are striking. Little more than a strip of asphalt separates East Palo Alto from Palo Alto, with its startups, venture capitalists, Craftsman homes and Whole Foods. “You used to say you’re on the wrong side of the tracks. Now you’re on the wrong side of the freeway,” said Gloria Hernandez-Goff, the hard-charging superintendent of Ravenswood City school district, which has eight schools and a preschool. East Palo Alto has traditionally been a center for African American and Latino communities. Its suburban houses are clustered on flat land by the bay, sometimes with no sidewalks and few trees, but residents say the town boasts a strong sense of cohesion. Yet as in the rest of Silicon Valley, the technology economy is drawing new inhabitants and businesses – the Facebook headquarters is within Ravenswood’s catchment area – and contributing to dislocation as well as the tax base. “Now you have Caucasians moving back into the community, you have Facebookers and Googlers and Yahooers,” said Pastor Paul Bains, a local leader. “That’s what’s driven the cost back up. Before, houses were rarely over $500,000. And now, can you find one under $750,000? You probably could, but it’s a rare find.”

A new Missouri law could make school bullying a felony and that's a problem - A Missouri law set to go into effect on January 1 has some teachers and student advocates worried that punishing everyday school bullying could become yet another means of black and brown children being pushed directly into the penal system.  Under the new law, third-degree assault and some forms of harassment that inflict “emotional distress” on the victim will be considered a felony. As the Saint Louis Post-Dispatch points out, this means that anyone found to have intentionally caused physical harm to another person could be charged for having committed a felony.  While these changes are part of a broader Missouri law to get tougher on assault, misdemeanors, and felonies, schools are required to report harassment to local police, which means that children could end up getting charged with a felony for fighting. The law doesn’t mention how it applies to cases that happen on school grounds.  In theory, a law like this could lead to a drastic decrease in instances of fighting and bullying in school as students consider the drastic impacts a felony conviction could have on their lives. On the other hand, though, many see it as yet another way of the state strengthening the school-to-prison pipeline problem in which mostly students of color end up in adult prisons after multiple interactions with the juvenile criminal system.

Free Market for Education? Economists Generally Don’t Buy It – NYTimes - The odds are good that privatizing education will be part of the agenda for President-elect Donald J. Trump’s administration. The Republican platform calls for increasing the role of banks in giving out student loans. And Mr. Trump and the platform advocate an expansion of both vouchers, which enable students to attend the private school of their choice with government funds, and charter schools. In addition, Betsy DeVos, Mr. Trump’s nominee for education secretary, has supported legislation that would establish vouchers in Michigan, as well as the rapid expansion of the state’s charter school sector.  You might think that most economists agree with this overall approach, because economists generally like free markets. For example, over 90 percent of the members of the University of Chicago’s panel of leading economists thought that ride-hailing services like Uber and Lyft made consumers better off by providing competition for the highly regulated taxi industry. But economists are far less optimistic about what an unfettered market can achieve in education. Only a third of economists on the Chicago panel agreed that students would be better off if they all had access to vouchers to use at any private (or public) school of their choice. While economists are trained about the value of free markets, they are also trained to spot when markets can’t work alone and government intervention is required.In elementary and secondary education, the right mix of competition and regulation can produce impressive results. Charter schools, which are publicly funded but privately operated, provide competition for traditional public schools. In Massachusetts, where urban charters have delivered spectacular results, the state closely reviews charter application and renewals, closing poor performers.But some supporters of charter schools disagree with this approach, arguing that parents, not government, should be the sole judge of school quality. In Michigan, Ms. DeVos fought legislation that would have provided tighter government oversight of charter schools. Excessive faith in the power of free markets can lead to infeasible policy proposals. The Republican platform recommends expanding the role of private banks in student loans, with the goal of enhancing financing choices for students. But making student loans a competitive, private-sector market is an unattainable goal. In economics textbooks, student loans are the example used to show there are some products that markets will never provide on their own.

History major requirements changed to attract more students: Students majoring in history now have a more flexible curriculum, which faculty members said they hope will attract more majors to a shrinking department. History majors no longer have to take foreign language classes or classes on European, North American and U.S. history and can choose to specialize in a topic or region. The changes allow students to tailor their academic plans to better reflect a globalizing world and its impact on the study of history, faculty said. Katrin Schultheiss, the chair of the history department, said faculty made the changes to the requirements largely due to enrollment pressures. She said by becoming more flexible and more responsive to students’ interests, the department hopes to recruit students who might not have decided to major in history otherwise. “I think the main gain for students is that they have a great deal more flexibility than they had before, and they can adapt it to whatever their plans are for the future,” Schultheiss said. “Whatever they want to do, there’s a way to make the history department work for them.” The history department had 153 majors in 2011, but enrollment has dropped significantly since then: Only 72 undergraduate students majored in history in 2015 and 83 students majored in 2016, according to GW’s institutional research office. Individual school funding is linked to the number of students taking classes in that school under the University’s new budget model – which can put pressure on departments to recruit students to bring in revenue for the school.

GWU Eliminates U.S. History As A Requirement For History Majors --   Upon his death in 1799, George Washington's will set aside 50 shares of the Potowmack Company in his estate to fund the creation of a national university in the nation's capital.  Just over 20 years later, an Act of Congress created the Columbian College in the District of Columbia which subsequently changed its name to George Washington University in 1904 in honor of Washington.   Now, some 200 years later, GWU, like many of the nation's universities, has been overrun with liberal, elitist professors who have decided to shun America's first president, and the inspiration behind the founding their university, by removing U.S. History as a required course for history majors.  Of course, why would U.S. history be important for history majors...this country has been a fairly irrelevant player in shaping world history for the past 200 years. Syndicated radio host Larry Elders recently blasted the decision on Fox News as just another effort to indoctrinate students with the notion that "America is nothing more than a series of incidents that oppress people,  whether it's Native Americans or women or blacks or Hispanics or Asian people.""According to a lot of professors, the founding fathers are a bunch of old rich white guys who owned slaves," syndicated radio host Larry Elder said Monday on "Fox & Friends." "As a result, they're no longer relevant.""I call this the access of indoctrination. Schools have long since passed the line from education to indoctrination, and this is one more step toward that.""Kids are learning that America is nothing more than a series of incidents that oppress people, whether it's Native Americans or women or blacks or Hispanics or Asian people," he said. "That's what they're learning."

Opposition to “offensive” speech on campuses will ultimately burn dissidents - Vox: Freedom of speech is often misunderstood, frequently taken for granted, and always on the defensive against forces both within and outside of government. On college campuses — nominally bastions of free inquiry, robust debate, constructive lessons in failure, and unexpected discovery — there exists a prevailing controversy over the scope and meaning of free speech. Some believe the universal right to free expression should extend to all, even ideas that are deemed a threat to the public interest (as homosexuality was only a generation ago) or which are a threat to prevailing conventional wisdom and political norms (as miscegenation was in much of the country, as well). A competing viewpoint holds that free speech is just a cop-out code phrase, mostly working in the service of professional trolls or entitled jerks to abusively act out with impunity.   PEN America, the literary and human rights association that lists as one of its core principles a commitment to "protect open expression in the United States and worldwide," set out to explore the state of free speech on the nation’s campuses — re-examining several high-profile incidents and controversies. While not comprehensive, the report, published this fall, is impressively thorough, treating much of its content as teachable case studies, rather than a set of self-affirming anecdotes.  Some press coverage, however, suggested that the PEN America report — titled “And Campus For All: Diversity, Inclusion, and Freedom of Speech at U.S. Universities" — had exonerated campuses from the charge that they insufficiently protect free speech, and that it sided with students who think "cries of ‘free speech’ are too often used as a cudgel against them,” as the New York Times put it.  The report itself contributes in a small way to this confused take, largely due to a single line in its conclusion which (improbably) asserts that there is no “pervasive ‘crisis’ for free speech on campus.” But that same report exhaustively details dozens of cases where certain speech was inappropriately muted on campus. More examples:

Save the Snowflakes - Our nation’s snowflakes are being cared for by colleges and universities across the country. These schools – no,HEROES – are financially supporting cry-ins, hot chocolate, bubbles, kittens, puppies and ponies, crayons, and Play-Doh to comfort these wounded snowflakes. Some schools even canceled exams and classes to ensure that America’s youth are treated with extra care and understanding during these difficult times. But clearly, state funding – tax-payer dollars – are simply not enough. State budgets cannot be expected to bear this burden alone. It’s going to take a far more sustainable funding source to ensure special snowflakes have the emotional support they need. In response, we here at the Media Research Center have launched the Save the Snowflakes project to respond to this emergency and bring crucial attention to this devastating human crisis. The media may not choose to expose this atrocity, but the Media Research Center, through our Save the Snowflakes initiative, is doing much more – we’re taking action! We won’t rest until we save each and every special snowflake from the horrors of exposure to … things they simply do not agree with.

The Curse of Credentialism - James Kwak --Yale Law School is undeniably an elite institution, the undisputed number one school in a field that is intensely (and toxically) hierarchical. Also, because it is a law school—as opposed to other elite institutions such as West Point or the UConn women’s basketball team—it is filled with people who have never had any idea of what they wanted to do other than be successful and gain access to the best opportunities out there. One of the curious things about Yale is that it is impossible to compete over grades; the first semester is pass/fail, and for reasons not worth going into the grading scheme is essentially meaningless after that point. I thought this was wonderful, but I’m sure at least some of my classmates experienced it as a disappointment. So what do you do if you’ve spent your life trying to prove that you’re smarter than other people? Some people use their newfound freedom to do truly great things: the Iraqi Refugee Assistance Project (now International Refugee Assistance Project), for example, was founded by a few students in the class before me. Many others pour themselves into clinics that make a huge difference in people’s lives.  I wrote a book. But a common reaction is to find other things compete over. And, as Vance describes, the two primary candidates are membership of the Yale Law Journal and post-graduation federal court clerkships (which is a competition that goes on and on, because it takes at least a second, and often a third year of clerking to make it to the Supreme Court). The institutional culture communicates that the most prestigious distinctions are Journal membership and federal clerkships (I’m simplifying slightly, but that’s pretty close). As Vance writes: “No one seemed to know what value the credential actually held. We were told that the Journal was a huge career boost but that it wasn’t that important, that we shouldn’t stress about it but that it was a prerequisite for certain types of jobs.” Most students come to law school with little interest in 35,000-word legal theory articles (and no interest in editing and cite-checking those articles, which is mainly what law review editors do), yet come springtime they become intensely interested in the pathologically stupid citation formatting, or “Bluebooking” test (what Vance calls “the  most important test of our first year”) that represents the first step toward Journal membership. The same goes for clerkships…

Missing Credentials - The typical modern credential (i.e., standard worker quality sign of widely understood significance) is based on a narrow written declared test of knowledge given early in one’s career on a pre-announced date at a quiet location. In this test, there is a list of questions to which one gives answers, answers then graded by independent judges who supposedly look only at the answers, and don’t take into account other things they know about the testee. In this post I want to point out that a much larger space of credentials are possible. For example, you could be evaluated on actual products and contributions, based on your efforts over a long period, instead of being evaluated on short tests. You could be tested via tasks you must perform, instead of questions you must answer. After all, mostly we want to know what workers can do, not what questions they can answer. Since much of real question answering in the world is done verbally, test question-answering could also be done verbally, instead of in writing. And it could be done with frequent distractions and interruptions, as with most real question-answering. However expressed, judges could take your first response as a starting point to ask you more questions (or give you more tasks), and dig deeper into your understanding. Judges could know you well, and choose questions specifically for you, and interpret your answers given all they know about you. This is, after all, closer to how most question-answering in the world actually goes. Tests could be done at random days and times, and spread all through your career. Tests might be disguised as ordinary interactions, and not revealed to be tests until afterward. These approaches could discourage cramming for tests and other strategies that makes you good only at tests, and not so much at remembering or using your knowledge at other times. Finally, you could be tested on your ability to integrate knowledge from a wide range of topic areas, instead of on your knowledge of a narrow topic area. Yes you could show that you know many areas via passing tests for many areas, but that won’t show that you have integrated these diverse areas usefully together in your mind.

Fake Academe, Looking Much Like the Real Thing - The caller ID on my office telephone said the number was from Las Vegas, but when I picked up the receiver I heard what sounded like a busy overseas call center in the background. The operator, “John,” asked if I would be interested in attending the 15th World Cardiology and Angiology Conference in Philadelphia next month. “Do I have to be a doctor?” I said, because I’m not one. I got the call because 20 minutes earlier I had entered my phone number into a website run by a Hyderabad, India, company called OMICS International. “You can have the student rate,” the man replied. With a 20 percent discount, it would be $599. The conference was in just a few weeks, I pointed out — would that be enough time for the academic paper I would be submitting to be properly reviewed? (Again, I know nothing about cardiology.) It would be approved on an “expedited basis” within 24 hours, he replied, and he asked which credit card I would like to use. If it seems that I was about to be taken, that’s because I was. OMICS International is a leader in the growing business of academic publication fraud. It has created scores of “journals” that mimic the look and feel of traditional scholarly publications, but without the integrity. This year the Federal Trade Commission formally charged OMICS with “deceiving academics and researchers about the nature of its publications and hiding publication fees ranging from hundreds to thousands of dollars.”  OMICS is also in the less well-known business of what might be called conference fraud, which is what led to the call from John. Both schemes exploit a fundamental weakness of modern higher education: Academics need to publish in order to advance professionally, get better jobs or secure tenure. Even within the halls of respectable academia, the difference between legitimate and fake publications and conferences is far blurrier than scholars would like to admit.

Unprecedented and Unprincipled Adversary -- Universities must work together to confront a large, adaptive and well-camouflaged apparatus that aspires to mimic and rival legitimate science, argues U.S. Senator Sheldon Whitehouse. America’s universities are home, more than any place else in our country, to the enterprise of science. That has been an important and proud role for our great universities, and it has produced wonderful discoveries. Besides providing technical progress, science gives our society its headlights, warning us of oncoming hazards. As the pace of change accelerates, we need those headlights brighter than ever. So when a threat looms over the enterprise of science, the universities that are its home need to help address the threat. The threat is simple. The fossil fuel industry has adopted and powered up infrastructure and methods originally built by the tobacco industry and others to attack and deny science. That effort has coalesced into a large, adaptive and well-camouflaged apparatus that aspires to mimic and rival legitimate science. The science that universities support now has an unprecedented and unprincipled new adversary. Researchers who study that adversary report that it consists of dozens of front organizations. Those organizations hire stables of paid-for scientists who recite messages that have been honed by public relations experts. The organizations often have common funding, staffing and messaging: the beast is a Hydra.  The science-denial machinery is an industrial-strength adversary, and it has big advantages over real science. First, it does not need to win its disputes with real science; it just needs to create a public illusion of a dispute. Then industry’s political forces can be put into play to stop any efforts to address whatever problem science had disclosed, since now it is “disputed science.” Hence the infamous phrase from the tobacco-era science denial operation -- “Doubt is our product.” Second, the science-denial operatives don’t waste much time in peer-reviewed forums. They head straight to Fox News and talk radio, to committee hearings and editorial pages. Their work is, at its heart, PR dressed up as science but not actual science. So they go directly to their audience -- and the more uninformed the audience, the better.

As Obama Steps Aside, Banks See New Opportunity in Student-Lending Business  - WSJ - The nearly $1.4 trillion student-loan market is expected to be far more hospitable to private lenders under a Donald Trump administration than during the last eight years. Under President Barack Obama, banks such as J.P. Morgan Chase & Co. and U.S. Bancorp—student-loan lenders until a few years ago—were largely sidelined. Origination of federally backed student loans was transferred entirely to the U.S. government, already the dominant force in the market.  The move was designed to lower lending costs for the government, which wanted to redirect savings to student grants and to offset costs associated with the Affordable Care Act. Regulatory scrutiny of private lenders also intensified after the Consumer Financial Protection Bureau opened in 2011.  Investors are betting this will change. Shares of the largest private student lender by origination volume, SLM Corp., or Sallie Mae, have led the charge since the Nov. 8, election, rising about 55%, compared with a 24% rise in the KBW Nasdaq Bank index. “Political risk has now been removed,” Sallie Mae CEO Raymond Quinlan said at an investment conference Nov. 30. “We can now deal with the facts as opposed to a nightmare.”

Calpers Rings Pension Warning Bell -- It's increasingly clear that pensions can't rely on investment returns to pad their coffers the way they used to. The biggest U.S. pension fund appears to recognize this. The chief investment officer of the $303 billion California Public Employees' Retirement System just recommended that it lower its annual assumed rate of return to 7 percent from 7.5 percent, which will require workers to contribute more money to the plan. This is a good sign because it finally shows some grasp of reality. Unfortunately it points to a substantial amount of pain ahead for workers, who will inevitably have to pay more into their pensions in the very near future. And that pain could be even worse because expectation of a 7 percent annualized return is still too high.  Calpers is often thought of as a trailblazer for other public pensions, which collectively had a 7.5 percent assumed rate of return on their assets as of 2015. The California fund is big, but it pales in comparison to the estimated $3.6 trillion of assets in state and local government retirement systems as of 2015, according to the National Association of State Retirement Administrators. If all of these funds were to reduce their return assumptions by a mere half percentage point, as Calpers is doing, it would likely require employees to offset the difference by billions of dollars a year.  As small as the 0.5 percentage point adjustment is, it's still too big for California employees to absorb all at once. That's why the fund's CFO, Cheryl Eason, proposes starting with a reduction in the assumed rate of return to 7.375 percent in the 2017-18 fiscal year and then lowering it from there.  “We believe this schedule would give employers time to plan their budgets and minimize the impact to them as well as to those active members,” The California pension fund's decision would require as much as $2 billion in annual state payments by the time of full implementation in 2020, according to a Los Angeles Times article citing a member of Gov. Jerry Brown's budget staff. By the time Calpers gets that assumed rate of return down to 7 percent, as its CFO recommends, the fund may very well be thinking about lowering expectations even further.  

New York’s Teamsters May Have Their Pensions Cut. What Went Wrong? - NYT - As troubled pension funds go, the New York State Teamsters Conference Pension and Retirement Fund, with some $1.3 billion in assets, is by no means the largest. Neither is it in the direst financial shape, even though just 44.8 percent of its obligations are funded. But given that participants in this fund may face benefits cuts of at least 20 percent, learning what went wrong could be instructive not only for other imperiled retirement funds but also for taxpayers who may have to cover the shortfalls. Like many pension plans, the Teamsters fund was hurt badly by the steep market decline of 2008. Those overseeing the fund also tie its troubles to the decline of unionized employment in the trucking industry, which has translated into fewer contributions to the plan. Both of those factors are real. But an examination of the fund identified other pernicious forces: most notably, illiquid, opaque and high-cost investments. At least 40 percent of the fund is in so-called alternative investments, including expensive private equity deals, hedge funds and real estate. For a fund poised to suspend benefits, holdings like these are especially problematic. Eileen Appelbaum, senior economist at the Center for Economic and Policy Research, a nonpartisan organization in Washington, said she was not surprised by the findings on the Teamsters fund. “Wall Street promises these really high returns, but private equity has not delivered since 2006, and hedge funds have been losing money for a very long time,” Ms. Appelbaum said. “It’s not a sensible way to proceed.”

The Scandal of Vast Inequality in Retirement Pay - As indicated in a recently-released report by the Institute for Policy Studies (IPS), the financial security of retiring corporate CEOs is far, far greater than the financial security of average Americans. According to the extensively-researched IPS report, A Tale of Two Retirements, 100 corporate CEOs possess company retirement funds totaling $4.7 billion―an amount equivalent to the entire retirement savings of 41 percent of U.S. families (50 million families, including 116 million Americans). The retirement funds of these 100 CEOs are also equivalent to those of 75 percent of Latino families, of 59 percent of African-American families, of 55 percent of female-headed households, and of 44 percent of white working class households. Indeed, the top 100 CEO nest eggs, if averaged, would generate a $253,088 monthly retirement check to these 100 individuals for the rest of their lives. By contrast, workers who had 401(k) pension plans at the end of 2013 had only enough in these plans to pay them an average monthly benefit of $101. Of course, these were the lucky ones. Among workers 56 to 61 years old, 39 percent had no employer-sponsored retirement plan at all, and would likely depend on Social Security, which pays an average of $1,239 per month, for retirement security. Of course, these are only averages. When one looks at individuals, the contrasts are even starker. Glenn Renwick, the Progressive Insurance Company’s CEO who retired in 2016, receives a monthly retirement check from his company for $1,035,733. Among Walmart’s 1.5 million employees, fewer than two-thirds have a company-sponsored retirement plan and, if they do, it will pay them only $131 per month. But Walmart’s CEO, Doug McMillon can expect to receive at least $360,000 per month―more than 2,700 times the amount a typical Walmart worker with a 401(k) account can expect. And there’s also CEO David Cote of Honeywell―a company that has locked out its workers from its factories in Green Island, NY and South Bend Indiana for seven months for rejecting a contract that eliminated workers’ pensions―who receives a monthly retirement check from the company for $908,712.

A Tale of Two Retirements: The Great Divide Between CEOs and Everyone Else --The Institute for Policy Studies (IPS) earlier this month released its second annual report on the CEO-worker retirement benefit gap. A Tale of Two Retirements analyzes how CEOs are provided with colossal nest eggs– monthly retirement checks ranging from more than $100,000 to more than $1,000,000– while at the same time many of their companies pursue strategies that erode retirement security for their employees. The CEO-worker retirement benefit gap has become such a chasm, not as the result of executives working harder or investing more wisely, but as “yet one more example of rule-rigging in favor of the 1%,” according to the IPS. The Financial Times  reported in ‘Negligible’ link found between executive pay and performance on a similar disconnect in Britain, this documented in a Lancaster University Management School study. From the pink paper: The correlation between high executive pay and good performance is “negligible”, a new academic study has found, providing reformers with fresh evidence that a shake-up of Britain’s corporate remuneration systems is overdue. Although big company bosses enjoyed pay rises of more than 80 per cent in a decade, performance as measured by economic returns on invested capital was less than 1 per cent over the period, the paper by Lancaster University Management School says. As the IPS study summarizes:The sum of the 100 largest CEO company retirement funds — $4.7 billion — is equal to the entire retirement account savings of the 41 percent of American families that have the least amount of retirement savings (this represents 50 million families and 116 million people). On average, the CEOs’ nest eggs are worth nearly $47.5 million. If converted to an annuity at age 65, this would be enough to generate a $253,088 monthly retirement check for the rest of their lives. Contrast that with the situation for ordinary workers. For those lucky enough to have a 401(k) plan, the median balance at the end of 2013 was just $18,433, enough for a monthly retirement check of just $101 (IPS report, p. 5) Over the last several decades, the trend has been for retirement plans for ordinary US workers to shift from defined benefit to defined contribution plans (for those workers lucky enough to have any retirement plan). The IPS study notes that according to  the Economic Policy Institute, the share of prime working age families covered by a defined benefit pension plan plummeted from 41 percent in 1989 to 21 percent in 2013.  Even worse, among the baby boomer generation,  39 percent of workers aged 56-61 years old have no employer-sponsored retirement plan whatsoever, leaving them dependent on Social Security, which pays out average benefits of $1,239 per month per beneficiary (IPS report p. 5).

Reform Bill Would Drastically Alter Social Security Benefits - The big hoopla over the future of Social Security is that if nothing is done to boost revenue, cut benefits or enact some combination of the two, the Social Security Board of Trustees has forecast that the program will have exhausted its more than $2.8 trillion in spare cash by the year 2034. Should this happen, across-the-board benefit cuts of up to 21 percent may be needed to sustain payouts through 2090. Thus, Trump's hands-off proposal on Social Security, while not a defining fix, gave solace to some retirees and pre-retirees that—for now at least—their benefits wouldn't be altered.However, not all Republicans see eye-to-eye with President-elect Trump, and as I surmised a few weeks prior, it could mean the possibility of Trump's having to compromise on his pledge not to alter Social Security. Perhaps the biggest test comes from Rep. Sam Johnson (R-Tx.), the chairman of the Ways and Means Social Security subcommittee. On Dec. 8, Johnson unveiled his "plan to permanently save Social Security."The 54-page bill, known as the Social Security Reform Act of 2016, covers a number of critical topics, most of which would revolve around reducing the rate at which benefits grow. Let's take a quick look at the key points of this Republican Social Security bill.

  • For starters, Johnson's legislation would increase the full retirement age from 67, which is the current expectation of people born in 1960 and after, to 69 years of age by 2030.
  • It would reduce cost-of-living adjustments (COLAs) for higher-earning individuals, while at the same time increasing benefits at a faster pace for lower-income retirees. In particular, individuals earning in excess of $85,000 and couples with more than $170,000 in earnings would have their COLAs completely cut out beginning in December 2018.
  • Johnson's legislation would begin phasing out the taxation of Social Security benefits beginning in 2045 and ending by 2054..
  • The bill would place a cap on the benefit amount for spouses and children of higher-earning retired and disabled individuals.
  • It would eliminate the retirement earnings test, which applies only to people receiving benefits before hitting their full retirement age (FRA). In 2017, the Social Security Administration can withhold $1 in benefits for every $2 in wages earned above $16,920, and $1 in benefits for every $3 in wages earned above $44,880 if you'll hit your FRA in 2017 and are already receiving benefits. .
  • Finally, Johnson's legislation would raise the minimum benefit available to people who worked throughout their lifetime but failed to earn a lot

The Coming Assault on Social Security - The first assault of the new Trump administration and Republican Congress upon Social Security has been launched. It comes in the form of release of a new report by the Congressional Budget Office, which of course these days is a wholly owned subsidiary of the Republican Congressional Caucus. Using some financial sleight-of-hand, this CBO report pushes forward by two years the date at which its ideologically driven experts claim Social Security benefits will exhaust the Trust Fund, and since the Social Security program is required to be self-financing, the date at which, barring adjustments by Congress in the program’s funding and/or benefit payment levels, promised benefits would have to be cut by what the CBO claims will have to be 31%. Such a cut would clearly be a staggering blow to the finances and livelihoods of nation’s retirees, dependents and the disabled. This end-of-the-year CBO report is at odds with a report issued earlier this year by the Trustees of the Social Security Administration, which projected that the Trust Fund, barring any changes in taxes or benefit payments, would be tapped out in 2033, and that at that point benefits, barring some fixes in Social Security financing, would have to be cut by an also horrific but far lower 21% (with the remaining 79% of benefit payments being covered by current employee FICA taxes being paid into the system). How did the projection on Social Security move from a cut in benefit payments of by just over a fifth being required in 17 years to a cut by almost a third being required in just 15 years? Well, the CBO decided, in its wisdom, that the estimates of economic trends being used by the SSA’s Trustees — a group about evenly divided between Republican and Democratic appointees, with Democrats having a slight edge — were too optimistic. Specifically, for example, the CBO gnomes are projecting that the interest rate on 10-year Treasury notes will only be at 1.7% in 2026, rising to just 2.3% in 2046. Since the Trust Fund — composed of FICA taxes paid by workers — is invested by law entirely in these 10-year notes, that’s a pretty low rate of return to be projecting. In contrast, the Trustees, in their 2016 report earlier this year, projected 10-year rates in 2016 of 2.4%, rising to 2.7% in 2031. For the record, the 10-year rate today is 2.51%, well above even the Trustee’s projection, and almost a percentage point higher than the latest CBO figure for the year.

The Quiet War on Medicaid - If Donald J. Trump decides to gut the basic guarantee of Medicare and revamp its structure so that it hurts older and sicker people, Democrats must and will push back hard. But if Democrats focus too much of their attention on Medicare, they may inadvertently assist the quieter war on Medicaid — one that could deny health benefits to millions of children, seniors, working families and people with disabilities.   Of the two battles, the Republican effort to dismantle Medicaid is more certain. Neither Mr. Trump nor Senate Republicans may have the stomach to fully own the political risks of Medicare privatization. But not only have Speaker Paul D. Ryan and Tom Price, Mr. Trump’s choice for secretary of health and human services, made proposals to deeply cut Medicaid through arbitrary block grants or “per capita caps,” during the campaign, Mr. Trump has also proposed block grants.  If Mr. Trump chooses to oppose his party’s Medicare proposals while pushing unprecedented cuts to older people and working families in other vital safety-net programs, it would play into what seems to be an emerging strategy of his: to publicly fight a few select or symbolic populist battles in order to mask an overall economic and fiscal strategy that showers benefits on the most well-off at the expense of tens of millions of Americans. Without an intense focus by progressives on the widespread benefits of Medicaid and its efficiency, it will be too easy for Mr. Trump to market the false notion that Medicaid is a bloated, wasteful program and that such financing caps are means simply to give states more flexibility while “slowing growth.” Medicaid’s actual spending per beneficiary has, on average, grown about 3 percentage points less each year than it has for those with private health insurance, according to the Center on Budget and Policy Priorities — a long-term trend that is projected to continue. The arbitrary spending caps proposed by Mr. Price and Mr. Ryan would cut Medicaid to the bone, leaving no alternative for states but to impose harsh cuts in benefits and coverage. Mr. Price’s own proposal, which he presented as the chairman of the House budget committee, would cut Medicaid by about $1 trillion over the next decade. This is on top of the reduction that would result from the repeal of the Affordable Care Act, which both Mr. Trump and Republican leaders have championed. Together, full repeal and block granting would cut Medicaid and the Children’s Health Insurance Program funding by about $2.1 trillion over the next 10 years — a 40 percent cut.

Republicans Consider Obamacare Repeal Without A Replacement Strategy Republicans have spent a lot of time in recent weeks vowing to repeal Obamacare.  But, it is quickly becoming apparent that, since precisely zero people expected the 2016 election cycle to end with Republican control of all three branches of government in Washington D.C., no viable alternative has been fully vetted and stands ready to replace the failed legislation.  According to Bloomberg, the lack of a fully negotiated replacement option could result in Republicans repealing the bill on a piecemeal basis with a replacement to be implemented at a later date.“They haven’t come to a consensus in the House and the Senate about the possible replacement plans,” said Douglas Holtz-Eakin, a conservative economist and former adviser to Senator John McCain’s 2008 presidential campaign. “They don’t know Point B.”Republicans are debating how long to delay implementing the repeal. Aides involved in the deliberations said some parts of the law may be ended quickly, such as its regulations affecting insurer health plans and businesses. Other pieces may be maintained for up to three or four years, such as insurance subsidies and the Medicaid expansion. Some parts of the law may never be repealed, such as the provision letting people under age 26 remain on a parent’s plan.  While Trump has repeatedly called for expanding the use of Health Savings Accounts and allowing insurance companies to sale policies across state lines, none of those policies have been officially written into a bill at this point.  And while dozens of Obamacare alternatives have been introduced in Congress over the years none of them have actually received enough support to get off the ground.

The U.S. spends more on health care than any other country. Here’s what we’re buying. - American health-care spending, measured in trillions of dollars, boggles the mind. Last year, we spent $3.2 trillion on health care -- a number so large that it can be difficult to grasp its scale. A new study published in the Journal of the American Medical Association reveals what patients and their insurers are spending that money on, breaking it down by 155 diseases, patient age and category -- such as pharmaceuticals or hospitalizations. Among its findings:

  • Chronic -- and often preventable -- diseases are a huge driver of personal health spending. The three most expensive diseases in 2013: diabetes ($101 billion), the most common form of heart disease ($88 billion) and back and neck pain ($88 billion).
  • Yearly spending increases aren't uniform: Over a nearly two-decade period, diabetes and low back and neck pain grew at more than 6 percent per year -- much faster than overall spending. Meanwhile, heart disease spending grew at 0.2 percent.
  • Medical spending increases with age -- with the exception of newborns. About 38 percent of personal health spending in 2013 was for people over age 65. Annual spending for girls between 1 and 4 years old averaged $2,000 per person; older women 70 to 74 years old averaged $16,000.

The analysis provides some insight into what's driving one particularly large statistic: Within a decade, close to a fifth of the American economy will consist of health care."It’s important we have a complete landscape when thinking about ways to make the health care system more efficient," said Joseph Dieleman, an assistant professor at the Institute for Health Metrics and Evaluation at the University of Washington who led the work. The data show that the primary drivers of health-care spending vary considerably. For example, more than half of diabetes care is spending on drugs, while only about 4 percent of spending on low back and neck pain was on pharmaceuticals. Generally, more spending is done on elderly people, but about 70 percent of the spending on low back and neck pain was on working-age adults. Such insights provide a way to find the drivers of growth in health-care spending and to launch strategies to control it.

To Stop Price Spikes on Prescription Drugs, a Widening Radar-  Gretchen Morgenson -- Congressional reports can be a snooze. But that is not how I’d characterize Wednesday’s in-depth account of price gouging among prescription drug makers. The 130-page narrative prepared by the United States Senate Special Committee on Aging was juicy, detailing how four pharmaceutical companies have taken advantage of our health care system to enrich themselves and their executives, harming patients and taxpayers. Susan Collins, a Republican from Maine who is chairwoman of the committee, and Claire McCaskill, a Democrat from Missouri who is its ranking member, published the report. But in a statement, they said their work was not finished and called for “continued efforts to stop bad actors who are acquiring drugs that have been off-patent for decades and driving up their prices solely because they can.”The report focused on Retrophin, Rodelis Therapeutics, Turing Pharmaceuticals and an old favorite, Valeant Pharmaceuticals International. But these four companies are not alone in pursuing the pernicious price-hike business model, the committee noted. Other companies take the same approach, hurting taxpayers, patients and the health care system. That’s for sure. It is unclear where the Senate may set its sights next. But fresh Medicare data points to a candidate right in Ms. McCaskill’s backyard: St. Louis-based Mallinckrodt PLC. It makes H.P. Acthar Gel, a 1950s vintage, off-patent drug whose cost has rocketed from $40 a vial in 2001 to $38,000 today. You may not have heard of Acthar, but if you pay taxes, you’re an interested party. H.P. Acthar is marketed for a variety of severe afflictions, including acute exacerbations of multiple sclerosis and rheumatic disorders.According to the Medicare Drug Spending Dashboard for 2015, it was the single most expensive drug, per patient, that the government paid for during the course of last year. Of the 3,100 beneficiaries using Acthar, Medicare spent an average of $162,371. Total Medicare spending on Acthar was $504 million last year, a 29 percent increase from the year before. The 2015 spending was up from $49.5 million in 2011.

More Doctors Demand Payment Upfront - If you've been to the doctor's office lately, chances are that you've spotted a sign saying "payment is due at the time of service." Or perhaps the receptionist has expectantly held out a hand for a credit card when checking you in.When it's a $25 office visit copay, no big deal, right? But what if it's a $2,500 copay for a surgical procedure -- or a $1,000 deductible for an emergency room visit?More and more doctors' offices and hospitals are demanding share of cost payments in full up front, according to Kaiser Health News. That's not good news for patients, especially with an uncertain future for health care in America.While this may sound cold, from the perspective of the medical community, it's simply good business practice. The higher the deductible, the lower the probability that the patient will pay a bill in full. And that leaves clinics and hospitals holding the short straw. Unpaid bills can quickly drive up operating costs, so they must often be passed on to other patients. After all, someone has to pay staff, maintain equipment, stock medications and supplies, manage costs associated with licensure, bill insurance companies for their share and perform the myriad other tasks of keeping a hospital or clinic open. To ensure that they're not caught short, many providers ask for the money patients owe in advance of services. It gets more complicated as copays get bigger, though -- for two reasons. One is the sheer amount of money involved. Many patients don't have several thousand dollars -- especially in an emergency -- and struggle to cover copays up front, although they might be able to work out a payment plan with a health care provider. For scheduled, planned events it's frustrating to suddenly be slammed with a deductible, but in a crisis, it can be dangerous. There's another problem, though, and it lies in disputes with insurance companies. The problem is that if the patient has already paid that share of cost -- as, for example, in an emergency situation -- it can be difficult to force the insurance company to reimburse the patient. The health care provider no longer has a stake in the matter because they've been paid already, making them unlikely to help out.

Did a US Firm Use a Doctor-Industry Nexus in India To Push Through an Untested Drug? - Pharma companies’ marketing overdrives have come under the scanner following a recent controversy over allegations against an American firm’s sale of a drug in India for nerve disorders leading to numbness or weakness. Abbot India, affiliated to Abbott Global Health & Research, did not respond to queries about a recent report in the British Medical Journal (BMJ) that said the company’s drug Surbex Star, to treat neuropathy, is both clinically untested and was pushed through free medical camps that it helped organise. The report also said that the company’s salespersons, or medical representatives, screened and tested patients who came to the camps. According to the BMJ: “Health camps have become an industry-wide marketing gimmick in India. Violating national law, pharmaceutical sales agents test patients for several chronic diseases at clinics or community events, attracting new customers for doctors who, in return, prescribe the companies’ products.” India has been making efforts to curb unfair medical practices and is mulling making its voluntary uniform code for pharma marketing practices (UCPMP) mandatory. In September 2016, the Department of Pharmaceuticals (DoP) issued a notification to extend the dates for implementation of the voluntary code “till further orders”. Earlier, in July, Anath Kumar, the country’s minister for chemicals and fertilizers, said that the government was contemplating making the code compulsory as the voluntary UCPMP was not yielding expected results.

Scientist Warns That Gene Editing Could Wipe Out Future Generations Of Geniuses - While the development of new genome-editing technology that could one day ensure that children do not inherit unwanted diseases and disorders sounds like a magnificent breakthrough, one scientist is warning that the latest technology runs the risk of eliminating future geniuses like Thomas Edison and Stephen Hawking. According to Dr. Jim Kozubek, author of Modern Prometheus, eliminating conditions such as depression, autism, schizophrenia or Asperger's through the new Crispr-Cas9 human genome editing technology runs the risk of seeing future generations of geniuses wiped out. Express reports: Dr Kozubek said a world without depression, autism, schizophrenia or Asperger’s might also mean one without the likes of playwright Tennessee Williams, as figures show that writers are ten times more like to suffer from bipolar than the general population and poets are 40 times more likely to be diagnosed with it. Dr Kozubek said: “Thomas Edison was ‘addled’ and kicked out of school. Tennessee Williams, as a teenager on the boulevards of Paris felt afraid of ‘the process of thought’ and came within ‘a hairsbreadth of going quite mad’. Kozubek says that “Darwin showed us that evolution does not progress toward an ideal concept or model, but rather is a work of tinkering toward adaptation in local niches.” He added that a condition like autism should be thought of as a “gift” that has made its was through human genes for millions of years. “Before we begin modifying our genes with gene editing tools such as Crispr-Cas9, we’d be smart to recall that genetic variants that contribute to psychiatric conditions may even be beneficial depending on the environment or genetic background,”Kozubek said.  Dr. Kozubek’s rather shocking warning comes as human trials using Crispr are already underway inside the United States.

Microchips in every American? -- What better way to move toward that goal than to start with the category labeled as “disabled”: Last Thursday, the House passed HR 4919, also known as Kevin and Avonte’s Law, which would allow the US attorney general to award grants to law enforcement for the creation and operation of “locative tracking technology programs.” Though the program’s mission is to find “individuals with forms of dementia or children with developmental disabilities who have wandered from safe environments,” it provides no restriction on the tracking program’s inclusion of other individuals. The bill would also require the attorney general to work with the secretary of health and human services and unnamed health organizations to establish the “best practices” for the use of tracking devices. …“While this initiative may have noble intentions, ‘small and temporary’ programs in the name of safety and security often evolve into permanent and enlarged bureaucracies that infringe on the American people’s freedoms. That is exactly what we have here. A safety problem exists for people with Alzheimer’s, autism and other mental health issues, so the fix, we are told, is to have the Department of Justice, start a tracking program so we can use some device or method to track these individuals 24/7,” Representative Louie Gohmert (R-TX) said in a floor speech opposing the bill. …Though the bill specifically mentions those with Alzheimer’s and autism, how long before these tracking programs are extended to those with ADHD and bipolar disorder, among other officially recognized disorders. Even the dislike of authority is considered a mental disorder known as “Oppositional Defiant Disorder,” which could also warrant microchipping in the future. If these programs expand unchecked, how long will it be before all Americans are told that mass microchipping is necessary so that law enforcement and the government can better “protect” them?  Here is the full story, via the excellent Mark Thorson.

Romania's Secretary of State warned polio could make a comeback in Europe - Romania's secretary of state and head of the Department for Emergency Situations warned last week that polio could make a comeback in the country.   Raed Arafat announced on Facebook that anti-vaccination movements in Romania have intensified, and diseases that should long have been eradicated could start emerging once again.  "As a doctor, I'm telling you that the worst thing would be the reappearance of diseases that have been eradicated thanks to vaccination campaigns," he wrote.   He added that he wouldn't know what a parent would do if they found out their child had a dangerous disease that they could have been protected from.  Polio is a virus which is unsymptomatic in about 70% of cases, but it can be horrific. Around 1 in 200 people who are infected become paralysed. About 2-5% of children, and 15-30% of adults who experience muscle weakness die. Thanks to an effective vaccination program, polio is on the verge of elimination. There were only 96 cases of polio in the entire world in 2015.  However, in his post, Arafat claimed that polio is starting to make a come-back, and he said that anti-vaccination campaigns are to blame.  "Polio is a disease eradicated due to vaccination, and which began to reappear because of the parents' refusal to vaccinate their children," he said.  He also said that he respects other people's opinions, but public personalities shouldn't stand against vaccination unless they come with "indisputable scientific evidence."  "At this moment, the only indisputable evidence is in favor of vaccination, not against," he wrote. "I ask and urge you to get well informed before condemning your child and other children to death or mutilation for life!"

China’s giant cow farms polluting the environment with manure and waste (AFP) - Giant piles of black manure towering over cornfields, while rancid-smelling effluent from thousands of cows spills onto the land - this is the price of a glass of milk in China today. Large-scale dairy farms have boomed in the Asian giant, as its near 1.4 billion consumers overcame centuries of cultural reluctance to embrace the white fluid. An economic boom and government backing transformed dairy into a US$40-billion-a-year industry, shifting production away from small-scale producers towards massive megafarms with up to 10,000 cattle - and a lot more waste. "The smell of the manure... in the summer it's very intense," said Ren Xiangjun, a farmer in Gannan county. Pointing at a stream of green water escaping from under a grey brick wall at the giant farm owned by agro-conglomerate Feihe International, he added: "You can see how it flows right out of the farm. Dodging packets of animal medicine and syringes littered nearby, he explained: "The rubbish left after injections is just thrown here. My land is directly affected." When the Feihe farm opened in 2012 in the grassy hills of the northern province of Heilongjiang it said it had 10,000 cows. In Daxing village next door, a woman also surnamed Ren said: "You can see the manure piled up like a mountain. There are no advantages for us. There is just pollution and noise." The dairy industry in China has posted average yearly growth rates over 12 per cent since 2000, due to rising wealth and desire for the health benefits of calcium.

China’s smog is so bad masks and filters are starting to sell out --Near-record pollution levels in parts of China this week proved a two-edged sword for the country’s e-commerce titans: orders poured in for anti-smog products, but transport restrictions meant it was a challenge to get these delivered. Up to 50 million orders in north China alone face delivery delays due to grounded planes, closed highways and traffic bans, a spokeswoman for Alibaba Holding Group Ltd told Reuters, citing affiliate Cainiao Network Technology Co Ltd, which oversees China’s largest logistics firms. Online shoppers splurged on masks, filters and other anti-pollution gadgets, with e-commerce firms and brands reporting record demand in response to ‘red alert’ warnings in 24 cities by mid-week. “In one day of red alert you’ll probably do a month’s sales,” said Liam Bates, founder of Beijing-based Origins Technology Ltd, which makes air pollution monitors and air filters. The red alert is the top warning in a four-tier system that triggers a series of regulations, including the closure of schools, factories and offices, and a blanket ban on up to half the vehicles in affected cities. The system was introduced in 2014 as part of a national effort to reconcile China's industrial engine with growing pressure from health groups.  The alerts in two dozen cities this week told citizens to stay indoors as air quality index (AQI) readings topped the maximum hazardous limit determined by the World Health Organization, and shrouded northeast China in thick smog.

Mongolia's Air Pollution Is Five Times Worse Than Beijing's -- If you think air pollution in China has been bad, just look at Mongolia. Levels of particulate matter in the air have risen to almost 80 times the recommended safety level set by the World Health Organization -- and five times worse than Beijing during the past week’s bout with the worst smog of the year. Mongolian power plants working overtime during the frigid winter belch plumes of soot into the atmosphere, while acrid smoke from coal fires shrouds the shantytowns of the capital, Ulaanbaatar, in a brown fog. Angry residents planned a protest, organized on social media, on Dec. 26. The level of PM2.5, or fine particulate matter, in the air as measured hourly peaked at 1,985 micrograms a cubic meter on Dec. 16 in the capital’s Bayankhoshuu district, according to data posted by government website The daily average settled at 1,071 micrograms that day. The World Health Organization recommends PM2.5 exposure of no more than 25 micrograms over 24 hours.  In Beijing, the year’s worst bout of noxious smog prompted officials to issue the year’s first red alert and order 1,200 factories to close or cut output. Earlier this week, PM2.5 levels exceeded 400 in the capital, and Chinese officials on Tuesday canceled 351 flight departures because of limited visibility. The highest daily average in the past week, on Wednesday, registered 378. Worse, the PM2.5 reading in Shijiazhuang, capital of Hebei, exceeded 1,000 micrograms per cubic meter earlier this week, according to the China National Environment Monitoring Center.

Paris Air Pollution Has Reached A Critical Level: During the first week of December this year, abnormal weather conditions have resulted in unusually still air in Paris, trapping pollutants in the region. As a result, the city has taken the extraordinary measure of making public transport temporarily free of charge and restricting the use of passenger vehicles in the city. This infographic shows the quality of the air in Paris during the first week of December, from 2011 to 2016, according to the Airparif's Citeair Index. Levels had remained relatively safe and stable over the previous five years, but the exceptional weather conditions this December have driven the pollution to a critical level. This chart shows mean air pollution levels over the first seven days of December in Paris 2011-2016.

Navarre group sues EPA over clean water - A Navarre-based environmental group has filed a lawsuit asking the U.S. Environmental Protection Agency to create and implement new, more stringent guidelines limiting the toxins that can be released into Florida's surface water. Florida Clean Water Network Inc., the nonprofit group behind the suit, is one of the numerous organizations and municipalities across the state that oppose new water quality standards proposed by the Florida Department of Environmental Protection. Opponents believe the DEP's new rules will allow higher levels of dangerous pollutants to be dumped in Florida's swimming, fishing and drinking water.The DEP has vehemently denied the assertions as false, stating the new rules strengthen, not weaken, public protections. In July of this year, the Environmental Regulation Commission approved the organization's new guidelines by a 3-2 vote. The EPA still has to approve the new standards before they go into effect, and the Florida Clean Water Network filed its lawsuit in federal court Wednesday in hopes of compelling the EPA to discard the DEP's standards and create new regulations internally.  Until the DEP drafted its new regulations, Florida's human health criteria had not been updated since 1992. In a written statement issued in July, DEP Secretary Jon Steverson said the new DEP standards "are consistent with EPA’s recommendations, set stringent and protective criteria for 39 chemicals that currently have no limits, and also update 43 chemicals whose criteria are more than 20 years old.” However, environmental groups say the new regulations loosen restrictions on roughly half of the previously regulated chemicals. For example, the new criteria would allow for slightly higher concentrations of benzene, a chemical that causes cancer and anemia and is used in the production of rubber, paint and pesticides. Benzene has also been found in fracking fluid, and some critics allege the DEP's new regulations were designed to help accommodate the fracking industry's attempts to push into Florida. DEP officials have strongly denied those allegations.

With fewer agents, EPA cutting back on cases - Despite fears that environmental protections will relax under Donald Trump's administration, fewer cases are being pursued by the Environmental Protection Agency now than at any time in the past 20 years. The number of prosecutions from EPA investigations during the final year of President Barack Obama's administration are half as many as earlier in his presidency, or under the tenures of Presidents Bill Clinton and George W. Bush, according to federal data. Some critics, including a former top agency official, blame fear by EPA of angering Congress. The decline comes as the number of EPA investigators has dwindled to a 10-year low. There are about one-fourth fewer investigators as a minimum set by Congress, according to agency figures. An EPA spokesman attributed the decline in agents to budget cuts. The agency has shrunk by nearly 2,000 employees since 2010. A $600 million decline in EPA funds in that time is a factor, a former official said in an interview. But Doug Parker, who headed the criminal investigation division for four years before leaving the agency in March, also said top EPA officials were afraid of crossing congressional Republicans with large numbers of prosecutions for environmental crimes. "There was deep division among the senior leadership," particularly between career staff and political appointments, he said. No one specifically advocated reducing investigators to placate Congress during "many a meeting" over the reduced number of agents, said Parker, Still, he said, "the political calculus for the political folks was, 'Let's keep enforcement kind of quiet because we don't want to 'poke the bear.'" During the first 11 months of the fiscal year that ended Sept. 30, 81 people or businesses faced prosecution based on EPA investigations, according to data compiled by Syracuse University researchers. In fiscal 2011, there were 182 prosecutions, according to a report by the university's Transactional Records Access Clearinghouse, which tracks a variety of federal data. The number was 198 in fiscal 1998 under the Clinton administration, and 196 in Bush's first year in 2001.

Government Destroys Couple's Rights Over Rainwater: "If You're Honest, They Take Everything Away" - An Oregon couple has been told they must destroy a 2-acre pond on their land — the property’s most attractive feature — because the government said so. Although Jon and Sabrina Carey purchased the 10-acre property near Butte Falls two and a half years ago, the pond has been in place for 40 years — but that fact doesn’t matter to the Jackson County Watermaster’s Office. “I basically bought a lemon,” said Jon, who became teary-eyed at the edge of the partially ice-covered body of water being targeted by government, in an interview with the Mail Tribune. “That’s how they explained it to me.”But the couple desperately wants to keep the stunning longstanding feature in tact, so, as theMail Tribune reports, the Careys have “pleaded with the Medford Water Commission to adopt the pond and treat it as a municipal water source, something Jackson County Watermaster Larry Menteer has opposed because of the precedent it would set.“The Water Commission has rights to the watershed around the Careys’ property, where dozens, if not hundreds, of ponds are located, as well as Medford’s primary source of water, Big Butte Springs.”And the Careys aren’t the only people in the watershed who’ve had difficulties with, well, ‘the government’s’ water.Eagle Point resident Gary Harrington spent 90 days in jail for illegally harboring some 13 million gallons of illicit rainwater — that’s enough rain to fill around 20 Olympic-sized swimming pools.Harrington masterfully crafted several ponds on his property — even building docks for one, and stocking it with largemouth bass — but his insistence the water would assist in fire control and prevention didn’t satisfy the government, since a “1925 state law dictates that the water belongs to the Medford Water Commission.”

President Obama Signs Water Bill With Big Ag ‘Poison Pill’ Rider: In a slap in the face to fishermen, Tribes, environmental justice advocates, conservationists and family farmers, President Obama on December 16 signed the Water Infrastructure Improvements for the Nation (WIIN) Act into law with its environmentally destructive Big Ag rider sponsored by Senator Dianne Feinstein (D-CA) and Congressman Kevin McCarthy (R-CA).The controversial rider in the bill, opposed by retiring Senator Barbara Boxer, taints an otherwise good bill that sponsors water projects across the nation. The last minute rider, requested by corporate agribusiness interests, allows San Joaquin Valley growers and Southern California water agencies to pump more water out of the Delta, driving Sacramento River winter-run Chinook salmon, Central Valley steelhead, Delta and longfin smelt, green sturgeon and other fish species closer and closer to extinction, according to Delta advocates.The addition of the Big Ag rider to the bill caused a bitter rift between Boxer, one of the bill’s original sponsors, and Feinstein. The U.S. Senate approved the water bill by a vote of 78 to 21 on Friday, December 9.Also known as the Water Resources Development Act of 2016, the bill authorizes water projects across the country to restore watersheds, improve waterways and flood control, and improve drinking water infrastructure, according to President Obama in his signing statement. The law also authorizes $170 million for communities facing drinking water emergencies, including funding for Flint, Michigan, to recover from the lead contamination in its drinking water system.Senator Boxer spoke out strongly against the bill on the Senator Floor last week. Boxer called the rider a “devastating maneuver” and a “poison pill” designed to undermine the Endangered Species Act by changing the restrictions on the amount and time that water could be delivered to agricultural districts, including the Westlands Water District, in the southern San Joaquin Valley.

Obama names new national monuments in Utah and Nevada - President Barack Obama designated two national monuments Wednesday at sites in Utah and Nevada that have become key flashpoints over use of public land in the U.S. West, marking the administration's latest move to protect environmentally sensitive areas in its final days. The Bears Ears National Monument in Utah will cover 1.35 million acres in the Four Corners region, the White House said. In a victory for Native American tribes and conservationists, the designation protects land that is considered sacred and is home to an estimated 100,000 archaeological sites, including ancient cliff dwellings. It's a blow for state Republican leaders and many rural residents who fear it will add another layer of unnecessary federal control and close the area to energy development and recreation, a common refrain in the battle over use of the American West's vast open spaces. In Nevada, a 300,000-acre Gold Butte National Monument outside Las Vegas would protect a scenic and ecologically fragile area near where rancher Cliven Bundy led in an armed standoff with government agents in 2014. It includes rock art, artifacts, rare fossils and recently discovered tracks. The White House and conservationists said both sites were at risk of looting and vandalism."Today's actions will help protect this cultural legacy and will ensure that future generations are able to enjoy and appreciate these scenic and historic landscapes," Obama said in a statement. His administration has rushed to safeguard vulnerable areas ahead of President-elect Donald Trump's inauguration. It has blocked new mining claims outside Yellowstone National Park and new oil drilling in the Arctic Ocean. Obama's creation and expansion of monuments covers more acreage than any other president.

 Obama Designates Two New National Monuments, Protecting 1.65 Million Acres - President Obama used his authority under the Antiquities Act to protect two large areas in the western U.S. The new Bears Ears National Monument in Utah preserves 1.35 million acres containing 100,000 significant Native American sites, while the Gold Butte National Monument in Nevada sets aside 300,000 acres, also home to Indigenous archeological sites. Protection for both of these sites has been supported by Native American tribes. Looting and desecration of artifacts has been common in these areas.  "The rock art, ancient dwellings and ceremonial sites concealed within these breathtaking landscapes help tell the story of people who have stewarded these lands for hundreds of generations," said U.S. Secretary of the Interior Sally Jewell. "Today's action builds on an extraordinary effort from tribes, local communities and members of Congress to ensure that these treasures are protected for generations to come, so that tribes may continue to use and care for these lands, and all may have an opportunity to enjoy their beauty and learn from their rich cultural history."  A coalition of the Hopi Nation, Navajo Nation, Ute Mountain Ute Tribe, Ute Indian Tribe of the Uintah Ouray and Zuni Tribe will serve on the Bears Ears Commission, making the tribes co-managers of the national monument along with the federal government.

Obama Seizes Area Near Bundy Ranch In Massive Last Minute Land Grab -- With a stroke of the pen President Obama has unilaterally declared vast swaths of land in Utah and Nevada as two new national monuments, thus putting them under control of the federal government. Startlingly, the area in Nevada includes the site of the infamous Bundy Ranch standoff as well as land very close to the Bundy Ranch itself. With this move Obama has possibly triggered another armed standoff while also heading off any moves set to be made by incoming president Donald Trump. A “fact sheet” put out by the White House reads: In addition to protecting more land and water than any Administration in history, President Obama has taken unprecedented steps to elevate the voices of Native peoples in the management of our natural resources.  Today’s actions build on this important work, and further demonstrate the President’s commitment to protecting sacred sites and our land, water and wildlife for future generations. […] Located in Clark County, Nevada just northeast of the outskirts of Las Vegas, the Gold Butte National Monument spans nearly 300,000 acres and will protect significant cultural resources, important geological formations, and vital plant and wildlife habitat. The monument will provide critical protections for important Native American historical sites, as well as areas that are currently used for traditional purposes by tribes. Notably, the area includes abundant rock art, archeological artifacts, and rare fossils, including recently discovered dinosaur tracks dating back hundreds of millions of years. In recent years these resources have faced increasing damage from threats such as deliberate destruction and vandalism, and today’s designation will help ensure that these cultural and archaeological treasures are better protected. Today’s action follows decades of local support from tribes, local stakeholders and conservationists, and draws from legislation that was first introduced in 2008. Right now it is extremely difficult to confirm exactly how much of the land in and around the Bundy Ranch is now a national monument but a map put out by the Las Vegas Review seems to line up directly with the Bundy grazing allotment.

As China’s Largest Freshwater Lake Shrinks, Solution Faces Criticism - — Long celebrated as China’s largest freshwater lake, Poyang reaches more than three times the expanse of Los Angeles in the summer wet season. It is home to the rare Yangtze finless porpoise, and its mud flats are the primary winter feeding grounds for thousands of birds that fly south each autumn to escape Siberia’s chill, including the critically endangered Siberian crane. Now it is Poyang itself that is at risk. In recent years, the average expanse of the lake, in the southeastern province of Jiangxi, has been shrinking, and winter water levels have declined sharply. Culprits include the Three Gorges Dam, which stores water upstream on the Yangtze for winter electricity generation, lowering a nearby river channel and sucking water from the lake. Dredging to collect sand for construction projects has also lowered the lake’s bed and caused more runoff. This year, drought turned much of the lake into grassy plains. The local government has proposed building a sluice gate to keep more water inside the lake in the winter, but critics say the gate would essentially be a dam, and it could cause bigger problems.“I think you’re proposing a solution without understanding the causes of the problem,” said David Shankman, who has studied the lake’s hydrology. “The whole idea of the dam is that there would be some economic benefit, but there may be potential long-term ecological problems,” he added.  The primary feature of the $1.9 billion Poyang Lake Water Conservancy Project would be a 10,000-foot sluice gate across a natural channel that connects the lake’s northern edge to the Yangtze, according to a November report by the Jiangxi provincial government.

Hong Kong’s illegal ivory hub status ‘could grow after planned mainland China ban’ -- Wildlife campaigners have urged Hong Kong authorities to fast-track the phasing out of the city’s ivory trade, warning of a surge in illegal business after the mainland announced a total ban within a year.WWF Hong Kong yesterday contrasted Beijing’s quick action with the city’s plan to end the controversial trade in five years, which effectively allows traders a grace period until 2021.The group’s senior wildlife crime officer, Cheryl Lo, called on the local government to act swiftly, given that Hong Kong is an important transit hub for illegal ivory supplies to the mainland and other parts of Asia.  While hailing China’s “determination to help save Africa’s elephants from extinction”, Lo warned that in the four-year window between the mainland ban and Hong Kong catching up, Chinese sellers could move stocks across the border for sale in the city. But she said the recent news was still cause for optimism. “With China’s announcement, now three of the world’s largest domestic ivory markets – that is China, Hong Kong and the US – are being phased out.”

Cheetahs heading towards extinction as population crashes - The sleek, speedy cheetah is rapidly heading towards extinction according to a new study into declining numbers. The report estimates that there are just 7,100 of the world's fastest mammals now left in the wild. Cheetahs are in trouble because they range far beyond protected areas and are coming increasingly into conflict with humans. The authors are calling for an urgent re-categorisation of the species from vulnerable to endangered. According to the study, more than half the world's surviving cheetahs live in one population that ranges across six countries in southern Africa. Cheetahs in Asia have been essentially wiped out. A group estimated to number fewer than 50 individuals clings on in Iran. Because the cheetah is one of the widest-ranging carnivores, it roams across lands far outside protected areas. Some 77% of their habitat falls outside these parks and reserves. As a result, the animal struggles because these lands are increasingly being developed by farmers and the cheetah's prey is declining because of bushmeat hunting. In Zimbabwe, the cheetah population has fallen from around 1,200 to just 170 animals in 16 years, with the main cause being major changes in land tenure. Researchers involved with the study say that the threats facing the fabled predator have gone unnoticed for far too long. "Given the secretive nature of this elusive cat, it has been difficult to gather hard information on the species, leading to its plight being overlooked," said Dr Sarah Durant, from the Zoological Society of London, UK, and the report's lead author. "Our findings show that the large space requirements for the cheetah, coupled with the complex range of threats faced by the species in the wild, mean that it is likely to be much more vulnerable to extinction than was previously.

 Anthrax in the Arctic: why wolves are the least of a reindeer’s worries this Christmas - David Attenborough's Planet Earth II should be top of the TV catch-up list this Christmas. Over 75 years ago, a naturally occurring outbreak of anthrax (a bacterial disease affecting the skin and lungs), caused mass death among the caribou of the Yamal-Nenets region in Arctic Siberia. For decades, the diseased bodies lay buried beneath the frozen ice. But this summer, unusually high temperatures caused the permafrost to thaw.  The results were catastrophic. Spores from the unleashed bacteria were ingested by a herd of grazing reindeer, some of whom were then consumed by the local human population. Over 70 people, including 41 children, were rushed to Salekhard hospital, where a 12-year-old boy died of the infection.  If the Planet Earth team had flown over the Yamal tundra this August, their cameras would have captured a landscape strewn with the smoking pyres of caribou carcasses – 2,000-plus of whom also perished from the disease. The region’s governor, Dmitry Kobylkin, has announced that the cull of a further 100,000 animals is set to follow. It may feel like sacrilege to criticise Planet Earth, but in an era facing climate change, a new mass extinction and a rise in infectious disease, did it get the balance right? The caribou wolf hunt may serve as a beautiful metaphor for the tenacious and ingenious struggle for survival (animal or human). But it was also troublingly thin on context. Not only is man-made climate change responsible for the “extraordinary” temperatures that led to this summer’s anthrax outbreak. But warmer winters mean more snow is falling as rain – when this freezes it prevents animals from reaching the grazing beneath. According to research conducted on an Arctic island near the North Pole, the average weight of an adult reindeer has fallen from 55kg to 48kg since the 1990s.

Warming is Sending Mountain Glaciers ‘Off a Cliff’ - Photos showing the jarring, sometimes miles-long, retreat of mountain glaciers have long been emblems of the often stark changes wrought by Earth’s rising temperature.  But while scientists could draw a line from human-caused warming to glacier loss on a global scale, attributing any one glacier’s retreat to climate change has been difficult because of relatively short records and glaciers’ large natural variations.  In a new study detailed this month in the journal Nature Geoscience, researchers have figured out how to link global warming to the retreat of individual mountain glaciers. They showed that for 36 glaciers with robust records, that retreat is “categorical evidence” of climate change, study co-author Gerard Roe of the University of Washington said during a press conference at the annual meeting of the American Geophysical Union held last week in San Francisco.  Other research presented at the meeting also illustrated the increasingly detailed view that scientists are getting of glaciers — often situated in remote, hard-to-access areas — thanks to improvements in observational technologies. Clearer pictures of how glaciers around the world are changing helps improve predictions of how everything from local water supplies to global sea levels could be affected as the glaciers melt.`` “We’re entering an era where our eyes are open,” The length of glaciers changes naturally in response to the competing influences of accumulating snow and summertime melt. In a constant climate, or one without human-driving warming, in which accumulation and temperatures would fluctuate randomly, glacier length would also advance and retreat randomly in response.

Arctic heat waves could break records this year - It has been currently been presumed that there is a high chance that as a result of the global warming, the Arctic heat wave could break all the previous records that it has created so far. Temperatures in the North Pole could surge higher by 20degrees and that definitely makes a lot of difference to the environment as well. In the month of November and December itself, it has been recorded that the temperatures were about 5degree higher than the prior year, and the satellite diagram show that the temperature changing pattern is highly abnormal. In accordance to the BBC it has been said that the report is not due to just one source but a lot of calculations and reports have been created to make this final report. The biggest fear is that the heat wave is going to melt the level of ice even more and that is indeed alarming. Many of the islands are getting submerged slowly and gradually and that is the reason why the authorities seem even more concerned as well. This might lead to an enhanced level of global warming and within just a few years, a lot of small islands might get submerged as well. The news is showing the fact that every year, this is going to increase by at least 2% every year and this might turn out to be disastrous as well.

North Pole 50 Degrees Warmer Than Normal in December - Gauis Publius: Temperatures over the Arctic ocean are as much as 50 degrees F (30 Celsius) above normal. It’s above freezing in places that are normally 20 below zero in degrees F. Arctic sea ice collapse on the Atlantic side has allowed warm storms to penetrate the central Arctic. This extreme heat is destabilizing the northern hemisphere’s atmospheric circulation all the way up to the top of the stratosphere. (Full-size image here.) No, this is not a Season of Merry and Bright post, despite the phrase “North Pole” in the headline. It’s a climate post, to keep you up on the news. Nick Visser writing at the Huffington Post:  It’s the second year in a row the North Pole ― now in perpetual darkness after saying goodbye to the sun in late October ― has seen abnormally high temperatures around the Christmas holiday. It’s also the second time this year. In November, temperatures in the region skyrocketed 36 degrees above normal. The weather forecast adds to a string of climate change-related indicators setting off serious warning bells in 2016. Polar sea ice is at record lows, and during last month’s heat wave, the region lost 19,000 square miles of it in just five days. The National Snow and Ice Data Center called the melt an “almost unprecedented occurrence.” And it’s not just the North Pole: “The World Meteorological Organization has said it expects 2016 likely will surpass last year as the hottest year in recorded history.” From a highly technical post at Daily Kos by “FishOutOfWater,” a geochemist by profession (emphasis mine): The lack of sea ice has dramatically affected the northern hemisphere’s atmospheric circulation for months. The heat this fall has formed a warm dome over the Arctic ocean and provided moisture for deep, early Siberian snow. A record deep Siberian snow pack for October pushed south of normal developing a deep pool of cold air over central Siberia. The much larger than normal temperature contrasts (gradients) across Central Eurasia have intensified the polar jet stream across Asia and the north Pacific Ocean. This is a predicted consequence of intense early snowfall in Siberia associated with warm water entering the Arctic seas. This fall has had all time record minimum sea ice extent in the seas north of Eurasia and this unprecedented weather pattern is the atmospheric response to these warm waters so deep into the Arctic. Intense atmospheric waves, associated with intense storms have whipped across both the Pacific and Atlantic. When intense storms approached the Arctic from both the Pacific and Atlantic in late October the stratospheric polar vortex was pinched from both sides, a 2 wave pattern, and split in two. This stratospheric polar vortex split is unprecedented for so early in the Arctic winter season as far as I know.

Bone-chilling temps sink to -80 degrees F in Siberia, shattering records - Western Siberia is currently stuck in a mini Ice Age as temperatures plummeted to nearly -80 degrees Fahrenheit, breaking all previous cold records. And meteorologists say that even icier weather is coming. Temps tumbled to -62 degrees Celsius (-79.6°F) at the Bolshoe Olkhovskoe oilfield in the Khanti-Mansi region this week. And the Kazym village in the Beloyarsky district showed a biting -58 degrees C (-72.4°F). In the province of Nadym, the bone-shattering cold pushed past the -50 degrees C (-58°F) mark, forcing schools to shut down. In provinces like Yakutia, schools stayed open despite a bone-chilling -52 degrees C (-61.6°F). While these arctic temperatures are commonplace in eastern Siberia, it rarely gets this frigid in the west.The glacial weather has frozen vehicles' fuel lines and batteries, forcing people to take taxis. And even that wasn’t a foolproof method of getting to work because many of the cabs wouldn’t start either. With demand outpacing supply, the price of a cab ride tripled during the deep freeze. The Nizhnevartovsk airport had to cancel some flights because of frigid conditions, and commuter buses were taken offline. Police issued warnings that drivers should stay at home and not attempt any long-distance or local trips. In Surgut and Shanty-Mansiysk, flights were also cancelled or delayed. While folks in the U.S. complain about polar vortexes, locals have a different take on the frigid #Environment: learn to like it. One woman was seen bicycling at -43-degree C (-45.4°F). Hardier locals took to deep diving into ice holes in Urai and Nizhnevartovsk, and others were seen pouring cold water over themselves.

The “Warm Arctic, Cold Continents” theory -- Last month, temperatures in the high Arctic spiked dramatically — a move that corresponded with record low levels of Arctic sea ice during a time of year when this ice is supposed to be expanding. A buoy close to the North Pole just reported temperatures close to the freezing point of 32 degrees Fahrenheit, which is 10s of degrees warmer than normal for this time of year. But these bursts of Arctic warmth don’t stand alone — last month, extremely warm North Pole temperatures corresponded with extremely cold temperatures over Siberia. This week, meanwhile, there are large bursts of un-seasonally cold air over Alaska and Siberia once again. It is all looking rather consistent with an outlook that has been dubbed “Warm Arctic, Cold Continents” — a notion that remains scientifically contentious but, if accurate, is deeply consequential for how climate change could unfold in the Northern Hemisphere winter. The core idea here begins with the fact that the Arctic is warming up faster than the mid-latitudes and the equator, and losing its characteristic floating sea ice cover in the process. This also changes the Arctic atmosphere, and these changes interact with large scale atmospheric patterns that affect our weather (like the jet stream and the polar vortex). The result can be a kind of swapping of the cold air masses of the Arctic with the warm air masses to the south of them. The Arctic then gets hot (relatively), and the mid-latitudes — including sometimes, as during the infamous “polar vortex” event of 2013-2014, the United States — get cold.

Arctic Ice Management - Desch - ABSTRACT : As the Earth's climate has changed, Arctic sea ice extent has decreased drastically. It is likely that the late-summer Arctic will be ice-free as soon as the 2030s. This loss of sea ice represents one of the most severe positive feedbacks in the climate system, as sunlight that would otherwise be reflected by sea ice is absorbed by open ocean. It is unlikely that CO2 levels and mean temperatures can be decreased in time to prevent this loss, so restoring sea ice artificially is an imperative. Here we investigate a means for enhancing Arctic sea ice production by using wind power during the Arctic winter to pump water to the surface, where it will freeze more rapidly. We show that where appropriate devices are employed, it is possible to increase ice thickness above natural levels, by about 1 m over the course of the winter. We examine the effects this has in the Arctic climate, concluding that deployment over 10% of the Arctic, especially where ice survival is marginal, could more than reverse current trends of ice loss in the Arctic, using existing industrial capacity. We propose that winter ice thickening by wind-powered pumps be considered and assessed as part of a multi-pronged strategy for restoring sea ice and arresting the strongest feedbacks in the climate system.

 The Important Lesson Scientists Could Learn From Trump’s Victory --The election is the most recent illustration of trends that have been visible for some time, of America’s stark divisions in, among other things, class, education, ethnicity, geography, and politics. The reaction to the election’s outcome has lent support to the idea that if we are to avoid permanently entrenching these cultural and political differences, we need to listen to and communicate with people who hold very different views and values.This call has been mostly directed—often self-directed—at the journalists, pundits, urbanites, and other so-called elites who, in hindsight, seemed not to take seriously the perspectives and values of those who felt their voices were not being heard or the nominee they chose to represent them. But the need to engage with citizens and their concerns could also be applied to another group that often finds distrust directed its way: scientists. Although it varies a bit by discipline, there is a near-complete lack of incentives for scientists to reach out beyond the insular world of academic research. Peer-reviewed journals, scholarly conferences, and inside-the-Beltway professional organizations—not to mention the enormous amounts of work busy professional researchers are expected to take on—frequently serve to keep the public at arm’s length. This means that scientists and other experts too often fail to challenge their own assumptions or engage meaningfully with people who are not scientists or experts. This insularity is bad for science and bad for society. Just as the recent election results shocked professional prognosticators, scientists are often baffled and dismayed when people dispute or ignore their expertise on important topics, such as climate change, genetically modified crops, and nuclear power. Science says something is true and most scientists agree! How could you think otherwise? But by framing issues that have profound impacts on citizens as purely technical questions that don’t require public input, scientists and other experts risk losing the trust of citizens on whom they depend for funding and support.

T. Rex: Engineering Fantasies -  Sandwichman - Global warming? “It’s an engineering problem, and it has engineering solutions.” According to Rex Tillerson, Donald Trump’s choice for Secretary of State, adapting to climate change is an engineering problem that has an engineering solution. A soundbite from a Council on Foreign Relations presentation by Tillerson has been widely reported. But it is worthwhile to consider his full answer and its context. Here are the question and answer: (video) […]  My philosophy is to make money. If I can drill and make money, then that’s what I want to do.” — Rex Tillerson, to Charlie Rose, March 2013. To be sure, Tillerson’s answer was in response to the question, “is your philosophy ‘Drill, baby, drill!’?” […] When Tillerson spoke about an engineering solution to climate change, he talked about managing the consequences, adapting to higher sea levels and relocating agriculture. He didn’t specify trying to reverse global warming through blocking incoming solar radiation. But building dikes against rising sea levels and massively relocating agriculture are also forms of geo-engineering when undertaken on such a large scale. No less than schemes to block solar radiation, adaptation projects would require planning and coordination. But engineering solutions also require something that Tillerson has little confidence in: the competency of models to accurately predict the severity and consequences of climate change. Tillerson’s insistence that there will be engineering solutions to engineering problems proceeds immediately after his dismissal of numbers that are “all over the map” — numbers that would be crucial to the success of engineering solutions!  What exactly is going on here?  Robert Fletcher and Crelis Rammelt refer to “Lacanian fantasy” in “Decoupling: A Key Fantasy of the Post-2015 Sustainable Development Agenda.” Such a fantasy enables, simultaneously, both the promise of a future solution and an alibi for not achieving that solution in the form of a “disavowal,” which proclaims, in effect, “I know very well, but still…” The concept of decoupling GDP growth from carbon emissions and, by implication, from fossil fuel consumption, is the obvious complement to Tillerson’s engineering solution, in that the fantasy of decoupling envisions mitigation of climate change, while Tillerson’s fantasy envisions adaptation to the changing climate.

States Will Lead on Climate Change in the Trump Era - NYTimes: State governments will serve as an important bulwark against any attempt by President-elect Donald Trump to roll back the progress the United States has made in addressing climate change. And that’s good news for the planet. Over the last decade or so, most states have reduced their greenhouse gas emissions by promoting energy efficiency and renewable fuels. These trends should continue as clean energy costs continue to decline and, in some parts of the country, fall below the cost of dirtier fuels like coal. The Brookings Institution reported this month that between 2000 and 2014, 33 states and the District of Columbia cut carbon emissions while expanding their economies. That list includes red states run by Republican legislatures, like Alaska, Georgia, Tennessee and West Virginia. It’s hard to know how Mr. Trump will change climate policy, but it is almost certain that he won’t advance it. He told The Times last month that he has an “open mind” about climate change, but has also called it a “hoax.” The people he has chosen to lead the Environmental Protection Agency, the Department of Energy and the Department of Interior — the three agencies with the greatest influence on energy policy — have either denied or expressed skepticism that human activity is causing global warming, something that virtually all scientists agree on. And many people expect him to walk away from President Obama’s commitments under the Paris climate agreement and get rid of or weaken the E.P.A.’s Clean Power Plan, which requires states to lower carbon emissions from the electricity sector. He and his appointees might also try to water down fuel economy regulations for cars and trucks, and cut clean energy tax incentives and research spending.

California, at Forefront of Climate Fight, Won’t Back Down to Trump — Foreign governments concerned about climate change may soon be spending more time dealing with Sacramento than Washington.President-elect Donald J. Trump has packed his cabinet with nominees who dispute the science of global warming. He has signaled he will withdraw the United States from the Paris climate agreement. He has belittled the notion of global warming and attacked policies intended to combat it.But California — a state that has for 50 years been a leader in environmental advocacy — is about to step unto the breach. In a show of defiance, Gov. Jerry Brown, a Democrat, and legislative leaders said they would work directly with other nations and states to defend and strengthen what were already far and away the most aggressive policies to fight climate change in the nation. That includes a legislatively mandated target of reducing carbon emissions in California to 40 percent below 1990 levels by 2030.“California can make a significant contribution to advancing the cause of dealing with climate change, irrespective of what goes on in Washington,” Mr. Brown said in an interview. “I wouldn’t underestimate California’s resolve if everything moves in this extreme climate denial direction. Yes, we will take action.”  The prospect of California’s elevated role on climate change is the latest sign of how this state, where Hillary Clinton defeated Mr. Trump by more than four million votes, is preparing to resist the policies of the incoming White House. State and city officials have already vowed to fight any attempt by Washington to crack down on undocumented immigrants; Los Angeles officials last week set aside $10 million to help fund the legal costs of residents facing deportation.

Climate Change Secession - Some private citizen groups in California, distraught at the prospect of an America under President Donald Trump, are advocating that the state secede from the union.Constitutional scholars (and most Californians) assure us the separation is not going to happen. But is there any instance in which California could go its own way? What if Trump withdraws the nation from the United Nations Climate Change Accord and rejects the validity of the global warming threat altogether?Could and should that set the stage for environmentally precocious California to break ranks with the president and join the Climate Change Treaty as a separate entity? It is not all that outlandish, considering California would not be declaring itself a sovereign state. It would simply be using its existing progressive greenhouse gas emission reduction policies to directly participate in a worldwide crusade to slow the rate of human-induced global warming. That shouldn't exclude it from being a member of the United States in good standing. California's unilateral action could arguably be justified as a legitimate manifestation of States' Rights that would serve as an inspiration at home and abroad. We are talking about policies aimed at having 33 percent of the state's electricity come from clean, renewable energy by 2030 and 80 percent by 2050.Even if Trump disapproved of California's environmental autonomous streak, he would have a tough time treating it as secession. There are already 36 of our states that have independently instituted greenhouse gas emission reduction programs (albeit more modest than California's). Besides, Trump and the Republican Party in general fancy themselves outspoken champions of states' rights.But what of the UN Treaty apparatus? Would it accept California as an individual member of a formal network currently reserved for sovereign states? It should. California is roughly the size of Poland and has the sixth largest economy in the world. Its progressive environmental stance has much to contribute to the rest of the world. Nonetheless, UN officials seem wary of accepting anyone but national governments as full-fledged Treaty participants. It would be hard to keep track of all the grassroots emission reduction efforts by communities and other local entities around the world, even though more progress has currently been made from the bottom up than the top down.

California's largest separatist movement just opened its first 'embassy'— in Moscow - The California separatist group Yes California set up a makeshift embassy in Moscow earlier this month in partnership with far-right Russian nationalists who enjoy Kremlin support while promoting secessionist movements in Europe and the United States.The “Embassy of the Independent Republic of California"is part of Yes California's outreach to countries that are likely to recognize and support California's independence from the United States, the group's leader, 30-year-old Louis Marinelli, said in a Skype interview from Russia last week.Marinelli is organizing the California independence referendum from Russia's fourth-largest city, Yekaterinburg, where he has lived with his wife Anastasia since September."We don't expect that the US' staunchest allies will recognize a state's independence movement," Marinelli said. "That would be a slap in the face to the US." So Marinelli said he is looking specifically to countries with veto power on the UN Security Council (UNSC) — Russia and China — to support his movement and recognize the results of an independence referendum in the event that the US and its UNSC allies reject its legitimacy.  "We don't think that Russia needs to be an enemy of California, or that it even is one to begin with," Marinelli said. "The idea that Russia is an enemy of the US — that's a Cold War mentality."

Dem AGs warn Trump against repealing Obama’s climate rule - A group of Democratic state attorneys general is warning President-elect Donald Trump against repealing the Clean Power Plan, saying it would lead to more lawsuits. The group, led by New York Attorney General Eric Schneiderman (D) and representing 14 states and five localities, wrote Thursday that it is in Trump’s best interest to preserve Obama’s climate change rule for power plants and continue defending it in federal court. They stopped short of threatening to sue Trump if he tries to unwind the rule, but guaranteed him that someone would sue. “We advocate that you reject misguided advice that the Clean Power Plan be discarded; advice that, if followed, would assuredly lead to more litigation,” they wrote.  “Instead, we urge you to support the defense of this critically-important rule and the implementation of its carefully constructed strategies to reduce emissions from the nation’s largest sources.” The letter came in part as a response to advice from West Virginia Attorney General Patrick Morrisey (R), the leading litigator fighting the Clean Power Plan. Morrisey and other Republican state attorneys general told Trump earlier this month that he should issue an order on his first day in office instructing the EPA to stop working to enforce the rule, and then take other long-term steps to fully repeal it and make sure a future president can’t reinstate it or a similar regulation.

'Climate Change' Deleted From Wisconsin DNR Website - Whoever is managing Wisconsin's Department of Natural Resources website must be wearing out the delete key. The word " climate " has been quietly stripped from the department's webpage dedicated to explaining the state's response to climate change, Raw Story reported.  In total, 13 original appearances of the word "climate" have been kiboshed. The only place you'll see the word now is in the "climatechange.html" URL and a tiny footnote link. Not only that, any reference to humanity's contribution to global warming has been deleted.  The text that appears on the webpage now inserts classic climate skeptic arguments, in which Earth's "changes" are being "debated." This is the text on the website as of today:  In a post for Urban Milwaukee , political writer James Rowen reported that the original text actually acknowledged that "[h]uman activities that increase heat–trapping ('green house') gases are the main cause [of global warming.] Earth's average temperature has increased 1.4 °F since 1850 and the eight warmest years on record have occurred since 1998."  In fact, Rowen has detailed the quiet scrubbing of climate change from the entire DNR website for several years, changes that he describes as "Orwellian" and "propagandistic."  This news should not surprise anyone who has followed the career of Wisconsin's notorious climate-change-denying Governor, Scott Walker. Ever since he took office in 2011, Walker has used his powers to "reduce the role of science in environmental policymaking and to silence discussion of controversial subjects, including climate change, by state employees," as Scientific American observed. And let's not forget that in April 2015, state officials banned employees of a state agency from talking about climate change, conducting any work on it or even responding to emails about it.  In the image below, Rowen shows the exact edits that have been made on the DNR webpage in question. Deletions are crossed out with the black line and a version of the highlighted text is what appears now on the page.

Trump's Energy Policy: 10 Big Changes - President-elect Donald Trump intends to hit the ground running on energy and environment policy. Trump already has an expert team in place drafting important policy changes from the Obama administration. Here are 10 likely changes that will impact energy production, energy use, and the U.S. economy.

  1. Goodbye to the Clean Power Plan. The EPA’s Clean Power Plan was political poison for Democrats in the November elections. In 14 Senate races highlighted before the elections by the liberal website Mother Jones as being especially important in the global warming debate, 11 were won by candidates opposing the Clean Power Plan. The Clean Power Plan was decisively damaging to Hillary Clinton in Great Lakes battleground states like Pennsylvania, Ohio, Michigan, and Wisconsin.
  2. Increased energy production on federal lands. Oil and natural gas prices have fallen dramatically thanks to the fracking revolution and increased production. This increased production, however, has occurred in spite of – rather than because of – Obama administration policies..
  3. Coal gets a reprieve. Restrictions on coal production and coal power have reached unprecedented severity under the Obama administration. Coal is unlikely to be saddled with any new environmental restrictions under the Trump administration. Just as importantly, the Trump administration is likely to rescind many of the restrictions imposed by the Obama administration, such as a new slate of restrictions announced last week. .
  4. Wind power industry loses its free pass to kill bald eagles. The Obama administration last week dramatically increased the number of bald eagles wind power companies can kill without penalty. Expect the Trump administration to reverse this course and make the wind power industry accountable to the same environmental protections that apply to everyone else.
  5. Wind and solar power loses disproportionate subsidies. Wind and solar subsidies during the past decade have dwarfed those of all other energy sources, imposing expensive and unreliable power on American consumers.
  6. Ethanol gets closer scrutiny.. Consumer advocates, free-marketers, and environmental groups have united in opposition to ethanol, yet the ethanol requirements remain. Not only do they remain, but the Obama administration recently increased the amount of ethanol that must be blended into gasoline. Expect the Trump administration to take a hard look at ethanol and consider rolling back federal ethanol mandates.
  7. Yucca Mountain finally begins accepting nuclear waste. Nuclear power is currently hampered by strong government headwinds. The Yucca Mountain storage facility for spent nuclear fuel is essentially ready to accept spent fuel but the Obama administration and Obama’s Senate ally Harry Reid have blocked Yucca Mountain from accepting spent fuel. .
  8. Next-generation nuclear power surges forward.  For example, many scientists, economists, and environmentalists see tremendous promise for small molten salt reactors powered by thorium. To date, the federal government has been dragging its feet studying and approving new nuclear reactor designs. 
  9. Hydro power reverses its long decline. The Obama administration has presided over the removal of existing hydropower dams despite hydropower providing affordable, emissions-free electricity.  Expect the Trump administration to reverse federal energy policy that hinders hydropower production. Hydropower could be poised for a major comeback.
  10. Natural gas exports increase. Natural gas is in high global demand to reduce pollution in an affordable manner. Asia in particular suffers extreme air pollution exacerbated by Chinese coal. In Europe, our friends and allies are overly dependent on Russian natural gas, making them vulnerable to aggressive Russian foreign policy. The Obama administration has blocked the construction of natural gas export terminals that would allow American energy companies to deliver natural gas to countries that need it. Expect the Trump administration to reverse course on this short-sighted policy. More natural gas exports will bring environmental and strategic political relief to countries abroad, while simultaneously providing America economic and strategic political benefits.

What will be the impact of these expected changes in federal energy policy? The answer is more abundant energy, more affordable energy, and environmental policy that addresses true environmental concerns rather than serving as a protection racket for politically favored energy sources.

Trump’s potentially toxic effect on the solar industry - The solar industry is wary. US president-elect Donald Trump has picked climate sceptics and oil industry executives for key positions in his administration, promising to scrap President Obama’s clean power plan and withdraw from the Paris climate agreement. Underlying these concerns is a gnawing fear that the rapid expansion of solar energy generation overseen by Obama could soon be undermined.The US installed a record 4.1GW of solar power in 2016’s third quarter, 191% up on the same period last year, in a boom fuelled by investment tax credits (ITCs) that offer solar and wind firms a 30% tax rebate.Industry leaders fear the tax credits may not survive a Trump administration which has vowed to cut $100bn (£80bn) of climate spending, and will need to find more savings to fund $6.2tn (£5tn) of tax cuts.“The tax credit will cost around $50bn in the period to 2022 and might be an easy choice for Trump,” said James Watson, the CEO of SolarPower Europe. “He’s got a very sceptical climate team around him who would not be too worried about cutting back the ITCs.” Any moves in this direction could increase US emissions and have a toxic effect internationally, just as the budding solar industry is nearing cost parity with fossil fuels such as coal and gas.Renewable energy companies have already been battered by Trump’s victory, with shares in one US solar giant, SunPower Corp, plummeting 14% the day after the election. However, Trump has not yet commented on the future of the ITCs and some analysts say he may be loathe to go up against Republicans in Congress who recently voted to extend the scheme until 2022.

China to Cut Solar, Wind Power Prices as Project Costs Fall -- China is reducing the amount of money it pays to newly completed solar and wind power generators for their electricity, in order to reflect declines in construction costs, the country’s price regulator and economic planner said Monday. The nation will cut tariffs paid to solar farms by as much as 19 percent in 2017 from this year’s levels, and by as much as 15 percent for wind mills in 2018 from current prices, according to a statement posted on the National Development and Reform Commission’s website. The changes will help reduce subsidies paid to new photovoltaic and wind power projects by about 6 billion yuan ($863 million) annually, the NDRC said. The move comes as average solar panel prices have tumbled about 30 percent this year, according to data from Bloomberg New Energy Finance, resulting in a lowering of the bids that solar developers offer to build projects. Prices of wind turbines also fell in 2016, according to London-based BNEF. China will also encourage local authorities to continue making use of auctions to select renewable energy developers, in order to further lower power prices, according to the NDRC. Reductions to renewable power prices will be smallest in regions in China that have the calmest wind and the weakest solar radiation, according to the NDRC. These areas are also where people or industries make use of more electricity, it said.

EU Commission favours keeping limits on Chinese solar panels -- The European Commission has recommended keeping import duties and a minimum price for solar panels and cells from China for two more years, according to documents seen by Reuters. The European Union and China came close to a trade war in 2013 over EU allegations of solar panel dumping by China. But this was averted by an agreement to allow a limited amount of tariff-free panels at prices not below 0.56 euros per watt. The Commission is currently reviewing that agreement and also import duties of up to 64.9 percent for those outside the agreement all of which ended in Dec. 2015. In the documents, the Commission said ending the measures would likely lead to a continuation of Chinese subsidies for the solar sector and a significant increase in dumped imports of solar cells and modules. It also said the measures would only have a limited effect on demand and that comparisons between the 50,000 people working in importing and installation and the 5,000 to 10,000 in manufacturing were not appropriate. Job gains in the former could be outweighed by losses in the latter, it said. A separate document said the minimum panel price would be cut to 0.46 euros/watt.

Turbines are threat to migrating birds, study finds - Birds of prey are at serious risk of crashing into offshore turbines as they migrate over open water, according to new research. Scientists have discovered that unlike seabirds, which tend to avoid offshore structures, raptors such as hen harriers are attracted to the turbines by an “island effect”. A turbine’s blade can reach a height of 220m (752ft) which is around the same altitude at which the birds of prey fly over water.   Researchers at Aarhus University, Denmark, led by Henrik Skov, set up two bird finding radars and a laser rangefinder on a narrow strait on the Baltic Sea off the north coast of Germany during the autumn migration. One of the radars was placed next to Nysted wind farm and the other placed further up the Danish west coast. After watching the birds migration route, scientists spotted a large number of sparrowhawks, kites, harriers, buzzards and falcons flying through the sound. The researchers found the the birds were deliberately making a beeline for the turbines and flying away from their normal route out of Scandinavia. According to the study, the birds became more attracted to the structures as the head winds increased. Writing in the Royal Society journal Biology Letters, the scientists suggested that the animals were trying seek shelter for bad weather. They said: “Birds are attracted to offshore structures for various reasons.“However, An ‘island effect’ similar to the process which causes attraction of land-bird species to small islands is perhaps the most likely driver behind the attraction behaviour.”

New EU Wood Energy Rules Threaten Climate, Forests -- As American foresters ramp up logging to meet the growing demand for wood pellets by power plants on the other side of the Atlantic Ocean, a new European wood energy proposal would allow the power plants to continue claiming their operations are green for at least 13 more years, despite releasing more heat-trapping pollution than coal. Most of the wood fueling converted coal plants in England, Denmark and other European countries is coming from North American forests. Each month, about 1 million tons of tree trunks and branches from southern U.S. pine plantations and natural forests is being turned into pellets and shipped to European power plants, mostly to Drax power station in the U.K.  The growing transatlantic trade is being financed with billions of dollars in European climate subsidies because of a regulatory loophole that allows wood energy to count as if it’s as clean as solar or wind energy, when in reality it’s often worse for the climate than burning coal. Only the pollution released when wood pellets are produced and transported is counted on climate ledgers. Actual pollution from the smokestack — by far the greatest source of carbon pollution from wood energy — is overlooked.  This flaw of treating bioenergy as “carbon neutral” is enmeshed in climate policies and models worldwide. Its impacts have become apparent in recent years as European power plants were encouraged to switch from coal to wood, and as the U.S. increased the amount of biofuel that must be blended into gasoline. Both policies are touted as green but are harming the climate and environment. A proposal to extend the carbon neutral loophole for at least 10 more years was included in draft clean energy rules for 2021 to 2030, recently unveiled by the European Commission. The rules provide a regulatory path forward for ensuring the European Union meets its 2030 pledge under the Paris climate pact. If they become law following votes in European Parliament, as currently drafted, that path forward would be paved with deceitful accounting practices. The proposed rules were released just a few months after the commission released a 361-page warning about the risks to the climate and American wildlife from the growing use of wood in the continent’s power plants.

Christmas electricity blackout report ‘laughable’ - A report that warned of Christmas blackouts next year and purported to come from a group of MPs has been discredited after it emerged it was only backed by a single MP and included misleading claims. The British Infrastructure Group (BIG), chaired by Conservative MP Grant Shapps, published a report on Monday that said coal power station closures and a drive for renewable energy had left the UK facing “intermittent blackouts for the foreseeable future”. The dire prediction was attributed to a “group of MPs” in widespread media coverage, including the Sun, which wrote “Britain teeters on the brink of an energy crisis, MPs claim”. Emails from Shapps to journalists before the report was published show it was billed as coming from a group of MPs. “The British Infrastructure Group of MPs (BIG) is releasing a new report warning of potential blackouts over this and next Christmas thanks to mismanagement of the UK’s electricity networks,” he wrote. But Shapps was the only MP to put his name to the report, titled Electric Shock, his office told the Guardian. Green campaigners said the report was “laughable” and “crap”. Energy experts also said its central claim – that the UK was on the verge of blackouts next winter – was wrong and misleading.

Temer government set to overthrow Brazil’s environmental agenda - Brazil’s conservative National Congress has rushed to pass a wave of legislative initiatives, which taken all together, would dismantle much of the nation’s body of law protecting the environment and indigenous people — an effort likely to escalate in 2017. With the legitimacy and future of the corruption-besieged Michel Temer government threatened and uncertain, the bancada ruralista, as the agribusiness lobby is called, is using an array of Congressional maneuvers to speed passage of laws that would amount to the biggest setback for the environmental and indigenous movements in 30 years, or since the end of the military dictatorship. The latest attempt occurred last week, just before the parliamentary recess. The agricultural lobby unexpectedly put forward three bills, known as Decretos Legislativos (PDCs), which are laws promulgated by the President of the Senate over which the country’s President does not have the right of veto. The PDCs would authorize the construction of three industrial waterways in major river basins — PDC 119/2015 on the Tapajós River (and on its two “legs”, the Teles Pires and Juruena rivers) in the Amazon; PDC 120/2015 on the Tocantins and Araguaia rivers, also in the Amazon; and PDC 118/2015 on the Paraguai River. If eventually passed, as seems likely, the bills will allow industrial waterways (requiring many dozens of new dams) to be built without the proper assessment of environmental and social impacts. The waterways would be used by agribusiness as a cheap means of exporting soy and other commodities. . If the three bills being hurried thru Congress are approved, the standard Environmental Impact Study will be replaced by a so-called Technical, Economic and Environmental Viability Study, drawn up not by government, but by the companies carrying out the project — those with the most interest in making the project economically viable, and with the least to gain from a thorough analysis of socio-environmental risks.

World’s Biggest Wealth Fund Excludes 15 More Coal Companies - Norway’s $870 billion sovereign wealth fund expanded the list of miners and power producers excluded from its portfolio as it continues to cull its investments of coal-related businesses. After an initial exclusion of 44 companies, 15 more have now been banned, including U.S.-based Alliant Energy Corp. and Westar Energy Inc., Malaysia’s Tenaga Nasional Bhd and Canada’s Emera Inc., according to a statement from Norges Bank Investment Management. The exclusions are based on new criteria introduced by the government in February, impacting companies that rely on coal for at least 30 percent of their activities or revenues. The fund also excluded 30 subsidiaries, on top of eight that were taken out in April, it said. It placed 11 companies, including Endesa SA and The Southern Co., under observation for possible exclusion. “Further exclusions will follow in 2017,” NBIM said in the statement. The fund always sells its holdings before making the exclusions public.

To Slow Global Warming, We Need Nuclear Power - If 20 fire marshals came around and told us our houses were about to burn down, we’d buy some fire insurance. So when the leading science academies in 20 developed countries, along with several major American corporations and the national security community, all tell us that burning fossil fuels is causing dangerous changes to the climate, we think it’s time for the United States to get serious about clean energy. It also means supporting safely operating nuclear power plants that produce carbon-free electricity. Already, 60 percent of our carbon-free electricity comes from the 99 nuclear reactors that dot the nation’s map. These reactors provide low-cost, reliable electricity for the United States, which uses nearly 20 percent of the world’s electricity. But over the next decade, at least eight of these reactors are scheduled to shut down. That will push up carbon emissions from the American electricity sector by nearly 3 percent, according to the United States Energy Information Administration. In California, the closing of the San Onofre Nuclear Generating Station in 2012 contributed to a 24 percent increase in carbon emissions from the electricity sector, according to data from the California Environmental Protection Agency Air Resources Board. Carbon emissions from the electricity sector in New England rose 5 percent in 2015, the first year-to-year increase since 2010, largely because of the closing of the Vermont Yankee Nuclear Power Station in December 2014, according to ISO New England, the region’s grid operator. In roughly two decades, the United States could lose about half its reactors. That’s because, by 2038, 50 reactors will be at least 60 years old, and will face having to close. Without them, or enough new reactors to replace them, it will be much harder to reduce carbon emissions.

Nuclear safety watchdog 'downplayed crashes involving vehicles with radioactive materials' | Daily Mail - The watchdog that oversees nuclear safety has been accused of playing down the seriousness of hundreds of serious mistakes at power plants and military bases.The Office for Nuclear Regulation [ONR] is responsible for the regulation of safety at nuclear sites and grades incidents with an International Nuclear Event Scale (INES) score.Between 2012 and March 2015, the ONR gave 973 incidents a score of 'zero' - meaning there had been 'no nuclear or radiological safety significance.'This included an incident where a vehicle carrying nuclear material on the M1 hit a lorry and instances where workers at the main nuclear warhead base at Aldermaston in Berkshire were contaminated. The ONR only issued an INES score of one - which amounts to 'minor problems with safety components' - 90 times during the same period.Elsewhere, a score of zero was given where tritium, a radioactive variant of hydrogen that can increase the risk of cancer, was found on four occasions at elevated levels in groundwater around the Dungeness B reactor in Kent.It was awarded when uranium and an unstable form of caesium were left in bin bags at Springfields, a former power plant and Amersham nuclear materials factory, The Times reported. There were also 30 fires at power stations and at least a dozen leaks of radioactive substances that were judged to have 'no safety significance.'

Japan axes Monju Fast Breeder Reactor - Once envisioned as playing a key role in Japan’s nuclear fuel-recycling policy, the controversial Monju prototype fast-breeder atomic reactor will now be scrapped, the government formally announced Wednesday. The reactor, in Tsuruga, Fukui Prefecture, has been a magnet for controversy, barely operating over the past two decades despite its planned key role. Wednesday’s ministerial decision came in spite of a failure to obtain local support for the decommissioning plan. It was also the end of a process that included a discussion of Japan’s overall fast-reactor policy by the government panel. The government has invested more than $8.5 billion in research and development for the reactor in hopes it would serve as a linchpin of nuclear fuel-recycling efforts. Because resource-poor Japan relies on uranium imports to power its conventional reactors, the government will still continue to develop fast reactors in pursuit of a nuclear fuel cycle that reprocesses spent fuel and reuses plutonium and uranium extracted through reprocessing. But Monju’s fate is sure to prompt more public scrutiny of the fuel-cycle policy, with many nuclear reactors left idled after the 2011 Fukushima nuclear disaster. That crisis has left much of the public wary of nuclear power.

Trump’s Nuclear Boast Is Obama’s Modernization Plan - Bloomberg editorial - There's no good place to start a nuclear arms race -- and Twitter is an especially bad venue. So it's unfortunate that President-elect Donald Trump on Thursday tweeted his desire for the U.S. to "greatly strengthen and expand its nuclear capability," then followed up on Friday morning by saying, "Let it be an arms race."  It's hard to know exactly what Trump means -- such are the limitations of communication via 140 characters or off-the-air phone calls to morning-TV hosts -- but it's possible he is simply referring to the need to continue the U.S.'s nuclear modernization program. In the 2016 federal budget, President Barack Obama laid the groundwork for a $1 trillion overhaul of the nation's nuclear arsenal: warheads, missiles, bombers, submarines, targeting systems and the Department of Energy's huge research and development system.The plan has some flaws. Not all three legs of the "nuclear triad" (missiles on subs, planes and buried in the ground) are in need of an upgrade, for example: Intercontinental ballistic missiles are part of a Cold War deterrence strategy based on mutually assured destruction. Meanwhile, the accuracy of submarine-based missiles has vastly improved in the last several decades. And a plan to create a new nuclear cruise missile that could be launched from a bomber and directed at a target up to 1,500 miles away may be too risky.For the most part, however, the plan is well conceived and necessary, to deter both major powers such as Russia and China and hostile smaller nations intent on joining the nuclear club such as Iran. It would leave the U.S. with 700 deployed ICBMs, subs and bombers capable of delivering nuclear warheads -- the maximum allowed under the second Strategic Arms Reduction Treaty with Russia, which is set to go into force in 2018.

Reasons Trump Won’t Lead A Nuclear Renaissance - Donald Trump in the White House and Theresa May in 10 Downing Street will open the door to more nuclear spending, no doubt. Prime minister May has already given a green light to Britain’s most expensive energy project, a heavily subsidized nuclear power station at Hinkley Point. Based on the most recent federal budgeting approvals, we expect that no U.S. nuclear weapons programs will want for funds. But, despite all the post-election industry euphoria, should we anticipate a full renaissance for U.S. commercial nuclear power? Is that just a bridge too far, so to speak? Let’s look at the what will go into some of these decisions.

  • 1.Need for the product. With no growth in the market for electricity, the industry needs new power plants only to replace old ones and to decarbonize output in order to mitigate global warming.
  • 2.Economics. Nuclear power looks like an expensive means of producing base load electricity with significant known risks and ongoing waste storage/disposal issues. A new 1,000 MW nuclear plant ordered today for 2025 in service would cost about $10 billion.  A new base load gas fired unit of the same size capacity could be completed in a few years and cost one fifth as much per MW and produce at a lower cost per kwh. Producing a commodity like electricity at a relatively high price in a competitive market is not a winning business strategy.
  • 3. Base load generation. Nuclear plants run as base load units, something renewables cannot do — at least not until economical energy storage comes into the picture– because of the intermittency of their output. Still, renewables, particularly wind in the U.S. midwest and Texas, will temporarily displace more large central station power generation, forcing more units to “cycle”. Nuclear plants are less well suited for this duty.
  • 4. Power markets. Neither U.S. nor UK power markets will support unsubsidized or non-mandated new generation. To the extent that the U.S. wholesale power markets remain both deregulated and regulated in parts, this is also a negative for new nuclear capacity.
  • 5. Nuclear as infrastructure. As currently built, nuclear projects require a large contingent of well paid labor and massive amounts of steel and concrete. A handful of qualified engineering firms, the usual suspects, also build other infrastructure and one can only think that these politically connected firms can lobby for nuclear projects as hard as they lobby for new bridges or highways.
  • 6. Resilience needed. Infrastructure should be resilient and anti-fragile.
  • 7. Investor-owned operators needed. The two major U.S. electric utilities with an outsized presence in nuclear power, Entergy and Exelon, could be characterized as the Dogs of the UTY, thanks to their less than stellar stock performances. EDF, the builder of the new British station, almost didn’t get to a positive decision on the new plant due to a revolt on the part of concerned directors. Do investors want more nuclear power? Probably not without subsidies or guarantees.
  • 8. Coastal locations needed. One problem with commercial nuclear power is not that it produces expensive electricity via fission, but that its voracious need for cooling water requires mostly coastal or riparian sites. Ignore the technology for a moment. Rising seas, hurricanes, storm surges and the like could render an ever broader swath of coastline unsuitable for infrastructure of any sort. Even if the Trump administration sees no issues, property and casualty insurors as well as and bond investors might.
  • 9. Using nuclear subsidies as corporate welfare. New York and Illinois both launched programs best described as Welfare for the Nuclear Elderly. It’s heart-warming to see such generosity just prior to the holiday season aimed at aging, uneconomic nuclear plants. This sounds to us like a job creation/preservation program for rural areas (where high paying jobs are scarce) masquerading as an environmentally beneficial, carbon mitigating proposal.
  • 10. Nuclear for defense. Defense spending may crowd out civilian needs.The military already plans to modernize its nuclear warfare capability over coming decades.

Without a rationale rooted in decarbonization or in shortage of alternative fuels or energy sources, the new administration in the U.S. can only make a weak case for commercial nuclear power. If it will not embrace direct subsidies (which the incoming Congress may be reluctant to do as a matter of principle), the administration may have a hard time finding private partners for nuclear projects. But it can, and probably will, make a strong case for completing the huge nuclear tasks already on the government’s plate. That spending could boost the economy just as much as putting up new nuclear power stations.

World War Three, by Mistake -  By Eric Schlosser On June 3, 1980, at about two-thirty in the morning, computers at the National Military Command Center, beneath the Pentagon, at the headquarters of the North American Air Defense Command (NORAD), deep within Cheyenne Mountain, Colorado, and at Site R, the Pentagon’s alternate command post center hidden inside Raven Rock Mountain, Pennsylvania, issued an urgent warning: the Soviet Union had just launched a nuclear attack on the United States. The Soviets had recently invaded Afghanistan, and the animosity between the two superpowers was greater than at any other time since the Cuban Missile Crisis.U.S. Air Force ballistic-missile crews removed their launch keys from the safes, bomber crews ran to their planes, fighter planes took off to search the skies, and the Federal Aviation Administration prepared to order every airborne commercial airliner to land.President Jimmy Carter’s national-security adviser, Zbigniew Brzezinski, was asleep in Washington, D.C., when the phone rang. His military aide, General William Odom, was calling to inform him that two hundred and twenty missiles launched from Soviet submarines were heading toward the United States. Brzezinski told Odom to get confirmation of the attack. A retaliatory strike would have to be ordered quickly; Washington might be destroyed within minutes. Odom called back and offered a correction: twenty-two hundred Soviet missiles had been launched.Brzezinski decided not to wake up his wife, preferring that she die in her sleep. As he prepared to call Carter and recommend an American counterattack, the phone rang for a third time. Odom apologized—it was a false alarm. An investigation later found that a defective computer chip in a communications device at NORAD headquarters had generated the erroneous warning. The chip cost forty-six cents.My book “Command and Control” explores how the systems devised to govern the use of nuclear weapons, like all complex technological systems, are inherently flawed. They are designed, built, installed, maintained, and operated by human beings. But the failure of a nuclear command-and-control system can have consequences far more serious than the crash of an online dating site from too much traffic or flight delays caused by a software glitch. Millions of people, perhaps hundreds of millions, could be annihilated inadvertently. “Command and Control” focusses on near-catastrophic errors and accidents in the arms race between the United States and the Soviet Union that ended in 1991. The danger never went away. Today, the odds of a nuclear war being started by mistake are low—and yet the risk is growing, as the United States and Russia drift toward a new cold war.

What The Frack Will Kasich Do With Oil-Gas Benefits Giveaway Bill? –  Gov. John Kasich is learning that he may still be governor, but that’s a office that doesn’t hold the power it once did, now that majority Republicans in the General Assembly can dismiss his agenda or override his veto pen at will.  They don’t need him anymore. He needs them if he wants his last two years as state chief executive to be something other than a Medieval-style bleeding session where he’s the anemic patient voodoo doctors have their way with. The petulant lame-duck governor has been able to command deference from his own party members whose love for him these days isn’t as deep as it once was, when he thought he’d be the next leader of the free world. He’s getting a taste of his own bitter medicine as the GOP majority buddies up again with oil and gas frackers who asked for and received hundreds of millions in Santa-like gift giveaways from lawmakers who radically altered a bill that will cost state and local governments about $264 million combined, if a bill passed passed in the recently concluded lame-duck session becomes law with or without his signature.As predictable as night following the day, it was basic Kasich for the governor’s office to decline comment on what he will do with the bill, that opens the sluice gate of funds flowing from the state to oil-gas companies at a time when state revenues have fallen by almost 5 percent, causing Kasich to panic as he forecasts recession is coming. John Kasich has always looked for new revenues to cover the cost of his income tax cuts. One source of revenue he’s pursued without success has been to call for more taxes on shale fracking in Ohio. But Republican legislators have opposed Kasich in the past and could do the same thing again if he vetoes Senate Bill 235, this year’s vehicle of largess to the industry’s Christmas wish list. Kasich loved to label Ohio’s low severance-tax rate “a big fat joke,” knowing statehouse media scribes would eat up his rhetoric. But that big fat joke may be on him now, as he’s confronted with what to do with it in light of the state’s unraveling budget situation. One House committee chairman said the bill represents a clarification of current law, adding that any refunds from the state to industry players represents taxes that never should have been collected.

Ohio Gov. Kasich Vetoes Renewable Energy Freeze - Ohio Gov. John Kasich vetoed House Bill 554 Tuesday, a bill that would have effectively extended the freeze on the state's clean energy standards. Ohio's renewable energy and energy efficiency standards have been frozen for the past two years, ever since Gov. Kasich signed SB 310 on June 13, 2014. According to the Environmental Defense Fund , the freeze cost the state its place as a national leader in the clean energy economy by hampering innovation, investment and jobs.  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. Moreover, those firms that did grow had to find business out of state.  The state's original Renewable Portfolio Standard , 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) to 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.

Ohio voters have spoken: A fracking ban would be a disaster: Jackie Stewart (Opinion) - - The U.S. Chamber of Commerce recently released a report that explains what would happen if fracking were to be banned in Ohio and across the nation - and the results are not pretty. The report found that Ohio would lose 397,000 (predominantly union) jobs, $33 billion in GDP, and Ohio households would be hit with an extra $3,956 per year in cost-of-living expenses. Ohioans have a lot to lose with a ban on fracking, so it's really no surprise that they made their voices heard at the polls. In Youngstown, for example, voters rejected an anti-fracking ballot measure for the sixth time in a row on Election Day. Not only that, but due to a Democratic platform that threatens to reject fossil fuel development, Ohio's union households voted Republican in the presidential election by a margin of 52 percent, a major shift from 2012 when 37 percent voted Republican. In other words, Ohioans voted overwhelming for energy production and all the benefits that come with it. One area of production that will bring some of those benefits is infrastructure. The building trades are anxiously awaiting their opportunity for the thousands of jobs tied to $8 billion in pipelines that are under construction or currently pending for approval. Not only will these pipelines create jobs, they'll also provide millions in tax revenues that are slated to go to our schools. Medina, Lorain, and Erie schools will see over $116 million from one pipeline alone. Elected officials in Harrison County have said there are already millions in tax revenues coming in from these projects. The very small towns in southeastern Ohio have watched their tax coffers swell by millions. Even though drilling may not be occurring around Cleveland, infrastructure--pipelines, natural gas compressor stations, and power plants--are in the works all over the state, which in turn will revitalize the entire state's economy.

A Last Resort That Might Work: Small Town Votes in Community Bill of Rights to Ban Fracking - At issue was the NEXUS pipeline, a 255-mile transmission system that would bring fracked natural gas from eastern Ohio to southeastern Michigan. A project of Spectra Energy, a company based in Houston, the pipeline would run under the Maumee River and through several Waterville neighborhoods. The company also wants to build a compressor station there that would move gas along the pipeline. "The [supporters of the pipeline had] way more money," says Jacobs. "They tried to paint us as out-of-state radicals that are bad for business." But Jacobs' side scored a win on November 8, when residents passed the community bill of rights, amending the town's charter. It's an unconventional strategy, and it was not residents' first choice. But, like many other cities and towns that have passed similar laws against extractive industries, they chose it as a last resort -- and it just might work.Concerned about the pipeline's potential effects on air and water, residents appealed in March to local elected officials, who said it was up to state and federal agencies to approve or deny the project. Then they turned to the Federal Energy Regulatory Commission (FERC) and the Ohio Environmental Protection Agency (EPA). Finding little support at either, they finally enlisted the help of the Community Environmental Defense Fund (CELDF), a public interest law firm that advocates for local control over environmental issues. CELDF helped residents draft the new amendment, which, among other things, bans "the siting or operation of equipment to support extraction of hydrocarbons." […] According to ProPublica, there have been 197 incidents with Ohio oil and gas pipelines since 1986. With causes ranging from corrosion to storm damage, these failures have caused 17 deaths and nearly 100 injuries.

Oil, Gas Companies Seek Permission to Kill, Harm Imperiled Bats for 50 Years - Center for Biological Diversity (press release) — The U.S. Fish and Wildlife Service is considering an application from nine oil and gas companies that would allow them to avoid liability under the Endangered Species Act for killing and harming protected bats in Ohio, Pennsylvania and West Virginia over the next 50 years. The proposal would cover not only exploration and well development through fracking, but also pipeline construction.  “Oil and gas companies are trying to pull a fast one here by getting a 50-year free pass to kill bats,” said Jared Margolis, an attorney at the Center for Biological Diversity, which filed comments opposing the proposal on behalf of several national and local environmental groups. “As these bat species continue to decline, more must be done to protect their habitat, yet this proposal would authorize companies to do no more than the minimum to mitigate the extremely harmful impacts of their fossil fuel extraction activities.”The bats at issue include the endangered Indiana bat, the threatened northern long-eared bat and three species that have been proposed for Endangered Species Act protections — the little brown bat, the eastern small-footed bat and the tri-colored bat. These species have been decimated in recent years by white-nose syndrome, a fungal disease that has spread rapidly across the eastern half of the United States, and is estimated to have killed more than 6 million bats in the Northeast and Canada. “Bat populations are plummeting, and any additional stress or harm to these species and their habitat only exacerbates the risk that they will be lost forever,” said Ryan Talbott, attorney for Allegheny Defense Project. “It’s simply not possible to develop a plan that adequately predicts what management actions may be necessary to protect these species and their habitats over the course of 50 years of oil and gas exploitation.”

Bat Out of Hell - Bat-related Delay in Rover Pipeline A Godsend for Canadian Gas? - The build-out of incremental natural gas takeaway capacity out of the Marcellus/Utica region has come in fits and starts, with new pipelines—as opposed to the reversal or expansion of existing pipes—proving to be the most troublesome. Energy Transfer Partners and Traverse Midstream Holdings’ long-planned 3.25-Bcf/d Rover Pipeline to southern Michigan is a case in point. The latest challenge for the $4.2 billion project is getting final federal approval in time to allow tree clearing along the pipeline’s 711-mile route to be completed before federally protected bats start roosting in early April. If that timeline’s not met, Rover’s planned completion later in 2017 may be delayed a full year, enabling Western Canadian gas producers to sell more gas to Ontario and the Upper Midwest. Today we assess what’s at stake for ETP, Traverse, and producer-shippers in the Marcellus/Utica and Western Canada. The adjacent and over/under Marcellus and Utica shale plays in Pennsylvania, northern West Virginia and eastern Ohio have had a profound effect on the U.S. energy sector. Natural gas production in the Marcellus took off about seven years ago, rising from ~2 Bcf/d in early 2010 to ~18 Bcf/d now. Utica production’s meteoric ascent started in mid-2013; since then the play’s output has increased from ~300 MMcf/d to ~4.2 Bcf/d. In addition to giving the U.S. an entirely new gas-production epicenter, the development of the Marcellus/Utica is forcing a major reworking of the nation’s gas pipeline delivery network. That network was once geared to moving vast quantities of Gulf Coast gas to the Northeast and Midwest, but now it is focused on moving gas out of Pennsylvania, West Virginia and Ohio in just about every direction—to New England, the Mid-Atlantic states, the Southeast, the Gulf Coast, the Midwest and Ontario/Quebec. We discussed this extensive re-plumbing at length in our 50 Ways to Leave the Marcellus Drill Down Report, and more recently in I Saw Miles and Miles of Texas/Part 1, our series of Drill Down reports on transporting Marcellus/Utica and other gas to LNG export terminals along the Gulf Coast (and to Mexico) and in our Too Much Pipe On Our Hands? blog series.

 Steam cracker feedstock selection in changing times. The Shale Revolution has had a profound impact on U.S. NGL markets by vastly increasing production and by lowering NGL prices relative to the prices of crude oil and natural gas. That has been good news for the nation’s steam crackers, the petrochemical plants that have enjoyed low NGL feedstock prices since 2012. Today we begin a series on how steam cracker operators determine day-by-day which feedstocks are the most economic, and on the factors driving the value of ethylene feedstock prices. NGL production, the pricing of NGL “purity” products (ethane, propane, normal butane, isobutane, and natural gasoline), and steam cracker economics are frequent topics in the RBN blogosphere. Nearly five years ago, when U.S. NGL production was just beginning to take off, we ran a series on feedstock economics (Let’s Get Cracking) that provided a primer on ethylene production and discussed this underlying principal of feedstock acquisition in the steam cracker industry: The best cracker feedstock is the one that will produce the highest ethylene margin possible, after deducting byproduct credits. Two years later, in the midst of the biggest run-up in NGL production in U.S. history, we took an even deeper dive into the NGL/steam-cracker world with our What’s Crackin’ With Steam Crackers Drill Down Report (available to RBN Backstage Pass members). In that report, we discussed the fact that the margin for producing ethylene with ethane (the lightest and most prolific NGL) had just hit an all-time high (~70 cents/lb—a record that still stands today) due to the combination of a low ethane price (~24 cents/gal) and a high price for ethylene (76 cents/lb). Well, a lot’s changed since then. NGL production volumes remain high and ethane prices are still on the low end, averaging only 19.5 cents/gal in 2016 (although just last week ethane prices hit a two-and-a-half-year high of 28 cents/gal).  However, ethylene prices have tumbled (to about 25 cents/lb) and so has the margin for producing ethylene with ethane––that margin averaged ~19 cents/gal for 2016, and now stands at only ~15 cents/lb, down nearly 80% from the September 2014 pinnacle

Pennsylvania gas-related employment doubles in nine years - Natural gas-related employment in Pennsylvania has more than doubled in the last nine years, due to the development of the Marcellus Shale play, according to a report by the Pennsylvania Department of Labor and Industry. "Direct employment in gas development grew from 9,017 to 19,623 over the past nine years of the Marcellus boom," the quarterly Marcellus Shale Update reports. The department began tracking the impact of Marcellus Shale gas development on the number of jobs in key industries in early 2015, although the employment impact of shale gas drilling in the play had begun making itself felt much earlier than that, James Martini, a Pennsylvania labor department economist, said in an interview on Wednesday. "This was really started about 2008; employment really started to grow among those industries," he said. Job growth in the state "peaked probably sometime toward the end of 2014, the beginning of 2015," as a result of the price-related downturn in the oil and gas industry."It's just not as profitable to drill wells right now, due to the price," Martini said. "There's been a slowdown and a job loss in those industries in the last couple of years." Data from the labor department, which tracks employment levels in the second quarter of each year, show employment in the state in six core industries rose to an estimated high point of 31,189 estimated jobs in the second quarter of 2012, then fell slightly to 29,839 in the same quarter of 2013 before rising again in the second quarter of 2014 to almost the exact same level as two years earlier.

A new front emerges in the battle against eminent domain - Eminent domain attorneys and their clients battling new pipelines in Pennsylvania courts feel they may have a new weapon in the fight against controversial projects like Sunoco’s Mariner East. The recent decision by the Pennsylvania Supreme Court to toss out industry-friendly provisions of the state’s oil and gas law included eminent domain for gas storage.All across the state, private landowners have fought eminent domain takings for pipelines, arguing that the lines do not serve the public good. But they haven’t had much luck in convincing county judges, who have in all but just a few cases, ruled against landowners.In September, a majority of the Supreme Court ruled that using eminent domain for underground gas storage violated both the federal and state constitutions. The court wrote that the public was not the “primary and paramount” beneficiary, as the state had claimed. “Instead, it advances the proposition that allowing such takings would somehow advance the development of infrastructure of the Commonwealth. Such a projected benefit is speculative, and, in any event, would be merely an incidental one and not the primary purpose for allowing these takings,” wrote Justice Debra McCloskey Todd for the majority. The decision was cheered by lawyers like Alex Bomstein, an attorney for the Clean Air Council challenging eminent domain takings by Sunoco Logistics for the Mariner East 2 pipeline. Mariner East 2 will carry natural gas liquids from western Pennsylvania to Delaware County where it will be shipped to Scotland to make plastics.  “Mere economic benefit is not enough,” said Bomstein. “Right now in Pennsylvania nobody is starving from lack of ethane. Nobody is crying in the streets for more butane. There is no apparent public need for these things and that’s demonstrated by the fact that [the gas products] are being exported.”

 Another Native-led pipeline battle bubbles up in New Jersey - The Ramapough Lunaape Nation has spurred the charge against the proposed 178-mile Pilgrim pipeline, which would transport Bakken crude oil from Albany, New York, to New Jersey’s Linden Harbor. The pipeline would cut through forests and a critical drinking water reservoir.Last week, the town of Mahwah, New Jersey, issued summonses against the Ramapough Lunaape for establishing a campground and protest signs without permits — even though they’re on tribal land.Unlike the federally recognized Standing Rock Sioux Tribe, the Ramapough Lunaape Nation is only recognized by New Jersey and New York. The federal government isn’t bound by the same obligations to non-recognized tribes, meaning this fight is more complicated than the Dakota Access Pipeline resistance.In 1993, the nation’s bid for federal recognition crumbled — thanks in part to Donald Trump, who campaigned against the Ramapough Lunaape to stamp out potential casino competition in Atlantic City. This isn’t the nation’s first brush with environmental racism by a long shot. In the mid-20th century, Ford Motor Company dumped thousands of tons of toxic paint sludge on Ramapough ancestral land — the same land Pilgrim could trespass. The area became a Superfund site after years of soaring cases of cancer and birth defects within the community.

Is the Pilgrim Pipeline Protest the Next #NoDAPL?  Is this the next #NoDAPL ? The Ramapough Lunaape tribe in the township of Mahwah, New Jersey are protesting the interstate Pilgrim Pipeline , a proposed 178-mile dual pipeline that would carry fracked Bakken shale oil from Albany, New York to the Bayway Refinery in Linden, New Jersey.  While it is not yet finalized, the preliminary route crosses five counties and 30 municipalities in New Jersey and five counties and 25 municipalities in New York, as well as the Highlands region, where the groundwater and surface water are the direct source of water for more than 4.5 million people in both states, according to the Coalition Against Pilgrim Pipeline . The pipeline would also run through a portion of the Ramapo Valley Reservation. Similar to the Standing Rock Sioux, the Lunaape worry that a potential pipeline leak would pollute drinking water and sacred sites.  "The Pilgrim Pipeline is another of the many needless pipelines running through the Lunaape homeland which is endangering the water of millions, while it appears to be criminally circumventing federal law," Ramapough Lunaape Chief Dwaine Perry told MintPress earlier this month.   The $1 billion project, operated by Connecticut-based Pilgrim Pipeline Holdings , consists of two parallel pipelines so crude and refined products can be sent in both directions. The pipeline is capable of carrying 400,000 barrels of oil per day.  Members of the Lunaape want others in New Jersey to join their fight against the project. NBC New York reports that the Lunaape have displayed anti-Pilgrim pipeline signs alongside teepees that were initially erected to recognize the efforts of the Standing Rock Sioux, who are protesting the heavily contested Dakota Access Pipeline in North Dakota.

Gas company wants new ruling on West Virginia royalties: (AP) — A Pittsburgh-based natural gas producer has asked West Virginia's top court to reconsider its recent ruling that gas companies cannot take deductions for post-production costs from royalty payments to the state's landowners for mineral rights. The State Journal ( reports EQT Production Co. wants the Supreme Court to withdraw its November ruling and rehear the case. The ruling was requested by the U.S. District Court for the Northern District of West Virginia, where Patrick Leggett and several other mineral rights owners sued EQT, arguing the company was improperly deducting fees from royalty payments. Leggett owns a farm in Doddridge County where EQT has about 20 wells. He says the company deducted 25 to 30 percent from royalty payments for years. EQT's lawyers argue the court misinterpreted state law.

FuelFix Not Fooled By New Fracking Study … Were You? -- The University of Chicago is out with a new study titled “The Local Economic and Welfare Consequences of Hydraulic Fracturing,” which compares the costs and benefits of fracking in nine shale regions in the US. According to the school’s press release, the new study has some great news for the oil and gas industry. And yet, the oil and gas industry has so far responded with cricket chirps. Now, why is that? Part of the problem could have to do with timing. The results of the study were publicly announced in a press release issued on December 22 by the Energy Policy Institute at the University of Chicago (EPIC) with this headline… Study suggests hydraulic fracturing boosts local economies…and this subheading:On average, benefits such as employment and income gains have exceeded costsThat looks like some serious pie on the windowsill for oil and gas fans, but so far no-one has bothered to swipe it. As of this writing, the American Petroleum Institute has not issued a statement of cheer for the findings, and a quick check of the Intertubes hasn’t turned up anything from other major stakeholders.Our friends over at FuelFix ran with the press release on December 22, but they didn’t just repost it. Their headline was this… Fracking benefits local economies, but drives up crime rates, study finds…and their lede (fancyspeak for first paragraph) was this: Hydraulic fracturing and the shale boom have provided  many benefits for communities around the country, but the boom has also driven up local crime rates and decreased residents’ quality of life, according to a University of Chicago study released Thursday. That’s much closer to the study’s actual content than the EPIC headline expresses. Here’s a snippet from the abstract for the full study: …estimated willingness- to-pay (WTP) for the decrease in local amenities (e.g., crime and noise) is roughly equal to -$1000 to -$1,600 per household annually (-1.9% to -3.1% of mean household in-come). Overall, we estimate that WTP for allowing fracking equals about $1,300 to $1,900 per household annually (2.5% to 3.7%), although there is substantial heterogeneity across shale regions.

'Fracking' debate lacks basic groundwater research - On Dec. 13, the U.S. Environmental Protection Agency released a long-awaited final report on the effects of hydraulic fracturing on drinking water resources in the United StatesThe report identifies risk factors based on a review of available data and studies. But it is short on definitive statements.  The EPA has struggled with its messaging, which was summarized in an earlier draft as there is "no evidence for widespread, systemic impacts" and in the final report as "hydraulic fracturing activities can impact drinking water resources under some circumstances."  Although consistent with one another, these statements convey different overarching messages in media reporting. The messaging problems arise in large part because the U.S. government has funded little fundamental research to address key unanswered questions. The  EPA report notes insufficient pre- and post-fracturing data on the quality of drinking water resources and the paucity of long-term, systematic studies.  Unfortunately, studies to date for hydraulic fracturing have relied almost exclusively on wells of convenience — domestic wells that are sampled to address questions of liability.  Such wells are a poor substitute for specially-designed monitoring wells. They also lead to a false sense that the issue of groundwater contamination is being addressed in a comprehensive way. Groundwater moves slowly, and contaminant occurrence in aquifers used for drinking water can significantly lag behind oil and gas well installation and hydraulic fracturing. This time lag complicates the true picture of groundwater contamination and supports the need for long-term monitoring. Groundwater supplies more than 40 percent of U.S. drinking water and virtually all of the drinking water in rural areas, where most oil and gas operations are underway. Once contaminated, groundwater is exceedingly difficult and expensive to clean up.

EPA says fracking study's data gaps are an important contribution to science - The EPA says its fracking study, published this month, is the most comprehensive look so far at all the science available on whether or not fracking pollutes drinking water. Critics have pointed to a lack of data in the report, which led to limitations in the agency’s conclusion that fracking “impacts drinking water under some circumstances.” The EPA’s science advisor Tom Burke says the gaps in data represent the “state of the science.” “The identification of data gaps is actually an important contribution to the science and not a failure,” said Burke. “We are really just beginning to understand fracking,” he said.   Burke says that in addition to lack of information about all the shale gas wells, there is a lack of information about locations of groundwater aquifers, and the quality of the water. For a decade, Pennsylvania residents living in shale gas areas worried that fracking could pollute their water. The state has found more than 250 cases where shale gas drilling and production did contaminate drinking water. In 2010 Congress ordered the EPA to investigate.  The agency used the northeastern Pennsylvania town of Dimock as one of its case studies. Dimock had garnered international headlines and drew visitors and protestors from around the world after gas drilling led to dangerous levels of methane migrating into some resident’s drinking water. Residents also suspected other toxic chemicals from the gas operations had leaked along with the methane. Back in 2012, Dimock resident Victoria Switzer described her experience to StateImpact. Like a lot of people who live near fracking in rural areas, Switzer got water from a well in her backyard. But soon after the gas wells went in, she said her water turned black, then orange. Then one day it was soapy. “It was foamy and grey and it smelled,” she said. “Richie the neighbor thought it was turpentine, I thought it was perfume like.” But here’s the thing, there was no baseline water testing done at her home before gas drilling. Without that, it was difficult to prove the gas company polluted her water. Cabot Oil and Gas denied responsibility. The residents relied on donated water and struggled to figure out what was in their well water, and how it got there.

Meet the New EPA Fracking Report, Same as the Old EPA Fracking Report - Triple Pundit (registration) (blog) -- The US Environmental Protection Agency touched off a virtual tsumani of criticism from environmental stakeholders in June 2015, when it released a major oil and gas fracking study that seemed to downplay the risk to the nation’s water resources. The drilling industry welcomed the report as vindication but it looks like both sides should have taken a deep breath and waited, because the 2015 report was only a draft version. Earlier this month EPA released the final results of its fracking study. Although the final report was based on essentially the same data as the draft version, it elicited exactly the opposite set of responses. So, what changed? The main problem with the draft version of the fracking study seems to have been rooted in the way that EPA chose to present it to the public, not in the report itself.EPA issued a press release for the draft report on June 4, 2015. Right under the headline, “Potential Impacts to Drinking Water Resources from Hydraulic Fracturing Activities,” the press release provided a one-sentence summary that sparked waves of dismay among environmental groups and scientific organizations: Assessment shows hydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources… That was actually not the entire one-sentence summary. The full sentence contains an important caveat:  Assessment shows hydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources and identifies important vulnerabilities to drinking water resources. That “important vulnerabilities” caveat was repeated in the first paragraph of the press release.  The press release is also pretty clear that those risk factors do exist, and they do cause problems in specific cases: EPA’s review of data sources available to the agency found specific instances where well integrity and waste water management related to hydraulic fracturing activities impacted drinking water resources, but they were small compared to the large number of hydraulically fractured wells across the country.  That brings us to the final version of the report, released on December 13 under the title, “Hydraulic Fracturing for Oil and Gas: Impacts from the Hydraulic Fracturing Water Cycle on Drinking Water Resources.”  The New York Times greeted the final version with the headline, “Reversing Course, E.P.A. Says Fracking Can Contaminate Drinking Water,” which is clearly not what happened. EPA already included specific instances of contamination in the draft report, and it also referred to them in last year’s press release. So, there was no course reversal. What EPA did do was revise its press release. In the final version, the headline is “EPA Releases Final Report on Impacts from Hydraulic Fracturing Activities on Drinking Water,” and the new one-sentence summary is this: EPA’s report concludes that hydraulic fracturing activities can impact drinking water resources under some circumstances and identifies factors that influence these impacts.

Study says drill noise can cause health problems — Forget about breathing silica dust or drinking methane-infused water: A new study suggests merely hearing the noise associated with natural gas fracking operations can jeopardize human health. Industry leaders, however, maintain their operations are safe, while highlighting declines in carbon dioxide pollution due to electricity producers switching their fuel sources from coal to natural gas. The study, in which West Virginia University occupational and environmental health professor Michael McCawley participated, suggests those living near fracking operations can experience “sleep disturbance, cardiovascular disease and other conditions that are negatively impacted by stress.” “People living near oil and gas development may bring up concerns like air pollution, traffic and groundwater safety, but many also complain about noise,” said Jake Hays, director of the Environmental Health Program at PSE Healthy Energy, a nonprofit research institute based in Oakland, Calif. “But until now, most of the research relevant to public health has focused on the impacts of air and water pollution.” In addition to methane, natural gas producers have confirmed the potential to discharge various amounts of pollutants into the air from the operations at well sites, compressors and refineries. These include benzene, carbon dioxide, nitrogen oxides, carbon monoxide, sulfur dioxide, carbon dioxide equivalent, xylenes, toluene and formaldehyde. However, environmental researchers now are concerned with the noise drilling and fracking operations create. Indeed, the noise generated at the sites is such that some companies working in the Upper Ohio Valley establish sound barrier walls around their operations to mitigate the public disturbance. “Oil and gas operations produce a complex symphony of noise types, including intermittent and continuous sounds and varying intensities,” Researchers claim fracking noise negatively impacts human health in three areas: Annoyance, sleep disturbance and cardiovascular health. They claim sustained, low-decibel sounds can be as disruptive as high-decibel sounds.

Court tells EPA to review its rules on oil and gas waste - A federal court directed the U.S. Environmental Protection Agency to review and possibly update its regulations on oil and gas waste, in a decision that was welcomed by environmental groups who had sued the agency, claiming its rules have failed to keep pace with the fracking boom. The U.S. District Court for the District of Columbia issued a consent decree late Wednesday saying the EPA must review the regulations, and if necessary issue a new rulemaking if it deems an update to be appropriate. The actions must take place by March 2019, the court said. The consent decree, which is designed to settle a dispute between two parties without either admitting guilt or liability, is the outcome of a lawsuit against EPA by seven environmental groups who claimed that the agency has failed to review oil and gas waste regulations, as required every three years under the Resource Conservation and Recovery Act of 1976. In the suit, filed in May, the plaintiffs said existing regulations are too weak to stop the escape of toxic materials such as benzene and mercury that have been used in the fracking boom since the mid-2000s. The environmental groups including the Natural Resources Defense Council and the Environmental Integrity Project argued that EPA should use the law to stop drillers spreading fracking waste on fields and roads, and require landfills and pond that receive fracking waste to install liners that prevent leakage. The suit also urged EPA to use the rules to address the disposal of waste water in underground injection wells, a practice that has been linked to earthquakes in several states.

 U.S. refiners cash in on Mexico's record fuel imports -(Reuters) - U.S. Gulf Coast refiners are cashing in on rising fuel demand from Mexico, shipping record volumes to a southern neighbor that has failed to expand its refining network to supply a fast-growing economy. The fuel trade could top a million barrels per day (bpd) at times in 2017 as Mexico becomes increasingly dependent on the United States for strategic energy supplies and providing business worth more than $15 billion a year to refiners such as Valero, Marathon Petroleum and Citgo Petroleum. The rise in Mexico's fuel imports reflects an economy that, after expanding for 27 quarters in a row even amid a public austerity plan, has been unable to increase its refining output to satisfy the consistent growth of its energy demand. It has led to rapid reversal in energy trade between the two countries. In 2016, crude exporter Mexico will be a net oil importer from the United States for the first time as shipments of refined fuel heading south outnumber shipments of crude to the north, according to the U.S. Energy Information Administration (EIA). Just ten years ago, the United States' net oil imports from Mexico stood at 1.45 million bpd. Profit margins for the exports are strong for U.S. Gulf Coast refiners, said a source at a refiner involved in the trade.Mexico constitutes a bright spot in what has otherwise been a dark year the U.S. refining industry with profits at a five-year low in 2016. The exports also help to ease a supply glut in the U.S. market, said Barclays equity analyst Paul Cheng. That boosts profit margins industry-wide, even for refiners that are not directly involved in the trade, he added.Mexico's fuel demand is around 2.04 million bpd and the government expects growth of 2-3 percent per year in coming years. The country is the world's fourth-largest consumer of gasoline. Car sales through September increased 18 percent on the year, to a record of 1.12 million units, pointing to continued strong demand growth.

US refiners export record amounts of gasoline, diesel - The U.S. last week exported a record 8 million barrels of gasoline and nearly 10 million barrels of distillates, or diesel, according to weekly government data released on Thursday. U.S. refined product exports have been growing as refineries run at high levels and the U.S. has been oversupplied with gasoline and crude oil. Analysts said a big chunk of the exported fuel probably went to Mexico and destinations in South and Central America."We have never exported more gasoline and distillates than we did last week. ...The total amount of exports is huge. There's no doubt about it that it's a record," said Tom Kloza, head of global energy analysis at Oil Price Information Service.The 1.1 million barrels of gasoline exported per day, rose from 795,000 barrels a day the week earlier and 472,000 barrels a day at the same time last year, according to weekly data from the Energy Information Administration.Final detailed data on December exports will not be available for several months. October data should be available next week. Distillate exports totaled 1.4 million barrels a day last week, up from a four week average of about 1.2 million barrels a day."The export markets are taking what the domestic demand doesn't need, and it's good for refiners on the Gulf Coast…from that stand point it's helping refining margins," said Andrew Lipow, president of Lipow Oil Associates. He said there is strong demand in Mexico and the Caribbean at this time of year.Kloza said Mexico has increasingly become a destination for U.S. gasoline exports, as refineries there are far less efficient and run at about 50 percent capacity compared to closer to 90 percent in the U.S."They're just across the Gulf of Mexico. We've added two million barrels a day of [refining] capacity to the U.S. in this century," he said. "If it weren't for gasoline exports - and the highest months for exports can be December and January - we'd be looking to match that big inventory buildup we had last January." Kloza said supply peaked last winter at about 258 million barrels.Mexico exports its heavier crude to the Gulf Coast for refining. In September, just over 500,000 barrels a day of Mexican crude was sent to the U.S.  "There's clearly a lot of demand for Gulf Coast gasoline. The difference maker is exports. I think Mexico is probably 40 to 50 percent of it."

 Massive ethane shipment launches out of Port of Houston -- The world's largest ethane carrier has officially departed the world's largest ethane terminal, naturally. The Ethane Crystal vessel set sail from Houston-based Enterprise Products Partners LP's new terminal at Morgan's Point,  the Houston Chronicle reports. The carrier is the first of its kind to be classified as a VLEC, or a very large ethane carrier. According to multiple trade reports, the Ethane Crystal is the first of six VLECs that South Korea’s Samsung Heavy Industries Co. Ltd. is building for India’s Reliance Industries Ltd. Meanwhile, Enterprise's terminal is the largest of its kind in the world and has been in the works since 2014. The first ethane export out of the terminal occurred this fall. The VLECs can transport more than three times as much ethane as the vessels that carried the terminal's initial shipments, the Chronicle reports. The cost of the terminal was not disclosed in 2014, but in Enterprise’s second-quarter 2016 earnings report, the company said the ethane export facility was part of $1.4 billion worth of projects expected to be completed by the end of this year.

 OKOGA responds to new guidelines for fracking - – The Oklahoma Oil & Gas Association (OKOGA) today said its member companies are ready to immediately implement the Oklahoma Corporation Commission’s new guidelines for hydraulic fracturing that are intended to help manage and mitigate anomalous seismic activity that has occurred near oil and natural gas completion operations. The Commission in a joint release with Oklahoma Geological Survey (OGS) said preliminary research indicates that the anomalous seismic events have been “small” and “less frequent.” The Commission stressed that these guidelines are a proactive approach to address these anomalous events and that its primary focus continues to be on disposal activities in the state-designated Areas of Interest where there remains a higher risk of induced seismicity. “The Commission’s announcement is another example of states being in the best position to move quickly and effectively to properly regulate oil and natural gas activities using transparent data and sound science,” said OKOGA’s President Chad Warmington. “The new guidelines to manage and mitigate anomalous seismic events will help to protect and maximize the development of Oklahoma’s abundant natural resources for years to come. As the data indicates, these seismic events have been small, rare and manageable. OKOGA operators in Oklahoma are actively monitoring their operations and adjusting in real time if they identify geologic risk factors, using methods that have proven effective in Ohio and British Colombia. The OCC’s new guidelines will compliment these efforts. “Seismic activity in Oklahoma is down more than 20 percent since last year, thanks to measures taken by the state in collaboration with the Oklahoma oil and natural gas industry and the scientific community. We remain committed to being an active partner and working together to understand and further reduce the number of seismic events in Oklahoma.”

 More work needed to combat ozone pollution, climate change  - Two years ago, NASA discovered a methane plume the size of Delaware stretching into southwestern Colorado from northern New Mexico. At the time, we suspected this methane cloud was caused in large part by emissions from the oil and gas industry. And thanks to NASA’s recently released follow-up report, we know that oil and gas-related emissions are a driving force behind the Four Corners methane cloud. The vast infrastructure of natural gas “processing facilities, storage tanks, pipeline leaks and well pads” are contributing to methane leaks in the Basin. Interestingly, only a small percentage of sites are driving emissions. NASA’s data found that just 10 percent of sites contributed more than half of the observed emissions. These sites known as “super emitters” are not an uncommon problem within the oil and gas industry and have been observed in other studies.   Interior Secretary Sally Jewell recently announced new rules to cut methane waste and pollution that are set to take effect in January.  Methane is a powerful greenhouse gas contributor that is 80 times more powerful than carbon dioxide in the near term. It is crucial to make cuts now to slow down the effects of climate change that we are already seeing; such as higher temperatures, drought and longer, more intense wildfire seasons in Colorado that are worsening our air quality. When methane is released, oil and gas operations also emit toxic chemicals, such as benzene, that can harm the health of oil and gas workers and families living near drill sites, as well as ozone-formingvolatile organic compounds. Ozone can trigger asthma attacks and worsen COPD, and is especially harmful for at-risk populations such as children, seniors, low-income populations and minorities.

Oil companies hiring fracking crews in Bakken — Oil companies are hiring in the Bakken, and more jobs are expected to open up next year. Job Service North Dakota announced six oil companies are looking for workers to man fracking crews in the new year, said Cindy Sanford, customer service office manager of Job Service’s Williston branch. She said she couldn’t reveal the names of the companies due to confidentiality clauses, but she said the companies are looking to hire 45 to 65 workers per crew. On the low end, that could bring 300 hires to the Bakken, she said. “It’s getting busier in our offices, as far as not only with job seekers but also the companies,” said Phil Davis, the agency’s western area director. “We are seeing more of the service rigs — not so much the drilling rigs — but our service rigs and workover rigs, jobs are coming back there, which is a great thing.” Oil companies announced in October they would post positions for workers in the Bakken as oil prices climbed to an 18-month high in December. Oil on the New York Mercantile rang out Thursday at $53.83, almost a 50 percent increase over last year. That’s down from an all-time high of $136.29, which was set July 3, 2008, but almost double the 10-year low — barrels of oil went for less than $27 in early 2016. After peaking in June 2014, oil prices started to fall off, causing oil companies to lay off workers and take rigs offline. As of Thursday, North Dakota’s rig count was 39. That’s down from its all-time high of 218 in May 2012, but the count has been on a slight increase over the past several months. The recent job postings in western North Dakota mostly are for service or workover rigs, which are used to complete a well and install the pump after drilling is done. As of Thursday, almost 500 jobs posted on Job Service North Dakota mentioned oil.

Shale Spending Is Set To Soar - Oil prices are rising and the worst of the downturn appears to be over. After two years of spending cuts, 2017 could mark the first time in several years that spending levels across the oil and gas industry increase. North American oil and gas companies could ratchet up spending by as much as 30 percent, according to Raymond James. That will be possible because banks are finally showing signs of loosening credit once again, after two years of slashing lending.  The credit redetermination period, which occurs twice a year in the spring and fall, has been a closely watched event since the start of the oil price downturn in 2014. Every six months, oil analysts and investors pay close attention to see if banks will cut off drillers, hoping to reduce their exposure to a risky industry. Over the course of 2015, banks showed surprising leniency, considering the magnitude of the downturn and the extraordinary debt levels across the sector. But as the oil bust stretched into 2016, touching new lows, credit became increasingly hard to come by for the most indebted drillers. Still, the latest credit redetermination period illustrated some evidence that the industry is already passed an inflection point – the oil market is already beginning to rebound. According to Reuters, 34 oil and gas companies saw their credit lines raised by an average of 5 percent, providing an additional $1.3 billion in lending. That is a dramatic turnaround from the 40 percent reduction in credit witnessed over the past three redetermination periods, stretching back to early 2015. Not all companies received more favorable treatment – 10 companies surveyed by Reuters saw their credit lines cut and 12 more were left unchanged. A major variable in determining the amount of credit offered to drillers is the oil and gas reserves on a company’s books. When oil prices collapse, more of the reserves become economically unviable, leading to a reduction in lending. But, with oil prices rising, the reverse is happening: exploration companies are finding that more oil and gas reserves under their possession are now deemed to be profitable, opening up the lending taps. For example, Diamondback Energy, a Midland, Texas oil and gas company, saw its credit line increased from $700 million to $1 billion.

Freezing Winter Sees Natural Gas Prices Surge - Natural gas prices are surging as cold weather eats into U.S. inventories, tightening the market much more quickly than many analysts had expected. The blast of Arctic weather in December put a strain on natural gas markets, with millions of people cranking up the heat to keep warm. The EIA reported a surprise dropin storage levels in the week ending on December 16, falling by 209 billion cubic feet. That decline puts total storage levels at 3,597 Bcf, or just a small 78 Bcf above the five-year average. Such a scenario was difficult to imagine earlier this year, when the U.S. was emerging from peak winter demand season with record levels of gas sitting in storage. Flush with supply, prices crashed below $2/MMBtu. But natural gas production suddenly started to fall after years of blistering growth, upending forecasts calling for years of oversupply. Meanwhile, demand continues to rise as gas-fired power plants replace coal, so while natural gas consumption is highly seasonal, the seasonal peaks are getting taller and the valleys are getting shallower. Structural demand will continue to rise.By mid-December, Arctic weather descended on much of the U.S., pushing temperatures to extremely low levels. As a result, the heating degree days (HDD) – a measure of demand for gas pertaining to home heating – was 11 percent above average.But seasonal shifts still matter. In the first three weeks of December U.S. natural gas consumption averaged 92 billion cubic feet per day (Bcf/d), up 21 percent from year-ago levels and also 17 percent above the five-year average. In other words, the U.S. is consuming natural gas at record levels, leading to a much faster drawdown in inventories than had been predicted earlier this year. The end result is that natural gas prices are surging, topping $3.70 per million Btu (MMBtu), the highest price in years. The tightening of the market and the rise in prices is a godsend for struggling gas drillers, which had fallen out of favor with investors in recent years because of persistently low prices. Chesapeake Energy, one of the largest natural gas producers in the U.S., has seen its share price spike by more than 300 percent this year, and it’s also up by more than a third in just the past few months, reflecting the rise in gas prices.

Natural Gas Prices Rise on Cold Weather Forecasts - WSJ: Natural gas prices rose sharply Wednesday as forecasts called for colder weather and as futures’ expiration likely forced sellers to buy and close out their positions. Natural gas has been on a tear as weather forecasts have shifted colder. The rally had paused earlier Wednesday as market participants took profits and awaited more information about January temperatures, but prices surged at the end of the session as traders scrambled to close out positions, brokers and analysts said. Natural gas for January delivery gained 16.9 cents, or 4.49%, to settle at $3.93 a million British thermal units on the New York Mercantile Exchange, the highest settlement value in more than two years. The more actively traded February contract rose 13.2 cents, or 3.51%, to $3.898 a million British thermal units. “It’s not the most liquid of times for the markets,” said Scott Shelton, a broker at ICAP, noting that jockeying ahead of the contract expiration could have an outsize effect on prices amid otherwise light holiday trading. Forecasts of colder weather as natural gas stockpiles shrink are also lifting prices, analysts said. “Bullish sentiment could push people out of short positions and cause short covering. I think that’s what we saw today in the expiration of the January contract but it’s probably true in some of the other contracts as well,” Weather models are suggesting that a blast of cold Arctic air will lower temperatures across the U.S. in January, ending a spate of mild weather that weighed on prices in recent weeks. Winter weather is the biggest driver for natural gas demand and often for prices, since about half of U.S. homes use natural gas for heat. Low temperatures in December have already led to high demand. Analysts and traders are expecting the U.S. Energy Information Administration to report Thursday that stockpiles shrank by 221.5 billion cubic feet in the week ended Friday, nearly three times the usual withdrawal from storage this time of year, according to the average forecast of analysts, brokers and traders surveyed by The Wall Street Journal. That would bring the amount of natural gas in storage below the five-year average.

Natural gas prices flare up to 2-year high on cold weather, lower supply  -- Natural gas futures surged to the highest price in two years on expectations a blast of cold air next month will boost demand as stockpiles decline.The January natural gas futures contract gained 4.5 percent to settle at $3.930 per million British thermal units, the highest since December 2014. The contract expired Wednesday afternoon, and the new front-month contract for February was also up sharply, at $3.89 per mmBtus.Traders said natural gas futures also moved higher on expectations for a big drawdown in supply for a second week, when the government releases data at 10:30 a.m. ET Thursday. The Energy Information Administration is expected to report that storage shrank by about 220 billion cubic feet of gas for the week ended Dec. 23.That would mean that gas in storage — at an estimated 3.375 trillion cubic feet — would be more than 10 percent below last year's level and 1.8 percent under the five-year average for last week, according to Dow Jones. Natural gas has gained 11 percent in three sessions and is up 68 percent for the year. It hit a low of $1.61 per mmBtus in March. "We're up 65 cents in less than two weeks, all on that call for the return of colder weather. I think the market might have gotten ahead of itself," said Gene McGillian, manager of market research at Tradition Energy. John Kilduff of Again Capital said the market got a push from the latest forecast from the government that showed colder temperatures for most of the country in January.

Natural Gas Drillers Rush To Hedge Production As Prices Soar - Natural gas prices are soaring on cold weather and falling production, spreading optimistic conditions for gas producers for the first time in years. Natural gas spot prices are at their highest point since 2014, boosting share prices for drillers across the industry. Because natural gas prices are notoriously volatile, many companies are not taking any chances, locking in hedges for future production. According to S&P Global Market Intelligence, many top U.S. natural gas producers have already started to secure hedges for their production at $3 per MMBtu, which stands in stark contrast to how they approached 2016.  For example, at the start of the year, Chesapeake Energy and Southwestern Energy Co. had no hedges for their 2016 production, a decision that likely haunted them as natural gas prices fell below $2/MMBtu for large stretches of the first and second quarters of this year. Having been burned by the market, Chesapeake and Southwestern seemed to have learned their lesson, with both companies recently moving to secure hedges for next year. Both companies have more than half of their estimated production locked in at $3/MMBtu, S&P Global Market Intelligence says.  Other companies are following suit, even drillers that are not exclusively focused on gas. "We've been hedging significantly more, so that's helped underpin and provide more comfort to the cash flows that we'll have in 2017, but the opportunities are there to add more hedges and more rigs if prices go high enough,” Devon Energy’s CEO David Hager said on Devon’s quarterly earnings call in November. Devon, an Oklahoma and Texas-focused oil and gas producer, had 29 percent of its 2017 gas production hedged at $2.98, S&P said.  Locking in hedges at $3/MMBtu and above will provide a good bit of breathing room for natural gas producers, which have had a tough time over the past few years. Natural gas prices have not been this high since late 2014, and with NYMEX futures prices averaging above $3/MMBtu throughout 2017, a dose of optimism is spreading throughout the industry. Share prices for many natural gas producers likely have huge upsides heading into the New Year.

Natural Gas Price Wobbles Following Massive Inventory Drawdown -  The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 237 billion cubic feet for the week ending December 23. Analysts were expecting a storage decline of between 220 billion and 230 billion cubic feet. The five-year average for the week is a withdrawal of around 80 billion cubic feet, and last year’s storage decline for the week totaled 58 billion cubic feet. Natural gas inventories fell by 209 billion cubic feet in the week ending December 16. Natural gas futures for February delivery traded down by around 2% in advance of the EIA’s report, at around $3.82 per million BTUs, and traded around $3.84 immediately after the data release. Natural gas closed at $3.90 per million BTUs on Wednesday, a five-day and 52-week high. The 52-week range for natural gas is $2.49 to $3.90. One year ago the price for a million BTUs was around $2.86. Demand for natural gas was nearly four times higher last week than in the same period a week ago and nearly three times higher than the five-year average. In case you’re wondering, yes, it’s really cold out there. For the coming week, demand is expected to be moderate for the first part of the week as temperatures warm up along the East Coast and in the central and southeastern parts of the country. But another Arctic blast is expected to hit the northwest and northern Plains early next week, sending temperatures plunging again as the weather system moves east. Frigid weather is expected to drive demand very high by the end of next week. Stockpiles have now dropped to 10.9% below their levels of a year ago and 2.3% below the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 3.360 trillion cubic feet, around 79 billion cubic feet below the five-year average of 3.439 trillion cubic feet and 413 billion cubic feet below last year’s total for the same period. Working gas in storage totaled 3.773 trillion cubic feet for the same period a year ago.

Natural Gas Retreats Despite Major Stockpile Drain -- Natural gas prices retreated Thursday as moderating weather forecasts had traders pulling back slightly from a strong rally despite a larger-than-expected withdrawal from stockpiles. Natural gas for February delivery settled down 9.6 cent, or 2.5%, to $3.802 a million British thermal units on the New York Mercantile Exchange. The retreat comes a day after prices rallied to nearly $4/mmBtu for the first time in two years on expectations for a heavy drain from stockpiles and weather forecasts that have suggested extreme cold destined for parts of the country in January. Thursday’s weather updates showed colder-than-normal weather patterns breaking up or retreating more quickly than expected and warmer-than-normal weather sticking around in some big East Coast markets a little longer and more strongly than previously forecast. About half of U.S. homes use natural gas for heat, making winter weather the biggest driver for demand and often for prices. “There’s some thinking that the cold’s going to be short lived,” said Kyle Cooper, a consultant for Ion Energy Group in Houston. Futures did pare some losses after the federal government’s weekly storage update showed last week’s drain from storage went far beyond expectations. The U.S. Energy Information Administration said natural-gas stockpiles shrank by 237 billion cubic feet last week, compared with the 222 bcf expected by forecasters surveyed by The Wall Street Journal. But weather forecasts have been even more important than storage updates in recent weeks because traders are trying to anticipate how cold the heart of winter will be and how much heating demand might drain stockpiles that are still near record highs. Some also expect cold weather to be even more impactful than usual after several years of the country’s power grid shifting to use more natural gas, potentially making winter demand spikes much larger than historical norms.

NYMEX February gas settles 9.6 cents lower at $3.802/MMBtu -  The NYMEX February natural gas futures contract settled at $3.802/MMBtu Thursday, down 9.6 cents from Wednesday, after trading in negative territory for the entire session. The NYMEX January contract surged nearly 17 cents before expiring Wednesday, however, the February contract has not followed suit, tumbling ahead of and then on the heels of the weekly storage report release by the US Energy Information Administration. The amount of gas in US storage facilities fell 237 Bcf to 3.360 Tcf in the week that ended December 23. The withdrawal was slightly larger than the 236-Bcf pull expected by an S&P Global Platts survey of analysts. It was also almost five times larger than the pull reported in the corresponding week last year and nearly triple the five-year average. It registers as the largest withdrawal of the ongoing heating season and the largest since a 240-Bcf draw was reported for the week that ended January 24, EIA data show. "With a bullish storage report and colder-than-normal weather outlook, the likely explanation for this pullback in the contract is that the market is taking a breather, but we're likely to head higher from here," .. In the corresponding week in 2015, the EIA reported a 50-Bcf draw, while the five-year average is a withdrawal of 80 Bcf. The pull finally flipped the surplus to the five-year average to a deficit for the first time in 2016 and put stocks further below levels at this time last year. It was also only the third time the EIA has reported a pull of greater than 200 Bcf during the month of December, although it was the second such draw in a row. As a result, stocks were 413 Bcf, or 10.9%, below the year-ago level of 3.773 Tcf, and 79 Bcf, or 2.3%, under the five-year average of 3.439 Tcf.

Natural Gas Prices Extend Thursday's Decline, However Broader Bias Remains to the Upside  - Economic Natural gas prices are down roughly 1.4% in today’s trading, falling to $3.743. This follows a decline by the contract for February delivery on the New York Mercantile Exchange of over 2% on Thursday. For the week overall, the contract is up 1.3% and, for the year, natural gas prices are up 30%. In yesterday’s trading, the weekly Energy Information Administration natural gas storage report showed a decline of 237 Billion Cubic feet (Bcf) for the week ending December 23rd, the sixth successive draw. The decline was larger than the 209 Bcf last week and above consensus expectations of a 219 Bcf draw. This was the largest draw since February 2014 and over three times the average decline at this time of the year. However, natural gas futures still declined due to short term weather forecasts. According to, high pressure will return this weekend over the East to ease national demand back below normal. It will be mild over the central and southern US into next week while the West has weather systems return with valley rains and mountain snows. Most importantly, however, early next week an Artic outbreak is expected into the Northwest and Northern Plains, then spreading south and east Wednesday through Friday. Overall, natural gas demand will be moderate increasing to high-very high late next week. Thus, natural gas prices are expected to stabilize as resume the move to the upside in next week’s trading. Resistance is at the latest rally high at $3.902. The next target is at the upper boundary of the gap formed in late 2014 at the $4.062 level, as can be seen on the weekly chart. On the downside, support has been found in the vicinity of the December 9 corrective top at $3.758. Although today’s price action broke below this level, the break was minimal and additional downside follow through is required in order to confirm a solid breakdown and suggest natural gas prices are heading lower.

 Natural Gas: Still Far From A 'Long Bubble' - (6 graphs) The latest Commitments of Traders report by the CFTC shows Money Managers continued to reduce their short exposure at a rapid pace. Aggregate short position in Henry Hub financial futures-plus-options dropped by another ~0.2 Tcf, a third major weekly decrease in a row (the graph below). In the meantime, Money Managers' aggregate long position in Henry Hub financial futures-plus-options was little changed week on week. On a net basis, Money Managers' aggregate net length increased by a staggering 1.5 Tcf in just six weeks, an abnormally wide fluctuation in the context of the metric's historical volatility. At 3.0 Tcf, Money Managers' current net length in Henry Hub futures-plus-options represents a major positioning turnaround relative to the net short position of as much as 0.6 Tcf as recently as in March of this year.

U.S. Shale Is Now Cash Flow Neutral - Oil prices are probably already high enough to spark a rebound in shale production.  The IEA says that in the third quarter of 2016, the U.S. shale industry became cash flow neutral for the first time ever. That isn’t a typo. For years, the drilling boom was done with a lot of debt, and the revenues earned from steadily higher levels of output were not enough to cover the cost of drilling, even when oil prices traded above $100 per barrel in the go-go drilling days between 2011 and 2014. Even when U.S. oil production hit a peak at 9.7 million barrels per day in the second quarter of 2015, the industry did not break even. Indeed, shale companies were coming off of one of their worst quarters in terms of cash flow in recent history. That all changed around the middle of 2015 when the most indebted and high-cost producers went out of business and consolidation began to take hold. E&P companies began cutting costs, laying off workers, squeezing their suppliers and deferring projects that no longer made sense.  By 2016, oil companies large and small had shed a lot of that extra fat, running leaner than at any point in the last few years. By the third quarter, oil prices had climbed back to above $40 and traded at around $50 per barrel for some time, replenishing some lost revenue. That was enough to make the industry cash flow neutral for the first time in its history.  That suggests that moving forward, the shale industry could move into cash flow positive territory. Oil prices seem to be trading safely above $50 per barrel for the time being, and OPEC cuts could induce more price gains. The industry is now focusing on shale plays that have lower breakeven prices, namely, the Permian Basin and some parts of the Bakken. Wood Mackenzie suggests that $55 per barrel is a sweet spot for the oil and gas industry to rebound, a level that is only slightly above today’s prices. At $55 per barrel, the shale industry is cash flow positive and will grow accordingly.

U.S. Prepares To Sell Off Its Oil Reserves --The U.S. is beginning to wind down one of the core energy security policies of the past half century as the boom in domestic drilling eases concerns about supply. The U.S. Department of Energy could begin to sell off some of its strategic petroleum reserve (SPR) as soon as January, the beginning of a multi-year process to shrink the nation’s stockpile of oil. Congress has authorized DOE to sell off $375.4 million worth of oil in its recent budget resolution. The DOE said that such a sale could be held in January 2017. To be sure, part of the motivation to sell crude is to finance upkeep for the SPR itself.The reserves are held in salt caverns in Louisiana and Texas, setup decades ago in the aftermath of the Arab Oil Embargo in 1973. The SPR system can hold more than 700 million barrels of oil, the largest strategic stockpile in the world. The idea is that the SPR holds 90 days’ worth of oil supplies, which could be released in the event of a global outage. A release has only occurred a handful of times, such as the Persian Gulf War, Hurricane Katrina and the Arab Spring.mSome of the storage systems are rusting and corroding after decades of use. In September, the DOE issued a report to Congress, which came to a dire conclusion about the condition of the reserve. “This equipment today is near, at, or beyond the end of its design life,” the report said. The sale "will allow the Department to take necessary steps to increase the integrity and extend the life” of the reserve, a DOE spokesperson said in December after the budget resolution was passed. It is hard to overstate the significance of the SPR to U.S. energy policy. In fact, some analysts would argue the U.S. does not really have a comprehensive energy security policy. There is no coherent theory, policy or philosophy driving U.S. energy security concerns, other than the U.S. military policing the world to ensure the security of supply, a mission that has governed American actions abroad since the Carter administration at least. The one cornerstone of energy security policy has been the SPR. As long as the U.S. had 3 months’ worth of supply, it could weather unexpected disruptions. The International Energy Agency was setup in the 1970s as well, and participating members – in addition to the U.S., the group includes Europe, Japan, Korea, Australia and New Zealand – also have pledged to hold a 90-day supply. But U.S. policymakers no longer view the SPR is all that important. Even the more hawkish members of Congress have been lulled into a sense of security from the surge in U.S. oil production and the resulting crash in oil prices. The world is awash in oil, so why does the U.S. need to stockpile such a massive volume of oil at great expense? The ostensible reason of selling off oil from the SPR is to finance its maintenance to ensure its existence over the long-term, but if the Congress still truly believed in the importance of the SPR, they would have found funding elsewhere instead of reducing the stockpile.

US Russia Relations: Rex Tillerson's ExxonMobil Could Restart Russia Operations If Trump Cancels Sanctions: Oil giant ExxonMobil successful lobbied against a bill that would have made it difficult for President-elect Donald Trump to lift sanctions against Russia, Politico reported Sunday. The Texas-based corporation can now restart its billion-dollar program in the country if Trump decides to ease restrictions against Moscow. The bill, called STAND for Ukraine Act, would have extended sanctions imposed against Russia by the Obama administration in 2014 — in response to Moscow’s annexation of Crimea — for five years, making it difficult for his successor to repeal the sanctions. The bill, which passed the House was introduced in the Senate on Dec. 9 with only Democratic cosponsors. However, the Senate adjourned earlier this month without discussing the Russian sanctions making it easy for Trump to do away with the restrictions, should he choose to do so when he assumes office. Trump’s pick for secretary of State, ExxonMobil CEO Rex Tillerson, is expected to play a key role in influencing Trump’s decision on the sanctions. The restrictions imposed in 2014 reportedly forced ExxonMobil to abandon its oil drilling project in Russia’s Arctic, which cost the company nearly $1 billion. Exxon collaborates with Russia’s state-owned Rosneft on 10 ventures in the Russian Arctic, the Black Sea and western Siberia.

Canada’s Trudeau says Trump very supportive of Keystone XL pipeline - Canadian Prime Minister Justin Trudeau said on Wednesday that U.S. President-elect Donald Trump was “very supportive” of TransCanada Corp’s proposed Keystone XL crude oil pipeline in their first conversation after the U.S. election. “He actually brought up Keystone XL and indicated that he was very supportive of it,” Trudeau told an event in Calgary, Canada’s oil capital. “I’m confident that the right decisions will be taken.” Trudeau, who too supports Keystone XL, said also he saw “extraordinary opportunities” for his country if the United States under Trump steps back from tackling climate change, a move that would make Canada relatively more attractive for green-technology investment. Trump has said he would approve the 830,000-barrel-per-day Alberta-U.S. Midwest Keystone XL which the Obama administration rejected over environmental concerns. Trump’s election heartened investors in Canada’s battered energy industry, which has struggled with two years of low prices and long-running concerns about market access. Critics of Trudeau’s Liberals say Canada’s environment policies will make the country less attractive to resource-based investment compared to the United States.

Canada’s pipeline plans compromise its climate goals - Last October, many environmentalists let out a sigh of relief at the news that Canadians had elected a new prime minister: Justin Trudeau. For nearly a decade, they had watched in dismay as his predecessor, Stephen Harper, muzzled climate scientists and gutted environmental laws. With Trudeau in charge, the whole country looked greener. There were plans for a new nationwide carbon tax, an end to fossil fuel subsidies, and a goal of achieving net zero emissions by 2050. Just this week, Trudeau announced a freeze of offshore leasing in Canada’s Arctic waters for at least five years. During last year’s Paris climate negotiations, the new prime minister boasted, “Canada is back, my friends.” But a rash of approvals for new fossil fuel projects has left many of those hopes dashed—alongside doubts about Canada’s ability to meet its climate goals. In late November, the Canadian government announced long-awaited decisions on three major oil sands pipelines, approving two of them. For Trudeau, the mixed pipeline decisions reflect an effort to find balance between environmental protection and economic growth. Alberta’s tar sands account for roughly three percent of Canada’s economy and a large chunk of its exports, helping fund programs such as government provided health care. Though the new pipelines will allow Canada’s carbon-intensive oil industry to expand, they will not, Trudeau insisted, compromise its commitment to reducing greenhouse gas emissions under the Paris Agreement.

Can The Canadian Oil Industry Recover In 2017? --Even with oil barely over half of what it fetched in June of 2014 and the active drilling rig count doing better than (December 20, 2016 – 257, December 16, 2014 – 420; source JWN Rig Locator) compared to two years ago, it is obviously reckless to declare next year a success while it hasn’t even started yet. However, it appears 2017 will provide significantly better times than the two previous years perhaps not by design but by exception. It won’t be as bad as 2016 because oil and gas prices are higher and it looks to be headed in an opposite direction from 2015 which was characterized by continuous contraction. Historically, most times this industry looks forward with even modest optimism it has been incorrect. The herd always seems to be going in the wrong direction. Super. However, the recent OPEC and non-OPEC cooperation meetings have placed a floor under oil prices. Bloomberg News ran a headline December 18 declaring, “OPEC Deal Makes Oil Investors Most Bullish Since Slump Began”. It reported about the weekly data from the U.S. Commodity Futures Trading Commission where speculators report trading positions. The last time this many traders were going “long” on crude was July of 2014. Meanwhile, the shorts continue to retreat. One New York hedge fund manager said, “There’s been a full embrace of the OPEC, non-OPEC deal. They are being given the benefit of the doubt. The consensus is supplies will tighten quickly and as a result investors are positioning for higher prices in the near term.”Since oil prices began their freefall in late November of 2014 there has been mountains written about what crude will or won’t do. Every modest gyration in the U.S. rig count or storage levels has caused prices to move one way or another. In the end what causes prices to rise is when more commodity traders think it should go up than down. This is why the CFTC data is comforting, at least for this week. After all this has happened before.The easiest explanation of why 2017 looks materially different than the past two years comes from the December mid-month report from the International Energy Agency (IEA). Analyzing the news from the two supply management meetings, the IEA redrew its main chart through to mid-2017 which is reproduced below. 

Christmas gas shortages weaknesses in Mexico's oil industry - Drivers in parts of Mexico have found themselves mired in long lines or turned away from gas stations in the days and weeks before Christmas, as fuel shortages hit cities and towns in the state of Michoacan. The shortages have been attributed to a number of factors, including pipeline theft, pricing and maintenance issues for state oil company Pemex, and speculation ahead of a shift to competitive-pricing model slated for January. These challenges and the resultant shortages come at a time when Pemex’s refining and transport capacity is lagging the strong growth in demand. In the days before Christmas, at least 50 gas stations in Morelia, a city in northeastern Michoacan state, and surrounding communities were facing shortages. Gasoline and diesel were hard to find in many places, with long lines at some stations and others displaying “no gasoline” signs. “There’s been a lot panic buying with lines 40 cars long at gas stations and many closed in Morelia,” . In other parts of the state, drivers were gathering in lines at 7 a.m. at stations where sales began at 10 a.m. Gas shortages have been reported in at least 12 Mexican states, including San Luis Potosí, Guanajuato, Aguascalientes, Chiapas, Nuevo Leon, and Oaxaca. In San Luis Potosí there were reports of lines with more than a 100 cars and tens of people on foot with tanks and containers.Shortages appeared in parts of Michoacan two months ago, and gas-sector officials in the region indicated that shortages of some types of gas and in some areas would continue well into 2017.  Pemex authorities have asked consumers not to make "panic buys" of gasoline so that the company could restore supplies as soon as possible. The firm also said it was stepping up its resupply efforts.

US gasoline exports to Mexico hit record high on refinery issues, strong demand - Mexico's record-low refinery production and growing consumer demand helped push US gasoline exports there to a new high in October, a trend that has boosted prices in both countries. Gasoline exports to Mexico climbed 1.86 million barrels to 12.08 million barrels in October, according to US Energy Information Administration data released Friday, the highest total since that data started being tracked in 1993. The previous peak was 11.42 million barrels in December 2010. Mexico is by far the largest importer of US gasoline, taking in 45.8% of the 177.4 million barrels of finished gasoline the US exported through October of this year. That export demand has pushed prices to unseasonably strong levels in the US Gulf Coast, which typically sees demand weaken during the fall and winter months.The outright price for Gulf Coast pipeline-delivered conventional gasoline was assessed at $1.7098/gal Thursday, its highest price since August 18, 2015. Conventional gasoline is the main grade exported to Mexico, as it does not require ethanol blending. "I think [Mexico has] come to accept the fact that it makes more sense to import products from more efficient refineries right next to them on the Gulf Coast than to keep wasting money on their own inefficient system," The main issue plaguing Mexico's 1.6 million b/d refining capacity is "chronic underinvestment in downstream investments over the years," Another hurdle is the difficulty in processing the heavy sour crude the country produces.

High Court rules fracking can go ahead in North Yorkshire -- Anti-fracking campaigners have lost their legal challenge to a decision to allow fracking to take place in North Yorkshire. Third Energy was granted planning permission to extract shale gas at Kirby Misperton in Ryedale in May. Friends of the Earth and residents had challenged North Yorkshire County Council’s decision in the High Court. Planners had voted 7-4 in favour of the application, despite more than 4,300 objections and only 36 representations of support. It was the first fracking operation to be approved in England since a ban was lifted in 2012. Campaigners had claimed in court the county council had not considered the impact on climate change and had not put provision in place for money to fund any remedial works.

US LNG makes negligible impact on European gas market - The startup in February this year of US LNG exports based on cheap American shale gas had been expected to see a good proportion of cargoes heading across the Atlantic to Europe given the relatively short shipping route and Europe's massively underused LNG import capacity. But with European gas prices staying stubbornly low for most of the year and the margins for US LNG having been largely eroded due to the slump in global LNG prices, in the end only a handful of cargoes ended up in Europe. As 2016 nears its end, more than 50 cargoes have left the Cheniere Energy-operated Sabine Pass terminal in the Gulf of Mexico for international markets. But of those cargoes, just three landed in mainland Europe -- one in Portugal, one in Spain and one in Italy -- while another two shipments were made to Turkey. According to industry sources, the two to the Iberian Peninsula were considered to be "test" cargoes given that they were not followed up by any new cargoes, while the shipment to Italy was seemingly a one-off as it was procured by Uniper to meet its obligations under the country's "peak-shaving" tender program. Italy's economy ministry holds tenders several times a year for companies to provide gas that can be used during periods of unexpected peak demand. Uniper won Italy's latest peak-shaving tender held in October and opted to supply 105,000 cu m of LNG (63 million cu m of gas) from Sabine Pass to be stored "until needed" at the Toscana FSRU off the coast of Livorno. So the evidence so far suggests that southern Europe has been able to attract some US LNG -- though in limited volume -- but the appeal of US LNG in northwest Europe has yet to emerge where competition from pipeline suppliers Norway and Russia is fierce.

 Who Wants To Keep Gas Flowing Through Ukraine And Why?  --This past year of 2016 set a new record for the export history of Gazprom, Russia’s biggest gas company. Its chairman, Alexey Miller, has claimed that by the end of the year Gazprom will have shipped a total of 180 billion cubic meters to non-CIS countries.Gazprom had only planned to export between 166 and 170 billion cubic meters of gas in 2016 (in 2015, 158.56 billion cubic meters of gas were delivered to non-CIS countries).But even this new high is not the limit. Gazprom’s latest calculations envision a further uptick in shipments in 2017, and those will primarily be to the European Union. The key factors here are, first and foremost, the weather conditions (this winter promises to be a more severe one in Europe than last year), and second - the jump in demand for gas in Europe that has been seen in recent months in the face of lower domestic production in EU countries.The biggest consumers of Russian gas are still Germany (47.4 billion cubic meters in 2015), Turkey (27 billion), Italy (24.4 billion), Great Britain (22.5 billion), and France (10.5 billion). And Russian gas shipments play a very important role in ensuring the energy security of Southeastern Europe. In 2015 Bulgaria purchased 3.1 billion cubic meters of gas from the companies that make up the Gazprom Group, while Greece bought 2 billion cubic meters, Serbia - 1.9 billion cubic meters, and Croatia - 0.6 billion cubic meters.The market price for Russian gas has taken some interesting twists and turns. It is worth noting that that figure has risen right along with the increase in supply. This proves once again that the close interdependence of European consumers and Russian energy suppliers is «overriding» the market formula: simultaneous growth in both supply and price is an atypical phenomenon in a market environment, however, it proves once again that any moves aimed at «replacing» Russian gas or «displacing» Russia from the EU gas market might be disruptive for Europe’s energy sector.The attempts by some countries to block Russian gas supplies look particularly irrational in this context. This primarily applies to Poland, which rushed to the European Court to appeal the European Commission’s decision to allow Gazprom greater access to the OPAL pipeline that links Nord Stream with the gas-transit system of Central and Western Europe.

Platts: Will India Become The New Engine Of Growth In Asia? --  Platts tweeted this about two hours ago, "Will India become the new engine for Asian demand growth?" And then a link to their video snapshot titled "five commodity themes to watch closely in 2017." Here they are:

  • OPEC production: OPEC's agreement to cut production and then non-OPEC producers also agreed to cut production; tough implementation is just beginning
  • US production: US oil production: under Obama, US crude oil production grew "breathtakingly" from less than 5 million bopd to 9.5 million bopd (no comments, please); Trump is pro-US crude oil growth; at $65 WTI, IRR for US operators is estimated to be between 35 and 40%; plenty of capital available; watch for lots of hedging; how will that affect OPEC's plans to cut production
  • Asian demand: will India become the new engine for growth in Asia
    • for the 3rd year in a row, 2017 is likely to see a larger percentage rate for growth in oil demand in India than in a slowing Chian
    • current Indian demand is similar to that of China in the 1990s
    • Indian govt likely to increase crude oil demand; Make In India initiative (see link)
    • India's initiatives have caught the interest of Saudi Aramco and Rosneft
    • see graphic below
  • Global gas market: is 2017 the year in which we see the emergence of a global gas market?
    • could global prices for natural gas converge? this is a huge story
    • see graphic below
  • EVs: could 2017 be the year that economic reality hits the electric car market (at 4:13 in the video)

Oil Rally Gains Momentum Ahead Of OPEC Cuts - OPEC and non-OPEC cuts set to begin next week. The oil production cuts that OPEC and a handful of non-OPEC countries agreed to will take effect on January 1. The deal calls for a six-month average, so even leaving aside the possibility of cheating, participating countries are not exactly obliged to start cuts immediately. The cuts could take place at a later date so that average levels hit the targeted range by June. Moreover, data on what exactly is happening at the ground level will come in on a delay, with January output levels not published until February. As a result, while the oil markets are optimistic that OPEC and non-OPEC countries are accelerating the move towards a balance, we may not get a clear picture if that is indeed the case for a few months. In the most bullish case, OPEC and non-OPEC take a combined 1.8 million barrels of oil per day off the market by mid-year, which would likely push the supply/demand balance into a deficit. Presumably that would lead to a rise in oil prices, but analysts are skeptical that such a scenario will truly play out. “To go above $60 is going to be difficult. We’re already close to the top rather than the bottom of the range right now,” Olivier Jakob, oil analyst with Petromatrix, told Reuters. “From January, we’ll start to have a better idea about the level of OPEC production. That is going to be more and more of a focus.” A survey of oil analysts puts oil at $58 per barrel over the course of 2017, fueled by tighter conditions after the OPEC cuts. The prices would be up roughly a quarter from this year’s average. The big question, however, is how quickly and how substantially U.S. shale output comes roaring back. Citigroup estimates an increase of 500,000 barrels per day if oil prices average $60 per barrel. Macquerie largely concurs, with the firm predicting a 1 mb/d increase if oil prices rise above $60. “It’s going to take them a while to gear up,” Mike Wittner, head of commodities research at Societe General, told Bloomberg. “The investment’s got to gather pace, the drillers and the fracking contractors also need time. It’s a gradual process.”

Oil Is Going To $10 Or $90 In 2017, Depending On Who You Ask --In a Reuters poll of 29 analysts and economists carried out after the OPEC deal, Raymond James had the highest 2017 forecast for Brent price, at US$83 per barrel, while the poll saw Brent averaging US$57.01 next year. On the opposing side is Shawn Driscoll, portfolio manager at the T. Rowe Price New Era fund, who told earlier this month that “we’re in a secular bear market for oil”, expected to go on for 10 to 15 years. Other analyst projections are “massively” underestimating how quickly and how big the U.S. shale comeback will be, Driscoll said, adding that he sees oil at below US$50 at the end of 2017, and a “dip below $40 a barrel” at some point in 2018. Most of the other projections in the past month or two — prompted by the pending OPEC deal and then the cartel’s agreement to cut output–have not only talked oil prices up, but made more analysts optimistic that an agreement would speed up the drawdown of the global oil glut. The market is likely to move into deficit in the first half next year by an estimated 600,000 bpd, said the International Energy Agency (IEA), as long as OPEC and non-OPEC producers manage to (and are willing to) stick to promised cuts. More than a month before the deal was announced, the World Bank raised its oil price forecast for 2017 to average US$55 next year, or US$2 more than its earlier forecast. At oil above US$55 next year, energy consultancy Wood Mackenzie sees the oil and gas industry turning cash flow positive for the first time since the downturn, and expects 2017 will be a year of “stability and opportunity” for the sector. In its latest Short-Term Energy Outlook from December 6, the U.S. Energy Information Administration (EIA) expects Brent Crude prices to average US$51.66 in 2017, with WTI Crude prices averaging US$50.66 next year. However, EIA warned: “The values of futures and options contracts indicate significant uncertainty in the price outlook.”

OPEC Production Cuts Have Already Failed – New Supply Rapidly Offsetting Quotas -- Once the again the decision by OPEC to manipulate the price of oil by cutting production is proving to be totally futile, with the reopening of pipelines in Libya reinforcing the idea it was a bad decision from the beginning. OPEC members were correct on one thing. Unless all the members cooperated, along with key producers outside the cartel, the initiative would fail. With U.S. production starting to climb once again, Libya and Nigeria adding supply, and Russia strategically taking its time to comply with the quotas it agreed to, this deal is rapidly falling apart as to its effect on the oil market. It’s going to get worse with output from the U.S., Libya and Nigeria expected to continue to climb.   Even if all the participants in the cuts were to adhere to quotas - which isn't going to happen - it wouldn't matter any longer with the new supply quickly coming to the market.

Goldman Flip Flops Again, Now Sees High OPEC Compliance -- In just five days, Goldman Sachs has changed its mind about the expected OPEC cuts compliance, now seeing cartel members—especially Saudi Arabia—as having a “strong” incentive to stick to promised cuts, which prompted the bank to raise on Friday its WTI price forecast for the second quarter next year to US$57.50 from US$55. The forecast for WTI price for the first quarter of 2017 was left unchanged at US$55. Goldman Sachs also lifted its Brent Crude price forecast to US$59 from US$56.50 for the second quarter, and now expects Brent price to average US$57.40 next year, up by US$3.40 compared to previous estimates. Five days ago, Goldman was expecting low compliance to the cuts, and kept its WTI price forecast at US$55 for the first half of 2017. Having analyzed Saudi Arabia’s fiscal revenue expectations and outlook for next year, Goldman now sees the compliance at 84 percent. “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 Sachs said in a note today, as quoted by Platts.

US crude settles at $53.90, up 1.7%, just days before producer output cuts take effect -  Oil jumped 1.7 percent Tuesday, continuing its year-end rally with support from expectations of tighter supply once the first output cut deal between OPEC and non-OPEC producers in 15 years takes effect on Sunday. U.S. crude prices have surged 25 percent since mid-November, helped by expectations for OPEC's supply cut and generally solid U.S. economic figures that have also bolstered equity prices. Trading was thin on Tuesday, with less than one-third of the usual volume in futures contracts in West Texas Intermediate crude oil. With oil near $54 a barrel, U.S. crude futures are not far from the year's high of $54.51 high reached on December 12. "Some of the doubts (in OPEC) people are showing are going to have to be put to rest," said Phil Flynn, analyst at Price Futures Group in Chicago. "There's a strong possibility that we're going to rally into the end of the year."  Jan. 1 brings the official start of the deal agreed by the Organization of Petroleum Exporting Countries and several non-OPEC producers to lower production by almost 1.8 million barrels per day (bpd). Brent crude was up 87 cents, or 1.6 percent, at $56.03 a barrel by 2:35 p.m. ET (1935). The global benchmark reached $57.89 on Dec. 12, the highest since July 2015. U.S. West Texas Intermediate crude settled up 88 cents, or 1.7 percent, to $53.90. Crude may struggle to rally much further before evidence is available of OPEC's compliance with the cuts, analysts said.

Oil rises for 4th day on optimism over production cuts - Oil futures rose for a fourth straight session on Wednesday, trading at nearly 18-month highs on expectations the Organization of the Petroleum Exporting Countries and other major producing nations will make good on promises to cut output in the new year.  On the New York Mercantile Exchange, light, sweet crude futures for delivery in February gained 16 cents a barrel, or 0.3%, to finish at $54.06—their highest close since July 2, 2015. February Brent crude on London’s ICE Futures exchange climbed 13 cents, or 0.2%, to $56.22 a barrel—the highest finish since July 22, 2015. “Remember it was a year ago almost to the day when Saudi Arabia said they would continue to flood the market with oil. Now we have the first OPEC and non-OPEC cut since 2001. Energy has made an incredible comeback and the new year looks bullish and bright,”   Most market participants are waiting to see if major oil producers inside and outside the Organization of the Petroleum Exporting Countries will deliver on pledges to curtail production beginning next month. The deal, if carried out as planned, should reduce global supply by about 2%. Venezuela, an OPEC member whose economy has suffered greatly due to low oil prices, on Tuesday committed to cutting 95,000 barrels a day in line with the pact. While market participants are at present optimistic that participating nations will abide by the pact, there is still a degree of skepticism about how closely and for how long producers will comply with individual quotas.  “We may see some reduction in output as production is ramped down toward the lower targets, although others could also be take the opportunity to push a few more barrels into the market at the most attractive price,”  Aside from quota cheating, U.S. shale production could also frustrate OPEC’s plan to shrink the supply overhang.

US crude settles at $54.06, setting a fresh 18-month high as the market awaits OPEC cuts  -- Crude oil prices edged up for a fourth consecutive session on Wednesday, close to their highest levels since mid-2015, ahead of U.S. oil inventory figures and as the market awaits evidence of OPEC supply reductions in the new year. U.S. benchmark West Texas Intermediate (WIT) crude oil prices settled up 16 cents at $54.06 for the best close since July 2, 2015. The intraday peak fell just short of the year's high of $54.51 reached on Dec. 12. Prices fell after the settle in light of data from industry group the American Petroleum Institute, which showed a surprise build of 4.2 million barrels in U.S. crude inventories. Five analysts polled ahead of weekly inventory reports from API and the U.S. Department of Energy's Energy Information Administration (EIA) estimated, on average, that crude stocks declined by 1.5 million barrels in the week to Dec. 23. The EIA report has been rescheduled to Thursday at 11 a.m. EST (1600 GMT), following the federal holiday on Monday because of the Christmas holiday.   International Brent crude futures crude futures fell 15 cents to $55.94 a barrel by 4:41 p.m. ET (2141 GMT). The international benchmark hit $57.89 on Dec. 12, its highest since July 2015. Trading was thin on Wednesday, with just 189,000 front-month futures contracts changing hands in WTI by 11:07 a.m. ET (1607 GMT), compared with a daily average of 525,000 over the last 200 days. It is expected to remain quiet for the balance of the week.

Oil Slides After Biggest Inventory Build In 6 Weeks - Having risen for the 8th straight day - the longest stretch in 7 years - oil prices kneejerked lower after API reported a surprisingly large 4.8mm inventory build (1.5mm draw expected) - the largest in 6 weeks. Gasoline and Distillates saw draws but Cushing built for the 4th week of the last 5. API

  • Crude +4.2mm (-1.5mm exp) - biggest in 6 weeks
  • Cushing +528k (+500k exp) - 4th build in last 5 weeks
  • Gasoline -2.8mm (+1mm exp)
  • Distillates -1.7mm (+1mm exp)

Following last week's surprise build, API reported another surprise build this week in overall crude inventories... And the reaction was a kneejerk lower holding below $54...

Oil Falls After API Reports The Biggest Crude Inventory Build In 6 Weeks - Oil prices fell on Wednesday after having to 18-month highs as oil markets are anticipating OPEC cuts that are expected to be made starting January 1 next year. The American Petroleum Institute’s (API) weekly report showed build of 4.2 million barrels to the United States’ commercial crude inventories, instead of an expected 1.5 million-barrel draw.The build comes after last week’s report from the Energy Information Administration (EIA) that showed a build of 2.3 million barrels of crude oil in inventories the week prior. Gasoline inventories have seen several weeks of strong additions consumption started to fall because the winter weather has caused a bit of a lull in demand while refineries continue to churn out gasoline. API data this week shows a 2.8 million barrel draw to gasoline stockpiles whereas a one million barrel draw was predicted.Crude levels at the Cushing, Oklahoma continue to increase, and are rising in line with analyst expectations, 528,000 barrels were added. Crude storage levels at this key site have been rising rapidly since October, and this week’s report confirms the fourth build in five weeks according to Zerohedge.Lastly, API data sees a bullish 1.7 million barrel draw to distillate inventories.Today’s API projections are expected to be confirmed by tomorrow’s EIA data. Markets in the meantime remain optimistic about OPEC's willingness to stick to the output cut deal and CFTC data now show that the OPEC bears are feeling the squeeze and have now cut back bearish bets on WTI to levels not seen since August 2014. While oil traders seem extremely bullish, storage fundamentals indicate larger crude stockpiles than one year ago around this time of the year. The price of WTI was down 0.45% to $53.66 at 3:55 PM CST, while Brent traded 0.25% lower at $55.95. Gasoline prices were up 0.80% to $1.6750.

Has The OPEC Rally Gone Too Far? -- Oil prices continue to edge up as 2016 comes to a close, a dramatic turnaround for the industry compared to the start of the year.  In January, oil prices were melting down, dropping below $30 per barrel. The industry was panicking, slashing spending and jobs, and it was hard to see any evidence of a rebound. By December, things look much different. The industry is adding rigs back to the shale patch, oil prices are rising, the market is moving closer to balance, and the OPEC deal could accelerate that adjustment. The consensus is that oil prices will post further gains in 2017. But even as WTI trades above $54 per barrel – the highest price since the summer of 2015 – there are several reasons why oil should be trading much lower.

  • 1. Doubts over OPEC deal. The OPEC deal is set to take effect in a few days, but the promised cuts are not inevitable. First, the cuts are an average over a six-month period, and won’t be delivered immediately in January. Second, some cheating is to be expected, as OPEC has a long track record of non-compliance. Third, non-OPEC cuts, particularly from Russia, are also not a given. It will take time to see if participating countries actually deliver reductions, but the oil markets should be more skeptical than they have been to date.
  • 2. Libya and Nigeria will add output in 2017. Two key OPEC members – Libya and Nigeria – are exempted from the OPEC deal, and they have every intention of ramping up production. Together, Libya and Nigeria could offset roughly half of the entire promised OPEC reductions.
  • 3. U.S. shale comeback. Everyone is watching to see how quickly U.S. shale will rebound. Output is already back up by more than 300,000 bpd from a low point in July, according to EIA data. But that is just the beginning. The oil and gas rig count is already up by more than 60 percent since bottoming out in May. Estimates vary on how much additional production can be added in 2017, ranging from 500,000 bpd to 1 mb/d of new output.
  • 4. Dollar strength. The U.S. dollar has strengthened by more than 20 percent in the past two years and is now at its highest level in more than a decade.  OPEC will be more likely to cheat to take advantage of dollar-denominated sales because the upside of doing so will be larger. That would be bad news for prices if the deal starts to fall apart.
  • 5. Demand growth slows. The IEA projects oil demand climbing by just 1.3 million barrels per day (mb/d) in 2017, the lowest level in years. China, in particular, is seeing its demand growth slow as its strategic petroleum reserve starts to fill up. Weak demand will stretch out the time it takes for the market to balance.
  • 6. Inventories still elevated. Crude oil inventories are still at very high levels, well above long-term averages in both the U.S. and around the world.
  • 7. Oil speculators already stretched. Hedge funds and other money managers have already built up the most bullish position on crude oil since 2014, which has helped push up oil prices in recent weeks. The mass accumulation of net-long positions raises the risk of a snap back in the other direction should bearish news arise.

Oil Price Roulette: Investors Bet On $100 Oil  -- Oil prices are rising and speculators are already staking out bullish positions on futures for the next few months, but some traders are rolling the dice on a much bigger price spike in the next two years. Some contracts that pay off big time if oil prices hit $100 per barrel by December 2018 just saw a spike in interest, according to Bloomberg. The $100 December 2018 call option, Bloomberg says, “was the most traded contract on Tuesday across the whole ICE Brent market.” That contract gives the owner the right to buy Dec. 2018 futures at $100 per barrel. Few oil analysts expect oil prices to rise that high within the next two years. The oil market is still oversupplied, and even with the OPEC deal – which will take 1.8 million barrels per day off the market if fully fulfilled – the world is still flush with oil sitting in storage. It will take time to work through those inventories, providing a cushion to a tightening market. However, the sudden interest in such a remote possibility of a large price spike suggests that investors are growing more confident that the market is on the upswing. “That’s a relatively cheap lottery ticket,” “It’s clearly not the consensus in the market that we’re going to see a return to those prices any time soon, so it’s more likely a hedge against unforeseen geopolitical events during that time.” Purchasing these options may not be such a huge risk – Bloomberg says they could cost a bit more than $1 million while the payoff would be multiples of that if prices happened to go that high. It is similar to going to Vegas and playing roulette, putting some money on a single number or a few numbers, which have long odds but huge payouts. On the other hand, the spike in interest in the $100 options could also just be a small part of a broader hedging program from some companies, cropping up now since the contracts are two years out. With oil back above $50 per barrel, money managers have become much more bullish on crude. In fact, collectively, hedge funds and other investors have sold off short bets and purchased long positions, building up the most bullish net-long position in more than two years. OPEC has not yet cut back by a single barrel, but its Nov. 30 deal in Vienna has succeeded in sparking a bull run for oil.

Can U.S. Shale Add 1 Million Bpd In 2017? | Oil prices are up on expectations that OPEC will contribute to a faster balancing in 2017, with up to 1.8 million barrels per day in cuts along with some non-OPEC countries. That has put a floor beneath prices, with fears of another downturn largely dissolved after OPEC’s announcement. But what if U.S. shale comes roaring back and ruins the price rally? Estimates run the gamut on how quickly U.S. shale production can rebound and by what magnitude. Citigroup sees output rebounding by 500,000 barrels per day if oil prices average $60 per barrel. A December 12 report from Macquarie said that oil prices above $60 could spark a 1 million barrel-per-day revival. U.S. shale is already up about 300,000 barrels per day from a low point in the summer of 2016, at least according to preliminary data. The gains are expected to continue. The industry is producing about as much oil as it was two years ago, with only one-third of the more than 1,700 rigs in 2014. Drillers are producing just as much oil with a lot less effort. If U.S. shale surges back by 1 mb/d as Macquarie suggests, it would offset most of the cuts from OPEC and non-OPEC countries. Additionally, one would have to assume some degree of non-compliance and/or “cheating” on the cuts from participating countries, plus an expected increase in supply from Libya and Nigeria. Altogether, a rise in oil prices could be self-defeating, leading to prices falling once again later in the year.Then there are also the implications on oil demand to consider. Higher prices might cut into demand growth, leading to an expansion in consumption at a much slower rate. The IEA already thinks oil demand will grow by 1.3 million barrels per day in 2017, one of the weakest in years. An initial price spike might throw off those figures, causing estimates to end up being more optimistic than reality. Again, a price surge could be self-defeating, causing prices to fall right back down.

Caught Red-Handed? Iraq Is Talking Down Its Oil Exports - Even though crude prices may be subdued amid thin trading over the holiday period, there is always a thing (or five) going on in the oil markets. Henceforth, are five things to consider in oil markets today:

  • 1) SOMO, Iraq's state oil marketing company, has issued a statement saying it has firm plans to 'cut daily crude oil exports by specified percentages' as it looks to comply with its agreed production cut of 210,000 bpd. One thing it doesn't mention, however, is whether it will cut output by January 1, as agreed.
  • 2) According to our ClipperData, crude waiting offshore in the Gulf of Mexico has risen to a four-month high at just under 25 million barrels, amid strong arrivals from the Arab Gulf last week. There is still a backlog of large vessels in the US Gulf after inclement weather slowed imports in the week before last, while a modicum of ad valorem tax strategizing is also likely underway - bolstering volumes offshore.
  • 3) While Iran has entered into agreements relating to its natural gas - with deals with Total and CNPC - the country is yet to sign any oil deals with international companies - despite oil minister Bijan Zanganeh outlining 50 potential projects late last year.
  • 4) In recent days, BP has announced two deals - a $2.2 billion expansion of output in Abu Dhabi, and a $916 million investment in fields in Mauritania and Senegal. BP this year has also bought a 10 percent stake in Eni’s Egyptian gas field, Zohr, for $375 million, and part of Indonesia’s Tangguh LNG project for $313 million. Key takeaway? As oil prices rise, so doth the fortunes of the whole industry.
  • 5) Finally, according to Wood MacKenzie, a net 450,000 bpd of crude processing capacity will be added next year in Asia. This is the most since 2014, as refinery expansions from China to India will offset closures in Japan. This increase equates to a ~1.5 percent rise in Asian refining capacity; it is currently nearly 29 million bpd.

Oil Slides After Bigger Than Expected Inventory Build -- Oil prices were back to unchanged ahead of DOE data, after falling on last night's surprise API inventory build. Prices jumped higher however as DOE reported a much smaller build than API (+614k vs +4.2mm), though admittedly a build (expectations were for a draw). Cushing built for the 4th week of the last 5 but gasoline and distillates saw significant draws. Production dipped very modestly. DOE:

  • Crude  +614k (-1.5mm exp)
  • Cushing  +172k (+500k exp)
  • Gasoline  -1.593mm (+1mm exp)
  • Distillates -1.881mm (+1mm exp)

Product Inventory draws continue... Notably, as Bloomberg details, total product inventory outside the Strategic Petroleum Reserve took a big drop for the second week in a row, falling 12.9 million barrels. The total of 1.32 billion is the lowest level since March. The demand picture is mixed...

  • U.S. Fuel Demand Rose 0.51% in Past Four Weeks
  • Gasoline Demand Rose 0.56% in Past Four Weeks
  • Jet Fuel Demand Rose 2.41% in Past Four Weeks
  • Residual Fuel Demand Fell 25.70% in Past Four Weeks
  • U.S. Gasoline Demand Rose 9,000 B/D Last Week
  • U.S. Distillate Demand Fell 582,000 B/D Last Week

Gasoline exports also hit a fresh record as they rose 354,000 barrels a day to 1.149 million. This is the third week this year that exports have surpassed 1 million barrels a day.

 Oil prices edge up despite unexpected U.S. crude inventory build -  (Reuters) - U.S. oil prices rose in early Asian trade on Friday shrugging off a second consecutive week of crude oil inventory builds, with a U.S. Energy Information Administration (EIA) report late on Thursday indicating an unexpected rise in crude stocks. U.S. benchmark West Texas intermediate (WTI) crude futures were up 18 cents or 0.33 percent to $53.95 at 0021 GMT after settling 29 cents lower at $53.77 per barrel in the previous session. Brent crude oil futures had yet to trade after settling 8 cents lower at $56.14 in the previous session. Crude inventories were up 614,000 barrels in the week to Dec. 23, the EIA data showed, compared with analysts' expectations for a decrease of 2.1 million barrel. Despite the unexpected rise in crude stocks, the EIA data published on Thursday showed a significantly smaller rise in crude stocks compared with Wednesday's American Petroleum Institute (API) data that indicated a 4.2 million barrel build in U.S. crude oil stocks in the same period. "Today's Department of Energy report was positive for light products due to draws in gasoline and distillate inventories compared to consensus' build expectations," British bank Barclays said in a note. Gasoline stocks fell 1.6 million barrels, compared with analysts' expectations in a Reuters poll for a 1.3 million-barrel rise. The market is likely to have focused on the surprise draw in product stocks and taken on a slightly more bullish view toward the WTI contract, traders said. Oil prices will gradually rise toward $60 per barrel by the end of 2017, a Reuters poll showed on Thursday, with further upside capped by a strong dollar, a likely recovery in U.S. oil output and possible non-compliance by OPEC with agreed cuts.

Oil complex nearly flat after US crude build, product draws - Oil futures were little changed Thursday after US Energy Information Administration data showed a build in crude stocks, but draws in gasoline and distillate inventories. US crude inventories rose 614,000 barrels to 486.063 million barrels in the week that ended December 23, according to the EIA. Analysts S&P Global Platts surveyed Tuesday were looking for a draw of 1.5 million barrels. NYMEX January crude settled down 29 cents at $53.77/b. ICE February Brent expired 8 cents lower at $56.14/b. The March contract settled down 11 cents at $56.85/b. The main driver behind last week's build was a slowdown in refinery activity. Crude runs fell 101,000 b/d to 16.557 million b/d, lowering the refinery utilization rate by 0.5 percentage point to 91% of capacity.Analysts were looking for an increase of 0.5 percentage point, which was consistent with seasonal trends as refiners tend to ramp up activity in December after completing autumn maintenance. A decline in US crude imports helped mitigate the size of last week's crude build. Crude imports dropped 304,000 b/d to 8.167 million b/d. Imports have averaged 7.9 million b/d so far in 2016. A weaker dollar, which makes crude and fuel imports less expensive for holders of other currencies, helped support crude prices Thursday. The US Dollar Index was down 0.6 point at 102.69 in the afternoon. On Wednesday, that index approached last week's mark of 103.63, which represented a 14-year high.

  OilPrice Intelligence Report: Oil Ends 2016 On A Bullish Note: Oil prices posted incremental gains at the start of this week on the eve of scheduled OPEC cuts, but had stalled by Thursday after the EIA reported a surprise uptick in oil inventories. Oil ends the year nearly twice as high as where it started, pointing to a more balanced market in the months ahead. U.S. shale promises discipline. By most accounts, U.S. shale is poised for growth in 2017. A tightening oil market could push prices up: Should crude hit $60 per barrel, shale output could rise by 500,000 bpd, according to Citigroup. At $70 per barrel, production would grow by 1 million barrels per day. That of course, could merely induce another downturn as the world becomes once again flush with supply. Some shale companies are expanding operations, but cautiously. “There’s a real concern by industry that we could be in for another one of these price adjustments, if we get carried away with development," Harold Hamm, CEO Continental Resources, told Bloomberg. “They’re going to be disciplined going forward." The EIA reported another drawdown in natural gas stocks, with inventories falling 237 billion cubic feet in the week ending on December 23. That puts total stocks at 413 Bcf lower than last year’s levels at this time and also 79 Bcf below the five-year average. It is hard to overstate the significance of this development – inventories had been running well above the five-year average since late 2015, but are now back in normal territory. In other words, the gas market is no longer in a glut, which helps explain why prices are up above $3.81/MMBtu, the highest price in more than two years. Production has fallen this year while demand has climbed. If inventories continue to fall, prices will rise even further, potentially surpassing $4/MMBtu for the first time since 2014. That is good news for natural gas drillers, who are already adding rigs back to the shale patch. It is also good for coal-fired power plants, which are being called upon more than they have in the recent past to generate electricity. Oil prices often gain much more traction in the media, but the ongoing rise in natural gas is a huge untold story.   Hedge funds and other money managers have built up such a speculative position on rising oil prices that they risk sparking a liquidation if OPEC does not delivery on their promised cuts. "The boat is loaded to one side in the market right now. Shorts have covered. People have piled in from the long side, waiting for these cutbacks to come through. If they don't, there's going to be big punishment in this market," John Kilduff, founding partner of Again Capital, told CNBC's "Squawk Box." He also said that China could be the oil market’s Achilles’ heel, as growth continues to slow. Oil demand could disappoint if China fails to come through. “That's the real demand center. That's the swing place, and I still see issues there," he said.

Baker Hughes rig count, December 30, 2016 - Business Insider: The US oil rig count increased by two to 525 in the final week of 2016, rising to the highest level in a year, according to oilfield-services company Baker Hughes. The gas rig count increased by three to 132. With one miscellaneous rig remaining in use, the total count rose by five to 658. In 2016, the oil rig count staged a comeback not seen since the most recent oil crash. This week's increase put it just 11 rigs short of where it started the year, but well off pre-crash levels. After oil prices bottomed in February and started rising, producers gained confidence to increase activity. The crash caused demand for oilfield-services equipment to plunge, and forced drillers to find ways to produce more efficiently. US production levels will continue to be closely watched in 2017, especially as OPEC and non-OPEC members implement their agreement to lower output. Crude oil prices were little changed after the rig-count release on a light day of trading. West Texas Intermediate crude oil futures, the US benchmark, were down 0.2% to $53.60 per barrel. Oil was on pace to finish up 46% for the year.

Rising Rig Count Sees Oil Edge Lower On Final Trading Day Of 2016 | Baker Hughes this week reported yet another increase in the U.S. oil and gas rig count, with 5 more rigs coming online. The previous two weeks have seen increases of 16 and 13 rigs respectively, bringing the total number of active rigs to 658. The U.S. is now just 40 rigs below the count this time last year as North-American E&P companies are reacting on the OPEC agreement which has already bumped up oil prices to 18-month highs. More specific, Baker Hughes sees the U.S. oil rig count increasing by just two rigs while the gas rig count added 3 rigs amid rapidly rising natural gas prices. The Permian basin counted 2 more oil rigs this week while the Eagle Ford added one rig. The U.S. rig count is poised to grow further as the last credit redetermination period showed that the industry has already passed an inflection point, meaning that banks are more eager to issue new credit to drillers. While banks were reluctant to open the money tap earlier this year, rising oil prices and an improved outlook for U.S. shale drillers are reason enough for banks to expand credit facilities once again. According to Raymond James, capex in U.S. shale could increase as much as 30 percent as a result of looser credit lines. (Click to enlarge) Oil prices continued to trade slightly lower following the rig count release, with WTI trading 0,37 percent down at $53.57 and Brent trading 0,44 percent down at $56.58 at the time of writing.

Oil down, but ends year with biggest gain since 2009 | Reuters: Oil prices settled slightly lower on Friday, the year's last trading day, but attained their biggest annual gain since 2009, after OPEC and partners agreed to cut output to reduce a supply overhang that has depressed prices for two years. A two-rig rise in the oil rig count in the United States, the ninth weekly increase in a row, as reported by oilfield services provider Baker Hughes Inc (BHI.N), added to bearish sentiments. But the total count of 525 for the week, the last for the year, was still below last year's level by 11 rigs. U.S. benchmark West Texas Intermediate (WTI) crude futures were down 5 cents, or 0.1 percent, at $53.72 a barrel, while Brent fell 3 cents, or 0.1 percent, to $56.82. "Some profit-taking ... very light trading - a lot of people have already done what they needed to do for the year." Brent rose 52 percent this year and WTI climbed around 45 percent, the largest annual gains since 2009, when the benchmarks rose 78 percent and 71 percent respectively. Oil prices have slumped since the summer of 2014 from above $100 a barrel. The price rout, due to an oversupply thanks in part to the U.S. shale oil revolution, was accentuated later that year when Saudi Arabia rejected any deal by the Organization of the Petroleum Exporting Countries (OPEC) to cut output and instead fought for market share. But a historic OPEC agreement struck over three months from September that will reduce production from Jan. 1, marked a return to the 13-country group's old objective of defending prices.

Saudi Arabia will tax expats and hike gas prices again - Saudi Arabia has already been forced to tighten its belt. Now it's preparing for four more years of austerity.Slammed by lower oil revenues, the kingdom's budget deficit swelled to 366 billion riyals ($98 billion) in 2015, and 297 billion riyals this year. It was forced to borrow money from international investors for the first time ever, raising $17.5 billion in October. In response, the government has already slashed energy subsidies and cut wages for officials.But in a new report -- the Fiscal Balance Program 2020, published over the weekend -- it warns of dire consequences if it doesn't press ahead with more dramatic measures. "The government would find itself in a place of needing to cut capital spending by at least 90%, cut government operational spending by at least 30%, cut government wage bill by at least 30%, and substantially cut government retirement benefits," it said, if no further action were taken.   So here are some of the steps the government plans to take over the next few years:

  • 1. Hike gas prices, again. The government is expecting to save 209 billion riyals per year by 2020 by gradually phasing out subsidies.  That will mean Saudis paying much more each year to fill their cars and cool their homes.
  • 2. Raise taxes. From 2017, it will introduce a levy on expat workers and their dependents. The tax will start at 100 riyals per month and rise to as much as 800 riyals ($213) per month in 2020.  From the second quarter of 2017, it will tax harmful products such as sugary drinks and tobacco. And then in 2018, as previously announced, it will introduce a general sales tax as part of a broader initiative by the six Gulf Cooperation Council states.
  • 3. Soften the blow. Cutting subsidies and raising taxes risks damaging the economy and hurting lower income families.  So the government has also set out plans to boost the private sector, including an investment fund worth 200 billion riyals to help diversify the economy. The fund should help companies become more efficient.

 Why the Saudis may be preparing for a real war- Last week, I attended an event between senior officials of the Gulf Cooperation Council ("GCC") and members of the Slovenian government. During his opening remarks, Abdel Aziz Abu Hamad Aluwaisheg, Assistant Secretary General of the GCC, candidly discussed Saudi Arabia's central economic problem, which is that energy consumption in the Kingdom had averaged over 8 percent, while economic growth had averaged under 4 percent, for the last few decades. In other words, energy consumption has outstripped economic growth in the Kingdom by over 2X. With the result being that the Kingdom is now being forced to take increasingly drastic measures to keep its position as a leader in the world and maintain domestic stability. Even though Mr. Aluwaisheg suggested that Saudi's consumption problem could, hopefully, be resolved through strong economic reforms, the Kingdom's buildup of arms over the last six years, and lack of specifics regarding its touted "Vision 2030", suggests that more hawkish portions of the Saudi political establishment may be preparing for war as a hedge against state failure.The above chart is the value of Saudi exports over the last five years, with exports projected to be nearly a quarter of what they were in 2012 by the end of the year. The last time that exports were this low was during Saudi's financial crisis in 2009. However, back then, the country was 23 percent smaller. (26 million people then vs. 32 million people now.) In other words, the Saudis currently have far less money coming in, but far more mouths to feed.This downward trend in Saudi's economy is not part of some normal or temporary cycle. It's endemic of a much larger issue that threatens the Saudi state. Namely, energy consumption. The Saudi economy isn't at risk because it is running out of oil, it is at risk because the Saudi domestic consumption of energy (i.e. oil) will soon exceed their export of energy (i.e. they will soon consume over 50 percent of the energy they produce).

U.S. forces embedding more to help Iraqis retake Mosul: commander | Reuters: U.S. forces assisting Iraqi troops to retake Mosul from Islamic State are embedding more extensively, a senior commander said on Friday, a move that could accelerate a two month-old campaign which has slackened after quick initial advances. More than 5,000 American service members are currently deployed in Iraq as part of an international coalition that is advising local forces in a bid to recapture the third of the country the jihadists seized in 2014 when Iraq's army and police dropped their weapons and fled. Coalition advisors were initially concentrated at a high-level headquarters in Baghdad but have fanned out over the past two years to multiple locations to stay near advancing troops. Now, as Iraqi forces controlling around a quarter of Mosul - Islamic State's last major stronghold in Iraq - proceed deeper into the northern city and encounter fierce counter-attacks that render progress slow and punishing, U.S. troops are stepping up their involvement. "We are deepening our integration with them," said U.S. Army Colonel Brett G. Sylvia. "We are now pushing that into more of the Iraqi formations pushing forward, some formations that we haven't partnered with in the past where we are now partnering with them." During a rare interview at the U.S. section of a base for Iraqi army and Kurdish peshmerga forces in Makhmour, 75 km (47 miles) southeast of Mosul, the combat brigade commander would not be drawn on whether his troops were operating inside Mosul proper. But Sylvia, who commands the 1,700-strong Task Force Strike, told Reuters the level of integration resembles that of small special operations teams embedding with larger indigenous forces to help build capacity.

Iraqi Forces Shift Tactics in Mosul as Forces Advance on New Fronts —Iraqi security forces began a dramatic shift in tactics Thursday in their stalled offensive to retake Mosul, Islamic State’s last major stronghold, advancing on new fronts and bringing federal police into the battle after counterattacks inflicted heavy casualties. Iraq’s military announced a multi-sided offensive on the city’s northern, eastern and southeastern neighborhoods in an attempt to choke off supplies of weapons and new fighters. In the past week, Iraq’s military has begun using heavy artillery in the crowded city, in spite of the risk to civilians, and has moved forces from Baghdad and other areas to support the Counter Terrorism Forces. Some 4,000 federal police have been shifted from the capital and south of Mosul to support the fight in the east. The changes follow a series of devastating counterattacks by Islamic State that have raised questions about the battle plan and even the military’s capacity to secure other urban centers, including the capital Baghdad. “The current Mosul fight has turned into a war of attrition,” said Iskandar Witwit, a lawmaker on the security and defense committee and a former army general. “This will negatively affect security in Iraq for sure.” For more than two weeks, Iraqi troops have largely stood pat to re-supply, repair vehicles and rotate forces. They have also tried to secure the areas they have retaken while defending against militant attacks. Much of the tactical reassessment has revolved around the Counter Terrorism Forces. The elite U.S-trained forces are spearheading the drive to reclaim the eastern half of the city and have led nearly every successful effort to win back territory from Islamic State. The units—about one-fifth the total involved in the offensive—have taken unusually heavy losses in Mosul.

Damascus water supply cut after rebels pollute it: authority | Reuters: The Damascus water authority has been forced to cut supplies coming into the Syrian capital for a few days and use reserves instead after rebels polluted the water with diesel, it said on Friday. The al-Fija spring which supplies Damascus with water is in the rebel-held Wadi Barada valley northwest of the capital in a mountainous area near the Lebanese border. The government controls much of the surrounding territory and on Friday carried out aerial attacks and shelled the rebel-held area, the Syrian Observatory for Human Rights said. A military news outlet run by Syrian government ally Hezbollah said the rebels in the Wadi Barada valley had refused to leave the area and as a result the Syrian Arab Army began an offensive against them on Friday morning. Through a series of so-called settlement agreements and army offensives, the Syrian government, backed by Russian air power and Iran-backed militias, has been steadily suppressing armed opposition around the capital.

A Bigger Problem Than ISIS? - On the morning of August 7, 2014, a team of fighters from the Islamic State, riding in pickup trucks and purloined American Humvees, swept out of the Iraqi village of Wana and headed for the Mosul Dam.  A group of Kurdish soldiers was stationed at the dam, and the ISIS fighters bombarded them from a distance and then moved in. When the battle was over, the area was nearly empty; most of the Iraqis who worked at the dam, a crew of nearly fifteen hundred, had fled. The fighters began to loot and destroy equipment. An ISIS propaganda video posted online shows a fighter carrying a flag across, and a man’s voice says, “The banner of unification flutters above the dam.”  The next day, Vice-President Joe Biden telephoned Masoud Barzani, the President of the Kurdish region, and urged him to retake the dam as quickly as possible. American officials feared that ISIS might try to blow it up, engulfing Mosul and a string of cities all the way to Baghdad in a colossal wave. Ten days later, after an intense struggle, Kurdish forces pushed out the ISIS fighters and took control of the dam. But, in the months that followed, American officials inspected the dam and became concerned that it was on the brink of collapse. The problem wasn’t structural: the dam had been built to survive an aerial bombardment. (In fact, during the Gulf War, American jets bombed its generator, but the dam remained intact.) The problem, according to Azzam Alwash, an Iraqi-American civil engineer who has served as an adviser on the dam, is that “it’s just in the wrong place.” Completed in 1984, the dam sits on a foundation of soluble rock. To keep it stable, hundreds of employees have to work around the clock, pumping a cement mixture into the earth below. Without continuous maintenance, the rock beneath would wash away, causing the dam to sink and then break apart. But Iraq’s recent history has not been conducive to that kind of vigilance.

Erdogan Seeks to Join Forces With Trump Against IS in Syria - Turkey’s military deployed tanks and guns on the Syrian border as President Recep Tayyip Erdogan urged joint action with the Trump administration against Islamic State in its de facto capital, Raqqa. The deployment, including long-range guns and armored personnel carriers, followed Erdogan’s remark on Saturday that Turkish troops fighting to capture the jihadists’ stronghold of al-Bab in northwest Syria could move first to the town of Manbij and then to Raqqa. The artillery reinforcements were sent to the border towns of Oguzeli and Karkamis, north of Manbij, state-run Anadolu Agency reported Sunday.  Erdogan reiterated his country’s readiness to extend its fight against the jihadist group in Raqqa if U.S. President-elect Donald Trump agrees to block Kurdish forces from participating. Turkey is concerned that Kurdish territorial gains in Syria could lead to a new state there, emboldening the separatist aspirations of its own Kurds. Kurds have established control over much of Syria’s north during five years of violence, and in doing so, emerged as a favored U.S. fighting force in the ground war against Islamic State.

Erdogan says he has evidence US-led coalition has given support to Isis - The Turkish President Recep Tayyip Erdogan says he has uncovered evidence that US-led coalition forces have helped support terrorists in Syria – including Isis. American-led forces have been working alongside Syrian rebels fighting President Bashar al-Assad but have attempted to avoid helping Isis and other Islamist militant groups.However, speaking on Tuesday in the Turkish capital, Ankara, he said he believed they had given support to a variety of militant groups, including Isis Kurdish outfits YPG and PYD.  “They were accusing us of supporting Daesh [Islamic State],” he told a press conference, according to Reuters. “Now they give support to terrorist groups including Daesh, YPG, PYD. It's very clear. We have confirmed evidence, with pictures, photos and videos.” Mr Erdogan also said on Tuesday that Saudi Arabia and Qatar should join its meeting with Russia and Iran to discuss Syrian peace efforts.  Russia, Turkey and Iran, which helped broker the withdrawal of civilians and militants from the Syrian city of Aleppo, have agreed to hold talks on Syria in Kazakhstan next month.

US Slams Claims of Turkish 'Evidence' Backing Islamic State: — The U.S. Embassy in Ankara in a strongly worded statement Wednesday denied claims by Turkish President Recep Tayyip Erdogan that there is “confirmed evidence” showing U.S.-led coalition forces have given support to Islamic State. “The United States government is not supporting Daesh,” the embassy said, using an Arabic acronym for the Islamic State (IS) group. The United States “did not create or support Daesh in the past. Assertions the United States government is supporting Daesh are not true,” the statement said. Erdogan on Tuesday accused the U.S.-led coalition of not only backing IS but also Kurdish rebel factions operating inside and outside of Turkey. “They were accusing us of supporting Daesh,” Erdogan said. “Now they give support to terrorist groups including Daesh" and Kurdish rebel groups. “It's very clear," he said. "We have confirmed evidence, with pictures, photos and videos.”

The Pathologies of War: Dual Propaganda Campaigns in Reporting on Syria - The travesty of war in Syria represents a defining political issue today. The Pew Research Center estimates that by 2016, as many as six in ten Syrians were displaced from their homes due to the civil war between Syrian and Russian government forces and rebel groups (Connor and Krostad, 10/5/16). This represents an astounding 12.5 million people. Estimates vary, but when taken in total suggest that deaths from the conflict are in the hundreds of thousands, perhaps as large as half a million (Barnard, 10/11/16). But a serious problem that’s emerged is the willful ignorance exhibited by the defenders of the U.S., Russian, and Syrian governments, which is driven largely by political considerations, rather than human rights concerns. On one side, U.S. political officials and pundits eagerly condemn the Russian and Syrian governments for human rights atrocities, but they focus only on heinous crimes committed by officially designated enemies of state. These officials and the journalists who enable them downplay the United States’ own role in funding and arming of radical Islamist groups that have destabilized Syria and are responsible for countless deaths. On the other side, the Putin and Assad governments have no interest in acknowledging their own atrocities, and make numerous attempts to woo naïve western bloggers, celebrities, and other willing dupes in terms of attributing the responsibility for war deaths exclusively at the feet of radical Islamists.  Some critics of U.S. foreign policy reflexively assume that countries opposing U.S. imperialism and military power must represent a valiant, anti-imperialist, revolutionary force for good. At the very least, some on the American “left” insist that such countries should not be criticized or condemned. I’ve had numerous experiences with these individuals, as I begin to speak up with greater frequency about the destructiveness of Syria war.

Russia Warns Any Attempt By Obama To Arm Syrian Rebels Will Be Seen As A "Hostile Act" --First, it was China which lodged a protest against the US defense bill, which was signed by Barack Obama late on Friday and which, among other things, contained a provision to establish as US "ministry of truth" and media propaganda. On Sunday, China lodged "stern representations" with the United States after Obama signed the NDAA into law which suggests a plan to conduct high-level military exchanges with self-ruled Taiwan. Part of the $618.7 billion National Defense Authorization Act "expresses the sense of Congress that (the U.S. Department of Defense) should conduct a program of senior military exchanges between the United States and Taiwan". In other words, it appears the Trump team is not the only one jeopardising the "One China" policy: as Reuters adds, in a statement late Sunday, China's Foreign Ministry said it had lodged a protest with the United States over the Taiwan content of the act and expressed its strong opposition. Taiwan is Chinese territory and purely an internal matter, the ministry said.It noted that the part of the defense policy bill referring to Taiwan was not legally binding, but said it was an interference with China's internal affairs that China could not accept."We urge the U.S. side to abide by its promises made to China on the Taiwan issue, stop U.S.-Taiwan military contacts and arms sales to Taiwan, to avoid damaging Sino-U.S. ties and peace and stability in the Taiwan Strait."Then, overnight, Russia also joined the global opposition to the US defense policy bill when itsaid on Tuesday that a U.S. decision to ease some restrictions on arming Syrian rebels had opened the way for deliveries of shoulder-fired anti-aircraft missiles, a move it said would directly threaten Russian forces in Syria. According to Reuters, Foreign Ministry spokeswoman Maria Zakharova said the policy change easing some restrictions on weapons supplies to rebels was set out in a new U.S. defense spending bill signed by Obama while on his last vacation as US president in Hawaii, and that Moscow regarded the step as a hostile act.

Russia Reaches Syria Cease-Fire Pact With Turkey— and the U.S. Had Nothing to Do With It -- Russian President Vladimir Putin said Thursday that after negotiations in Moscow between his administration and its Turkish and Iranian counterparts, an accord regarding the war in Syria has been reached, establishing a fragile truce that, according to The New York Times represents “a potential turning point in a civil war that has lasted nearly six years and claimed hundreds of thousands of lives.” The cease-fire is to start at midnight in Syria (5 p.m. EST) and will be followed by peace talks between Syrian President Bashar Assad and opposing forces—though which rebel groups will be involved is unclear.  And though the United States apparently was not involved in the negotiations, Russia’s foreign minister has said President-elect Donald Trump’s administration will be invited to join the talks, as will Egypt, Saudi Arabia, Qatar and Jordan.   “This is potentially a major change for international politics, anti-terrorism and peace. Give peace a chance!” Truthdig Editor in Chief Robert Scheer wrote in a brief analysis sent to Truthdig staff. “If Trump gets behind this truce, he will start off on an incredibly important shift to a saner world. However, if he rejects it, as many Democrat and Republican leaders will urge, a huge possibility for a more peaceful world will be lost and American imperial hegemony will stay firmly on its destructive course.”  From CBC News[Putin] says [the truce] will be followed by peace talks between Syrian President Bashar al-Assad’s government and the opposition, and that the Syrian parties would take part in talks to be held in Kazakhstan, without specifying a date.“The agreements reached are, of course, fragile, need a special attention and involvement ... But after all, this is a notable result of our joint work, efforts by the Defence and Foreign ministries, our partners in the regions,” Putin said. ... Syria’s military said it had agreed to a nationwide ceasefire. In a statement carried by Syrian state news agency SANA on Thursday, the military command “declares a comprehensive nationwide cessation of hostilities as of midnight.”

Another PR Fiasco For Obama: Russia, Turkey Agree On Syria Ceasefire Plan, Snub Washington - In the latest snub of president Obama and the US State Department, on Wednesday Turkey and Russia reached an agreement for a ceasefire in Syria, Turkey's foreign minister said, and according to Anadolu News Agency, will aim to put it into effect by midnight. Anadolu, citing sources, said the two countries have reached a consensus that will be presented to participants in the conflict on expanding the ceasefire that was established in Aleppo earlier this month. There may be a hurdle however: Ankara would not budge on its opposition to President Bashar al-Assad staying in power. The comments by Mevlut Cavusoglu on Wednesday appeared to signal a tentative advance in talks aimed at reaching a truce, but the insistence that Assad must go will do little to smooth negotiations with Russia, his biggest backer. Not content with isolating the US, Russia, Iran and Turkey also made a mockery of the UN when they said last week they were ready to help broker a peace deal after holding talks in Moscow where they adopted a declaration setting out the principles any agreement should adhere to. Arrangements for the talks, which would not include the United States and be distinct from separate intermittent U.N.-brokered negotiations, remain hazy, butMoscow has said they would take place in Kazakhstan, a close ally.

Russia's Putin says Syrian government, opposition sign ceasefire deal | Reuters: Russian President Vladimir Putin said on Thursday that Syrian opposition groups and the Syrian government had signed a number of documents including a ceasefire deal that would take effect at midnight on the night of Dec. 29-30. Speaking at the meeting with Russian Defence Minister Sergei Shoigu and Foreign Minister Sergei Lavrov, Putin said that three documents which open the way for solving the Syria crisis were signed earlier on Thursday. The documents include a ceasefire agreement between the Syrian government and the opposition, measures to monitor the ceasefire deal and a statement on the readiness to start peace talks to settle the Syrian crisis, Putin said. "The agreements reached are, of course, fragile, need a special attention and involvement... But after all, this is a notable result of our joint work, efforts by the defence and foreign ministries, our partners in the regions," Putin said. He also said that Russia had agreed to reduce its military deployment in Syria. Lavrov said that the ministry has started preparations for the meeting on Syrian crisis resolution in Astana, the capital of Kazakhstan. Putin's announcement followed a statement carried by Syrian state news agency SANA, which said the Syrian army would begin a ceasefire at midnight. The statement said the agreement excluded Islamic State, the group formerly known as the Nusra Front and all groups linked to them.

Syria truce backed by Russia, Turkey, holds but clashes reported | Reuters: A Russian- and Turkish-backed ceasefire that aims to end nearly six years of war in Syria and lead to peace talks appeared to hold on Friday but was tarnished by clashes since it took effect at midnight. Russian President Vladimir Putin, a key ally of Syrian President Bashar al-Assad, announced the ceasefire on Thursday after forging the agreement with Turkey, a longtime backer of the opposition. Monitors and a rebel official reported clashes almost immediately after midnight (2200 GMT Thursday) between insurgents and government forces along the provincial boundary between Idlib and Hama, and isolated incidents of gunfire further south. Less than 12 hours later, Syrian government forces and their allies clashed with rebels in a strategic valley northwest of Damascus, and helicopter gunships carried out air raids in the area, the Syrian Observatory for Human Rights reported. Government warplanes then carried out air strikes in northern Hama, the monitor said. Calm still prevailed in many areas included in the deal, the Observatory and rebel officials said, but the fighting highlighted the fragility of any truce agreement in a country where repeated international efforts towards peace have failed. Russian Foreign Minister Sergei Lavrov said the United States could join a fresh peace process once President-elect Donald Trump takes office on Jan. 20. He also wanted Egypt to join, together with Saudi Arabia, Qatar, Iraq, Jordan and the United Nations. A number of rebel groups have signed the agreement, Russia's Defence Ministry said. Several rebel officials acknowledged the deal, and a spokesman for the Free Syrian Army (FSA), a loose alliance of insurgent groups, said it would abide by the truce.

How Russia and Turkey brokered peace in Syria — and sidelined the US - Call it a pop-up alliance. After spending much of this year berating each other afterTurkey shot down a Russian jet over the Syrian-Turkish border, the two governments are suddenly the "honest brokers" of a ceasefire in Syria -- one that is designed to lead to political negotiations. The United States, which has long championed the stuttering diplomatic process on resolving the Syrian conflict, is nowhere to be seen.The ceasefire -- negotiated between Russia, Turkey and the Syrian government as well as Iran and Syrian rebel groups supported by Turkey -- explicitly excludes factions deemed by the United Nations Security Council as "terrorists." This rules out the Islamic State in Iraq and Syria (ISIS) and Jabhat Fateh al-Sham, the former al Qaeda affiliate in Syria that used to be known as Jabhat al-Nusra.Russian President Vladimir Putin declared that the ceasefire was only the first step, with other documents signed on enforcing the truce and beginning peace talks. The Syrian military promised to cease operations nationwide at midnight Thursday. Russian and Turkey are now driving what had been a UN-led political process.Each is responsible for bringing its own allies into the process: the Russians will bring the Assad regime on board and the Turks as many moderate factions as they can coax or cajole. Both sides envisage a rapid timeline, with the Turkish Foreign Ministry saying the Assad regime and opposition would meet soon in Kazakhstan, according to Turkish state media.Plenty can still go wrong, and recent history gives little cause for optimism. Putin acknowledged that "all the agreements reached are very fragile." Turkish Foreign Minister Mevlut Cavusoğlu said Thursday that details on how to monitor the ceasefire and apply sanctions against those who breached it were still being worked out. And he insisted there would be no direct negotiations between Turkey and the Syrian government.But the intent is clear: peel off moderate rebel groups from the tacit alliances they have formed with radical Islamist groups in parts of Syria. Then crush the militant groups excluded from the process. And this is where, inevitably, things get complicated.

'Stances have shifted': Russia, Turkey, Iran are discussing chopping Syria into zones of influence : (Reuters) - Syria would be divided into informal zones of regional power influence and Bashar al-Assad would remain president for at least a few years under an outline deal between Russia, Turkey and Iran, sources say. Such a deal, which would allow regional autonomy within a federal structure controlled by Assad's Alawite sect, is in its infancy, subject to change and would need the buy-in of Assad and the rebels and, eventually, the Gulf states and the United States, sources familiar with Russia's thinking say. "There has been a move toward a compromise," said Andrey Kortunov, director general of the Russian International Affairs Council, a think tank close to the Russian Foreign Ministry. "A final deal will be hard, but stances have shifted." Assad's powers would be cut under a deal between the three nations, say several sources. Russia and Turkey would allow him to stay until the next presidential election when he would quit in favor of a less polarizing Alawite candidate. Iran has yet to be persuaded of that, say the sources. But either way Assad would eventually go, in a face-saving way, with guarantees for him and his family. "A couple of names in the leadership have been mentioned (as potential successors)," said Kortunov, declining to name names.Nobody thinks a wider Syrian peace deal, something that has eluded the international community for years, will be easy, quick or certain of success. What is clear is that President Vladimir Putin wants to play the lead role in trying to broker a settlement, initially with Turkey and Iran. That would bolster his narrative of Russia regaining its mantle as a world power and serious Middle East player.

A new balance of power in the Middle East - FT - Officials from Russia, Iran and Turkey were preening themselves earlier this month ahead of a trilateral meeting in Moscow of foreign and defence ministers, to discuss Syria after Aleppo. Were they inviting their US counterparts? No. A realpolitik parley is no place for Panglossian procrastinators who, furthermore, would spoil the triumph of Russia and Iran as they savour the destruction of rebel Aleppo and the salvage of a rump state for Bashar al-Assad, their Syrian client. Turkey, to be fair, was more focused on the realpolitik than the triumphalism. Ankara has had to give up its support for Sunni rebels trying to topple the Assad regime, and move towards Russia and Iran to prevent Syrian Kurdish fighters allied with insurgent Turkish Kurds from consolidating a self-governing entity along its borders. In either case, it is not so easy to escape the carnage of Syria. On the eve of the ministers’ meeting, Andrei Karlov, Russia’s ambassador to Turkey, was shot dead by an Ankara policeman, who shouted “Don’t forget Aleppo”. The truck murders in a Berlin Christmas market that same evening highlighted how easily terror can strike. But it is remarkable, given the way Mr Putin’s air force has eviscerated Syria’s Sunni rebels (rather than Isis jihadis), that Russia has suffered little reprisal. Yes, alongside the jihadist atrocities in Paris and Nice, Brussels and Istanbul, a Russian airliner was brought down by a bomb over Sinai shortly after Russia intervened in Syria. European officials say the Russian plane was not the original target. That could now change. Mr Putin said the Karlov murder was aimed at sabotaging the “peace process in Syria” — a breathtakingly cynical remark that makes one suspect Russia, as well as the west, is likely to have more occasions to remember Aleppo. As they look towards 2017, Russia and Iran can, nonetheless, consider they have had a good year confounding their adversaries in the Middle East — and that the west, and its allies in the region, is in exploitable disarray. The Kremlin seems to be getting away with its cyber intervention in the US election. It is having some success in dividing Europe and erecting an illiberal democratic pole inside the EU. And President Putin has a new admirer in US president-elect Donald Trump.

Russia: Mass Graves Full Of Tortured Civilians Discovered In Aleppo - Russian military forces have discovered mass graves in eastern parts of the Syrian city of Aleppo, with many of the bodies reportedly showing signs of torture. Maj. Gen. Igor Konashenkov, a spokesperson for the Russian defense ministry, announced the horrifying discovery on Monday. “Many of the corpses were found with missing body parts, and most had gunshot wounds to the head,” he said, according to RT, a Russian state-owned news network. Until recently, the eastern portion of Aleppo, once Syria’s largest city and industrial and financial center, was under the control of so-called “moderate” rebels, many of whom have received both intelligence and material support from the United States and its allies in the Middle East. Last week, Russian and Syrian military forces oversaw the evacuation of civilians from eastern Aleppo. Prior to that, the rebel-held portion of the city had been controlled by two main factions, Jabhat al-Nusra, a terrorist group with ties to al-Qaeda also known as the Nusra Front, and Ahrar al-Sham, another extremist group that receives U.S. support despite being designated a terrorist organization. In an apparent attempt to court the U.S. government by distancing itself from al-Qaeda, the Nusra Front recently attempted to “rebrand” itself. Despite efforts to market themselves as kinder, gentler terrorists, the group has continued to commit atrocities, including burning buses intended to be used in the evacuation and even blocking food aid from reaching Aleppo’s starving residents. WikiLeaks’ archive of diplomatic cables reveals that the United States, Israel, and Saudi Arabia have sought to overthrow the government of Syrian leader Bashar Assad since at least 2006, and support for extremist fighters remains a key part of that strategy.  Konashenkov promised a full investigation into the war crimes of rebel forces in Aleppo, suggesting in his statement that the results would surprise many people who receive their news from Western mainstream media sources.

 Iran Negotiated Boeing Plane Purchases At Half Price - One year ago, the airplane market was spooked by reports of "market tests" for Boeing 777 plane prices, when according to the CEO of Delta the company had acquired a used 777s for a paltry $8 million, a 97% discount from new Boeing 777-ER prices! Boeing's late December decision to cut production of its 777 long-haul jet due to a drop in demand, confirmed that behind the stable industry facade, the underlying economics are far worse than most suspect, and that prices were set to plunge absent implicit government subsidies.  Then, over the weekend, we got a glimpse into the real "price" of airplanes, when Iran said on Sunday it had negotiated to pay only about half the announced price for 80 new Boeing airliners in an order that Boeing had previously said was worth $16.6 billion. The sale includes 50 twin-jet, narrow-body 737 planes and 30 long-range, wide-body 777 aircraft. The first airplanes are scheduled for delivery in 2018, with the entire order being fulfilled over 10 years. "Boeing has announced that its IranAir contract is worth $16.6 billion. However, considering the nature of our order and its choice possibilities, the purchase contract for 80 Boeing aircraft is worth about 50 percent of that amount," said Deputy Transport Minister Asghar Fakhrieh-Kashan, quoted by Iran's IRNA state news agency. Then there is the question of how much funding the Ex-Im bank may have provided to Iran: when all is said and done, it is possible that the Persian nation ended up paying nothing out of pocket, and merely funded its purchase of Boeing airplanes with a generous loan from Uncle Sam.

Officials Count Around 30,000 War Dead in Afghanistan This Year: — Hostilities in Afghanistan have left around 30,000 people dead and as many wounded, mostly insurgents, according to the latest official estimates. As of Sunday, counter-insurgency operations conducted by Afghan police and military forces around the country had left more than 18,500 "enemy" fighters dead and wounded 12,000 more, according to defense and interior ministry officials. Mohammad Radmanesh, the deputy defense ministry spokesman, told VOA that authorities have also captured hundreds of insurgents. He declined to discuss casualties among the Afghan National Security and Defense Forces, or ANDSF, but admitted they "increased by more than 10 percent compared to the previous year." ANDSF suffered around 20,000 casualties, including 5,000 deaths in 2015, according to the United States military. The Special Inspector General for Afghanistan Reconstruction (SIGAR), a U.S. government watchdog, reported in October that more than 5,500 Afghan forces were killed in the first eight months of 2016 while around 10,000 were wounded. The totals for the full year are likely to be much higher because the war has intensified since August.

Are India, Iran and Russia Parting Ways on Afghanistan? -- Iran, Russia and India were the big three powers that acted in unison – in supporting the Northern Alliance – to prevent a complete takeover of Afghanistan by the Taliban between 1996 and 2001. This experience of working together to resist the Taliban has largely shaped their actions in Afghanistan since then.Cooperation between the three states, even in the overt domain, continued over the years and was evident recently as well. In November 2016, India completed the delivery of a batch of four Mi-25 Russian combat helicopters to Afghanistan. Earlier in March 2016, India and Iran signed a bilateral deal to develop the Chabahar port that would provide Afghanistan an alternate access to the sea, bypassing Pakistan. Such instances of collaboration involving Russia, Iran and India have given rise to a belief that these three powers have convergent interests regarding peace and stability in Afghanistan.It is in light of this history of cooperation that Russia’s statements regarding the ISIS in Afghanistan have caused a stir in India. The Russian president’s special representative to Afghanistan, Zamir Kabulov, went on record saying that the ISIS — not the Taliban — is a bigger threat in the region.Similarly, Iran continues to make overtures towards sections in the Taliban. Afghanistan’s former intelligence chief, Rahmatullah Nabil, in November accused Iran of supporting the Taliban in order to counter the Daesh threat. In sharp contrast, India still regards the Taliban and its sponsors as bigger threats to Afghanistan. Earlier this month, the Ministry of External Aaffairs spokesperson said regarding the Taliban, “They have to respect the internationally agreed red lines, give up terrorism and violence, sever all ties with al Qaeda, agree to follow democratic norms and not do anything which will erode the gains of the last 15 years. Ultimately it is for the government of Afghanistan to decide whom to talk to and how.”

"She Betrayed Our Country" - Afghan "Top Gun" Pilot Seeks US Asylum, Sparks Domestic Outrage --The aftermath from the shock announcement that Afghanistan’s first woman fixed-wing pilot is seeking asylum in the US has been a to spark a "spirited national debate" on many of the country’s most vexing issues: insecurity, women’s rights and mass exodus of young people. It all started when Niloofar Rahmani, a 25-year-old pilot described widely domestically as the “Afghan Top Gun”, was scheduled to return to Afghanistan last week after a 15-month training course with the US air force. But on the eve of her departure, she announced she will not be returning according to AFP, citing fears for her safety, triggering a storm of criticism in Afghanistan for “betraying” her nation but also garnering support from activists. For a country whose love-hate relationship with the US in the past two decades has mostly gravitated to the latter, the defection was a huge blow: “What she said in the US was irresponsible and unexpected. She was meant to be a role model for other young Afghans,” defense ministry spokesman Mohammad Radmanesh said on Monday. “She has betrayed her country. It is a shame.” Rahmani had emerged as a symbol of hope for Afghan women when she surfaced in the press in 2013 after becoming Afghanistan’s first woman pilot since the Taliban era, dressed in tan combat boots, khaki overalls and aviator glasses. The once-unimaginable feat last year won her the US State Department’s “Women of Courage Award”. But with fame came death threats from insurgents and she routinely faced contempt from her male colleagues in a conservative nation where many still believe that a woman does not belong outside the home. In an interview in Kabul last year, Rahmani said she always carried a pistol for her protection and though she has grown accustomed to the ogling eyes of men, she never left her airbase in uniform, lest it make her a target.

Israeli Prime Minister Benjamin Netanyahu Faces Criminal Investigation For Fraud & Bribery -- The Times of Israel is reporting that police are calling on Israeli Attorney General Avichai Mandelblit to allow them to open a full criminal investigation against Prime Minister Benjamin Netanyahu.  On Monday, December 26th, Israeli police announced that they are absolutely convinced that a criminal investigation will be opened in the next few days due to new documents that were recently received in a special inquiry that began about 9 months ago. The offenses that Netanyahu allegedly will face will be bribery and aggravated-fraud. In June it was reported that police had recently started their secret investigation, with demand that no details be leaked to the media.Attorney General Mandelblit also allegedly instructed employees in the state prosecutor’s office to investigate allegations that Netanyahu accepted 1 million euros (about $1.1 million) from accused French fraudster Arnaud Mimran in 2009.Earlier in December, in an apparently unrelated case, there were calls for the Netanyahu to be investigated for his role in a Defense Ministry deal to purchase submarines from a German company that is partly owned by the Iranian government.The affair overtook public debate in Israel last month, as accusations came about that the Israeli prime minister may have been financially swayed in the decision by his personal counsel David Shimron, who himself had ties with the submarines’ builder, ThyssenKrupp. The purchase was opposed by sectors of the defense establishment, including former defense minister Moshe Ya’alon. A spokesman for Netanyahu defended the Prime Minister by telling The Times of Israel, “This is absolutely false. There was nothing and there will be nothing.”  What is most interesting about this news is the possible correlation with the U.S. decision to abstain from the vote in the United Nations that aims to stop Israeli construction on occupied Palestinian territory. Does the U.S. know something about Netanyahu’s investigation and possible crimes and are they now seeking to publicly separate themselves from the controversial Israeli Prime Minister?

Sovereign-Wealth Funds Threatened by Government Spending - WSJ: Kazakh President Nursultan Nazarbayev says the country’s sovereign-wealth fund has the money to help wean the central Asian nation off its dependence on oil revenues and build an economy of entrepreneurs. But since Mr. Nazarbayev created the so-called National Fund in 2000, his government has withdrawn $83 billion from it, according to a Wall Street Journal analysis of data from Kazakhstan’s central bank that was corroborated by the International Monetary Fund. The National Fund has a balance of $61 billion as of Nov. 30, down 21% from its peak in August 2014. Leaders of petrostates from Kazakhstan to Azerbaijan, Russia and Venezuela have spent billions of dollars from sovereign-wealth funds as the relatively low price of oil has pressured government budgets. Spending the money deposited in these funds—rather than just the investment income they generate—is threatening the funds’ long-term viability. “It’s really important for Kazakhstan and other oil-producing developing nations to convert these savings into a permanent windfall,” said Angela Cummine, an Oxford University academic and author of “Citizen’s Wealth,” a book examining sovereign-wealth funds. “It is very unwise to draw down the fund until it is depleted because then the major windfall from oil will be gone but economic problems will remain.” Kazakh Prime Minister Bakytzhan Sagintayev acknowledged the problem in December. “If we continue spending in this way, we won’t have a National Fund soon,” he told business leaders. The government in November published a draft decree “to prevent further reduction” of the National Fund. The government proposes spending less of it and investing more of the fund’s money in higher-yielding assets such as stocks and private equity rather than bonds, according to the draft. On Dec. 22, an official at the central bank said that the president has signed the new decree.

 China's Awkward Exchange Rate Regime: an Update --As 2016 draws to a close, it’s natural to look back over the year’s posts. With all the swirling concerns about China-U.S. relations—including the selection of the protectionist co-author of Death by China to head a new White House National Trade Council—we wondered whether our February doubts about China’s exchange rate regime remain intact.The answer is yes, but for reasons radically inconsistent with President-elect Trump’s promise to declare China a currency manipulator on his first day in office. Like any country with a fixed exchange rate, China’s central bank intervenes actively to maintain its (evolving) currency target. But, for the past two years, the People’s Bank has been intervening to prevent (or at least to slow), rather than promote, the depreciation of its currency versus the dollar. That is, the RMB remains overvalued compared to what it would be in the absence of official intervention. And, despite the secretive instincts of China’s authorities, the evidence is there for all to see. The country’s foreign exchange reserves, which neared a world-topping $4 trillion at the peak in June 2014 are poised to fall below $3 trillion, the lowest level since early 2011 (see first chart). And, while China’s currency has depreciated versus the dollar by more than 11 percent (from Y6.24/US$ to Y6.95/US$) over the past 2½ years; on a real broad effective basis, it appreciated by as much as 15 percent, and remains 7 percent above its mid-2014 level (see the second chart).

China's central bank denies yuan broke 7.0000/dollar on Dec. 28 - - Reuters: China's central bank on Wednesday rejected a media report that the yuan had weakened beyond the 7.0000 per dollar level in the onshore market on Dec. 28, calling the report "irresponsible". The yuan traded between 6.9500 and 6.9666 per dollar on Wednesday, the PBOC said on its microblog . "But some irresponsible media reported that the onshore rate of the yuan broke the psychological threshold of 7.0000," the central bank said. Persistent downward pressure on the yuan has contributed to large capital outflows this year and the central bank has spent some of its foreign exchange reserves to support the currency's value. The yuan edged weaker against the dollar on Wednesday in weak market sentiment as the year winds down. The spot yuan is on track to finish the year with a loss of nearly 7 percent against the dollar, and traders expect depreciation pressure to extend into 2017. Markets will be watching household dollar purchases closely at the beginning of 2017, when individuals will get a fresh $50,000 foreign-exchange conversion quota.

China Retools in Push to Stabilize Yuan - WSJ: China enhanced its ability to stabilize its currency, as the rising dollar threatens to undermine its economy by accelerating the flow of capital out of the country. China’s central bank is adjusting the mix of foreign currencies used in setting the yuan’s official daily value, a change analysts said should help support the weakening currency. The move, which goes into effect Jan. 1, reflects the delicate dance Chinese policy makers face with the yuan. China wants a slightly weaker currency to help exporters and maintain competitiveness with other economies as the dollar rises. But it also worries that a sharp decline in the yuan’s value would raise fears the central bank is losing control, undermine the public’s trust and trigger excessive capital outflows. By diluting the dollar’s share and bringing in currencies from the Korean won to the Saudi riyal and Swedish krona, the People’s Bank of China is giving itself more room to maneuver to keep the yuan from falling too fast, analysts said.In recent weeks, the yuan has buckled under uncertainty about China’s economic performance, a surging U.S. dollar following Donald Trump’s presidential-election victory and escalating flows of Chinese currency moving offshore.  The potential for faster U.S. interest-rate increases could add even more downward pressure on the yuan, with some analysts and investors predicting the currency could break the psychologically important seven-yuan-per-dollar level as soon as next month. The yuan has dropped 7% against the dollar this year, nearly double the decline from the year before. China’s move is the latest by global policy makers trying to adjust to a powerful dollar rally that has recently lifted the U.S. currency to a 14-year high. In emerging markets, a stronger dollar makes it more expensive for governments and companies to pay back their dollar-denominated loans. Mexico raised interest rates this month, looking to head off inflation as the peso tumbled against the dollar. Central banks in other developing countries, including Indonesia and Malaysia, have also taken steps to support their currencies against the dollar.  In China, how to manage the yuan’s value has become a hot topic in official circles since a nearly 2% devaluation 16 months ago shocked global markets. In the past year the central bank has sought a less abrupt path, constricting channels for moving money out of the country and managing the pace of depreciation.

Trump Hotels has had its eye on China — but the door hasn’t opened — Donald Trump calls China an “enemy” of the United States, a threat and an international pariah whose modus operandi is to lie, cheat and steal — but for at least eight years his hotel chain has been trying to do business here.Although negotiations have yet to bear fruit, Trump Hotels has made confident predictions this year about opening 20 or 30 luxury hotels in China. It is an ambition that would involve the company in direct negotiations with a Communist Party that the president-elect professes to fundamentally distrust.On Dec. 12, Trump tweeted that he would do “no new deals” during his time in the White House. It is not clear what that means for Trump Hotels as a company, and both the Trump Organization and the Trump transition team declined to comment for this article.If Trump Hotels goes ahead with its efforts to expand to China, or even if it only lays plans to do so after his term in office, it could hugely complicate one of the most important foreign policy relationships Trump will have to negotiate during his presidency. And the suspicion that Trump as president might be trying to badger China or butter it up to promote his business there risks coloring perceptions of his every move in regard to Beijing — even those that are completely aboveboard.“It’s very hard for foreign politicians to do business in China,” said Liu Xuemei, vice president of New World Development’s Huamei Real Estate Development. Liu said it isn’t hard to throw up a building in China; the difficulty lies in all the procedures involved in buying land and getting permission to build on it.“It’s a lot of trouble,” she said. “If your relationship with China isn’t good, there’s no way your papers and permits will be approved. The Chinese government is hard to deal with, so buildings are hard to build.”

US anti-propaganda law ‘may set stage for war of ideas with China’ -- China and the United States could head down the slippery slope ­towards ideological confrontation after US President Barack ­Obama quietly signed an “anti-propaganda bill” into law, mainland observers said. The legislation was signed as part of the National Defence ­Authorisation Act of 2017 shortly before Christmas. The anti-propaganda act is backed by an annual budget of US$800 million to, among other things, establish a fund to train journalists, and to give contracts and grants to non-governmental organisations, civil society organisations, think tanks and private firms specialising in deciphering trends in disinformation campaigns by other countries. In a panel discussion hosted by the Atlantic Council, a Washington-based think tank, in mid-March, one of the legislation’s ­architects, Republican Senator Rob Portman, said the act was not meant to target a specific country but the propaganda itself. But Portman did spell out what he and co-drafter Senator Chris Murphy, a Democrat, saw as threats from China. “China spends billions annually on its foreign propaganda ­efforts,” Portman said. “China’s land reclamation in the South China Sea is a recent ­example of how effective disinformation operations can be used to seize initiative, and in this case catch the US and its allies off guard.” Beijing Institute of Technology economics professor Hu Xingdou said tension between China and the US could escalate with the passage of the bill. “We always have ideological differences but with Donald Trump being the next [US] president and his hostile views towards Beijing, he may actually make China America’s biggest enemy,” Hu said.

As China Pivots, Donald Trump Risks Fighting an Old War - WSJ: —To see the potential pitfalls in Donald Trump’s emerging policy on Beijing, look no further than “Death by China,” a book by the president-elect’s pick to help revive U.S. manufacturing. Peter Navarro, the Harvard-trained economist designated to head the new White House National Trade Council, calls it a “survival guide” against “the planet’s most efficient assassin.” He cites China’s perils: faulty products from “toxic toddler overalls” and “flaming pajamas” to “arsenic-laden vitamins” and “self-immolating boom boxes.” And China, he writes, is killing millions of U.S. jobs with products mass produced in pollution-spewing sweatshops using “slave” labor. Mr. Navarro also issues a call to arms. To counter this onslaught, Washington must punish China for manipulating its currency—Beijing’s prime “weapon of job destruction” and the reason for massive U.S. trade deficits. Consumers must shun Chinese products to weaken Beijing commercially and militarily, he writes. Every “ Wal-Mart dollar” spent on Chinese imports “represents a down payment on our own unemployment as well as additional financing for a rapidly arming China.”China's Xi Jinping is nearing the end of his first five-year term. After decades of collective leadership among top Communist Party officials, could Mr. Xi be shifting to a more rigidly autocratic model? Photo: Xinhua News Agency Like most caricatures, the book contains elements of truth; Chinese mercantilism undoubtedly fueled surging exports that were partly responsible for devastating U.S. Rust Belt communities. Yet it is also hyperbolic and out-of-date, reflecting a way of thinking about China that increases the likelihood for backward-looking and overblown remedies like the 45% tariffs on Chinese exports Mr. Trump has threatened. Worse, such protectionist measures will do little to address the next China shock: Beijing’s efforts to seize the technologies that will drive American prosperity in the 21st century and provide future jobs. Chances are they will exacerbate the problem. China is fixed on the future. It is already shedding sunset industries it captured from the U.S. and promoting cleaner, smarter manufacturing from 3-D printing to aviation and electric vehicles

 China may tighten capital controls as yuan outflow continues -- China’s foreign exchange reserves, once the pride of the nation’s policymakers and citizens, may continue shrinking in 2017, as a yearlong capital outflow shows no sign of abating. That may exert pressure on the government to tighten the screws on remittances of the yuan to stabilize the currency, analysts and economists say. The Chinese foreign exchange reserves shrank by about a quarter from US$3.99 trillion in June 2014 to US$3.05 trillion as of November, and the country was displaced in October by Japan as America’s top foreign creditor, as the People’s Bank of China spent more of its reserves to defend the yuan. China must “safeguard the foreign reserve pool” as this is a higher priority than propping up the yuan’s exchange rate, best left to market forces, said Yu Yongding, a Chinese Academy of Social Sciences professor and a former adviser to the central bank. “The key issue is the foreign reserve,” Yu said. “If we keep guarding the currency rate, the reserve drops, and when it drops to an inadequate level, we will face even bigger depreciation pressure for the currency,” he said.China’s US Treasuries holdings fell to US$1.12 trillion at the end of October, slightly less than the US$1.13 trillion held by Japan, losing the crown of being America’s largest foreign creditor for the first time in six years. Money is leaving China’s shores at a faster clip, as more citizens and companies rush to get their currency out of the country before the yuan’s value deteriorates faster. The average daily turnover of China’s foreign exchange market reached US$34.2 billion as of December 19, 12 per cent more than the US$30.5 billion daily average in November, according to research by investment bank China International Capital Corp (CICC).

Chinese Carrier Sails By Taiwan, Enters Contested South China Sea -- (video) Two days after China demonstratively showed off a live-fire exercise involving its one and only aircraft carrier, the Liaoning, in the Yellow Sea, with the Defense Ministry hinting that the carrier would next sail to the South China Sea after announcing that "as a next step it will conduct scheduled cross-sea training and tests," Beijing did just that and as Reuters reports, a group of Chinese warships led by the country's sole aircraft carrier passed south of Taiwan on Monday, and entered the top half of the South China Sea, in what China has termed a routine exercise.

S.Korea household debt burden threatens vulnerable households as yields rise | Reuters: South Korea's central bank on Tuesday warned that the debt-servicing capacity of some of the country's most vulnerable households could fall on the back of a delay in economic recovery and rising interest rates. In a bi-annual report on financial stability, the Bank of Korea said although households' overall debt repayment capacity appears solid, those in low-income basket and in low-credit groups face default risks given that debt accumulation has far outpaced disposable income growth. "Those people (categorised as vulnerable households) would feel a bigger debt repayment burden than other households when the interest rates increase, as many of them have variable-rate loans, and often more than one," Byun Seung-sik, head of Financial Stability Department at the BOK said. "They (the number of vulnerable households) are on the rise." Household debt stood at 1,295.8 trillion won ($1.08 trillion) at the end of the third quarter this year, up 11.2 percent from a year earlier. The bank said about 6.4 percent of borrowers, representing 78.6 trillion won of total debt, will see their debt repayment capacity fall when interest rates increase. South Korean households are bracing for higher loan rates as local yields track U.S. interest rates, which are expected to rise in 2017. The U.S. Federal Reserve earlier this month raised short-term interest rates by a quarter of a percentage point and signaled a quicker pace of monetary policy tightening for the year ahead, triggering bond yield spikes in emerging economies. The household debt-to-disposable income ratio was at 151.1 percent at the end of the third quarter, having risen 7.4 percentage points from the end of 2015.

Demographic Shock Ground Zero: Japan Births Drop Below Million For The First Time On Record - Nowhere is the demographic impact more visible than in what is the epicenter of the developed world's demographic problems: Japan. It is here that according to the latest government data, the number of births in Japan is likely to fall below a million this year for the first time since data became available in 1899, reflecting a fast-ageing society and the high cost of child care. The number of births is estimated at 981,000 this year, down from slightly more than a million last year, data from the ministry showed. Births hit a record high of 2.696 million in 1949.Japan will also post a natural population decline this year as deaths outpace births, its 10th consecutive drop, as seen by the light blue line in the chart above.A shrinking population of women in their 20s and 30s is a key factor in the falling number, a ministry official said. Japan's fertility rate was 1.45 in 2015, up 0.03 points from a year earlier, helped by an economic recovery, and is recovering from the record low of 1.26 hit in 2005. However, it is still far from the government's goal of 1.80.On Thursday, Japan's cabinet approved a record $830 billion spending budget for fiscal 2017, which includes child-rearing support: at this rate, the local population may not need the free money in the not too distant future. The only hope, as in the case of many European nations, is that a surge in immigration will offset the natural decline of the domestic population whose average age has never been higher.  Meanwhile, after peaking at the start of the decade, Japan's total population of 126.92 million is back to the where it was at the start of the century and declining fast.

Kuroda sees Japan taking 'big step' toward ending deflation- -- As the global economy emerges from a period of post-crisis adjustment, Japan will make headway toward overcoming deflation next year, Bank of Japan Gov. Haruhiko Kuroda said Monday. "The global economy seems to have finally moved out of its adjustment phase after the global financial crisis ... and is entering a new phase," Kuroda said during a speech at a meeting of the Japan Business Federation, the influential corporate lobby known as Keidanren. "I am convinced that the coming new year will be one in which Japan's economy will take a big step forward toward overcoming deflation," he said. To bolster Japanese economic growth, finding latent demand to lift consumption is critical, Kuroda said. "Japan's economy has improved significantly during a period of more than three and a half years," he said. "The excessive appreciation of the yen has been fairly corrected, and stock prices have increased substantially. Corporate profits have marked their historical high levels, and business fixed investment has recovered." The governor attributed successes to the bank's bold monetary policies, such as negative interest rates and quantitative easing. As the global and Japanese economies improve, "to ensure that Japan never falls back into deflation, it is necessary to achieve 2% inflation in this round of monetary easing," Kuroda said. Kuroda sees the economy reviving, judging from his recent statements. Monday's speech, "A New Phase of the Global Economy and Challenges Facing Japan's Economy," also noted other positive signs. Business confidence in the manufacturing sector in both emerging and resource-rich countries has improved, and imports are recovering in emerging nations, he explained.

Restrictions on cash withdrawals may continue beyond Dec 30 - Restrictions on withdrawal of cash from banks and ATMs are likely to continue beyond December 30 as currency printing presses and RBI have not been able to keep pace with the demand of new currency notes. As the 50-day deadline for completion of demonetisation process draws near, there is a growing consensus among bankers that the restrictions on withdrawal would have to continue even in the New Year so as to maintain orderly working at the banks. Banks at many places are not in a position to disburse even the current limit of Rs 24,000 per week due to cash crunch and are rationing the valid currency depending on cash availability. If this limit is withdrawn for individual and businesses from January 2, it is unlikely that banks would be able to disburse the higher demand for valid currencies given the current cash position. “Most of us think that the withdrawal limit would not be completely withdrawn. It is a possibility that it could be relaxed if the cash situation improves,” said a senior public sector bank official. At a time when banks are struggling to meet the demand of individual customers, it would be impossible to service MSME and big corporates which requires cash in large quantity, the official said, the practical way would be to relax it gradually. Recently, SBI Chairperson Arundhati Bhattacharya had also indicated that restriction on withdrawals cannot be lifted entirely unless more cash is made available to banks. After the demonetisation of high value Rs 500/1000 notes, the government has fixed a limit of Rs 24,000 per week on withdrawal from bank accounts and Rs 2,500 per day from ATMs in view of the currency crunch that followed. The government and RBI has not specified when the restrictions will be withdrawn. Finance Secretary Ashok Lavasa had said the withdrawal cap would be will be reviewed after December 30.

India's Prime Minister Has Singlehandedly Crushed The Economy With His Reckless Cash Ban -  Today’s piece should be seen as a bit of a follow-up to yesterday’s post, India’s Demonetization Debacle Highlights the Dangers of Monetary MonopolyThe Washington Post reports: — Over the past two years, this suburb of New Delhi mushroomed into a flourishing enclave of small cellphone manufacturers, attracting tens of thousands of workers from the countryside. Noida, known as the “handset hub,” was touted as a showcase for Prime Minister Narendra Modi’s pet “Make in India” initiative.Then on Nov. 8, Modi’s government took a step that has jolted the bustling industrial quarter. It scrapped high-denomination currency, with a view, officials said, to curbing illicit wealth and the financing of terrorism. But the cash shortage triggered by the move has also curbed legitimate small enterprises. Many of Noida’s manufacturing units have slashed production by nearly half, and more than a quarter of the workers have gone back to their villages.“It was a booming sunrise industry before November 8th. Not now,” said Vipin Malhan, president of the Noida Entrepreneurs Association, who also runs a business that makes cellphone accessories here. “Many small factories and assembling units, which used to work round-the-clock, with three shifts, have scaled down to just a single shift. We are all in shock now. One word that businesses dread is ‘uncertainty.’ The government has thrown that at us.”Several small- and medium-scale industrial clusters, employing a total of more than 80 million people across India, are reporting declining sales, production slowdowns and layoffs since bills worth 500 and 1,000 Indian rupees were invalidated (500 Indian rupees is worth about $7.40). Towns famous for weavers, lockmakers, power looms, bicycle-parts manufacturers, ready-made garments and handicrafts face rising inventories of unsold goods.Even large car manufacturers have halted production in some of their factories for several days because of a sharp dip in consumer spending. And in a reflection of the belt-tightening that has accompanied the general sense of uncertainty, credit card companies have posted a decline in the total value of transactions, even as the cash shortage is forcing people to use their cards more. “We started hearing murmurs that there were no fresh orders from the market. That our raw material was stuck because we could not pay. Stocks were piling up,” said Sudhir Ramphool Singh, 33, who lost his job at a cellphone assembly unit in Noida and returned to his Dharavu village in northern India this month. He is the sole breadwinner for his family of seven. “Production slowed. The unit was shut down for 10 days. When it reopened, many of us were asked to go.”

 Modi to crank up campaign against India’s black money - Mr Modi is expected to intensify his campaign against black money, with his next target likely to be property purchased with illicit wealth and not registered in the true owners’ names. Speculation is rife that he is also seriously considering other dramatic and unusual reform measures — including possibly abolishing income tax and replacing it with a banking transaction tax. “The long-term question is whether [demonetisation] represents a willing shift from conventional economic policy,” Rajeev Malik, senior economist at CLSA. “After this particular step, I can’t rule out anything. The [ February] budget will pretty much tell us whether this is a starting point for something more unconventional.” Mr Modi has said nothing publicly about the origin of the idea of demonetisation — a measure virtually without parallel in contemporary economic history — but few believe New Delhi’s official narrative that it was simply acting on the central bank’s advice. Instead, the measure appears to be the brainchild of a little known Pune-based organisation, called Arthakranti, which loosely translates as economic revolution. This group is seeking radical changes to India’s revenue-collecting mechanism.  Its volunteers — founded and led by former small businessman Anil Bokil — have lobbied politicians for years, and their quest brought them into contact with Mr Modi back when he was still chief minister of Gujarat.  Arthakranti advocates restricting cash use and replacing all of India’s taxes with a single, banking transaction tax of 2 per cent on every transaction through the financial system.  The recent removal of vast amounts of cash from the economy could, some analysts think, be the start of a sustained effort to realise Arthakranti’s vision. “It seems to appeal to a lot of very radical thinkers,” says Saurabh Mukherjea, chief executive of Ambit Capital. “By reducing cash, you force everybody into the banking system, and every transaction gets taxed. If you don’t spend, and don’t transact, you don’t pay tax.”

 India Fears Run On Banks: Capital Controls And Withdrawal Limits To Continue - Indian banks are fearful of running out of cash as lines queue up to withdraw money. Bankers say they cannot cope with any sudden increase in demand, and warn against lifting cash withdrawal limits. A decision by New Delhi on November 8 to scrap all large-denomination banknotes overnight removed 86 per cent of India’s currency from circulation. In an effort to prevent banks running out of cash, the finance ministry then imposed strict limits on the amount of new notes that could be withdrawn. Customers can currently withdraw just Rs2,500 from an ATM per day — equivalent to $37 — or Rs24,000 over the counter per week.“If the government lifts the limits on Friday and there is a sudden rush, banks will be totally dependent on the central bank to give them enough liquidity,” said Soumyajit Niyogi, associate director at India Ratings and Research. “The Reserve Bank of India has been giving assurances that it has enough cash but reports of how much currency there currently is in the system suggest this might not be the case.”New Delhi claims that purging most of India’s old cash supply, and replacing it with a smaller quantity of new banknotes, will eliminate illicitly earned or unaccounted for income that has been beyond the reach of tax officials.But as of December 19, banks had replaced just 38 per cent of the Rs15.3tn in demonetised notes that was sucked out of the system by November’s announcement, according to RBI data.The figures have alarmed bankers, who are now urging the government not to lift the curbs immediately. One executive said: “The government and the RBI need to make sure there is enough cash in the system before they lift the withdrawal limits.” A private banker told the Indian Express newspaper: “If the limits are relaxed, people will ask for more cash and there is limited cash. This will only turn banks into villains.”

Cash is medieval, cards break vicious economic cycles - Indian Express - There is something medieval about cash: In providing the medium of exchange economies needed for transactions, rulers made a hefty profit converting pieces of paper or metal into money (this profit is called “seigniorage”). With democratically-elected governments, the extortionary nature of this activity is perhaps less obvious. But cash is a zero-cost loan for the government. If it instead issues a bond to fund its expenses, it needs to pay interest. The Rs 65,000 crore of dividend paid by the RBI to the government every year is seigniorage-related. A fall in currency in circulation would bring this down. Despite this, perhaps the reason why cash has been successful for so long is that it is liberating; one just needs to know basic arithmetic to transact. It doesn’t need third-party validation like a card does for every transaction, which can at times be unavailable (recall the joke about a visitor to a paid toilet that only accepts online payments being asked to wait till the network comes on), expensive or intrusive. Cash also provides tremendous flexibility. Take our office pool for peanuts and biscuits (researchers get hungry). In the current cash shortage, we are transferring money online — but fear that our colleague who makes the purchases could get questioned on the dozens of small inflows into his bank account. Cash also provides anonymity and not all anonymity is bad; think of a grandmother squeezing notes into a child’s hand for chocolates, away from her parents’ eyes. Cards (they stand for all digital payments in this article) provide better security (for all the risk of digital fraud, statistically, they are an improvement over misplacing cash or getting pickpocketed), are easier to carry, hygienic and don’t face the problem of providing change.

RBI Warns of Stress as Indian Banks’ Bad Loans Hit 14-Year High - Bad debts at Indian lenders, especially those in the dominant state-run sector, have climbed to a 14-year high and could swell further, putting a strain on their capital buffers and profitability, a central bank study showed. The industry’s gross bad-loan ratio jumped to 9.1 percent in September, from 7.8 percent in March, according to the Reserve Bank of India’s Financial Stability Report released Thursday. That’s the highest since the year ended March 2002. Stressed assets, including soured debt and restructured loans, rose to 12.3 percent of outstanding lending from 11.5 percent, the report showed. Under a “macro stress test,” the gross non-performing loan ratio may rise even further by March 2017, the deadline set by the RBI for banks to clean up soured credit. “The performance of the Indian banking sector remained subdued during 2015-16 amidst rising proportion of banks’ delinquent loans, consequent increase in provisioning and continued slowdown in credit growth,” the RBI said in the study, which is released every six months. Weakness in the Indian banking system would be a blow to Prime Minister Narendra Modi, who is seeking to revive credit growth from near a two-decade low, in order to maintain a robust pace of expansion among the world’s major economies. His plans to revitalize the cash-driven economy hit a roadblock after his sudden decision to ban high-denomination notes. “The withdrawal of specified bank notes will impart far-reaching changes going forward,” Governor Urjit Patel wrote in a foreword to the report. He added it will “significantly transform the domestic economy” and boost efficiency and transparency as India moves to a less cash-dependent society. State-run lenders underperformed their peers in the private sector, according to the report, which measures risks to the banking system by tracking factors such as profitability, asset quality and liquidity. The public-sector banks showed the lowest ratio of capital to risk-weighted assets among bank groups with negative returns on their assets.

Why is there now a 4-year jail term for keeping demonetised notes (that are worthless anyway)? - In the blink-and-miss game of new demonetisation rules that’s been on since November 8, the government seems to have reserved a strong punch for the end of the year.  Early on Wednesday, the Union cabinet cleared an ordinance which makes the simple act of holding on to demonetised Rs 1,000 and Rs 500 notes a criminal offence.  The penalty for keeping the old bills could result in a jail term of up to four years. However, the reason for this drastic move was far from clear. The Union government itself kept mum and released no official statement, nor did it bother to explain why it was proposing a jail term for something as trivial as keeping old notes. Without any clarity from the authorities, confusion reigned.  The first conundrum that faced everyone was why this: if the old Rs 1,000 and Rs 500 banknotes would anyway be worthless after December 30, why is keeping these worthless scraps of paper now a criminal offence?  What's the purpose of punishing someone holding currency that's ceased value and is no longer a legal tender. Some explain. #Demonetisation Others pointed out that no matter the original demonetisation notification on November 8, the Union government could not unilaterally dissolve the promissory nature of a banknote. If simply holding on to old notes was illegal, though, how could someone go to the Reserve Bank of India and execute the promissory nature of the banned notes? It is, therefore, still unclear why the government undertook such a drastic move.

 This Is What Happens When Millions Of People Suddenly Get The Internet --For nearly five decades, Myanmar lived under military dictatorships that suppressed all forms of dissent and limited free speech, leading to US and European sanctions that largely cut off the country from the rest of the world. That changed in 2011, when the military junta was officially dissolved and a nominally civilian government was established. In 2015, in the first national election since the military eased its hold, Aung San Suu Kyi’s National League for Democracy Party was voted into power. Of the changes to hit the largely Buddhist country since then, few have been as drastic — and as rapid — as the sudden arrival of the internet to the general public. It revolutionized everything, from how people interact with one another to how they get their news, once the exclusive purview of hyper-regulated state-sanctioned media.Today, news sites have become so popular that print magazines called Facebook and The Internet regurgitate stories spotted online for stragglers who have not yet joined the internet revolution. Many of them feature sensational and salacious tales, cribbed from Facebook pages with a very loose definition of facts. Drinking ice-cold water while eating hot food will give you a stomach ache! Angelina Jolie has secretly adopted a Burmese baby but is keeping it locked away due to a deformity! A Thai cabinet minister is secretly dating an Olympic gymnast!  These stories, at least, do little harm. But there has also been an increase in articles that demonize the country’s minority Muslim community, with fake news claiming that vast hordes of Muslim worshippers are attacking Buddhist sites. These articles, quickly shared and amplified on social media, have correlated with a surge in anti-Muslim protests and attacks on local Muslim groups.

Facebook Safety Alerts Like Bangkok to Be Triggered More Often - Facebook Inc. said it wasn’t a mistake to tell people in Bangkok to mark themselves as safe after the report of a small bomb explosion. It’s an example of how much more common the social network’s “safety check” alerts are going to become. The alerts Tuesday in Bangkok caused panic when people thought they had to be worried about their loved ones. It turned out that a protester was throwing small firecracker bombs at a government building and no one was injured. Facebook used to decide internally about when it was appropriate to activate safety check, which asks users in a certain geographic area to mark themselves safe after disasters such as the earthquake in Nepal or terrorist attacks in Paris. The incidents that drew the company’s attention tended to be large global crises. In November, Facebook handed the power of safety check to its 1.8 billion users, who can now decide on what disasters merit the tool.   “This allows safety check to be used by more people, more often no matter how big or small the crisis is,” Facebook said. The alert has been used more than 300 times since June, when the company started testing to let the community trigger it, compared with 39 times Facebook initiated safety check over the previous two years, according to the company.The problem: by deferring the responsibility to its users, Facebook will likely start sending more alerts that cause alarm over incidents that are benign, like what happened in Bangkok. The company said that as people get more used to safety check, they will be less likely to equate an alert with a major disaster. The tool debuted for Nepal’s 2015 earthquake, which killed almost 9,000 people.

Report: Netanyahu Threatened New Zealand - Israeli Prime Minister Benjamin Netanyahu reportedly called New Zealand’s foreign minister before last week’s United Nations vote on the settlements and threatened that “Your actions are a declaration of war,” according to a new Haaretz report. New Zealand—along with Senegal, Malaysia, and Venezuela—led a move to resubmit for a vote on a resolution condemning Israeli settlements in the West Bank and East Jerusalem. A few hours before Netanyahu’s last-ditch effort to prevent the vote, a senior Israeli foreign ministry official in Jerusalem called New Zealand’s ambassador to Israel “and warned that if New Zealand’s move came to a vote, Israel might close its embassy in Wellington in protest,” Haaretz additionally reported.

Kabila deal hangs by thread after marathon meeting  --Hopes of a deal to end the Democratic Republic of Congo's dangerous political crisis before Christmas were fast dissipating on Saturday, after fruitless all-night talks over President Joseph Kabila's refusal to quit power. Kabila's second and final five-year term ended on December 20, but he has shown no intention of leaving office soon, sparking violent protests that have left at least 40 people dead this week, according to the United Nations. The influential Catholic Church has been brokering talks between the government and opposition and hopes rose this week of an imminent deal, with a draft seen by AFP news agency outlining plans for fresh elections at the end of next year, when Kabila would step down. But that optimism has been slipping, and negotiators from the two camps left church offices in Kinshasa just before 5:30am local time without a deal to prevent a fresh descent into a new political crisis."The work is practically finished - the final touches are all that is left to do before the deal is signed," insisted Marcel Utembi, president of the Congo National Episcopal Conference (CENCO), who had pushed for a deal before Christmas. But others indicated there was still a long way to go.

Brazil’s Public Accounts Worsen in November as Slump Drags on -- Brazil’s public accounts deteriorated in November as the country’s worst recession in a century drags on, according to a partial snapshot of government finances published by the national treasury on Monday. The central government’s primary budget deficit, which excludes interest payments and the finances of states and municipalities, hit 38.4 billion reais in November - its worst-ever result for the month. That compares with a one-off surplus of 40.8 billion reais in October and a median forecast of a 41 billion reais deficit from analysts surveyed by Bloomberg. President Michel Temer notched up his biggest congressional victory to date in December following the passage of a constitutional amendment to cap increases in public spending to the previous year’s rate of inflation. That was the first in a series of measures designed to tackle the record budget gap and to put public indebtedness back on a sustainable track. For next year, Temer has proposed a reform of Brazil’s pension system. He also plans to grapple with labor regulation in an attempt to boost formal job creation and stimulate economic growth. Brazil’s gross domestic product has contracted more than 7 percent over the last two years. Economists surveyed by the central bank have been repeatedly dialing down their estimates for next year’s growth over recent weeks.

Hunger is driving up crime in Venezuela as violence hits new highs, report says - Venezuela’s violence hit new peaks in 2016 amid a breakdown in the law enforcement and judicial systems and a spike in hunger-related crimes, a leading nonprofit reported Wednesday.  According to the Observatory of Venezuelan Violence, or OVV, the South American nation saw at least 28,479 violent deaths this year for a total of 91.8 deaths per 100,000 residents. If the number proves accurate, Venezuela would have the second-highest homicide rate in the world after El Salvador and ahead of Honduras. Venezuela’s homicide rate is also about 3.6 times higher than that of neighboring Colombia and Brazil, the group said.  The Venezuelan government quit providing comprehensive and regular crime statistics in 2003 but regularly argues that the OVV’s numbers are overstated and politically motivated to tarnish the accomplishments of the socialist administration.  Last year, independent analysts also questioned the OVV’s methodology. This year, the organization, which compiles data from six universities, said it was relying more on primary sources and less on statistical algorithms to fine-tune its figures.  In its annual report, the group said that Venezuela’s judiciary had shed all vestiges of independence and was being used as a political bludgeon. In addition, increased poverty and shortages “had promoted increased violence in the country.” Also, for the first time, the group said it had observed “ the presence of hunger-related generalized violence.”

Venezuela military trafficking food as millions in the country go hungry - When hunger drew tens of thousands of Venezuelans to the streets last summer in protest, President Nicolas Maduro turned to the military to manage the country's diminished food supply, putting generals in charge of everything from butter to rice.But instead of fighting hunger, the military is making money from it, an Associated Press investigation shows. That's what grocer Jose Campos found when he ran out of pantry staples this year. In the middle of the night, he would travel to an illegal market run by the military to buy corn flour — at 100 times the government-set price."The military would be watching over whole bags of money," Campos said. "They always had what I needed."  With much of the oil country on the verge of starvation and malnourished children dying in pediatric wards, food trafficking has become big business in Venezuela. And the military is at the heart of the graft, according to documents and interviews with more than 60 officials, company owners and workers, including five former generals.  As a result, food is not reaching those who most need it.The U.S. government has taken notice. Prosecutors have opened investigations against senior Venezuelan officials for laundering riches from food contracts through the U.S. financial system, according to several people with direct knowledge of the probes. No charges have been brought. "Lately, food is a better business than drugs," said retired Gen. Cliver Alcala, who helped oversee border security.

Actually, Trump's Been Great for Mexico's Exports (So Far)  Let us first get an update on the state of Mexican exports to the United States--by far its largest export market. Buoyed by automakers setting up shop south of the border to manufacture automobiles and automobile components at significantly lower costs destined for the United States, it's become a key manufacturing hub for this industry. Consequently, Mexico is now the second-largest exporter to the US (China is tops) after overtaking Canada. To an economist, it simply makes common sense. To the isolationist-protectionist, bunker-mentality specialist Trump, it's "stealing American jobs": Mexico is overtaking Canada as the No. 2 exporter of goods to the U.S. this year, in a sign of how economic ties have deepened between the two countries even as the relationship is being questioned by President-elect Donald Trump.  Shipments from Mexico totaled $245 billion in the first 10 months of the year, according to Commerce Department figures released Tuesday, ahead of Canada’s $230 billion. If the trend continues, it would be the first time ever the U.S. bought more imports from its neighbor to the south. The two countries ended 2015 tied in exports to the U.S. Now, more on all this Trumpery. All of Trump's over-the-top anti-Mexico rhetoric has sunk its currency, the peso, to very weak levels.  Mexicans' worst fears came to pass with the US presidential elections that sunk the currency even further. All-time lows, in fact. But, guess, what: just before Trump assumes office, Mexico has turned an expected trade deficit into a surplus, with a weak currency contributing quite a lot. In large part, this unexpected turn of events is due to his rabid anti-Mexico rhetoric about building a wall and the United States leaving the North American Free Trade Agreement (NAFTA): Consider the following unexpected scenario: as long as Trump does not do something radical like leave NAFTA (which, unfortunately, appears under the executive's privilege), Mexico may actually be helped by Trump.

Italy Eyes Exemption to Spare Monte Paschi Bond Holders - WSJ: Italy will rely on a loophole to avoid hurting small bond investors of Banca Monte dei Paschi di Siena SpA, raising questions about the effectiveness of new European banking rules. Early Friday, the Italian government announced a plan to rescue Monte dei Paschi, its third-largest lender and a perennial trouble spot in Europe’s most troubled banking system. The government will use taxpayer money to bail it out. The new rules are meant to shield taxpayers from the cost of bank failures. They require a bank’s junior creditors to suffer losses when taxpayer cash is used. Since around half of Monte dei Paschi’s junior bonds are held by mom-and-pop investors, that would be a painful remedy. But Italy is indicating those investors may have been “missold” the bank bonds, which would permit an exception.The European Commission, which is responsible for enforcing rules, said in a statement it is having “close and constructive contacts” with Italy to work on a restructuring plan and highlighted the mis-selling provisions. A German finance ministry spokeswoman, Nadine Kalwey, said Italy could bail out a bank “under strict exceptional conditions.” She also noted that small investors can be compensated if they received “flawed” advice when buying securities. Monte dei Paschi is the first major test of Europe’s postcrisis plan for handling troubled banks. Scarred by experiences in Ireland, where the government itself needed a bailout after spending tens of billions of euros in taxpayer money to help crumbling lenders, and elsewhere, the European Union agreed to an ambitious set of rules to shield taxpayers from the costs of bank failures.

How JPMorgan could not save Italy's problem bank | Reuters: Monte dei Paschi di Siena, Italy's third-largest lender, was destined to be wound down within months unless it could raise billions of euros and pull itself out of a swamp of bad loans that threatened to swallow up its five centuries of banking. Former Italian Industry Minister Corrado Passera's recapitalization plan was supported by Swiss investment bank UBS - Monte dei Paschi's long-time adviser - but the former minister was running out of time. The Tuscan lender had already changed advisory horses - turning away from UBS and Citi, and instead engaging JPMorgan to engineer a survival strategy, according to bankers close to the matter. Its board was meeting that day at its HQ in a 13th-century fortress to decide whether to formally commit to the Wall Street player's plan, they said. Veteran banker Passera felt he would at least have a chance to make his case. He didn't. As the train reached Florence, about 70 km from Siena, his phone rang. Monte dei Paschi's chairman told him the board would not hear him, according to a source familiar with the events. The bank had instead pinned its fate on JPMorgan's plan to clear out 28 billion euros ($29 billion) in bad debts and raise 5 billion euros in equity - one that ended in failure in the early hours of Friday when the Tuscan lender said it could not find enough investors and asked the government to bail it out. For the plan's skeptics, the failure to rescue the bank privately was testament to a misplaced belief in government circles that Italy could find a solution to its banking problem child without the need for a politically unpopular state bailout. Passera's proposal - never made public - had involved a 2.5-billion-euro capital increase reserved for private equity funds and a 1-billion-euro share sale to existing Monte dei Paschi investors, according to the source familiar with events.

Monte dei Paschi shortfall hits €8bn, says ECB - The European Central Bank has said that Monte dei Paschi di Siena’s capital shortfall has risen to €8.8bn from €5bn, significantly increasing the price tag of the rescue of Italy’s third-largest lender by the government.  In a statement released late on Monday, MPS also revealed that the ECB had warned that the bank’s liquidity had suffered a “rapid deterioration” over the past month, as it tried in vain to muster enough cash from private investors to avoid a state bailout.  The worsening capital and liquidity position at MPS marks a new twist in a long-running saga surrounding the fate of world’s oldest bank, which has arguably emerged as the weakest link in the Italian and European banking system.  Last week, the Italian government led by Paolo Gentiloni, the centre-left prime minister, approved the use of up to €20bn in public funds to help stabilise the most fragile financial institutions, which are saddled with non-performing loans dating from the country’s lengthy and deep recession. MPS is in line to be the first beneficiary of the decree, after it became clear last week that it could not meet an ECB-mandated deadline of December 31 to raise €5bn in capital from the private market, despite an aggressive effort mounted by investment bankers at JPMorgan and Mediobanca.  But the Tuscan bank will now consume more of the Italian bank rescue money than previously thought: on Monday, the ECB sent a letter to the Italian finance ministry to inform it that MPS’s capital shortfall was now €8.8bn, compared to the €5bn it was estimated to need in the aftermath of July’s Europe-wide banking stress tests.

Monte dei Paschi sees funding gap grow - BBC News: Italian lender Monte dei Paschi is facing a capital shortfall of €8.8bn (£7.5bn), higher than the €5bn previously estimated by the bank, the European Central Bank has said. It comes after Italy approved a €20bn fund to prop up its embattled banking sector on 23 December. Monte dei Paschi had asked for a capital injection to stay afloat. It is carrying a mountain of bad loans made to customers who cannot afford to repay them. In a statement from the bank on Monday, it confirmed it had officially asked the ECB to go ahead with a "precautionary recapitalisation". This will entail a forced conversion of the bank's junior bonds - many of which are held by small investors - into shares. It also permits the government to buy shares or bonds on market terms endorsed by EU state aid officials. In response, the ECB said it had calculated the capital it believed that the bank needed, based on an EU stress test of large lenders earlier this year. Monte dei Paschi (MPS) has formally requested a bailout from the Italian government - but it is far from a done deal. The government is trying to present the plan as a "precautionary recapitalisation" rather than a full-blown rescue. It is an important distinction under EU state aid law, which would enable it to limit the losses suffered by investors. This matters. In Italy, large numbers of bank investors are ordinary savers, people who thought bank bonds were a safe bet for their life savings, for example. The government is trying to protect them - but if the European Commission were to interpret the rules harshly, it might not be able to.

Bank Bailout Balloons, Tab for Italian Banking Crisis Soars -- Wolf Richter - Over the Christmas holidays, when no one was supposed to pay attention, and when the markets were closed, the bailout costs of Monte dei Paschi di Siena, the third largest bank in Italy, and the center of the Italian banking crisis, suddenly jumped by 75% to €8.8 billion ($9.2 billion)! Just how immense the black hole inside of a bank really is remains unknown until the bank collapses entirely and the pieces are sorted out. No one wants to know, especially not bank regulators. But when banks are teetering, and a bank bailout, or rather a bondholder bailout is being discussed, the aspects of that hole begin to emerge, and the hole keeps getting bigger the longer someone looks at it. Earlier this year, the ECB’s stress tests of 51 large European banks determined that Monte dei Paschi was the shakiest among them. The ECB gave the bank until the end of 2016 to raise enough capital or contemplate the prospect of being wound down. Last week, after Monte dei Paschi failed to work out a private-sector rescue deal led by JP Morgan, a taxpayer bailout was moved to the front burner. The bank’s shares and bonds were suspended from trading until the details of the bailout would emerge. This came after two prior capital increases from the private sector in recent years had failed to fill the holes. Each time, gullible investors had gotten crushed.On Friday, the Italian government decided to shanghai its taxpayers into bailing out the bank’s bondholders with only a small haircut for holders of certain junior bonds. The decree it approved to that effect was based on the assumption that a €5-billion bailout – a “precautionary recapitalization” – would be needed.A “precautionary recapitalization” is EU lingo for a taxpayer bailout of a bank that is “illiquid” but is still deemed “solvent.” If a bank is no longer “solvent,” it needs to be wound down, under the new EU regulations banning state aid. This would entail much bigger losses for bondholders and possibly some losses for uninsured depositors. However, a “precautionary recapitalization” would only require that certain junior bondholders take a small first loss before a big capital contribution by the state would bail out the rest, on terms that need to be endorsed by EU state-aid officials in Brussels.

Italy criticizes ECB over Monte Paschi capital decision | Reuters: Italy's economy minister has said the European Central Bank should have explained more clearly why it nearly doubled its estimate of the capital shortfall for the ailing bank Monte dei Paschi di Siena (BMPS.MI), which is being bailed out by the state. In unusually critical comments of the euro zone's banking supervisor, Pier Carlo Padoan told a newspaper that the ECB's new capital target was the result of a "very rigid stance" in its assessment of the bank's risk profile. "It would have been useful, if not kind, to have a bit more information from the ECB about the criteria that led to this assessment," Padoan told the financial newspaper Il Sole 24 Ore. Monte dei Paschi, Italy's third biggest lender and the world's oldest, said on Monday the ECB had estimated its capital shortfall at 8.8 billion euros (7.5 billion pounds), compared with a 5 billion-euro gap previously indicated by the bank. The higher capital requirement substantially increases the cost of the bank's rescue by the government after it failed to raise the 5 billion euros on the market. The Bank of Italy said in a statement later on Thursday that based on its own calculations the Treasury may have to put up around 6.6 billion euros to salvage the lender, including 2 billion euros to compensate around 40,000 retail bond holders. The size of the state intervention has raised concern that Italy's newly created 20-billion-euro bank bailout fund may not have enough money for other weak banks. The government says the fund is sufficient.

Italy Slams ECB For Revealing It Has A "Bank Run" Problem -- With the world still napping in a post-Christmas daze, the ECB surprised Italian bank watchers on December 26 when it advised the insolvent, and nationalized, Monte dei Paschi that its capital shortfall had increased by 76% from €5 billion to €8.8 billion as a result of a deposit flight, aka "bank run", that had accelerated and led to a deterioration in the bank's liquidity.The week before, Monte Paschi admitted, it had already suffered roughly €14 billion in deposit outflows, or 11%, in the first nine months of the year as shown in the chart below. And then, out of nowhere, the ECB said on Monday that Monte Paschi "was solvent but signaled the bank's liquidity position had rapidly deteriorated between the end of November and December 21."Needless to say, Italy was furious at the ECB for unexpectedly admitting that the country's banks are not only in a worse shape than presented at a time when the government requested the parliament's approval to issue an additional €20 billion in new public debt to fund bank nationalizations, but that the bank run gripping at least one of Italy's banks was substantially more aggressive than portrayed. The anger culminated overnight when in unusually critical comments of the ECB, Italy's economy minister Pier Carlo Padoan said in a newspaper interview the central bank's new capital target was the result of a "very rigid stance" in its assessment of the bank's risk profile. He bashed Draghi saying, that the European Central Bank "should have explained more clearly why it nearly doubled its estimated capital shortfall for the ailing Monte dei Paschi di Siena (BMPS.MI) bank, which is being bailed out by the state."

 Italy's Insolvent Monte Paschi To Issue €15 Billion In Debt --For a glimpse into just how insane modern finance and capital markets are, look no further than Italy's thrice insolvent (in three years) bank Monte Paschi, which after failing to finalize a private, is finalizing the terms of its nationalization with the Italian government: a rescue which will cost Italian taxpayers at least €6.6 billion, and likely more.The bailout, however, is not the punchline. What is, is that according to Reuters, Monte dei Paschi di Siena - which has yet to be bailed out, plans to issue no less than €15 billion of debt next year "to restore liquidity and boost investor confidence."According to daily La Repubblica, Monte dei Paschi would issue the debt in the form of bonds and commercial paper. A third of that debt would have a short-term maturity date, while the rest would mature in three years, it added. The bank could not immediately be reached for comment.In other words, when the bank was on its own, without the explicit banking of the government, and certainly not the ECB which confirmed that Monte Paschi's deposit flight was greater than expected, no investor would touch it with a ten foot pole. However, once the bank has the full "backing" of the Italian nation, which will own at least 75% of the common equity after the bank is nationalized, there is a line of people waiting to hand over "other people's money" to the bank to generate a modest return, Reuters confirms as much, stating that the debt sales would be supported by government guarantees which form part of a liquidity scheme for banks in need which the European Commission has agreed to extend for six months. Of course, by providing the insolvent bank this blanket guarantee, the Commission would once again be violating one of its core principles: under EU state aid rules, banks with a capital shortfall cannot benefit from general liquidity support schemes, meaning the Commission takes decisions on a case-by-case basis, as it did for Monte dei Paschi, which may be insolvent, but it is systematically important so anything goes.

ECB Lowers Deutsche Bank's Capital Requirements, Allowing It To Pay Bonuses - While Deutsche Bank has had a generally terrible year, with its stock price plunging to all time lows on capitalization (and, at times, liquidity) concerns following the now concluded episode of its RMBS fine which the bank settled last week for roughly $7 billion of which just over $3 billion in actual cash payments, well below Wall Street's worst case scenario, another far more important open item was whether DB executives and staffers would receive a bonus in a year in which markets seriously wondered if the biggest European bank would get a government bailout. Here, the the rumormill was in overdrive: in October speculation was rampant was that DB would skip cash bonuses, making payments in shares of non-core units of the bank; other rumors tied bonus payments to the company's share price, while in yet more rumors, some suggested that DB would cancel or even clawback bonuses for/from former executives.  In any case, had DB not succeeded in settling its RMBS litigation, it was assured that the German lender would not pay any bonuses to anyone. So now that that particular episode in the bank's history has been concluded, and the management team got an implicit greenlight to make bonus payments... a new problem emerged: Deutsche would be in further breach of its capital requirement had it made billions in bonus payments. Fast forward to this morning when the ECB once again rode to the rescue, if not so much of Deutsche Bank the company, then certainly the employees of the German bank, and as Reuters reported overnight, Mario Draghi agreed to lower the minimum capital requirements for Deutsche Bank on Tuesday, "giving the lender more leeway to structure bonus payments and dividends." Deutsche Bank said the ECB requires it to maintain a phase-in common equity tier 1 (CET 1) ratio of at least 9.51% on a consolidated basis, starting January 2017. This is below Deutsche Bank's current requirement of 10.76 percent, a threshold the bank cannot fall below this year without having to limit dividends, variable remuneration and coupon payments to holders of Additional Tier 1 instruments, the bank said.

Why Politicians Are to Blame for Most Terrorist Attacks --European political leaders are making the same mistake in reacting to the massacre at the Christmas fair in Berlin, in which 12 died, as they did during previous terrorist attacks in Paris and Brussels. There is an over-concentration on the failings of the security services in not identifying and neutralising the Tunisian petty criminal, Anis Amri, as the threat he turned out to be. There is too little focus on bringing to an end the wars in Syria and Iraq which make this type of atrocity unstoppable. In the aftermath of the killings the visibility of Amri, who was shot dead in Milan this morning, as a potential threat looks misleadingly obvious, and the culpability of those who did not see this appears more glaring than it really was. The number of possible suspects – suspected before they have done anything – is too great to police them effectively.  No politician or security official wishing to retain their job can tell a frightened and enraged public that it is impossible to defend them. Those in charge become an easy target for critics who opportunistically exploit terrorism to blame government incompetence or demand communal punishment of asylum seekers, immigrants or Muslims. At such times, the media is at its self-righteous worst, whipping up hysteria and portraying horrifying but small-scale incidents as if they were existential threats. This has always been true, but 24/7 news coverage makes it worse as reporters run out of things to say and lose all sense of proportion. As the old American newspaper nostrum has it: “if it bleeds, it leads.” But in over-reacting, governments and media play into the hands of the terrorists who want to create fear and demonstrate their strength, but whose greatest gains come when they provoke an exaggerated self-destructive response. 9/11 was the most successful terrorist attack in history, not just because it destroyed the Twin Towers but because it lured the Bush administration into invading Afghanistan and Iraq. Subsequently, Guantanamo, Abu Ghraib, rendition, torture and “targeted killings” (otherwise known as assassination campaigns), all justified by 9/11, have acted as recruiting sergeants for al-Qaeda type organisations.

Europol Admits ISIS Actively Targeting Refugees To Carry Out Terrorist Attacks In The EU - Confirming what most of us deduced long ago via the application of just a bit of common sense, Europol and Frontex, Europe's  border and coast guard agency, are finally admitting that their intelligence indicates coordinated efforts on the part of ISIS to recruit asylum seekers, both in Syria and in migrant camps after they've already reached Europe, to carry out terrorist attacks.  In a report published my Europol, counter-terrorism experts warn that, among other things, "Syrian refugee diaspora may become vulnerable to radicalisation once in Europe and may be specifically targeted by Islamic extremist recruiters."

  • Radicalised persons are not necessarily profound believers
  • Elements of the (Sunni Muslim) Syrian refugee diaspora may become vulnerable to radicalisation once in Europe and may be specifically targeted by Islamic extremist recruiters
  • The majority of attacks claimed by IS appear to be masterminded and perpetrated by individuals inspired by IS, rather than those who work with the organisation directly
  • Intelligence suggests that IS has assembled teams in Syria which are sent to the EU tasked with carrying out attacks
  • Training possibilities for IS are believed to be decreasing in Syria

The report goes on to note that "German authorities were aware of around 300 recorded attempts made by jihadists to recruit refugees" as of April 2016 while Merkel continued to relentlessly push her "open-border" policies.

   France's Le Pen Promises to Withdraw from EU and NATO if Elected --  France's Le Pen wants stronger ties with Moscow, out of the EU and NATO -- in an effort to make France great again. She said NATO exists only 'to serve Washington's objectives' and that “it was established when there was a risk from the Warsaw Pact and the expansionism of the communist Soviet Union.' She furthered, 'the Soviet Union no longer exists, and neither does the Warsaw Pact. Washington maintains the NATO presence to serve its objectives in Europe.' On the topic of the EU, Le Pen wants out, saying “the people must have the opportunity to vote for the liberation from slavery and blackmail imposed by technocrats in Brussels to return sovereignty to the country.” Moreover, she also suggested Portugal, Italy, Spain, Ireland, Greece and Cyprus should leave too -- leaving a very cucked Germany by themselves holding their small balls. As for the topic of refugees and immigration, she wants to send them, the fuck, back. “I am against the policy which would promote the entry of immigrants into Europe, which cannot accept them … this tsunami of migrants should be limited. Europe does not have the power to ensure they all find work and opportunities to enrich themselves. Immigrants are illegal since once they set foot on European soil ... they have violated the law. They must be sent back to their homeland. " If she wins, the EU is over.

Israel Urges Jews To Leave France, Suspends "Working Ties" With Countries That Voted For UN Resolution --In an unexpected escalation that was not the result of Israel's angry response to Friday's UN vote which passed a resolution condemning the country's Palestinian settlements, and which the US refused to veto,  Israeli Defense Minister Avigdor Lieberman on Monday called on French Jews to leave their country to protest a Paris-hosted conference planned for next month aimed at restarting Palestine-Israel peace talks, Israeli daily Yedioth Ahronoth has reported.  According to Turkey's Anadolu news agency, the Israeli government has repeatedly stated in recent months that it would not participate in the conference, which is scheduled to be held on Jan. 15 with the participation of representatives from 70 countries. Speaking at a meeting of his right-wing Yisrael Beiteinu party, Lieberman reportedly said: "Perhaps it's time to tell the Jews of France, ‘This isn't your country, this isn't your land. Leave France and come to Israel’.""That's the only response to this plot," Lieberman added, in reference to the planned conference. He also criticized the timing of the event, which will be held shortly before French presidential elections. "With France going to elections soon, this is not the time for a peace summit," the newspaper quoted Lieberman as saying. "It [the planned conference] is a tribunal against the State of Israel." He added: "This summit's entire purpose is to undermine the State of Israel's security and tarnish its good name."

Le Pen Presidential Campaign Threatened By Russian Bank Failure -- A problem has emerged for France's anti-immigrant, anti-Euro presidential frontrunner, Marine Le Pen, and it has little to do with being behind in the polls ahead of the 2017 presidential elections, far from it. It has, however, everything to do with something far simpler: money, as the National Front leader is suddenly struggling to raise the €20 million ($21 million) she needs to fund the French presidential and legislative campaigns in 2017 after the party’s Russian lender failed, the party treasurer said.  This past July, the Central Bank of Russia revoked the license of the National Front’s Moscow-based lender First Czech Russian Bank OOO and Le Pen's party has still to find another backer, according to treasurer Wallerand de Saint Just. Saint Just said he’s seeking international financiers in countries including Russia because French banks have refused to fund his party. In a phone interview with Bloomberg, Saint Just said that “the loss of the FCRB was a hard blow for us" adding that “the Russia loan was a stable resource. Now we are still searching for loans.” And, since a Le Pen victory threatens to be the final straw that crushes the European establishment camel, it is no surprise that no existing financial organizations are willing to provide her with the funds she may need to crush them. Last week, the French Le Parisian reported that a U.S. investment bank was preparing to lend the party $20 million in August, but pulled the plug on the deal at the last minute.

Sturgeon’s Brexit plan: Keep Scotland in the single market even if the UK leaves — Scotland's First Minister Nicola Sturgeon on Tuesday detailed her bold proposal to keep Scotland in the European single market after Brexit, even if the rest of the UK leaves.  The plan, published in a paper titled "Scotland's Place in Europe," calls for the whole of the UK to remain the single market, but outlines a separate plan for a "substantial" transfer of powers which would allow Scotland to remain part of the free-trade zone.    Sturgeon added that she would most likely call a second independence referendum if Prime Minister Theresa May doesn't agree to these requests.  Speaking at a press conference to launch the paper, Sturgeon cited analysis which suggested that leaving the single market could destroy 80,000 jobs in Scotland, and cost every worker £2,000 over a decade.   She called for the UK government to clarify whether it intends to remain in the single market and customs union or as soon as Article 50 is triggered. She said: "It would make no economic sense whatsoever for the UK to leave the single market. It would be entirely democratically justifiable for the UK to remain within it."  Sturgeon accepted, however, that it was "unlikely" May would opt to retain the UK's single market membership, given the pressure she is under to reduce immigration. Any state that wants to be a member of the internal market must accept the free movement of people, an agreement that has led to high levels of EU migration to the UK.  The main alternative outlined in the paper is a "Norway option," whereby Scotland would remain within the single market by remaining part of the European Economic Area (EEA) as a non-EU member — as countries including Norway, Iceland, and Switzerland currently are. It would also mean that Scotland co-operated closely with the rest of the trading bloc on major policy areas such as energy and justice, even if the rest of the UK does not.

Brexit a real opportunity for Britain, says King -- Britain could be better off outside the EU single market and should take advantage of the “many opportunities” of Brexit, the former governor of the Bank of England said. Lord King of Lothbury said that the UK should be “self-confident” about leaving the “unsuccessful” union and that new trade deals could make Britain’s exit a success. The crossbench peer also urged the government to reveal its policies on immigration “sooner rather than later”, saying that it would be a mistake to dump the issue in a “basket” to be negotiated once the formal process of leaving the EU begins next year. He said that if the UK joined Norway as a non-EU member of the single market, which would allow free access for business, there would be questions over whether the government would be able to sign trade deals with those outside the bloc. “I don’t think it makes sense for us to pretend we should remain in the single market and I think there are real question marks about whether it makes sense to remain in the customs union,” he told Radio 4’s Today programme yesterday. “Clearly if we do that we cannot make our own trade deals with other countries.” He said that there were reasons to be optimistic, including agricultural reform and developing a new relationship with Ireland. “I think the challenges we face mean it’s not a bed of roses, no one should pretend that, but equally it is not the end of the world and there are some real opportunities that arise from the fact of Brexit we might take,” he said. “Being out of what is a pretty unsuccessful European Union, particularly in the economic sense, gives us opportunities as well as obviously great political difficulties.” He added that the EU had failed to put in place a framework for success for the monetary union, and predicted that Germany could abandon the euro. “I think if you look at Italy, Portugal, even France now they are really struggling. As soon as German taxpayers see their money is being thrown away they will start to ask serious questions about whether they want to be part of it.”

Brexit transition deal may avert UK economic ‘catastrophe’ - FT - It will be “totally impossible” for Britain to wrap up a trade pact with the EU within two years and a transition deal will be needed to avert “a catastrophe” for the British economy, according to one of the EU’s most eminent lawyers.Jean-Claude Piris, the head of the EU Council’s legal service from 1988-2010, said a trade deal would comprise “thousands of pages and hundreds of articles” and there was no chance of it being completed before a scheduled Brexit in 2019.The comments by Mr Piris, the legal architect of a succession of EU treaties from Maastricht to Lisbon, directly contradict claims by Theresa May, Britain’s prime minister, that both a divorce deal and a trade accord can be signed within two years of Article 50 being triggered.“I would expect us to be able to negotiate a deal in the two-year period that has been set out,” Mrs May told MPs on December 20. David Davis, Brexit minister, has made the same claim.Mr Piris said in an interview that putting in place a UK-EU trade deal “could take up to 10 years” because of the complexity of the task, but added that he hoped it could be concluded more quickly. “We could do it in maybe five years, I don’t know.”In any event, he said, there would be an inevitable gap between the scheduled date of Brexit in spring 2019 and the entry into force of a trade deal. He said that could cause serious economic damage unless a stopgap arrangement was put in place. “You vitally need a transition period,” he said. Mr Piris said the interim arrangement was needed to stop the UK falling into the “WTO gap” — where it applied the rules of the World Trade Organisation until the free-trade agreement came into force. Asked whether a trade deal could take a decade to complete and ratify, Mr Piris said: “It’s not the most pessimistic view because the most pessimistic view is that there will be no agreement at all.“It will take years, that’s for sure. I don’t know how many years . . . some people say between four and eight years but that is if people have goodwill on both sides.

Brexit vote sparks rush of British Jews seeking Portuguese passports - The UK’s decision to leave the European Union has fuelled an 80-fold increase in the number of British Sephardic Jews seeking Portuguese citizenship under a recent law intended to make amends for their ancestors’ expulsion from the Iberian peninsula more than 500 years ago.Last year both Spain and Portugal brought in legislation to facilitate the return of the descendants of the thousands of Jews who were forced from the countries at the end of the 15th century.The Spanish government said the offer of citizenship was intended to right the “historical wrong” that saw the country’s Jewish community exiled, forced to convert to Catholicism or burned at the stake. Portugal said that while there was no way to make up for what had been done, the offer of citizenship represented “an attribution of a right”.In the wake of June’s Brexit vote, however, a rapidly increasing number of British Sephardic Jews have been applying for Portuguese citizenship as a way to deal with the uncertainty created by the leave victory. According to the Jewish Community of Oporto – which, along with the Lisbon Jewish community, is certifying applicants – demand from the UK has soared since 23 June. Dr Michael Rothwell, a delegate to the community, said it had received just five applications before Brexit compared with 400 in the two months following the vote.“I think people are a bit nervous about this and therefore feel that having a European Union passport would be an advantage even if they are not necessarily planning to move to Portugal,” he said. “Having citizenship of an EU country has its benefits.”Rothwell said the community had not been surprised by the rush for Portuguese passports, adding that the number of individuals applying was greater that 400 as many had applied in groups. Although there are no precise figures, the UK’s Sephardic population is estimated to be in the thousands.

Nearly 1,000 City staff at four big US banks given €1m in pay deals in 2015 -  Four major US banks handed almost 1,000 of their top City staff at least €1m (£850,000) in pay deals last year. Goldman Sachs, the highest profile Wall Street bank, disclosed that 11 of its key staff received at least €5m in 2015. The disclosures by Goldman, JP Morgan, Morgan Stanley and Bank of America Merrill Lynch show that 971 of their staff received €1m in 2015. The information was provided in regulatory disclosures instituted since the 2008 banking crisis, when it became apparent that bankers were being paid huge sums that could not be withheld when banks got into trouble. Regulations now require banks to spread out bonuses over a number of years. Morgan Stanley, for instance, said that 40% to 60% of its pay deals were deferred over three years, with part of it in shares. The UK arm of Goldman Sachs paid 286 of its staff €1m or more, compared with 262 in 2014. JP Morgan’s disclosures show 301 of its staff received more than €1m, with 11 receiving over €5m. Morgan Stanley’s data shows 198 staff received €1m or more and Bank of America Merrill Lynch shows 186 staff being handed €1m or more. The disclosures relate to legal entities based in the UK so the majority of the individuals involved will be based in the City, though some may be located in other parts of the EU. They help to shed light on the pay deals being offered in the City in the wake of the 2008 financial crash and at a time when the sector is facing scrutiny as a result of the vote to leave the EU. The European Banking Authority (EBA), the pan-European banking regulator, also collates data and in March it announced that London had more than three times as many high-earning bankers as the rest of the EU combined. Overall, the number of high earners across the EU rose 21.6% to 3,865 in 2014, up from 3,178 in 2013.

 Britain could 'indefinitely' pay billions for former EU workers' pensions despite Brexit — Britain could still be forced to pay the pensions of former workers of the European Union despite Brexit. That's according to Professor Iain Begg from the LSE's European Institute. Professor Begg made the prediction in a new report titled "Brexit: Six months on," which was jointly released by The UK in a Changing Europe and the Political Studies Association this week. In a section entitled "The EU budget and public finances" he warned that contributions to the EU — despite Britain leaving the EU — is going to be the most "toxic" issue during upcoming talks and said the UK will still be forced to fork out billions of pounds in pensions to former EU workers. Here is a key excerpt from his passage in the report (emphasis ours):  "...the German Finance Minister has hinted that such payments could last until 2030, although beyond 2023 any lingering payments would be small, so his warning is exaggerated. These are transitional problems which will gradually fade, although the UK could remain liable indefinitely for a proportion of the pensions of former employees of EU institutions. "All these issues will be part of the Article 50 negotiations. While the implications are relatively insignificant in macroeconomic terms – the question of who pays for a few billion of pension liabilities is trivial compared to broader issues relating to the single market, trade, the City and migration – there is obvious potential for these issues to become high-profile politically, further complicating an already difficult negotiation. Moreover, in 2018 the rest of the EU will start negotiations on its next seven-year budget deal, a process that invariably becomes very fractious."

Brits Are Hoarding Cash Amid "Economic Uncertainties" As FTSE Hits Record High -- Despite the FTSE 100 soaring to new record highs, Britons are holding onto their cash in a sign that they may be hunkering down in the face of economic uncertainties,according to the British Bankers Association. As Bloomberg reports, personal deposits grew an annual 4.8 percent in November, data compiled by the BBA show. They increased by 32.4 billion pounds ($39.7 billion) in the first 11 months of the year, outstripping the 19.8 billion-pound growth in the same period of 2015. But while the economy has held up well so far, most economists foresee a slowdown in 2017 as businesses seek more clarity on the nation’s future relationship with the world’s largest trading bloc.“We’ve seen personal deposits, in particular, grow more strongly in recent months as consumers hoard cash in the absence of higher-yielding, liquid investment opportunities,” BBA Chief Economist Rebecca Harding said.“This growth in personal deposits may also suggest that consumers are looking to grow their cash reserves against potential economic uncertainties, such as an expectation of lower wage growth.”“Slower economic growth in 2017 is likely to result in pressure on employment with a risk of a rise in unemployment,” said Martin Ellis, housing economist at Halifax. “This deterioration in the labor market, together with an expected squeeze on households’ spending power, is likely to curb housing demand.”So - stocks at record highs and the citizenry hoarding cash due to economic uncertainty - makes perfect sense in this new normal.

Record level of cancelled urgent operations for NHS England - Overstretched hospitals were forced to cancel more life-saving operations last month than at any time since official records began, new data reveals. Almost double the number of urgent procedures such as heart surgery were delayed in November than during the same month the year before. MPs said the figures showed hospitals in England are “close to breaking point” even before most parts of the country are hit by severe winter weather, which traditionally exacerbates demand for services. They come in the same month managers were told to turn away thousands of patients from accident and emergency in a bid to stave off a seasonal crisis. NHS England records show 446 urgent operations were cancelled in November, a rise of 24 per cent on the previous month and an 84 per cent hike on November 2015.Brighton and Sussex University Hospitals NHS Trust coped worst with patient demand in November, the data shows, cancelling 48 operations.  Pennine Acute Hospitals NHS Trust, about which Health Secretary Jeremy Hunt recently said there were serious safety concerns, was forced to cancel 42 urgent operations.Next worse were Oxford University NHS Foundation Trust, which cancelled 31 urgent procedures, followed by North Bristol NHS Trust and Barts Health NHS Trust, which each cancelled 28. "Waiting for an operation is stressful enough even when everything goes smoothly, to be told that your operation has been delayed heaps even more strain on patients,” said Norman Lamb, who was a health minister in the Coalition Government. As well as turning patients away from A&E departments, the health service regulator has also asked hospitals to postpone non-urgent operations, such as hip replacement and cataracts, in order to free up more beds.

Minority children in the UK perform better in school but are still less likely to be employed - Black and Asian children in the UK are more likely to be unemployed as adults despite doing better at school, according to a report by the government’s official body on social mobility. The Social Mobility Commission said young people from black backgrounds and Asian Muslim women in particular struggled to convert academic achievement into improved job prospects later in life. Wednesday’s report says geography, discrimination by employers, and cultural barriers were to blame for "broken promises" on social mobility. The head of the commission, former Labour government minister Alan Milburn, said the UK was a long way from having a "level playing field" for people of different genders, ethnicities, and social backgrounds. "It is striking that many of the groups that are doing best at school or improving their results the most are losing out when it comes to jobs and opportunities later in life," Milburn said. "Action is needed across the education system and labour market to better understand barriers to success. Renewed action is needed by government, educators and employers to dismantle them." The report found that while white boys from poorer backgrounds performed worse at schools, they were still more likely to secure employment and face barriers to social mobility in adulthood than ethnic minority children. The report comes just a few weeks after a separate government report on integration blamed "cultural and religious practices" for leaving women from Muslim communities economically and socially isolated. Wednesday's report by the Social Mobility Commission found women from all ethnicities were being paid less than their male counterparts. On average, women were paid about 18 percent less than men.

£4m food crime unit set up over horse meat scandal has still not resulted in any prosecutions: Britain's food-policing unit which was created following the horse meat scandal has still not resulted in any prosecutions despite costing the taxpayer £4m. The National Food Crime Unit (NFCU) was created two years ago but as yet its work in deadly diet pills, horse meat or wine fraud has not led to any criminal charges being bought against anyone. It comes as the unit, which costs £2m a year to run, receives at least five phone calls a day from whistleblowers reporting crimes within the food industry. The infamous bonfire of the quangos never really got going and there is still enormous scope to roll back the state John O'Connell, chief executive of the TaxPayers' AllianceIts new whistleblower helpline, set up three months ago, has so far received more than 300 calls. The unit was formed following an inquiry by food safety expert Professor Chris Elliott into horse meat in the food chain in 2013 after it was revealed that horse meat had found its way into products sold as beef and lamb. He warned that government cuts had dismantled much of the local-government apparatus, such as trading standards departments, and recommended a dedicated unit was created.But yet three years on, despite the creation of the NFCU, the Food Standard's Agency (FSA) is set to allow  "trusted" retailers to be given special permission to police themselves to save money. Tesco has been selected to pilot the scheme despite being at the centre of the horse meat scandal just four years ago, in which burgers being sold as "beef " actually contained mince made from horses.

4 Out Of 5 Middle-Aged Brits Are Fat, Lazy Drunks; New Study Finds --A new study just released from Public Health England concludes that 4 out of 5 Brits between the ages of 40 - 60 are fat, lazy and/or alcoholics, characteristics which the study shockingly found to be having an adverse effect on the group's long-term health. The study, which compared data collected from 40 - 60 year olds between 2011 - 2013 to similar data collected 20 years prior found that Brits, both men and women, were almost universally less healthy on nearly every metric tested...a fact that researchers attributed to the sedentary nature of our modern lifestyles. The demands of modern day living are taking their toll on the health of the nation, and it’s those in middle age that are suffering the consequences most, as their health reaches worrying new levels.Over 15 million Britons are living with a long term health condition, and busy lives and desk jobs make it difficult to live healthily. But just making a few small changes will have significant benefits to people’s health now and in later life.We know that people often bury their heads in the sand when it comes to their general health but the consequences of doing nothing can be catastrophic. There are an estimated 11.9 million people at increased risk of developing Type 2 diabetes in the UK because of their lifestyle and more than one million who already have the condition but have not yet been diagnosed.Type 2 diabetes can lead to serious complications such as amputation, blindness, heart attack, stroke and kidney disease. We know how hard it is to change the habits of a lifetime but we want people to seek the help they need to lose weight, stop smoking and take more exercise.As Dr. Joan Costa-Font of the London School of Economics points out, while our lifestyles have certainly grown more sedentary over the decades our caloric intake has not changed to match the decline in activity.  Per RT

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